<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 27, 1996.
REGISTRATION NO. 333-
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
SIMON PROPERTY GROUP, INC.
(Exact name of registrant as specified in its charter)
------------------------
<TABLE>
<S> <C> <C>
MARYLAND 6798 35-1901999
(State or other jurisdiction of (Primary Standard Industrial (IRS Employer
incorporation or organization) Classification Code No.) Identification No.)
</TABLE>
------------------------
NATIONAL CITY CENTER, 115 WEST WASHINGTON STREET, SUITE 15 EAST, INDIANAPOLIS,
IN 46204
(317) 636-1600
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------
DAVID SIMON
PRESIDENT AND CHIEF EXECUTIVE OFFICER
SIMON PROPERTY GROUP, INC.
NATIONAL CITY CENTER
115 WEST WASHINGTON STREET, SUITE 15 EAST
INDIANAPOLIS, IN 46204
(317) 636-1600
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
COPIES TO:
<TABLE>
<S> <C>
EDWIN S. MAYNARD, ESQ. RICHARD L. POSEN, ESQ.
TOBY S. MYERSON, ESQ. WILLIAM N. DYE, ESQ.
PAUL, WEISS, RIFKIND, WHARTON & GARRISON WILLKIE FARR & GALLAGHER
1285 AVENUE OF THE AMERICAS 153 EAST 53RD STREET
NEW YORK, NY 10019-6064 NEW YORK, NY 10022
(212) 373-3000 (212) 821-8000
</TABLE>
------------------------
Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes effective
and upon consummation of the merger described in the enclosed Prospectus/Joint
Proxy Statement.
------------------------
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. /X/
------------------------
If any of the securities being registered on this form are to be offered in
connection with the formation of holding company and there is compliance with
General Instruction G, check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
Title of each Proposed Proposed
class of Amount maximum maximum Amount
securities to be to be offering price aggregate of registration
registered registered per unit offering price fee
- -------------------------------------------------------------------------------------------------
Common Stock $.0001 par
value per share(1)... 39,714,023 Shares $23.89706(2) $949,048,360(2) $156,615.47(3)
- -------------------------------------------------------------------------------------------------
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</TABLE>
(1) This Registration Statement relates to the Common Stock of the Registrant
issuable to holders of common shares of DeBartolo Realty Corporation, an
Ohio corporation ("DRC"), in the proposed merger of DRC with a subsidiary of
the Registrant.
(2) Pursuant to Rule 457(f), the proposed maximum offering price per unit and
proposed maximum aggregate offering price were computed in accordance with
Rule 457(c) on the basis of the average of the high and low prices per share
of the Common Stock of the Registrant on June 21, 1996.
(3) A fee of $170,642.59 was paid previously in connection with the filing of
preliminary proxy materials pursuant to Rule 0-11 under the Securities
Exchange Act of 1934, as amended.
------------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
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<PAGE> 2
SIMON PROPERTY GROUP, INC.
CROSS-REFERENCE SHEET BETWEEN ITEMS IN FORM S-4 AND PROSPECTUS/JOINT PROXY
STATEMENT
PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
HEADING IN PROSPECTUS/
ITEM NO. FORM S-4 CAPTION JOINT PROXY STATEMENT
- --------- ------------------------------------------------------- -------------------------------------
<S> <C> <C>
A. INFORMATION ABOUT THE TRANSACTION
Item 1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus............... Cover Page of Registration Statement;
Cross Reference Sheet; Outside
Front Cover Page of
Prospectus/Joint Proxy Statement
Item 2. Inside Front and Outside Back Cover Pages of
Prospectus........................................... Inside Front Cover Page of
Prospectus/ Joint Proxy Statement;
Table of Contents; Available
Information; Incorporation of
Certain Documents by Reference
Item 3. Risk Factors, Ratio of Earnings to Fixed Charges and
Other Information.................................... Summary; The Merger; Risk Factors;
Pro Forma Combined and Selected
Historical Financial Data; SPG
Annual Meeting Matters
Item 4. Terms of the Transaction............................... Summary; The Merger; Certain
Agreements; The Proposed Merger and
Related Matters
Item 5. Pro Forma Financial Information........................ Summary; Comparative Per Share
Information; Pro Forma Combined and
Selected Historical Financial Data
Item 6. Material Contracts with the Company Being Acquired..... Summary; The Merger; Certain
Agreements
Item 7. Additional Information Required for Reoffering by
Persons and Parties Deemed to be Underwriters........ *
Item 8. Interests of Named Experts and Counsel................. The Proposed Merger and Related
Matters
Item 9. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities....................... *
B. INFORMATION ABOUT THE REGISTRANT
Item 10. Information with Respect to S-3 Registrants............ Summary; The Companies; Available
Information
Item 11. Incorporation of Certain Information by
Reference............................................ Available Information; Incorporation
of Certain Documents by Reference
Item 12. Information with Respect to S-2 or S-3
Registrants.......................................... *
Item 13. Incorporation of Certain Information by Reference...... *
Item 14. Information with Respect to Registrants Other than S-2
or S-3 Registrants................................... *
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
Item 15. Information with Respect to S-3 Companies.............. Summary; The Companies; Available
Information; Incorporation of
Certain Documents by Reference
Item 16. Information with Respect to S-2 or S-3 Companies....... *
Item 17. Information with Respect to Companies Other than S-2 or
S-3 Companies........................................ *
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
HEADING IN PROSPECTUS/
ITEM NO. FORM S-4 CAPTION JOINT PROXY STATEMENT
- --------- ------------------------------------------------------- -------------------------------------
<S> <C> <C>
D. VOTING AND MANAGEMENT INFORMATION
Item 18. Information if Proxies, Consents or Authorizations Are
to be Solicited...................................... Summary; The Merger; The Companies;
The Meetings of Stockholders of
SPG; The Meeting of Shareholders of
DRC; The Proposed Merger and
Related Matters
Item 19. Information if Proxies, Consents or Authorizations Are
Not to be Solicited or in an Exchange Offer.......... *
</TABLE>
- ---------------
* Omitted because inapplicable or answer is in the negative.
<PAGE> 4
SIMON PROPERTY GROUP, INC.
115 WEST WASHINGTON STREET
INDIANAPOLIS, INDIANA 46204
June , 1996
To the Stockholders of Simon Property Group, Inc.:
In March of this year, Simon Property Group, Inc. ("SPG") announced its
intention to complete a merger with DeBartolo Realty Corporation ("DRC") in
order to create what we believe will be the largest developer, owner and
operator of super-regional and regional shopping centers in the country. Due to
the significance of this event, we advised each of you that we intended to
postpone our annual meeting of stockholders originally scheduled for May 15,
1996. We did this in order to allow us sufficient time to provide you with
additional information regarding the merger and permit any stockholder vote
required for the merger to be held at a convenient time and place in conjunction
with the annual meeting.
Accordingly, you are cordially invited to attend a special meeting of
stockholders of SPG which will be held at the Indianapolis Hyatt Regency, One
South Capitol Avenue, Indianapolis, Indiana on August 6, 1996, at 10:00 a.m.,
Indianapolis time (the "SPG Special Meeting"). At the SPG Special Meeting, we
will seek your approval of a single proposal (the "SPG Proposal") calling for
the adoption of an Agreement and Plan of Merger, dated as of March 26, 1996, as
amended (the "Merger Agreement"), among SPG, DRC and Day Acquisition Corp., an
Ohio corporation and subsidiary of SPG ("Sub"). Pursuant to the Merger
Agreement, Sub will merge with and into DRC and the shareholders of DRC will
become stockholders of SPG. A key element of the SPG Proposal is to increase the
size of the Board of Directors of SPG from nine (9) to thirteen (13) members,
including an increase in the number of independent directors from five (5) to
seven (7). We view the increase in the size of the Board as a positive element
of the SPG Proposal and would urge that you give it favorable consideration.
The Board of Directors of SPG, including its independent directors, has
concluded that the SPG Proposal is fair to, and in the best interests of, SPG
and its stockholders and that it is in the best interests of SPG and its
stockholders to adopt the Amended SPG Charter (as described in the accompanying
Prospectus/Joint Proxy Statement), which provides for, among other things, an
increase in the size of its Board of Directors from nine to thirteen members,
and to adopt the Amended SPG By-laws. The SPG Board of Directors has obtained an
opinion from its independent financial advisor, Merrill Lynch & Co., to the
effect that, at the date of such opinion and based upon and subject to certain
matters stated therein, the Exchange Ratio (as such term is defined in the
accompanying Prospectus/Joint Proxy Statement) is fair to SPG from a financial
point of view. Accordingly, the Board of Directors recommends that you vote FOR
the SPG Proposal.
You are also cordially invited to attend the 1996 annual meeting of
stockholders of SPG (the "SPG Annual Meeting"), which will be held at the same
location as, and immediately following, the SPG Special Meeting.
At the SPG Annual Meeting, you will be asked to elect five (5) directors,
ratify the appointment of SPG's independent accountants and transact such other
business as may properly come before the SPG Annual Meeting. The five directors
elected at the SPG Annual Meeting will serve only until such time as the merger
is completed, following which, the Board composition will be changed as
described in the attached materials.
THE ACCOMPANYING NOTICE OF SPECIAL AND ANNUAL MEETINGS OF STOCKHOLDERS AND
PROSPECTUS/JOINT PROXY STATEMENT, AND THE ANNEXES THERETO, PROVIDE DETAILED
INFORMATION CONCERNING MATTERS TO BE CONSIDERED AT THE SPECIAL AND ANNUAL
MEETINGS, THE REASONS FOR YOUR BOARD OF DIRECTORS' RECOMMENDATION OF THE MERGER
AND THE MERGER AGREEMENT AND CERTAIN ADDITIONAL INFORMATION, INCLUDING, WITHOUT
LIMITATION, INFORMATION ON BOTH SPG AND DRC. YOU ARE URGED TO CAREFULLY CONSIDER
ALL OF THE INFORMATION IN THE ACCOMPANYING MATERIAL. STOCKHOLDERS OF SPG WILL
NOT BE REQUIRED TO EXCHANGE THEIR STOCK CERTIFICATES IN CONNECTION WITH THIS
MERGER.
It is important that your shares of SPG common stock be represented at the
SPG Special Meeting and the SPG Annual Meeting, regardless of the number of
shares you hold. Therefore, please sign, date and return your proxy cards as
soon as possible, whether or not you plan to attend the SPG Special Meeting or
the SPG Annual Meeting. This will not prevent you from voting your shares in
person if you subsequently choose to attend the SPG Special Meeting and/or the
SPG Annual Meeting.
Very truly yours,
David Simon
President and Chief Executive Officer
2
<PAGE> 5
DEBARTOLO REALTY CORPORATION
7655 MARKET STREET
YOUNGSTOWN, OHIO 44513
June , 1996
To the Shareholders of DeBartolo Realty Corporation:
In March of this year, DeBartolo Realty Corporation ("DRC") announced its
proposed merger (the "Merger") with a subsidiary of Simon Property Group, Inc.
("SPG"), pursuant to which DRC would become a subsidiary of SPG. The Merger
would create, what DRC's Board of Directors believes will be, the largest
developer, owner and operator of super-regional and regional malls in North
America with one of the strongest management teams in the industry. DRC's Board
of Directors believes that the Merger represents an attractive opportunity and
recommends that you vote FOR adoption of the Merger Agreement and approval of
the Merger.
Accordingly, you are cordially invited to attend a Special Meeting of
Shareholders of DRC to be held at its corporate offices at 7655 Market Street,
Youngstown, Ohio, on August 6, 1996 at 11:00 a.m., Youngstown time.
At the Special Meeting you will be asked to consider a proposal to adopt an
Agreement and Plan of Merger, dated as of March 26, 1996, as amended (the
"Merger Agreement"), providing for the Merger and to authorize the Merger and
the other transactions contemplated by the Merger Agreement. The consummation of
the Merger will result in, among other things, DRC becoming a subsidiary of SPG
and the exchange of the outstanding DRC Common Stock for newly issued SPG Common
Stock, all as more fully described in the attached Prospectus/Joint Proxy
Statement.
ADDITIONAL INFORMATION REGARDING THE MERGER AND THE MERGER AGREEMENT IS SET
FORTH IN THE ACCOMPANYING PROSPECTUS/JOINT PROXY STATEMENT AND THE ANNEXES
THERETO, WHICH YOU ARE URGED TO READ CAREFULLY IN THEIR ENTIRETY. PLEASE DO NOT
SEND ANY SHARE CERTIFICATES AT THIS TIME.
DRC's Board of Directors has carefully considered the terms and conditions
of the proposed Merger and has determined that the terms of the Merger Agreement
and the transactions contemplated thereby are fair to, and in the best interests
of, DRC and its shareholders. In addition, in connection with its approval of
the transaction with SPG, the Board of Directors of DRC received opinions from
its financial advisors, Morgan Stanley & Co. Incorporated and The Blackstone
Group L.P., to the effect that, as of the date of such opinions and based upon
and subject to certain matters stated therein, the consideration to be received
by the public holders of DRC Common Stock is fair from a financial point of view
to such holders. Accordingly, your Board of Directors recommends that you vote
FOR the adoption of the Merger Agreement and the authorization of the Merger and
the other transactions contemplated by the Merger Agreement.
In view of the importance of the action to be taken at this Special Meeting
of Shareholders of DRC, we urge you to review carefully the accompanying Notice
of Special Meeting of Shareholders and the Prospectus/Joint Proxy Statement,
which also includes information on DRC and SPG. Whether or not you expect to
attend the Special Meeting, please complete, sign and date the enclosed proxy
and return it in the accompanying envelope in order that the necessary quorum
may be assured. Any proxy may be revoked in the manner described in the
accompanying proxy statement at any time before it has been voted at the Special
Meeting.
Very truly yours,
EDWARD J. DeBARTOLO, JR.
Chairman of the Board
<PAGE> 6
SIMON PROPERTY GROUP, INC.
115 WEST WASHINGTON STREET
INDIANAPOLIS, INDIANA 46204
NOTICE OF SPECIAL AND ANNUAL MEETINGS OF STOCKHOLDERS
To the Stockholders of Simon Property Group, Inc.:
Please take notice that a Special Meeting (the "SPG Special Meeting") of
stockholders of Simon Property Group, Inc. ("SPG") will be held at the
Indianapolis Hyatt Regency, One South Capitol Avenue, Indianapolis, Indiana, on
August 6, 1996, at 10:00 a.m., Indianapolis time.
At the SPG Special Meeting, you will be asked to consider a single proposal
(the "SPG Proposal") for which SPG is seeking approval by at least 80% of the
aggregate votes entitled to be cast by holders of the outstanding SPG Common
Stock, Class B Common Stock and Series A Preferred Stock (the "Equity Stock"),
voting together as a single class (the "Required Vote"), and a majority of the
votes entitled to be cast by holders of Class B Common Stock, voting separately.
The approval by the Required Vote of the SPG Proposal will have the following
effect: (i) the approval of the Agreement and Plan of Merger, dated as of March
26, 1996, as amended (the "Merger Agreement"), among SPG, Day Acquisition Corp.
(a subsidiary of SPG) ("Sub") and DeBartolo Realty Corporation ("DRC"), pursuant
to which Sub shall merge with and into DRC and SPG shall issue SPG Common Stock
to DRC shareholders in exchange for their common shares of DRC, such that DRC
will become a subsidiary of SPG; and (ii) pursuant to the Merger Agreement and
subject to completion of the transactions contemplated thereby, the approval of
certain amendments to the Charter and By-laws of SPG providing for, among other
things, a change in the name of SPG, an increase in the amount of authorized
common stock, the creation of a new class of common stock, to be designated
Class C Common Stock, all outstanding shares of which will be issued to The
Edward J. DeBartolo Corporation ("EJDC") (a corporation controlled by the
DeBartolo family), which shares will entitle EJDC to elect two members of the
Board of Directors of the Company, the expansion of the Board of Directors from
nine to 13 persons and the election of a slate of 13 persons thereto, the
adoption of a limited system of classified terms for directors ending in 1999
and the changing of certain limits on the maximum ownership interest that may be
held by certain stockholders, all as more fully described in the accompanying
Prospectus/Joint Proxy Statement.
The approval of the SPG Proposal by less than the Required Vote but by a
majority of the aggregate votes entitled to be cast by holders of the
outstanding Equity Stock, voting together as a single class, will have the
following effect: (i) the approval of the Merger Agreement; (ii) the approval of
amendments to the Charter providing for a change in the name of SPG, an increase
in the amount of authorized common stock and the changing of certain limits to
the maximum ownership interest that may be held by certain stockholders; and
(iii) the election of a slate of nine persons to the Board of Directors whose
service will commence at the effective time of the Merger. In addition, a set of
amendments to the By-laws of SPG different from those contained in the SPG
Proposal, having been previously approved by the Board of Directors, will become
effective without a stockholder vote.
The 1996 Annual Meeting (the "SPG Annual Meeting" and, together with the
SPG Special Meeting, the "SPG Meetings") of stockholders of SPG will be held
immediately following the SPG Special Meeting, at the same location as the SPG
Special Meeting, to consider the following proposals:
(1) To elect five directors to serve until the earlier to occur of (i)
the effective time of the Merger and (ii) the next annual meeting of
stockholders or until their successors are elected and have qualified (such
directors, if they are not to serve on the Board of Directors following the
Merger, will cease to hold office as directors upon such effective time);
(2) To approve the appointment of Arthur Andersen LLP as independent
accountants for SPG for 1996; and
(3) To transact such other business as may come before the SPG Annual
Meeting.
Only stockholders of record at the close of business on June 21, 1996 will
be entitled to vote at the SPG Meetings or any adjournment or postponement
thereof.
<PAGE> 7
WE CORDIALLY INVITE YOU TO ATTEND THE SPG MEETINGS BUT REGARDLESS OF
WHETHER YOU PLAN TO BE PRESENT, PLEASE PROMPTLY DATE, MARK, SIGN AND MAIL THE
ENCLOSED PROXY IN THE ENVELOPE PROVIDED, WHICH REQUIRES NO ADDITIONAL POSTAGE IF
MAILED IN THE UNITED STATES. ANY STOCKHOLDER WHO EXECUTES AND DELIVERS A PROXY
MAY REVOKE THE AUTHORITY GRANTED THEREUNDER AT ANY TIME PRIOR TO ITS USE BY
GIVING WRITTEN NOTICE OF SUCH REVOCATION TO THE UNDERSIGNED AT 115 WEST
WASHINGTON STREET, INDIANAPOLIS, INDIANA 46204, BY EXECUTING AND DELIVERING A
PROXY BEARING A LATER DATE OR BY ATTENDING AND VOTING AT THE SPG MEETINGS. YOUR
VOTE IS IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN.
Dated: June , 1996.
By Order of the Board of Directors
of Simon Property Group, Inc.
James M. Barkley, Secretary
2
<PAGE> 8
DEBARTOLO REALTY CORPORATION
7655 MARKET STREET
YOUNGSTOWN, OHIO 44513
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 6, 1996
------------------------
To the Shareholders of DeBartolo Realty Corporation:
PLEASE TAKE NOTICE that a Special Meeting of Shareholders of DeBartolo
Realty Corporation, an Ohio corporation ("DRC"), will be held at DRC's corporate
offices at 7655 Market Street, Youngstown, Ohio, on August 6, 1996 at 11:00
a.m., Youngstown time, for the following purposes:
1. To consider and vote on a proposal (the "Merger Proposal") to adopt
the Agreement and Plan of Merger, dated as of March 26, 1996, as amended
(the "Merger Agreement"), by and among Simon Property Group, Inc., a
Maryland corporation ("SPG"), Day Acquisition Corp., a subsidiary of SPG
("Sub"), and DRC, providing for the merger (the "Merger") of Sub with and
into DRC and to authorize the Merger and certain related transactions. The
consummation of the Merger and such related transactions will result in,
among other things, DRC's becoming a subsidiary of SPG and the exchange of
the outstanding DRC Common Stock for newly issued SPG Common Stock, all as
more fully described in the accompanying Prospectus/Joint Proxy Statement.
A copy of the Merger Agreement is attached as Annex I to the accompanying
Prospectus/Joint Proxy Statement.
2. To transact such other business as may properly come before the
meeting, or any adjournment or postponement thereof.
The Board of Directors of DRC has fixed the close of business on June 21,
1996, as the record date for the determination of the holders of DRC Common
Stock entitled to notice of, and to vote at, the meeting and adjournments or
postponements thereof. The Merger Proposal requires the affirmative vote of the
holders of two-thirds of the outstanding shares of DRC Common Stock entitled to
vote at the meeting. DRC shareholders will be entitled to dissenters' appraisal
rights under Ohio law in connection with the Merger.
Information regarding the proposed Merger, the Merger Agreement and related
matters is contained in the accompanying Prospectus/Joint Proxy Statement and
the annexes thereto, which are incorporated by reference herein and form a part
of this Notice.
WE CORDIALLY INVITE YOU TO ATTEND THE DRC SPECIAL MEETING BUT REGARDLESS OF
WHETHER YOU PLAN TO BE PRESENT, PLEASE PROMPTLY DATE, MARK, SIGN AND MAIL THE
ENCLOSED PROXY IN THE ENVELOPE PROVIDED, WHICH REQUIRES NO ADDITIONAL POSTAGE IF
MAILED IN THE UNITED STATES. ANY SHAREHOLDER WHO EXECUTES AND DELIVERS THE PROXY
MAY REVOKE THE AUTHORITY GRANTED THEREUNDER AT ANY TIME PRIOR TO ITS USE BY
GIVING WRITTEN NOTICE OF SUCH REVOCATION TO THE UNDERSIGNED AT 7655 MARKET
STREET, YOUNGSTOWN, OHIO 44513, BY EXECUTING AND DELIVERING A PROXY BEARING A
LATER DATE OR BY ATTENDING AND VOTING AT THE DRC SPECIAL MEETING. YOUR VOTE IS
IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN.
By Order of the Board of Directors
of DeBartolo Realty Corporation
Kim A. Rieck
Secretary
Youngstown, Ohio
June , 1996
PLEASE DO NOT SEND ANY SHARE CERTIFICATES AT THIS TIME.
<PAGE> 9
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS/JOINT PROXY STATEMENT SHALL NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR
SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH
OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS/JOINT PROXY STATEMENT
SIMON PROPERTY GROUP, INC. [LOGOS]
AND
DEBARTOLO REALTY CORPORATION
PROSPECTUS/JOINT PROXY STATEMENT
SPECIAL AND ANNUAL MEETINGS OF STOCKHOLDERS OF
SIMON PROPERTY GROUP, INC.
EACH TO BE HELD ON AUGUST 6, 1996
SPECIAL MEETING OF SHAREHOLDERS OF
DEBARTOLO REALTY CORPORATION
TO BE HELD ON AUGUST 6, 1996
This Prospectus/Joint Proxy Statement relates to shares of common stock,
par value $0.0001 per share ("SPG Common Stock"), of Simon Property Group, Inc.,
a Maryland corporation ("SPG"), that may be issued pursuant to an Agreement and
Plan of Merger, dated as of March 26, 1996, as amended (the "Merger Agreement"),
among SPG, Day Acquisition Corp., an Ohio corporation and a subsidiary of SPG
("Sub"), and DeBartolo Realty Corporation, an Ohio corporation ("DRC"). The
Merger Agreement provides for the merger of Sub with and into DRC (the "Merger")
and for the conversion of each outstanding common share, par value $0.01 per
share, of DRC ("DRC Common Stock"), other than shares as to which dissenters'
rights have been perfected, into the right to receive the "Merger
Consideration," consisting of sixty-eight one-hundredths (0.68) of a share of
SPG Common Stock with respect to each share of DRC Common Stock (the "Exchange
Ratio"), plus a cash payment in lieu of any fraction of a share of SPG Common
Stock, as more fully described in this Prospectus/Joint Proxy Statement.
This Prospectus/Joint Proxy Statement is being furnished to (i) the
shareholders of DRC in connection with the solicitation of proxies by the Board
of Directors of DRC from holders of outstanding shares of DRC Common Stock, for
use at the special meeting of shareholders of DRC scheduled to be held on August
6, 1996 at DRC's corporate offices at 7655 Market Street, Youngstown, Ohio at
11:00 a.m., Youngstown time, and at any adjournment or postponement thereof and
(ii) the stockholders of SPG in connection with the solicitation of proxies by
the Board of Directors of SPG from holders of outstanding shares of SPG Common
Stock, for use at the special and annual meetings of stockholders of SPG and at
any adjournments or postponements thereof. The special meeting of stockholders
of SPG is scheduled to be held on August 6, 1996, at the Indianapolis Hyatt
Regency, One South Capitol Avenue, Indianapolis, Indiana at 10:00 a.m.,
Indianapolis time, and the annual meeting will be held at the same location
immediately following the special meeting.
SPG has filed a registration statement on Form S-4 (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
with the Securities and Exchange Commission (the "Commission") covering up to
39,714,023 shares of SPG Common Stock to be issued in connection with the
Merger. This Prospectus/Joint Proxy Statement also constitutes the Prospectus of
SPG filed as part of the Registration Statement with respect to (i) the shares
of SPG Common Stock to be issued in connection with the Merger and (ii) the
offering and resale from time to time of up to 4,315,970 of such shares by BJS
Capital Partners L.P.
SEE "RISK FACTORS" ON PAGE 29 FOR CERTAIN INFORMATION THAT SHOULD BE
CONSIDERED BY THE SPG STOCKHOLDERS AND DRC SHAREHOLDERS.
This Prospectus/Joint Proxy Statement is first being mailed to stockholders
of SPG and shareholders of DRC on or about June , 1996.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS/JOINT PROXY STATEMENT.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The date of this Prospectus/Joint Proxy Statement is June , 1996.
<PAGE> 10
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in the Summary and under the captions "RISK FACTORS,"
"THE PROPOSED MERGER AND RELATED MATTERS--Recommendation of the SPG Board of
Directors; Reasons for the Merger," "--Recommendation of the DRC Board of
Directors; Reasons for the Merger," "--Opinion of Financial Advisor to SPG" and
"--Opinions of Financial Advisors to DRC" and elsewhere in this Prospectus/Joint
Proxy Statement constitute "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995 (the "Reform Act"). Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements of
SPG, DRC or the Simon DeBartolo Group (as defined below) or industry results to
be materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
among others, the following: general economic and business conditions, which
will, among other things, affect demand for retail space or retail goods,
availability and creditworthiness of prospective tenants, lease rents and the
availability of financing; adverse changes in the real estate markets including,
among other things, competition with other companies; risks of real estate
development and acquisition; governmental actions and initiatives;
environmental/safety requirements; and other changes and factors referenced in
this Prospectus/Joint Proxy Statement. See "RISK FACTORS."
AVAILABLE INFORMATION
SPG has filed with the Commission a Registration Statement on Form S-4 (the
"Registration Statement," which term shall include all amendments, exhibits,
annexes and schedules thereto) pursuant to the Securities Act, and the rules and
regulations promulgated thereunder, covering the SPG Common Stock to be issued
by it in connection with the Merger. This Prospectus/Joint Proxy Statement does
not contain all of the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission. For further information, reference is hereby made to the
Registration Statement. Statements made in this Prospectus/Joint Proxy Statement
as to the contents of any contract, agreement or other document referred to are
not necessarily complete. With respect to each such contract, agreement or other
document filed as an exhibit to the Registration Statement or incorporated by
reference herein, reference is made to the exhibit for a more complete
description of the matters involved, and each such statement shall be deemed
qualified in its entirety by such reference. The information in this
Prospectus/Joint Proxy Statement concerning SPG and DRC has been furnished by
SPG and DRC, respectively.
SPG and DRC are each subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith file reports, proxy and information statements and other
information with the Commission. Such reports and other information can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth St., N.W., Washington, D.C.
20549, and at the Regional Offices of the Commission at 7 World Trade Center,
13th Floor, New York, New York 10048 and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such material can be
obtained by mail from the Public Reference Section of the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. The Commission maintains a World Wide Web site
(http://www.sec.gov) that contains such material regarding issuers that file
electronically with the Commission. This Registration Statement has been so
filed and may be obtained at such site.
In addition, the SPG Common Stock and DRC Common Stock are listed on the
New York Stock Exchange ("NYSE"), and SPG and DRC are required to file reports,
proxy and information statements and other information with the NYSE. These
documents can be inspected at the principal office of the NYSE, 11 Wall Street,
New York, New York 10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
THIS PROSPECTUS/JOINT PROXY STATEMENT INCORPORATES SPG AND DRC DOCUMENTS BY
REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. DOCUMENTS OF SPG
INCORPORATED HEREIN BY REFERENCE ARE AVAILABLE UPON REQUEST FROM JAMES M.
BARKLEY, SECRETARY, SIMON PROPERTY GROUP, INC., NATIONAL CITY CENTER, 115 WEST
WASHINGTON STREET, INDIANAPOLIS, INDIANA 46204, (317) 636-1600. DOCUMENTS OF DRC
INCORPORATED HEREIN BY REFERENCE ARE AVAILABLE UPON REQUEST FROM KIM A. RIECK,
SECRETARY, DEBARTOLO REALTY CORPORATION, 7655 MARKET STREET, YOUNGSTOWN, OHIO
44513, (330) 758-7292. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY
REQUESTS SHOULD BE MADE NO LATER THAN FIVE BUSINESS DAYS PRIOR TO THE DATE OF
THE SPG MEETINGS AND THE DRC SPECIAL MEETING (EACH AS DEFINED BELOW), AS
APPLICABLE.
<PAGE> 11
The following documents of SPG filed with the Commission (File No. 1-12618)
are incorporated herein by reference:
1. SPG's Annual Report on Form 10-K for the year ended December 31,
1995, as amended by Form 10-K/A-1 (filed on April 29, 1996);
2. SPG's Quarterly Report on Form 10-Q for the calendar quarter ended
March 31, 1996, as amended by Form 10-Q/A-1 (filed on June 27,
1996); and
3. SPG's Current Report on Form 8-K dated March 26, 1996.
The following documents of DRC filed with the Commission (File No. 1-12558)
are incorporated herein by reference:
1. DRC's Annual Report on Form 10-K for the year ended December 31,
1995, as amended by Amendment No. 1 thereto on Form 10-K/A (filed
on April 29, 1996) and as further amended by Amendment No. 2
thereto on Form 10-K/A (filed on June 26, 1996);
2. DRC's Quarterly Report on Form 10-Q for the calendar quarter ended
March 31, 1996, as amended by Amendment No. 1 thereto on Form
10-Q/A (filed on June 26, 1996); and
3. DRC's Current Report on Form 8-K dated March 26, 1996.
In addition, all reports and other documents subsequently filed by SPG and
DRC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to
the date of the SPG Meetings and the DRC Special Meeting shall be deemed to be
incorporated by reference herein and to be a part hereof from the date of filing
of such reports and documents. Any statement contained in a document
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus/Joint Proxy Statement to the extent that a
statement contained in this Prospectus/Joint Proxy Statement modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed to constitute a part of this Prospectus/Joint Proxy Statement
except as so modified or superseded.
SPG AND DRC WILL PROVIDE, WITHOUT CHARGE, TO EACH PERSON WHO RECEIVES THIS
PROSPECTUS/JOINT PROXY STATEMENT, UPON THE WRITTEN OR ORAL REQUEST OF SUCH
PERSON, A COPY OF SUCH DOCUMENTS INCORPORATED HEREIN BY REFERENCE (NOT INCLUDING
EXHIBITS TO SUCH INFORMATION UNLESS THE EXHIBITS THEMSELVES ARE SPECIFICALLY
INCORPORATED BY REFERENCE). REQUESTS FOR DOCUMENTS SHOULD BE MADE AS SPECIFIED
ABOVE.
<PAGE> 12
TABLE OF CONTENTS
<TABLE>
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SUMMARY.............................................. 1
General............................................ 1
The Companies...................................... 1
Recommendations of the Boards of Directors;
Reasons for the Merger........................... 2
Opinions of Financial Advisors..................... 3
Structure of SPG, DRC and the Simon DeBartolo
Group............................................ 4
Governance of the Simon DeBartolo Group After the
Merger........................................... 8
SPG Stockholders Meetings; DRC Shareholders
Meeting.......................................... 8
The Merger......................................... 9
Amendments to SPG's Charter and By-laws............ 11
Certain Other Transactions and Agreements.......... 11
New York Stock Exchange Listing of SPG Common
Stock............................................ 12
Regulatory Approval................................ 12
Federal Income Tax Consequences of the Merger...... 12
Dissenters' Rights................................. 13
Comparative Rights of Shareholders of DRC and
Stockholders of SPG.............................. 13
The Amended Operating Partnership Agreement and the
Existing SPG Partnership Agreement and
DRC Partnership Agreement........................ 13
Historical and Pro Forma Per Share Information..... 14
Dividend and Distribution Policies................. 14
Risk Factors....................................... 14
Interests of Certain Persons in the Merger and the
Other Transactions............................... 15
Summary Pro Forma Combined and Selected Historical
Financial Data................................... 16
RISK FACTORS......................................... 29
Conflicts of Interest Related to the Merger........ 29
Risks Associated with Failure to Obtain Required
Vote............................................. 30
Potential Adverse Effects of Combining the
Companies........................................ 30
Conflicts of Interest Related to Operations;
Failure to Enforce Terms of Partnership Agreement
and
Other Agreements................................. 30
Possible Adverse Effects on Stock Prices Arising
from Shares Available for Future Sale............ 30
Increased Indebtedness of Simon DeBartolo Group as
Compared with SPG; No Limitation on Further
Indebtedness..................................... 31
Issuance of Preferred Stock by the Simon DeBartolo
Group and Issuance of Preferred Units by the
Operating Partnership and the SPG Operating
Partnership...................................... 32
Federal Income Tax Consequences.................... 32
Certain Tax Risks.................................. 32
Real Estate Investment Risks....................... 33
Limited Control with Respect to Certain
Properties....................................... 33
Limits on Change of Control; Dissenters' Rights.... 34
Dependence on Key Personnel........................ 34
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Impact of Interest Rates and Other Factors on
Stock Price...................................... 34
Termination Payments if Merger Fails to Occur...... 34
COMPARATIVE PER SHARE INFORMATION.................... 35
Comparative Market Data............................ 35
Historical and Pro Forma Per Share Information..... 36
CAPITALIZATION....................................... 37
THE MEETINGS OF STOCKHOLDERS OF SPG.................. 38
Introduction....................................... 38
Date, Time and Place of Meetings................... 38
Matters to be Considered at the Meetings........... 38
Record Date and Vote Required...................... 38
Proxy.............................................. 39
Solicitation of Proxies............................ 39
Irrevocable Proxy.................................. 40
Other Matters...................................... 40
THE MEETING OF SHAREHOLDERS OF DRC................... 40
Introduction....................................... 40
Date, Time and Place of Meeting.................... 40
Matters to be Considered at the Meeting............ 40
Record Date and Vote Required...................... 40
Proxy.............................................. 41
Solicitation of Proxies............................ 41
Dissenters' Rights................................. 41
BJS Irrevocable Proxy.............................. 41
Other Matters...................................... 41
THE PROPOSED MERGER AND RELATED MATTERS.............. 42
Background of the Merger........................... 42
Recommendation of the SPG Board of Directors;
Reasons for the Merger........................... 44
Recommendation of the DRC Board of Directors;
Reasons for the Merger........................... 46
Opinion of Financial Advisor to SPG................ 47
Opinions of Financial Advisors to DRC.............. 50
Dissenters' Rights................................. 56
THE MERGER........................................... 57
General............................................ 57
Effects of the Merger.............................. 57
Effective Time of the Merger....................... 57
Terms of the Merger................................ 57
Exchange of DRC Common Stock Certificates.......... 57
Dissenting Shares.................................. 59
Conversion of Sub Common Stock..................... 59
Conditions to the Merger; Termination;
Waiver and Amendment............................. 59
No Solicitation; Board Action; Fees and Expenses... 60
Conduct of SPG's and DRC's Businesses Pending
Completion of the Merger......................... 61
Certain Additional Mutual Covenants................ 63
Certain Additional Covenants of SPG................ 63
Certain Additional Covenants of DRC................ 64
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Certain Provisions Relating to Employee Benefits
and Incentive Plans.............................. 64
Representations and Warranties..................... 65
New York Stock Exchange Listing of SPG Common
Stock............................................ 65
Exchange Act Reporting............................. 65
Federal Income Tax Consequences to Holders of DRC
Common Stock..................................... 65
Opinions of SPG's Counsel.......................... 66
Federal Income Tax Considerations Relating to the
Simon DeBartolo Group and the Surviving
Subsidiary Corporation........................... 67
Accounting Treatment............................... 77
Regulatory Approval................................ 77
Certain Transactions and Agreements Relating to the
Merger........................................... 77
Structure of the Simon DeBartolo Group............. 79
Benefits of the Merger and the Other Transactions
to the Simons and the DeBartolos................. 80
AMENDMENTS TO SPG'S CHARTER AND
BY-LAWS............................................ 81
Name............................................... 81
Size of the SPG Board of Directors................. 81
Class C Common Stock............................... 83
Restrictions on Transfer........................... 83
Authorized Capital................................. 84
Amended SPG By-laws................................ 84
Recommendation of the SPG Board of Directors....... 84
THE COMPANIES........................................ 85
SPG................................................ 85
DRC................................................ 86
POLICIES OF THE SIMON DeBARTOLO GROUP................ 86
Dividend and Distribution Policies................. 86
Investment Policies................................ 87
Financing Policies................................. 88
Conflicts of Interest Policies..................... 89
Policies with Respect to Certain Other
Activities....................................... 89
MANAGEMENT OF SPG AND THE SIMON DeBARTOLO GROUP
BEFORE AND AFTER THE MERGER........................ 90
Board of Directors of the Simon DeBartolo Group.... 90
Senior Management of the Simon DeBartolo Group..... 92
Employment Agreement............................... 92
Management of SPG Prior to the Merger.............. 93
CERTAIN AGREEMENTS................................... 94
Stockholders Agreement............................. 94
The Agreements of Limited Partnership.............. 96
The Registration Rights Agreements................. 100
Employment Agreement............................... 101
DISTRIBUTION OF SHARES BY BJS........................ 101
CERTAIN ALTERNATIVE GOVERNANCE ARRANGEMENTS AND
RELATED MATTERS
IF THE REQUIRED VOTE IS NOT OBTAINED............... 102
Board of Directors of the Simon DeBartolo Group if
the Required Vote is not Obtained................ 102
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Provisions of the Merger Agreement Applicable if
the Required Vote is not Obtained................ 103
Alternative Amendments to SPG's Charter and
By-laws.......................................... 103
Certain Provisions of the Stockholders Agreement... 104
Certain Benefits of the Merger to the Simons and
the DeBartolos if the Required Vote is not
Obtained......................................... 105
FEDERAL SECURITIES LAW CONSEQUENCES.................. 105
PRO FORMA COMBINED AND SELECTED HISTORICAL FINANCIAL
DATA............................................... 107
Simon DeBartolo Group Pro Forma Combined Financial
Data............................................. 107
Summary Historical Financial Data of SPG........... 110
Summary Historical Financial Data of DRC........... 115
Simon DeBartolo Group Pro Forma Combined Condensed
Financial Information (Unaudited)................ 119
DESCRIPTION OF SPG'S CAPITAL STOCK................... 126
General............................................ 126
SPG Common Stock and Class B Common Stock.......... 126
Proposed Class C Common Stock...................... 127
Series A Preferred Stock........................... 127
Restrictions on Transfer........................... 128
Transfer Agent and Registrar....................... 130
CERTAIN PROVISIONS OF SPG'S CHARTER AND BY-LAWS AND
OF MARYLAND LAW.................................... 130
Evaluation of Business Combinations and Changes in
Control.......................................... 130
Additional Classes and Series of Capital Stock..... 130
Number of Directors; Filling Vacancies; Removal.... 131
Stockholder Meetings............................... 131
Advance Notice Provisions for Stockholder
Nominations and Stockholder Proposals............ 131
Director Action.................................... 132
Certain Maryland Statutes.......................... 132
SIGNIFICANT DIFFERENCES BETWEEN THE CORPORATE LAWS OF
OHIO AND MARYLAND AND COMPARISON OF RIGHTS OF
HOLDERS
OF DRC COMMON STOCK AND SPG COMMON STOCK........... 133
General............................................ 133
Changes in Control................................. 133
Removal of Directors............................... 133
Indemnification and Liability of Directors and
Officers......................................... 134
Certain Voting Rights.............................. 135
Amendment of Articles of Incorporation............. 136
Amendment of By-Laws and Regulations............... 136
Special Meetings................................... 136
Stockholders' Action Without Meeting............... 136
Stockholder Nominations and Proposals.............. 137
Stockholders' Inspection Rights.................... 137
Dissenters' Rights................................. 137
Investment Policies................................ 137
Redemption and Restrictions on Transfers........... 137
SPG ANNUAL MEETING MATTERS........................... 138
Security Ownership of Certain Beneficial Owners and
Management....................................... 138
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Election of Directors.............................. 139
Executive Compensation............................. 142
Compensation Committee Interlocks and Insider
Participation.................................... 144
Report of Compensation Committee on Executive
Compensation..................................... 144
Performance Graph.................................. 146
Certain Transactions............................... 146
Ratification of the Appointment of Independent
Accountants...................................... 147
SPG Stockholder Proposals.......................... 147
EXPERTS.............................................. 148
SPG................................................ 148
DRC................................................ 148
LEGAL MATTERS........................................ 148
GLOSSARY............................................. 149
ANNEX I AGREEMENT AND PLAN OF MERGER, AS AMENDED
ANNEX II OPINION OF MERRILL LYNCH
ANNEX III OPINION OF MORGAN STANLEY
ANNEX IV OPINION OF BLACKSTONE
ANNEX V SECTION OF THE OHIO STATUTE RELATING TO
DISSENTERS' RIGHTS
ANNEX VI PROPOSED AMENDED AND RESTATED CHARTER OF
SPG
ANNEX VII PROPOSED ALTERNATIVE AMENDED CHARTER OF SPG
ANNEX VIII PROPOSED AMENDED AND RESTATED BY-LAWS OF
SPG
</TABLE>
iii
<PAGE> 15
SUMMARY
The following summarizes certain information contained or incorporated by
reference elsewhere in this Prospectus/Joint Proxy Statement. This summary is
not intended to be complete and is qualified in its entirety by reference to the
more detailed information appearing or incorporated by reference elsewhere
herein. As used herein, (i) the term "SPG" includes SPG and, where the context
indicates, entities owned or controlled by SPG, including, without limitation,
the SPG Operating Partnership (as defined below); (ii) the term "Simon DeBartolo
Group" refers to SPG following the Merger, including, where the context
indicates, entities owned or controlled by the Simon DeBartolo Group, including,
without limitation, the Surviving Subsidiary Corporation, the Operating
Partnership and the SPG Operating Partnership (each as defined below); and (iii)
the term "DRC" includes DRC and, where the context indicates, entities owned or
controlled by DRC, including, without limitation, the DRC Operating Partnership
(as defined below) and DeBartolo Capital Partnership. Stockholders of SPG and
shareholders of DRC are urged to review carefully this Prospectus/Joint Proxy
Statement, each of the annexes hereto and the documents incorporated herein by
reference. See "GLOSSARY" for the definition of certain capitalized terms used
in this Prospectus/Joint Proxy Statement.
GENERAL
This Prospectus/Joint Proxy Statement relates to the special meeting of
stockholders (the "SPG Special Meeting") and the annual meeting of stockholders
(the "SPG Annual Meeting" and, together with the SPG Special Meeting, the "SPG
Meetings") of Simon Property Group, Inc., a Maryland corporation ("SPG"), and
the special meeting of shareholders (the "DRC Special Meeting") of DeBartolo
Realty Corporation, an Ohio corporation ("DRC"). At the respective special
meetings of SPG and DRC, among other things, the SPG stockholders and the DRC
shareholders will each consider a proposal involving the combination of SPG and
DRC through the proposed merger (the "Merger") of Day Acquisition Corp., an Ohio
corporation and a subsidiary of SPG ("Sub"), with and into DRC. Following the
Merger, SPG will be renamed Simon DeBartolo Group, Inc. and will be referred to
herein as the "Simon DeBartolo Group." At the SPG Special Meeting, as part of
the Merger proposal, the stockholders of SPG will also be asked to consider an
amendment to the Charter and By-laws of SPG (respectively, the "SPG Charter" and
"SPG By-laws") to become effective upon consummation of the Merger, providing
for, among other things, the expansion of its Board of Directors (the "SPG Board
of Directors") to 13 members, which is intended to increase the number of
directors elected by all holders of voting stock of the Simon DeBartolo Group
and to provide representation thereon by certain members of the Board of
Directors of DRC (the "DRC Board of Directors"). In the Merger, each outstanding
common share, par value $0.01 per share, of DRC ("DRC Common Stock"), other than
shares as to which dissenters' rights have been perfected ("Dissenters'
Shares"), will be converted into the right to receive the Merger Consideration.
The "Merger Consideration" with respect to each share of DRC Common Stock shall
consist of sixty-eight one-hundredths (0.68) of a share of common stock ("SPG
Common Stock"), par value $0.0001 per share, of SPG (the "Exchange Ratio"), plus
a cash payment in lieu of any fraction of a share. The Merger will be effected
pursuant to an Agreement and Plan of Merger, dated as of March 26, 1996, as
amended (the "Merger Agreement"), among SPG, Sub and DRC, a copy of which is
attached to this Prospectus/Joint Proxy Statement as Annex I. See "THE
MERGER--Terms of the Merger" and "AMENDMENTS TO SPG'S CHARTER AND BY-LAWS."
THE COMPANIES
SPG
SPG is a Maryland corporation that, through its 61.1%-owned subsidiary,
Simon Property Group, L.P., a Delaware limited partnership (the "SPG Operating
Partnership"), is engaged primarily in the ownership, development, management,
leasing, acquisition and expansion of income-producing properties, primarily
super-regional and regional malls and community shopping centers. Since January
1, 1994, SPG has elected to be taxed as a real estate investment trust ("REIT")
under the Internal Revenue Code of 1986, as amended (the "Code"). The SPG
Operating Partnership was formed to acquire the shopping center and real estate
business of the Simons (as defined in the "GLOSSARY"), including Melvin and
Herbert Simon and certain of their affiliates. SPG completed its initial public
offering of SPG Common Stock in December, 1993 (the "SPG IPO").
As of March 31, 1996, the SPG Operating Partnership owned or held interests
in a diversified portfolio of 122 income-producing properties (the "SPG
Portfolio Properties") containing an aggregate of approximately 62 million
square feet of gross leasable area ("GLA"), of which approximately 37 million
square feet is owned ("Owned GLA") by the SPG Operating Partnership. In
addition, as of such date, the SPG Operating Partnership had interests in four
properties under construction in the United States and six parcels of land held
for development containing an aggregate of approximately 284 acres.
<PAGE> 16
DRC
DRC is an Ohio corporation that, through its 61.9%-owned subsidiary,
DeBartolo Realty Partnership, L.P., a Delaware limited partnership (the "DRC
Operating Partnership"), is engaged primarily in the ownership, development,
management, leasing, acquisition and expansion of super-regional and regional
malls and community shopping centers. Beginning in 1994, DRC has elected to be
taxed as a REIT under the Code. The DRC Operating Partnership was formed to
continue and expand the shopping center business of The Edward J. DeBartolo
Corporation ("EJDC") and its affiliates. DRC completed its initial public
offering of DRC Common Stock in April, 1994 (the "DRC IPO").
As of March 31, 1996, the DRC Operating Partnership owned or held
interests, directly or indirectly, in a portfolio of 50 super-regional and
regional malls and 11 community centers (the "DRC Portfolio Properties")
containing an aggregate of 47.1 million square feet of GLA. In addition, as of
such date, the DRC Operating Partnership owned land held for development
comprising an aggregate of approximately 433 acres.
RECOMMENDATIONS OF THE BOARDS OF DIRECTORS; REASONS FOR THE MERGER
SPG
The SPG Board of Directors believes that the Merger, including the Exchange
Ratio, is fair to and in the best interests of SPG and its stockholders. The SPG
Board of Directors also believes that the modification to the SPG Charter and
SPG By-laws giving effect to the increase of the size of its Board of Directors
and the issuance of the Class C Common Stock (as defined in the "GLOSSARY") is
in the best interests of SPG and its stockholders in light of the Merger and the
Other Transactions (as defined in the "GLOSSARY"). Accordingly, the SPG Board of
Directors has approved the SPG Proposal (as defined below; see "--SPG
Stockholders Meetings; DRC Shareholders Meeting") and recommends that the
stockholders of SPG vote FOR the SPG Proposal. The material factors that the SPG
Board of Directors considered in granting such approval include, among other
things, the following: (i) creation of the largest developer, owner and operator
of shopping centers in the country with potentially greater access to capital
markets; (ii) expansion of geographic diversification of the Simon DeBartolo
Group's ownership and operation of properties; (iii) improvement in the strength
and quality of tenant relationships; (iv) opportunities for economies of scale
and operating efficiencies that should result from the Merger and which are
expected to increase the Simon DeBartolo Group's Funds From Operations (as
defined in the "GLOSSARY") per share; (v) creation of one of the most
experienced management teams in the shopping center business; (vi) the
opportunity to recognize unrealized potential in the DRC portfolio through
anticipated improved leasing opportunities and the expected superior access to
capital of the Simon DeBartolo Group; (vii) the expected tax-free nature of the
Merger and certain of the Other Transactions; and (viii) significant increase in
Total Market Capitalization (as defined in the "GLOSSARY") of the combined
entity, which the Board believes would enhance liquidity through increased
trading volume and may improve SPG's public market valuation. The Board also
took into account the oral opinion of Merrill Lynch & Co. ("Merrill Lynch"),
given March 25, 1996 (confirmed by means of a written opinion dated such date),
to the effect that, as of such date and based upon and subject to certain
matters stated therein, the Exchange Ratio was fair from a financial point of
view to SPG. See "THE PROPOSED MERGER AND RELATED MATTERS--Recommendation of the
SPG Board of Directors; Reasons for the Merger" and "--Opinion of Financial
Advisor to SPG."
DRC
The DRC Board of Directors believes that the Merger, including the Merger
Consideration, is fair and in the best interests of the DRC shareholders.
Accordingly, the DRC Board of Directors has approved the Merger Agreement and
the terms of the Merger and recommends that the DRC shareholders adopt the
Merger Agreement and authorize the Merger and the transactions contemplated
thereby. Among the most important factors considered by the DRC Board of
Directors were (i) the creation of the largest developer, owner and operator of
super-regional and regional shopping malls in North America with one of the
strongest management teams in the industry; (ii) the attractive opportunity,
relative to historical trading prices of DRC Common Stock, for DRC shareholders
to continue their investment in the stock of a regional mall company, but with
significantly expanded geographic diversification and very little overlap of
portfolios; (iii) the significant increase in the market capitalization of the
combined company, which may enhance liquidity; (iv) anticipated improvement in
access of the Simon DeBartolo Group to capital markets, which should make debt
or other financing available on more attractive terms, thereby permitting the
Simon DeBartolo Group to recognize the additional potential of the DRC
portfolio; (v) the opportunity to recognize significant synergies; and (vi) the
expected tax-free nature of the Merger and certain of the transactions related
thereto. See "THE PROPOSED MERGER AND RELATED MATTERS--Recommendation of the DRC
Board of Directors; Reasons for the Merger." The decision of the DRC Board of
Directors to approve the Merger Agreement and to recommend that the DRC
shareholders vote to adopt the Merger Agreement and to approve the Merger is
also based upon several other factors, including the opinions of
2
<PAGE> 17
Morgan Stanley & Co. Incorporated ("Morgan Stanley") and The Blackstone Group
L.P. ("Blackstone"), DRC's financial advisors for the Merger, to the effect,
respectively, that the Merger Consideration and the Exchange Ratio of DRC Common
Stock for SPG Common Stock reflected in the Merger Agreement are fair from a
financial point of view to DRC's public shareholders. See "THE PROPOSED MERGER
AND RELATED MATTERS--Recommendation of the DRC Board of Directors; Reasons for
the Merger" and "--Opinions of Financial Advisors to DRC."
OPINIONS OF FINANCIAL ADVISORS
SPG
Opinion of Merrill Lynch
Merrill Lynch, an independent investment banking firm, has rendered its
opinion (each and any opinion rendered by Merrill Lynch in connection with the
Merger being referred to as the "Merrill Lynch Opinion") to the SPG Board of
Directors to the effect that, based upon and subject to certain matters referred
to therein, the Exchange Ratio is fair, from a financial point of view, to SPG
as of the date such opinion was rendered. Merrill Lynch also participated as
SPG's advisor in the negotiations with DRC concerning the Exchange Ratio and the
structure of the Merger and the Other Transactions. A copy of the Merrill Lynch
Opinion dated as of the date of this Prospectus/Joint Proxy Statement, which
sets forth the matters considered by it, is attached to this Prospectus/Joint
Proxy Statement as Annex II and should be read in its entirety. See "THE
PROPOSED MERGER AND RELATED MATTERS--Opinion of Financial Advisor to SPG."
DRC
Opinion of Morgan Stanley
Morgan Stanley, an independent investment banking firm, has rendered its
opinion (each and any opinion rendered by Morgan Stanley in connection with the
Merger being referred to as the "Morgan Stanley Opinion") to the DRC Board of
Directors to the effect that the Merger Consideration to be received by the
public holders of DRC Common Stock pursuant to the Merger Agreement is fair to
such public shareholders of DRC from a financial point of view as of the date
such opinion was rendered. Morgan Stanley also participated as DRC's advisor in
the negotiations with SPG concerning the Exchange Ratio and the structure of the
Merger and the Other Transactions. A copy of the Morgan Stanley Opinion dated as
of the date of this Prospectus/Joint Proxy Statement, which sets forth the
matters considered by it, is attached to this Prospectus/Joint Proxy Statement
as Annex III, and should be read in its entirety. Joseph R. Perella, a Managing
Director and a member of the Operating Committee of Morgan Stanley, is a member
of the SPG Board of Directors. Mr. Perella did not participate in the rendering
of advice to DRC, the preparation or approval of the Morgan Stanley Opinion or
the consideration by or vote of the SPG Board of Directors to approve the Merger
Agreement. See "THE PROPOSED MERGER AND RELATED MATTERS--Opinions of Financial
Advisors to DRC--Opinion of Morgan Stanley."
Opinion of Blackstone
Blackstone, an independent investment banking firm, has rendered its
opinion (each and any opinion rendered by Blackstone in connection with the
Merger being referred to as the "Blackstone Opinion") to the DRC Board of
Directors to the effect that the Exchange Ratio is fair to the public
shareholders of DRC from a financial point of view as of the date such opinion
was rendered. Blackstone also participated as DRC's advisor in the negotiations
with SPG concerning the Exchange Ratio and structure of the Merger and the Other
Transactions. A copy of the Blackstone Opinion dated as of the date of this
Prospectus/Joint Proxy Statement, which sets forth the matters considered by it,
is attached to this Prospectus/Joint Proxy Statement as Annex IV and should be
read in its entirety. BJS Capital Partners L.P. ("BJS"), an affiliate of
Blackstone, owns 6,347,016 shares of DRC Common Stock as a result of a
debt-for-equity exchange which occurred in April, 1994. As of March 25, 1996,
the shares of DRC Common Stock held by BJS represented 11.5% of the total issued
and outstanding shares of DRC Common Stock. BJS also has a debt investment in
EJDC. Mark T. Gallogly, a Senior Managing Director of Blackstone, is a member of
the DRC Board of Directors. Mr. Gallogly did not participate in the preparation
of the Blackstone Opinion. For a description of rights of BJS to sell shares of
SPG Common Stock that it will receive in the Merger, see "DISTRIBUTION OF SHARES
BY BJS." The Blackstone Opinion is more fully discussed in "THE PROPOSED MERGER
AND RELATED MATTERS--Opinions of Financial Advisors to DRC-- Opinion of
Blackstone."
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<PAGE> 18
STRUCTURE OF SPG, DRC AND THE SIMON DEBARTOLO GROUP
EXISTING STRUCTURE OF SPG
SPG owns or holds interests in the SPG Portfolio Properties through its
61.1% interest in the SPG Operating Partnership, of which it is sole general
partner. On March 31, 1996, the Simons and certain third parties (the "SPG
Limited Partners") held 37,282,628 SPG Units (as defined below), representing
the remaining 38.9% interest in the SPG Operating Partnership not held by SPG.
As of such date, the Simons beneficially owned 34,112,045 SPG Units,
representing 35.6% of the outstanding SPG Units. The operations of SPG are
carried on through the SPG Operating Partnership and the SPG Management Company
(as defined in the "GLOSSARY").
In addition to 55,360,225 shares of SPG Common Stock outstanding at March
31, 1996, SPG had outstanding at such date 3,200,000 shares of Class B Common
Stock, par value $0.0001 per share ("Class B Common Stock"). The Simons, as
holders of the Class B Common Stock, are entitled to elect four of the nine
members of the SPG Board of Directors, unless their portion of the aggregate
equity interest of SPG (including SPG Common Stock, Class B Common Stock and
units of the SPG Operating Partnership ("SPG Units") considered on an
as-converted basis) decreases to less than 50% of the amount that they owned as
of the closing of the Merger, in which case they will be entitled to elect only
two members of the SPG Board of Directors. See "DESCRIPTION OF SPG'S CAPITAL
STOCK--SPG Common Stock and Class B Common Stock." The shares of Class B Common
Stock also convert automatically into an equal number of shares of SPG Common
Stock in certain circumstances, including the reduction of the Simons' aggregate
equity interest to less than 5%. SPG also had outstanding, as of March 31, 1996,
4,000,000 shares of Series A Preferred Stock (as defined in the "GLOSSARY"), all
of which were issued on October 26, 1995. At any time on or after October 26,
1997, such shares may be converted into SPG Common Stock (as of March 31, 1996,
3,809,523 shares of SPG Common Stock). The proceeds from the issuance of the
Series A Preferred Stock were contributed to the SPG Operating Partnership in
exchange for preferred units in that partnership and such preferred units
entitle SPG to distributions equal to the aggregate dividends payable on the
Series A Preferred Stock, and convert into SPG Units on the same economic terms
and conditions as the Series A Preferred Stock can convert into SPG Common
Stock. Thus, under the SPG Partnership Agreement, a full conversion of the
Series A Preferred Stock would result in a concurrent conversion of preferred
units of the SPG Operating Partnership into SPG Units. The Series A Preferred
Stock has voting power equal to the number of shares of SPG Common Stock into
which such stock would be convertible. All references herein to SPG Units do not
include preferred units of the SPG Operating Partnership owned by the Simon
DeBartolo Group.
SPG Units held by limited partners in the SPG Operating Partnership may be
exchanged for shares of SPG Common Stock on a one-for-one basis or for cash at
SPG's option (the "SPG Exchange Rights"). If all SPG Units held by SPG Limited
Partners outstanding on March 31, 1996, including the Simons and the other SPG
Limited Partners, were exchanged for SPG Common Stock, an aggregate 37,282,628
additional shares of SPG Common Stock would be issued. See "DESCRIPTION OF SPG'S
CAPITAL STOCK."
EXISTING STRUCTURE OF DRC
Substantially all of DRC's assets are held by, and its operations are
conducted through, the DRC Operating Partnership. DRC owns a 61.9% interest in
the DRC Operating Partnership. The DeBartolos (as defined in the "GLOSSARY"),
certain current and former employees of EJDC and a third party (collectively,
the "DRC Limited Partners") hold the remaining 38.1% limited partnership
interests in the DRC Operating Partnership. As of March 31, 1996, the DeBartolos
beneficially owned a 36.5% limited partnership interest in the DRC Operating
Partnership.
Subject to certain restrictions, the limited partnership interests in the
DRC Operating Partnership held by the DRC Limited Partners (the "DRC Interests")
may be exchanged for shares of DRC Common Stock. As of March 31, 1996, if all
such interests were exchanged, an aggregate of 34,100,867 additional shares of
DRC Common Stock would be issued.
STRUCTURE OF THE SIMON DEBARTOLO GROUP
The Merger will result in the combination of the existing businesses and
properties of SPG and DRC within the Simon DeBartolo Group. In structuring the
transaction, SPG and DRC have determined that such businesses will be conducted
and such properties will be held through the DRC Operating Partnership
(following the Merger, to be renamed the Simon-DeBartolo Group, L.P. and
referred to herein as the "Operating Partnership") and that DRC should survive
the Merger as a subsidiary of the Simon DeBartolo Group. In the Merger, Sub will
merge with and into DRC, with DRC (following the Merger, the "Surviving
Subsidiary Corporation") being the surviving company and becoming a subsidiary
of the Simon DeBartolo Group (with the Simon DeBartolo Group owning in excess of
99.9% of its outstanding common shares). In exchange for their shares of DRC
Common Stock, the non-dissenting public shareholders of DRC will receive the
Merger Consideration.
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<PAGE> 19
The Operating Partnership will continue in existence after the Merger under
an amended and restated limited partnership agreement (the "Amended Operating
Partnership Agreement"). DRC Interests held by the DRC Limited Partners will be
redesignated as units of interest in the Operating Partnership ("Units") which
are exchangeable for shares of SPG Common Stock on a one-for-one basis or cash,
at the election of the Simon DeBartolo Group. The partners of the existing SPG
Operating Partnership will contribute SPG Units owned by them to the Operating
Partnership in exchange for a like number of Units in the Operating Partnership.
As discussed below, following the Merger the Simon DeBartolo Group intends to
simplify the structure of the combined company and to consolidate operations
into the Operating Partnership.
The Simon DeBartolo Group will be the non-managing general partner, and the
Surviving Subsidiary Corporation will be the managing general partner, of the
Operating Partnership. The Simon DeBartolo Group will remain the sole general
partner of the SPG Operating Partnership and the Operating Partnership will
become a special limited partner in the SPG Operating Partnership. The Simon
DeBartolo Group, both directly and indirectly through its ownership of the
Surviving Subsidiary Corporation, will own a 61.4% interest in the Operating
Partnership and the former SPG Limited Partners and the existing DRC Limited
Partners as limited partners of the Operating Partnership will own beneficially,
in the aggregate, a 38.6% interest in the Operating Partnership. In addition,
the Simon DeBartolo Group, directly and indirectly through its ownership
interest in the Operating Partnership and the Surviving Subsidiary Corporation,
will own beneficially a 61.0% interest in the SPG Operating Partnership, with
the balance of the interests in the SPG Operating Partnership owned beneficially
by the limited partners of the Operating Partnership (such limited partners, the
"Limited Partners").
Immediately after the Effective Time (as defined below; see "--The
Merger"), properties owned by the DRC Operating Partnership and the SPG
Operating Partnership will continue to be owned by them immediately after the
Effective Time. Subject to the receipt of required consents, it is contemplated
that, subsequent to the first anniversary of the Closing Date (as defined in the
"GLOSSARY"), additional reorganizational transactions will be effected that will
have the effect of simplifying the structure of the Simon DeBartolo Group in
existence after the Merger so that, ultimately, the Operating Partnership will
directly own all of the property and partnership interests now owned by the SPG
Operating Partnership.
The SPG Operating Partnership will hold substantially all of the economic
interest in the SPG Management Company, while the voting stock will be held by
the Simons or their affiliates. The Operating Partnership will hold
substantially all of the economic interest in the DRC Management Company (as
defined in the "GLOSSARY"), while the voting stock will be held by the SPG
Management Company.
5
<PAGE> 20
STRUCTURE OF SPG AND DRC
PRIOR TO THE MERGER AND THE OTHER TRANSACTIONS
[Corporate structure chart of each of SPG and DRC prior to the Merger
and the Other Transactions]
- ---------------
The information provided in these notes is given as of March 31, 1996.
(1) Included within the public holdings of DRC Common Stock are shares owned by
BJS representing 11.5% of the outstanding DRC Common Stock.
(2) The Simons own all of the outstanding Class B Common Stock and less than one
percent of the outstanding SPG Common Stock.
(3) The Simons own a 35.6% limited partnership interest and, together with the
other SPG Limited Partners, a 38.9% limited partnership interest, in the SPG
Operating Partnership.
(4) SPG owns a 61.1% general partnership interest in the SPG Operating
Partnership.
(5) SPG will own over 99.9% of the outstanding common stock of Sub, which will
merge with and into DRC in the Merger.
(6) The DeBartolos own a 36.5% limited partnership interest and, together with
the other DRC Limited Partners, a 38.1% limited partnership interest, in the
DRC Operating Partnership.
(7) DRC, the general partner of the DRC Operating Partnership, owns a 61.9%
interest therein.
(8) The SPG Operating Partnership, directly or indirectly, owns substantially
all of SPG's property interests.
(9) The DRC Operating Partnership, directly or indirectly, owns substantially
all of DRC's property interests.
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<PAGE> 21
STRUCTURE OF THE SIMON DEBARTOLO GROUP
FOLLOWING CONSUMMATION OF THE MERGER AND THE OTHER TRANSACTIONS
[Corporate structure chart of the Simon DeBartolo Group
following consummation of the Merger and the Other Transactions]
- ---------------
The information provided in these notes gives effect to the Merger and the Other
Transactions as if they occurred on March 31, 1996.
(1) Included within the public holdings of SPG Common Stock are shares owned by
BJS that will represent 4.5% of the outstanding SPG Common Stock.
(2) The Simons will own less than 1% of the outstanding shares of SPG Common
Stock and all of the Class B Common Stock.
(3) The DeBartolos will own less than 1% of the outstanding SPG Common Stock and
all of the Class C Common Stock.
(4) The Simon DeBartolo Group will own over 99.9% of the common stock of the
Surviving Subsidiary Corporation and, both directly and indirectly through
its ownership of the Surviving Subsidiary Corporation, will own a 61.4%
interest in the Operating Partnership and, as general partner, will own 1%
of the SPG Units and a 49.5% interest in the capital of the SPG Operating
Partnership.
(5) The Limited Partners as a group (including the Simons and the DeBartolos)
will own a 38.6% beneficial interest in the Operating Partnership and the
SPG Operating Partnership, of which the Simons will own 21.7% and the
DeBartolos will own 14.2%.
(6) The Operating Partnership will own a 49.5% special limited partnership
interest in, and an additional 49.5% interest in the profits of, the SPG
Operating Partnership.
(7) Properties owned by the Operating Partnership will be held as they were held
in the pre-Merger structure. Later acquired properties will be held by, and
future operations will be conducted through, the Operating Partnership.
Until transferred to the Operating Partnership (assuming all necessary
consents can be obtained), properties owned by the SPG Operating Partnership
will continue to be owned by the SPG Operating Partnership.
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<PAGE> 22
GOVERNANCE OF THE SIMON DEBARTOLO GROUP AFTER THE MERGER
BOARD OF DIRECTORS
At the SPG Special Meeting, holders of the Equity Stock (as defined below),
voting as a single class, will consider and vote upon the election, effective
upon the Effective Time, of the following 13 persons to serve on the Board of
Directors of the Simon DeBartolo Group: from the existing Board of Directors of
SPG, Birch Bayh, William T. Dillard, II, Terry S. Prindiville, J. Albert Smith,
Jr., David Simon, Herbert Simon and Melvin Simon and from the existing Board of
Directors of DRC, Edward J. DeBartolo, Jr., G. William Miller, Fredrick W.
Petri, Richard S. Sokolov, Philip J. Ward and M. Denise DeBartolo York. See "THE
MEETINGS OF STOCKHOLDERS OF SPG--Matters to be Considered at the Meetings,"
"AMENDMENTS TO SPG'S CHARTER AND BY-LAWS" and "MANAGEMENT OF SPG AND THE SIMON
DeBARTOLO GROUP BEFORE AND AFTER THE MERGER--Board of Directors of the Simon
DeBartolo Group."
In order to implement the Merger and achieve its full benefits, SPG is
proposing and recommending to its stockholders at the SPG Special Meeting (and
any postponement or adjournment thereof) the adoption and approval of the SPG
Proposal, effective as of the Effective Time, including the adoption of the
Amended SPG Charter and the Amended SPG By-laws (each as defined in the
"GLOSSARY"), and will use its best efforts to seek and solicit the Required Vote
(as defined below). If the Amended SPG Charter and Amended SPG By-laws are
adopted and approved by the Required Vote at the SPG Special Meeting, upon or
immediately following the Effective Time, SPG will issue the entire amount of
Class C Common Stock to EJDC for nominal consideration. Adoption of the Amended
SPG Charter and the Amended SPG By-laws will result in the expansion of the
Board of Directors of the Simon DeBartolo Group to 13 members, composed of four
directors elected by the holders of the Class B Common Stock voting separately
as a single class, two directors elected by the holders of the Class C Common
Stock voting separately as a single class and seven directors elected by the
holders of the SPG Common Stock, the Class B Common Stock, the Class C Common
Stock and the Series A Preferred Stock (the "Equity Stock") voting together as a
single class. The terms of office of such last mentioned seven directors will be
temporarily classified, ending in 1997 through 1999. Thereafter, all directors
of the Simon DeBartolo Group will serve terms of one year. For a discussion and
description of the Amended SPG Charter and the Amended SPG By-laws, see
"AMENDMENTS TO SPG'S CHARTER AND BY-LAWS."
For a discussion of the disadvantages to the stockholders of the Simon
DeBartolo Group of the failure to obtain the Required Vote (assuming the Merger
is nonetheless duly approved and consummated) and a general discussion of the
consequences thereof, including a discussion of the Alternative Amended SPG
Charter and the Alternative Amended SPG By-laws (each as defined in the
"GLOSSARY") and other arrangements (including the maintenance of a nine-member
Board of Directors rather than its expansion to 13 members), see "RISK
FACTORS--Risks Associated with Failure to Obtain Required Vote" and "CERTAIN
ALTERNATIVE GOVERNANCE ARRANGEMENTS AND RELATED MATTERS IF THE REQUIRED VOTE IS
NOT OBTAINED."
SPG STOCKHOLDERS MEETINGS; DRC SHAREHOLDERS MEETING
SPG STOCKHOLDERS MEETINGS
The SPG Special Meeting will be held at the Indianapolis Hyatt Regency, One
South Capitol Avenue, Indianapolis, Indiana, on August 6, 1996, at 10:00 a.m.,
Indianapolis time. The SPG Annual Meeting will be held immediately following the
SPG Special Meeting at the same location as the SPG Special Meeting. At the SPG
Special Meeting, the holders of Equity Stock, voting together as a class, will
be asked to consider and vote upon a single proposal (the "SPG Proposal") (i) to
approve the Merger Agreement and the issuance of the Merger Consideration, (ii)
to approve certain amendments to the SPG Charter and the SPG By-laws and (iii)
to elect a slate of 13 persons to an expanded Board of Directors for which SPG
is seeking the approval of at least 80% of the aggregate votes entitled to be
cast by holders of the Equity Stock, voting together as a single class (the
"Required Vote"), as well as a majority of the votes entitled to be cast by
holders of Class B Common Stock, voting separately. If the SPG Proposal is not
approved by the Required Vote but is approved by a majority of the votes
entitled to be cast with respect thereto, the Merger Agreement and the issuance
with the Merger Consideration will be approved, a different set of amendments to
the SPG Charter and the SPG By-laws will come into effect and a slate of nine
persons will be seated on the Board of Directors of the Simon DeBartolo Group.
The owners of the Class B Common Stock have executed an irrevocable proxy
granting to certain representatives of DRC the full power to vote such shares,
together with any other voting security of SPG that they may own, in favor of
the SPG Proposal and against any proposal made in opposition to or in
competition with the SPG Proposal.
At the SPG Annual Meeting, the holders of the Equity Stock, voting together
as a single class, will be asked to approve the election of five Common Stock
Directors (as defined in the "GLOSSARY") to serve until the earlier to
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<PAGE> 23
occur of the Effective Time of the Merger and the next annual meeting of
stockholders (if the Merger is not consummated) and the appointment of Arthur
Andersen LLP as independent accountants for SPG for 1996. The Common Stock
Directors elected at the SPG Annual Meeting, if they are not to be members of
the Board of Directors following the Merger, will cease to hold office as
directors as of the Effective Time of the Merger and will be replaced by persons
listed under "MANAGEMENT OF SPG AND THE SIMON DeBARTOLO GROUP BEFORE AND AFTER
THE MERGER--Board of Directors of the Simon DeBartolo Group." At the SPG Annual
Meeting, directors will be elected by a plurality of the votes cast by shares
entitled to vote at such meeting. The appointment of independent accountants
will require the affirmative vote of a majority of the votes cast on the matter
at the SPG Annual Meeting.
Holders of SPG Common Stock and Class B Common Stock are entitled to one
vote for each share held of record on all matters submitted to a vote of the SPG
stockholders, other than the election of directors elected exclusively by the
holders of Class B Common Stock. Holders of Series A Preferred Stock are
entitled to the number of votes equal to the number of shares of SPG Common
Stock into which such shares of Series A Preferred Stock would be convertible
pursuant to the Conversion Formula (as defined in the "GLOSSARY"). As of March
31, 1996, (i) there were 55,360,225 shares of SPG Common Stock outstanding, (ii)
there were 3,200,000 shares of Class B Common Stock outstanding and (iii) the
aggregate voting power of all shares of Series A Preferred Stock was equal to
that of 3,809,523 shares of SPG Common Stock. See "DESCRIPTION OF SPG'S CAPITAL
STOCK--SPG Common Stock and Class B Common Stock" and "--Series A Preferred
Stock."
As of March 31, 1996, directors and executive officers of SPG as a group
beneficially held outstanding shares of Equity Stock representing 5.5% of all
the votes entitled to be cast by holders of Equity Stock at the SPG Meetings and
as of the record date for the SPG Common Stock for purposes of voting on the SPG
Proposal (the "SPG Record Date"), such persons as a group held outstanding
shares of Equity Stock representing 5.5% of such shares.
See "THE MEETINGS OF STOCKHOLDERS OF SPG."
DRC SPECIAL MEETING
The DRC Special Meeting will be held at DRC's corporate offices, 7655
Market Street, Youngstown, Ohio 44513 on August 6, 1996, at 11:00 a.m.,
Youngstown time. At the DRC Special Meeting, the holders of DRC Common Stock
will be asked to consider and vote upon a proposal to adopt the Merger Agreement
and to authorize the Merger and the other transactions contemplated thereby, as
more fully described under "THE MEETING OF SHAREHOLDERS OF DRC--Matters to be
Considered at the Meeting" and "THE MERGER." The holders of record of
outstanding shares of DRC Common Stock on the DRC Record Date (as defined below)
will be entitled to one vote per share on all matters to be considered at the
DRC Special Meeting.
BJS, which owned 6,347,016 shares of DRC Common Stock as of March 31, 1996,
has executed an irrevocable proxy granting to certain representatives of SPG the
full power to vote such DRC Common Stock, together with any other voting
security of DRC that it may own at the time of the DRC Special Meeting, to adopt
the Merger, the Merger Agreement and the transactions contemplated thereby and
to vote against any proposal made in opposition to or in competition with the
Merger, the Merger Agreement and the transactions contemplated thereby. The
proxy granted by BJS is subject to withdrawal only upon withdrawal by DRC's
Board of Directors of its recommendation that DRC's shareholders vote in favor
of adopting the Merger Agreement and approving the Merger.
As of the record date for the DRC Common Stock for purposes of voting on
the Merger (the "DRC Record Date"), directors and executive officers of DRC as a
group beneficially held shares of the outstanding DRC Common Stock representing
less than one percent of all the votes entitled to be cast by holders of DRC
Common Stock at the DRC Special Meeting.
See "THE MEETING OF SHAREHOLDERS OF DRC."
THE MERGER
The Merger Agreement provides that, subject to the satisfaction or waiver
of certain conditions, Sub will be merged with and into DRC, whereupon the
separate existence of Sub will cease and DRC will be the surviving corporation
of the Merger and will be a subsidiary of the Simon DeBartolo Group. See "THE
MERGER--Effects of the Merger." The Merger will become effective upon the filing
of a Certificate of Merger (as defined in the "GLOSSARY") with the Secretary of
State of the State of Ohio (the "Effective Time"). At the Effective Time, each
outstanding share of DRC Common Stock (other than Dissenters' Shares) will be
converted into the right to receive the Merger Consideration. See "THE
MERGER--Terms of the Merger" and "THE PROPOSED MERGER AND RELATED MATTERS--
Dissenters' Rights." Simultaneously with the consummation of the Merger, certain
related contribution, sale and other
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<PAGE> 24
transactions (the "Other Transactions") will occur and certain agreements will
be entered into or become effective. For a discussion of these Other
Transactions and these agreements, see "--Certain Other Transactions and
Agreements," "THE MERGER--Certain Transactions and Agreements Relating to the
Merger" and "CERTAIN AGREEMENTS."
In addition to obtaining the SPG Stockholder Approvals and the DRC
Shareholder Approvals (each as defined in the "GLOSSARY"), (i) the obligations
of SPG on the one hand and DRC on the other to consummate the Merger are subject
to the simultaneous consummation of the Other Transactions, the receipt of all
material consents and waivers of lenders to EJDC necessary for the consummation
of the Merger and the Other Transactions, and the satisfaction or waiver of
certain other customary mutual conditions; (ii) the obligations of SPG to
consummate the Merger are further subject to, among other things, receipt of
material consents and waivers from non-governmental third parties which if not
obtained would have a material adverse effect on DRC, receipt of opinions from
counsel for SPG as to the Simon DeBartolo Group's status as a REIT and from
counsel for DRC as to the treatment of the Merger as a tax-free reorganization
and on the status of DRC as a REIT and there having been no change in DRC's
business, results of operations or financial condition which would have a
material adverse effect on DRC; and (iii) the obligations of DRC to consummate
the Merger are also further subject to, among other things, receipt of consents
and waivers from non-governmental third parties which if not obtained would have
a material adverse effect on SPG, receipt of opinions from counsel for SPG as
to, among other things, the Simon DeBartolo Group's status as a REIT and
regarding the treatment of the Merger as a tax-free reorganization, and there
having been no change in SPG's business, results of operations or financial
condition which would have a material adverse effect on SPG. See "THE
MERGER--Conditions to the Merger; Termination; Waiver and Amendment."
The Merger Agreement may be terminated and the Merger abandoned prior to
the Effective Time, whether before or after the SPG Stockholder Approvals and
the DRC Shareholder Approvals are obtained, as follows: (i) by mutual written
consent of SPG and DRC; (ii) by SPG, upon a breach of any representation or
warranty on the part of DRC set forth in the Merger Agreement, or if any such
representation or warranty of DRC shall have become untrue (in either case,
having a material adverse effect on DRC) or the breach in any material respect
of any covenant or agreement of DRC set forth in the Merger Agreement; (iii) by
DRC, upon a breach of any representation or warranty on the part of SPG set
forth in the Merger Agreement, or if any such representation or warranty of SPG
shall have become untrue (in either case, having a material adverse effect on
SPG) or the breach in any material respect of any covenant or agreement of SPG
set forth in the Merger Agreement; (iv) by either SPG or DRC, if any permanent
injunction or other action preventing the consummation of the Merger shall have
become final and nonappealable; (v) by either SPG or DRC, if the Merger shall
not have been consummated before October 30, 1996 (and if the terminating party
has not willfully breached any of its representations, warranties or covenants
in the Merger Agreement); (vi) by either SPG or DRC, if either the SPG
Stockholder Approvals or the DRC Shareholder Approvals are not obtained; (vii)
by DRC, upon payment of the Break-Up Fee (as defined below; see "THE MERGER--No
Solicitation; Board Action; Fees and Expenses") by DRC as directed by SPG, if
the DRC Board of Directors shall have withdrawn or modified its approval or
recommendation of the Merger or the Merger Agreement in connection with, or
recommended or approved, a Superior Competing Transaction (as defined below; see
"THE MERGER--No Solicitation; Board Action; Fees and Expenses"); (viii) by SPG
if the DRC Board of Directors or any committee thereof shall have (A) withdrawn
or modified in a manner adverse to SPG its approval or recommendation of the
Merger or the Merger Agreement, or approved or recommended any Superior
Competing Transaction, (B) entered into certain agreements with respect to any
Competing Transaction (as defined below; see "THE MERGER--No Solicitation; Board
Action; Fees and Expenses" or (C) resolved to do any of the foregoing or (ix) by
DRC, if the average closing price of the SPG Common Stock on the NYSE for the
period beginning on the eighteenth trading day prior to the DRC Special Meeting
and through and including the third trading day prior to the DRC Special Meeting
is less than $21.25.
If the Merger Agreement is terminated in certain circumstances involving a
Competing Transaction, then DRC shall be obligated to pay the Break-Up Fee, and
in certain other circumstances expenses incurred by SPG in connection with the
Merger Agreement and the Other Transactions, up to a maximum of $7.5 million. If
the Merger Agreement is terminated in connection with the failure of SPG to
obtain certain consents to the Merger and the Other Transactions which if not
obtained would have a material adverse effect on SPG, then SPG shall be
obligated to pay the Termination Fee (as defined below). For a complete
discussion of such fees, see "THE MERGER--No Solicitation; Board Action; Fees
and Expenses."
In addition to customary mutual covenants, each of SPG and DRC are subject
to covenants applicable prior to the Effective Time requiring them to operate
their respective businesses in the ordinary course and imposing certain other
specific restrictions on such operations. See "THE MERGER--Conduct of SPG's and
DRC's Businesses Pending Completion of the Merger," "--Certain Additional Mutual
Covenants," "--Certain Additional Covenants of SPG" and "--Certain Additional
Covenants of DRC."
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<PAGE> 25
Pursuant to the Merger Agreement, SPG and DRC have agreed to take certain
actions with respect to, and to provide certain benefits under, the Benefit
Plans of DRC and SPG, the DRC Stock Incentive Plan and the Severance Program
(each as defined in the "GLOSSARY"). See "THE MERGER--Certain Provisions
Relating to Employee Benefits and Incentive Plans."
AMENDMENTS TO SPG'S CHARTER AND BY-LAWS
Under the Merger Agreement, SPG is required to propose and recommend to its
stockholders at the SPG Special Meeting the adoption and approval, effective as
of the Effective Time, of the SPG Proposal, including, among other things, the
adoption of the Merger Agreement and the amendments giving effect to certain
terms thereof through the adoption of the Amended SPG Charter and the Amended
SPG By-laws. If the Amended SPG Charter and Amended SPG By-laws are adopted and
approved at the SPG Special Meeting, upon or immediately following the Effective
Time, SPG will issue the entire amount of Class C Common Stock to EJDC for
nominal consideration.
If the Required Vote is obtained at the SPG Special Meeting, the Simon
DeBartolo Group's Board of Directors will have 13 members, continuing the
existing majority of publicly elected independent directors while also
continuing significant board representation of the Simons and the DeBartolos.
The Simons will continue to have the right to elect four of such directors and
the DeBartolos, acting through EJDC, will have the right to elect two of such
directors. See "RISK FACTORS--Conflicts of Interest Related to the
Merger--Continuing Substantial Influence of the Simons and the DeBartolos,"
"AMENDMENTS TO SPG'S CHARTER AND BY-LAWS--Class C Common Stock" and "DESCRIPTION
OF SPG'S CAPITAL STOCK--SPG Common Stock and Class B Common Stock."
If, however, the Required Vote is not obtained at the SPG Special Meeting,
but the Merger is nonetheless approved, the Alternative Amended SPG Charter and
Alternative Amended SPG By-laws will become effective, providing for, among
other things, a nine-person Board of Directors. For a discussion of the
disadvantages of these alternative governance arrangements to the stockholders
of the Simon DeBartolo Group, see "RISK FACTORS--Risks Associated with Failure
to Obtain Required Vote" and "CERTAIN ALTERNATIVE GOVERNANCE ARRANGEMENTS AND
RELATED MATTERS IF THE REQUIRED VOTE IS NOT OBTAINED."
CERTAIN OTHER TRANSACTIONS AND AGREEMENTS
In connection with the Merger Agreement and the Merger, certain additional
agreements (the "Other Transaction Agreements") have been, or will be, entered
into on or prior to the Effective Time which provide for the Other Transactions
to be effected on or prior to the Effective Time. The Other Transaction
Agreements consist of:
- The Stock Purchase Agreement, dated as of March 26, 1996, between EJDC
and the SPG Management Company (the "Stock Purchase Agreement"), pursuant
to which the voting stock of the DRC Management Company currently held by
EJDC will be purchased at the Effective Time by the SPG Management
Company for $2.5 million in cash.
- The several Contribution Agreements among DRC, the DRC Operating
Partnership, SPG, the SPG Operating Partnership and the SPG Limited
Partners (collectively, the "Contribution Agreement"), providing for the
contribution to the DRC Operating Partnership at the Effective Time (i)
by the SPG Limited Partners of their respective SPG Units in exchange for
Units and (ii) by SPG, as general partner of the SPG Operating
Partnership, of certain of its interests in the SPG Operating Partnership
in exchange for a non-managing general partner interest in the Operating
Partnership, so that following completion of the Other Transactions, the
Operating Partnership will own a substantial economic interest in the SPG
Operating Partnership. The Contribution Agreement also establishes the
formula for the allocation of Units among the partners of the Operating
Partnership at the Effective Time as well as the basis for the exchange
of SPG Units for Units.
- The Termination Agreement, dated as of March 26, 1996, among DRC, certain
DRC Affiliates (as defined in the "GLOSSARY") and the DeBartolos (the
"Termination Agreement"), providing for the termination, as of the
Effective Time, of the rights of the DeBartolos and certain other DRC
Affiliates under all the agreements providing exchange rights, cash
tender rights and registration rights for the DeBartolos and other DRC
Limited Partners and of the DRC Noncompetition Agreement (as defined in
the "GLOSSARY"), which imposes certain noncompete restrictions on certain
of the DeBartolos.
See "THE MERGER--Certain Transactions and Agreements Relating to the
Merger."
In addition, in connection with the Merger Agreement and the Merger,
certain agreements (the "Related Agreements") have been entered into or will be
entered into which consist of:
- The Stockholders Agreement, dated as of March 26, 1996, among SPG, DRC,
the Simons and the DeBartolos (the "Stockholders Agreement") providing
for rights and duties imposed on the parties thereto, including (a) the
voting of shares held by the Simons and the DeBartolos to effect the SPG
Proposal, including the Merger, the amendments to the SPG Charter and SPG
By-laws, the Other Transactions and the election of certain persons to
11
<PAGE> 26
the Board of Directors of the Simon DeBartolo Group and (b) the execution
and delivery at or prior to the Effective Time of the amended and restated
partnership agreements of the Operating Partnership and the SPG Operating
Partnership. See "CERTAIN AGREEMENTS--Stockholders Agreement."
- The Fifth Amended and Restated Limited Partnership Agreement of the
Operating Partnership (the "Amended Operating Partnership Agreement"), to
become effective at the Effective Time, among DRC, SPG, the DRC Limited
Partners and the SPG Limited Partners, providing for (a) the admission to
the Operating Partnership of SPG as the non-managing general partner and
the SPG Limited Partners as limited partners and (b) the terms and
provisions governing the Operating Partnership such as contribution of
capital, allocation and distribution of capital and income, duties of the
managing general partner, the non-managing general partner and the
Limited Partners (as defined in the "GLOSSARY"), transfer of Units and
the rights of Limited Partners to convert Units into shares of SPG Common
Stock. See "CERTAIN AGREEMENTS--The Agreements of Limited Partnership."
- The Third Amended and Restated Agreement of Limited Partnership of the
SPG Operating Partnership, to become effective at the Effective Time,
among SPG and DRC, as the managing general partner of the Operating
Partnership (the "Amended SPG Partnership Agreement"), pursuant to which
the Simon DeBartolo Group will continue as general partner of such
partnership and the Operating Partnership will have a limited partnership
interest in such partnership. See "CERTAIN AGREEMENTS--The Agreements of
Limited Partnership."
- A new Registration Rights Agreement, to be executed at or prior to the
Effective Time, among SPG, the Simons, the DeBartolos and certain other
Unit holders (collectively, the "Rights Holders") (the "New Registration
Rights Agreement") pursuant to which the Simon DeBartolo Group will grant
registration rights with respect to certain shares of SPG Common Stock.
See "CERTAIN AGREEMENTS--The Registration Rights Agreements--The New
Registration Rights Agreement."
- The BJS Registration Rights Agreement, dated as of March 26, 1996,
between BJS and SPG (the "BJS Registration Rights Agreement"), pursuant
to which SPG has agreed to cause the registration of the shares of SPG
Common Stock to be issued to BJS as an affiliated holder of DRC Common
Stock in connection with the Merger in order to permit sales of some or
all of such shares by BJS from time to time. Such registration is being
effected pursuant to the Registration Statement of which this
Prospectus/Joint Proxy Statement is a part. See "CERTAIN AGREEMENTS--The
Registration Rights Agreements--The BJS Registration Rights Agreement"
and "DISTRIBUTION OF SHARES BY BJS."
NEW YORK STOCK EXCHANGE LISTING OF SPG COMMON STOCK
SPG has obtained preliminary approval for the listing on the NYSE of the
shares of SPG Common Stock to be issued in the Merger. Approval of the listing
of such shares for trading on the NYSE is a condition to the respective
obligations of SPG and DRC to consummate the Merger. See "THE MERGER--Conditions
to the Merger; Termination; Waiver and Amendment."
REGULATORY APPROVAL
Other than (i) the Commission's declaring effective the Registration
Statement containing this Prospectus/Joint Proxy Statement, (ii) approvals in
connection with compliance with applicable Blue Sky or state securities laws,
(iii) the filing of the Certificate of Merger with the Secretary of State of the
State of Ohio, (iv) the filing of such reports under Section 13(a) of the
Exchange Act as may be required in connection with the Merger Agreement and the
Other Transactions and (v) such filings as may be required in connection with
the payment of any Transfer and Gains Taxes (as defined in the "GLOSSARY"),
neither the management of SPG nor the management of DRC believes that any filing
with or approval of any governmental authority is necessary in connection with
the consummation of the Merger.
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The Merger is expected to qualify for treatment as a tax-free
reorganization under Section 368(a) of the Code, and the DRC shareholders who
exchange their DRC Common Stock for SPG Common Stock will not recognize any gain
or loss on the exchange except where DRC shareholders receive cash proceeds in
lieu of fractional interests in shares of SPG Common Stock greater than the tax
basis allocated to such shareholders' fractional share interests. However, in
the event that the Merger does not qualify as a reorganization, each DRC
shareholder will recognize gain or loss equal to the difference between the
shareholder's tax basis in the DRC Common Stock and the fair market value of the
SPG Common Stock received in the Merger. Upon receipt of cash in exchange for
its shares, a Dissenting Shareholder (as defined below; see "--Dissenters'
Rights") will recognize a taxable gain or loss to the extent the cash received
exceeds or is less than the Dissenting Shareholder's basis in its shares. See
"THE MERGER--Federal Income Tax Consequences to Holders of DRC Common Stock."
12
<PAGE> 27
DISSENTERS' RIGHTS
Holders of shares of DRC Common Stock who do not vote in favor of adoption
of the Merger Agreement and who otherwise comply with the requirements of Ohio
law respecting the perfection of dissenters' rights ("Dissenting Shareholders")
may dissent from the Merger and elect to have the "fair cash value" of their
shares, excluding any appreciation or depreciation resulting from the Merger,
judicially determined and paid to them. In order to have such "fair cash value"
judicially determined and paid, a Dissenting Shareholder must deliver to DRC a
written demand for payment of such "fair cash value" of its shares of DRC Common
Stock not later than ten days after the taking of the vote on the Merger
Agreement and must comply with other requirements of Section 1701.85 of the Ohio
Statute (as defined in the "GLOSSARY"), the full text of which is attached as
Annex V to this Prospectus/Joint Proxy Statement. Any deviation from such
requirements may result in the forfeiture of rights as a Dissenting Shareholder.
Upon receipt of cash in exchange for its shares, a Dissenting Shareholder will
recognize a taxable gain or loss to the extent the cash received exceeds or is
less than the Dissenting Shareholder's basis in its shares. Fair cash value is
determined as of the day prior to the date on which the vote of the DRC
shareholders authorizing the Merger is taken and excludes any appreciation or
depreciation in market value resulting from the proposed Merger. See "THE
PROPOSED MERGER AND RELATED MATTERS--Dissenters' Rights" and Annex V hereto.
Holders of shares of SPG Common Stock will not have dissenters' rights
under Maryland law.
COMPARATIVE RIGHTS OF SHAREHOLDERS OF DRC AND STOCKHOLDERS OF SPG
DRC is incorporated under the laws of the State of Ohio, and SPG is
incorporated under the laws of the State of Maryland. DRC shareholders will,
upon consummation of the Merger, become stockholders of SPG and their rights as
such will be governed by Maryland law and the SPG Charter and SPG By-laws.
Important differences exist between the laws of Ohio and the rights of
shareholders of DRC and the laws of Maryland and the rights of stockholders of
SPG. Such differences include, but are not limited to, the following: (i) laws
governing changes in control and business combinations; (ii) the removal of
directors and the filling of vacancies on the board of directors; (iii)
indemnification and liability of directors and officers; and (iv) voting
requirements and various other rights of corporate security holders. For a
description of these and other differences between Ohio and Maryland law, see
"SIGNIFICANT DIFFERENCES BETWEEN THE CORPORATE LAWS OF OHIO AND MARYLAND AND
COMPARISON OF RIGHTS OF HOLDERS OF DRC COMMON STOCK AND SPG COMMON STOCK."
THE AMENDED OPERATING PARTNERSHIP AGREEMENT AND THE EXISTING SPG PARTNERSHIP
AGREEMENT AND DRC PARTNERSHIP AGREEMENT
For a discussion of the Amended Operating Partnership Agreement, which will
set forth the terms and provisions governing the Operating Partnership and which
establishes different, and in certain cases greater, rights of some or all of
the partners than the existing SPG Partnership Agreement and DRC Partnership
Agreement (each as defined in the "GLOSSARY"), see "CERTAIN AGREEMENTS--The
Agreements of Limited Partnership."
13
<PAGE> 28
HISTORICAL AND PRO FORMA PER SHARE INFORMATION
The following table sets forth certain historical, pro forma and pro forma
equivalent information giving effect to the Merger and the Other Transactions
(see "PRO FORMA COMBINED AND SELECTED HISTORICAL FINANCIAL DATA"). The data is
based on the historical and pro forma financial statements.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE YEAR ENDED
MARCH 31, 1996 DECEMBER 31, 1995
----------------------------------------- -----------------------------------------
DRC DRC
PRO PRO FORMA PRO PRO FORMA
PER SHARE HISTORICAL FORMA(1) EQUIVALENT(2) HISTORICAL FORMA(1) EQUIVALENT(2)
- --------------------------------------- ---------- -------- ------------- ---------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net Income per Share of Common Stock
Before Extraordinary Items
SPG.................................. $ 0.23 $ 0.25 -- $ 1.08 $ 1.13 --
DRC.................................. $ 0.15 -- $0.17 $ 0.53 -- $0.77
Cash Distributions(3)
SPG.................................. $ 0.49 $ 0.49 -- $ 1.97 $ 1.97 --
DRC.................................. $ 0.32 -- $0.33 $ 1.26 -- $1.34
Book Value per Share of Common Stock
SPG.................................. $ 1.98 $10.65 -- N/A N/A N/A
DRC.................................. $ 0.24 -- $7.24 N/A N/A N/A
</TABLE>
- ---------------
(1) The pro forma weighted average shares outstanding during the three months
ended March 31, 1996 and the pro forma number of shares outstanding at March
31, 1996 used to compute the pro forma data after giving effect to the
Merger were 96,266,696 and 96,444,745, respectively. The pro forma weighted
average shares outstanding during the year ended December 31, 1995 used to
compute pro forma net income per share after giving effect to the Merger was
93,194,398.
(2) The DRC pro forma equivalent per share amounts are calculated by multiplying
pro forma Net Income per Share of Common Stock Before Extraordinary Items,
pro forma Cash Distributions per share and pro forma Book Value per Share of
Common Stock by the Exchange Ratio (0.68) so that the per share amounts are
equated to the respective values for one share of DRC Common Stock.
(3) SPG currently pays a quarterly distribution of $0.4925 per share. Future
distributions by the Simon DeBartolo Group, however, will be at the
discretion of its Board of Directors and will depend on certain factors. See
"POLICIES OF THE SIMON DeBARTOLO GROUP--Dividend and Distribution Policies."
DIVIDEND AND DISTRIBUTION POLICIES
Prior to the Merger each of SPG and DRC shall make a distribution (a
"Special Distribution") to their respective stockholders and shareholders, the
record date for which shall be the close of business on the last business day
prior to the Effective Time. The Special Distribution of each party will be
equal to that party's most recent quarterly distribution rate, multiplied by the
number of days since the last distribution record date through and including the
Effective Time, and divided by 91.
While it is not currently intended that the Simon DeBartolo Group will
reduce quarterly distributions as a result of the Merger and the Other
Transactions, future distributions paid by the Simon DeBartolo Group will be at
the discretion of its Board of Directors and will depend on its actual cash
flow, financial condition, capital requirements, annual distribution
requirements under the REIT provisions of the Code and such other factors as
such Board of Directors deems relevant. The next full quarterly dividend paid by
the Simon DeBartolo Group will be adjusted to take into account the Special
Distribution. Assuming the Simon DeBartolo Group continues to make regular
quarterly distributions at a current rate of $0.4925 per share of SPG Common
Stock, following the Merger, each former shareholder of DRC, as a stockholder of
the Simon DeBartolo Group, would be entitled to receive a quarterly distribution
from the Simon DeBartolo Group equivalent to $0.3349 per share of DRC Common
Stock held prior to the Merger.
See "POLICIES OF THE SIMON DeBARTOLO GROUP--Dividend and Distribution
Policies."
RISK FACTORS
In considering whether to approve the Merger, the stockholders of SPG and
shareholders of DRC should consider, in addition to the other information in
this Prospectus/Joint Proxy Statement, the matters described under "RISK
FACTORS," including the following risk factors:
- Possible conflicts of interest resulting from the interests of certain
members of the Board of Directors and
14
<PAGE> 29
management of each of SPG and DRC in the Merger and the Other
Transactions that are in addition to the interests of and benefits to the
shareholders of DRC and stockholders of SPG generally.
- Substantial influence of the Simons and the DeBartolos on the Board of
Directors of the Simon DeBartolo Group.
- No assurance that costs or other factors associated with combining SPG
and DRC would not adversely affect future combined results of operations
or the benefits of expected cost savings.
- The Merger is expected to result in the Simon DeBartolo Group having a
greater ratio of debt to Total Market Capitalization than that of SPG
(before giving effect to the Merger).
In addition, there are certain risks associated with tax matters, the
possible adverse effects on stock prices arising from shares of the SPG Common
Stock available for future sale and other matters.
INTERESTS OF CERTAIN PERSONS IN THE MERGER AND THE OTHER TRANSACTIONS
Certain persons will receive certain benefits in connection with or
otherwise have interests in the Merger and the Other Transactions, as follows:
INTERESTS OF THE SIMONS AND THE DEBARTOLOS
If the Required Vote is obtained, the Simons and the DeBartolos will have
the collective ability to elect six of 13 members of the Simon DeBartolo Group's
Board of Directors. If the Merger is completed but the Required Vote is not
obtained, then the Simons and DeBartolos collectively would have the ability to
designate members constituting a majority of the nine member Board of Directors
of the Simon DeBartolo Group. In either case, the Simons and the DeBartolos
would have the ability to exercise substantial influence over the affairs of the
Simon DeBartolo Group. See "RISK FACTORS--Conflicts of Interest Related to the
Merger," "THE MERGER--Benefits of the Merger and the Other Transactions to the
Simons and the DeBartolos--The Rights of the Simons and DeBartolos to Have
Representation on the Board of Directors of the Simon DeBartolo Group," "RISK
FACTORS--Risks Associated with Failure to Obtain Required Vote" and "CERTAIN
ALTERNATIVE GOVERNANCE ARRANGEMENTS AND RELATED MATTERS IF THE REQUIRED VOTE IS
NOT OBTAINED--Certain Benefits of the Merger to the Simons and the DeBartolos if
the Required Vote is not Obtained."
Pursuant to the EJDC Sales Rights (as defined below), EJDC (an affiliate of
the DeBartolos) will have the right to dispose of certain of its Units to
satisfy certain amortization requirements under certain outstanding indebtedness
of EJDC. See "RISK FACTORS--Possible Adverse Effects on Stock Prices Arising
from Shares Available for Future Sale" and "CERTAIN AGREEMENTS--The Agreements
of Limited Partnership." In addition, each of EJDC, Edward J. DeBartolo, Jr. and
M. Denise DeBartolo York have previously executed noncompetition agreements with
DRC which will be terminated in connection with the Merger and replaced with
agreements of the DeBartolos not to use the "DeBartolo" name in the shopping
center business. See "RISK FACTORS--Conflicts of Interest Related to the
Merger--Termination of Noncompetition Agreement" and "CERTAIN
AGREEMENTS--Stockholders Agreement."
Pursuant to the Stock Purchase Agreement, EJDC will receive $2.5 million in
cash from the SPG Management Company for 95% of the outstanding common stock of
the DRC Management Company. As a result of such sale, the Simons, who currently
control the SPG Management Company, will control both the SPG Management Company
and the DRC Management Company. See "RISK FACTORS--Conflicts of Interest Related
to the Merger--Continuing Substantial Influence of the Simons and the
DeBartolos" and "THE MERGER--Benefits of the Merger and the Other Transactions
to the Simons and the DeBartolos."
INTERESTS OF BJS AND ITS AFFILIATES
BJS owns 6,347,016 shares of DRC Common Stock, representing, as of March
25, 1996, 11.5% of the total issued and outstanding DRC Common Stock. BJS also
has a debt investment in EJDC. BJS will receive certain registration rights in
respect of shares of SPG Common Stock it will receive in connection with the
Merger. Blackstone, an affiliate of BJS, will receive a fee of $2,125,000 for
services rendered as financial advisor to DRC upon consummation of the proposed
transaction between SPG and DRC. See "--Opinions of Financial
Advisors--DRC--Opinion of Blackstone" and "THE PROPOSED MERGER AND RELATED
MATTERS--Opinions of Financial Advisors to DRC--Opinion of Blackstone."
15
<PAGE> 30
INTEREST OF CERTAIN OTHER PERSONS
For a discussion of the interests of certain other persons in the Merger
and the Other Transactions, including an executive employment agreement,
director and officer insurance and indemnification and the rights of the Limited
Partners of the Operating Partnership, see "RISK FACTORS--Conflicts of Interest
Related to the Merger--Amended and Restated Partnership Agreements" and "--Other
Conflicts."
SUMMARY PRO FORMA COMBINED AND SELECTED HISTORICAL FINANCIAL DATA
SIMON DEBARTOLO GROUP PRO FORMA COMBINED FINANCIAL DATA
The following pro forma combined financial data for the Simon DeBartolo
Group are derived from the historical financial data of SPG and DRC.
The unaudited pro forma combined Balance Sheet Data as of March 31, 1996 is
presented as if the Merger and the Other Transactions had occurred on March 31,
1996. The unaudited pro forma combined Operating Data for the three month period
ended March 31, 1996 and the year ended December 31, 1995 are presented as if
the Merger and the Other Transactions had occurred as of January 1, 1995 and
carried forward through March 31, 1996.
Preparation of the pro forma financial information was based on assumptions
deemed appropriate by the management of SPG and DRC. The assumptions give effect
to the Merger and the Other Transactions under the purchase method of accounting
in accordance with generally accepted accounting principles and the combined
entity qualifying as a REIT, distributing all of its taxable income and,
therefore, incurring no federal income tax expense during the periods presented.
The pro forma financial information is unaudited and is not necessarily
indicative of the results which actually would have occurred if the Merger and
the Other Transactions had been consummated at the beginning of the periods
presented, nor does it purport to represent the future financial position and
results of operations for future periods. The pro forma information should be
read in conjunction with the historical financial statements of SPG and DRC
incorporated by reference into this Prospectus/Joint Proxy Statement and, in
selected form, set forth under "PRO FORMA COMBINED AND SELECTED HISTORICAL
FINANCIAL DATA."
16
<PAGE> 31
SIMON DEBARTOLO GROUP
PRO FORMA FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED FOR THE YEAR ENDED
MARCH 31, 1996 DECEMBER 31, 1995
-------------------- ------------------
<S> <C> <C>
OPERATING DATA:
Total revenue..................................................... $ 228,810 $ 889,714
Depreciation and amortization..................................... 43,075 162,786
Operating income before interest.................................. 101,379 408,648
Interest expense.................................................. 64,598 251,113
Income of the Operating Partnership............................... 41,652 173,482
Limited partners' interest in the Operating Partnership........... 15,294 66,389
----------- -----------
Net income........................................................ 26,358 107,093
Preferred dividends............................................... 2,031 1,490
----------- -----------
Net income available to common stockholders....................... $ 24,327 $ 105,603
=========== ===========
EARNINGS PER COMMON SHARE:
Net income........................................................ $ 0.25 $ 1.13
Distributions per common share.................................... $ 0.49 $ 1.97
Weighted average shares outstanding............................... 96,266,696 93,194,398
BALANCE SHEET DATA:
Total assets...................................................... $ 5,531,342 N/A
Mortgages and notes payable....................................... 3,488,332 N/A
Limited partners' interest in the Operating Partnership........... 650,085 N/A
Stockholders' equity.............................................. $ 1,127,080 N/A
OTHER DATA:
Cash flow provided by (used in) (1):
Operating activities............................................ $ 71,285 $ 303,236
Investing activities............................................ (72,634) (306,421)
Financing activities............................................ 70,905 (88,481)
Funds From Operations of the Operating Partnership (2)............ $ 86,778 $ 354,491
=========== ===========
Funds From Operations allocable to the Simon DeBartolo Group...... $ 53,282 $ 217,657
=========== ===========
</TABLE>
- ---------------
(1) The pro forma cash flow information for the three months ended March 31,
1996 and the year ended December 31, 1995 is based on the combined
historical information of SPG and DRC adjusted as if the Merger and the
Other Transactions had occurred as of the beginning of the respective
periods.
(2) Funds From Operations, as used in the above table and as defined by NAREIT
(as defined in the "GLOSSARY"), means the consolidated net income of the
Operating Partnership without giving effect to depreciation and
amortization, gains or losses from extraordinary items, gains or losses on
sales of real estate, gains or losses on investments in marketable
securities and any provision/benefit for income taxes for such period, plus
the allocable portion, based on the Simon DeBartolo Group's ownership
interest, of Funds From Operations of unconsolidated entities all determined
on a consistent basis in accordance with generally accepted accounting
principles. The management of SPG and DRC believe that Funds From Operations
is an important and widely used measure of the operating performance of
REITs which provides a relevant basis for comparison among REITs. Funds From
Operations is presented to assist investors in analyzing the performance of
the Simon DeBartolo Group. The method of calculating Funds From Operations
as used in the above table may be different from methods used by other
REITs. Funds From Operations: (i) does not represent cash flow from
operations as defined by generally accepted accounting principles; (ii)
should not be considered as an alternative to net income as a measure of
operating performance or to cash flows from operating, investing and
financing activities; and (iii) is not an alternative to cash flows as a
measure of liquidity. In March 1995, NAREIT modified its definition of Funds
From Operations. The modified definition provides that amortization of
deferred financing costs and depreciation of non-rental real estate assets
are no longer to be added back to net income in arriving at Funds From
Operations. The modified definition was adopted for the pro forma period
ended March 31, 1996. If the modified definition had been adopted for the
pro forma period ended December 31, 1995, Funds From Operations of the
Operating Partnership and Funds From Operations allocable to the Simon
DeBartolo Group would have been $346,017 and $212,454, respectively.
17
<PAGE> 32
The following table reconciles pro forma income of the Operating
Partnership to pro forma Funds From Operations for the periods presented:
<TABLE>
<CAPTION>
FOR THE THREE FOR THE YEAR
MONTHS ENDED ENDED
MARCH 31, 1996 DECEMBER 31, 1995
-------------- -----------------
<S> <C> <C>
Pro forma income of the Operating Partnership before extraordinary
items................................................................ $ 41,652 $ 173,482
Plus:
Depreciation and amortization less minority interests for
consolidated properties plus the Operating Partnership's share
from
unconsolidated affiliates....................................... 47,157 180,471
Amortization included in interest expense......................... -- 3,774
Less:
Operating Partnership's share of gains on sales of assets......... -- (1,746)
Preferred distributions........................................... (2,031) (1,490)
------- --------
Pro forma Funds From Operations of the Operating Partnership........... $ 86,778 $ 354,491
======= ========
Pro forma Funds From Operations allocable to the Simon DeBartolo
Group................................................................ $ 53,282 $ 217,657
======= ========
</TABLE>
18
<PAGE> 33
SUMMARY HISTORICAL FINANCIAL DATA OF SPG
The following summary historical financial data of SPG and summary combined
historical financial data of the SPG Predecessor (as defined in the "GLOSSARY")
are derived from the Consolidated Financial Statements of SPG and the combined
financial statements of the SPG Predecessor incorporated by reference into this
Prospectus/Joint Proxy Statement.
<TABLE>
<CAPTION>
SPG
---------------------------
(IN THOUSANDS, EXCEPT PER
SHARE AND PROPERTY DATA)
FOR THE THREE MONTHS ENDED
MARCH 31,
---------------------------
1996 1995
---------- ----------
<S> <C> <C>
OPERATING DATA:
Total revenue.............................................................. $ 139,444 $ 129,490
Depreciation and amortization.............................................. 24,672 21,107
Operating income before interest........................................... 61,073 58,865
Interest expense........................................................... 38,566 38,933
Income before extraordinary items.......................................... 23,832 22,207
Extraordinary items........................................................ (265) --
Income of SPG Operating Partnership after extraordinary items.............. 23,567 22,207
Less--limited partners' interest in SPG Operating Partnership.............. 8,382 9,560
---------- ----------
Net income................................................................. 15,185 12,647
Preferred dividends........................................................ 2,031 --
---------- ----------
Net income................................................................. $ 13,154 $ 12,647
========== ==========
EARNINGS PER SHARE OF COMMON STOCK:
Income before extraordinary items.......................................... $ 0.23 $ 0.26
Extraordinary items........................................................ 0.00 0.00
---------- ----------
Net income................................................................. $ 0.23 $ 0.26
---------- ----------
Distributions per share of common stock.................................... $ 0.49 $ 0.49
========== ==========
Weighted average shares outstanding........................................ 58,382 49,378
BALANCE SHEET DATA:
Investment properties, net................................................. $2,015,850 $1,876,222
Total assets............................................................... 2,532,548 2,306,434
Mortgages and notes payable................................................ 1,995,620 1,959,972
Limited partners' interest in SPG Operating Partnership.................... 78,366 55,263
Stockholders' equity....................................................... $ 216,082 $ 75,289
OTHER DATA:
Cash flow provided by (used in):
Operating activities..................................................... $ 39,248 $ 41,735
Investing activities..................................................... (18,570) (11,963)
Financing activities..................................................... (38,254) (39,534)
Funds From Operations of SPG Operating Partnership(3)...................... $ 48,680 $ 44,743
========== ==========
Funds From Operations allocable to SPG(3).................................. $ 29,727 $ 25,480
========== ==========
</TABLE>
19
<PAGE> 34
<TABLE>
<CAPTION>
SPG
---------------------------
(IN THOUSANDS, EXCEPT PER
SHARE
AND PROPERTY DATA)
FOR THE THREE MONTHS ENDED
MARCH 31,
---------------------------
1996 1995
---------- ----------
<S> <C> <C>
EBITDA(4):
Wholly-owned and consolidated joint venture properties..................... $ 85,745 $ 82,322
Non-consolidated joint venture portfolio properties........................ 29,996 19,464
---------- ----------
Total of properties........................................................ $ 115,741 $ 101,786
========== ==========
EBITDA after minority interest............................................. $ 91,112 $ 85,123
PROPERTY DATA:
OCCUPANCY AT END OF PERIOD:
Regional malls(5).......................................................... 83.0% 84.3%
Community shopping centers................................................. 93.1% 94.0%
Total tenant sales (millions)(6)........................................... $ 1,032 $ 934
NUMBER OF PORTFOLIO PROPERTIES AT END OF PERIOD:
Regional malls........................................................... 62 59
Specialty retail and mixed-use........................................... 5 5
Community shopping centers............................................... 55 55
---------- ----------
Total................................................................. 122 119
========== ==========
AVERAGE RENT PER SQUARE FOOT AT END OF PERIOD(7):
Regional malls(5).......................................................... $ 19.70 $ 17.79
Community shopping centers................................................. $ 7.36 $ 7.21
GLA AT END OF PERIOD (IN THOUSANDS OF SQUARE FEET)......................... 62,219 58,259
</TABLE>
20
<PAGE> 35
SUMMARY HISTORICAL FINANCIAL DATA OF SPG (CONTINUED)
<TABLE>
<CAPTION>
SPG SPG PREDECESSOR
---------------------------------------- ---------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE AND PROPERTY DATA)
FOR THE FOR THE
PERIOD FROM PERIOD FROM
FOR THE YEAR ENDED DECEMBER 20 TO JANUARY 1 TO FOR THE YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 19, DECEMBER 31,
----------------------- -------------- ------------- -----------------------
1995(1) 1994(1) 1993 1993 1992 1991
---------- ---------- -------------- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Total revenue.................... $ 553,657 $ 473,676 $ 18,424 $ 405,869 $ 400,852 $ 378,029
Depreciation and amortization.... 92,739 75,945 2,051 60,243 58,104 56,033
Operating income before
interest....................... 251,136 214,298 12,278 169,825 166,066 148,073
Interest expense (2)............. 150,224 150,164 3,548 156,909 178,075 159,798
Income (loss) before
extraordinary items............ 101,505 60,308 8,707 6,912 (11,692) (15,865)
Extraordinary items.............. (3,285) (17,980) (30,481) 26,189 -- --
Income (loss) of SPG Operating
Partnership after extraordinary
items.......................... 98,220 42,328 (21,774) 33,101 (11,692) (15,865)
Less--limited partners' interest
in SPG Operating Partnership... 38,949 18,951 (10,408) -- -- --
---------- ---------- ---------- -------- ---------- ----------
Net income (loss)................ 59,271 23,377 (11,366) 33,101 (11,692) (15,865)
Preferred dividends.............. 1,490 -- -- -- -- --
---------- ---------- ---------- -------- ---------- ----------
Net income (loss)................ $ 57,781 $ 23,377 $ (11,366) $ 33,101 $ (11,692) $ (15,865)
========== ========== ========== ======== ========== ==========
EARNINGS PER SHARE OF COMMON
STOCK:
Income before extraordinary
items.......................... $ 1.08 $ 0.71 $ 0.11 N/A N/A N/A
Extraordinary items.............. (0.04) (0.21) (0.39) N/A N/A N/A
---------- ---------- ----------
Net income (loss)................ $ 1.04 $ 0.50 $ (0.28) N/A N/A N/A
========== ========== ==========
Distributions per share of common
stock.......................... $ 1.97 $ 1.90 -- N/A N/A N/A
Weighted average shares
outstanding.................... 55,312 47,012 40,950 N/A N/A N/A
BALANCE SHEET DATA:
Investment properties, net....... $2,009,344 $1,829,111 $1,350,360 N/A $1,156,009 $1,143,050
Total assets..................... 2,556,436 2,316,860 1,793,654 N/A 1,494,289 1,432,028
Mortgages and notes payable...... 1,980,759 1,938,091 1,455,884 N/A 1,711,778 1,548,292
Limited partners' interest in SPG
Operating Partnership.......... 86,692 44,386 27,032 N/A N/A N/A
Stockholders' equity and owners'
(deficit)...................... $ 232,946 $ 57,307 $ 29,521 N/A $ (565,566) $ (418,697)
OTHER DATA:
Cash flow provided by (used in):
Operating activities........... $ 194,336 $ 128,023 N/A N/A N/A N/A
Investing activities........... (222,679) (266,772) N/A N/A N/A N/A
Financing activities........... (14,075) 133,263 N/A N/A N/A N/A
Funds From Operations of SPG
Operating Partnership (3)...... $ 208,348 $ 176,384 N/A N/A N/A N/A
========== ==========
Funds From Operations allocable
to SPG......................... $ 124,592 $ 98,215 N/A N/A N/A N/A
========== ==========
</TABLE>
21
<PAGE> 36
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AND PROPERTY DATA)
<S> <C> <C> <C> <C> <C>
EBITDA(4):
Wholly-owned and consolidated joint venture
properties.................................. $343,875 $290,243 $244,397 $224,170 $204,106
Non-consolidated joint venture portfolio
properties.................................. 93,673 96,592 102,282 92,365 78,220
-------- -------- -------- -------- --------
Total of properties........................... $437,548 $386,835 $346,679 $316,535 $282,326
======== ======== ======== ======== ========
EBITDA after minority interest................ $357,158 $307,372 $256,169 $227,931 $210,634
PROPERTY DATA:
OCCUPANCY AT END OF PERIOD:
Regional malls (5)............................ 86.4% 86.2% 85.6% 84.6% 85.2%
Community shopping centers.................... 95.1% 94.6% 89.3% 89.3% 86.4%
Total tenant sales (millions) (6)............. $ 6,868 $ 6,504 $ 6,291 $ 5,968 $ 5,539
NUMBER OF PORTFOLIO PROPERTIES AT END OF
PERIOD:
Regional malls.............................. 62 59 54 53 53
Specialty retail and mixed-use.............. 5 5 5 5 4
Community shopping centers.................. 55 55 55 52 51
-------- -------- -------- -------- --------
Total.................................... 122 119 114 110 108
======== ======== ======== ======== ========
AVERAGE RENT PER SQUARE FOOT AT THE END OF
PERIOD (7):
Regional malls (5)............................ $ 18.68 $ 17.43 $ 16.91 $ 16.14 $ 14.96
Community shopping centers.................... $ 7.27 $ 7.09 $ 6.88 $ 6.78 $ 6.27
GLA AT END OF PERIOD (IN THOUSANDS OF SQUARE
FEET)....................................... 62,232 58,200 54,042 52,404 51,375
</TABLE>
- ---------------
SPG Summary Historical Footnotes
(1) See Note 4 to the Financial Statements of SPG contained in SPG's Annual
Report on Form 10-K for the year ended December 31, 1995 incorporated by
reference into this Prospectus/Joint Proxy Statement which describes 1995
and 1994 real estate acquisitions.
(2) Interest expense for the year ended December 31, 1994 includes $27.2 million
of additional contingent interest paid in connection with the refinancing of
a property. The property lender was entitled to participate in the
appreciated market value of the property upon refinancing. None of the other
mortgages or debt instruments affecting the SPG Portfolio Properties
contains similar provisions and SPG's management does not presently expect
to enter into financing arrangements with similar participation features in
the future. Accordingly, SPG's management considers the payment made to the
lender unusual in nature. As explained in footnote (3) below, unusual or
extraordinary items are excluded for purposes of computing Funds From
Operations. Accordingly, this item has been excluded from Funds From
Operations in this table.
(3) Funds From Operations, as used in the above table and as defined by NAREIT,
means the consolidated net income of the SPG Operating Partnership without
giving effect to depreciation and amortization, gains or losses from
extraordinary items, gains or losses on sales of real estate, gains or
losses on investments in marketable securities and any provision/benefit for
income taxes for such period, plus the allocable portion, based on SPG's
ownership interest, of Funds From Operations of unconsolidated entities, all
determined on a consistent basis in accordance with generally accepted
accounting principles. SPG's management believes that Funds From Operations
is an important and widely used measure of the operating performance of
REITs which provides a relevant basis for comparison among REITs. Funds From
Operations is presented to assist investors in analyzing the performance of
SPG. SPG's method of calculating Funds From Operations may be different from
the methods used by other REITs. Funds From Operations: (i) does not
represent cash flow from operations as defined by generally accepted
accounting principles; (ii) should not be considered as an alternative to
net income as a measure of operating performance or to cash flows from
operating, investing and financing activities; and (iii) is not an
alternative to cash flows as a measure of liquidity. In March 1995, NAREIT
modified its definition of Funds From Operations. The modified definition
provides that amortization of deferred financing costs and depreciation of
non-rental real estate assets are no longer to be added back to net income
in arriving at Funds From Operations. The modified definition was adopted
for the period ended March 31, 1996. If the modified definition had been
adopted in each of the prior periods, Funds From Operations of SPG Operating
Partnership would have been $41,936 for the three month period ended March
31, 1995 and $197,909 and $167,761 for the years ended December 31, 1995 and
1994, respectively. Similarly, Funds
22
<PAGE> 37
From Operations allocable to SPG would have been $23,882 for the three month
period ended March 31, 1995 and $119,339 and $92,604 for 1995 and 1994,
respectively.
(4) Total EBITDA represents earnings before interest, taxes, depreciation and
amortization for all properties. EBITDA after minority interest represents
earnings before interest, taxes, depreciation and amortization for all
properties after distribution to the third-party joint venture partners.
EBITDA: (i) does not represent cash flow from operations as defined by
generally accepted accounting principles; (ii) should not be considered as
an alternative to net income as a measure of operating performance or to
cash flows from operating, investing and financing activities; and (iii) is
not an alternative to cash flows as a measure of liquidity. SPG's management
believes that in addition to cash flows and net income, EBITDA is a useful
financial performance measurement for assessing the operating performance of
an equity REIT because, together with net income and cash flows, EBITDA
provides investors with an additional basis to evaluate the ability of a
REIT to incur and service debt and to fund acquisitions and other capital
expenditures. To evaluate EBITDA and the trends it depicts, the components
of EBITDA, such as revenues and operating expenses, should be considered.
SPG's method of calculating EBITDA may be different from the methods used by
other REITs. SPG's weighted average share of the operating results for the
three months ended March 31, 1996 and 1995 was 61.0% and 57.0% and was
60.3%, 55.2% and 52.2% in 1995, 1994 and 1993, respectively. SPG's share of
the SPG Operating Partnership was 61.1% and 57.7% at March 31, 1996 and
1995, respectively, and was 61.0% and 56.4% at December 31, 1995 and 1994,
respectively.
(5) Includes mall and freestanding stores at regional malls. Also includes
non-anchor specialty centers and the retail space at mixed-use properties.
(6) Based on reports of sales furnished by tenants. Does not include sales by
retailers that own their own stores or are otherwise not required to report
sales.
(7) Represents annualized base rent per leased square foot of mall and
freestanding Owned GLA at regional malls and Owned GLA at community shopping
centers.
23
<PAGE> 38
SUMMARY HISTORICAL FINANCIAL DATA OF DRC
The following summary historical financial data of DRC and summary combined
historical financial data of the DRC Predecessor (as defined in the "GLOSSARY")
are derived from the Consolidated Financial Statements of DRC and the combined
financial statements of the DRC Predecessor incorporated by reference into this
Prospectus/Joint Proxy Statement.
<TABLE>
<CAPTION>
DRC
-------------------------
(IN THOUSANDS, EXCEPT PER
SHARE AND PROPERTY DATA)
FOR THE THREE MONTHS
ENDED
MARCH 31,
-------------------------
1996 1995
---------- ----------
<S> <C> <C>
OPERATING DATA:
Total revenue........................................................ $ 88,426 $ 79,229
Depreciation and amortization........................................ 15,525 14,160
Operating income before interest..................................... 39,744 36,812
Interest expense..................................................... 29,524 30,873
Income before extraordinary items.................................... 13,766 11,739
Extraordinary items.................................................. 9,191 --
---------- ----------
Income of DRC Operating Partnership after extraordinary items........ 22,957 11,739
Less--limited partners' interest in DRC Operating Partnership........ (8,762) (4,842)
---------- ----------
Net income......................................................... $ 14,195 $ 6,897
========= =========
EARNINGS PER SHARE OF COMMON STOCK:
Income before extraordinary items.................................... $ 0.15 $ 0.14
Extraordinary items.................................................. 0.10 --
---------- ----------
Net income........................................................... $ 0.25 $ 0.14
========= =========
Distributions per share of common stock.............................. $ 0.32 $ 0.32
Weighted average shares outstanding.................................. 55,610 48,982
BALANCE SHEET DATA:
Investment properties, net........................................... $1,330,507 $1,216,882
Total assets......................................................... 1,600,914 1,558,005
Mortgages and notes payable (1)...................................... 1,470,274 1,408,501
Limited partners' interest in DRC Operating Partnership.............. 8,295 5,332
Stockholders' equity................................................. $ 13,451 $ 7,593
OTHER DATA:
Cash flow provided by (used in):
Operating activities............................................... $ 32,037 $ 29,292
Investing activities............................................... (17,864) (3,290)
Financing activities............................................... (32,651) (26,116)
DRC Operating Partnership's share of cash generated before debt
repayments and capital expenditures(2)............................. $ 33,700 $ 28,700
========= =========
Cash generated before debt repayments and capital expenditures
applicable to DRC's shareholders(3)................................ $ 20,800 $ 16,900
========= =========
</TABLE>
24
<PAGE> 39
<TABLE>
<CAPTION>
DRC
-------------------------
(IN THOUSANDS, EXCEPT PER
SHARE AND PROPERTY DATA)
FOR THE THREE MONTHS
ENDED
MARCH 31,
-------------------------
1996 1995
---------- ----------
<S> <C> <C>
EBITDA(4):
Wholly-owned and consolidated joint venture properties............... $ 55,322 $ 51,025
Non-consolidated joint venture portfolio properties.................. 21,795 23,036
---------- ----------
Total of properties.................................................. $ 77,117 $ 74,061
========= =========
EBITDA after minority interest....................................... $ 63,449 $ 59,510
PROPERTY DATA:
OCCUPANCY AT END OF PERIOD:
Mall GLA leased at end of period................................... 84.2% 84.0%
Mall store sales (thousands)....................................... $ 612,300 $ 590,200
NUMBER OF PORTFOLIO PROPERTIES AT END OF PERIOD:
Regional malls..................................................... 50 51
Community shopping centers......................................... 11 11
---------- ----------
Total........................................................... 61 62
========= =========
</TABLE>
25
<PAGE> 40
SUMMARY HISTORICAL FINANCIAL DATA OF DRC (CONTINUED)
<TABLE>
<CAPTION>
DRC DRC PREDECESSOR
--------------------------- ----------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE AND PROPERTY DATA)
FOR THE FOR THE
FOR THE YEAR PERIOD FROM PERIOD FROM
ENDED APRIL 21 TO JANUARY 1, TO
DECEMBER 31, DECEMBER 31, APRIL 20, FOR THE YEAR ENDED DECEMBER 31,
------------ ------------ ------------- ------------------------------------
1995 1994 1994 1993 1992 1991
------------ ------------ ------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Total revenue...................... $ 332,657 $ 228,943 $95,272 $ 308,955 $ 295,899 $ 281,835
Depreciation and amortization...... 58,603 39,578 16,616 54,227 54,751 48,939
Operating income before interest... 155,556 104,672 43,008 135,200 118,204 122,293
Interest expense................... 124,567 87,040 44,119 152,683 155,927 157,070
Income (loss) before extraordinary
items............................ 46,343 27,668 3,905 (9,762) (25,448) (22,095)
Extraordinary items................ (11,267) (8,932) -- -- -- --
---------- ---------- ------- ---------- ---------- ----------
Income (loss) of the DRC Operating
Partnership after extraordinary
items............................ 35,076 18,736 3,905 (9,762) (25,448) (22,095)
Less--limited partners' interest in
the DRC Operating Partnership.... 14,165 7,728 -- -- -- --
---------- ---------- ------- ---------- ---------- ----------
Net income (loss).................. $ 20,911 $ 11,008 $ 3,905 $ (9,762) $ (25,448) $ (22,095)
========== ========== ======= ========== ========== ==========
EARNINGS PER COMMON SHARE:
Income before extraordinary
items............................ $ 0.53 $ 0.34 N/A N/A N/A N/A
Extraordinary items................ (0.13) (0.11) N/A N/A N/A N/A
---------- ----------
Net Income (loss).................. $ 0.40 $ 0.23 N/A N/A N/A N/A
========== ==========
Distributions per common share..... $ 1.26 $ 0.875 N/A N/A N/A N/A
Weighted average shares
outstanding...................... 51,687 48,372 N/A N/A N/A N/A
BALANCE SHEET DATA:
Investment properties, net......... $1,219,325 $1,217,838 N/A $1,228,453 $1,257,962 $1,215,663
Total assets....................... 1,531,994 1,572,970 N/A 1,645,080 1,683,717 1,674,802
Mortgages and notes payable (1).... 1,348,573 1,409,827 N/A 1,628,711 1,612,748 1,569,798
Limited partners' interest in the
DRC Operating Partnership........ 17,142 11,253 N/A -- -- --
Shareholders' equity and owners'
(deficit)........................ $ 27,673 $ 16,026 N/A $ (114,702) $ (79,524) $ (68,933)
OTHER DATA:
Cash flow provided by (used in):
Operating activities............. $ 108,900 N/A N/A N/A N/A N/A
Investing activities............. (47,542) N/A N/A N/A N/A N/A
Financing activities............. (74,406) N/A N/A N/A N/A N/A
DRC Operating Partnership's share
of cash generated before debt
repayments and capital
expenditures(2).................. $ 129,600 N/A N/A N/A N/A N/A
Cash generated before debt
repayments and capital
expenditures applicable to DRC's
shareholders(3).................. $ 77,900 N/A N/A N/A N/A N/A
</TABLE>
26
<PAGE> 41
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AND PROPERTY DATA)
<S> <C> <C> <C> <C> <C>
EBITDA(4):
Wholly-owned and consolidated joint
venture portfolio properties........ $ 214,369 $ 207,932 $ 189,427 $ 177,437 $ 171,232
Non-consolidated joint venture
properties.......................... 95,563 92,796 85,325 81,277 75,491
---------- ---------- ---------- ---------- ----------
Total of portfolio properties......... $ 309,932 $ 300,728 $ 274,752 $ 258,714 $ 246,723
========== ========== ========== ========== ==========
EBITDA after minority interest........ $ 251,563 $ 240,740 $ 217,508 $ 201,902 $ 179,156
PROPERTY DATA:
OCCUPANCY AT END OF PERIOD:
Mall GLA leased at end of year...... 84.4% 85.0% 86.2% 87.2% 88.7%
Mall store sales.................... $2,813,254 $2,786,625 $2,805,182 $2,782,239 $2,682,069
NUMBER OF PROPERTIES AT END OF PERIOD:
Regional malls...................... 51 51 51 51 51
Community shopping centers.......... 11 11 11 11 11
---------- ---------- ---------- ---------- ----------
Total............................ 62 62 62 62 62
========== ========== ========== ========== ==========
AVERAGE BASE RENT PER SQUARE FOOT FOR
DEBARTOLO MALLS..................... $ 19.78 $ 19.39 $ 18.49 $ 17.54 $ 16.40
MALL GLA (IN THOUSANDS OF SQUARE
FEET)............................... 15,163 15,300 14,945 14,886 14,926
</TABLE>
- ---------------
DRC Summary Historical Footnotes
(1) DRC's pro rata share of mortgages and notes payable (including
nonconsolidated joint ventures) was $1,555,099 as of December 31, 1995.
(2) Industry analysts generally consider cash generated before debt repayments
and capital expenditures (also commonly referred to as funds from
operations) to be an appropriate measure of the performance of an equity
REIT. Cash generated before debt repayments and capital expenditures
represents net income (loss) (computed in accordance with generally accepted
accounting principles), excluding gains (losses) from debt restructuring and
sales of property (other than adjacent land located at DRC properties after
April 21, 1994), plus depreciation and amortization and other non-cash
items. DRC's management believes that cash generated before debt repayments
and capital expenditures is an important and widely used measure of the
operating performance of REITs which provides a relevant basis for
comparison among REITs. Cash generated before debt repayments and capital
expenditures is presented to assist investors in analyzing the performance
of DRC. DRC's method of calculating cash generated before debt repayments
and capital expenditures may be different from the methods used by other
REITs to calculate funds from operations. Cash generated before debt
repayments and capital expenditures: (i) does not represent cash flow from
operations as defined by generally accepted accounting principles; (ii)
should not be considered as an alternative to net income as a measure of
operating performance or to cash flows from operating, investing and
financing activities; and (iii) is not an alternative to cash flows as a
measure of liquidity. In March 1995, NAREIT modified its definition of cash
generated before debt repayments and capital expenditures. The modified
definition provides that amortization of deferred financing costs and
depreciation of non-rental real estate assets are no longer to be added back
to net income in arriving at cash generated before debt repayments and
capital expenditures. The modified definition was adopted for the period
ended March 31, 1996 and included the add-back of certain formation costs of
$2,400 for such period as an unusual item. The cash generated before debt
repayments and capital expenditures for the three month period ended March
31, 1995 has been restated to $28,400 from $28,700, which includes the
add-back of certain formation costs of $3,900 for such period as an unusual
item. If the modified definition had been adopted in each of the prior
periods, cash generated before debt repayments and capital expenditures
would have been $128,200 for the period ended December 31, 1995, which
includes the add-back of certain formation costs of $12,700 for such period
as an unusual item.
(3) Represents DRC's share of cash generated before debt repayments and capital
expenditures.
27
<PAGE> 42
(4) Total EBITDA represents earnings before interest, taxes, depreciation and
amortization for all properties. EBITDA after minority interest represents
earnings before interest, taxes, depreciation and amortization for all
properties after distribution to the third-party joint venture partners.
EBITDA: (i) does not represent cash flow from operations as defined by
generally accepted accounting principles; (ii) should not be considered as
an alternative to net income as a measure of operating performance or to
cash flows from operating, investing and financing activities; and (iii) is
not an alternative to cash flows as a measure of liquidity. DRC's management
believes that in addition to cash flows and net income, EBITDA is a useful
financial performance measurement for assessing the operating performance of
an equity REIT because, together with net income and cash flows, EBITDA
provides investors with an additional basis to evaluate the ability of a
REIT to incur and service debt and to fund acquisitions and other capital
expenditures. To evaluate EBITDA and the trends it depicts, the components
of EBITDA, such as revenues and operating expenses, should be considered.
DRC's method of calculating EBITDA may be different from the methods used by
other REITs. DRC's weighted average share of the operating results for the
three months ended March 31, 1996 and 1995 was 61.8% and 58.8% and was 59.6%
in 1995. DRC's share of the DRC Operating Partnership was 61.9% and 58.8% at
March 31, 1996 and 1995, respectively, and was 61.8% and 58.8% at December
31, 1995 and 1994, respectively.
See "PRO FORMA COMBINED AND SELECTED HISTORICAL FINANCIAL DATA."
28
<PAGE> 43
RISK FACTORS
SPG stockholders and DRC shareholders should carefully consider, among
other things, the following risk factors before approving the Merger. Certain
statements set forth below under this caption may constitute "forward-looking
statements" within the meaning of the Reform Act. See "SPECIAL NOTE REGARDING
FORWARD-LOOKING STATEMENTS" for additional factors relating to such statements.
CONFLICTS OF INTEREST RELATED TO THE MERGER
Conflicts of interest related to the Merger exist because certain members
of the Board of Directors and management of each of SPG and DRC have certain
interests in, and will receive certain benefits from, the Merger that are in
addition to the interests of and benefits to the stockholders of SPG and
shareholders of DRC generally.
CONTINUING SUBSTANTIAL INFLUENCE OF THE SIMONS AND THE DEBARTOLOS
If the Required Vote is obtained, the Amended SPG Charter will govern the
Simon DeBartolo Group. As a result, the Simons and the DeBartolos, separately
and collectively, may have influence over, among other things, matters that will
be submitted by the Board of Directors of the Simon DeBartolo Group to its
stockholders for a vote. Such matters could involve proposals effecting or
preventing transactions that could result in a change of control of the Simon
DeBartolo Group.
The Amended SPG Charter will provide that the Board of Directors of the
Simon DeBartolo Group will consist of 13 members. Under the Amended SPG Charter,
(i) the Simons will continue to own all the outstanding shares of Class B Common
Stock, enabling the Simons to elect four of the 13 members of the Board of
Directors, and (ii) the DeBartolos will own all of the outstanding shares of
Class C Common Stock, enabling the DeBartolos to elect two of the 13 members of
the Board of Directors of the Simon DeBartolo Group. Although the Simons and the
DeBartolos will have the right to elect a total of six directors, all holders of
Equity Stock (including the Class B and Class C Common Stock) will then have the
right, voting together as a single class, to elect the remaining seven
directors. See "AMENDMENTS TO SPG'S CHARTER AND BY-LAWS--Size of the SPG Board
of Directors."
In addition, following the consummation of the Merger, the Simons will
continue to own 95% of the outstanding voting common stock of the SPG Management
Company, enabling the Simons to control all stockholder votes and the election
of the board of directors of the SPG Management Company, which will own 95% of
the outstanding voting stock of the DRC Management Company. See "THE
MERGER--Certain Transactions and Agreements Relating to the Merger."
AMENDED AND RESTATED PARTNERSHIP AGREEMENTS
The Amended Operating Partnership Agreement differs from the existing SPG
Operating Partnership Agreement and modifies the existing DRC Operating
Partnership Agreement with respect to special tax distributions to Limited
Partners on the sale of certain properties, certain rights to exchange Units for
cash in lieu of SPG Common Stock and certain rights to sell such Units pursuant
to particular exemptions to the general restrictions on transferability of the
Units. In general, such benefits and restrictions are not applicable to, and do
not run in favor of, the stockholders of SPG, the shareholders of DRC or, after
the Effective Time, the stockholders of the Simon DeBartolo Group. Nevertheless,
such differences between the treatment of limited partners under the Operating
Partnership's partnership agreement and the stockholders of the Simon DeBartolo
Group could give rise to conflicts or divergence of the interests of such
security holders from time to time. See "CERTAIN AGREEMENTS--The Agreements of
Limited Partnership."
Pursuant to the Amended Operating Partnership Agreement, in each of 1996,
1997 and 1998 EJDC is permitted to dispose of Units held by EJDC (together with
its affiliates) at the Effective Time in order to satisfy amortization
requirements under certain outstanding indebtedness of EJDC (the "EJDC Sales
Rights"). The EJDC Sales Rights modify similar rights granted to EJDC (and its
affiliates) in the existing DRC Operating Partnership Agreement. See "--Possible
Adverse Effects on Stock Prices Arising from Shares Available for Future Sale"
and "CERTAIN AGREEMENTS--The Agreements of Limited Partnership."
TERMINATION OF NONCOMPETITION AGREEMENT
EJDC, Edward J. DeBartolo, Jr. and M. Denise DeBartolo York, among others,
previously executed a noncompetition agreement with DRC, which agreement will be
terminated in connection with the Merger. Pursuant to the Stockholders
Agreement, Mr. DeBartolo and Ms. York have agreed to refrain from using the
"DeBartolo" name in any business that owns, manages, leases or develops regional
shopping malls. See "THE MERGER--Certain Transactions
29
<PAGE> 44
and Agreements Relating to the Merger--Other Transactions--Termination
Agreement" and "CERTAIN AGREEMENTS--Stockholders Agreement."
OTHER CONFLICTS
For a discussion of an employment agreement to take effect at the Effective
Time, changes in the Ownership Limit (as defined in the "GLOSSARY") and
indemnification arrangements with respect to the DRC Board of Directors, see
"MANAGEMENT OF SPG AND THE SIMON DeBARTOLO GROUP BEFORE AND AFTER THE
MERGER--Employment Agreement," "AMENDMENTS TO SPG'S CHARTER AND
BY-LAWS--Restrictions on Transfer" and "THE MERGER--Certain Additional Covenants
of SPG," respectively.
RISKS ASSOCIATED WITH FAILURE TO OBTAIN REQUIRED VOTE
If the Required Vote is not obtained but the Merger is nonetheless
approved, the Alternative Amended SPG Charter and Alternative Amended SPG
By-laws will govern the Simon DeBartolo Group. The Alternative Amended SPG
Charter will provide that the Board of Directors of the Simon DeBartolo Group
will continue to consist of nine members. Under the Alternative Amended SPG
Charter, (i) the Simons will continue to own all of the outstanding shares of
Class B Common Stock, enabling the Simons to elect four of the nine members of
the Board of Directors and (ii) no Class C Common Stock will be authorized.
Nevertheless, under the terms of the Stockholders Agreement, the DeBartolos will
have the right (i) to designate one nominee for election as a director, whom the
Simons, as the holders of the Class B Common Stock, have agreed to elect, and
(ii) to designate for nomination two directors initially and, after two years,
one director to be elected by the holders of Equity Stock, voting together as a
single class. See "CERTAIN ALTERNATIVE GOVERNANCE ARRANGEMENTS AND RELATED
MATTERS IF THE REQUIRED VOTE IS NOT OBTAINED" and "THE MERGER--Benefits of the
Merger and the Other Transactions to the Simons and the DeBartolos." While the
directors so nominated by the DeBartolos technically will constitute
"Independent Directors" under the Alternative Amended SPG Charter, the directors
elected by the Simons and the directors designated by the DeBartolos together
would constitute a majority of the Board of Directors of the Simon DeBartolo
Group, effectively enabling the Simons and the DeBartolos, acting together, to
control the Board of Directors or, acting separately, to exercise substantial
influence over the Board of Directors.
POTENTIAL ADVERSE EFFECTS OF COMBINING THE COMPANIES
SPG and DRC are large enterprises with operations nationwide. There can be
no assurance that costs or other factors associated with the integration of the
two companies would not adversely affect future combined results of operations
or the benefits of expected cost savings.
CONFLICTS OF INTEREST RELATED TO OPERATIONS; FAILURE TO ENFORCE TERMS OF
PARTNERSHIP AGREEMENT AND OTHER AGREEMENTS
The potential for conflicts of interest currently exists in the operations
of SPG and DRC because the Simons and the DeBartolos historically have been
interested parties on both sides of certain transactions involving the business
and properties of SPG and DRC, respectively. These historical arrangements and
therefore the potential for such conflicts of interest will survive the Merger.
Following the Merger, decisions regarding the enforcement of the terms of
certain agreements of the Simon DeBartolo Group with the Simons and/or the
DeBartolos including, but not limited to, partnership agreements, agreements
related to the Property Partnerships (as defined in the "GLOSSARY") and
noncompetition agreements will be made only by the Independent Directors. The
failure to enforce the material terms of any such agreement, particularly the
indemnification provisions and the remedy provisions for breaches of
representations and warranties, could result in a substantial monetary loss to
the Simon DeBartolo Group.
POSSIBLE ADVERSE EFFECTS ON STOCK PRICES ARISING FROM SHARES AVAILABLE FOR
FUTURE SALE
If the Merger had occurred on March 31, 1996, the Simon DeBartolo Group
(including the Operating Partnership and the SPG Operating Partnership) would
have outstanding at such date 93,242,546 shares of SPG Common Stock, 3,200,000
shares of Class B Common Stock, 4,000 shares of Class C Common Stock (assuming
the Required Vote is obtained), 4,000,000 shares of Series A Preferred Stock
(which are convertible into shares of SPG Common Stock), 60,543,423 Units and
2,069,134 stock options. On March 31, 1996, if the Merger had occurred on such
date, in accordance with the New Registration Rights Agreement, up to a maximum
of 59,033,584 shares of SPG Common Stock would have been subject to registration
and sale at the demand of Rights Holders. In addition, in accordance with the
BJS Registration Rights Agreement, the Simon DeBartolo Group has registered
pursuant to the Registration Statement of which this Prospectus/Joint Proxy
Statement is a part the 4,315,970 shares of SPG Common Stock to be issued to BJS
in
30
<PAGE> 45
connection with the Merger in exchange for the DRC Common Stock owned by it in
order to permit sales of some or all of such shares of SPG Common Stock by BJS
from time to time. The New Registration Rights Agreement and the BJS
Registration Rights Agreement are more fully described in "CERTAIN
AGREEMENTS--The Registration Rights Agreements." Also, pursuant to the EJDC
Sales Rights, in each of 1996, 1997 and 1998 EJDC is permitted to dispose of the
Units held by EJDC (together with its affiliates) at the Effective Time in order
to satisfy amortization requirements aggregating approximately $369.0 million
under certain outstanding indebtedness of EJDC as more fully described in
"CERTAIN AGREEMENTS--The Agreements of Limited Partnership."
EJDC pledged its DRC Interests and other significant assets to secure
certain outstanding EJDC indebtedness. This indebtedness will not be an
obligation of the Simon DeBartolo Group, will not be secured by any of its
assets of the Simon DeBartolo Group and will not be cross-defaulted with
indebtedness of the Simon DeBartolo Group. A default on such EJDC indebtedness
may cause EJDC's lenders to foreclose on EJDC's Units. In such an event, it is
likely that the lenders or a single transferee from the lenders would attempt to
dispose of these Units. Such lenders or such single transferee from the lenders
may be permitted to exchange these Units for shares of SPG Common Stock or cash,
at the option of the Simon DeBartolo Group, and (if SPG elects to issue shares)
to dispose of such shares.
Sales of substantial numbers of shares of SPG Common Stock or Units, or the
perception that such sales could occur, could adversely affect the prevailing
market price for the SPG Common Stock. If such sales reduce the market price of
the SPG Common Stock, SPG's ability to raise additional capital in the equity
market could be adversely affected. The existence of registration rights
contained in various registration rights agreements also may adversely affect
the terms upon which the Simon DeBartolo Group can obtain additional equity in
the future. See "CERTAIN AGREEMENTS--The Registration Rights Agreements."
INCREASED INDEBTEDNESS OF SIMON DEBARTOLO GROUP AS COMPARED WITH SPG; NO
LIMITATION ON FURTHER INDEBTEDNESS
SPG currently has a policy of limiting the extent of its borrowings to not
more than 50% of Total Market Capitalization. The ratios of debt to Total Market
Capitalization of SPG and DRC on March 31, 1996 were 48.3% and 53.7%,
respectively. The Simon DeBartolo Group expects that its ratio of debt to Total
Market Capitalization will exceed 50% and does not intend to implement a policy
of limiting the extent of its borrowings. Any increase in the Simon DeBartolo
Group's ratio of indebtedness to Total Market Capitalization may have an adverse
effect on the ability of the Simon DeBartolo Group to satisfy certain financial
ratios specified in certain loan agreements as compared with SPG's ability to
satisfy such ratios. Neither the Amended SPG Charter nor the Alternative Amended
SPG Charter contains any limitation on the amount of indebtedness the Simon
DeBartolo Group may incur or the percentage of its Total Market Capitalization
that its borrowings may represent. Accordingly, the Simon DeBartolo Group could
become more leveraged, resulting in an increased risk of default on the
obligations of the Simon DeBartolo Group and in an increase in the debt service
requirements, both of which could adversely affect the financial condition or
results of operations of the Simon DeBartolo Group. The Simon DeBartolo Group
will, however, be a party to certain loan agreements that contain restrictive
covenants limiting the total amount of indebtedness that the Simon DeBartolo
Group will be permitted to incur.
As is currently the case with respect to SPG and DRC, the Simon DeBartolo
Group will be subject to the risks normally associated with debt financing,
including the risk that the Simon DeBartolo Group's cash flow from operations
will be insufficient to meet required payments of principal and interest, the
risk that existing indebtedness will not be able to be refinanced or that the
terms of such refinancing will not be as favorable as the terms of such
indebtedness and the risk that necessary capital expenditures for such purposes
as renovations and other improvements will not be able to be financed on
favorable terms or at all. Certain significant expenditures associated with a
property (such as mortgage payments) generally will not be reduced when
circumstances cause a reduction in income from such property. Should such events
occur, the Simon DeBartolo Group's Funds From Operations and its ability to make
expected distributions to its stockholders may be adversely affected. If a
property is mortgaged to secure payment of indebtedness and the Simon DeBartolo
Group is unable to meet mortgage payments, the property could be transferred to
the mortgagee with a possible consequent loss of income and asset value to the
Simon DeBartolo Group. Certain of the mortgage indebtedness of the Simon
DeBartolo Group will contain cross-default and cross-collateralization features
among various properties. Under cross-default provisions, a default under any
mortgage included in the cross-defaulted package constitutes a default under all
such mortgages and can lead to acceleration of the indebtedness due on each
property within the collateral package. Pursuant to the cross-collateralization
feature, the excess of the value of a property over the mortgage indebtedness
specific to that property serves as additional collateral for indebtedness
against each other property within that particular financing package.
Certain loans of the Simon DeBartolo Group have and will have floating
interest rates. In certain cases, the Simon DeBartolo Group will continue to be
a party to existing interest rate protection agreements and will consider
additional
31
<PAGE> 46
ones with financial institutions whereby these institutions agree to indemnify
the Simon DeBartolo Group against the risk of increases in interest rates above
certain levels. Assuming the Merger occurred on March 31, 1996, of the $1,037.9
million total amount of the floating rate indebtedness of the Simon DeBartolo
Group on such date, $304.2 million would not be covered by such arrangements.
Approximately $2,323 million of the Simon DeBartolo Group's debt will
mature on or before April 30, 2001. The Simon DeBartolo Group does not expect to
have sufficient cash flow to make all of the balloon payments of principal when
due under mortgages on certain properties. It is intended that the Simon
DeBartolo Group will refinance such debt at or before maturity. However, there
can be no assurance that the Simon DeBartolo Group will be able to refinance
such indebtedness or otherwise to obtain funds by selling assets or by raising
equity. An inability to make any such balloon payment when due would permit the
mortgage lender to foreclose on such properties, which could have a material
adverse effect on the Simon DeBartolo Group. Interest rates on any debt issued
to refinance such mortgage debt may be higher than the rates on the current
mortgages, which could adversely affect cash generated before debt repayments
and capital expenditures available for distribution. See "PRO FORMA COMBINED AND
SELECTED HISTORICAL FINANCIAL DATA."
ISSUANCE OF PREFERRED STOCK BY THE SIMON DEBARTOLO GROUP AND ISSUANCE OF
PREFERRED UNITS BY THE OPERATING PARTNERSHIP AND THE SPG OPERATING PARTNERSHIP
As is currently the case with each of SPG and DRC and their respective
Partnerships (as defined in the "GLOSSARY"), following the Merger, the Simon
DeBartolo Group will be authorized (i) to issue and sell preferred stock, which
will have rights and preferences (including, but not limited to, the payment of
dividends) senior to the SPG Common Stock and (ii) to use the proceeds of such
issuances and sales to purchase preferred units in the Partnerships which will
have rights and preferences (including, but not limited to, the payment of
distributions) senior to Units or SPG Units, including Units or SPG Units owned
by the Simon DeBartolo Group or the Operating Partnership. The issuance of
preferred stock in the Simon DeBartolo Group and preferred units in the
Partnerships will not require further action by the stockholders of the Simon
DeBartolo Group.
FEDERAL INCOME TAX CONSEQUENCES
The Merger is expected to qualify for treatment as a tax-free
reorganization under Section 368(a) of the Code; however, in the event that the
Merger does not qualify as a Reorganization, each DRC shareholder will recognize
gain or loss equal to the difference between the shareholder's tax basis in the
DRC Common Stock and the fair market value of SPG Common Stock received in the
Merger. See "THE MERGER--Federal Income Tax Consequences to Holders of DRC
Common Stock." Any Dissenting Shareholder will recognize taxable gain or loss
upon receipt of cash in exchange for its shares.
CERTAIN TAX RISKS
LIMITS ON OWNERSHIP NECESSARY TO MAINTAIN REIT QUALIFICATION
In order to maintain the Simon DeBartolo Group's and the Surviving
Subsidiary Corporation's qualifications as REITs under the REIT Requirements (as
defined in the "GLOSSARY"), not more than 50% in value of the outstanding
capital stock of the Simon DeBartolo Group may be owned, directly or indirectly,
by five or fewer individuals (as defined in the Code to include certain
entities) during the last half of a taxable year (other than the first year).
The Amended SPG Charter or the Alternative Amended SPG Charter, as the case may
be, will prohibit ownership of more than 6% of the value of the outstanding
shares of capital stock of the Simon DeBartolo Group by any single stockholder
(with an exception for the Simons, who generally may not own more than 24% of
the value of the outstanding shares of capital stock of the Simon DeBartolo
Group).
REIT CLASSIFICATION
The Simon DeBartolo Group and the Surviving Subsidiary Corporation intend
to continue to operate so as to qualify as REITs under the REIT Requirements. A
REIT generally is not subject to federal income tax at the corporate level on
income it currently distributes to its stockholders so long as it distributes at
least 95% of its taxable income. The Simon DeBartolo Group and the Surviving
Subsidiary Corporation expect to continue to qualify as REITs, but no assurance
can be given that they will so qualify or be able to remain so qualified. As a
result of the REIT asset tests, a failure on the part of the Surviving
Subsidiary Corporation to qualify as a REIT would, in turn, cause the Simon
DeBartolo Group to fail to qualify as a REIT. See "THE MERGER--Federal Income
Tax Considerations Relating to the Simon DeBartolo Group and the Surviving
Subsidiary Corporation--Requirements for Qualification--Asset Tests." No
assurance can be given
32
<PAGE> 47
that legislation, new regulations, administrative interpretations or court
decisions will not significantly change the tax laws with respect to
qualification as a REIT or the federal income tax consequences of such
qualification.
If either the Simon DeBartolo Group or the Surviving Subsidiary Corporation
fails to qualify as a REIT, the nonqualifying entity will be subject to federal
income tax (including any applicable alternative minimum tax) on its taxable
income at regular corporate rates. In addition, as discussed above, if the
Surviving Subsidiary Corporation fails to qualify as a REIT, the Simon DeBartolo
Group similarly will be subject to federal income tax. Unless entitled to relief
under certain statutory provisions, the Simon DeBartolo Group and the Surviving
Subsidiary Corporation will be disqualified from treatment as a REIT for the
four taxable years following the year during which qualification is lost. The
additional tax would significantly reduce the Funds From Operations of the Simon
DeBartolo Group. See "THE MERGER--Federal Income Tax Considerations Relating to
the Simon DeBartolo Group and the Surviving Subsidiary Corporation."
EFFECT OF DISTRIBUTION REQUIREMENTS
To obtain and maintain their status as REITs, both the Simon DeBartolo
Group and the Surviving Subsidiary Corporation generally will be required each
year to distribute to their stockholders at least 95% of their taxable income
after certain adjustments. In addition, both the Simon DeBartolo Group and the
Surviving Subsidiary Corporation will be subject to a 4% nondeductible excise
tax on the amount, if any, by which certain distributions paid by them during
each calendar year are less than the sum of 85% of their ordinary income for
such calendar year, 95% of their capital gain net income for the calendar year
and any amount of such income that was not distributed in prior years. For the
year ended 1995, SPG and DRC each distributed an amount substantially in excess
of 95% of its taxable income.
CONSEQUENCES OF FAILURE TO QUALIFY THE PARTNERSHIPS OR THE PROPERTY
PARTNERSHIPS AS PARTNERSHIPS
The Operating Partnership and SPG Operating Partnership have received
opinions of each of their respective counsel that they and each of the Property
Partnerships are properly treated as partnerships for federal income tax
purposes. If the Internal Revenue Service (the "IRS") were to challenge
successfully the tax status of any such partnerships as a partnership for
federal income tax purposes, the affected partnership would be taxable as a
corporation. In such event, since the value of either the Simon DeBartolo
Group's ownership interest or the Surviving Subsidiary Corporation's ownership
interest in the affected partnership could exceed 5% of the value of its assets,
the Simon DeBartolo Group or the Surviving Subsidiary Corporation could cease to
qualify as a REIT. The same consequence could follow from a determination that
the affected REIT owned more than 10% of the voting stock of the partnership
that is then treated as a corporation. In addition, the imposition of a
corporate tax on the Operating Partnership, the SPG Operating Partnership or any
of the Property Partnerships would reduce the amount of Funds From Operations of
the Simon DeBartolo Group. See "THE MERGER--Federal Income Tax Considerations
Relating to the Simon DeBartolo Group and the Surviving Subsidiary
Corporation--Income Taxation of the Partnerships, the Property Partnerships and
Their Partners--Classification of the Partnerships and the Property Partnerships
as Partnerships."
REAL ESTATE INVESTMENT RISKS
Real property investments are relatively illiquid. The Simon DeBartolo
Group will face competition from other shopping mall developers for the
acquisition of prime development sites and for tenants and will be subject to
the risks of real estate development, including the lack of financing,
construction delays, budget overruns and lease-up. Various federal, state and
local laws, ordinances and regulations impose liability on an owner of real
estate in connection with the removal or remediation of certain hazardous or
toxic substances on or in such property. Both SPG and DRC believe that adequate
amounts have been reserved to cover the costs and expenses related to any
environmental condition with respect to any of their respective properties that
will become properties of the Simon DeBartolo Group. The ability of the Simon
DeBartolo Group to maintain or increase its Funds From Operations and Cash
Available for Distribution (each as defined in the "GLOSSARY") is dependant to a
significant degree on the ability of the Simon DeBartolo Group to manage the
risks associated with the inability to lease or add GLA.
LIMITED CONTROL WITH RESPECT TO CERTAIN PROPERTIES
On April 30, 1996, if the Merger occurred on such date, the Simon DeBartolo
Group would own interests in 53 Portfolio Properties (as defined in the
"GLOSSARY") not wholly owned directly or indirectly by the Operating Partnership
or the SPG Operating Partnership ("Joint Venture Properties"). With respect to
these Joint Venture Properties, the Simon DeBartolo Group will be the sole
general partner of 17 limited partnerships, the managing general partner of 16
limited partnerships, a limited partner of one limited partnership and a general
partner of 28 general partnerships and will have day-to-day operational control
over 48 limited partnerships and general partnerships. On a pro
33
<PAGE> 48
forma basis assuming the Merger occurred on December 31, 1994, in 1995 the Joint
Venture Properties would have generated 18.1% of the Simon DeBartolo Group's
EBITDA (as defined in the "GLOSSARY"). The third-party partners' ownership
interests in Joint Venture Properties generally range from 20% to 70%.
With respect to limited partnerships owning Joint Venture Properties for
which the Simon DeBartolo Group will serve as general partner, the Simon
DeBartolo Group will not have sole control of certain major decisions relating
to such Joint Venture Properties, although the Simon DeBartolo Group generally
will have a right of approval with respect to such matters. With respect to the
limited or general partnerships owning Joint Venture Properties in which the
Simon DeBartolo Group will not be the managing or co-managing general partner,
the Simon DeBartolo Group will not have day-to-day operational control. These
limitations may result in decisions by third parties with respect to such
properties that do not fully reflect the interests of the Simon DeBartolo Group
at such time, including decisions relating to the requirements with which the
Simon DeBartolo Group must comply in order to maintain its status as a REIT for
tax purposes. In addition, the sale or transfer of interests in certain of the
partnerships is subject to rights of first refusal and certain partnership
agreements provide for buy-sell or similar arrangements. Such rights may be
triggered at a time when the Simon DeBartolo Group will not desire to sell but
may be forced to do so because it does not have the cash to purchase the other
party's interest.
The Simon DeBartolo Group will be contractually restricted from selling
certain of these properties without the consent of certain unrelated parties.
These limitations on sale may adversely affect the Simon DeBartolo Group's
ability to sell these properties at the most advantageous time for the Simon
DeBartolo Group.
LIMITS ON CHANGE OF CONTROL; DISSENTERS' RIGHTS
Certain provisions of the Amended SPG Charter and the Alternative Amended
SPG Charter could have the effect of delaying or preventing a change of control
of the Simon DeBartolo Group even if some of the Simon DeBartolo Group's
stockholders deem such a change to be in the Simon DeBartolo Group's and their
best interest. See "AMENDMENTS TO SPG'S CHARTER AND BY-LAWS." Currently, under
the Ohio Statute, DRC's shareholders have dissenters' rights with respect to
certain mergers, asset sales and share exchanges, subject to certain exceptions.
Except for certain instances, the Maryland General Corporation Law (the "MGCL")
eliminates dissenters' rights with respect to shares of any class or series of
stock listed on a national securities exchange. The stockholders of the Simon
DeBartolo Group will be governed by the MGCL. See "SIGNIFICANT DIFFERENCES
BETWEEN THE CORPORATE LAWS OF OHIO AND MARYLAND AND COMPARISON OF RIGHTS OF
HOLDERS OF DRC COMMON STOCK AND SPG COMMON STOCK--Dissenters' Rights."
DEPENDENCE ON KEY PERSONNEL
The Simon DeBartolo Group will depend on the services of certain key
personnel, including Melvin Simon, Herbert Simon, David Simon and Richard S.
Sokolov (who has entered into an employment agreement), following the
consummation of the Merger. Both SPG's management and DRC's management believe
that the loss of the services of any of these key personnel could have an
adverse effect on the results of the Simon DeBartolo Group's operations. See
"MANAGEMENT OF SPG AND THE SIMON DeBARTOLO GROUP BEFORE AND AFTER THE
MERGER--Senior Management of the Simon DeBartolo Group" and "--Employment
Agreement."
IMPACT OF INTEREST RATES AND OTHER FACTORS ON STOCK PRICE
Any significant increase in market interest rates from their current levels
could lead holders of SPG Common Stock to seek higher yields through other
investments, which could adversely affect the market price of the shares of SPG
Common Stock. One of the factors that may influence the price of SPG Common
Stock in public markets will be the annual distribution rate on SPG Common Stock
as compared with the yields on alternative investments. Moreover, numerous other
factors, such as governmental regulatory action and tax laws, could have a
significant impact on the future market price of SPG Common Stock.
TERMINATION PAYMENTS IF MERGER FAILS TO OCCUR
The Merger Agreement provides for fees up to $35.0 million payable by SPG
or DRC to the other party in certain circumstances under which the Merger
Agreement is terminated, which fees are more fully described in "THE MERGER--No
Solicitation; Board Action; Fees and Expenses."
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<PAGE> 49
COMPARATIVE PER SHARE INFORMATION
COMPARATIVE MARKET DATA
The shares of SPG Common Stock and DRC Common Stock are designated for
trading on the NYSE under the symbols "SPG" and "EJD," respectively. The
following table sets forth the distributions paid or declared per share and the
high and low prices per share of SPG Common Stock and DRC Common Stock quoted on
the NYSE, respectively, for the periods indicated, as reported in published
financial sources:
<TABLE>
<CAPTION>
SPG COMMON STOCK DRC COMMON STOCK
-------------------------------- ----------------------------------
HIGH LOW DISTRIBUTIONS HIGH LOW DISTRIBUTIONS
---- --- ------------- ---- --- -------------
<S> <C> <C> <C> <C> <C> <C>
1993:
Fourth Quarter.................................. $22 5/8(1) $22 1/4(1) -- -- -- --
1994:
First Quarter................................... 28 22 1/2 $ 0.475 -- -- --
Second Quarter.................................. 28 23 5/8 0.475 $15 1/2(2) $13 3/4(2) $ 0.245(2)
Third Quarter................................... 27 7/8 25 1/8 0.475 15 1/4 14 0.315
Fourth Quarter.................................. 25 3/4 22 3/4 0.475 15 13 0.315
1995:
First Quarter................................... 26 22 1/2 0.4925 15 1/8 13 3/8 0.315
Second Quarter.................................. 25 1/4 23 3/8 0.4925 14 7/8 13 1/2 0.315
Third Quarter................................... 26 24 1/8 0.4925 14 7/8 13 7/8 0.315
Fourth Quarter.................................. 25 5/8 22 3/4 0.4925 14 1/8 12 5/8 0.315
1996:
First Quarter................................... 24 1/2 21 1/8 0.4925 16 1/8 12 1/4 0.315
Second Quarter(3)............................... 24 3/8 22 1/4 -- 16 1/2 14 5/8 --
</TABLE>
- ---------------
(1) From December 14, 1993.
(2) From April 15, 1994.
(3) Through June 25, 1996.
The following table sets forth the closing price per share of each of SPG
Common Stock and DRC Common Stock on (i) March 25, 1996, the last trading day
prior to the public announcement of the Merger Agreement and (ii) June 25, 1996,
the most recent date for which prices were available prior to mailing this
Prospectus/Joint Proxy Statement.
<TABLE>
<CAPTION>
SPG COMMON STOCK DRC COMMON STOCK
---------------- ----------------
<S> <C> <C>
March 25, 1996............................................ $23 7/8 $14 5/8
June 25, 1996............................................. $24 1/4 $16 3/8
</TABLE>
At the Record Date (close of business on June 21, 1996), there were
approximately 1,243 holders of record of SPG Common Stock and approximately
1,529 holders of record of DRC Common Stock.
BECAUSE THE MARKET PRICE OF SPG COMMON STOCK IS SUBJECT TO FLUCTUATION, THE
MARKET VALUE OF THE SPG COMMON STOCK THAT HOLDERS OF DRC COMMON STOCK WILL
RECEIVE IN THE MERGER MAY INCREASE OR DECREASE PRIOR TO AND FOLLOWING THE
MERGER. SPG STOCKHOLDERS AND DRC SHAREHOLDERS ARE URGED TO OBTAIN CURRENT MARKET
QUOTATIONS FOR SPG COMMON STOCK AND DRC COMMON STOCK.
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<PAGE> 50
HISTORICAL AND PRO FORMA PER SHARE INFORMATION
The following table sets forth certain historical, pro forma and pro forma
equivalent information giving effect to the Merger and the Other Transactions
(see "PRO FORMA COMBINED AND SELECTED HISTORICAL FINANCIAL DATA"). The data is
based on the historical and pro forma financial statements.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE YEAR ENDED
ENDED MARCH 31, 1996 DECEMBER 31, 1995
------------------------------------- -------------------------------------
DRC DRC
PRO PRO FORMA PRO PRO FORMA
PER SHARE HISTORICAL FORMA(1) EQUIVALENT(2) HISTORICAL FORMA(1) EQUIVALENT(2)
- ------------------------------------------- ---------- -------- ------------- ---------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net Income per Share of Common Stock Before
Extraordinary Items
SPG...................................... $ 0.23 $ 0.25 -- $ 1.08 $ 1.13 --
DRC...................................... $ 0.15 -- $0.17 $ 0.53 -- $0.77
Cash Distributions(3)
SPG...................................... $ 0.49 $ 0.49 -- $ 1.97 $ 1.97 --
DRC...................................... $ 0.32 -- $0.33 $ 1.26 -- $1.34
Book Value per Share of Common Stock
SPG...................................... $ 1.98 $10.65 -- N/A N/A N/A
DRC...................................... $ 0.24 -- $7.24 N/A N/A N/A
</TABLE>
- ---------------
(1) The pro forma weighted average shares outstanding during the three months
ended March 31, 1996 and the pro forma number of shares outstanding at March
31, 1996 used to compute the pro forma data after giving effect to the
Merger were 96,266,696 and 96,444,745, respectively. The pro forma weighted
average shares outstanding during the year ended December 31, 1995 used to
compute pro forma net income per share after giving effect to the Merger was
93,194,398.
(2) The DRC pro forma equivalent per share amounts are calculated by multiplying
pro forma Net Income per Share of Common Stock Before Extraordinary Items,
pro forma Cash Distributions per share and pro forma Book Value per Share of
Common Stock by the Exchange Ratio (0.68) so that the per share amounts are
equated to the respective values for one share of DRC Common Stock.
(3) SPG currently pays a quarterly distribution of $0.4925 per share. Future
distributions by the Simon DeBartolo Group, however, will be at the
discretion of its Board of Directors and will depend on certain factors. See
"POLICIES OF THE SIMON DeBARTOLO GROUP--Dividend and Distribution Policies."
36
<PAGE> 51
CAPITALIZATION
The following table sets forth the historical capitalization of SPG and DRC
at March 31, 1996 and the pro forma combined capitalization of the Simon
DeBartolo Group as adjusted to give effect to the Merger and the Other
Transactions as if the Merger had occurred on March 31, 1996. The Merger would
have resulted in the issuance of 37,884,520 shares of SPG Common Stock (the
number of shares that would be issued as part of the Merger Consideration in
exchange for all of the outstanding shares of DRC Common Stock assuming that
there are 55,712,529 shares of DRC Common Stock outstanding immediately prior to
the Effective Time). The following table should be read in conjunction with the
historical and pro forma financial statements and related notes included
elsewhere in, or incorporated by reference into, this Prospectus/Joint Proxy
Statement.
<TABLE>
<CAPTION>
MARCH 31, 1996
----------------------------------------
SIMON
DEBARTOLO
GROUP
SPG DRC PRO FORMA
HISTORICAL HISTORICAL COMBINED
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Debt......................................................... $1,995,620 $1,470,274 $3,488,332
Limited partners' interest in operating partnership.......... 78,366 8,295 650,085
Stockholders' and shareholders' equity
Series A convertible preferred stock....................... 99,923 -- 99,923
Common Stock............................................... 6 555 10
Class B Common Stock....................................... 1 -- 1
Class C Common Stock....................................... -- -- --(1)
Capital in excess of par value............................. 269,771 12,896 1,180,765
Accumulated deficit........................................ (146,702) -- (146,702)
Unamortized restricted stock award......................... (6,917) -- (6,917)
---------- ---------- ----------
Total stockholders' and shareholders' equity............... 216,082 13,451 1,127,080
---------- ---------- ----------
Total capitalization.................................. $2,290,068 $1,492,020 $5,265,497
========== ========== ==========
</TABLE>
- ---------------
(1) The Class C Common Stock will be issued if the Required Vote is obtained at
the SPG Special Meeting and the Amended SPG Charter therefore becomes
effective at the Effective Time. See "AMENDMENTS TO SPG'S CHARTER AND
BY-LAWS."
37
<PAGE> 52
THE MEETINGS OF STOCKHOLDERS OF SPG
INTRODUCTION
This Prospectus/Joint Proxy Statement is being furnished in connection with
the solicitation of proxies by the SPG Board of Directors for use in connection
with the SPG Special Meeting and the SPG Annual Meeting and any adjournments or
postponements of such meetings.
It is anticipated that the mailing of the Prospectus/Joint Proxy Statement
to SPG stockholders will commence on June , 1996.
DATE, TIME AND PLACE OF MEETINGS
The SPG Special Meeting will be held at the Indianapolis Hyatt Regency, One
South Capitol Avenue, Indianapolis, Indiana, on August 6, 1996, at 10:00 a.m.,
Indianapolis time. The SPG Annual Meeting will be held immediately following the
SPG Special Meeting, at the same location as the SPG Special Meeting.
MATTERS TO BE CONSIDERED AT THE MEETINGS
SPG SPECIAL MEETING
At the SPG Special Meeting, the holders of Equity Stock, voting together as
a single class, will be asked to consider and vote upon the SPG Proposal, for
which SPG is seeking the Required Vote (and the holders of Class B Common Stock
voting as a separate class will also consider and vote on the SPG Proposal). The
approval by the Required Vote (and a majority of the shares of Class B Common
Stock) of the SPG Proposal will have the following effect: (i) the approval of
the Merger Agreement among SPG, Sub and DRC and the issuance of the Merger
Consideration thereunder, as more fully described under "THE MERGER" and (ii)
the approval of the Amended SPG Charter and Amended SPG By-laws, providing for,
among other things, a change in the name of SPG, an increase in the amount of
authorized capital stock, the creation of a new class of common stock, a change
in the Ownership Limit, the expansion of the Board of Directors from nine to 13
persons and the election of the 13 persons identified in "MANAGEMENT OF SPG AND
THE SIMON DeBARTOLO GROUP BEFORE AND AFTER THE MERGER--Board of Directors of the
Simon DeBartolo Group" and the adoption of a system of limited classified terms
for Common Stock Directors, all as more fully described under "AMENDMENTS TO
SPG'S CHARTER AND BY-LAWS."
If the SPG Proposal receives less than the Required Vote but receives the
Majority Approval Vote (as defined in the "GLOSSARY"), then the Merger Agreement
will have been approved; however, subject to the consummation of the
transactions contemplated in the Merger Agreement, as of the Effective Time, the
charter of the Simon DeBartolo Group will be the Alternative Amended SPG
Charter, the Alternative Amended SPG By-laws previously approved by the Board of
Directors will become effective without a stockholder vote and the Board of
Directors of the Simon DeBartolo Group will have nine seats, which will be
filled by the nine persons identified under "CERTAIN ALTERNATIVE GOVERNANCE
ARRANGEMENTS AND RELATED MATTERS IF THE REQUIRED VOTE IS NOT OBTAINED--Board of
Directors of the Simon DeBartolo Group if the Required Vote is Not Obtained."
SPG ANNUAL MEETING
At the SPG Annual Meeting, the holders of Equity Stock, voting together as
a single class, will be asked to consider the following proposals:
(1) The election of five Common Stock Directors to serve until the
earlier to occur of (i) the Effective Time of the Merger and (ii) the next
annual meeting of stockholders or until their successors are elected and
have qualified (such directors, if they are not to serve on the Board of
Directors following the Merger, will cease to hold office as directors upon
such Effective Time);
(2) The approval of the appointment of Arthur Andersen LLP as
independent accountants for SPG for 1996; and
(3) Such other business as may come before the SPG Annual Meeting.
RECORD DATE AND VOTE REQUIRED
The SPG Board of Directors has fixed the close of business on June 21, 1996
as the record date for the SPG Annual Meeting and the SPG Special Meeting. As of
such date, there were 55,360,225 shares of SPG Common Stock, 3,200,000 shares of
Class B Common Stock and 4,000,000 shares of Series A Preferred Stock
outstanding. As to matters
38
<PAGE> 53
subject to the approval of holders of Equity Stock, holders of Series A
Preferred Stock are entitled to a number of votes equal to the number of shares
of SPG Common Stock into which their shares would be convertible pursuant to the
Conversion Formula (as defined in the "GLOSSARY"). See "DESCRIPTION OF SPG'S
CAPITAL STOCK--SPG Common Stock and Class B Common Stock" and "-- Series A
Preferred Stock." As of March 31, 1996, (i) there were 55,360,225 shares of SPG
Common Stock outstanding, (ii) there were 3,200,000 shares of Class B Common
Stock outstanding and (iii) the aggregate voting power of all shares of Series A
Preferred Stock was equal to that of 3,809,523 shares of SPG Common Stock. As a
result, on such date, the holders of Equity Stock would have been entitled to
cast an aggregate of 62,369,748 votes on matters subject to approval by the
holders of Equity Stock.
The presence, in person or by proxy, of SPG stockholders owning shares of
Equity Stock representing a majority of all the votes entitled to be cast by
holders of Equity Stock at the SPG Annual Meeting and the SPG Special Meeting,
respectively, is necessary to constitute a quorum at each such meeting.
As of March 31, 1996, directors and executive officers of SPG as a group
beneficially held outstanding shares of Equity Stock representing 5.5% of all
the votes entitled to be cast by holders of Equity Stock at the SPG Meetings and
each such person has advised SPG that he or she intends to vote to approve and
adopt the SPG Proposal.
The number of affirmative votes required for approval of the SPG Proposal
at the SPG Special Meeting is more fully described above under "--Matters to be
Considered at the Meetings."
At the SPG Annual Meeting, directors will be elected by a plurality of the
votes cast by shares entitled to vote at such meeting. The appointment of
independent accountants will require the affirmative vote of a majority of the
votes cast on the matter at the SPG Annual Meeting.
A proxy may indicate that all or a portion of the shares represented by
such proxy are not being voted with respect to a specific proposal. This could
occur, for example, when a broker is not permitted to vote shares held in street
name on certain proposals in the absence of instructions from the beneficial
owner. Such broker non-votes and abstentions will be considered as not present
and entitled to vote on such proposal, even though such shares will be
considered present for purposes of determining a quorum and voting on other
proposals. BECAUSE APPROVAL OF THE PROPOSAL AT THE SPG SPECIAL MEETING REQUIRES
THE AFFIRMATIVE VOTE OF A PROPORTION OF THE OUTSTANDING SHARES OF EQUITY STOCK
AS DESCRIBED MORE FULLY ABOVE IN "--MATTERS TO BE CONSIDERED AT THE MEETINGS,"
ANY BROKER NON-VOTES OR ABSTENTIONS ON THE PROPOSAL WILL HAVE THE SAME EFFECT AS
A VOTE "AGAINST" AND WILL AFFECT WHETHER THE PROPOSAL WILL BE APPROVED. NEITHER
OF THE MATTERS TO BE CONSIDERED AT THE SPG ANNUAL MEETING--THE ELECTION OF
DIRECTORS AND THE APPOINTMENT OF INDEPENDENT ACCOUNTANTS-- REQUIRES THE
AFFIRMATIVE VOTE OF A SPECIFIED NUMBER OF SHARES OF EQUITY STOCK. ACCORDINGLY,
NEITHER BROKER NON-VOTES NOR ABSTENTIONS WILL AFFECT THE DETERMINATION OF SUCH
MATTERS IF A QUORUM IS PRESENT AT THE SPG ANNUAL MEETING.
PROXY
Enclosed is a form of proxy which should be completed, dated, signed and
returned by each SPG stockholder before the SPG Special and Annual Meetings to
ensure that such stockholder's shares will be voted at the meetings. Any SPG
stockholder signing and delivering a proxy has the power to revoke the proxy at
any time prior to its use by filing with the Corporate Secretary of SPG a
written revocation of the proxy or a duly executed proxy bearing a later date or
by attending and voting in person at the meetings.
Shares represented by a properly executed proxy will be voted in accordance
with the instructions indicated on such proxy with respect to the proposal at
the SPG Special Meeting and the election of directors and the appointment of
independent accountants at the SPG Annual Meeting, and at the discretion of the
proxy holders on all other matters to come properly before either meeting. If a
stockholder executes a proxy with no instructions indicated thereon, shares
represented by such proxy will be voted in favor of the proposal at the SPG
Special Meeting and, at the SPG Annual Meeting, for the election as directors of
all nominees listed on the form of proxy and for the appointment of Arthur
Andersen LLP as independent accountants for SPG for 1996.
SOLICITATION OF PROXIES
SPG will bear the expense of the proxy solicitation. Such solicitation will
be by mail but also may be by telephone or in person by the directors, officers
or employees of SPG who will not receive any additional compensation therefor.
In addition, SPG retained MacKenzie Partners, Inc., a proxy solicitation firm,
to assist in the solicitation of proxies. SPG anticipates that the cost of such
proxy solicitation firm to SPG and DRC, in the aggregate, will not exceed
$25,000, plus expenses. The telephone number of MacKenzie Partners, Inc. is
(212) 929-5500. SPG and DRC are also considering retaining another proxy
solicitation firm to assist in the solicitation of proxies, but no final
decision has been made with respect to the hiring of a second proxy solicitation
firm and no specific fees have been discussed. SPG does not anticipate the
hiring of another proxy solicitation firm will cause the aggregate cost of proxy
solicitation to exceed $50,000.
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<PAGE> 54
IRREVOCABLE PROXY
The owners of all the Class B Common Stock have executed an irrevocable
proxy granting to certain representatives of DRC the full power to vote such
shares, together with any other voting security of SPG that they may own, in
favor of the SPG Proposal and against any proposal made in opposition to or in
competition with the SPG Proposal.
OTHER MATTERS
The SPG Board of Directors knows of no matters, other than those described
in this Prospectus/Joint Proxy Statement, which are to be brought before the SPG
Special and Annual Meetings. However, if any other matters properly come before
either meeting, it is the intention of the persons named in the enclosed form of
proxy to vote such proxy in accordance with their judgment on such matters.
STOCKHOLDERS OF SPG SHOULD NOT RETURN THEIR SHARES WITH THEIR PROXIES,
THERE IS NO NEED FOR SPG'S STOCKHOLDERS TO RETURN THEIR SHARES IN CONNECTION
WITH THE SPG MEETINGS OR THE MERGER.
THE MEETING OF SHAREHOLDERS OF DRC
INTRODUCTION
This Prospectus/Joint Proxy Statement is being furnished to holders of DRC
Common Stock in connection with the solicitation of proxies by the DRC Board of
Directors for use at the DRC Special Meeting, and at any adjournment or
postponement thereof for the purposes set forth in the foregoing Notice of
Special Meeting of Shareholders.
It is anticipated that the mailing of this Prospectus/Joint Proxy Statement
and accompanying form of proxy will commence on June , 1996.
DATE, TIME AND PLACE OF MEETING
The DRC Special Meeting will be held at DRC's corporate offices at 7655
Market Street, Youngstown, Ohio 44513. The DRC Special Meeting will be held on
August 6, 1996 at 11:00 a.m., Youngstown time.
MATTERS TO BE CONSIDERED AT THE MEETING
At the DRC Special Meeting, holders of DRC Common Stock will consider and
vote upon (a) a proposal to adopt the Merger Agreement and authorize the Merger
and the other transactions contemplated by the Merger Agreement and (b) such
other matters as may properly come before the meeting. The adoption by DRC's
shareholders of the Merger Agreement and the authorization of the Merger will
result in the exchange of the outstanding DRC Common Stock for newly issued SPG
Common Stock, as more fully described under "THE MERGER--Terms of the Merger"
and "--Exchange of DRC Common Stock Certificates."
RECORD DATE AND VOTE REQUIRED
The DRC Record Date for the determination of DRC's shareholders entitled to
vote at the DRC Special Meeting has been fixed as the close of business on June
21, 1996. As of such date there were 55,493,524 shares of DRC Common Stock
outstanding and entitled to vote at the DRC Special Meeting. Each share of DRC
Common Stock outstanding on the DRC Record Date will be entitled to one vote on
all matters to be considered at the DRC Special Meeting.
The presence, in person or by proxy, of DRC shareholders owning at least a
majority of the shares of outstanding DRC Common Stock entitled to vote at the
DRC Special Meeting, is necessary to constitute a quorum at such meeting. The
approval by the DRC shareholders of the Merger will require the affirmative vote
of the holders of two-thirds of the shares of outstanding DRC Common Stock
outstanding on the record date. As of the DRC Record Date, the directors and
executive officers of DRC beneficially owned less than one percent of the
outstanding DRC Common Stock and each such person has advised DRC that he or she
intends to vote to approve and adopt the Merger and the Merger Agreement.
A proxy may indicate that all or a portion of the shares represented by
such proxy are not being voted with respect to the proposals being considered at
the DRC Special Meeting. Shares that are not voted with respect to a specific
proposal will be considered as not present and entitled to vote on such
proposal, even though such shares will be considered present for purposes of
determining a quorum and voting on other proposals, if any, that properly come
before the meeting. ABSTENTIONS ON SPECIFIC PROPOSALS WILL BE CONSIDERED AS
PRESENT, BUT NOT VOTING IN FAVOR OF SUCH PROPOSAL. BECAUSE APPROVAL OF THE
MERGER REQUIRES THE AFFIRMATIVE VOTE OF THE HOLDERS OF AT LEAST TWO-THIRDS OF
THE OUTSTANDING SHARES OF THE
40
<PAGE> 55
DRC COMMON STOCK, ANY NONVOTING OR ABSTENTIONS ON SUCH MATTER WILL HAVE THE SAME
EFFECT AS A VOTE "AGAINST" AND WILL AFFECT WHETHER THE MERGER WILL BE APPROVED
BUT WILL BE COUNTED FOR PURPOSES OF DETERMINING A QUORUM.
PROXY
Enclosed is a form of proxy which should be completed, dated, signed and
returned by each DRC shareholder before the DRC Special Meeting to ensure that
such shareholder's shares will be voted at the meeting. Any DRC shareholder
signing and delivering a proxy has the power to revoke the proxy at any time
before its use by filing with the Corporate Secretary of DRC a written
revocation of the proxy or a duly executed proxy bearing a later date, by giving
notice of revocation in open meeting or by attending and voting in person at the
DRC Special Meeting. Attendance at the DRC Special Meeting will not itself
constitute a revocation of a proxy unless such proxy is formally revoked by one
of the foregoing methods.
Shares represented by a properly executed proxy will be voted in accordance
with the instructions indicated on such proxy with respect to the adoption of
the Merger Agreement and authorization of the Merger, and at the discretion of
the proxy holders on all other matters to properly come before the meeting. If a
shareholder executes a proxy with no instructions indicated thereon, shares
represented by such proxy will be voted in favor of the proposal to adopt the
Merger Agreement and to approve the Merger.
SOLICITATION OF PROXIES
All expenses of this solicitation with respect to the solicitation of
proxies from the DRC shareholders will be borne by DRC. Such solicitation will
be by mail, but also may be in person by directors, officers or employees of
DRC, who will not receive any additional compensation therefor, or by telephone.
DRC has retained MacKenzie Partners, Inc. as its proxy solicitation firm, to
assist in its solicitation of proxies. DRC anticipates that the costs of such
proxy solicitation firm to SPG and DRC, in the aggregate, will not exceed
$25,000, plus expenses. Its telephone number is (212) 929-5500. SPG and DRC are
also considering retaining another proxy solicitation firm to assist in the
solicitation of proxies, but no final decision has been made with respect to the
hiring of a second proxy solicitation firm and no specific fees have been
discussed. SPG does not anticipate the hiring of another proxy solicitation firm
will cause the aggregate cost of proxy solicitation to exceed $50,000.
DISSENTERS' RIGHTS
HOLDERS OF DRC COMMON STOCK HAVE THE RIGHT UNDER SECTION 1701.84 OF THE
OHIO STATUTE TO DEMAND APPRAISAL OF, AND OBTAIN PAYMENT FOR, THE "FAIR VALUE" OF
THEIR SHARES BY FOLLOWING THE PROCEDURES DESCRIBED IN SECTION 1701.85 OF THE
OHIO STATUTE, A COPY OF WHICH IS ATTACHED AS ANNEX V HERETO. SEE "THE PROPOSED
MERGER AND RELATED MATTERS--DISSENTERS' RIGHTS."
BJS IRREVOCABLE PROXY
BJS, which owned 6,347,016 shares of DRC Common Stock as of March 31, 1996,
has executed an irrevocable proxy granting to certain representatives of SPG the
full power to vote such DRC Common Stock, together with any other voting
security of DRC that it may own at the time of the DRC Special Meeting, to adopt
the Merger, the Merger Agreement and the transactions contemplated thereby and
to vote against any proposal made in opposition to or in competition with the
Merger, the Merger Agreement and the transactions contemplated thereby. The
proxy granted by BJS is subject to withdrawal only upon withdrawal by DRC's
Board of Directors of its recommendation that DRC's shareholders vote in favor
of adopting the Merger Agreement and approving the Merger.
OTHER MATTERS
The DRC Board of Directors knows of no matters, other than those described
in this Prospectus/Joint Proxy Statement, which are to be brought before the DRC
Special Meeting. If any other matters properly come before the meeting, however,
it is the intention of the persons named in the enclosed form of proxy to vote
such proxy in accordance with their judgment on such matters.
SHAREHOLDERS SHOULD NOT SEND ANY STOCK CERTIFICATES WITH THEIR PROXY CARDS.
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<PAGE> 56
THE PROPOSED MERGER AND RELATED MATTERS
Certain statements set forth below under this caption may constitute
"forward-looking statements" within the meaning of the Reform Act. See "SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS" for additional factors relating to
such statements.
BACKGROUND OF THE MERGER
Both SPG and DRC are publicly owned REITs whose predecessors operated as a
group of affiliated partnerships and related entities for the purpose of
developing, owning and operating enclosed malls and community shopping centers
throughout the United States.
On October 25, 1995, David Simon, President and Chief Executive Officer of
SPG, and Richard Sokolov, President and Chief Executive Officer of DRC, met in
Atlanta, Georgia at a convention hosted by NAREIT, an industry trade
organization, at which time they initially discussed each company's possible
interest in pursuing a merger. At that time, Mr. Simon and Mr. Sokolov
considered whether a merger would be in the best interests of both companies and
their shareholders. Among the other issues considered were whether a merger
would combine the talents of their respective companies, reduce corporate
overhead by eliminating redundancies and create a larger company which might
improve both companies' competitive position in the industry and be attractive
to institutional investors thereby increasing access to public equity and debt
markets.
At the next meeting held to discuss such a transaction, held in Pittsburgh,
Pennsylvania on November 28, 1995, Herbert Simon, the Co-Chairman of the Board
of SPG, David Simon, Edward J. DeBartolo, Jr., the Chairman of the Board of DRC,
Larry Thrailkill, Executive Vice President and Chief Operating Officer of EJDC,
Anthony Liberati, a director of DRC, and Edward Muransky, President of DeBartolo
Entertainment, Inc., held further discussions concerning a possible merger
between SPG and DRC. At the conclusion of those discussions, it was agreed that
SPG would attempt to arrive at an independent valuation for DRC and would share
that valuation with DRC principals at a subsequent meeting.
The next meeting at which representatives of SPG and DRC discussed the
possibility of a merger occurred on December 21, 1995. Herbert Simon, David
Simon, Edward J. DeBartolo, Jr., Richard Sokolov, Larry Thrailkill and M. Denise
DeBartolo York, a director of DRC and Chairman of the Board of EJDC, met again
in Pittsburgh, Pennsylvania to engage in discussions regarding a possible
merger. During the course of this meeting, Herbert and David Simon proposed a
merger pursuant to which the holders of DRC Common Stock would exchange each of
their shares for 0.64 shares of SPG Common Stock. Representatives of DRC agreed
at the end of that discussion to consider the proposal from SPG representatives.
David Simon and Richard Sokolov next met to discuss the proposed
transaction on January 10, 1996 in Akron, Ohio. At that meeting, they discussed
the ways in which the combined entity might be organized following a merger as
well as their respective views on the short and long term prospects of the
shopping center business.
David Simon, Richard Sokolov and Larry Thrailkill next met on February 8,
1996, in New York City, at which time Mr. Thrailkill and Mr. Sokolov indicated
that the 0.64 exchange ratio previously proposed by Mr. Simon would not be
sufficient consideration for the proposed transaction and suggested a ratio of
0.72 as a counterproposal. The parties at that meeting also discussed (i)
governance matters for the surviving entity, including the composition of the
Board of Directors and the naming of Mr. Sokolov as President and Chief
Operating Officer and Mr. Simon as Chief Executive Officer of the surviving
entity, (ii) certain tax and other matters which affected the DeBartolos and
their DRC Interests, and the fact that those issues would have to be taken into
account in any merger of SPG and DRC, (iii) the desirability of incorporating
price protection mechanisms into the exchange ratio for the proposed merger
transaction, (iv) the desirability of maintaining a portion of the combined
company's operations in Youngstown, Ohio and (v) the necessity to secure the
consent of various third parties, in particular, certain lenders of EJDC.
David Simon, Richard Sokolov, James Barkley, General Counsel of SPG, and
Larry Thrailkill held their next meetings to discuss a proposed merger in New
York on February 28 and 29, 1996, together with representatives of Merrill
Lynch, financial advisor to SPG, Morgan Stanley and Blackstone, financial
advisors to DRC, Paul, Weiss, Rifkind, Wharton & Garrison, SPG's counsel, and
Willkie Farr & Gallagher, DRC's counsel. At the meeting, the representatives of
SPG and DRC and their respective advisors and counsel discussed a range of
issues, including the basic terms and provisions of a proposed merger agreement,
the size and composition of the Board of Directors and the mechanics of due
diligence associated with the proposed merger. At the conclusion of the meeting,
it was agreed that counsel for SPG would commence the drafting of definitive
merger documentation for review by all parties. Representatives of SPG and DRC
during the course of these meetings also executed a confidentiality agreement
covering the proposed merger discussions and any materials exchanged between the
parties during the course of those discussions.
42
<PAGE> 57
During the period from February 29 to March 11, 1996, several telephone
conversations were held among Herbert Simon, David Simon, Richard Sokolov,
Edward DeBartolo, Jr., M. Denise DeBartolo York, John C. York, II, Ms. York's
husband, and Anthony Liberati. During such conversations, among other things,
further proposals for the possible exchange ratio were discussed.
During the week of March 11, 1996, David Simon, Richard Sokolov and Larry
Thrailkill met in New York with counsel for both SPG and DRC, as well as their
respective financial advisors, to discuss and negotiate the terms and conditions
of drafts of the definitive documentation prepared by SPG's counsel to date. At
the conclusion of these discussions, it was agreed that there were certain
issues remaining to be resolved including the proposed ratio for the exchange of
DRC stock for stock of SPG.
On March 15, 1996, Herbert Simon, David Simon, Richard Sokolov, Edward J.
DeBartolo, Jr., M. Denise DeBartolo York and Larry Thrailkill met in Cleveland,
Ohio in an effort to discuss and, if possible, to resolve outstanding economic
issues with respect to the proposed merger transaction. At that meeting, subject
to resolution of several significant issues, a firm proposal was made for a
ratio of 0.68 for exchanging stock of DRC for stock of SPG at the time of the
merger. The representatives of SPG and EJDC present at the meeting also
discussed what a fair price for the stock owned by the EJDC in the DRC
Management Company would be. It was proposed that, subject to resolution of the
outstanding issues, the total cash consideration for the purchase by the SPG
Management Company of EJDC's interest in the DRC Management Company should be
$2.5 million. At the conclusion of the meeting, the parties agreed to proceed as
rapidly as possible to resolve all remaining issues and finalize the
documentation for the proposed transaction.
During the week of March 18, 1996, the parties discussed the necessity for
SPG to gain approval by the Required Vote of SPG's stockholders to effect the
proposed increase in the number of the Board members of the combined company
from nine to thirteen, and the resulting changes in the Charter and By-laws of
SPG. While all parties agreed that it was in the best interests of both SPG and
DRC to increase the number of Board members of the Simon DeBartolo Group from
nine to thirteen, they also determined it to be desirable and in the best
interests of SPG's stockholders and DRC's shareholders to devise a method by
which the transaction could be completed without an increase in the number of
its Board members in the event that the Required Vote was not obtained but the
proposed merger was approved. Discussions regarding this and other issues
continued throughout the week of March 18, 1996, but had not yet been finally
resolved as of Friday, March 22, 1996.
On March 22, 1996, the SPG Board of Directors held a regularly scheduled
meeting at which details of the status of the merger discussions and other,
unrelated business matters were presented. Representatives of Merrill Lynch and
Paul, Weiss, Rifkind, Wharton & Garrison were present at the meeting. Prior to
the meeting, the members of the Board of Directors were furnished with a summary
of the proposed transaction prepared by counsel for SPG, the then current drafts
of the Merger Agreement, the Other Transaction Agreements and the Related
Agreements, as well as financial material prepared for their consideration by
Merrill Lynch. During the meeting, the SPG Board of Directors discussed the
status of the proposed transaction, including the proposed exchange ratio and
the issue concerning the composition of the Board of Directors and the Required
Vote. Further, Merrill Lynch briefed the Board on the contents of the materials
it had prepared. See "THE PROPOSED MERGER AND RELATED MATTERS--Opinions of
Financial Advisor to SPG." David Simon then updated the SPG Board of Directors
on the status of other unresolved issues with respect to the proposed
transaction, including the matter of the increase in the number of Board
members. David Simon informed the Board that this significant issue was
outstanding and might not be resolved. The Board of Directors concluded that it
would take no action at that meeting concerning the proposed transaction and
that they agreed with the positions taken by SPG's management with respect to
the outstanding issues regarding the proposed transaction. David Simon indicated
to the Board that he would keep them apprised of any further developments.
On March 22, 1996, the DRC Board of Directors held a special meeting to
consider the proposed merger of DRC and SPG. Representatives of Morgan Stanley,
Blackstone and of Willkie Farr & Gallagher were present at the meeting. At the
meeting Mr. Sokolov presented a history of the negotiations that had led to the
merger proposal as well as a detailed description of the benefits to DRC and its
shareholders of the merger proposal. A detailed presentation by the financial
advisors was made (see "THE PROPOSED MERGER AND RELATED MATTERS--Opinions of
Financial Advisors to DRC"), at the conclusion of which both advisors indicated
their oral opinion that the Merger Consideration, including the Exchange Ratio
of 0.68 shares of SPG Common Stock per share of DRC Common Stock, was fair from
a financial point of view. Counsel to DRC provided the directors with a review
of the law applicable to the Board's consideration of the merger proposal as
well as a detailed review of the Merger Agreement, the Other Transaction
Agreements and the Related Agreements in their then current form.
Mr. Sokolov and DRC's counsel described to DRC's Board of Directors the
issues that remained unresolved in negotiations with SPG, the most important of
which related to governance of the combined company. Members of the Board
requested the negotiating team, among other things, to seek to reconsider
provisions made for employees of DRC
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who might be terminated in the period following the Effective Date. Because of
the significance of the open issues, the meeting was adjourned without a vote.
During the period March 22 through March 25, 1996, more discussions were
held by telephone between representatives of SPG and DRC. During those
discussions, a tentative resolution of the Simon DeBartolo Group Board
composition issue was reached, and the parties agreed to instruct their
respective counsel and financial advisors to resume discussions on the
documentation for the proposed transaction with a view to determining whether
all outstanding issues could be finalized and the documentation completed.
The DRC Board of Directors next convened by telephone on the evening of
March 24th and received a report on the status of the negotiations. The Board
was told that progress had been made on open issues and agreed that a special
meeting would be held the following afternoon for formal consideration of the
proposed transaction.
During the evening of March 25, 1996, the SPG Board of Directors convened a
special telephonic meeting. Also present by telephone at that meeting were
representatives of Merrill Lynch and Paul, Weiss, Rifkind, Wharton & Garrison.
David Simon briefed the Board on the status of discussions, indicated that
agreements had been reached on all significant issues and informed the SPG Board
of Directors that the terms and conditions of the proposed transaction required
review and consideration by the Board at that time.
Paul, Weiss, Rifkind, Wharton & Garrison and Mr. Barkley then reviewed and
discussed with the SPG Board of Directors, among other things, each of the
significant agreements that would be used to document the Merger, including the
Merger Agreement, the Other Transaction Agreements and the Related Agreements,
and relevant legal considerations. Following the discussion, Merrill Lynch
presented its oral opinion to the Board of Directors of SPG (see "--Opinion of
Financial Advisor to SPG"). Based upon the totality of the facts and
circumstances considered at the meeting and the prior meeting, the SPG Board of
Directors concluded that the Merger, including the Exchange Ratio, is fair and
that the SPG Proposal, including the Merger and the proposed amendments to the
SPG Charter and the SPG By-laws, among other things, to increase the size of the
SPG Board of Directors to 13 members and the Other Transactions, is in the best
interests of SPG and its stockholders. The SPG Board of Directors voted to
approve the Merger and the Other Transactions and to recommend that the
stockholders of SPG vote FOR the SPG Proposal.
On the afternoon of March 25th, the DRC Board of Directors convened their
next special meeting to discuss the proposed Merger by telephone.
Representatives of DRC's financial advisors and Willkie Farr & Gallagher were
again present. Mr. Sokolov and representatives of Willkie Farr reported to the
Board that the parties were close to agreement on all substantive issues and
that a materially improved offer had been received from SPG regarding the
treatment of employees. The financial advisors to DRC then reviewed again for
the Board its analysis of the proposed transaction and reaffirmed their opinion
that the Merger Consideration was fair and that the Merger would be in the best
interests of the DRC shareholders. The Board then voted that the Merger,
including the Merger Consideration, is fair and in the best interests of DRC's
shareholders, to approve the Merger Agreement and to recommend that the DRC
shareholders adopt the Merger Agreement and approve the Merger and the
transactions contemplated thereby.
On March 26, 1996, SPG and DRC issued a joint press release to the effect
that an agreement in principle for the Merger had been reached and on March 28,
1996, SPG and DRC issued a joint press release to the effect that a definitive
agreement for the Merger had been signed.
RECOMMENDATION OF THE SPG BOARD OF DIRECTORS; REASONS FOR THE MERGER
The SPG Proposal requests approval of the Merger Agreement itself, approval
of the Amended SPG Charter and Amended SPG By-laws, the election of a slate of
13 persons to the expanded Board of Directors of the Simon DeBartolo Group and
approval of several other subsidiary matters, all of which are necessary to give
the Merger Agreement its full intended effect.
The SPG Board of Directors believes that the Merger and such related
matters, including the Exchange Ratio and the amendment to the SPG Charter and
the SPG By-laws, is fair and in the best interests of SPG and its stockholders.
Accordingly, the SPG Board of Directors has approved the SPG Proposal and
recommends that the stockholders of SPG vote FOR approval and adoption of the
SPG Proposal. In reaching this determination, the SPG Board of Directors
consulted with SPG management, as well as its financial advisors, legal counsel
and accountants, and considered a number of factors. The material factors that
the SPG Board of Directors considered in approving the SPG Proposal and
recommending approval of the SPG Proposal are discussed below.
(i) The Merger would create the country's largest developer, owner and
operator of shopping centers, providing, in the SPG Board of Directors'
opinion, the Simon DeBartolo Group with potentially greater access to
capital markets and a larger and more diverse portfolio.
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(ii) The combination of DRC's properties with those of SPG would
expand the geographic diversification of the Simon DeBartolo Group's
ownership and operation of properties into Florida, an attractive retail
market because of its recent history of significant growth, and enhance the
Simon DeBartolo Group's operations in the Midwest and the Northeast. In the
SPG Board of Directors' view, this could limit the impact that adverse
economic or real estate conditions in a particular region might have on the
Simon DeBartolo Group as a whole.
(iii) DRC has a significant tenant base and the Merger would improve
the strength and quality of tenant relationships.
(iv) The opportunities for economies of scale and operating
efficiencies that should result from the Merger would lead, in the
estimation of SPG's management based on assumptions which it believes to be
reasonable, to significant savings, including estimated savings initially
of $10.0 million per annum, increasing over time to up to $20.0 million per
annum in administrative costs and public company expenses, which are
expected to increase the Simon DeBartolo Group's Funds From Operations per
share.
(v) The Merger would result in one of the most experienced
professional management teams in the shopping center business, combining
the strengths and best practices of the two organizations.
(vi) The combination could allow the Simon DeBartolo Group to capture
significant, currently unrealized potential in the DRC portfolio. This
potential includes, among other things, (i) anticipated improved leasing
opportunities presented by DRC properties' location in markets with higher
than average expected growth and (ii) redevelopment, portfolio upgrade and
refinancing opportunities which are currently being pursued or potentially
present in DRC's portfolio which can be exploited through the Simon
DeBartolo Group's expected superior access to capital on favorable terms.
(vii) For federal income tax purposes, the Merger and certain of the
Other Transactions are expected to be tax-free transactions.
(viii) The Total Market Capitalization of the Simon DeBartolo Group if
the Merger and the Other Transactions occurred on March 18, 1996 would be
approximately $7.5 billion, which would be substantially greater than SPG's
current Total Market Capitalization. The SPG Board of Directors believes
that it would provide SPG's stockholders with enhanced liquidity through
increased trading volume, which may improve SPG's public market valuation.
(ix) The oral opinion of Merrill Lynch on March 25, 1996, confirmed by
means of a written opinion dated such date, to the effect that, as of such
date and based upon and subject to certain matters stated therein, the
Exchange Ratio was fair from a financial point of view to SPG, which the
SPG Board of Directors viewed as favorable not only because of the
conclusion reached by Merrill Lynch, but also because such conclusion was
consistent with the opinion of SPG's management. See "--Opinion of
Financial Advisor to SPG."
The SPG Board of Directors also considered certain potentially negative
factors which could arise from the Merger. These included, among others, the
significant costs involved in connection with consummating the Merger and the
substantial management time and effort required to effectuate the Merger and
integrate the businesses of SPG and DRC. The SPG Board of Directors considered
that the Merger would increase the ratio of debt to Total Market Capitalization
of the Simon DeBartolo Group from the ratio of debt to Total Market
Capitalization of SPG. The SPG Board of Directors recognized this increase could
adversely affect the ability of the Simon DeBartolo Group to obtain debt
financing for additional development and would subject SPG to the risks of
higher leverage. See "RISK FACTORS-- Increased Indebtedness of Simon DeBartolo
Group as Compared with SPG; No Limitation on Further Indebtedness." The SPG
Board of Directors concluded that the increase in debt would not be at an
unacceptable level. Finally, the SPG Board of Directors considered the risk that
the anticipated benefits of the Merger might not be fully realized. The SPG
Board of Directors did not believe that the negative factors were sufficient,
either individually or collectively, to outweigh the advantages of the Merger.
In view of the wide variety of factors considered in connection with its
evaluation of the Merger, the SPG Board of Directors did not find it practicable
to, and did not, quantify or otherwise attempt to assign relative weight to the
specific factors considered in reaching its determination.
The SPG Board of Directors believes that the adoption of the Amended SPG
Charter and the Amended SPG By-laws and the election to the Board of Directors
of the 13 persons identified in "MANAGEMENT OF SPG AND THE SIMON DeBARTOLO GROUP
BEFORE AND AFTER THE MERGER--Board of Directors of the Simon DeBartolo Group"
are necessary and desirable and in the best interests of SPG's stockholders in
order to give the Merger Agreement its full intended effect and to realize in
full the beneficial factors set forth above. Accordingly, a vote in favor of the
SPG Proposal is a vote in favor of the Merger Agreement as well as a vote in
favor of the adoption of the Amended
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SPG Charter and the Amended SPG By-laws and in favor of the election of the 13
persons referred to above to the Board of Directors. The affirmative vote of at
least 80% of the aggregate votes entitled to be cast by holders of the
outstanding Equity Stock, voting together as a single class, is required for the
adoption of all the elements of the SPG Proposal. Should the Required Vote not
be achieved but the SPG Proposal nevertheless receives the affirmative vote of a
majority of the aggregate votes entitled to be cast by holders of the
outstanding Equity Stock, voting together as a single class, the Merger
Agreement will be approved, but neither the Amended SPG Charter nor the Amended
SPG By-laws can be adopted, and the 13 persons identified in "MANAGEMENT OF SPG
AND THE SIMON DeBARTOLO GROUP BEFORE AND AFTER THE MERGER--Board of Directors of
the Simon DeBartolo Group" cannot as a group become directors. Instead, the
Alternative Amended SPG Charter will be adopted and the Alternative Amended SPG
By-laws, having been previously approved by the Board of Directors, will become
effective without a stockholder vote. The SPG Board of Directors believes that
this outcome is significantly less desirable to SPG and its stockholders than
the approval of the SPG Proposal by the Required Vote because the Amended SPG
Charter provides for a 13-member Board of Directors of whom seven members would
be Independent Directors, whereas the Alternative Amended SPG Charter provides
for a nine-member Board of whom only three would be Independent Directors. If
such approval is not obtained, SPG will seek such approval at the annual
meetings in 1997 and 1998 of its stockholders. See "RISK FACTORS-- Conflicts of
Interest Related to the Merger" and "--Risks Associated with Failure to Obtain
Required Vote" and "CERTAIN ALTERNATIVE GOVERNANCE ARRANGEMENTS AND RELATED
MATTERS IF THE REQUIRED VOTE IS NOT OBTAINED."
THE SPG BOARD OF DIRECTORS BELIEVES THAT THE MERGER, INCLUDING THE EXCHANGE
RATIO, IS FAIR, BELIEVES THAT THE SPG PROPOSAL, INCLUDING THE MERGER AND THE
ADOPTION OF THE AMENDED SPG CHARTER AND THE AMENDED SPG BY-LAWS, IS IN THE BEST
INTERESTS OF SPG AND ITS STOCKHOLDERS, HAS APPROVED THE SPG PROPOSAL, AND
RECOMMENDS THAT THE STOCKHOLDERS OF SPG VOTE FOR THE SPG PROPOSAL.
In the event the Merger is not consummated for any reason, SPG will
continue to pursue its business objectives of (i) maximizing Funds From
Operations, (ii) increasing distributions per share of SPG Common Stock, (iii)
increasing the value of its properties by continuing its growth through the
active management and expansion of existing shopping centers and selective
development and acquisition of new shopping centers and (iv) holding its
properties for long-term investment. In addition, SPG may seek other acquisition
opportunities and additional debt or equity financing.
RECOMMENDATION OF THE DRC BOARD OF DIRECTORS; REASONS FOR THE MERGER
The DRC Board of Directors has determined that the Merger, including the
Merger Consideration, is fair and in the best interests of the shareholders of
DRC and has approved the Merger Agreement. Accordingly, the DRC Board of
Directors recommends that the shareholders of DRC vote FOR approval and adoption
of the Merger Agreement and the authorization of the Merger and the transactions
contemplated thereby.
In reaching the determination that the Merger Agreement and the Merger are
in the best interests of DRC and its shareholders, the DRC Board of Directors
consulted with DRC management, as well as its financial advisors, legal counsel
and accountants and considered the short-term and long-term interests of DRC
based upon several factors to which relative weights were not assigned. Among
the most important factors the DRC Board of Directors considered were the
following:
(i) The Merger would create the largest developer, owner and operator
of super-regional and regional shopping malls in North America with one of
the strongest management teams in the industry;
(ii) The Merger Consideration represents an attractive opportunity,
relative to historical trading prices of the DRC Common Stock, for DRC
shareholders to continue their investment in the stock of a regional mall
owner and operator, but with significantly expanded geographic
diversification and very little overlap of portfolios;
(iii) The Merger would significantly increase the market
capitalization of the combined company, which, may enhance the liquidity of
the SPG Common Stock after the Merger by increasing trading volumes;
(iv) The Merger is anticipated to improve significantly the Simon
DeBartolo Group's access to capital markets, which should make additional
debt or other financing available upon more attractive terms, which in turn
should permit the Simon DeBartolo Group to realize certain additional
opportunities to improve the performance of certain properties in the DRC
portfolio;
(v) The Merger could allow opportunities to realize significant
synergies, which are expected to have a positive effect on the financial
results for the Simon DeBartolo Group;
(vi) The tax-free nature of the Merger and certain of the transactions
related thereto;
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(vii) General industry, economic and market conditions, both current
and projected, the paramount interests of DRC's shareholders and the
potential impact of the Merger upon the interests of DRC's employees,
suppliers, creditors and customers as well as the possible impacts on the
communities in which DRC has operations;
(viii) The oral opinions of each of Morgan Stanley and Blackstone on
March 25, 1996, confirmed, in each case, by means of a written opinion by
such party dated such date, that the Merger Consideration and the Exchange
Ratio, respectively, is fair from a financial point of view to the public
holders of DRC Common Stock, as described under "--Opinions of Financial
Advisors to DRC--Opinion of Morgan Stanley" and "--Opinion of Blackstone;"
and
(ix) Presentations from, and discussions with, senior executives of
DRC, representatives of its outside legal counsel and representatives of
Morgan Stanley and Blackstone regarding the business, financial, accounting
and legal due diligence with respect to SPG and the terms and conditions of
the Merger Agreement.
The DRC Board of Directors also considered certain potentially negative
factors which could arise from the Merger. These included, among others, the
significant costs involved in connection with consummating the Merger, the
substantial management time and effort required to effectuate the Merger and
integrate the businesses of SPG and DRC and the related disruption to DRC's
operations. The DRC Board of Directors also considered the loss of control
inherent in the Merger as well as the risk that the anticipated benefits of the
Merger might not be fully realized. The DRC Board of Directors did not believe
that the negative factors were sufficient, either individually or collectively,
to outweigh the advantages of the Merger.
THE DRC BOARD OF DIRECTORS BELIEVES THAT THE MERGER, INCLUDING THE MERGER
CONSIDERATION, IS FAIR AND IN THE BEST INTERESTS OF DRC AND ITS SHAREHOLDERS AND
HAS APPROVED THE MERGER AGREEMENT AND RECOMMENDS THAT THE SHAREHOLDERS OF DRC
VOTE FOR ADOPTION OF THE MERGER AGREEMENT AND APPROVAL OF THE MERGER AND THE
TRANSACTIONS RELATED THERETO.
In the event the Merger is not consummated for any reason, DRC will
continue to pursue its fundamental strategy of capitalizing on the significant
growth opportunities already existing in its portfolio of properties with the
goal of increasing cash available per share for distribution. The Company
expects to pursue this internal growth strategy through strategic expansion and
renovations, enhancing lease revenues and improving operating margins. In
conjunction with this primary focus, DRC expects to pursue new developments and
acquisitions on a selected basis.
OPINION OF FINANCIAL ADVISOR TO SPG
On March 25, 1996, Merrill Lynch delivered its oral opinion, which opinion
was subsequently confirmed in written opinions dated as of March 25, 1996 and
the date of this Prospectus/Joint Proxy Statement, to the SPG Board of Directors
to the effect that, as of such dates and based upon the assumptions made,
matters considered and limits of review, as set forth in such opinions, the
Exchange Ratio was fair to SPG from a financial point of view.
A COPY OF THE MERRILL LYNCH OPINION DATED THE DATE OF THIS PROSPECTUS/JOINT
PROXY STATEMENT (UPDATING THE MERRILL LYNCH OPINION DATED MARCH 25, 1996), WHICH
SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND CERTAIN LIMITATIONS ON
THE SCOPE OF REVIEW UNDERTAKEN BY MERRILL LYNCH, IS ATTACHED HERETO AS ANNEX II
AND IS INCORPORATED HEREIN BY REFERENCE. THE DESCRIPTION OF THE WRITTEN OPINION
SET FORTH HEREIN IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF
THE WRITTEN OPINION. STOCKHOLDERS OF SPG ARE URGED TO READ IN ITS ENTIRETY THE
MERRILL LYNCH OPINION. THE MERRILL LYNCH OPINION IS ADDRESSED TO THE SPG BOARD
OF DIRECTORS AND ADDRESSES ONLY THE FAIRNESS FROM A FINANCIAL POINT OF VIEW OF
THE EXCHANGE RATIO AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY SPG
STOCKHOLDER AS TO HOW SUCH STOCKHOLDER SHOULD VOTE AT THE SPG SPECIAL MEETING.
THE EXCHANGE RATIO WAS DETERMINED ON THE BASIS OF NEGOTIATIONS BETWEEN SPG AND
DRC.
SPG retained Merrill Lynch to render financial advisory services with
respect to SPG's proposed business combination with DRC. No limitations were
imposed by the SPG Board of Directors upon Merrill Lynch with respect to the
investigations made or the procedures followed by it in rendering its opinion.
In connection with the preparation of its opinion dated March 25, 1996,
Merrill Lynch, among other things: (i) reviewed DRC's Annual Report on Form 10-K
and related financial information for the fiscal year ended
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December 31, 1994 and a draft of DRC's Annual Report on Form 10-K and related
financial information for the fiscal year ended December 31, 1995 as well as the
related unaudited financial information for the three and nine month periods
ended September 30, 1995; (ii) reviewed SPG's Annual Report on Form 10-K and
related financial information for the fiscal year ended December 31, 1994 and a
draft of SPG's Form 10-K, the Current Report on Form 8-K and related financial
information for the fiscal year ended December 31, 1995; (iii) reviewed certain
information, including financial information, relating to the business,
earnings, cash flow, assets and prospects of DRC and SPG, which were based on
information and specific assumptions provided to Merrill Lynch by DRC and SPG
for tabulation and calculation by Merrill Lynch and, thereafter, reviewed and
approved by SPG's management; (iv) conducted discussions with members of senior
management of DRC and SPG concerning their respective businesses and prospects;
(v) reviewed the historical market prices and trading activity for DRC Common
Stock and SPG Common Stock and compared them with those of certain publicly
traded companies which Merrill Lynch deemed to be reasonably similar to DRC and
SPG, respectively; (vi) considered the pro forma effect of the Merger on SPG's
capitalization ratios, funds from operations per share and cash flow per share;
(vii) reviewed a draft of the Merger Agreement dated March 25, 1996; and (viii)
reviewed such other financial studies and analyses and performed such other
investigations and took into account such other matters as Merrill Lynch deemed
necessary.
In preparing its opinion, Merrill Lynch relied on the accuracy and
completeness of all information supplied or otherwise made available to it by
DRC and SPG, and did not independently verify such information or undertake an
independent appraisal of the assets of DRC or SPG. With respect to the financial
information reviewed and approved by SPG in particular, Merrill Lynch relied
upon, without independent investigation, the estimates of SPG's management of
the expense savings achievable as a result of the Merger. In addition, Merrill
Lynch assumed that the financial information furnished to it by DRC and SPG were
based on reasonable assumptions and reflected the best currently available
estimates and judgment of DRC's or SPG's management as to the expected future
financial performance of DRC or SPG, as the case may be.
The matters considered by Merrill Lynch in arriving at the Merrill Lynch
Opinion are based on numerous macroeconomic, operating and financial assumptions
with respect to industry performance, general business and economic conditions,
many of which are beyond the control of SPG and DRC, and involve the application
of complex methodologies and educated judgment. Any estimates incorporated in
the analyses performed by Merrill Lynch are not necessarily indicative of actual
past or future results or values, which may be significantly more or less
favorable than such estimates. Estimated values do not purport to be appraisals
and do not necessarily reflect the prices at which businesses or companies may
be sold in the future. The Merrill Lynch Opinion does not present a discussion
of the relative merits of the Merger as compared with any other business plan or
opportunity that might be presented to SPG, or the effect of any other
arrangement in which SPG might engage.
At the meetings of the SPG Board of Directors held on March 22, 1996 and
March 25, 1996, Merrill Lynch presented certain financial analyses accompanied
by written materials in connection with the delivery of its fairness opinion.
The following is a summary of the material financial and comparative analyses
performed by Merrill Lynch in arriving at its March 25, 1996 opinion.
ANALYSIS OF SELECTED COMPARABLE PUBLICLY TRADED COMPANIES
Using publicly available information and estimates of future financial
results published by First Call (as defined in the "GLOSSARY"), Merrill Lynch
compared certain financial and operating information and ratios for both SPG and
DRC with the corresponding financial and operating information for a group of
eight publicly traded companies engaged primarily in the ownership, management,
operation and acquisition of regional mall properties which Merrill Lynch deemed
to be reasonably comparable to SPG and DRC for the purpose of its analysis,
including CBL & Associates Properties, Inc., General Growth Properties, Inc., JP
Realty, Inc., The Macerich Company, The Mills Corp., Taubman Centers Inc., Urban
Shopping Centers, Inc. and The Rouse Co. (the "Comparable Companies"). The
estimates published by First Call were not prepared in connection with the
Merger or at Merrill Lynch's request.
Merrill Lynch's calculations resulted in the following relevant ranges for
the Comparable Companies as of September 30, 1995 and for SPG and DRC as of
December 31, 1995: a range of debt to total market capitalization of 20.9% to
67.4%, with a mean of 47.8% (with SPG at 46.5% and DRC at 53.3%); a range of
payout ratios (each, a "Payout Ratio"), i.e., the ratio of dividends to Funds
From Operations of 36.5% to 104.4%, with a mean of 80.1% calculated on the basis
of actual results for 1995 (with SPG at 83.1% and DRC at 78.3%); equity market
capitalization as a multiple of 1995 Funds From Operations of 9.1x to 11.9x,
with a mean of 10.8x (with SPG at 10.8x and DRC at 9.1x); equity market
capitalization as a multiple of projected 1996 Funds From Operations of 8.5x to
10.9x, with a mean of 9.9x (with SPG at 10.1x and DRC at 8.5x); and equity
market capitalization as a multiple of projected 1997 Funds From Operations of
8.0x to 10.0x, with a mean of 9.2x (with SPG at 9.6x and DRC at 8.0x). In
calculating SPG's projected 1996 and 1997 Funds
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From Operations, the amortization of formation costs were given no effect, in
order to make the basis for calculating SPG's projected Funds From Operations
consistent in that regard with the methodology used by DRC to calculate its
Funds From Operations.
Merrill Lynch observed that based on the closing price of SPG Common Stock
on the NYSE of $24.00 as of March 20, 1996, the Exchange Ratio yielded an offer
value for the DRC Common Stock that was within the range of values implied by
the above trading multiples.
None of the companies utilized in the above analysis for comparative
purposes is, of course, identical to SPG or DRC. Accordingly, a complete
analysis of the results of the foregoing calculations cannot be limited to a
quantitative review of such results and involves complex considerations and
judgments concerning differences in financial and operating characteristics of
the Comparable Companies and other factors that could affect the public trading
value of the Comparable Companies as well as that of SPG or DRC. In addition,
the multiples of equity market capitalization to estimated 1995, and projected
1996 and 1997 Funds From Operations for the Comparable Companies are based on
projections prepared by research analysts using only publicly available
information. Accordingly, such estimates may or may not prove to be accurate.
DISCOUNTED CASH FLOW ANALYSIS
Merrill Lynch also performed discounted cash flow analyses (i.e., an
analysis of the present value for the projected cash flows for the periods and
at the discount rates indicated) of both SPG and DRC based upon projections of
SPG's and DRC's respective net cash flows (defined as total revenues minus
property operating and maintenance expenses, property management expenses, real
estate taxes, capital expenditures, and development capital) for the years 1996
through 2000, inclusive, using discount rates reflecting a weighted average cost
of capital ranging from 10.5% to 12.5% and terminal value multiples of calendar
year 2000 EBITDA ranging from 10.5x to 12.5x.
Merrill Lynch observed that based on the closing price of SPG Common Stock
on the NYSE of $24.00 as of March 20, 1996, the Exchange Ratio yielded an offer
value for the DRC Common Stock that was within the range of values implied by
the discounted cash flow analysis.
IMPLIED EXCHANGE RATIO ANALYSIS
Merrill Lynch utilized the results of the discounted cash flow analyses
described above as well as the SPG management's estimates of the expense savings
achievable as a result of the Merger to calculate a range of implied exchange
ratios based on a comparison of the relative ranges of value for DRC and SPG. In
the instance where estimated expense savings were given no effect, this analysis
yielded a range of implied exchange ratios of SPG Common Stock for each share of
DRC Common Stock which included the Exchange Ratio of 0.68.
In the instance where estimated expense savings were allocated to the
shareholders of DRC in proportion to such shareholders' proposed interest in the
Simon DeBartolo Group (approximately 39%), this analysis yielded a range of
implied exchange ratios of SPG Common Stock for each share of DRC Common Stock
which was higher than the Exchange Ratio of 0.68.
CONTRIBUTION ANALYSIS
Merrill Lynch observed that DRC shareholders would receive 39.0% of the
outstanding SPG Common Stock pursuant to the Merger, after giving effect to the
issuance of SPG Common Stock in the Merger and assuming full conversion of
outstanding Units. Merrill Lynch reviewed certain projected operating and
financial information (including, among other things, rental income, total
revenues, net operating income, and Funds From Operations) for SPG, DRC and the
pro forma combined equity giving effect to the estimated expense savings.
Merrill Lynch also analyzed the relative income statement and operating
contributions of SPG and DRC to the combined entity. Merrill Lynch observed that
in 1996, 1997, and 1998 DRC would contribute 40.3%, 40.4%, and 40.5% to the
Simon DeBartolo Group's EBITDA, respectively, and 39.0%, 39.2%, and 39.2% to the
Simon DeBartolo Group's Funds From Operations, respectively. Merrill Lynch
observed that DRC's pro forma contribution to the Simon DeBartolo Group's
projected EBITDA and Funds From Operations in 1996, 1997, and 1998 is roughly
proportionate to the amount of the SPG Common Stock to be received by DRC
shareholders in the Merger.
PRO FORMA COMBINATION ANALYSIS
Merrill Lynch also analyzed the pro forma effects resulting from the
Merger, including the potential impact on SPG's projected stand alone Funds From
Operations per share and the anticipated accretion (i.e., the incremental
increase) to SPG's Funds From Operations per share resulting from the Merger.
Merrill Lynch observed that, after giving
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effect to SPG's management's estimate of the expense savings achievable as a
result of the Merger, the Merger was accretive to SPG's projected Funds From
Operations per share in each of the years 1996 through 2000.
The summary set forth above does not purport to be a complete description
of the analyses performed by Merrill Lynch in arriving at its opinion. The
preparation of a fairness opinion is a complex process and not necessarily
susceptible to partial or summary description. Merrill Lynch believes that its
analyses must be considered as a whole and that selecting portions of its
analyses and of the factors considered by it, without considering all factors
and analyses, could create a misleading view of the processes underlying its
analyses set forth in its opinion. In its analyses, Merrill Lynch made numerous
assumptions with respect to industry performance, general business and economic
conditions and other matters, many of which are beyond SPG's and Merrill Lynch's
control. Any estimates contained in Merrill Lynch's analyses are not necessarily
indicative of actual values, which may be significantly more or less favorable
than as set forth therein. Estimated values do not purport to be appraisals and
do not necessarily reflect the prices at which businesses or companies may be
sold in the future and such estimates are inherently subject to uncertainty.
The SPG Board of Directors selected Merrill Lynch to render a fairness
opinion because Merrill Lynch is an internationally recognized investment
banking firm with substantial experience in transactions similar to the Merger
and because it is familiar with SPG and its business. Merrill Lynch has from
time to time rendered investment banking, financial advisory and other services
to SPG for which it has received customary compensation. Merrill Lynch is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, leveraged buyouts, negotiated
underwritings, secondary distributions of listed and unlisted securities and
private placements.
Pursuant to a letter agreement dated as of March 5, 1996, SPG has agreed to
pay Merrill Lynch (i) a $100,000 retainer fee, and (ii) a transaction fee equal
to $4.0 million upon consummation of the Merger against which the amount
referred to in clause (i) will be credited. The fees paid or payable to Merrill
Lynch are not contingent upon the contents of the opinion delivered. In
addition, SPG has agreed to reimburse Merrill Lynch for its reasonable
out-of-pocket expenses, subject to certain limitations, and to indemnify Merrill
Lynch and certain related persons against certain liabilities arising out of or
in conjunction with its rendering of services under its engagement, including
certain liabilities under the federal securities laws.
In the ordinary course of its business, Merrill Lynch actively trades in
the securities of SPG for its own account and the accounts of its customers and,
accordingly, may at any time hold a long or short position in such securities.
OPINIONS OF FINANCIAL ADVISORS TO DRC
OPINION OF MORGAN STANLEY
DRC retained Morgan Stanley to act as DRC's financial advisor in connection
with the merger and related matters based upon Morgan Stanley's qualifications,
reputation and expertise. At the March 25, 1996 meeting of the DRC Board of
Directors, Morgan Stanley rendered an oral opinion to the DRC Board of Directors
that, as of such date and subject to the considerations expressed to the DRC
Board of Directors, the Merger Consideration to be received by the public
holders of DRC Common Stock pursuant to the Merger Agreement is fair from a
financial point of view to such holders. Morgan Stanley confirmed its oral
opinion by delivery of a written opinion dated March 25, 1996.
THE FULL TEXT OF THE MORGAN STANLEY OPINION DATED THE DATE OF THIS
PROSPECTUS/JOINT PROXY STATEMENT (UPDATING THE MORGAN STANLEY OPINION DATED
MARCH 25, 1996), WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND
LIMITATIONS ON THE REVIEW UNDERTAKEN, IS ATTACHED AS ANNEX III TO THIS
PROSPECTUS/JOINT PROXY STATEMENT AND IS INCORPORATED HEREIN BY REFERENCE.
HOLDERS OF DRC COMMON STOCK ARE URGED TO, AND SHOULD, READ THE MORGAN STANLEY
OPINION CAREFULLY AND IN ITS ENTIRETY. THE MORGAN STANLEY OPINION IS DIRECTED TO
THE DRC BOARD OF DIRECTORS AND ADDRESSES ONLY THE FAIRNESS FROM A FINANCIAL
POINT OF VIEW OF THE CONSIDERATION TO BE RECEIVED BY THE PUBLIC HOLDERS OF DRC
COMMON STOCK PURSUANT TO THE MERGER AGREEMENT, AND IT DOES NOT ADDRESS ANY OTHER
ASPECT OF THE MERGER NOR DOES IT CONSTITUTE A RECOMMENDATION TO ANY HOLDER OF
DRC COMMON STOCK AS TO HOW TO VOTE AT THE DRC SPECIAL MEETING. THE SUMMARY OF
THE MORGAN STANLEY OPINION SET FORTH IN THIS PROSPECTUS/JOINT PROXY STATEMENT IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH OPINION ATTACHED
AS ANNEX III.
In arriving at its opinion, Morgan Stanley (i) analyzed certain publicly
available financial statements and other information of DRC, (ii) analyzed
certain internal financial statements and other financial and operating data
concerning DRC prepared by the management of DRC, (iii) analyzed certain
financial projections prepared by the management of DRC, (iv) discussed the past
and current operations and financial condition and prospects of DRC and certain
of its real property assets with senior executives of DRC, (v) reviewed the
reported prices and trading activity of DRC Common Stock, (vi) compared the
financial performance of DRC and the prices and trading activity of DRC Common
Stock with that of certain other comparable publicly-traded companies and their
securities, (vii) analyzed certain publicly available
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financial statements and other information of SPG, (viii) analyzed certain
internal financial statements and other financial and operating data concerning
SPG prepared by the management of SPG, (ix) analyzed certain financial
projections prepared by the management of SPG, (x) discussed the past and
current operations and financial condition and prospects of SPG and certain of
its real property assets with senior management of SPG, (xi) reviewed the
reported prices and trading activity of SPG Common Stock, (xii) compared the
financial performance of SPG and the prices and trading activity of SPG Common
Stock with that of certain other comparable publicly-traded companies and their
securities, (xiii) discussed with senior management of each of DRC and SPG their
estimates of the synergies and other cost savings to be realized pursuant to the
Merger, (xiv) participated in discussions and negotiations among representatives
of the DRC, SPG and their financial and legal advisors, (xv) reviewed drafts of
the Merger Agreement and certain drafts of the Other Transaction Agreements, the
Related Agreements and other related documents, and (xvi) performed such other
analyses as Morgan Stanley deemed appropriate.
In rendering its opinion, Morgan Stanley assumed and relied upon without
independent verification the accuracy and completeness of the information
reviewed by Morgan Stanley for the purposes of its opinion. With respect to the
projected financial information, Morgan Stanley assumed that such information
has been reasonably prepared on bases reflecting the best then available
estimates and judgments of the future financial performance of DRC and SPG.
Further, Morgan Stanley relied upon DRC's and SPG's estimates of the synergies
and cost savings to be realized pursuant to the Merger. Morgan Stanley did not
make any independent valuation or appraisal of the assets or liabilities of DRC
or of SPG, nor was Morgan Stanley provided with any such appraisals. The Morgan
Stanley Opinion rendered on March 25, 1996 is necessarily based on economic,
market and other conditions as in effect on, and the information made available
to Morgan Stanley as of such date.
In arriving at its opinion, Morgan Stanley was not authorized to solicit,
and did not solicit, interest from any party with respect to the acquisition of
DRC or any of its assets, nor did Morgan Stanley negotiate with any party, other
than SPG, with respect to the possible acquisition of DRC or any of its assets.
At the meetings of the DRC Board of Directors held on March 22, 1996 and
March 25, 1996, Morgan Stanley presented certain financial analyses accompanied
by written materials in connection with the delivery of its fairness opinion.
The following is a summary of the material financial and comparative analyses
performed by Morgan Stanley in arriving at its March 25, 1996 opinion.
Selected Comparable Public Companies Analysis
Using publicly available information, Morgan Stanley compared selected
historical and projected financial, operating and stock market performance data
of DRC and SPG with the corresponding data of certain publicly-traded companies
that Morgan Stanley considered comparable in certain respects with that of DRC
and SPG for purposes of this analysis. The comparable companies consisted of
regional mall REITs. Morgan Stanley considered DRC and SPG in relation to a set
of comparables which consisted of CBL & Associates Properties, Inc., General
Growth Properties, Inc., The Macerich Company, Taubman Centers Inc., Urban
Shopping Centers, Inc. and The Rouse Co. (the "Mall Comparables"). The ratios of
the common stock trading price to Funds From Operations per share (each, an "FFO
Multiple") for 1995 and 1996 for the Mall Comparables were based on Funds From
Operations per share as reported by the companies, if available, and as
estimated by First Call and Morgan Stanley, computed on the same basis for each
company as reported by such company and closing stock prices as of March 21,
1996. Funds From Operations estimates for DRC for 1996 were based on internal
projections. Morgan Stanley noted that the Exchange Ratio of 0.68 shares of SPG
Common Stock per share of DRC Common Stock multiplied by the SPG Common Stock
trading price represented 10.8x and 10.1x DRC's reported 1995 and estimated 1996
Funds From Operations per share, respectively, equal to and higher than the
average FFO Multiples of the Mall Comparables of 10.8x and 10.0x for 1995 and
1996, respectively. Morgan Stanley noted that DRC's leverage was higher than
that of all but one of the Mall Comparables and that as a result DRC may be
viewed negatively by the public relative to the Mall Comparables.
Morgan Stanley compared SPG's FFO Multiple with the median FFO Multiple for
the Mall Comparables. The FFO Multiple for SPG for the year ended December 31,
1995 was based on reported Funds From Operations, and for the year ended
December 31, 1996 the FFO Multiple was based on SPG projections of Funds From
Operations. In calculating the FFO Multiples for the periods, Morgan Stanley
noted that SPG's 1995 FFO Multiple of 10.7x and 1996 FFO Multiple of 10.1x were
comparable to the average FFO Multiples of the Mall Comparables of 10.8x and
10.0x for 1995 and 1996.
Stock Trading History
Morgan Stanley reviewed the history of trading prices and volume for DRC
Common Stock and SPG Common Stock, both separately and in relation to the
Standard & Poor's 500 Index and an index composed of the Mall Comparables. In
addition, Morgan Stanley reviewed the trading prices of DRC Common Stock and SPG
Common Stock
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for the periods ending two weeks prior to the public announcement by DRC and SPG
of their intention to merge and commencing one year prior, two years prior and
at the DRC IPO. The average trading price of SPG Common Stock multiplied by 0.68
was 20% greater than the average DRC Common Stock trading price for the latter
period, with comparable premiums for the one-year and two-year periods. In
addition, Morgan Stanley reviewed the historical ratio of the DRC Common Stock
price to the SPG Common Stock price for the period commencing with the DRC IPO.
Through March 20, 1996, the average of this ratio was 0.5664, as compared with
the Exchange Ratio of 0.68.
Contribution Analysis
Morgan Stanley reviewed DRC's and SPG's financial contribution to the
combined entity on a projected pro forma basis. On a pro forma basis, assuming
conversion of all SPG Units and Units, DRC shareholders are retaining
approximately 39%, based upon an Exchange Ratio of 0.68, of the ownership in the
Simon DeBartolo Group. Based on DRC management's financial projections for 1996
through 1998 and SPG management's financial projections for the same period, DRC
would contribute 37.6% of the Funds From Operations of the Simon DeBartolo
Group. Morgan Stanley noted that DRC's shareholders will receive a greater
percentage of the stock than would theoretically be indicated by their
contribution of Funds From Operations. Morgan Stanley also noted that DRC's
shareholders will receive a lesser percentage of stock than would be indicated
by their contribution of EBITDA. With regard to the latter, Morgan Stanley noted
that the contribution analysis is impacted by the level of debt on DRC's and
SPG's balance sheets. Specifically, the greater percentage of debt in DRC's
capital structure finances greater EBITDA but reduces relative Funds From
Operations due to service costs of the debt. Based on projections provided to
Morgan Stanley by DRC and the publicly disclosed September 30, 1995 debt
outstanding for SPG, DRC's ratio of debt to total market capitalization was
55.6% while SPG's ratio of debt to total market capitalization was 47.6%.
Pro Forma Merger Analysis
Morgan Stanley performed an analysis of the effect of the Merger on SPG's
Funds From Operations per share for the projected years ended December 31, 1996
through December 31, 2000, which assumed that the Merger had been consummated on
January 1, 1996. Morgan Stanley combined the projected operating results of DRC
and SPG and estimated cost savings, based on internal estimates provided by each
company, to arrive at the Simon DeBartolo Group projected Funds From Operations.
Morgan Stanley's analysis was based upon the Exchange Ratio of 0.68 and
estimated annual expense savings resulting from the Merger and expected to arise
primarily from savings in duplicative public company and general administrative
expenses. Morgan Stanley then compared the Simon DeBartolo Group Funds From
Operations per share with SPG's stand-alone Funds From Operations per share to
determine the projected pro forma impact of the Merger on the Simon DeBartolo
Group's Funds From Operations per share. This analysis indicated that the Simon
DeBartolo Group's Funds From Operations per share on a pro forma basis in each
of 1996 through 2000 would be higher than the stand-alone projections for SPG of
Funds From Operations for each such year were the Merger not to occur. Morgan
Stanley noted that the Merger would result in a dividend increase of
approximately 6.3% for DRC shareholders, based on the Simon DeBartolo Group's
maintenance of SPG's current $0.4925 quarterly dividend per share and the
Exchange Ratio.
Morgan Stanley noted that the Merger resulted in a slight increase in the
leverage ratios and slight decrease in the debt service coverage ratios for SPG,
and an improvement in these ratios for DRC shareholders in the surviving entity.
Specifically, SPG's ratio of debt to Total Market Capitalization as of September
30, 1995 increased from 47.6% to 48.6% on a pro forma basis. SPG's ratio of
EBITDA to interest expense for 12 months ended September 30, 1995 decreased from
2.3x to 2.28x. On a pro forma basis, DRC's debt to Total Market Capitalization
decreased from 55.6% to 48.6% on a pro forma basis and DRC's pro forma EBITDA to
interest coverage ratio increased from 2.07x to 2.28x. SPG's coverage and
leverage ratios were computed using 100% of consolidated properties and
estimated interest in non-consolidated joint ventures. DRC's coverage and
leverage ratios were computed using 100% of consolidated properties and actual
interest in non-consolidated Joint Venture Properties.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to a partial analysis or summary description. Morgan
Stanley believes that its analyses must be considered as a whole and that
selecting portions of its analyses, without considering all analyses, would
create an incomplete view of the process underlying its opinion. In addition,
Morgan Stanley may have given various analyses more or less weight than other
analyses, and may have deemed various assumptions more or less probable than
other assumptions, so that the ranges of valuations resulting for a particular
analysis described above should not be taken to be Morgan Stanley's view of the
actual value of DRC and SPG.
In performing its analyses, Morgan Stanley made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of DRC and SPG. The analyses
performed by Morgan Stanley are not necessarily indicative of actual value,
which may be significantly more or less favorable than suggested by such
analyses. Such analyses were prepared solely as a part of Morgan Stanley's
analysis of whether the Merger Consideration to be received by the public
holders of DRC Common Stock is fair from a
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financial point of view to such holders, and were conducted in connection with
the delivery of the Morgan Stanley Opinion. The analyses do not purport to be
appraisals or to reflect the prices at which DRC might actually be sold. Because
such estimates are inherently subject to uncertainty, none of DRC, Morgan
Stanley, or any other person assumes responsibility for their accuracy. The
Morgan Stanley analyses described above should not be viewed as determinative of
the opinion of the DRC Board of Directors or the management of DRC with respect
to the value of DRC or of whether Morgan Stanley would have rendered an opinion
of fairness with respect to, or the DRC Board of Directors or the management of
DRC would have been willing to agree to, any consideration other than the Merger
Consideration.
The DRC Board of Directors retained Morgan Stanley based upon its
experience and expertise. Morgan Stanley is an internationally recognized
investment banking and advisory firm. As part of its investment banking
business, Morgan Stanley is regularly engaged in the valuation of businesses and
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuation for estate, corporate and
other purposes. In the ordinary course of its business, Morgan Stanley and its
affiliates may actively trade the debt and equity securities of DRC and SPG for
their own account and for the accounts of customers and, accordingly, may at any
time hold long or short positions in such securities. Joseph R. Perella, a
Managing Director and a member of the Operating Committee of Morgan Stanley, is
a member of the SPG Board of Directors. Mr. Perella did not participate in the
rendering of advice to DRC, the preparation or approval of the Morgan Stanley
Opinion or the consideration by or vote of the SPG Board of Directors to approve
the Merger Agreement.
Pursuant to a letter agreement dated March 21, 1996, as amended, between
DRC and Morgan Stanley, Morgan Stanley is entitled to a transaction fee of
$3.875 million which is payable upon consummation of the Merger, as well as to
reimbursement of reasonable expenses. In addition, DRC has agreed to indemnify
Morgan Stanley and its affiliates against certain liabilities and expenses,
including liabilities under federal securities laws.
OPINION OF BLACKSTONE
At the March 22, 1996 meeting of the DRC Board of Directors, Blackstone
presented certain financial analyses accompanied by written materials to the DRC
Board of Directors, which analyses are summarized below. Blackstone reviewed the
foregoing again at a meeting of the DRC Board of Directors on March 25, 1996 and
rendered to the DRC Board of Directors an oral opinion, which was confirmed by
Blackstone's written opinion dated March 25, 1996 to the DRC Board of Directors,
that, as of the date of such opinion, the Exchange Ratio is fair to the public
holders of DRC Common Stock from a financial point of view. Such opinion has
been updated as of the date of the Prospectus/Joint Proxy Statement.
DRC'S SHAREHOLDERS ARE URGED TO READ THE TEXT OF THE BLACKSTONE OPINION IN
ITS ENTIRETY. A COPY OF THE FULL TEXT OF THE BLACKSTONE OPINION, DATED AS OF THE
DATE OF THE PROSPECTUS/JOINT PROXY STATEMENT, WHICH SETS FORTH THE ASSUMPTIONS
MADE, MATTERS CONSIDERED AND LIMITATIONS OF THE REVIEW UNDERTAKEN, IS ATTACHED
AS ANNEX IV HERETO AND IS INCORPORATED HEREIN BY REFERENCE. BLACKSTONE HAS
CONSENTED TO THE USE AND PUBLICATION OF THE BLACKSTONE OPINION IN THE
PROSPECTUS/JOINT PROXY STATEMENT AND ANNEX IV HERETO. THE SUMMARY DISCUSSION OF
THE BLACKSTONE OPINION, DATED AS OF THE DATE OF THE PROSPECTUS/JOINT PROXY
STATEMENT, SET FORTH IN THIS PROSPECTUS/JOINT PROXY STATEMENT IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH OPINION. THE BLACKSTONE
OPINION DOES NOT CONSTITUTE A RECOMMENDATION TO ANY HOLDER OF DRC COMMON STOCK
AS TO HOW TO VOTE AT THE DRC SPECIAL MEETING. THE EXCHANGE RATIO WAS DETERMINED
ON THE BASIS OF NEGOTIATIONS BETWEEN DRC AND SPG.
In arriving at the Blackstone Opinion, Blackstone reviewed and analyzed:
(i) the terms of the draft Merger Agreement and certain related documents; (ii)
certain publicly available information concerning the business, financial
condition, assets and operations of DRC and SPG which Blackstone believed to be
relevant to its inquiry; (iii) certain publicly available information relating
to financial markets and industry and economic conditions; and (iv) certain non-
public financial and other information, including financial forecasts, with
respect to the business operation, assets, financial condition and prospects of
DRC and SPG furnished to Blackstone by DRC and SPG. In addition, Blackstone met
with management of DRC and of SPG to discuss the business, operations, assets,
financial condition, history and prospects of DRC's and SPG's businesses. In
particular, Blackstone discussed with management of DRC and of SPG their
estimates of the synergies and other cost savings expected to be realized
pursuant to the Merger.
In the course of its investigation, Blackstone relied upon, and assumed the
accuracy and completeness of, publicly available information and the financial
and other information provided by DRC and SPG, but Blackstone did not assume any
responsibility for independent verification of any such information. Blackstone
relied upon the assurances of management of DRC and SPG that they are not aware
of any facts that would make such information inaccurate, incomplete or
misleading. With respect to financial forecasts and pro forma financial
forecasts of DRC and SPG and projected synergies and other cost savings in
connection with the Merger, Blackstone relied upon DRC's and SPG's assurances
that they have been reasonably prepared on bases reflecting the best currently
available estimates and judgments of DRC's and SPG's management as to the future
financial performance of DRC and SPG, respectively.
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Blackstone expressed no view as to such financial forecasts or projected
synergies or other cost savings or the assumptions on which they are based.
Blackstone did not conduct a physical inspection of the properties and
facilities of DRC or SPG and did not make an independent evaluation or appraisal
of the assets of DRC or SPG, nor was it furnished with any such evaluations or
appraisals. The Blackstone Opinion is necessarily based upon business, market
(both concerning the financial markets and the regional mall market), economic,
regulatory, tax and other conditions as they exist on, and can be evaluated as
of, the date of the Blackstone Opinion. No limitations were imposed by DRC upon
the investigation made by Blackstone or otherwise with respect to the Blackstone
Opinion.
In conducting its analysis, Blackstone considered: (i) certain publicly
available and other information concerning the trading of, and the trading
market for, DRC Common Stock and SPG Common Stock; (ii) the historical and
current financial position and the historical and projected Funds From
Operations and results of operations of DRC and SPG; (iii) publicly available
historical and current financial information and stock price data with respect
to certain public companies with operations that Blackstone considered
comparable to those of DRC and SPG; and (iv) financial terms of certain business
combinations and other transactions that Blackstone deemed relevant. In addition
to the foregoing, Blackstone conducted such other studies, analyses and
investigations as it deemed appropriate in arriving at the Blackstone Opinion.
Blackstone was not requested to, nor did it, solicit third party indications of
interest in acquiring DRC or any of DRC's assets.
At the meeting of the DRC Board of Directors on March 22, 1996, and prior
to delivering its oral opinion to the DRC Board of Directors that the Exchange
Ratio is fair to the public holders of DRC Common Stock from a financial point
of view, and again, at the meeting of the DRC Board of Directors on March 25,
1996, prior to delivering its written opinion that the Exchange Ratio is fair to
the public holders of DRC Common Stock from a financial point of view,
Blackstone reviewed and discussed certain information with the DRC Board of
Directors.
The following is a brief summary of certain analyses performed by
Blackstone and reviewed with the DRC Board of Directors in connection with the
preparation of the Blackstone Opinion and with its oral presentation on March
25, 1996.
Trading Comparables Analysis
Using publicly available information, Blackstone compared selected
historical and projected financial, operating and stock market performance data
of DRC and SPG with the corresponding data of certain publicly-traded companies
that Blackstone considered comparable in certain respects with that of DRC and
SPG for purposes of such analysis. The comparable companies consisted of
regional mall REITs, including General Growth Properties, Inc., Taubman Centers,
Inc., Urban Shopping Centers, Inc. and CBL & Associates Properties, Inc. The
1995 and 1996 FFO Multiples and dividend yield were based on reported figures,
to the extent available, Morgan Stanley research estimates and closing stock
prices as of March 20, 1996. For purposes of this discussion of the Blackstone
Opinion, Funds From Operations (i) with respect to 1996, has the meaning set
forth in the "GLOSSARY" and (ii) with respect to 1995, has the same meaning
except (A) allowing the add-back to earnings of amortizing deferred financing
fees and (B) allowing the add-back of depreciation of assets not relating to
real estate.
The estimated industry weighted mean 1996 and 1995 FFO Multiple was 9.9x
and 10.5x, respectively. Blackstone noted that the Exchange Ratio of 0.68 shares
of SPG Common Stock per share of DRC Common Stock represented a 10.1x and 10.8x
FFO Multiple on DRC's estimated 1996 and reported 1995 Funds From Operations per
share, respectively, which was higher than the estimated industry weighted mean
1996 and 1995 FFO Multiple of 9.9x and 10.5x, respectively, and higher than
DRC's 1996 and 1995 FFO Multiple of 8.5x and 9.1x, respectively.
Blackstone also noted that SPG's 1996 and 1995 FFO Multiples of 10.1x and
10.7x, respectively, were higher than the comparable industry weighted mean
averages, whereas DRC's 1996 and 1995 FFO Multiples of 8.5x and 9.1x,
respectively, were lower than the comparable industry weighted mean averages.
Stock Trading History/Implied Exchange Ratio Analysis
Blackstone reviewed the historical market prices and volume for DRC Common
Stock, SPG Common Stock and comparable mall companies since their respective
initial public offerings. In addition, Blackstone reviewed the historical ratio
of the market price for the DRC Common Stock to the market price for SPG Common
Stock for the period commencing with the DRC IPO. Blackstone noted that the
historical average of such ratio was 0.56, as compared with the Exchange Ratio
of 0.68. Blackstone noted that such historical ratio has never exceeded 0.68.
Blackstone also noted that the Simon DeBartolo Group would likely have improved
liquidity through increased trading volumes relative to either DRC or SPG
analyzed separately.
Precedent Transactions Analysis
An analysis was conducted of the stock-for-stock mergers involving public
REITs consummated since 1993. Blackstone noted that the Merger is substantially
larger than the mergers of the REITs referred to above, and therefore it
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did not believe that those transactions provide a reliable comparison to the
Merger or that such analysis regarding REIT mergers is significant to
Blackstone's determination that the Exchange Ratio is fair to the public holders
of DRC Common Stock from a financial point of view. Similar analysis was also
done with respect to other public stock-for-stock mergers consummated since
1993. Blackstone noted that as a result of differences between REIT and non-REIT
mergers, it did not believe that those transactions provide a reliable
comparison to the Merger or that such analysis regarding non-REIT mergers is
significant to Blackstone's determination that the Exchange Ratio is fair to the
public holders of DRC Common Stock from a financial point of view.
Pro Forma Merger Analysis
Blackstone performed an analysis of the pro forma effects on SPG resulting
from the Merger. Blackstone combined the projected operating results of DRC and
SPG and estimated cost savings, based on estimates provided by each of DRC and
SPG, to arrive at the Simon DeBartolo Group projected Funds From Operations.
Blackstone noted that if there are annual cost savings as a result of the
Merger, then the Merger would be accretive to SPG's Funds From Operations per
share on a pro forma basis in 1996 based upon the Exchange Ratio. Blackstone
noted that, based on estimates of potential cost savings in a combination of DRC
and SPG provided to Blackstone by DRC and SPG, an acquisition by SPG of DRC
would lead to accretions to SPG's Funds From Operations per share at prices
involving significant premiums to the current price of DRC Common Stock.
Blackstone presented a summary of the possible accretion to SPG's 1996 estimated
Funds From Operations per share.
THE BLACKSTONE OPINION DATED AS OF THE DATE OF THE PROSPECTUS/JOINT PROXY
STATEMENT, A COPY OF WHICH IS ATTACHED HERETO AS ANNEX IV, SHOULD BE READ IN ITS
ENTIRETY. THE SUMMARY OF THE FINANCIAL AND COMPARATIVE ANALYSES SET FORTH ABOVE
CONTAINS A SUMMARY OF ALL MATERIAL ANALYSES EMPLOYED BY BLACKSTONE IN REACHING
SUCH OPINION, BUT DOES NOT PURPORT TO BE A COMPLETE DESCRIPTION OF BLACKSTONE'S
PRESENTATION TO THE DRC BOARD OF DIRECTORS ON EITHER MARCH 22, 1996 OR MARCH 25,
1996 OR THE ANALYSES CONDUCTED BY BLACKSTONE. FURTHERMORE, ANY RANGE OF VALUES
PRESENTED IN SUCH ANALYSES WERE NOT INTENDED IN ANY SPECIFIC INSTANCE TO
REPRESENT DEFINITIVE CONCLUSIONS OF THE VALUE OF DRC. BLACKSTONE BELIEVES THAT
ITS ANALYSES AND THE SUMMARY THEREOF SET FORTH ABOVE MUST BE CONSIDERED AS A
WHOLE AND THAT SELECTING PORTIONS OF ITS ANALYSES AND THE FACTORS CONSIDERED BY
IT, WITHOUT CONSIDERING ALL THE FACTORS OR ANALYSES, COULD CREATE AN INCOMPLETE
AND/OR MISLEADING VIEW OF THE PROCESS UNDERLYING THE BLACKSTONE OPINION. IN
ADDITION, BLACKSTONE HAS GIVEN VARIOUS ANALYSES MORE OR LESS WEIGHT THAN OTHER
ANALYSES, AND MAY HAVE DEEMED VARIOUS ASSUMPTIONS MORE OR LESS PROBABLE THAN
OTHER ASSUMPTIONS, SO THAT ANY RANGES OF VALUES RESULTING FROM ANY PARTICULAR
ANALYSIS DESCRIBED ABOVE SHOULD NOT BE TAKEN TO BE BLACKSTONE'S VIEW OF THE
ACTUAL VALUE OF DRC. IN PERFORMING ITS ANALYSES, BLACKSTONE MADE NUMEROUS
ASSUMPTIONS WITH RESPECT TO INDUSTRY PERFORMANCE, GENERAL BUSINESS, ECONOMIC,
MARKET AND FINANCIAL CONDITIONS AND OTHER MATTERS, MANY OF WHICH ARE BEYOND THE
CONTROL OF SPG OR DRC. ANY VALUE CONTAINED IN THE ANALYSES PERFORMED BY
BLACKSTONE IS NOT NECESSARILY INDICATIVE OF THE ACTUAL VALUES OR ACTUAL FUTURE
RESULTS, WHICH MAY BE SIGNIFICANTLY MORE OR LESS FAVORABLE THAN AS SET FORTH
THEREIN. ANALYSES RELATING TO ANY RANGE OF VALUES OF THE BUSINESS OR DRC COMMON
STOCK DO NOT PURPORT TO BE APPRAISALS OR TO REFLECT THE PRICES AT WHICH SUCH
BUSINESS OR DRC COMMON STOCK MAY BE SOLD. ACCORDINGLY, SUCH ANALYSES AND ANY
RANGES OF VALUES ARE INHERENTLY SUBJECT TO SUBSTANTIAL UNCERTAINTY. NO PUBLIC
COMPANY UTILIZED AS A COMPARISON IS IDENTICAL TO DRC OR SPG, AND NONE OF THE
PRECEDENT TRANSACTIONS UTILIZED AS A COMPARISON IS IDENTICAL TO THE MERGER.
ACCORDINGLY, AN ANALYSIS OF PUBLICLY TRADED COMPARABLE COMPANIES AND PRECEDENT
TRANSACTIONS IS NOT PURELY MATHEMATICAL; RATHER IT INVOLVES COMPLEX
CONSIDERATIONS AND JUDGMENTS CONCERNING DIFFERENCES IN FINANCIAL AND OPERATING
CHARACTERISTICS OF THE COMPARABLE COMPANIES OR THE COMPANIES INVOLVED IN
PRECEDENT TRANSACTIONS AND OTHER FACTORS THAT COULD AFFECT THE PUBLIC TRADING
VALUE OF THE COMPARABLE COMPANIES OR COMPANY OR TRANSACTION WITH WHICH THEY ARE
BEING COMPARED.
DRC selected Blackstone primarily due to Blackstone's reputation and
experience in investment banking, mergers and acquisitions, and the valuation of
businesses and securities in connection with mergers and acquisitions in
general, as well as Blackstone's knowledge and familiarity with DRC in
particular. BJS, an affiliate of Blackstone, owns 6,347,016 shares of DRC Common
Stock as a result of a debt-for-equity exchange which occurred in April, 1994.
As of March 25, 1996, BJS' shares of DRC Common Stock represented 11.5% of the
total issued and outstanding DRC Common Stock. BJS has negotiated with SPG for
registration rights with respect to the SPG Common Stock to be received by BJS
in connection with the Merger. See "CERTAIN AGREEMENTS--The Registration Rights
Agreements--The BJS Registration Rights Agreement." The distribution of such SPG
Common Stock by BJS may be effected from time to time, in one or more
transactions pursuant to the registration of BJS's shares under the Registration
Statement of which this Prospectus/Joint Proxy Statement is a part. See
"DISTRIBUTION OF SHARES BY BJS." BJS also has a debt investment in EJDC. Mr.
Mark T. Gallogly, a Senior Managing Director of Blackstone, is a member of the
DRC Board of Directors. Mr. Gallogly did not participate in the preparation of
the Blackstone Opinion.
Pursuant to a letter agreement dated February 23, 1996, between DRC and
Blackstone, DRC has agreed to pay Blackstone, as compensation for Blackstone's
services as financial advisor in connection with a potential transaction between
SPG and DRC, a fee of $2,125,000. DRC's obligation to pay such fee is
conditioned upon the consummation of
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the Merger. DRC also agreed to reimburse Blackstone for all of Blackstone's
reasonable travel and all other out-of-pocket fees and expenses in connection
with Blackstone's engagement, and has agreed to indemnify Blackstone against
certain liabilities and expenses in connection with Blackstone's engagement.
DISSENTERS' RIGHTS
The rights and remedies of shareholders of DRC whose shares of DRC Common
Stock are not voted in favor of the proposal to adopt the Merger Agreement are
set forth in Section 1701.85 of the Ohio Statute (the text of which is included
in Annex V to this Prospectus/Joint Proxy Statement). The following summary of
Section 1701.85 is not intended to be complete and is qualified in its entirety
by reference to the full text of Annex V. It is recommended that each
shareholder having questions in respect of its rights under the Ohio Statute
consult with his or her legal counsel.
Section 1701.85 provides, in effect, that a shareholder of DRC whose shares
of DRC Common Stock are not voted in favor of the proposal to adopt the Merger
Agreement is entitled, if the Merger is consummated, to be paid the fair cash
value of such shares held of record by the shareholder on the DRC Record Date,
if the shareholder serves a written demand therefor on DRC, or following the
Effective Time on the Surviving Subsidiary Corporation (for purposes of Section
1701.85, DRC and the Surviving Subsidiary Corporation are together referred to
as "DRC"), on or before the tenth day following the shareholders' vote
authorizing the Merger and if the shareholder otherwise complies with Section
1701.85. Any such demand must specify the shareholder's name and address, the
number of shares of DRC Common Stock as to which relief is sought and the amount
claimed by the shareholder as the fair cash value thereof. If DRC and any
shareholder cannot agree upon the fair cash value of such shares, DRC or the
shareholder may, within the three months after the service of the written demand
by the shareholder, file or join in a petition in the Court of Common Pleas of
Mahoning County, Ohio, for a determination of the fair cash value thereof.
Dissenting Shareholders will also be entitled to receive any Special
Distribution in the same amounts as they would have received had they voted in
favor of the Merger.
The fair cash value of a share of DRC Common Stock for the purposes of
Section 1701.85 is the amount that a willing seller who is under no compulsion
to sell would be willing to accept and that a willing buyer who is under no
compulsion to purchase would be willing to pay, but in no event shall the fair
cash value of such a share exceed the amount specified in the demand of the
particular shareholder. FAIR CASH VALUE IS DETERMINED AS OF THE DAY PRIOR TO THE
DATE ON WHICH THE VOTE OF THE DRC SHAREHOLDERS AUTHORIZING THE MERGER IS TAKEN
AND EXCLUDES ANY APPRECIATION OR DEPRECIATION IN MARKET VALUE RESULTING FROM THE
PROPOSED MERGER. The Supreme Court of Ohio has held that when the trial court
finds that there is a reasonably suitable active market for shares, the market
price as of the day prior to that on which the shareholder vote is taken,
excluding any appreciation or depreciation in the market price resulting from
the proposed transaction, would satisfy the willing seller-willing buyer test
and would be the fair cash value of such shares.
Upon receipt of cash in exchange for its shares, a Dissenting Shareholder
will recognize a taxable gain or loss to the extent the cash received exceeds or
is less than the Dissenting Shareholder's basis in its shares.
Failure to vote against the Merger will not constitute a waiver of a
shareholder's rights under Section 1701.85. Neither voting against the Merger
nor abstaining from voting will constitute a written demand as required by that
section. The rights of a dissenting shareholder to be paid the fair cash value
of his or her shares will terminate (i) if the Merger is not consummated; (ii)
if the shareholder fails to serve a timely and appropriate written demand upon
DRC; (iii) if the shareholder does not, upon request of DRC, make timely and
appropriate surrender of the certificates evidencing the shares for endorsement
thereon of a legend to the effect that demand for the fair cash value of such
shares has been made; (iv) if the demand is withdrawn with the consent of the
directors of DRC; or (v) if DRC and the dissenting shareholder shall not have
agreed upon the fair cash value of such shares and DRC has not filed, or such
shareholder has not filed or joined in, an appropriate petition in the Court of
Common Pleas of Mahoning County, Ohio, for an appraisal of the fair cash value
of such shares within three months.
FAILURE TO TAKE ANY OF THE STEPS REQUIRED UNDER SECTION 1701.85 ON A TIMELY
BASIS MAY RESULT IN THE LOSS OF SUCH DISSENTERS' RIGHTS. BECAUSE A PROXY WHICH
DOES NOT CONTAIN VOTING INSTRUCTIONS WILL, UNLESS REVOKED, BE VOTED FOR ADOPTION
OF THE MERGER AGREEMENT AND APPROVAL OF THE MERGER, A HOLDER OF DRC COMMON STOCK
WHO VOTES BY PROXY AND WHO WISHES TO EXERCISE HIS APPRAISAL RIGHTS MUST (I) VOTE
AGAINST THE ADOPTION OF THE MERGER AGREEMENT AND AUTHORIZATION OF THE MERGER OR
(II) ABSTAIN FROM VOTING ON ADOPTION OF THE MERGER AGREEMENT AND AUTHORIZATION
OF THE MERGER.
Holders of shares of SPG Common Stock will not have dissenters' rights
under Maryland law.
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THE MERGER
GENERAL
The following description of the Merger and the Merger Agreement does not
purport to be complete and is qualified in its entirety by reference to the
Merger Agreement, a copy of which is attached as Annex I to this
Prospectus/Joint Proxy Statement and incorporated herein by reference.
Shareholders of DRC and stockholders of SPG are urged to read the Merger
Agreement in its entirety.
EFFECTS OF THE MERGER
The Merger Agreement provides that, subject to the approval of the Merger
by the shareholders of DRC and the stockholders of SPG and the satisfaction or
waiver of the other conditions to the Merger, Sub will be merged with and into
DRC, whereupon the separate existence of Sub will cease and DRC will be the
surviving corporation of the Merger and a subsidiary of the Simon DeBartolo
Group. At the Effective Time, the conversion of DRC Common Stock pursuant to the
Merger Agreement will be effected as described below. DRC's Articles of
Incorporation ("DRC Articles") and its Regulations ("DRC Regulations")
immediately prior to the Effective Time will be the Articles of Incorporation
and Regulations of the Surviving Subsidiary Corporation. The Charter and By-laws
of the Simon DeBartolo Group following the Effective Time will be either the
Amended SPG Charter and Amended SPG By-laws or the Alternative Amended SPG
Charter and the Alternative Amended SPG By-laws as described below in
"AMENDMENTS TO SPG'S CHARTER AND BY-LAWS" and "CERTAIN ALTERNATIVE GOVERNANCE
ARRANGEMENTS AND RELATED MATTERS IF THE REQUIRED VOTE IS NOT OBTAINED."
Following completion of the Merger, the directors of the Simon DeBartolo Group
will be the individuals identified below in "MANAGEMENT OF SPG AND THE SIMON
DeBARTOLO GROUP BEFORE AND AFTER THE MERGER--Board of Directors of the Simon
DeBartolo Group" (see also "CERTAIN ALTERNATIVE GOVERNANCE ARRANGEMENTS AND
RELATED MATTERS IF THE REQUIRED VOTE IS NOT OBTAINED--Board of Directors of the
Simon DeBartolo Group if the Required Vote is Not Obtained"). The composition of
the Board of Directors of the Surviving Subsidiary Corporation after the
Effective Time will be the same as that of the Simon DeBartolo Group. The
officers of the Simon DeBartolo Group will be the individuals identified below
in "MANAGEMENT OF SPG AND THE SIMON DeBARTOLO GROUP BEFORE AND AFTER THE
MERGER--Senior Management of the Simon DeBartolo Group," who will also serve as
officers of the Surviving Subsidiary Corporation.
EFFECTIVE TIME OF THE MERGER
Following the adoption of the Merger Agreement by the shareholders of DRC
and the stockholders of SPG and subject to satisfaction or waiver of the terms
and conditions thereof, the Merger will become effective upon the filing of a
Certificate of Merger filed with the Secretary of State of the State of Ohio,
which filing will be made as soon as practicable.
TERMS OF THE MERGER
At the Effective Time, each outstanding share of DRC Common Stock (except
Dissenters' Shares) shall, subject to Article NINTH of the SPG Charter (relating
to the treatment of shares of Excess Stock (as defined in the "GLOSSARY")), be
converted into the right to receive the Merger Consideration. For a discussion
of Excess Stock, see "DESCRIPTION OF SPG'S CAPITAL STOCK." The Merger
Consideration with respect to each share of DRC Common Stock will consist of
sixty-eight one-hundredths (0.68) of a fully paid share of SPG Common Stock, and
a cash payment in lieu of any fraction of a share of SPG Common Stock
representing the proportionate interest, if any, of each holder of DRC Common
Stock otherwise entitled to receive a fractional share of SPG Common Stock in
the net proceeds from the sale by the Exchange Agent (as defined below), in one
or more transactions on behalf of all such holders, of the fractional shares of
SPG Common Stock, executed on the NYSE in round lots to the extent practicable.
Each share of DRC Common Stock held by DRC in its treasury immediately prior to
the Effective Time will be canceled and no payment will be made with respect
thereto.
EXCHANGE OF DRC COMMON STOCK CERTIFICATES
Following the Effective Time, The First National Bank of Chicago which will
act as Exchange Agent (the "Exchange Agent") in connection with the Merger,
shall mail to each holder of record of a certificate or certificates which
immediately prior to the Effective Time represented outstanding shares of DRC
Common Stock ("Certificates"), which shares were converted into the right to
receive the Merger Consideration, (i) a letter of transmittal (a "Letter of
Transmittal") (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass,
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only upon delivery of the Certificates to the Exchange Agent) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for the Merger Consideration.
Each of SPG and DRC shall declare a Special Distribution to their
respective stockholders and shareholders, the record date for which shall be the
close of business on the last business day prior to the Effective Time. The
Special Distribution of each party will be equal to that party's most recent
quarterly distribution rate, multiplied by the number of days elapsed since the
last distribution record date through and including the Effective Time, and
divided by 91.
Upon the surrender of any Certificates to the Exchange Agent in connection
with the Merger, by any holder thereof, together with a duly completed and
executed Letter of Transmittal, such holder will be entitled to receive (i) the
Merger Consideration with respect to the shares of DRC Common Stock represented
by such Certificates and (ii) if such Certificates are exchangeable for one or
more whole shares of SPG Common Stock, at the time of such surrender or other
appropriate payment date, the amount of dividends or other distributions with a
record date after the Effective Time theretofore declared with respect to such
whole shares of SPG Common Stock.
All Merger Consideration shall be paid upon the surrender of Certificates
and there shall be no further registration of transfers on the stock transfer
books of the Simon DeBartolo Group of the shares of DRC Common Stock which were
outstanding immediately prior to the Effective Time, except that the cash
payments to be made in lieu of fractional shares that is part of the Merger
Consideration shall be made as soon as practicable after the Exchange Agent
determines the aggregate amount of cash available to make such payments. If,
after the Effective Time, Certificates are presented to the Simon DeBartolo
Group for any reason, they shall be canceled and exchanged. No interest will be
paid or accrued on the Merger Consideration. No such holder will be entitled to
dividends or other rights in respect of any fractional interest other than cash
in lieu of fractional shares of SPG Common Stock to which any DRC shareholder
may be entitled as part of such shareholder's Merger Consideration. SHAREHOLDERS
OF DRC SHOULD NOT SUBMIT THEIR CERTIFICATES FOR EXCHANGE UNTIL SUCH SHAREHOLDER
HAS RECEIVED THE LETTER OF TRANSMITTAL AND THE ACCOMPANYING INSTRUCTIONS.
SPG or the Exchange Agent shall be entitled to deduct and withhold from the
Merger Consideration otherwise payable pursuant to the Merger Agreement to any
holder of shares of DRC Common Stock such amounts as SPG or the Exchange Agent
is required to deduct and withhold with respect to the making of such payment
under the Code, or any provision of state, local or foreign tax law. To the
extent that amounts are so withheld by SPG or the Exchange Agent, such withheld
amounts shall be treated for all purposes as having been paid to the holder of
the shares of DRC Common Stock in respect of which such deduction and
withholding was made by SPG or the Exchange Agent.
If any certificate for shares of SPG Common Stock is to be issued to a
person other than the person in whose name the certificate for shares of DRC
Common Stock surrendered in exchange therefor is registered, it will be a
condition of such issuance that the stock certificate so surrendered will be
properly endorsed (with such signature guarantees as may be required by the
Letter of Transmittal) and otherwise in proper form for transfer and that the
person requesting such issuance will (i) pay any transfer or other taxes
required by reason of the issuance of certificates for shares of SPG Common
Stock to a person other than the registered holder of the Certificate
surrendered or (ii) establish to the satisfaction of SPG that such tax has been
paid or is not applicable.
At the Effective Time, the share transfer books of DRC will be closed and
no transfers of shares of DRC Common Stock that were outstanding immediately
prior to the Effective Time will thereafter be made. If a Certificate
representing such shares is presented for transfer, it will be canceled and
exchanged as described above.
None of the Simon DeBartolo Group, SPG, DRC or the Exchange Agent shall be
liable to any person in respect of any Merger Consideration delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law. Any portion of the Merger Consideration delivered to the Exchange
Agent that remains unclaimed for six months after the Effective Time shall be
redelivered by the Exchange Agent to the Simon DeBartolo Group, upon demand, and
any holders of Certificates who have not theretofore complied with the exchange
procedure described above and in the Letter of Transmittal shall thereafter look
only to the Simon DeBartolo Group for delivery of the Merger Consideration,
subject to applicable escheat and other similar laws.
Shares of SPG Common Stock to be issued to shareholders of DRC in
connection with the Merger will be freely transferable under the Securities Act,
except for shares issued to any person who may be deemed to be an "affiliate" of
DRC or SPG within the meaning of Rule 145 under the Securities Act. It is
expected that the affiliates of DRC and SPG will be able to sell such shares
without registration in accordance with the applicable limitations of Rules 144
and 145 under the Securities Act. In addition, certain affiliates of DRC (and of
SPG) will, following the Merger, have registration rights, including shelf
registration rights. See "CERTAIN AGREEMENTS--The Registration Rights
Agreements" and "DISTRIBUTION OF SHARES BY BJS."
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DISSENTING SHARES
For a discussion of the rights of holders of DRC Common Stock who do not
vote in favor of the Merger and who deliver to DRC a written demand for the cash
value of their shares of DRC Common Stock, see "THE PROPOSED MERGER AND RELATED
MATTERS--Dissenters' Rights."
CONVERSION OF SUB COMMON STOCK
In order to satisfy the minimum shareholder requirements necessary for
qualification as a REIT under the Code, immediately prior to the Effective Time
SPG shall hold 1,100 common shares, without par value, of Sub ("Sub Common
Stock"), and 110 individuals will hold fractional shares of Sub Common Stock
aggregating 0.11 of a share of Sub Common Stock, representing 0.0001% of Sub's
outstanding shares. At the Effective Time, such shares or fractions of shares
will be converted into shares of the Surviving Subsidiary Corporation at the
rate of 1,000 common shares of the Surviving Subsidiary Corporation for each
whole share of Sub Common Stock, such that following the Merger, the Simon
DeBartolo Group will own 1,100,000 common shares of the Surviving Subsidiary
Corporation and such 110 individuals will each own one common share.
CONDITIONS TO THE MERGER; TERMINATION; WAIVER AND AMENDMENT
In addition to the SPG Stockholder Approvals and the DRC Shareholder
Approvals, the obligations of SPG on the one hand and DRC on the other to
consummate the Merger and the Other Transactions are subject to the satisfaction
or waiver of certain other conditions including, among others: (i) that the
Other Transaction Agreements have been executed and delivered and remain in full
force and effect and the Other Transactions are being consummated prior to, or
simultaneously with, the Merger; (ii) that the Related Agreements have been
executed and delivered and remain in full force and effect; (iii) the receipt of
all material consents and waivers of lenders to EJDC, an affiliate of the
DeBartolos, necessary for the consummation of the Merger and the Other
Transactions; (iv) the absence of any injunction or other legal prohibition
against the Merger; (v) the effectiveness of the Registration Statement and the
absence of a stop order with respect thereto; (vi) the receipt of all "Blue Sky"
or state securities permits and authorizations and items necessary to issue the
shares of SPG Common Stock as part of the Merger Consideration and the approval
of such shares for listing on the NYSE; and (vii) the taking or obtaining of all
material actions by or filings with governmental authorities required in
connection with the Merger and Other Transactions.
The obligations of SPG to consummate the Merger and the Other Transactions
are further conditioned on the following: (i) the continuing accuracy in all
material respects of the representations and warranties made by DRC in the
Merger Agreement; (ii) the performance in all material respects of all
agreements and covenants to be performed by DRC under the Merger Agreement;
(iii) the receipt of consents and waivers from non-governmental third parties
which if not obtained would cause a material adverse effect on DRC; (iv) the
receipt of opinions from counsel for SPG as to the Simon DeBartolo Group's
status as a REIT and from counsel for DRC as to the treatment of the Merger as a
tax-free reorganization and on the status of DRC as a REIT; and (v) there having
been no change in DRC's business, results of operations or financial condition
which would have a material adverse effect on DRC. Materiality for the purpose
of clauses (i), (iii) and (v) above being defined in the Merger Agreement as
events resulting in aggregate net economic losses to DRC in excess of $58.0
million, and SPG would not be obligated to close if the net economic losses
created by the failure of the conditions described in such clauses to be
satisfied exceeded, in the aggregate, $58.0 million.
The obligations of DRC to consummate the Merger and the Other Transactions
are further conditioned on the following: (i) the continuing accuracy in all
material respects of the representations and warranties made by SPG in the
Merger Agreement; (ii) the performance in all material respects of all
agreements and covenants to be performed by SPG under the Merger Agreement;
(iii) the receipt of consents and waivers from non-governmental third parties
which if not obtained would have a material adverse effect on SPG; (iv) the
receipt of opinions from counsel for SPG as to the Simon DeBartolo Group's
status as a REIT and regarding the treatment of the Merger as a tax-free
reorganization and on certain other matters; and (v) no change in SPG's
business, results of operations or financial condition had occurred which would
have a material adverse effect on SPG. DRC would not, in any event, be obligated
to close if the failure of the conditions described in clauses (i), (iii) and
(v) to be satisfied, in the aggregate, caused such a material adverse effect.
The Merger Agreement may be terminated and the Merger abandoned prior to
the Effective Time, whether before or after the SPG Stockholder Approvals and
DRC Shareholder Approvals: (i) by mutual written consent of SPG and DRC; (ii) by
SPG, upon a breach of any representation or warranty on the part of DRC set
forth in the Merger Agreement, or if any representation or warranty of DRC shall
have become untrue (in either case, such that DRC would have net economic losses
of $58.0 million) or the breach in any material respect of any covenant or
agreement of DRC set forth in the Merger Agreement; (iii) by DRC, upon a breach
of any representation or warranty on the part of SPG set forth in the Merger
Agreement, or if any such representation or warranty of SPG shall have became
untrue (in either case, having a
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material adverse effect on SPG) or the breach in any material respect of any
covenant or agreement of SPG set forth in the Merger Agreement; (iv) by either
SPG or DRC, if any permanent injunction or action preventing the consummation of
the Merger shall have become final and nonappealable; (v) by either SPG or DRC,
if the Merger shall not have been consummated before October 30, 1996 (and if
the terminating party has not willfully breached any of its representations,
warranties or covenants in the Merger Agreement); (vi) by either SPG or DRC, if
either the SPG Stockholder Approvals or the DRC Shareholder Approvals are not
obtained; (vii) by DRC, upon payment of the Break-Up Fee (as defined below; see
"--No Solicitation; Board Action; Fees and Expenses") by DRC as directed by SPG,
if the DRC Board of Directors shall have withdrawn or modified its approval or
recommendation of the Merger or the Merger Agreement in connection with, or
recommended or approved, a Superior Competing Transaction; (viii) by SPG if the
DRC Board of Directors or any committee thereof shall have (A) withdrawn or
modified in a manner adverse to SPG its approval or recommendation of the Merger
or the Merger Agreement, or approved or recommended any Superior Competing
Transaction, (B) entered into any agreement with respect to any Competing
Transaction (other than a confidentiality agreement in compliance with fiduciary
obligations of the DRC Board of Directors) or (C) resolved to do any of the
foregoing or (ix) by DRC, if the average closing price of the SPG Common Stock
on the NYSE for the period beginning on the eighteenth trading day prior to the
DRC Special Meeting and through and including the third trading day prior to the
DRC Special Meeting is less than $21.25.
SPG and DRC may, by an appropriate instrument executed at any time prior to
the Effective Time, whether before or after the DRC Shareholder Approvals and
the SPG Stockholder Approvals are obtained, amend the Merger Agreement; provided
that after the receipt of such approvals, no amendment or modification may be
made which alters the amount or changes the form of the consideration to be paid
to the shareholders of DRC in the Merger or that in any way adversely affects
such shareholders or SPG's stockholders.
Either of the parties to the Merger Agreement may also, at any time prior
to the Effective Time, by action taken by its Board of Directors: (i) extend the
time for the performance of any of the obligations or other acts of the other
party; (ii) waive any inaccuracies in the representations and warranties
contained in the Merger Agreement or in any document delivered pursuant thereto
and (iii) subject to limitations on amendment, waive compliance with any of the
agreements or conditions contained in the Merger Agreement to the extent
permitted by law.
NO SOLICITATION; BOARD ACTION; FEES AND EXPENSES
The Merger Agreement provides that DRC shall not initiate, solicit
(including by way of furnishing non-public information or assistance) any
inquiries or make any proposal that constitutes, or may reasonably be expected
to lead to, any Competing Transaction or authorize or permit any of the
officers, directors or employees of DRC or any representative retained by DRC to
take any such action, and DRC must notify SPG in writing of all of the relevant
details relating to all inquiries and proposals which it may receive relating to
any of such matters. "Competing Transaction" means any of the following (other
than the transactions contemplated by the Merger Agreement or a transaction with
SPG): (i) any merger, consolidation, share exchange, business combination or
other similar transaction; (ii) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition of 40% or more of the assets of DRC in a single
transaction or series of transactions, excluding any bona fide financing
transactions which do not, individually or in the aggregate, have as a purpose
or effect the sale or transfer of control of such assets; (iii) any tender offer
or exchange offer for 40% or more of the outstanding shares of capital stock of
DRC or the filing of a registration statement under the Securities Act in
connection therewith; or (iv) any public announcements of a proposal, plan or
intention to do any of the foregoing or any agreement to engage in any of the
foregoing.
Notwithstanding the above-described non-solicitation provision and other
provisions of the Merger Agreement, to the extent required by the fiduciary
obligations of the DRC Board of Directors, as determined in good faith based on
the advice of DRC's outside counsel, DRC may: (i) disclose to its shareholders
any information required by law to be disclosed, (ii) in response to an
unsolicited request thereof, participate in discussions or negotiations with, or
furnish information pursuant to a customary confidentiality agreement to, any
person in connection with a Competing Transaction proposed by such person and
(iii) approve or recommend (and, in connection therewith withdraw or modify its
approval or recommendation of the Merger) a bona fide proposal of a Competing
Transaction made by a third party which the DRC Board of Directors determines in
good faith (based on the advice of DRC's independent financial advisor) to be
more favorable from a financial point of view to DRC's shareholders than the
Merger, and for which financing, to the extent required, is then committed (a
"Superior Competing Transaction").
Except as described below, all fees and expenses incurred in connection
with the Merger, the Merger Agreement and the transactions contemplated by the
Merger Agreement are to be paid by the party incurring such expenses. However,
if the Merger Agreement is terminated by reason of: (i) the breach by DRC of any
covenant, agreement, representation or warranty contained therein and prior to
termination of the Merger Agreement DRC shall have received a proposal for a
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Competing Transaction and within 12 months after the date of such termination
DRC shall have entered into a definitive agreement providing for a Competing
Transaction that is equally or more favorable to DRC's shareholders than the
Merger from a financial point of view; (ii) the failure of the DRC Shareholder
Approvals to be obtained and prior to termination of the Merger Agreement DRC
shall have received a proposal for a Competing Transaction and within 12 months
after the date of such termination DRC shall have entered into a definitive
agreement providing for a Competing Transaction that is equally or more
favorable to DRC's shareholders than the Merger from a financial point of view;
(iii) the withdrawal, modification or change by the DRC Board of Directors of
its recommendation of the Merger in connection with, or the approval or
recommendation by such Board of Directors of, a Superior Competing Transaction;
or (iv) the entry by DRC into any agreement in respect of a Competing
Transaction (other than a confidentiality agreement as contemplated above), then
DRC shall be obligated to pay as directed by SPG an amount equal to the lesser
of (x) $35.0 million and (y) the maximum amount payable to SPG as a transaction
termination fee that would not cause SPG to fail to qualify as a REIT (the
"Break-Up Fee"). If the Merger Agreement is terminated by reason of the willful
breach by DRC of any covenant, agreement, representation or warranty contained
therein and prior to termination of the Merger Agreement DRC shall have received
a proposal for a Competing Transaction and within 12 months after the date of
such termination DRC shall have entered into a definitive agreement providing
for a Competing Transaction that is not equally or more favorable to DRC's
shareholders than the Merger from a financial point of view, then DRC shall be
obligated to pay as directed by SPG an amount equal to the lesser of (x) SPG's
out-of-pocket expenses incurred in connection with the Merger Agreement and
Other Transactions (but in no event an amount greater than $7.5 million) and (y)
the maximum amount payable to SPG as expenses in connection with the Merger and
the Other Transaction that would not cause SPG to fail to qualify as a REIT.
If the Merger Agreement is terminated in connection with the failure of SPG
to obtain all non-governmental third-party consents which if not obtained would
have a material adverse effect on SPG, then SPG shall pay as directed by the DRC
Operating Partnership an amount equal to the lesser of (x) $35.0 million and (y)
the maximum amount payable to the DRC Operating Partnership as a transaction
termination fee that would not cause DRC to fail to qualify as a REIT (the
"Termination Fee"). SPG and DRC have agreed that the payment of the Termination
Fee shall be DRC's exclusive remedy for the termination of the Merger Agreement
under such circumstances.
CONDUCT OF SPG'S AND DRC'S BUSINESSES PENDING COMPLETION OF THE MERGER
COVENANTS OF DRC
The Merger Agreement provides that, except as otherwise expressly permitted
or contemplated by the Merger Agreement (including certain planned activities
previously disclosed to SPG and certain specified exceptions described in the
Merger Agreement) or as consented to by SPG, during the period from the date of
the Merger Agreement to the Effective Time, DRC (including the DRC Operating
Partnership and DRC's other subsidiaries and joint ventures): (a) will carry on
its business in the usual, regular and ordinary course, substantially in the
same manner as previously conducted and (b) will not (i) except for regular
quarterly dividends not in excess of $0.315 per share of DRC Common Stock (and
comparable regular quarterly distributions by the DRC Operating Partnership) and
the Special Distribution, declare, set aside or pay any dividends on, or make
any other distributions in respect of, any of its capital stock or partnership
interests, split, combine or reclassify any of its capital stock or partnership
interests, or issue or authorize the issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital stock or partnership
interests or purchase, redeem or otherwise acquire any shares of its capital
stock or partnership interests; (ii) issue, deliver, sell, pledge or otherwise
encumber any shares of its capital stock or partnership interests, any other
voting securities or any securities convertible into, or any rights, warrants or
options to acquire, any such shares, partnership interest, voting securities or
convertible securities; (iii) issue, deliver or sell, or grant any option or
other right in respect of, any shares of capital stock, any other voting
securities of DRC (including partnership interests of the DRC Operating
Partnership (or such subsidiaries or joint ventures)) or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities except to DRC (or such
subsidiaries or joint ventures); (iv) amend its articles of incorporation, code
of regulations or other comparable charter, partnership agreement or
organizational documents; (v) in the case of DRC or the DRC Operating
Partnership, merge or consolidate with any person; (vi) in a transaction
involving capital, securities or other assets or indebtedness of DRC (including
subsidiaries and joint ventures) in excess of (x) $10.0 million, without
providing to SPG reasonable prior written notice of and an opportunity to
consult in connection with such transaction or (y) $20.0 million, without
obtaining the prior written consent of SPG, which consent is not to unreasonably
be withheld or delayed: (A) acquire or agree to acquire by merging or
consolidating with, or by purchasing all or a substantial portion of the equity
securities or assets of, or by any other manner, any business or any
corporation, partnership or other business organization or division thereof or
interest therein or any assets; (B) mortgage or otherwise encumber or subject to
any lien or sell, lease or otherwise dispose of any of its material properties
or assets; (C) make or agree to make any new capital expenditures, except in
accordance with budgets
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relating to DRC previously delivered to SPG; or (D) incur any indebtedness for
borrowed money or guarantee any such indebtedness of another person or enter
into any arrangement having the economic effect of any of the foregoing, prepay
or refinance any indebtedness or make any loans, advances or capital
contributions to, or investments in, any other person (or engage in any
transactions of the types described in clauses (A), (B), (C) and (D) above,
whether or not related, involving, in the aggregate, capital, securities or
other assets or indebtedness of DRC (including subsidiaries and joint ventures)
in excess of $150.0 million), without obtaining the prior written consent of
SPG, which consent is not to unreasonably be withheld or delayed; (vii) make any
tax election (unless required by law or necessary to preserve DRC's status as a
REIT); (viii) (A) except as required by generally accepted accounting
principles, the Commission or applicable law, change in any material manner any
of its methods, principles or practices of accounting in effect on December 31,
1995, or (B) make or rescind any election relating to taxes, settle or
compromise any claim relating to taxes, except in the case of settlements or
compromises relating to taxes on real property in an amount not to exceed,
individually or in the aggregate, $5.0 million, or change any of its methods of
reporting income or deductions for federal income tax purposes from those
employed in the preparation of its federal income tax return for the taxable
year ending December 31, 1995; (ix) adopt any new employee benefit plan,
incentive plan, severance plan, stock option or similar plan, grant new stock
appreciation rights or amend any existing plan or rights, except such changes as
are required by law or which are not more favorable to participants than
provisions presently in effect; (x) settle any shareholder derivative or class
action claims arising out of or in connection with the Merger or the Other
Transactions; (xi) enter into or amend or otherwise modify any agreement or
arrangement with persons that are affiliates or, as of March 26, 1996, were
officers, directors or employees of DRC not approved by a majority of the
"independent" members of the DRC Board of Directors or (xii) authorize or commit
or agree to take any of the foregoing actions.
COVENANTS OF SPG
The Merger Agreement provides that, except as otherwise expressly permitted
or contemplated by the Merger Agreement (including certain planned activities
previously disclosed to DRC and certain specified exceptions described in the
Merger Agreement) or as consented to by DRC, during the period from the date of
the Merger Agreement to the Effective Time, SPG (including the SPG Operating
Partnership and SPG's other subsidiaries and joint ventures): (a) will carry on
its business in the usual, regular and ordinary course, substantially in the
same manner as previously conducted and (b) will not (i) except for regular
quarterly dividends determined in a manner consistent with past practice (and in
no event in excess of 104% of the prior dividend) (and comparable regular
quarterly distributions by the SPG Operating Partnership) and the Special
Distribution, declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock or partnership interests,
split, combine or reclassify any of its capital stock or partnership interests,
or issue or authorize the issuance of any other securities in respect of, in
lieu of or in substitution for shares of its capital stock or partnership
interests or purchase, redeem or otherwise acquire any shares of its capital
stock or partnership interests; (ii) issue, deliver, sell, pledge or otherwise
encumber any shares of its capital stock or partnership interests, any other
voting securities or any securities convertible into, or any rights, warrants or
options to acquire, any such shares, partnership interest, voting securities or
convertible securities; (iii) issue, deliver or sell, or grant any option or
other right in respect of, any shares of capital stock, any other voting
securities of SPG (including partnership interests of the SPG Operating
Partnership (or such subsidiaries or joint ventures)) or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities except to SPG (or such
subsidiaries or joint ventures); (iv) amend its articles of incorporation,
by-laws or code of regulations or other comparable charter, partnership
agreement or organizational documents; (v) in the case of SPG or the SPG
Operating Partnership, merge or consolidate with any person; (vi) in a
transaction involving capital, securities or other assets or indebtedness of SPG
(including subsidiaries and joint ventures) in excess of $89.4 million, without
obtaining the prior written consent of DRC, which consent is not to unreasonably
be withheld or delayed: (A) acquire or agree to acquire by merging or
consolidating with, or by purchasing all or a substantial portion of the equity
securities or assets of, or by any other manner, any business or any
corporation, partnership or other business organization or division thereof or
interest therein or any assets; (B) mortgage or otherwise encumber or subject to
any lien or sell, lease or otherwise dispose of any of its material properties
or assets or assign or encumber the right to receive income, dividends,
distributions and the like; (C) make or agree to make any new capital
expenditures, except in accordance with budgets relating to SPG previously
delivered to DRC; or (D) incur any indebtedness for borrowed money or guarantee
any such indebtedness of another person or enter into any arrangement having the
economic effect of any of the foregoing, prepay or refinance any indebtedness or
make any loans, advances or capital contributions to, or investments in, any
other person (or engage in any transactions of the types described in clauses
(A), (B), (C) and (D) above, whether or not related, involving, in the
aggregate, capital, securities or other assets or indebtedness of SPG (including
subsidiaries and joint ventures) in excess of $250.0 million), without obtaining
the prior written consent of DRC, which consent is not to unreasonably be
withheld or delayed; (vii) make any tax election (unless required by law or
necessary to preserve SPG's status as a REIT); (viii) (A) except as required by
generally accepted accounting principles, the Commission or
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applicable law, change in any material manner any of its methods, principles or
practices of accounting in effect on December 31, 1995, or (B) make or rescind
any express or deemed election relating to taxes, settle or compromise any claim
relating to taxes, except in the case of settlements or compromises relating to
taxes on real property in an amount not to exceed, individually or in the
aggregate, $5.0 million, or change any of its methods of reporting income or
deductions for federal income tax purposes from those employed in the
preparation of its federal income tax return for the taxable year ending
December 31, 1995; (ix) enter into or amend or otherwise modify any agreement or
arrangement with persons that are affiliates or, as of March 26, 1996 were
officers, directors or employees of SPG not approved by a majority of the Common
Stock Directors or (x) authorize or commit or agree to take any of the foregoing
actions.
CERTAIN ADDITIONAL MUTUAL COVENANTS
The Merger Agreement provides that each of SPG and DRC will (i) not take
any action that would cause its representations and warranties to become untrue
or any conditions to closing not be satisfied; (ii) cooperate with one another
in preparing, responding to the Commission in respect of, and causing to be
mailed to SPG's stockholders and DRC's shareholders this Prospectus/Joint Proxy
Statement and the Registration Statement on Form S-4 in which it is included;
(iii) afford access to information regarding its business to the other and its
representatives and hold in confidence nonpublic information relating to the
other party (subject to customary exceptions); (iv) provide prompt notice to the
other party of breaches by it of representations, warranties or covenants in the
Merger Agreement; (v) consult with one another prior to making any public
statements regarding statements regarding the Merger; (vi) cooperate with each
other in preparing returns and other documents relating to any Transfer and
Gains Taxes related to the Merger or the Other Transactions and to qualify the
Merger as a tax-free reorganization; (vii) negotiate in good faith the Amended
SPG Partnership Agreement, which negotiation has been completed; and (viii)
comply with certain other customary covenants.
CERTAIN ADDITIONAL COVENANTS OF SPG
The Merger Agreement provides that (i) the Simon DeBartolo Group will,
following the Merger, cause the Operating Partnership or the SPG Operating
Partnership to pay all Transfer and Gains Taxes, if any, incurred by SPG or DRC
in connection with the consummation of the Merger or the Other Transactions;
(ii) prior to the Effective Time, SPG will use its best efforts to have the NYSE
approve for listing, upon official notice of issuance, the SPG Common Stock to
be issued in the Merger; (iii) SPG will use its best efforts to obtain state
securities or "Blue Sky" approvals necessary in connection with the Merger and
the Other Transactions; (iv) SPG will call, give notice of, and convene the SPG
Special Meeting for the purpose of obtaining the SPG Stockholder Approvals; (v)
SPG will use its best efforts to cause the conditions precedent to the Merger
and the Other Transactions to become satisfied and to cause the expeditious
consummation of the Merger and Other Transactions, including, (A) making
governmental filings and taking all reasonable steps to obtain required
governmental consents and approvals, (B) obtaining necessary non-governmental
third-party consents, except that SPG is required to consult with DRC prior to
making expenditures in obtaining such consents and (C) defending legal
proceedings challenging the Merger Agreement or the Other Transactions or
Related Agreements, except that SPG is not required to take any such action that
would cause a court or administrative order to be issued restraining
consummation of the Merger; (vi) SPG will (A) propose and recommend to its
stockholders at the SPG Special Meeting (and any postponement or adjournment
thereof) to adopt and approve, effective as of the Effective Time, the Amended
SPG Charter and the Amended SPG By-laws and will use its best efforts (including
postponement or adjournment of the SPG Special Meeting for a reasonable period
of time and for a reasonable number of times) to seek and solicit the Required
Vote (including retention of proxy solicitors), (B) if the Amended SPG Charter
and Amended SPG By-laws are adopted and approved at the SPG Special Meeting,
upon or immediately following the Effective Time issue the entire amount of
Class C Common Stock to EJDC for nominal consideration (for discussion of the
Simon DeBartolo Group's continuing obligations to seek approval of the Amended
SPG Charter and the Amended SPG By-laws, if the Required Vote is not obtained,
see "CERTAIN ALTERNATIVE GOVERNANCE ARRANGEMENTS AND RELATED MATTERS IF THE
REQUIRED VOTE IS NOT OBTAINED"); (vii) SPG will indemnify each person who is now
or has been at any time prior to the date hereof or who becomes prior to the
Effective Time, an officer or director of DRC against all losses, liabilities
and expenses (including attorneys' fees and expenses) in connection with any
claim arising out of the fact that such person is or was a director or officer
of DRC at or prior to the Effective Time and will obtain and maintain in effect
at the Effective Time and continuing until the sixth anniversary of the
Effective Time directors and officers liability insurance with a coverage amount
of $15.0 million and other terms and conditions comparable to SPG's current
directors and officers liability insurance policy covering such directors and
officers with respect to their service as such prior to the Effective Time; and
(viii) SPG will comply with certain other customary covenants.
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CERTAIN ADDITIONAL COVENANTS OF DRC
The Merger Agreement provides that (i) DRC will give notice of, and convene
the DRC Special Meeting for the purpose of obtaining the DRC Shareholder
Approvals; (ii) DRC will use its best efforts to cause the conditions precedent
to the Merger and the Other Transactions to become satisfied and to cause the
expeditious consummation of the Merger and Other Transactions, including, (A)
making governmental filings and taking all reasonable steps to obtain required
governmental consents and approvals, (B) obtaining necessary non-governmental
third-party consents, except that DRC is required to consult with SPG prior to
making expenditures in obtaining such consents and in no event will make payment
of any such amount in excess of $5.0 million in obtaining such consents without
obtaining the prior written consent of SPG, which consent is not to unreasonably
be withheld or delayed, except that no payments of any kind by DRC will be made
to obtain consents from any lender, financier or other holder of indebtedness of
EJDC or the DeBartolos in such capacity and (C) defending legal proceedings
challenging the Merger Agreement or the Other Transactions or Related
Agreements, except that DRC is not required to take any such action that would
cause a court or administrative order to be issued restraining consummation of
the Merger; (iii) DRC will not solicit or take certain other actions in respect
of Competing Transactions (see "--No Solicitation; Board Action; Fees and
Expenses"); (iv) DRC will, in its capacity as general partner of the DRC
Operating Partnership, execute and deliver (A) the Contribution Agreement with
the holders of SPG Units and, in such capacity, perform its obligations
thereunder, including obligations to issue Units of the Operating Partnership to
SPG Limited Partners and SPG as general partner of the SPG Operating Partnership
in exchange for their SPG Units and, in the case of SPG, other economic
interests in the SPG Operating Partnership upon consummation of the Merger as
part of the Other Transactions and (B) the Amended Operating Partnership
Agreement; and (v) DRC will comply with certain other customary covenants.
CERTAIN PROVISIONS RELATING TO EMPLOYEE BENEFITS AND INCENTIVE PLANS
BENEFIT PLANS
After the Effective Time, SPG will maintain, or cause DRC to maintain, the
Benefit Plans of DRC at benefit levels not materially less favorable than those
in effect at DRC prior to the Merger. SPG will cause DRC to maintain its annual
bonus plan as in effect at the Effective Time for the remainder of the 1996
fiscal year.
STOCK INCENTIVE PLAN
Immediately prior to or as of the Effective Time, as a result of the Merger
DRC will accelerate the vesting of DRC Stock Options (as defined in the
"GLOSSARY") previously granted under the DRC Stock Incentive Plan and will
accelerate the vesting of and issue DRC Common Stock subject to previously
earned deferred stock awards. As of the Effective Time, each outstanding DRC
Stock Option will be assumed by SPG and will be deemed to constitute an option
to acquire the same number of shares of SPG Common Stock as the holder would
have been entitled to receive pursuant to the Merger had such holder exercised
such DRC Stock Option in full immediately prior to the Effective Time at a price
per share equal to the aggregate exercise price for the shares subject to such
DRC Stock Option divided by the number of full shares of SPG Common Stock deemed
to be purchasable pursuant to such DRC Stock Option. Each share of DRC Common
Stock (whether or not purchasable pursuant to options) will be converted into
shares of SPG Common Stock at the Exchange Ratio.
As of the Effective Time, DRC will grant deferred stock awards under the
DRC Stock Incentive Plan as an incentive stay bonus for participants in the DRC
Stock Incentive Plan who remain in the employ of DRC or a DRC Affiliate through
the Effective Time (the "Stay Bonus"). Each share of DRC Common Stock granted
pursuant to such award will be converted into shares of SPG Common Stock at the
Exchange Ratio. Shares awarded pursuant to the Stay Bonus will vest in three
equal installments on each of April 1, 1997, August 1, 1997 and January 1, 1998,
subject to earlier vesting as provided in the Severance Program.
As of the Effective Time, SPG will assume the DRC Stock Incentive Plan,
providing for issuance of SPG Common Stock in lieu of DRC Common Stock and all
DRC Common Stock will be converted into SPG Common Stock pursuant to the Merger
Consideration. The committee administering the DRC Stock Incentive Plan will
establish new Funds From Operations growth targets for the unearned long-term
incentive stock awards previously allocated to participants in the DRC Stock
Incentive Plan for fiscal years 1996, 1997 and 1998 which will match the growth
target established by SPG under the SPG Employee Plan (as defined in the
"GLOSSARY"). See "ANNUAL MEETING MATTERS-- Executive Compensation."
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THE SEVERANCE PROGRAM
Immediately prior to or as of the Effective Time, DRC will adopt the
Severance Program and SPG will cause DRC to maintain such Severance Program
which will provide benefits to eligible employees of DRC who are terminated
without Cause (as defined in the Severance Program) or who resign for Good
Reason (as defined in the Severance Program) within the two-year period
following the Effective Time.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties
relating to, among other things: (i) the due organization, power and standing of
SPG and DRC and similar corporate matters; (ii) the authorization, execution,
delivery and enforceability of the Merger Agreement; (iii) the capital structure
of SPG and DRC; (iv) conflicts under charters or by-laws, violations of any
instruments or law and required consents or approvals; (v) certain documents
filed by each of SPG and DRC with the Commission and the accuracy of information
contained therein; (vi) litigation; (vii) conduct of business in the ordinary
course and the absence of certain changes or events; (viii) taxes; (ix)
compliance with laws; (x) indebtedness; (xi) brokers' and finders' fees with
respect to the Merger; (xii) the nonapplicability of certain state takeover
laws; (xiii) the percentage of SPG stockholders and DRC shareholders,
respectively, required to approve the SPG Proposal (in the case of SPG) and the
Merger (in the case of DRC); and (xiv) SPG's receipt of the Merrill Lynch
Opinion and DRC's receipt of the Morgan Stanley Opinion.
NEW YORK STOCK EXCHANGE LISTING OF SPG COMMON STOCK
SPG has obtained preliminary approval for the listing on the NYSE of the
shares of SPG Common Stock to be issued in the Merger. Approval of the listing
of such shares for trading on the NYSE is a condition to the respective
obligations of SPG and DRC to consummate the Merger. See "--Conditions to the
Merger; Termination; Waiver and Amendment."
EXCHANGE ACT REPORTING
After the Merger is consummated, no shares of DRC Common Stock will be
outstanding and public trading of DRC Common Stock will cease. Accordingly, DRC
Common Stock will, at such time, be delisted from the NYSE and will be
deregistered under, and cease to be subject to the reporting requirements of,
the Exchange Act. SPG is and will, following consummation of the Merger,
continue to be subject to the reporting requirements of the Exchange Act.
FEDERAL INCOME TAX CONSEQUENCES TO HOLDERS OF DRC COMMON STOCK
The following discussion describes the material federal income tax
consequences applicable to holders of DRC Common Stock that are expected to
result from the Merger and certain transactions associated therewith. This
discussion does not address all aspects of taxation that may be relevant to
particular stockholders in light of their personal investment or tax
circumstances, or to certain types of stockholders (including insurance
companies, financial institutions, broker-dealers, foreign corporations and
persons who are not citizens or residents of the United States) subject to
special treatment under the federal income tax laws, nor does it give a detailed
discussions of any state, local or foreign tax considerations. Accordingly, DRC
SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX
CONSEQUENCES OF THE MERGER, INCLUDING THE APPLICABLE FEDERAL, STATE, LOCAL AND
FOREIGN TAX CONSEQUENCES TO THEM OF THE MERGER.
The following discussion is based on the Code, applicable Treasury
Regulations (as defined in the "GLOSSARY"), judicial authority and
administrative rulings and practice, all as of the date of this Prospectus/Joint
Proxy Statement. There can be no assurance that future legislative, judicial or
administrative changes or interpretations will not adversely affect the accuracy
of the statements and conclusions set forth herein. Any such changes or
interpretations could be applied retroactively and could affect the tax
consequences of the Merger to DRC's shareholders.
The Merger has been structured to qualify as a tax-free reorganization
within the meaning of Section 368(a) of the Code. It is expected that each of
Paul, Weiss, Rifkind, Wharton & Garrison, counsel to SPG, and Willkie Farr &
Gallagher, counsel to DRC, will issue opinions at the closing of the Merger to
such effect. Such opinions will be based upon the understanding that the
relevant facts are as described in the Prospectus/Joint Proxy Statement and
exhibits and appendices hereto, and in rendering such opinions such counsel will
rely on the accuracy of the factual statements and representations in the
foregoing documents and upon certain representations made in writing to such
counsel. The issuance of such opinions is also contingent upon certain facts not
ascertainable until after the DRC Special Meeting. The obligations of SPG and
DRC to consummate the Merger are conditioned upon the receipt of such opinions.
An opinion of
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counsel is not binding on the Internal Revenue Service ("IRS") or the courts.
Neither SPG nor DRC have requested or will request an advance ruling from the
IRS.
Assuming the Merger so qualifies, the material federal income tax
consequences of the Merger will be as follows:
(i) The exchange in the Merger of DRC Common Stock for SPG Common
Stock will not result in the recognition of gain or loss to DRC
shareholders with respect to such exchange, except as described in (ii)
below.
(ii) Each shareholder of DRC who receives cash proceeds in lieu of
fractional interests in shares of SPG Common Stock will recognize gain or
loss equal to the difference between such proceeds and the tax basis
allocated to such shareholder's fractional share interests. Each Dissenting
Shareholder who receives cash proceeds for the shares not voted in favor of
the Merger will recognize a taxable gain or loss equal to the difference
between such proceeds and the tax basis allocated to such shares. See "THE
PROPOSED MERGER AND RELATED MATTERS--Dissenters' Rights" and Annex V
hereto. Any such gain or loss recognized as described in this paragraph
will constitute capital gain or loss if such shareholder's shares of DRC
Common Stock were held as a capital asset at the Effective Time, unless the
receipt of such cash by such shareholder has the effect of a distribution
of a dividend, in which case such gain will be taxed as ordinary income to
the extent of the earnings and profits of the Surviving Subsidiary
Corporation.
(iii) The tax basis of the shares of SPG Common Stock (including
fractional share interests for which cash is ultimately received) received
by a DRC shareholder will be equal to the tax basis of the shares of DRC
Common Stock exchanged therefor, decreased by the amount of cash received
by such shareholder, and increased by the amount of gain (if any)
recognized by such shareholder in the Merger.
(iv) A shareholder's holding period with respect to the SPG Common
Stock received in the Merger will include the holding period of the DRC
Common Stock exchanged in the Merger if such DRC Common Stock was held as a
capital asset at the Effective Time.
(v) No gain or loss will be recognized by DRC, Sub or SPG as a result
of the Merger.
In addition, even if the Merger would otherwise be a Reorganization, its
status as a Reorganization may be adversely affected unless the following
statements are true:
(i) there is no plan or intention by the DRC shareholders to sell,
exchange, or otherwise dispose of a number of shares of SPG Common Stock
received in the Merger that would reduce the DRC shareholders' ownership of
SPG Common Stock to a number of shares having a value, as of the Effective
Time, of less than 50 percent of the value of all of the formerly
outstanding DRC Common Stock as of the same date (including, for this
purpose, shares of DRC Common Stock exchanged for cash in lieu of
fractional shares of SPG Common Stock); and
(ii) the principal DRC shareholders (those shareholders known to the
management of DRC to own beneficially more than five percent of the
outstanding stock of DRC) have no present intention to sell or dispose of
the SPG Common Stock received in the Merger.
Even if the Merger qualifies as a Reorganization, a recipient of shares of
SPG Common Stock would recognize gain to the extent that such shares were
considered to be received in exchange for services or property (other than
solely shares of DRC Common Stock). All or a portion of such gain may be taxable
as ordinary income. Gain will also have to be recognized to the extent that a
DRC shareholder is treated as receiving (directly or indirectly) consideration
other than SPG Common Stock in exchange for such shareholder's DRC Common Stock.
If the Merger is not a Reorganization, then each DRC shareholder will
recognize gain or loss with respect to each share of DRC Common Stock equal to
the difference between the shareholder's basis in such share and the fair market
value, as of the Effective Time, of the SPG Common Stock received in exchange
therefor. In such event, an DRC shareholder's aggregate basis in any SPG Common
Stock received will equal its fair market value, and the shareholder's holding
period for such stock will begin the day after the Merger.
OPINIONS OF SPG'S COUNSEL
In the opinion of Paul, Weiss, Rifkind, Wharton & Garrison ("SPG's
Counsel"), commencing with SPG's taxable year ending December 31, 1994 and
assuming that the actions described in this discussion of "--Federal Income Tax
Considerations Relating to the Simon DeBartolo Group and the Surviving
Subsidiary Corporation" are completed in a timely fashion, SPG was organized and
has operated in conformity with the requirements for qualification as a REIT
within the meaning of the Code and the Simon DeBartolo Group will be organized
in conformity with the requirements for qualification as a REIT, and its
proposed method of operation will enable it to meet the requirements for
qualification and taxation as a REIT under the Code. In the opinion of Willkie
Farr & Gallagher, counsel to DRC, commencing with
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DRC's taxable year ending December 31, 1994 and assuming that the actions
described in this discussion of "--Federal Income Tax Considerations Relating to
the Simon DeBartolo Group and the Surviving Subsidiary Corporation" are
completed in a timely fashion, DRC was organized and has operated in conformity
with the requirements for qualification as a REIT within the meaning of the
Code. It must be emphasized that counsels' opinions are based on various
assumptions and are conditioned upon certain representations made by the
companies as to factual matters. Such factual assumptions and representations
are set forth below in this discussion of "--Federal Income Tax Considerations
Relating to the Simon DeBartolo Group and the Surviving Subsidiary Corporation."
In addition, counsels' opinions are based upon the factual representations of
the companies concerning their businesses and properties, and the businesses and
properties of the DRC Operating Partnership and the SPG Operating Partnership,
as set forth in this Prospectus/Joint Proxy Statement. Moreover, such
qualification and taxation as a REIT depend upon the ability of both the Simon
DeBartolo Group and the Surviving Subsidiary Corporation to meet, through actual
annual operating results, distribution levels, diversity of stock ownership, and
the various other qualification tests imposed under the Code discussed below,
the results of which have not and will not be reviewed by SPG's Counsel or
counsel to DRC. Accordingly, no assurance can be given that the actual results
of the Companies' operations for any one taxable year will satisfy such
requirements. See "--Federal Income Tax Consequences Relating to the Simon
DeBartolo Group and the Surviving Subsidiary Corporation--Failure to Qualify."
FEDERAL INCOME TAX CONSIDERATIONS RELATING TO THE SIMON DEBARTOLO GROUP AND THE
SURVIVING SUBSIDIARY CORPORATION
The following is a summary of material federal income tax considerations
that may be relevant to a prospective stockholder of the Simon DeBartolo Group,
is based upon current law, and is not tax advice. This discussion does not
address all aspects of taxation that may be relevant to particular stockholders
in light of their personal investment or tax circumstances, or to certain types
of stockholders (including insurance companies, tax exempt organizations,
financial institutions, broker-dealers, foreign corporations and persons who are
not citizens or residents of the United States) subject to special treatment
under the federal income tax laws, nor does it give a detailed discussion of any
state, local or foreign tax considerations. This summary of federal income tax
considerations reflects the views of SPG's Counsel. See "--Federal Income Tax
Consequences to Holders of DRC Common Stock" for a discussion of certain tax
consequences of the Merger to the DRC shareholders.
EACH PROSPECTIVE STOCKHOLDER OF THE SIMON DeBARTOLO GROUP IS ENCOURAGED TO
CONSULT ITS OWN TAX ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES TO IT OF THE
PURCHASE, OWNERSHIP AND SALE OF THE SHARES OF THE SIMON DeBARTOLO GROUP COMMON
STOCK AND OF THE SIMON DeBARTOLO GROUP'S ELECTION TO BE TAXED AS A REIT,
INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF SUCH
PURCHASE, OWNERSHIP, SALE AND ELECTION AND OF POTENTIAL CHANGES IN APPLICABLE
TAX LAWS.
GENERAL
Both SPG and DRC have made elections to be taxed as a REIT for federal
income tax purposes commencing with their taxable years ending December 31,
1994. Management of both companies believe that both companies are organized and
operated in such a manner as to qualify for taxation as a REIT under the Code.
Both companies intend to continue to operate in such a manner, but no assurance
can be given that they will operate in a manner so as to qualify or remain
qualified. See "POLICIES OF THE SIMON DeBARTOLO GROUP--Dividend and Distribution
Policies."
The REIT Requirements relating to the federal income tax treatment of REITs
and their stockholders are highly technical and complex. The following
discussion sets forth only the material aspects of those requirements. This
summary is qualified in its entirety by the applicable Code provisions, rules
and Treasury Regulations promulgated thereunder, and administrative and judicial
interpretations thereof.
TAXATION OF THE SIMON DEBARTOLO GROUP AND THE SURVIVING SUBSIDIARY CORPORATION
A REIT generally is not subject to federal corporate income taxes on that
portion of its ordinary income or capital gain that is distributed currently to
stockholders because the REIT provisions of the Code generally allow a REIT to
deduct dividends paid to its stockholders. This deduction for dividends paid to
stockholders substantially eliminates the federal "double taxation" on earnings
(once at the corporate level and once again at the stockholder level) that
generally results from investment in a corporation.
However, REITs may be subject to federal income tax in the following
circumstances. First, a REIT will be taxed at regular corporate rates on any
undistributed REIT taxable income and undistributed net capital gains. Second,
under certain circumstances, a REIT may be subject to the "alternative minimum
tax" on its items of tax preference, if any.
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Third, if the REIT has (i) net income from the sale or other disposition of
"foreclosure property" (generally, property acquired by reason of a default on a
lease or an indebtedness held by a REIT) that is held primarily for sale to
customers in the ordinary course of business or (ii) other non-qualifying net
income from foreclosure property, it will be subject to tax at the highest
corporate rate on such income. Fourth, if the REIT has net income from a
"prohibited transaction" (generally, a sale or other disposition of property
held primarily for sale to customers in the ordinary course of business, other
than foreclosure property), such income will be subject to a 100% tax. Fifth, if
the REIT should fail to satisfy the 75% gross income test or the 95% gross
income test (as discussed below), and has nonetheless maintained its
qualification as a REIT because certain other requirements have been met, it
will be subject to a 100% tax on the net income attributable to the greater of
the amount by which the REIT fails the 75% or 95% test, multiplied by a fraction
intended to reflect the REIT's profitability. Sixth, if the REIT should fail to
distribute with respect to each calendar year at least the sum of (i) 85% of its
REIT ordinary income for such year, (ii) 95% of its REIT capital gain net income
for such year, and (iii) any undistributed taxable income from prior periods,
the REIT will be subject to a four percent excise tax on the excess of such
required distribution over the amounts actually distributed. Seventh, if a REIT
acquires any asset from a C corporation (i.e., a corporation generally subject
to a full corporate-level tax, but not including a corporation, such as SPG that
also qualifies for treatment as a REIT) in a transaction in which the basis of
the asset in the REIT's hands is determined by reference to the basis of the
asset (or any other property) in the hands of the C corporation, and the REIT
recognizes gain on the disposition of such asset during the 10-year period
beginning on the date on which such asset was acquired by the REIT (the
"Restriction Period"), then pursuant to guidelines issued by the IRS in IRS
Notice 88-19 (the "Built-in Gain Rules"), the excess of the fair market value of
such property at the beginning of the applicable Restriction Period over the
REIT's adjusted basis in such asset as of the beginning of such Restriction
Period (the "Built-in Gain") will be subject to a tax at the highest regular
corporate rate. The Built-in Gain Rules may also apply with respect to the Simon
DeBartolo Group's share of Built-in Gains, if any, arising from assets disposed
of by the SPG Operating Partnership during the Restriction Period and
attributable to appreciation during periods in which the Simon DeBartolo Group
held interests in the SPG Operating Partnership and did not elect to be taxed as
a REIT. The results described above with respect to the recognition of Built-in
Gain assume that both the Simon DeBartolo Group and, to the extent applicable in
the future, the Surviving Subsidiary Corporation will make elections pursuant to
the Built-in Gain Rules or applicable future administrative rules or Treasury
Regulations.
REQUIREMENTS FOR QUALIFICATION
To qualify as a REIT, a corporation must elect to be so treated and must
meet the requirements, discussed below, relating to its organization, sources of
income, nature of assets, and distributions of income to stockholders.
Organizational Requirements
The Code defines a REIT as a corporation, trust or association: (i) that is
managed by one or more trustees or directors; (ii) the beneficial ownership of
which is evidenced by transferable shares or by transferable certificates of
beneficial interest; (iii) that would be taxable as a domestic corporation but
for the REIT Requirements; (iv) that is neither a financial institution nor an
insurance company subject to certain provisions of the Code; (v) the beneficial
ownership of which is held by 100 or more persons; and (vi) during the last half
of each taxable year not more than 50% in value of the outstanding capital stock
of which is owned, directly or indirectly through the application of certain
attribution rules, by five or fewer individuals (as defined in the Code to
include certain entities). In addition, certain other tests, described below,
regarding the nature of a REIT's income and assets must also be satisfied. The
Code provides that conditions (i) through (iv), inclusive, must be met during
the entire taxable year and that condition (v) must be met during at least 335
days of a taxable year of 12 months, or during a proportionate part of a taxable
year of less than 12 months. Conditions (v) and (vi) will not apply until after
the first taxable year for which an election is made to be taxed as a REIT.
SPG has satisfied the requirements set forth in (i) through (v) above and
believes that it has issued sufficient shares of SPG Common Stock to allow it to
satisfy the requirement set forth in (vi) above. DRC has satisfied the
requirements set forth in (i) through (v) above and believes that it has issued
sufficient shares of DRC Common Stock to allow it to satisfy the requirement set
forth in (vi) above. The Simon DeBartolo Group will satisfy the requirements set
forth in (i) through (iv) above and the Amended SPG Charter includes certain
restrictions regarding transfer of the SPG Common Stock that are intended to
assist the Simon DeBartolo Group in satisfying the share ownership requirements
described in (v) and (vi) above. See "DESCRIPTION OF SPG'S CAPITAL
STOCK--Restrictions On Transfer." The Surviving Subsidiary Corporation will
satisfy the requirements set forth in (i) through (v) above, and requirement
(vi) will be satisfied by virtue of the Simon DeBartolo Group's owning 99% of
the Surviving Subsidiary Corporation's outstanding stock.
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In addition, a corporation may not elect to become a REIT unless its
taxable year is the calendar year. Both SPG and DRC's taxable year is the
calendar year.
The Simon DeBartolo Group will have several "qualified REIT subsidiaries."
Code section 856(i) provides that a corporation that is a "qualified REIT
subsidiary" will not be treated as a separate corporation, and all assets,
liabilities and items of income, deduction, and credit of a "qualified REIT
subsidiary" will be treated as assets, liabilities, and such items (as the case
may be) of the REIT. In applying the requirements described herein, the Simon
DeBartolo Group's "qualified REIT subsidiaries" will be ignored, and all assets,
liabilities, and items of income, deduction, and credit of such subsidiary will
be treated as assets, liabilities and items of the Simon DeBartolo Group.
In the case of a REIT which is a partner in a partnership, the REIT will be
deemed to own its proportionate share of the assets of the partnership and will
be deemed to be entitled to the income of the partnership attributable to such
share. In addition, the character of the assets and gross income of the
partnership shall retain the same character in the hands of the REIT for
purposes of the REIT Requirements, including satisfying the income tests and
asset tests. Thus, the Simon DeBartolo Group and the Surviving Subsidiary
Corporation's proportionate share of the assets, liabilities and items of income
of the Operating Partnership, the SPG Operating Partnership and the partnerships
in which those two partnerships will have an interest will be treated as assets,
liabilities and items of income of the Simon DeBartolo Group and the Surviving
Subsidiary Corporation for purposes of applying the requirements described
herein, provided that the Operating Partnership, the SPG Operating Partnership
and the Property Partnerships are treated as partnerships for federal income tax
purposes. See "--Income Taxation of the Partnerships, the Property Partnerships
and Their Partners."
Income Tests
For the Simon DeBartolo Group and the Surviving Subsidiary Corporation to
maintain qualification as REITs, there are three gross income requirements that
each of the companies must satisfy annually. First, at least 75% of the
company's gross income (excluding gross income from prohibited transactions) for
each taxable year must be derived directly or indirectly from investments
relating to real property or mortgages on real property (including "rents from
real property," dividends from qualified REITs and, in certain circumstances,
interest) or from "qualified temporary investment income" (described below).
Second, at least 95% of the company's gross income (excluding gross income from
prohibited transactions) for each taxable year must be derived from such real
property investments and from dividends, interest, and gain from the sale or
disposition of stock or securities or from any combination of the foregoing.
Third, short-term gain from the sale or other disposition of stock or
securities, gain from prohibited transactions, and gain on the sale or other
disposition of real property held for less than four years (apart from
involuntary conversions and sales of foreclosure property) must represent less
than 30% of the company's gross income (including gross income from prohibited
transactions) for each taxable year. In applying these tests, the Simon
DeBartolo Group and the Surviving Subsidiary Corporation will be treated as
realizing their share of the income and bearing their share of the loss of the
Operating Partnership and the SPG Operating Partnership, and the character of
such income or loss, as well as other partnership items, will be determined at
the partnership level.
Rents received by each of the companies will qualify as "rents from real
property" only if several conditions are met. First, the amount of rent must not
be based in whole or in part on the income or profits of any person. However, an
amount received or accrued generally will not be excluded from the term "rents
from real property" solely by reason of being based on a fixed percentage or
percentages of receipts or sales. Second, the Code provides that rents received
from a tenant will not qualify as "rents from real property" if the REIT, or an
owner of ten percent or more of the REIT, directly or constructively owns ten
percent or more of such tenant (a "Related Party Tenant"). Third, if rent
attributable to personal property, leased in connection with a lease of real
property, is greater than 15% of the total rent received under the lease, then
the portion of rent attributable to such personal property will not qualify as
"rents from real property." Finally, for rents received to qualify as "rents
from real property," the REIT generally must not operate or manage the property
or furnish or render services to the tenants of such property, other than
through an "independent contractor" who is adequately compensated and from whom
the REIT does not derive any income; provided, however, that the REIT may
directly perform certain customary services (e.g., furnishing water, heat, light
and air conditioning, and cleaning windows, public entrances and lobbies) other
than services which are considered rendered to the occupant of the property
(e.g., renting parking spaces on a reserved basis to tenants). The law
concerning types of services that may be rendered by a REIT and its tenants is
constantly evolving and the consequences of rendering impermissible services are
somewhat uncertain.
It is expected that both of the companies' real estate investments will
give rise to income that will enable them to satisfy all of the income tests
described above. Substantially all of the Simon DeBartolo Group and the
Surviving Subsidiary Corporation's income will be derived from their interests
in the Operating Partnership and the SPG Operating
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Partnership, which income will, for the most part, qualify as "rents from real
property" for purposes of the 75% and the 95% gross income tests.
Neither company presently charges, nor does either company anticipate
charging, more than a de minimis amount of rent that is based in whole or in
part on the income or profits of any person (except by reason of being based on
a percentage of receipts or sales, as described above). The determination of
whether a tenant is a Related Party Tenant is made after the application of
complex attribution rules. Accordingly, neither company can be absolutely
certain whether all Related Party Tenants have been or will be identified.
However, neither company anticipates receiving rents in excess of a de minimis
amount from Related Party Tenants. Neither company anticipates holding a lease
on any property in which rents attributable to personal property constitute
greater than 15% of the total rents received under the lease. Neither company
will knowingly directly perform services considered to be rendered to the
occupant of property. Both companies, through the Operating Partnership and the
SPG Operating Partnership, will perform all development, construction and
leasing services for, and will operate and manage, wholly-owned properties
directly without using an "independent contractor." SPG's management believes
that, in almost all instances, the only services to be provided to lessees of
these properties will be those usually or customarily rendered in connection
with the rental of space for occupancy only.
The IRS has issued private rulings holding that if a partnership in which a
REIT is a partner provides management services to properties not wholly owned by
such partnership, the income received from such services or properties should
qualify as "rents from real property" to the extent of such REIT's interest in
such property. (For example, if the Operating Partnership provides management
services to a property in which it holds a 75% interest, 75% of the income
received from the provision of such services should qualify as "rents from real
property.") It is intended that neither the Operating Partnership nor the SPG
Operating Partnership will provide such services as of the Effective Time, but
they may provide such services in the future.
The SPG Operating Partnership owns five percent of the voting common stock,
substantially all of the nonvoting common stock and all of the preferred stock
of the SPG Management Company, a corporation that is taxable as a regular
corporation. The Operating Partnership will own five percent of the voting
common stock and all of the preferred stock of the DRC Management Company, a
corporation that is also taxable as a regular corporation. The SPG Management
Company, after the Merger, will own 95% of the voting common stock of the DRC
Management Company. The SPG Management Company and the DRC Management Company
(together, the "Management Companies") will perform management, development,
construction and leasing services for the Joint Venture Properties, the Excluded
Properties (as defined in the "GLOSSARY") and other real estate owned in whole
or in part by third parties. The income earned by and taxed to the Management
Companies would be nonqualifying income if earned by either the Simon DeBartolo
Group or the Surviving Subsidiary Corporation through the Operating Partnership
and the SPG Operating Partnership to the extent that such properties are owned
by third parties. As a result of the corporate structure, the income will be
earned by and taxed to the Management Companies and will be received by the
Operating Partnership and the SPG Operating Partnership only indirectly as
dividends and interest that qualify under the 95% test.
The term "interest" generally does not include any amount received or
accrued (directly or indirectly) if the determination of such amount depends in
whole or in part on the income or profits of any Person. An amount received or
accrued generally will not be excluded from the term "interest," however, solely
by reason of being based on a fixed percentage or percentages of receipts or
sales. The Operating Partnership and the SPG Operating Partnership may advance
money from time to time to tenants for the purpose of financing tenant
improvements. The Operating Partnership and the SPG Operating Partnership do not
intend to charge interest that will depend in whole or in part on the income or
profits of any person.
If either the Simon DeBartolo Group or the Surviving Subsidiary Corporation
fails to satisfy one or both of the 75% or 95% gross income tests for any
taxable year, it may nevertheless qualify as a REIT for such year if it is
entitled to relief under certain provisions of the Code. These relief provisions
will be generally available if (i) the failure to meet such tests was due to
reasonable cause and not due to willful neglect, (ii) a schedule of the sources
of income is attached to that company's return, and (iii) any incorrect
information on the schedule was not due to fraud with intent to evade tax. It is
not possible, however, to state whether in all circumstances the Simon DeBartolo
Group or the Surviving Subsidiary Corporation would be entitled to the benefit
of these relief provisions. As discussed above in "--Taxation of the Simon
DeBartolo Group and the Surviving Subsidiary Corporation," even if these relief
provisions apply, a tax would be imposed with respect to the excess net income.
No similar mitigation provision applies to provide relief if the 30% income test
is failed, and in such case, the Simon DeBartolo Group or the Surviving
Subsidiary Corporation would cease to qualify as a REIT. See "--Failure to
Qualify."
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Asset Tests
In order for either the Simon DeBartolo Group or the Surviving Subsidiary
Corporation to qualify as a REIT, at the close of each quarter of its taxable
year each company must also satisfy three tests relating to the nature of its
assets. First, at least 75% of the value of the company's total assets must be
represented by real estate assets (which for this purpose include (i) its
allocable share of real estate assets held by partnerships in which the company
or a "qualified REIT subsidiary" of the company owns an interest, (ii) stock or
debt instruments purchased with the proceeds of a stock offering or a long-term
(at least five years) debt offering of the company and held for not more than
one year from the date the company receives such proceeds), cash, cash items,
and government securities and (iii) shares in qualified REITs. Second, not more
than 25% of the company's total assets may be represented by securities other
than those in the 75% asset class. Third, of the investments included in the 25%
asset class, the value of any one issuer's securities owned by the company may
not exceed five percent of the value of the company's total assets, and the
company may not own more than ten percent of any one issuer's outstanding voting
securities (excluding securities of a qualified REIT subsidiary or another
REIT).
Both SPG and DRC anticipate that the Simon DeBartolo Group and the
Surviving Subsidiary Corporation will be able to comply with these asset tests.
Both companies are presently deemed to and will continue to be deemed to hold
directly their proportionate shares of all real estate and other assets of the
SPG Operating Partnership and the Operating Partnership, respectively, and they
should be considered to hold their proportionate share of all assets deemed
owned by those partnerships through the partnerships' ownership of partnership
interests in other partnerships. As a result, each company plans to hold more
than 75% of their assets as real estate assets. In addition, neither company
plans to hold any securities representing more than ten percent of any one
issuer's voting securities, other than any qualified REIT subsidiary, nor
securities of any one issuer exceeding five percent of the value of either the
Simon DeBartolo Group or the Surviving Subsidiary Corporation's gross assets,
respectively (determined in accordance with generally accepted accounting
principles).
The securities of the Surviving Subsidiary Corporation held by the Simon
DeBartolo Group will not violate this asset test as long as the Surviving
Subsidiary Corporation qualifies as a REIT. If, however, the Surviving
Subsidiary Corporation fails to qualify as a REIT for any reason, the Simon
DeBartolo Group would then fail this asset test because the Surviving Subsidiary
Corporation's voting securities, more than ten percent of which the Simon
DeBartolo Group will own, would no longer be excludable.
The SPG Operating Partnership owns five percent of the voting common stock,
substantially all of the nonvoting common stock and all of the participating
preferred stock of the SPG Management Company. The Operating Partnership will
own five percent of the voting common stock and all of the nonvoting preferred
stock of the DRC Management Company. Neither the SPG Operating Partnership nor
the Operating Partnership will own more than ten percent of the voting
securities of the SPG Management Company or the DRC Management Company
respectively. SPG's management believes that (a) neither the value of the
securities of SPG Management Company nor the value of DRC Management Company
held by the Simon DeBartolo Group will exceed five percent of the value of the
total assets of the Simon DeBartolo Group and (b) neither the value of the
securities of SPG Management Company nor the value of DRC Management Company
held by the Surviving Subsidiary Corporation will exceed five percent of the
value of the total assets of the Surviving Subsidiary Corporation. No
independent appraisals have been obtained. SPG's Counsel, in rendering its
opinion as to the qualification of both the Simon DeBartolo Group and the
Surviving Subsidiary Corporation as REITs, is relying on the conclusions of
SPG's management as well as DRC's management regarding the values of such
securities of the Management Companies.
After initially meeting the asset tests at the close of any quarter,
neither the Simon DeBartolo Group nor the Surviving Subsidiary Corporation will
lose its status as a REIT for failure to satisfy the asset tests at the end of a
later quarter solely by reason of changes in asset values. If the failure to
satisfy the asset tests results from an acquisition of securities or other
property during a quarter, the failure can be cured by disposition of sufficient
nonqualifying assets within 30 days after the close of that quarter. It is
intended that both the Simon DeBartolo Group and the Surviving Subsidiary
Corporation maintain adequate records of the value of their assets to ensure
compliance with the asset tests, and to take such other action within 30 days
after the close of any quarter as may be required to cure any noncompliance.
However, there can be no assurance that such other action will always be
successful.
Annual Distribution Requirements
In order to be taxed as REITs, both the Simon DeBartolo Group and the
Surviving Subsidiary Corporation will be required to meet certain annual
distribution requirements. Each company will have to distribute dividends (other
than capital gain dividends) to its stockholders in an amount at least equal to
(i) the sum of (a) 95% of the company's "REIT taxable income" (computed without
regard to the dividends paid deduction and the company's net capital gain) and
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(b) 95% of the net income, if any, from foreclosure property in excess of the
special tax on income from foreclosure property, minus (ii) the sum of certain
items of noncash income. In addition, during the Restriction Period, if the
Simon DeBartolo Group disposes of any asset that is subject to the Built-in Gain
Rules, the Simon DeBartolo Group will be required, pursuant to guidelines issued
by the IRS, to distribute at least 95% of the Built-in Gain (after tax), if any,
recognized on the disposition of such asset. Such distributions must be paid in
the taxable year to which they relate, or in the following taxable year if
declared before the company timely files its tax return for such year and if
paid on or before the first regular dividend payment after such declaration.
To the extent that either company does not distribute all of its net
capital gain or distributes at least 95% (but less than 100%) of its REIT
taxable income, as adjusted, it will be subject to tax on the undistributed
portion, at regular ordinary and capital gains corporate tax rates. Furthermore,
if either company fails to distribute during each calendar year at least the sum
of (a) 85% of its REIT ordinary income for such year, (b) 95% of its REIT
capital gain net income for such year, and (c) any undistributed taxable income
from prior periods, the company will be subject to a four percent excise tax on
the excess of such required distribution over the amounts actually distributed.
Both the Simon DeBartolo Group and the Surviving Subsidiary Corporation intend
to make timely distributions sufficient to satisfy this annual distribution
requirement.
It is expected that the Simon DeBartolo Group's REIT taxable income will be
less than its cash flow, due to the allowance of depreciation and other noncash
charges in computing the Simon DeBartolo Group taxable income. Accordingly, the
Simon DeBartolo Group anticipates that it will generally have sufficient cash or
liquid assets to enable it to satisfy the 95% distribution requirement.
It is possible that, from time to time, either the Simon DeBartolo Group or
the Surviving Subsidiary Corporation may not have sufficient cash or other
liquid assets to meet the 95% distribution requirement due to timing differences
between the actual receipt of income and actual payment of deductible expenses
and the inclusion of such income and deduction of such expenses in arriving at
taxable income of either company or if the amount of nondeductible expenses such
as principal amortization or capital expenditures exceed the amount of noncash
deductions. In the event that such situation occurs, in order to meet the 95%
distribution requirement, either company may find it necessary to arrange for
short-term, or possibly long-term, borrowings or to pay dividends in the form of
taxable share dividends. If the amount of nondeductible expenses exceeds noncash
deductions, either company may refinance its indebtedness to reduce principal
payments and borrow funds for capital expenditures.
Under certain circumstances, either the Simon DeBartolo Group or the
Surviving Subsidiary Corporation may be able to rectify a failure to meet the
distribution requirement for a year by paying "deficiency dividends" to
stockholders in a later year, which may be included in either company's
deduction for dividends paid for the earlier year. Thus, either company may be
able to avoid being taxed on amounts distributed as deficiency dividends;
however, such company will be required to pay interest based upon the amount of
any deduction taken for deficiency dividends.
FAILURE TO QUALIFY
If either the Simon DeBartolo Group or the Surviving Subsidiary Corporation
fails to qualify for taxation as a REIT in any taxable year, and the relief
provisions do not apply, the Simon DeBartolo Group (and the Surviving Subsidiary
Corporation) would be subject to tax (including any applicable alternative
minimum tax) on its taxable income at regular corporate rates. Distributions to
stockholders in any year in which either the Simon DeBartolo Group or the
Surviving Subsidiary Corporation fails to qualify will not be deductible by the
Simon DeBartolo Group nor will they be required to be made. In such event, to
the extent of current or accumulated earnings and profits, all distributions to
stockholders will be taxable as ordinary income, and subject to certain
limitations of the Code, corporate distributees may be eligible for the
dividends-received deduction. Unless entitled to relief under specific statutory
provisions, the Simon DeBartolo Group (and the Surviving Subsidiary Corporation)
will also be disqualified from taxation as a REIT for the four taxable years
following the year during which qualification was lost. It is not possible to
state whether in all circumstances either the Simon DeBartolo Group or the
Surviving Subsidiary Corporation would be entitled to such statutory relief.
TAXATION OF U.S. STOCKHOLDERS
As used herein, the term "U.S. Stockholder" means a holder of shares of SPG
Common Stock that (for United States federal income tax purposes) (i) is a
citizen or resident of the United States, (ii) is a corporation, partnership, or
other entity created or organized in or under the laws of the United States or
of any political subdivision thereof, or (iii) is an estate or trust the income
of which is subject to United States federal income taxation regardless of its
source. For any
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taxable year for which the Simon DeBartolo Group qualifies for taxation as a
REIT, amounts distributed to taxable U.S. Stockholders will be taxed as follows:
Distributions Generally
Distributions to U.S. Stockholders, other than capital gain dividends
discussed below, will be taxable as ordinary income to such holders up to the
amount of the Simon DeBartolo Group's current or accumulated earnings and
profits. Such distributions are not eligible for the dividends-received
deduction for corporations. To the extent that the Simon DeBartolo Group makes
distributions in excess of its current or accumulated earnings and profits, such
distributions will first be treated as a tax-free return of capital, reducing
the tax basis in the U.S. Stockholders' shares of SPG Common Stock, and
distributions in excess of the U.S. Stockholders' tax basis in their respective
shares of the SPG Common Stock are taxable as gain realized from the sale of
such shares. Dividends declared by the Simon DeBartolo Group in October,
November, or December of any year payable to a stockholder of record on a
specified date in any such month will be treated as both paid by the Simon
DeBartolo Group and received by the stockholder on December 31 of such year,
provided that the dividend is actually paid by the Simon DeBartolo Group during
January of the following calendar year. Stockholders may not include on their
own income tax returns any tax losses of the Simon DeBartolo Group.
The Simon DeBartolo Group will be treated as having sufficient earnings and
profits to treat as a dividend any distribution by the Simon DeBartolo Group up
to the greater of its current or accumulated earnings and profits. As a result,
stockholders may be required to treat certain distributions that would otherwise
result in a tax-free return of capital as taxable dividends. Moreover, any
"deficiency dividend" will be treated as a "dividend" (an ordinary dividend or a
capital gain dividend, as the case may be), regardless of the Simon DeBartolo
Group's earnings and profits.
Capital Gain Dividends
Dividends to U.S. Stockholders that are properly designated by the Simon
DeBartolo Group as capital gain dividends will be treated as long-term capital
gain (to the extent they do not exceed the Simon DeBartolo Group's actual net
capital gain) for the taxable year without regard to the period for which the
stockholder has held his stock. Corporate stockholders, however, may be required
to treat up to 20% of certain capital gain dividends as ordinary income. Capital
gain dividends are not eligible for the dividends-received deduction for
corporations.
Passive Activity and Loss; Investment Interest Limitations
Distributions from the Simon DeBartolo Group and gain from the disposition
of the shares of the SPG Common Stock will not ordinarily be treated as passive
activity income, and therefore, U.S. Stockholders generally will not be able to
apply any "passive losses" against such income. Dividends from the Simon
DeBartolo Group (to the extent they do not constitute a return of capital)
generally will be treated as investment income for purposes of the investment
interest limitation. Net capital gain from the disposition of SPG Common Stock
and capital gain dividends generally will be excluded from investment income
unless the taxpayer elects to have the gain taxed at ordinary rates.
Dispositions of Shares of Common Stock
A U.S. Stockholder will recognize gain or loss on the sale or exchange of
shares of SPG Common Stock to the extent of the difference between the amount
realized on such sale or exchange and the holder's tax basis in such shares.
Such gain or loss generally will constitute long-term capital gain or loss if
the holder has held such shares for more than one year. Losses incurred on the
sale or exchange of shares of the SPG Common Stock held for six months or less
(after applying certain holding period rules), however, will generally be deemed
long-term capital loss to the extent of any long-term capital gain dividends
received by the U.S. Stockholder with respect to such shares.
Treatment of Tax-Exempt U.S. Stockholders
The IRS has ruled that amounts distributed by a REIT to a tax-exempt
pension trust did not constitute unrelated business taxable income ("UBTI").
Although rulings are merely interpretations of law by the IRS and may be revoked
or modified, based on this analysis, indebtedness incurred by the Simon
DeBartolo Group in connection with the acquisition of an investment should not
cause any income derived from the investment to be treated as UBTI to a
tax-exempt entity. A tax-exempt entity that incurs indebtedness to finance its
purchase of shares, however, will be subject to UBTI by virtue of the
acquisition indebtedness rules.
In addition, qualified trusts that hold more than ten percent (by value) of
the interests in a REIT are required to treat a percentage of REIT dividends as
UBTI. The requirement applies only if (i) the qualification of the REIT depends
upon the application of a "look-through" exception to the restriction on REIT
stockholdings by five or fewer individuals,
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including qualified trusts (see "DESCRIPTION OF SPG'S CAPITAL
STOCK--Restrictions on Transfer"), and (ii) the REIT is "predominantly held" by
qualified trusts. It is not anticipated that qualification of either the Simon
DeBartolo Group or the Surviving Subsidiary Corporation as a REIT will depend
upon application of the "look-through" exception or that the Simon DeBartolo
Group or the Surviving Subsidiary Corporation will be "predominantly held" by
qualified trusts.
SPECIAL TAX CONSIDERATIONS FOR FOREIGN STOCKHOLDERS
The rules governing United States federal income taxation of non-resident
alien individuals, foreign corporations, foreign partnerships, and foreign
trusts and estates (collectively, "Non-U.S. Stockholders") are complex, and the
following discussion is intended only as a summary of such rules. Prospective
Non-U.S. Stockholders should consult with their own tax advisors to determine
the impact of federal, state, and local income tax laws on an investment in the
Simon DeBartolo Group, including any reporting requirements, as well as the tax
treatment of such an investment under their home country laws.
In general, Non-U.S. Stockholders will be subject to regular United States
federal income tax with respect to their investment in the Simon DeBartolo Group
if such investment is "effectively connected" with the Non-U.S. Stockholder's
conduct of a trade or business in the United States. A corporate Non-U.S.
Stockholder that receives income that is (or is treated as) effectively
connected with a United States trade or business may also be subject to the
branch profits tax under section 884 of the Code, which is payable in addition
to regular United States corporate income tax. The following discussion will
apply to Non-U.S. Stockholders whose investment in the Simon DeBartolo Group is
not so effectively connected. The Simon DeBartolo Group expects to withhold
United States income tax, as described below, on the gross amount of any
distributions paid to a Non-U.S. Stockholder unless (i) a lower treaty rate
applies and the required form evidencing eligibility for that reduced rate is
filed with the Simon DeBartolo Group, or (ii) the Non-U.S. Stockholder files an
IRS Form 4224 with the Simon DeBartolo Group, claiming that the distribution is
"effectively connected" income.
A distribution by the Simon DeBartolo Group that is not attributable to
gain from the sale or exchange by the Simon DeBartolo Group of a United States
real property interest and that is not designated by the Simon DeBartolo Group
as a capital gain dividend will be treated as an ordinary income dividend to the
extent made out of current or accumulated earnings and profits. Generally, an
ordinary income dividend will be subject to a United States withholding tax
equal to 30% of the gross amount of the distribution unless such tax is reduced
or eliminated by an applicable tax treaty. A distribution of cash in excess of
the Simon DeBartolo Group's earnings and profits will be treated first as a
return of capital that will reduce a Non-U.S. Stockholder's basis in its shares
of the SPG Common Stock (but not below zero) and then as gain from the
disposition of such shares, the tax treatment of which is described under the
rules discussed below with respect to dispositions of shares.
Distributions by the Simon DeBartolo Group that are attributable to gain
from the sale or exchange of a United States real property interest will be
taxed to a Non-U.S. Stockholder under the Foreign Investment in Real Property
Tax Act of 1980 ("FIRPTA"). Under FIRPTA, such distributions are taxed to a
Non-U.S. Stockholder as if such distributions were gains "effectively connected"
with a United States trade or business. Accordingly, a Non-U.S. Stockholder will
be taxed at the normal capital gain rates applicable to a U.S. Stockholder
(subject to any applicable alternative minimum tax and a special alternative
minimum tax in the case of non-resident alien individuals). Distributions
subject to FIRPTA may also be subject to a 30% branch profits tax in the hands
of a foreign corporate stockholder that is not entitled to treaty exemption.
The Simon DeBartolo Group will be required to withhold from distributions
to Non-U.S. Stockholders, and remit to the IRS, (i) 35% of designated capital
gain dividends (or, if greater, 35% of the amount of any distributions that
could be designated as capital gain dividends) and (ii) 30% of ordinary
dividends paid out of earnings and profits. In addition, if the Simon DeBartolo
Group designates prior distributions as capital gain dividends, subsequent
distributions, up to the amount of such prior distributions not withheld
against, will be treated as capital gain dividends for purposes of withholding.
A distribution in excess of the Simon DeBartolo Group's earnings and profits may
be subject to 30% dividend withholding if at the time of the distribution it
cannot be determined whether the distribution will be in an amount in excess of
the Simon DeBartolo Group's current or accumulated earnings and profits. Tax
treaties may reduce the Simon DeBartolo Group's withholding obligations. If the
amount withheld by the Simon DeBartolo Group with respect to a distribution to a
Non-U.S. Stockholder exceeds the stockholder's United States tax liability with
respect to such distribution (as determined under the rules described in the two
preceding paragraphs), the Non-U.S. Stockholder may file for a refund of such
excess from the IRS. It should be noted that the 35% withholding tax rate on
capital gain dividends currently corresponds to the maximum income tax rate
applicable to corporations, but is higher than the 28% maximum rate on capital
gains of individuals.
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Unless the shares of the SPG Common Stock constitute a "United States real
property interest" within the meaning of FIRPTA or are effectively connected
with a U.S. trade or business, a sale of such shares by a Non-U.S. Stockholder
generally will not be subject to United States taxation. The shares of the SPG
Common Stock will not constitute a United States real property interest if the
Simon DeBartolo Group is a "domestically controlled REIT." A domestically
controlled REIT is a REIT in which at all times during a specified testing
period less than 50% in value of its shares is held directly or indirectly by
Non-U.S. Stockholders. It is currently anticipated that the Simon DeBartolo
Group will be a domestically controlled REIT, and therefore that the sale of
shares in the Simon DeBartolo Group will not be subject to taxation under
FIRPTA. However, because the shares of the SPG Common Stock are publicly traded,
no assurance can be given that the Simon DeBartolo Group will continue to be a
domestically controlled REIT. Notwithstanding the foregoing, capital gain not
subject to FIRPTA will be taxable to a Non-U.S. Stockholder if the Non-U.S.
Stockholder is a nonresident alien individual who is present in the United
States for 183 days or more during the taxable year and certain other conditions
apply, in which case the nonresident alien individual will be subject to a 30%
tax on such individual's capital gains. If the Simon DeBartolo Group did not
constitute a domestically controlled REIT, whether a Non-U.S. Stockholder's sale
of shares of the SPG Common Stock would be subject to tax under FIRPTA as a sale
of a United States real property interest would depend on whether the shares
were "regularly traded" (as defined by applicable Treasury Regulations) on an
established securities market (e.g., the NYSE, on which the shares of the SPG
Common Stock are listed) and on the size of the selling stockholder's interest
in the Simon DeBartolo Group. If the gain on the sale of the Simon DeBartolo
Group's shares were subject to taxation under FIRPTA, the Non-U.S. Stockholder
would be subject to the same treatment as a U.S. Stockholder with respect to
such gain (subject to applicable alternative minimum tax and a special
alternative minimum tax in the case of nonresident alien individuals). In any
event, a purchaser of shares of the SPG Common Stock from a Non-U.S. Stockholder
will not be required under FIRPTA to withhold on the purchase price if the
purchased shares of the SPG Common Stock are "regularly traded" on an
established securities market or if the Simon DeBartolo Group is a domestically
controlled REIT. Otherwise, under FIRPTA the purchaser of shares of the SPG
Common Stock may be required to withhold ten percent of the purchase price and
remit such amount to the IRS.
INCOME TAXATION OF THE PARTNERSHIPS, THE PROPERTY PARTNERSHIPS AND THEIR
PARTNERS
The following discussion summarizes certain federal income tax
considerations applicable to the Simon DeBartolo Group's investment in the
Operating Partnership, the SPG Operating Partnership and the Property
Partnerships.
Classification of the Partnerships and the Property Partnerships as
Partnerships
The Simon DeBartolo Group will be entitled to include in its income its
distributive share of the income and to deduct its distributive share of the
losses of the Operating Partnership and the SPG Operating Partnership (including
the Operating Partnership and the SPG Operating Partnership's share of the
income or losses of the Property Partnerships) only if the Partnerships and the
Property Partnerships are classified for federal income tax purposes as
partnerships rather than as associations taxable as corporations. An
organization formed as a partnership will be treated as a partnership for
federal income tax purposes rather than as a corporation only if it has no more
than two of the four corporate characteristics that the Treasury Regulations use
to distinguish a partnership from a corporation for tax purposes. These four
characteristics are continuity of life, centralization of management, limited
liability, and free transferability of interests.
None of the Operating Partnership, SPG Operating Partnership, the Property
Partnerships, DRC Operating Partnership nor the partnerships in which DRC owns
an interest have requested, nor do they intend to request, a ruling from the IRS
that they will be treated as partnerships for federal income tax purposes. In
the opinion of SPG's Counsel, which is based on the provisions of the
partnership agreements of the Operating Partnership, SPG Operating Partnership
and the Property Partnerships and on certain factual assumptions and
representations of SPG and DRC, the SPG Operating Partnership and the Property
Partnerships have been and continue to be, and giving effect to the Merger the
Operating Partnership will be, treated as partnerships for federal income tax
purposes. In the opinion of counsel to DRC, which is based on the provisions of
the partnership agreements of the Operating Partnership, the DRC Operating
Partnership and the partnerships in which DRC owns an interest and on certain
factual assumptions and representations of SPG and DRC, the DRC Operating
Partnership and the partnerships in which DRC owns an interest have been and
continue to be treated as partnerships for federal income tax purposes. SPG's
Counsel's opinions are not binding on the IRS or the courts.
If for any reason the Operating Partnership, the SPG Operating Partnership
or one of the Property Partnerships were taxable as a corporation rather than as
a partnership for federal income tax purposes, neither the Simon DeBartolo Group
nor the Surviving Subsidiary Corporation would be able to satisfy the
requirements for REIT status. See "--Requirements for Qualification--Income
Tests" and "--Requirements for Qualification--Asset Tests." In addition, any
change
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in any such partnership's status for tax purposes might be treated as a taxable
event, in which case both the Simon DeBartolo Group and the Surviving Subsidiary
Corporation might incur a tax liability without any related cash distribution.
See "--Requirements for Qualification--Annual Distribution Requirements."
Further, items of income and deduction of any such partnership would not pass
through to its partners, and its partners would be treated as stockholders for
tax purposes. Any such partnership would be required to pay income tax at
corporate tax rates on its net income, and distributions to its partners would
constitute dividends that would not be deductible in computing such
partnership's taxable income.
Partners, Not Partnerships, Subject to Tax
A partnership is not a taxable entity for federal income tax purposes.
Rather, a partner is required to take into account its allocable share of a
partnership's income, gains, losses, deductions, and credits for any taxable
year of the partnership ending within or with the taxable year of the partner,
without regard to whether the partner has received or will receive any
distributions from the partnership.
Partnership Allocations
Although a partnership agreement will generally determine the allocation of
income and losses among partners, such allocations will be disregarded for tax
purposes under section 704(b) of the Code if they do not comply with the
provisions of section 704(b) of the Code and the Treasury Regulations
promulgated thereunder as to substantial economic effect.
If an allocation is not recognized for federal income tax purposes, the
item subject to the allocation will be reallocated in accordance with the
partners' interests in the partnership, which will be determined by taking into
account all of the facts and circumstances relating to the economic arrangement
of the partners with respect to such item. The allocations of taxable income and
loss of the Operating Partnership and the SPG Operating Partnership are intended
to comply with the requirements of section 704(b) of the Code and the Treasury
Regulations promulgated thereunder.
Sale of Partnership Property
Generally, any gain realized by a partnership on the sale of property held
by the partnership for more than one year will be long-term capital gain, except
for any portion of such gain that is treated as depreciation or cost recovery
recapture. However, under the REIT Requirements, both the Simon DeBartolo Group
and the Surviving Subsidiary Corporation's shares, as partners, of any gain
realized by the Operating Partnership or the SPG Operating Partnership on the
sale of any property held as inventory or other property held primarily for sale
to customers in the ordinary course of a trade or business will be treated as
income from a prohibited transaction that is subject to a 100% penalty tax. See
"--Taxation of the Simon DeBartolo Group and the Surviving Subsidiary
Corporation." Such prohibited transaction income will also have an adverse
effect upon both the Simon DeBartolo Group and the Surviving Subsidiary
Corporation's ability to satisfy the income tests for REIT status. See
"--Requirements for Qualification--Income Tests." Whether property is held as
inventory or primarily for sale to customers in the ordinary course of a trade
or business is a question of fact that depends on all the facts and
circumstances with respect to the particular transaction. A safe harbor to avoid
classification as a prohibited transaction exists as to real estate assets held
for the production of rental income by a REIT for at least four years where in
any taxable year the REIT has made no more than seven sales of property or, in
the alternative, the aggregate of the adjusted bases of all properties sold does
not exceed ten percent of the adjusted bases of all of the REIT's properties
during the year and the expenditures includible in a property's basis made
during the four-year period prior to disposition must not exceed 30% of the
property's net sales price. The Operating Partnership and the SPG Operating
Partnership intend to hold the Portfolio Properties for investment with a view
to long-term appreciation, to engage in the business of acquiring, developing,
owning, operating and leasing the Portfolio Properties and to make such
occasional sales of the Portfolio Properties, including peripheral land, as are
consistent with the investment objectives of the Simon DeBartolo Group, the
Surviving Subsidiary Corporation, the Operating Partnership and the SPG
Operating Partnership. No assurance can be given, however, that every property
sale by the Operating Partnership or the SPG Operating Partnership will
constitute a sale of property held for investment.
INFORMATION REPORTING REQUIREMENT AND BACKUP WITHHOLDING TAX
Both the Simon DeBartolo Group and the Surviving Subsidiary Corporation
will report to its U.S. Stockholders and the IRS the amount of distributions
paid during each calendar year and the amount of tax withheld, if any. Under
certain circumstances, U.S. Stockholders may be subject to backup withholding at
a rate of 31% with respect to distributions paid. Backup withholding will apply
only if the holder (i) fails to furnish its taxpayer identification number
("TIN") (which, for an individual, would be his Social Security number), (ii)
furnishes an incorrect TIN, (iii) is notified by the IRS that it has failed
properly to report payments of interest and dividends, or (iv) under certain
circumstances, fails to
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certify, under penalty of perjury, that it has furnished a correct TIN and has
not been notified by the IRS that it is subject to backup withholding for
failure to report interest and dividend payments. Backup withholding will not
apply with respect to payments made to certain exempt recipients, such as
corporations and tax-exempt organizations. U.S. Stockholders should consult
their own tax advisors regarding their qualification for exemption from backup
withholding and the procedure for obtaining such an exemption. Backup
withholding is not an additional tax. Rather, the amount of any backup
withholding with respect to a payment to a U.S. Stockholder will be allowed as a
credit against such U.S. Stockholder's United States federal income tax
liability and may entitle such U.S. Stockholder to a refund, provided that the
required information is furnished to the IRS.
Additional issues may arise pertaining to information reporting and backup
withholding with respect to Non-U.S. Stockholders. For example, the Simon
DeBartolo Group may be required to withhold a portion of capital gain
distributions to any stockholders who fail to certify their non-foreign status
to the Simon DeBartolo Group. Non-U.S. Stockholders should consult their tax
advisors with respect to any such information reporting and backup withholding
requirements.
STATE AND LOCAL TAX CONSIDERATIONS
Both the Simon DeBartolo Group and the Surviving Subsidiary Corporation
are, and their stockholders may be, subject to state or local taxation in
various state or local jurisdictions, including those in which the Simon
DeBartolo Group, the Surviving Subsidiary Corporation, their stockholders, the
Operating Partnership, the SPG Operating Partnership or the Property
Partnerships transact business or reside. The state and local tax treatment of
the Simon DeBartolo Group, the Surviving Subsidiary Corporation and their
stockholders may not conform to the federal income tax consequences discussed
above. Consequently, prospective stockholders should consult their own tax
advisors regarding the effect of state and local tax laws on their investment in
the Simon DeBartolo Group.
POSSIBLE FEDERAL TAX DEVELOPMENTS
The rules dealing with federal income taxation are constantly under review
by the IRS, the Treasury Department and Congress. New federal tax legislation or
other provisions may be enacted into law or new interpretations, rulings or
Treasury Regulations could be adopted, all of which could affect the taxation of
the Simon DeBartolo Group, the Surviving Subsidiary Corporation or of their
stockholders. No prediction can be made as to the likelihood of passage of any
new tax legislation or other provisions either directly or indirectly affecting
the Simon DeBartolo Group, the Surviving Subsidiary Corporation or their
stockholders. Consequently, the tax treatment described herein may be modified
prospectively or retroactively by legislative action.
ACCOUNTING TREATMENT
The Merger and Other Transactions will be accounted for by SPG using the
purchase method of accounting in accordance with generally accepted accounting
principles. These transactions result for financial reporting purposes in the
effective purchase of substantially all the DRC Common Stock and DRC Limited
Partners' interest in the DRC Operating Partnership. Accordingly, 100% of the
assets and liabilities of DRC will be adjusted to fair value and the results of
operations of DRC will be included in the results of operations of SPG for
periods subsequent to the Effective Time.
REGULATORY APPROVAL
Other than (i) the Commission's declaring effective the Registration
Statement containing this Prospectus/Joint Proxy Statement, (ii) approvals in
connection with compliance with applicable Blue Sky or state securities laws,
(iii) the filing of the Certificate of Merger with the Secretary of State of the
State of Ohio, (iv) the filing of such reports under Section 13(a) of the
Exchange Act, as may be required in connection with the Merger Agreement and the
Other Transactions and (v) such filings as may be required in connection with
the payment of any Transfer and Gains Taxes, neither the management of SPG nor
the management of DRC believes that any filing with or approval of any
governmental authority is necessary in connection with the consummation of the
Merger.
CERTAIN TRANSACTIONS AND AGREEMENTS RELATING TO THE MERGER
OTHER TRANSACTIONS
In connection with the Merger Agreement and the Merger, certain Other
Transaction Agreements (as listed below) have been or will be entered into on or
prior to the Effective Time which provide for the consummation of the Other
Transactions on or prior to the Effective Time.
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Stock Purchase Agreement. Pursuant to the Stock Purchase Agreement, dated
as of March 26, 1996, EJDC will sell, at the Effective Time, all of its 665 (out
of 700 authorized issued and outstanding) shares of common stock of the DRC
Management Company to the SPG Management Company for $2.5 million in cash. As a
result, EJDC will no longer have any interest in the DRC Management Company and
the SPG Management Company will have control of the DRC Management Company;
however, the Operating Partnership, as the continuing holder of the nonvoting
preferred stock of the DRC Management Company, is entitled to receive
substantially all of the after-tax economic benefit in the form of preferred
stock dividends of the DRC Management Company.
The consummation of the transactions contemplated by the Stock Purchase
Agreement are subject to the consummation of the Merger, and to the continued
accuracy of customary representations and warranties with respect to EJDC's
ownership of its shares of common stock of the DRC Management Company to be sold
and compliance with customary covenants with respect to the business conduct of
the DRC Management Company prior to the consummation of such transactions.
Contribution Agreement. Pursuant to the Contribution Agreement, SPG, as
the general partner of the SPG Operating Partnership, and all of the SPG Limited
Partners (including members of the Simon family) at the Effective Time will
transfer to the Operating Partnership respective SPG Units (and in the case of
SPG an interest in the profits of the SPG Operating Partnership) in exchange for
Units of the Operating Partnership. In this regard, SPG, which owns 61.1% of the
SPG Units, will transfer to the Operating Partnership SPG Units equal to 10.6%
of the total SPG Units outstanding and assign a 49.5% interest in the profits of
the SPG Operating Partnership in exchange for a non-managing general partner
interest in the Operating Partnership and the SPG Limited Partners will transfer
their SPG Units (which SPG Units constitute 38.9% of the total outstanding SPG
Units), such that following completion of the Other Transactions and the
Operating Partnership will own 49.5% of the total outstanding SPG Units (38.9%
from the SPG Limited Partners and 10.6% from SPG) and an additional 49.5%
interest in the profits of the SPG Operating Partnership. It is anticipated that
subsequent to the first anniversary of the Closing Date, SPG will transfer to
the Operating Partnership all of its remaining economic interest in the SPG
Operating Partnership except for one percent of the total issued and outstanding
SPG Units, representing SPG's general partnership interest which will be
retained pending receipt of the consents necessary to terminate the SPG
Operating Partnership. It is also anticipated that 13 months after the Closing
Date, all preferred units owned by SPG will be transferred to the Operating
Partnership in exchange for the same number of preferred units in the Operating
Partnership. The Simons, who hold 35.6% of the SPG Units, have agreed to
contribute such Units as contemplated above; the remaining SPG Limited Partners,
who hold 3.3% of the SPG Units, are not subject to this requirement, although
the election of any or all of such remaining SPG Limited Partners not to
contribute their SPG Units shall not affect the completion of the Merger or any
of the Other Transactions and such SPG Limited Partners could, at their
election, remain SPG Limited Partners following completion of such transactions.
The terms of the Units are more fully described in "CERTAIN AGREEMENTS--The
Agreements of Limited Partnership." The transactions contemplated by the
Contribution Agreement will occur simultaneously with the Merger.
An exchange formula more fully described in the Contribution Agreement sets
forth the methodology used to determine the number of Units to be outstanding
after the Merger and to be allocated to the current partners of the DRC
Operating Partnership, SPG and the SPG Limited Partners. The principle of the
exchange formula is to make the ownership of the Operating Partnership, as
between the former SPG general and limited partners, on the one hand, and the
DRC general and limited partners, on the other hand, identical to the respective
percentages of the outstanding shares of common stock of the Simon DeBartolo
Group which would be owned by the former DRC shareholders and by the SPG
stockholders if all interests and units in both the DRC Operating Partnership
and the SPG Operating Partnership held by their respective limited partners were
converted into shares of the respective corporations prior to the Merger (the
"Ownership Percentages"). On the assumption that no additional SPG Units or DRC
Interests are issued prior to the Effective Time, the former SPG partners would
be allocated 61.0% of the Units, of which 37.3% would be allocated to the Simon
DeBartolo Group, as the non-managing general partner, and 23.7% would be
allocated to the exchanging Limited Partners, and the DRC partners would own
39.0% of the Units, of which 24.1% would be owned by the Simon DeBartolo Group
as general partner, and the balance by the existing DRC Limited Partners. The
same beneficial ownership percentages will apply in the case of the SPG
Operating Partnership. Assuming that the Ownership Percentages accurately
reflect the relative values of the DRC Operating Partnership and the SPG
Operating Partnership, the failure of any of the SPG partners to contribute will
not affect the aggregate value of the economic interest owned in the two
partnerships on a combined basis by the Simon DeBartolo Group.
The consummation of the Contribution Agreement is subject to the execution
and delivery of the Amended Operating Partnership Agreement and the Amended SPG
Operating Partnership. The Contribution Agreement contains customary
representations and warranties of each transferor of SPG Units with respect to
its ownership of the SPG Units.
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Termination Agreement. The Termination Agreement, dated as of March 26,
1996, provides for the termination, as of the Effective Time, of certain rights
of or restrictions on certain of the DeBartolos pursuant to the following
existing agreements: (a) the Exchange Rights Agreement (as defined in the
"GLOSSARY") addressing rights of DRC Limited Partners to exchange their
respective DRC Interests for DRC Common Stock), (b) the Cash Tender Agreement
(as defined in the "GLOSSARY") (addressing rights of the DeBartolos to require
DRC to purchase their respective DRC Interests for cash), (c) the DRC
Registration Rights Agreement (as defined in the "GLOSSARY") granting to any DRC
Limited Partner holding DRC Common Stock received pursuant to the Exchange
Rights Agreement the right to have shares of such DRC Common Stock registered
under the Securities Act and (d) the Noncompetition Agreement which restrict the
activities of certain DeBartolos by limiting their ability to engage in
activities competing with the business of DRC.
RELATED AGREEMENTS
In connection with to the Merger Agreement and the Merger, SPG, DRC,
certain of the Simons and certain of the DeBartolos have entered or will enter
into the Related Agreements on or prior to the Effective Time. The Related
Agreements are (a) the Stockholders Agreement, executed as of March 26, 1996,
(b) the Amended Operating Partnership Agreement and the Amended SPG Partnership
Agreement, each to be entered into on or prior to the Effective Time, and (c)
the New Registration Rights Agreement, to be entered into on or prior to the
Effective Time, and the BJS Registration Rights Agreement, dated as of March 26,
1996. See "CERTAIN AGREEMENTS."
STRUCTURE OF THE SIMON DEBARTOLO GROUP
The Merger will result in the combination of the existing businesses and
properties of SPG and DRC within the Simon DeBartolo Group. In structuring the
transaction, SPG and DRC have determined that such businesses will be conducted
and such properties will be held through the Operating Partnership and that DRC
should survive the Merger as a subsidiary of the Simon DeBartolo Group. In order
to accomplish those goals, SPG has formed and will effect the Merger through
Sub. In the Merger, Sub will merge with and into DRC, with DRC as the Surviving
Subsidiary Corporation being the surviving entity and becoming a subsidiary of
the Simon DeBartolo Group (with the Simon DeBartolo Group owning in excess of
99.9% of its outstanding common shares). In exchange for their shares of DRC
Common Stock, the non-dissenting public shareholders of DRC will receive the
Merger Consideration.
The Operating Partnership will continue in existence after the Merger under
the Amended Operating Partnership Agreement. DRC Interests held by the DRC
Limited Partners will be redesignated as Units which are exchangeable for shares
of SPG Common Stock on a one-for-one basis or cash, at the election of the Simon
DeBartolo Group. The partners of the existing SPG Operating Partnership will
contribute SPG Units owned by them to the Operating Partnership in exchange for
a like number of Units in the Operating Partnership.
The Simon DeBartolo Group will be the non-managing general partner, and the
Surviving Subsidiary Corporation will be the managing general partner, of the
Operating Partnership. The Simon DeBartolo Group will remain the sole general
partner of the SPG Operating Partnership and the Operating Partnership will
become a special limited partner in the SPG Operating Partnership. The Simon
DeBartolo Group, both directly and indirectly through its ownership of the
Surviving Subsidiary Corporation, will own a 61.4% interest in the Operating
Partnership and the former SPG Limited Partners and the existing DRC Limited
Partners as limited partners of the Operating Partnership will own beneficially,
in the aggregate, a 38.6% interest in the Operating Partnership. In addition,
the Simon DeBartolo Group, directly and indirectly through its ownership
interest in the Operating Partnership and the Surviving Subsidiary Corporation,
will own beneficially a 61.0% economic interest in the SPG Operating
Partnership, with the balance of the interests in the SPG Operating Partnership
owned beneficially by the Limited Partners of the Operating Partnership. The
foregoing percentages do not reflect the ownership by the Simon DeBartolo Group
of preferred units in the SPG Partnership. Should these preferred units be
converted into SPG Units (which will occur if the outstanding Series A Preferred
Stock is converted into SPG Common Stock), the net result would be a slight
increase in the percentage ownership of the Simon DeBartolo Group in the
Operating Partnership which would be coupled with a slight increase in the
amount of funds available for distribution to the Partners.
To the extent that the SPG Units are not so contributed to the Operating
Partnership, the direct and indirect interest of the Simon DeBartolo Group (i)
in the Operating Partnership will be increased above the 61.4% interest and (ii)
in the SPG Operating Partnership will be reduced below the 61.0% interest. See
"--Certain Transactions and Agreements Relating to the Merger."
Immediately after the Effective Time, the Simon DeBartolo Group will
continue to hold 1.0% of the SPG Units and an additional 49.5% interest in the
capital of the SPG Operating Partnership. In addition, properties owned by the
DRC Operating Partnership and the SPG Operating Partnership will continue to be
owned by them immediately after the
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Effective Time. Subject to the receipt of required consents, it is contemplated
that, subsequent to the first anniversary of the Closing Date, additional
reorganizational transactions will be effected that will have the effect of
simplifying the structure of the Simon DeBartolo Group in existence after the
Merger so that, ultimately, the Operating Partnership will directly own all of
the property and partnership interests now owned by the SPG Operating
Partnership.
The SPG Operating Partnership will hold substantially all of the economic
interest in the SPG Management Company, while the voting stock will be held by
the Simons or their affiliates. The Operating Partnership will hold
substantially all of the economic interest in the DRC Management Company, while
the voting stock will be held by the SPG Management Company.
BENEFITS OF THE MERGER AND THE OTHER TRANSACTIONS TO THE SIMONS AND THE
DEBARTOLOS
The Simons and the DeBartolos will receive certain material benefits in
connection with the Merger and the Other Transactions, including:
THE RIGHTS OF THE SIMONS AND DEBARTOLOS TO HAVE REPRESENTATION ON THE
BOARD OF DIRECTORS OF THE SIMON DEBARTOLO GROUP
Assuming completion of the Merger, the DeBartolos' Ownership Interest will
be 14.2%. Pursuant to the Amended SPG Charter and the Amended SPG By-laws (which
will be in effect assuming the Required Vote is obtained), the DeBartolos will
be entitled to vote their Class C Common Stock, separately as a class, to elect
two Class C Directors (as defined in the "GLOSSARY") (or one director, if the
DeBartolos' Ownership Interest is reduced by more than 50% by reason of sale or
transfer of their Units or any of their capital stock of the Simon DeBartolo
Group) of the Board of Directors of the Simon DeBartolo Group. If the
DeBartolos' Ownership Interest is reduced for any reason to less than five
percent, the rights of the DeBartolos enumerated above will terminate. See also
"RISK FACTORS--Conflicts of Interest Related to the Merger--Continuing
Substantial Influence of the Simons and the DeBartolos."
The Simons and the DeBartolos, as holders of the Class B Common Stock and
the Class C Common Stock, respectively, will be entitled to elect six of the 13
directors of the Simon DeBartolo Group in the aggregate, each class of stock
voting as a separate class, and together with holders of SPG Common Stock and
Series A Preferred Stock, voting together as a single class, to elect the
remaining seven directors of the Simon DeBartolo Group. This will enable the
Simons and the DeBartolos, acting separately or together as a group, to exert
considerable influence over the affairs of the Simon DeBartolo Group. See "RISK
FACTORS--Conflicts of Interest Related to the Merger--Continuing Substantial
Influence of the Simons and the DeBartolos," "AMENDMENTS TO SPG'S CHARTER AND
BY-LAWS" and "MANAGEMENT OF SPG AND THE SIMON DeBARTOLO GROUP BEFORE AND AFTER
THE MERGER--Board of Directors of the Simon DeBartolo Group."
For a discussion of the even greater influence that the Simons and
DeBartolos will be able to exercise on the Board of Directors of the Simon
DeBartolo Group if the Merger is completed but the Required Vote is not
obtained, see "CERTAIN ALTERNATIVE GOVERNANCE ARRANGEMENTS AND RELATED MATTERS
IF THE REQUIRED VOTE IS NOT OBTAINED." See also "RISK FACTORS--Risks Associated
with Failure to Obtain Required Vote."
POTENTIAL FOR EJDC TO OBTAIN LIQUIDITY BY DISPOSING OF UNITS
Pursuant to the Amended Operating Partnership Agreement, in 1996, 1997 and
1998 EJDC is permitted to dispose of Units held by EJDC (together with its
affiliates) at the Effective Time in order to satisfy amortization requirements
aggregating approximately $369.0 million under certain outstanding indebtedness
of EJDC as more fully described in "CERTAIN AGREEMENTS--The Agreements of
Limited Partnership--The Agreement of Limited Partnership of the Operating
Partnership--Exchange Rights." Such disposition may, at the option of the Simon
DeBartolo Group, be effected by any of the following means: (a) conversion of
such number of Units into shares of SPG Common Stock and disposition of such
shares under a registration statement filed by the Simon DeBartolo Group (such
registration statement not to be subject to any "hold-backs" or "black-outs"
imposed by the Simon DeBartolo Group), (b) redemption of such number of Units by
the Simon DeBartolo Group for cash at a predetermined price or (c) the sale by
EJDC of such number of Units to up to three institutional investors. Other
Limited Partners will not have the right to dispose of Units (other than to
their respective affiliates) without the consent of the Simon DeBartolo Group.
In addition, such dispositions may have a negative impact on the market price of
the SPG Common Stock.
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REALIZATION BY THE DEBARTOLOS OF LIQUIDITY IN THE DRC MANAGEMENT COMPANY
Pursuant to the Stock Purchase Agreement, as more fully described in
"--Certain Transactions and Agreements Relating to the Merger," EJDC will sell,
at or prior to the Effective Time, to the SPG Management Company all of the
shares of common stock of the DRC Management Company held by EJDC (such shares
constituting 95% of the authorized, issued and outstanding common stock of the
DRC Management Company) for $2.5 million in cash. The Operating Partnership
retains the nonvoting preferred stock of the DRC Management Company, which
entitles it to receive substantially all of the after tax economic benefit in
the form of preferred stock dividends of the DRC Management Company.
AMENDMENTS TO SPG'S CHARTER AND BY-LAWS
At the SPG Special Meeting, stockholders of SPG will be asked to vote upon
and approve the Amended SPG Charter and Amended SPG By-laws, reflecting the
following significant amendments:
- to change the name of SPG to Simon DeBartolo Group, Inc.;
- to increase the size of SPG Board of Directors from nine to 13 directors;
- to authorize the creation of a class of common stock called Class C
Common Stock;
- to change the Ownership Limit for the stockholders of SPG; and
- to increase the authorized capital stock of SPG.
Each of these significant amendments will be discussed below.
The Amended SPG Charter also incorporates the Articles Supplementary (as
defined in the "GLOSSARY") dated October 26, 1995 to the SPG Charter, which
Articles Supplementary set forth the rights and restrictions of the Series A
Preferred Stock, and includes various conforming changes.
The following summary does not purport to be complete and is qualified by
reference to the Amended SPG Charter and Amended SPG By-laws, copies of which
are attached to this Prospectus/Joint Proxy Statement. See also "CERTAIN
PROVISIONS OF SPG'S CHARTER AND BY-LAWS AND OF MARYLAND LAW" and "DESCRIPTION OF
SPG'S CAPITAL STOCK."
For a discussion of the Alternative Amended SPG Charter and the Alternative
Amended SPG By-laws which would become effective if the Merger is approved but
the Required Vote is not obtained, see "CERTAIN ALTERNATIVE GOVERNANCE
ARRANGEMENTS AND RELATED MATTERS IF THE REQUIRED VOTE IS NOT OBTAINED."
NAME
The name of SPG is proposed to be changed from "Simon Property Group, Inc."
to "Simon DeBartolo Group, Inc." to reflect the combination of the businesses
conducted prior to the Effective Time by SPG and DRC.
SIZE OF THE SPG BOARD OF DIRECTORS
The Amended SPG Charter provides that, subject to any rights of holders of
the preferred stock to elect additional directors under specified circumstances,
the number of directors will be 13 while both the Class B Common Stock and Class
C Common Stock are outstanding, and nine while either (but not both) of the
Class B Common Stock or the Class C Common Stock is outstanding. Out of such 13,
four will be Class B Directors (elected by holders of Class B Common Stock
voting as a single class), two will be Class C Directors (elected by holders of
Class C Common Stock) and seven will be Common Stock Directors (elected by
holders of Equity Stock, voting together as a single class).
The size of the SPG Board of Directors is increased by the creation of two
new seats each for Class C Directors and for Common Stock Directors, so as to
create vacancies for representatives of the DeBartolos and DRC to be appointed
to the SPG Board of Directors after the Merger to advise SPG with respect to the
combined businesses of SPG and DRC. Three of the initial seven Common Stock
Directors to be nominated will be current independent directors of DRC. See
"MANAGEMENT OF SPG AND THE SIMON DeBARTOLO GROUP BEFORE AND AFTER THE
MERGER--Board of Directors of the Simon DeBartolo Group."
Under the Amended SPG Charter, the Simons and the DeBartolos, in addition
to electing their respective Class B Directors and Class C Directors through
their holdings of Class B Common Stock and Class C Common Stock, will also
participate in the election of Common Stock Directors with holders of SPG Common
Stock and Series A Preferred
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Stock. This will enable them, acting together, to exert considerable influence
over the affairs of the Simon DeBartolo Group.
The Amended SPG By-laws provide that vacancies on the SPG Board of
Directors occurring prior to the expiration of the term, if filled by the SPG
stockholders, will be filled for the remainder of such term and, if filled by
the SPG Board of Directors, will be filled until the next annual meeting.
Subject to any right of holders of preferred stock, vacancies created by the
resignation or removal of a director elected by the holders of Class B Common
Stock will be filled by the holders of the Class B Common Stock, and vacancies
created by the resignation or removal of a director elected by the holders of
the Equity Stock, voting together as a single class, may be filled by the
stockholders, or by a majority of the directors then in office.
Any vacancies on the SPG Board of Directors with respect to a director
elected by the holders of Class C Common Stock will be filled as follows:
(a) at any time after the Closing Date, any vacancy resulting from
death or disability will be filled by holders of Class C Common Stock,
voting as a separate class, to elect as a replacement director a candidate
who (i) is the Chief Executive Officer of EJDC (or any successor to such
corporation), provided that such right may be exercised only once and may
be exercised only to fill a vacancy resulting from the death or disability
of Edward J. DeBartolo, Jr. or M. Denise DeBartolo York, or (ii) has
similar experience and standing in the business community to the
Independent Directors and who has been approved by a majority of the
Independent Directors elected by the holders of SPG Common Stock and other
capital stock entitled to vote with the SPG Common Stock as a single class.
If such Independent Directors do not approve such candidate, the holders of
Class C Common Stock may propose another candidate. The right of holders of
Class C Common Stock to propose candidates will continue until one such
candidate is approved by a majority of the Independent Directors;
(b) at any time prior to the fourth anniversary of the Closing Date,
any vacancy other than one resulting from a death or disability will reduce
by such vacancy an equivalent number of the directors that holders of Class
C Common Stock may, voting as a separate class, elect, and such a vacancy
will be filled by a majority of the entire SPG Board of Directors. If
consequently the number of directors that holders of Class C Common Stock
may elect is reduced to zero, then immediately and automatically each share
of Class C Common Stock will be converted into one share of SPG Common
Stock;
(c) at any time during the period from and including the fourth
anniversary to but not including the fifth anniversary of the Closing Date,
any vacancy other than one resulting from a death or disability will be
filled by holders of Class C Common Stock, voting as a separate class, to
elect as a replacement director a candidate who meets the qualifications
and has been selected in accordance with the procedures summarized in
paragraph (a)(ii) above; provided that if during such period vacancies
result other than from death or disability with respect to both of the
directors who were directors on the fourth anniversary date, then the
number of directors that the holders of Class C Common Stock may, voting as
a separate class, elect will be reduced to one, and the vacancy with
respect to the second resigned director will be filled by a majority of the
entire SPG Board of Directors; and
(d) at any time after the fifth anniversary of the Closing Date, any
vacancy other than one resulting from a death or disability will be filled
by holders of Class C Common Stock, voting as a separate class, to elect as
a replacement director a candidate who meets the qualifications and has
been selected in accordance with the procedures summarized in paragraph
(a)(ii) above.
The Amended SPG Charter and Amended SPG By-laws continue to require
generally that a majority of a quorum is necessary to approve any matter to come
before the SPG Board of Directors; however, the Amended SPG By-laws require that
at least six of the Independent Directors approve the sale of any property owned
by any partnership in which SPG acts as general partner, and the Amended SPG
Charter requires that a majority of the Independent Directors approve any
transaction between the Simon DeBartolo Group on the one hand and the Simons
and/or the DeBartolos on the other hand.
Amendments to the Amended SPG Charter will require a resolution adopted by
a majority of the SPG Board of Directors (including a majority of the
Independent Directors, a majority of the directors elected by the Class B Common
Stock and one director elected by the Class C Common Stock), and the affirmative
vote of holders of not less than a majority of the aggregate votes entitled to
be cast thereon, voting as a single class. However, amendments to certain
provisions in the Amended SPG Charter with respect to (i) the director's duties
with respect to certain business combination transactions; (ii) liabilities of
officers and directors; (iii) stockholders' presenting proposals in connection
with stockholders meetings; or (iv) amendments, will each continue to require
the affirmative vote of not less than 80% of the aggregate votes entitled to be
cast thereon, voting as a single class. In addition, amendments with respect to
(x) the composition or procedure of the SPG Board of Directors will require the
affirmative vote of not less than 80% of the
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aggregate votes entitled to be cast thereon, voting as a single class, and the
affirmative vote of not less than a majority of the aggregate votes entitled to
be cast thereon by holders of each of the Class B Common Stock and Class C
Common Stock, each voting as a separate class; and (y) rights or restrictions of
Class B Common Stock or Class C Common Stock will require the affirmative vote
of not less than 80% of the aggregate votes entitled to be cast thereon, voting
as a single class, and the affirmative vote of not less than a majority of the
aggregate votes entitled to be cast by the holders of Class B Common Stock or
Class C Common Stock, as the case may be.
CLASS C COMMON STOCK
Four thousand shares of Class C Common Stock will be authorized in the
Amended SPG Charter. Class C Common Stock will be issued to EJDC for nominal
consideration in connection with the transactions contemplated by the Merger
Agreement to enable the DeBartolos to elect two Class C Directors to the SPG
Board of Directors under the Amended SPG Charter. Except with respect to the
right to elect directors, as summarized below, each share of Class C Common
Stock has the same rights and restrictions as a share of Class B Common Stock.
See "DESCRIPTION OF SPG'S CAPITAL STOCK."
All shares of Class C Common Stock, when issued, will be duly authorized,
fully paid and nonassessable. The holders of Class C Common Stock will be
entitled to one vote for each share held of record on all matters submitted to a
vote of the stockholders, other than the election of directors elected
exclusively by the holders of Class B Common Stock. Holders of Class C Common
Stock, together with holders of SPG Common Stock, Class B Common Stock and
Series A Preferred Stock, voting as a single class, will be entitled to vote and
elect the Common Stock Directors. Holders of Class C Common Stock will have no
right to cumulative voting for the election of directors. Subject to
preferential rights with respect to any outstanding preferred stock, holders of
Class C Common Stock will be entitled to receive ratably, together with holders
of SPG Common Stock and Class B Common Stock, such dividends as may be declared
by the Board of Directors out of funds legally available therefor. If SPG is
liquidated, subject to the right of any holders of preferred stock (including
any Excess Stock into which such preferred stock has been converted) to receive
preferential distributions, each outstanding share of Class C Common Stock will
be entitled to participate pro rata (together with shares of SPG Common Stock,
Class B Common Stock and Excess Stock (other than Excess Stock issued upon the
conversion of preferred stock)) in the assets remaining after payment of, or
adequate provision for, all known debts and liabilities of SPG.
The holders of Class C Common Stock will initially be entitled to elect two
of the 13 members of the SPG Board of Directors. At such time as the DeBartolos
sell or otherwise transfer to unaffiliated parties at least 50% of their
aggregate Ownership Interest (i.e., all SPG Common Stock, Class C Common Stock
and Units), through their ownership of Class C Common Stock, the DeBartolos will
be entitled to elect only one of the 13 members of the SPG Board of Directors.
The shares of Class C Common Stock may be converted at the option of the
holder into an equal number of shares of SPG Common Stock. If the DeBartolos'
aggregate Ownership Interest on a fully diluted basis has been reduced to less
than five percent, the outstanding shares of Class C Common Stock convert
automatically into an equal number of shares of SPG Common Stock. Shares of
Class C Common Stock will also convert automatically into an equal number of
shares of SPG Common Stock upon the sale or transfer thereof to a person not
affiliated with the DeBartolos.
Holders of shares of Class C Common Stock will have no sinking fund,
redemption rights or preemptive rights to subscribe for any securities of SPG.
RESTRICTIONS ON TRANSFER
The Amended SPG Charter will continue to contain certain restrictions on
the number of shares of capital stock of SPG (including the SPG Common Stock,
Class B Common Stock and Class C Common Stock) that individual stockholders may
own. Because the SPG Board of Directors currently believes it is essential for
SPG to continue to qualify as a REIT, the Amended SPG Charter provides that no
holder may own, or be deemed to own by virtue of the applicable attribution
provisions of the Code, more than six percent (based on the lower of outstanding
shares, voting power or value) of the capital stock of SPG other than shares of
Excess Stock, if any (with an exception for the Simons, whose limit is 24%). See
"DESCRIPTION OF SPG'S CAPITAL STOCK--Restrictions On Transfer."
The Ownership Limit under the Amended SPG Charter is more liberal to a
stockholder of SPG (other than the Simons), who will be subject to a six percent
SPG Ownership Limit (as opposed to a 4.9% limit under the SPG Charter), but more
restrictive to the Simons (whose limit will be 24% rather than 30%) and more
restrictive to shareholders of DRC (whose ownership limit under the DRC Articles
is 9.9%).
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AUTHORIZED CAPITAL
The authorized capital of SPG is proposed to be changed as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES OF CURRENT PROPOSED
------------------------------------------------------------------- ----------- -----------
<S> <C> <C>
SPG Common Stock................................................... 246,000,000 383,996,000
Class B Common Stock............................................... 12,000,000 12,000,000
Class C Common Stock............................................... -- 4,000
Series A Preferred Stock........................................... 4,000,000 4,000,000
Excess Stock....................................................... 150,000,000 250,000,000
--------- ---------
Total Authorized................................................. 412,000,000 650,000,000
</TABLE>
The SPG Board of Directors believes it is desirable to authorize additional
shares of capital stock so that there will be sufficient shares available for
issuance for purposes that the SPG Board of Directors may hereafter determine to
be in the best interests of SPG and its stockholders. Such purposes could
include the offer of shares for cash, the declaration of stock splits and stock
dividends, mergers and acquisitions and other general corporate purposes. In
many situations, prompt action may be required which would not permit seeking
stockholder approval to authorize additional shares for the specific
transactions on a timely basis. While the SPG Board of Directors does not have a
present plan to issue additional shares of SPG Common Stock, it believes it
should have the flexibility to act promptly in the best interests of
stockholders. The terms of any future issuance of shares of capital stock will
be dependent largely on market and financial conditions and other factors
existing at the time of issuance.
The availability for issuance of additional SPG Common Stock could enable
the SPG Board of Directors to render more difficult or discourage an attempt to
obtain control of the Simon DeBartolo Group; however, the Simon DeBartolo Group
is not aware of any pending or threatened efforts to obtain such control.
AMENDED SPG BY-LAWS
Conforming changes will be required of the SPG By-laws to conform the
provisions of the SPG By-laws to those of the Amended SPG Charter.
In particular, the Amended SPG By-laws will provide that a Class C Director
will be appointed to each committee of the SPG Board of Directors, other than
the Audit Committee, all of whose members must be Independent Directors, and
amendments to the Amended SPG By-laws adopted by the SPG Board of Directors will
require the vote of two-thirds of the SPG Board of Directors, including a
majority of the Class B Directors and at least one Class C Director.
The Amended SPG By-laws will also eliminate certain provisions in the SPG
By-laws which allow directors numbering less than the required quorum to act in
certain circumstances.
RECOMMENDATION OF THE SPG BOARD OF DIRECTORS
The SPG Board of Directors considers the Amended SPG Charter and Amended
SPG By-laws to be in the best interest of SPG and the stockholders and
recommends that stockholders vote IN FAVOR of their adoption. Adoption of such
Amended SPG Charter and Amended SPG By-laws requires the affirmative vote of not
less than (i) 80% of the aggregate votes entitled to be cast thereon by holders
of Equity Stock, voting as a single class, and (ii) a majority of the aggregate
votes entitled to be cast by the holders of the Class B Common Stock. See also
"THE PROPOSED MERGER AND RELATED MATTERS--Recommendation of the SPG Board of
Directors; Reasons for the Merger" and "THE MEETINGS OF STOCKHOLDERS OF SPG."
Each vote cast in favor of the Amended SPG Charter and SPG By-laws
constitutes a vote in favor of the election of the slate of 13 directors to the
SPG Board of Directors effective as of the Effective Time, as set forth in
"MANAGEMENT OF SPG AND THE SIMON DeBARTOLO GROUP BEFORE AND AFTER THE
MERGER--Board of Directors of the Simon DeBartolo Group."
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THE COMPANIES
SPG
GENERAL
SPG is a Maryland corporation that, through its 61.1%-owned subsidiary, the
SPG Operating Partnership, is engaged primarily in the ownership, development,
management, leasing, acquisition and expansion of income-producing properties,
primarily regional malls and community shopping centers. On March 31, 1996, SPG
was the sole general partner of the SPG Operating Partnership. The SPG Operating
Partnership was formed to acquire the shopping center and real estate business
of the Simons. SPG completed the SPG IPO in December, 1993.
In addition, the SPG Operating Partnership owns a preferred stock and
non-controlling common stock interest in the SPG Management Company, which
manages regional malls and community shopping centers not wholly owned by the
SPG Operating Partnership and certain other properties and also engages in
certain property development activities.
As of March 31, 1996, the SPG Operating Partnership owned or held interests
in a diversified portfolio of 122 SPG Portfolio Properties, including 62
enclosed regional malls, 55 community shopping centers, two specialty retail
centers and three mixed-use properties located in 28 states. The SPG Portfolio
Properties contain an aggregate of approximately 62 million square feet of GLA,
of which approximately 37 million square feet is Owned GLA. More than 2,200
different retailers occupy approximately 7,000 stores in the SPG Portfolio
Properties. Total estimated retail sales at the SPG Portfolio Properties
approached $8.9 billion in 1995. As of March 31, 1996, mall and freestanding
Owned GLA was 82.9% leased in the regional malls and 93.1% leased for Owned GLA
in the community shopping centers. In addition, as of such date, the SPG
Operating Partnership had interests in four properties under construction in the
United States, and six parcels of land held for development containing an
aggregate of approximately 284 acres.
SPG has elected, effective January 1, 1994, to be taxed as a REIT under
sections 856 through 860 of the Code and applicable Treasury Regulations
relating to REIT qualification. SPG is self-administered and self-managed and
does not engage or pay a REIT advisor. SPG provides management, leasing,
accounting, design and construction expertise through its own personnel or,
where appropriate, through outside professionals.
EXISTING STRUCTURE OF SPG
SPG owns or holds interests in the SPG Portfolio Properties through the SPG
Operating Partnership of which it is sole general partner. On March 31, 1996 the
SPG Limited Partners held 37,282,628 SPG Units, representing the remaining 38.9%
interest in the SPG Operating Partnership not held by SPG. As of such date, the
Simons beneficially owned 34,112,045 SPG Units, representing 35.6% of the
outstanding SPG Units. The operations of SPG are carried on through the SPG
Operating Partnership and the SPG Management Company. The expenses of SPG are
borne by the SPG Operating Partnership. Substantially all of the economic
interest in the SPG Management Company is held by the SPG Operating Partnership,
while the voting stock is controlled by the Simons through other affiliates.
In addition to 55,360,225 shares of SPG Common Stock outstanding at March
31, 1996, SPG had outstanding at such date 3,200,000 shares of Class B Common
Stock. The Simons, as holders of Class B Common Stock, are entitled to elect
four of the nine members of the SPG Board of Directors, unless their portion of
the aggregate equity interest of SPG (including SPG Common Stock, Class B Common
Stock and SPG Units considered on an as-converted basis) decreases to less than
50% of the amount that they owned as of the closing of the Merger, in which case
they will be entitled to elect only two members of the SPG Board of Directors.
See "DESCRIPTION OF SPG'S CAPITAL STOCK--SPG Common Stock and Class B Common
Stock." The shares of Class B Common Stock also convert automatically into an
equal number of shares of SPG Common Stock in certain circumstances, including
the reduction of the Simons' aggregate equity interest to less than 5%. SPG also
had outstanding, as of March 31, 1996, 4,000,000 shares of Series A Preferred
Stock, all of which were issued on October 26, 1995. At any time on or after
October 26, 1997, such shares may be converted into SPG Common Stock (as of
March 31, 1996, 3,809,523.6 shares of SPG Common Stock) determined pursuant to
the Conversion Formula. The proceeds from the issuance of the Series A Preferred
Stock were contributed to the SPG Operating Partnership in exchange for
preferred units in that partnership and such preferred units entitle SPG to
distributions equal to the aggregate dividends payable on the Series A Preferred
Stock, and convert into SPG Units on the same economic terms and conditions as
the Series A Preferred Stock can convert into SPG Common Stock. Thus, under the
SPG Partnership Agreement, a full conversion of the Series A Preferred Stock
would result in a concurrent conversion of preferred units of the SPG Operating
Partnership into SPG Units. The Series A Preferred Stock has voting power equal
to the number of shares of SPG Common Stock, including fractional shares, into
which it would be convertible.
SPG Units held by limited partners in the SPG Operating Partnership,
including the Simons and the other SPG Limited Partners, may be exchanged for
shares of SPG Common Stock on a one-for-one basis or for cash at SPG's option.
If all SPG Units held by the SPG Limited Partners outstanding on March 31, 1996
were exchanged for SPG Common Stock, an aggregate 37,282,628 additional shares
of SPG Common Stock would be issued. See "DESCRIPTION OF SPG'S CAPITAL STOCK."
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DRC
GENERAL
DRC is an Ohio corporation that through its 61.9%-owned subsidiary, the DRC
Operating Partnership, is primarily engaged in the ownership, development,
management, leasing, acquisition and expansion of super-regional and regional
malls and community shopping centers. Beginning in 1994, DRC has elected to be
taxed as an REIT under the Code. As of March 31, 1996, DRC was the sole general
partner of the DRC Operating Partnership. The DRC Operating Partnership was
formed to continue and expand the shopping center business of EJDC and its
affiliates. DRC is self-administered and self-managed and does not engage or pay
a REIT advisor. DRC completed the DRC IPO in April, 1994.
As of March 31, 1996, the DRC Operating Partnership owned or held interests
in the 61 DRC Portfolio Properties, including 50 super-regional and regional
malls and 11 community centers located in 16 states. The DRC Portfolio
Properties contain an aggregate of 47.1 million square feet of GLA. At the malls
included in the DRC Portfolio Properties, there are approximately 5,000 mall
stores and over 200 anchors operating under 39 trade names. In addition, as of
such date, the DRC Operating Partnership owned land held for development
comprising an aggregate of approximately 433 acres.
EXISTING STRUCTURE OF DRC
Substantially all of DRC's assets are held by, and its operations are
conducted through, the DRC Operating Partnership. DRC owns a 61.9% interest in
the DRC Operating Partnership. The DRC Limited Partners hold the remaining 38.1%
limited partnership interests in the DRC Operating Partnership. As of March 31,
1996, the DeBartolos beneficially owned a 36.5% limited partnership interest in
the DRC Operating Partnership.
In addition, the DRC Operating Partnership owns 100% of the nonvoting
preferred stock and 5% of the common stock of the DRC Management Company, which
provides architectural, design, construction and other services to substantially
all of the DRC Portfolio Properties as well as certain other regional malls and
community shopping centers owned by third parties. Substantially all of the
economic interest in the DRC Management Company is held by the DRC Operating
Partnership, while the remaining 95% of the voting stock is owned by EJDC.
Subject to certain restrictions, the DRC Interests held by the DRC Limited
Partners may be exchanged for shares of DRC Common Stock. If all DRC Interests
outstanding on March 31, 1996 were exchanged, an aggregate of 34,100,867
additional shares of DRC Common Stock would be issued.
POLICIES OF THE SIMON DEBARTOLO GROUP
The following is a discussion of dividend and distribution policies,
investment policies, financing policies, conflicts of interest policies and
policies with respect to certain other activities of the Simon DeBartolo Group
which the Simon DeBartolo Group expects to continue following the Merger. The
policies with respect to these activities have been determined by the SPG Board
of Directors and may be amended or rescinded from time to time following the
Merger at the discretion of the Board of Directors of the Simon DeBartolo Group
without a vote of the stockholders of the Simon DeBartolo Group.
DIVIDEND AND DISTRIBUTION POLICIES
It is intended that the Simon DeBartolo Group operate so as to qualify as a
REIT under sections 856 through 860 of the Code and applicable Treasury
Regulations. To obtain and maintain its status as a REIT, the Simon DeBartolo
Group generally will be required each year to distribute to its stockholders at
least 95% of its taxable income after certain adjustments. In the event that
Funds From Operations are insufficient to meet these distribution requirements,
the Simon DeBartolo Group could be required to borrow the amount of the
deficiency or sell assets to obtain the cash necessary to make distributions
required to retain REIT status.
While the Simon DeBartolo Group does not intend to reduce quarterly
distributions as a result of the Merger and the Other Transactions, future
distributions paid by the Simon DeBartolo Group will be at the discretion of its
Board of Directors and will depend on its actual cash flow, financial condition,
capital requirements, annual distribution requirements under the REIT provisions
of the Code and such other factors as the Board of Directors deems relevant. The
next full quarterly dividend paid by the Simon DeBartolo Group will be adjusted
to take into account the Special Distribution. Assuming the Simon DeBartolo
Group continues to make regular quarterly distributions at a current rate of
$0.4925 per share of SPG Common Stock, following the Merger, each former
shareholder of DRC, as a stockholder of the
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Simon DeBartolo Group, would be entitled to receive a quarterly distribution
from the Simon DeBartolo Group equivalent to $0.3349 per share of DRC Common
Stock held prior to the Merger.
It is anticipated that Funds From Operations of the Simon DeBartolo Group
will exceed earnings and profits due to non-cash expenses, primarily
depreciation and amortization, to be incurred by the Simon DeBartolo Group.
Distributions by the Simon DeBartolo Group to the extent of current or
accumulated earnings and profits for federal income tax purposes, other than
capital gains dividends, will be taxable to stockholders as ordinary dividend
income. Any dividend designated by the Simon DeBartolo Group as a capital gain
dividend generally will give rise to capital gain for stockholders.
Distributions in excess of the Simon DeBartolo Group's current or accumulated
earnings and profits will be treated as a non-taxable reduction of a
stockholder's basis in its share of SPG Common Stock to the extent thereof, and
thereafter as capital gain. Distributions treated as non-taxable reductions in
basis will have the effect of deferring taxation until the sale of a
stockholder's shares of SPG Common Stock or future distributions in excess of
the stockholder's basis in the share of SPG Common Stock.
The Simon DeBartolo Group will maintain a distribution reinvestment plan
under which stockholders may elect to reinvest their distributions automatically
in additional shares of SPG Common Stock. To fulfill its obligations under the
distribution reinvestment plan, the Simon DeBartolo Group may, from time to
time, elect to purchase shares of SPG Common Stock in the open market on behalf
of participating stockholders or issue new shares of SPG Common Stock to such
stockholders. The Simon DeBartolo Group may suspend or amend such plan at any
time. This Prospectus/Joint Proxy Statement does not constitute an offer of any
shares of SPG Common Stock that may be issued by the Simon DeBartolo Group in
connection with a distribution reinvestment program, and such shares may be
purchased only pursuant to a separate prospectus contained in an effective
registration statement.
Prior to the Merger, each of SPG and DRC shall declare a Special
Distribution to their respective shareholders, the record date for which shall
be the close of business on the last business day prior to the Effective Time.
INVESTMENT POLICIES
The Simon DeBartolo Group will conduct all its investment activities
through the Operating Partnership and the SPG Operating Partnership for as long
as such partnerships exist. New activities of the Simon DeBartolo Group will be
conducted primarily through the Operating Partnership and it is intended that,
if all necessary consents can be obtained, the assets of the SPG Operating
Partnership ultimately be transferred to the Operating Partnership. The Simon
DeBartolo Group's primary business objective will be to increase Funds From
Operations per share and the value of its properties and operations. It is
intended that the Simon DeBartolo Group will achieve these objectives by
pursuing an aggressive leasing strategy; continuing to improve the performance
of the Portfolio Properties through both traditional and innovative management
techniques; where appropriate, renovating and/or expanding Portfolio Properties;
developing new shopping centers whenever such development meets the economic
criteria of the Simon DeBartolo Group; and acquiring additional shopping centers
and the portfolios of other retail real estate companies that meet its
investment criteria, although no assurance can be given that the Simon DeBartolo
Group will achieve such objectives. The Simon DeBartolo Group's policy will be
to develop and acquire properties primarily for generation of current income and
long-term value appreciation. The Simon DeBartolo Group will not have a policy
limiting the amount or percentage of assets that may be invested in any
particular property or type of property or in any geographic area.
The Simon DeBartolo Group may purchase or lease properties for long-term
investment, develop or redevelop its properties or sell such properties, in
whole or in part, when circumstances warrant. SPG currently participates and the
Simon DeBartolo Group may continue to participate with other entities in
property ownership, through joint ventures or other types of co-ownership.
Equity investments may be subject to existing mortgage financing and other
indebtedness that have priority over the equity interest of SPG or the Simon
DeBartolo Group.
While SPG emphasizes equity real estate investments, the Simon DeBartolo
Group may, in its discretion, invest in mortgages (which may or may not be
insured by a governmental agency) and other real estate interests consistent
with its qualification as a REIT. It is not intended that the Simon DeBartolo
Group invest to a significant extent in mortgages or deeds of trust, but it may
invest in participating or convertible mortgages if the Simon DeBartolo Group
concludes that it may benefit from the cash flow or any appreciation in the
value of the property.
Subject to the percentage ownership limitations and gross income tests
necessary for REIT qualification, the Simon DeBartolo Group may also invest in
securities of other entities engaged in real estate activities or securities of
other issuers. The Simon DeBartolo Group may invest in the securities of other
issuers in connection with acquisitions of indirect interests in real estate
(normally general or limited partnership interests in special purpose
partnerships owning one or more properties). The Simon DeBartolo Group may in
the future acquire all or substantially all of the securities or assets of other
REITs, management companies or similar entities where such investments would be
consistent with its
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investment policies. It is not intended that the Simon DeBartolo Group invest in
securities of other issuers (other than the Operating Partnership and the SPG
Operating Partnership and certain wholly-owned subsidiaries and to acquire
interests in real estate) for the purpose of exercising control. It is not
intended that the Simon DeBartolo Group's investments in securities will require
it to register as an "investment company" under the Investment Company Act of
1940, as amended, and it is intended that the Simon DeBartolo Group divest
securities before any such registration would be required.
FINANCING POLICIES
Prior to the Merger, SPG maintained a policy of limiting its ratio of debt
to Total Market Capitalization to not more than 50%. Following the Merger it is
intended that the Simon DeBartolo Group will not have a stated policy
limitation. Moreover, the Amended SPG Charter or Alternative Amended SPG Charter
will not contain any limitation on the amount or percentage of indebtedness the
Simon DeBartolo Group may incur. Certain agreements relating to indebtedness of
SPG (which will become agreements of the Simon DeBartolo Group) do, however, set
forth restrictions on the amount of indebtedness that the Simon DeBartolo Group
will be permitted to incur. If SPG's pro rata share of indebtedness of all
unconsolidated Joint Venture Properties were included, the Simon DeBartolo
Group's ratio of debt to Total Market Capitalization is expected to be in excess
of 50%. See "RISK FACTORS--Increased Indebtedness of Simon DeBartolo Group as
Compared with SPG; No Limitation on Further Indebtedness."
To the extent that its Board of Directors determines to seek additional
capital, the Simon DeBartolo Group may raise such capital through additional
equity offerings, debt financing or retention of cash flow (subject to
provisions in the Code requiring the distribution by a REIT of a certain
percentage of taxable income and taking into account taxes that would be imposed
on undistributed taxable income), or a combination of these methods.
If the Simon DeBartolo Group's Board of Directors determines to raise
additional equity capital, it may, without stockholder approval, issue
additional shares of SPG Common Stock or other capital stock of the Simon
DeBartolo Group up to the amount of its authorized capital in any manner (and on
such terms and for such consideration) as it deems appropriate, including in
exchange for property. Such securities may be senior to the outstanding classes
of Equity Stock and may include additional classes of preferred stock (which may
be convertible into SPG Common Stock). Existing stockholders will have no
preemptive right to purchase shares in any subsequent offering of securities by
the Simon DeBartolo Group, and any such offering could cause a dilution of a
stockholder's investment in the Simon DeBartolo Group.
Following the Merger, as long as the Operating Partnership is in existence,
the proceeds of the sale of any equity securities by the Simon DeBartolo Group
will be contributed to the Operating Partnership in exchange for Units, which
will dilute the ownership interest, if any, of the Limited Partners. It is
anticipated that, following the Merger, any additional borrowings would be made
through the Operating Partnership, although the Simon DeBartolo Group might
incur borrowings that would be reloaned to the Operating Partnership. Borrowings
may be in the form of bank borrowings, publicly and privately placed debt
instruments, or purchase money obligations to the sellers of properties, any of
which indebtedness may be unsecured or may be secured by any or all of the
assets of the Simon DeBartolo Group, the Operating Partnership, the SPG
Operating Partnership, or any existing or new property-owning partnership and
may have full or limited recourse to all or any portion of the assets of the
Simon DeBartolo Group, the Operating Partnership, the SPG Operating Partnership,
or any existing or new property-owning partnership. Although the Simon DeBartolo
Group may borrow to fund the payment of dividends, it currently has no intention
or expectation that it will do so.
To the extent that the Simon DeBartolo Group's Board of Directors
determines to obtain additional debt financing, it is intended that the Simon
DeBartolo Group do so generally through mortgages on properties and drawings
against revolving lines of credit in a manner consistent with its debt
capitalization policy. These mortgages may be recourse, non-recourse or
cross-collateralized. The Simon DeBartolo Group will not have a policy limiting
the number or amount of mortgages that may be placed on any particular property,
but mortgage financing instruments usually limit additional indebtedness on such
properties.
The Simon DeBartolo Group may seek to obtain unsecured or secured lines of
credit or may determine to issue debt securities (which may be convertible into
capital stock or be accompanied by warrants to purchase capital stock) in
addition to the outstanding debt securities of the SPG Operating Partnership, or
to sell or securitize its lease receivables. The proceeds from any borrowings
may be used to finance acquisitions, to develop or redevelop properties, to
refinance existing indebtedness, for working capital or capital improvements, or
for meeting the income distribution requirements applicable to REITs if the
Simon DeBartolo Group has income without the receipt of cash sufficient to
enable it to meet such distribution requirements. The Simon DeBartolo Group also
may determine to finance acquisitions through the exchange of properties or
issuance of additional Units in the Operating Partnership, shares of SPG Common
Stock, shares of preferred stock or other securities. The ability to offer Units
to transferors may result in a beneficial structure for the transferors because
the exchange of Units for properties may defer the recognition of gain for tax
purposes by the
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transferor and may be an advantage for the Simon DeBartolo Group since certain
investors may be limited in the number of shares of SPG Common Stock that they
may purchase.
CONFLICTS OF INTEREST POLICIES
The Simon DeBartolo Group will continue certain policies of SPG and enter
into certain agreements designed to reduce or eliminate potential conflicts of
interest. Any transaction between the Simon DeBartolo Group and the Simons or
the DeBartolos (including property acquisitions, service and property management
agreements and retail space leases) must be approved by a majority of the Simon
DeBartolo Group's Independent Directors (or, in the case of a nine-member Board
of Directors, by the Special Committee (as defined below) and other directors
not otherwise affiliated with the Simons or the Simon DeBartolo Group; see
"CERTAIN ALTERNATIVE GOVERNANCE ARRANGEMENTS AND RELATED MATTERS IF THE REQUIRED
VOTE IS NOT OBTAINED--Alternative Amendments to SPG's Charter and By-laws"). The
SPG Management Company has agreed with SPG that if in the future the Simon
DeBartolo Group is permitted by applicable tax law and regulations to conduct
any or all of the activities that are now being conducted by the SPG Management
Company, the SPG Management Company will not compete with SPG or the Simon
DeBartolo Group with respect to new or renewal business of this nature.
Following the Merger, six of the seven Independent Directors (or the
Special Committee and other directors not otherwise affiliated with the Simons
or the Simon DeBartolo Group) have the power to authorize and require the sale
of any Portfolio Property because the sale of Portfolio Properties may have an
adverse tax impact on the Simons or the DeBartolos and the other Limited
Partners and therefore may involve conflicts of interest that could have an
adverse impact on the stockholders of the Simon DeBartolo Group. The exercise of
such powers is subject to applicable agreements with third parties. In addition,
decisions with respect to the exercise of the options to acquire Excluded Retail
Properties (as defined in the "GLOSSARY") from the Simons or the DeBartolos and
the enforcement of contracts between SPG and the Simons or the DeBartolos, will
be made by the Independent Directors (or the Special Committee and other
directors not otherwise affiliated with the Simons or the Simon DeBartolo
Group). See "RISK FACTORS-- Conflicts of Interest Related to the Merger." The
Simon Noncompetition Agreements (as defined in the "GLOSSARY") contain covenants
limiting the ability of the Simons to participate in certain shopping center
activities in North America. The Stockholders Agreement imposes restrictions on
the use of the "DeBartolo" name by the DeBartolos. See "CERTAIN
AGREEMENTS--Stockholders Agreement."
POLICIES WITH RESPECT TO CERTAIN OTHER ACTIVITIES
It is not intended that the Simon DeBartolo Group make investments other
than as previously described. It is intended that the Simon DeBartolo Group make
investments in such a manner as to be consistent with the REIT Requirements,
unless, because of changing circumstances or changes in the REIT Requirements,
the Simon DeBartolo Group's Board of Directors determines that it is no longer
in the best interests of the Simon DeBartolo Group to qualify as a REIT. The
Simon DeBartolo Group has authority to offer shares of its capital stock or
other securities in exchange for property and to repurchase or otherwise
reacquire its shares or any other securities and may engage in such activities
in the future. SPG may in the future issue shares of SPG Common Stock to holders
of Units in the Operating Partnership upon exercise of their SPG Exchange
Rights. SPG has not made loans to other entities or persons, including its
officers and directors, other than the SPG Management Company. The Simon
DeBartolo Group may in the future make loans to joint ventures in which it
participates. It is not intended that the Simon DeBartolo Group engage in (i)
trading, underwriting or agency distribution or sale of securities of other
issuers and (ii) the active trade of loans and investments.
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MANAGEMENT OF SPG AND THE SIMON DEBARTOLO GROUP
BEFORE AND AFTER THE MERGER
BOARD OF DIRECTORS OF THE SIMON DEBARTOLO GROUP
The following table sets forth the proposed composition of the Board of
Directors of the Simon DeBartolo Group at the Effective Time, if the Required
Vote is obtained at the SPG Special Meeting.
<TABLE>
<CAPTION>
YEAR OF CLASS OF
EXPIRATION DIRECTORSHIP
NAME AGE OF TERM OF SUCCESSOR
-------------------------------------------------- --- ---------- ------------
<S> <C> <C> <C>
G. William Miller................................. 71 1998 Common Stock
Fredrick W. Petri................................. 49 1999 Common Stock
Philip J. Ward.................................... 47 1999 Common Stock
Birch Bayh........................................ 68 1997 Common Stock
William T. Dillard, II............................ 51 1998 Common Stock
Terry S. Prindiville.............................. 60 1998 Common Stock
J. Albert Smith, Jr............................... 55 1999 Common Stock
Melvin Simon...................................... 69 1997 Class B
Herbert Simon..................................... 61 1997 Class B
David Simon....................................... 34 1997 Class B
Richard S. Sokolov................................ 46 1997 Class B
Edward J. DeBartolo, Jr........................... 49 1997 Class C
M. Denise DeBartolo York.......................... 45 1997 Class C
</TABLE>
If the Required Vote is not obtained but the Merger is nonetheless approved
and consummated, no Class C Common Stock will be authorized or issued and the
Simon DeBartolo Group will have a nine-member Board of Directors. For a
description of the composition of the Board of Directors of the Simon DeBartolo
Group if the Required Vote is not obtained, see "CERTAIN ALTERNATIVE GOVERNANCE
ARRANGEMENTS AND RELATED MATTERS IF THE REQUIRED VOTE IS NOT OBTAINED."
Messrs. Birch Bayh, William T. Dillard, II, Terry S. Prindiville, J. Albert
Smith, Jr., David Simon, Herbert Simon and Melvin Simon are currently directors
of SPG and Messrs. DeBartolo, Miller, Petri, Sokolov and Ward and Ms. York are
currently directors of DRC.
Set forth below is a summary of the business experience of the nominees for
directorships.
G. William Miller, a director of DRC since the DRC IPO, has been Chairman
of the Board and Chief Executive Officer of G. William Miller & Co. Inc., a
merchant banking firm, since 1983. He is a former Secretary of the U.S. Treasury
and a former Chairman of the Federal Reserve Board. From January 1990 until
February 1992, he was Chairman and Chief Executive Officer of Federated Stores,
Inc., the parent company of predecessors to Federated Department Stores, Inc.
Mr. Miller is Chairman of the Board and a director of Waccamaw Corporation. He
is also a director of GS Industries, Inc., Kleinwort Benson Australian Income
Fund, Inc. and Repligen Corporation.
Fredrick W. Petri, a director of DRC since the DRC IPO, is a partner of
Petrone, Petri & Company, a real estate investment firm he founded in 1993, and
an officer of Housing Capital Company since its formation in 1994. Prior
thereto, he was an Executive Vice President of Wells Fargo Bank, where for over
18 years he held various real estate positions. Mr. Petri is currently a trustee
of the Urban Land Institute and a director of Storage Trust Realty. He
previously was a member of the Board of Governors and a Vice President of the
National Association of Real Estate Investment Trusts and a director of the
National Association of Industrial and Office Park Development. He is a director
of the University of Wisconsin's Real Estate Center.
Philip J. Ward, a director of DRC since the DRC IPO, is Senior Managing
Director, Head of Real Estate Investments, for CIGNA Investments, Inc., a
wholly-owned subsidiary of CIGNA Corporation. He is a member of the
International Council of Shopping Centers, the Urban Land Institute, the
National Association of Industrial and Office Parks and the Society of
Industrial and Office Realtors. He is a director of the Connecticut Housing
Investment Fund.
Birch Bayh, 68 is the senior partner in the Washington, D.C. law firm of
Bayh, Connaughton & Malone, P.C. He served as a United States Senator from
Indiana from 1963 to 1981. Mr. Bayh also serves as a director of ICN
Pharmaceuticals and Acordia, Inc.
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William T. Dillard, II, 51, is President and Chief Operating Officer of
Dillard Department Stores, Inc., a retailing chain, a position he has held since
1977. Mr. Dillard also serves as a director of Dillard Department Stores, Inc.,
Frederick Atkins, Inc., Texas Commerce Bancshares, Inc., Acxiom Corporation and
Barnes & Noble, Inc.
Terry S. Prindiville, 60, retired as Executive Vice President and Director
of Support Services of J.C. Penney Company, Inc. a retailing chain, a position
he held from 1988 until 1995. He is also the Chairman of the Board of Directors
of JCP Realty, Inc., a wholly-owned subsidiary of J.C. Penney Company, Inc. and
a holder of SPG Units which will be exchanged for Units pursuant to the
Contribution Agreement as part of the Other Transactions.
J. Albert Smith, Jr., 55, is the President of Bank One, Indianapolis, NA, a
commercial bank, a position he has held since September 30, 1994. Prior to his
current position, he was the President of Banc One Mortgage Corporation, a
mortgage banking firm, a position he held since 1975.
Melvin Simon is the Co-Chairman of the SPG Board of Directors. In addition,
he is the Chairman of the Board of Directors of Melvin Simon & Associates, Inc.
("MSA, Inc."), a company he founded in 1960 with his brother, Herbert Simon.
Herbert Simon is the Co-Chairman of the SPG Board of Directors. Mr. Simon
served as Chief Executive Officer from SPG's incorporation through January 2,
1995, when he was appointed Co-Chairman of the Board. In addition, Mr. Simon is
the Chief Executive Officer and President of MSA, Inc., positions he has held
since its founding. Mr. Simon is also a director of Kohl's Corporation, a
specialty retailer.
David Simon is the President and Chief Executive Officer of SPG. Mr. Simon
has served as President from SPG's incorporation and was appointed Chief
Executive Officer on January 3, 1995. In addition, he has been Executive Vice
President, Chief Operating Officer and Chief Financial Officer of MSA, Inc.
since 1990. From 1988 to 1990, Mr. Simon was Vice President of Wasserstein
Perella & Company, a firm specializing in mergers and acquisitions. He is the
son of Melvin Simon, the nephew of Herbert Simon and a director of Healthcare
Compare Corp.
Richard S. Sokolov has been the President, Chief Executive Officer and a
director of DRC since its formation. Prior to that he had served as Senior Vice
President, Development of EJDC since 1986 and as Vice President and General
Counsel since 1982. In addition, Mr. Sokolov is a trustee and a member of the
Executive Committee of the International Council of Shopping Centers.
Edward J. DeBartolo, Jr. has been the Chairman of the DRC Board of
Directors since its formation. Mr. DeBartolo has been President and Chief
Executive Officer of EJDC since 1994 and a director of EJDC since 1973. He
previously served as President and Chief Administrative Officer of EJDC since
1979. He has been associated with EJDC in an executive capacity since 1973. Mr.
DeBartolo is Chairman of the San Francisco 49ers professional football team and
is also Chairman and Chief Executive Officer of DeBartolo Entertainment, Inc.
EJDC owns a majority of the interests in the San Francisco 49ers. Mr. DeBartolo,
Jr. is the son of the late Edward J. DeBartolo and the brother of M. Denise
DeBartolo York.
M. Denise DeBartolo York, a director of DRC since February 1995, serves as
Chairman of the Board of EJDC and DeBartolo, Inc. Ms. York previously served
EJDC as Executive Vice President of Personnel/Communications and has been
associated with EJDC in an executive capacity since 1975. She is the daughter of
the late Edward J. DeBartolo and the sister of Edward J. DeBartolo, Jr.
The adoption and approval of the Amended SPG Charter and the Amended SPG
By-laws and election of the 13 persons set forth above to the SPG Board of
Directors by the Required Vote will also create, within the seven Independent
Directors so elected, three categories of Independent Directors: one that serves
until the annual meeting in 1997, one that serves until the annual meeting in
1998, and one that serves until the annual meeting in 1999. Directors not
subject to such limited classified arrangement will serve on a year-to-year
basis.
Such classified board structure is part of the arrangements contemplated by
the Merger Agreement, and is limited in both scope and time: it is limited to
Independent Directors only (which will constitute only seven out of a board of
13 directors under the Amended SPG Charter), and expires at the annual meeting
in 1999. The SPG Board of Directors has concluded that such classified board
structure in the years immediately after the Merger would be beneficial to the
Simon DeBartolo Group. The SPG Board of Directors believes that the continuity
and stability provided by Independent Directors with prior knowledge of DRC or
SPG before the Merger would be conducive to the long-term planning that will
help ensure maximum exploitation of the synergies of the combined businesses and
continued creation of stockholder value.
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The adoption of the classified board structure will not, and is not
intended to, insulate any SPG director from the desires of stockholders or from
the directors' fiduciary duties, or act as an anti-takeover device.
Such classified board structure will make it more difficult to change the
composition of Independent Directors in one single stockholders' meeting, prior
to 1999. In particular, it will make it impossible, other than for cause, (i)
prior to the annual meeting in 1999, to remove all Independent Directors at a
single stockholders' meeting, and (ii) prior to the annual meeting in 1998, to
remove a majority of the Independent Directors at a single stockholders'
meeting. However, subject to the rights of the holders of any class separately
entitled to elect one or more directors, any or all of the directors of the
Simon DeBartolo Group may still be removed at any time for cause by the
affirmative vote of holders of at least a majority of the combined voting power
of all classes of capital stock, voting as a single class.
SENIOR MANAGEMENT OF THE SIMON DEBARTOLO GROUP
The following table sets forth certain information with respect to the
persons who will be executive officers of the Simon DeBartolo Group upon
completion of the Merger.
<TABLE>
<CAPTION>
NAME AGE POSITION
------------------------------------- --- -------------------------------------------------
<S> <C> <C>
Melvin Simon(1)...................... 69 Co-Chairman
Herbert Simon(1)..................... 61 Co-Chairman
David Simon(1)....................... 34 Chief Executive Officer
Richard S. Sokolov................... 46 President and Chief Operating Officer
Randolph L. Foxworthy................ 51 Executive Vice President--Corporate Development
William J. Garvey.................... 57 Executive Vice President--Property Development
James A. Napoli...................... 50 Executive Vice President--Leasing
James M. Barkley..................... 44 General Counsel; Secretary
</TABLE>
- ---------------
(1) Melvin Simon is the brother of Herbert Simon and the father of David Simon.
Set forth below is a summary of the business experience of the persons who
will be executive officers of the Simon DeBartolo Group. The executive officers
of the Simon DeBartolo Group will serve at the pleasure of the Simon DeBartolo
Group's Board of Directors. For biographical information of Melvin Simon,
Herbert Simon, David Simon and Richard S. Sokolov, see "--Board of Directors of
the Simon DeBartolo Group."
Mr. Foxworthy is the Executive Vice President--Corporate Development and a
director of SPG. Mr. Foxworthy joined MSA, Inc., the principal entity
constituting the SPG Predecessor businesses, in 1980 and has been an Executive
Vice President of MSA, Inc. since 1986 in charge of Corporate Development and
has held the same position with SPG since the SPG IPO. Prior to assuming the
position of Executive Vice President, Mr. Foxworthy served as General Counsel,
in which capacity he supervised all legal operations of MSA, Inc.
Mr. Garvey is the Executive Vice President--Property Development of SPG.
Mr. Garvey, who was Executive Vice President and Director of Development at MSA,
Inc., joined MSA, Inc. in 1979 and has held various positions with MSA, Inc.
since that date and has held his current position with SPG since the SPG IPO.
Mr. Napoli is the Executive Vice President--Leasing of SPG. Mr. Napoli also
served as Executive Vice President and Director of Leasing of MSA, Inc. and has
held his current position with SPG since the SPG IPO. Mr. Napoli was Executive
Vice President and Director of Leasing for May Centers, Inc. before he joined
MSA, Inc. in 1989.
Mr. Barkley serves as SPG's General Counsel and Secretary. Mr. Barkley
holds the same position for MSA, Inc. and has held his current position with SPG
since the SPG IPO. He joined MSA, Inc. in 1978 as Assistant General Counsel for
Development Activity.
EMPLOYMENT AGREEMENT
SPG and its indirect majority-owned subsidiary, the Simon Property Group
Administrative Services Partnership, L.P. ("SAS") have entered into an
employment agreement (the "Employment Agreement") with Richard S. Sokolov to be
effective as of the Closing Date. The Employment Agreement has a one-year term
with automatic renewals for successive one-year periods on each of the first two
anniversaries of the Closing Date, unless either party gives at least ninety
days' written notice to the other electing not to renew.
Under the Employment Agreement, Mr. Sokolov will be employed as the
President and Chief Operating Officer of SPG. In addition, SPG will use its best
efforts to nominate Mr. Sokolov for election to, and to cause Mr. Sokolov to be
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elected to, the SPG Board of Directors and the Executive Committee of the SPG
Board of Directors. Mr. Sokolov's initial principal base of operations will be
in Youngstown, Ohio.
All compensation under the Employment Agreement will be paid by SAS. Mr.
Sokolov's compensation will include a base salary of $508,500 per annum, subject
to annual review by SPG and SAS, and a maximum annual bonus opportunity of up to
75% of base salary under SPG's (or its affiliates') annual cash bonus plan for
senior executives of SPG. In addition, currently outstanding Deferred Stock
Awards under DRC's existing incentive plan relating to performance for 1994 and
1995 will be converted into SPG Shares pursuant to the Merger and deemed fully
vested immediately prior to the Merger; the awards relating to performance for
1996 will be converted into SPG Shares pursuant to the Merger and will no longer
be subject to vesting on the basis of performance, but will vest in equal
one-third portions on each of the first, second and third anniversaries of the
Closing Date subject to Mr. Sokolov's continued employment with SPG and
accelerated vesting upon termination by SPG without "cause," by Mr. Sokolov for
"good reason" (each as defined in the Employment Agreement) and upon Mr.
Sokolov's death or disability; and the remaining currently outstanding awards
relating to performance for 1997 and 1998 will be converted into SPG Shares
pursuant to the Merger and will be "earned" based upon SPG's achievement of
certain Funds From Operations growth targets in respect of fiscal years 1997 and
1998, subject to a three-year vesting schedule and acceleration of earned shares
upon termination by SPG without cause, by Mr. Sokolov for good reason, upon Mr.
Sokolov's death or disability or the failure of SPG to offer continued
employment to Mr. Sokolov after the third anniversary of the Closing Date on
substantially equivalent terms (other than location of employment).
Under the Employment Agreement, Mr. Sokolov is prohibited from competing
with SPG or its affiliates during the term of his employment with SPG or for one
year thereafter. In addition, Mr. Sokolov will be subject to a customary
confidentiality covenant and will be prohibited from soliciting away employees
or clients and hiring employees of SPG or its affiliates for one year following
termination.
Upon a termination of Mr. Sokolov's employment by SPG without cause, by Mr.
Sokolov for good reason, or due to the failure of SPG to renew the employment
term through the third anniversary of the Closing Date or to offer Mr. Sokolov
continued employment thereafter under substantially equivalent terms (other than
location of employment), Mr. Sokolov will be entitled to severance in an amount
equal to the sum of one year's base salary and the maximum target bonus for the
year of termination, payable in 12 equal monthly installments. Upon termination
for any other reason, Mr. Sokolov will not be entitled to receive severance
payments, other than base salary accrued through the date of termination and any
accrued but unpaid compensation in respect of any previously completed fiscal
year; provided that if Mr. Sokolov resigns his employment as of the third
anniversary of the Closing Date as a result of the receipt of an offer of
continued employment with SPG on substantially equivalent terms but that would
require Mr. Sokolov to relocate from Youngstown, Ohio, Mr. Sokolov will, at his
election, be entitled to either the cash severance described above or the
acceleration of vesting of his earned deferred stock awards.
MANAGEMENT OF SPG PRIOR TO THE MERGER
The following table sets forth certain information with respect to the
executive officers of SPG as of the date of this Prospectus/Joint Proxy
Statement.
<TABLE>
<CAPTION>
NAME AGE POSITION
------------------------------------- --- -------------------------------------------------
<S> <C> <C>
Melvin Simon(1)...................... 69 Co-Chairman
Herbert Simon(1)..................... 61 Co-Chairman
David Simon(1)....................... 34 President and Chief Executive Officer
Randolph L. Foxworthy................ 51 Executive Vice President--Corporate Development
William J. Garvey.................... 57 Executive Vice President--Property Development
James A. Napoli...................... 50 Executive Vice President--Leasing
John R. Neutzling.................... 43 Executive Vice President--Property Management
James M. Barkley..................... 44 General Counsel; Secretary
Dennis L. Cavanagh................... 47 Senior Vice President--Financial Services
</TABLE>
- ---------------
(1) Melvin Simon is the brother of Herbert Simon and the father of David Simon.
Set forth below is a summary of the business experience of the executive
officers of SPG. The executive officers of SPG serve at the pleasure of the SPG
Board of Directors and have served in such capacities since the completion of
the SPG IPO. For biographical information of Melvin Simon, Herbert Simon and
David Simon, see "--Board of Directors of the Simon DeBartolo Group." For
biographical information of Randolph L. Foxworthy, William J. Garvey, James A.
Napoli and James M. Barkley, see "--Senior Management of the Simon DeBartolo
Group."
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Mr. Neutzling holds the position of Executive Vice President--Property
Management of SPG. Mr. Neutzling has also been an Executive Vice President of
MSA, Inc. since 1992 overseeing all property and asset management functions and
has held his current position with SPG since the SPG IPO. He joined MSA, Inc. in
1974 and has held various positions with MSA, Inc. since that date.
Mr. Cavanagh, SPG's Senior Vice President--Financial Services, also served
as Senior Vice President of Financial Services for MSA, Inc and has held his
current position with SPG since the SPG IPO. Before joining MSA, Inc. in 1990,
he served as Executive Vice President and Chief Financial Officer of LJ Hooker,
a real estate development firm, from 1989 to 1990 and Senior Vice President and
Chief Financial Officer of May Centers, Inc. prior to 1989.
CERTAIN AGREEMENTS
STOCKHOLDERS AGREEMENT
GENERAL
The Stockholders Agreement was entered into as of March 26, 1996 among SPG,
DRC, the Simons and the DeBartolos. The following description of the
Stockholders Agreement does not purport to be complete and is qualified in its
entirety by reference to the Stockholders Agreement, a copy of which has been
filed as an exhibit to this Prospectus/Joint Proxy Statement.
The provisions of the Stockholders Agreement are applicable to all shares
of SPG Common Stock, Class B Common Stock, Class C Common Stock (if issued), DRC
Common Stock, SPG Units, DRC Interests and Units owned by the Simons or the
DeBartolos, including those acquired after March 26, 1996.
CERTAIN AGREEMENTS EFFECTIVE PRIOR TO THE EFFECTIVE TIME
Pursuant to the Stockholders Agreement, SPG has agreed to nominate for
election to the Simon DeBartolo Group Board of Directors, effective as of the
Effective Time, the persons set forth under "MANAGEMENT OF SPG AND THE SIMON
DeBARTOLO GROUP BEFORE AND AFTER THE MERGER--Board of Directors of the Simon
DeBartolo Group."
The Simons have agreed to vote their shares of Equity Stock to approve,
and, together with SPG, have agreed to use best efforts to ensure that the SPG
stockholder vote approves, the Merger and Other Transactions, including the
amendment of the SPG Charter and SPG By-laws and consequent election to the SPG
Board of Directors of the persons set forth under "MANAGEMENT OF SPG AND THE
SIMON DeBARTOLO GROUP BEFORE AND AFTER THE MERGER--Board of Directors of the
Simon DeBartolo Group."
The DeBartolos have agreed to vote their shares of voting securities in
DRC, and to support all reasonable efforts to secure DRC shareholder approval,
to approve the Merger and Other Transactions.
At or prior to the Effective Time, SPG and the Simons that own SPG Units
have agreed to execute and deliver the Contribution Agreement. See "THE
MERGER--Certain Transactions and Agreements Relating to the Merger." At or prior
to the Effective Time, the DeBartolos, the Simons that are to be parties to the
Contribution Agreement, DRC and SPG have agreed to, and have agreed to cause
their affiliates that they control to, execute and deliver the Amended SPG
Partnership Agreement and the Amended Operating Partnership Agreement to, among
other things, create a special limited partnership interest in the SPG Operating
Partnership to be held by the Operating Partnership following the Effective
Time. At the Effective Time, SPG has agreed to execute and deliver the New
Registration Rights Agreement. See "--The Registration Rights Agreements--The
New Registration Rights Agreement" below.
The DeBartolos have covenanted that prior to the Effective Time, except as
the result of the exercise by a secured creditor of remedies arising from
certain pledges and debt agreements, they will not (A) sell, assign, dispose of,
encumber or otherwise transfer any DRC Common Stock or DRC Interests or (B)
convert or exchange (or allow the conversion or exchange of) any DRC Interests
into or for shares of DRC Common Stock; except that EJDC has the right to
dispose of the DRC Interests held by the DeBartolos to no more than three
institutional investors under certain limited circumstances and within certain
limitations set forth in the Stockholders Agreement.
Each DeBartolo has also covenanted and agreed that, for a period of seven
years after the date of the Stockholders Agreement, without the express prior
written consent of SPG or the Simon DeBartolo Group and the Simons, it will not,
singly or with others, directly or indirectly, except with respect to any action
taken in furtherance of approving certain amendments to SPG's Charter and SPG's
By-laws as contemplated by the Merger Agreement, (i) make, or participate in,
any solicitation of proxies with respect to the SPG Common Stock (including by
the execution of action by written
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consent), become a participant in any election contest with respect to SPG or
the Simon DeBartolo Group, seek to advise, encourage or influence any person or
entity with respect to the voting of any SPG Common Stock or demand a copy of
SPG's or the Simon DeBartolo Group's stock ledger, list of stockholders or other
books and records, (ii) participate in or encourage the formation of any group
which owns or seeks or offers to acquire beneficial ownership of securities of
SPG or the Simon DeBartolo Group or which seeks or offers to affect control of
SPG or the Simon DeBartolo Group or for the purpose of circumventing any
provision of the Stockholders Agreement, (iii) otherwise act, alone or in
concert with others (including by providing financing for another party), to
seek to exercise a controlling influence over the management, SPG Board of
Directors or policies of SPG or the Simon DeBartolo Group, (iv) deposit any SPG
Common Stock into a voting trust or subject any SPG Common Stock to any
arrangement with respect to voting of any SPG Common Stock, other than any trust
for relatives or family members over which the DeBartolos retain sole voting
power or any charitable trust or charitable foundation otherwise in compliance
with the Stockholders Agreement, (v) make a request to SPG or the Simon
DeBartolo Group to amend or waive any provision of the Stockholders Agreement,
the SPG Charter or SPG By-laws, including any request to permit the DeBartolos
or any other person to take any action in respect of the matters referred to
above, or (vi) disclose any intention, plan or arrangement inconsistent with the
foregoing; except that the prohibitions summarized above will not prohibit any
person who is serving as a director of the Simon DeBartolo Group from, solely in
his or her capacity as such director, (A) taking any action or making any
statement at any meeting of the Simon DeBartolo Group's Board of Directors or
any committee thereof; (B) making any statement to any officer, director or
agent of the Simon DeBartolo Group; or (C) making any statement or disclosure
required under the federal securities laws or other applicable laws.
The Simons have covenanted that prior to the Effective Time, they will not
(i) sell, assign, dispose of, encumber or otherwise transfer any of the SPG
Common Stock, Class B Common Stock or the SPG Units that they beneficially own
or (ii) convert (or allow the conversion of) any SPG Units that they
beneficially own into shares of SPG Common Stock.
CERTAIN AGREEMENTS EFFECTIVE AFTER THE EFFECTIVE TIME
SPG has agreed to nominate Edward J. DeBartolo, Jr. and M. Denise DeBartolo
York to the Simon DeBartolo Group Board of Directors, effective as of the
Effective Time, and Edward J. DeBartolo, Jr. and M. Denise DeBartolo York have
each agreed to be so nominated and, upon being so elected and subject to
reelection by the stockholders in each annual meeting thereafter, both have
agreed not to resign (except if disabled) as a director prior to the fourth
anniversary date of the Effective Time and that one of them may not resign as a
director prior to the fifth anniversary date of the Effective Time.
After the Effective Time and until such time as the DeBartolo family name
ceases to be used in connection with a material portion of the operations or
assets of the Simon DeBartolo Group and, except with respect to certain excluded
properties, the DeBartolos have agreed not to use or license to any third party
the DeBartolo family name, and have agreed not to permit any third party (other
than certain affiliates and persons who otherwise have the legal right to use
the DeBartolo family name other than through permission granted by the DeBartolo
family members) to use or license the DeBartolo family name, in connection with
(i) any of the businesses of owning, managing, leasing or developing regional
shopping malls or (ii) purchasing land initially intended to be held for
regional shopping mall development; provided that such agreement will not
require that (A) any person existing on the date of the Stockholders Agreement
cease using the DeBartolo family name in any activity not permitted by clauses
(i) or (ii) above; or (B) DeBartolo Entertainment, Inc. or its successors and
assigns cease or restrict or change its current use of the DeBartolo family name
in connection with the businesses currently conducted by it, including arranging
for the creation and leasing of retail properties located on or adjacent to
office, hotel, casino or entertainment facilities.
The parties to the Stockholders Agreement have provided for various
agreements if the Amended SPG Charter and the Amended SPG By-laws are not
adopted because of the failure to obtain the Required Vote but the Majority
Approval Vote is obtained and the Merger is consummated. See "CERTAIN
ALTERNATIVE GOVERNANCE ARRANGEMENTS AND RELATED MATTERS IF THE REQUIRED VOTE IS
NOT OBTAINED."
TERMINATION
The Stockholders Agreement will terminate on the earliest of the occurrence
of (i) the termination of the Merger Agreement, (ii) such time after the
Effective Time as no DeBartolo holds any Class C Common Stock, SPG Common Stock
or Units, (iii) such time after the Effective Time as no Simon holds any SPG
Common Stock, Class B Common Stock or Units, (iv) such time as may be agreed
among the Simons and the DeBartolos or (v) the failure of SPG and DRC to
consummate the Merger on or before December 31, 1996.
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THE AGREEMENTS OF LIMITED PARTNERSHIP
GENERAL
After giving effect to the Other Transactions, although both the Operating
Partnership and the SPG Operating Partnership will be operating partnerships of
the Simon DeBartolo Group and the Surviving Subsidiary Corporation, the
Operating Partnership will become the primary operating partnership while the
SPG Operating Partnership will become a subsidiary partnership of the Operating
Partnership. To effectuate this change, it is anticipated that subsequent to the
first anniversary of the Closing Date, the Simon DeBartolo Group will transfer
to the Operating Partnership all of its remaining directly-held economic
interest in the SPG Operating Partnership other than SPG's general partnership
interest represented by SPG Units constituting one percent of the total SPG
Units outstanding. Furthermore, it is the intention of SPG and DRC that the
Simon DeBartolo Group as general partner and the Operating Partnership as
general partner and limited partner of the SPG Operating Partnership,
respectively, cause the SPG Operating Partnership to transfer, subsequent to the
first anniversary of the Closing Date, substantially all of its assets to the
Operating Partnership, if all necessary consents to such a transfer can be
obtained. If such transfer of assets can be effected, then the Simon DeBartolo
Group's remaining one percent interest in the SPG Limited Partnership and any
preferred units in the SPG Operating Partnership would be contributed to the
Operating Partnership and the SPG Limited Partnership's existence would
terminate. See "THE MERGER--Structure of the Simon DeBartolo Group."
The Amended Operating Partnership Agreement contains material changes from
the SPG Partnership Agreement and the DRC Partnership Agreement. In particular,
the Amended Operating Partnership Agreement is materially different from the SPG
Partnership Agreement in that it provides for two general partners and affords
the following additional rights to certain Limited Partners: (i) any Limited
Partner has the option of electing to be unconditionally liable to the Operating
Partnership for any deficit in its capital account, (ii) during the first five
years after the Effective Time, a Limited Partner that is allocated
pre-contribution gain on a Covered Sale (as defined in the "GLOSSARY") is
entitled to a distribution, pro rata with all partners, of sufficient cash to
pay the tax on such gain and distribution, (iii) during the sixth through the
eighth years after the Effective Time, a Limited Partner that is one of the
DeBartolos and that is allocated gain on a Covered Sale can, to the extent of
the tax due on such allocation and exchange, require the Operating Partnership
to exchange such Limited Partner's Units pursuant to the exchange rights under
the Amended Operating Partnership Agreement for cash and (iv) during the first
three years after the Effective Time, EJDC as a Limited Partner has the right to
dispose of up to 30% of the Units held by the EJDC (and its affiliates) as of
the Effective Time in each such year for the purposes and in the manner and
subject to the limits described below.
The proposed Amended and Restated SPG Partnership Agreement differs from
the current SPG Partnership Agreement in that it provides for the admission of
the Operating Partnership as a limited partner and grants the Operating
Partnership the right to approve, among others, the following actions by the SPG
Operating Partnership: the disposition or encumbrance of any property; any
borrowing or lending of funds; the admission of any additional partners; and a
merger, liquidation, dissolution or sale of all or substantially all assets. In
addition, as discussed herein, all future property acquisitions will be effected
by the Operating Partnership and, if the necessary consents can be obtained, it
is contemplated that the SPG Operating Partnership will liquidate and transfer
its properties to the Operating Partnership.
THE AGREEMENT OF LIMITED PARTNERSHIP OF THE OPERATING PARTNERSHIP
The following summary of the Amended Operating Partnership Agreement and
the descriptions of certain provisions set forth elsewhere in this
Prospectus/Joint Proxy Statement are qualified in their entirety by reference to
the Amended Operating Partnership Agreement which is filed as an exhibit to the
Registration Statement of which this Prospectus/Joint Proxy Statement is a part.
Management
The Operating Partnership will be a continuation of the DRC Operating
Partnership, organized on November 18, 1993 as a Delaware limited partnership
pursuant to the terms of the DRC Partnership Agreement then in effect. As part
of the Other Transactions, this agreement will be amended and restated at the
Effective Time as the Amended Operating Partnership Agreement. Generally,
pursuant to the Amended Operating Partnership Agreement, the Simon DeBartolo
Group as the non-managing general partner and the Surviving Subsidiary
Corporation as the managing general partner, collectively, will have full,
exclusive and complete responsibility and discretion in the management and
control of the Operating Partnership and the Limited Partners of the Operating
Partnership, in such capacity, will have no authority to transact business for,
or participate in the management activities or decisions of, the Operating
Partnership. However, for so long as the Simons own at least ten percent of the
Units, the consent of the Simons will be required, and for so long as the
DeBartolos own at least ten percent of the Units, the consent of the DeBartolos
will be required, for the Operating Partnership (i) to make a general assignment
for the benefit of creditors, (ii) to take title to any property other than in
the
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name of the Operating Partnership or one of its affiliates, (iii) to institute
any proceeding for bankruptcy or to dissolve, liquidate or wind up the affairs
of the Operating Partnership, (iv) to act or cause the taking or refraining from
the taking of any action with respect to the dissolution and winding up of the
Operating Partnership or an election to continue the business of the Operating
Partnership, (v) to issue preferred units, (vi) to make any withdrawal or
modification of any federal income tax election and (vii) to sell, exchange,
transfer or otherwise dispose of all or substantially all of the Operating
Partnership's assets (including by way of merger, consolidation or other
combination in one or a series of transactions). In addition, the consent of
Limited Partners who hold in the aggregate more than 50% of the limited
partnership interests in the Operating Partnership then allocable to and held by
such Limited Partners will be required in order to amend materially the Amended
Operating Partnership Agreement.
Further, under the terms of the Amended Operating Partnership Agreement (i)
any property acquisitions shall be acquired through the Operating Partnership or
one of its subsidiary partnerships and not through the SPG Operating
Partnership, (ii) except for funds contributed to the SPG Operating Partnership
99% by the Operating Partnership as its limited partner and one percent by the
Simon DeBartolo Group as its general partner and funds raised for the purpose of
maintaining, renovating or expanding a property owned by the SPG Operating
Partnership or funds raised for the refinancing of debt of the SPG Operating
Partnership, any funds raised, whether by issuance of stock, borrowing or
otherwise, will be made available to the Operating Partnership, whether as
capital contributions, loans or otherwise, as appropriate and (iii) the Simon
DeBartolo Group and the Surviving Subsidiary Corporation will conduct their
respective affairs, to the extent they are so able to do, in a manner which will
preserve the equivalence in value between a Unit and a share of SPG Common
Stock.
Transferability of Interests
The Amended Operating Partnership Agreement provides that (i) the Surviving
Subsidiary Corporation may not withdraw from the Operating Partnership, merge or
consolidate with another person, sell or assign substantially all of its assets,
or sell, assign, pledge, encumber or otherwise dispose of any portion of its
interest in the Operating Partnership except where such merger, consolidation,
sale, assignment, pledge or other disposal is with, or to, the Simon DeBartolo
Group as its sole successor, (ii) the Simon DeBartolo Group may not withdraw
from the Operating Partnership, merge or consolidate with another person other
than the Surviving Subsidiary Corporation, sell or assign substantially all of
its assets, or transfer or assign its interest in the Operating Partnership,
without the consent of Limited Partners who hold in the aggregate more than 50%
of the limited partnership interests in the Operating Partnership then allocable
to and held by such Limited Partners and (iii) except as described below in the
immediately succeeding paragraph, the Limited Partners may not transfer their
interests in the Operating Partnership without the consent of the Simon
DeBartolo Group and the Surviving Subsidiary Corporation. Limited Partners will
be permitted to assign Units to affiliates and will be permitted to pledge Units
and the related pledgee will have the ability to acquire such pledged Units in
foreclosure.
In addition, (i) EJDC (which for purposes of this description of the
Agreement of Limited Partnership of the Operating Partnership shall mean EJDC as
a Limited Partner and any of its affiliates) is given the option, exercisable
during the first five years after the Effective Time, to exchange or transfer
certain of its Units (see "--Exchange Rights"), (ii) certain transfers by
Limited Partners that were formerly DRC Limited Partners must be consented to in
writing by EJDC's lenders, (iii) the JCP (as defined in the "GLOSSARY") limited
partner (or its pledgee) has the right to transfer its partnership interest to a
single accredited investor and any such transferee shall be admitted to the
Operating Partnership as a substitute Limited Partner and (iv) certain lenders
of EJDC, upon a loan default, have the right to transfer to themselves Units
pledged to them as security and to transfer such Units to one or more third
parties.
Additional Funds and Capital Contributions
To the extent that the Operating Partnership does not borrow all funds
required for its operations, the Amended Operating Partnership Agreement
provides additional methods of obtaining funds. The Simon DeBartolo Group and/or
the Surviving Subsidiary Corporation may borrow and then lend to the Operating
Partnership, on the same terms, such required funds. The Simon DeBartolo Group
and/or the Surviving Subsidiary Corporation may also contribute the required
funds to the Operating Partnership as additional capital contributions. In the
event of any such additional capital contributions, the Simon DeBartolo Group's
and/or the Surviving Subsidiary Corporation's partnership interests in the
Operating Partnership, as the case may be, will be increased proportionately
based upon the amount of such additional capital contributions and the value of
a Unit at the time of such contributions. As a consequence of such
contributions, the partnership interests of the partners not making any
additional capital contributions will be decreased proportionately. The Simon
DeBartolo Group may also contribute or lend, as preferred contributed funds or
as a loan having the same terms and conditions as the preferred stock issued by
it, the proceeds received by the Simon DeBartolo Group from the sale of its
preferred stock and shall receive in exchange for such contribution a number of
preferred units in the Operating Partnership equal to the number of shares of
preferred stock so sold. Such preferred units shall be entitled to priority
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distributions (which distributions will match the amount of dividends payable to
holders of the preferred stock) and shall entitle the Simon DeBartolo Group, as
holder, to substantially the same economic rights as a holder of the preferred
stock. See "--Distributions."
Each Limited Partner also has the option of electing to be unconditionally
liable to the Operating Partnership for any deficit in its capital account.
Awards Under Stock Option Plan
If stock options granted in connection with the SPG Stock Option Plans (as
defined in the "GLOSSARY") are exercised at any time or from time to time, the
Amended Operating Partnership Agreement requires the Simon DeBartolo Group to
sell to the Operating Partnership, at fair market value, shares of the Simon
DeBartolo Group sufficient to satisfy the exercised stock options. The Simon
DeBartolo Group also is obligated to purchase Units for cash in an amount equal
to the fair market value of such shares.
Exchange Rights
The Limited Partners will have the right to exchange all or any portion of
their Units for cash or SPG Common Stock on a one-for-one basis, as selected by
the Simon DeBartolo Group. The amount of cash received by the Limited Partners
will be based upon the trading price of the SPG Common Stock at the time of
exchange. During the three-year period beginning on the fifth anniversary of the
Effective Time and ending on the eighth such anniversary, Limited Partners that
are one of the DeBartolos may, to the extent of tax due as a result of gain
allocated on a Covered Sale and the subsequent exercise of such Limited
Partner's exchange rights, require the Simon DeBartolo Group to exchange its
Units for cash. See "--Distributions."
To give EJDC sufficient liquidity to satisfy aggregate amortization
requirements of approximately $369.0 million with regard to certain indebtedness
of EJDC, EJDC will have, in addition to the above described exchange rights, the
following option to dispose of certain of its Units. Solely for the purpose of
meeting such amortization requirements, in 1996, 1997 and 1998 EJDC has the
option to dispose annually of up to 30% of the Units held by EJDC (and its
affiliates) as of the Effective Time by one of the following methods, as
selected by the Simon DeBartolo Group: (1) EJDC may exchange the Units for SPG
Common Stock and then sell the SPG Common Stock in a registered offering not
subject to restrictions that must be imposed on the exercise of registration
rights, (2) the Simon DeBartolo Group may redeem the Units for cash or (3) EJDC
may sell the Units to up to three institutional investors who are then admitted
to the Operating Partnership as substitute Limited Partners. The proceeds of
EJDC's disposition of Units pursuant to the above-described option may not be
used by EJDC for any purpose other than to satisfy transaction costs and taxes
payable in connection with such disposition and the amortization requirements
for each year, as follows: The amortization requirement (i) for 1996 may not
exceed $180.0 million (consisting of a scheduled $90.0 million amortization
requirement in 1996 and permitted prepayments of EJDC's scheduled $90.0 million
amortization requirement for 1997), (ii) for 1997 may not exceed $180.0 million
minus the actual amortization payment (including prepayments) made by EJDC in
1996 and (iii) for 1998 may not exceed $189.0 million. On March 31, 1996, the
DeBartolos would own 22,245,611 Units, representing 14.2% of the total
outstanding Units, if the Merger and the Other Transactions had occurred on such
date.
Distributions
Distributions, other than liquidating distributions, will be made first to
holders of preferred units, if any, in an amount equal to the aggregate
dividends or redemption amounts payable by the Simon DeBartolo Group on any
class or series of preferred stock issued by the Simon DeBartolo Group, the
proceeds of which have been contributed to the Operating Partnership (see
"--Additional Funds and Capital Contributions") and all distributions in excess
of such amounts will be made to the partners in accordance with their
proportionate ownership of Units. It is intended that the Surviving Subsidiary
Corporation, as managing general partner, will cause the Operating Partnership
to make such distributions in sufficient amounts to enable the Simon DeBartolo
Group and the Surviving Subsidiary Corporation to pay stockholder dividends that
will satisfy the REIT Requirements. See "RISK FACTORS--Certain Tax Risks--Effect
of Distribution Requirements."
In the event of a Covered Sale which occurs during the five-year period
beginning with the Effective Time and ending on the fifth anniversary of such
date, and which gives rise to an allocation of taxable income or gain to one or
more Limited Partners, the Surviving Subsidiary Corporation, as managing general
partner, shall cause the Operating Partnership to distribute to the Partners,
pro rata, in accordance with partnership Units, sufficient amounts to enable
such Limited Partners to pay any tax liability incurred by reason of such
allocation and distribution.
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Operations
The Operating Partnership will assume and pay when due, or reimburse the
Surviving Subsidiary Corporation or the Simon DeBartolo Group for payment of,
all administrative and operating expenses of the Operating Partnership and a
portion of the costs and expenses relating to the operation of the Simon
DeBartolo Group and the Surviving Subsidiary Corporation, as appropriately
apportioned between the Operating Partnership and the SPG Operating Partnership
by the Surviving Subsidiary Corporation. However, most administrative and
operating functions will be conducted at the Operating Partnership and SPG
Operating Partnership levels. In the event of any conflict in the fiduciary
duties owed by the Simon DeBartolo Group to its stockholders and, as
non-managing general partner of the Operating Partnership, to the Limited
Partners, the Simon DeBartolo Group will fulfill its fiduciary duties to the
Limited Partners by acting in the best interests of the Simon DeBartolo Group's
stockholders.
THE AGREEMENT OF LIMITED PARTNERSHIP OF THE SPG OPERATING PARTNERSHIP
The following summary of the Amended SPG Partnership Agreement and the
descriptions of certain provisions set forth elsewhere in this Prospectus/Joint
Proxy Statement are qualified in their entirety by reference to the Amended SPG
Partnership Agreement which is filed as an exhibit to the Registration Statement
of which this Prospectus/Joint Proxy Statement is a part.
Management
The SPG Operating Partnership was organized on November 19, 1993 as a
Delaware limited partnership pursuant to the terms of the SPG Partnership
Agreement and, as part of the Other Transactions, such agreement will be amended
and restated as the Amended SPG Partnership Agreement. Generally, pursuant to
the Amended SPG Partnership Agreement, the Simon DeBartolo Group as general
partner and the Operating Partnership as limited partner, collectively, will
have full, exclusive and complete responsibility and discretion in the
management and control of the SPG Operating Partnership.
Further, the Simon DeBartolo Group and the Operating Partnership have
agreed in the Amended SPG Partnership Agreement that (i) any property
acquisitions shall be acquired through the Operating Partnership or one of its
subsidiary partnerships and not through the SPG Operating Partnership, (ii)
except for funds contributed to the SPG Operating Partnership 99% by the
Operating Partnership as its limited partner and one percent by the Simon
DeBartolo Group as its general partner and funds raised for the purpose of
maintaining, rehabilitating or expanding a property owned by the SPG Operating
Partnership or funds raised to refinance debt of the SPG Operating Partnership,
any funds raised by the Simon DeBartolo Group, whether by issuance of stock,
borrowing or otherwise, will be made available to the Operating Partnership
whether as capital contributions, loans or otherwise, as appropriate and (iii)
as general partner and limited partner, the Simon DeBartolo Group and the
Operating Partnership will conduct their respective affairs, to the extent they
are so able to do, in a manner which will preserve the equivalence in value
between an SPG Unit and a share of SPG Common Stock.
Transferability of Interests
The Amended SPG Partnership Agreement provides that (i) the Simon DeBartolo
Group may not withdraw from the SPG Operating Partnership, merge or consolidate
with another person, sell substantially all of its assets, or sell, assign,
pledge, encumber or otherwise dispose of any portion of its interest in the SPG
Operating Partnership except where such merger, consolidation, sale, assignment,
pledge or other disposal is with, or to, the Operating Partnership as its sole
successor and (ii) the Operating Partnership may not withdraw from the SPG
Operating Partnership, merge or consolidate with another person other than the
Simon DeBartolo Group, sell substantially all of its assets, or transfer or
assign its interest in the SPG Operating Partnership, without the consent of the
Simon DeBartolo Group. Any violation of (ii), above, will result in immediate
termination of the SPG Operating Partnership.
Additional Funds and Capital Contributions
To the extent that the SPG Operating Partnership does not borrow all funds
required for its operations, the Amended SPG Partnership Agreement provides the
following methods for the SPG Operating Partnership to obtain such funds: (i)
the Simon DeBartolo Group and/or the Operating Partnership may borrow and then
lend to the SPG Operating Partnership, on equivalent terms, such required funds;
(ii) the Simon DeBartolo Group may contribute or lend, as preferred contributed
funds or as a loan having the same terms as preferred stock issued by it, the
proceeds received by the Simon DeBartolo Group from the sale of its preferred
stock and shall receive in exchange for such contribution, a number of preferred
units in the SPG Operating Partnership, equal to the number of shares of
preferred stock so sold. Such preferred units shall be entitled to priority
distributions and shall entitle the Simon DeBartolo Group, as holder, to
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substantially the same economic rights as a holder of the preferred stock. See
"--Distributions"; and (iii) the Simon DeBartolo Group, as general partner, may
contribute to the SPG Operating Partnership one percent and the Operating
Partnership, as limited partner, 99% of the required funds as additional capital
contributions. In the event of any such additional capital contributions, the
Simon DeBartolo Group's and Operating Partnership's partnership interests in the
SPG Operating Partnership will be increased proportionately based upon the
amount of such additional capital contributions and the value of the SPG
Operating Partnership at the time of such contributions. Any loan or
contribution of preferred contributed funds by the Simon DeBartolo Group to the
SPG Operating Partnership may be made only for the purpose of funding the
maintenance, rehabilitation or expansion of a property or refinancing a debt of
the SPG Operating Partnership.
Distributions
Distributions under the Amended SPG Partnership Agreement, other than
liquidating distributions, will be made first to holders of preferred units in
the SPG Operating Partnership in an amount equal to the aggregate dividends or
redemption payments payable by the Simon DeBartolo Group on the Series A
Preferred Stock or other classes or series of preferred stock issued by the
Simon DeBartolo Group the proceeds of which have been contributed to the SPG
Operating Partnership (see "--Additional Funds and Capital Contributions") and
all distributions in excess of such amounts will be made to the partners in
accordance with their interests in the SPG Operating Partnership. It is intended
that the Simon DeBartolo Group, as general partner, will cause the SPG Operating
Partnership to make such distributions in amounts sufficient to enable the Simon
DeBartolo Group and the Surviving Subsidiary Corporation to satisfy the REIT
Requirements. See "RISK FACTORS--Certain Tax Risks--Effect of Distribution
Requirements."
In order to preserve the equivalence in value between an SPG Unit and the
SPG Common Stock, the Simon DeBartolo Group shall make an additional capital
contribution of required funds, in exchange for additional units (not including
preferred units), only where the Operating Partnership also makes such a
contribution on a 99% to one percent basis with the Simon DeBartolo Group (see
"--Additional Funds and Capital Contributions").
Operations
Pursuant to the Amended SPG Partnership Agreement, the SPG Operating
Partnership will assume and pay when due, or reimburse the Simon DeBartolo Group
or the Operating Partnership for payment of, all administrative and operating
expenses of the SPG Operating Partnership and a portion of the costs and
expenses relating to the operations of the Simon DeBartolo Group and the
Surviving Subsidiary Corporation, as appropriately apportioned between the SPG
Operating Partnership and the Operating Partnership by the Operating Partnership
as limited partner of the SPG Operating Partnership. However, most
administrative and operating functions will be conducted at the Operating
Partnership and SPG Operating Partnership levels. Pursuant to the Amended SPG
Partnership Agreement, the limited partner agrees that in the event of any
conflict in the fiduciary duties owed by the Simon DeBartolo Group to its
stockholders and, as general partner, to the limited partner, the Simon
DeBartolo Group will fulfill its fiduciary duties to the limited partner by
acting in the best interests of the Simon DeBartolo Group's stockholders.
THE REGISTRATION RIGHTS AGREEMENTS
THE NEW REGISTRATION RIGHTS AGREEMENT
The Simon DeBartolo Group will enter into the New Registration Rights
Agreement to enable the Rights Holders to register under the Securities Act the
following categories of shares: (a) shares issuable upon exchange of the Units,
see "--The Agreements of Limited Partnership," (b) shares issuable upon the
conversion of the Class B Common Stock, see "DESCRIPTION OF SPG'S CAPITAL
STOCK--SPG Common Stock and Class B Common Stock," and (c) shares issuable upon
conversion of Class C Common Stock, see "DESCRIPTION OF SPG'S CAPITAL
STOCK--Proposed Class C Common Stock." The terms and conditions of the New
Registration Rights Agreement are substantially similar to those of the existing
SPG registration rights agreement.
Pursuant to the New Registration Rights Agreement, any Rights Holder has
the right to cause in any 12-month period upon a written demand to the Simon
DeBartolo Group the registration of their shares of SPG Common Stock (provided
that all such shares required to be registered by the Simon DeBartolo Group have
an estimated market value of at least $10.0 million). In addition, the Rights
Holders have the right to "piggyback" on a registration statement of the Simon
DeBartolo Group.
All expenses of any registration made pursuant to the New Registration
Rights Agreement are to be borne by the Simon DeBartolo Group, other than
underwriting discounts or selling commissions of any Rights Holder, which shall
be borne by such Rights Holder.
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THE BJS REGISTRATION RIGHTS AGREEMENT
Under the terms and conditions of the BJS Registration Rights Agreement and
pursuant to the Registration Statement of which this Prospectus/Joint Proxy
Statement is a part, the Simon DeBartolo Group has registered 4,315,970 shares
of SPG Common Stock to be issued to BJS pursuant to the Merger in exchange for
shares of DRC Common Stock in order to permit sales from time to time. See
"DISTRIBUTION OF SHARES BY BJS." The registration rights of BJS with respect to
its DRC Common Stock pursuant to the DeBartolo Registration Rights Agreement
will be terminated pursuant to the Termination Agreement.
EMPLOYMENT AGREEMENT
The Simon DeBartolo Group will enter into an agreement with the current
Chief Executive Officer of DRC, Richard S. Sokolov, who will become the
President and Chief Operating Officer of the Simon DeBartolo Group at the
Effective Time. See "MANAGEMENT OF SPG AND THE SIMON DeBARTOLO GROUP BEFORE AND
AFTER THE MERGER--Employment Agreement."
DISTRIBUTION OF SHARES BY BJS
The Merger is a transaction which falls under Rule 145 under the Securities
Act ("Rule 145"). While shareholders of DRC who are not affiliates of DRC or SPG
may resell the SPG Common Stock acquired by them in connection with the Merger
without restriction, the resale of the SPG Common Stock received by such
affiliates is subject to certain limitations. BJS is considered to be an
"Affiliate" of DRC and will be deemed to be an underwriter of the SPG Common
Stock received by it upon resale of such securities pursuant to Rule 145(c). The
Registration Statement of which this Prospectus/Joint Proxy Statement is a part
also relates to and covers the resale of all of the SPG Common Stock to be
received by BJS pursuant to the Merger (which shares are referred to herein as
the "Resale Shares"). If the Merger is consummated, BJS has advised SPG that it
intends to offer and sell such Resale Shares, subject to certain limitations
contained in the BJS Registration Rights Agreement, from time to time following
the consummation of the Merger in negotiated transactions or otherwise in light
of prevailing market conditions, as more fully described below.
The following table sets forth the number of shares of DRC Common Stock
beneficially owned by BJS as of the record date for the DRC Shareholders
Meeting, the number of shares of SPG Common Stock which will be beneficially
owned by it as of the Effective Date if the Merger is consummated and the number
of shares of SPG Common Stock that may be reoffered hereby.
<TABLE>
<CAPTION>
DRC
COMMON SPG SHARES
STOCK TO BE OWNED MAXIMUM SPG SHARES
BENEFICIALLY BENEFICIALLY SPG SHARES BENEFICIALLY
OWNED AS OF AS OF THE THAT MAY BE OWNED IF
THE DRC EFFECTIVE OFFERED OFFERING
NAME OF SELLING STOCKHOLDER RECORD DATE TIME(1) HEREBY(1) COMPLETED
- ----------------------------------------------------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
BJS Capital Partners L.P............................. 6,347,016 4,315,970 4,315,970 0
</TABLE>
- ---------------
(1) Based on the Exchange Ratio of 0.68 shares of SPG Common Stock for each
share of DRC Common Stock.
The distribution of Resale Shares by BJS may be effected from time to time,
in one or more transactions (which may involve block transactions), in special
offerings, exchange distributions and/or secondary distributions, in negotiated
transactions, or a combination of such methods of sale, at market prices
prevailing at the time of sale, at prices related to such prevailing prices or
at negotiated prices. BJS has agreed that it will not sell any Resale Shares
pursuant to the Registration Statement during the 90-day period following the
Effective Time other than pursuant to Rule 144 under the Securities Act. BJS may
effect such transactions by selling Resale Shares to or through broker-dealers,
and such broker-dealers may receive compensation in the form of underwriting
discounts, concessions or commissions from BJS and/or purchasers of Resale
Shares for whom they may act as agent (which compensation may be in excess of
customary commissions). Without limiting the foregoing, such brokers may act as
dealers by purchasing any and all Resale Shares covered by this Prospectus/Joint
Proxy Statement either as agents for others or as principals for their own
accounts and reselling such securities pursuant to this Prospectus/Joint Proxy
Statement. BJS and any broker-dealer that participates with BJS in the
distribution of Resale Shares may be deemed to be underwriters and any
commissions received by them and any profit on the resale of Resale Shares sold
by them might be deemed to be underwriting discounts and commissions under the
Securities Act. The engagement of a broker for the reoffering or resale of any
of the Resale Shares covered by the Registration Statement of which this
Prospectus/Joint Proxy Statement forms a part may be terminated at any time by
BJS or the broker.
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SPG will not receive any of the proceeds from any sale of Resale Shares by
BJS.
Pursuant to certain provisions of the New Registration Rights Agreement
incorporated by reference by the BJS Registration Rights Agreement, SPG has
agreed to indemnify BJS and any broker-dealers that participate in the
distribution of the Resale Shares from certain liabilities, including
liabilities under the Securities Act.
CERTAIN ALTERNATIVE GOVERNANCE ARRANGEMENTS
AND RELATED MATTERS IF THE REQUIRED
VOTE IS NOT OBTAINED
SPG is seeking approval at the SPG Special Meeting of the SPG Proposal,
which includes, in addition to the Merger, the adoption of the Amended SPG
Charter and Amended SPG By-laws, providing for, among other things, the
expansion of the Board of Directors of the Simon DeBartolo Group to 13 members
and the election of an initial slate of 13 persons to serve on the expanded
Board of Directors. See "THE MEETINGS OF STOCKHOLDERS OF SPG," "AMENDMENTS TO
SPG'S CHARTER AND BY-LAWS" and "MANAGEMENT OF SPG AND THE SIMON DeBARTOLO GROUP
BEFORE AND AFTER THE MERGER." The SPG Board of Directors has stated above that
it believes that it is in the best interests of the stockholders of SPG for the
stockholders to approve the SPG Proposal because, among other reasons, the
13-member Board of Directors provided for under the SPG Proposal establishes
seven independent board seats not to be occupied by affiliates of the Simon
DeBartolo Group or of the Simons or DeBartolos. The approval of the SPG Proposal
requires the Required Vote of 80% of all the votes entitled to be cast with
respect to the SPG Proposal (which includes all the outstanding Equity Stock).
See "RISK FACTORS--Risks Associated with Failure to Obtain Required Vote."
In addition, if the Merger is approved but the Required Vote is not
obtained at the SPG Special Meeting and therefore effective at the Effective
Time, the Alternative Amended SPG Charter and Alternative Amended SPG By-laws
become effective, the Simon DeBartolo Group is obligated under the Stockholders
Agreement to use its best efforts to have the Amended SPG Charter and SPG
By-laws adopted at the annual stockholders meeting in 1997 or 1998.
Pursuant to the Stockholders Agreement, if the Merger is approved by the
Majority Approval Vote but the Required Vote is not received, at the Effective
Time, the Board of Directors of the Simon DeBartolo Group will consist of the
nine persons listed under "--Board of Directors of the Simon DeBartolo Group if
the Required Vote is not Obtained" below, including M. Denise DeBartolo York as
a Class B Director and Edward J. DeBartolo, Jr., Richard S. Sokolov and G.
William Miller as Common Stock Directors. As a result, while a majority of the
nine directors of the Simon DeBartolo Group will be Independent Directors under
the Alternative Amended SPG Charter, four of the nine directors will be elected
by the Simons as the holders of the Class B Common Stock and three of the five
other directors will be former officers or directors of DRC. Furthermore, the
Alternative Amended SPG Charter and the Stockholders Agreement provide that, so
long as the DeBartolos maintain a certain minimum ownership interest in the
Simon DeBartolo Group, one Class B Director and one and, prior to the annual
stockholders meeting in 1999, two nominees for Common Stock Directors will
always be designated by the DeBartolos. In addition, pursuant to the Employment
Agreement, Richard S. Sokolov, an officer of DRC, has the right to be nominated
for election to the Board of Directors of the Simon DeBartolo Group during the
term of such agreement, all as more fully described below. See "RISK
FACTORS--Risks Associated with Failure to Obtain Required Vote."
BOARD OF DIRECTORS OF THE SIMON DEBARTOLO GROUP IF THE REQUIRED VOTE IS NOT
OBTAINED
The following table sets forth the composition of the nine-member Board of
Directors of the Simon DeBartolo Group at the Effective Time if the Required
Vote is not obtained at the SPG Special Meeting but the Merger is approved and
consummated and the Alternative Amended SPG Charter and the Alternative Amended
SPG By-laws become effective.
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Each director's term will expire at the next annual meeting of stockholders of
the Simon DeBartolo Group following the Effective Time.
<TABLE>
<CAPTION>
CLASS OF
NAME AGE DIRECTORSHIP
--------------------------------------------------------------------- --- ----------------
<S> <C> <C>
Edward J. DeBartolo, Jr.............................................. 49 Common Stock
G. William Miller.................................................... 71 Common Stock
Richard S. Sokolov................................................... 46 Common Stock
Birch Bayh........................................................... 68 Common Stock
J. Albert Smith, Jr. ................................................ 55 Common Stock
Melvin Simon......................................................... 69 Class B
Herbert Simon........................................................ 61 Class B
David Simon.......................................................... 34 Class B
M. Denise DeBartolo York............................................. 45 Class B
</TABLE>
For a summary of the directors' business experience, see "MANAGEMENT OF SPG AND
THE SIMON DeBARTOLO GROUP BEFORE AND AFTER THE MERGER--Board of Directors of the
Simon DeBartolo Group."
PROVISIONS OF THE MERGER AGREEMENT APPLICABLE IF THE REQUIRED VOTE IS NOT
OBTAINED
If the Merger is approved but the Required Vote is not obtained at the SPG
Special Meeting, and, therefore, the Alternative Amended SPG Charter and the
Alternative Amended SPG By-laws become effective, SPG has agreed under the
Merger Agreement that it will (i) propose and recommend, at the annual
stockholders meeting of the Simon DeBartolo Group in 1997 (and if the Required
Vote is not obtained at such meeting, at the annual stockholders meeting in
1998), the adoption and approval of the Amended SPG Charter and the Amended SPG
By-laws, (ii) use its best efforts to seek and solicit the Required Vote in such
meeting, subject to the maintenance of a certain Ownership Interest in the Simon
DeBartolo Group by the DeBartolos and (iii) upon such adoption and approval
thereof, issue the entire amount of Class C Common Stock to EJDC for nominal
consideration.
ALTERNATIVE AMENDMENTS TO SPG'S CHARTER AND BY-LAWS
In the event that the Required Vote is not obtained and the Amended SPG
Charter and Amended SPG By-laws are not adopted but the Merger is approved and
consummated, amendments to the SPG Charter and SPG By-laws are proposed in the
form of the Alternative Amended SPG Charter (which requires stockholder approval
by a majority of the votes entitled to be cast thereon by holders of SPG Equity
Stock, considered as a single class) and Alternative Amended By-laws (which have
been adopted by the Board and do not require stockholder approval, but will
become effective contingent upon the effectiveness of the Alternative Amended
SPG Charter).
The Alternative Amended SPG Charter and Alternative Amended By-laws
represent the minimum amendments required of the SPG Charter and SPG By-laws, in
the event the Merger is consummated and approved but the Amended SPG Charter and
Amended SPG By-laws are not adopted and approved by the Required Vote, to enable
SPG to conduct the combined businesses of SPG and DRC after the Merger, and to
enable representatives of the DeBartolos or the current DRC Board of Directors
to be elected to the Board of Directors of the Simon DeBartolo Group to advise
the Simon DeBartolo Group respecting such combined businesses.
The following summary does not purport to be complete and is qualified by
reference to the Alternative Amended SPG Charter (attached as Annex VII to this
Prospectus/Joint Proxy Statement) and Alternative Amended SPG By-laws, copies of
which have also been filed as exhibits to the Registration Statement of which
this Prospectus/Joint Proxy Statement forms a part.
ALTERNATIVE AMENDED SPG CHARTER
The following significant amendments to the SPG Charter are proposed by the
Alternative Amended SPG Charter:
- to change the name of SPG to Simon DeBartolo Group, Inc. (see "AMENDMENTS
TO SPG's CHARTER AND BY-LAWS--Name"),
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- to increase the authorized capital of SPG (see "AMENDMENTS TO SPG's
CHARTER AND BY-LAWS-- Authorized Capital," except that no Class C Common
Stock will be authorized, and the proposed authorized share of SPG Common
Stock will be 384,000,000 rather than 383,996,000), and
- to change the Ownership Limit for the stockholders of SPG (see
"AMENDMENTS TO SPG'S CHARTER AND BY-LAWS--Restrictions on Transfer").
Under the Alternative Amended SPG Charter, no Class C Common Stock will be
authorized and the size of the Board of Directors of the Simon DeBartolo Group
will remain at nine. See "--Certain Provisions of the Stockholders Agreement"
below for a discussion of the provisions with respect to the nomination and
election of certain members of the DeBartolo family and certain other members of
the DRC Board of Directors to the Board of Directors of the Simon DeBartolo
Group.
ALTERNATIVE AMENDED SPG BY-LAWS
Concurrent with the effectiveness of the Alternative Amended SPG Charter,
certain amendments to the SPG By-laws previously adopted by the SPG Board of
Directors will become effective. These amendments conform the provisions of the
SPG By-laws to those of the Alternative Amended SPG Charter.
In particular, the Alternative Amended By-laws will provide for the
establishment of a Special Committee initially of three directors (the "Special
Committee"), none of whom may be employed by the Simon DeBartolo Group or
affiliated with the Simons or the DeBartolos. Transactions with the Simons or
the DeBartolos and certain affiliates will require the approval of a majority of
the Special Committee.
RECOMMENDATION OF THE SPG BOARD OF DIRECTORS
In the event the Required Vote is not obtained, the SPG Board of Directors
considers the Alternative Amended SPG Charter to be in the best interest of SPG
and its stockholders and recommends that stockholders vote IN FAVOR of its
adoption. Adoption of such amendments requires at least the Majority Approval
Vote. See also "THE PROPOSED MERGER AND RELATED MATTERS--Recommendation of the
SPG Board of Directors; Reasons for the Merger" and "THE MEETINGS OF
STOCKHOLDERS OF SPG."
Each vote considered to be cast in favor of the Alternative Amended SPG
Charter constitutes a vote in favor of the election of the slate of nine
directors of the Board of Directors of the Simon DeBartolo Group effective as of
the Effective Time, as set forth in "--Board of Directors of the Simon DeBartolo
Group if the Required Vote is not Obtained."
CERTAIN PROVISIONS OF THE STOCKHOLDERS AGREEMENT
If the Amended SPG Charter and the Amended SPG By-laws are not adopted
because of the failure to obtain the Required Vote but the Merger is consummated
then until such time as such amendments are adopted, the parties to the
Stockholders Agreement have agreed to vote two representatives of the DeBartolos
for election to the Simon DeBartolo Group Board of Directors, one as a Class B
Director (the "DeBartolo Seat") and the other as a Common Stock Director (the
"Other Seat").
Under the Stockholders Agreement, SPG has agreed to obtain the resignations
of four directors, one of whom would be a Class B Director, at or prior to the
Effective Time. The Simons have agreed to vote all their Class B Common Stock to
elect M. Denise DeBartolo York to the DeBartolo Seat, for so long as she is
alive and not disabled and until she resigns. SPG has agreed that the Simon
DeBartolo Group will nominate Edward J. DeBartolo, Jr., for so long as he is
alive and not disabled and until he resigns, to the Other Seat. The Simons have
agreed to vote all their Class B Common Stock and other voting securities, if
any, in SPG in favor of such election. For so long as the DeBartolo Seat is
occupied by a director selected by the DeBartolos, a director occupying either
the DeBartolo Seat or the Other Seat will serve on all committees of the SPG
Board of Directors other than the Audit Committee and the Special Committee (or
any other committee on which only "Outside Directors" (as defined below) may be
members). For purposes of the Stockholders Agreement, an Outside Director is a
director of the Simon DeBartolo Group who is neither employed by the Simon
DeBartolo Group nor affiliated with the Simons or the DeBartolos.
For the remaining directors designated in the SPG Special Meeting to be
elected by holders of all Equity Stock of SPG voting as a single class, SPG has
agreed to designate Richard S. Sokolov, G. William Miller and two individuals
from the current SPG Board of Directors.
Any vacancy with respect the DeBartolo Seat or the Other Seat will be
filled in a manner similar to that described under "AMENDMENTS TO SPG'S CHARTER
AND BY-LAWS--Size of the SPG Board of Directors" for filling a vacancy arising
with respect to a director elected by holders of Class C Common Stock, i.e.,
depending on whether the
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<PAGE> 119
vacancy results from death, disability, or otherwise, and depending on when it
occurs. If the DeBartolos were to lose any rights with respect to a board seat,
they would lose their rights first to the Other Seat, then to the DeBartolo
Seat.
At such time as the DeBartolos sell or otherwise transfer to unaffiliated
parties at least 50% of their initial aggregate equity interest in the Simon
DeBartolo Group (i.e., SPG Common Stock and Units), the DeBartolos will lose
their rights to the Other Seat. If the DeBartolos' Ownership Interest in the
Simon DeBartolo Group on a fully diluted basis is reduced to less than five
percent, the DeBartolos will lose their rights to both the DeBartolo Seat and
the Other Seat.
If the Amended SPG Charter and the Amended SPG By-laws are not adopted
because of the failure to obtain the Required Vote in the 1997 or 1998 annual
meetings, the parties to the Stockholders Agreement have agreed that EJDC may at
the 1997 annual meeting nominate a candidate for the seat initially occupied by
Mr. Miller, which candidate must be approved by a majority of the Special
Committee and must be a person of similar experience and standing in the
business community to the other Outside Directors of the Simon DeBartolo Group.
If the Special Committee does not approve any such candidate EJDC may propose
another candidate until one such candidate is approved. EJDC will have the right
to renominate such approved candidate for re-election at the 1998 annual meeting
without the approval of the Special Committee. Each Simon has agreed to vote or
to cause to be voted all such Simon's capital stock of the Simon DeBartolo Group
entitled to vote thereon in favor of the adoption of the Amended SPG Charter and
the Amended SPG By-laws in the 1997 (and, if applicable, 1998) annual meeting
pursuant to the Simon DeBartolo Group's compliance with its obligations under
the Merger Agreement. In addition, each Simon has agreed to vote or cause to be
voted all such Simon's capital stock of the Simon DeBartolo Group entitled to
vote thereon in favor of each nominee designated pursuant to the voting
provisions described above.
CERTAIN BENEFITS OF THE MERGER TO THE SIMONS AND THE DEBARTOLOS IF THE REQUIRED
VOTE IS NOT OBTAINED
In the event that the Required Vote is not obtained and the Alternative
Amended SPG Charter and the Alternative Amended SPG By-laws become effective,
and as a result no Class C Common Stock is issued to the DeBartolos, under the
Stockholders Agreement, (i) the Simons are obligated (provided that the
DeBartolos' Ownership Interest is not reduced by more than 50% by reason of sale
or transfer of their Units or any of their capital stock of the Simon DeBartolo
Group) to elect as one of the four Class B Directors M. Denise DeBartolo York
and (ii) SPG has agreed to nominate and the Simons have agreed to vote all their
Equity Stock for Edward J. DeBartolo, Jr. as a Common Stock Director. If the
DeBartolos' Ownership Interest is reduced for any reason to less than five
percent, the rights of the DeBartolos enumerated in this paragraph will
terminate.
Under the Alternative Amended SPG Charter and the Alternative Amended SPG
By-laws, the Simons will be entitled, as holders of the Class B Common Stock
voting as a separate class, to elect four of the nine directors of the Simon
DeBartolo Group in the aggregate (one of such four to be M. Denise DeBartolo
York), and together with holders of the SPG Common Stock and Series A Preferred
Stock, voting as a single class, to vote for the election of the remaining five
directors of the Simon DeBartolo Group. As discussed above, pursuant to the
Stockholders Agreement, SPG has agreed to nominate and the Simons have agreed to
vote their shares of Equity Stock to elect Edward J. DeBartolo, Jr. as one of
the remaining five directors. This will enable the Simons and the DeBartolos,
acting separately, to be able to exert considerable influence over the affairs
of the Simon DeBartolo Group or, acting together as a group, to control the
Simon DeBartolo Group, because under such circumstances five of the nine members
of the Board of Directors of the Simon DeBartolo Group would be the Simons or
the DeBartolos; though a Special Committee of the Board of Directors would make
decisions regarding certain matters involving conflicts of interest. See
"--Board of Directors of the Simon DeBartolo Group if the Required Vote is not
Obtained," "--Certain Provisions of the Stockholders Agreement" and "RISK
FACTORS--Risks Associated with Failure to Obtain Required Vote."
FEDERAL SECURITIES LAW CONSEQUENCES
All SPG Common Stock issued in connection with the Merger will be freely
transferable, except that any SPG Common Stock received by persons who are
deemed to be "affiliates" (as such term is defined under the Securities Act) of
SPG or DRC prior to the Merger may be sold by them only in transactions
permitted by the resale provisions of Rule 145 under the Securities Act with
respect to affiliates of SPG or DRC, or Rule 144 under the Securities Act with
respect to persons who are or become affiliates of SPG, or as otherwise
permitted under the Securities Act. Persons who may be deemed to be affiliates
of SPG or DRC generally include individuals or entities that control, are
controlled by or are under common control with, such person and generally
include the executive officers and directors of such person as well as principal
stockholders of such person.
Affiliates may not sell their SPG Common Stock acquired in connection with
the Merger except pursuant to an effective registration under the Securities Act
covering such shares or in compliance with Rule 145 under the Securities
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<PAGE> 120
Act (or Rule 144 under the Securities Act in the case of persons who become
affiliates of SPG) or another applicable exemption from the registration
requirements of the Securities Act. In general, Rule 145 under the Securities
Act provides that for two years following the Effective Time an affiliate
(together with certain related persons) would be entitled to sell SPG Common
Stock acquired in connection with the Merger only through unsolicited "broker
transactions" or in transactions directly with a "market maker," as such terms
are defined in Rule 144. Additionally, the number of shares to be sold by an
affiliate (together with certain related persons and certain persons acting in
concert) within any three-month period for purposes of Rule 145 under the
Securities Act may not exceed the greater of 1% of the outstanding SPG Common
Stock or the average weekly trading volume of such shares during the four
calendar weeks preceding such sale. Rule 145 under the Securities Act will
remain available to affiliates if SPG remains current with its informational
filings with the Commission under the Exchange Act. Two years after the
Effective Time, an affiliate will be able to sell such SPG Common Stock without
being subject to such manner of sale or volume limitations provided that SPG is
current with its Exchange Act informational filings and such affiliate is not
then an affiliate of SPG. Three years after the Effective Time, an affiliate
will be able to sell such SPG Common Stock without any restrictions so long as
such affiliate had not been an affiliate of SPG for at least three months prior
to the date of such sale. See "THE MERGER-- Accounting Treatment."
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<PAGE> 121
PRO FORMA COMBINED AND SELECTED HISTORICAL FINANCIAL DATA
SIMON DEBARTOLO GROUP PRO FORMA COMBINED FINANCIAL DATA
The following pro forma combined financial data for the Simon DeBartolo
Group are derived from the historical financial data of SPG and DRC.
The unaudited pro forma combined Balance Sheet Data as of March 31, 1996 is
presented as if the Merger and the Other Transactions had occurred on March 31,
1996. The unaudited pro forma combined Operating Data for the three month period
ended March 31, 1996 and the year ended December 31, 1995 are presented as if
the Merger and the Other Transactions had occurred as of January 1, 1995 and
carried forward through March 31, 1996.
Preparation of the pro forma financial information was based on assumptions
deemed appropriate by the management of SPG and DRC. The assumptions give effect
to the Merger and the Other Transactions under the purchase method of accounting
in accordance with generally accepted accounting principles and the combined
entity qualifying as a REIT, distributing all of its taxable income and,
therefore, incurring no federal income tax expense during the periods presented.
The pro forma financial information is unaudited and is not necessarily
indicative of the results which actually would have occurred if the Merger and
the Other Transactions had been consummated at the beginning of the periods
presented, nor does it purport to represent the future financial position and
results of operations for future periods. The pro forma information should be
read in conjunction with the historical financial statements of SPG and DRC
incorporated by reference into this Prospectus/Joint Proxy Statement.
107
<PAGE> 122
SIMON DEBARTOLO GROUP
PRO FORMA FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED FOR THE YEAR ENDED
MARCH 31, 1996 DECEMBER 31, 1995
-------------------- ------------------
<S> <C> <C>
OPERATING DATA:
Total revenue..................................................... $ 228,810 $ 889,714
Depreciation and amortization..................................... 43,075 162,786
Operating income before interest.................................. 101,379 408,648
Interest expense.................................................. 64,598 251,113
Income of the Operating Partnership............................... 41,652 173,482
Limited partners' interest in the Operating Partnership........... 15,294 66,389
----------- -----------
Net income........................................................ 26,358 107,093
Preferred dividends............................................... 2,031 1,490
----------- -----------
Net income available to common stockholders....................... $ 24,327 $ 105,603
=========== ===========
EARNINGS PER COMMON SHARE:
Net income........................................................ $ 0.25 $ 1.13
Distributions per common share.................................... $ 0.49 $ 1.97
Weighted average shares outstanding............................... 96,266,696 93,194,398
BALANCE SHEET DATA:
Total assets...................................................... $ 5,531,342 N/A
Mortgages and notes payable....................................... 3,488,332 N/A
Limited partners' interest in the Operating Partnership........... 650,085 N/A
Stockholders' equity.............................................. $ 1,127,080 N/A
OTHER DATA:
Cash flow provided by (used in)(1):
Operating activities............................................ $ 71,285 $ 303,236
Investing activities............................................ (72,634) (306,421)
Financing activities............................................ 70,905 (88,481)
Funds From Operations of the Operating Partnership (2)............ $ 86,778 $ 354,491
=========== ===========
Funds From Operations allocable to the Simon DeBartolo Group...... $ 53,282 $ 217,657
=========== ===========
</TABLE>
- ---------------
(1) The pro forma cash flow information for the three months ended March 31,
1996 and the year ended December 31, 1995 is based on the combined
historical information of SPG and DRC adjusted as if the Merger and the
Other Transactions had occurred as of the beginning of the respective
periods.
(2) Funds From Operations, as used in the above table and as defined by NAREIT
(as defined in the "GLOSSARY"), means the consolidated net income of the
Operating Partnership without giving effect to depreciation and
amortization, gains or losses from extraordinary items, gains or losses on
sales of real estate, gains or losses on investments in marketable
securities and any provision/benefit for income taxes for such period, plus
the allocable portion, based on the Simon DeBartolo Group's ownership
interest, of Funds From Operations of unconsolidated entities all determined
on a consistent basis in accordance with generally accepted accounting
principles. The management of SPG and DRC believe that Funds From Operations
is an important and widely used measure of the operating performance of
REITs which provides a relevant basis for comparison among REITs. Funds From
Operations is presented to assist investors in analyzing the performance of
the Simon DeBartolo Group. The method of calculating Funds From Operations
as used in the above table may be different from methods used by other
REITs. Funds From Operations: (i) does not represent cash flow from
operations as defined by generally accepted accounting principles; (ii)
should not be considered as an alternative to net income as a measure of
operating performance or to cash flows from operating, investing and
financing activities; and (iii) is not an alternative to cash flows as a
measure of liquidity. In March 1995, NAREIT modified its definition of Funds
From Operations. The modified definition provides that amortization of
deferred financing costs and depreciation of non-rental real estate assets
are no longer to be added back to net income in arriving at Funds From
Operations. The modified definition was adopted for the pro forma period
ended March 31, 1996. If the modified definition had been adopted for the
pro forma period ended December 31, 1995, Funds From Operations of the
Operating Partnership and Funds From Operations allocable to the Simon
DeBartolo Group would have been $346,017 and $212,454, respectively.
108
<PAGE> 123
The following table reconciles pro forma income of the Operating
Partnership to pro forma Funds From Operations for the periods presented:
<TABLE>
<CAPTION>
FOR THE THREE
MONTHS ENDED FOR THE YEAR ENDED
MARCH 31, 1996 DECEMBER 31, 1995
-------------- ------------------
<S> <C> <C>
Pro forma income of the Operating Partnership before extraordinary
items................................................................ $ 41,652 $173,482
Plus:
Depreciation and amortization less minority interests for
consolidated properties plus the Operating Partnership's share
from unconsolidated affiliates................................... 47,157 180,471
Amortization included in interest expense......................... -- 3,774
Less:
Operating Partnership's share of gains on sales of assets......... -- (1,746)
Preferred distributions........................................... (2,031) (1,490)
------- --------
Pro forma Funds From Operations of the Operating Partnership........... $ 86,778 $354,491
======= ========
Pro forma Funds From Operations allocable to the Simon DeBartolo
Group................................................................ $ 53,282 $217,657
======= ========
</TABLE>
109
<PAGE> 124
SUMMARY HISTORICAL FINANCIAL DATA OF SPG
The following summary historical financial data of SPG and summary combined
historical financial data of the SPG Predecessor (as defined in the "GLOSSARY")
are derived from the Consolidated Financial Statements of SPG and the combined
financial statements of the SPG Predecessor incorporated by reference into this
Prospectus/Joint Proxy Statement.
<TABLE>
<CAPTION>
SPG
-------------------------------
(IN THOUSANDS, EXCEPT PER SHARE
AND PROPERTY DATA)
FOR THE THREE MONTHS ENDED
MARCH 31,
-------------------------------
1996 1995
---------- ----------
<S> <C> <C>
OPERATING DATA:
Total revenue.......................................................... $ 139,444 $ 129,490
Depreciation and amortization.......................................... 24,672 21,107
Operating income before interest....................................... 61,073 58,865
Interest expense....................................................... 38,566 38,933
Income before extraordinary items...................................... 23,832 22,207
Extraordinary items.................................................... (265) --
Income of SPG Operating Partnership after extraordinary items.......... 23,567 22,207
Less--limited partners' interest in SPG Operating Partnership.......... 8,382 9,560
---------- ----------
Net income............................................................. 15,185 12,647
Preferred dividends.................................................... 2,031 --
---------- ----------
Net income............................................................. $ 13,154 $ 12,647
========== ==========
EARNINGS PER SHARE OF COMMON STOCK:
Income before extraordinary items...................................... $ 0.23 $ 0.26
Extraordinary items.................................................... 0.00 0.00
---------- ----------
Net income............................................................. $ 0.23 $ 0.26
========== ==========
Distributions per share of common stock................................ $ 0.49 $ 0.49
========== ==========
Weighted average shares outstanding.................................... 58,382 49,378
BALANCE SHEET DATA:
Investment properties, net............................................. $2,015,850 $1,876,222
Total assets........................................................... 2,532,548 2,306,434
Mortgages and notes payable............................................ 1,995,620 1,959,972
Limited partners' interest in SPG Operating Partnership................ 78,366 55,263
Stockholders' equity................................................... $ 216,082 $ 75,289
OTHER DATA:
Cash flow provided by (used in):
Operating activities................................................. $ 39,248 $ 41,735
Investing activities................................................. (18,570) (11,963)
Financing activities................................................. (38,254) (39,534)
Funds From Operations of SPG Operating Partnership(3).................. $ 48,680 $ 44,743
========== ==========
Funds From Operations allocable to SPG(3).............................. $ 29,727 $ 25,480
========== ==========
</TABLE>
110
<PAGE> 125
<TABLE>
<CAPTION>
SPG
(IN THOUSANDS, EXCEPT PER SHARE
AND PROPERTY DATA)
FOR THE THREE MONTHS ENDED
MARCH 31,
1996 1995
---------- ----------
<S> <C> <C>
EBITDA(4):
Wholly-owned and consolidated joint venture properties................. $ 85,745 $ 82,322
Non-consolidated joint venture portfolio properties.................... 29,996 19,464
---------- ----------
Total of properties.................................................... $ 115,741 $ 101,786
========== ==========
EBITDA after minority interest......................................... $ 91,112 $ 85,123
PROPERTY DATA:
OCCUPANCY AT END OF PERIOD:
Regional malls(5)...................................................... 83.0% 84.3%
Community shopping centers............................................. 93.1% 94.0%
Total tenant sales (millions)(6)....................................... $ 1,032 $ 934
NUMBER OF PORTFOLIO PROPERTIES AT END OF PERIOD:
Regional malls....................................................... 62 59
Specialty retail and mixed-use....................................... 5 5
Community shopping centers........................................... 55 55
---------- ----------
Total............................................................. 122 119
========== ==========
AVERAGE RENT PER SQUARE FOOT AT END OF PERIOD(7):
Regional malls(5)...................................................... $ 19.70 $ 17.79
Community shopping centers............................................. $ 7.36 $ 7.21
GLA AT END OF PERIOD (IN THOUSANDS OF SQUARE FEET)..................... 62,219 58,259
</TABLE>
111
<PAGE> 126
SUMMARY HISTORICAL FINANCIAL DATA OF SPG (CONTINUED)
<TABLE>
<CAPTION>
SPG SPG PREDECESSOR
---------------------------------------- ---------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE AND PROPERTY DATA)
FOR THE FOR THE
PERIOD FROM PERIOD FROM
FOR THE YEAR ENDED DECEMBER 20 TO JANUARY 1 TO FOR THE YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 19, DECEMBER 31,
----------------------- -------------- ------------- -----------------------
1995(1) 1994(1) 1993 1993 1992 1991
---------- ---------- -------------- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Total revenue.................... $ 553,657 $ 473,676 $ 18,424 $ 405,869 $ 400,852 $ 378,029
Depreciation and amortization.... 92,739 75,945 2,051 60,243 58,104 56,033
Operating income before
interest....................... 251,136 214,298 12,278 169,825 166,066 148,073
Interest expense(2).............. 150,224 150,164 3,548 156,909 178,075 159,798
Income (loss) before
extraordinary items............ 101,505 60,308 8,707 6,912 (11,692) (15,865)
Extraordinary items.............. (3,285) (17,980) (30,481) 26,189 -- --
Income (loss) of SPG Operating
Partnership after extraordinary
items.......................... 98,220 42,328 (21,774) 33,101 (11,692) (15,865)
Less--limited partners' interest
in SPG Operating Partnership... 38,949 18,951 (10,408) -- -- --
---------- ---------- ---------- -------- ---------- ----------
Net income (loss)................ 59,271 23,377 (11,366) 33,101 (11,692) (15,865)
Preferred dividends.............. 1,490 -- -- -- -- --
---------- ---------- ---------- -------- ---------- ----------
Net income (loss)................ $ 57,781 $ 23,377 $ (11,366) $ 33,101 $ (11,692) $ (15,865)
========== ========== ========== ======== ========== ==========
EARNINGS PER SHARE OF COMMON
STOCK:
Income before extraordinary
items.......................... $ 1.08 $ 0.71 $ 0.11 N/A N/A N/A
Extraordinary items.............. (0.04) (0.21) (0.39) N/A N/A N/A
---------- ---------- ----------
Net income (loss)................ $ 1.04 $ 0.50 $ (0.28) N/A N/A N/A
========== ========== ==========
Distributions per share of common
stock.......................... $ 1.97 $ 1.90 -- N/A N/A N/A
Weighted average shares
outstanding.................... 55,312 47,012 40,950 N/A N/A N/A
BALANCE SHEET DATA:
Investment properties, net....... $2,009,344 $1,829,111 $1,350,360 N/A $1,156,009 $1,143,050
Total assets..................... 2,556,436 2,316,860 1,793,654 N/A 1,494,289 1,432,028
Mortgages and notes payable...... 1,980,759 1,938,091 1,455,884 N/A 1,711,778 1,548,292
Limited partners' interest in SPG
Operating Partnership.......... 86,692 44,386 27,032 N/A N/A N/A
Stockholders' equity and owners'
(deficit)...................... $ 232,946 $ 57,307 $ 29,521 N/A $ (565,566) $ (418,697)
OTHER DATA:
Cash flow provided by (used in):
Operating activities........... $ 194,336 $ 128,023 N/A N/A N/A N/A
Investing activities........... (222,679) (266,772) N/A N/A N/A N/A
Financing activities........... (14,075) 133,263 N/A N/A N/A N/A
Funds From Operations of SPG
Operating Partnership (3)...... $ 208,348 $ 176,384 N/A N/A N/A N/A
========== ========== ========== ======== ========== ==========
Funds From Operations allocable
to SPG......................... $ 124,592 $ 98,215 N/A N/A N/A N/A
========== ========== ========== ======== ========== ==========
</TABLE>
112
<PAGE> 127
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AND PROPERTY DATA)
<S> <C> <C> <C> <C> <C>
EBITDA(4):
Wholly-owned and consolidated joint venture
properties....................................... $343,875 $290,243 $244,397 $224,170 $204,106
Non-consolidated joint venture portfolio
properties....................................... 93,673 96,592 102,282 92,365 78,220
-------- -------- -------- -------- --------
Total of properties................................. $437,548 $386,835 $346,679 $316,535 $282,326
======== ======== ======== ======== ========
EBITDA after minority interest...................... $357,158 $307,372 $256,169 $227,931 $210,634
PROPERTY DATA:
OCCUPANCY AT END OF PERIOD:
Regional malls(5)................................... 86.4% 86.2% 85.6% 84.6% 85.2%
Community shopping centers.......................... 95.1% 94.6% 89.3% 89.3% 86.4%
Total tenant sales (millions)(6).................... $ 6,868 $ 6,504 $ 6,291 $ 5,968 $ 5,539
NUMBER OF PORTFOLIO PROPERTIES AT END OF PERIOD:
Regional malls...................................... 62 59 54 53 53
Specialty retail and mixed-use...................... 5 5 5 5 4
Community shopping centers.......................... 55 55 55 52 51
-------- ---- ---- ---- ---- ---- ---- ---- ----
Total....................................... 122 119 114 110 108
======== ======== ======== ======== ========
AVERAGE RENT PER SQUARE FOOT AT THE END OF PERIOD(7):
Regional malls(5)................................... $ 18.68 $ 17.43 $ 16.91 $ 16.14 $ 14.96
Community shopping centers.......................... $ 7.27 $ 7.09 $ 6.88 $ 6.78 $ 6.27
GLA AT END OF PERIOD (IN THOUSANDS OF SQUARE FEET).... 62,232 58,200 54,042 52,404 51,375
</TABLE>
- ---------------
SPG SUMMARY HISTORICAL FOOTNOTES
(1) See Note 4 to the Financial Statements of SPG contained in SPG's Annual
Report on Form 10-K for the year ended December 31, 1995 incorporated by
reference into this Prospectus/Joint Proxy Statement which describes 1995
and 1994 real estate acquisitions.
(2) Interest expense for the year ended December 31, 1994 includes $27.2 million
of additional contingent interest paid in connection with the refinancing of
a property. The property lender was entitled to participate in the
appreciated market value of the property upon refinancing. None of the other
mortgages or debt instruments affecting the SPG Portfolio Properties
contains similar provisions and SPG's management does not presently expect
to enter into financing arrangements with similar participation features in
the future. Accordingly, SPG's management considers the payment made to the
lender unusual in nature. As explained in footnote (3) below, unusual or
extraordinary items are excluded for purposes of computing Funds From
Operations. Accordingly, this item has been excluded from Funds From
Operations in this table.
(3) Funds From Operations, as used in the above table and as defined by NAREIT,
means the consolidated net income of the SPG Operating Partnership without
giving effect to depreciation and amortization, gains or losses from
extraordinary items, gains or losses on sales of real estate, gains or
losses on investments in marketable securities and any provision/benefit for
income taxes for such period, plus the allocable portion, based on SPG's
ownership interest, of Funds From Operations of unconsolidated entities, all
determined on a consistent basis in accordance with generally accepted
accounting principles. SPG's management believes that Funds From Operations
is an important and widely used measure of the operating performance of
REITs which provides a relevant basis for comparison among REITs. Funds From
Operations is presented to assist investors in analyzing the performance of
SPG. SPG's method of calculating Funds From Operations may be different from
the methods used by other REITs. Funds From Operations: (i) does not
represent cash flow from operations as defined by generally accepted
accounting principles; (ii) should not be considered as an alternative to
net income as a measure of operating performance or to cash flows from
operating, investing and financing activities; and (iii) is not an
alternative to cash flows as a measure of liquidity. In March 1995, NAREIT
modified its definition of Funds From Operations. The modified definition
provides that amortization of deferred financing costs and depreciation of
nonrental real estate assets are no longer to be added back to net income in
arriving at Funds From Operations. The modified definition was adopted for
the period ended March 31, 1996. If the modified definition had been adopted
in each of the prior periods, Funds From Operations of SPG Operating
Partnership would have been $41,936 for the three month period ended March
31, 1995 and $197,909 and $167,761 for the years ended December 31, 1995 and
1994, respectively. Similarly, Funds From Operations allocable to SPG would
have been $23,882 for the three month period ended March 31, 1995 and
$119,339 and $92,604 for 1995 and 1994, respectively.
113
<PAGE> 128
(4) Total EBITDA represents earnings before interest, taxes, depreciation and
amortization for all properties. EBITDA after minority interest represents
earnings before interest, taxes, depreciation and amortization for all
properties after distribution to the third-party joint venture partners.
EBITDA: (i) does not represent cash flow from operations as defined by
generally accepted accounting principles; (ii) should not be considered as
an alternative to net income as a measure of operating performance or to
cash flows from operating, investing and financing activities; and (iii) is
not an alternative to cash flows as a measure of liquidity. SPG's management
believes that in addition to cash flows and net income, EBITDA is a useful
financial performance measurement for assessing the operating performance of
an equity REIT because, together with net income and cash flows, EBITDA
provides investors with an additional basis to evaluate the ability of a
REIT to incur and service debt and to fund acquisitions and other capital
expenditures. To evaluate EBITDA and the trends it depicts, the components
of EBITDA, such as revenues and operating expenses, should be considered.
SPG's method of calculating EBITDA may be different from the methods used by
other REITs. SPG's weighted average share of the operating results for the
three months ended March 31, 1996 and 1995 was 61.0% and 57.0% and was
60.3%, 55.2% and 52.2% in 1995, 1994 and 1993, respectively. SPG's share of
the SPG Operating Partnership was 61.1% and 57.7% at March 31, 1996 and
1995, respectively, and was 61.0% and 56.4% at December 31, 1995 and 1994,
respectively.
(5) Includes mall and freestanding stores at regional malls. Also includes
non-anchor specialty centers and the retail space at mixed-use properties.
(6) Based on reports of sales furnished by tenants. Does not include sales by
retailers that own their own stores or are otherwise not required to report
sales.
(7) Represents annualized base rent per leased square foot of mall and
freestanding Owned GLA at regional malls and Owned GLA at community shopping
centers.
114
<PAGE> 129
SUMMARY HISTORICAL FINANCIAL DATA OF DRC
The following summary historical financial data of DRC and summary combined
historical financial data of the DRC Predecessor (as defined in the "GLOSSARY")
are derived from the Consolidated Financial Statements of DRC and the combined
financial statements of the DRC Predecessor incorporated by reference into this
Prospectus/Joint Proxy Statement.
<TABLE>
<CAPTION>
DRC
----------------------------------
(IN THOUSANDS, EXCEPT PER SHARE
AND PROPERTY DATA)
FOR THE THREE MONTHS ENDED MARCH
31,
----------------------------------
1996 1995
---------- -----------
<S> <C> <C>
OPERATING DATA:
Total revenue........................................................ $ 88,426 $ 79,229
Depreciation and amortization........................................ 15,525 14,160
Operating income before interest..................................... 39,744 36,812
Interest expense..................................................... 29,524 30,873
Income before extraordinary items.................................... 13,766 11,739
Extraordinary items.................................................. 9,191 --
---------- ----------
Income of DRC Operating Partnership after extraordinary items........ 22,957 11,739
Less--limited partners' interest in DRC Operating Partnership........ (8,762) (4,842)
---------- ----------
Net income........................................................... $ 14,195 $ 6,897
========== ==========
EARNINGS PER SHARE OF COMMON STOCK:
Income before extraordinary items.................................... $ 0.15 $ 0.14
Extraordinary items.................................................. 0.10 --
---------- ----------
Net income........................................................... $ 0.25 $ 0.14
========== ==========
Distributions per share of common stock.............................. $ 0.32 $ 0.32
Weighted average shares outstanding.................................. 55,610 48,982
BALANCE SHEET DATA:
Investment properties, net........................................... $1,330,507 $ 1,216,882
Total assets......................................................... 1,600,914 1,558,005
Mortgages and notes payable (1)...................................... 1,470,274 1,408,501
Limited partners' interest in DRC Operating Partnership.............. 8,295 5,332
Stockholders' equity................................................. $ 13,451 $ 7,593
OTHER DATA:
Cash flow provided by (used in):
Operating activities............................................... $ 32,037 $ 29,292
Investing activities............................................... (17,864) (3,290)
Financing activities............................................... (32,651) (26,116)
DRC Operating Partnership's share of cash generated before debt
repayments and capital expenditures(2)............................. $ 33,700 $ 28,700
========== ==========
Cash generated before debt repayments and capital expenditures
applicable to DRC's shareholders(3)................................ $ 20,800 $ 16,900
========== ==========
</TABLE>
115
<PAGE> 130
<TABLE>
<CAPTION>
DRC
----------------------------------
(IN THOUSANDS, EXCEPT PER SHARE
AND PROPERTY DATA)
FOR THE THREE MONTHS ENDED MARCH
31,
----------------------------------
1996 1995
---------- -----------
<S> <C> <C>
EBITDA(4):
Wholly-owned and consolidated joint venture properties............... $ 55,322 $ 51,025
Non-consolidated joint venture portfolio properties.................. 21,795 23,036
---------- ----------
Total of properties.................................................. $ 77,117 $ 74,061
========== ==========
EBITDA after minority interest....................................... $ 63,449 $ 59,510
PROPERTY DATA:
OCCUPANCY AT END OF PERIOD:
Mall GLA leased at end of period................................... 84.2% 84.0%
Mall store sales (thousands)....................................... $ 612,300 $ 590,200
NUMBER OF PORTFOLIO PROPERTIES AT END OF PERIOD:
Regional malls..................................................... 50 51
Community shopping centers......................................... 11 11
---------- ----------
Total........................................................... 61 62
========== ==========
</TABLE>
116
<PAGE> 131
SUMMARY HISTORICAL FINANCIAL DATA OF DRC (CONTINUED)
<TABLE>
<CAPTION>
DRC DRC PREDECESSOR
--------------------------- ---------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE AND PROPERTY DATA)
FOR THE FOR THE
FOR THE PERIOD FROM PERIOD FROM
YEAR ENDED APRIL 21 TO JANUARY 1 TO
DECEMBER 31, DECEMBER 31, APRIL 20, FOR THE YEAR ENDED DECEMBER 31,
------------ ------------ ------------ ------------------------------------
1995 1994 1994 1993 1992 1991
------------ ------------ ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Total revenue........................ $ 332,657 $ 228,943 $ 95,272 $ 308,955 $ 295,899 $ 281,835
Depreciation and amortization........ 58,603 39,578 16,616 54,227 54,751 48,939
Operating income before interest..... 155,556 104,672 43,008 135,200 118,204 122,293
Interest expense..................... 124,567 87,040 44,119 152,683 155,927 157,070
Income (loss) before extraordinary
items.............................. 46,343 27,668 3,905 (9,762) (25,448) (22,095)
Extraordinary items.................. (11,267) (8,932) -- -- -- --
---------- ---------- ------- ---------- ---------- ----------
Income (loss) of the DRC Operating
Partnership after extraordinary
items.............................. 35,076 18,736 3,905 (9,762) (25,448) (22,095)
---------- ---------- ------- ---------- ---------- ----------
Less--limited partners' interest in
the DRC Operating Partnership...... 14,165 7,728 -- -- -- --
---------- ---------- ------- ---------- ---------- ----------
Net income (loss).................... $ 20,911 $ 11,008 $ 3,905 $ (9,762) $ (25,448) $ (22,095)
========== ========== ======= ========== ========== ==========
EARNINGS PER COMMON SHARE:
Income before extraordinary items.... $ 0.53 $ 0.34 N/A N/A N/A N/A
Extraordinary items.................. (0.13) (0.11) N/A N/A N/A N/A
---------- ----------
Net income (loss).................... $ 0.40 $ 0.23 N/A N/A N/A N/A
========== ==========
Distributions per common share....... $ 1.26 $ 0.875 N/A N/A N/A N/A
Weighted average shares
outstanding........................ 51,687 48,372 N/A N/A N/A N/A
BALANCE SHEET DATA:
Investment properties, net........... $ 1,219,325 $ 1,217,838 N/A $1,228,453 $1,257,962 $1,215,663
Total assets......................... 1,531,994 1,572,970 N/A 1,645,080 1,683,717 1,674,802
Mortgages and notes payable(1)....... 1,348,573 1,409,827 N/A 1,628,711 1,612,748 1,569,798
Limited partners' interest in the DRC
Operating Partnership.............. 17,142 11,253 N/A -- -- --
Shareholders' equity and owners'
(deficit).......................... $ 27,673 $ 16,026 N/A $ (114,702) $ (79,524) $ (68,933)
OTHER DATA:
Cash flow provided by (used in):
Operating activities............... $ 108,900 N/A N/A N/A N/A N/A
Investing activities............... (47,542) N/A N/A N/A N/A N/A
Financing activities............... (74,406) N/A N/A N/A N/A N/A
DRC Operating Partnership's share of
cash generated before debt
repayments and capital
expenditures(2).................... $ 129,600 N/A N/A N/A N/A N/A
Cash generated before debt repayments
and capital expenditures applicable
to DRC's shareholders(3)........... $ 77,900 N/A N/A N/A N/A N/A
</TABLE>
117
<PAGE> 132
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE AND PROPERTY DATA)
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
EBITDA(4):
Wholly-owned and consolidated joint venture
portfolio properties........................ $ 214,369 $ 207,932 $ 189,427 $ 177,437 $ 171,232
Non-consolidated joint venture properties..... 95,563 92,796 85,325 81,277 75,491
---------- ---------- ---------- ---------- ----------
Total of portfolio properties................. $ 309,932 $ 300,728 $ 274,752 $ 258,714 $ 246,723
========== ========== ========== ========== ==========
EBITDA after minority interest................ $ 251,563 $ 240,740 $ 217,508 $ 201,902 $ 179,156
PROPERTY DATA:
OCCUPANCY AT END OF PERIOD:
Mall GLA leased at end of year.............. 84.4% 85.0% 86.2% 87.2% 88.7%
Mall store sales............................ $2,813,254 $2,786,625 $2,805,182 $2,782,239 $2,682,069
NUMBER OF PROPERTIES AT END OF PERIOD:
Regional malls.............................. 51 51 51 51 51
Community shopping centers.................. 11 11 11 11 11
---------- ---------- ---------- ---------- ----------
Total.................................... 62 62 62 62 62
========== ========== ========== ========== ==========
AVERAGE BASE RENT PER SQUARE FOOT FOR
DEBARTOLO MALLS............................. $ 19.78 $ 19.39 $ 18.49 $ 17.54 $ 16.40
MALL GLA (IN THOUSANDS OF SQUARE FEET)........ 15,163 15,300 14,945 14,886 14,926
</TABLE>
- ---------------
DRC SUMMARY HISTORICAL FOOTNOTES
(1) DRC's pro rata share of mortgages and notes payable (including
nonconsolidated joint ventures) was $1,555,099 as of December 31, 1995.
(2) Industry analysts generally consider cash generated before debt repayments
and capital expenditures (also commonly referred to as funds from
operations) to be an appropriate measure of the performance of an equity
REIT. Cash generated before debt repayments and capital expenditures
represents net income (loss) (computed in accordance with generally accepted
accounting principles), excluding gains (losses) from debt restructuring and
sales of property (other than adjacent land located at DRC properties after
April 21, 1994), plus depreciation and amortization and other non-cash
items. DRC's management believes that cash generated before debt repayments
and capital expenditures is an important and widely used measure of the
operating performance of REITs which provides a relevant basis for
comparison among REITs. Cash generated before debt repayments and capital
expenditures is presented to assist investors in analyzing the performance
of DRC. DRC's method of calculating cash generated before debt repayments
and capital expenditures may be different from the methods used by other
REITs to calculate funds from operations. Cash generated before debt
repayments and capital expenditures: (i) does not represent cash flow from
operations as defined by generally accepted accounting principles; (ii)
should not be considered as an alternative to net income as a measure of
operating performance or to cash flows from operating, investing and
financing activities; and (iii) is not an alternative to cash flows as a
measure of liquidity. In March 1995, NAREIT modified its definition of cash
generated before debt repayments and capital expenditures. The modified
definition provides that amortization of deferred financing costs and
depreciation of non-rental real estate assets are no longer to be added back
to net income in arriving at cash generated before debt repayments and
capital expenditures. The modified definition was adopted for the period
ended March 31, 1996 and included the add-back of certain formation costs of
$2,400 for such period as an unusual item. The cash generated before debt
repayments and capital expenditures for the three month period ended March
31, 1995 has been restated to $28,400 from $28,700, which includes the
add-back of certain formation costs of $3,900 for such period as an unusual
item. If the modified definition had been adopted in each of the prior
periods, cash generated before debt repayments and capital expenditures
would have been $128,200 for the period ended December 31, 1995, which
includes the add-back of certain formation costs of $12,700 for such period
as an unusual item.
(3) Represents DRC's share of cash generated before debt repayments and capital
expenditures.
(4) Total EBITDA represents earnings before interest, taxes, depreciation and
amortization for all properties. EBITDA after minority interest represents
earnings before interest, taxes, depreciation and amortization for all
properties after distribution to the third-party joint venture partners.
EBITDA: (i) does not represent cash flow from operations as defined by
generally accepted accounting principles; (ii) should not be considered as
an alternative to net income as a measure of operating performance or to
cash flows from operating, investing and financing activities; and (iii) is
not an alternative to cash flows as a measure of liquidity. DRC's management
believes that in addition to cash flows and net income, EBITDA is a useful
financial performance measurement for assessing the operating performance of
an equity REIT because, together with net income and cash flows, EBITDA
provides investors with an additional basis to evaluate the ability of a
REIT to incur and service debt and to fund acquisitions and other capital
expenditures. To evaluate EBITDA and the trends it depicts, the components
of EBITDA, such as revenues and operating expenses, should be considered.
DRC's method of calculating EBITDA may be different from the methods used by
other REITs. DRC's weighted average share of the operating results for the
three months ended March 31, 1996 and 1995 was 61.8% and 58.8% and was 59.6%
in 1995. DRC's share of the DRC Operating Partnership was 61.9% and 58.8% at
March 31, 1996 and 1995, respectively, and was 61.8% and 58.8% at December
31, 1995 and 1994, respectively.
118
<PAGE> 133
SIMON DEBARTOLO GROUP PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
(UNAUDITED)
The accompanying financial statements present the unaudited pro forma
combined condensed Balance Sheet of the Simon DeBartolo Group as of March 31,
1996 and the unaudited pro forma combined condensed Statement of Operations of
the Simon DeBartolo Group for the three month period ended March 31, 1996 and
for the year ended December 31, 1995.
The unaudited pro forma combined condensed Balance Sheet as of March 31,
1996 is presented as if the Merger and the Other Transactions had occurred on
March 31, 1996. The unaudited pro forma combined condensed Statement of
Operations for the three month period ended March 31, 1996 and for the year
ended December 31, 1995 are presented as if the Merger and the Other
Transactions had occurred as of January 1, 1995 and carried forward through
March 31, 1996.
Preparation of the pro forma financial information was based on assumptions
deemed appropriate by the management of SPG and DRC. The assumptions give effect
to the Merger and the Other Transactions under the purchase method of accounting
in accordance with generally accepted accounting principles and the combined
entity qualifying as a REIT, distributing all of its taxable income and,
therefore, incurring no federal income tax expense during the periods presented.
The pro forma financial information is unaudited and is not necessarily
indicative of the results which actually would have occurred if the transactions
had been consummated at the beginning of the periods presented, nor does it
purport to represent the future financial position and results of operations for
future periods. The pro forma information should be read in conjunction with the
historical financial statements of SPG and DRC incorporated by reference into
this Prospectus/Joint Proxy Statement.
119
<PAGE> 134
SIMON DEBARTOLO GROUP
PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS OF MARCH 31, 1996
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
MERGER AND
OTHER PRO
TRANSACTIONS FORMA
SPG DRC PRO FORMA COMBINED
(HISTORICAL)(A) (HISTORICAL)(A) ADJUSTMENTS CONDENSED
--------------- --------------- ------------ ----------
<S> <C> <C> <C> <C>
ASSETS:
Investment in properties, partnerships and
joint ventures, net......................... $ 2,081,210 $ 1,376,241 $ 1,611,668(B) $5,069,119
Cash, cash equivalents and short-term
investments................................. 45,145 27,133 (36,200)(C) 36,078
Receivables.................................... 138,901 42,137 (26,293)(D) 154,745
Note receivable from the SPG Management
Company..................................... 91,478 -- -- 91,478
Other assets................................... 121,105 118,967 (60,150)(E) 179,922
---------- ---------- ---------- ----------
TOTAL ASSETS........................... $ 2,477,839 $ 1,564,478 $ 1,489,025 $5,531,342
========== ========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
LIABILITIES:
Mortgages and other notes payable.............. $ 1,995,620 $ 1,470,274 $ 22,438(F) $3,488,332
Accounts payable, accrued expenses and other
liabilities................................. 167,548 72,458 5,616(G) 245,622
Investment in the SPG Management Company....... 20,223 -- -- 20,223
---------- ---------- ---------- ----------
TOTAL LIABILITIES...................... 2,183,391 1,542,732 28,054 3,754,177
---------- ---------- ---------- ----------
LIMITED PARTNERS' INTEREST IN THE OPERATING
PARTNERSHIP.................................... 78,366 8,295 563,424(H) 650,085
STOCKHOLDERS' EQUITY:
Preferred stock................................ 99,923 -- -- 99,923
Common stock................................... 7 555 (551)(H) 11
Capital in excess of par value................. 269,771 12,896 898,098(H) 1,180,765
Accumulated deficit............................ (146,702) -- -- (146,702)
Unamortized restricted stock award............. (6,917) -- -- (6,917)
---------- ---------- ---------- ----------
TOTAL STOCKHOLDERS' EQUITY............. 216,082 13,451 897,547 1,127,080
---------- ---------- ---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY............................... $ 2,477,839 $ 1,564,478 $ 1,489,025 $5,531,342
========== ========== ========== ==========
</TABLE>
The accompanying notes and management's assumptions are an integral part of this
statement.
120
<PAGE> 135
SIMON DEBARTOLO GROUP--NOTES AND MANAGEMENT ASSUMPTIONS TO PRO FORMA COMBINED
CONDENSED FINANCIAL INFORMATION (UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND PER
SHARE AMOUNTS)
1. Accounting Treatment
The exchange of DRC Common Stock for SPG Common Stock, the Merger, and the
transfer by the SPG and the SPG Limited Partners' interests in the SPG Operating
Partnership to the DRC Operating Partnership under the contribution agreement
technically result in a reverse merger for financial reporting purposes. In
substance, DRC and the DRC Limited Partners' interests in the DRC Operating
Partnership are being acquired and accordingly will be adjusted to fair value in
connection with the application of purchase accounting. The interests
transferred by SPG and SPG Limited Partners to the DRC Operating Partnership
have been appropriately reflected at historical cost.
2. Adjustments To Pro Forma Combined Condensed Balance Sheet
<TABLE>
<S> <C> <C>
(A) Certain reclassifications have been made to the SPG and DRC historical balance sheets to
conform to the desired pro forma combined condensed balance sheet presentation.
(B)
Represents adjustments to record the Merger and the Other Transactions in accordance with
the purchase method of accounting, based upon an assumed purchase price of $1,505,317
assuming a market value of SPG Common Stock of $24.25 (which was the closing price of
SPG's Common Stock on May 31, 1996), and the Exchange Ratio of 0.68 as follows:
Value of DRC Common Stock (55,712,529 shares outstanding immediately prior to
the Merger) and 34,203,623 DRC Operating Partnership interests multiplied by
the Exchange Ratio and the market value of SPG Common Stock............. $1,482,717
Merger and the Other Transactions costs (see below).......................... 22,600
-----------
$1,505,317
=========
Estimated fees and expenses related to the Merger and the Other Transactions,
as follows:
Advisory fees................................................................ $11,000
Legal and accounting......................................................... 6,200
Severance and relocation costs............................................... 19,000
-----------
36,200
Less DRC expenses............................................................ 13,600
-----------
SPG transaction costs........................................................ $22,600
=========
Adjustment to reflect investment in properties, partnerships and joint
ventures, net at fair value:
Purchase price (see above)................................................... $1,505,317
Historical book value of DRC equity acquired as of the Effective Time:
Historical book value of the DRC Operating Partnership....................... (21,746)
To adjust equity for the Stay Bonus and to reflect accelerated vesting of
accrued compensation settled with DRC Common Stock (for a description of the
Stay Bonus, see "THE MERGER--Certain Provisions Relating to Employee
Benefits and Incentive Plans--Stock Incentive Plans")................... 5,616
To reflect DRC's expenses associated with the Merger and the Other
Transactions (for a description of the Other Transactions, see "THE
MERGER--Certain Transactions and Agreements Related to the Merger")..... 13,600
-----------
$(2,530)
=========
</TABLE>
121
<PAGE> 136
<TABLE>
<S> <C> <C>
Adjustments to reflect certain assets and liabilities of DRC at fair value:
Receivables (see Note (D))................................................... 26,293
Other assets (see Note (E)).................................................. 60,150
Mortgages and other notes payable (see Note (F))............................. 22,438
-----------
Adjustment required to reflect investment in properties, partnerships and
joint ventures, net at fair value............................................ $1,611,668
=========
(C)
To reflect the decrease in cash and cash equivalents due to the estimated
Merger and the Other Transactions costs, including expenses of DRC........... $(36,200)
=========
(D)
To reflect the adjustment to eliminate DRC's deferred asset related to the
straight-lining of rent related to leases.................................... $(26,293)
=========
(E)
Adjustments to other assets:
To eliminate deferred financing, interest rate buy-downs and similar costs
related to mortgages and other notes payable and organization costs.......... $(55,202)
To adjust DRC's historical basis in the DRC Management Company to estimated
fair market value of $15,000................................................. 14,237
To eliminate deferred leasing costs.......................................... (19,185)
-----------
$(60,150)
=========
(F)
To record a premium required to adjust mortgages and other notes payable to
fair value using a discount rate estimated on an instrument by instrument
basis........................................................................ $22,438
=========
(G)
To record accrued compensation expense related to the Stay Bonus ($8,424 and
DRC Common Stock issued in the amount of $1,318) and to reflect the
accelerated vesting of accrued compensation settled with DRC Common Stock
($1,490)..................................................................... $5,616
=========
(H)
To adjust DRC's shareholders' equity and the DRC Limited Partners' interests to reflect
the issuance of 37,884,520 shares of SPG Common Stock and the conversion of the DRC
Limited Partners' interests in the DRC Operating Partnership into Units in the Operating
Partnership at the Exchange Ratio (assuming that there are 55,712,529 shares of DRC Common
Stock and 34,203,623 DRC Limited Partners' interests outstanding immediately prior to the
Effective Time) with an assumed value of $24.25 per SPG share (which was the closing price
of SPG's Common Stock on May 31, 1996), and per Unit, respectively, in exchange for
substantially all of the outstanding DRC Common Stock and DRC Interests, as follows:
</TABLE>
<TABLE>
<CAPTION>
TOTAL TOTAL
COMMON EQUITY OF
STOCKHOLDERS' LIMITED THE
AND PARTNERS' OPERATING
CAPITAL IN SHAREHOLDERS' INTEREST PARTNERSHIP
EXCESS EQUITY BEFORE IN THE BEFORE
COMMON OF PAR ACCUMULATED UNRESTRICTED OPERATING PREFERRED
STOCK VALUE DEFICIT STOCK AWARD PARTNERSHIP UNITS
------ ---------- ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Value of Shares and Interests Acquired........ $ 4 $ 918,696 $ -- $ 918,700 $ 564,017 $1,482,717
Historical Value of SPG....................... 7 269,771 (146,702) 123,076 78,366 201,442
----- ---------- --------- ---------- -------- ----------
Combined Equity............................... 11 1,188,467 (146,702) 1,041,776 642,383 1,684,159
--------------------------------------------------------------------------------------------------------------------------
Pro Forma Ownership........................... 61.4% 38.6% 100.0%
========== ======== ==========
Pro Forma Equity.............................. 11 1,180,765 (146,702) 1,034,074 650,085 1,684,159
Less Historical Value of SPG.................. 7 269,771 (146,702) 123,076 78,366 201,442
Less Historical Value of DRC.................. 555 12,896 -- 13,451 8,295 21,746
----- ---------- --------- ---------- -------- ----------
Pro Forma Adjustments......................... $(551 ) $ 898,098 $ -- $ 897,547 $ 563,424 $1,460,971
===== ========== ========= ========== ======== ==========
</TABLE>
122
<PAGE> 137
SIMON DEBARTOLO GROUP
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
MERGER AND
OTHER TRANSACTIONS PRO FORMA
SPG DRC PRO FORMA COMBINED
(HISTORICAL) (HISTORICAL) ADJUSTMENTS CONDENSED
------------ ------------ ------------------ ------------------
<S> <C> <C> <C> <C>
REVENUE
Minimum rent.......................... $ 78,454 $ 56,554 $ 940(A) $ 135,948
Overage rent.......................... 4,967 2,794 -- 7,761
Tenant reimbursements................. 46,656 23,040 -- 69,696
Other income.......................... 9,367 6,038 -- 15,405
--------- --------- --------- ---------
Total revenue................. 139,444 88,426 940 228,810
--------- --------- --------- ---------
EXPENSES
Property and other operating
expenses........................... 53,699 33,157 (2,500)(B) 84,356
Depreciation and amortization......... 24,672 15,525 2,878(C) 43,075
--------- --------- --------- ---------
Total expenses................ 78,371 48,682 378 127,431
--------- --------- --------- ---------
OPERATING INCOME........................ 61,073 39,744 562 101,379
INTEREST EXPENSE........................ 38,566 29,524 (3,492)(D) 64,598
--------- --------- --------- ---------
INCOME BEFORE MINORITY INTEREST......... 22,507 10,220 4,054 36,781
MINORITY PARTNERS' INTEREST............. (503) 65 -- (438)
--------- --------- --------- ---------
INCOME BEFORE UNCONSOLIDATED ENTITIES... 22,004 10,285 4,054 36,343
INCOME FROM UNCONSOLIDATED ENTITIES..... 1,828 3,481 -- 5,309
--------- --------- --------- ---------
INCOME OF THE OPERATING PARTNERSHIP..... 23,832 13,766 4,054 41,652
LESS LIMITED PARTNERS' INTEREST
IN THE OPERATING PARTNERSHIP.......... 8,485 5,254 1,555(E) 15,294
--------- --------- --------- ---------
NET INCOME FROM CONTINUING OPERATIONS... 15,347 8,512 2,499 26,358
PREFERRED DIVIDENDS..................... 2,031 -- -- 2,031
--------- --------- --------- ---------
NET INCOME FROM CONTINUING OPERATIONS
AVAILABLE TO COMMON STOCKHOLDERS
BEFORE EXTRAORDINARY ITEMS............ $ 13,316 $ 8,512 $ 2,499 $ 24,327
========= ========= ========= =========
NET INCOME BEFORE EXTRAORDINARY ITEMS
PER SHARE OF COMMON STOCK............. $ 0.23 $ 0.15 $ 0.25
========= ========= =========
WEIGHTED AVERAGE SHARES OUTSTANDING..... 58,382,176 55,610,000 96,266,696(F)
========= ========= =========
</TABLE>
The accompanying notes and management's assumptions are an integral part of this
statement.
123
<PAGE> 138
SIMON DEBARTOLO GROUP
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
MERGER AND
OTHER
TRANSACTIONS PRO FORMA
SPG DRC PRO FORMA COMBINED
(HISTORICAL) (HISTORICAL) ADJUSTMENTS CONDENSED
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
REVENUE
Minimum rent.................................. $ 307,849 $ 205,056 $ 3,400(A) $ 516,305
Overage rent.................................. 23,278 12,924 -- 36,202
Tenant reimbursements......................... 191,535 82,147 -- 273,682
Other income.................................. 30,995 32,530 -- 63,525
----------- ----------- -------- -----------
Total revenue......................... 553,657 332,657 3,400 889,714
----------- ----------- -------- -----------
EXPENSES
Property and other operating expenses......... 209,782 118,498 (10,000)(B) 318,280
Depreciation and amortization................. 92,739 58,603 11,444(C) 162,786
----------- ----------- -------- -----------
Total expenses........................ 302,521 177,101 1,444 481,066
----------- ----------- -------- -----------
OPERATING INCOME................................ 251,136 155,556 1,956 408,648
INTEREST EXPENSE................................ 150,224 124,567 (23,678)(D) 251,113
----------- ----------- -------- -----------
INCOME BEFORE MINORITY INTEREST................. 100,912 30,989 25,634 157,535
MINORITY PARTNERS' INTEREST..................... (2,681) 1,029 -- (1,652)
GAIN ON SALE OF ASSET........................... 1,871 5,460 -- 7,331
----------- ----------- -------- -----------
INCOME BEFORE UNCONSOLIDATED ENTITIES........... 100,102 37,478 25,634 163,214
INCOME FROM UNCONSOLIDATED
ENTITIES...................................... 1,403 8,865 -- 10,268
----------- ----------- -------- -----------
INCOME OF THE OPERATING
PARTNERSHIP................................... 101,505 46,343 25,634 173,482
LESS LIMITED PARTNERS' INTEREST IN
THE OPERATING PARTNERSHIP..................... 40,297(G) 18,715(G) 7,377(E) 66,389
----------- ----------- -------- -----------
NET INCOME FROM CONTINUING OPERATIONS........... 61,208 27,628 18,257 107,093
PREFERRED DIVIDENDS............................. 1,490 -- -- 1,490
----------- ----------- -------- -----------
NET INCOME FROM CONTINUING OPERATIONS AVAILABLE
TO COMMON STOCKHOLDERS BEFORE
EXTRAORDINARY ITEMS........................... $ 59,718 $ 27,628 $ 18,257 $ 105,603
=========== =========== ======== ===========
NET INCOME BEFORE EXTRAORDINARY ITEMS PER SHARE
OF COMMON STOCK............................... $ 1.08 $ 0.53 $ 1.13
=========== =========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING............. 55,312,078 51,687,000 93,194,398(F)
=========== =========== ===========
</TABLE>
The accompanying notes and management's assumptions are an integral part of this
statement.
124
<PAGE> 139
3. Adjustments To Pro Forma Combined Condensed Statement of Operations
Immediately prior to the Merger and the Other Transactions, DRC will
expense $8,424 in connection with the Stay Bonus which has not been included in
the Pro Forma Combined Condensed Statement of Operations. DRC will also incur
$13,600 of expenses in connection with the Merger and the Other Transactions
which have not been included in the Pro Forma Combined Condensed Statement of
Operations.
<TABLE>
<CAPTION>
FOR THE
THREE MONTHS FOR THE YEAR
ENDED ENDED
MARCH 31, 1996 DECEMBER 31, 1995
-------------- -----------------
<S> <C> <C> <C>
(A) To recognize revenue from straight-lining rent related to leases
which will be reset in connection with the Merger and the Other
Transactions...................................................... $ 940 $ 3,400
========== ==========
(B) To reflect cost savings to eliminate duplicative public company
costs and other identified redundancies which have been estimated
based upon historical costs for those items as a result of the
Merger and the Other Transactions................................. $ (2,500) $ (10,000)
========== ==========
(C) To reflect the increase in depreciation as a result of recording
the investment properties of DRC at acquisition value versus
historical cost and utilizing an estimated useful life of 35 years
offset by the decrease in amortization expense as a result of the
elimination of deferred leasing costs............................. $ 2,878 $ 11,444
========== ==========
(D) To reflect the following adjustments to interest expense:
(1) To reflect the elimination of amortization of deferred
mortgage costs related to DRC written-off in connection with the
Merger and the Other Transactions............................. $ (2,557) $ (18,929)
(2) To reflect the amortization of the premium required to adjust
mortgages and other notes payable to fair value............... (935) (4,749)
---------- ----------
$ (3,492) $ (23,678)
========== ==========
(E) To adjust the allocation of the Limited Partners' interest in the
net income of the Operating Partnership, after consideration of
the preferred unit distribution, that will not be owned by Simon
DeBartolo Group. The Limited Partners' pro forma ownership
interest for the three months ended March 31, 1996 and for the
year ended December 31, 1995 was 38.6%............................ $ 1,555 $ 7,377
========== ==========
(F) The pro forma weighted average shares outstanding is computed as
follows:
SPG Historical Weighted Average Shares Outstanding................ 58,382,176 55,312,078
Issuance of shares of SPG Common Stock in connection with the
Merger and the Other Transactions (assuming that there are
55,712,529 shares of DRC Common Stock outstanding immediately
prior to the Effective Time)...................................... 37,884,520 37,882,320
---------- ----------
96,266,696 93,194,398
========== ==========
(G) The historical amounts of the Limited Partners' interest in the operating partnership of SPG and DRC have
been adjusted to exclude the Limited Partners' pro rata share of historical extraordinary items ($1,348
for SPG and $4,550 for DRC). The adjustments were required to determine the Limited Partners' interest in
pro forma income of the Operating Partnerships from continuing operations.
</TABLE>
125
<PAGE> 140
DESCRIPTION OF SPG'S CAPITAL STOCK
The following summary is a description of certain provisions of the SPG
Charter and SPG By-laws. This summary does not purport to be complete and is
qualified by reference to the SPG Charter and SPG By-laws, which have been filed
as exhibits to the Registration Statement of which this Prospectus/Joint Proxy
Statement is a part. See also "CERTAIN PROVISIONS OF SPG'S CHARTER AND BY-LAWS
AND OF MARYLAND LAW" and "AMENDMENTS TO SPG'S CHARTER AND BY-LAWS." Except as
otherwise discussed below or in the section "AMENDMENTS TO SPG'S CHARTER AND
BY-LAWS," the provisions of the SPG Charter and SPG By-laws described below will
continue to apply to the Simon DeBartolo Group and will not be affected by (i)
the Amended SPG Charter and Amended SPG By-laws, if the Required Vote is
obtained, and (ii) the Alternative Amended SPG Charter and Alternative Amended
SPG By-laws, if the Required Vote is not obtained but the Majority Approval Vote
is obtained.
GENERAL
Under the SPG Charter, the total number of shares of all classes of capital
stock that SPG has authority to issue is 412,000,000 shares, par value $0.0001
per share, currently consisting of 246,000,000 shares of SPG Common Stock,
12,000,000 shares of Class B Common Stock, 4,000,000 shares of Series A
Preferred Stock and 150,000,000 shares of Excess Stock. An increase in the
amount of authorized capital stock is proposed. The SPG Board of Directors is
authorized to reclassify any unissued portion of the authorized shares of
capital stock to provide for the issuance of shares in other classes or series.
If approved by the Required Vote, 4,000 shares of Class C Common Stock will be
authorized. See "AMENDMENTS TO SPG'S CHARTER AND BY-LAWS."
SPG COMMON STOCK AND CLASS B COMMON STOCK
All outstanding shares of SPG Common Stock and Class B Common Stock are
duly authorized, fully paid and nonassessable. Holders of SPG Common Stock and
Class B Common Stock are entitled to one vote for each share held of record on
all matters submitted to a vote of the stockholders, other than the election of
directors elected exclusively by the holders of Class B Common Stock (and, if
the Required Vote is obtained, the Class C Common Stock). Holders of SPG Common
Stock and Class B Common Stock have no right to cumulative voting for the
election of directors. Subject to preferential rights with respect to the Series
A Preferred Stock, the holders of SPG Common Stock and Class B Common Stock
(and, if the Required Vote is obtained, the Class C Common Stock) are entitled
to receive ratably such dividends as may be declared by the SPG Board of
Directors out of funds legally available therefor. If SPG is liquidated, subject
to the right of the holders of Series A Preferred Stock (including any Excess
Stock into which such Series A Preferred Stock has been converted) to receive
preferential distributions, each outstanding share of SPG Common Stock and Class
B Common Stock (and, if the Required Vote is obtained, the Class C Common
Stock), including shares of Excess Stock (other than those issued upon the
conversion of Series A Preferred Stock), if any, will be entitled to participate
pro rata in the assets remaining after payment of, or adequate provision for,
all known debts and liabilities of SPG.
The holders of Class B Common Stock currently are entitled to elect four
Class B Directors. If the Simons sell or otherwise transfer to unaffiliated
parties 50% or more of their aggregate Ownership Interest in SPG (including all
SPG Common Stock, Class B Common Stock and SPG Units convertible into SPG Common
Stock), then the holders of the Class B Common Stock will be entitled to elect
only two Class B Directors.
Shares of Class B Common Stock may be converted at the holder's option into
shares of SPG Common Stock. If the Simons' aggregate equity interest in SPG on a
fully diluted basis has been reduced to less than five percent, the outstanding
shares of Class B Common Stock convert automatically into an equal number of
shares of SPG Common Stock. Shares of Class B Common Stock also convert
automatically into an equal number of shares of SPG Common Stock upon the sale
or transfer thereof to a person not affiliated with the Simons. Holders of
shares of SPG Common Stock and Class B Common Stock have no sinking fund rights,
redemption rights or preemptive rights to subscribe for any securities of SPG.
Pursuant to the MGCL, a corporation generally cannot dissolve, merge,
consolidate, sell all or substantially all of its assets, engage in a share
exchange or engage in similar transactions outside the ordinary course of
business unless approved by the Board of Directors and by the affirmative vote
of at least two-thirds of the votes entitled to cast on the matter.
The SPG Partnership Agreement further provides that SPG may not merge,
consolidate or engage in any combination with another person or sell all or
substantially all of its assets unless such transaction includes the merger of
the SPG Operating Partnership, which merger requires the approval of the holders
of a majority of the SPG Units. This voting requirement might limit the
possibility for acquisition or change in control of SPG, even if some of SPG's
stockholders deem such a change to be in SPG's and their best interest.
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PROPOSED CLASS C COMMON STOCK
It is contemplated that a new class of SPG capital stock, denoted Class C
Common Stock, will be created in connection with the proposed Merger. For a
complete description of the terms applicable to such proposed Class C Common
Stock, see "AMENDMENTS TO SPG'S CHARTER AND BY-LAWS."
SERIES A PREFERRED STOCK
Series A Preferred Stock ranks, with respect to dividends, voting,
preferences, qualifications, limitations, restrictions and the distribution of
assets upon liquidation, senior to SPG Common Stock and Class B Common Stock
(and, if the Required Vote is obtained, Class C Common Stock). Classification of
authorized but unissued capital stock into additional shares of preferred stock
and issuance thereof, unless ranking junior to or on a parity with Series A
Preferred Stock, must be approved by an 80% vote of the holders of Series A
Preferred Stock. See "--Series A Preferred Stock-- Voting Rights," below. The
Series A Preferred Stock has no preemptive rights and is not subject to any
sinking fund or other obligation of SPG to purchase or redeem it.
DIVIDENDS
Holders of Series A Preferred Stock are entitled to receive cumulative cash
dividends of the greater of either (i) $0.5078125 per share per calendar
quarter, or (ii) the aggregate amount of dividends paid since the end of the
previous calendar quarter on the number of shares of SPG Common Stock into which
each share of Series A Preferred Stock is convertible, in either case payable in
arrears when and as declared by the SPG Board of Directors, out of funds legally
available therefor, on the last business day of each quarter. Dividends are
cumulative from the payment date of any such declaration and accrue whether or
not there are funds of SPG legally available for the payment of such dividends.
SPG may not declare or pay any dividend on the SPG Common Stock or the
Class B Common Stock (and, if the Required Vote is obtained, Class C Common
Stock) or on any other class of stock ranking junior to Series A Preferred Stock
as to dividends and upon liquidation, distribution or winding up of SPG (the SPG
Common Stock, Class B Common Stock (and, if the Required Vote is obtained, Class
C Common Stock), and any other such junior class being referred to as the
"Junior Stock"), other than in shares of Junior Stock or rights to purchase or
acquire Junior Stock, and SPG may not redeem or make any payment on account of,
or set apart money for, a sinking or other analogous fund for the purchase,
redemption or other retirement of any Junior Stock or make any distribution in
respect thereof, in each case, either directly or indirectly and whether in cash
or property or in obligations or shares of SPG, unless and until such time as
all accrued and unpaid dividends with respect to Series A Preferred Stock have
been paid (or declared and a sum sufficient for the payment thereof is set apart
for such payment) and sufficient funds have been set apart for the payment of
the dividend for the current dividend period with respect to Series A Preferred
Stock.
REDEMPTION
SPG may not redeem any shares of the Series A Preferred Stock unless all
accrued and unpaid dividends on Series A Preferred Stock shall have been paid or
are contemporaneously declared and paid in full. If such dividends have been
paid or will be paid contemporaneously, the Series A Preferred Stock is
redeemable:
(i) by each holder thereof, at any time after SPG notifies the holder
that SPG intends to issue to a "foreign person" (as defined in Section
897(h)(4)(B) of the Code) an amount of SPG's equity securities sufficient
to give the "foreign person" a 48% or larger share of SPG's outstanding
equity securities, at a redemption price of $25.00 per share;
(ii) by SPG, after October 26, 1997, if the closing price of the SPG
Common Stock on 20 out of any 30 consecutive trading days is more than 120%
of the then-current Conversion Price (as defined in the "GLOSSARY"), at a
redemption price--payable in shares of SPG Common Stock--of the number of
shares of SPG Common Stock into which the Series A Preferred Stock is then
convertible; and
(iii) by SPG, after October 26, 2000, at a specified price per share
that begins at $26.75 (beginning October 26, 2000) and decreases at a rate
of $0.25 per year to a price of $25.00 (beginning October 26, 2007, and
thereafter).
Shares of Series A Preferred Stock that are redeemed, repurchased or
otherwise re-acquired by SPG become authorized but unissued SPG Common Stock and
may be reissued as SPG Common Stock or may be reclassified into any other class
or series of stock.
LIQUIDATION RIGHTS
In the event of any liquidation, dissolution or winding up of the affairs
of SPG (any or all of such events, a "liquidation"), whether voluntary or
involuntary, the holders of Series A Preferred Stock then outstanding shall be
entitled to be paid out of the assets of SPG, before any payment shall be made
to the holders of the Junior Stock, an amount equal to $25 per share, plus an
amount equal to any unpaid cumulative dividends on Series A Preferred Stock
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accrued to the date when such payment shall be made available to the holders
thereof. Neither a consolidation or merger of SPG with or into any other
corporation or corporations, nor a sale or transfer by SPG of all or
substantially all of its assets, nor a statutory share exchange in which
stockholders of SPG may participate shall be deemed to be a liquidation of SPG.
VOTING RIGHTS
As noted previously, SPG may not, without the approval of the holders of
80% of Series A Preferred Stock, voting as a single class, (a) classify or
authorize the issuance of any new, or increase the authorized number of shares
of any existing, class of capital stock of SPG which would be senior or superior
as to dividends or upon liquidation to Series A Preferred Stock, or (b) take any
action to cause any amendment, alteration or repeal of any of the provisions of
the SPG Charter that would adversely affect, alter or change the rights of
holders of Series A Preferred Stock.
In addition, the holders of Series A Preferred Stock have the right to vote
with the holders of the SPG Common Stock on all other matters. In such votes,
holders of Series A Preferred Stock are entitled to the number of votes equal to
the number of shares of SPG Common Stock, including fractional shares, into
which Series A Preferred Stock is convertible (as of March 31, 1996, 0.9523809
votes per share of Series A Preferred Stock) pursuant to the Conversion Formula.
If dividends on Series A Preferred Stock are in arrears and are unpaid for
any four consecutive calendar quarters, then the holders of Series A Preferred
Stock (voting as a separate class) have an additional right to vote on any
acquisition of SPG by any other entity, including by merger, consolidation or
reorganization, as well as on the sale of all or substantially all of SPG's
assets. This separate voting right does not arise, however, if (i) SPG's
stockholders will have at least 50% of the aggregate voting power of the
surviving entity following the merger, consolidation, reorganization or other
acquisition, or (ii) the terms of the acquisition or sale provide for the
contemporaneous full payment of all accrued and unpaid dividends on the Series A
Preferred Stock.
CONVERSION AND REDEMPTION RIGHTS
At any time on or after October 26, 1997, the holders of Series A Preferred
Stock have the right to convert any or all of their shares into fully paid and
nonassessable shares of SPG Common Stock, pursuant to the Conversion Formula. As
of March 31, 1996, the Conversion Formula provided a ratio of 0.9523809 shares
of SPG Common Stock for each share of Series A Preferred Stock. The conversion
rate is to be adjusted based on the occurrence of certain events, such as stock
splits or dividends, as provided in the SPG Charter. Whenever SPG shall call for
redemption any Series A Preferred Stock, the conversion rights of the holders
shall terminate as to the shares called for redemption at the close of business
on the business day next preceding the redemption date unless a default shall
have been made in the payment of the redemption price or in the conversion
thereof. All shares of Series A Preferred Stock converted into SPG Common Stock
shall be retired and canceled and shall resume the status of authorized but
unissued shares of SPG Common Stock.
RESTRICTIONS ON TRANSFER
The SPG Charter contains (and the Amended SPG Charter and Alternative
Amended SPG Charter will both contain) certain restrictions on the number of
shares of capital stock of the Simon DeBartolo Group (including the SPG Common
Stock, Class B Common Stock, Series A Preferred Stock and, if the Required Vote
is obtained, Class C Common Stock) that individual stockholders may own. For the
Simon DeBartolo Group to qualify as a REIT under the Code, not more than 50% in
value of the outstanding capital stock of the Simon DeBartolo Group may be
owned, directly or indirectly, by five or fewer individuals (as defined in the
Code to include certain entities) during the last half of a taxable year (other
than the first year). The capital stock also must be beneficially owned by 100
or more persons during at least 335 days of a taxable year of 12 months or
during a proportionate part of a shorter taxable year and certain percentages of
the Simon DeBartolo Group's gross income must be from particular activities. See
"RISK FACTORS-- Certain Tax Risks--Limits on Ownership Necessary to Maintain
REIT Qualification." Because the management of SPG currently believes it is
essential for the Simon DeBartolo Group to maintain its status as a REIT, the
provisions of the Amended SPG Charter and the Alternative Amended SPG Charter
with respect to Excess Stock will both contain restrictions on the acquisition
of its capital stock intended to ensure compliance with these requirements. See
"POLICIES OF THE SIMON DeBARTOLO GROUP--Dividend and Distribution Policies."
The Amended SPG Charter and the Alternative Amended SPG Charter will both
provide that, subject to certain specified exceptions, no stockholder may own,
or be deemed to own by virtue of the attribution provisions of the Code, more
than the Ownership Limit, which will be equal to six percent (24% in the case of
the Simons) of any class of capital stock of the Simon DeBartolo Group
(calculated based on the lower of outstanding shares, voting power or value).
The Ownership Limit under the SPG Charter is currently 4.9% (30% in the case of
the Simons). In the event of a purported transfer or other event that would, if
effective, result in the ownership of shares of stock in violation of the
Ownership Limit, such transfer or other event with respect to that number of
shares that would be owned by the transferee in excess
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of the Ownership Limit would be deemed void ab initio and the intended
transferee would acquire no rights in such shares of stock. Such shares of stock
would automatically be converted into shares of Excess Stock, according to rules
set forth in the SPG Charter (and the Amended SPG Charter and the Alternative
Amended SPG Charter), to the extent necessary to ensure that the purported
transfer or other event does not result in ownership of shares of stock in
violation of the Ownership Limit. The board of directors of the Simon DeBartolo
Group may exempt a person from the Ownership Limit if they receive a ruling from
the IRS or an opinion of tax counsel that such ownership will not jeopardize the
Simon DeBartolo Group's status as a REIT.
Upon a purported transfer or other event that results in Excess Stock, the
Excess Stock will be deemed to have been transferred to a trustee to be held in
trust for the exclusive benefit of a Qualifying Charitable Organization
designated by the Simon DeBartolo Group. Such Excess Stock will be issued and
outstanding stock of the Simon DeBartolo Group, and it will be entitled to
dividends equal to any dividends which are declared and paid. Any dividend or
distribution paid prior to the discovery by the Simon DeBartolo Group that stock
has been converted into Excess Stock is to be repaid upon demand. The recipient
of such dividend will be personally liable to the trust. Any dividend or
distribution declared but unpaid will be rescinded as void ab initio with
respect to the such shares of stock and will automatically be deemed to have
been declared and paid with respect to the shares of Excess Stock into which
such shares were converted. Such Excess Stock will also be entitled to such
voting rights as are ascribed to the stock from which such shares of Excess
Stock were converted. Any voting rights exercised prior to discovery by the
Simon DeBartolo Group that shares of stock were converted to Excess Stock will
be rescinded and recast as determined by the trustee.
While Excess Stock is held in trust, an interest in that trust may be
transferred by the purported transferee, or other purported holder with respect
to such Excess Stock only to a person whose ownership of the shares of stock
would not violate the Ownership Limit, at which time the Excess Stock will be
automatically exchanged for the same number of shares of stock of the same type
and class as the shares of stock for which the Excess Stock was originally
exchanged.
The SPG Charter contains (and the Amended SPG Charter and the Alternative
Amended SPG Charter will both contain) provisions that are designed to ensure
that the purported transferee or other purported holder of the Excess Stock may
not receive in return for such a transfer an amount that reflects any
appreciation in the shares of stock for which such Excess Stock was exchanged
during the period that such Excess Stock was outstanding. Any amount received by
a purported transferee or other purported holder in excess of the amount
permitted to be received must be paid over to the trust. If the foregoing
restrictions are determined to be void or invalid by virtue of any legal
decision, statute, rule or regulation, then the intended transferee or holder of
any Excess Stock may be deemed, at the option of the Simon DeBartolo Group, to
have acted as an agent on behalf of the trust in acquiring or holding such
Excess Stock and to hold such Excess Stock on behalf of the trust.
The SPG Charter further provides (and the Amended SPG Charter and the
Alternative Amended SPG Charter will both also provide) that the Simon DeBartolo
Group may purchase, for a period of 90 days during the time the Excess Stock is
held by the trustee in trust, all or any portion of the Excess Stock from the
original transferee-stockholder at the lesser of the price paid for the stock by
the purported transferee (or if no notice of such purchase price is given, at a
price to be determined by the Board of Directors of the Simon DeBartolo Group,
in its sole discretion, but no lower than the lowest market price of such stock
at any time prior to the date the Simon DeBartolo Group exercises its purchase
option) and the closing market price for the stock on the date the Simon
DeBartolo Group exercises its option to purchase. The 90-day period begins on
the date of the violative transfer or other event if the original
transferee-stockholder gives notice to the Simon DeBartolo Group of the transfer
or (if no notice is given) the date the Board of Directors of the Simon
DeBartolo Group determines that a violative transfer or other event has been
made.
The SPG Charter further provides (and the Amended SPG Charter and the
Alternative Amended SPG Charter will also provide) that in the event of a
purported issuance or transfer that would, if effective, result in the Simon
DeBartolo Group's being beneficially owned by fewer than 100 persons, such
issuance or transfer would be deemed null and void ab initio, and the intended
transferee would acquire no rights to the stock.
All certificates representing shares of any class of stock of SPG bear (and
will bear) a legend referring to the restrictions described above.
All persons who own, directly or by virtue of the attribution provisions of
the Code, more than five percent (or such other percentage as may be required by
the Code or regulations promulgated thereunder) of the outstanding stock must
file an affidavit with the Simon DeBartolo Group containing the information
specified in the SPG Charter (or, as the case may be, the Amended SPG Charter or
the Alternative Amended SPG Charter) before January 30 of each year. In
addition, each stockholder shall, upon demand, be required to disclose to the
Simon DeBartolo Group in writing such information with respect to the direct,
indirect and constructive ownership of shares as the Board of Directors of the
Simon DeBartolo Group deems necessary to comply with the provisions of the SPG
Charter (or the Amended SPG
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Charter or the Alternative Amended SPG Charter) or the Code applicable to a REIT
or to comply with the requirements of any taxing authority or governmental
agency.
The Excess Stock provision will not be removed automatically even if the
REIT provisions of the Code are changed so as to no longer contain any ownership
concentration limitation or if the ownership concentration limitation is
increased. In addition to preserving the Simon DeBartolo Group's status as a
REIT, the Ownership Limit may have the effect of precluding an acquisition of
control of the Simon DeBartolo Group without the approval of the Board of
Directors of the Simon DeBartolo Group.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the SPG Common Stock is First National
Bank of Chicago, Chicago, Illinois.
CERTAIN PROVISIONS OF SPG'S CHARTER AND
BY-LAWS AND OF MARYLAND LAW
The following summary of certain provisions of Maryland law and the SPG
Charter and SPG By-laws does not purport to be complete, and is qualified by
reference to Maryland Law and the SPG Charter and SPG By-laws. See "SIGNIFICANT
DIFFERENCES BETWEEN THE CORPORATE LAWS OF OHIO AND MARYLAND AND COMPARISON OF
RIGHTS OF HOLDERS OF DRC COMMON STOCK AND SPG COMMON STOCK." Except as otherwise
discussed below or in the section "AMENDMENTS TO SPG'S CHARTER AND BY-LAWS," the
provisions of the SPG Charter and SPG By-laws described below remain unchanged
and are not affected by (i) the Amended SPG Charter and Amended SPG By-laws, if
the Required Vote is obtained, and (ii) the Alternative Amended SPG Charter and
Alternative Amended SPG By-laws, if the Required Vote is not obtained, but the
Majority Approval Vote is obtained.
The SPG Charter and SPG By-laws and certain Maryland statutes contain
provisions that may be deemed to have an anti-takeover effect and that may
delay, defer or prevent a tender offer or takeover attempt that a stockholder
might consider in its best interest, including an attempt that might result in a
premium over the market price for the shares held by stockholders. These
provisions are expected to discourage certain types of coercive takeover
practices and inadequate takeover bids and to encourage persons seeking to
acquire control of SPG to negotiate first with its Board of Directors. SPG's
management believes that the benefits of these provisions outweigh the potential
disadvantages of discouraging such proposals because, among other things,
negotiation of such proposals might result in an improvement of their terms.
EVALUATION OF BUSINESS COMBINATIONS AND CHANGES IN CONTROL
SPG's Charter provides that, when evaluating a proposed "business
combination" or "change in control" and determining what is in the best interest
of SPG and its stockholders, a director must give due consideration to all
relevant factors, including (i) the economic effect of the proposed transaction,
both immediate and long-term, upon SPG's stockholders, including stockholders,
if any, who do not participate in the transaction; (ii) the social and economic
effect of the proposed transaction on the employees of, customers of, and others
dealing with, SPG and in the communities in which SPG operates or is located;
(iii) whether the proposed transaction is acceptable based on the historical and
current operating results or financial condition of SPG; (iv) whether a more
favorable price could be obtained for SPG's stock or other securities in the
future; (v) the reputation and business practices of the offeror and its
management and affiliates as these factors would affect the employees of SPG;
(vi) the future value of the stock or any other securities of SPG; (vii) any
antitrust or other legal and regulatory issues that are raised by the proposed
transaction; and (viii) the business and financial condition and earnings
prospects of the potential acquiring person or entity, including, but not
limited to, debt service and other existing financial obligations, financial
obligations to be incurred in connection with the acquisition, and other likely
financial obligations of the acquiring person or entity. Pursuant to this
provision, the SPG Board of Directors may consider numerous judgmental or
subjective factors affecting a proposal, including certain non-financial
matters, and on the basis of these considerations may oppose and take any lawful
action to defeat a business combination or other transaction which, as an
exclusively financial matter, might be attractive to some, or a majority, of
SPG's stockholders.
ADDITIONAL CLASSES AND SERIES OF CAPITAL STOCK
The SPG Board of Directors is authorized to establish one or more classes
and series of capital stock, including series of preferred stock, from time to
time and to establish the number of shares in each class or series and to fix
the preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and conditions of
redemption of such class or series, without any further vote or action by the
stockholders (except in limited circumstances by holders of Series A Preferred
Stock), unless such action is required by applicable law or the rules of any
stock exchange or automated quotation system on which SPG's securities may be
listed or traded. The issuance of additional classes or series of capital stock
may have the effect of delaying, deferring or preventing a change in
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control of SPG without further action of its stockholders. The issuance of
additional classes or series of capital stock with voting and conversion rights
may adversely affect the voting power of the holders of capital stock of SPG,
including the loss of voting control to others. The ability of the SPG Board of
Directors to issue additional classes or series of capital stock, while
providing flexibility in connection with possible acquisitions and other
corporate purposes, could have the effect of making it more difficult for a
third party to acquire, or of discouraging a third party from acquiring, a
majority of the outstanding voting stock of SPG.
NUMBER OF DIRECTORS; FILLING VACANCIES; REMOVAL
The SPG Charter and SPG By-laws effectively fix the number of directors of
the SPG Board of Directors at nine. The SPG Charter and SPG By-laws provide
that, subject to any separate rights of holders of preferred stock, any vacancy
created by the resignation, death or removal of a Class B Director will be
filled by the holders of the Class B Common Stock, and that any vacancy created
by the resignation, death or removal of a Common Stock Director, may be filled
by a majority of the remaining directors or by the stockholders at a special
meeting. If such a vacancy has not been filled within 30 days after it occurs, a
special meeting of the holders of shares of SPG Common Stock and Class B Common
Stock must be called to fill the vacancy. Accordingly, the SPG Board of
Directors could temporarily prevent a stockholder from filling new directorships
with such stockholder's own nominees. If approved by the Required Vote, the
number of directors of the Simon DeBartolo Group will be fixed at 13, and
provisions with respect to the filling of vacancies of a director elected by the
holders of Class C Common Stock are described in "AMENDMENTS TO SPG'S CHARTER
AND BY-LAWS."
The SPG Charter and SPG By-laws provide that, subject to the right of
holders of any class separately entitled to elect one or more directors, if any
such right has been granted, directors may be removed only for cause and only
upon the affirmative vote of holders of at least a majority of the voting power
of all the then-outstanding shares entitled to vote generally in the election of
directors, voting together as a single class.
STOCKHOLDER MEETINGS
The SPG By-laws provide that stockholder action can be taken at an annual
meeting or at a special meeting of stockholders. While stockholders may take
action by written consent, such action requires the unanimous consent of the
stockholders entitled to vote on the matter. The SPG Charter requires
stockholders to give timely written notice to SPG of any stockholder proposals,
including nominations for directors, to come before an annual meeting. Special
meetings of stockholders may be called (i) by the Chairman of the Board or the
President, (ii) by a majority of the SPG Board of Directors, or (iii) with
certain exceptions, at the request of stockholders holding at least 25% of the
outstanding capital stock of SPG entitled to vote at the meeting.
ADVANCE NOTICE PROVISIONS FOR STOCKHOLDER NOMINATIONS AND STOCKHOLDER PROPOSALS
The SPG Charter and SPG By-laws establish an advance notice procedure for
stockholders to make nominations of candidates for election as directors or
bring other business before an annual meeting of stockholders of SPG. This
procedure provides that (i) only persons who are nominated by, or at the
direction of, the SPG Board of Directors, or by a stockholder who has given
timely written notice containing specified information to the Secretary of SPG
prior to the meeting at which directors are to be elected, will be eligible for
election as directors of SPG, and (ii) at an annual meeting only such business
may be conducted as has been brought before the meeting by, or at the direction
of, the Chairman of the SPG Board of Directors or by a stockholder who has given
timely written notice to the Secretary of SPG of such stockholder's intention to
bring such business before such meeting. In general, for notice of stockholder
nominations or business to be made at an annual meeting to be timely, such
notice must be received by SPG not less than 60 days nor more than 90 days prior
to the first anniversary of the previous year's annual meeting. Such notice must
contain information concerning the person or persons to be nominated or the
matters to be brought before the meeting and concerning the stockholder
submitting the proposal.
The purpose of requiring stockholders to give SPG advance notice of
nominations and other business is to afford the SPG Board of Directors a
meaningful opportunity to consider the qualifications of the proposed nominees
or the advisability of the other proposed business and, to the extent deemed
necessary or desirable by the SPG Board of Directors, to inform stockholders and
make recommendations about such qualifications or business, as well as to
provide a more orderly procedure for conducting meetings of stockholders.
Although the SPG By-laws do not give the SPG Board of Directors any power to
disapprove stockholder nominations for the election of directors or proposals
for action, they may have the effect of precluding a contest for the election of
directors or the consideration of stockholder proposals if the proper procedures
are not followed, and of discouraging or deterring a third party from conducting
a solicitation of proxies to elect its own slate of directors or to approve its
own proposal, without regard to whether consideration of such nominees or
proposals might be harmful or beneficial to SPG and its stockholders.
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DIRECTOR ACTION
The SPG Charter and SPG By-laws generally require that a majority of a
quorum is necessary to approve any matter to come before the SPG Board of
Directors; however, certain matters including sales of property, transactions
with the Simons (or, after the Merger, the DeBartolos) and certain affiliates
and certain other matters will also require approval of a majority of SPG's
Independent Directors. If approved by the Required Vote, the Amended SPG By-laws
will require that at least six of the Independent Directors approve the sale of
any property owned by any partnership in which SPG acts as general partner, and
the Amended SPG Charter requires that a majority of the Independent Directors
approve any transaction between the Simon DeBartolo Group on the one hand and
the Simons and/or the DeBartolos on the other hand. See "POLICIES OF THE SIMON
DeBARTOLO GROUP--Conflict of Interest Policies."
CERTAIN MARYLAND STATUTES
Under the MGCL, certain "business combinations" (including a merger,
consolidation, share exchange, or, in certain circumstances, an asset transfer
or issuance or reclassification of equity securities) between a Maryland
corporation and any person who beneficially owns ten percent or more of the
voting power of the corporation's shares or an affiliate of the corporation who,
at any time within the two-year period prior to the date in question, was the
beneficial owner of ten percent or more of the voting power of the
then-outstanding voting stock of the corporation (an "Interested Stockholder")
or an affiliate thereof are prohibited for five years after the most recent date
on which the Interested Stockholder became an Interested Stockholder.
Thereafter, any such business combination must be recommended by the board of
directors of such corporation and approved by the affirmative vote of at least
(a) 80% of the votes entitled to be cast by holders of outstanding voting shares
of the corporation and (b) two-thirds of the votes entitled to be cast by
holders of outstanding voting shares of the corporation other than shares held
by the Interested Stockholder with whom the business combination is to be
effected, unless, among other things, the corporation's stockholders receive a
minimum price (as defined in the MGCL) for their shares and the consideration is
received in cash or in the same form as previously paid by the Interested
Stockholder for its shares. These provisions of Maryland law do not apply,
however, to business combinations that are approved or exempted by the board of
directors of the corporation prior to the time that the Interested Stockholder
becomes an Interested Stockholder. The SPG Board of Directors has exempted from
these provisions of the MGCL any business combination with the Simons or the
officers of SPG (and, effective upon the Merger, with the DeBartolos), any
current or future affiliate or associate of theirs or any other person acting in
concert or as a group with any of the foregoing persons. The exemption may not
be revoked so long as any shares of Class B Common Stock remain outstanding
without obtaining the approval of a majority of such holders. If approved by the
Required Vote, similar provisions will be applicable to the Class C Common
Stock. See "AMENDMENTS TO SPG'S CHARTER AND BY-LAWS."
The MGCL provides that "control shares" (as defined below) of a Maryland
corporation acquired in a "control share acquisition" (as defined below) have no
voting rights except to the extent approved by a vote of two-thirds of the votes
entitled to be cast on the matter, excluding shares of stock owned by the
acquiror, by officers of the corporation or by directors who are employees of
the corporation. "Control shares" are voting shares of stock that, if aggregated
with all other such shares of stock previously acquired by the acquiror, or in
respect of which the acquiror is able to exercise or direct the exercise of
voting power, would entitle the acquiror to exercise voting power in electing
directors within one of the following ranges of voting power: (i) one-fifth or
more but less than one-third, (ii) one-third or more but less than a majority or
(iii) a majority of all voting power. Control shares do not include shares the
acquiring person is then entitled to vote as a result of having previously
obtained stockholder approval. A "control share acquisition" means the
acquisition of control shares, subject to certain exceptions.
A person who has made or proposes to make a control share acquisition, upon
satisfaction of certain conditions (including an undertaking to pay expenses),
may compel the board of directors to call a special meeting of stockholders to
be held within 50 days of demand to consider the voting rights of the shares. If
no request for a meeting is made, the corporation may itself present the
question at any stockholders meeting.
If voting rights are not approved at the meeting or if the acquiring person
does not deliver an acquiring person statement as required by the statute, then,
subject to certain conditions and limitations, the corporation may redeem any or
all of the control shares (except those for which voting rights have previously
been approved) for fair value determined, without regard to the absence of
voting rights for the control shares, as of the date of the last control share
acquisition or of any meeting of stockholders at which the voting rights of such
shares are considered and not approved. If voting rights for control shares are
approved at a stockholders meeting and the acquiror becomes entitled to vote a
majority of the shares entitled to vote, all other stockholders may exercise
appraisal rights. The fair value of the shares as determined for purposes of
such appraisal rights may not be less than the highest price per share paid by
the acquiror in the control share acquisition.
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The control share acquisition statute does not apply to shares acquired in
a merger, consolidation or share exchange if the corporation is a party to the
transaction, or to acquisitions approved or exempted by the charter or by-laws
of the corporation. The SPG By-laws contain a provision exempting from the
control share acquisition statute any and all acquisitions by any person of
SPG's shares of capital stock. No assurance can be given that such provision
will not be amended or eliminated at any point in the future.
The business combination statute and, if the foregoing exemption in the SPG
By-laws is rescinded, the control share acquisition statute could have the
effect of discouraging offers to acquire SPG and of increasing the difficulty of
consummating any such offer.
SIGNIFICANT DIFFERENCES BETWEEN THE CORPORATE
LAWS OF OHIO AND MARYLAND AND COMPARISON OF
RIGHTS OF HOLDERS OF DRC COMMON STOCK AND
SPG COMMON STOCK
GENERAL
SPG is incorporated under the laws of the State of Maryland and DRC is
incorporated under the laws of the State of Ohio. DRC shareholders, whose rights
as shareholders currently are governed by Ohio law, the DRC Articles and the DRC
Regulations, will become, upon consummation of the Merger and to the extent they
receive shares of SPG Common Stock, stockholders of SPG, and their rights as
stockholders will then be governed by Maryland law and the SPG Charter and SPG
By-laws. The following summary, which does not purport to be a complete
statement of the differences between the rights of SPG stockholders and the
rights of DRC shareholders, sets forth certain differences, including
differences which are material to DRC shareholders. The following summary is
qualified in its entirety by reference to the Ohio Statute and the MGCL, and to
the DRC Articles and DRC Regulations and the SPG Charter and SPG By-laws. Except
as otherwise discussed below or in the section "AMENDMENTS TO SPG'S CHARTER AND
BY-LAWS," the provisions of the SPG Charter and SPG By-laws described below
remain unchanged and are not affected by (i) the Amended SPG Charter and Amended
SPG By-laws, if the Required Vote is obtained, and (ii) the Alternative Amended
SPG Charter and Alternative Amended SPG By-laws, if the Required Vote is not
obtained, but the Majority Approval Vote is obtained.
CHANGES IN CONTROL
Certain provisions of the MGCL and the Ohio Statute, as well as provisions
of the DRC Articles, the DRC Regulations and the SPG Charter, may have the
effect of discouraging certain transactions that may involve an actual or
threatened change in control of SPG or DRC. Under the SPG Charter, the SPG Board
of Directors has the authority to classify and reclassify any unissued shares of
capital stock by setting or changing in any one or more respects the
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications or terms or conditions of redemption
of such shares of stock and may issue capital stock of any class or series from
time to time. The SPG Board of Directors' authority in this regard may enable it
to prevent a change in control of SPG. Except for the SPG Common Stock to be
issued as Merger Consideration and, if the Required Vote is obtained, the Class
C Common Stock, SPG has no present plan or intention to issue any capital stock,
including preferred stock. Under the Ohio Statute and the DRC Articles, the DRC
Board of Directors has similar authority to fix or change the terms of any
unissued shares of preferred stock of DRC, except that a vote of shareholders is
required to fix or change the voting rights of such preferred stock.
The MGCL contains provisions that may prevent, discourage or delay a change
in control of SPG. See "CERTAIN PROVISIONS OF SPG'S CHARTER AND BY-LAWS AND OF
MARYLAND LAW--Certain Maryland Statutes." While the Ohio Statute and other
provisions of Ohio law contain certain "business combination" and "control
share" provisions, the DRC Articles contain provisions making such laws not
applicable to DRC.
REMOVAL OF DIRECTORS
The SPG Charter provides that, subject to the rights of the holders of any
class separately entitled to elect one or more directors, a director may be
removed only for cause and only by the holders of a majority of the outstanding
shares entitled to vote for the election of directors, voting together as a
single class. Further, the SPG Charter provides that vacancies on the SPG Board
of Directors due to an increase in the number of directors may be filled by a
majority vote of the stockholders or a majority of the SPG Board of Directors as
increased. Vacancies due to other reasons may be filled by a vote of the
stockholders or a majority of the directors then in office, except that any
vacancy on the SPG Board of Directors of a director elected by the holders of
Class B Common Stock shall be filled by the holders of Class B Common Stock. Any
director chosen by the stockholders to fill a vacancy created by the removal of
a director shall hold office for
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the remainder of the term of the removed director. Any director chosen by the
SPG Board of Directors to fill a vacancy shall hold office until the next annual
meeting.
As described in greater detail under "AMENDMENTS TO SPG'S CHARTER AND
BY-LAWS," if the Required Vote is obtained and the Amended SPG Charter adopted
and approved, then (i) vacancies on the Board of Directors of the Simon
DeBartolo Group resulting from the death or disability of any Class C Director
must be filled by a candidate who is designated by holders of the Class C Common
Stock and who meets the qualifications and has been selected in accordance with
the procedures set forth in the Amended SPG Charter; (ii) any other vacancy of a
Class C Director occurring prior to the fourth anniversary of the Merger will
reduce the number of Class C Directors by the number of such vacancy, and the
Board of Directors of the Simon DeBartolo Group will fill the vacant position by
the majority vote of the entire Board of Directors of the Simon DeBartolo Group
(provided that if the number of Class C Directors is thereby reduced to zero,
the Class C Common Stock will immediately and automatically convert into SPG
Common Stock); (iii) a vacancy of one Class C Director occurring on or after the
fourth, but prior to the fifth, anniversary of the Merger will be filled by a
candidate who is designated by holders of the Class C Common Stock and who meets
the qualifications and has been selected in accordance with the procedures set
forth in the Amended SPG Charter, but vacancies with respect to both Class C
Directors during such period will reduce the number of Class C Directors by one
director, which director position will be filled by the majority vote of the
entire Board of Directors of the Simon DeBartolo Group; and (iv) a vacancy of
either or both Class C Directors occurring on or after the fifth anniversary of
the Merger will be filled by a candidate who is designated by holders of the
Class C Common Stock and who meets the qualifications and has been selected in
accordance with the procedures set forth in the Amended SPG Charter.
These provisions of the Amended SPG Charter may not be amended without the
affirmative vote of 80% of the aggregate votes entitled to be cast by the
holders of Equity Stock, voting together as a single class, a majority of the
aggregate votes entitled to be cast by the holders of Class B Common Stock and a
majority of the aggregate votes entitled to be cast by the holders of the Class
C Common Stock. The SPG By-laws provide that, in the event of a vacancy on the
SPG Board of Directors that is not filled by the remaining directors within 30
days after the vacancy occurs, or that a particular class of stockholders is
entitled to fill, the President shall call a special meeting of the class or
classes of stockholders that are entitled to elect the director position in
question.
The holders of Class B Common Stock have the right to elect four directors,
and the holders of SPG Common Stock and Class B Common Stock voting jointly as a
single class have the right to elect the remaining five directors. The holders
of Class B Common Stock will retain the right to elect four directors so long as
the Simons retain a specified percentage of the outstanding capital stock of
SPG. Neither the holders of SPG Common Stock nor the holders of Class B Common
Stock have cumulative voting rights in the election of directors, but the voting
of the Class B Common Stock is the subject of a voting trust. At least a
majority of the SPG Board of Directors must be SPG Independent Directors. If
approved by the Required Vote, holders of Class C Common Stock will be able to
elect two Class C Directors, and provisions with respect to the filling of
vacancy of such a Class C Director summarized above.
Under the DRC Regulations, a director may be removed from office only for
cause at a meeting of the shareholders called expressly for that purpose, by the
affirmative vote of the holders of at least 75% of the stock entitled to vote in
the election of directors. Vacancies on the DRC Board of Directors may be filled
for the unexpired portion of the term by a majority of the remaining directors.
The DRC Regulations provide that the DRC Board of Directors is composed of 11
directors, divided into three classes, serving terms of three years. Under the
DRC Articles, the holders of DRC Common Stock do not have cumulative voting
rights in the election of directors. At least a majority of the DRC Board of
Directors must be Independent Directors, as defined in the DRC Articles.
INDEMNIFICATION AND LIABILITY OF DIRECTORS AND OFFICERS
In general, directors, officers, employees and agents of both SPG and DRC
are entitled to indemnification to the fullest extent permitted by applicable
law.
Under the MGCL, a corporation may, and in certain circumstances must,
indemnify its officers, directors, employees or agents for expenses, judgments
or settlements actually and reasonably incurred by them in connection with suits
and other legal proceedings, unless (i) the act or omission was material to the
matter giving rise to the proceeding and either was committed in bad faith or
was the result of active and deliberate dishonesty; (ii) the person actually
received an improper personal benefit in money, property or services; or (iii)
in the case of any criminal proceeding, the person had reasonable cause to
believe that the act or omission was unlawful. Regardless, indemnification may
not be made to such persons in connection with a proceeding by or in the right
of the corporation in which the person seeking indemnification is found liable
to the corporation for receiving an improper personal benefit. The SPG Charter
provides that no subsequent amendment or repeal of the SPG Charter shall limit
or eliminate the benefits provided to directors and officers under such
provision with respect to any act or omission which occurred prior to such
amendment or repeal, or shall limit or eliminate any rights granted under any
existing indemnification agreement. Under the MGCL, a corporation may adopt
procedures
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for advancing expenses to directors, officers and others without a case-by-case
determination of eligibility as long as, in the case of directors and officers,
they affirm their good faith belief that the standard of conduct necessary for
indemnification has been met and undertake to repay the amounts advanced if it
is ultimately determined that the director or officer was not entitled to
indemnification. The SPG Charter and SPG By-laws provide for the indemnification
of directors and officers to the fullest extent permitted by, and contain
provisions for advancing expenses in the manner provided under, the MGCL.
The Ohio Statute provides mandatory indemnification for expenses if an
individual is successful on the merits or otherwise in the defense of any
proceeding to which he was a party because he was an officer or director of the
corporation. In addition, the Ohio Statute permits, but does not require,
indemnification against any liability if the individual acted in good faith and
in a manner he reasonably believed to be in or not opposed to its best
interests. In the case of any criminal proceeding, the individual must have had
no reasonable cause to believe the conduct was unlawful. The Ohio Statute
contains provisions for the advancement of expenses, including the mandatory
advancement of expenses of directors who agree (i) to repay such amounts if it
is proved by clear and convincing evidence that his action or failure to act was
undertaken with deliberate intent to cause injury to the corporation or with
reckless disregard of its best interests and (ii) to reasonably cooperate with
the corporation concerning the proceeding. The Ohio Statute also permits an Ohio
corporation to expand upon the indemnification scheme of the statute through
provisions in its articles of incorporation or regulations, or through
resolutions of its board of directors or shareholders, insurance, indemnity
contracts and self-insurance. In accordance with this authority, the DRC
Regulations provide for, among other things, mandatory indemnification in
situations where the standards for permissive indemnification under the Ohio
Statute are met.
Both the MGCL and the Ohio Statute have provisions limiting the personal
liability of directors.
Under the MGCL, a director's obligation to SPG and its stockholders is
limited to discharging his duties as a director in good faith, with the care an
ordinarily prudent person in a like position would exercise under similar
circumstances, and in a manner the director reasonably believes to be in the
best interests of the corporation. The MGCL also permits a corporation to
include in its charter provisions expanding or limiting the liability of
directors or officers for money damages, so long as such provisions do not limit
the liability of directors or officers for (i) the amount of any improper
benefit or profit in money, property or services actually received or (ii) a
judgment adverse to the director or officer based on a finding in the proceeding
that the person's action, or failure to act, resulted from active and deliberate
dishonesty and was material to the causes of action adjudicated in the
proceeding. The SPG Charter limits the liability of directors and officers to
the fullest extent allowed by the MGCL.
Under the Ohio Statute, a director's responsibility to DRC and its
shareholders is to discharge his duties as a director in good faith, with the
care an ordinarily prudent person in a like position would exercise under
similar circumstances, and in a manner the director reasonably believes to be in
or not opposed to the best interests of the corporation. A director is not
liable to the corporation for monetary damages resulting from a breach of these
standards unless it is proved by clear and convincing evidence that his action
or failure to act was undertaken with deliberate intent to cause injury to the
corporation or with reckless disregard for its best interests.
The MGCL and Ohio Statute provisions limiting the liability of directors
may not affect either the availability of equitable relief, including
injunctions, or the liability of directors for violations of the federal
securities laws.
CERTAIN VOTING RIGHTS
In general, the MGCL requires two-thirds of the outstanding shares entitled
to vote thereon to approve certain mergers, consolidations, share exchanges, or
transfers of assets. Under the MGCL, the board of directors of a surviving
corporation need not submit a plan of merger to its stockholders if (i) the
merger does not reclassify or change the surviving corporation's outstanding
stock or otherwise amend its charter and (ii) the number of shares, if any, of
common stock of the surviving corporation to be issued in connection with the
merger does not exceed 15% of the number of shares of the same class or series
outstanding immediately prior to the merger. The NYSE, however, may require
stockholder approval as a prerequisite to listing shares to be issued in certain
mergers or other acquisition transactions, such as where the transaction would
result in the present or potential increase of 20% or more in the outstanding
shares of common stock of the acquiring corporation.
The Ohio Statute requires the affirmative vote of the holders of at least
two-thirds of the outstanding shares entitled to vote thereon to approve
mergers, consolidations, asset sales, voluntary dissolution and certain other
transactions. Under the Ohio Statute, the shareholders of the surviving
corporation are required to approve a merger only if (i) the articles or
regulations of the surviving corporation then in effect require adoption by the
shareholders; (ii) the agreement conflicts with the articles or regulations of
the surviving corporation then in effect or changes the articles or regulations
or authorizes any action that, if authorized apart from the merger, would
require adoption by the shareholders; (iii) the merger involves the issuance or
transfer of shares by the surviving corporation to the shareholders of another
constituent
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corporation of such number of shares as entitle the holders of shares
immediately after the consummation of the merger to exercise one-sixth or more
of the voting power of the corporation in the election of directors; or (iv) the
agreement of merger makes such change in the directors of the surviving
corporation as would otherwise require action by the shareholders.
AMENDMENT OF ARTICLES OF INCORPORATION
Maryland law, as modified by the SPG Charter, generally requires the
affirmative vote of a majority of the aggregate votes entitled to be cast by
holders of the Equity Stock (considered for this purpose as a single class) to
amend the SPG Charter. Any amendment to provisions relating to limitation of
liability or indemnification of directors and officers, or certain business
combinations or changes in control, requires the affirmative vote of 80% of the
aggregate votes entitled to be cast thereon (considered for this purpose as a
single class). Any amendment to provisions relating to the Class B Common Stock
or to the governing of SPG by the SPG Board of Directors requires, in addition,
the affirmative vote of a majority of the aggregate votes entitled to be cast by
the holders of Class B Common Stock. If approved by the Required Vote, similar
provisions will be applicable to the Class C Common Stock. See "AMENDMENTS TO
SPG'S CHARTER AND BY-LAWS."
Under the DRC Articles, most amendments may be adopted by the affirmative
vote of the holders of a majority of the outstanding DRC Common Stock, except
that the vote of 66 2/3% of the outstanding DRC Common Stock is required to
amend, repeal or adopt provisions inconsistent with the limitations on share
ownership or the requirement of Independent Directors, as defined in the DRC
Articles, the vote of 75% of the outstanding voting preferred shares of DRC is
required to change the voting rights of such shares, and the vote of 80% of the
outstanding DRC Common Stock is required to amend, repeal or adopt any provision
relating to actions taken by written consent of the DRC Shareholders.
AMENDMENT OF BY-LAWS AND REGULATIONS
Except in certain limited circumstances, the SPG By-laws may be amended by
a two-thirds vote of the SPG Board of Directors (including the affirmative vote
of at least a majority of the Class B Directors) at any regular or special
meeting of the Board or by an 80% vote of the stock entitled to vote in the
election of directors (considered for this purpose as one class) cast at any
regular or special meeting of the stockholders called for that purpose. If
approved by the Required Vote, similar provisions will be applicable to the
Class C Common Stock. See "AMENDMENTS TO SPG'S CHARTER AND BY-LAWS."
The DRC Regulations may only be amended by the affirmative vote of the
holders of a majority of the voting power of DRC at a meeting of shareholders
called for that purpose, provided that certain sections regarding meetings of
shareholders and the composition of the DRC Board of Directors can only be
changed by a 75% vote of DRC's shareholders.
SPECIAL MEETINGS
Under the SPG By-laws, a special meeting of the stockholders of SPG may be
called by the Chairman of the Board, the President or a majority of the SPG
Board of Directors. The President shall call (i) a special meeting of the
holders of Class B Common Stock in the event of a vacancy on the Board from any
cause among the directors elected by the holders of Class B Common Stock and
(ii) a special meeting of the holders of SPG Equity Stock in the event of a
vacancy on the Board from any cause among the Common Stock Directors that is not
filled within 30 days after the vacancy occurs. If approved by the Required
Vote, similar provisions will be applicable to the Class C Common Stock. See
"AMENDMENTS TO SPG'S CHARTER AND BY-LAWS." Under Maryland law, a special meeting
of stockholders also may be called by stockholders entitled to cast at least 25%
of the votes at such meeting; however, a special meeting need not be called to
consider any matter which is substantially the same as a matter voted on at any
special meeting of stockholders held during the preceding 12 months unless the
meeting is requested by stockholders entitled to cast a majority of all the
votes entitled to be cast at the meeting.
The DRC Regulations provide that a special meeting of the shareholders may
be called by the Chairman of the Board, Vice Chairman, President or any Vice
President or by a majority of the directors and must be called upon the written
request of shareholders holding at least 50% of the shares entitled to vote at
such special meeting.
STOCKHOLDERS' ACTION WITHOUT MEETING
The MGCL provides that stockholders may take any action without a meeting
by unanimous written consent signed by each stockholder entitled to vote on the
matter, provided that each stockholder entitled to notice of the meeting but not
entitled to vote on the matter signs a written waiver of any right to dissent.
The DRC Articles and DRC Regulations prohibit shareholders from taking any
action by written consent.
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STOCKHOLDER NOMINATIONS AND PROPOSALS
The SPG By-laws provide that any stockholder desiring to make a nomination
for the election of directors or a proposal for new business at a meeting of
stockholders must submit written notice to the corporation generally not less
than 60 or more than 90 days in advance of the first anniversary of the
preceding year's annual meeting. See "CERTAIN PROVISIONS OF SPG'S CHARTER AND
BY-LAWS AND OF MARYLAND LAW--Advance Notice Provisions For Stockholder
Nominations and Stockholder Proposals." The DRC Regulations contain similar
provisions.
STOCKHOLDERS' INSPECTION RIGHTS
Under Maryland law, any stockholder has the right to inspect and copy the
by-laws, minutes of the proceedings of stockholders, annual statement of
affairs, and voting trust agreements on file at the corporation's principal
office. In addition, any Maryland stockholder or stockholders who together are,
and for at least six months have been, holders of record of at least five
percent of the outstanding stock of any class of the corporation may inspect and
copy the corporation's books of account, stock ledger and stockholders' list and
may require the corporation to produce a verified statement of affairs or
proposals.
Under the Ohio Statute, any shareholder, upon written demand stating the
specific purpose thereof, has the right for any reasonable and proper purpose to
inspect and copy the articles, regulations, books and records of account,
minutes, records of shareholders showing their names and addresses and number
and class of shares, and voting trust agreements, if any, on file with the
corporation.
DISSENTERS' RIGHTS
The MGCL provides for dissenters' rights in connection with certain
mergers, consolidations, asset sales and share exchanges, as well as with
certain amendments of a corporation's charter. Further, except for certain
instances in which the transaction is subject to the Business Combination
Provisions (as defined in the "GLOSSARY"), the MGCL eliminates dissenters'
rights with respect to shares of any class or series of stock listed on a
national securities exchange. Currently, SPG stockholders do not have
dissenters' rights with respect to their SPG Common Stock because SPG Common
Stock is listed on the NYSE.
The Ohio Statute also provides for dissenters' rights with respect to
certain mergers, asset sales and share exchanges, subject to certain exceptions.
Under the Ohio Statute, DRC's shareholders have dissenters' rights with respect
to the Merger. See "THE MERGER--Dissenting Shares."
INVESTMENT POLICIES
Neither SPG, in its Charter or By-laws, nor DRC, in its Articles or
Regulations, has a stated investment policy.
REDEMPTION AND RESTRICTIONS ON TRANSFERS
Both SPG and DRC have elected to be treated as REITs. See "THE
COMPANIES--SPG and DRC." The requirements for qualification of a corporation as
a REIT include the following: (i) management of the corporation by one or more
directors; (ii) beneficial ownership of the corporation evidenced by
transferable certificates of common stock; (iii) taxation of the corporation as
a domestic corporation but for Sections 856 through 859 of the Code; (iv) the
corporation is neither a financial institution nor an insurance company subject
to certain provisions of the Code; (v) calendar year taxable year; (vi)
beneficial ownership of the corporation held by 100 or more persons on 335 days
of each taxable year of 12 months; (vii) during the last half of each taxable
year, not more than 50% in value of the outstanding common stock of the
corporation is owned, directly or indirectly, by five or fewer individuals (as
defined in the Code); and (viii) adherence to certain specific income and asset
tests.
The SPG Charter provides that no person may directly or indirectly acquire
the beneficial or constructive ownership of more than 4.9% of Equity Stock
(based on the lower of outstanding shares, voting power or value) except for the
Simons (whose limit is 30%). In addition, the SPG Charter provides that each
share beneficially or constructively owned in violation of the ownership limit
shall be automatically converted into Excess Stock. Under the SPG Charter, SPG
may amend these provisions by a majority vote of its stockholders. If approved
by the stockholders, whether under the Amended SPG Charter or the Alternative
Amended SPG Charter, the Ownership Limit for the Simons and stockholders of SPG
other than the Simons will be 24% and 6%, respectively. See "AMENDMENTS TO SPG'S
CHARTER AND BY-LAWS."
Under the SPG Charter, any purported transfer of Equity Stock that results
in the issuance of Excess Stock shall be deemed to be a transfer of such Excess
Stock to SPG, as trustee of a trust for the exclusive benefit of the beneficial
owner of the Excess Stock. Shares of Excess Stock so held in trust shall be
issued and outstanding capital stock of SPG. Excess Stock is not transferable,
except under certain specified circumstances; however, the SPG Charter provides
that upon liquidation, dissolution, winding up and distribution of assets of
SPG, holders of Excess Stock will be entitled to receive,
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ratably with each other holder of SPG Common Stock and Excess Stock, that
portion of the assets of SPG available to such stockholders. SPG has the right
to repurchase Excess Stock, for a specified period, at a price per share
generally equal to the lesser of (i) the price per share in the transaction
which created such Excess Stock and (ii) the market price on the date SPG
exercises its repurchase right. Under the SPG Charter, the holders of Excess
Stock are not entitled to vote on any matters, except as required by the MGCL.
The DRC Articles contain similar provisions limiting ownership of DRC's
outstanding capital stock to 9.9% of the outstanding value or voting power and
imposing restrictions on the transfer of such capital stock.
SPG ANNUAL MEETING MATTERS
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Equity Stock and the SPG Units as of March 31, 1996 by (i) each
person known by SPG to be the beneficial owner of more than five percent of any
class of Equity Stock or SPG Units, (ii) each director of SPG, (iii) the Chief
Executive Officer of SPG and the four most highly compensated officers of SPG
other than the Chief Executive Officer and (iv) the directors and executive
officers of SPG as a group. Unless otherwise indicated in the footnotes, all of
the shares or SPG Units are owned directly, and the indicated person or entity
has sole voting and investment power. SPG has relied upon information supplied
by its officers, directors and certain stockholders and upon information
contained in filings with the Commission in completing this table.
<TABLE>
<CAPTION>
PERCENT OF PERCENT OF
NUMBER OF SHARES EQUITY STOCK SPG UNITS
NAME AND ADDRESS BENEFICIALLY OWNED BENEFICIALLY BENEFICIALLY
OF BENEFICIAL OWNER(1) (2)(3)(4) OWNED (5) OWNED (6)
- ------------------------------------------------------ ------------------ ------------ --------------------
<S> <C> <C> <C>
Birch Bayh............................................ 11,000 * *
William T. Dillard, II................................ 17,200(7) * *
Joseph R. Perella..................................... 11,000 * *
Terry S. Prindiville.................................. 12,000 * *
J. Albert Smith, Jr. ................................. 12,000 * *
Melvin Simon.......................................... 6,735,227(8)(9) 9.75% 7.00%
Herbert Simon......................................... 5,289,077(8)(9) 7.82% 5.48%
David Simon........................................... 2,556,276(9)(10) 3.94% 2.51%
Randolph L. Foxworthy................................. 162,503 * *
William J. Garvey..................................... 101,560 * *
James A. Napoli....................................... 78,190 * *
James M. Barkley...................................... 57,480 * *
MSA, Inc.............................................. 13,969,094(11) 19.10% 11.26%
Stichting Pensioenfonds ABP(12)....................... 5,347,750(13) 8.58% 0%
All directors and executive officers as a group (14
persons)............................................ 15,168,183(14) 19.60% 13.10%
</TABLE>
- ---------------
* Less than one percent
(1) Unless otherwise indicated, the address for each of the persons or
entities is 115 West Washington Street, Indianapolis, Indiana 46204.
(2) Includes the following shares of SPG Common Stock that may be purchased
pursuant to stock options that are exercisable within 60 days: Birch
Bayh--11,000; William Dillard, II--11,000; Joseph R. Perella--11,000;
Terry S. Prindiville--11,000; J. Albert Smith, Jr.--11,000; David
Simon--140,000; Randolph L. Foxworthy--70,000; William J. Garvey--70,000;
James A. Napoli--70,000; James M. Barkley--52,500; and all directors and
executive officers as a group--569,500.
(3) Includes the following shares of SPG Common Stock that may be received
upon exchange of SPG Units held by the following persons on March 20,
1996: Melvin Simon--6,697,817; Herbert Simon--5,245,476; David Simon--
2,403,436; Randolph L. Foxworthy--71,463; William J. Garvey--21,200; MSA,
Inc.--10,769,094; and all directors and executive officers as a
group--14,439,392. SPG Units held by limited partners are exchangeable
either for shares of SPG Common stock (on a one-to-one basis) or for cash,
as selected by the Independent Directors.
(4) Includes the following restricted shares which are subject to vesting
requirements: David Simon--8,190; Randolph L. Foxworthy--8,190; William J.
Garvey--8,190; James A. Napoli--8,190; James M. Barkley--4,980; and all
directors and executive officers as a group--50,205.
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(5) At March 20, 1996, there were 55,160,195 shares of SPG Common Stock,
3,200,000 shares of Class B Common Stock and 4,000,000 shares of Series A
Preferred Stock or an aggregate 62,360,195 shares of Equity Stock
outstanding. The percentages in this column assume that all options
exercisable within 60 days and SPG Units held by the person are exchanged
or exercised for shares of SPG Common Stock. The number of shares of SPG
Common Stock used to calculate the percentages does not give effect to the
exercise of options or exchange of SPG Units held by other persons.
(6) At March 20, 1996, there were 95,642,823 outstanding SPG Units, and
4,000,000 SPG preferred Units outstanding. At such date, SPG owned
58,360,195 Units and 4,000,000 SPG preferred Units. The percentages in
this column exclude the preferred units and assume that no SPG Units are
exchanged for shares of SPG Common Stock.
(7) Does not include 10,000 shares of SPG Common Stock owned by Mr. Dillard's
spouse, who has sole voting and investment power of such shares.
(8) Does not include any shares of Class B Common Stock or SPG Units owned by
MSA, Inc., which is owned 69% by Melvin Simon and 31% by Herbert Simon.
(9) Includes the following Units held by SFG Company, LLC: Melvin
Simon--323,704; Herbert Simon--66,062; David Simon--1,216,201; and MSA,
Inc.--132,124.
(10) Includes 1,132,282 SPG Units owned by trusts of which David Simon is a
beneficiary.
(11) Includes the 3,200,000 shares of SPG Common Stock issuable upon conversion
of Class B Common Stock held by MSA, Inc. By virtue of a voting trust
agreement, the shares of Class B Common Stock are held until December 20,
2003 by a voting trust and such trust is obligated to elect Melvin Simon,
Herbert Simon and David Simon as directors. Upon the occurrence of certain
events, the shares of Class B Common Stock convert automatically into an
equal number of shares of SPG Common Stock.
(12) The address of Stichting Pensioenfonds ABP is P.O. Box 2889, 6401 DJ
Herleen, The Netherlands.
(13) Includes 4,000,000 shares of Series A Preferred Stock which are convertible
on or after October 27, 1997 into shares of SPG Common Stock at a
conversion ratio of 0.9523809 to one.
(14) Does not include the 3,200,000 shares of Class B Common Stock and
10,769,094 SPG Units held by MSA, Inc. See Note (11).
ELECTION OF DIRECTORS
At the SPG Annual Meeting, nine directors are to be elected to serve until
the earlier of the Effective Time and the next annual meeting or until their
successors are elected and have qualified. Five directors are to be elected by
the holders of Equity Stock voting together as a single class and four directors
are to be elected by the holders of Class B Common Stock. Therefore, at the
Effective Time, each of the nine directors elected at the SPG Annual Meeting
will cease to be a member of the Board of Directors and (i) if the Required Vote
is obtained, the 13 persons identified under "MANAGEMENT OF SPG AND THE SIMON
DeBARTOLO GROUP BEFORE AND AFTER THE MERGER--Board of Directors of the Simon
DeBartolo Group" will become the members of the Board of Directors of the Simon
DeBartolo Group and (ii) if the Majority Approval Vote is obtained, the nine
persons identified under "CERTAIN ALTERNATIVE GOVERNANCE ARRANGEMENTS AND
RELATED MATTERS IF THE REQUIRED VOTE IS NOT OBTAINED--Board of Directors of the
Simon DeBartolo Group if the Required Vote is not Obtained" will become members
of the Board of Directors of the Simon DeBartolo Group. It is the intention of
the persons named in the Proxy hereby solicited to vote for the directors to be
elected by the holders of Equity Stock the five nominees named below, unless
otherwise specified in the Proxy. Each of such nominees is currently a director
and has held the position of director since the SPG IPO. Should any of these
nominees become unable to accept nomination or election (which is not
anticipated), it is the intention of the persons designated as proxies to vote
for the election of the remaining nominees and for such substitute nominees as
the SPG Board of Directors may designate.
Set forth below are the names of and certain other information regarding
the nominees for the five director positions to be elected by the holders of the
Equity Stock and the nominees for the four director positions to be elected by
the holders of Class B Common Stock at the SPG Annual Meeting. Information about
each nominee's ownership of equity securities of SPG appears in "--Security
Ownership of Certain Beneficial Owners and Management."
A plurality of the votes is required to elect directors. Abstentions and
broker non-votes will be treated as shares not voted and will have no effect on
such voting. Holders of Class B Common Stock have informed SPG that they intend
to cause all such shares to be voted in favor of the four nominees to be elected
by holders of Class B Common Stock listed below and for the five nominees to be
elected by the holders of Equity Stock.
THE SPG BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION
OF EACH OF THE NOMINEES NAMED BELOW.
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NOMINEES FOR COMMON STOCK DIRECTORS
For the biographies of Messrs. Bayh, Dillard, Prindiville and Smith, see
"MANAGEMENT OF SPG AND THE SIMON DeBARTOLO GROUP BEFORE AND AFTER THE
MERGER--Board of Directors of the Simon DeBartolo Group."
Joseph R. Perella, 54, is a Managing Director and member of the Operating
Committee of Morgan Stanley. He was Chairman of the Board of Wasserstein Perella
& Company, a firm specializing in mergers and acquisitions, from February 1988
until September 1, 1993. Prior to February 1988, Mr. Perella was Managing
Director and Co-Head of Investment Banking of The First Boston Corporation, an
investment banking firm.
NOMINEES FOR CLASS B DIRECTORS
For the biographies of Messrs. David Simon, Herbert Simon and Melvin Simon,
see "MANAGEMENT OF SPG AND THE SIMON DeBARTOLO GROUP BEFORE AND AFTER THE
MERGER--Board of Directors of the Simon DeBartolo Group."
For a biography of Mr. Foxworthy, see "MANAGEMENT OF SPG AND THE SIMON
DeBARTOLO GROUP BEFORE AND AFTER THE MERGER--Management of SPG Prior to the
Merger."
ATTENDANCE AND COMMITTEES OF THE BOARD OF DIRECTORS
The SPG Board of Directors held four meetings during 1995. The SPG Board of
Directors has established four standing committees: the Compensation Committee,
the Audit Committee, the Executive Committee and the Nominating Committee. All
directors attended 75% or more of the meetings of the SPG Board of Directors and
each committee on which they served.
The Compensation Committee, which consists of Herbert Simon and Messrs.
Bayh and Prindiville, sets remuneration levels for officers of the SPG, reviews
significant employee benefit programs and establishes, as it deems appropriate,
and administers executive compensation programs, including bonus plans, stock
option and other equity-based programs, deferred compensation plans and any
other cash or stock incentive programs. The Compensation Committee met twice
during 1995.
The Audit Committee, which consists of Messrs. Dillard, Perella and Smith,
makes recommendations concerning the engagement of independent public
accountants, reviews with the independent public accountants the scope of the
audit engagement, reviews the independent public accountants' letter of comments
and management's responses thereto, approves professional services provided by
the independent public accountants, reviews the independence of the independent
public accountants, reviews any major accounting changes made or contemplated,
considers the range of audit and non-audit fees, and reviews the adequacy of
SPG's internal accounting controls. The Audit Committee met twice during 1995.
The Executive Committee, which consists of Melvin Simon, Herbert Simon and
David Simon, approves the acquisition and disposition of real property,
authorizes the execution of certain contracts and agreements, including those
related to the borrowing of money by SPG, and generally exercises all other
powers of the SPG Board of Directors between meetings of the SPG Board of
Directors, except in cases where action of the entire SPG Board of Directors is
required by the SPG Charter, SPG By-laws or applicable law and except where
action by Common Stock Directors is required by SPG's conflict of interest
policies. The Executive Committee met once during 1995.
The Nominating Committee, which consists of Herbert Simon, David Simon and
Messrs. Bayh, Prindiville and Smith, nominates persons to serve as directors who
are elected by the holders of voting Equity Stock. In considering persons to
nominate, the Nominating Committee will consider persons recommended by
stockholders. The Nominating Committee met once in 1995.
The SPG By-laws require that each committee except the Audit Committee and
the Nominating Committee must have as a member at least one director elected by
the holders of Class B Common Stock. The entire Audit Committee and a majority
of both the Compensation and Nominating Committees must be composed of Common
Stock Directors. Further, the Nominating Committee is required to have at least
two members who were elected as directors by the holders of Class B Common
Stock.
At the meeting of directors to be held following the SPG Annual Meeting,
the SPG Board of Directors will reappoint members of the Board to the four
standing committees.
COMPENSATION OF DIRECTORS
SPG pays its directors who are not employees of SPG annual compensation of
$20,000 plus $1,000 for attendance (in person or by telephone) at each meeting
of the SPG Board of Directors or a committee thereof. Directors of SPG who are
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employees of SPG do not receive any compensation for their services as
directors. In addition, all directors are reimbursed for their expenses incurred
in attending directors' meetings.
Each director who is not an employee of SPG participates in its Director
Stock Option Plan (the "SPG Director Plan"). Each eligible director is
automatically granted options (the "SPG Director Options") to purchase at the
fair market value on the date of grant (i) 5,000 shares of SPG Common Stock upon
the director's initial election to the SPG Board of Directors and (ii) 3,000
shares of SPG Common Stock upon each reelection of such director to the SPG
Board of Directors. SPG Director Options become exercisable on the first
anniversary of the date of grant or at such earlier time as a change in control
of SPG (as defined in the SPG Director Plan) occurs, and remain exercisable
through the tenth anniversary of the date of grant. SPG Director Options that
are exercisable terminate 30 days after the optionee ceases to be a member of
the SPG Board of Directors. The SPG Board of Directors may amend, suspend or
discontinue the SPG Director Plan at any time. Certain specified amendments must
be approved by the holders of a majority of the issued and outstanding shares of
SPG Common Stock and Class B Common Stock entitled to vote.
SECTION 16(A) REPORTING
Section 16(a) of the Exchange Act requires SPG's directors, executive
officers and beneficial owners of more than ten percent of SPG's capital stock
to file reports of ownership and changes of ownership with the Commission and
the NYSE. Based solely on its review of the copies of such forms received by it,
and/or written representations from certain reporting persons, SPG believes
that, during the year ended December 31, 1995, its directors, executive officers
and beneficial owners of more than ten percent of SPG Common Stock have complied
with all filing requirements applicable to them. However, Messrs. Bayh, Dillard,
Perella, Prindiville and Smith inadvertently failed to report the May 1995 grant
of SPG Director Options on an annual report due February 15, 1996.
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EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation for
services in all capacities to SPG for the year ended December 31, 1995, for the
two persons who served as Chief Executive Officer during 1995 and the four other
most highly compensated executive officers of SPG for the year ended December
31, 1995 (the "Named Executives"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------
ANNUAL COMPENSATION RESTRICTED SECURITIES
NAME AND --------------------- STOCK UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS(1) AWARDS(2) OPTIONS(3) COMPENSATION(4)
- ----------------------------- ---- -------- -------- ---------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Herbert Simon 1995(6) $200,468 -- -- -- $ 1,277
Chief Executive Officer(5) 1994 200,468 -- -- -- 1,366
1993 200,468 -- -- -- 1,361
David Simon(7) 1995(6) $400,000 $102,735 $1,365,000 -- $10,996
Chief Executive Officer(5) 1994 374,039 150,000 -- -- 12,688
1993 250,000 -- -- 200,000 9,929
Randolph L. Foxworthy(7) 1995(6) $350,000 $ 75,000 $1,365,000 -- $12,170
Executive Vice President-- 1994 332,692 75,000 -- -- 12,418
Corporate Development 1993 250,000 -- -- 100,000 18,939
William J. Garvey(7) 1995(6) $348,077 $ 75,000 $1,365,000 -- $12,450
Executive Vice President-- 1994 312,019 60,000 -- -- 13,471
Property Development 1993 250,000 -- -- 100,000 18,544
James A. Napoli(7) 1995(6) $300,000 $100,000 $1,365,000 -- $11,773
Executive Vice President-- 1994 291,346 120,000 -- -- 13,145
Leasing 1993 245,577 -- -- 100,000 12,957
James M. Barkley(7) 1995(6) $228,269 $ 75,000 $ 830,000 -- $11,468
General Counsel and 1994 217,923 75,000 -- -- 11,806
Secretary 1993 208,000 -- -- 75,000 18,165
</TABLE>
- ---------------
(1) Bonus awards are accrued in the year indicated, but paid in the following
year.
(2) Pursuant to SPG's five-year Stock Incentive Program, a total of 1,000,000
restricted shares of SPG Common Stock were granted on March 22, 1995, having
a total value at the date of grant of $25.0 million. A portion of the
restricted shares awarded are earned if SPG attains annual and cumulative
targets for growth in Funds From Operations. See "--SPG Employee Plan--Stock
Incentive Program," below. The amounts indicated in the table represent the
total amount of restricted shares awarded which are subject to
performance-based conditions before they are earned and to subsequent
vesting requirements. Dividends are paid on restricted shares that are
earned. Earned shares vest in four installments of 25% on January 1 of the
year following the year in which the restricted shares are earned, provided
that the participant remains an employee immediately prior to the vesting
date. At December 31, 1995, the total number of restricted shares (and value
at such date) that have been earned by the persons named in the table were
as follows: Herbert Simon, 0 restricted shares ($0); David Simon, 8,190
restricted shares ($199,631); Randolph L. Foxworthy, 8,190 restricted shares
($199,631); William J. Garvey, 8,190 restricted shares ($199,631); James A.
Napoli, 8,190 restricted shares ($199,631); and James M. Barkley, 4,980
restricted shares ($121,388).
(3) Represents options to acquire SPG Common Stock granted under the SPG
Employee Plan (as defined in the "GLOSSARY"). SPG has not granted any stock
appreciation rights (SARs).
(4) Represents annualized amounts of (i) employer-paid contributions to 401(k)
retirement plan (the "SPG 401(k) Plan") and (ii) SPG-paid employee and
dependent life insurance premiums. Employer contributions to the 401(k)
retirement plan become vested 30% after completion of three years of
service, 40% after four years and an additional 20% after each additional
year until fully vested after seven years.
(5) Herbert Simon served as Chief Executive Officer through January 2, 1995.
(6) Amounts shown for 1993, SPG's first year of operations, represent annualized
amounts based on compensation for the period from December 20, 1993 to
December 31, 1993.
(7) Certain additional compensation was paid to these officers by MSA, Inc. for
services rendered for the benefit of MSA, Inc. during 1993.
OPTION EXERCISES AND YEAR-END VALUES
The following table sets forth information with respect to the unexercised
stock options granted to the Named Executives under the SPG Employee Plan and
held by them at December 31, 1995. No stock options were granted to the Named
Executives in 1995 and none of the Named Executives exercised any options during
1995.
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AGGREGATED OPTION EXERCISES IN 1995 AND
DECEMBER 31, 1995 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT DECEMBER 31, 1995 DECEMBER 31, 1995(1)
SHARES ACQUIRED VALUE ----------------------------- -----------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------- --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Herbert Simon(2)........... -- -- -- -- -- --
David Simon................ -- -- 140,000 60,000 $ 297,500 $ 127,500
Randolph L. Foxworthy...... -- -- 70,000 30,000 148,750 63,750
William J. Garvey.......... -- -- 70,000 30,000 148,750 63,750
James A. Napoli............ -- -- 70,000 30,000 148,750 63,750
James M. Barkley........... -- -- 52,500 22,500 111,563 47,813
</TABLE>
- ---------------
(1) The closing price of the SPG Common Stock as reported by the NYSE on
December 29, 1995 was $24.375. Value is calculated on the basis of the
difference between the exercise price and $24.375, multiplied by the number
of "in-the-money" shares of SPG Common Stock underlying the options.
(2) Herbert Simon is not eligible to participate in the SPG Employee Plan.
SPG EMPLOYEE PLAN
General. Under the SPG Employee Plan a maximum of 4,595,000 shares of SPG
Common Stock (subject to adjustment) are available for issuance to eligible
officers and key employees. The SPG Employee Plan is administered by the
Compensation Committee of the SPG Board of Directors (the "Compensation
Committee") which consists of persons not eligible to participate in the SPG
Employee Plan. During the ten-year period following the adoption of the SPG
Employee Plan, the Compensation Committee may, subject to the terms of the SPG
Employee Plan, grant to key employees (including officers and directors who are
employees) of the SPG Operating Partnership or its "affiliates" (as defined in
the SPG Employee Plan) the following types of awards: stock options (including
options with a reload feature), stock appreciation rights, performance units and
shares of restricted or unrestricted SPG Common Stock.
Any award granted under the SPG Employee Plan may be exercised over a
period determined by the Compensation Committee in its discretion. The exercise
price of an option may not be less than the fair market value of the shares of
the SPG Common Stock on the date of grant. The Compensation Committee may, in
its discretion, with the grantee's consent, amend, cancel, substitute,
accelerate the exercisability of or extend the scheduled expiration date of any
award, provided, however, that no award may be exercisable more than ten years
after the date of grant. The SPG Board of Directors in its capacity as the
general partner of SPG Operating Partnership may amend, suspend or discontinue
the SPG Employee Plan at any time. Certain specified amendments must be approved
by stockholders.
Option Grants. No options were granted under the SPG Employee Plan during
1995. All options granted to date under the SPG Employee Plan are exercisable at
the fair market value of the SPG Common Stock on the date of grant, have a
ten-year term, generally vest 40% on the first anniversary of the grant date and
an additional 30% on the second anniversary of the grant date, and generally
become 100% vested three years after the grant date.
Stock Incentive Program. Under SPG's five-year stock-based incentive
program (the "SPG Stock Incentive Program"), awards for an aggregate of
1,000,000 restricted shares of SPG Common Stock were granted in March 1995 under
the SPG Employee Plan to a total of 50 executive officers and key employees. A
percentage of the total number of shares awarded, ranging from 15% to 25%, may
be earned in each of the five years of the program if SPG attains annual and
cumulative targets for growth in Funds From Operations. The determination of
whether SPG has achieved its targets for a particular year is made in March of
the following year (the "SPG Determination Date") and, to the extent the targets
have been achieved, a portion of the awards of shares of restricted stock is
deemed to be earned as of the SPG Determination Date. Although the participant
is entitled to vote all earned shares and receive distributions paid thereon as
of the SPG Determination Date, earned shares vest in four installments of 25%
each on January 1 of each year following the year in which the SPG Determination
Date occurs. The participant must be employed by SPG on the day prior to the
vesting date to receive such shares; otherwise, the earned shares are forfeited.
INCENTIVE BONUS PLAN
The Incentive Bonus Plan (the "Bonus Plan") is intended to provide senior
executives and key employees with opportunities to earn incentives based upon
the performance of SPG, the participant's business unit and the individual
participant. At the beginning of a year, the Committee specifies the maximum
incentive pool available for distributions and approves performance measures for
each participant and three levels of performance that must be attained in order
to trigger the award of the bonuses. Each participant's bonus award for the year
is expressed as a percentage of base salary, a
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fixed dollar amount or a percentage of the available incentive pool. Bonus
amounts for each year are determined in the following February with disbursement
in March.
DEFERRED COMPENSATION PLAN
On December 1, 1995, the SPG Operating Partnership established a
non-qualified deferred compensation plan (the "Deferred Compensation Plan") for
the purpose of providing deferred compensation to certain executives and key
employees. Under the Deferred Compensation Plan, a participant may defer all or
a part of his compensation. SPG, at its discretion, may contribute a matching
amount equal to a rate selected by SPG, and an additional incentive contribution
amount on such terms as SPG may specify. All participant deferrals and SPG
matching and incentive contributions are credited to a participant's account and
remain general assets of SPG. A participant's elective deferrals are fully
vested. Except in the case of death or disability of the participant or
insolvency or a change in control of SPG, a participant becomes vested in SPG
matching and incentive contributions 20% after one year of service and an
additional 20% for each year thereafter. Upon death or disability of the
participant or insolvency or a change in control of SPG, a participant becomes
100% vested in his account.
All contributions under the Deferred Compensation Plan are deposited in
what is commonly referred to as a "rabbi trust" arrangement pursuant to which
the assets of the trust are subject to the claims of general creditors in the
event of SPG's insolvency. The trust assets are invested by the trustee in its
sole discretion. Payments of a participant's elective deferrals and vested
matching contributions are made as elected by the participant. These amounts
would be paid earlier in the event of termination of employment or death of the
participant, an unforeseen emergency affecting the participant or a change in
control of SPG.
OTHER RETIREMENT PLANS
The SPG Operating Partnership and certain related entities maintain the SPG
401(k) Plan. Effective October 1, 1993, the SPG 401(k) Plan permits participants
to defer up to a maximum of 12% of their compensation (as defined in the SPG
401(k) Plan), subject to certain limits imposed by the Code. Participants'
salary deferrals will be matched by participating employers in an amount equal
to 100% of the first two percent of such deferrals and 50% of the next four
percent of such deferrals. In addition, participating employers will contribute
annually three percent of eligible employees' compensation (as defined in the
SPG 401(k) Plan). Amounts deferred by employees will be immediately vested;
amounts contributed by participating employers will become vested 30% after the
completion of three years of service, 40% after the completion of four years of
service and an additional 20% after the completion of each additional year of
service until 100% vested after the completion of seven years of service.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The directors who served as members of the Compensation Committee during
1995 were Terry S. Prindiville, Birch Bayh and Herbert Simon. Herbert Simon
served as Chief Executive Officer of SPG through January 2, 1995. No other
member of the Compensation Committee during 1995 was an officer, employee or
former officer of SPG or any of its subsidiaries or had any relationship
requiring disclosure herein pursuant to regulations of the Commission. No
executive officer of SPG served as a member of a compensation committee or a
director of another entity under circumstances requiring disclosure herein
pursuant to regulations of the Commission.
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
GENERAL PRINCIPLES
As a general matter, SPG has adopted a compensation philosophy which
embraces the concept of pay for performance. SPG's strategy is to link executive
management compensation with SPG's performance and shareholder return and to
reward management for results that are consistent with the key goals of SPG.
This is described further below under "--Report of Compensation Committee on
Executive Compensation--1995 Executive Officer Compensation." SPG believes that
its compensation program attracts results-oriented employees and motivates them
to achieve higher levels of performance.
It is SPG's policy to establish executive officer base salary at levels
which are slightly below industry statistical norms for comparable REITs, while
providing significant additional compensation opportunities through programs
which are linked directly to SPG performance.
1995 CEO COMPENSATION
On January 2, 1995, Herbert Simon, who had served as Chief Executive
Officer of SPG since its formation, was appointed Co-Chairman of the Board and
David Simon, who had served as President and Chief Operating Officer of SPG
since its formation, was appointed Chief Executive Officer. Herbert Simon was
paid a base salary of $200,468 for 1995 and did not participate in the Bonus
Plan or the SPG Employee Plan. David Simon was paid a base salary of $400,000
for
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1995 and was paid a bonus of $102,734 in March 1996 with respect to 1995
performance. No stock options were granted to David Simon under the SPG Employee
Plan during 1995. At December 31, 1995, he held vested options to acquire
140,000 shares of SPG Common Stock and options to acquire an additional 60,000
shares that had not yet vested. Of David Simon's total award under the SPG Stock
Incentive Program of 54,600 shares of restricted stock, 8,190 shares were earned
in 1995 because SPG met its targets for growth in Funds From Operations for
1994. Based on information provided by SPG's compensation consultants,
management believes that David Simon's total compensation in 1995 was in the
50th percentile for chief executive officers of REITs with assets in excess of
$600.0 million.
1995 EXECUTIVE OFFICER COMPENSATION
SPG compensates its executive officers through four principal elements. The
first element, base pay, is determined through a review and analysis of peers in
the REIT industry in order to determine reasonable and competitive compensation
levels. The second element is participation in a discretionary Bonus Plan. Under
the Bonus Plan, participants have opportunities to participate in an incentive
pool depending upon performance of SPG, the participant's business unit and the
individual participant. Bonuses of $507,735 were paid in 1996 to the seven
eligible executive officers with respect to 1995 performance. See "--Executive
Compensation--Incentive Bonus Plan." The two remaining compensation elements are
intended to link executive compensation more directly to increases in value of
the SPG Common Stock. The third element consists of option awards under the SPG
Employee Plan. Although no options were granted in 1995, at December 31, 1995
the seven eligible executive officers held vested options to acquire an
aggregate of 514,500 shares that were previously granted under the SPG Employee
Plan. The fourth element consists of awards of restricted stock under the SPG
Stock Incentive Program whereby awards of restricted shares are earned if the
performance-based goals of the program are met. Of the total of 334,700 shares
of restricted stock awarded to the seven eligible executive officers under the
SPG Stock Incentive Program, 50,205 shares were earned in 1995 because SPG met
its targets for growth in Funds From Operations for 1994. See "--Executive
Compensation--SPG Employee Plan." SPG believes that each element of its
executive compensation program attracts results-oriented individuals and
motivates them to achieve levels of performance which are consistent with the
performance goals of SPG and its stockholders.
Terry S. Prindiville
Birch Bayh
Herbert Simon
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PERFORMANCE GRAPH
The following line graph sets forth a comparison of the percentage change
in the cumulative total stockholder return on the SPG Common Stock compared with
the cumulative total return of the S&P Composite--500 Stock Index and the NAREIT
Equity REIT Total Return Index for the period December 14, 1993, the date on
which trading of the SPG Common Stock commenced, through December 31, 1995. The
graph assumes an investment of $100 on December 14, 1993, a reinvestment of
dividends and actual increase of the market value of the SPG Common Stock
relative to an initial investment of $100. The comparisons in this table are
required by the Commission and are not intended to forecast or be indicative of
possible future performance of the SPG Common Stock.
<TABLE>
<CAPTION>
[Performance Graph]
NAREIT Eq-
Simon Prop- uity REIT
Measurement Period erty Group, Total Return
(Fiscal Year Covered) Inc. Index S&P 500
<S> <C> <C> <C>
12/14/93 100 100 100
12/31/93 101.68539 99.903418 100.71093
12/31/94 117.21202 103.16565 101.31307
12/31/95 124.9298 115.2696 137.42578
</TABLE>
CERTAIN TRANSACTIONS
TRANSACTIONS WITH THE SIMONS
SPG has entered into noncompetition agreements with Melvin Simon, Herbert
Simon and David Simon, all of whom are executive officers of SPG. Pursuant to
such agreements and except as set forth below, Melvin Simon and Herbert Simon
are prohibited from engaging in the shopping center business in North America
other than through SPG or as passive investors until the later of (i) December
20, 2003 or (ii) the date that they are no longer directors or officers of SPG
and David Simon is prohibited from engaging in the shopping center business in
North America other than through SPG and, with certain exceptions, for two years
thereafter if he resigns or is terminated for cause. The foregoing restrictions
will not prohibit Melvin Simon, Herbert Simon or David Simon from having an
ownership interest in the Excluded Properties and in the SPG Management Company,
and serving as directors and officers of the SPG Management Company. It is
anticipated that such commitments will not, in the aggregate, involve a material
amount of time, but no assurance can be given in this regard. In addition,
Melvin Simon and Herbert Simon may pursue other investment activities in which
they are currently engaged.
The Simons continue to own, in whole or in part, the Excluded Properties.
The SPG Management Company has entered into management agreements with the
partnerships that hold the Excluded Properties, some of which agreements were
not negotiated on an arm's-length basis. SPG's management believes, however,
that the terms of such management agreements are fair to SPG.
In connection with the use of the aggregate proceeds of the SPG IPO and
related financing to repay certain indebtedness encumbering SPG's properties,
SPG repaid approximately $180 million of indebtedness owed to the Simons, which
represented loans made by the Simons in lieu of third-party financing. Of this
amount, approximately $110 million
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was used by the Simons to pay income taxes and other third-party obligations
associated with their real estate business. In addition, the Simons were
released from personal liability under guaranties provided by the Simons by
substituting guaranties by SPG, or the provision by SPG of back-up guaranties in
favor of the Simons, on approximately $111 million of such debt. The Simons
remain personally liable under guaranties for approximately $345 million of
indebtedness encumbering SPG's properties.
With respect to a partnership that owns a regional mall, in the event that
SPG decides not to purchase the interest of its partner in the partnership
pursuant to a right that may be triggered in the future under the partnership
agreement to buy the interest of its partner, SPG and the Simons have agreed
that the Simons will have the right to cause SPG to exercise its purchase right
and to designate the Simons as assignees of the interest that SPG purchases from
its partner and, assuming the Simons' right is exercised, the Simons will
purchase the partner's interest acquired by SPG at the price paid by SPG and
become SPG's partner in the partnership. A similar arrangement existed for
another partnership until September 25, 1995, when the SPG Operating Partnership
acquired the remaining ownership interest in East Towne Mall in Knoxville,
Tennessee. The purchase involved the repayment of $75.0 million in existing debt
and payment of $18.5 million for the remaining ownership.
SPG MANAGEMENT COMPANY
Of the outstanding voting common stock of the SPG Management Company, 95%
is owned by the Simons, which will enable the Simons to control the election of
the Board of Directors of the SPG Management Company. The SPG Operating
Partnership owns common stock representing 80% of the value of the outstanding
stock of the SPG Management Company, all of the outstanding participating
preferred stock of the SPG Management Company and a mortgage note of the SPG
Management Company, which entitles SPG to more than 90% of the anticipated
after-tax economic benefits, in the form of dividends and interest, of the SPG
Management Company. The SPG Management Company must receive the approval of a
majority of the Common Stock Directors in order to provide services for any
property not currently managed by the SPG Management Company unless SPG owns at
least a 25% interest in such property. The SPG Management Company has agreed
with SPG that, if in the future SPG is permitted by applicable tax law and
regulations to conduct any or all of the activities that are now being conducted
by the SPG Management Company, the SPG Management Company will not compete with
SPG with respect to new or renewal business of this nature. See "THE
MERGER--Certain Transactions and Agreements Relating to the Merger" for a
discussion of the SPG Management Company's purchase of the DRC Management
Company. See also "RISK FACTORS--Conflicts of Interest Related to the
Merger--Continuing Substantial Influence of the Simons and the DeBartolos."
RELATIONSHIP WITH MORGAN STANLEY
During 1995, Morgan Stanley acted as a co-managing underwriter of SPG's
offering of 6,241,854 shares of SPG Common Stock. Joseph R. Perella, a director
of SPG, is a Managing Director of Morgan Stanley.
RELATIONSHIP WITH BAYH, CONNAUGHTON & MALONE, P.C.
During 1995, SPG engaged the Washington, D.C. law firm of Bayh, Connaughton
& Malone, P.C. to provide certain legal services. Birch Bayh, a director of SPG,
is a shareholder of such firm.
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The SPG Board of Directors has selected Arthur Andersen LLP as SPG's
independent accountants for 1996, subject to stockholder ratification. Arthur
Andersen LLP has served as SPG's independent accountants since SPG's inception.
SPG expects that representatives of Arthur Andersen LLP will be present at
the SPG Annual Meeting and will be afforded an opportunity to make a statement
if they desire to do so. Such representatives of Arthur Andersen LLP will be
available at that time to respond to appropriate questions addressed to the
officer presiding at the SPG Annual Meeting.
THE SPG BOARD OF DIRECTORS RECOMMENDS THAT ITS STOCKHOLDERS VOTE FOR THE
RATIFICATION OF THE SELECTION OF ARTHUR ANDERSEN LLP AS SPG'S INDEPENDENT
ACCOUNTANTS FOR 1996.
SPG STOCKHOLDER PROPOSALS
The date by which stockholder proposals must be received by SPG for
inclusion in the proxy materials relating to the 1997 annual meeting of
stockholders is November 30, 1996. Proposals must comply with all of the
requirements of Rule 14a-8 of the Commission as well as the requirements set
forth in the SPG By-laws. A copy of the SPG By-laws may be obtained from James
M. Barkley, General Counsel and Secretary, Simon Property Group, Inc., 115 West
Washington Street, Indianapolis, Indiana 46204.
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EXPERTS
SPG
The audited financial statements and schedule of SPG incorporated by
reference in the Registration Statement of which this Prospectus/Joint Proxy
Statement is a part, to the extent and for the periods indicated in their
reports, have been audited by Arthur Andersen LLP, independent public
accountants, and are incorporated by reference herein in reliance upon the
authority of said firm as experts in giving said reports.
DRC
The audited financial statements and schedules of DRC incorporated by
reference in the Registration Statement of which this Prospectus/Joint Proxy
Statement is a part, to the extent and for the periods indicated in their
report, have been audited by Ernst & Young LLP, independent public accountants,
and are incorporated by reference herein in reliance upon the authority of said
firm as experts in giving said report.
LEGAL MATTERS
The validity of the issuance of the shares of SPG Common Stock offered
pursuant to this Prospectus/Joint Proxy Statement will be passed upon by Piper &
Marbury L.L.P., Baltimore, Maryland, as counsel to SPG, and certain tax matters
related to SPG as described under "THE MERGER--Federal Income Tax Considerations
Relating to SPG" and certain tax matters as described under "THE MERGER--Federal
Income Tax Consequences to Holders of DRC Common Stock" will be passed upon by
Paul, Weiss, Rifkind, Wharton & Garrison, New York, New York and by Willkie Farr
& Gallagher, New York, New York.
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GLOSSARY
Unless the context otherwise requires, the following capitalized terms
shall have the meanings set forth below for the purposes of this
Prospectus/Joint Proxy Statement:
"Affiliate" means, with respect to any person, (i) any member of the
immediate family of such person; (ii) any partner, trustee, beneficiary or
shareholder of such person; (iii) any legal representative, successor or
assignee of any person referred to in the preceding clauses (i) and (ii); (iv)
any trustee or trust for the benefit of any person referred to in the preceding
clauses (i) through (iii); or (v) any entity which, directly or indirectly
through one or more intermediaries, controls, is controlled by, or is under
common control with, such person referred to in the preceding clauses (i)
through (iv).
"Alternative Amended SPG By-laws" means the amendments to the SPG By-laws
adopted by the SPG Board of Directors that will become effective upon the
effectiveness of the Alternative Amended SPG Charter if the Amended SPG Charter
and the Amended SPG By-laws are not adopted and approved by the Required Vote.
"Alternative Amended SPG Charter" means the amendments to the SPG Charter
proposed to be adopted by the stockholders of SPG if the Amended SPG Charter and
Amended SPG By-laws are not adopted and approved by the Required Vote.
"Amended Operating Partnership Agreement" means the Fifth Amended and
Restated Limited Partnership Agreement of the Operating Partnership to become
effective at the Effective Time among DRC as general partner, SPG as
non-managing general partner and the limited partners thereof.
"Amended SPG By-laws" means the Amended and Restated By-laws of SPG
proposed to be adopted by the Required Vote.
"Amended SPG Charter" means the Amended and Restated Articles of
Incorporation of SPG proposed to be adopted by the Required Vote.
"Amended SPG Partnership Agreement" means the Third Amended and Restated
Agreement of Limited Partnership of the SPG Operating Partnership to become
effective at the Effective Time between SPG as general partner and DRC as
special limited partner.
"Articles Supplementary" means the Articles Supplementary, dated as of
October 26, 1995, to the SPG Charter, which Articles Supplementary are filed as
an exhibit to SPG's Annual Report on Form 10-K for the year ended December 31,
1995, which Annual Report on Form 10-K is incorporated by reference into this
Prospectus/Joint Proxy Statement.
"BJS" means BJS Capital Partners L.P.
"BJS Registration Rights Agreement" means the registration rights
agreement, dated as of March 26, 1996, between BJS and SPG.
"Benefit Plans" means any bonus, pension, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase, stock
option, phantom stock, retirement, vacation, severance, disability, death
benefit, hospitalization, medical or other employee benefit plan, arrangement or
understanding (whether or not legally binding) providing benefits to any current
or former employee, officer or director.
"Blackstone" means The Blackstone Group L.P.
"Blackstone Opinion" means each and any opinion rendered by Blackstone in
connection with the Merger.
"Bonus Plan" means the Incentive Bonus Plan of SPG.
"Break-Up Fee" means an amount equal to the lesser of (i) $35.0 million and
(ii) the maximum amount payable to SPG as a transaction termination fee without
causing it to fail to qualify as a REIT.
"Built-in Gain" means, with respect to any REIT, the excess of the fair
market value of any property acquired by such REIT at the beginning of the
applicable Restriction Period over such REIT's adjusted basis in such asset as
of the beginning of such Restriction Period.
"Built-in Gain Rules" means the guidelines issued by the IRS in IRS Notice
88-19.
"Business Combination Provisions" means provisions contained in the MGCL
which may prevent, discourage or delay a change in control of SPG.
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"Cash Available for Distribution" means net income (computed in accordance
with generally accepted accounting principles), excluding gains (or losses) from
debt restructuring and sales of property, plus depreciation and amortization,
less operating capital expenditures not funded by tenants, and after similar
adjustments for unconsolidated partnerships and joint ventures.
"Cash Tender Agreement" means the existing agreement between DRC and the
DeBartolos setting forth the rights and conditions of the rights to exchange DRC
interests for cash.
"Certificate of Merger" means a certificate of merger on a form prescribed
by the Secretary of State of the State of Ohio executed in accordance with
Section 1701.81 of the Ohio Statute.
"Certificates" means certificates which immediately prior to the Effective
Time represented outstanding shares of DRC Common Stock.
"Class B Common Stock" means the Class B common stock, par value $.0001 per
share, of SPG.
"Class B Directors" means directors of SPG (or the Simon DeBartolo Group as
the context requires) elected by the holders of the Class B Common Stock.
"Class C Common Stock" means the Class C Common Stock, par value $.0001 per
share, of SPG proposed to be created under the Amended SPG Charter.
"Class C Directors" means directors of the Simon DeBartolo Group elected by
the holders of the Class C Common Stock.
"Closing Date" means the closing date of the Merger.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission.
"Common Stock Directors" means directors of SPG or the Simon DeBartolo
Group (as the case may be) elected by the holders of the SPG Common Stock, the
Class B Common Stock, the Series A Preferred Stock and, if applicable, the Class
C Common Stock, voting together as a single class.
"Comparable Companies" means a group of eight publicly traded companies
engaged primarily in the ownership, management, operation and acquisition of
regional mall properties which Merrill Lynch deemed to be reasonably comparable
to SPG and DRC for the purpose of its analysis.
"Compensation Committee" means the SPG Board of Directors' committee which
administers the SPG Employee Plan.
"Competing Transaction" means any of the following (other than the
transactions contemplated by the Merger Agreement or a transaction with SPG):
(i) any merger, consolidation, share exchange, business combination or other
similar transaction; (ii) any sale, lease, exchange, mortgage, pledge, transfer
or other disposition of 40% or more of the assets of DRC in a single transaction
or series of transactions, excluding any bona fide financing transactions which
do not, individually or in the aggregate, have as a purpose or effect the sale
or transfer of control of such assets; (iii) any tender offer or exchange offer
for 40% or more of the outstanding shares of capital stock of DRC or the filing
of a registration statement under the Securities Act in connection therewith; or
(iv) any public announcements of a proposal, plan or intention to do any of the
foregoing or any agreement to engage in any of the foregoing.
"Contribution Agreement" means, collectively, the agreements to be
effective as of the Effective Time among DRC, SPG and participating SPG Limited
Partners.
"control share acquisition" means the acquisition of control shares,
subject to certain exceptions.
"control shares" means voting shares of stock that, if aggregated with all
other such shares of stock previously acquired by the acquiror, or in respect of
which the acquiror is able to exercise or direct the exercise of voting power,
would entitle the acquiror to exercise voting power in electing directors within
one of the following ranges of voting power: (i) one-fifth or more but less than
one-third, (ii) one-third or more but less than a majority or (iii) a majority
of all voting power.
"Conversion Formula" means the formula used to determine the number of
shares of SPG Common Stock into which a share of Series A Preferred Stock will
be convertible, assuming that all conditions to convertibility are met, pursuant
to the Articles Supplementary. Each share of Series A Preferred Stock will be
convertible into the number of shares of SPG Common Stock equal to $25.00
divided by the Conversion Price in effect at the time of conversion. As of
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March 31, 1996, such number was 0.9523809. This description of the Conversion
Formula does not purport to be complete and is qualified in its entirety by
reference to the Articles Supplementary.
"Conversion Price" means, as of March 31, 1996, $26.25. In the event of a
stock dividend, stock split or similar event, the Conversion Price shall be
adjusted as follows: the Conversion Price after such event shall be the result,
calculated to the nearest $0.0001, of the Conversion Price immediately prior to
such event, divided by the number of shares of SPG Common Stock a holder of one
share of such SPG Common Stock would have been entitled to receive upon such
event. The adjustment of the Conversion Price is described more specifically in
the Articles Supplementary. This description of the Conversion Price and
adjustments thereto does not purport to be complete and is qualified in its
entirety by reference to the Articles Supplementary.
"Covered Sale" means any sale or other taxable disposition of any property
listed on Exhibit C to the Amended Operating Partnership Agreement which sale or
disposition would result in the allocation of pre-contribution gain under
Section 704(c) of the Code to a DRC Limited Partner.
"DeBartolo Seat" means the Class B Director seat held by a DeBartolo
pursuant to the Stockholders Agreement in the event that the Amended SPG Charter
and Amended SPG By-laws are not adopted.
"DeBartolos" means the estate of Edward J. DeBartolo, Edward J. DeBartolo,
Jr., M. Denise DeBartolo York, EJDC and certain of their affiliates and includes
certain other DeBartolo family members and estates and trusts established for
their benefit.
"Deferred Compensation Plan" means the non-qualified deferred compensation
plan established by the SPG Operating Partnership on December 1, 1995.
"Dissenting Shareholders" means holders of shares of DRC Common Stock who
do not vote in favor of adoption of the Merger Agreement and who otherwise
comply with the requirements of Ohio law respecting the perfection of
dissenters' rights.
"Dissenters' Shares" means shares of DRC Common Stock to which dissenters'
rights have been perfected.
"DRC" means DeBartolo Realty Corporation, an Ohio corporation, and, where
the context indicates, entities owned or controlled by DRC, including, without
limitation, the DRC Operating Partnership and DeBartolo Capital Partnership.
"DRC Affiliate" means the DRC Management Company, the DRC Operating
Partnership, DeBartolo Capital Partnership and any other subsidiary of DRC or
any partnership, joint venture or business trust in which the DRC Operating
Partnership has an interest.
"DRC Articles" means DRC's Amended and Restated Articles of Incorporation
in effect on the date hereof.
"DRC Board of Directors" means the Board of Directors of DRC.
"DRC Common Stock" means the common shares, par value $.01 per share, of
DRC.
"DRC Interests" means the partnership interests in the DRC Operating
Partnership.
"DRC IPO" means the initial public offering of DRC Common Stock in April,
1994.
"DRC Limited Partners" means the DeBartolos and the other limited partners
of the DRC Operating Partnership.
"DRC Management Company" means DeBartolo Properties Management, Inc., an
Ohio corporation.
"DRC Noncompetition Agreement" means the agreement among DRC, EJDC and
certain members of the DeBartolo family setting forth noncompete restrictions on
the parties.
"DRC Operating Partnership" means DeBartolo Realty Partnership, L.P., a
Delaware limited partnership of which DRC is the sole managing general partner.
"DRC Partnership Agreement" means the agreement between DRC as general
partner of the DRC Operating Partnership and the DRC Limited Partners, as
amended and restated through the date hereof.
"DRC Portfolio Properties" means any income producing property in which DRC
holds, directly or indirectly, an interest.
"DRC Predecessor" means the shopping center business of EJDC immediately
prior to the DRC IPO, other than properties not transferred to DRC as part of
the DRC IPO.
"DRC Record Date" means the date fixed for the determination of
shareholders of DRC entitled to notice of the meeting of DRC shareholders at
which the proposal to adopt the Merger Agreement is to be submitted.
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"DRC Registration Rights Agreement" means the agreement among DRC, certain
of the DeBartolos and BJS, setting forth registration rights of the DRC Common
Stock.
"DRC Regulations" means the Regulations of DRC in effect on the date
hereof.
"DRC Shareholder Approvals" means the approval of the Merger Agreement by
the vote of the holders of DRC Common Stock required to approve the Merger
Agreement and the transactions contemplated thereby.
"DRC Special Meeting" means the special meeting of shareholders of DRC to
which this Prospectus/Joint Proxy Statement relates to be held at DRC's
corporate offices at 7655 Market Street, Youngstown, Ohio, on August 6, 1996, at
11:00 a.m., Youngstown time.
"DRC Stock Incentive Plan" means the DRC 1994 Stock Incentive Plan.
"DRC Stock Options" means stock options granted under the DRC Stock
Incentive Plan.
"EBITDA" means earnings before interest, taxes, depreciation and
amortization for all properties. EBITDA after minority interest represents
earnings before interest, taxes, depreciation and amortization for all
properties after distribution to the third-party joint venture partners. EBITDA:
(i) does not represent cash flow from operations as defined by generally
accepted accounting principles; (ii) should not be considered as an alternative
to net income as a measure of operating performance or to cash flows from
operating, investing and financing activities; and (iii) is not an alternative
to cash flows as a measure of liquidity.
"Effective Time" means the effective time of the Merger which will be
simultaneous with the filing of the Certificate of Merger with the Secretary of
State of the State of Ohio.
"EJDC" means The Edward J. DeBartolo Corporation, an Ohio corporation.
"EJDC Sales Rights" means the right of EJDC to dispose of up to 30% of the
Units held by EJDC (together with its affiliates) at the Effective Time in each
of 1996, 1997 and 1998 in order to satisfy amortization requirements aggregating
approximately $320 million under certain outstanding indebtedness of EJDC.
"Employment Agreement" means the employment agreement among SAS and Richard
S. Sokolov to be effective as of the Effective Time.
"Equity Stock" means, collectively, the SPG Common Stock, Class B Common
Stock and Series A Preferred Stock as well as any other capital stock of SPG
that may be issued on or after the date hereof.
"Excess Stock" means the shares of Excess Stock, par value $0.0001 per
share, of SPG.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Agent" means First National Bank of Chicago.
"Exchange Ratio" means, with respect to each share of DRC Common Stock,
sixty-eight one-hundredths (0.68) of a share of SPG Common Stock.
"Exchange Rights Agreement" means the existing agreement between DRC and
DRC Limited Partners setting forth terms of exchange rights of DRC Interest into
DRC Common Stock.
"Excluded Properties" means properties in which the Simons own an interest
that were not transferred to SPG or the SPG Management Company in connection
with the SPG IPO.
"Excluded Retail Properties" means retail properties in which the Simons or
the DeBartolos own an interest that are not included in the Portfolio Properties
and that are the subject of options in favor of SPG or DRC.
"FFO Multiple" means the ratio of the common stock trading price to Funds
From Operations per share.
"FIRPTA" means Foreign Investment in Real Property Tax Act of 1980.
"First Call" means an on-line data service available to subscribers which
compiles securities estimates developed by research analysts.
"Funds From Operations" means, except as otherwise specified in this
Prospectus/Joint Proxy Statement, net income before depreciation and
amortization on real estate property assets, gains or losses from extraordinary
items, gains or losses on sales of real estate, gains or losses on investments
in marketable securities and any provision/ benefit for income taxes for such
period, plus the allocable portion, based on ownership interest, of funds from
operations of unconsolidated entities all determined on a consistent basis in
accordance with generally accepted accounting principles. For a discussion of
"Funds From Operations," as used in the rendering of the opinions of SPG's and
DRC's respective
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financial advisors and in the historical and pro forma financial statements
included herein, see "THE PROPOSED MERGER AND RELATED MATTERS--Opinion of
Financial Advisor to SPG" and "--Opinions of Financial Advisors to DRC" and
"SUMMARY--Summary Pro Forma Combined and Selected Historical Financial Data" and
"PRO FORMA COMBINED AND SELECTED HISTORICAL FINANCIAL DATA."
"GLA" means gross leasable area.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.
"Independent Directors" means (i) with respect to SPG, the Common Stock
Directors, (ii) with respect to DRC, the directors not employed by or affiliated
with any of the DeBartolos and not employed by DRC and (iii) with respect to the
Simon DeBartolo Group, directors neither employed by the Simon DeBartolo Group
nor affiliated with either the Simons or the DeBartolos.
"Interested Stockholder" means (i) a person who beneficially owns ten
percent or more of the voting power of a Maryland corporation's shares or (ii)
an affiliate of the corporation who, at any time within the two-year period
prior to the date in question, was the beneficial owner of ten percent or more
of the voting power of the then-outstanding voting stock of the corporation.
"IRS" means the Internal Revenue Service.
"JCP" means JCP Realty, Inc.
"Joint Venture Properties" means Portfolio Properties which, following the
Merger, will be less than wholly-owned, directly or indirectly, by the Operating
Partnership or the SPG Operating Partnership.
"Junior Stock" means any shares of SPG capital stock that are junior to the
Series A Preferred Stock of SPG as to dividends and upon liquidation,
distribution or winding up of SPG.
"Letter of Transmittal" means a letter of transmittal which shall specify
that delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon delivery of the Certificates to the Exchange Agent.
"Limited Partners" means the Simons, the DeBartolos and the other limited
partners of the Operating Partnership.
"Liquidation" or "liquidation" means any liquidation, dissolution or
winding up of the affairs of SPG.
"Majority Approval Vote" means the affirmative vote of not less than a
majority, but less than 80%, of the aggregate votes entitled to be cast by the
holders of Equity Stock (voting as single class) with respect to the SPG
Proposal at the SPG Special Meeting.
"Mall Comparables" means a set of companies deemed by Morgan Stanley to be
reasonably comparable to DRC and SPG consisting of CBL & Associates, Properties,
Inc., General Growth Properties, Inc., The Macerich Company, Taubman Centers
Inc., Urban Shopping Centers, Inc. and The Rouse Co.
"Management Companies" means, collectively, the DRC Management Company and
the SPG Management Company.
"Merger" means the proposed merger of Sub with and into DRC pursuant to the
Merger Agreement and the payment of the Merger Consideration to DRC's
shareholders by SPG.
"Merger Agreement" means the Agreement and Plan of Merger, dated as of
March 26, 1996, as amended, among SPG, Sub and DRC, a copy of which is attached
to this Prospectus/Joint Proxy Statement as Annex I.
"Merger Consideration" means, with respect to each share of DRC Common
Stock, sixty-eight one-hundredths (0.68) of a share of SPG Common Stock, plus a
cash payment (as more fully described in the Merger Agreement) in lieu of any
fraction of a share.
"Merger Proposal" means the proposal to adopt the Merger Agreement.
"Merrill Lynch" means Merrill Lynch & Co.
"Merrill Lynch Opinion" means each and any opinion rendered by Merrill
Lynch in connection with the Merger.
"MGCL" means the Maryland General Corporation Law.
"Morgan Stanley" means Morgan Stanley & Co. Incorporated.
"Morgan Stanley Opinion" means each and any opinion rendered by Morgan
Stanley in connection with the Merger.
"MSA, Inc." means Melvin Simon & Associates, Inc., an Indiana corporation.
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"Named Executives" means SPG's Chief Executive Officer and the four other
most highly compensated executive officers of SPG.
"NAREIT" means the National Association of Real Estate Investment Trusts,
an industry trade group.
"New Registration Rights Agreement" means the new registration rights
agreement to be executed on or prior to the Effective Time, granting
registration rights to the shares of SPG Common Stock issuable upon exchange of
Units held by the Simons and the DeBartolos.
"Non-U.S. Stockholders" means non-resident alien individuals, foreign
corporations, foreign partnerships, and foreign trusts and estates.
"NYSE" means the New York Stock Exchange.
"Ohio Statute" means the General Corporation Law of Ohio, Chapters 1701,
1704 and 1707 of the Ohio Revised Code.
"Operating Partnership" means the DRC Operating Partnership (to be renamed
Simon DeBartolo Group, L.P.) following the Effective Time.
"Other Seat" means the Common Stock Director seat on the Board of Directors
of the Simon DeBartolo Group to be held by a DeBartolo pursuant to the
Stockholders Agreement in the event that the Amended SPG Charter and Amended SPG
Bylaws are not adopted.
"Other Transaction Agreements" means, collectively, the Contribution
Agreement, the Stock Purchase Agreement and the Termination Agreement.
"Other Transactions" means, collectively, the transactions relating to the
Merger contemplated by the Other Transaction Agreements.
"Owned GLA" means the GLA of the SPG Portfolio Properties owned by the SPG
Operating Partnership.
"Ownership Interest" means, with respect to any person, the equity interest
in the Simon DeBartolo Group represented by any SPG Common Stock, Class B Common
Stock, Class C Common Stock, Series A Preferred Stock and Units held by such
person, expressed as a percentage of the aggregate equity interest in the Simon
DeBartolo Group, computed as of March 26, 1996 and giving effect to the Merger.
"Ownership Limit" means, after giving effect to the adoption of the SPG
Proposal by the stockholders of SPG, (i) in the case of the Simons, 24% of the
value of the outstanding Equity Stock of SPG and (ii) in the case of any other
person, six percent of the lesser of the number or value of the issued and
outstanding capital stock of SPG other than any shares of Excess Stock.
"Ownership Percentage" means the respective percentages of the outstanding
shares of SPG Common Stock of the Simon DeBartolo Group which would be owned by
the former DRC shareholders and by the SPG stockholders if all Units in both the
Operating Partnership and the SPG Operating Partnership were converted into
shares of the respective corporations prior to the Merger.
"Partnerships" means, collectively, (i) prior to the Merger, the DRC
Operating Partnership and the SPG Operating Partnership and (ii) following the
Merger, the Operating Partnership and the SPG Operating Partnership.
"Payout Ratio" means the ratio of dividends to Funds From Operations.
"Portfolio Properties" means properties of both SPG and DRC after giving
effect to the Merger (any income-producing property in which the Simon DeBartolo
Group holds, directly or indirectly, an interest).
"Principal Group Limited Partner" means any Limited Partner, together with
its Affiliates, which holds, as of any date, five percent or more of the
outstanding Units as of such date.
"Property Partnership" means any property-holding partnership in which an
interest is held by the Simon DeBartolo Group.
"Registration Statement" means the Registration Statement of which this
Prospectus/Joint Proxy Statement is a part filed by SPG on Form S-4 and any
amendments, exhibits, annexes and schedules thereto.
"REIT" means a real estate investment trust as defined pursuant to sections
856 through 860 of the Code.
"REIT Requirements" means sections 856 through 860 of the Code and
applicable Treasury Regulations, which are the requirements for qualifying as a
REIT.
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"Reform Act" means the Private Securities Litigation Reform Act of 1995, as
amended.
"Related Agreements" means the Stockholders Agreement, the Amended
Operating Partnership Agreement, the Amended SPG Partnership Agreement, the New
Registration Rights Agreement and the BJS Registration Rights Agreement.
"Related Party Tenant" means a tenant of which a REIT (or an owner of ten
percent or more of the REIT), directly or constructively owns ten percent or
more.
"Reorganization" means a reorganization under Section 368(a) of the Code.
"Required Vote" means the affirmative vote of not less than 80% of the
aggregate votes entitled to be cast by holders of Equity Stock (voting as a
single class).
"Resale Shares" means the SPG Common Stock to be received and sold from
time to time by BJS pursuant to the Merger.
"Restriction Period" means, with respect to any REIT, the ten-year period
beginning on the date such asset was acquired by such REIT.
"Rights Holders" means the entities granted rights under the New
Registration Rights Agreement.
"SAS" means Simon Property Administrative Service Partnership, L.P., an
indirect majority-owned subsidiary of SPG.
"Securities Act" means the Securities Act of 1933, as amended.
"Series A Preferred Stock" means the Series A Preferred Stock of SPG, par
value $.0001 per share.
"Severance Program" means the Severance Program of DRC and the DRC
Management Company.
"Simon DeBartolo Group" means Simon DeBartolo Group, Inc., a Maryland
corporation (formerly SPG), including, where the context indicates, entities
owned or controlled by the Simon DeBartolo Group, including, without limitation,
the Surviving Subsidiary Corporation, the Operating Partnership and the SPG
Operating Partnership.
"Simon Noncompetition Agreements" means the noncompetition agreements
between SPG and each of Melvin Simon, Herbert Simon and David Simon.
"Simons" means Melvin Simon, Herbert Simon, David Simon and certain of
their affiliates and includes certain other Simon family members and estates,
trusts and other entities established for their benefit.
"Special Committee" means a special committee, to be established under the
Alternative Amended By-laws, consisting of three directors of the Simon
DeBartolo Group, none of whom are employed by the Simon DeBartolo Group or
affiliated with any of the Simons or DeBartolos.
"Special Distribution" means the distribution to be made by each of SPG and
DRC to their respective stockholders and shareholders equal to SPG's or DRC's
(as the case may be) most recent quarterly distribution rate multiplied by the
number of days elapsed since the last distribution record date through and
including the Effective Time, and divided by 91.
"SPG" means Simon Property Group, Inc., a Maryland corporation, and where
the context indicates, entities owned or controlled by the Simon DeBartolo
Group, including, without limitation, the Surviving Subsidiary Corporation, the
Operating Partnership and the SPG Operating Partnership.
"SPG Annual Meeting" means the 1996 annual meeting of stockholders of SPG
to which the Prospectus/Joint Proxy Statement relates to be held at SPG's
corporate offices at the Indianapolis Hyatt Regency, One South Capitol Avenue,
Indianapolis, Indiana, on August 6, 1996, immediately following the SPG Special
Meeting.
"SPG Board of Directors" means (i) prior to the Merger, the Board of
Directors of SPG and (ii) following the Merger, the Board of Directors of the
Simon DeBartolo Group.
"SPG By-laws" means the By-laws of SPG, as amended, supplemented and
corrected and in effect on the date hereof.
"SPG Charter" means the Articles of Incorporation of SPG, as amended,
supplemented and corrected and in effect on the date hereof.
"SPG Common Stock" means the common stock, par value $0.0001 per share, of
SPG, and after the Merger, of Simon DeBartolo Group.
155
<PAGE> 170
"SPG Determination Date" means the date in a given year on which SPG
determines whether the growth target for the previous year has been achieved
with respect to stock-based incentive awards.
"SPG Director Options" means stock options issued under the SPG Director
Plan.
"SPG Director Plan" means SPG's Director Stock Option Plan.
"SPG Employee Plan" means the SPG Operating Partnership's Employee Stock
Plan.
"SPG Exchange Rights" means the rights of holders of SPG Units (or
following the Merger, Units) to exchange their SPG Units (or following the
Merger, Units) for shares of SPG Common Stock or cash, at the option of SPG (or
following the Merger, the Simon DeBartolo Group).
"SPG 401(k) Plan" means the tax-qualified retirement savings plan to be
maintained by SPG for eligible employees.
"SPG IPO" means the initial public offering of SPG Common Stock consummated
in December, 1993.
"SPG Limited Partners" means the Simons and the other limited partners of
the SPG Operating Partnership.
"SPG Management Company" means M.S. Management Associates, Inc., a Delaware
corporation.
"SPG Meetings" means, collectively, the SPG Annual Meeting and the SPG
Special Meeting.
"SPG Operating Partnership" means Simon Property Group, L.P., a Delaware
limited partnership that is a majority-owned subsidiary of SPG.
"SPG Partnership Agreement" means the agreement between SPG as general
partner of the SPG Operating Partnership and the SPG Limited Partners, as
amended and restated through the date hereof.
"SPG Portfolio Properties" means any income producing property in which SPG
holds an interest directly or indirectly.
"SPG Predecessor" means the business of the Simons existing immediately
prior to the formation of SPG, other than the Simons' interest in certain
excluded properties not transferred to SPG as part of the SPG IPO.
"SPG Proposal" means the single proposal for which SPG is seeking approval
by the Required Vote which, if adopted, will have the effect of (i) approval of
the Merger Agreement and (ii) approval of certain amendments to the SPG Charter
and SPG By-laws (including the election of the 13 persons to the SPG Board of
Directors as set forth in such amendments to the SPG Charter).
"SPG Record Date" means the record date of the SPG Common Stock for
purposes of voting on the SPG Proposal.
"SPG Special Meeting" means the special meeting of stockholders of SPG to
which this Prospectus/Joint Proxy Statement relates to be held at the
Indianapolis Hyatt Regency, One South Capitol Avenue, Indianapolis, Indiana on
August 6, 1996, at 10:00 a.m., Indianapolis time.
"SPG Stock Incentive Program" means the SPG five-year stock-based incentive
program.
"SPG Stock Option Plans" means collectively the SPG Employee Plan and the
SPG Director Plan.
"SPG Stockholder Approvals" means the approval of the Merger Agreement by
the vote of the holders of the SPG Common Stock required to approve the Merger
Agreement and the Other Transactions.
"SPG Units" means the partnership units in the SPG Operating Partnership.
"SPG's Counsel" means Paul, Weiss, Rifkind, Wharton and Garrison, counsel
to SPG.
"Stay Bonus" means the incentive stay bonus to be allocated among
participants in the DRC Incentive Plan who remain in the employ of DRC or a DRC
Affiliate through the Effective Time.
"Stock Purchase Agreement" means the agreement, dated as of March 26, 1996,
between EJDC and the SPG Management Company.
"Stockholders Agreement" means the agreement, dated as of March 26, 1996,
among SPG, DRC, certain of the Simons and certain of the DeBartolos.
"Sub" means Day Acquisition Corp., an Ohio corporation.
"Sub Common Stock" means the common shares, without par value, of Sub.
156
<PAGE> 171
"Superior Competing Transaction" means a bona fide proposal of a Competing
Transaction made by a third party which a majority of the members of the DRC
Board of Directors determines in good faith (based on the advice of DRC's
investment banking firm of national reputation) to be more favorable from a
financial point of view to DRC's shareholders than the Merger.
"Surviving Subsidiary Corporation" means DeBartolo Realty Corporation (to
be renamed SD Property Group, Inc. following the Effective Time).
"Termination Agreement" means the agreement executed on March 26, 1996
among DRC, certain DRC Affiliates and members of the DeBartolo family.
"Termination Fee" means the lesser of (i) $35.0 million and (ii) the
maximum amount payable to the DRC Operating Partnership as a transaction
termination fee that would not cause DRC to fail to qualify as a REIT to be paid
by SPG if the Merger Agreement is terminated if SPG fails to obtain all
non-governmental third-party consents which if not obtained would have a
material adverse effect on SPG.
"TIN" means the taxpayer identification number.
"Total Market Capitalization" means, in respect of any person, the market
value of issued and outstanding shares of capital stock of such person and
shares of such capital stock that may be issued in exchange for or on conversion
of other interests in such person plus total consolidated debt.
"Transfer and Gains Taxes" means all returns, questionnaires, applications
or other documents regarding any real property transfer or gains (including,
without limitation, any New York State Tax on Gains Derived from Certain Real
Property Transfers and New York State Real Estate Transfer Tax), sales, use,
transfer, value added stock transfer and stamp taxes, any transfer, recording,
registration and other fees and any similar taxes which become payable in
connection with the Merger and the Other Transactions (together with any related
interests, penalties or additions to tax).
"Treasury Regulations" means the regulations implementing the Code.
"TRS" means the Teacher's Retirement System of the State of Illinois.
"UBTI" means unrelated business taxable income within the meaning of
section 512 and section 514 of the Code.
"Units" means units (excluding preferred units) of interest in the
Operating Partnership.
"U.S. Stockholder" means a holder of shares of SPG Common Stock that (for
United States federal income tax purposes) is (i) a citizen or resident of the
United States, (ii) a corporation, partnership, or other entity created or
organized in or under the laws of the United States or of any political
subdivision thereof or (iii) an estate or trust the income of which is subject
to United States federal income taxation regardless of its source.
157
<PAGE> 172
ANNEXES TO
PRELIMINARY PROXY STATEMENT
OF
SIMON PROPERTY GROUP, INC.
AND
DEBARTOLO REALTY CORPORATION
<PAGE> 173
INDEX TO ANNEXES
ANNEX I............................................AGREEMENT AND PLAN OF MERGER,
AS AMENDED
ANNEX II...............................................OPINION OF MERRILL LYNCH
ANNEX III.............................................OPINION OF MORGAN STANLEY
ANNEX IV..................................................OPINION OF BLACKSTONE
ANNEX V.............................................SECTION OF THE OHIO STATUTE
RELATING TO DISSENTERS' RIGHTS
ANNEX VI.................................................. PROPOSED AMENDED AND
RESTATED CHARTER OF SPG
ANNEX VII................................................. PROPOSED ALTERNATIVE
AMENDED CHARTER OF SPG
ANNEX VIII................................................ PROPOSED AMENDED AND
RESTATED BY-LAWS OF SPG
<PAGE> 174
ANNEX I
AGREEMENT AND PLAN OF MERGER, AS AMENDED
<PAGE> 175
FINAL EXECUTION COPY
________________________________________________________________________________
AGREEMENT AND PLAN OF MERGER
Dated as of March 26, 1996,
Among
SIMON PROPERTY GROUP, INC.,
DAY ACQUISITION CORP.
And
DeBARTOLO REALTY CORPORATION
________________________________________________________________________________
<PAGE> 176
TABLE OF CONTENTS
Page
ARTICLE I
The Merger
SECTION 1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 1.2 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 1.3 Effective Time . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 1.4 Effects of the Merger . . . . . . . . . . . . . . . . . . . 4
SECTION 1.5 Charter and Code of Regulations. . . . . . . . . . . . . . 4
SECTION 1.6 Directors . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 1.7 Officers . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE II
Effect of the Merger on the Capital Stock
of the Constituent Corporations;
Exchange of Certificates
SECTION 2.1 Effect on Capital Stock . . . . . . . . . . . . . . . . . . 4
(a) Cancellation of Treasury Stock . . . . . . . . . . 4
(b) Conversion of Common Stock . . . . . . . . . . . . 4
(c) Conversion of Shares of Common Stock
of Sub . . . . . . . . . . . . . . . . . . . . . . 5
(d) Dissenting Shares . . . . . . . . . . . . . . . . . 5
SECTION 2.2 Exchange of Certificates . . . . . . . . . . . . . . . . . . 6
(a) Exchange Agent . . . . . . . . . . . . . . . . . . 6
(b) Parent To Provide Merger Consideration . . . . . . 6
(c) Exchange Procedure . . . . . . . . . . . . . . . . 6
(d) Record Dates; Distributions with Respect to
Unexchanged Shares . . . . . . . . . . . . . . . . 7
(e) No Further Ownership Rights in Common
Stock . . . . . . . . . . . . . . . . . . . . . . . 8
(f) No Liability . . . . . . . . . . . . . . . . . . . 8
(g) No Fractional Shares . . . . . . . . . . . . . . . 9
(h) Withholding Rights . . . . . . . . . . . . . . . . 9
ARTICLE III
Representations and Warranties
SECTION 3.1 Representations and Warranties of
the Company . . . . . . . . . . . . . . . . . . . . . . . .10
(a) Organization, Standing and Corporate
Power of the Company . . . . . . . . . . . . . . .10
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Page
(b) Company Subsidiaries and Joint
Ventures . . . . . . . . . . . . . . . . . . . . .10
(c) Capital Structure . . . . . . . . . . . . . . . . .11
(d) Authority; Noncontravention; Consents . . . . . . .13
(e) SEC Documents; Financial Statements;
Undisclosed Liabilities . . . . . . . . . . . . . 15
(f) Absence of Certain Changes or Events . . . . . . .16
(g) Litigation . . . . . . . . . . . . . . . . . . . .17
(h) Absence of Changes in Benefit Plans; ERISA
Compliance . . . . . . . . . . . . . . . . . . . . 18
(i) Taxes . . . . . . . . . . . . . . . . . . . . . . .19
(j) No Payments to Employees, Officers or Directors . .20
(k) Brokers; Schedule of Fees and Expenses . . . . . .20
(l) Compliance with Laws . . . . . . . . . . . . . . .21
(m) Contracts; Debt Instruments . . . . . . . . . . . .21
(n) Opinion of Financial Advisor . . . . . . . . . . .22
(o) State Takeover Statutes . . . . . . . . . . . . . .22
(p) Registration Statement . . . . . . . . . . . . . .22
(q) Parent Stock . . . . . . . . . . . . . . . . . . .23
(r) Vote Required . . . . . . . . . . . . . . . . . . .23
SECTION 3.2 Representations and Warranties
of Parent and Sub . . . . . . . . . . . . . . . . . . . . . 23
(a) Organization, Standing and Corporate
Power of Parent and Sub . . . . . . . . . . . . . .23
(b) Other Parent Subsidiaries and Parent
Joint Ventures . . . . . . . . . . . . . . . . . .23
(c) Capital Structure . . . . . . . . . . . . . . . . .24
(d) Authority; Noncontravention; Consents . . . . . . .26
(e) SEC Documents; Financial Statements; Undisclosed
Liabilities . . . . . . . . . . . . . . . . . . . 28
(f) Absence of Certain Changes or Events . . . . . . .29
(g) Litigation . . . . . . . . . . . . . . . . . . . .30
(h) Absence of Changes in Benefit Plans; ERISA
Compliance. . . . . . . . . . . . . . . . . . . . 31
(i) Taxes . . . . . . . . . . . . . . . . . . . . . . .32
(j) No Payments to Employees, Officers or Directors . .32
(k) Brokers; Schedule of Fees and Expenses . . . . . .33
(l) Compliance with Laws . . . . . . . . . . . . . . .33
(m) Contracts; Debt Instruments . . . . . . . . . . . .33
(n) Opinion of Financial Advisor . . . . . . . . . . .34
(o) State Statutes . . . . . . . . . . . . . . . . . .34
(p) Interim Operations of Sub. . . . . . . . . . . . .34
(q) Registration Statement . . . . . . . . . . . . . .34
(r) Vote Required . . . . . . . . . . . . . . . . . . .34
ii
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Page
ARTICLE IV
Covenants
SECTION 4.1 Conduct of Business by the Company . . . . . . . . . . . . .35
SECTION 4.2 Conduct of Business by Parent . . . . . . . . . . . . . . .39
SECTION 4.3 Other Actions . . . . . . . . . . . . . . . . . . . . . . .42
ARTICLE V
Additional Covenants
SECTION 5.1 Preparation of the Registration Statement and
the Proxy Statement; Shareholders Meeting and Parent
Stockholders Meeting . . . . . . . . . . . . . . . . . . . .42
SECTION 5.2 Access to Information;
Confidentiality . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 5.3 Best Efforts; Notification . . . . . . . . . . . . . . . . .45
SECTION 5.4 Affiliates . . . . . . . . . . . . . . . . . . . . . . . . .47
SECTION 5.5 Tax Treatment . . . . . . . . . . . . . . . . . . . . . . .47
SECTION 5.6 Amendment of Parent's Charter
and By-Laws . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 5.7 No Solicitation of Transactions by the Company . . . . . . .49
SECTION 5.8 Public Announcements . . . . . . . . . . . . . . . . . . . .50
SECTION 5.9 Listing . . . . . . . . . . . . . . . . . . . . . . . . . .50
SECTION 5.10 Letters of Accountants . . . . . . . . . . . . . . . . . . .50
SECTION 5.11 Transfer and Gains Taxes . . . . . . . . . . . . . . . . . .51
SECTION 5.12 Benefit Plans and Other Employee
Arrangements . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 5.13 Private Placement of Common Stock
of Sub . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 5.14 Indemnification; Directors' and Officers' Insurance . . . .54
SECTION 5.15 Related Agreements . . . . . . . . . . . . . . . . . . . . .56
SECTION 5.16 Special Tax Distributions to the Company Reinvested . . . .56
SECTION 5.17 Amendment of Parent Operating Partnership Agreement . . . .56
SECTION 5.18 Additional Parent Agreements. . . . . . . . . . . . . . . .57
ARTICLE VI
Conditions Precedent
SECTION 6.1 Conditions to Each Party's Obligation
To Effect the Merger . . . . . . . . . . . . . . . . . . . .57
(a) Shareholder Approval . . . . . . . . . . . . . . .57
(b) HSR Act . . . . . . . . . . . . . . . . . . . . . .57
iii
<PAGE> 179
Page
(c) Listing of Shares . . . . . . . . . . . . . . . . .57
(d) Registration Statement . . . . . . . . . . . . . .57
(e) No Injunctions or Restraints . . . . . . . . . . .58
(f) Blue Sky Laws . . . . . . . . . . . . . . . . . . .58
(g) Related Transactions . . . . . . . . . . . . . . .58
(h) Certain Actions and Consents . . . . . . . . . . .58
(i) EJDC Lender Consents . . . . . . . . . . . . . . .58
SECTION 6.2 Conditions to Obligations of Parent
and Sub . . . . . . . . . . . . . . . . . . . . . . . . . . 58
(a) Representations and Warranties . . . . . . . . . .59
(b) Performance of Obligations of
the Company . . . . . . . . . . . . . . . . . . .59
(c) Material Adverse Change . . . . . . . . . . . . . .59
(d) Opinions Relating to REIT and
Partnership Status . . . . . . . . . . . . . . . .60
(e) Other Tax Opinion . . . . . . . . . . . . . . . . .60
(f) Consents . . . . . . . . . . . . . . . . . . . . .60
SECTION 6.3 Conditions to Obligation of
the Company . . . . . . . . . . . . . . . . . . . .61
(a) Representations and Warranties . . . . . . . . . .61
(b) Performance of Obligations of each
of Parent and Sub . . . . . . . . . . . . . . . . .61
(c) Material Adverse Change . . . . . . . . . . . . . .62
(d) Opinion Relating to REIT Status . . . . . . . . . .62
(e) Other Tax Opinion . . . . . . . . . . . . . . . . .62
(f) Consents . . . . . . . . . . . . . . . . . . . . .62
(g) The Investment Company Act Opinion . . . . . . . .62
ARTICLE VII
Board Actions
SECTION 7.1 Board Actions . . . . . . . . . . . . . . . . . . . . . . .63
ARTICLE VIII
Termination, Amendment and Waiver
SECTION 8.1 Termination . . . . . . . . . . . . . . . . . . . . . . . .63
SECTION 8.2 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . .65
SECTION 8.3 Effect of Termination . . . . . . . . . . . . . . . . . . .68
SECTION 8.4 Amendment . . . . . . . . . . . . . . . . . . . . . . . . .68
SECTION 8.5 Extension; Waiver . . . . . . . . . . . . . . . . . . . . .68
iv
<PAGE> 180
Page
ARTICLE IX
General Provisions
SECTION 9.1 Nonsurvival of Representations
and Warranties . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 9.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . .69
SECTION 9.3 Certain Definitions . . . . . . . . . . . . . . . . . . . .70
SECTION 9.4 Interpretation . . . . . . . . . . . . . . . . . . . . . . .72
SECTION 9.5 Counterparts . . . . . . . . . . . . . . . . . . . . . . . .72
SECTION 9.6 Entire Agreement; No Third-Party Beneficiaries . . . . . . .72
SECTION 9.7 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . .73
SECTION 9.8 Assignment . . . . . . . . . . . . . . . . . . . . . . . . .73
SECTION 9.9 Enforcement . . . . . . . . . . . . . . . . . . . . . . . .73
v
<PAGE> 181
Schedules
A Holder of Common Stock Delivering Proxies to Parent
B Holder of Parent Stock Delivering Proxies to the Company
C Parent Principals
D Company Principals
E [Intentionally Omitted]
F [Intentionally Omitted]
Exhibits
A Form of Contribution Agreement
B [Intentionally Omitted]
C [Intentionally Omitted]
D Form of Resale Agreement with Affiliates
E-1 Form of Amended and Restated Charter of Parent
E-2 Alternative Form of Amended and Restated Charter of Parent
F-1 Form of Amended and Restated By-laws of Parent
F-2 Alternative Form of Amended and Restated By-laws of Parent
G [Intentionally Omitted]
H Form of Severance Plan
I Form of Amended and Restated Agreement of Limited
Partnership of the Operating Partnership
J [Intentionally Omitted]
K Form of Registration Rights Agreement
L Form of letters and certificates with respect to tax
opinions of Willkie Farr & Gallagher
M Form of letters and certificate with respect to
tax opinion of Paul, Weiss, Rifkind, Wharton &
Garrison
N Form of opinion of Paul, Weiss, Rifkind, Wharton &
Garrison relating to the Investment Company Act of 1940
vi
<PAGE> 182
Index of Defined Terms
In
Agreement and Plan of Merger
Term Section
- ---- -------
"affiliate" 9.3
"Agreement" Title
"Amended and Restated Operating Partnership Agreement" 6.1(g)
"Amended and Restated Parent Operating Partnership Agreement" 6.1(g)
"Antitrust Authorizations" 5.3(a)
"Average Closing Price" 8.1(j)
"Base Amount" 8.2(b)
"Break-Up Expenses" 8.2(b)
"Break-Up Fee" 8.2(b)
"Break-Up Fee Tax Opinion" 8.2(b)
"Certificate of Merger" 1.3
"Certificates" 2.2(c)
"Class B Stock" Recital (e)
"Class C Stock" 5.6(a)
"Closing Date" 1.2
"Code" Recital (d)
"Committee" 5.12(b)(iv)
"Common Stock" Recital (b)
"Company" Title
"Company Benefit Plans" 3.1(h)(i)
"Company Disclosure Letter" 9.3
"Company Employee Stock Awards" 3.1(c)
"Company Filed SEC Documents" 3.1(f)
"Company Interests" 9.3
"Company Joint Venture" 9.3
"Company Partnership Interests" 3.1(f)
"Company Principals" Recital (f)
"Company SEC Documents" 3.1(e)
"Company Shareholder Approvals" 3.1(d)
"Company Shareholders Meeting" 5.1(b)
"Company Stock-Related Awards" 3.1(c)
"Company Subsidiary" 9.3
"Competing Transaction" 5.7
"Confidentiality Agreement" 5.2
"Contribution Agreement" Recital (h)
"Dissenting Shares" 2.1(d)
"Economic Losses" 6.2(a)
"Effective Time" 1.3
"EJDC" 9.3
"Employee Exchange Rights Holders" 3.1(m)(iii)
"ERISA" 3.1(h)(ii)
"Excess Common Stock" 3.1(c)
"Excess Parent Shares" 2.2(g)(ii)
"Excess Stock" 3.1(c)
"Exchange Act" 3.1(d)
"Exchange Agent" 2.2(a)
vii
<PAGE> 183
"Exchange Fund" 2.2(b)
"Exchange Rights Agreement" 4.1(a)
"Exchange Trust" 2.2(g)(ii)
"Expense Fee Base Amount" 8.2(b)
"FFO" 5.12(b)(iv)
"Financial Statement Date" 3.1(f)
"Financing Partnership" 9.3
"GAAP" 3.1(e)
"Governmental Entity" 3.1(d)
"HSR Act" 3.1(d)
"indebtedness" 3.1(m)(ii)
"Indemnified Liabilities" 5.14(a)
"Indemnified Parties" 5.14(a)
"Indemnifying Parties" 5.14(a)
"knowledge" 9.3
"Laws" 3.1(d)
"Liens" 3.1(b)(i)
"Majority Company Joint Venture" 9.3
"Management Company" 9.3
"Material Adverse Change" 3.1(f)
"Material Adverse Effect" 3.1(a)
"Merger" Recital (b)
"Merger Consideration" 2.1(b)
"Merrill Lynch" 3.2(k)
"MGCL" 3.1(q)
"Minority Company Joint Venture" 9.3
"Morgan Stanley" 3.1(k)
"NYSE" 2.2(g)(ii)
"Ohio Statute" 1.1
"Operating Partnership" 9.3
"Operating Partnership Agreement" 3.1(c)
"Parent" Title
"Parent Benefit Plans" 3.2(h)(i)
"Parent Common Stock" Recital (e)
"Parent Disclosure Letter" 9.3
"Parent Employee Options" 3.2(c)
"Parent Excess Stock" 3.2(c)
"Parent Filed SEC Documents" 3.2(f)
"Parent Financial Statement Date" 3.2(f)
"Parent Interests" 9.3
"Parent Joint Venture" 9.3
"Parent Management Company" 9.3
"Parent Material Adverse Change" 3.2(f)
"Parent Material Adverse Effect" 3.2(a)
"Parent Operating Partnership" 9.3
"Parent Operating Partnership Agreement" 3.2(c)
"Parent Options" 3.2(c)
"Parent Preferred Stock" 3.2(c)
"Parent Principals" Recital (f)
"Parent SEC Documents" 3.2(e)
"Parent Stock" Recital (e)
"Parent Stockholder Approvals" 3.2(d)
"Parent Stockholders Meeting" 5.1(c)
viii
<PAGE> 184
"Parent Subsidiary" 9.3
"Parent Units" 3.2(c)
"person" 9.3
"Preferred Stock" 3.1(c)
"Proxy Statement" 3.1(d)
"Qualifying Income" 8.2(b)
"Registration Statement" 3.2(d)
"REIT" 3.1(i)(ii)
"REIT Requirements" 8.2(b)
"Required Vote" 5.6(a)
"SEC" 3.1(d)
"Shareholder Approvals" 3.2(d)
"Securities Act" 3.1(e)
"Stay Bonus" 5.12(b)(iii)
"Stock Incentive Plan" 5.12(b)(i)
"Stock Options" 5.12(b)(i)
"Stock Purchase Agreement" Recital (g)
"Stockholders Agreement" Recital (f)
"Sub" Title
"Sub Common Stock" 3.2(c)
"Subsidiary" 9.3
"Superior Competing Transaction" 7.1(c)
"Surviving Corporation" 1.1
"Takeover Statute" 5.3(a)
"taxes" 3.1(i)(i)
"Termination Agreement Recital(g)
"Termination Fee" 8.2(c)
"Termination Fee Base Amount" 8.2(c)
"Termination Fee Tax Opinion" 8.2(c)
"Transactions" Recital (h)
"Transfer and Gains Taxes" 5.11
"Unconsolidated Company Financial 3.1(e)
Statements"
"Unconsolidated Parent Financial 3.2(e)
Statements"
"Wholly-Owned Company Joint Venture" 9.3
"Wholly-Owned Parent Joint Venture" 9.3
ix
<PAGE> 185
AGREEMENT AND PLAN OF MERGER (the "AGREEMENT") dated
as of March 26, 1996, among SIMON PROPERTY GROUP,
INC., a Maryland corporation ("PARENT"), DAY
ACQUISITION CORP., an Ohio corporation and a direct
subsidiary of Parent ("SUB"), and DeBARTOLO REALTY
CORPORATION, an Ohio corporation (the "COMPANY").
RECITALS
(a) Certain terms used herein shall have the meanings assigned to them in
Section 9.3.
(b) The respective Boards of Directors of Parent, Sub and the
Company have approved the merger of Sub, Parent's direct subsidiary, with and
into the Company as set forth below (the "MERGER"), upon the terms and subject
to the conditions set forth in this Agreement, whereby each issued and
outstanding share of common stock, par value $.01 per share, of the Company (the
"COMMON STOCK") will be converted into the right to receive the Merger
Consideration (as defined below).
(c) Parent, Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger.
(d) For federal income tax purposes it is intended that the
Merger qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "CODE").
(e) As a condition to the willingness of each of Parent and the
Company to enter into this Agreement, the holder of Common Stock listed on
SCHEDULE A hereto delivered to Parent a proxy to vote its shares of Common Stock
in favor of the Merger and the approval and adoption of this Agreement and the
holders of common stock, par value $.0001, of Parent (the "PARENT COMMON STOCK")
and the holders of Class B common stock, par value $.0001 per share, of Parent
(the "CLASS B STOCK" and together with the Parent Common Stock, the "PARENT
STOCK") listed on SCHEDULE B hereto have delivered to the Company a proxy to
vote their shares of Parent Stock in favor of the Merger and the approval and
adoption of this Agreement.
<PAGE> 186
2
(f) Simultaneously with the execution of this Agreement, the
persons listed on SCHEDULE C hereto (the "PARENT PRINCIPALS") and the persons
listed on SCHEDULE D hereto (the "COMPANY PRINCIPALS") have executed a
Stockholders Agreement (the "STOCKHOLDERS AGREEMENT"), providing for, among
other things, agreement of the Parent Principals and the Company Principals to
vote their respective shares of Parent Stock and Common Stock in favor of the
Merger at the Parent Stockholders Meeting (as defined below) and the Company
Shareholders Meeting (as defined below), respectively, and subject to
consummation of the Merger, to provide certain other agreements among Parent,
the Parent Principals and the Company Principals.
(g) Simultaneously with the execution of this Agreement, (i)
the Parent Management Company (as defined below) and EJDC (as defined below),
have executed a Stock Purchase Agreement (the "STOCK PURCHASE AGREEMENT")
providing for the sale by EJDC of 95% of the issued and outstanding voting stock
of the Management Company to the Parent Management Company simultaneously with
the completion of the other Transactions (as defined below), and (ii) the
Company, the Operating Partnership (as defined below) and certain limited
partners of the Operating Partnership have entered into an agreement (the
"TERMINATION AGREEMENT") providing for the termination upon completion of the
other Transactions of certain agreements establishing rights of such limited
partners and of a noncompetition agreement affecting certain Company Principals.
(h) The transactions contemplated under this Agreement, the
Stockholders Agreement, the Stock Purchase Agreement, the Contribution Agreement
substantially in the form of EXHIBIT A hereto (the "CONTRIBUTION AGREEMENT")
among each of the Parent Principals, Parent and the Operating Partnership, the
Termination Agreement, this Agreement, subject to the provisions of Section 5.6,
the purchase of Class C Common Stock of the Parent pursuant to a subscription
agreement to be entered into pursuant thereto, and the other documents and
agreements contemplated hereby, including, without limitation, the Merger, shall
be referred to collectively in this Agreement as the "TRANSACTIONS."
(i) In connection with the transactions contemplated by the
Contribution Agreement, the Operating Partnership Agreement (as defined below)
and the Parent Operating Partnership Agreement (as defined below) shall be
amended and restated, effective as of the Effective Time. Parent shall enter
into a Registration Rights Agreement, effective as of the Effective Time, in the
form attached as EXHIBIT K with certain holders (after giving effect to the
Merger) of the Parent Common Stock and units of limited partnership interest in
the Operating Partnership.
<PAGE> 187
3
NOW, THEREFORE, in consideration of the representations,
warranties, covenants and agreements contained in this Agreement, the parties
agree as follows:
ARTICLE I
The Merger
SECTION 1.1 The Merger. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the General
Corporation Law of Ohio, Chapter 1701 of the Ohio Revised Code (the "OHIO
STATUTE"), Sub shall be merged with and into the Company at the Effective Time.
Following the Merger, the separate corporate existence of Sub shall cease and
the Company shall continue as the surviving corporation (the "SURVIVING
CORPORATION") and shall succeed to and assume all the rights and obligations of
Sub in accordance with the Ohio Statute. At the election of Parent, any other
direct subsidiary of Parent acceptable to the Company in its reasonable judgment
may be substituted for Sub as a constituent corporation in the Merger. In such
event, the parties agree to execute an appropriate amendment to this Agreement
in order to reflect such substitution.
SECTION 1.2 Closing. The closing of the Merger will take place
at 10:00 a.m. on a date to be specified by the parties, which (subject to
satisfaction or waiver of the conditions set forth in Sections 6.2 and 6.3)
shall be no later than the second business day after satisfaction or waiver of
the conditions set forth in Section 6.1 (the "CLOSING DATE"), at the offices of
Paul, Weiss, Rifkind, Wharton & Garrison, New York, New York, unless another
date or place is agreed to in writing by the parties hereto.
SECTION 1.3 Effective Time. As soon as practicable following
the satisfaction or waiver of the conditions set forth in Article VI, the
parties shall file a certificate of merger or other appropriate documents (the
"CERTIFICATE OF MERGER") executed in accordance with Section 1701.81 of the Ohio
Statute and shall make all other filings or recordings required under the Ohio
Statute. The Merger shall become effective at such time as the Certificate of
Merger has been duly filed with the Secretary of State of the State of Ohio, or
at such other time as Parent and the Company shall agree should be specified in
the Certificate of Merger (the time the Merger becomes effective being the
"EFFECTIVE TIME"), it being understood that the parties shall cause the
Effective Time to occur on the Closing Date.
<PAGE> 188
4
SECTION 1.4 Effects of the Merger. The Merger shall have the
effects set forth in the Ohio Statute.
SECTION 1.5 Charter and Code of Regulations. The Amended and
Restated Articles of Incorporation and Code of Regulations of the Company as in
effect at the Effective Time shall be the Articles of Incorporation and Code of
Regulations of the Surviving Corporation; provided that each of such Articles of
Incorporation and Code of Regulations shall be amended and restated immediately
following the Effective Time in forms reasonably acceptable to each of the
Company and Parent.
SECTION 1.6 Directors. The directors of the Company at the
Effective Time shall be the directors of the Surviving Corporation, who shall be
the same individuals who are directors of Parent immediately following the
Effective Time, until the earlier of their resignation or removal or until their
respective successors are duly elected and qualified, as the case may be.
SECTION 1.7 Officers. The officers of the Company at the
Effective Time shall be the officers of the Surviving Corporation until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
ARTICLE II
Effect of the Merger on the Capital Stock of the
Constituent Corporations; Exchange of Certificates
SECTION 2.1 Effect on Capital Stock. By virtue of the Merger
and without any action on the part of the holder of any shares of Common Stock
or the holder of any shares of capital stock of Parent or Sub:
(a) Cancellation of Treasury Stock. As of the
Effective Time, each share of capital stock of the Company that is owned by the
Company or any Company Subsidiary (as defined below) or Wholly-Owned Company
Joint Venture (as defined below) shall automatically be canceled and retired and
all rights with respect thereto shall cease to exist, and no consideration shall
be delivered in exchange therefor.
(b) Conversion of Common Stock. Upon the Effective
Time, each issued and outstanding share of Common Stock (other than shares to be
canceled in accordance with Section 2.1(a)) shall be converted into the right to
receive from Parent sixty-eight one hundredths (.68) of a fully paid and
nonassessable share of Parent Common Stock. As of the
<PAGE> 189
5
Effective Time, all such shares of Common Stock shall no longer be outstanding
and shall automatically be canceled and retired and all rights with respect
thereto shall cease to exist, and each holder of a certificate representing any
such shares of Common Stock shall cease to have any rights with respect thereto,
except the right to receive, upon surrender of such certificate in accordance
with Section 2.2(c), certificates representing the shares of Parent Common Stock
required to be delivered under this Section 2.1(b) and any cash in lieu of
fractional shares of Parent Common Stock to be issued or paid in consideration
therefor upon surrender of such certificate (the "MERGER CONSIDERATION") and any
dividends or other distributions to which such holder is entitled pursuant to
Section 2.2(d), in each case, without interest and less any required withholding
taxes. Notwithstanding the foregoing, the parties understand that the rights of
each shareholder of the Company under this Section 2.1(b) are subject to Article
NINTH of the Charter of Parent; provided that Parent hereby agrees to provide at
the Effective Time waivers of such provision upon certification of sufficient
facts in the reasonable judgment of Parent's Board of Directors to indicate that
the ownership limit provisions set forth in Section 856(a)(6) of the Code will
not be violated upon the granting of such waivers.
(c) Conversion of Shares of Common Stock of Sub.
Immediately prior to the Effective Time Sub shall have issued and outstanding
1,100.11 shares of common stock, and as of the Effective Time such shares or
fractions thereof shall be converted, at the rate of 1,000 shares of the
Surviving Corporation for each whole share of Sub, and a proportionate number of
shares of the Surviving Corporation for each fractional share of Sub, into and
become a total of 1,100,110 validly issued, fully paid and non-assessable shares
of common stock, par value $.01 per share, of the Surviving Corporation.
(d) Dissenting Shares. Notwithstanding Section 2.1(b),
shares of Common Stock outstanding immediately prior to the Effective Time and
held by a holder who has not voted in favor of the Merger and who has delivered
to the Company a written demand for the fair cash value of his shares of Common
Stock (the "DISSENTING SHARES") in accordance with the Ohio Statute shall not be
converted into a right to receive the Merger Consideration, unless the holder's
rights have terminated under Section 1701.85(D) of the Ohio Statute. Dissenting
shares shall be treated in accordance with Section 1701.85 of the Ohio Statute.
If after the Effective Time such holder's rights shall terminate in accordance
with Section 1701.85(D) of the Ohio Statute, such shares of Common Stock shall
be treated as if they had been converted as of the Effective
<PAGE> 190
6
Time into a right to receive the Merger Consideration. The Company shall give
Parent prompt notice of any demands received by the Company for the exercise of
dissenter's rights with respect to shares of Common Stock, and Parent shall have
the right to participate in all negotiations and proceedings with respect to
such demands. The Company shall not, except with the prior written consent of
Parent, make any payment with respect to, or settle or offer to settle, any such
demands.
SECTION 2.2 Exchange of Certificates.
(a) Exchange Agent. Prior to the Effective Time,
Parent shall appoint The First National Bank of Chicago or another bank or trust
company reasonably acceptable to the Company to act as exchange agent (the
"EXCHANGE AGENT") for the exchange of the Merger Consideration upon surrender of
certificates representing issued and outstanding Common Stock.
(b) Parent To Provide Merger Consideration. Parent
shall provide to the Exchange Agent on or before the Effective Time, for the
benefit of the holders of Common Stock, shares of Parent Common Stock issuable,
cash payable in respect of dividends pursuant to Section 2.2(d)(i) and cash
payable in lieu of fractional shares pursuant to Section 2.2(g) (collectively,
the "EXCHANGE FUND") in exchange for the issued and outstanding shares of Common
Stock pursuant to Section 2.1.
(c) Exchange Procedure. As soon as reasonably
practicable after the Effective Time, the Exchange Agent shall mail to each
holder of record of a certificate or certificates which immediately prior to the
Effective Time represented outstanding shares of Common Stock (the
"CERTIFICATES") whose shares were converted into the right to receive the Merger
Consideration pursuant to Section 2.1, (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Exchange
Agent and shall be in a form and have such other provisions as Parent may
reasonably specify) and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for the Merger Consideration. Upon surrender of a
Certificate for cancellation to the Exchange Agent or to such other agent or
agents as may be appointed by Parent, together with such letter of transmittal,
duly executed, and such other documents as may reasonably be required by the
Exchange Agent, the holder of such Certificate shall be entitled to receive in
exchange therefor the Merger Consideration into which the shares of Common Stock
theretofore represented by such Certificate shall have been converted pursuant
to
<PAGE> 191
7
Section 2.1 and any dividends or other distributions to which such holder is
entitled pursuant to Section 2.2(d), and the Certificate so surrendered shall
forthwith be canceled. In the event of a transfer of ownership of Common Stock
which is not registered in the transfer records of the Company, payment may be
made to a person other than the person in whose name the Certificate so
surrendered is registered if such Certificate shall be properly endorsed or
otherwise be in proper form for transfer and the person requesting such payment
either shall pay any transfer or other taxes required by reason of such payment
being made to a person other than the registered holder of such Certificate or
establish to the satisfaction of Parent that such tax or taxes have been paid or
are not applicable. Until surrendered as contemplated by this Section 2.2, each
Certificate shall be deemed at any time after the Effective Time to represent
only the right to receive upon such surrender the Merger Consideration, without
interest, into which the shares of Common Stock theretofore represented by such
Certificate shall have been converted pursuant to Section 2.1 and any dividends
or other distributions to which such holder is entitled pursuant to Section
2.2(d). No interest will be paid or will accrue on the Merger Consideration upon
the surrender of any Certificate or on any cash payable pursuant to Section
2.2(d) or Section 2.2(g).
(d) Record Dates; Distributions with Respect to
Unexchanged Shares.
(i) Each of Parent and the Company shall
declare a dividend to their respective shareholders, the record date for which
shall be the close of business on the last business day prior to the Effective
Time. The dividend of each shall be equal to such party's most recent quarterly
dividend rate, multiplied by the number of days elapsed since the last dividend
record date through and including the Effective Time, and divided by 90. The
dividends payable hereunder to holders of Common Stock shall be paid upon
presentation of the certificates of Common Stock for exchange in accordance with
this Article II.
(ii) No dividends or other distributions
with respect to Parent Common Stock with a record date after the Effective Time
shall be paid to the holder of any unsurrendered Certificate with respect to the
shares of Parent Common Stock represented thereby, and no cash payment in lieu
of fractional shares shall be paid to any such holder pursuant to Section
2.2(g), in each case until the surrender of such Certificate in accordance with
this Article II. Subject to the effect of applicable escheat laws, following
surrender of any such Certificate there shall be paid to the holder of such
Certificate, without
<PAGE> 192
8
interest, (i) at the time of such surrender, the amount of any cash payable in
lieu of any fractional share of Parent Common Stock to which such holder is
entitled pursuant to Section 2.2(g) and (ii) if such Certificate is exchangeable
for one or more whole shares of Parent Common Stock, (x) at the time of such
surrender the amount of dividends or other distributions with a record date
after the Effective Time theretofore paid with respect to such whole shares of
Parent Common Stock and (y) at the appropriate payment date, the amount of
dividends or other distributions with a record date after the Effective Time but
prior to such surrender and with a payment date subsequent to such surrender
payable with respect to such whole shares of Parent Common Stock.
(e) No Further Ownership Rights in Common Stock. All
Merger Consideration paid upon the surrender of Certificates in accordance with
the terms of this Article II (and any cash paid pursuant to Section 2.2(g))
shall be deemed to have been paid in full satisfaction of all rights pertaining
to the shares of Common Stock theretofore represented by such Certificates,
subject, however, to the Surviving Corporation's obligation to pay, without
interest, any dividends or make any other distributions with a record date prior
to the Effective Time which may have been declared or made by the Company on
such shares of Common Stock in accordance with the terms of this Agreement or
prior to the date of this Agreement and which remain unpaid at the Effective
Time and have not been paid prior to such surrender, and there shall be no
further registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of Common Stock which were outstanding immediately
prior to the Effective Time. If, after the Effective Time, Certificates are
presented to the Surviving Corporation for any reason, they shall be canceled
and exchanged as provided in this Article II.
(f) No Liability. None of Parent, Sub, the Company or
the Exchange Agent shall be liable to any person in respect of any Merger
Consideration delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law. Any portion of the Exchange Fund
delivered to the Exchange Agent pursuant to this Agreement that remains
unclaimed for six months after the Effective Time shall be redelivered by the
Exchange Agent to Parent, upon demand, and any holders of Certificates who have
not theretofore complied with Section 2.2(c) shall thereafter look only to
Parent for delivery of the Merger Consideration, subject to applicable escheat
and other similar laws.
<PAGE> 193
9
(g) No Fractional Shares.
(i) No certificates or scrip representing
fractional shares of Parent Common Stock shall be issued upon the surrender for
exchange of Certificates, and such fractional share interests will not entitle
the owner thereof to vote, to receive dividends or to any other rights of a
stockholder of Parent.
(ii) Notwithstanding any other provision of
this Agreement, each holder of shares of Common Stock exchanged pursuant to the
Merger who would otherwise have been entitled to receive a fraction of a share
of Parent Common Stock (after taking into account all Certificates delivered by
such holder) shall receive, from the Exchange Agent in accordance with the
provisions of this Section 2.2(g), a cash payment in lieu of such fractional
shares of Parent Common Stock, as applicable, representing such holder's
proportionate interest, if any, in the net proceeds from the sale by the
Exchange Agent in one or more transactions (which sale transactions shall be
made at such times, in such manner and on such terms as the Exchange Agent shall
determine in its reasonable discretion) on behalf of all such holders of the
aggregate of the fractional shares of Parent Common Stock, as applicable, which
would otherwise have been issued (the "EXCESS PARENT SHARES"). The sale of the
Excess Parent Shares by the Exchange Agent shall be executed on the New York
Stock Exchange (the "NYSE") through one or more member firms of the NYSE and
shall be executed in round lots to the extent practicable. Until the net
proceeds of such sale or sales have been distributed to the holders of
Certificates, the Exchange Agent will hold such proceeds in trust (the "EXCHANGE
TRUST") for the holders of Certificates. Parent shall pay all commissions,
transfer taxes and other out-of-pocket transaction costs, including the expenses
and compensation of the Exchange Agent, incurred in connection with this sale of
the Excess Parent Shares. As soon as practicable after the determination of the
amount of cash, if any, to be paid to holders of Certificates Stock in lieu of
any fractional shares of Parent Common Stock, as applicable, the Exchange Agent
shall make available such amounts to such holders of Certificates without
interest.
(h) Withholding Rights. Parent or the Exchange Agent
shall be entitled to deduct and withhold from the Merger Consideration otherwise
payable pursuant to this Agreement to any holder of shares of Common Stock such
amounts as Parent or the Exchange Agent is required to deduct and withhold with
respect to the making of such payment under the Code, or any provision of state,
local or foreign tax law. To the extent that amounts are so withheld by Parent
or the Exchange Agent, such withheld amounts shall
<PAGE> 194
10
be treated for all purposes of this Agreement as having been paid to the holder
of the shares of Common Stock in respect of which such deduction and withholding
was made by Parent or the Exchange Agent.
ARTICLE III
Representations and Warranties
SECTION 3.1 Representations and Warranties of the Company. The
Company represents and warrants to Parent and Sub as follows:
(a) Organization, Standing and Corporate Power of the
Company. The Company is a corporation duly organized and validly existing under
the laws of Ohio and has the requisite corporate power and authority to carry on
its business as now being conducted. The Company is duly qualified or licensed
to do business and is in good standing in each jurisdiction in which the nature
of its business or the ownership or leasing of its properties makes such
qualification or licensing necessary, other than in such jurisdictions where the
failure to be so qualified or licensed, individually or in the aggregate, would
not have a material adverse effect on the business, properties, assets,
financial condition or results of operations of the Company and the Company
Subsidiaries and Company Joint Ventures (as defined below) (but only to the
extent of the Company Interests (as defined below) with respect to the Company
Joint Ventures) taken as a whole (a "MATERIAL ADVERSE EFFECT"). The Company has
delivered to Parent complete and correct copies of its Articles of Incorporation
and Code of Regulations, as amended to the date of this Agreement.
(b) Company Subsidiaries and Joint Ventures.
(i) SCHEDULE 3.1(b)(I) to the Company
Disclosure Letter (as defined below) sets forth each Company Subsidiary and the
ownership interest therein of the Company. Except as set forth in SCHEDULE
3.1(b)(I) to the Company Disclosure Letter, (A) all the outstanding shares of
capital stock of each Company Subsidiary that is a corporation have been validly
issued and are fully paid and nonassessable, are owned by the Company, by
another Company Subsidiary or by the Company and another Company Subsidiary,
free and clear of all pledges, claims, liens, charges, encumbrances and security
interests of any kind or nature whatsoever (collectively, "LIENS") and (B) all
equity interests in each Company Subsidiary that is a partnership, joint
venture, limited liability company or trust are owned by the Company, by another
Company Subsidiary or by the Company and another Company Subsidiary free and
clear of all
<PAGE> 195
11
Liens. Except for the capital stock of or other equity interests in the Company
Subsidiaries and except for the ownership interests in the Company Joint
Ventures, the Company does not own, directly or indirectly, any capital stock or
other ownership interest, with a fair market value as of the date of this
Agreement greater that $5,000,000 in any person. Each Company Subsidiary that is
a corporation is duly incorporated and validly existing under the laws of its
jurisdiction of incorporation and has the requisite corporate power and
authority to carry on its business as now being conducted and each Company
Subsidiary that is a partnership, limited liability company or trust is duly
organized and validly existing under the laws of its jurisdiction of
organization and has the requisite power and authority to carry on its business
as now being conducted. Each Company Subsidiary is duly qualified or licensed to
do business and is in good standing in each jurisdiction in which the nature of
its business or the ownership or leasing of its properties makes such
qualification or licensing necessary, other than in such jurisdictions where the
failure to be so qualified or licensed, individually or in the aggregate, would
not have a Material Adverse Effect.
(ii) SCHEDULE 3.1(b)(II) to the Company
Disclosure Letter lists each Company Joint Venture and identifies which of such
Company Joint Ventures are Majority Company Joint Ventures. Each Majority
Company Joint Venture (as defined below), and to the knowledge of the Company,
each Minority Company Joint Venture (as defined below) has made all filings
required by and is in compliance with all Laws (as defined below) necessary to
do business in each jurisdiction in which the nature of its business or the
ownership or the leasing of its properties makes such filings or compliance
necessary, other than such jurisdictions where the failure to have so filed or
to be in such compliance, individually or in the aggregate, would not have a
Material Adverse Effect. SCHEDULE 3.1(b)(II) lists, as of the date hereof, each
partner, joint venturer or other person having a direct ownership interest,
other than the Company or a Company Subsidiary or Company Joint Venture, in the
Majority Company Joint Ventures and, to the knowledge of the Company, in the
Minority Company Joint Ventures.
(c) Capital Structure. The authorized capital stock of
the Company consists of 175,000,000 shares of Common Stock; 10,000,000 shares of
preferred stock, par value $.01 per share (the "PREFERRED STOCK"), in two
classes: 5,000,000 shares of voting Preferred Stock and 5,000,000 shares of
non-voting Preferred Stock; 1,750,000 shares of excess common stock, par value
$.01 per share ("EXCESS COMMON STOCK"); and 100,000 shares of excess Preferred
Stock, par value $.01 per share (together with the Excess Common Stock, the
"EXCESS STOCK"). On the date
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12
hereof (i) 55,491,479 shares of Common Stock and no shares of Preferred Stock or
Excess Stock were issued and outstanding, (ii) no shares of Common Stock,
Preferred Stock or Excess Stock were held by the Company in its treasury, (iii)
2,896,452 shares of Common Stock were available for issuance under the Company's
1994 Stock Incentive Plan pursuant to awards granted to employees of the Company
(the "COMPANY EMPLOYEE STOCK AWARDS"), (iv) 13,000 shares of Common Stock were
reserved for issuance upon exercise of outstanding stock options to purchase
shares of Common Stock granted to directors of the Company (together with the
Company Employee Stock Awards, the "COMPANY STOCK-RELATED AWARDS") and (v)
34,100,367 shares of Common Stock were reserved for issuance upon the exchange
of Company Partnership Interests (as defined below) for shares of Common Stock
pursuant to the Exchange Rights Agreement (as defined below). On the date of
this Agreement, except as set forth above in this Section 3.1(c) or as required
pursuant to the Exchange Rights Agreement, no shares of capital stock or other
voting securities of the Company were issued, reserved for issuance or
outstanding. There are no outstanding stock appreciation rights relating to the
capital stock of the Company. All outstanding shares of capital stock of the
Company are duly authorized, validly issued, fully paid and nonassessable and
not subject to preemptive rights. There are no bonds, debentures, notes or other
indebtedness of the Company having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matters on which
shareholders of the Company may vote. Except (A) for the Company Stock-Related
Awards, the Company Partnership Interests (which, subject to certain
restrictions, may be exchanged by such limited partners for shares of Common
Stock), (B) as required pursuant to rights of first refusal or rights of first
offer, "buy-sell" provisions, anti-dilution provisions or pro-rata funding
obligations set forth in the terms of any partnership or joint venture agreement
governing any of the Company Joint Ventures existing on the date of this
Agreement, (C) as set forth in SCHEDULE 3.1(c) to the Company Disclosure Letter,
(D) as otherwise permitted under Section 4.1, (E) as required under the Fourth
Amended and Restated Agreement of Limited Partnership of the Operating
Partnership, as amended through the date hereof (the "OPERATING PARTNERSHIP
AGREEMENT") and (F) as contemplated under the Company's dividend reinvestment
plan, as of the date of this Agreement there are no outstanding securities,
options, warrants, calls, rights, commitments, agreements, arrangements or
undertakings of any kind to which the Company or any Company Subsidiary or
Majority Company Joint Venture or, to the knowledge of the Company, any Minority
Company Joint Venture is a party or by which such entity is bound, obligating
the Company or any Company Subsidiary or Majority Company Joint Venture or, to
the knowledge of the
<PAGE> 197
13
Company, any Minority Company Joint Venture to issue, deliver or sell, or cause
to be issued, delivered or sold, additional shares of capital stock, voting
securities or other ownership interests of the Company or any Company Subsidiary
or Majority Company Joint Venture or, to the knowledge of the Company, any
Minority Company Joint Venture or obligating the Company or any Company
Subsidiary or Majority Company Joint Venture or, to the knowledge of the
Company, any Minority Company Joint Venture to issue, grant, extend or enter
into any such security, option, warrant, call, right, commitment, agreement,
arrangement or undertaking (other than to the Company, a Company Subsidiary or a
Wholly-Owned Company Joint Venture). Except (x) as required pursuant to rights
of first refusal or rights of first offer, "buy-sell" provisions, anti-dilution
provisions or pro-rata funding obligations set forth in the terms of any
partnership or joint venture agreement governing any of the Company Joint
Ventures existing on the date of this Agreement, (y) as set forth on SCHEDULE
3.1(c) to the Company Disclosure Letter and (z) as required under the Operating
Partnership Agreement, the Exchange Rights Agreement and the Cash Tender
Agreement (as defined in the Termination Agreement), there are no outstanding
contractual obligations of the Company or any Company Subsidiary or Majority
Company Joint Venture or, to the knowledge of the Company, any Minority Company
Joint Venture to repurchase, redeem or otherwise acquire any shares of capital
stock of the Company or any capital stock, voting securities or other ownership
interests in any Company Subsidiary or Majority Company Joint Venture or, to the
knowledge of the Company, any Minority Company Joint Venture or make any
material investment (in the form of a loan, capital contribution or otherwise)
in any person (other than a Company Subsidiary or a Wholly-Owned Company Joint
Venture).
(d) Authority; Noncontravention; Consents. The Company
has the requisite corporate power and authority to enter into this Agreement
and, subject to approval of this Agreement by the vote of the holders of the
Common Stock required to approve this Agreement and the transactions
contemplated hereby (the "COMPANY SHAREHOLDER APPROVALS"), to consummate the
transactions contemplated by this Agreement to which the Company is a party. The
execution and delivery of this Agreement by the Company and the consummation by
the Company of the transactions contemplated by this Agreement to which the
Company is a party have been duly authorized by all necessary corporate action
on the part of the Company, subject to approval of this Agreement pursuant to
the Company Shareholder Approvals. This Agreement has been duly executed and
delivered by the Company and constitutes a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms. Except as
set forth in
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14
SCHEDULE 3.1(d) to the Company Disclosure Letter, the execution and delivery of
this Agreement by the Company do not, and the consummation of the transactions
contemplated by this Agreement to which the Company is a party and compliance by
the Company with the provisions of this Agreement will not, conflict with, or
result in any violation of, or default (with or without notice or lapse of time,
or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a material benefit under, or result
in the creation of any Lien upon any of the properties or assets of the Company
or any Company Subsidiary or Majority Company Joint Venture or, to the knowledge
of the Company, any Minority Company Joint Venture, under, (i) the Amended and
Restated Articles of Incorporation or Code of Regulations of the Company or the
comparable charter or organizational documents or partnership or similar
agreement (as the case may be) of any Company Subsidiary or Majority Company
Joint Venture or, to the knowledge of the Company, any Minority Company Joint
Venture, (ii) any loan or credit agreement, note, bond, mortgage, indenture,
reciprocal easement agreement, lease or other agreement, instrument, permit,
concession, franchise or license applicable to the Company or any Company
Subsidiary or Majority Company Joint Venture or their respective properties or
assets or, to the knowledge of the Company, to any Minority Company Joint
Venture or its properties or assets or (iii) subject to the governmental filings
and other matters referred to in the following sentence, any judgment, order,
decree, statute, law, ordinance, rule or regulation (collectively, "LAWS")
applicable to the Company or any Company Subsidiary or Majority Company Joint
Venture or, to the knowledge of the Company, any Minority Company Joint Venture,
or their respective properties or assets, other than, in the case of clause (ii)
or (iii), any such conflicts, violations, defaults, rights or Liens that
individually or in the aggregate would not (x) have a Material Adverse Effect or
(y) prevent the consummation of the Transactions. No consent, approval, order or
authorization of, or registration, declaration or filing with, any federal,
state or local government or any court, administrative or regulatory agency or
commission or other governmental authority or agency, domestic or foreign (a
"GOVERNMENTAL ENTITY"), is required by or with respect to the Company or any
Company Subsidiary or any Majority Company Joint Venture or, to the knowledge of
the Company, any Minority Company Joint Venture in connection with the execution
and delivery of this Agreement by the Company or the consummation by the Company
of the transactions contemplated by this Agreement, except for (i) the filing by
any person in connection with any of the Transactions of a premerger
notification and report form under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR ACT"), (ii) the filing with the
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15
Securities and Exchange Commission (the "SEC") of (x) a joint proxy statement
relating to the approval by the Company's shareholders and Parent's stockholders
of the transactions contemplated by this Agreement (as amended or supplemented
from time to time, the "PROXY STATEMENT") and (y) such reports under Section
13(a) of the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"),
as may be required in connection with this Agreement and the transactions
contemplated by this Agreement, (iii) the filing of the Certificate of Merger
with the Secretary of State of the State of Ohio, (iv) such filings as may be
required in connection with the payment of any Transfer and Gains Taxes (as
defined below) and (v) such other consents, approvals, orders, authorizations,
registrations, declarations and filings as are set forth in SCHEDULE 3.1(d) to
the Company Disclosure Letter or (A) as may be required under (x) the laws of
any foreign country in which the Company or any Company Subsidiary or Company
Joint Venture conducts any business or owns any property or assets, (y) federal,
state, local or foreign environmental laws or (z) the "blue sky" laws of various
states or (B) which, if not obtained or made, would not prevent or delay in any
material respect the consummation of any of the transactions contemplated by
this Agreement or otherwise prevent the Company from performing its obligations
under this Agreement in any material respect or have, individually or in the
aggregate, a Material Adverse Effect.
(e) SEC Documents; Financial Statements; Undisclosed
Liabilities. The Company has filed all required reports, schedules, forms,
statements and other documents with the SEC since April 21, 1994 (the "COMPANY
SEC DOCUMENTS"). All of the Company SEC Documents (other than preliminary
material), as of their respective filing dates, complied in all material
respects with all applicable requirements of the Securities Act of 1933, as
amended (the "SECURITIES ACT"), and the Exchange Act and, in each case, the
rules and regulations promulgated thereunder applicable to such Company SEC
Documents. None of the Company SEC Documents at the time of filing contained any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except to the extent such statements have been modified or
superseded by later Filed Company SEC Documents. The consolidated financial
statements of the Company included in the Company SEC Documents complied as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles ("GAAP")
(except, in the case of unaudited statements, as permitted by Form
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16
10-Q of the SEC) applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto) and fairly presented, in
accordance with the applicable requirements of GAAP, the consolidated financial
position of the Company as of the dates thereof and the consolidated results of
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). To the knowledge of
the Company, the audited financial statements of the unconsolidated Company
Subsidiaries and Company Joint Ventures previously delivered to Parent (the
"UNCONSOLIDATED COMPANY FINANCIAL STATEMENTS") have been prepared in accordance
with GAAP applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto) and fairly presented, in accordance with
the applicable requirements of GAAP, the financial position of such Company
Subsidiaries and Company Joint Ventures, taken as a whole, as of the dates
thereof and the results of their respective operations and cash flows for the
periods then ended. Except as set forth in the Company Filed SEC Documents (as
defined below), in the Unconsolidated Company Financial Statements, in SCHEDULE
3.1(e) to the Company Disclosure Letter or as permitted by Section 4.1 (for the
purposes of this sentence, as if Section 4.1 had been in effect since December
31, 1995), neither the Company nor any Company Subsidiary or Majority Company
Joint Venture or, to the knowledge of the Company, any Minority Company Joint
Venture has any liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) required by GAAP to be set forth on a
consolidated balance sheet of the Company or, to the knowledge of the Company,
of any unconsolidated Company Subsidiary or Company Joint Venture or in the
notes thereto and which, individually or in the aggregate, would have a Material
Adverse Effect.
(f) Absence of Certain Changes or Events. Except as
disclosed in the Company SEC Documents filed and publicly available prior to the
date of this Agreement or in the draft Annual Report of the Company on Form 10-K
for the year ended December 31, 1995 previously delivered to Parent (referred to
collectively as the "COMPANY FILED SEC DOCUMENTS") or in SCHEDULE 3.1(f) to the
Company Disclosure Letter, since the date of the most recent financial
statements included in the Company Filed SEC Documents (the "FINANCIAL STATEMENT
DATE") and to the date of this Agreement, the Company, the Company Subsidiaries,
the Majority Company Joint Ventures and, to the knowledge of the Company, the
Minority Company Joint Ventures have conducted their business only in the
ordinary course and there has not been (i) any material adverse change in the
business, financial condition or results of operations of the Company and the
Company Subsidiaries and Company Joint Ventures (but only to the extent of the
Company Interests with respect to
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17
the Company Joint Ventures) taken as a whole, that have resulted or would
result, individually or in the aggregate, in an Economic Loss (as defined below)
of $58,000,000 or more, without giving effect to a general decline in the U.S.
economy or an adverse change in the financial condition of specialty retail
tenants or department stores (a "MATERIAL ADVERSE CHANGE"), nor has there been
any occurrence or circumstance that with the passage of time would reasonably be
expected to result in a Material Adverse Change, (ii) except for regular
quarterly (x) dividends (in the case of the Company) not in excess of $.315 per
share of Common Stock and (y) distributions (in the case of the Operating
Partnership) not in excess of $.315 in respect of that percentage of interests
in the Operating Partnership ("COMPANY PARTNERSHIP INTERESTS") exchangeable for
one share of Common Stock under the Exchange Rights Agreement, as the case may
be, in each case with customary record and payment dates, any declaration,
setting aside or payment of any dividend or other distribution (whether in cash,
stock or property) with respect to any of the Company's capital stock or any
Company Partnership Interests, other than the dividend required to be paid
pursuant to Section 2.2(d)(i) (and the corresponding Operating Partnership
distribution) and any special tax distributions required to be paid by the
Operating Partnership pursuant to the Operating Partnership Agreement, (iii) any
split, combination or reclassification of any of the Company's capital stock or
any issuance or the authorization of any issuance of any other securities in
respect of, in lieu of or in substitution for, or giving the right to acquire by
exchange or exercise, shares of its capital stock or any issuance of an
ownership interest in, any Company Subsidiary or Majority Company Joint Venture
or, to the knowledge of the Company, any Minority Company Joint Venture, except
(A) as required pursuant to rights of first refusal or rights of first offer,
"buy-sell" provisions, anti-dilution provisions or pro-rata funding obligations
set forth in the terms of any partnership or joint venture agreement governing
any of the Company Joint Ventures existing on the date of this Agreement and (B)
as permitted by Section 4.1, (iv) any damage, destruction or loss, whether or
not covered by insurance, that has or would have a Material Adverse Effect or
(v) any change in accounting methods, principles or practices by the Company or
any Company Subsidiary or Majority Company Joint Venture or, to the knowledge of
the Company, any Minority Company Joint Venture materially affecting its assets,
liabilities or business, except insofar as may have been disclosed in the
Company Filed SEC Documents or required by a change in GAAP.
(g) Litigation. Except as disclosed in the Company
Filed SEC Documents or in SCHEDULE 3.1(g) to the Company Disclosure Letter, and
other than personal injury and other routine tort litigation arising from the
ordinary
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18
course of operations of the Company, the Company Subsidiaries and Company Joint
Ventures (i) which are covered by adequate insurance or (ii) for which all
material costs and liabilities arising therefrom are reimbursable pursuant to
common area maintenance agreements, there is no suit, action or proceeding
pending or, to the knowledge of the Company, threatened in writing against or
affecting the Company or any Company Subsidiary or Majority Company Joint
Venture or, to the knowledge of the Company, any Minority Company Joint Venture
that, individually or in the aggregate, could reasonably be expected to (A) have
a Material Adverse Effect or (B) prevent the consummation of any of the
Transactions, nor is there any judgment, decree, injunction, rule or order of
any Governmental Entity or arbitrator outstanding against the Company or any
Company Subsidiary or Majority Company Joint Venture or, to the knowledge of the
Company, any Minority Company Joint Venture having, or which, insofar as
reasonably can be foreseen, in the future would have, any such effect.
(h) Absence of Changes in Benefit Plans; ERISA
Compliance.
(i) Except as disclosed in the Company
Filed SEC Documents or in SCHEDULE 3.1(h)(i) to the Company Disclosure Letter
and except as permitted by Section 4.1 (for the purpose of this sentence, as if
Section 4.1 had been in effect since December 31, 1995), since the date of the
most recent audited financial statements included in the Company Filed SEC
Documents, there has not been any adoption or amendment in any material respect
by the Company or any Company Subsidiary or Majority Company Joint Venture or,
to the knowledge of the Company, any Minority Company Joint Venture of any
bonus, pension, profit sharing, deferred compensation, incentive compensation,
stock ownership, stock purchase, stock option, phantom stock, retirement,
vacation, severance, disability, death benefit, hospitalization, medical or
other employee benefit plan, arrangement or understanding (whether or not
legally binding) providing benefits to any current or former employee, officer
or director of the Company, any Company Subsidiary, any Majority Company Joint
Venture or, to the knowledge of the Company, any Minority Company Joint Venture
or any person affiliated with the Company under Section 414(b), (c), (m) or (o)
of the Code (collectively, "COMPANY BENEFIT PLANS").
(ii) Except as described in the Company
Filed SEC Documents or in SCHEDULE 3.1(h)(ii) to the Company Disclosure Letter
or as would not have a Material Adverse Effect, (A) all Company Benefit Plans of
the Company, the Company Subsidiaries and the Majority Company Joint Ventures
and, to the knowledge of the Company, of the Minority Company Joint Ventures,
including any such plan that is an
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19
"employee benefit plan" as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), are in compliance with all
applicable requirements of law, including ERISA and the Code, and (B) neither
the Company nor any Company Subsidiary or Majority Company Joint Venture or, to
the knowledge of the Company, any Minority Company Joint Venture has any
liabilities or obligations with respect to any such Company Benefit Plan,
whether accrued, contingent or otherwise, nor to the knowledge of the Company
are any such liabilities or obligations expected to be incurred. Except as set
forth in SCHEDULE 3.1(h)(ii) to the Company Disclosure Letter, the execution of,
and performance of the transactions contemplated in, this Agreement will not
(either alone or upon the occurrence of any additional or subsequent events)
constitute an event under any Company Benefit Plan of the Company, a Company
Subsidiary or a Majority Company Joint Venture and, to the knowledge of the
Company, of a Minority Company Joint Venture, policy, arrangement or agreement
or any trust or loan that will or may result in any payment (whether of
severance pay or otherwise), acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligation to fund benefits with respect
to any employee or director. The only severance agreements or severance policies
applicable to the Company or the Company Subsidiaries or Majority Company Joint
Ventures or, to the knowledge of the Company, to the Minority Company Joint
Ventures are the agreement and policies specifically referred to in SCHEDULE
3.1(h)(ii) to the Company Disclosure Letter and the severance program referred
to in Section 5.12(c).
(i) Taxes.
(i) Each of the Company and each Company
Subsidiary and Majority Company Joint Venture and, to the knowledge of the
Company, each Minority Company Joint Venture has filed all tax returns and
reports required to be filed by it (after giving effect to any filing extension
properly granted by a Governmental Entity having authority to do so) and has
paid (or the Company has paid on its behalf) all taxes required to be paid by
it, and the most recent financial statements contained in the Company Filed SEC
Documents reflect an adequate reserve for all material taxes payable by the
Company (and by those Company Subsidiaries and Company Joint Ventures whose
financial statements are contained therein) for all taxable periods and portions
thereof through the date of such financial statements. Since the Financial
Statement Date, the Company has incurred no liability for taxes under Sections
857(b), 860(c) or 4981 of the Code, and neither the Company nor any Company
Subsidiary or Majority Company Joint Venture or, to the knowledge of the
Company, any Minority Company Joint
<PAGE> 204
20
Venture has incurred any liability for taxes other than in the ordinary course
of business. Except as set forth in SCHEDULE 3.1(i)(i) to the Company Disclosure
Letter, to the knowledge of the Company, no event has occurred, and no condition
or circumstance exists, which presents a material risk that any material tax
described in the preceding sentence will be imposed upon the Company. To the
knowledge of the Company, no deficiencies for any taxes have been proposed,
asserted or assessed against the Company or any of the Company Subsidiaries, and
no requests for waivers of the time to assess any such taxes are pending. As
used in this Agreement, "TAXES" shall include all federal, state, local and
foreign income, property, sales, excise and other taxes, tariffs or governmental
charges of any nature whatsoever, together with penalties, interest or additions
to tax with respect thereto.
(ii) The Company (i) for all taxable years
commencing with 1994 through the most recent December 31, has been subject to
taxation as a real estate investment trust (a "REIT") within the meaning of the
Code and has satisfied all requirements to qualify as a REIT for such years,
(ii) has operated, and intends to continue to operate, in such a manner as to
qualify as a REIT for the tax year ending December 31, 1996, and (iii) has not
taken or omitted to take any action which could result in a challenge to its
status as a REIT, and to the Company's knowledge, no such challenge is pending
or threatened. Each Company Joint Venture, the Operating Partnership, the
Financing Partnership (as defined below) and each other Company Subsidiary which
is a partnership, joint venture or limited liability company has been during and
since 1994 and continues to be treated for federal income tax purposes as a
partnership and not as a corporation or an association taxable as a corporation.
(j) No Payments to Employees, Officers or Directors.
Except as set forth on SCHEDULE 3.1(j) to the Company Disclosure Letter or as
otherwise specifically provided for in this Agreement, there is no employment or
severance contract, or other agreement requiring payments to be made on a change
of control or otherwise as a result of the consummation of any of the
Transactions, with respect to any employee, officer or director of the Company
or any Company Subsidiary or Majority Company Joint Venture or, to the knowledge
of the Company, any Minority Company Joint Venture.
(k) Brokers; Schedule of Fees and Expenses. No broker,
investment banker, financial advisor or other person, other than Morgan Stanley
& Co. Incorporated ("MORGAN STANLEY") and The Blackstone Group, L.P., the fees
and expenses of which have previously been disclosed to
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21
Parent and will be paid by the Company, is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in connection with the
Transactions based upon arrangements made by or on behalf of the Company or any
Company Subsidiary.
(l) Compliance with Laws. To the knowledge of the
Company, except as disclosed in the Company Filed SEC Documents and except as
set forth in SCHEDULE 3.1(l) to the Company Disclosure Letter, neither the
Company nor any of the Company Subsidiaries or Majority Company Joint Ventures
or, to the knowledge of the Company, any Minority Company Joint Ventures has
violated or failed to comply with any statute, law, ordinance, regulation, rule,
judgment, decree or order of any Governmental Entity applicable to its business,
properties or operations, except for violations and failures to comply that
would not, individually or in the aggregate, reasonably be expected to result in
a Material Adverse Effect.
(m) Contracts; Debt Instruments.
(i) To the knowledge of the Company,
neither the Company nor any Company Subsidiary or Company Joint Venture is in
violation of or in default under, in any material respect (nor does there exist
any condition which upon the passage of time or the giving of notice or both
would cause such a violation of or default under), any material loan or credit
agreement, note, bond, mortgage, indenture, lease, permit, concession,
franchise, license or any other material contract, agreement, arrangement or
understanding, to which it is a party or by which it or any of its properties or
assets is bound, except as set forth in SCHEDULE 3.1(m)(i) to the Company
Disclosure Letter and except for violations or defaults that would not,
individually or in the aggregate, result in a Material Adverse Effect.
(ii) Except for any of the following
expressly identified in the Company Filed SEC Documents and except as permitted
by Section 4.1, SCHEDULE 3.1(m)(ii) to the Company Disclosure Letter sets forth
(x) a list of all loan or credit agreements, notes, bonds, mortgages, indentures
and other agreements and instruments pursuant to which any indebtedness of the
Company or any of the Company Subsidiaries or the Majority Company Joint
Ventures or, to the knowledge of the Company, of the Minority Company Joint
Ventures, other than indebtedness payable to the Company, a Company Subsidiary
or a Wholly-Owned Company Joint Venture or to any third-party partner or joint
venturer in any Company Joint Venture, in an aggregate principal amount in
excess of $2,000,000 per item is outstanding or may be incurred and (y) the
respective principal amounts
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22
outstanding thereunder on February 29, 1996. For purposes of this Section
3.1(m)(ii) and Section 3.2(m)(ii), "INDEBTEDNESS" shall mean, with respect to
any person, without duplication, (A) all indebtedness of such person for
borrowed money, whether secured or unsecured, (B) all obligations of such person
under conditional sale or other title retention agreements relating to property
purchased by such person, (C) all capitalized lease obligations of such person,
(D) all obligations of such person under interest rate or currency hedging
transactions (valued at the termination value thereof) and (E) all guarantees of
such person of any such indebtedness of any other person.
(iii) The Termination Agreement shall, as
of the Effective Time, have the effect of (i) terminating all rights of any
party under each of the Registration Rights Agreement and the Cash Tender
Agreement and (ii) waiving the rights of all parties to the Exchange Rights
Agreement that are also parties to the Termination Agreement. All parties to the
Exchange Rights Agreement are parties to the Termination Agreement other than
JCP Realty, Inc. and certain present and former employees (and their heirs,
successors and assigns) (the "EMPLOYEE EXCHANGE RIGHTS HOLDERS") of EJDC and its
affiliates, the Company or a Company Subsidiary or a Company Joint Venture,
which Employee Exchange Rights Holders own, in the aggregate, less than one
percent of the interests in the Operating Partnership.
(n) Opinion of Financial Advisor. The Company has
received the opinion of Morgan Stanley, dated March 25, 1996, satisfactory to
the Company, a signed version of which has been provided to Parent and Sub, to
the effect that the Merger Consideration provided for in this Agreement in
connection with the exchange of Parent Common Stock for Common Stock is fair to
the shareholders of the Company from a financial point of view.
(o) State Takeover Statutes. No Takeover Statute (as
defined below) of the State of Ohio, including, without limitation, Section
1701.831 of the Ohio Statute, Chapter 1704 of the Ohio Revised Code and Sections
1707.041 and 1707.043 of the Ohio Revised Code applies or purports to apply to
the Merger, this Agreement, any of the Transactions, the Company or any of its
equity securities.
(p) Registration Statement. The information furnished
to Parent or Sub by the Company for inclusion in the Registration Statement will
not, as of the effective date of the Registration Statement, contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the
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23
statements therein, in light of the circumstances under which they were made,
not misleading.
(q) Parent Stock. The Company is not an "interested
stockholder" of Parent pursuant to the Maryland "Business Combination" statute
at Sections 3-601 et seq. of the Maryland General Corporation Law (the "MGCL").
(r) Vote Required. The affirmative vote of at least
two-thirds of the outstanding shares of Common Stock is the only vote of the
holders of any class or series of the Company's capital stock necessary (under
applicable law or otherwise) to approve this Agreement and the transactions
contemplated hereby.
SECTION 3.2 Representations and Warranties of Parent and Sub.
Each of Parent and Sub represents and warrants to the Company as follows:
(a) Organization, Standing and Corporate Power of
Parent and Sub. Each of Parent and Sub is a corporation duly organized and
validly existing under the laws of its jurisdiction of incorporation and has the
requisite corporate power and authority to carry on its business as now being
conducted. Each of Parent and Sub is duly qualified or licensed to do business
and is in good standing in each jurisdiction in which the nature of its business
or the ownership or leasing of its properties makes such qualification or
licensing necessary, other than in such jurisdictions where the failure to be so
qualified or licensed, individually or in the aggregate, would not have a
material adverse effect on the business, properties, assets, financial condition
or results of operations of Parent and the Parent Subsidiaries and Parent Joint
Ventures (but only to the extent of the Parent Interests (as defined below) with
respect to Parent Joint Ventures), taken as a whole (a "PARENT MATERIAL ADVERSE
EFFECT"). Each of Parent and Sub has delivered to the Company complete and
correct copies of its Charter or Articles of Incorporation and Bylaws or Code of
Regulations (as the case may be), as amended or supplemented to the date of this
Agreement.
(b) Other Parent Subsidiaries and Parent Joint
Ventures.
(i) SCHEDULE 3.2(b)(i) to the Parent
Disclosure Letter sets forth each Parent Subsidiary (as defined below)(other
than Sub) and the ownership interest therein of Parent. Except as set forth in
SCHEDULE 3.2(b)(i) to the Parent Disclosure Letter, (A) all the outstanding
shares of capital stock of each Parent Subsidiary that is a corporation have
been validly issued and are fully paid and nonassessable and are owned by
Parent, by another Parent
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24
Subsidiary or by Parent and another Parent Subsidiary, free and clear of all
Liens and (B) all equity interests in each Parent Subsidiary that is a
partnership, joint venture, limited liability company or trust are owned by
Parent, by another Parent Subsidiary or by Parent and another Parent Subsidiary
free and clear of all Liens. Except for the capital stock of or other equity
interests in the Parent Subsidiaries and except for the ownership interests in
the Parent Joint Ventures (as defined below), Parent does not own, directly or
indirectly, any capital stock or other ownership interest, with a fair market
value as of the date of this Agreement greater than $5,000,000 in any person.
Each Parent Subsidiary (other than Sub) that is a corporation is duly
incorporated and validly existing under the laws of its jurisdiction of
incorporation and has the requisite corporate power and authority to carry on
its business as now being conducted and each Parent Subsidiary that is a
partnership, limited liability company or trust is duly organized and validly
existing under the laws of its jurisdiction of organization and has the
requisite power and authority to carry on its business as now being conducted.
Each Parent Subsidiary (other than Sub) is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such qualification
or licensing necessary, other than in such jurisdictions where the failure to be
so qualified or licensed individually or in the aggregate, would not have a
Parent Material Adverse Effect.
(ii) SCHEDULE 3.2(b)(ii) to the Parent
Disclosure Letter lists each Parent Joint Venture. Each Parent Joint Venture has
made all filings required by and is in compliance with all Laws necessary to do
business in each jurisdiction in which the nature of its business or the
ownership or the leasing of its properties makes such filings or compliance
necessary, other than such jurisdictions where the failure to have so filed or
to be in such compliance, individually or in the aggregate, would not have a
Parent Material Adverse Effect. SCHEDULE 3.2(b)(ii) lists, as of the date
hereof, each partner, joint venturer or other person having a direct ownership
interest, other than Parent or a Parent Subsidiary or Parent Joint Venture, in
the Parent Joint Ventures.
(c) Capital Structure. The authorized capital stock of
Parent consists of 246,000,000 shares of Parent Common Stock; 12,000,000 shares
of Class B Stock; 4,000,000 shares of Series A Convertible Preferred Stock, par
value $.0001 per share (the "PARENT PREFERRED STOCK"); and 150,000,000 shares of
Excess Stock, par value $.0001 per share (the "PARENT EXCESS STOCK"). On the
date hereof, (i) 55,360,225 shares of Parent Common Stock, 3,200,000
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25
shares of Class B Stock, 4,000,000 shares of Parent Preferred Stock and no
shares of Parent Excess Stock were issued and outstanding, (ii) no shares of
Parent Stock or Parent Preferred Stock were held by Parent, (iii) 1,496,728
shares of Parent Common Stock were reserved for issuance upon exercise of
outstanding stock options to purchase shares of Parent Common Stock granted to
Parent employees ("PARENT EMPLOYEE OPTIONS"), (iv) 55,000 shares of Parent
Common Stock were reserved for issuance upon exercise of outstanding stock
options to purchase shares of Parent Common Stock granted to Parent directors
(together with the Parent Employee Options, the "PARENT OPTIONS") and (v)
37,282,628 shares of Parent Common Stock were reserved for issuance upon
exchange of Parent Units (as defined below) for shares of Parent Common Stock
pursuant to the Second Amended and Restated Agreement of Limited Partnership or
the Parent Operating Partnership (the "PARENT OPERATING PARTNERSHIP AGREEMENT").
On the date of this Agreement, except as set forth in this Section 3.2(c), no
shares of capital stock or other voting securities of Parent were issued,
reserved for issuance or outstanding. There are no outstanding stock
appreciation rights relating to the capital stock of Parent. All outstanding
shares of capital stock of Parent are, and all shares which may be issued
pursuant to this Agreement will be, when issued, duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive rights. There
are no bonds, debentures, notes or other indebtedness of Parent having the right
to vote (or convertible into, or exchangeable for, securities having the right
to vote) on any matters on which stockholders of Parent may vote. Except (A) for
the Parent Options and shares of Class B Stock and Parent Preferred Stock (each
of which is exchangeable for shares of Parent Common Stock), units ("PARENT
UNITS") of partnership interest held by limited partners in the Parent Operating
Partnership (as defined below) (which, subject to certain restrictions, may be
put to Parent in exchange for cash or Parent Common Stock at Parent's election),
(B) for such outstanding rights to acquire Parent Units as are disclosed in
SCHEDULE 3.2(c) to the Parent Disclosure Letter, (C) as required pursuant to
rights of first refusal or rights of first offer, "buy-sell" provisions,
anti-dilution provisions or pro-rata funding obligations set forth in the terms
of any partnership or joint venture agreement governing any of the Parent Joint
Ventures existing on the date of this Agreement, (D) as set forth in SCHEDULE
3.2(c) to the Parent Disclosure Letter, (E) as otherwise permitted under Section
4.2, (F) as required under the Parent Operating Partnership Agreement and (G) as
contemplated under Parent's dividend reinvestment plan, as of the date of this
Agreement there are no outstanding securities, options, warrants, calls, rights,
commitments, agreements, arrangements or undertakings of any kind to which
Parent or any Parent
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Subsidiary or Parent Joint Venture is a party or by which such entity is bound,
obligating Parent or any Parent Subsidiary or Parent Joint Venture to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of
capital stock, voting securities or other ownership interests of Parent or of
any Parent Subsidiary or Parent Joint Venture or obligating Parent or any Parent
Subsidiary or Parent Joint Venture to issue, grant, extend or enter into any
such security, option, warrant, call, right, commitment, agreement, arrangement
or undertaking (other than to Parent or a Parent Subsidiary or a Wholly-Owned
Parent Joint Venture). Except (x) as required pursuant to rights of first
refusal or rights of first offer, "buy-sell" provisions, anti-dilution
provisions or pro-rata funding obligations set forth in the terms of any
partnership or joint venture agreement governing any of the Company Joint
Ventures existing on the date of this Agreement,(y) as set forth on SCHEDULE
3.2(c) to the Parent Disclosure Letter and (z) as required under the Partnership
Agreement, there are no outstanding contractual obligations of Parent or any
Parent Subsidiary or Parent Joint Venture to repurchase, redeem or otherwise
acquire any shares of capital stock or other ownership interests in any Parent
Subsidiary or Parent Joint Venture or make any material investment (in the form
of a loan, capital contribution or otherwise) in any person (other than a Parent
Subsidiary or a Wholly-Owned Parent Joint Venture). The authorized capital stock
of Sub consists of 1,500 shares of common stock, without par value (the "SUB
COMMON STOCK"). As of the date of this Agreement, all of the issued and
outstanding shares of Sub Common Stock are owned by Parent. Immediately prior to
the Effective Time, 1,100.11 shares of Sub Common Stock shall be issued and
outstanding, (i) 1,100 shares of which shall be owned by Parent, (ii) 110
fractional shares, equal to .001 share, of which shall be owned by 110
individuals, and (iii) all of which shares shall be duly authorized, validly
issued, fully paid and nonassessable.
(d) Authority; Noncontravention; Consents. Each of
Parent and Sub has the requisite corporate power and authority to enter into
this Agreement, and subject to approval of this Agreement by the vote of the
holders of the Parent Stock required to approve this Agreement and the
transactions contemplated hereby (including, without limitation, the issuance of
Parent Common Stock in connection with the Merger and the approval of an Amended
and Restated Charter of Parent in the form of EXHIBIT E-1 or EXHIBIT E-2, as the
case may be, as contemplated by Section 5.6 and the approval of an Amended and
Restated By-laws of Parent in the form of EXHIBIT F-1, as contemplated by and to
the extent required under Section 5.6(a)) (the "PARENT STOCKHOLDER APPROVALS"
and, together with the Company Shareholder
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27
Approvals, the "SHAREHOLDER APPROVALS") to consummate the transactions
contemplated by this Agreement to which Parent or Sub (as the case may be) is a
party. The execution and delivery of this Agreement by each of Parent and Sub
and the consummation by each of Parent and Sub of the transactions contemplated
by this Agreement to which Parent or Sub (as the case may be) is a party have
been duly authorized by all necessary corporate action on the part of each of
Parent and Sub, subject to approval of this Agreement pursuant to the Parent
Stockholder Approvals. This Agreement has been duly executed and delivered by
each of Parent and Sub and constitutes a valid and binding obligation of each of
Parent and Sub, enforceable against each of Parent and Sub in accordance with
its terms. Except as set forth in SCHEDULE 3.2(d) to the Parent Disclosure
Letter, the execution and delivery of this Agreement by each of Parent and Sub
do not, and the consummation of the transactions contemplated by this Agreement
to which Parent or Sub (as the case may be) is a party and compliance by each of
Parent and Sub with the provisions of this Agreement will not, conflict with, or
result in any violation of, or default (with or without notice or lapse of time,
or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a material benefit under, or result
in the creation of any Lien upon any of the properties or assets of Parent, Sub
or any other Parent Subsidiary or any Parent Joint Venture under, (i) the
Charter or Articles of Incorporation or By-laws or Code of Regulations (as the
case may be) of Parent and Sub or the comparable charter or organizational
documents or partnership or similar agreement (as the case may be) of any other
Parent Subsidiary or any Parent Joint Venture each as amended or supplemented to
the date of this Agreement, (ii) any loan or credit agreement, note, bond,
mortgage, indenture, reciprocal easement agreement, lease or other agreement,
instrument, permit, concession, franchise or license applicable to Parent, Sub
or any other Parent Subsidiary or any Parent Joint Venture or their respective
properties or assets or (iii) subject to the governmental filings and other
matters referred to in the following sentence, any Laws applicable to Parent,
Sub or any other Parent Subsidiary or any Parent Joint Venture or their
respective properties or assets, other than, in the case of clause (ii) or
(iii), any such conflicts, violations, defaults, rights or Liens that
individually or in the aggregate would not (x) have a Parent Material Adverse
Effect or (y) prevent the consummation of the Transactions. No consent,
approval, order or authorization of, or registration, declaration or filing
with, any Governmental Entity is required by or with respect to Parent, Sub, any
other Parent Subsidiary or any Parent Joint Venture in connection with the
execution and delivery of this Agreement or the consummation by Parent or Sub,
as the case may be, of
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28
any of the transactions contemplated by this Agreement, except for (i) the
filing by any person in connection with any of the Transactions of a premerger
notification and report form under the HSR Act, (ii) the filing with the SEC of
(x) the Proxy Statement and a registration statement on Form S-4 (or other
appropriate form) in connection with the registration of the Parent Common Stock
constituting the Merger Consideration (the "REGISTRATION STATEMENT") and (y)
such reports under Section 13(a) of the Exchange Act as may be required in
connection with this Agreement and the transactions contemplated by this
Agreement, (iii) the filing of the Certificate of Merger with the Secretary of
State of the State of Ohio, (iv) such filings as may be required in connection
with the payment of any Transfer and Gains Taxes and (v) such other consents,
approvals, orders, authorizations, registrations, declarations and filings as
are set forth in SCHEDULE 3.2(d) to the Parent Disclosure Letter or (A) as may
be required under (x) the laws of any foreign country in which Parent or any
Parent Subsidiary or Parent Joint Venture conducts any business or owns any
property or assets, (y) federal, state, local or foreign environmental laws or
(z) the "blue sky" laws of various states or (B) which, if not obtained or made,
would not prevent or delay in any material respect the consummation of any of
the transactions contemplated by this Agreement or otherwise prevent Parent or
Sub from performing their respective obligations under this Agreement in any
material respect or have, individually or in the aggregate, a Parent Material
Adverse Effect.
(e) SEC Documents; Financial Statements; Undisclosed
Liabilities. Parent has filed all required reports, schedules, forms, statements
and other documents with the SEC since December 20, 1993 (the "PARENT SEC
DOCUMENTS"). All of the Parent SEC Documents (other than preliminary material),
as of their respective filing dates, complied in all material respects with all
applicable requirements of the Securities Act and the Exchange Act and, in each
case, the rules and regulations promulgated thereunder. None of the Parent SEC
Documents at the time of filing contained any untrue statement of a material
fact or omitted to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, except to the extent such statements
have been modified or superseded by later Filed Parent SEC Documents. The
consolidated financial statements of Parent included in the Parent SEC Documents
complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with GAAP (except, in the case of
unaudited statements, as permitted by Form 10-Q of the SEC) applied on a
consistent
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29
basis during the periods involved (except as may be indicated in the notes
thereto) and fairly presented, in accordance with the applicable requirements of
GAAP, the consolidated financial position of Parent and the Parent Subsidiaries
and Parent Joint Ventures, taken as a whole, as of the dates thereof and the
consolidated results of operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). To the knowledge of Parent, the audited financial statements of
the unconsolidated Parent Subsidiaries and Parent Joint Ventures previously
delivered to the Company (the "UNCONSOLIDATED PARENT FINANCIAL STATEMENTS") have
been prepared in accordance with GAAP applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and fairly
presented, in accordance with the applicable requirements of GAAP, the financial
position of such Parent Subsidiaries and Parent Joint Ventures, taken as a
whole, as of the dates thereof and the results of their respective operations
and cash flows for the periods then ended. Except as set forth in the Parent
Filed SEC Documents (as defined below), in the Unconsolidated Parent Financial
Statements, in SCHEDULE 3.2(e) to the Parent Disclosure Letter or as permitted
by Section 4.2 (for the purpose of this sentence, as if Section 4.2 had been in
effect since December 31, 1995), neither Parent nor any Parent Subsidiary or
Parent Joint Venture has any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) required by GAAP to be set forth on
a consolidated balance sheet of Parent or, to the knowledge of Parent, of any
unconsolidated Parent Subsidiary or Parent Joint Venture or in the notes thereto
and which, individually or in the aggregate, would have a Parent Material
Adverse Effect.
(f) Absence of Certain Changes or Events. Except as
disclosed in the Parent SEC Documents filed and publicly available prior to the
date of this Agreement (referred to collectively as the "PARENT FILED SEC
DOCUMENTS") or in SCHEDULE 3.2(f) to the Parent Disclosure Letter, since the
date of the most recent financial statements included in the Parent Filed SEC
Documents (the "PARENT FINANCIAL STATEMENT DATE") to the date of this Agreement,
Parent, the Parent Subsidiaries and the Parent Joint Ventures have conducted
their business only in the ordinary course and there has not been (i) any
material adverse change in the business, financial condition or results of
operations of Parent and the Parent Subsidiaries and Parent Joint Ventures (but
only to the extent of the Parent Interests with respect to Parent Joint
Ventures) taken as a whole, without giving effect to a general decline in the
U.S. economy or an adverse change in the financial condition of specialty retail
tenants or department stores
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30
(a "PARENT MATERIAL ADVERSE CHANGE"), nor has there been any occurrence or
circumstance that with the passage of time would reasonably be expected to
result in a Parent Material Adverse Change, (ii) except for regular quarterly
dividends (in the case of Parent) and distributions (in the case of the Parent
Operating Partnership) (in each case in an amount determined in a manner
consistent with past practice but in no event in excess of 104 percent of the
most recent previously paid dividend or distribution, as the case may be, with
customary record and payment dates, any declaration, setting aside or payment of
any dividend or distribution (whether in cash, stock or property) with respect
to any of Parent's capital stock or any Parent Units, other than the dividend
required to be paid pursuant to Section 2.2(d)(i) (and the corresponding Parent
Operating Partnership distribution), (iii) any split, combination or
reclassification of any of Parent's capital stock or any issuance or the
authorization of any issuance of any other securities in respect of, in lieu of
or in substitution for, or giving the right to acquire by exchange or exercise,
shares of its capital stock or any issuance of an ownership interest in any
Parent Subsidiary or any Parent Joint Venture, except (A) as required pursuant
to rights of first refusal or rights of first offer, "buy-sell" provisions,
anti-dilution provisions or pro-rata funding obligations set forth in the terms
of any partnership or joint venture agreement governing any of the Parent Joint
Ventures existing on the date of this Agreement and (B) as permitted by Section
4.2, (iv) any damage, destruction or loss, whether or not covered by insurance,
that has or would have a Parent Material Adverse Effect or (v) any change in
accounting methods, principles or practices by Parent or any Parent Subsidiary
or Parent Joint Venture materially affecting its assets, liabilities or
business, except insofar as may have been disclosed in the Parent Filed SEC
Documents or required by a change in GAAP.
(g) Litigation. Except as disclosed in the Parent
Filed SEC Documents or in SCHEDULE 3.2(g) of the Parent Disclosure Letter, and
other than personal injury and other routine tort litigation arising from the
ordinary course of operations of Parent, the Parent Subsidiaries and the Parent
Joint Ventures (i) which are covered by adequate insurance or (ii) for which all
material costs and liabilities arising therefrom are reimbursable pursuant to
common area maintenance agreements, there is no suit, action or proceeding
pending or, to the knowledge of Parent, threatened in writing against or
affecting Parent or any Parent Subsidiary or Parent Joint Venture that,
individually or in the aggregate, could reasonably be expected to (A) have a
Parent Material Adverse Effect or (B) prevent the consummation of any of the
Transactions, nor is there any judgment, decree, injunction, rule or order of
any
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31
Governmental Entity or arbitrator outstanding against Parent or any Parent
Subsidiary or Parent Joint Venture having, or which, insofar as reasonably can
be foreseen, in the future would have any such effect.
(h) Absence of Changes in Benefit Plans; ERISA Compliance.
(i) Except as disclosed in the Parent Filed SEC Documents
or in SCHEDULE 3.2(h)(i) to the Parent Disclosure Letter and except as permitted
by Section 4.2 (for the purpose of this sentence, as if Section 4.2 had been in
effect since December 31, 1995), since the date of the most recent audited
financial statements included in the Parent Filed SEC Documents, there has not
been any adoption or amendment in any material respect by Parent or any Parent
Subsidiary or Parent Joint Venture of any bonus, pension, profit sharing,
deferred compensation, incentive compensation, stock ownership, stock purchase,
stock option, phantom stock, retirement, vacation, severance, disability, death
benefit, hospitalization, medical or other employee benefit plan, arrangement or
understanding (whether or not legally binding) providing benefits to any current
or former employee, officer or director of Parent, any Parent Subsidiary, any
Parent Joint Venture or any person affiliated with Parent under Section 414(b),
(c), (m) or (o) of the Code (collectively, "PARENT BENEFIT PLANS").
(ii) Except as described in the Parent Filed SEC
Documents or in SCHEDULE 3.2(h)(ii) to the Parent Disclosure Letter or as would
not have a Parent Material Adverse Effect, (a) all Parent Benefit Plans,
including any such plan that is an "employee benefit plan" as defined in Section
3(3) of ERISA, are in compliance with all applicable requirements of law,
including ERISA and the Code, and (B) neither Parent nor any Parent Subsidiary
or Parent Joint Venture has any liabilities or obligations with respect to any
such Parent Benefit Plans, whether accrued, contingent or otherwise, nor to the
knowledge of Parent are any such liabilities or obligations expected to be
incurred. Except as set forth in SCHEDULE 3.2(h)(ii) to the Parent Disclosure
Letter, the execution of, and performance of the transactions contemplated in,
this Agreement will not (either alone or upon the occurrence of any additional
or subsequent events) constitute an event under any Parent Benefit Plan, policy,
arrangement or agreement or any trust or loan that will or may result in any
payment (whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any employee or director. The only severance agreements
or severance policies applicable to Parent or Parent Subsidiaries or Parent
Joint Ventures are the agreement and policies specifically referred to in
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32
SCHEDULE 3.2(h)(ii) to the Parent Disclosure Letter and the severance program
referred to in Section 5.12(c).
(i) Taxes.
(i) Except as set forth in SCHEDULE 3.2(i)(i) to the
Parent Disclosure Letter, each of Parent and each Parent Subsidiary and Parent
Joint Venture has filed all tax returns and reports required to be filed by it
(after giving effect to any filing extension properly granted by a Governmental
Entity having authority to do so) and has paid (or Parent has paid on its
behalf) all taxes required to be paid by it, and the most recent financial
statements contained in the Parent Filed SEC Documents reflect an adequate
reserve for all material taxes payable by Parent (and by those Parent
Subsidiaries and Parent Joint Ventures whose financial statements are contained
therein) for all taxable periods and portions thereof through the date of such
financial statements. Since the Parent Financial Statement Date, Parent has
incurred no liability for taxes under Sections 857(b), 860(c) or 4981 of the
Code, and neither Parent nor any Parent Subsidiary or Parent Joint Venture has
incurred any liability for taxes other than in the ordinary course of business.
To the knowledge of Parent, no event has occurred, and no condition or
circumstance exists, which presents a material risk that any material tax
described in the preceding sentence will be imposed upon Parent. To the
knowledge of Parent, no deficiencies for any taxes have been proposed, asserted
or assessed against Parent or any of the Parent Subsidiaries, and no requests
for waivers of the time to assess any such taxes are pending.
(ii) Parent (i) for all taxable years commencing with
1994 through the most recent December 31, has been subject to taxation as a REIT
within the meaning of the Code and has satisfied all requirements to qualify as
a REIT for such years, (ii) has operated, and intends to continue to operate, in
such a manner as to qualify as a REIT for the tax year ending December 31, 1996,
and (iii) has not taken or omitted to take any action which could result in a
challenge to its status as a REIT, and to Parent's knowledge, no such challenge
is pending or threatened. Each Parent Joint Venture, the Parent Operating
Partnership (as defined below) and each other Parent Subsidiary which is a
partnership, joint venture or limited liability company has been treated during
and since 1994 and continues to be treated for federal income tax purposes as a
partnership and not as a corporation or as an association taxable as a
corporation.
(j) No Payments to Employees, Officers or Directors. Except as
set forth in SCHEDULE 3.2(j) to the
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33
Parent Disclosure Letter or as otherwise specifically provided for in this
Agreement, there is no employment or severance contract, or other agreement
requiring payments to be made on a change of control or otherwise as a result of
the consummation of any of the Transactions, with respect to any employee,
officer or director of Parent or any Parent Subsidiary or Parent Joint Venture.
(k) Brokers; Schedule of Fees and Expenses. No broker,
investment banker, financial advisor or other person, other than Merrill Lynch &
Co. ("MERRILL LYNCH"), the fees and expenses of which have previously been
disclosed to the Company and will be paid by Parent, is entitled to any
broker's, finder's, financial advisor's or other similar fee or commission in
connection with the Transactions based upon arrangements made by or on behalf of
Parent or Sub or any other Parent Subsidiary.
(l) Compliance with Laws. To the knowledge of Parent, except
as disclosed in the Parent Filed SEC Documents, neither Parent nor any of the
Parent Subsidiaries or Parent Joint Ventures has violated or failed to comply
with any statute, law, ordinance, regulation, rule, judgment, decree or order of
any Governmental Entity applicable to its business, properties or operations,
except for violations and failures to comply that would not, individually or in
the aggregate, reasonably be expected to result in a Parent Material Adverse
Effect.
(m) Contracts; Debt Instruments.
(i) To the knowledge of Parent, neither Parent nor any
Parent Subsidiary or Parent Joint Venture is in violation of or in default
under, in any material respect (nor does there exist any condition which upon
the passage of time or the giving of notice or both would cause such a violation
of or default under), any material loan or credit agreement, note, bond,
mortgage, indenture, lease, permit, concession, franchise, license or any other
material contract, agreement, arrangement or understanding, to which it is a
party or by which it or any of its properties or assets is bound, except as set
forth in SCHEDULE 3.2(m)(i) to the Parent Disclosure Letter and except for
violations or defaults that would not, individually or in the aggregate, result
in a Parent Material Adverse Effect.
(ii) Except for any of the following expressly identified
in the most recent financial statements contained in the Parent Filed SEC
Documents and except as permitted by Section 4.2, SCHEDULE 3.2(m)(ii) to the
Parent Disclosure Letter sets forth (x) a list of all loan or credit agreements,
notes, bonds, mortgages, indentures and other agreements and instruments
pursuant to which any
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34
indebtedness of Parent or any of the Parent Subsidiaries or the Parent Joint
Ventures, other than indebtedness payable to Parent, a Parent Subsidiary or a
Wholly-Owned Parent Joint Venture or to any third-party partner or joint
venturer in any Parent Joint Venture, in an aggregate principal amount in excess
of $2,000,000 per item is outstanding or may be incurred and (y) the respective
principal amounts outstanding thereunder on February 29, 1996.
(n) Opinion of Financial Advisor. Parent has received the
opinion of Merrill Lynch, dated March 25, 1996, satisfactory to Parent, a signed
version of which has been provided to the Company, to the effect that the
exchange ratio provided for in this Agreement in connection with the exchange of
Parent Common Stock for Common Stock in the Merger is fair to Parent and the
stockholders of Parent from a financial point of view.
(o) State Statutes. Parent has taken all action necessary
to exempt transactions with the Company and its affiliates from the operation of
the Maryland "Business Combination" statute at Sections 3-601 et seq. of the
MGCL and the Maryland "control share" statute at Sections 3-701 et seq. of the
MGCL.
(p) Interim Operations of Sub. Sub was formed solely for
the purpose of engaging in the transactions contemplated by this Agreement and
has not engaged in any business activities or conducted any operations other
than in connection with the transactions contemplated by this Agreement.
(q) Registration Statement. The Registration Statement
will conform, in all material respects to the requirements of the Securities Act
and the rules and regulations of the SEC thereunder and will not, as of the
effective date of the Registration Statement, contain 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; provided, however, that this
representation and warranty shall not apply to any statements or omissions made
in reliance upon and in conformity with information furnished to Parent or Sub
by the Company in writing for inclusion in the Registration Statement.
(r) Vote Required. The affirmative vote of the holders of
(i) a majority of the shares of Parent Stock and Parent Preferred Stock voting
together as a single class present in person or represented by proxy at the
Parent Stockholders Meeting (provided that the shares so present or
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35
represented constitute a majority of the shares of Parent Stock and Parent
Preferred Stock) is the only vote of the holders of any class or series of
Parent's capital stock necessary to approve the issuance of Parent Common Stock
in connection with the Merger; (ii) at least (x) 80% of the votes entitled to be
cast by the holders of shares of Parent's capital stock voting together as
single class and (y) at least a majority of the outstanding shares of Class B
Stock are the only votes of the holders of any class or series of Parent's
capital stock necessary (under applicable law or otherwise) to approve the
adoption of the Amended and Restated Charter and By-laws of Parent in the forms
of EXHIBIT E-1 and EXHIBIT F-1, as contemplated by Section 5.6(a); and (iii) a
majority of the votes entitled to be cast by the holders of the Parent Stock and
the Parent Preferred Stock voting together as a single class to approve the
adoption (if necessary under Section 5.6) of the Amended and Restated Charter of
Parent in the form of EXHIBIT E-2 as contemplated by Section 5.6(b).
ARTICLE IV
Covenants
SECTION 4.1 Conduct of Business by the Company. During the period from
the date of this Agreement to the Effective Time, the Company shall, and shall
cause the Company Subsidiaries and Majority Company Joint Ventures each to and
shall, where the Company or a Company Subsidiary has the contractual right to do
so, use commercially reasonable efforts to cause all Minority Company Joint
Ventures each to, carry on its businesses in the usual, regular and ordinary
course in substantially the same manner as heretofore conducted and, to the
extent consistent therewith, use commercially reasonable efforts to preserve
intact its current business organization, goodwill and ongoing businesses.
Without limiting the generality of the foregoing, the following additional
restrictions shall apply: During the period from the date of this Agreement to
the Effective Time, except as set forth in SCHEDULE 4.1 to the Company
Disclosure Letter, the Company shall not and shall cause the Company
Subsidiaries and Majority Company Joint Ventures not to (and not to authorize or
commit or agree to) and shall, where the Company or a Company Subsidiary has the
contractual right to do so, use commercially reasonable efforts to cause all
Minority Company Joint Ventures not to (and not to authorize or commit or agree
to):
(a) (i) except for (x) regular quarterly dividends (in the case of
the Company) not in excess of $.315 per share of Common Stock and (y)
distributions (in
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36
the case of the Operating Partnership) not in excess of $.315 in respect of that
percentage of Company Partnership Interests exchangeable for one share of Common
Stock under the Exchange Rights Agreement, as the case may be, in each case with
customary record and payment dates, declare, set aside or pay any dividends on,
or make any other distributions in respect of, any of the Company's capital
stock, any Company Partnership Interests or partnership interests or stock in
any Company Subsidiary that is not directly or indirectly wholly-owned by the
Company, other than the dividend required to be paid pursuant to Section
2.2(d)(i) (and the corresponding Operating Partnership distribution) and any
special tax distributions required to be paid by the Operating Partnership
pursuant to the Operating Partnership Agreement, (ii) except in connection with
the Transactions as required under the Exchange Rights Agreement or, with
respect to Company Joint Ventures, as otherwise permitted by Section 4.1(e),
split, combine or reclassify any capital stock, Company Partnership Interests or
other partnership interests or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of such
capital stock or partnership interests or (iii) except as required (A) under the
Exchange Rights Agreement, dated as of April 21, 1994, among the Company, the
Operating Partnership and the persons listed on SCHEDULE A thereto and certain
other persons owning limited partnership interests in the Operating Partnership
(the "EXCHANGE RIGHTS AGREEMENT"), and (B) except as contemplated under or
required pursuant to "buy-sell" provisions set forth in the terms of any
partnership or joint venture agreement governing any Company Joint Venture
existing on the date of this Agreement and subject to Section 4.1(e), purchase,
redeem or otherwise acquire any shares of capital stock of the Company or any
Company Partnership Interests or partnership interests in the Financing
Partnership or any options, warrants or rights to acquire, or security
convertible into, shares of such capital stock or such Company Partnership
Interests or partnership interests;
(b) except as contemplated under or required pursuant to the
Exchange Rights Agreement, the Company's dividend reinvestment plan, Section
4.1(e), the exercise of stock options outstanding on the date of this Agreement
and rights of first refusal or rights of first offer, "buy-sell" provisions or
anti-dilution provisions or pro-rata funding obligations set forth in the terms
of any partnership or joint venture agreement governing any of the Company Joint
Ventures existing on the date of this Agreement, issue, deliver or sell, or
grant any option or other right in respect of, any shares of capital stock, any
other voting securities (including Company Partnership Interests or other
partnership interests) of the Company or any Company Subsidiary or Company Joint
Venture or any securities
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convertible into, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities except to the Company, a
Company Subsidiary or a Wholly-Owned Company Joint Venture;
(c) except as otherwise contemplated by this Agreement, amend the
articles or certificate of incorporation, by-laws, code of regulations,
partnership agreement or other comparable charter or organizational documents of
the Company or any Company Subsidiary or Majority Company Joint Venture or where
the Company has the necessary contractual power, any Minority Company Joint
Venture;
(d) in the case of the Company or the Operating Partnership, merge
or consolidate with any person;
(e) (x) in a transaction involving capital, securities or other
assets or indebtedness of the Company, a Company Subsidiary, a Company Joint
Venture (but only to the extent of the Company Interests with respect to Company
Joint Ventures) or any combination thereof in excess of $10,000,000, without
providing to Parent reasonable prior written notice of and an opportunity to
consult in connection with such transaction or (y) in a transaction involving
capital, securities, other assets or indebtedness of the Company, a Company
Subsidiary or Company Joint Venture (but only to the extent of the Company
Interests with respect to Company Joint Ventures) or any combination thereof in
excess of $20,000,000, without obtaining the prior written consent of Parent,
which consent shall not unreasonably be withheld or delayed: (i) acquire or
agree to acquire by merging or consolidating with, or by purchasing all or a
substantial portion of the equity securities or assets of, or by any other
manner, any business or any corporation, partnership, limited liability company,
joint venture, association, business trust or other business organization or
division thereof or interest therein or any assets; (ii) mortgage or otherwise
encumber or subject to any Lien or sell, lease or otherwise dispose of any of
its material properties or assets or assign or encumber the right to receive
income, dividends, distributions and the like; (iii) make or agree to make any
new capital expenditures, except in accordance with budgets relating to the
Company, the Company Subsidiaries and the Company Joint Ventures that have been
previously delivered to Parent; or (iv) incur any indebtedness for borrowed
money or guarantee any such indebtedness of another person, issue or sell any
debt securities or warrants or other rights to acquire any debt securities of
the Company, guarantee any debt securities of another person, enter into any
"keep well" or other agreement to maintain any financial statement condition of
another person or enter into any arrangement having the economic effect of any
of the foregoing, prepay
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or refinance any indebtedness or make any loans, advances or capital
contributions to, or investments in, any other person;
(f) engage in any transactions of the types described in clauses
(i), (ii), (iii) and (iv) of paragraph (e) above, whether or not related,
involving, in the aggregate, capital, securities or other assets or indebtedness
of the Company, a Company Subsidiary, a Company Joint Venture (but only to the
extent of the Company Interests with respect to a Company Joint Venture) or any
combination thereof in excess of $150,000,000, without obtaining the prior
written consent of Parent, which consent shall not unreasonably be withheld or
delayed;
(g) make any tax election (unless required by law or necessary to
preserve the Company's status as a REIT or the status of the Operating
Partnership, the Financing Partnership or any Company Joint Venture as a
partnership for federal tax purposes);
(h) (i) change in any material manner any of its methods, principles
or practices of accounting in effect at the Financial Statement Date, or (ii)
make or rescind any express or deemed election relating to taxes, settle or
compromise any claim, action, suit, litigation, proceeding, arbitration,
investigation, audit or controversy relating to taxes, except in the case of
settlements or compromises relating to taxes on real property in an amount not
to exceed, individually or in the aggregate $5,000,000, or change any of its
methods of reporting income or deductions for federal income tax purposes from
those employed in the preparation of its federal income tax return for the
taxable year ending December 31, 1995, except, in the case of clause (i), as may
be required by the SEC, applicable law or GAAP;
(i) except as provided in this Agreement, adopt any new employee
benefit plan, incentive plan, severance plan, stock option or similar plan,
grant new stock appreciation rights or amend any existing plan or rights, except
such changes as are required by law or which are not more favorable to
participants than provisions presently in effect;
(j) settle any shareholder derivative or class action claims arising
out of or in connection with any of the Transactions; and
(k) enter into or amend or otherwise modify any agreement or
arrangement with persons that are affiliates or, as of the date hereof, are
officers, directors or employees of the Company or any Company
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Subsidiary or Company Joint Venture not approved by a majority of the
"independent" members of the Board of Directors of the Company.
SECTION 4.2 Conduct of Business by Parent. During the period from the
date of this Agreement to the Effective Time, Parent shall, and shall cause the
Parent Subsidiaries and the Parent Joint Ventures each to carry on its
businesses in the usual, regular and ordinary course in substantially the same
manner as heretofore conducted and, to the extent consistent therewith, use
commercially reasonable efforts to preserve intact its current business
organization, goodwill and ongoing businesses. Without limiting the generality
of the foregoing, the following additional restrictions shall apply: During the
period from the date of this Agreement to the Effective Time, except as set
forth in SCHEDULE 4.2 to the Parent Disclosure Letter, Parent shall not and
shall cause the Parent Subsidiaries and the Parent Joint Ventures not to (and
not to authorize or commit or agree to):
(a) (i) except (x) in the case of Parent, for regular quarterly
dividends (in an amount determined in a manner consistent with Parent's past
practice but in no event in excess of 104 percent of the most recent previously
paid dividend or distribution, as the case may be), and (y) in the case of the
Parent Operating Partnership, for regular distributions to the general and
limited partners of the Parent Operating Partnership (in an amount determined in
a manner consistent with past practice but in no event in excess of 104 percent
of the most recent previously paid dividend or distribution, as the case may
be), in each case with customary record and payment dates, declare, set aside or
pay any dividends on, or make any other distributions in respect of, any of
Parent's capital stock or the Parent Units or partnership interests or stock in
any Parent Subsidiary that is not directly or indirectly wholly-owned by Parent,
other than the dividend required to be paid pursuant to Section 2.2(d)(i) (and
the corresponding Parent Operating Partnership distribution), (ii) except in
connection with the Transactions, as required under the Parent Operating
Partnership Agreement or, with respect to Parent Joint Ventures, as otherwise
permitted by Section 4.2(e), split, combine or reclassify any capital stock or
partnership interests or issue or authorize the issuance of any other securities
in respect of, in lieu of or in substitution for shares of such capital stock or
partnership interests or (iii) except (A) as contemplated under the exchange
provisions of the Parent Operating Partnership Agreement and (B) as contemplated
under or required pursuant to "buy-sell" provisions set forth in the terms of
any partnership or joint venture agreement governing any Parent Joint Venture
existing on the date of
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this Agreement and subject to Section 4.2(e), purchase, redeem or otherwise
acquire any shares of capital stock of Parent or Parent Units or any options,
warrants or rights to acquire, or security convertible into, shares of capital
stock of Parent or such Parent Units;
(b) except (i) as contemplated under or required pursuant to this
Agreement, Parent's dividend reinvestment plan, the exercise of stock options
outstanding on the date hereof, Section 4.2(e), rights of first refusal or
rights of first offer, "buy-sell" provisions, anti-dilution provisions or
pro-rata funding obligations set forth in the terms of any partnership or joint
venture agreement governing any of the Parent Joint Ventures existing on the
date of this Agreement or (ii) for stock options granted pursuant to existing
employee and director stock option plans, issue, deliver or sell, or grant any
option or other right in respect of, any shares of capital stock, any other
voting securities (including Parent Units or other partnership interests) of the
Parent or any Parent Subsidiary or Parent Joint Venture or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities except to Parent, a Parent
Subsidiary or any Wholly-Owned Parent Joint Venture;
(c) except as otherwise contemplated by this Agreement, amend the
Charter, articles or certificate of incorporation, by-laws, code of regulations,
partnership agreement or other comparable charter or organizational documents of
Parent, any Parent Subsidiary or Parent Joint Venture;
(d) in the case of Parent or the Parent Operating Partnership, merge
or consolidate with any person;
(e) in a transaction involving capital, securities, other assets or
indebtedness of Parent, a Parent Subsidiary or a Parent Joint Venture (but only
to the extent of the Parent Interests with respect to Parent Joint Ventures) or
any combination thereof in excess of $89,400,000, without obtaining the prior
written consent of the Company, which consent shall not unreasonably be withheld
or delayed: (i) acquire or agree to acquire by merging or consolidating with, or
by purchasing all or a substantial portion of the equity securities or assets
of, or by any other manner, any business or any corporation, partnership,
limited liability company, joint venture, association, business trust or other
business organization or division thereof or interest therein or any assets;
(ii) mortgage or otherwise encumber or subject to any Lien or sell, lease or
otherwise dispose of any of its material properties or assets or assign or
encumber the right to
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41
receive income, dividends, distributions and the like; (iii) make or agree to
make any new capital expenditures, except in accordance with budgets relating to
Parent, Parent Subsidiaries and Parent Joint Ventures that have been previously
delivered to Parent; or (iv) incur any indebtedness for borrowed money or
guarantee any such indebtedness of another person, issue or sell any debt
securities or warrants or other rights to acquire any debt securities of Parent,
guarantee any debt securities of another person, enter into any "keep well" or
other agreement to maintain any financial statement condition of another person
or enter into any arrangement having the economic effect of any of the
foregoing, prepay or refinance any indebtedness or make any loans, advances or
capital contributions to, or investments in, any other person;
(f) engage in any transactions of the types described in clauses
(i), (ii), (iii) and (iv) of paragraph (e) above, whether or not related,
involving, in the aggregate, capital, securities or other assets or obligations
of Parent, a Parent Subsidiary, a Parent Joint Venture (but only to the extent
of the Parent Interests with respect to a Parent Joint Venture) or any
combination thereof in excess of $250,000,000, without obtaining the prior
written consent of the Company, which consent shall not unreasonably be withheld
or delayed;
(g) make any tax election (unless required by law or necessary to
preserve Parent's status as a REIT or the status of the Parent Operating
Partnership or any Parent Joint Venture as a partnership for federal tax
purposes);
(h) (i) change in any material manner any of its methods, principles
or practices of accounting in effect at the Parent Financial Statement Date, or
(ii) make or rescind any express or deemed election relating to taxes, settle or
compromise any claim, action, suit, litigation, proceeding, arbitration,
investigation, audit or controversy relating to taxes, except in the case of
settlements or compromises relating to taxes on real property in an amount not
to exceed, individually or in the aggregate, $5,000,000, or change any of its
methods of reporting income or deductions for federal income tax purposes from
those employed in the preparation of its federal income tax return for the
taxable year ending December 31, 1995, except, in the case of clause (i), as may
be required by the SEC, applicable law or GAAP; and
(i) enter into or amend or otherwise modify any agreement or
arrangement with persons that are affiliates or, as of the date hereof, are
officers, directors or employees of Parent or any Parent Subsidiary or
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Parent Joint Venture not approved by a majority of the "independent" members of
the Board of Directors of Parent.
SECTION 4.3 Other Actions. Each of Company on the one hand and Parent
and Sub on the other hand shall not and shall cause its respective subsidiaries
and joint ventures not to take any action that would result in (i) any of the
representations and warranties of such party (without giving effect to any
"knowledge" qualification) set forth in this Agreement that are qualified as to
materiality becoming untrue, (ii) any of such representations and warranties
(without giving effect to any "knowledge" qualification) that are not so
qualified becoming untrue in any material respect or (iii) except as
contemplated by Section 7.1, any of the conditions to the Merger set forth in
Article VI not being satisfied.
ARTICLE V
Additional Covenants
SECTION 5.1 Preparation of the Registration Statement and the Proxy
Statement; Shareholders Meeting and Parent Stockholders Meeting.
(a) As soon as practicable following the date of this Agreement, the
Company and Parent shall prepare and file with the SEC a preliminary Proxy
Statement in form and substance satisfactory to each of Parent and the Company
and Parent shall prepare and file with the SEC the Registration Statement, in
which the Proxy Statement will be included as a prospectus. Each of the Company
and Parent shall use its best efforts to (i) respond to any comments of the SEC
and (ii) have the Registration Statement declared effective under the Securities
Act and the rules and regulations promulgated thereunder as promptly as
practicable after such filing and to keep the Registration Statement effective
as long as is necessary to consummate the Merger. Each of the Company and Parent
will use its best efforts to cause the Proxy Statement to be mailed to the
Company's shareholders or Parent's stockholders, respectively, as promptly as
practicable after the Registration Statement is declared effective under the
Securities Act ; provided, that Parent shall not be obligated to cause the Proxy
Statement to be mailed to its stockholders until it shall have received from the
lenders to EJDC reasonable written assurance that the written consents necessary
to satisfy the conditions contained in Section 6.1(i) will be delivered on or
prior to the Closing Date. Each party will notify the other promptly of the
receipt of any comments from the SEC and of any request by the SEC for
amendments or supplements to the Registration Statement or the Proxy Statement
or for
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43
additional information and will supply the other with copies of all
correspondence between such party or any of its representatives and the SEC,
with respect to the Registration Statement or the Proxy Statement. The
Registration Statement and the Proxy Statement shall comply in all material
respects with all applicable requirements of law. Whenever any event occurs
which is required to be set forth in an amendment or supplement to the
Registration Statement or the Proxy Statement, Parent or the Company, as the
case may be, shall promptly inform the other of such occurrences and cooperate
in filing with the SEC and/or mailing to stockholders of Parent and the
shareholders of the Company such amendment or supplement. The Proxy Statement
shall include the recommendations of the Board of Directors of Parent in favor
of the issuance of Parent Common Stock and such other recommendations thereof
required to be made under Section 5.6 in connection with the Merger and of the
Board of Directors of the Company in favor of the Merger, provided that the
recommendation of the Board of Directors of the Company may not be included or
may be withdrawn if the Board of Directors of the Company has accepted a
proposal for a Superior Competing Transaction (as defined below) in accordance
with the terms of Section 7.1. Parent shall also take any action required to be
taken under any applicable state securities or "blue sky" laws in connection
with the issuance of Parent Company Stock pursuant to the Merger, and the
Company shall furnish all information concerning the Company and the holders of
the Common Stock and rights to acquire Common Stock pursuant to the Company
Stock Related Plans as may be reasonably requested in connection with any such
action. Parent will use its best efforts to obtain, prior to the effective date
of the Registration Statement, all necessary state securities or "blue sky"
permits or approvals required to carry out the transactions contemplated by this
Agreement and will pay or cause a Parent Subsidiary to pay all expenses incident
thereto. In connection with the preparation of the Proxy Statement and the
Registration Statement, the Company shall use reasonable efforts to cause to be
delivered to Parent and Sub prior to the mailing of the Proxy Statement to the
Company's shareholders and the Parent's stockholders, the opinion of Willkie
Farr & Gallagher, dated the date of the Proxy Statement, that (i) the Company
was organized and has operated in conformity with the requirements for
qualification as a REIT within the meaning of the Code since 1994 and (ii) each
Company Joint Venture, the Operating Partnership, the Financing Partnership and
each other Company Subsidiary that is a partnership, joint venture or limited
liability company has been during and since 1994, and continues to be, treated
as of such date, for federal income tax purposes, as a partnership and not as a
corporation or an association taxable as a corporation.
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44
(b) The Company will, as soon as practicable following the date of
this Agreement, duly call, give notice of, convene and hold a meeting of its
shareholders (the "COMPANY SHAREHOLDERS MEETING") for the purpose of obtaining
the Company Shareholder Approvals. The Company will, through its Board of
Directors, recommend to its shareholders approval of this Agreement and the
transactions contemplated by this Agreement; provided that prior to the Company
Shareholder Meeting such recommendation may be withdrawn, modified or amended to
the extent that, as a result of the commencement or receipt of a proposal with
respect to a Superior Competing Transaction (as defined below), the Board of
Directors of the Company determines in good faith that it is in compliance with
Section 7.1(c).
(c) Parent will, as soon as practicable following the date of this
Agreement (but in no event sooner than 30 days following the date the Proxy
Statement is mailed to the stockholders of Parent), duly call, give notice of,
convene and hold a meeting of its stockholders (the "PARENT STOCKHOLDERS
MEETING") for the purpose of obtaining the Parent Stockholder Approvals. Parent
will, through its Board of Directors, recommend to its stockholders approval of
this Agreement and the transactions contemplated by this Agreement, including,
but not limited to, the requisite vote of such stockholders approving the
issuance of the Parent Common Stock in connection with the Merger in accordance
with the rules of the NYSE and the approval of the Amended and Restated Charter
of Parent as contemplated by Section 5.6(a) (or if the Required Vote (as defined
below) is not obtained by 5.6(b)) and the Amended and Restated By-laws of Parent
as contemplated by Section 5.6(a).
SECTION 5.2 Access to Information; Confidentiality. Subject to the
requirements of confidentiality agreements with third parties, each of the
Company and Parent shall, and shall cause each of its respective subsidiaries
(including in the case of the Company all Company Subsidiaries) and use best
efforts to cause each of its respective joint ventures to, afford to the other
party and to the officers, employees, accountants, counsel, financial advisors
and other representatives of such other party, reasonable access during normal
business hours during the period prior to the Effective Time to all their
respective properties, books, contracts, commitments, personnel and records and,
during such period, each of the Company and Parent shall, and shall cause each
of its respective subsidiaries (including in the case of the Company all Company
Subsidiaries) and majority-owned joint ventures to and shall use best efforts to
cause each of its other respective joint ventures to, furnish promptly to the
other party (a) a copy of each report, schedule, registr-
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45
ation statement and other document filed by it during such period pursuant to
the requirements of federal or state securities laws and (b) all other
information concerning its business, properties and personnel as such other
party may reasonably request. Each of the Company and Parent will hold, and will
cause its and its respective subsidiaries' (including in the case of the Company
all Company Subsidiaries) and joint ventures' officers, employees, accountants,
counsel, financial advisors and other representatives and affiliates to hold,
any nonpublic information in confidence to the extent required by, and in
accordance with, and will comply the provisions of the letter agreement dated as
of February 29, 1996, between the Company and Parent (the "CONFIDENTIALITY
AGREEMENT").
SECTION 5.3 Best Efforts; Notification.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use its best efforts to take, or cause
to be taken, all actions, and to do, or cause to be done, and to assist and
cooperate with the other parties in doing, all things necessary, proper or
advisable to fulfill all conditions applicable to such party pursuant to this
Agreement and to consummate and make effective, in the most expeditious manner
practicable, the Merger and the other transactions contemplated hereby,
including (i) the obtaining of all necessary actions or nonactions, waivers,
consents and approvals from Governmental Entities and the making of all
necessary registrations and filings (including filings under the HSR Act and all
other filings with Governmental Entities, if any) and the taking of all
reasonable steps as may be necessary to obtain an approval, waiver or exemption
from, or to avoid an action or proceeding by, any Governmental Entity, (ii) the
obtaining of all necessary consents, approvals, waivers or exemption from
non-governmental third parties; provided, however, that if either party is
obliged to make expenditures, or incur costs, expenses or other liabilities to
obtain the consent of any non-Governmental Entity, it shall consult reasonably
with the other party upon reasonable notice prior to making payment of any such
amount, and in no event shall the Company make payment of any such amount in
excess of $5,000,000 in obtaining such consents without obtaining the prior
written consent of Parent, which consent shall not unreasonably be withheld or
delayed; provided further that no payments of any kind by the Company shall be
made to obtain consents from any lender, financier or other holder of
indebtedness of EJDC (as defined below) or any other Company Principal in such
capacity, (iii) the defending of any lawsuits or other legal proceedings,
whether judicial or administrative, challenging this Agreement or the
Stockholders Agreement or the consummation of the Transactions,
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46
including seeking to have any stay or temporary restraining order entered by any
court or other Governmental Entity vacated or reversed, and (iv) the execution
and delivery of any additional instruments necessary to consummate the
transactions contemplated by and to fully carry out the purposes of, this
Agreement; provided, however, that a party shall not be obligated to take any
action pursuant to the foregoing if the taking of such action or the obtaining
of any waiver, consent, approval or exemption is reasonably likely to result in
the imposition of a condition or restriction of the type referred to in Section
6.1(e). In the case of any actions or nonactions, waivers or consents of any
Governmental Entity required for consummation of the Merger and the other
Transactions under the HSR Act or any federal or state antitrust or similar law
("ANTITRUST AUTHORIZATIONS"), the reasonable steps of Parent shall be deemed to
include reasonable efforts to obtain consent to such Antitrust Authorizations by
agreeing to hold separate orders or divestiture of real property assets;
provided that any such divestiture or hold separate agreement (i) shall not
require divesting or holding separate assets that generate more than 35% of the
aggregate earnings before interest, taxes, depreciation and amortization,
calculated in accordance with GAAP for the period of the most recent twelve (12)
months as determined at the time of calculation (or in the case of any real
property asset that shall not have been in existence for 12 months at the time
of calculation, calculated for the entire period of such asset's existence and
annualized), of Parent and the Surviving Corporation, taken as a whole, in a
single metropolitan area, and (ii) shall be done in a tax efficient manner,
reasonably acceptable to the limited partners of the Operating Partnership, so
as to eliminate or render de minimis the taxes which would otherwise be payable
by such limited partners upon such divestiture or hold separate agreement. Under
no circumstances shall such reasonable steps include any obligation by Parent to
agree to hold separate or divest assets or portions of assets in more than one
metropolitan area. In connection with and without limiting the foregoing, the
Company and its Board of Directors shall (i) take all reasonable action
necessary so that no "fair price," "moratorium," "control share acquisition" or
any other anti-takeover statute or similar statute enacted under state or
federal laws of the United States or similar statute or regulation (a "TAKEOVER
STATUTE") becomes is or becomes applicable to the Merger, this Agreement or any
of the other Transactions and (ii) if any Takeover Statute becomes applicable to
the Merger, this Agreement or any other Transaction, take all action necessary
so that the Merger and the other Transactions may be consummated as promptly as
practicable on the terms contemplated by this Agreement and the Stockholders
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47
Agreement and otherwise to minimize the effect of such Takeover Statute on the
Merger and the other Transactions.
(b) The Company shall give prompt notice to Parent, and Parent or
Sub shall give prompt notice to the Company, if (i) any representation or
warranty made by it contained in this Agreement that is qualified as to
materiality becoming untrue or inaccurate in any respect or any such
representation or warranty that is not so qualified becoming untrue or
inaccurate in any material respect or (ii) the failure by it to comply with or
satisfy in any material respect any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement; provided, however, that
no such notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement.
(c) The Company shall request that the Employee Exchange Rights
Holders execute and deliver, or otherwise agree to be bound by, the Termination
Agreement in respect of the termination of the rights of the Employee Exchange
Rights Holders under the Exchange Rights Agreement as of the Effective Time.
SECTION 5.4 Affiliates. Prior to the Closing Date, the Company shall
deliver to Parent a letter identifying all persons who are, at the time this
Agreement is submitted for approval to the shareholders of the Company,
"affiliates" of the Company for purposes of Rule 145 under the Securities Act.
The Company shall use its best efforts to cause each such person to deliver to
Parent on or prior to the Closing Date a written agreement substantially in the
form attached as EXHIBIT D hereto.
SECTION 5.5 Tax Treatment. Each of Parent and the Company shall use its
reasonable best efforts to cause the Merger to qualify as a reorganization under
the provisions of Sections 368(a)(1)(a) and 368(a)(2)(E) of the Code and to
obtain the opinions of counsel referred to in Sections 6.2(e) and 6.3(e).
SECTION 5.6 Amendment of Parent's Charter and By-Laws.
(a) Parent shall propose and recommend to its stockholders at the
Parent Stockholders Meeting (and any postponement or adjournment thereof) to
adopt and approve, effective as of the Effective Time, the amendment and
restatement of Parent's Charter substantially in the form set forth as EXHIBIT
E-1 hereto and the amendment and restatement of Parent's By-laws substantially
in the form set forth as EXHIBIT F-1 hereto and shall use best efforts
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(including postponement or adjournment of the Parent Stockholders Meeting for a
reasonable period of time and for a reasonable number of times) to seek and
solicit the requisite amount of stockholder votes for such adoption and approval
(the "REQUIRED VOTE")(including retention of proxy solicitors). If such
amendment and restatement is adopted and approved at the Parent Stockholders
Meeting (or at any such postponement or adjournment thereof) Parent shall upon
or immediately following the Effective Time issue the entire amount of Class C
Common Stock, par value $.0001 per share ("CLASS C STOCK"), authorized in such
Charter to EJDC for aggregate consideration of $100,000.
(b) If the Required Vote is not obtained at the Parent Stockholders
Meeting (or at any such postponement or adjournment thereof) then:
(i) Parent shall propose and recommend to its Stockholders at
the Parent Stockholders Meeting (or a postponement or adjournment
thereof held prior to the Closing Date) that Parent's Charter be
amended in the form set forth as EXHIBIT E-2 hereto, and Parent shall,
through its Board of Directors, adopt and approve the amendments of
Parent's By-Laws substantially in the form set forth as EXHIBIT F-2
hereto, each effective as of the Effective Time;
(ii) Parent shall propose and recommend to its stockholders at
the first annual stockholders meeting after the Effective Time (and if
the Required Vote is not obtained at such meeting, at the second annual
stockholders meeting after the Effective Time) to adopt and approve the
amendment and restatement of the Charter and By-Laws substantially to
the effect of EXHIBITS E-1 AND F-1 hereto, and shall use best efforts
to seek and solicit the Required Vote in such first meeting (or such
second meeting, as the case may be)(and shall retain proxy solicitors);
provided, that if at any time prior to such first meeting (or if the
Required Vote is not obtained at such first meeting, prior to such
second meeting) (x) the "Aggregate Assumed Equity Interest in the
Corporation" (as defined in the form of Charter set forth in EXHIBIT
E-1 hereto) of the "DeBartolo Family Group" (as defined in such form of
Charter) is for any reason reduced to less than 5%, Parent shall be
released from its obligations under this Section 5.6(b)(ii); and (y) if
the Company Principals shall sell or transfer a portion of their Parent
Common Stock (or prior to the Effective Time, their Common Stock) or
Parent
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Units (or prior to the Effective Time, their Company Partnership
Interests) so as to reduce their "Aggregate Assumed Equity Interest in
the Corporation" (as defined in such Charter) to less than 50% of the
"DeBartolo Family Group Initial Aggregate Assumed Equity Interest in
the Corporation" (as defined in such Charter but calculated as if the
Effective Time occurred on the date of this Agreement), Parent shall
only be obligated to propose and recommend an amended and restated
charter providing for only one director to be elected by holders of
Class C Stock (but substantially to the effect of EXHIBIT E-1 hereto in
all other respects). Upon such adoption and approval thereof, subject
to the other provisions of this clause (ii) of this Section 5.6(b),
Parent shall issue the entire amount of Class C Stock authorized in
such Charter to EJDC for consideration equal to $100,000.
SECTION 5.7 No Solicitation of Transactions by the Company. Subject to
Section 7.1, the Company shall not directly or indirectly, through any officer,
director, employee, agent, investment banker, financial advisor, attorney,
accountant, broker, finder or other representative, initiate, solicit (including
by way of furnishing non-public information or assistance) any inquiries or the
making of any proposal that constitutes, or may reasonably be expected to lead
to, any Competing Transaction (as defined below), or authorize or permit any of
the officers, directors, employees or agents of the Company or any attorney,
investment banker, financial advisor, attorney, accountant, broker, finder or
other representative retained by the Company to take any such action, and the
Company shall notify Parent in writing (as promptly as practicable) of all of
the relevant details relating to all inquiries and proposals which it or any
Company Subsidiary or any Company Joint Venture or any such officer, director,
employee, agent, investment banker, financial advisor, attorney, accountant,
broker, finder or other representative may receive relating to any of such
matters and if such inquiry or proposal is in writing, the Company shall deliver
to Parent a copy of such inquiry or proposal. For purposes of this Agreement,
"COMPETING TRANSACTION" shall mean any of the following (other than the
transactions contemplated by this Agreement or a transaction with Parent or a
Parent Subsidiary): (i) any merger, consolidation, share exchange, business
combination, or similar transaction; (ii) any sale, lease, exchange, mortgage,
pledge, transfer or other disposition of 40% or more of the assets of the
Company and the Company Interests taken as a whole, in a single transaction or
series of related transactions, excluding any bona fide financing transactions
which do not, individually
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or in the aggregate, have as a purpose or effect the sale or transfer of control
of such assets; (iii) any tender offer or exchange offer for 40% or more of the
outstanding shares of capital stock of the Company or the filing of a
registration statement under the Securities Act in connection therewith; or (iv)
any public announcements of a proposal, plan or intention to do any of the
foregoing or any agreement to engage in any of the foregoing.
SECTION 5.8 Public Announcements. Parent and Sub on the one hand and
the Company on the other hand will consult with each other before issuing, and
provide each other the opportunity to review and comment upon, any press release
or other public statements with respect to the Transactions, including the
Merger, and shall not issue any such press release or make any such public
statement prior to such consultation, except as may be required by applicable
law, court process or by obligations pursuant to any listing agreement with any
national securities exchange. The parties agree that the initial press release
to be issued with respect to the Transactions will be in the form agreed to by
the parties hereto prior to the execution of this Agreement.
SECTION 5.9 Listing. Parent will promptly prepare and submit to the
NYSE a supplemental listing application covering Parent Common Stock issuable in
the Merger. Prior to the Effective Time, Parent shall use its best efforts to
have NYSE approve for listing, upon official notice of issuance, the Parent
Common Stock to be issued in the Merger.
SECTION 5.10 Letters of Accountants.
(a) The Company shall use its reasonable best efforts to cause to
be delivered to Parent "comfort" letters of Ernst & Young LLP, the Company's
independent public accountants, dated and delivered the date on which the
Registration Statement shall become effective and as of the Effective Time, and
addressed to Parent, in form and substance reasonably satisfactory to Parent and
reasonably customary in scope and substance for letters delivered by independent
public accountants in connection with transactions such as those contemplated by
this Agreement.
(b) Parent shall use its reasonable best efforts to cause to be
delivered to the Company "comfort" letters of Arthur Andersen LLP, Parent's
independent public accountants, dated the date on which the Registration
Statement shall become effective and as of the Effective Time, and addressed to
the Company, in form and substance reasonably satisfactory to the Company and
reasonably customary in scope and substance for letters delivered by
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independent public accountants in connection with transactions such as those
contemplated by this Agreement.
SECTION 5.11 Transfer and Gains Taxes. Parent and the Company shall
cooperate in the preparation, execution and filing of all returns,
questionnaires, applications or other documents regarding any real property
transfer or gains (including, without limitation, any New York State Tax on
Gains Derived from Certain Real Property Transfers and New York State Real
Estate Transfer Tax), sales, use, transfer, value added stock transfer and stamp
taxes, any transfer, recording, registration and other fees and any similar
taxes which become payable in connection with the Transactions (together with
any related interests, penalties or additions to tax, "TRANSFER AND GAINS
TAXES"). From and after the Effective Time, Parent shall cause the Operating
Partnership or the Parent Operating Partnership, as appropriate, to pay or cause
to be paid, without deduction or withholding from any amounts payable to the
holders of the Common Stock, all Transfer and Gains Taxes.
SECTION 5.12 Benefit Plans and Other Employee Arrangements.
(a) Benefit Plans. After the Effective Time Parent shall either (i)
maintain or cause the Company (or its successors or assigns) to maintain the
Company Benefit Plans at benefit levels not materially less favorable than those
in effect on the date of this Agreement or (ii) provide or cause the Company (or
its successors or assigns) to provide benefits to employees of the Company, the
Company Subsidiaries and the Company Joint Ventures that are not materially less
favorable to such employees than those provided under the Parent Benefit Plans
(as they may be amended from time to time) to similarly situated employees of
Parent, the Parent Subsidiaries and Parent Joint Ventures. With respect to any
Parent Benefit Plan which is an "employee benefit plan" as defined in Section
3(3) of ERISA, solely for purposes of determining eligibility to participate,
vesting, and entitlement to benefits but not for purposes of accrual of pension
benefits, service with the Company, any Company Subsidiary or any Company Joint
Ventures shall be treated as service with Parent or the Parent Subsidiaries or
Parent Joint Ventures (as applicable); provided, however, that such service
shall not be recognized to the extent that such recognition would result in a
duplication of benefits (or is not otherwise recognized for such purposes under
the Parent Benefit Plans). With respect to the Company's Annual Bonus Plan,
Parent shall cause the Company to maintain such plan as in effect at the
Effective Time for the remainder of fiscal year 1996. For subsequent fiscal
years, employees of the Company, Company Subsidiaries and Company Joint Ventures
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shall participate in any annual bonus plan maintained for similarly situated
employees of Parent, Parent Subsidiaries and Parent Joint Ventures on
substantially the same basis as such similarly situated employees.
(b) Stock Incentive Plan.
(i) Immediately prior to or as of the Effective Time and
solely with respect to individuals employed by the Company immediately prior to
that date, the Company shall accelerate the vesting of 123,020 shares of Common
Stock subject to earned deferred stock awards and 13,000 shares of Common Stock
subject to outstanding stock options ("STOCK OPTIONS") granted under the
Company's 1994 Stock Incentive Plan (the "STOCK INCENTIVE PLAN").
(ii) As of the Effective Time, each outstanding Stock Option
shall be assumed by Parent and shall be deemed to constitute an option to
acquire, on the same terms and conditions as were applicable under such Stock
Option, the same number of shares of Parent Common Stock as the holder of such
Stock Option would have been entitled to receive pursuant to the Merger had such
holder exercised such Stock Option in full immediately prior to the Effective
Time at a price per share equal to the aggregate exercise price for the shares
subject to such Stock Option divided by the number of full shares of Parent
Common Stock deemed to be purchasable pursuant to such Stock Option; provided,
however, that the number of shares of Parent Common Stock that may be purchased
upon exercise of such Stock Option shall not include any fractional share and,
upon the first such exercise of such Stock Option, a cash payment shall be made
for any fractional share calculated in accordance with and in the manner
provided for calculations as to be paid in lieu of fractional shares as part of
the Merger Consideration under Section 2.2(g).
(iii) As of the Effective Time, Parent shall grant deferred
stock awards in respect of an aggregate of 404,250 shares of Common Stock under
the Stock Incentive Plan as an incentive "stay" bonus (the "STAY BONUS") to be
allocated among persons who participate in the Stock Incentive Plan and who
remain in the employ of the Company, a Company Subsidiary or Company Joint
Venture through the Effective Time. Such award shall be converted into shares of
Parent Common Stock in the same manner that Common Stock shall be converted in
connection with the Merger pursuant to Section 2.1(b) of this Agreement. Shares
awarded to participants pursuant to the Stay Bonus shall vest in three equal
installments on each of April 1, 1997, August 1, 1997 and January 1, 1998,
subject to earlier vesting as provided in the severance program attached hereto
as EXHIBIT H.
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(iv) As of the Effective Time, Parent shall assume the Stock
Incentive Plan, providing for issuance of Parent Common Stock in lieu of Common
Stock, which shall be converted in the same manner that Common Stock is
converted in connection with the Merger pursuant to Section 2.1(b) of this
Agreement, and its Board of Directors shall appoint a committee to administer
the Plan (the "COMMITTEE"). With respect to unearned long-term incentive
deferred stock awards previously allocated to participants in the Stock
Incentive Plan for fiscal years 1996, 1997 and 1998, the Committee shall
establish new funds from operations ("FFO") growth targets for such awards,
based on the consolidated FFO of Parent and the Surviving Corporation, which
targets shall be the same as those applicable to restricted stock grants made
under the Parent Operating Partnership Employee Stock Plan and which shall be
$2.39 per share for 1996. The FFO growth targets for 1997 and 1998 shall be set
by the Committee but shall not exceed $2.58 per share for 1997, and $2.79 per
share for 1998. In each case, FFO shall be calculated in a manner consistent
with that proposed by the National Association of Real Estate Investment Trusts.
As a condition to continued eligibility for such long-term awards, a Stock
Incentive Plan participant shall be required to enter into an agreement with the
Company and/or Parent, in form and substance reasonably satisfactory to Parent,
acknowledging the substitution of Parent Common Stock in lieu of Common Stock,
the establishment of such new FFO growth targets, and such other terms not
inconsistent with the terms of the Stock Incentive Plan as the Committee deems
reasonable.
(c) Severance Program. As of the Effective Time, the Company shall
adopt a severance program substantially in the form attached hereto as EXHIBIT
H, and Parent shall cause the Company (or its successors or assigns) to maintain
such severance program in accordance with the terms thereof.
(d) Cooperation. The Company and Parent shall cooperate in good
faith with respect to the effectuation of the covenants described in subsections
(b) and (c).
SECTION 5.13 Private Placement of Common Stock of Sub. Each of Parent
and Sub shall use its best efforts to cause 110 "accredited investors" (as
defined in Rule 501(a) under the Securities Act) to purchase, on or prior to the
Effective Date, a fractional share equal to .001 share of the Sub Common Stock,
at a purchase price of $1,000 per .001 share.
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SECTION 5.14 Indemnification; Directors' and Officers' Insurance.
(a) The Company shall, and from and after the Effective Time, Parent
and the Surviving Corporation shall, indemnify, defend and hold harmless each
person who is now or has been at any time prior to the date hereof or who
becomes prior to the Effective Time, an officer or director of the Company or
any Company Subsidiary (the "INDEMNIFIED PARTIES") against all losses, claims,
damages, costs, expenses (including attorneys' fees and expenses), liabilities
or judgments or amounts that are paid in settlement of, with the approval of the
indemnifying party (which approval shall not be unreasonably withheld), or
otherwise in connection with any threatened or actual claim, action, suit
proceeding or investigation with any threatened or actual claim, action, suit,
proceeding or investigation based on or arising out of the fact that such person
is or was a director or officer of the Company or any Company Subsidiary at or
prior to the Effective Time, whether asserted or claimed prior to, or at or
after, the Effective Time ("INDEMNIFIED LIABILITIES"), including all Indemnified
Liabilities based on, or arising out of, or pertaining to this Agreement or the
Transactions, in each case to the full extent a corporation is permitted under
the Ohio Statute to indemnify its own directors or officers as the case may be
(and Parent and the Surviving Corporation, as the case may be, will pay expenses
in advance of the final disposition of any such action or proceeding to each
Indemnified Party to the full extent permitted by law subject to the limitations
set forth in the fourth sentence of this Section 5.14(a)). Any Indemnified
Parties proposing to assert the right to be indemnified under this Section 5.14
shall, promptly after receipt of notice of commencement of any action against
such Indemnified Parties in respect of which a claim is to be made under this
Section 5.14 against the Company, and from and after the Effective Time, Parent
and the Surviving Corporation (collectively, the "INDEMNIFYING PARTIES"), notify
the Indemnifying Parties of the commencement of such action, enclosing a copy of
all papers served. If any such action is brought against any of the Indemnified
Parties and such Indemnified Parties notify the Indemnifying Parties of its
commencement, the Indemnifying Parties will be entitled to participate in and,
to the extent that they elect by delivering written notice to such Indemnified
Parties promptly after receiving notice of the commencement of the action from
the Indemnified Parties, to assume the defense of the action and after notice
from the Indemnifying Parties to the Indemnified Parties of their election to
assume the defense, the Indemnifying Parties will not be liable to the
Indemnified Parties for any legal or other expenses except as provided below and
except for the reasonable costs of investigation subsequently incurred by the
Indemnified
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Parties in connection with the defense. If the Indemnifying Parties assume the
defense, the Indemnifying Parties shall have the right to settle such action
without the consent of the Indemnified Parties; provided, however, that the
Indemnifying Parties shall be required to obtain such consent (which consent
shall not be unreasonably withheld) if the settlement includes any admission or
wrongdoing on the part of the Indemnified Parties or any decree or restriction
on the Indemnified Parties or their officers or directors; provided, further,
that no Indemnifying Parties, in the defense of any such action shall, except
with the consent of the Indemnified Parties (which consent shall not be
unreasonably withheld), consent to entry of any judgment or enter into any
settlement that does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Parties of a release from all
liability with respect to such action. The Indemnified Parties will have the
right to employ their own counsel in any such action, but the fees, expenses and
other charges of such counsel will be at the expense of such Indemnified Parties
unless (i) the employment of counsel by the Indemnified Parties has been
authorized in writing by the Indemnifying Parties, (ii) the Indemnified Parties
have reasonably concluded (based on advice of counsel) that there may be legal
defenses available to them that are different from or in addition to those
available to the Indemnifying Parties, (iii) a conflict or potential conflict
exists (based on advice of counsel to the Indemnified Parties) between the
Indemnified Parties and the Indemnifying Parties (in which case the Indemnifying
Parties will not have the right to direct the defense of such action on behalf
of the Indemnified Parties) or (iv) the Indemnifying Parties have not in fact
employed counsel to assume the defense of such action within a reasonable time
after receiving notice of the commencement of the action, in each of which cases
the reasonable fees, disbursements and other charges of counsel will be at the
expense of the Indemnifying Parties. It is understood that the Indemnifying
Parties shall not, in connection with any proceeding or related proceedings in
the same jurisdiction, be liable for the reasonable fees, disbursements and
other charges of more than one separate firm admitted to practice in such
jurisdiction at any one time from all such Indemnified Parties unless (a) the
employment of more than one counsel has been authorized in writing by the
Indemnifying Parties, (b) any of the Indemnified Parties have reasonably
concluded (based on advice of counsel) that there may be legal defenses
available to them that are different from or in addition to those available to
other Indemnified Parties or (c) a conflict or potential conflict exists (based
on advice of counsel to the Indemnified Parties) between any of the Indemnified
Parties and the other Indemnified Parties, in each case of which the
Indemnifying Parties shall be
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obligated to pay the reasonable fees and expenses of such additional counsel or
counsels. The Indemnifying Parties will not be liable for any settlement of any
action or claim effected without their written consent (which consent shall not
be unreasonably withheld).
(b) Parent shall obtain and maintain in effect at the Effective Time
and continuing until the sixth anniversary of the Effective Time "run-off"
directors and officers liability insurance with a coverage amount of $15,000,000
and other terms and conditions comparable to Parent's current directors and
officers liability insurance policy covering the directors and officers of the
Company with respect to their service as such prior to the Effective Time.
(c) The provisions of this Section 5.14 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party, his or her
heirs and his or her personal representatives and shall be binding on all
successors and assigns of Parent, Sub, the Company and the Surviving
Corporation.
SECTION 5.15 Related Agreements. The Company hereby agrees that it
shall:
(a) at the Effective Time, in its capacity as general partner of the
Operating Partnership, execute and deliver one or more Contribution Agreements,
each substantially in the form attached hereto as EXHIBIT A, with the holders of
Parent Units and shall in such capacity satisfy its obligations thereunder; and
(b) subject to the receipt of all necessary consents from the
limited partners of the Operating Partnership, in its capacity as general
partner of the Operating Partnership, execute and deliver the Amended and
Restated Operating Partnership Agreement (as defined below).
SECTION 5.16 Special Tax Distributions to the Company Reinvested. Prior
to the Effective Time, the Company shall reinvest in or contribute to the
Operating Partnership the amount of any special tax distributions paid by the
Operating Partnership to the Company.
SECTION 5.17 Amendment of Parent Operating Partnership Agreement. The
parties agree to negotiate in good faith to amend and restate the Parent
Operating Partnership Agreement (concurrently with the consummation of the
Merger) in a form reasonably acceptable to each of Parent and the Company. Such
amendment and restatement of the Parent Operating Partnership Agreement shall
provide, among other things, for special limited partnership
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interests that will be acquired by the Operating Partnership pursuant to the
Contribution Agreement, upon effectiveness of the Merger, that will include the
following rights and powers: (a) the right to receive information concerning any
matter affecting the partnership; (b) the right to approve the acquisition,
disposition or encumbrance (other than as a result of operating leases or in the
ordinary course of business) of partnership real property; (c) the right to
approve a merger, liquidation or dissolution of the partnership and the sale of
all or substantially all of its assets; (d) the right to approve any borrowing
or lending; (e) the right to approve the admission of additional general or
limited partners, the making of additional capital contributions, the withdrawal
of any part of a partner's capital contribution and the transfer or assignment
of any partnership interest; and (f) the right to approve the making,
modification or withdrawal of tax elections.
SECTION 5.18 Additional Parent Agreements. The Parent hereby agrees
that it shall (i) at the Effective Time, execute and deliver the Contribution
Agreement substantially in the form attached hereto as EXHIBIT A and satisfy its
obligations thereunder and (ii) execute and deliver, at the Effective Time, the
Amended and Restated Operating Partnership Agreement (as defined below).
ARTICLE VI
Conditions Precedent
SECTION 6.1 Conditions to Each Party's Obligation To Effect the Merger.
The respective obligation of each party to effect the Merger and to consummate
the other Transactions contemplated to occur on the Closing Date is subject to
the satisfaction or waiver on or prior to the Effective Time of the following
conditions:
(a) Shareholder Approval. This Agreement shall have been approved
and adopted by the Shareholder Approvals.
(b) HSR Act. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated or shall
have expired.
(c) Listing of Shares. The NYSE shall have approved for listing the
Parent Common Stock to be issued in the Merger.
(d) Registration Statement. The Registration Statement shall have
become effective under the
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Securities Act and shall not be the subject of any stop order or proceedings by
the SEC seeking a stop order.
(e) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger or any of the other Transactions shall be in effect.
(f) Blue Sky Laws. Parent shall have received all state securities
or "blue sky" permits and other authorizations necessary to issue the shares of
Parent Common Stock comprising the Merger Consideration.
(g) Related Transactions. The Stock Purchase Agreement, the
Stockholders Agreement and the Termination Agreement shall remain in full force
and effect and the respective transactions contemplated thereby shall have been
consummated prior to, or are being consummated simultaneously with, the Merger.
The Contribution Agreement shall have been duly executed by the Company (in its
capacity as general partner of the Operating Partnership), Parent and each
Parent Principal owning Parent Units, shall remain in full force and effect and
the transactions contemplated thereby shall have been consummated simultaneously
with the Merger. An Amended and Restated Operating Partnership Agreement
substantially in the form appended hereto as EXHIBIT I (the "AMENDED AND
RESTATED OPERATING PARTNERSHIP AGREEMENT"), an Amended and Restated Parent
Operating Partnership Agreement in a form reasonably acceptable to each of
Parent and the Company as provided in and subject to Section 5.17 (the "AMENDED
AND RESTATED PARENT OPERATING PARTNERSHIP AGREEMENT") and a Registration Rights
Agreement substantially in the form appended hereto as EXHIBIT K shall each have
been duly executed and delivered by the parties thereto and shall remain in full
force and effect.
(h) Certain Actions and Consents. All material actions by or in
respect of or filings with any Governmental Entity required for the consummation
of the Transactions shall have been obtained or made.
(i) EJDC Lender Consents. All material consents and waivers of
lenders to EJDC necessary in connection with the consummation of the
Transactions shall have been obtained.
SECTION 6.2 Conditions to Obligations of Parent and Sub. The
obligations of Parent and Sub to effect the Merger and to consummate the other
Transactions contemplated to occur on the Closing Date are further subject to
the
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following conditions any one or more of which may be waived by both Parent and
Sub:
(a) Representations and Warranties. The representations and
warranties of the Company (without giving effect to any "materiality"
qualification or limitation) set forth in this Agreement shall be true and
correct as of the Closing Date, as though made on and as of the Closing Date,
except to the extent the representation or warranty is expressly limited by its
terms to another date, and Parent shall have received a certificate (which
certificate may be qualified by knowledge to the same extent as such
representations and warranties are so qualified) signed on behalf of the Company
by the chief executive officer or the chief financial officer of the Company to
such effect. This condition shall be deemed satisfied notwithstanding any
failure of a representation or warranty of the Company to be true and correct as
of the Closing Date (without giving effect to any materiality qualification) if
the aggregate amount of Economic Losses (as defined below) that would reasonably
be expected to arise as a result of the failures of such representations and
warranties to be true and correct as of the Closing Date does not exceed
$58,000,000 (such amount to be calculated by counting in all cases from the
first dollar of such Economic Losses without giving effect to the $58,000,000
limitation set forth in Section 3.1(f)). "ECONOMIC LOSSES" shall mean any and
all net damage, net loss (including diminution in the value of properties or
assets), net liability or expense suffered by the Company and the Company
Interests taken as a whole, but shall not include any claims, damages, loss,
expense or other liability resulting from any class action or shareholders'
derivative lawsuits relating to the Transactions against the Company, if any,
filed subsequent to the date of this Agreement or any amounts paid or expenses
incurred by the Company in obtaining non-governmental third party consents, as
contemplated by Section 5.3 up to the amount of $5,000,000 provided therein.
(b) Performance of Obligations of the Company. The Company shall
have performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Effective Time, and each of Parent
and Sub shall have received a certificate signed on behalf of the Company by the
chief executive officer or the chief financial officer of the Company to such
effect.
(c) Material Adverse Change. Since the date of this Agreement, there
has been no material adverse change in the business, results of operations or
financial condition of the Company and the Company Subsidiaries and Company
Joint Ventures (but only to the extent of the
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Company Interests with respect to a Company Joint Venture) taken as a whole,
that have resulted or would result individually or in the aggregate, in Economic
Losses of $58,000,000 or more, without giving effect to a general decline in the
U.S. economy or an adverse change in the financial condition of specialty retail
tenants or department stores. Each of Parent and Sub shall have received a
certificate of the chief executive officer or chief financial officer of the
Company to the effect that there has been no such material adverse change.
(d) Opinions Relating to REIT and Partnership Status. Each of Parent
and Sub shall have received (i) an opinion of Willkie Farr & Gallagher, dated as
of the Closing Date, reasonably satisfactory to each of Parent and Sub that
commencing with the taxable year ended December 31, 1994 (A) the Company was
organized and has operated in conformity with the requirements for qualification
as a REIT within the meaning of the Code and (B) each Company Joint Venture, the
Operating Partnership, the Financing Partnership and each other Company
Subsidiary that is a partnership, joint venture or limited liability company has
been during and since 1994, and continues to be, treated for federal income tax
purposes as a partnership and not as a corporation or an association taxable as
a corporation and (ii) an opinion of Paul, Weiss, Rifkind, Wharton & Garrison,
counsel to Parent, reasonably satisfactory to Parent, that, (A) commencing with
its taxable year ended December 31, 1994, Parent was organized and has operated
in conformity with the requirements for qualification as a REIT and that, after
giving effect to the Merger, the Parent's proposed method of operation will
enable it to continue to meet the requirements for qualification and taxation as
a REIT under the Code and (B) the Parent Operating Partnership and each Parent
Joint Venture has been during and since 1994, and continues to be, treated for
federal income tax purposes as partnerships, and not as corporations or
associations taxable as corporations (in the case of each of (A) and (B) above,
with customary exceptions, assumptions and qualifications).
(e) Other Tax Opinion. Each of Parent and Sub shall have received an
opinion dated the Closing Date from Willkie Farr & Gallagher, based upon
certificates and letters, which letters and certificates are substantially in
the form set forth in EXHIBIT L hereto and dated the Closing Date, to the effect
that the Merger will qualify as a reorganization under the provisions of Section
368(a) of the Code.
(f) Consents. All consents and waivers (including without
limitation, waivers of rights of first refusal) from third parties necessary in
connection with the
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consummation of the Transactions shall have been obtained, other than such
consents and waivers from third parties, which, if not obtained, would not
result, individually or in the aggregate, in Economic Losses of $58,000,000 or
more.
Notwithstanding the foregoing, neither Parent nor Sub shall be
obligated to effect the Merger if the Economic Losses resulting from the failure
of one or more of the conditions set forth in Sections 6.2(a), 6.2(c) and 6.2(f)
to be satisfied (the determination of whether a failure of any of such
conditions has occurred for the purposes of this sentence being made without
giving effect to the $58,000,000 limitations set forth in such subsections), in
the aggregate, but without duplication exceeds $58,000,000.
SECTION 6.3 Conditions to Obligation of the Company.
The obligation of the Company to effect the Merger and to consummate
the other Transactions contemplated to occur on the Closing Date is further
subject to the following conditions, any one or more of which may be waived by
the Company:
(a) Representations and Warranties. The representations and
warranties of each of Parent and Sub set forth in this Agreement that are
qualified as to materiality shall be true and correct, and the representations
and warranties of Parent set forth in this Agreement that are not so qualified
shall be true and correct in all material respects, in each case as of the date
of this Agreement and as of the Closing Date, as though made on and as of the
Closing Date, except to the extent the representation or warranty is expressly
limited by its terms to another date, and the Company shall have received a
certificate (which certificate may be qualified by knowledge to the same extent
as the representations and warranties of each of Parent and Sub contained herein
are so qualified) signed on behalf of each of Parent and Sub by the chief
executive officer and the chief financial officer of such party to such effect.
This condition shall be deemed satisfied unless any or all breaches of either
Parent's or Sub's representations and warranties in this Agreement (without
giving effect to any materiality qualification or limitation) have a Parent
Material Adverse Effect.
(b) Performance of Obligations of each of Parent and Sub. Each of
Parent and Sub shall have performed in all material respects all obligations
required to be performed by it under this Agreement at or prior to the Effective
Time, and the Company shall have received a certificate of each of Parent and
Sub signed on behalf of
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such party by the chief executive officer or the chief financial officer of such
party to such effect.
(c) Material Adverse Change. Since the date of this Agreement, there
shall have been no Parent Material Adverse Change and the Company shall have
received a certificate of the chief executive officer or chief financial officer
of the Parent to such effect.
(d) Opinion Relating to REIT Status. The Company shall have received
an opinion of Paul, Weiss, Rifkind, Wharton & Garrison, counsel to Parent,
reasonably satisfactory to the Company, that, (A) commencing with its taxable
year ended December 31, 1994, Parent was organized and has operated in
conformity with the requirements for qualification as a REIT and that, after
giving effect to the Merger, the Parent's proposed method of operation will
enable it to continue to meet the requirements for qualification and taxation as
a REIT under the Code and (B) the Parent Operating Partnership and each Parent
Joint Venture has been during and since 1994, and continues to be, treated for
federal income tax purposes as partnerships, and not as corporations or
associations taxable as corporations (in the case of (A) and (B) above with
customary exceptions, assumptions and qualifications).
(e) Other Tax Opinion. The Company shall have received an opinion
dated the Closing Date from Paul, Weiss, Rifkind, Wharton & Garrison, based upon
certificates and letters, which letters and certificates are substantially in
the form set forth in EXHIBIT M hereto and dated the Closing Date, to the effect
that the Merger will qualify as a reorganization under the provisions of Section
368(a) of the Code.
(f) Consents. All consents and waivers (including, without
limitation, waivers or rights of first refusal) from third parties necessary in
connection with the consummation of the Transactions shall have been obtained,
other than such consents and waivers from third parties, which, if not obtained,
would not have a Parent Material Adverse Effect.
(g) The Investment Company Act Opinion. The Company shall have
received a favorable opinion dated the Closing Date from Paul, Weiss, Rifkind,
Wharton & Garrison, as to the matter described in EXHIBIT N.
Notwithstanding the foregoing, the Company shall not be obligated to
effect the Merger if the failure of one or more of the conditions set forth in
Sections 6.3(a), 6.3(c) and 6.3(f) to be satisfied (the determination of whether
a failure of any of such conditions has occurred for
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63
the purposes of this sentence being made without giving effect to any
materiality qualification or limitation set forth in such subsections), in the
aggregate, causes a Parent Material Adverse Effect.
ARTICLE VII
Board Actions
SECTION 7.1 Board Actions. Notwithstanding Section 5.7 or any other
provision of this Agreement to the contrary, to the extent required by the
fiduciary obligations of the Board of Directors of the Company, as determined in
good faith based on the advice of the Company's outside counsel, the Company
may:
(a) disclose to the shareholders of the Company any information
required to be disclosed under applicable law;
(b) in response to an unsolicited request therefor, participate in
discussions or negotiations with, or furnish information with respect to the
Company pursuant to a confidentiality agreement no less favorable to the Company
than the Confidentiality Agreement (as determined by the Company's outside
counsel) to, any person in connection with a Competing Transaction proposed by
such person; and
(c) approve or recommend (and, in connection therewith withdraw or
modify its approval or recommendation of this Agreement or the Merger) a
Superior Competing Transaction (as defined below) or enter into an agreement
with respect to such Superior Competing Transaction (For purposes of this
Agreement, "SUPERIOR COMPETING TRANSACTION" means a bona fide proposal of a
Competing Transaction made by a third party which a majority of the members of
Board of Directors of the Company determines in good faith (based on the advice
of the Company's investment banking firm of national reputation) to be more
favorable from a financial point of view to the Company's shareholders than the
Merger, and for which financing, to the extent required, is then committed).
ARTICLE VIII
Termination, Amendment and Waiver
SECTION 8.1 Termination. This Agreement may be terminated at any time
prior to the filing of the Certificate of Merger with the Secretary of State of
the
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64
State of Ohio, whether before or after either of the Shareholder Approvals are
obtained:
(a) by mutual written consent duly authorized by the respective
Boards of Directors of Parent and the Company;
(b) by Parent, upon a breach of any representation, warranty,
covenant or agreement on the part of the Company set forth in this Agreement, or
if any representation or warranty of the Company shall have become untrue, in
either case such that the conditions set forth in Section 6.2(a) or Section
6.2(b), as the case may be, would be incapable of being satisfied by October 30,
1996 (as otherwise extended);
(c) by the Company, upon a breach of any representation, warranty,
covenant or agreement on the part of Parent set forth in this Agreement, or if
any representation or warranty of Parent shall have become untrue, in either
case such that the conditions set forth in Section 6.3(a) or Section 6.3(b), as
the case may be, would be incapable of being satisfied by October 30, 1996 (as
otherwise extended);
(d) by either Parent or the Company, if any judgment, injunction,
order, decree or action by any Governmental Entity of competent authority
preventing the consummation of the Merger shall have become final and
nonappealable;
(e) by either Parent or the Company, if the Merger shall not have
been consummated before October 30, 1996; provided, however, that a party that
has willfully and materially breached a representation, warranty or covenant of
such party set forth in this Agreement shall not be entitled to exercise its
right to terminate under this Section 8.1(e);
(f) by either Parent or the Company if, upon a vote at a duly held
Company Shareholders Meeting or any adjournment thereof, the Company Shareholder
Approvals shall not have been obtained as contemplated by Section 5.1;
(g) by either Parent or the Company if, upon a vote at a duly held
Parent Stockholders Meeting or any adjournment thereof, the Parent Stockholder
Approvals shall not have been obtained as contemplated by Section 5.1;
(h) by the Company, upon payment to Parent of the amounts referred
to in Section 8.2(b), if prior to the Company Shareholders Meeting, the Board of
Directors of the Company shall have withdrawn or modified in any manner
<PAGE> 249
65
adverse to Parent and Sub its approval or recommendation of the Merger or this
Agreement in connection with, or approved or recommended, a Superior Competing
Transaction; and
(i) by Parent if (i) prior to the Company Shareholders Meeting, the
Board of Directors of the Company or any committee thereof shall have withdrawn
or modified in any manner adverse to Parent and Sub its approval or
recommendation of the Merger or this Agreement in connection with, or approved
or recommended, any Superior Competing Transaction, (ii) the Company shall have
entered into any agreement with respect to any Competing Transaction (other than
a confidentiality agreement as contemplated by Section 7.1(b)) or (iii) the
Board of Directors of the Company or any committee thereof shall have resolved
to do any of the foregoing.
(j) by the Company if the Average Closing Price (as defined below)
is less than $21.25. "AVERAGE CLOSING PRICE" shall mean the average of the
closing prices of Parent Common Stock on the NYSE for all trading days beginning
on the eighteenth trading day prior to the date of the Company Shareholder
Meeting and ending on and including the third trading day prior to such date.
SECTION 8.2 Expenses.
(a) Except as otherwise specified in this Section 8.2 or agreed in
writing by the parties, all out-of-pocket costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such cost or expense.
(b) The Company agrees that if this Agreement shall be terminated
(i) pursuant to Section 8.1(b), (f), (h) or (i) and, in the case of Section
8.1(b) or (f), following the date of this Agreement and prior to termination,
the Company shall have received a proposal constituting a Competing Transaction
and within 12 months following termination the Company shall enter into a
definitive agreement providing for a Competing Transaction that is equally or
more favorable from a financial point of view to the Company's shareholders as
the Merger, then the Company will pay as directed by Parent a fee in an amount
equal to the Break-Up Fee (as defined below) and (ii) pursuant to Section 8.1(b)
and following the date of this Agreement and prior to termination the Company
shall have received a proposal constituting a Competing Transaction, the Company
shall have willfully breached any representation, warranty or covenant of the
Company set forth in this Agreement and within 12 months following termination,
the Company shall enter into a definitive agreement providing for a Competing
Transaction that is not
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66
equally or more favorable from a financial point of view to the Company's
shareholders as the Merger, then the Company will pay, as directed by Parent an
amount equal to the Break-Up Expenses (as defined below). Payment of any of such
amounts shall be made, as directed by Parent, by wire transfer of immediately
available funds promptly, but in no event later than two business days after
such termination. The "BREAK-UP FEE" shall be an amount equal to the lesser of
(i) $35,000,000 (the "BASE AMOUNT") and (ii) the sum of (A) the maximum amount
that can be paid to Parent without causing it to fail to meet the requirements
of Sections 856(c)(2) and (3) of the Code determined as if the payment of
such amount did not constitute income described in Sections
856(c)(2)(A)-(H) and 856(c)(3)(A)-(I) of the code ("QUALIFYING INCOME"), as
determined by independent accountants to Parent and (B) in the event Parent
receives a letter from outside counsel (the "BREAK-UP FEE TAX OPINION")
indicating that Parent has received a ruling from the IRS holding that Parent's
receipt of the Base Amount would either constitute Qualifying Income or would be
excluded from gross income within the meaning of Sections 856(c)(2) and
(3) of the Code (the "REIT REQUIREMENTS") or that the receipt by Parent of the
remaining balance of the Base Amount following the receipt of and pursuant to
such ruling would not be deemed constructively received prior thereto, the Base
Amount less the amount payable under clause (A) above. The Company's obligation
to pay the Break-Up Fee shall terminate three years from the date of this
Agreement. In the event that Parent is not able to receive the full Base Amount,
the Company shall place the unpaid amount in escrow and shall not release any
portion thereof to Parent unless and until the Company receives any one or
combination of the following: (i) a letter from Parent's independent accountants
indicating the maximum amount that can be paid at that time to Parent without
causing Parent to fail to meet the REIT Requirements or (ii) a Break-Up Fee Tax
Opinion, in which event the Company shall pay to Parent the lesser of the unpaid
Base Amount or the maximum amount stated in the letter referred to in (i) above.
The "BREAK-UP EXPENSES" shall be an amount equal to the lesser of (i) Parent's
out-of-pocket expenses incurred in connection with this Agreement and the
Transactions (including, without limitation, all attorneys', accountants' and
investment bankers' fees and expenses) but in no event in an amount greater than
$7,500,000 (the "EXPENSE FEE BASE AMOUNT") and (ii) the sum of (A) the maximum
amount that can be paid to Parent without causing it to fail to meet the
requirements of Sections 856(c)(2) and (3) of the Code determined as if
the payment of such amount did not constitute Qualifying Income, as determined
by independent accountants to Parent and (B) in the event Parent receives a
Break-Up Fee Tax Opinion indicating that Parent has received a ruling from the
IRS holding that Parent's receipt of the Expense Fee Base Amount
<PAGE> 251
67
would either constitute Qualifying Income or would be excluded from gross income
within the meaning of the REIT Requirements or that receipt by Parent of the
remaining balance of the Expense Fee Base Amount following the receipt of and
pursuant to such ruling would not be deemed constructively received prior
thereto, the Expense Fee Base Amount less the amount payable under clause (A)
above. The Company's obligation to pay the Break-Up Expenses shall terminate
three years from the date of this Agreement. In the event that Parent is not
able to receive the full Expense Fee Base Amount, the Company shall place the
unpaid amount in escrow and shall not release any portion thereof to Parent
unless and until the Company receives any one or combination of the following:
(i) a letter from Parent's independent accountants indicating the maximum amount
that can be paid at that time to Parent without causing Parent to fail to meet
the REIT Requirements or (ii) a Break-Up Fee Tax Opinion, in which event the
Company shall pay to Parent the lesser of the unpaid Expense Fee Base Amount or
the maximum amount stated in the letter referred to in (i) above.
(c) Parent agrees that if the Company is entitled to terminate this
Agreement by reason of the failure of Parent to satisfy, by October 30, 1996,
the conditions to the obligations of the Company to effect the Merger set forth
in Section 6.3(f) and so exercises such right to terminate, then Parent will pay
a fee in an amount equal to the Termination Fee (as defined below) as directed
by the Operating Partnership. Payments of any such amounts shall be made, as
directed by the Operating Partnership, by wire transfer of immediately available
funds promptly, but in no event later than two business days after such
termination. The "TERMINATION FEE" shall be an amount equal to the lesser of (i)
$35,000,000 (the "TERMINATION FEE BASE AMOUNT") and (ii) the sum of (A) the
maximum amount that can be paid to the Operating Partnership without causing the
Company to fail to meet the requirements of Sections 856(c)(2) and (3) of
the Code determined as if the payment of such amount did not constitute
Qualifying Income, as determined by independent accountants to the Company and
(B) in the event the Company receives a letter from outside counsel (the
"TERMINATION FEE TAX OPINION") indicating that the Company has received a ruling
from the IRS holding that the Operating Partnership's receipt of the Termination
Fee Base Amount would either constitute Qualifying Income or would be excluded
from gross income within the meaning of the REIT Requirements or that the
receipt by the Operating Partnership of the remaining balance of the Termination
Fee Base Amount following the receipt of and pursuant to such ruling would not
be deemed constructively received prior thereto, the Termination Fee Base Amount
less the amount payable under clause (A) above. Parent's obligation to pay
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68
the Termination Fee shall terminate three years from the date of this Agreement.
In the event that the Operating Partnership is not able to receive the full
Termination Fee Base Amount, Parent shall place the unpaid amount in escrow and
shall not release any portion thereof to the Operating Partnership unless and
until Parent receives any one or combination of the following: (i) a letter from
the Company's independent accountants indicating the maximum amount that can be
paid at that time to the Operating Partnership without causing the Company to
fail to meet the REIT Requirements or (ii) a Termination Fee Tax Opinion, in
which event Parent shall pay to the Operating Partnership the lesser of the
unpaid Termination Fee Base Amount or the maximum amount stated in the letter
referred to in (i) above.
SECTION 8.3 Effect of Termination. In the event of termination of this
Agreement by either the Company or Parent as provided in Section 8.1, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Parent, or the Company, other than the last
sentence of Section 5.2, Section 8.2, this Section 8.3 and Article IX and except
to the extent that such termination results from a material breach by a party of
any of its representations, warranties, covenants or agreements set forth in
this Agreement.
SECTION 8.4 Amendment. This Agreement may be amended by the parties in
writing by action of their respective Boards of Directors at any time before or
after any Shareholder Approvals are obtained and prior to the filing of the
Certificate of Merger with the Secretary of State of the State of Ohio;
provided, however, that, after the Shareholder Approvals are obtained, no such
amendment, modification or supplement shall alter the amount or change the form
of the consideration to be delivered to the Company's shareholders or alter or
change any of the terms or conditions of this Agreement if such alteration or
change would adversely affect the Company's shareholders or the Parent's
stockholders.
SECTION 8.5 Extension; Waiver. At any time prior to the Effective Time,
the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other party, (b) waive any inaccuracies in the
representations and warranties of the other party contained in this Agreement or
in any document delivered pursuant to this Agreement or (c) subject to the
proviso of Section 8.4, waive compliance with any of the agreements or
conditions of the other party contained in this Agreement (Parent and Sub being
deemed one party for the purposes of this Section 8.5). Any agreement on the
part of a party to any such extension or waiver shall be valid only if set forth
in an
<PAGE> 253
69
instrument in writing signed on behalf of such party. Any waivers pursuant to
clause (c) of the second preceding sentence (i) of the provisions of Section
4.1(e) may be given in writing on behalf of Parent and Sub by the Chief
Executive Officer of Parent and (ii) of the provisions of Section 4.2(e) may be
given in writing by or on behalf of the Company by the Chief Executive Officer
of the Company. The failure of any party to this Agreement to assert any of its
rights under this Agreement or otherwise shall not constitute a waiver of those
rights.
ARTICLE IX
General Provisions
SECTION 9.1 Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time. This Section 9.1
shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time.
SECTION 9.2 Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally, sent by overnight courier (providing proof of
delivery) to the parties or sent by telecopy (providing confirmation of
transmission) at the following addresses or telecopy numbers (or at such other
address or telecopy number for a party as shall be specified by like notice):
(a) if to Parent or Sub, to
Simon Property Group, Inc.
Merchants Plaza
115 West Washington Street
Suite 15 East
Indianapolis, IN 46204
Attn: David Simon
James M. Barkley, Esq.
Fax: (317) 685-7221
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70
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, NY 10019-6064
Attn: Edwin S. Maynard, Esq.
Toby S. Myerson, Esq.
Fax: (212) 757-3990
(b) if to the Company, to
DeBartolo Realty Corporation
7655 Market Street
P.O. Box 3287
Youngstown, Ohio 44513-3287
Attn: Richard S. Sokolov
Fax: (216) 758-1610
with a copy to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, NY 10022
Attn: Richard L. Posen, Esq.
William N. Dye, Esq.
Fax: (212) 821-8111
SECTION 9.3 Certain Definitions. For purposes of this Agreement:
An "AFFILIATE" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first person.
"COMPANY DISCLOSURE LETTER" means the letter previously delivered to
each of Parent and Sub by the Company disclosing certain information in
connection with this Agreement.
"COMPANY INTERESTS" means, collectively, the Company Subsidiaries and
all direct or indirect interests of the Company or any Company Subsidiary in any
Company Joint Venture.
"COMPANY JOINT VENTURE" means, collectively, any partnership, joint
venture or business trust in which the Operating Partnership or the Financing
Partnership owns an interest.
<PAGE> 255
71
"COMPANY SUBSIDIARY" means the Management Company and each Subsidiary
of the Company, including, without limitation, the Operating Partnership, the
Financing Partnership and each Subsidiary (if any) of the Operating Partnership
or the Financing Partnership (as defined below), but excluding Company Joint
Ventures.
"EJDC" means The Edward J. DeBartolo Corporation, an Ohio corporation.
"FINANCING PARTNERSHIP" means DeBartolo Capital Partnership, a Delaware
general partnership.
"KNOWLEDGE" where used herein with respect to the Company shall mean
the knowledge of the persons named in SCHEDULE 9.3 to the Company Disclosure
Letter and where used with respect to Parent shall mean the knowledge of the
persons named in SCHEDULE 9.3 to the Parent Disclosure Letter.
"MAJORITY COMPANY JOINT VENTURE" means, collectively, all Company Joint
Ventures identified as Majority Company Joint Ventures on SCHEDULE 3.1(b)(ii) to
the Company Disclosure Letter.
"MANAGEMENT COMPANY" means The DeBartolo Properties Management, Inc.,
an Ohio Corporation.
"MINORITY COMPANY JOINT VENTURE" means, collectively, all Company Joint
Ventures other than the Majority Company Joint Ventures.
"OPERATING PARTNERSHIP" means DeBartolo Realty Partnership, L.P., a
Delaware limited partnership.
"PARENT DISCLOSURE LETTER" means the letter previously delivered to the
Company by Parent and Sub disclosing certain information in connection with this
Agreement.
"PARENT INTERESTS" means, collectively, the Parent Subsidiaries and all
direct or indirect interests of Parent or any Parent Subsidiary in any Parent
Joint Venture.
"PARENT JOINT VENTURE" means, collectively, any partnership, business
trust or joint venture in which the Parent Operating Partnership owns an
interest.
"PARENT MANAGEMENT COMPANY" means M.S. Management Associates, Inc., a
Delaware corporation.
"PARENT OPERATING PARTNERSHIP" means Simon Property Group, L.P., a
Delaware limited partnership.
<PAGE> 256
72
"PARENT SUBSIDIARY" means each Subsidiary of Parent, including, without
limitation, the Parent Operating Partnership and each Subsidiary (if any) of the
Parent Operating Partnership but excluding Parent Joint Ventures.
"PERSON" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity.
"SUBSIDIARY" of any person means any corporation, partnership, limited
liability company, joint venture or other legal entity of which such person
(either directly or through or together with another Subsidiary of such person)
owns 50% or more of the voting stock or other voting equity interests of such
corporation, partnership, limited liability company, joint venture or other
legal entity.
"WHOLLY-OWNED COMPANY JOINT VENTURE" means a Company Joint Venture, all
of the equity interests of which are owned by the Company, a Company Subsidiary
or another Wholly-Owned Company Joint Venture.
"WHOLLY-OWNED PARENT JOINT VENTURE" means a Parent Joint Venture, all
of the equity interests of which are owned by Parent, a Parent Subsidiary or
another Wholly-Owned Parent Joint Venture.
SECTION 9.4 Interpretation. When a reference is made in this Agreement
to a Section, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include",
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation."
SECTION 9.5 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
SECTION 9.6 Entire Agreement; No Third-Party Beneficiaries. This
Agreement, the Confidentiality Agreement and the other agreements entered into
in connection with the Transactions (a) constitute the entire agreement and
supersedes all prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter of this Agreement and,
(b) except for the provisions of Article II, Section 5.6(b)(ii), the next to
last sentence of Section 5.12(a), Section 5.12(b) and (c)
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73
and Section 5.14, are not intended to confer upon any person other than the
parties hereto any rights or remedies, it being understood that EJDC shall have
the right to enforce the provisions of Section 5.6(b)(ii).
SECTION 9.7 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, REGARDLESS OF
THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICT OF
LAWS THEREOF, EXCEPT TO THE EXTENT THAT THE MERGER OR OTHER TRANSACTIONS
CONTEMPLATED HEREBY ARE REQUIRED TO BE GOVERNED BY THE OHIO STATUTE.
SECTION 9.8 Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned or delegated, in
whole or in part, by operation of law or otherwise by any of the parties without
the prior written consent of the other parties. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of, and be
enforceable by, the parties and their respective successors and assigns.
SECTION 9.9 Enforcement. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of New York or in any New York State court located in New
York City, this being in addition to any other remedy to which they are entitled
at law or in equity. In addition, each of the parties hereto (a) consents to
submit itself (without making such submission exclusive) to the personal
jurisdiction of any federal court located in the State of New York or any New
York State court in the event any dispute arises out of this Agreement or any of
the transactions contemplated by this Agreement and (b) agrees that it will not
attempt to deny or defeat such personal jurisdiction by motion or other request
for leave from any such court.
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IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
SIMON PROPERTY GROUP, INC.
By: /s/ David Simon
---------------------------------
Name: David Simon
Title: President
DAY ACQUISITION CORP.
By: /s/ David Simon
---------------------------------
Name: David Simon
Title: President
DeBARTOLO REALTY CORPORATION
By: /s/ Richard S. Sokolov
---------------------------------
Name: Richard S. Sokolov
Title: Chief Executive Officer
<PAGE> 259
EXECUTION COPY
AMENDMENT NO. 1 TO
THE AGREEMENT AND PLAN OF MERGER
THIS AMENDMENT NO. 1 (this "Amendment") to the Merger
Agreement (as defined below), dated as of June 26, 1996, is hereby entered into
by and among Simon Property Group, Inc., a Maryland corporation ("Parent"), Day
Acquisition Corp., an Ohio corporation and a direct subsidiary of Parent
("Sub"), and DeBartolo Realty Corporation, an Ohio corporation (the "Company").
Capitalized terms not otherwise defined have the meanings set forth in the
Merger Agreement.
(a) the Board of Directors of each of Parent, Sub and the
Company have approved the merger of Sub with and into the Company, upon terms
and subject to the conditions set forth in the Agreement and Plan of Merger,
dated as of March 26, 1996, among Parent, Sub and the Company (the "Merger
Agreement"); and
(b) Parent, Sub and Company now wish to amend the Merger
Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and for good and valuable consideration, the
receipt and adequacy of which is hereby acknowledged, the parties hereto agree
as follows:
Section 1. Amendment. The Merger Agreement is hereby amended
and modified as follows:
(a) The Exhibit Index to the Merger Agreement is amended
by:
(i) substituting the words "Form of Subscription
Agreement" for the words "[Intentionally
Omitted]" opposite the letter "B";
(ii) substituting "G-1" for the letter "G" and
substituting the words "Form of Amended and
Restated Articles of Incorporation of the
Surviving Corporation" for the words
"[Intentionally Omitted]" opposite "G-1";
(iii) inserting "G-2" immediately below "G-1" and
inserting the words "Form of Amended and
Restated Regulations of the Surviving
Corporation" opposite "G-2"; and
(iv) substituting the words "Form of Amended and
Restated Agreement of Limited Partnership of
the Parent Operating
<PAGE> 260
Partnership" for the words "[Intentionally
Omitted]" opposite the letter "J".
(b) Recital (h) to the Merger Agreement is amended by:
(i) substituting the words "one or more
Contribution Agreements, each substantially
in the form attached as EXHIBIT A hereto or
in such other form as is mutually acceptable
to Parent and the Company as evidenced by
each party's execution thereof (the
"CONTRIBUTION AGREEMENTS")" for the words
"the Contribution Agreement substantially in
the form of EXHIBIT A hereto (the
"CONTRIBUTION AGREEMENT"); and
(ii) substituting the words "Subscription
Agreement substantially in the form attached
as EXHIBIT B hereto (the "SUBSCRIPTION
AGREEMENT")" for the words "subscription
agreement".
(c) Section 1.5 of the Merger Agreement is amended by:
(i) deleting the words "Code of" before the first
and second references to the word
"Regulations";
(ii) deleting the words "each of" before the words
"such Articles of Incorporation";
(iii) deleting the words "and Code of Regulations"
after the words "such Articles of
Incorporation" and immediately before the
words "shall be amended"; and
(iv) inserting the words "the form attached as
EXHIBIT G-1 hereto and such Regulations shall
be amended and restated in the form attached
as EXHIBIT G-2 hereto" after the words
"following the Effective Time in" and
deleting the remainder of the sentence
following such insertion up to but not
including the period.
(d) Section 2.1(d) of the Merger Agreement is amended by
inserting the following after the word "demands" at the end of such section:
"; provided, that,
2
<PAGE> 261
any such payments in respect of demands of dissenters shall be made from the
Company's own funds."
(e) Section 2.2(b) of the Merger Agreement is amended by
deleting the words ", cash payable in respect of dividends pursuant to Section
2.2(d)(i)."
(f) Section 2.2(d)(i) of the Merger Agreement is amended
by:
(i) substituting the figure "91" for the figure
"90" at the end of the second sentence;
(ii) inserting as the third sentence "Such
dividends shall be paid in the ordinary
course of business consistent with the past
practice of Parent or the Company as the case
may be as to the manner and timing of
payment."; and
(iii) deleting the sentence commencing with "The
dividends payable hereunder" in its entirety.
(g) Section 5.15(a) of the Merger Agreement is amended by
inserting the words "or in such other form as is mutually acceptable to Parent
and the Company as evidenced by each party's execution thereof" after the words
"EXHIBIT A" and immediately before the fourth comma.
(h) Section 5.17 of the Merger Agreement is amended in
its entirety by substituting the words "[Intentionally Omitted]."
(i) Section 5.18 of the Merger Agreement is deleted in
its entirety and replaced with the following:
SECTION 5.18 Additional Parent Agreements. The Parent hereby
agrees that it shall, at the Effective Time, (i) execute and deliver one or
more Contribution Agreements, each substantially in the form attached hereto as
EXHIBIT A or in such other form as is mutually acceptable to Parent and the
Company as evidenced by each party's execution thereof and satisfy its
obligations thereunder, (ii) execute and deliver the Amended and Restated
Operating Partnership Agreement (as defined below) and (iii) execute and
deliver the Amended and Restated Parent Operating Partnership Agreement (as
defined below).
(j) Section 6.1(g) of the Merger Agreement is amended by:
3
<PAGE> 262
(i) substituting the words "One or more
Contribution Agreements" for the words "the
Contribution Agreement" at the beginning of
the second sentence;
(ii) inserting the words "substantially in the
form appended hereto as EXHIBIT J"
immediately after the words "an Amended and
Restated Parent Operating Partnership
Agreement" after the comma in the third
sentence; and
(iii) deleting the words "in a form reasonably
acceptable to each of Parent and the Company
as provided in and subject to Section 5.17"
in the third sentence.
(k) The Exhibits to the Merger Agreement are amended as
follows:
(i) Exhibit A (Form of Contribution Agreement) of
the Merger Agreement is deleted in its
entirety and is replaced by Exhibit A
attached hereto.
(ii) Exhibit B (Form of Subscription Agreement) is
in the form of Exhibit B attached hereto.
(iii) Exhibit G-1 (Form of Amended and Restated
Articles of Incorporation of the Surviving
Corporation) of the Merger Agreement is in
the form of Exhibit G-1 attached hereto.
(iv) Exhibit G-2 (Form of Amended and Restated
Regulations of the Surviving Corporation) of
the Merger Agreement is in the form of
Exhibit G-2 attached hereto.
(v) Exhibit I (Form of Amended and Restated
Agreement of Limited Partnership of the
Operating Partnership) of the Merger
Agreement is deleted in its entirety and is
replaced by Exhibit I attached hereto.
(vi) Exhibit J (Form of Amended and Restated
Agreement of Limited Partnership of the
Parent Operating Partnership) of the Merger
Agreement is in the form of Exhibit J
attached hereto.
4
<PAGE> 263
(vii) Exhibit K (Form of Registration Right
Agreement) of the Merger Agreement is deleted
in its entirety and is replaced by Exhibit K
attached hereto.
Section 2. Effectiveness. The amendments to the Merger
Agreement provided for in this Amendment shall become effective as of the date
hereof upon the execution and delivery of one or more counterparts of this
Amendment duly executed by Parent, Sub and the Company.
Section 3. Miscellaneous. (a) Except as expressly provided
herein, the execution, delivery and effectiveness of this Amendment shall not
operate as a waiver of any rights, powers or remedies of Parent, Sub and the
Company under the Merger Agreement, nor constitute a waiver of any provision of
the Merger Agreement. Except as expressly amended hereby, the Merger Agreement
shall be unchanged and remain in full force and effect and the Merger Agreement
as amended hereby is ratified and confirmed.
(b) This Amendment shall form a part of the Merger
Agreement for all purposes, and each party to the Merger Agreement shall be
bound and shall be inured of the benefits hereby.
(c) This Amendment may be executed in any number of
counterparts, each of which shall be an original and all of which taken
together shall constitute one and the same instrument and any of the parties
hereto may execute this Amendment by signing any such counterpart.
(d) THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, REGARDLESS OF THE LAWS THAT
MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICT OF LAWS THEREOF,
EXCEPT TO THE EXTENT THAT THE MERGER OR OTHER TRANSACTIONS CONTEMPLATED HEREBY
ARE REQUIRED TO BE GOVERNED BY THE OHIO STATUTE.
(e) From and after the effectiveness of this Amendment as
provided in Section 2 hereof, all references to the Merger Agreement in the
Merger Agreement and in any other agreement in connection with the Transactions
shall be deemed to be references to the Merger Agreement after giving effect to
this Amendment.
5
<PAGE> 264
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed as of the day and year first above written.
SIMON PROPERTY GROUP, INC.
By /s/ DAVID SIMON
------------------------------------
Name: David Simon
Title: President
DAY ACQUISITION CORP.
By /s/DAVID SIMON
------------------------------------
Name: David Simon
Title: President
DeBARTOLO REALTY CORPORATION
By /s/ RICHARD S. SOKOLOV
------------------------------------
Name: Richard S. Sokolov
Title: Chief Executive Officer
6
<PAGE> 265
ANNEX II
OPINION OF MERRILL LYNCH(2)
- ------------------------
(2) NOTE TO PRELIMINARY PROXY MATERIALS: The attached form of opinion will
be replaced in the final Prospectus/Joint Proxy Statement with an
opinion dated the date of the final Prospectus/Joint Proxy Statement.
<PAGE> 266
[LETTERHEAD OF MERRILL LYNCH & CO.]
June , 1996
Board of Directors
Simon Property Group, Inc.
115 West Washington Street
Indianapolis, Indiana 46204
Gentlemen:
Simon Property Group, Inc. (the "Company"), Day Acquisition Corp., a
corporation which will be 99.9% owned by the Company prior to the Effective Time
as defined in the Agreement referred to below (the "Purchaser"), and DeBartolo
Realty Corporation (the "Subject Company") propose to enter into an agreement
and plan of merger (the "Agreement") pursuant to which the Purchaser will be
merged with and into the Subject Company in a transaction (the "Merger") in
which each share of the Subject Company's common stock, par value $0.01 per
share (the "Shares") other than Shares owned by the Company and 110 individuals
who were shareholders of the Purchaser prior to the Effective Time, will be
converted into the right to receive 0.68 shares of the common stock of the
Company (the "Company Shares"). The ratio for the conversion of the Shares into
a right to receive the Company Shares is referred to as the "Exchange Ratio".
You have asked us whether, in our opinion, the Exchange Ratio pursuant
to the Merger is fair to the Company from a financial point of view.
In arriving at the opinion set forth below, we have, among other
things:
(1) Reviewed the Subject Company's Annual Report, Form 10-K and
related financial information for the fiscal years ended
December 31, 1994 and December 31, 1995, as well as the
related unaudited financial information for the three month
period ended March 31, 1996;
(2) Reviewed the Company's Annual Report, Form 10-K and related
financial information for the fiscal year ended December 31,
1994, the Company's Form 10-K, the Current Report on Form 8-K
and related financial information for the fiscal year ended
December 31, 1995, as well as the related unaudited financial
information for the three month period ended March 31, 1996;
(3) Reviewed certain information, including financial forecasts,
relating to the business, earnings, cash flow, assets and
prospects of the Subject Company and the Company, which were
based on information and specific assumptions provided to us
by the Subject Company and the Company for tabulation and
calculation by Merrill Lynch & Co. and, thereafter, reviewed
and approved by the Company's management;
<PAGE> 267
(4) Conducted discussions with members of senior management of the
Subject Company and the Company concerning their respective
businesses and prospects;
(5) Reviewed the historical market prices and trading activity for
the Shares and the Company Shares and compared them with that
of certain publicly traded companies which we deemed to be
reasonably similar to the Subject Company and the Company,
respectively;
(6) Considered the pro forma effect of the Merger on the Company's
capitalization ratios, funds from operations per share and
cash flow per share;
(7) Reviewed the Agreement dated March 26, 1996 and Amendment No.
1 to Schedule 14A Information of Simon Property Group, Inc.
and DeBartolo Realty Corporation as filed with the Securities
and Exchange Commission on June 14, 1996; and
(8) Reviewed such other financial studies and analyses and
performed such other investigations and took into account such
other matters as we deemed necessary.
In preparing our opinion, we have relied on the accuracy and
completeness of all information supplied or otherwise made available to us by
the Subject Company and the Company, and we have not independently verified such
information or undertaken an independent appraisal of the assets of the Subject
Company or the Company. With respect to the financial forecasts reviewed and
approved by the Company, we have assumed that they are based on reasonable
assumptions and reflect the best currently available estimates and judgment of
the Subject Company's or the Company's management as to the expected future
financial performance of the Subject Company or the Company, as the case may be.
On the basis of, and subject to the foregoing, we are of the opinion
that the Exchange Ratio is fair to the Company from a financial point of view.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By:
----------------------------
<PAGE> 268
ANNEX III
OPINION OF MORGAN STANLEY(3)
- --------
(3) NOTE TO PRELIMINARY PROXY MATERIALS: The attached form of opinion will
be replaced in the final Prospectus/Joint Proxy Statement with an
opinion dated the date of the final Prospectus/Joint Proxy Statement.
<PAGE> 269
[LETTERHEAD OF MORGAN STANLEY & CO.]
June , 1996
Board of Directors
DeBartolo Realty Corporation
7620 Market Street
Youngstown, OH 44513
Gentlemen:
We understand that DeBartolo Realty Corporation ("DeBartolo" or the "Company"),
Simon Property Group, Inc. ("Simon") and Merger Sub, a wholly owned subsidiary
of Simon ("Merger Sub"), have entered into an Agreement and Plan of Merger, as
amended (the "Merger Agreement"), which provides, among other things, for the
merger (the "Merger") of Merger Sub with and into the Company. Pursuant to the
Merger, each outstanding share of common stock, par value $.01 per share (the
"DeBartolo Common Stock") of DeBartolo, other than shares held in treasury or by
any wholly owned subsidiary of the Company or as to which dissenters' rights
have been perfected, will be converted into the right to receive, subject to
certain adjustments, .68 shares of common stock of Simon, par value $.0001 per
share (the "Simon Stock"), (such consideration, the "Merger Consideration"). We
further understand that, pursuant to the Merger, certain holders of units
evidencing limited partnership interests in DeBartolo Realty Partnership, L.P.,
a Delaware limited partnership, will receive the right, subject to certain
adjustments, to convert each such unit into .68 shares of Simon Stock, such
conversion right subject to certain limitations and conditions. The terms and
conditions of the Merger are more fully set forth in the Merger Agreement.
You have asked our opinion as to whether the Merger Consideration to be received
by the holders of shares of DeBartolo Common Stock pursuant to the Merger
Agreement is fair from a financial point of view to such holders (other than
Simon and its affiliates).
For purposes of the opinions set forth herein, we have:
(i) analyzed certain publicly available financial statements and other
information of the Company;
(ii) analyzed certain internal financial statements and other financial
and operating data concerning the Company prepared by the
management of the Company;
<PAGE> 270
Board of Directors
June __, 1996
Page 2
(iii) analyzed certain financial projections prepared by the management
of the Company;
(iv) discussed the past and current operations and financial condition
and the prospects of the Company and certain of its real property
assets with senior executives of the Company;
(v) reviewed the reported prices and trading activity of DeBartolo
Common Stock;
(vi) compared the financial performance of the Company and the prices
and trading activity of DeBartolo Common Stock with that of
certain other comparable publicly-traded companies and their
securities;
(vii) analyzed certain publicly available financial statements and other
information of Simon;
(viii) analyzed certain internal financial statements and other financial
and operating data concerning Simon prepared by the management of
Simon;
(ix) analyzed certain financial projections prepared by the management
of Simon;
(x) discussed the past and current operations and financial condition
and the prospects of Simon and certain of its real property assets
with senior management of Simon;
(xi) reviewed the reported prices and trading activity of Simon Stock;
(xii) compared the financial performance of Simon and the prices and
trading activity of Simon Stock with that of certain other
comparable publicly-traded companies and their securities;
(xiii) discussed with senior management of each of the Company and Simon
their estimates of the synergies and other cost savings to be
realized pursuant to the Merger;
(xiv) participated in discussions and negotiations among representatives
of the Company, Simon and their financial and legal advisors;
(xv) reviewed the Merger Agreement and certain related documents;
and
(xvi) performed such other analyses as we have deemed appropriate.
<PAGE> 271
Board of Directors
June __, 1996
Page 3
We have assumed and relied upon without independent verification the accuracy
and completeness of the information reviewed by us for the purposes of this
opinion. With respect to the financial projections, we have assumed that they
have been reasonably prepared on bases reflecting the best currently available
estimates and judgments of the future financial performance of the Company and
of Simon. Further, we have relied upon the Company's and Simon's estimates of
the synergies and other cost savings to be realized pursuant to the Merger. We
have not made any independent valuation or appraisal of the assets or
liabilities of the Company or of Simon, nor have we been provided with any such
appraisals. Our opinion is necessarily based on economic, market and other
conditions as in effect on, and the information made available to us as of, the
date hereof.
In arriving at our opinion, we were not authorized to solicit, and did not
solicit, interest from any party with respect to the acquisition of the Company
or any of its assets, nor did we negotiate with any party, other than Simon,
with respect to the possible acquisition of the Company or any of its assets.
It is understood that this letter is for the information of the Board of
Directors of the Company and may not be used for any other purpose without our
prior written consent, except that this opinion may be included in its entirety
in any filing made by the Company with the Securities and Exchange Commission
with respect to the Merger. We express no opinion and make no recommendation as
to how the shareholders of the Company should vote at the shareholders' meeting
held in connection with the Merger.
We have acted as financial advisor to the Board of Directors of the Company in
connection with this transaction and will receive a fee for our services. In the
past, Morgan Stanley & Co. Incorporated and its affiliates ("Morgan Stanley")
have provided financial advisory and financing services for the Company and
Simon and have received fees for the rendering of these services. The Morgan
Stanley Real Estate Fund, L. P., an affiliate of Morgan Stanley, owns
approximately 1.8% of the outstanding shares of DeBartolo Common Stock as of the
date hereof. In addition, a Managing Director of Morgan Stanley is a member of
the Board of Directors of Simon. We understand that Simon has established a
Special Committee to consider the issues related to the Merger and that such
Morgan Stanley Managing Director is not a member of such Special Committee.
<PAGE> 272
Board of Directors
June __, 1996
Page 4
Based on the foregoing, we are of the opinion on the date hereof that the Merger
Consideration to be received by the holders of shares of DeBartolo Common Stock
pursuant to the Merger Agreement is fair from a financial point of view to such
holders (other than Simon and its affiliates).
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By:
----------------------------
Christopher J. Niehaus
Principal
<PAGE> 273
ANNEX IV
OPINION OF BLACKSTONE(4)
- --------
(4) NOTE TO PRELIMINARY PROXY MATERIALS: The attached form of opinion will
be replaced in the final Prospectus/Joint Proxy Statement with an
opinion dated the date of the final Prospectus/Joint Proxy Statement.
<PAGE> 274
[LETTERHEAD OF THE BLACKSTONE GROUP L.P.]
June , 1996
Board of Directors
DeBartolo Realty Corporation
7620 Market Street
Youngstown, OH 44513
Dear Sirs:
You have asked our opinion with respect to the fairness, from a financial point
of view, to holders of the common stock, par value $.01 per share (the
"Shares"), of DeBartolo Realty Corporation (the "Company") of the consideration
to be received by such holders pursuant to the Agreement and Plan of Merger,
dated as of March 26, 1996, as amended ( the "Agreement"), among the Company,
Simon Property Group, Inc. (the "Parent") and the Parent's merger subsidiary,
Day Acquisition Corp. ("Sub"), other than: (i) holders of such Shares as to
which dissenters' rights have properly been exercised; and (ii) the Parent and
its affiliates. The Agreement provides, among other things, for the merger (the
"Merger") of Sub with and into the Company in which each outstanding Share will
be converted into the right to receive 0.68 shares (the "Exchange Ratio") of the
common stock, par value $.0001 per share, of the Parent (the "Parent Shares"),
other than: (i) Shares as to which dissenters' rights have properly been
exercised and (ii) Shares of the Parent and its affiliates. The terms and
conditions of the Merger are set forth in more detail in the Agreement.
In arriving at our opinion, we have reviewed and analyzed: (i) the terms of the
Agreement and certain related documents; (ii) certain publicly available
information concerning the business, financial condition, assets and operations
of the Company and the Parent which we believe to be relevant to our inquiry;
(iii) certain publicly available information relating to financial markets and
industry and economic conditions; and (iv) certain financial and other
information, including financial forecasts, with respect to the business
operation, assets, financial condition and prospects of the Company and the
Parent furnished to us by the Company and the Parent. We have met with
management of the Company and of the Parent to discuss the business, operations,
assets, financial condition, history and prospects of the Company's and the
Parent's businesses.
In conducting our analysis, we have also considered (i) certain publicly
available and other information concerning the trading of, and the trading
market for, the Shares and the Parent Shares; (ii) the historical and current
financial position and the historical and projected funds from operations and
results of operations of the Company and the Parent; (iii) publicly available
historical and current financial information and stock price data with respect
to certain public companies with operations that we considered comparable to
those of the Company and the Parent; and (iv) financial terms of certain
business combinations and other transactions that we have deemed relevant. In
addition to the foregoing, we have conducted such other studies, analyses and
investigations as we have deemed appropriate in arriving at our opinion. We were
not requested to, nor did we, solicit third party indications of interest in
acquiring the Company or any of its assets.
<PAGE> 275
In the course of our investigation, we have relied upon, and have assumed the
accuracy and completeness of, all of the foregoing information, and we have not
assumed any responsibility for independent verification of any such information.
We have further relied upon the assurances of management of the Company and the
Parent that they are not aware of any facts that would make such information
inaccurate, incomplete or misleading. With respect to financial forecasts and
pro forma financial forecasts of the Company and the Parent and projected
transaction synergies as a result of the Merger, we have relied upon the
Company's and the Parent's assurances that they have been reasonably prepared on
bases reflecting the best currently available estimates and judgements of the
Company's management as to the future financial performance of the Company. We
express no view as to such financial forecasts or projected transaction
synergies or the assumptions on which they are based. We have not conducted a
physical inspection of the properties and facilities of the Company and have not
made an independent evaluation or appraisal of the assets of the Company, nor
have we been furnished with any such evaluations or appraisals. Our opinion is
necessarily based upon business, market (both concerning the financial markets
and the regional mall market), economic, regulatory, tax and other conditions as
they exist on, and can be evaluated as of, the date hereof.
We have acted as financial advisor to the Company in connection with the
Transaction and will receive a fee for our services which is contingent upon the
consummation of the Transaction. In addition, the Company has agreed to
indemnify us for certain liabilities arising out of the performance of such
services (including, the rendering of this opinion). Mark T. Gallogly, a Senior
Managing Director of our firm, is a member of the Board of Directors of the
Company. BJS Capital Partners L.P., an affiliate of our firm, has an equity
investment of 6,347,016 Shares, representing approximately 11% of the Shares,
and has negotiated with the Parent for registration rights with respect to the
Parent Shares to be received in exchange for such affiliate's Shares. Such
affiliate also has a debt investment in an affiliate of the Company.
Based upon and subject to the foregoing, it is our opinion that, as of the date
hereof, the Exchange Ratio is fair to holders of the Shares from a financial
point of view, other than: (i) holders of such Shares as to which dissenters'
rights have properly been exercised; and (ii) the Parent and its affiliates.
It is understood that this letter is for the information of the Board of
Directors of the Company and may not be used for any other purpose without our
prior written consent, except that this opinion may be included in its entirety
in any filing made by the Company with the Securities and Exchange Commission
with respect to the Merger. Our opinion does not constitute a recommendation to
any stockholder of the Company as to how such stockholder should vote with
respect to the Merger.
Very truly yours,
THE BLACKSTONE GROUP L.P.
<PAGE> 276
ANNEX V
SECTION OF THE
OHIO STATUTE RELATING
TO DISSENTERS' RIGHTS
<PAGE> 277
SECTION 1701.85 DISSENTING SHAREHOLDER'S DEMAND FOR FAIR CASH VALUE OF
SHARES.
(A)(1) A shareholder of a domestic corporation is entitled to relief as
a dissenting shareholder in respect of the proposals described in sections
1701.74, 1701.76, and 1701.84 of the Revised Code, only in compliance with this
section.
(2) If the proposal must be submitted to the shareholders of the
corporation involved, the dissenting shareholder shall be a record holder of the
shares of the corporation as to which he seeks relief as of the date fixed for
the determination of shareholders entitled to notice of a meeting of the
shareholders at which the proposal is to be submitted, and such shares shall not
have been voted in favor of the proposal. Not later than ten days after the date
on which the vote on the proposal was taken at the meeting of the shareholders,
the dissenting shareholder shall deliver to the corporation a written demand for
payment to him of the fair cash value of the shares as to which he seeks relief,
which demand shall state his address, the number and class of such shares, and
the amount claimed by him as the fair cash value of the shares.
(3) The dissenting shareholder entitled to relief under division (C) of
section 1701.84 of the Revised Code in the case of a merger pursuant to section
1701.80 of the Revised Code and a dissenting shareholder entitled to relief
under division (E) of section 1701.84 of the Revised Code in the case of a
merger pursuant to section 1701.801 of the Revised Code shall be a record holder
of the shares of the corporation as to which he seeks relief as of the date on
which the agreement of merger was adopted by the directors of that corporation.
Within twenty days after he has been sent the notice provided in section 1701.80
or 1701.801 of the Revised Code, the dissenting shareholder shall deliver to the
corporation a written demand for payment with the same information as that
provided for in division (A)(2) of this section.
(4) In the case of a merger or consolidation, a demand served on the
constituent corporation involved constitutes service on the surviving or the new
entity, whether the demand is served before, on, or after the effective date of
the merger or consolidation.
(5) If the corporation sends to the dissenting shareholder, at the
address specified in his demand, a request for the certificates representing the
shares as to which he seeks relief, the dissenting shareholder, within fifteen
days from the date of the sending of such request, shall deliver to the
corporation the certificates requested so that the corporation may forthwith
endorse on them a legend to the effect that demand for the fair cash value of
such shares has been made. The corporation promptly shall return such endorsed
certificates to the dissenting shareholder. A dissenting shareholder's failure
to deliver such certificates terminates his rights as a dissenting shareholder,
at the option of the corporation, exercised by written notice sent to the
dissenting shareholder within twenty days after the lapse of the fifteen day
period, unless a court for good cause shown otherwise directs. If shares
represented by a certificate on which such a legend has been endorsed are
transferred, each new certificate issued for them shall bear a similar legend,
together with the name of the original dissenting holder of such shares. Upon
receiving a demand for payment from a dissenting shareholder who is the record
holder of uncertificated securities, the corporation shall make an appropriate
notation of the demand for payment in its shareholder records. If uncertificated
shares for which payment has been demanded are to be transferred, any new
certificate issued for the shares shall bear the legend required for
certificated securities as provided in this paragraph. A transferee of the
shares so endorsed, or of uncertificated securities where such notation has been
made, acquires only such rights in the corporation as the original dissenting
holder of such shares had immediately after the service of
1
<PAGE> 278
a demand for payment of the fair cash value of the shares. A request under this
paragraph by the corporation is not an admission by the corporation that the
shareholder is entitled to relief under this section.
(B) Unless the corporation and the dissenting shareholder have come to
an agreement on the fair cash value per share of the shares as to which the
dissenting shareholder seeks relief, the dissenting shareholder or the
corporation, which in case of a merger or consolidation may be the surviving or
new entity, within three months after the service of the demand by the
dissenting shareholder, may file a complaint in the court of common pleas of the
county in which the principal office of the corporation that issued the shares
is located or was located when the proposal was adopted by the shareholders of
the corporation, or, if the proposal was not required to be submitted to the
shareholders, was approved by the directors. Other dissenting shareholders,
within that three-month period, may join as plaintiffs or may be joined as
defendants in any such proceeding, and any two or more such proceedings may be
consolidated. The complaint shall contain a brief statement of the facts,
including the vote and the facts entitling the dissenting shareholder to the
relief demanded. No answer to such a complaint is required. Upon the filing of
such a complaint, the court, on motion of the petitioner, shall enter an order
fixing a date for a hearing on the complaint and requiring that a copy of the
complaint and a notice of the filing and of the date for hearing be given to the
respondent or defendant in the manner in which summons is required to be served
or substituted service is required to be made in other cases. On the day fixed
for the hearing on the complaint or any adjournment of it, the court shall
determine from the complaint and from such evidence as is submitted by either
party whether the dissenting shareholder is entitled to be paid the fair cash
value of any shares and, if so, the number and class of such shares. If the
court finds that the dissenting shareholder is so entitled, the court may
appoint one or more persons as appraisers to receive evidence and to recommend a
decision on the amount of the fair cash value. The appraisers have such power
and authority as is specified in the order of their appointment. The court
thereupon shall make a finding as to the fair cash value of a share and shall
render judgment against the corporation for the payment of it, with interest at
such rate and from such date as the court considers equitable. The costs of the
proceeding, including reasonable compensation to the appraisers to be fixed by
the court, shall be assessed or apportioned as the court considers equitable.
The proceeding is a special proceeding and final orders in it may be vacated,
modified, or reversed on appeal pursuant to the Rules of Appellate Procedure
and, to the extent not in conflict with those rules, Chapter 2505. of the
Revised Code. If, during the pendency of any proceeding instituted under this
section, a suit or proceeding is or has been instituted to enjoin or otherwise
to prevent the carrying out of the action as to which the shareholder has
dissented, the proceeding instituted under this section shall be stayed until
the final determination of the other suit or proceeding. Unless any provision in
division (D) of this section is applicable, the fair cash value of the shares
that is agreed upon by the parties or fixed under this section shall be paid
within thirty days after the date of final determination of such value under
this division, the effective date of the amendment to the articles, or the
consummation of the other action involved, whichever occurs last. Upon the
occurrence of the last such event, payment shall be made immediately to a holder
of uncertificated securities entitled to such payment. In the case of holders of
shares represented by certificates, payment shall be made only upon and
simultaneously with the surrender to the corporation of the certificates
representing the shares for which the payment is made.
(C) If the proposal was required to be submitted to the shareholders of
the corporation, fair cash value as to those shareholders shall be determined as
of the day prior to
2
<PAGE> 279
the day on which the vote by the shareholders was taken and, in the case of a
merger pursuant to section 1701.80 or 1701.801 of the Revised Code, fair cash
value as to shareholders of a constituent subsidiary corporation shall be
determined as of the day before the adoption of the agreement of merger by the
directors of the particular subsidiary corporation. The fair cash value of a
share for the purposes of this section is the amount that a willing seller who
is under no compulsion to sell would be willing to accept and that a willing
buyer who is under no compulsion to purchase would be willing to pay, but in no
event shall the fair cash value of a share exceed the amount specified in the
demand of the particular shareholder. In computing such fair cash value, any
appreciation or depreciation in market value resulting from the proposal
submitted to the directors or to the shareholders shall be excluded.
(D)(1) The right and obligation of a dissenting shareholder to receive
such fair cash value and to sell such shares as to which he seeks relief, and
the right and obligation of the corporation to purchase such shares and to pay
the fair cash value of them terminates if any of the following applies:
(a) The dissenting shareholder has not complied with this section,
unless the corporation by its directors waives such failure;
(b) The corporation abandons the action involved or is finally enjoined
or prevented from carrying it out, or the shareholders rescind their adoption of
the action involved;
(c) The dissenting shareholder withdraws his demand, with the consent
of the corporation by its directors;
(d) The corporation and the dissenting shareholder have not come to an
agreement as to the fair cash value per share, and neither the shareholder nor
the corporation has filed or joined in a complaint under division (B) of this
section within the period provided in that division.
(2) For purposes of division (D)(1) of this section, if the merger or
consolidation has become effective and the surviving or new entity is not a
corporation, action required to be taken by the directors of the corporation
shall be taken by the general partners of a surviving or new partnership or the
comparable representatives of any other surviving or new entity.
(E) From the time of the dissenting shareholder's giving of the demand
until either the termination of the rights and obligations arising from it or
the purchase of the shares by the corporation, all other rights accruing from
such shares, including voting and dividend or distribution rights, are
suspended. If during the suspension, any dividend or distribution is paid in
money upon shares of such class or any dividend, distribution, or interest is
paid in money upon any securities issued in extinguishment of or in substitution
for such shares, an amount equal to the dividend, distribution, or interest
which, except for the suspension, would have been payable upon such shares or
securities, shall be paid to the holder of record as a credit upon the fair cash
value of the shares. If the right to receive fair cash value is terminated other
than by the purchase of the shares by the corporation, all rights of the holder
shall be restored and all distributions which, except for the suspension, would
have been made shall be made to the holder of record of the shares at the time
of termination.
3
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ANNEX VI
PROPOSED AMENDED AND RESTATED
CHARTER OF SPG
<PAGE> 281
SIMON PROPERTY GROUP, INC.
ARTICLES OF AMENDMENT AND RESTATEMENT
SIMON PROPERTY GROUP, INC., a Maryland corporation, having its
principal office in Baltimore City, Maryland (which is hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The Charter of the Corporation is hereby amended and restated to
read in its entirety as follows:
SIMON DeBARTOLO GROUP, INC.
AMENDED AND RESTATED ARTICLES OF INCORPORATION
FIRST: THE UNDERSIGNED, James J. Winn, Jr., whose address is Charles
Center South, 36 South Charles Street, Baltimore, Maryland 21201, being at least
eighteen years of age, acting as incorporator, does hereby form a corporation
under the General Laws of the State of Maryland.
SECOND: The name of the corporation (which is hereinafter called the
"Corporation") is:
Simon DeBartolo Group, Inc.
THIRD: (a) The purposes for which and any of which the Corporation is
formed and the business and objects to be carried on and promoted by it are:
(1) To engage in the business of a real estate investment trust
("REIT") as that phrase is defined in the Internal Revenue Code of
1986, as amended (the "Code"), and to engage in any lawful act or
activity for which corporations may be organized under the Maryland
General Corporation Law.
(2) To engage in any one or more businesses or transactions, or to
acquire all or any portion of any entity engaged in any one or more
businesses or transactions, which the Board of Directors may from time
to time authorize or approve, whether or not related to the business
described elsewhere in this Article or to any other business at the
time or theretofore engaged in by the Corporation.
(b) The foregoing enumerated purposes and objects shall be in no
way limited or restricted by reference to, or inference from, the terms of any
other clause of this or any other Article of the Charter of the Corporation, and
each shall be regarded as independent; and they are
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intended to be and shall be construed as powers as well as purposes and
objects of the Corporation and shall be in addition to and not in limitation
of the general powers of corporations under the General Laws of the State of
Maryland.
FOURTH: The present address of the principal office of the Corporation
in the State of Maryland is c/o The Corporation Trust Incorporated, 32 South
Street, Baltimore, Maryland 21202.
FIFTH: The name and address of the resident agent of the Corporation in
this State is The Corporation Trust Incorporated, 32 South Street, Baltimore,
Maryland 21202. Said resident agent is a Maryland corporation.
SIXTH: (a) The total number of shares of stock of all classes which the
Corporation has authority to issue is 650,000,000 shares of capital stock (par
value $.000l per share), amounting in aggregate par value to $65,000.00, of
which shares 383,996,000 are classified as "Common Stock", 12,000,000 are
classified as "Class B Common Stock", 4,000 are classified as "Class C Common
Stock," 4,000,000 are classified as "Series A Preferred Stock," and 250,000,000
are classified as "Excess Stock". The Board of Directors may classify and
reclassify any unissued shares of capital stock by setting or changing in any
one or more respects the preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications or terms or conditions
of redemption of such shares of stock.
(b) The following is a description of the preferences, conversion
and other rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption of the Common Stock of the
Corporation:
(1) Each share of Common Stock shall have one vote, and, except as
otherwise provided in respect of any class of stock hereafter
classified or reclassified, and except as otherwise provided with
respect to directors elected by the holders of the Class B Common Stock
or of the Class C Common Stock, each voting as a separate class, the
exclusive voting power for all purposes shall be vested in the holders
of the Common Stock, the Class B Common Stock, the Class C Common
Stock, and the Series A Preferred Stock, voting together as a single
class. Shares of Common Stock shall not have cumulative voting rights.
(2) Subject to the provisions of law and any preferences of any
class of stock hereafter classified or reclassified, dividends, or
other distributions, including dividends or other distributions payable
in shares of another class of the Corporation's stock, may be paid
ratably on the Common Stock at such time and in such amounts as the
Board of Directors may deem advisable, but only if at the same time,
dividends are paid on outstanding shares of Class B Common Stock and
Class C Common Stock in accordance with subparagraphs (c)(2) and
(c-1)(2), respectively, of this Article Sixth.
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(3) In the event of any liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, the holders of the
Common Stock shall be entitled, together with the holders of Class B
Common Stock, Class C Common Stock, Excess Stock and any other class of
stock hereafter classified or reclassified not having a preference on
distributions in the liquidation, dissolution or winding up of the
Corporation, to share ratably in the net assets of the Corporation
remaining, after payment or provision for payment of the debts and
other liabilities of the Corporation and the amount to which the
holders of any class of stock hereafter classified or reclassified
having a preference on distributions in the liquidation, dissolution or
winding up of the Corporation shall be entitled.
(4) Each share of Common Stock is convertible into Excess Stock as
provided in Article NINTH hereof.
(c) The following is a description (which should be read in
conjunction with paragraph (c-1) of this Article SIXTH) of the preferences,
conversion and other rights, voting powers, restrictions, limitations as to
dividends, qualifications and terms and conditions of redemption of the Class B
Common Stock of the Corporation:
(1) Each share of Class B Common Stock shall have one vote, and,
except as otherwise provided in respect of any class of stock hereafter
classified or reclassified and except as otherwise provided in this
paragraph (c) and in paragraph (c-1), the exclusive voting power for
all purposes shall be vested in the holders of the Class B Common
Stock, the Class C Common Stock, the Common Stock, and the Series A
Preferred Stock voting together as a single class. Shares of Class B
Common Stock shall not have cumulative voting rights. The holders of
the shares of Class B Common Stock shall have the right, voting as a
separate class, to elect four directors of the Corporation and shall
vote with the holders of the Class C Common Stock, the Common Stock,
and the Series A Preferred Stock (voting together as a single class) to
elect the remaining directors (other than the director or directors to
be elected by the holders of the Class C Common Stock voting as a
separate class); provided that if the Simon Family Group (as defined in
Article NINTH) shall sell or transfer a portion of their Common Stock,
Class B Common Stock and Units (as defined in Article NINTH) so as to
reduce their Aggregate Assumed Equity Interest in the Corporation (as
defined in Article NINTH) to less than 50% of the Simon Family Group
Initial Aggregate Assumed Equity Interest (as defined in Article NINTH)
in the Corporation, from and after the date of such reduction the
holders of the shares of Class B Common Stock shall have the right,
voting as a separate class, to elect two directors of the Corporation.
For purposes of this subparagraph, shares held in a voting trust shall
be deemed owned by the beneficiaries of the voting trust.
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(2) Subject to the provisions of law and the preferences of the
Series A Preferred Stock and of any class of stock hereafter classified
or reclassified, dividends or other distributions, including dividends
or other distributions payable in shares of another class of the
Corporation's stock, may be paid ratably on the Class B Common Stock at
such time and in such amounts as the Board of Directors may deem
advisable; provided that cash dividends or other distributions shall be
paid on each share of Class B Common Stock at the same time as cash
dividends or other distributions are paid on Common Stock or Class C
Common Stock and in an amount equal to the amount payable on the number
of shares of Common Stock into which each share of Class B Common Stock
is then convertible; provided further that non-cash dividends or other
non-cash distributions (including the issuance of warrants or rights to
acquire securities of the Corporation) shall be distributed on each
share of Class B Common Stock at the same time as such non-cash
dividends or other non-cash distributions are distributed on Common
Stock or Class C Common Stock and in an amount equal to the amount
distributable on the number of shares of Common Stock into which each
share of Class B Common Stock is then convertible; provided further
that any dividends or other distributions payable otherwise on the
Class B Common Stock shall be paid in shares of Common Stock or
securities convertible or exchangeable into Common Stock (or warrants
or rights issued to acquire Common Stock or securities convertible or
exchangeable into Common Stock).
(3) (A) Each share of Class B Common Stock is convertible into
Excess Stock as provided in Article NINTH hereof. Each share of Class B
Common Stock may be converted at the option of the holder thereof into
one share of Common Stock. Immediately and automatically each share of
Class B Common Stock shall be converted into one share of Common Stock
(i) if the Aggregate Assumed Equity Interest in the Corporation of the
Simon Family Group is for any reason reduced to less than 5% of the
Aggregate Assumed Equity Interest in the Corporation or (ii) if such
share of Class B Common Stock is otherwise sold or otherwise
transferred to or is otherwise held by anyone other than a member of
the Simon Family Group. For purposes of this subparagraph, shares held
in a voting trust shall be deemed owned by the beneficiaries of the
voting trust.
(B) The Corporation may not subdivide its outstanding shares
of Common Stock, combine its outstanding shares of Common Stock into a
smaller number of shares, or issue by reclassification of its shares of
Common Stock any shares of the Corporation without making the same
adjustment to the Class B Common Stock. The Corporation shall not
distribute to all holders of its Common Stock evidences of its
indebtedness or assets (excluding cash dividends or other distributions
to the extent permitted by subparagraph (c)(2) of this Article
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<PAGE> 285
SIXTH) or rights or warrants to subscribe for or purchase securities
issued by the Corporation or property of the Corporation (excluding
those referred to in subparagraph (c)(2) of this Article SIXTH),
without making the same distribution to all holders of its Class B
Common Stock. No adjustment of the conversion rate shall be made as a
result of or in connection with the issuance of Common Stock of the
Corporation pursuant to options or stock purchase agreements now or
hereafter granted or entered into with officers or employees of the
Corporation or its subsidiaries in connection with their employment,
whether entered into at the beginning of the employment or at any time
thereafter. In case of any capital reorganization of the Corporation,
or the consolidation or merger of the Corporation with or into another
corporation, or a statutory share exchange, or the sale, transfer or
other disposition of all or substantially all of the property, assets
or business of the Corporation then, in each such case, each share of
Common Stock and each share of Class B Common Stock shall be treated
the same.
(C) Upon conversion of any shares of Class B Common Stock, no
payment or adjustment shall be made on account of dividends accrued,
whether or not in arrears, on such shares or on account of dividends
declared and payable to holders of Common Stock of record on a date
prior to the date of conversion.
(D) Except with respect to shares of Class B Common Stock
which have been deemed to have been automatically converted into Common
Stock pursuant to subparagraph (c)(3)(A) of this Article SIXTH, in
order to convert shares of Class B Common Stock into Common Stock the
holder thereof shall surrender at the office of the Transfer Agent the
certificate or certificates therefor, duly endorsed to the Corporation
or in blank, and give written notice to the Corporation at said office
that he elects to convert such shares and shall state in writing
therein the name or names (with addresses) in which he wishes the
certificate or certificates for Common Stock to be issued. Shares of
Class B Common Stock shall be deemed to have been converted on the date
of the surrender of such certificate or certificates for shares for
conversion as provided above, and the person or persons entitled to
receive the Common Stock issuable upon such conversion shall be treated
for all purposes as the record holder or holders of such Common Stock
on such date. As soon as practicable on or after the date of conversion
as aforesaid, the Corporation will issue and deliver at said office a
certificate or certificates for the number of full shares of Common
Stock issuable upon such conversion, together with cash for any
fraction of a share, as provided in subparagraph (c)(3)(F) of this
Article SIXTH, to the person or persons entitled to receive the same.
The Corporation will pay any and all federal original issue taxes that
may be payable in respect of the issue or delivery of shares of Common
Stock on conversion of shares of Class B Common Stock pursuant
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hereto. The Corporation shall not, however, be required to pay any tax
which may be payable in respect of any transfer involved in the issue
and delivery of shares of Common Stock in a name other than that in
which the shares of Class B Common Stock so converted were registered,
and no issue or delivery shall be made unless and until the person
requesting such issue has paid to the Corporation the amount of any
such tax, or has established to the satisfaction of the Corporation
either that such tax has been paid or that no such tax is payable.
(E) All shares of Class B Common Stock converted into Common
Stock shall be retired and cancelled and shall not be reissued as Class
B Common Stock but such shares so retired and cancelled shall resume
the status of authorized and unclassified shares of Common Stock.
(F) The Corporation shall not issue fractional shares of
Common Stock upon any conversion of shares of Class B Common Stock. As
to any final fraction of a share which the holder of one or more shares
of Class B Common Stock would be entitled to receive upon exercise of
such holder's conversion right the Corporation shall pay a cash
adjustment in an amount equal to the same fraction of the Market Price
(as defined in Article NINTH) for the date of exercise.
(G) The Corporation shall at all times have authorized and
unissued a number of shares of Common Stock sufficient for the
conversion of all shares of Class B Common Stock at the time
outstanding. If any shares of Common Stock require registration with or
approval of any governmental authority under any Federal or State law,
before such shares may be validly issued upon conversion, then the
Corporation will in good faith and as expeditiously as possible
endeavor to secure such registration or approval as the case may be.
The Corporation warrants that all Common Stock issued upon conversion
of shares of Class B Common Stock will upon issue be fully paid and
nonassessable by the Corporation and free from original issue taxes.
(4) Subject to the provisions of law and the preferences of the
Series A Preferred Stock and of any class of stock hereafter classified
or reclassified, in the event of any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the
holders of Class B Common Stock shall be entitled, together with the
holders of Class C Common Stock, Common Stock, Excess Stock and any
other class of stock hereafter classified or reclassified not having a
preference on distributions in the liquidation, dissolution or winding
up of the Corporation, to share ratably in the net assets of the
Corporation remaining, after payment or provision for payment of the
debts and other liabilities of the Corporation and the amount to which
the holders of the Series A Preferred Stock
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<PAGE> 287
and of any class of stock hereafter classified or reclassified having a
preference on distributions in the liquidation, dissolution or winding
up of the Corporation shall be entitled.
(c-1) The following is a description (which should be read in
conjunction with paragraph (c) of this Article SIXTH) of the preferences,
conversion and other rights, voting powers, restrictions, limitations as to
dividends, qualifications and terms and conditions of redemption of the Class C
Common Stock of the Corporation:
(1) Each share of Class C Common Stock shall have one vote, and,
except as otherwise provided in respect of any class of stock hereafter
classified or reclassified and except as otherwise provided in this
paragraph (c-1) and in paragraph (c), the exclusive voting power for
all purposes shall be vested in the holders of the Class C Common
Stock, the Class B Common Stock, the Common Stock, and the Series A
Preferred Stock voting together as a single class. Shares of Class C
Common Stock shall not have cumulative voting rights. Subject to
paragraph (b) of Article SEVENTH, the holders of the shares of Class C
Common Stock shall have the right, voting as a separate class, to elect
two directors of the Corporation and shall vote with the holders of the
Class B Common Stock, the Common Stock, and the Series A Preferred
Stock (voting together as a single class) to elect the remaining
directors (other than the directors to be elected by the holders of the
Class B Common Stock voting as a separate class); provided that if the
DeBartolo Family Group (as defined in Article NINTH) shall sell or
transfer a portion of their Common Stock, Class C Common Stock and
Units (as defined in Article NINTH) so as to reduce their Aggregate
Assumed Equity Interest in the Corporation (as defined in Article
NINTH) to less than 50% of the DeBartolo Family Group Initial Aggregate
Assumed Equity Interest (as defined in Article NINTH) in the
Corporation, from and after the date of such reduction the holders of
the shares of Class C Common Stock shall have the right, voting as a
separate class, to elect one director of the Corporation. For purposes
of this subparagraph, shares held in a voting trust shall be deemed
owned by the beneficiaries of the voting trust.
(2) Subject to the provisions of law and the preferences of the
Series A Preferred Stock and of any class of stock hereafter classified
or reclassified, dividends or other distributions, including dividends
or other distributions payable in shares of another class of the
Corporation's stock, may be paid ratably on the Class C Common Stock at
such time and in such amounts as the Board of Directors may deem
advisable; provided that cash dividends or other distributions shall be
paid on each share of Class C Common Stock at the same time as cash
dividends or other distributions are paid on Common Stock or Class B
Common Stock and in an amount equal to the amount payable on the number
of shares of
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Common Stock into which each share of Class C Common Stock is then
convertible; provided further that non-cash dividends or other non-cash
distributions (including the issuance of warrants or rights to acquire
securities of the Corporation) shall be distributed on each share of
Class C Common Stock at the same time as such non-cash dividends or
other non-cash distributions are distributed on Common Stock or Class B
Common Stock and in an amount equal to the amount distributable on the
number of shares of Common Stock into which each share of Class C
Common Stock is then convertible; provided further that any dividends
or other distributions payable otherwise on the Class C Common Stock
shall be paid in shares of Common Stock or securities convertible or
exchangeable into Common Stock (or warrants or rights issued to acquire
Common Stock or securities convertible or exchangeable into Common
Stock).
(3) (A) Each share of Class C Common Stock is convertible into
Excess Stock as provided in Article NINTH hereof. Each share of Class C
Common Stock may be converted at the option of the holder thereof into
one share of Common Stock. Immediately and automatically each share of
Class C Common Stock shall be converted into one share of Common Stock
(i) if the Aggregate Assumed Equity Interest in the Corporation of the
DeBartolo Family Group is for any reason reduced to less than 5% of the
Aggregate Assumed Equity Interest in the Corporation or (ii) if such
share of Class C Common Stock is otherwise sold or otherwise
transferred to or is otherwise held by anyone other than a member of
the DeBartolo Family Group. For purposes of this subparagraph, shares
held in a voting trust shall be deemed owned by the beneficiaries of
the voting trust.
(B) The Corporation may not subdivide its outstanding shares
of Common Stock, combine its outstanding shares of Common Stock into a
smaller number of shares, or issue by reclassification of its shares of
Common Stock any shares of the Corporation without making the same
adjustment to the Class C Common Stock. The Corporation shall not
distribute to all holders of its Common Stock evidences of its
indebtedness or assets (excluding cash dividends or other distributions
to the extent permitted by subparagraph (c-1)(2) of this Article SIXTH)
or rights or warrants to subscribe for or purchase securities issued by
the Corporation or property of the Corporation (excluding those
referred to in subparagraph (c-1)(2) of this Article SIXTH), without
making the same distribution to all holders of its Class C Common
Stock. No adjustment of the conversion rate shall be made as a result
of or in connection with the issuance of Common Stock of the
Corporation pursuant to options or stock purchase agreements now or
hereafter granted or entered into with officers or employees of the
Corporation or its subsidiaries in connection with their employment,
whether entered into at the beginning of the employment or at any time
thereafter. In case
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of any capital reorganization of the Corporation, or the consolidation
or merger of the Corporation with or into another corporation, or a
statutory share exchange, or the sale, transfer or other disposition of
all or substantially all of the property, assets or business of the
Corporation then, in each such case, each share of Common Stock and
each share of Class C Common Stock shall be treated the same.
(C) Upon conversion of any shares of Class C Common Stock, no
payment or adjustment shall be made on account of dividends accrued,
whether or not in arrears, on such shares or on account of dividends
declared and payable to holders of Common Stock of record on a date
prior to the date of conversion.
(D) Except with respect to shares of Class C Common Stock
which have been deemed to have been automatically converted into Common
Stock pursuant to subparagraph (c-1)(3)(A) of this Article SIXTH, in
order to convert shares of Class C Common Stock into Common Stock the
holder thereof shall surrender at the office of the Transfer Agent the
certificate or certificates therefor, duly endorsed to the Corporation
or in blank, and give written notice to the Corporation at said office
that he elects to convert such shares and shall state in writing
therein the name or names (with addresses) in which he wishes the
certificate or certificates for Common Stock to be issued. Shares of
Class C Common Stock shall be deemed to have been converted on the date
of the surrender of such certificate or certificates for shares for
conversion as provided above, and the person or persons entitled to
receive the Common Stock issuable upon such conversion shall be treated
for all purposes as the record holder or holders of such Common Stock
on such date. As soon as practicable on or after the date of conversion
as aforesaid, the Corporation will issue and deliver at said office a
certificate or certificates for the number of full shares of Common
Stock issuable upon such conversion, together with cash for any
fraction of a share, as provided in subparagraph (c-1)(3)(F) of this
Article SIXTH, to the person or persons entitled to receive the same.
The Corporation will pay any and all federal original issue taxes that
may be payable in respect of the issue or delivery of shares of Common
Stock on conversion of shares of Class C Common Stock pursuant hereto.
The Corporation shall not, however, be required to pay any tax which
may be payable in respect of any transfer involved in the issue and
delivery of shares of Common Stock in a name other than that in which
the shares of Class C Common Stock so converted were registered, and no
issue or delivery shall be made unless and until the person requesting
such issue has paid to the Corporation the amount of any such tax, or
has established to the satisfaction of the Corporation either that such
tax has been paid or that no such tax is payable.
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<PAGE> 290
(E) All shares of Class C Common Stock converted into Common
Stock shall be retired and cancelled and shall not be reissued as Class
C Common Stock but such shares so retired and cancelled shall resume
the status of authorized and unclassified shares of Common Stock.
(F) The Corporation shall not issue fractional shares of
Common Stock upon any conversion of shares of Class C Common Stock. As
to any final fraction of a share which the holder of one or more shares
of Class C Common Stock would be entitled to receive upon exercise of
such holder's conversion right the Corporation shall pay a cash
adjustment in an amount equal to the same fraction of the Market Price
(as defined in Article NINTH) for the date of exercise.
(G) The Corporation shall at all times have authorized and
unissued a number of shares of Common Stock sufficient for the
conversion of all shares of Class C Common Stock at the time
outstanding. If any shares of Common Stock require registration with or
approval of any governmental authority under any Federal or State law,
before such shares may be validly issued upon conversion, then the
Corporation will in good faith and as expeditiously as possible
endeavor to secure such registration or approval as the case may be.
The Corporation warrants that all Common Stock issued upon conversion
of shares of Class C Common Stock will upon issue be fully paid and
nonassessable by the Corporation and free from original issue taxes.
(4) Subject to the provisions of law and the preferences of the
Series A Preferred Stock and of any class of stock hereafter classified
or reclassified, in the event of any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the
holders of Class C Common Stock shall be entitled, together with the
holders of Class B Common Stock, Common Stock, Excess Stock and any
other class of stock hereafter classified or reclassified not having a
preference on distributions in the liquidation, dissolution or winding
up of the Corporation, to share ratably in the net assets of the
Corporation remaining, after payment or provision for payment of the
debts and other liabilities of the Corporation and the amount to which
the holders of the Series A Preferred Stock and any class of stock
hereafter classified or reclassified having a preference on
distributions in the liquidation, dissolution or winding up of the
Corporation shall be entitled.
(c-2) Subject in all cases to the provisions of Article NINTH with
respect to Excess Stock, the following is a description of the
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and conditions of
redemption of the Series A Preferred Stock of the Corporation:
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(1) All shares of Series A Preferred Stock redeemed, purchased,
exchanged or otherwise acquired by the Corporation as provided in this
paragraph (c-2) shall be retired and canceled and, upon the taking of
any action required by applicable law, shall be restored to the status
of authorized but unissued shares of capital stock and reclassified as
Common Stock, and may thereafter be issued or reclassified, but not as
Series A Preferred Stock.
(2) The Series A Preferred Stock shall, with respect to dividend
rights, rights upon liquidation, winding up or dissolution, and
redemption rights, rank (A) junior to any other class or series of
preferred stock hereafter duly established by the Board of Directors of
the Corporation, the terms of which shall specifically provide that
such series shall rank prior to the Series A Preferred Stock as to the
payment of dividends and distribution of assets upon liquidation (the
"Senior Preferred Stock"), (B) pari passu with any other class or
series of preferred stock hereafter duly established by the Board of
Directors of the Corporation, the terms of which shall specifically
provide that such class or series shall rank pari passu with the Series
A Preferred Stock as to the payment of dividends and distribution of
assets upon liquidation (the "Parity Preferred Stock") and (C) prior to
any other class or series of preferred stock or other class or series
of capital stock of or other equity interests in the Corporation,
including, without limitation, all classes of the common stock of the
Corporation, whether now existing or hereafter created (all of such
classes or series of capital stock and other equity interests of the
Corporation, including, without limitation, the Common Stock, the Class
B Common Stock, and the Class C Common Stock, all $0.0001 par value, of
the Corporation are collectively referred to herein as the "Junior
Securities").
(3) (A) Except as may be required by law or as otherwise expressly
provided in this subparagraph (c-2)(3), on all matters upon which the
holders of shares of Common Stock shall be entitled to vote, the shares
of Common Stock and Series A Preferred Stock shall be voted together as
a single class, and each share of Series A Preferred Stock shall be
entitled to one vote (or fraction thereof) for each share (or fraction
thereof) of Common Stock issuable upon conversion, pursuant to
subparagraph (c-2)(5), of such share of Series A Preferred Stock,
determined as of the close of business on the record date established
by the Board of Directors of the Corporation for the purpose of voting
on such matter.
(B) If, and whenever, at any time or times, dividends payable
on shares of Series A Preferred Stock shall have been in arrears and
unpaid (whether or not declared and whether or not there are funds of
the Corporation legally available for the payment of dividends) for
four consecutive quarterly dividend periods, then the holders of record
of shares of Series A Preferred Stock, as reflected in the stock
transfer records of the Corporation (the "Holders") shall,
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in addition to any other voting rights, have the right to vote
separately as a single class with respect to (i) any acquisition of the
Corporation by another entity by means of any transaction or series of
related transactions (including, without limitation, any
reorganization, merger or consolidation, but excluding any merger
effected exclusively for the purpose of changing the domicile of the
Corporation) or (ii) any sale of all or substantially all of the assets
of the Corporation; unless, in each such case, either (A) the Holders
of record of the Corporation's securities as constituted immediately
prior to such acquisition or sale will, immediately after such
acquisition or sale (by virtue of securities issued as consideration
for such acquisition or sale or otherwise), hold at least 50% of the
aggregate voting power of all classes of voting securities of the
surviving or acquiring entity or (B) the terms of such acquisition or
sale require, as a condition precedent to the consummation thereof, the
payment in full of all accrued and unpaid dividends (whether or not
declared and whether or not there are funds of the Corporation legally
available for the payment of dividends) on the Series A Preferred
Stock.
(C) So long as any shares of Series A Preferred Stock are
outstanding, the Corporation will not, without the affirmative vote of
at least 80% of the outstanding shares of Series A Preferred Stock (or
such greater number as may be required by law), voting separately as a
single class, in person or by proxy, at a special or annual meeting
called for the purpose, or by unanimous written consent in lieu of a
meeting: (i) effect or allow any amendment, alteration or repeal of any
of the provisions of the Charter of the Corporation or of any articles
amendatory thereof or supplement thereto which in any manner would
adversely affect, alter or change the powers, preferences or rights of
any share of Series A Preferred Stock; or (ii) create, authorize or
issue any class or series of Senior Preferred Stock.
(4) (A) The Holders of shares of Series A Preferred Stock shall be
entitled to receive, when and as declared by the Board of Directors of
the Corporation, quarterly dividends on the shares of Series A
Preferred Stock, cumulative from the initial date of issuance of such
shares (the "Issue Date"), in an amount equal to the greater of (i)
$0.5078125 per share per calendar quarter or (ii) an amount per share
equal to the dividends paid since the last Dividend Payment Date (as
hereinafter defined) with respect to the number of shares of Common
Stock then issuable upon conversion of a share of Series A Preferred
Stock. Dividends on the shares of Series A Preferred Stock shall be
payable on the last Business Day (as hereinafter defined) of each
calendar quarter, commencing on the last Business Day of the fourth
calendar quarter of 1995 (each such last Business Day of a calendar
quarter being a "Dividend Payment Date"). Such dividends shall be paid
to the Holders of record at the close of business on the record date
specified by the Board of Directors of the Corporation at the time
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<PAGE> 293
such dividend is declared; provided, however, that such record date
shall not be more than 60 days nor less than 10 days prior to the
respective Dividend Payment Date. Dividends on the shares of Series A
Preferred Stock shall be fully cumulative and shall accrue (whether or
not declared and whether or not there are funds of the Corporation
legally available for the payment of dividends) from the Issue Date,
based on a 91-day quarter and the actual number of days elapsed. As
used in this paragraph (c-2), "Business Day" shall mean any day (other
than a day which is a Saturday, Sunday or legal holiday in the State of
New York) on which banks are authorized to be open for business in New
York City.
(B) Any dividend payment made on shares of Series A Preferred
Stock shall first be credited against the dividends accrued with
respect to the earliest quarterly period for which dividends have not
been paid.
(C) All dividends paid with respect to shares of Series A
Preferred Stock pursuant to this subparagraph (c-2)(4) shall be paid
pro rata to the Holders entitled thereto.
(5) The Holders of shares of Series A Preferred Stock shall have
the right, at their option, to convert such shares into shares of
Common Stock at any time on or after the second anniversary of the
Issue Date, subject to the following terms and conditions:
(A) Each share of Series A Preferred Stock shall be
convertible, at the option of the Holder thereof, into such number of
fully paid and nonassessable shares of Common Stock of the Corporation
equal to $25.00 divided by the Conversion Price (as hereinafter
defined) in effect at the time of conversion. The price at which shares
of Common Stock shall be delivered upon conversion (herein called the
"Conversion Price") shall be initially $26.25 per share of Common
Stock. The Conversion Price shall be reduced and increased in certain
instances as provided in subparagraph (c-2)(7) below. The number of
shares of Common Stock into which each share of Series A Preferred
Stock is convertible on the Issue Date is 0.9523809.
(B) In order to convert shares of Series A Preferred Stock
into Common Stock the Holder thereof shall surrender to the Corporation
the certificate or certificates therefor, duly endorsed or assigned to
the Corporation or in blank, and give written notice to the Corporation
that such Holder elects to convert such shares. No payment or
adjustment shall be made upon any conversion on account of any
dividends accrued on the shares of Series A Preferred Stock being
surrendered for conversion or on account of any dividends on the Common
Stock issued upon such conversion.
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<PAGE> 294
(C) Shares of Series A Preferred Stock shall be deemed to
have been converted immediately prior to the close of business on the
day of the surrender of such shares for conversion in accordance with
subsection (c-2)(5)(B) above, and the person or persons entitled to
receive the Common Stock issuable upon such conversion shall be treated
for all purposes as the records holder or holders of such Common Stock
at such time. As promptly as practicable on or after the conversion
date, the Corporation shall issue and deliver a certificate or
certificates for the number of full shares of Common Stock issuable
upon such conversion, together with payment in lieu of any fraction of
a share, as hereinafter provided, to the person or persons entitled to
receive the same. In case shares of Series A Preferred Stock are called
for redemption, the right to convert such shares shall cease and
terminate at the close of business on the date fixed for redemption,
unless default shall be made in payment of the redemption price on the
redemption date.
(D) No fractional shares of Common Stock shall be issued upon
conversion of any shares of Series A Preferred Stock, but, instead of
any fraction of a share which would otherwise be issuable, the
Corporation shall pay a cash adjustment in respect of such fraction in
an amount equal to the same fraction of the Average Trading Price (as
hereinafter defined) of the Common Stock for the ten (10) trading days
ending on the day of conversion if the day of conversion is a trading
day (as hereinafter defined) or, if such day is not a trading day, the
most recent trading day immediately preceding the day of conversion. As
used in this paragraph (c-2), (i) "Average Trading Price" shall mean
the average of the Closing Sale Price (as hereafter defined) reported
for each trading day within the period; (ii) "Closing Sale Price" on
any trading day shall mean, with respect to one share of Common Stock,
the last reported sale price regular way or, in case no such reported
sale takes place on such day, the average of the closing bid and asked
prices regular way for such day, in each case on the New York Stock
Exchange, or, if the Common Stock is not listed or admitted to trading
on such exchange, on the principal national securities exchange on
which the Common Stock is listed or admitted to trading, or, if the
Common Stock is not listed or admitted to trading on any national
securities exchange, the average of the highest reported bid and lowest
reported asked prices as furnished by the National Association of
Securities Dealers, Inc. through NASDAQ or a similar organization if
NASDAQ is no longer reporting such information. If on any such trading
day the shares of Common Stock are not quoted by any such organization,
the Closing Sale Price of one share on such day shall be the fair
market value of one share of Common Stock on such day, as determined in
good faith by the Board of Directors of the Corporation, whose
determination shall be evidenced by a duly adopted resolution of the
Board of Directors and shall be conclusive; and (iii) "Trading Day"
shall mean a day on which the New York Stock Exchange, or,
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<PAGE> 295
if the Common Stock is not listed or admitted to trading on such
exchange, such other exchange or market upon which the Closing Sale
Price is to be determined as hereinabove provided, is open for trading.
(E) The Corporation shall at all times reserve and keep
available, free from pre-emptive rights, out of its authorized but
unissued Common Stock, for the purposes of effecting the conversion of
shares of Series A Preferred Stock, the full number of shares of Common
Stock then deliverable upon the conversion of all shares of Series A
Preferred Stock then outstanding.
(F) Each share of Series A Preferred Stock is convertible
into Excess Stock as provided in Article NINTH.
(6) (A) Upon a liquidation, dissolution or winding up of the
affairs of the Corporation, whether voluntary or involuntary, the
Holders of Series A Preferred Stock shall be entitled, before any
assets of the Corporation shall be distributed among or paid over the
holders of any Junior Securities, but after distributions of such
assets among, or payment thereof over to, creditors of the Corporation
and to Holders of any Senior Preferred Stock, to receive from the
assets of the Corporation available for distribution to stockholders an
amount in cash or property (valued at its fair market value), or a
combination thereof, equal to $25.00 per share (prorated for fractional
shares), plus, in each such case, an amount in cash or property (valued
at its fair market value) equal to all accrued and unpaid dividends
thereon (whether or not declared and whether or not there are funds of
the Corporation legally available for the payment of dividends) to and
including the date of final distribution. After any such payment in
full, the Holders of Series A Preferred Stock shall not, as such, be
entitled to any further participation in any distribution of assets of
the Corporation. As used in this subparagraph (c-2)(6), the terms
"liquidation preference" and "liquidation value" (and other terms of
similar import) shall mean $25.00 per share.
(B) Neither the merger or consolidation of the Corporation
into or with any other corporation or the merger or consolidation of
any other corporation into or with the Corporation, nor the sale of all
or substantially all the assets of the Corporation, shall be deemed to
be a liquidation, dissolution or winding up, voluntary or involuntary,
for the purposes of this subparagraph (c-2)(6).
(C) If, upon any such liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary, the assets of the
Corporation shall be insufficient to make the full payments required by
subparagraph (c-2)(6)(A) and all full distributions with respect to all
Parity Preferred Stock,
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<PAGE> 296
no such distribution shall be made on account of any shares of any
Parity Preferred Stock or Series A Preferred Stock unless proportionate
distributive amounts shall be paid on account of the shares of Series A
Preferred Stock and Parity Preferred Stock, ratably, in proportion to
the full distributable amounts to which Holders of the Series A
Preferred Stock and holders of all such Parity Preferred Stock are
respectively entitled upon such dissolution, liquidation or winding up.
(7) Shares of Series A Preferred Stock shall be redeemable by the
Corporation as provided below (with all references in this subparagraph
(c-2)(7) to a redemption price per share to be adjusted proportionally
in respect of fractional shares):
(A) (i) At the option of the Corporation, shares of Series A
Preferred Stock may be redeemed, as a whole or from time to time in
part, at any time from and after the fifth anniversary of the Issue
Date, at the following redemption prices per share: If redeemed during
the 12-month period beginning on the anniversary date of the Issue Date
indicated,
<TABLE>
<CAPTION>
Redemption Redemption
Anniversary Price Anniversary Price
----------- ----- ----------- -----
<S> <C> <C> <C>
Fifth $26.75 Ninth $25.75
Sixth $26.50 Tenth $25.50
Seventh $26.25 Eleventh $25.25
Eighth $26.00
</TABLE>
and thereafter at a redemption price of $25.00 per share, in each case
payable in cash.
(ii) At the option of any Holder, at any time specified
by such Holder upon not less than 10 days notice after receiving 60
days prior written notice of the Corporation stating that the
Corporation intends to issue shares of Common Stock or other equity
securities of the Corporation to any "foreign person" (as such term is
used in Section 897(h)(4)(B) of the Internal Revenue Code of 1986, as
amended, or any successor provision), directly or indirectly, if such
issuance would result in ownership of 48% or more of the value of all
outstanding shares of Common Stock and other equity securities of the
Corporation, directly or indirectly, by "foreign persons". The
redemption price shall equal $25.00 per share plus all accrued and
unpaid dividends (whether or not declared and whether or not there are
funds of the Corporation legally available for the payment of
dividends) on such share.
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<PAGE> 297
(B) In addition to the redemption option set forth in
subparagraph (c-2)(7)(A) above, at the option of the Corporation,
shares of Series A Preferred Stock may be redeemed, as a whole or from
time to time in part, from and after the second anniversary of the
Issue Date and during any period that the Closing Sale Price of the
Common Stock exceeds 120% of the Conversion Price for any 20 trading
days within a period of 30 consecutive trading days, at a redemption
price, payable in shares of Common Stock, equal to that number of
shares of Common Stock then issuable upon conversion, pursuant to
subparagraph (c-2)(5) above, of the shares of Series A Preferred Stock
to be redeemed.
(C) The Corporation shall not redeem any shares of Series A
Preferred Stock pursuant to subparagraph (c-2)(7)(A)(i) or subparagraph
(c-2)(7)(B) above, unless and until all accrued and unpaid dividends
(whether or not declared and whether or not there are funds of the
Corporation legally available for the payment of dividends) on the
Series A Preferred Stock have been or contemporaneously are declared
and paid in full.
(D) Whenever shares of Series A Preferred Stock are to be
redeemed pursuant to subparagraph (c-2)(7)(A)(i) or subparagraph
(c-2)(7)(B) above, a notice of such redemption shall be mailed,
addressed to each Holder of the shares to be redeemed, by first class
mail, postage prepaid, or delivered to each Holder of the shares to be
redeemed at such Holder's address as the same appears on the stock
transfer records of the Corporation. Such notice shall be mailed or
delivered (i) in the case of a redemption pursuant to subparagraph
(c-2)(7)(A)(i) above, not less than 60 days prior to the date fixed for
redemption or (ii) in the case of a redemption pursuant to subparagraph
(c-2)(7)(B) above, not less than 10 days prior to the date fixed for
redemption. Each such notice shall state: (i) the date fixed for
redemption; (ii) the number of shares to be redeemed; (iii) the
redemption price; (iv) the place or places where such shares are to be
surrendered for payment of the redemption price; and (v) that dividends
on the shares to be redeemed will cease to accrue on such date fixed
for redemption unless default shall be made in payment of the
redemption price on such date. If fewer than all shares of Series A
Preferred Stock held by a Holder are to be redeemed, the notice mailed
to such Holder shall specify the number of shares to be redeemed from
such Holder.
(E) Notice having been given as provided in subparagraph
(c-2)(7)(A)(ii) or subparagraph (c-2)(7)(D) above, as applicable:
(i) in the case of a redemption pursuant to
subparagraphs (c-2)(7)(A)(i) or (ii) above, if on or before the
redemption date specified in such notice an amount in cash sufficient
to redeem in full, on the
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<PAGE> 298
redemption date and at the applicable redemption price, all shares of
Series A Preferred Stock called for redemption shall have been set
apart and deposited in trust so as to be available for such purpose and
only for such purpose, or shall have been paid to the Holders thereof,
then effective as of the close of business on such redemption date, the
shares of Series A Preferred Stock so called for redemption shall cease
to accrue dividends, and said shares shall no longer be deemed to be
outstanding and shall have the status of authorized but unissued shares
of capital stock and be reclassified as Common Stock of the
Corporation, and all rights of the Holders thereof, as such as
stockholders of the Corporation (except the right to receive from the
Corporation the redemption price) shall cease;
(ii) in the case of redemption pursuant to subparagraph
(c-2)(7)(B) above, all shares of Series A Preferred Stock called for
redemption shall be deemed to have been converted into shares of Common
Stock in accordance with subparagraph (c-2)(5) above immediately prior
to the close of business on the redemption date specified in such
notice, and the person or persons entitled to receive the Common Stock
issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such Common Stock at such time; and
effective as of the close of business on such redemption date, the
shares of Series A Preferred Stock so called for redemption shall cease
to accrue dividends, and said shares shall no longer be deemed to be
outstanding and shall have the status of authorized but unissued shares
of Common Stock of the Corporation, and all rights of the Holders
thereof, as such as stockholders of the Corporation (except the right
to receive from the Corporation the redemption price) shall cease; and
(iii) in either such case, upon surrender in accordance
with said notice of the certificates for any shares so redeemed
(properly endorsed or assigned for transfer, if the notice shall so
state), such shares shall be redeemed by the Corporation at the
redemption price as aforesaid. In the case of redemption pursuant to
subparagraph (c-2)(7)(B) above, as promptly as practicable on or after
the date of such surrender, the Corporation shall issue and deliver a
certificate or certificates for the number of full shares of Common
Stock issuable upon such redemption, together with payment in lieu of
any fraction of a share, to the person or persons entitled to receive
the same, all in accordance with the provisions of subparagraph
(c-2)(5) above. In case fewer than all the shares of Series A Preferred
Stock represented by any certificate so surrendered are redeemed, a new
certificate of like terms and having the same date of original issuance
shall be issued representing the unredeemed shares of Series A
Preferred Stock without cost to the Holder thereof.
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<PAGE> 299
(F) In the event that fewer than all the shares of Series A
Preferred Stock are to be redeemed pursuant to subparagraph
(c-2)(7)(A)(i) or subparagraph (c-2)(7)(B) above, the Corporation shall
redeem shares of Series A Preferred Stock pro rata among the Holders,
based on the number of shares of Series A Preferred Stock held by each
Holder.
(G) Nothing contained in this subparagraph (c-2)(7) shall
limit any legal right of the Corporation to purchase or otherwise
acquire any shares of Series A Preferred Stock at any price, whether
higher or lower than the redemption price.
(8) (A) The Conversion Price and the number of shares of Common
Stock issuable upon the conversion of shares of Series A Preferred
Stock shall be subject to adjustment in case the Corporation shall at
any time after the Issue Date (i) pay a dividend or make any other
distribution to all holders of its outstanding Common Stock, Class B
Common Stock, or Class C Common Stock in shares of Common Stock, Class
B Common Stock, or Class C Common Stock such that the total number of
shares of Common Stock, Class B Common Stock, and Class C Common Stock
outstanding is increased; (ii) subdivide or split-up its outstanding
shares of Common Stock, Class B Common Stock, or Class C Common Stock
into a greater total number of shares of Common Stock, Class B Common
Stock, and Class C Common Stock; (iii) combine its outstanding shares
of Common Stock, Class B Common Stock, or Class C Common Stock into a
smaller total number of shares of Common Stock, Class B Common Stock,
and Class C Common Stock; (iv) issue by reclassification of its shares
of Common Stock, Class B Common Stock, or Class C Common Stock other
shares of capital stock of the Corporation; (v) issue rights or
warrants to all holders of its outstanding Common Stock, Class B Common
Stock, or Class C Common Stock entitling them to subscribe for or
purchase shares of Common Stock, Class B Common Stock, or Class C
Common Stock at a price per share less than the Closing Sale Price of
the Common Stock on the trading day preceding the record date of such
issuance or (vi) in case the Corporation shall distribute to all
holders of its outstanding Common Stock, Class B Common Stock, or Class
C Common Stock evidences of its indebtedness or assets (excluding cash
dividends, dividends or distributions in shares of Common Stock, Class
B Common Stock, or Class C Common Stock or rights or warrants to
subscribe for or purchase securities referred to in the preceding
clause (v)). In any such event, the number of shares of Common Stock
issuable upon conversion of each share of Series A Preferred Stock
immediately prior thereto shall be adjusted so that the Holder thereof
shall be entitled to receive the kind and number of shares of Common
Stock or other securities of the Corporation that such Holder would
have owned or would have been entitled to receive after the happening
of
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<PAGE> 300
any of the events described above had such share of Series A Preferred
Stock been converted immediately prior to the happening of such event
or any record date with respect thereto. An adjustment made pursuant to
this subparagraph (c-2)(8)(A) shall become effective immediately after
the effective date of such event, retroactive to the record date, if
any, for such event.
(B) Whenever the number of shares of Common Stock issuable
upon the conversion of shares of Series A Preferred Stock is adjusted,
as provided in subparagraph (c-2)(8)(A) above, the Conversion Price
shall be adjusted (calculated to the nearest $.0001) by multiplying
such Conversion Price immediately prior to such adjustment by a
fraction, the numerator of which shall be the number of shares of
Common Stock issuable upon conversion of each share of Series A
Preferred Stock immediately prior to such adjustment, and the
denominator of which shall be the number of shares of Common Stock so
issuable immediately thereafter.
(C) Notwithstanding anything in this subparagraph (c-2)(8),
in no event will any adjustment be made to the Conversion Price or the
number of shares of Common Stock issuable upon the conversion of shares
of Series A Preferred Stock solely as a result of any conversion of any
shares of Class B Common Stock or Class C Common Stock into shares of
Common Stock on a one-for-one basis.
(D) For purposes of this subparagraph (c-2)(8), the term
"shares of Common Stock" shall mean the class of stock designated as
the Common Stock of the Corporation at the Issue Date. In the event
that at any time, as a result of an adjustment made pursuant to
subparagraph (c-2)(8)(A) above, the shares of Series A Preferred Stock
shall become convertible into any securities of the Corporation other
than shares of Common Stock, thereafter the number of such other
securities so issuable upon such conversion and the Conversion Price of
such securities shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the
provisions with respect to the shares of Common Stock.
(9) In case at any time:
(A) the Corporation shall set a record date for the
purpose of declaring a dividend (or any other distribution) on the
Common Stock, Class B Common Stock, or Class C Common Stock payable
otherwise than in cash out of its retained earnings; or
(B) the Corporation shall set a record date for the
granting to the holders of the Common Stock, Class B Common Stock, or
Class C Common
<PAGE> 301
Stock of rights or warrants to subscribe for or purchase
any shares of capital stock of any class or of any other rights; or
(C) of any reclassification of the capital stock of the
Corporation (other than a subdivision or combination of its outstanding
shares of Common Stock, Class B Common Stock, or Class C Common Stock),
or of any consolidation or merger to which the Corporation is a party
and for which approval of any stockholders of the Corporation is
required, or of the sale or transfer of all or substantially all of the
assets of the Corporation;
then, in any such case, the Corporation shall cause to be mailed to the
Holders of the Series A Preferred Stock, at least 20 days (or 10 days
in any case specified in subparagraphs (c-2)(9)(A) or (B) above) prior
to the applicable record or effective date hereinafter specified, a
notice stating (i) the date on which a record is to be taken for the
purpose of such dividend, distribution, rights or warrants, or, if a
record is not to be taken, the date as of which the holders of Common
Stock, Class B Common Stock, or Class C Common Stock of record to be
entitled to such dividend, distribution, rights or warrants are to be
determined, or (ii) the date on which such reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or
winding up is expected to become effective, and the date as of which it
is expected that holders of Common Stock, Class B Common Stock, or
Class C Common Stock of record shall be entitled to exchange their
shares of Common Stock, Class B Common Stock, or Class C Common Stock
for securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up. In no event shall the giving of such notice
limit the Corporation's obligations to adjust the Conversion Price and
number of shares of Common Stock issuable upon the conversion of shares
of Series A Preferred Stock upon the occurrence of the events specified
in subparagraph (c-2)(8) above.
(d) A description of the preferences, conversion and
other rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption of the Excess Stock of the
Corporation is set forth in Article NINTH hereof.
(e) Subject to the foregoing, the power of the Board of
Directors to classify and reclassify any of the shares of capital stock shall
include, without limitation, subject to the provisions of the Charter, authority
to classify or reclassify any unissued shares of such stock into a class or
classes of preferred stock, preference stock, special stock or other stock, and
to divide and classify shares of any class into one or more series of such
class, by determining, fixing, or altering one or more of the following:
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<PAGE> 302
(1) The distinctive designation of such class or series
and the number of shares to constitute such class or series; provided
that, unless otherwise prohibited by the terms of such or any other
class or series, the number of shares of any class or series may be
decreased by the Board of Directors in connection with any
classification or reclassification of unissued shares and the number of
shares of such class or series may be increased by the Board of
Directors in connection with any such classification or
reclassification, and any shares of any class or series which have been
redeemed, purchased, otherwise acquired or converted into shares of
Common Stock or any other class or series shall become part of the
authorized capital stock and be subject to classification and
reclassification as provided in this subparagraph.
(2) Whether or not and, if so, the rates, amounts and
times at which, and the conditions under which, dividends shall be
payable on shares of such class or series, whether any such dividends
shall rank senior or junior to or on a parity with the dividends
payable on any other class or series of stock, and the status of any
such dividends as cumulative, cumulative to a limited extent or
non-cumulative and as participating or non-participating.
(3) Whether or not shares of such class or series shall
have voting rights, in addition to any voting rights provided by law
and, if so, the terms of such voting rights provided that, there shall
be no increase in the number of directors except as set forth in
paragraph (a) of Article SEVENTH and such voting rights shall not
effect the rights of the holders of the Class B Common Stock or the
Class C Common Stock with respect to the election of directors.
(4) Whether or not shares of such class or series shall
have conversion or exchange privileges and, if so, the terms and
conditions thereof, including provision for adjustment of the
conversion or exchange rate in such events or at such times as the
Board of Directors shall determine.
(5) Whether or not shares of such class or series shall
be subject to redemption and, if so, the terms and conditions of such
redemption, including the date or dates upon or after which they shall
be redeemable and the amount per share payable in case of redemption,
which amount may vary under different conditions and at different
redemption dates; and whether or not there shall be any sinking fund or
purchase account in respect thereof, and if so, the terms thereof.
(6) The rights of the holders of shares of such class or
series upon the liquidation, dissolution or winding up of the affairs
of, or upon any distribution of the assets of, the Corporation, which
rights may vary depending upon whether such liquidation, dissolution or
winding up is voluntary or involuntary and, if
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<PAGE> 303
voluntary, may vary at different dates, and whether such rights shall
rank senior or junior to or on a parity with such rights of any other
class or series of stock.
(7) Whether or not there shall be any limitations applicable,
while shares of such class or series are outstanding, upon the payment
of dividends or making of distributions on, or the acquisition of, or
the use of moneys for purchase or redemption of, any stock of the
Corporation, or upon any other action of the Corporation, including
action under this subparagraph, and, if so, the terms and conditions
thereof.
(8) Any other preferences, rights, restrictions, including
restrictions on transferability, and qualifications of shares of such
class or series, not inconsistent with law and the Charter of the
Corporation.
(f) For the purposes hereof and of any articles supplementary to
the Charter providing for the classification or reclassification of any shares
of capital stock or of any other charter document of the Corporation (unless
otherwise provided in any such articles or document), any class or series of
stock of the Corporation shall be deemed to rank:
(1) prior to another class or series either as to dividends or
upon liquidation, if the holders of such class or series shall be
entitled to the receipt of dividends or of amounts distributable on
liquidation, dissolution or winding up, as the case may be, in
preference or priority to holders of such other class or series;
(2) on a parity with another class or series either as to
dividends or upon liquidation, whether or not the dividend rates,
dividend payment dates or redemption or liquidation price per share
thereof be different from those of such others, if the holders of such
class or series of stock shall be entitled to receipt of dividends or
amounts distributable upon liquidation, dissolution or winding up, as
the case may be, in proportion to their respective dividend rates or
redemption or liquidation prices, without preference or priority over
the holders of such other class or series; and
(3) junior to another class or series either as to dividends or
upon liquidation, if the rights of the holders of such class or series
shall be subject or subordinate to the rights of the holders of such
other class or series in respect of the receipt of dividends or the
amounts distributable upon liquidation, dissolution or winding up, as
the case may be.
SEVENTH: (a) The business and affairs of the Corporation shall be
managed under the direction of the Board of Directors. The number of directors
of the Corporation shall never be less than the minimum number permitted by the
General Laws of the State of Maryland now or hereafter in force and:
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<PAGE> 304
(1) so long as any shares of both Class B Common Stock and Class C
Common Stock are outstanding, the number of directors of the
Corporation shall be thirteen;
(2) so long as any shares of Class B Common Stock (but no Class C
Common Stock) are outstanding, the number of directors of the
Corporation shall be nine; and
(3) so long as any shares of Class C Common Stock (but no Class B
Common Stock) are outstanding, the number of directors of the
Corporation shall be nine.
At least a majority of the directors shall be Independent Directors (as defined
in Article NINTH).
(b) Subject to the rights of the holders of any class of Preferred
Stock then outstanding, newly created directorships resulting from any increase
in the authorized number of directors shall be filled by a vote of the
stockholders or a majority of the entire Board of Directors, and any vacancies
on the Board of Directors resulting from death, disability ("disability," which
for purposes of this paragraph (b) shall mean illness, physical or mental
disability or other incapacity), resignation, retirement, disqualification,
removal from office, or other cause shall be filled by a vote of the
stockholders or a majority of the directors then in office; provided that
(1) any vacancies on the Board of Directors resulting from death,
disability, resignation, retirement, disqualification, removal from
office, or other cause of a director elected by the holders of Class B
Common Stock shall be filled by a vote of the holders of Class B Common
Stock; and
(2) any vacancies on the Board of Directors with respect to a
director elected by the holders of Class C Common Stock shall be filled
as follows:
(A) at any time after the closing date of the Merger, any
vacancy resulting from death or disability shall be filled by holders
of Class C Common Stock, voting as a separate class to elect as a
replacement director a candidate who (i) is the Chief Executive Officer
of The Edward J. DeBartolo Corporation (or any successor to such
corporation), provided that the right granted pursuant to this
subparagraph (b)(2)(A)(i) may be exercised only once and may only be
exercised to fill a vacancy resulting from the death or disability of
Edward J. DeBartolo, Jr. or Marie Denise DeBartolo York, or (ii) has
similar experience and standing in the business community to the
Independent Directors and who has been approved by a majority of the
Independent Directors elected by the holders of Common Stock and other
capital stock entitled to vote with the Common Stock as a single class.
If such Independent Directors do not approve such candidate,
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<PAGE> 305
the holders of Class C Common Stock may propose another candidate for
approval by a majority of the Independent Directors. The right of
holders of Class C Common Stock to propose candidates to the
Independent Directors shall continue until one such candidate is
approved by a majority of the Independent Directors;
(B) at any time prior to the fourth anniversary of the
closing date of the Merger, any vacancy other than one resulting from a
death or disability shall, subparagraph (c-1)(1) of Article SIXTH
notwithstanding, reduce by such vacancy an equivalent number of the
directors that holders of Class C Common Stock may, voting as a
separate class, elect, and such a vacancy shall be filled by a majority
of the entire Board of Directors. If as a result of this subparagraph
(b)(2)(B) the number of directors that holders of Class C Common Stock
may elect is reduced to zero, then immediately and automatically each
share of Class C Common Stock shall be converted into one share of
Common Stock;
(C) at any time during the period from and including the
fourth anniversary to but not including the fifth anniversary of the
closing date of the Merger, any vacancy other than one resulting from a
death or disability shall be filled by holders of Class C Common Stock,
voting as a separate class, to elect as a replacement director a
candidate who meets the qualifications and has been selected in
accordance with the procedures set forth in subparagraph (b)(2)(A)(ii)
above; provided if during such period vacancies result other than from
death or disability with respect to both of the directors who were
directors on the fourth anniversary date, then, subparagraph (c-1)(1)
of Article SIXTH notwithstanding, the number of directors that the
holders of Class C Common Stock may, voting as a separate class, elect
shall be reduced to one, and the vacancy with respect to the second
resigned director shall be filled by a majority of the entire Board of
Directors; and
(D) at any time after the fifth anniversary of the closing
date of the Merger, any vacancy other than one resulting from a death
or disability shall be filled by holders of Class C Common Stock,
voting as a separate class, to elect as a replacement director a
candidate who meets the qualifications and has been selected in
accordance with the procedures set forth in subparagraph (b)(2)(A)(ii)
above.
No decrease in the number of directors constituting the Board of Directors shall
affect the tenure of office of any director.
(c) Whenever the holders of any one or more series of Preferred
Stock of the Corporation shall have the right, voting separately as a class, to
elect one or more directors of the
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<PAGE> 306
Corporation, the Board of Directors shall consist of said directors so elected
in addition to the number of directors fixed as provided in paragraph (a) of
this Article SEVENTH or in the By-Laws; provided that if any shares of Class B
Common Stock or Class C Common Stock are outstanding, the election of one or
more directors by such holders of Preferred Stock will eliminate the
corresponding number a directors to be elected by the combined holders of the
Common Stock, the Class B Common Stock, the Class C Common Stock, and the Series
A Preferred Stock voting together as a single class, and will neither increase
the size of the Board of Directors nor eliminate the seat or seats of directors
elected by the holders of the Class B Common Stock or of the Class C Common
Stock, each voting as a separate class. Notwithstanding the foregoing, and
except as otherwise may be required by law, whenever the holders of any one or
more series of Preferred Stock of the Corporation shall have the right, voting
separately as a class, to elect one or more directors of the Corporation, the
terms of the director or directors elected by such holders shall expire at the
next succeeding annual meeting of stockholders.
(d) Subject to the rights of the holders of any class separately
entitled to elect one or more directors, any director, or the entire Board of
Directors, may be removed from office at any time, but only for cause and then
only by the affirmative vote of the holders of at least a majority of the
combined voting power of all classes of shares of capital stock entitled to vote
in the election for directors voting together as a single class.
(e) The following are the names of the current directors of the
Corporation, each of whom shall serve until the annual meeting of stockholders
indicated next to his or her name, and who thereafter will serve (or whose
replacement will serve) until the next following annual meeting of stockholders.
<TABLE>
<CAPTION>
Current Term
Ends with
Election at
NAME OF CURRENT Director Annual
DIRECTOR Stock Classes Entitled to Elect Class Meeting in:
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(person from current Common Stock, Class B Common A 1997(1)
Simon Board) Stock, Class C Common Stock,
Series A Preferred Stock
(person from current Common Stock, Class B Common A 1998(2)
Simon Board Stock, Class C Common Stock,
Series A Preferred Stock
(person from current Common Stock, Class B Common A 1998(2)
Simon Board) Stock, Class C Common Stock,
Series A Preferred Stock
</TABLE>
- 26 -
<PAGE> 307
<TABLE>
<CAPTION>
<S> <C> <C> <C>
(person from current Common Stock, Class B Common A 1998(2)
DeBartolo Board) Stock, Class C Common Stock,
Series A Preferred Stock
(person from current Common Stock, Class B Common A 1999(2)
Simon Board) Stock, Class C Common Stock,
Series A Preferred Stock
(person from current Common Stock, Class B Common A 1999(2)
DeBartolo Board) Stock, Class C Common Stock,
Series A Preferred Stock
(person from current Common Stock, Class B Common A 1999(2)
DeBartolo Board) Stock, Class C Common Stock,
Series A Preferred Stock
(Simon director) Class B Common Stock B 1997(1)
(Simon director) Class B Common Stock B 1997(1)
(Simon director) Class B Common Stock B 1997(1)
(Simon director) Class B Common Stock B 1997(1)
(DeBartolo director) Class C Common Stock C 1997(1)
(DeBartolo director) Class C Common Stock C 1997(1)
</TABLE>
- -----------------------------
(1) In the event that proposed amendments to this section are submitted to the
stockholders subsequent to 1996, this date shall be adjusted such that (a) if
the proposal is submitted in 1997, this date will be changed to one that is the
sum of this date plus one year; and (b) if the proposal is submitted in 1998,
this date will be changed to one that is the sum of this date plus two years.
(2) In the event that proposed amendments to this section are submitted to the
stockholders subsequent to 1996, whether in 1997 or 1998, this date will be
changed to one that is the sum of this date plus one year.
(f) Any action by the Corporation relating to (1) transactions
between the Corporation and M.S. Management Associates, Inc., Simon MOA
Management Company, Inc., DeBartolo Properties Management, Inc. and/or M.S.
Management Associates (Indiana), Inc. or (2) transactions involving the
Corporation, individually or in its capacity as general partner (whether
directly or indirectly through another entity) of Simon DeBartolo Group, L.P.,
in which the Simon Family Group or the DeBartolo Family Group or any member or
affiliate of any member of the Simon Family Group or DeBartolo Family Group has
an interest (other than through ownership interests in the Corporation or Simon
DeBartolo Group, L.P.), shall, in addition to such other vote that may be
required, require the prior approval of a majority of the Independent Directors.
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<PAGE> 308
EIGHTH: (a) The following provisions are hereby adopted for the purpose
of defining, limiting, and regulating the powers of the Corporation and of the
directors and the stockholders:
(1) The Board of Directors is hereby empowered to authorize the
issuance from time to time of shares of its stock of any class, whether
now or hereafter authorized, or securities convertible into shares of
its stock of any class or classes, whether now or hereafter authorized,
for such consideration as may be deemed advisable by the Board of
Directors and without any action by the stockholders.
(2) No holder of any stock or any other securities of the
Corporation, whether now or hereafter authorized, shall have any
preemptive right to subscribe for or purchase any stock or any other
securities of the Corporation other than such, if any, as the Board of
Directors, in its sole discretion, may determine and at such price or
prices and upon such other terms as the Board of Directors, in its sole
discretion, may fix; and any stock or other securities which the Board
of Directors may determine to offer for subscription may, as the Board
of Directors in its sole discretion shall determine, be offered to the
holders of any class, series or type of stock or other securities at
the time outstanding to the exclusion of the holders of any or all
other classes, series or types of stock or other securities at the time
outstanding.
(3) The Board of Directors of the Corporation shall, consistent
with applicable law, have power in its sole discretion to determine
from time to time in accordance with sound accounting practice or other
reasonable valuation methods what constitutes annual or other net
profits, earnings, surplus, or net assets in excess of capital; to fix
and vary from time to time the amount to be reserved as working
capital, or determine that retained earnings or surplus shall remain in
the hands of the Corporation; to set apart out of any funds of the
Corporation such reserve or reserves in such amount or amounts and for
such proper purpose or purposes as it shall determine and to abolish
any such reserve or any part thereof; to redeem or purchase its stock
or to distribute and pay distributions or dividends in stock, cash or
other securities or property, out of surplus or any other funds or
amounts legally available therefor, at such times and to the
stockholders of record on such dates as it may, from time to time,
determine; to determine the amount, purpose, time of creation, increase
or decrease, alteration or cancellation of any reserves or charges and
the propriety thereof (whether or not any obligation or liability for
which such reserves or charges shall have been created shall have been
paid or discharged); to determine the fair value and any matters
relating to the acquisition, holding and disposition of any assets by
the Corporation; and to determine whether and to what extent and at
what times and places and under
- 28 -
<PAGE> 309
what conditions and regulations the books, accounts and documents of
the Corporation, or any of them, shall be open to the inspection of
stockholders, except as otherwise provided by statute or by the
By-Laws, and, except as so provided, no stockholder shall have any
right to inspect any book, account or document of the Corporation
unless authorized so to do by resolution of the Board of Directors.
(4) The Board of Directors shall, in connection with the exercise
of its business judgment involving a Business Combination (as defined
in Section 3-601 of the Corporations and Associations Article of the
Annotated Code of Maryland) or any actual or proposed transaction which
would or may involve a change in control of the Corporation (whether by
purchases of shares of stock or any other securities of the Corporation
in the open market, or otherwise, tender offer, merger, consolidation,
dissolution, liquidation, sale of all or substantially all of the
assets of the Corporation, proxy solicitation or otherwise), in
determining what is in the best interests of the Corporation and its
stockholders and in making any recommendation to its stockholders, give
due consideration to all relevant factors, including, but not limited
to (A) the economic effect, both immediate and long-term, upon the
Corporation's stockholders, including stockholders, if any, who do not
participate in the transaction; (B) the social and economic effect on
the employees, customers of, and others dealing with, the Corporation
and its subsidiaries and on the communities in which the Corporation
and its subsidiaries operate or are located; (C) whether the proposal
is acceptable based on the historical and current operating results or
financial condition of the Corporation; (D) whether a more favorable
price could be obtained for the Corporation's stock or other securities
in the future; (E) the reputation and business practices of the offeror
and its management and affiliates as they would affect the employees of
the Corporation and its subsidiaries; (F) the future value of the stock
or any other securities of the Corporation; (G) any antitrust or other
legal and regulatory issues that are raised by the proposal; and (H)
the business and financial condition and earnings prospects of the
acquiring person or entity, including, but not limited to, debt service
and other existing financial obligations, financial obligations to be
incurred in connection with the acquisition, and other likely financial
obligations of the acquiring person or entity. If the Board of
Directors determines that any proposed Business Combination (as defined
in Section 3-601 of the Corporations and Associations Article of the
Annotated Code of Maryland) or actual or proposed transaction which
would or may involve a change in control of the Corporation should be
rejected, it may take any lawful action to defeat such transaction,
including, but not limited to, any or all of the following: advising
stockholders not to accept the proposal; instituting litigation against
the party making the proposal; filing complaints with governmental and
regulatory authorities; acquiring the stock or any of the securities of
the Corporation; selling
- 29 -
<PAGE> 310
or otherwise issuing authorized but unissued stock, other securities or
granting options or rights with respect thereto; acquiring a company to
create an antitrust or other regulatory problem for the party making
the proposal; and obtaining a more favorable offer from another
individual or entity.
(5) The Corporation shall provide any indemnification permitted by
the laws of Maryland and shall indemnify directors, officers, agents
and employees as follows: (A) the Corporation shall indemnify its
directors and officers, whether serving the Corporation or at its
request any other entity, to the full extent required or permitted by
the General Laws of the State of Maryland now or hereafter in force,
including the advance of expenses under the procedures and to the full
extent permitted by law and (B) the Corporation shall indemnify other
employees and agents, whether serving the Corporation or at its request
any other entity, to such extent as shall be authorized by the Board of
Directors or the Corporation's ByLaws and be permitted by law. The
foregoing rights of indemnification shall not be exclusive of any other
rights to which those seeking indemnification may be entitled. The
Board of Directors may take such action as is necessary to carry out
these indemnification provisions and is expressly empowered to adopt,
approve and amend from time to time such by-laws, resolutions or
contracts implementing such provisions or such further indemnification
arrangements as may be permitted by law. No amendment of the Charter of
the Corporation or repeal of any of its provisions shall limit or
eliminate the right to indemnification provided hereunder with respect
to acts or omissions occurring prior to such amendment or repeal or
shall limit or eliminate the rights granted under indemnification
agreements entered into by the Corporation and its directors, officers,
agents and employees.
(6) To the fullest extent permitted by Maryland statutory or
decisional law, as amended or interpreted, no director or officer of
the Corporation shall be personally liable to the Corporation or its
stockholders for money damages. No amendment of the Charter of the
Corporation or repeal of any of its provisions shall limit or eliminate
the benefits provided to directors and officers under this provision
with respect to any act or omission which occurred prior to such
amendment or repeal.
(7) For any stockholder proposal to be presented in connection
with an annual meeting of stockholders of the Corporation, including
any proposal relating to the nomination of a director to be elected to
the Board of Directors of the Corporation, the stockholders must have
given timely written notice thereof in writing to the Secretary of the
Corporation in the manner and containing the information required by
the By-Laws. Stockholder proposals to be presented in connection with a
special meeting of stockholders will be presented by the
- 30 -
<PAGE> 311
Corporation only to the extent required by Section 2-502 of the
Corporations and Associations Article of the Annotated Code of
Maryland.
(b) The Corporation reserves the right to amend, alter, change or
repeal any provision contained in the Charter, including any amendments changing
the terms or contract rights, as expressly set forth in the Charter, of any of
its outstanding stock by classification, reclassification or otherwise, by a
majority of the directors (including a majority of the Independent Directors, a
majority of the directors elected by the holders of the Class B Common Stock and
one director elected by the holders of the Class C Common Stock, if such Class B
Common Stock and Class C Common Stock have at that time elected directors)
adopting a resolution setting forth the proposed change, declaring its
advisability, and either calling a special meeting of the stockholders certified
to vote on the proposed change, or directing the proposed change to be
considered at the next annual stockholders meeting. Unless otherwise provided
herein, the proposed change will be effective only if it is adopted upon the
affirmative vote of the holders of not less than a majority of the aggregate
votes entitled to be cast thereon (considered for this purpose as a single
class); provided however, that any amendment to, repeal of or adoption of any
provision inconsistent with subparagraphs (a)(4), (a)(6) or (a)(7) or this
paragraph (b) of Article EIGHTH will be effective only if it is adopted upon the
affirmative vote of not less than 80% of the aggregate votes entitled to be cast
thereon (considered for this purpose as a single class) and any amendment to,
repeal of, or adoption of any provision inconsistent with paragraphs (c) or
(c-1) of Article SIXTH or Article SEVENTH will be effective only if it is
adopted upon both (1) the affirmative vote of not less than 80% of the aggregate
votes entitled to be cast thereon (considered for this purpose as a single
class) and (2) the affirmative vote of not less than a majority of the aggregate
votes entitled to be cast by the holders of the Class B Common Stock (in the
case of paragraph (c) of Article SIXTH or Article SEVENTH) or by the holders of
the Class C Common Stock (in the case of paragraph (c-1) of Article SIXTH or
Article SEVENTH).
(c) In furtherance and not in limitation of the powers conferred
by statute, the Board of Directors is expressly authorized to make, alter or
repeal the ByLaws of the Corporation.
(d) The enumeration and definition of particular powers of the
Board of Directors included in the foregoing shall in no way be limited or
restricted by reference to or inference from the terms of any other clause of
this or any other Article of the Charter of the Corporation, or construed as or
deemed by inference or otherwise in any manner to exclude or limit any powers
conferred upon the Board of Directors under the General Laws of the State of
Maryland now or hereafter in force.
NINTH: (a) (1) The following terms shall have the following meaning:
- 31 -
<PAGE> 312
"Aggregate Assumed Equity Interest in the Corporation" shall mean
the aggregate equity interest in the Corporation represented by the
Common Stock, the Class B Common Stock, the Class C Common Stock and
the Units on the assumption that all shares of Class B Common Stock and
Class C Common Stock and all such Units are exchanged for Common Stock
"Beneficial Ownership" shall mean ownership of Capital Stock by a
Person who would be treated as an owner of such shares of Capital Stock
either directly or indirectly through the application of Section 544 of
the Code, as modified by Section 856(h)(1)(B) of the Code, and any
comparable successor provisions thereto. The terms "Beneficial Owner,"
"Beneficially Owns" and "Beneficially Owned" shall have correlative
meanings.
"Beneficiary" shall mean any Qualified Charitable Organization
which, from time to time, is designated by the Corporation to be a
beneficiary of the Trust.
"Board of Directors" shall mean the Board of Directors of the
Corporation.
"By-Laws" shall mean the By-Laws of the Corporation.
"Capital Stock" shall mean stock that is Common Stock, Class B
Common Stock, Class C Common Stock, Excess Stock or Preferred Stock.
"Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
"Constructive Ownership" shall mean ownership of Capital Stock by
a Person who would be treated as an owner of such shares of Capital
Stock either directly or indirectly through the application of Section
318 of the Code, and any comparable successor provisions thereto, as
modified by Section 856(d)(5) of the Code. The terms "Constructive
Owner," "Constructively Owns" and "Constructively Owned" shall have
correlative meanings.
"DeBartolo Family Group" shall mean the Estate of Edward J.
DeBartolo, Sr., Edward J. DeBartolo, Jr. and Marie Denise DeBartolo
York, other members of the immediate family of any of the foregoing,
any other lineal descendants of any of the foregoing, any estates of
any of the foregoing, any trusts established for the benefit of any of
the foregoing, and any other entity controlled by any of the foregoing.
"DeBartolo Family Group Initial Aggregate Assumed Equity Interest
in the Corporation" shall mean the portion of the Aggregate Assumed
Equity Interest
- 32 -
<PAGE> 313
in the Corporation owned by the DeBartolo Family Group immediately
following the closing of the Merger.
"Exchange Rights" shall mean any rights granted to limited
partners of Simon DeBartolo Group, L.P., a Delaware limited partnership
(including pursuant to an Exchange Rights Agreement) and Simon Property
Group L.P., a Delaware limited partnership, to exchange (subject to the
Ownership Limit) limited partnership interests in such Partnership for
shares of Capital Stock.
"Independent Director" shall mean a director of the Corporation
who is neither employed by the Corporation nor a member (or an
affiliate of a member) of the Simon Family Group or the DeBartolo
Family Group.
"Market Price" of any class of Capital Stock on any date shall
mean the average of the Closing Price for the five consecutive Trading
Days ending on such date, or if such date is not a Trading Date, the
five consecutive Trading Days preceding such date. The "Closing Price"
on any date shall mean (i) the last sale price, regular way, or, in
case no such sale takes place on such day, the average of the closing
bid and asked prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with respect to
securities listed or admitted to trading on the New York Stock
Exchange, or (ii) if such class of Capital Stock is not listed or
admitted to trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on
which such class of capital stock is listed or admitted to trading, or
(iii) if such class of capital stock is not listed or admitted to
trading on any national securities exchange, the last quoted price, or
if not so quoted, the average of the high bid and low asked prices in
the over-the-counter market, as reported by the National Association of
Securities Dealers, Inc. Automated Quotation System or, if such system
is no longer in use, the principal other automated quotations systems
that may then be in use, or (iv) if such class of Capital Stock is not
quoted by any such organization, the average of the closing bid and
asked prices as furnished by a professional market maker making a
market in such class of Capital Stock selected by the Board of
Directors.
"Merger" shall mean the merger, pursuant to the Agreement and Plan
of Merger dated March 26, 1996, among the Corporation, Day Acquisition
Corp., an Ohio corporation and a wholly owned subsidiary of the
Corporation ("Sub"), and DeBartolo Realty Corporation, an Ohio
corporation ("DeBartolo"), pursuant to which merger Sub shall be merged
with and into DeBartolo.
- 33 -
<PAGE> 314
"Option" shall mean any options, rights, warrants or convertible
or exchangeable securities containing the right to subscribe for,
purchase or receive upon exchange or conversion shares of Capital
Stock.
"Ownership Limit" shall mean (x) in the case of any member of the
Simon Family Group, 24%, and (y) in the case of any other Person, 6%,
in each case, of any class of Capital Stock, or any combination
thereof, determined by (i) number of shares outstanding, (ii) voting
power or (iii) value (as determined by the Board of Directors),
whichever produces the smallest holding of Capital Stock under the
three methods, computed with regard to all outstanding shares of
Capital Stock and, to the extent provided by the Code, all shares of
Capital Stock issuable under outstanding Options and Exchange Rights
that have not been exercised.
"Person" shall mean an individual, corporation, partnership,
estate, trust (including a trust qualified under Section 401(a) or
501(c)(17) of the Code), a portion of a trust permanently set aside for
or to be used exclusively for the purposes described in Section 642(c)
of the Code, association, private foundation within the meaning of
Section 509(a) of the Code, joint stock company or other entity and
also includes a group as the term is used for purposes of Section
13(d)(3) of the Securities Exchange Act of 1934, as amended.
"Purported Beneficial Holder" shall mean, with respect to any
event (other than a purported Transfer) which results in Excess Stock,
the Person for whom the Purported Record Holder held shares that were,
pursuant to subparagraph (a)(3) of this article NINTH, automatically
converted into Excess Stock upon the occurrence of such event.
"Purported Beneficial Transferee" shall mean, with respect to any
purported Transfer which results in Excess Stock, the purported
beneficial transferee for whom the Purported Record Transferee would
have acquired shares of Common Stock or Preferred Stock if such
Transfer had been valid under subparagraph (a)(2) of this Article
NINTH.
"Purported Record Holder" shall mean, with respect to any event
(other than a purported Transfer) which results in Excess Stock, the
record holder of the shares that were, pursuant to subparagraph (a)(3)
of this Article NINTH, automatically converted into Excess Stock upon
the occurrence of such event.
"Purported Record Transferee" shall mean, with respect to any
purported Transfer which results in Excess Stock, the record holder of
the Common Stock or the Preferred Stock if such Transfer had been valid
under subparagraph (a)(2) of this Article NINTH.
- 34 -
<PAGE> 315
"Qualified Charitable Organization" shall mean (i) any entity
which would be exempt from federal income under Section 501(c)(3) of
the Code and to which contributions are deductible under Section 170 of
the Code or (ii) any federal, state or local government entity.
"REIT" shall mean a real estate investment trust under Section 856
of the Code.
"Restriction Termination Date" shall mean the first day after the
effective date of the Merger on which the Corporation's status as a
REIT shall have been terminated by the Board of Directors and the
stockholders of the Corporation.
"Simon Family Group" shall mean Melvin Simon, Herbert Simon and
David Simon, other members of the immediate family of any of the
foregoing, any other lineal descendants of any of the foregoing, any
estates of any of the foregoing, any trust established for the benefit
of any of the foregoing, and any other entity controlled by any of the
foregoing.
"Simon Family Group Initial Aggregate Assumed Equity Interest in
the Corporation" shall mean the portion of the Aggregate Assumed Equity
Interest in the Corporation owned by the Simon Family Group immediately
following the closing of the Merger.
"Trading Day" shall mean, with respect to any class of Capital
Stock, a day on which the principal national securities exchange on
which such class of Capital Stock is listed or admitted to trading is
open for the transaction of business or, if such class of Capital Stock
is not listed or admitted to trading on any national securities
exchange, shall mean any day other than a Saturday, a Sunday or a day
on which banking institutions in the State of New York are authorized
or obligated by law or executive order to close.
"Transfer" shall mean any sale, transfer, gift, hypothecation,
pledge, assignment, devise or other disposition of Capital Stock
(including (i) the granting of any option (including an option to
acquire an Option or any series of such options) or entering into any
agreement for the sale, transfer or other disposition of Capital Stock
or (ii) the sale, transfer, assignment or other disposition of any
securities or rights convertible into or exchangeable for Capital
Stock), whether voluntary or involuntary, whether of record,
constructively or beneficially and whether by operation of law or
otherwise.
"Trust" shall mean the trust created pursuant to subparagraph
(b)(1) of this Article NINTH.
- 35 -
<PAGE> 316
"Trustee" shall mean any trustee for the Trust (or any successor
trustee) appointed from time to time by the Corporation; provided,
however, during any period in which Excess Stock is issued and
outstanding the Corporation shall undertake to appoint trustees of the
Trust which trustees are unaffiliated with the Corporation.
"Undesignated Excess Stock" shall have the meaning set forth in
subparagraph (b)(3) of this Article NINTH.
"Units" shall mean units representing limited partnership
interests in Simon Property Group, L.P. or DeBartolo Realty Partnership
L.P.
(2) (A) Except as provided in subparagraph (a)(9) of this Article
NINTH, from the effective date of the Merger and prior to the
Restriction Termination Date, no Person shall Beneficially Own or
Constructively Own shares of the outstanding Capital Stock in excess of
the Ownership Limit.
(B) Except as provided in subparagraph (a)(9) of this Article
NINTH, from the effective date of the Merger and prior to the
Restriction Termination Date, any Transfer that, if effective, would
result in any Person Beneficially Owning or Constructively Owning
Capital Stock in excess of the Ownership Limit shall be void ab initio
as to the Transfer of that number of shares of Capital Stock which
would be otherwise Beneficially or Constructively Owned by such Person
in excess of the Ownership Limit; and the intended transferee shall
acquire no rights in such shares of Common Stock or Preferred Stock in
excess of the Ownership Limit.
(C) Except as provided in subparagraph (a)(9) of this Article
NINTH, from the effective date of the Merger and prior to the
Restriction Termination Date, any Transfer that, if effective, would
result in the Capital Stock being Beneficially Owned by fewer than 100
Persons (determined without reference to any rules of attribution)
shall be void ab initio; and the intended transferee shall acquire no
rights in such shares of Common Stock or Preferred Stock.
(D) Except as provided in subparagraph (a)(9) of this Article
NINTH, from the effective date of the Merger and prior to the
Restriction Termination Date, any Transfer of shares or other event or
transaction involving Capital Stock that, if effective, would result in
the Corporation being "closely held" within the meaning of Section
856(h) of the Code shall be void ab initio as to the Transfer of that
number of shares or other event or transaction of Capital Stock which
would cause the Corporation to be "closely held" within the meaning of
Section 856(h) of the Code; and the intended transferee shall acquire
no rights
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in such shares of Common Stock or Preferred Stock in excess of the
Ownership Limit.
(3) (A) If, notwithstanding the other provisions contained in this
Article NINTH, at any time after the effective date of the Merger and
prior to the Restriction Termination Date, there is a purported
Transfer or other event such that any Person would Beneficially Own or
Constructively Own Capital Stock in excess of the Ownership Limit,
then, except as otherwise provided in subparagraph (a)(9), each such
share of Common Stock or Preferred Stock which, when taken together
with all other Capital Stock, would be in excess of the Ownership Limit
(rounded up to the nearest whole share), shall automatically be
converted into one share of Excess Stock, as further described in
subparagraph (a)(3)(C) below and such shares of Excess Stock shall be
automatically transferred to the Trustee as trustee for the Trust. The
Corporation shall issue fractional shares of Excess Stock if required
by such conversion ratio. Such conversion shall be effective as of the
close of business on the business day prior to the date of the Transfer
or other event.
(B) If, notwithstanding the other provisions contained in
this Article NINTH, at any time after the effective date of the Merger
and prior to the Restriction Termination Date, there is a purported
Transfer or other event which, if effective, would cause the
Corporation to become "closely held" within the meaning of Section
856(h) of the Code, then each share of Common Stock or Preferred Stock
being Transferred or which are otherwise affected by such event and
which, in either case, would cause, when taken together with all other
Capital Stock, the Corporation to be "closely held" within the meaning
of Section 856(h) of the Code (rounded up to the nearest whole share)
shall automatically be converted into one share of Excess Stock, as
further described in subparagraph (a)(3)(C) of this Article NINTH, and
such shares of Excess Stock shall be automatically transferred to
Trustee as trustee for the Trust. The Corporation shall issue
fractional shares of Excess Stock if required by such conversion ratio.
Such conversion shall be effective as of the close of business on the
business day prior to the date of the Transfer or other event.
(C) Upon conversion of Common Stock or Preferred Stock into
Excess Stock pursuant to this subparagraph (a)(3) of this Article
NINTH, Common Stock shall be converted into Excess Common Stock and
Preferred Stock shall be converted into Excess Preferred Stock.
(4) If the Board of Directors or its designees shall at any time
determine in good faith that a Transfer or other event has taken place
in violation of subparagraph (a)(2) of this Article NINTH or that a
Person intends to acquire
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or has attempted to acquire Beneficial Ownership or Constructive
Ownership of any shares of Capital Stock in violation of subparagraph
(a)(2) of this Article NINTH, the Board of Directors or its designees
may take such action as it or they deem advisable to refuse to give
effect to or to prevent such Transfer or other event, including, but
not limited to, refusing to give effect to such Transfer or other event
on the books of the Corporation or instituting proceedings to enjoin
such Transfer or other event or transaction; provided, however, that
any Transfers or attempted Transfers (or, in the case of events other
than a Transfer, Beneficial Ownership or Constructive Ownership) in
violation of subparagraphs (a)(2)(A), (B), (C) and (D) of this Article
NINTH shall be void ab initio and any Transfers or attempted Transfers
(or, in the case of events other than a Transfer, Beneficial Ownership
or Constructive Ownership) in violation of subparagraphs (a)(2)(A),
(B), and (D) shall automatically result in the conversion described in
subparagraph (a)(3), irrespective of any action (or non-action) by the
Board of Directors or its designees.
(5) Any Person who acquires or attempts to acquire shares of
Capital Stock in violation of subparagraph (a)(2) of this Article
NINTH, or any Person who is a transferee such that Excess Stock results
under subparagraph (a)(3) of this Article NINTH, shall immediately give
written notice to the Corporation of such event and shall provide to
the Corporation such other information as the Corporation may request
in order to determine the effect, if any, of such Transfer or attempted
Transfer or other event on the Corporation's status as a REIT.
(6) From the effective date of the Merger and prior to the
Restriction Termination Date:
(A) Every Beneficial Owner or Constructive Owner of more than
5%, or such lower percentages as required pursuant to regulations under
the Code, of the outstanding Capital Stock of the Corporation shall,
before January 30 of each year, give written notice to the Corporation
stating the name and address of such Beneficial Owner or Constructive
Owner, the general ownership structure of such Beneficial Owner or
Constructive Owner, the number of shares of each class of Capital Stock
Beneficially Owned or Constructively Owned, and a description of how
such shares are held.
(B) Each Person who is a Beneficial Owner or Constructive
Owner of Capital Stock and each Person (including the stockholder of
record) who is holding Capital Stock for a Beneficial Owner or
Constructive Owner shall provide on demand to the Corporation such
information as the Corporation may request from time to time in order
to determine the Corporation's status as a REIT and to ensure
compliance with the Ownership Limit.
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(7) Subject to subparagraph (a)(12) of this Article NINTH, nothing
contained in this Article NINTH shall limit the authority of the Board
of Directors to take such other action as it deems necessary or
advisable to protect the Corporation and the interests of its
stockholders by preservation of the Corporation's status as REIT and to
ensure compliance with the Ownership Limit.
(8) In the case of an ambiguity in the application of any of the
provisions of subparagraph (a) of this Article NINTH, including any
definition contained in subparagraph (a)(1), the Board of Directors
shall have the power to determine the application of the provisions of
this subparagraph (a) with respect to any situation based on the facts
known to it.
(9) The Board of Directors upon receipt of a ruling from the
Internal Revenue Service or an opinion of tax counsel in each case to
the effect that the restrictions contained in subparagraphs (a)(2)(A),
(B), (C) and (D) of this Article NINTH will not be violated, may exempt
a Person from the Ownership Limit:
(A) (i) if such Person is not an individual for purposes of
Section 542(a)(2) of the Code, or (ii) if such Person is an underwriter
which participates in a public offering of Common Stock or Preferred
Stock for a period of 90 days following the purchase by such
underwriter of the Common Stock or Preferred Stock, or (iii) in such
other circumstances which the Board of Directors determines are
appropriately excepted from the Ownership Limit, and
(B) the Board of Directors obtains such representations and
undertakings from such Person as are reasonably necessary to ascertain
that no individual's Beneficial Ownership and Constructive Ownership of
Capital Stock will violate the Ownership Limit and agrees that any
violation or attempted violation will result in such Common Stock or
Preferred Stock being converted into shares of Excess Stock in
accordance with subparagraph (a)(3) of this Article NINTH.
(10) From the effective date of the Merger and until the
Restriction Terminate Date, each certificate for the respective class
of Capital Stock shall bear the following legend:
The shares of Capital Stock represented by this certificate are
subject to restrictions on 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 from time to time (the "Code"). Transfers in contravention
of such restrictions shall be void ab initio. Unless excepted by
the Board of Directors of the Corporation, no Person may (1)
Beneficially Own or Constructively Own shares of Capital Stock in
excess
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of 6% (other than members of the Simon Family Group, whose
relevant percentage is 24%) of the value of any class of
outstanding Capital Stock of the Corporation, or any combination
thereof, determined as provided in the Corporation's Charter, as
the same may be amended from time to time (the "Charter"), and
computed with regard to all outstanding shares of Capital Stock
and, to the extent provided by the Code, all shares of Capital
Stock issuable under existing Options and Exchange Rights that
have not been exercised; or (2) Beneficially Own Capital Stock
which would result in the Corporation being "closely held" under
Section 856(h) of the Code. Unless so excepted, any acquisition of
Capital Stock and continued holding of ownership constitutes a
continuous representation of compliance with the above
limitations, and any Person who attempts to Beneficially Own or
Constructively Own shares of Capital Stock in excess of the above
limitations has an affirmative obligation to notify the
Corporation immediately upon such attempt. If the restrictions on
transfer are violated, the transfer will be void ab initio and the
shares of Capital Stock represented hereby will be automatically
converted into shares of Excess Stock and will be transferred to
the Trustee to be held in trust for the benefit of one or more
Qualified Charitable Organizations, whereupon such Person shall
forfeit all rights and interests in such Excess Stock. In
addition, certain Beneficial Owners or Constructive Owners must
give written notice as to certain information on demand and on an
annual basis. All capitalized terms in this legend have the
meanings defined in the Charter. The Corporation will mail without
charge to any requesting stockholder a copy of the Charter,
including the express terms of each class and series of the
authorized capital stock of the Corporation, within five days
after receipt of a written request therefor.
(11) If any provision of this Article NINTH or any application of
any such provision is determined to be invalid by any federal or state
court having jurisdiction over the issues, the validity of the
remaining provisions shall not be affected, and other applications of
such provision shall be affected only to the extent necessary to comply
with the determination of such court.
(12) Nothing in this Article NINTH shall preclude the settlement
of any transaction entered into through the facilities of the New York
Stock Exchange.
(b) (1) Upon any purported Transfer or other event that results in
Excess Stock pursuant to subparagraph (a)(3) of this Article NINTH,
such Excess Stock shall be deemed to have been transferred to the
Trustee as trustee of the Trust for the exclusive benefit of one or
more Qualifying Charitable Organizations as are designated from time to
time by the Board of Directors with respect to such Excess Stock.
Shares of Excess Stock held in trust shall be issued
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<PAGE> 321
and outstanding stock of the Corporation. The Purported Record Transferee or
Purported Record Holder and the Purported Beneficial Transferee or Purported
Beneficial Holder shall have no rights in such Excess Stock, except such rights
to certain proceeds upon Transfer of shares of Excess Stock or upon any
voluntary or involuntary liquidation, dissolution or winding up of, or any
distribution of the assets of, the Corporation as are expressly set forth
herein.
(2) Excess Stock shall be entitled to dividends in an amount equal
to any dividends which are declared and paid with respect to shares of
Common Stock or Preferred Stock from which such shares of Excess Stock
were converted. Any dividend or distribution paid prior to discovery by
the Corporation that shares of Common Stock or Preferred Stock have
been converted into Excess Stock shall be repaid to the Corporation
upon demand for delivery to the Trustee. The recipient of such dividend
shall be personally liable to the Trust for such dividend. Any dividend
or distribution declared but unpaid shall be rescinded as void ab
initio with respect to such shares of Common Stock or Preferred Stock
and shall automatically be deemed to have been declared and paid with
respect to the shares of Excess Stock into which such shares of Common
Stock or Preferred Stock shall have been converted.
(3) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of, or any distribution of the assets of, the
Corporation, (i) subject to the preferential rights of the Preferred
Stock, if any, as may be determined by the Board of Directors and the
preferential rights of the Excess Preferred Stock, if any, each holder
of shares of Excess Common Stock shall be entitled to receive, ratably
with each other holder of Common Stock and Excess Common Stock that
portion of the assets of the Corporation available for distribution to
the holders of Common Stock or Excess Common Stock as the number of
shares of the Excess Common Stock held by such holder bears to the
total number of shares of Common Stock and the number of shares of
Excess Common Stock then outstanding and (ii) each holder of shares of
Excess Preferred Stock shall be entitled to receive that portion of the
assets of the Corporation which a holder of the shares of Preferred
Stock that were converted into such shares of Excess Preferred Stock
would have been entitled to receive had such shares of Preferred Stock
remained outstanding. Notwithstanding the foregoing, distributions
shall not be made to holders of Excess Stock except in accordance with
the following sentence. The Corporation shall distribute to the
Trustee, as holder of the Excess Stock in trust, on behalf of the
Beneficiaries any such assets received in respect of the Excess Stock
in any liquidation, dissolution or winding up of, or any distribution
of the assets of the Corporation. Following any such distribution, the
Trustee shall distribute such proceeds between the Purported Record
Transferee or Purported Record Holder, as appropriate, and the
Qualified Charitable Organizations which are Beneficiaries in
accordance with procedure for
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<PAGE> 322
distribution of proceeds upon Transfer of Excess Stock set forth in
subparagraph (b)(5) of this Article NINTH; provided, however, that with
respect to any Excess Stock as to which no Beneficiary shall have been
determined within 10 days following the date upon which the Corporation
is prepared to distribute assets ("Undesignated Excess Stock"), any
assets that would have been distributed on account of such Undesignated
Excess Stock had a Beneficiary been determined shall be distributed to
the holders of Common Stock and the Beneficiaries of the Trust
designated with respect to shares of Excess Common Stock, or to the
holders of Preferred Stock and the Beneficiaries of the Trust
designated with respect to shares of Excess Preferred Stock as
determined in the sole discretion of the Board of Directors.
(4) Excess Stock shall be entitled to such voting rights as are
ascribed to shares of Common Stock or Preferred Stock from which such
shares of Excess Stock were converted. Any voting rights exercised
prior to discovery by the Corporation that shares of Common Stock or
Preferred Stock have been converted into Excess Stock shall be
rescinded and recast as determined by the Trustee.
(5) (A) Following the expiration of the ninety day period referred
to in subparagraph (b)(6) of this Article NINTH, Excess Stock shall be
transferable by the Trustee to any Person whose Beneficial Ownership or
Constructive Ownership of shares of Capital Stock outstanding, after
giving effect to such Transfer, would not result in the shares of
Excess Stock proposed to be transferred constituting Excess Stock in
the hands of the proposed transferee. A Purported Record Transferee or,
in the case of Excess Stock resulting from any event other than a
purported Transfer, the Purported Record Holder shall have no rights
whatsoever in such Excess Stock, except that such Purported Record
Transferee or, in the case of Excess Stock resulting from any event
other than a purported Transfer, the Purported Record Holder, upon
completion of such Transfer, shall be entitled to receive the lesser of
a price per share for such Excess Stock not in excess (based on the
information provided to the Corporation in the notice given pursuant to
this subparagraph (b)(5)(A)) of (x) the price per share such Purported
Beneficial Transferee paid for the Common Stock or Preferred Stock in
the purported Transfer that resulted in the Excess Stock, or (y) if the
Purported Beneficial Transferee did not give value for such shares of
Excess Stock (through a gift, devise or other transaction), a price per
share of Excess Stock equal to the Market Price of the Common Stock or
Preferred Stock on the date of the purported Transfer that resulted in
the Excess Stock. Upon such transfer of any interest in Excess Stock
held by the Trust, the corresponding shares of Excess Stock in the
Trust shall be automatically converted into such number of shares of
Common Stock or Preferred Stock (of the same class as the shares that
were converted into such Excess Stock) as is equal to the number of
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<PAGE> 323
shares of Excess Stock, and such shares of Common Stock or Preferred
Stock (of the same class as the shares that were converted into such
Excess Stock) as is equal to the number of shares of Excess Stock, and
such shares of Common Stock or Preferred Stock shall be transferred of
record to the proposed transferee of the Excess Stock. If,
notwithstanding the provisions of this Article NINTH, under any
circumstances, a Purported Transferee receives an amount for shares of
Excess Stock that exceeds the amount provided by the formula set forth
above, the Purported Transferee must pay the excess to the Trust. Prior
to any transfer resulting in Common Stock or Preferred Stock being
converted into Excess Stock, the Purported Record Transferee and
Purported Beneficial Transferee, jointly, or Purported Record Holder
and Purported Beneficial Holder, jointly, must give written notice to
the Corporation of the date and sale price of the purported Transfer
that resulted in Excess Stock or the Market Price on the date of the
other event that resulted in Excess Stock. Prior to a Transfer by the
Trustee of any shares of Excess Stock, the intended transferee must
give advance notice to the Corporation of the information (after giving
effect to the intended Transfer) required under subparagraph (a)(6),
and the Corporation must have waived in writing its purchase rights, if
any, under subparagraph (b)(6) of this Article NINTH. The Board of
Directors may waive the notice requirements of this subparagraph in
such circumstances as it deems appropriate.
(B) Notwithstanding the foregoing, if the provisions of
paragraph (b)(5) of this Article NINTH are determined to be void or
invalid by virtue of any legal decision, statue, rule or regulation,
then the Purported Beneficial Transferee or Purported Beneficial Holder
of any shares of Excess Stock may be deemed, at the option of the
Corporation, to have acted as an agent on behalf of the Trust, in
acquiring or holding such shares of Excess Stock and to hold such
shares of Excess Stock in trust on behalf of the Trust.
(6) Shares of Excess Stock shall be deemed to have been offered
for sale by the Trust to the Corporation, or its designee, at a price
per share of Excess Stock equal to the lesser of:
(A) (i) in the case of Excess Stock resulting from a
purported Transfer, (x) the price per share of the Common Stock or
Preferred Stock in the transaction that created such Excess Stock (or,
in the case of devise or gift, the Market Price of the Common Stock or
Preferred Stock at the time of such devise or gift), or (y) in the
absence of a notice from the Purported Record Transferee or Purported
Record Holder and Purported Beneficial Transferee to the Corporation
within ten days after request therefor, such price as may be determined
by the Board of Directors in its sole discretion, which price per share
of Excess Stock shall be equal to the lowest Market Price of Common
Stock or
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<PAGE> 324
Preferred Stock (whichever resulted in Excess Stock) at any time prior
to the date the Corporation, or its designee, accepts such offer; or
(ii) in the case of Excess Stock resulting from an event
other than a Purported Transfer, (x) the Market Price of the Common
Stock or Preferred Stock on the date of such event, or (y) in the
absence of a notice from the Purported Record Holder and Purported
Beneficial Holder to the Corporation within ten days after request
therefor, such price as may be determined, by the Board of Directors in
its sole discretion, which price shall be the lowest Market Price for
shares of Common Stock or Preferred Stock (whichever resulted in Excess
Stock) at any time from the date of the event resulting in Excess Stock
and prior to the date the Corporation, or its designee, accepts such
offer, and
(B) the Market Price of the Common Stock or Preferred Stock on the
date the Corporation, or its designee, accepts such offer. The
Corporation shall have the right to accept such offer for a period of
ninety days after the later of (i) the date of the Transfer which
resulted in such shares of Excess Stock and (ii) the date the Board of
Directors determines in good faith that a Transfer or other event
resulting in shares of Excess Stock has occurred, if the Corporation
does not receive a notice of such Transfer or other event pursuant to
subparagraph (a)(5) of this Article NINTH.
TENTH: Whenever the Corporation shall have the obligation to purchase
Units and shall have the right to choose to satisfy such obligation by
purchasing such Units either with cash or with Common Stock, the determination
whether to utilize cash or Common Stock to effect such purchase shall be made by
majority vote of the Independent Directors.
ELEVENTH: The duration of the Corporation shall be perpetual. The
Corporation shall be subject to termination at any time by the vote of the
holders of a majority of the outstanding shares of Common Stock, Class B Common
Stock, Class C Common Stock, and Series A Preferred Stock entitled to vote
thereon.
TWELFTH: In the event any term, provision, sentence or paragraph of the
Charter of the Corporation is declared by a court of competent jurisdiction to
be invalid or unenforceable, such term, provision, sentence or paragraph shall
be deemed severed from the remainder of the Charter, and the balance of the
Charter shall remain in effect and be enforced to the fullest extent permitted
by law and shall be construed to preserve the intent and purposes of the
Charter. Any such invalidity or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such term, provision, sentence or paragraph
of the Charter in any other jurisdiction.
IN WITNESS WHEREOF, I have signed these Articles of Incorporation,
acknowledging the same to be my act, on [ ], 1996.
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<PAGE> 325
Witness:
- ---------------------------------- --------------------------------------
SECOND: (a) As of immediately before the amendment the total number of
shares of stock of all classes which the Corporation has authority to issue is
412,000,000 shares, of which shares 246,000,000 are Common Stock, 12,000,000 are
Class B Common Stock, 4,000,000 are Series A Preferred Stock, and 150,000,000
are Excess Stock.
(b) As amended the total number of shares of stock of all
classes which the Corporation has authority to issue is 650,000,000 shares, of
which 383,996,000 shares are Common Stock (par value $.0001 per share),
12,000,000 shares are Class B Common Stock (par value $.0001 per share), 4,000
shares are Class C Common Stock (par value $.0001 per share), 4,000,000 shares
are Series A Preferred Stock (par value $.0001 per share), and 250,000,000
shares are Excess Stock (par value $.0001 per share).
(c) The aggregate par value of all shares having a par value is
$41,200 before the amendment and $65,000.00 as amended.
(d) The shares of stock of the Corporation are divided into
classes, and the amendment contains a description, as amended, of each class,
including the preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption.
THIRD: The foregoing amendment to the Charter of the Corporation has
been approved by a majority of the entire Board of Directors and by the
requisite number of shares entitled to vote on the matter.
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<PAGE> 326
IN WITNESS WHEREOF, SIMON PROPERTY GROUP, INC. has caused these presents to be
signed in its name and on its behalf by its President and witnessed by its
Secretary on [ ], 1996.
WITNESS: SIMON PROPERTY GROUP, INC.
By
- ---------------------------------- --------------------------------------
Secretary President
THE UNDERSIGNED, President of SIMON PROPERTY GROUP, INC., who executed
on behalf of the Corporation the foregoing Articles of Amendment and Restatement
of which this certificate is made a part, hereby acknowledges in the name and on
behalf of said Corporation the foregoing Articles of Amendment and Restatement
to be the corporate act of said Corporation and hereby certifies that to the
best of his knowledge, information, and belief the matters and facts set forth
therein with respect to the authorization and approval thereof are true in all
material respects under the penalties of perjury.
By
-------------------------------------
-------------------------------------
President
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<PAGE> 327
ANNEX VII
PROPOSED ALTERNATIVE AMENDED
CHARTER OF SPG
<PAGE> 328
SIMON PROPERTY GROUP, INC.
ARTICLES OF AMENDMENT
SIMON PROPERTY GROUP, INC., a Maryland corporation, having its
principal office in Baltimore City, Maryland (which is hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The Charter of the Corporation is hereby amended by changing the
following provisions:
1. Article SECOND is hereby replaced in its entirety by the following:
SECOND: The name of the corporation (which is hereinafter called the
"Corporation") is:
Simon DeBartolo Group, Inc.
2. Paragraph (a) of Article SIXTH is hereby replaced in its entirety by
the following:
SIXTH: (a) The total number of shares of stock of all classes which the
Corporation has authority to issue is 650,000,000 shares of capital stock (par
value $.000l per share), amounting in aggregate par value to $65,000.00, of
which shares 384,000,000 are classified as "Common Stock", 12,000,000 are
classified as "Class B Common Stock", 4,000,000 are classified as "Series A
Preferred Stock," and 250,000,000 are classified as "Excess Stock". The Board of
Directors may classify and reclassify any unissued shares of capital stock by
setting or changing in any one or more respects the preferences, conversion or
other rights, voting powers, restrictions, limitations as to dividends,
qualifications or terms or conditions of redemption of such shares of stock.
3. Article NINTH is hereby replaced in its entirety by the following:
NINTH: (a) (1) The following terms shall have the following meaning:
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"Aggregate Assumed Equity Interest in the Corporation" shall
mean the aggregate equity interest in the Corporation represented by
the Common Stock, the Class B Common Stock, and the Units on the
assumption that all shares of Class B Common Stock and all such Units
are exchanged for Common Stock
"Beneficial Ownership" shall mean ownership of Capital Stock
by a Person who would be treated as an owner of such shares of Capital
Stock either directly or indirectly through the application of Section
544 of the Code, as modified by Section 856(h)(1)(B) of the Code, and
any comparable successor provisions thereto. The terms "Beneficial
Owner," "Beneficially Owns" and "Beneficially Owned" shall have
correlative meanings.
"Beneficiary" shall mean any Qualified Charitable Organization
which, from time to time, is designated by the Corporation to be a
beneficiary of the Trust.
"Board of Directors" shall mean the Board of Directors of the
Corporation.
"By-Laws" shall mean the By-Laws of the Corporation.
"Capital Stock" shall mean stock that is Common Stock, Class B
Common Stock, Excess Stock or Preferred Stock.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
"Constructive Ownership" shall mean ownership of Capital Stock
by a Person who would be treated as an owner of such shares of Capital
Stock either directly or indirectly through the application of Section
318 of the Code, and any comparable successor provisions thereto, as
modified by Section 856(d)(5) of the Code. The terms "Constructive
Owner," "Constructively Owns" and "Constructively Owned" shall have
correlative meanings.
"DeBartolo Family Group" shall mean the Estate of Edward J.
DeBartolo, Sr., Edward J. DeBartolo, Jr. and Marie Denise DeBartolo
York, other members of the immediate family of any of the foregoing,
any other lineal descendants of any of the foregoing, any estates of
any of the foregoing, any trusts established for the benefit of any of
the foregoing, and any other entity controlled by any of the foregoing.
"DeBartolo Family Group Initial Aggregate Assumed Equity
Interest in the Corporation" shall mean the portion of the Aggregate
Assumed Equity Interest
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in the Corporation owned by the DeBartolo Family Group immediately
following the closing of the Merger.
"Exchange Rights" shall mean any rights granted to limited
partners of Simon DeBartolo Group, L.P., a Delaware limited partnership
(including pursuant to an Exchange Rights Agreement) and Simon Property
Group L.P., a Delaware limited partnership, to exchange (subject to the
Ownership Limit) limited partnership interests in such Partnership for
shares of Capital Stock.
"Independent Director" shall mean a director of the
Corporation who is neither employed by the Corporation nor a member (or
an affiliate of a member) of the Simon Family Group.
"Market Price" of any class of Capital Stock on any date shall
mean the average of the Closing Price for the five consecutive Trading
Days ending on such date, or if such date is not a Trading Date, the
five consecutive Trading Days preceding such date. The "Closing Price"
on any date shall mean (i) the last sale price, regular way, or, in
case no such sale takes place on such day, the average of the closing
bid and asked prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with respect to
securities listed or admitted to trading on the New York Stock
Exchange, or (ii) if such class of Capital Stock is not listed or
admitted to trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on
which such class of capital stock is listed or admitted to trading, or
(iii) if such class of capital stock is not listed or admitted to
trading on any national securities exchange, the last quoted price, or
if not so quoted, the average of the high bid and low asked prices in
the over-the-counter market, as reported by the National Association of
Securities Dealers, Inc. Automated Quotation System or, if such system
is no longer in use, the principal other automated quotations systems
that may then be in use, or (iv) if such class of Capital Stock is not
quoted by any such organization, the average of the closing bid and
asked prices as furnished by a professional market maker making a
market in such class of Capital Stock selected by the Board of
Directors.
"Merger" shall mean the merger, pursuant to the Agreement and
Plan of Merger dated March 26, 1996 among the Corporation, Day
Acquisition Corp., an Ohio corporation and a wholly owned subsidiary of
the Corporation ("Sub"), and DeBartolo Realty Corporation, an Ohio
corporation ("DeBartolo"), pursuant to which merger Sub shall be merged
with and into DeBartolo.
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<PAGE> 331
"Option" shall mean any options, rights, warrants or
convertible or exchangeable securities containing the right to
subscribe for, purchase or receive upon exchange or conversion shares
of Capital Stock.
"Ownership Limit" shall mean (x) in the case of any member of
the Simon Family Group, 24%, and (y) in the case of any other Person,
6%, in each case, of any class of Capital Stock, or any combination
thereof, determined by (i) number of shares outstanding, (ii) voting
power or (iii) value (as determined by the Board of Directors),
whichever produces the smallest holding of Capital Stock under the
three methods, computed with regard to all outstanding shares of
Capital Stock and, to the extent provided by the Code, all shares of
Capital Stock issuable under outstanding Options and Exchange Rights
that have not been exercised.
"Person" shall mean an individual, corporation, partnership,
estate, trust (including a trust qualified under Section 401(a) or
501(c)(17) of the Code), a portion of a trust permanently set aside for
or to be used exclusively for the purposes described in Section 642(c)
of the Code, association, private foundation within the meaning of
Section 509(a) of the Code, joint stock company or other entity and
also includes a group as the term is used for purposes of Section
13(d)(3) of the Securities Exchange Act of 1934, as amended.
"Purported Beneficial Holder" shall mean, with respect to any
event (other than a purported Transfer) which results in Excess Stock,
the Person for whom the Purported Record Holder held shares that were,
pursuant to subparagraph (a)(3) of this article NINTH, automatically
converted into Excess Stock upon the occurrence of such event.
"Purported Beneficial Transferee" shall mean, with respect to
any purported Transfer which results in Excess Stock, the purported
beneficial transferee for whom the Purported Record Transferee would
have acquired shares of Common Stock or Preferred Stock if such
Transfer had been valid under subparagraph (a)(2) of this Article
NINTH.
"Purported Record Holder" shall mean, with respect to any
event (other than a purported Transfer) which results in Excess Stock,
the record holder of the shares that were, pursuant to subparagraph
(a)(3) of this Article NINTH, automatically converted into Excess Stock
upon the occurrence of such event.
"Purported Record Transferee" shall mean, with respect to any
purported Transfer which results in Excess Stock, the record holder of
the Common Stock or the Preferred Stock if such Transfer had been valid
under subparagraph (a)(2) of this Article NINTH.
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"Qualified Charitable Organization" shall mean (i) any entity
which would be exempt from federal income under Section 501(c)(3) of
the Code and to which contributions are deductible under Section 170 of
the Code or (ii) any federal, state or local government entity.
"REIT" shall mean a real estate investment trust under Section
856 of the Code.
"Restriction Termination Date" shall mean the first day after
the effective date of the Merger on which the Corporation's status as a
REIT shall have been terminated by the Board of Directors and the
stockholders of the Corporation.
"Simon Family Group" shall mean Melvin Simon, Herbert Simon
and David Simon, other members of the immediate family of any of the
foregoing, any other lineal descendants of any of the foregoing, any
estates of any of the foregoing, any trust established for the benefit
of any of the foregoing, and any other entity controlled by any of the
foregoing.
"Simon Family Group Initial Aggregate Assumed Equity Interest
in the Corporation" shall mean the portion of the Aggregate Assumed
Equity Interest in the Corporation owned by the Simon Family Group
immediately following the closing of the Merger.
"Trading Day" shall mean, with respect to any class of Capital
Stock, a day on which the principal national securities exchange on
which such class of Capital Stock is listed or admitted to trading is
open for the transaction of business or, if such class of Capital Stock
is not listed or admitted to trading on any national securities
exchange, shall mean any day other than a Saturday, a Sunday or a day
on which banking institutions in the State of New York are authorized
or obligated by law or executive order to close.
"Transfer" shall mean any sale, transfer, gift, hypothecation,
pledge, assignment, devise or other disposition of Capital Stock
(including (i) the granting of any option (including an option to
acquire an Option or any series of such options) or entering into any
agreement for the sale, transfer or other disposition of Capital Stock
or (ii) the sale, transfer, assignment or other disposition of any
securities or rights convertible into or exchangeable for Capital
Stock), whether voluntary or involuntary, whether of record,
constructively or beneficially and whether by operation of law or
otherwise.
"Trust" shall mean the trust created pursuant to subparagraph
(b)(1) of this Article NINTH.
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"Trustee" shall mean any trustee for the Trust (or any
successor trustee) appointed from time to time by the Corporation;
provided, however, during any period in which Excess Stock is issued
and outstanding the Corporation shall undertake to appoint trustees of
the Trust which trustees are unaffiliated with the Corporation.
"Undesignated Excess Stock" shall have the meaning set forth
in subparagraph (b)(3) of this Article NINTH.
"Units" shall mean units representing limited partnership
interests in Simon Property Group, L.P. or DeBartolo Realty Partnership
L.P.
(2) (A) Except as provided in subparagraph (a)(9) of this
Article NINTH, from the effective date of the Merger and prior to the
Restriction Termination Date, no Person shall Beneficially Own or
Constructively Own shares of the outstanding Capital Stock in excess of
the Ownership Limit.
(B) Except as provided in subparagraph (a)(9) of this
Article NINTH, from the effective date of the Merger and prior to the
Restriction Termination Date, any Transfer that, if effective, would
result in any Person Beneficially Owning or Constructively Owning
Capital Stock in excess of the Ownership Limit shall be void ab initio
as to the Transfer of that number of shares of Capital Stock which
would be otherwise Beneficially or Constructively Owned by such Person
in excess of the Ownership Limit; and the intended transferee shall
acquire no rights in such shares of Common Stock or Preferred Stock in
excess of the Ownership Limit.
(C) Except as provided in subparagraph (a)(9) of this
Article NINTH, from the effective date of the Merger and prior to the
Restriction Termination Date, any Transfer that, if effective, would
result in the Capital Stock being Beneficially Owned by fewer than 100
Persons (determined without reference to any rules of attribution)
shall be void ab initio; and the intended transferee shall acquire no
rights in such shares of Common Stock or Preferred Stock.
(D) Except as provided in subparagraph (a)(9) of this
Article NINTH, from the effective date of the Merger and prior to the
Restriction Termination Date, any Transfer of shares or other event or
transaction involving Capital Stock that, if effective, would result in
the Corporation being "closely held" within the meaning of Section
856(h) of the Code shall be void ab initio as to the Transfer of that
number of shares or other event or transaction of Capital Stock which
would cause the Corporation to be "closely held" within the meaning of
Section 856(h) of the Code; and the intended transferee shall acquire
no rights
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in such shares of Common Stock or Preferred Stock in excess of the
Ownership Limit.
(3) (A) If, notwithstanding the other provisions contained in
this Article NINTH, at any time after the effective date of the Merger
and prior to the Restriction Termination Date, there is a purported
Transfer or other event such that any Person would Beneficially Own or
Constructively Own Capital Stock in excess of the Ownership Limit,
then, except as otherwise provided in subparagraph (a)(9), each such
share of Common Stock or Preferred Stock which, when taken together
with all other Capital Stock, would be in excess of the Ownership Limit
(rounded up to the nearest whole share), shall automatically be
converted into one share of Excess Stock, as further described in
subparagraph (a)(3)(C) below and such shares of Excess Stock shall be
automatically transferred to the Trustee as trustee for the Trust. The
Corporation shall issue fractional shares of Excess Stock if required
by such conversion ratio. Such conversion shall be effective as of the
close of business on the business day prior to the date of the Transfer
or other event.
(B) If, notwithstanding the other provisions
contained in this Article NINTH, at any time after the effective date
of the Merger and prior to the Restriction Termination Date, there is a
purported Transfer or other event which, if effective, would cause the
Corporation to become "closely held" within the meaning of Section
856(h) of the Code, then each share of Common Stock or Preferred Stock
being Transferred or which are otherwise affected by such event and
which, in either case, would cause, when taken together with all other
Capital Stock, the Corporation to be "closely held" within the meaning
of Section 856(h) of the Code (rounded up to the nearest whole share)
shall automatically be converted into one share of Excess Stock, as
further described in subparagraph (a)(3)(C) of this Article NINTH, and
such shares of Excess Stock shall be automatically transferred to
Trustee as trustee for the Trust. The Corporation shall issue
fractional shares of Excess Stock if required by such conversion ratio.
Such conversion shall be effective as of the close of business on the
business day prior to the date of the Transfer or other event.
(C) Upon conversion of Common Stock or Preferred
Stock into Excess Stock pursuant to this subparagraph (a)(3) of this
Article NINTH, Common Stock shall be converted into Excess Common Stock
and Preferred Stock shall be converted into Excess Preferred Stock.
(4) If the Board of Directors or its designees shall at any
time determine in good faith that a Transfer or other event has taken
place in violation of subparagraph (a)(2) of this Article NINTH or that
a Person intends to acquire
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<PAGE> 335
or has attempted to acquire Beneficial Ownership or Constructive
Ownership of any shares of Capital Stock in violation of subparagraph
(a)(2) of this Article NINTH, the Board of Directors or its designees
may take such action as it or they deem advisable to refuse to give
effect to or to prevent such Transfer or other event, including, but
not limited to, refusing to give effect to such Transfer or other event
on the books of the Corporation or instituting proceedings to enjoin
such Transfer or other event or transaction; provided, however, that
any Transfers or attempted Transfers (or, in the case of events other
than a Transfer, Beneficial Ownership or Constructive Ownership) in
violation of subparagraphs (a)(2)(A), (B), (C) and (D) of this Article
NINTH shall be void ab initio and any Transfers or attempted Transfers
(or, in the case of events other than a Transfer, Beneficial Ownership
or Constructive Ownership) in violation of subparagraphs (a)(2)(A),
(B), and (D) shall automatically result in the conversion described in
subparagraph (a)(3), irrespective of any action (or non-action) by the
Board of Directors or its designees.
(5) Any Person who acquires or attempts to acquire shares of
Capital Stock in violation of subparagraph (a)(2) of this Article
NINTH, or any Person who is a transferee such that Excess Stock results
under subparagraph (a)(3) of this Article NINTH, shall immediately give
written notice to the Corporation of such event and shall provide to
the Corporation such other information as the Corporation may request
in order to determine the effect, if any, of such Transfer or attempted
Transfer or other event on the Corporation's status as a REIT.
(6) From the effective date of the Merger and prior to the
Restriction Termination Date:
(A) Every Beneficial Owner or Constructive Owner of
more than 5%, or such lower percentages as required pursuant to
regulations under the Code, of the outstanding Capital Stock of the
Corporation shall, before January 30 of each year, give written notice
to the Corporation stating the name and address of such Beneficial
Owner or Constructive Owner, the general ownership structure of such
Beneficial Owner or Constructive Owner, the number of shares of each
class of Capital Stock Beneficially Owned or Constructively Owned, and
a description of how such shares are held.
(B) Each Person who is a Beneficial Owner or
Constructive Owner of Capital Stock and each Person (including the
stockholder of record) who is holding Capital Stock for a Beneficial
Owner or Constructive Owner shall provide on demand to the Corporation
such information as the Corporation may request from time to time in
order to determine the Corporation's status as a REIT and to ensure
compliance with the Ownership Limit.
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<PAGE> 336
(7) Subject to subparagraph (a)(12) of this Article NINTH,
nothing contained in this Article NINTH shall limit the authority of
the Board of Directors to take such other action as it deems necessary
or advisable to protect the Corporation and the interests of its
stockholders by preservation of the Corporation's status as REIT and to
ensure compliance with the Ownership Limit.
(8) In the case of an ambiguity in the application of any of
the provisions of subparagraph (a) of this Article NINTH, including any
definition contained in subparagraph (a)(1), the Board of Directors
shall have the power to determine the application of the provisions of
this subparagraph (a) with respect to any situation based on the facts
known to it.
(9) The Board of Directors upon receipt of a ruling from the
Internal Revenue Service or an opinion of tax counsel in each case to
the effect that the restrictions contained in subparagraphs (a)(2)(A),
(B), (C) and (D) of this Article NINTH will not be violated, may exempt
a Person from the Ownership Limit:
(A) (i) if such Person is not an individual for
purposes of Section 542(a)(2) of the Code, or (ii) if such Person is an
underwriter which participates in a public offering of Common Stock or
Preferred Stock for a period of 90 days following the purchase by such
underwriter of the Common Stock or Preferred Stock, or (iii) in such
other circumstances which the Board of Directors determines are
appropriately excepted from the Ownership Limit, and
(B) the Board of Directors obtains such
representations and undertakings from such Person as are reasonably
necessary to ascertain that no individual's Beneficial Ownership and
Constructive Ownership of Capital Stock will violate the Ownership
Limit and agrees that any violation or attempted violation will result
in such Common Stock or Preferred Stock being converted into shares of
Excess Stock in accordance with subparagraph (a)(3) of this Article
NINTH.
(10) From the effective date of the Merger and until the
Restriction Terminate Date, each certificate for the respective class
of Capital Stock shall bear the following legend:
The shares of Capital Stock represented by this certificate
are subject to restrictions on 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 from time to time (the "Code"). Transfers in
contravention of such restrictions shall be void ab initio.
Unless excepted by the Board of Directors of the Corporation,
no Person may (1) Beneficially Own or Constructively Own
shares of Capital Stock in excess
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<PAGE> 337
of 6% (other than members of the Simon Family Group, whose
relevant percentage is 24%) of the value of any class of
outstanding Capital Stock of the Corporation, or any
combination thereof, determined as provided in the
Corporation's Charter, as the same may be amended from time to
time (the "Charter"), and computed with regard to all
outstanding shares of Capital Stock and, to the extent
provided by the Code, all shares of Capital Stock issuable
under existing Options and Exchange Rights that have not been
exercised; or (2) Beneficially Own Capital Stock which would
result in the Corporation being "closely held" under Section
856(h) of the Code. Unless so excepted, any acquisition of
Capital Stock and continued holding of ownership constitutes a
continuous representation of compliance with the above
limitations, and any Person who attempts to Beneficially Own
or Constructively Own shares of Capital Stock in excess of the
above limitations has an affirmative obligation to notify the
Corporation immediately upon such attempt. If the restrictions
on transfer are violated, the transfer will be void ab initio
and the shares of Capital Stock represented hereby will be
automatically converted into shares of Excess Stock and will
be transferred to the Trustee to be held in trust for the
benefit of one or more Qualified Charitable Organizations,
whereupon such Person shall forfeit all rights and interests
in such Excess Stock. In addition, certain Beneficial Owners
or Constructive Owners must give written notice as to certain
information on demand and on an annual basis. All capitalized
terms in this legend have the meanings defined in the Charter.
The Corporation will mail without charge to any requesting
stockholder a copy of the Charter, including the express terms
of each class and series of the authorized capital stock of
the Corporation, within five days after receipt of a written
request therefor.
(11) If any provision of this Article NINTH or any application
of any such provision is determined to be invalid by any federal or
state court having jurisdiction over the issues, the validity of the
remaining provisions shall not be affected, and other applications of
such provision shall be affected only to the extent necessary to comply
with the determination of such court.
(12) Nothing in this Article NINTH shall preclude the
settlement of any transaction entered into through the facilities of
the New York Stock Exchange.
(b) (1) Upon any purported Transfer or other event that results in
Excess Stock pursuant to subparagraph (a)(3) of this Article NINTH, such Excess
Stock shall be deemed to have been transferred to the Trustee as trustee of the
Trust for the exclusive benefit of one or more Qualifying Charitable
Organizations as are designated from time to time by the Board of Directors with
respect to such Excess Stock. Shares of Excess Stock held in trust shall be
issued
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<PAGE> 338
and outstanding stock of the Corporation. The Purported Record
Transferee or Purported Record Holder and the Purported Beneficial
Transferee or Purported Beneficial Holder shall have no rights in such
Excess Stock, except such rights to certain proceeds upon Transfer of
shares of Excess Stock or upon any voluntary or involuntary
liquidation, dissolution or winding up of, or any distribution of the
assets of, the Corporation as are expressly set forth herein.
(2) Excess Stock shall be entitled to dividends in an amount
equal to any dividends which are declared and paid with respect to
shares of Common Stock or Preferred Stock from which such shares of
Excess Stock were converted. Any dividend or distribution paid
prior to discovery by the Corporation that shares of Common Stock
or Preferred Stock have been converted into Excess Stock shall be
repaid to the Corporation upon demand for delivery to the Trustee.
The recipient of such dividend shall be personally liable to the
Trust for such dividend. Any dividend or distribution declared but
unpaid shall be rescinded as void ab initio with respect to such
shares of Common Stock or Preferred Stock and shall automatically
be deemed to have been declared and paid with respect to the shares
of Excess Stock into which such shares of Common Stock or Preferred
Stock shall have been converted.
(3) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of, or any distribution of the assets of,
the Corporation, (i) subject to the preferential rights of the
Preferred Stock, if any, as may be determined by the Board of
Directors and the preferential rights of the Excess Preferred
Stock, if any, each holder of shares of Excess Common Stock shall
be entitled to receive, ratably with each other holder of Common
Stock and Excess Common Stock that portion of the assets of the
Corporation available for distribution to the holders of Common
Stock or Excess Common Stock as the number of shares of the Excess
Common Stock held by such holder bears to the total number of
shares of Common Stock and the number of shares of Excess Common
Stock then outstanding and (ii) each holder of shares of Excess
Preferred Stock shall be entitled to receive that portion of the
assets of the Corporation which a holder of the shares of Preferred
Stock that were converted into such shares of Excess Preferred
Stock would have been entitled to receive had such shares of
Preferred Stock remained outstanding. Notwithstanding the
foregoing, distributions shall not be made to holders of Excess
Stock except in accordance with the following sentence. The
Corporation shall distribute to the Trustee, as holder of the
Excess Stock in trust, on behalf of the Beneficiaries any such
assets received in respect of the Excess Stock in any liquidation,
dissolution or winding up of, or any distribution of the assets of
the Corporation. Following any such distribution, the Trustee shall
distribute such proceeds between the Purported Record Transferee or
Purported Record Holder, as appropriate, and the Qualified
Charitable Organizations which are Beneficiaries in accordance with
procedure for
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<PAGE> 339
distribution of proceeds upon Transfer of Excess Stock set forth in
subparagraph (b)(5) of this Article NINTH; provided, however, that with
respect to any Excess Stock as to which no Beneficiary shall have been
determined within 10 days following the date upon which the Corporation
is prepared to distribute assets ("Undesignated Excess Stock"), any
assets that would have been distributed on account of such Undesignated
Excess Stock had a Beneficiary been determined shall be distributed to
the holders of Common Stock and the Beneficiaries of the Trust
designated with respect to shares of Excess Common Stock, or to the
holders of Preferred Stock and the Beneficiaries of the Trust
designated with respect to shares of Excess Preferred Stock as
determined in the sole discretion of the Board of Directors.
(4) Excess Stock shall be entitled to such voting rights as
are ascribed to shares of Common Stock or Preferred Stock from which
such shares of Excess Stock were converted. Any voting rights exercised
prior to discovery by the Corporation that shares of Common Stock or
Preferred Stock have been converted into Excess Stock shall be
rescinded and recast as determined by the Trustee.
(5) (A) Following the expiration of the ninety day period
referred to in subparagraph (b)(6) of this Article NINTH, Excess Stock
shall be transferable by the Trustee to any Person whose Beneficial
Ownership or Constructive Ownership of shares of Capital Stock
outstanding, after giving effect to such Transfer, would not result in
the shares of Excess Stock proposed to be transferred constituting
Excess Stock in the hands of the proposed transferee. A Purported
Record Transferee or, in the case of Excess Stock resulting from any
event other than a purported Transfer, the Purported Record Holder
shall have no rights whatsoever in such Excess Stock, except that such
Purported Record Transferee or, in the case of Excess Stock resulting
from any event other than a purported Transfer, the Purported Record
Holder, upon completion of such Transfer, shall be entitled to receive
the lesser of a price per share for such Excess Stock not in excess
(based on the information provided to the Corporation in the notice
given pursuant to this subparagraph (b)(5)(A)) of (x) the price per
share such Purported Beneficial Transferee paid for the Common Stock or
Preferred Stock in the purported Transfer that resulted in the Excess
Stock, or (y) if the Purported Beneficial Transferee did not give value
for such shares of Excess Stock (through a gift, devise or other
transaction), a price per share of Excess Stock equal to the Market
Price of the Common Stock or Preferred Stock on the date of the
purported Transfer that resulted in the Excess Stock. Upon such
transfer of any interest in Excess Stock held by the Trust, the
corresponding shares of Excess Stock in the Trust shall be
automatically converted into such number of shares of Common Stock or
Preferred Stock (of the same class as the shares that were converted
into such Excess Stock) as is equal to the number of
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<PAGE> 340
shares of Excess Stock, and such shares of Common Stock or Preferred
Stock (of the same class as the shares that were converted into such
Excess Stock) as is equal to the number of shares of Excess Stock, and
such shares of Common Stock or Preferred Stock shall be transferred of
record to the proposed transferee of the Excess Stock. If,
notwithstanding the provisions of this Article NINTH, under any
circumstances, a Purported Transferee receives an amount for shares of
Excess Stock that exceeds the amount provided by the formula set forth
above, the Purported Transferee must pay the excess to the Trust. Prior
to any transfer resulting in Common Stock or Preferred Stock being
converted into Excess Stock, the Purported Record Transferee and
Purported Beneficial Transferee, jointly, or Purported Record Holder
and Purported Beneficial Holder, jointly, must give written notice to
the Corporation of the date and sale price of the purported Transfer
that resulted in Excess Stock or the Market Price on the date of the
other event that resulted in Excess Stock. Prior to a Transfer by the
Trustee of any shares of Excess Stock, the intended transferee must
give advance notice to the Corporation of the information (after giving
effect to the intended Transfer) required under subparagraph (a)(6),
and the Corporation must have waived in writing its purchase rights, if
any, under subparagraph (b)(6) of this Article NINTH. The Board of
Directors may waive the notice requirements of this subparagraph in
such circumstances as it deems appropriate.
(B) Notwithstanding the foregoing, if the provisions
of paragraph (b)(5) of this Article NINTH are determined to be void or
invalid by virtue of any legal decision, statue, rule or regulation,
then the Purported Beneficial Transferee or Purported Beneficial Holder
of any shares of Excess Stock may be deemed, at the option of the
Corporation, to have acted as an agent on behalf of the Trust, in
acquiring or holding such shares of Excess Stock and to hold such
shares of Excess Stock in trust on behalf of the Trust.
(6) Shares of Excess Stock shall be deemed to have been
offered for sale by the Trust to the Corporation, or its designee, at a
price per share of Excess Stock equal to the lesser of:
(A) (i) in the case of Excess Stock resulting from a
purported Transfer, (x) the price per share of the Common Stock or
Preferred Stock in the transaction that created such Excess Stock (or,
in the case of devise or gift, the Market Price of the Common Stock or
Preferred Stock at the time of such devise or gift), or (y) in the
absence of a notice from the Purported Record Transferee or Purported
Record Holder and Purported Beneficial Transferee to the Corporation
within ten days after request therefor, such price as may be determined
by the Board of Directors in its sole discretion, which price per share
of Excess Stock shall be equal to the lowest Market Price of Common
Stock or
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<PAGE> 341
Preferred Stock (whichever resulted in Excess Stock) at any time prior
to the date the Corporation, or its designee, accepts such offer; or
(ii) in the case of Excess Stock resulting
from an event other than a Purported Transfer, (x) the Market Price of
the Common Stock or Preferred Stock on the date of such event, or (y)
in the absence of a notice from the Purported Record Holder and
Purported Beneficial Holder to the Corporation within ten days after
request therefor, such price as may be determined, by the Board of
Directors in its sole discretion, which price shall be the lowest
Market Price for shares of Common Stock or Preferred Stock (whichever
resulted in Excess Stock) at any time from the date of the event
resulting in Excess Stock and prior to the date the Corporation, or its
designee, accepts such offer, and
(B) the Market Price of the Common Stock or Preferred
Stock on the date the Corporation, or its designee, accepts such offer.
The Corporation shall have the right to accept such offer for a period
of ninety days after the later of (i) the date of the Transfer which
resulted in such shares of Excess Stock and (ii) the date the Board of
Directors determines in good faith that a Transfer or other event
resulting in shares of Excess Stock has occurred, if the Corporation
does not receive a notice of such Transfer or other event pursuant to
subparagraph (a)(5) of this Article NINTH.
SECOND: (a) As of immediately before the amendment the total
number of shares of stock of all classes which the Corporation has authority to
issue is 412,000,000 shares, of which shares 246,000,000 are Common Stock,
12,000,000 are Class B Common Stock, 4,000,000 are Series A Preferred Stock, and
150,000,000 are Excess Stock.
(b) As amended the total number of shares of stock of
all classes which the Corporation has authority to issue is 650,000,000 shares,
of which 384,000,000 shares are Common Stock (par value $.0001 per share),
12,000,000 shares are Class B Common Stock (par value $.0001 per share),
4,000,000 shares are Series A Preferred Stock (par value $.0001 per share), and
250,000,000 shares are Excess Stock (par value $.0001 per share).
(c) The aggregate par value of all shares having a
par value is $41,200 before the amendment and $65,000.00 as amended.
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<PAGE> 342
(d) The shares of stock of the Corporation are
divided into classes, and the amendment contains a description, as amended, of
each class, including the preferences, conversion and other rights, voting
powers, restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption.
THIRD: The foregoing amendment to the Charter of the
Corporation has been approved by a majority of the entire Board of Directors and
by the requisite number of shares entitled to vote on the matter.
IN WITNESS WHEREOF, SIMON PROPERTY GROUP, INC. has caused these presents to be
signed in its name and on its behalf by its President and witnessed by its
Secretary on [ ], 1996.
WITNESS: SIMON PROPERTY GROUP, INC.
By
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Secretary President
THE UNDERSIGNED, President of SIMON PROPERTY GROUP, INC., who executed
on behalf of the Corporation the foregoing Articles of Amendment and Restatement
of which this certificate is made a part, hereby acknowledges in the name and on
behalf of said Corporation the foregoing Articles of Amendment and Restatement
to be the corporate act of said Corporation and hereby certifies that to the
best of his knowledge, information, and belief the matters and facts set forth
therein with respect to the authorization and approval thereof are true in all
material respects under the penalties of perjury.
By
----------------------------
----------------------------
President
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ANNEX VIII
PROPOSED AMENDED AND RESTATED
BY-LAWS OF SPG
<PAGE> 344
SIMON DEBARTOLO GROUP, INC.
AMENDED AND RESTATED BY-LAWS
ARTICLE I.
STOCKHOLDERS
SECTION 1.01. ANNUAL MEETING. The Corporation shall hold an annual
meeting of its stockholders to elect directors and transact any other business
within its powers, either at 10:00 a.m. on the second Wednesday of May in each
year if not a legal holiday, or at such other time on such other day falling on
or before the 30th day thereafter as shall be set by the Board of Directors.
Except as the Charter or statute provides otherwise, any business may be
considered at an annual meeting without the purpose of the meeting having been
specified in the notice. Failure to hold an annual meeting does not invalidate
the Corporation's existence or affect any otherwise valid corporate acts.
SECTION 1.02. SPECIAL MEETING. At any time in the interval between
annual meetings, a special meeting of the stockholders may be called by the
Chairman of the Board or the President or by a majority of the Board of
Directors by vote at a meeting or in writing (addressed to the Secretary of the
Corporation) with or without a meeting; provided that a special meeting of
holders of the Class B Common Stock or Class C Common Stock shall be called by
the President in the event a vacancy occurs on the Board from any cause among
the directors elected by the holders of the Class B Common Stock or Class C
Common Stock, as the case may be, and that a special meeting of holders of the
Series A Preferred Stock, the Common Stock, the Class C Common Stock and the
Class B Common Stock shall be called by the President in the event a vacancy
occurs on the Board from any cause among the directors elected by the holders of
the Series A Preferred Stock, the Common Stock, the Class C Common Stock and the
Class B Common Stock (voting together as a single class) and is not filled by
the directors within 30 days after the vacancy occurs. Special meetings of the
stockholders shall be called at the request of the stockholders as may be
required by law.
SECTION 1.03. PLACE OF MEETINGS. Meetings of stockholders shall be held
at such place in the United States as is set from time to time by the Board of
Directors.
SECTION 1.04. NOTICE OF MEETINGS; WAIVER OF NOTICE. Not less than ten
nor more than 90 days before each stockholders' meeting, the Secretary shall
give written notice of the meeting to each stockholder entitled to vote at the
meeting and each other stockholder entitled to notice of the meeting. The notice
shall state the time and place of the meeting and, if the meeting is a special
meeting or notice of the purpose is required by statute, the purpose of the
meeting. Notice is given to a stockholder when it is personally delivered to
him, left at his residence or usual place of business, or mailed to him at his
address as it appears on the records of the
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Corporation. Notwithstanding the foregoing provisions, each person who is
entitled to notice waives notice if he or she before or after the meeting signs
a waiver of the notice which is filed with the records of stockholders'
meetings, or is present at the meeting in person or by proxy.
SECTION 1.05. QUORUM; VOTING. Unless any statute or the Charter
provides otherwise, at a meeting of stockholders the presence in person or by
proxy of stockholders entitled to cast a majority of all the votes entitled to
be cast at the meeting constitutes a quorum, and a majority of all the votes
cast at a meeting at which a quorum is present is sufficient to approve any
matter which properly comes before the meeting, except that a plurality of all
the votes cast at a meeting at which a quorum is present is sufficient to elect
a director.
SECTION 1.06. ADJOURNMENTS. Whether or not a quorum is present, a
meeting of stockholders convened on the date for which it was called may be
adjourned from time to time without further notice by a majority vote of the
stockholders present in person or by proxy to a date not more than 120 days
after the original record date. Any business which might have been transacted at
the meeting as originally notified may be deferred and transacted at any such
adjourned meeting at which a quorum shall be present.
SECTION 1.07. GENERAL RIGHT TO VOTE; PROXIES. Unless the Charter
provides otherwise, each outstanding share of stock, regardless of class, is
entitled to one vote on each matter submitted to a vote at a meeting of
stockholders. In all elections for directors, each share of stock entitled to
vote may be voted for as many individuals as there are directors to be elected
and for whose election the share is entitled to be voted. A stockholder may vote
the stock he or she owns of record either in person or by written proxy signed
by the stockholder or by his or her duly authorized attorney in fact. Unless a
proxy provides otherwise, it is not valid more than 11 months after its date.
SECTION 1.08. LIST OF STOCKHOLDERS. At each meeting of stockholders, a
full, true and complete list of all stockholders entitled to vote at such
meeting, showing the number and class of shares held by each and certified by
the transfer agent for such class or by the Secretary, shall be furnished by the
Secretary.
SECTION 1.09. CONDUCT OF BUSINESS. Nominations of persons for election
to the Board of Directors and the proposal of business to be considered by the
stockholders may be made at an annual meeting of stockholders (a) pursuant to
the Corporation's notice of meeting, (b) by or at the direction of the Board of
Directors or (c) by any stockholder of the Corporation who was a stockholder of
record at the time of giving notice provided for in Section 1.12, who is
entitled to vote at the meeting and who complied with the notice procedures set
forth in Section 1.12. The chairman of the meeting shall have the power and duty
to determine whether a nomination or any business proposed to be brought before
the meeting was made in accordance with the procedures set forth in this Section
and Section 1.12 and, if any proposed nomination or business is not in
compliance with this Section and Section 1.12, to declare that such defective
nomination or proposal be disregarded.
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SECTION 1.10. CONDUCT OF VOTING. At all meetings of stockholders,
unless the voting is conducted by inspectors, the proxies and ballots shall be
received, and all questions touching the qualification of voters and the
validity of proxies, the acceptance or rejection of votes and procedures for the
conduct of business not otherwise specified by these By-Laws, the Charter or
law, shall be decided or determined by the chairman of the meeting. If demanded
by stockholders, present in person or by proxy, entitled to cast 10% in number
of votes entitled to be cast, or if ordered by the chairman, the vote upon any
election or question shall be taken by ballot and, upon like demand or order,
the voting shall be conducted by two inspectors, in which event the proxies and
ballots shall be received, and all questions touching the qualification of
voters and the validity of proxies and the acceptance or rejection of votes
shall be decided, by such inspectors. Unless so demanded or ordered, no vote
need be by ballot and voting need not be conducted by inspectors. The
stockholders at any meeting may choose an inspector or inspectors to act at such
meeting, and in default of such election the chairman of the meeting may appoint
an inspector or inspectors. No candidate for election as a director at a meeting
shall serve as an inspector thereat.
SECTION 1.11. INFORMAL ACTION BY STOCKHOLDERS. Any action required or
permitted to be taken at a meeting of stockholders may be taken without a
meeting if there is filed with the records of stockholders meetings an unanimous
written consent which sets forth the action and is signed by each stockholder
entitled to vote on the matter and a written waiver of any right to dissent
signed by each stockholder entitled to notice of the meeting but not entitled to
vote at it.
SECTION 1.12. STOCKHOLDER PROPOSALS. For any stockholder proposal to be
presented in connection with an annual meeting of stockholders of the
Corporation, including any proposal relating to the nomination of a director to
be elected to the Board of Directors of the Corporation, the stockholders must
have given timely notice thereof in writing to the Secretary of the Corporation.
To be timely, a stockholder's notice shall be delivered to the Secretary at the
principal executive offices of the Corporation not less than 60 days nor more
than 90 days prior to the first anniversary of the preceding year's annual
meeting; provided, however, that in the event that the date of the annual
meeting is advanced by more than 30 days or delayed by more than 60 days from
such anniversary date, notice by the stockholder to be timely must be so
delivered not earlier than the 90th day prior to such annual meeting and not
later than the close of business on the later of the 60th day prior to such
annual meeting or the tenth day following the day on which public announcement
of the date of such meeting is first made. Such stockholder's notice shall set
forth (a) as to each person whom the stockholder proposes to nominate for
election or reelection as a director all information relating to such person
that is required to be disclosed in solicitations of proxies for election of
directors, or is otherwise required, in each case pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended (the "Exchange Act")
(including such person's written consent to being named in the proxy statement
as a nominee and to serving as a director if elected); (b) as to any other
business that the stockholder proposes to bring before the meeting, a brief
description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting and any material interest in
such business of such stockholder and of the beneficial owner, if any, on
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whose behalf the proposal is made; and (c) as to the stockholder giving the
notice and the beneficial owner, if any, on whose behalf the nomination or
proposal is made, (i) the name and address of such stockholder, as they appear
on the Corporation's books, and of such beneficial owner and (ii) the class and
number of shares of stock of the Corporation which are owned beneficially and of
record by such stockholders and such beneficial owner.
ARTICLE II.
BOARD OF DIRECTORS
SECTION 2.01. FUNCTION OF DIRECTORS. The business and affairs of the
Corporation shall be managed under the direction of its Board of Directors. All
powers of the Corporation may be exercised by or under authority of the Board of
Directors, except as conferred on or reserved to the stockholders by statute or
by the Charter or By-Laws.
SECTION 2.02. NUMBER OF DIRECTORS. The Corporation shall have that
number of directors as provided in paragraph (a) of Article SEVENTH of its
Charter.
SECTION 2.03. ELECTION AND TENURE OF DIRECTORS. Subject to the rights
of holders of Class B Common Stock and Class C Common Stock, and subject to
paragraph (e) of Article SEVENTH of the Charter, at each annual meeting the
stockholders shall elect directors to hold office until the next annual meeting
and until their successors are elected and qualify.
SECTION 2.04. REMOVAL OF DIRECTOR. Any director or the entire Board of
Directors may be removed only in accordance with the provisions of the Charter.
SECTION 2.05. VACANCY ON BOARD. Subject to the rights of the holders of
any class of Preferred Stock then outstanding, newly created directorships
resulting from any increase in the authorized number of directors shall be
filled by a vote of the stockholders or a majority of the entire Board of
Directors, and any vacancies on the Board of Directors resulting from death,
resignation, retirement, disqualification, removal from office, or other cause
shall be filled in accordance with paragraph (b) of Article SEVENTH of the
Charter. A director elected by the stockholders or by the Board of Directors to
fill a vacancy which results from the removal of a director serves for the
balance of the term of the removed director.
SECTION 2.06. REGULAR MEETINGS. After each meeting of stockholders at
which directors shall have been elected, the Board of Directors shall meet as
soon as practicable for the purpose of organization and the transaction of other
business. In the event that no other time and place are specified by resolution
of the Board, the President or the Chairman, with notice in accordance with
Section 2.08, the Board of Directors shall meet immediately following the close
of, and at the place of, such stockholders' meeting. Any other regular meeting
of the Board of
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Directors shall be held on such date and at any place as may be designated
from time to time by the Board of Directors.
SECTION 2.07. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called at any time by the Chairman of the Board or the
President or by a majority of the Board of Directors by vote at a meeting, or in
writing with or without a meeting. A special meeting of the Board of Directors
shall be held on such date and at any place as may be designated from time to
time by the Board of Directors. In the absence of designation such meeting shall
be held at such place as may be designated in the call.
SECTION 2.08. NOTICE OF MEETING. Except as provided in Section 2.6, the
Secretary shall give notice to each director of each regular and special meeting
of the Board of Directors. The notice shall state the time and place of the
meeting. Notice is given to a director when it is delivered personally to him,
left at his residence or usual place of business, or sent by telegraph,
facsimile transmission or telephone, at least 24 hours before the time of the
meeting or, in the alternative by mail to his address as it shall appear on the
records of the Corporation, at least 72 hours before the time of the meeting.
Unless the By-Laws or a resolution of the Board of Directors provides otherwise,
the notice need not state the business to be transacted at or the purposes of
any regular or special meeting of the Board of Directors. No notice of any
meeting of the Board of Directors need be given to any director who attends
except where a director attends a meeting for the express purpose of objecting
to the transaction of any business because the meeting is not lawfully called or
convened, or to any director who, in writing executed and filed with the records
of the meeting either before or after the holding thereof, waives such notice.
Any meeting of the Board of Directors, regular or special, may adjourn from time
to time to reconvene at the same or some other place, and no notice need be
given of any such adjourned meeting other than by announcement.
SECTION 2.09. ACTION BY DIRECTORS. Unless statute or the Charter or
By-Laws requires a greater proportion, the action of a majority of the directors
present at a meeting at which a quorum is present is action of the Board of
Directors. A majority of the entire Board of Directors shall constitute a quorum
for the transaction of business. In addition, the affirmative vote of least
[six] of the Independent Directors is necessary to cause any partnership in
which the Corporation acts, directly or indirectly, as a general partner to sell
any property owned by such partnership in accordance with the terms of the
partnership agreement of such partnership. In the absence of a quorum, the
directors present by majority vote and without notice other than by announcement
may adjourn the meeting from time to time until a quorum shall attend. At any
such adjourned meeting at which a quorum shall be present, any business may be
transacted which might have been transacted at the meeting as originally
notified. Any action required or permitted to be taken at a meeting of the Board
of Directors may be taken without a meeting, if an unanimous written consent
which sets forth the action is signed by each member of the Board and filed with
the minutes of proceedings of the Board.
SECTION 2.10. MEETING BY CONFERENCE TELEPHONE. Members of the Board of
Directors may participate in a meeting by means of a conference telephone or
similar
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communications equipment if all persons participating in the meeting can hear
each other at the same time. Participation in a meeting by these means
constitutes presence in person at a meeting.
SECTION 2.11. COMPENSATION. By resolution of the Board of Directors a
fixed sum and expenses, if any, for attendance at each regular or special
meeting of the Board of Directors or of committees thereof, and other
compensation for their services as such or on committees of the Board of
Directors, may be paid to directors. Directors who are full-time employees of
the Corporation need not be paid for attendance at meetings of the board or
committees thereof for which fees are paid to other directors. A director who
serves the Corporation in any other capacity also may receive compensation for
such other services, pursuant to a resolution of the directors.
SECTION 2.12. ADVISORY DIRECTORS. The Board of Directors may by
resolution appoint advisory directors to the Board, who may also serve as
directors emeriti, and shall have such authority and receive such compensation
and reimbursement as the Board of Directors shall provide. Advisory directors or
directors emeriti shall not have the authority to participate by vote in the
transaction of business.
SECTION 2.13. LOSS OF DEPOSITS. No director shall be liable for any
loss which may occur by reason of the failure of any bank, trust company,
savings and loan association, or other institution with whom moneys or stock of
the Corporation have been deposited.
SECTION 2.14. SURETY BONDS. Unless required by law, no director shall
be obligated to give any bond or surety or other security for the performance of
any of his or her duties.
ARTICLE III.
COMMITTEES
SECTION 3.01. COMMITTEES. The Board of Directors may appoint from among
its members an Executive Committee, an Audit Committee, a Compensation
Committee, a Nominating Committee and other committees composed of two or more
directors and delegate to these committees any of the powers of the Board of
Directors, except the power to declare dividends or other distributions on
stock, elect directors, issue stock other than as provided in the next sentence,
recommend to the stockholders any action which requires stockholder approval,
amend the By-Laws, or approve any merger or share exchange which does not
require stockholder approval. Each committee except the Audit Committee and the
Nominating Committee shall have as a member at least one director elected by the
Class B Common Stock and at least one elected by the Class C Common Stock. The
entire Audit Committee and a majority of the Compensation Committee shall be
Independent Directors. The Nominating Committee shall have five members, with
two being Independent Directors, two elected by the Class B Common Stock, and
one elected by the Class C Common Stock, and, except as
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otherwise provided in paragraph (b) of Article SEVENTH of the Charter, only
those members of the Nominating Committee elected by the Class B Common Stock or
the Class C Common Stock shall nominate the persons to be elected to serve as
directors by the holders of Class B Common Stock or Class C Common Stock,
respectively. If the Board of Directors has given general authorization for the
issuance of stock, a committee of the Board, in accordance with a general
formula or method specified by the Board by resolution or by adoption of a stock
option or other plan, may fix the terms of stock subject to classification or
reclassification and the terms on which any stock may be issued, including all
terms and conditions required or permitted to be established or authorized by
the Board of Directors.
SECTION 3.02. COMMITTEE PROCEDURE. Each committee may fix rules of
procedure for its business. A majority of the members of a committee shall
constitute a quorum for the transaction of business and the act of a majority of
those present at a meeting at which a quorum is present shall be the act of the
committee. Any action required or permitted to be taken at a meeting of a
committee may be taken without a meeting, if an unanimous written consent which
sets forth the action is signed by each member of the committee and filed with
the minutes of the committee. The members of a committee may conduct any meeting
thereof by conference telephone in accordance with the provisions of Section
2.10.
ARTICLE IV.
OFFICERS
SECTION 4.01. EXECUTIVE AND OTHER OFFICERS. The Corporation shall
have a President, a Secretary, and a Treasurer. The Corporation may also have a
Chairman of the Board, a Chief Executive Officer, one or more Vice-Presidents,
assistant officers, and subordinate officers as may be established by the Board
of Directors. A person may hold more than one office in the Corporation except
that no person may serve concurrently as both President and Vice-President of
the Corporation. The Chairman of the Board shall be a director; the other
officers may be directors.
SECTION 4.02. CHAIRMAN OF THE BOARD. The Chairman of the Board, if one
be elected, shall preside at all meetings of the Board of Directors and of the
stockholders at which he or she shall be present. In general, the Chairman of
the Board shall perform all such duties as are from time to time assigned to him
or her by the Board of Directors.
SECTION 4.03. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer
shall be the principal executive officer of the Corporation and, subject to the
control of the Board of Directors and with the President, shall in general
supervise and control all of the business and affairs of the Corporation. In
general, he or she shall perform such other duties usually performed by a chief
executive officer of a corporation and such other duties as are from time to
time assigned to him or her by the Board of Directors of the Corporation. Unless
otherwise provided by resolution of the Board of Directors, the Chief Executive
Officer, if one be elected,
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in the absence of the Chairman of the Board, shall preside at all meetings of
the Board of Directors and of the stockholders at which he or she shall be
present.
SECTION 4.04. PRESIDENT. Unless otherwise specified by the Board of
Directors, the President shall be the chief operating officer of the Corporation
and perform the duties customarily performed by a chief operating officer of a
corporation. If no Chief Executive Officer is appointed, he or she shall also
serve as the Chief Executive Officer of the Corporation. The President may sign
and execute, in the name of the Corporation, all authorized deeds, mortgages,
bonds, contracts or other instruments, except in cases in which the signing and
execution thereof shall have been expressly delegated to some other officer or
agent of the Corporation. In general, he or she shall perform such other duties
usually performed by a president of a corporation and such other duties as are
from time to time assigned to him or her by the Board of Directors or the Chief
Executive Officer of the Corporation. Unless otherwise provided by resolution of
the Board of Directors, the President, in the absence of the Chairman of the
Board and the Chief Executive Officer, shall preside at all meetings of the
Board of Directors and of the stockholders at which he or she shall be present.
SECTION 4.05. VICE-PRESIDENTS. The Vice-President or Vice-Presidents,
at the request of the Chief Executive Officer or the President, or in the
President's absence or during his inability to act, shall perform the duties and
exercise the functions of the President, and when so acting shall have the
powers of the President. If there be more than one Vice-President, the Board of
Directors may determine which one or more of the Vice-Presidents shall perform
any of such duties or exercise any of such functions, or if such determination
is not made by the Board of Directors, the Chief Executive Officer, or the
President may make such determination; otherwise any of the Vice-Presidents may
perform any of such duties or exercise any of such functions. The Vice-President
or Vice-Presidents shall have such other powers and perform such other duties,
and have such additional descriptive designations in their titles (if any), as
are from time to time assigned to them by the Board of Directors, the Chief
Executive Officer, or the President.
SECTION 4.06. SECRETARY. The Secretary shall keep the minutes of the
meetings of the stockholders, of the Board of Directors and of any committees,
in books provided for the purpose; he or she shall see that all notices are duly
given in accordance with the provisions of the By-Laws or as required by law; he
or she shall be custodian of the records of the Corporation; he or she may
witness any document on behalf of the Corporation, the execution of which is
duly authorized, see that the corporate seal is affixed where such document is
required or desired to be under its seal, and, when so affixed, may attest the
same; and, in general, the Secretary shall perform all duties incident to the
office of a secretary of a corporation, and such other duties as are from time
to time assigned to him or her by the Board of Directors, the Chief Executive
Officer, or the President.
SECTION 4.07. TREASURER. The Treasurer shall have charge of and be
responsible for all funds, securities, receipts and disbursements of the
Corporation, and shall deposit, or cause to be deposited, in the name of the
Corporation, all moneys or other valuable effects in such banks,
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trust companies or other depositories as shall, from time to time, be selected
by the Board of Directors; he or she shall render to the President and to the
Board of Directors, whenever requested, an account of the financial condition of
the Corporation; and, in general, the Treasurer shall perform all the duties
incident to the office of a treasurer of a corporation, and such other duties as
are from time to time assigned to him or her by the Board of Directors, the
Chief Executive Officer, or the President.
SECTION 4.08. ASSISTANT AND SUBORDINATE OFFICERS. The assistant and
subordinate officers of the Corporation are all officers below the office of
Vice-President, Secretary, or Treasurer. The assistant or subordinate officers
shall have such duties as are from time to time assigned to them by the Board of
Directors, the Chief Executive Officer, or the President.
SECTION 4.09. ELECTION, TENURE AND REMOVAL OF OFFICERS. The Board of
Directors shall elect the officers. The Board of Directors may from time to time
authorize any committee or officer to appoint assistant and subordinate
officers. Election or appointment of an officer, employee or agent shall not of
itself create contract rights. All officers shall be appointed to hold their
offices, respectively, during the pleasure of the Board. The Board of Directors
(or, as to any assistant or subordinate officer, any committee or officer
authorized by the Board) may remove an officer at any time. The removal of an
officer does not prejudice any of his contract rights. The Board of Directors
(or, as to any assistant or subordinate officer, any committee or officer
authorized by the Board) may fill a vacancy which occurs in any office for the
unexpired portion of the term.
SECTION 4.10. COMPENSATION. The Board of Directors shall have power to
fix the salaries and other compensation and remuneration, of whatever kind, of
all officers of the Corporation. No officer shall be prevented from receiving
such salary by reason of the fact that he or she is also a director of the
Corporation. The Board of Directors may authorize any committee or officer, upon
whom the power of appointing assistant and subordinate officers may have been
conferred, to fix the salaries, compensation and remuneration of such assistant
and subordinate officers.
ARTICLE V.
DIVISIONAL TITLES
SECTION 5.01. CONFERRING DIVISIONAL TITLES. The Board of Directors may
from time to time confer upon any employee of a division of the Corporation the
title of President, Vice President, Treasurer or Controller of such division or
any other title or titles deemed appropriate, or may authorize the Chairman of
the Board or the President to do so. Any such titles so conferred may be
discontinued and withdrawn at any time by the Board of Directors, or by the
Chairman of the Board or the President if so authorized by the Board of
Directors. Any employee of a division designated by such a divisional title
shall have the powers and duties with
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respect to such division as shall be prescribed by the Board of Directors, the
Chairman of the Board or the President.
SECTION 5.02. EFFECT OF DIVISIONAL TITLES. The conferring of divisional
titles shall not create an office of the Corporation under Article IV unless
specifically designated as such by the Board of Directors; but any person who is
an officer of the Corporation may also have a divisional title.
ARTICLE VI.
STOCK
SECTION 6.01. CERTIFICATES FOR STOCK. Each stockholder is entitled to
certificates which represent and certify the shares of stock he or she holds in
the Corporation. Each stock certificate shall include on its face the name of
the Corporation, the name of the stockholder or other person to whom it is
issued, and the class of stock and number of shares it represents. It shall be
in such form, not inconsistent with law or with the Charter, as shall be
approved by the Board of Directors or any officer or officers designated for
such purpose by resolution of the Board of Directors. Each stock certificate
shall be signed by the Chairman of the Board, the President, or a
Vice-President, and countersigned by the Secretary, an Assistant Secretary, the
Treasurer, or an Assistant Treasurer. Each certificate may be sealed with the
actual corporate seal or a facsimile of it or in any other form and the
signatures may be either manual or facsimile signatures. A certificate is valid
and may be issued whether or not an officer who signed it is still an officer
when it is issued. A certificate may not be issued until the stock represented
by it is fully paid.
SECTION 6.02. TRANSFERS. The Board of Directors shall have power and
authority to make such rules and regulations as it may deem expedient concerning
the issue, transfer and registration of certificates of stock; and may appoint
transfer agents and registrars thereof. The duties of transfer agent and
registrar may be combined.
SECTION 6.03. RECORD DATES AND CLOSING OF TRANSFER BOOKS. The Board of
Directors may set a record date or direct that the stock transfer books be
closed for a stated period for the purpose of making any proper determination
with respect to stockholders, including which stockholders are entitled to
notice of a meeting, vote at a meeting, receive a dividend, or be allotted other
rights. The record date may not be prior to the close of business on the day the
record date is fixed nor, subject to Section 1.06, more than 90 days before the
date on which the action requiring the determination will be taken; the transfer
books may not be closed for a period longer than 20 days; and, in the case of a
meeting of stockholders, the record date or the closing of the transfer books
shall be at least ten days before the date of the meeting.
SECTION 6.04. STOCK LEDGER. The Corporation shall maintain a stock
ledger which contains the name and address of each stockholder and the number of
shares of stock of each
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class which the stockholder holds. The stock ledger may be in written form or in
any other form which can be converted within a reasonable time into written form
for visual inspection. The original or a duplicate of the stock ledger shall be
kept at the offices of a transfer agent for the particular class of stock, or,
if none, at the principal office in the State of Maryland or the principal
executive offices of the Corporation.
SECTION 6.05. CERTIFICATION OF BENEFICIAL OWNERS. The Board of
Directors may adopt by resolution a procedure by which a stockholder of the
Corporation may certify in writing to the Corporation that any shares of stock
registered in the name of the stockholder are held for the account of a
specified person other than the stockholder. The resolution shall set forth the
class of stockholders who may certify; the purpose for which the certification
may be made; the form of certification and the information to be contained in
it; if the certification is with respect to a record date or closing of the
stock transfer books, the time after the record date or closing of the stock
transfer books within which the certification must be received by the
Corporation; and any other provisions with respect to the procedure which the
Board considers necessary or desirable. On receipt of a certification which
complies with the procedure adopted by the Board in accordance with this
Section, the person specified in the certification is, for the purpose set forth
in the certification, the holder of record of the specified stock in place of
the stockholder who makes the certification.
SECTION 6.06. LOST STOCK CERTIFICATES. The Board of Directors of the
Corporation may determine the conditions for issuing a new stock certificate in
place of one which is alleged to have been lost, stolen, or destroyed, or the
Board of Directors may delegate such power to any officer or officers of the
Corporation. In their discretion, the Board of Directors or such officer or
officers may refuse to issue such new certificate save upon the order of some
court having jurisdiction in the premises.
SECTION 6.07. EXEMPTION FROM CONTROL SHARE ACQUISITION STATUTE. The
provisions of Sections 3-701 to 3-709 of the Corporations and Associations
Article of the Annotated Code of Maryland shall not apply to any share of the
capital stock of the Corporation and such shares of capital stock are exempted
from such Sections to the fullest extent permitted by Maryland law.
ARTICLE VII.
FINANCE
SECTION 7.01. CHECKS, DRAFTS, ETC. All checks, drafts and orders for
the payment of money, notes and other evidences of indebtedness, issued in the
name of the Corporation, shall, unless otherwise provided by resolution of the
Board of Directors, be signed by the Chief Executive Officer, the President, a
Vice-President or an Assistant Vice-President and countersigned by the
Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary.
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SECTION 7.02. ANNUAL STATEMENT OF AFFAIRS. The President or chief
accounting officer shall prepare annually a full and correct statement of the
affairs of the Corporation, to include a balance sheet and a financial statement
of operations for the preceding fiscal year. The statement of affairs shall be
submitted at the annual meeting of the stockholders and, within 20 days after
the meeting, placed on file at the Corporation's principal office.
SECTION 7.03. FISCAL YEAR. The fiscal year of the Corporation shall be
the twelve calendar months period ending December 31 in each year, unless
otherwise provided by the Board of Directors.
SECTION 7.04. DIVIDENDS. If declared by the Board of Directors at any
meeting thereof, the Corporation may pay dividends on its shares in cash,
property, or in shares of the capital stock of the Corporation, unless such
dividend is contrary to law or to a restriction contained in the Charter.
SECTION 7.05. CONTRACTS. To the extent permitted by applicable law, and
except as otherwise prescribed by the Charter or these By-Laws with respect to
certificates for shares, the Board of Directors may authorize any officer,
employee, or agent of the Corporation to enter into any contract or execute and
deliver any instrument in the name of and on behalf of the Corporation. Such
authority may be general or confined to specific instances.
ARTICLE VIII.
INDEMNIFICATION
SECTION 8.01. PROCEDURE. Any indemnification, or payment of expenses in
advance of the final disposition of any proceeding, shall be made promptly, and
in any event within 60 days, upon the written request of the director or officer
entitled to seek indemnification (the "Indemnified Party"). The right to
indemnification and advances hereunder shall be enforceable by the Indemnified
Party in any court of competent jurisdiction, if (i) the Corporation denies such
request, in whole or in part, or (ii) no disposition thereof is made within 60
days. The Indemnified Party's costs and expenses incurred in connection with
successfully establishing his right to indemnification, in whole or in part, in
any such action shall also be reimbursed by the Corporation. It shall be a
defense to any action for advance for expenses that (a) a determination has been
made that the facts then known to those making the determination would preclude
indemnification or (b) the Corporation has not received both (i) an undertaking
as required by law to repay such advances in the event it shall ultimately be
determined that the standard of conduct has not been met and (ii) a written
affirmation by the Indemnified Party of such Indemnified Party's good faith
belief that the standard of conduct necessary for indemnification by the
Corporation has been met.
SECTION 8.02. EXCLUSIVITY, ETC. The indemnification and advance of
expenses provided by the Charter and these By-Laws shall not be deemed exclusive
of any other rights to
- 12 -
<PAGE> 356
which a person seeking indemnification or advance of expenses may be entitled
under any law (common or statutory), or any agreement, vote of stockholders or
disinterested directors or other provision that is consistent with law, both as
to action in his official capacity and as to action in another capacity while
holding office or while employed by or acting as agent for the Corporation,
shall continue in respect of all events occurring while a person was a director
or officer after such person has ceased to be a director or officer, and shall
inure to the benefit of the estate, heirs, executors and administrators of such
person. All rights to indemnification and advance of expenses under the Charter
of the Corporation and hereunder shall be deemed to be a contract between the
Corporation and each director or officer of the Corporation who serves or served
in such capacity at any time while this By-Law is in effect. Nothing herein
shall prevent the amendment of this By-Law, provided that no such amendment
shall diminish the rights of any person hereunder with respect to events
occurring or claims made before its adoption or as to claims made after its
adoption in respect of events occurring before its adoption. Any repeal or
modification of this By-Law shall not in any way diminish any rights to
indemnification or advance of expenses of such director or officer or the
obligations of the Corporation arising hereunder with respect to events
occurring, or claims made, while this By-Law or any provision hereof is in
force.
SECTION 8.03. SEVERABILITY; DEFINITIONS. The invalidity or
unenforceability of any provision of this Article VIII shall not affect the
validity or enforceability of any other provision hereof. The phrase "this
By-Law" in this Article VIII means this Article VIII in its entirety.
ARTICLE IX.
SUNDRY PROVISIONS
SECTION 9.01. BOOKS AND RECORDS. The Corporation shall keep correct and
complete books and records of its accounts and transactions and minutes of the
proceedings of its stockholders and Board of Directors and of any executive or
other committee when exercising any of the powers of the Board of Directors. The
books and records of a Corporation may be in written form or in any other form
which can be converted within a reasonable time into written form for visual
inspection. Minutes shall be recorded in written form but may be maintained in
the form of a reproduction. The original or a certified copy of the By-Laws
shall be kept at the principal office of the Corporation.
SECTION 9.02. CORPORATE SEAL. The Board of Directors shall provide a
suitable seal, bearing the name of the Corporation, which shall be in the charge
of the Secretary. The Board of Directors may authorize one or more duplicate
seals and provide for the custody thereof. If the Corporation is required to
place its corporate seal to a document, it is sufficient to meet the requirement
of any law, rule, or regulation relating to a corporate seal to place the word
"Seal" adjacent to the signature of the person authorized to sign the document
on behalf of the Corporation.
- 13 -
<PAGE> 357
SECTION 9.03. BONDS. The Board of Directors may require any officer,
agent or employee of the Corporation to give a bond to the Corporation,
conditioned upon the faithful discharge of his duties, with one or more sureties
and in such amount as may be satisfactory to the Board of Directors.
SECTION 9.04. VOTING UPON SHARES IN OTHER CORPORATIONS. Stock of other
corporations or associations, registered in the name of the Corporation, may be
voted by the President, a Vice-President, or a proxy appointed by either of
them. The Board of Directors, however, may by resolution appoint some other
person to vote such shares, in which case such person shall be entitled to vote
such shares upon the production of a certified copy of such resolution.
SECTION 9.05. MAIL. Any notice or other document which is required by
these By-Laws to be mailed shall be deposited in the United States mails,
postage prepaid.
SECTION 9.06. EXECUTION OF DOCUMENTS. A person who holds more than one
office in the Corporation may not act in more than one capacity to execute,
acknowledge, or verify an instrument required by law to be executed,
acknowledged, or verified by more than one officer.
SECTION 9.07. RELIANCE. Each director, officer, employee and agent of
the Corporation shall, in the performance of his or her duties with respect to
the Corporation, be fully justified and protected with regard to any act or
failure to act in reliance in good faith upon the books of account or other
records of the Corporation, upon an opinion of counsel or upon reports made to
the Corporation by any of its officers or employees or by the adviser,
accountants, appraisers or other experts or consultants selected by the Board of
Directors or officers of the Corporation, regardless of whether such counsel or
expert may also be a director.
SECTION 9.08. CERTAIN RIGHTS OF DIRECTORS, OFFICERS, EMPLOYEES AND
AGENTS. The directors shall have no responsibility to devote their full time to
the affairs of the Corporation. Any director or officer, employee or agent of
the Corporation, in his or her personal capacity or in a capacity as an
affiliate, employee, or agent of any other person, or otherwise, may have
business interests and engage in business activities similar to or in addition
to those of or relating to the Corporation.
SECTION 9.09. AMENDMENTS. Subject to the special provisions of
Section 2.02, in accordance with the Charter, these By-Laws may be
repealed, altered, amended or rescinded (a) by the stockholders of the
Corporation only by vote of not less than 80% of the outstanding shares of
capital stock of the Corporation entitled to vote generally in the election of
directors (considered for this purpose as one class) cast at any meeting of the
stockholders called for that purpose (provided that notice of such proposed
repeal, alteration, amendment or rescission is included in the notice of such
meeting) or (b) except for the provision of Section 2.09 which relates to the
sale of property owned by partnerships in which the Corporation acts as a
general partner, by vote of two-thirds of the Board of Directors (including at
least a majority of the
- 14 -
<PAGE> 358
directors elected by the Class B Common Stock and at least one director elected
by Class C Common Stock) at a meeting held in accordance with the provisions of
these By-Laws.
- 15 -
<PAGE> 359
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
SPG's officers and directors are indemnified under Maryland law, SPG's
Charter and the SPG Partnership Agreement against certain liabilities. SPG's
Charter requires SPG to indemnify its directors and officers to the fullest
extent permitted from time to time by the laws of Maryland. SPG's By-laws
contain provisions which implement the indemnification provisions of SPG's
Charter.
The MGCL permits a corporation to indemnify its directors and officers,
among others, against judgments, penalties, fines, settlements and reasonable
expenses actually incurred by them in connection with any proceeding to which
they may be made a party by reason of their service in those or other capacities
unless it is established that the act or omission of the director or officer was
material to the matter giving rise to the proceeding and was committed in bad
faith or was the result of active and deliberate dishonesty, or the director or
officer actually received an improper personal benefit in money, property or
services, or in the case of any criminal proceeding, the director or officer had
reasonable cause to believe that the act or omission was unlawful. No amendment
of SPG's Charter shall limit or eliminate the right to indemnification provided
with respect to acts or omissions occurring prior to such amendment or repeal.
Maryland law permits SPG to provide indemnification to an officer to the same
extent as a director, although additional indemnification may be provided if
such officer is not also a director.
The MGCL permits the charter of a Maryland corporation to include a
provision limiting the liability of its directors and officers to the
corporation and its stockholders for money damages, subject to specified
restrictions. The MGCL does not, however, permit the liability of directors and
officers to the corporation or its stockholders to be limited to the extent that
(1) it is proved that the person actually received an improper benefit or profit
in money, property or services (to the extent such benefit or profit was
received) or (2) a judgment or other final adjudication adverse to such person
is entered in a proceeding based on a finding that the person's action, or
failure to act, was the result of active and deliberate dishonesty and was
material to the cause of action adjudicated in the proceeding. SPG's Charter
contains a provision consistent with the MGCL. No amendment of SPG's Charter
shall limit or eliminate the limitation of liability with respect to acts or
omissions occurring prior to such amendment or repeal.
The SPG Partnership Agreement also provides for indemnification of SPG and
its officers and directors to the same extent indemnification is provided to
officers and directors of SPG in its Charter, and limits the liability of SPG
and its officers and directors to the SPG Operating Partnership and its partners
to the same extent liability of officers and directors of SPG to SPG and its
stockholders is limited under SPG's Charter.
SPG has entered into indemnification agreements with each of SPG's
directors and officers. The indemnification agreements require, among other
things, that SPG indemnify its directors and officers to the fullest extent
permitted by law, and advance to the directors and officers all related
expenses, subject to reimbursement if it is subsequently determined that
indemnification is not permitted. SPG also must indemnify and advance all
expenses incurred by directors and officers seeking to enforce their rights
under the indemnification agreements, and cover each director and officer if SPG
obtains directors' and officers' liability insurance.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ----
<C> <C> <S>
2.1 -- Agreement and Plan of Merger among SPG, Sub and DRC, dated as of March 26, 1996,
as amended (included as Annex I to the Prospectus/Joint Proxy Statement filed as
part of this Registration Statement).
5.1 -- Opinion of Piper & Marbury, as to the legality of SPG Common Stock being
registered hereby.
8.1 -- Tax Opinion of Paul, Weiss, Rifkind, Wharton & Garrison.
8.2 -- Tax Opinion of Willkie Farr & Gallagher.
10.1.1 -- Form of Amended Operating Partnership Agreement to become effective at the
Effective Time.
10.1.2 -- Form of Amended SPG Partnership Agreement to become effective at the Effective
Time.
10.2 -- Stock Purchase Agreement, dated as of March 26, 1996.
</TABLE>
II-1
<PAGE> 360
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ----
<C> <C> <S>
10.3 -- Stockholders Agreement, dated as of March 26, 1996.
10.4.1 -- Form of New Registration Rights Agreement to be entered into on or prior to the
Effective Time.
10.4.2 -- BJS Registration Rights Agreement, dated as of March 26, 1996.
10.5 -- Contribution Agreement to become effective at the Effective Time.
10.6 -- Employment Agreement, dated as of March 26, 1996 and effective as of the
Effective Time.
10.7 -- Termination Agreement, dated as of March 26, 1996.
23.1 -- Consent of Piper & Marbury (included in Exhibit 5.1).
23.2 -- Consent of Paul, Weiss, Rifkind, Wharton & Garrison with respect to certain tax
matters (included in Exhibit 8.1).
23.3 -- Consent of Willkie Farr & Gallagher (included in Exhibit 8.2).
23.4 -- Consent of Arthur Andersen LLP.
23.5 -- Consent of Ernst & Young LLP.
23.6 -- Consents of Merrill Lynch.
23.7 -- Consents of Morgan Stanley (included in this Exhibit 23.7 and in Exhibit 99.2).
23.8 -- Consents of Blackstone (included in this Exhibit 23.8 and in Exhibit 99.3).
24.1 -- Power of Attorney (see signature pages).
27.1 -- Financial Data Schedule for 3 Months.
27.2 -- Financial Data Schedule for 12 Months.
99.1 -- Fairness opinion of Merrill Lynch (included as Annex II to the Prospectus/Joint
Proxy Statement filed as part of this Registration Statement).
99.2 -- Fairness opinion of Morgan Stanley (included as Annex III to the Prospectus/Joint
Proxy Statement filed as part of this Registration Statement).
99.3 -- Fairness opinion of Blackstone (included as Annex IV to the Prospectus/Joint
Proxy Statement filed as part of this Registration Statement).
99.4 -- Forms of Proxy.
99.5 -- Consents of Persons Named to Become Directors.
</TABLE>
(b) Financial Statement Schedules
None
(c) Fairness Opinions
The fairness opinions of Merrill Lynch, Morgan Stanley and Blackstone with
respect to the Merger are set forth as Annexes II, III and IV, respectively, to
the Prospectus/Joint Proxy Statement forming a part of this Registration
Statement.
ITEM 22. UNDERTAKINGS.
1. Rule 415 Offering. The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(A) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(B) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(C) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
II-2
<PAGE> 361
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
2. Subsequent Documents Incorporated by Reference. The undersigned
Registrant hereby undertakes that, for purposes of determining any liability
under the Securities Act of 1933, each filing of the Registrant's annual report
pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of
1934 (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
3. Registration on Form S-4. (a) The undersigned Registrant hereby
undertakes as follows: that prior to any public reoffering of the securities
registered hereunder through use of a prospectus which is a part of this
Registration Statement, by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c), the issuer undertakes that such
reoffering prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other Items of
the applicable form.
(b) The Registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (a) immediately preceding, or (ii) that purports to
meet the requirements of section 10(a)(3) of the Securities Act of 1933 and
is used in connection with an offering of securities subject to Rule 415,
will be filed as a part of an amendment to the registration statement and
will not be used until such amendment is effective, and that, for purposes
of determining any liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
4. Acceleration of Effectiveness. Insofar as indemnification for
liabilities arising under the Securities Act of 1933 may be permitted to
directors, officers and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been advised that in the
opinion of the Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
5. Response to Requests for Information. The undersigned Registrant
hereby undertakes to respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this Form,
within one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of the
registration statement through the date of responding to the request.
6. Post-effective Amendment. The undersigned Registrant hereby undertakes
to supply by means of a post-effective amendment all information concerning a
transaction, and the company being acquired involved therein, that was not the
subject of and included in the registration statement when it became effective.
II-3
<PAGE> 362
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-4 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF INDIANAPOLIS, STATE OF INDIANA, ON JUNE 26, 1996.
SIMON PROPERTY GROUP, INC.
By: /s/ DAVID SIMON
------------------------------------
David Simon
(President and Chief Executive
Officer)
KNOW ALL MEN BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE APPEARS
BELOW HEREBY CONSTITUTES AND APPOINTS MELVIN SIMON, HERBERT SIMON, DAVID SIMON
AND RANDOLPH L. FOXWORTHY OR ANY OF THEM THEIR TRUE AND LAWFUL
ATTORNEYS-IN-FACT, WITH FULL POWERS OF SUBSTITUTION AND RESUBSTITUTION, FOR HIM
AND IN HIS NAME, PLACE AND STEAD, IN ANY AND ALL CAPACITIES, TO SIGN ANY AND ALL
AMENDMENTS, INCLUDING ANY POST-EFFECTIVE AMENDMENTS, TO THIS REGISTRATION
STATEMENT, AND TO FILE THE SAME, WITH EXHIBITS THERETO, AND OTHER DOCUMENTS IN
CONNECTION THEREWITH, WITH THE COMMISSION, HEREBY RATIFYING AND CONFIRMING ALL
THAT SAID ATTORNEY-IN-FACT OR HIS SUBSTITUTES MAY LAWFULLY DO OR CAUSE TO BE
DONE BY VIRTUE HEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATE INDICATED.
<TABLE>
<CAPTION>
NAME TITLE DATE
- ------------------------------------------ ----------------------------------------- --------------
<C> <S> <C>
/s/ MELVIN SIMON Co-Chairman of the Board of Directors June 26, 1996
- ------------------------------------------
Melvin Simon
/s/ HERBERT SIMON Co-Chairman of the Board of Directors June 26, 1996
- ------------------------------------------
Herbert Simon
/s/ DAVID SIMON President, Chief Executive Officer and June 26, 1996
- ------------------------------------------ Director (Principal Executive Officer,
David Simon Principal Financial Officer and
Accounting Officer)
/s/ RANDOLPH L. FOXWORTHY Executive Vice President and Director June 26, 1996
- ------------------------------------------
Randolph L. Foxworthy
/s/ BIRCH BAYH Director June 26, 1996
- ------------------------------------------
Birch Bayh
/s/ WILLIAM DILLARD, II Director June 26, 1996
- ------------------------------------------
William Dillard, II
/s/ JOSEPH R. PERELLA Director June 26, 1996
- ------------------------------------------
Joseph R. Perella
/s/ TERRY S. PRINDIVILLE Director June 26, 1996
- ------------------------------------------
Terry S. Prindiville
/s/ J. ALBERT SMITH JR. Director June 26, 1996
- ------------------------------------------
J. Albert Smith Jr.
</TABLE>
S-1
<PAGE> 363
EXHIBIT INDEX
<TABLE>
<CAPTION>
LOCATION OF
EXHIBIT IN
SEQUENTIAL
NUMBERING
EXHIBIT NO. DESCRIPTION SYSTEM
- ----------- ----------------------------------------------------------------------- ------------
<C> <C> <S> <C>
2.1 -- Agreement and Plan of Merger among SPG, Sub and DRC, dated as of March
26, 1996, as amended (included as Annex I to the Prospectus/Joint Proxy
Statement filed as part of this Registration Statement).
5.1 -- Opinion of Piper & Marbury, as to the legality of SPG Common Stock
being registered hereby.
8.1 -- Tax Opinion of Paul, Weiss, Rifkind, Wharton & Garrison.
8.2 -- Tax Opinion of Willkie Farr & Gallagher.
10.1.1 -- Form of Amended Operating Partnership Agreement to become effective at
the Effective Time.
10.1.2 -- Form of Amended SPG Partnership Agreement to become effective at the
Effective Time.
10.2 -- Stock Purchase Agreement, dated as of March 26, 1996.
10.3 -- Stockholders Agreement, dated as of March 26, 1996.
10.4.1 -- Form of New Registration Rights Agreement to be entered into on or
prior to the Effective Time.
10.4.2 -- BJS Registration Rights Agreement, dated as of March 26, 1996.
10.5 -- Contribution Agreement to become effective at the Effective Time.
10.6 -- Employment Agreement, dated as of March 26, 1996 and effective as of
the Effective Time.
10.7 -- Termination Agreement, dated as of March 26, 1996.
23.1 -- Consent of Piper & Marbury (included in Exhibit 5.1).
23.2 -- Consent of Paul, Weiss, Rifkind, Wharton & Garrison (included in
Exhibit 8.1).
23.3 -- Consent of Willkie Farr & Gallagher (included in Exhibit 8.2).
23.4 -- Consent of Arthur Andersen LLP.
23.5 -- Consent of Ernst & Young LLP.
23.6 -- Consents of Merrill Lynch.
23.7 -- Consents of Morgan Stanley (included in this Exhibit 23.7 and in
Exhibit 99.2).
23.8 -- Consents of Blackstone (included in this Exhibit 23.8 and in Exhibit
99.3).
24.1 -- Power of Attorney (see signature pages).
27.1 -- Financial Data Schedule for 3 months.
27.2 -- Financial Data Schedule for 12 months.
99.1 -- Fairness opinion of Merrill Lynch (included as Annex II to the
Prospectus/Joint Proxy Statement filed as part of this Registration
Statement).
99.2 -- Fairness opinion of Morgan Stanley (included as Annex III to the
Prospectus/Joint Proxy Statement filed as part of this Registration
Statement).
99.3 -- Fairness opinion of Blackstone (included as Annex IV to the
Prospectus/Joint Proxy Statement filed as part of this Registration
Statement).
99.4 -- Forms of Proxy.
99.5 -- Consents of Persons Named to Become Directors.
</TABLE>
<PAGE> 1
EXHIBIT 5.1
PIPER & MARBURY
L.L.P.
CHARLES CENTER SOUTH
36 SOUTH CHARLES STREET
BALTIMORE, MARYLAND 21201-3018
410-539-2530 WASHINGTON
FAX: 410-539-0489 NEW YORK
PHILADELPHIA
EASTON
June 24, 1996
Simon Property Group, Inc.
115 West Washington Street
Indianapolis, Indiana 46204
Ladies and Gentlemen:
As Maryland counsel to Simon Property Group, Inc., a Maryland
corporation (the "Corporation"), in connection with the registration under the
Securities Act of 1933, as amended (the "Act"), pursuant to a Registration
Statement on Form S-4 of the Corporation (the "Registration Statement") to be
filed with the Securities and Exchange Commission (the "Commission"), of
39,714,023 shares of Common Stock, par value $.0001 per share (the "Shares") of
the Corporation to be issued in connection with the merger of Day Acquisition
Corp., an Ohio corporation and a subsidiary of the Corporation, with and into
DeBartolo Realty Corporation, an Ohio corporation, we have examined the
Registration Statement (and any amendments thereto), the Charter and By-Laws of
the Corporation, minutes of the proceedings of the Corporation's Board of
Directors authorizing the issuance of the Shares, and such other documents as
we have considered necessary. We have also examined the Certificate of
Secretary dated June 24, 1996 (the "Certificate"). In rendering our opinion,
we are relying as to factual matters on the Certificate and have made no
independent investigation or inquiries as to the matters set forth therein.
Based upon the foregoing, we are of the opinion and so advise you
that, upon issuance and delivery of the Shares upon the terms set forth in the
Registration Statement, the Shares will have been duly and validly authorized
and will be legally issued and fully-paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the heading "Legal
Matters" in the Prospectus/Proxy Statement included in the Registration
Statement. In giving our consent, we do not thereby admit that we are in the
category of persons whose consent is required under Section 7 of the Act or the
rules and regulations of the Commission thereunder.
Very truly yours,
/s/ Piper & Marbury L.L.P.
<PAGE> 1
EXHIBIT 8.1
[LETTERHEAD OF PAUL, WEISS, RIFKIND, WHARTON & GARRISON]
(212) 373-3000 June 25, 1996
Simon Property Group, Inc.
115 West Washington Street
Indianapolis, Indiana 45204
Dear Ladies and Gentlemen:
In connection with the proposed merger among Simon Property
Group, Inc. ("SPG"), Day Acquisition Corp. ("Sub") and DeBartolo Realty
Corporation ("DRC"), as described in the Form S-4 to be filed with the
Securities and Exchange Commission on June 26, 1996 (the "Registration
Statement"), you have requested our opinion concerning the federal income tax
matters set forth below. All capitalized terms used herein have their
respective meanings set forth in the Registration Statement unless otherwise
stated.
In rendering the opinions expressed herein, we have examined
and, with your consent, relied upon the following: (i) the Registration
Statement and all amendments to date; (ii) the Merger Agreement; (iii) the SPG
Partnership Agreement and the Amended Operating Partnership Agreement; (iv) the
partnership agreements of the partnerships which SPG, DRC, the SPG Operating
Partnership or the Operating Partnership, directly or indirectly, owns in whole
or in part (the "Subsidiary Partnerships"); (v) an opinion of Willkie Farr &
Gallagher ("WF&G") that DRC has
<PAGE> 2
Simon Property Group, Inc. 2
qualified as a REIT from the taxable year ended December 31, 1994 until the
Effective Time of the Merger; (vi) an opinion of WF&G that the DRC Operating
Partnership and each partnership, LLC, joint venture or business trust in which
DRC or the DRC Operating Partnership, directly or indirectly, owns an interest
have been treated as partnerships and not as corporations or associations
taxable as corporations from the beginning of the taxable year ended December
31, 1994 until the Effective Time of the Merger; and (vii) such other
documents, records and instruments as we have deemed necessary in order to
enable us to render the opinions expressed herein.
In our examination of documents, we have assumed, with your
consent, (i) that all documents submitted to us are authentic originals, or if
submitted as photocopies, that they faithfully reproduce the originals thereof;
(ii) that all such documents have been or will be duly executed to the extent
required; (iii) that all representations and statements set forth in such
documents are true and correct; (iv) that any representation or statement made
as a belief or made "to the knowledge of," or similarly qualified is correct
and accurate without such qualification; (v) that all obligations imposed by
any such documents on the parties thereto have been or will be performed or
satisfied in accordance with their terms; and (vi) that the Simon DeBartolo
Group, the Surviving Subsidiary Corporation, the SPG Operating Partnership, the
Operating Partnership, the Management Companies and the Subsidiary Partnerships
at all times will be organized and operated in accordance with the terms of
such documents. We have further assumed that the statements and descriptions
of the Simon DeBartolo Group's, the Surviving Subsidiary Corporation's, the SPG
Operating Partnership's, the Operating Partnership's, the Management Companies'
and the Subsidiary Partnerships' businesses, properties, and intended
activities as described in the Registration Statement are accurate and that all
actions contemplated in the Registration Statement with respect to the
organization of the Simon DeBartolo Group and the Surviving Subsidiary
Corporation as real estate investment trusts ("REITs") have been or will be
completed in a timely fashion.
For purposes of rendering the opinions expressed herein, we
also have assumed, with your consent, the accuracy of the representations
contained in the letter from SPG dated June 25, 1996 and the letter from DRC to
us dated June 25, 1996. These representations relate to the classification and
operation of SPG, Simon DeBartolo Group and the Surviving Subsidiary
Corporation as REITs and the organization and operation of the SPG Operating
Partnership, the Operating Partnership and the Management Companies. In
addition, we have assumed that SPG
<PAGE> 3
Simon Property Group, Inc. 3
has operated and that the Simon DeBartolo Group and the Surviving Subsidiary
Corporation will operate in accordance with the methods of operation described
in the Registration Statement.
Based upon and subject to the foregoing, we are of the
following opinions:
1. Commencing with the taxable year ended December 31,
1994, SPG has been organized in conformity with the
requirements for qualification as a REIT under the Code, and
SPG's, the SPG Operating Partnership's and the SPG Management
Company's methods of operation as described in the
Registration Statement and as represented by SPG, have
permitted, and will continue to permit SPG to continue to so
qualify for its current taxable year.
2. Commencing with the Effective Time, the Simon
DeBartolo Group and the Surviving Subsidiary Corporation will
be organized in conformity with the requirements for
qualification as a REIT under the Code, and the Simon
DeBartolo Group's, the Surviving Subsidiary Corporation's, the
SPG Operating Partnership's, the Operating Partnership's and
the Management Companies' methods of operation as described in
the Registration Statement and as represented by SPG and by
DRC, will permit the Simon DeBartolo Group and the Surviving
Subsidiary Corporation to so qualify for its current and
subsequent taxable years.
3. Commencing with the taxable year ended December 31,
1994, the SPG Operating Partnership and each partnership in
which SPG or the SPG Operating Partnership, directly or
indirectly, owns an interest, have been and will continue to
be treated as partnerships and not as corporations or
associations taxable as corporations, for federal income
tax purposes.
4. Commencing with the Effective Time, the Operating
Partnership and each of the Subsidiary Partnerships will be
treated as partnerships and not as corporations or
associations taxable as corporations, for federal income tax
purposes.
<PAGE> 4
Simon Property Group, Inc. 4
5. The discussion contained in that portion of the
Registration Statement under the captions "THE MERGER --
Federal Income Tax Consequences to Holders of DRC Common
Stock" and "THE MERGER -- Federal Income Tax Considerations
Relating to the Simon DeBartolo Group and the Surviving
Subsidiary Corporation" fairly summarizes the federal income
tax considerations that are likely to be material to a holder
of stock of SPG or DRC.
This opinion is given as of the date hereof and is based on
various statutory provisions, regulations promulgated thereunder and
interpretations thereof by the Internal Revenue Service and the courts having
jurisdiction over such matters, all of which are subject to change either
prospectively or retroactively. Further, any variation or difference in the
facts from those set forth in the Registration Statement may affect the
conclusions stated herein. Moreover, the Simon DeBartolo Group's and the
Surviving Subsidiary Corporation's qualifications and taxation as REITs depend
upon the Simon DeBartolo Group's and the Surviving Subsidiary Corporation's
abilities to meet -- through actual annual operating results -- requirements
under the Code regarding income, distributions and diversity of stock
ownership. Because the Simon DeBartolo Group's and the Surviving Subsidiary
Corporation's satisfaction of these requirements will depend upon future
events, no assurance can be given that the actual results of the Simon
DeBartolo Group's and the Surviving Subsidiary Corporation's operations for any
one taxable year will satisfy the tests necessary to qualify as or be taxed as
a REIT under the Code.
This opinion is furnished to you solely for use in connection
with the Registration Statement. We hereby consent to the filing of this
opinion as Exhibit 8.1 to the Registration Statement and to the use of our name
under the captions "THE MERGER -- Federal Income Tax Consequences to Holders of
DRC Common Stock" and "THE MERGER -- Opinion's of SPG's Counsel" in the
Registration Statement and the prospectus included therein. In giving this
consent we do not thereby admit that we come within the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended, or the rules and regulations of the Securities and Exchange Commission
thereunder.
<PAGE> 5
Simon Property Group, Inc. 5
We express no opinion as to any federal income tax issue or
other matter except those set forth or confirmed above.
Very truly yours,
/s/ PAUL, WEISS, RIFKIND, WHARTON & GARRISON
PAUL, WEISS, RIFKIND, WHARTON & GARRISON
<PAGE> 1
EXHIBIT 8.2
[LETTERHEAD OF WILLKIE FARR & GALLAGHER]
June 26, 1996
DeBartolo Realty Corporation
7655 Market Street
Youngstown, Ohio 45513
Ladies and Gentlemen:
We have acted as your counsel in connection with the proposed merger
(the "Merger") of a subsidiary of Simon Property Group, Inc., a Maryland
corporation ("Parent"), with and into DeBartolo Realty Corporation, an Ohio
corporation (the "Company"), pursuant to an Agreement and Plan of Merger (the
"Agreement"), dated as of March 26, 1996, as amended. In that connection we
have participated in the preparation of a Registration Statement on Form S-4
(the "Registration Statement"), including a Prospectus/Joint Proxy Statement
(the "Proxy Statement"), under the Securities Act of 1933, as amended.
Capitalized terms used herein and not otherwise defined have the meanings set
forth in the Registration Statement.
We have examined the Agreement, the Proxy Statement, representation
letters received from Parent and the Company and such other documents and
records as we have deemed necessary or appropriate for purposes of this
opinion. In particular, we have relied on representations made to us by the
Company in a letter dated June 26, 1996 relating to the qualification of the
Company as a real estate investment trust. To the extent that we have examined
and relied upon original documents or copies thereof in rendering this opinion,
we have assumed and relied upon (i) the authenticity of all documents submitted
to us as originals, (ii) the conformity to authentic original documents of all
documents submitted to us as copies, (iii) the genuineness of all signatures
and (iv) that all obligations imposed by the relevant documents on the parties
thereto have been or will be performed or satisfied in accordance with their
terms. We have also assumed (i) the Merger will be consummated in the manner
contemplated in the Proxy Statement and in accordance with the terms of the
Agreement
<PAGE> 2
DeBartolo Realty Corporation
June 26, 1996
Page 2
and the Company, the DRC Operating Partnership and each entity in which either
of them has an interest will at all times be organized and operated in
accordance with the terms of their respective organizational documents, (ii)
the statements concerning the Merger set forth in the Proxy Statement are
accurate and complete and (iii) the representations made to us by Parent and
the Company in their respective representation letters to us are accurate and
complete and that any representation or statement made as a belief or made "to
the knowledge of" or similarly qualified is correct and accurate without such
qualification.
Based on such facts, assumptions and representations and our review of
the Registration Statement, the exhibits thereto and such other documents and
information as we have considered appropriate, and subject to the
qualifications stated below, as of the date hereof, we are of the opinion that
commencing with the Company's first taxable year ending December 31, 1994, (1)
the Company has been organized in conformity with the requirements for
qualification and taxation as a real estate investment trust under the Internal
Revenue Code of 1986, as amended (the "Code") and the Company's and the
Operating Partnership's methods of operation as described in the Registration
Statement and as represented by the Company, have permitted, and will continue
to permit the Company to continue to so qualify for its current taxable year,
and (2) the DRC Operating Partnership and each partnership, limited liability
company, joint venture or trust in which the Company or the DRC Operating
Partnership directly or indirectly owns an interest have been, and continues to
be, classified as a partnership and not as a corporation or an association
taxable as a corporation for federal income tax purposes.
We are also of the opinion that the description of the federal income
tax consequences to the holders of outstanding shares of DRC Common Stock, par
value $0.01 per share, contained in the Proxy Statement under the heading, "THE
MERGER--Federal Income Tax Consequences to Holders of DRC Common Stock" fairly
summarizes the federal income tax considerations that are likely to be material
to such holders.
These opinions are given as of the date hereof and are based on
various statutory provisions, regulations promulgated thereunder and
interpretations thereof by the Internal Revenue Service and the courts having
jurisdiction over such matters, all of which are subject to change either
<PAGE> 3
DeBartolo Realty Corporation
June 26, 1996
Page 3
prospectively or retroactively. Further, any variation or difference in the
facts from those set forth in the Registration Statement or the representation
letters referred to above may affect the conclusions stated herein. Moreover,
the Company's qualification and taxation as a real estate investment trust
depends on its ability to meet -- through actual operating and other results --
certain requirements under the Code regarding, among other things, distribution
levels, gross income and asset tests, and diversity of stock ownership. As
Willkie Farr & Gallagher will not review annually whether the Company has
fulfilled those requirements, no assurance can be given that the actual results
of the Company's operation and other activities for any one or more taxable
years will satisfy the tests necessary to qualify or be taxed as a real estate
investment trust under the Code.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving this consent we do not thereby admit that we
come within the category of persons whose consent is required under Section 7
of the Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder.
We express no opinion as to any federal income tax issue or other
matter except those set forth or confirmed above.
Very truly yours,
/s/ WILLKIE FARR & GALLAGHER
WILLKIE FARR & GALLAGHER
<PAGE> 1
Exhibit 10.1.1
FORM OF
FIFTH AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
OF
SIMON-DEBARTOLO GROUP, L.P.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I Definitions; Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.2 Exhibit, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE II Continuation of Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . 29
2.1 Continuation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
2.2 Name. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
2.3 Character of the Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
2.4 Location of the Principal Place of Business. . . . . . . . . . . . . . . . . . 32
2.5 Registered Agent and Registered Office. . . . . . . . . . . . . . . . . . . . . 32
ARTICLE III Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
3.1 Commencement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
3.2 Dissolution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE IV Contributions to Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
4.1 General Partner Capital Contributions. . . . . . . . . . . . . . . . . . . . . . 34
4.2 Limited Partner Capital Contributions. . . . . . . . . . . . . . . . . . . . . . 35
4.3 Additional Funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.4 Stock Option Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
4.5 Dividend Reinvestment Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
4.6 No Third Party Beneficiary. . . . . . . . . . . . . . . . . . . . . . . . . . . 43
4.7 No Interest; No Return. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
4.8 Capital Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE V Representations, Warranties and Acknowledgement. . . . . . . . . . . . . . . . . 48
5.1 Representations and Warranties by Managing General Partner . . . . . . . . . . . 48
5.2 Representations and Warranties by Non-Managing General Partner . . . . . . . . . 50
5.3 Representations and Warranties by the Limited Partners . . . . . . . . . . . . . 51
5.4 Acknowledgment by Each Partner . . . . . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE VI Allocations, Distributions and Other Tax and Accounting Matters . . . . . 52
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
6.1 Allocations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
6.2 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
6.3 Books of Account; Segregation of Funds. . . . . . . . . . . . . . . . . . . . . 69
6.4 Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
6.5 Audits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
6.6 Tax Returns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
6.7 Tax Matters Partner. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
6.8 Withholding. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
ARTICLE VII Rights, Duties and Restrictions of theGeneral Partners . . . . . . . . . . . . . 77
7.1 Expenditures by Partnership. . . . . . . . . . . . . . . . . . . . . . . . . . . 77
7.2 Powers and Duties of the General Partners. . . . . . . . . . . . . . . . . . . . 77
7.3 Major Decisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
7.4 Managing General Partner and Non-Managing General Partner Participation. . . . . 90
7.5 Proscriptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
7.6 Additional Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
7.7 Title Holder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
7.8 Waiver and Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . 93
7.9 Limitation of Liability of Directors, Shareholders and Officers of the Managing
General Partner and the Non-Managing General Partner . . . . . . . . . . . . . . 96
ARTICLE VIII Dissolution, Liquidation and Winding-Up . . . . . . . . . . . . . . . . . . . . 97
8.1 Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
8.2 Distribution on Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . 97
8.3 Sale of Partnership Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . 98
8.4 Distributions in Kind . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
8.5 Documentation of Liquidation. . . . . . . . . . . . . . . . . . . . . . . . . 100
8.6 Liability of the Liquidating Agent . . . . . . . . . . . . . . . . . . . . . . . 100
ARTICLE IX Transfer of Partnership Interests and Related Matters . . . . . . . . . . . . . 101
9.1 Managing General Partner Transfers and Deemed Transfers . . . . . . . . . . . . 101
9.2 Non-Managing General Partner Transfers and Deemed Transfers . . . . . . . . . . 102
9.3 Transfers by Limited Partners . . . . . . . . . . . . . . . . . . . . . . . . . 103
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
9.4 Issuance of Additional Partnership Units and Preferred Units. . . . . . . . . . 109
9.5 Restrictions on Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
9.6 Shelf Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
ARTICLE X Rights and Obligations of the Limited Partners . . . . . . . . . . . . 118
10.1 No Participation in Management . . . . . . . . . . . . . . . . . . . . . . . . . 118
10.2 Bankruptcy of a Limited Partner . . . . . . . . . . . . . . . . . . . . . . . . 118
10.3 No Withdrawal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
10.4 Duties and Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
10.5 Guaranty and Indemnification Agreements . . . . . . . . . . . . . . . . . . . . 122
ARTICLE XI Grant of Rights to the Limited Partners . . . . . . . . . . . . . . . . . . . . 123
11.1 Grant of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
11.2 Limitation on Exercise of Rights . . . . . . . . . . . . . . . . . . . . . . . . 124
11.3 Computation of Purchase Price/Form of Payment . . . . . . . . . . . . . . . . . 125
11.4 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
11.5 Closing Deliveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
11.6 Term of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
11.7 Covenants of the Non-Managing General
Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
11.8 Limited Partners' Covenant . . . . . . . . . . . . . . . . . . . . . . . . . . . 129
11.9 Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130
ARTICLE XII EJDC Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131
12.1 Grant and Terms of Option . . . . . . . . . . . . . . . . . . . . . . . . . . . 131
ARTICLE XIII General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136
13.1 Investment Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . 136
13.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
13.3 Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
13.4 Liability of Limited Partners. . . . . . . . . . . . . . . . . . . . . . . . . . 139
13.5 Effect and Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
13.6 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
13.7 Partners Not Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
13.8 Entire Understanding; Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
13.9 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
13.10 Trust Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
13.11 Pronouns and Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140
13.12 Non-Effect on Certain Limited Partners . . . . . . . . . . . . . . . . . . . . . 140
13.13 Assumption of Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 141
13.14 Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141
</TABLE>
iv
<PAGE> 6
FIFTH AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT
OF
SIMON-DeBARTOLO GROUP, L.P.
THIS FIFTH AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT,
dated as of _________, 1996, is made by and among DeBARTOLO REALTY CORPORATION
(which has changed its name to SD Property Group, Inc.), an Ohio corporation
having an office at 7620 Market Street, Youngstown, Ohio 44513, as managing
general partner (the "Managing General Partner"), SIMON PROPERTY GROUP, INC.
(which has changed its name to Simon DeBartolo Group, Inc.), a Maryland
corporation having an office at Merchant's Plaza, 115 West Washington Street,
Indianapolis, Indiana 46204, as non-managing general partner (the "Non-Managing
General Partner"), and those parties who have executed this Agreement as limited
partners and whose names and addresses are set forth on Exhibit A hereto as
limited partners (the "Limited Partners").
W I T N E S S E T H :
WHEREAS, DeBartolo Realty Partnership, L.P., a Delaware
limited partnership (the "Partnership"), was organized on November 18, 1993,
and a Certificate of Limited
<PAGE> 7
2
Partnership in respect of the Partnership was filed in the office of the
Secretary of State of the State of Delaware. The Limited Partnership Agreement
of the Partnership was last amended and restated in its entirety by instrument
dated April 21, 1994; and
WHEREAS, concurrently with the execution hereof, Day
Acquisition Corp., an Ohio corporation which was formed as a wholly-owned
subsidiary of the Non-Managing General Partner on _________, 1996, merged into
the Managing General Partner pursuant to the Merger Agreement and Plan of
Merger among the Non-Managing General Partner, Day Acquisition Corp. and the
Managing General Partner dated as of March 26, 1996 (the "Merger Agreement");
and
WHEREAS, the parties hereto wish to provide for the further
amendment and restatement of the Agreement of Limited Partnership of the
Partnership, as heretofore amended and restated, to allow for the admission of
the Non-Managing General Partner and certain Limited Partners and to make
various other changes provided for below; and
WHEREAS, prior to the execution of this Agreement, the
interests of the Partners were represented by percentage
<PAGE> 8
3
interests in the Partnership and such interests shall henceforth be represented
by Units in the amounts set forth in Exhibit A; and
WHEREAS, the persons whose names appear on Exhibit A hereto as
Limited Partners consist of the existing limited partners in the Partnership
and certain of the existing limited partners of Simon Property Group, L.P., a
Delaware limited partnership ("Simon, L.P."), it being understood that such
limited partners of Simon, L.P. are concurrently herewith, in exchange for the
contribution to the Partnership of their interests in Simon, L.P., becoming
Limited Partners in the Partnership, each holding Units in the amount set forth
in Exhibit A; and
WHEREAS, concurrently with the execution hereof, the
Non-Managing General Partner is contributing to the Partnership a portion of
its interests in Simon, L.P., in exchange for its interest as non-managing
general partner of the Partnership, as set forth in Exhibit A.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained and other good and valuable consideration, the
receipt, adequacy and
<PAGE> 9
4
sufficiency of which are hereby acknowledged, the parties hereto, intending
legally to be bound, hereby agree that the Agreement of Limited Partnership of
the Partnership, as heretofore amended and restated, is hereby further amended
and restated in its entirety to read as follows:
ARTICLE I
DEFINITIONS; ETC.
1.1 DEFINITIONS. Except as otherwise herein expressly
provided, the following terms and phrases shall have the meanings set forth
below:
"Accountants" shall mean the firm or firms of independent
certified public accountants selected by the Managing General Partner from time
to time on behalf of the Partnership to audit the books and records of the
Partnership and to prepare and certify statements and reports in connection
therewith.
"Act" shall mean the Revised Uniform Limited Partnership Act
as enacted in the State of Delaware, as the same may hereafter be amended from
time to time.
<PAGE> 10
5
"Additional Units" shall have the meaning set forth in Section
9.4 hereof.
"Adjustment Date" shall have the meaning set forth in Section
4.3(b) hereof.
"Administrative Expenses" shall mean (i) all administrative
and operating costs and expenses incurred by the Partnership, and (ii) those
administrative costs and expenses and accounting and legal expenses incurred by
the Managing General Partner or the Non-Managing General Partner on behalf or
for the benefit of the Partnership.
"Affected Gain" shall have the meaning set forth in Section
6.1(g) hereof.
"Affiliate" shall mean, with respect to any Partner (or as to
any other Person the affiliates of which are relevant for purposes of any of
the provisions of this Agreement) (i) any member of the Immediate Family of
such Partner or Person; (ii) any partner, trustee, beneficiary or shareholder
of such Partner or Person; (iii) any legal representative, successor or
assignee of such Partner or any Person referred to in the preceding clauses (i)
and (ii); (iv) any trustee or trust for the benefit of such Partner or
<PAGE> 11
6
any Person referred to in the preceding clauses (i) through (iii); or (v) any
Entity which, directly or indirectly through one or more intermediaries,
Controls, is Controlled by or is under common Control with such Partner or any
Person referred to in the preceding clauses (i) through (iv).
"Affiliate Financing" shall mean financing or refinancing
obtained from a Partner or an Affiliate of a Partner by the Partnership.
"Agreement" shall mean this Fifth Amended and Restated Limited
Partnership Agreement, as originally executed and as amended, modified,
supplemented or restated from time to time, as the context requires.
"Amortization Requirements" shall have the meaning set forth in
Section 12.1(d) hereof.
"Bankruptcy" shall mean, with respect to any Partner, (i) the
commencement by such Partner of any proceeding seeking relief under any
provision or chapter of the federal Bankruptcy Code or any other federal or
state law relating to insolvency, bankruptcy or reorganization, (ii) an
adjudication that such Partner is insolvent or bankrupt, (iii) the
<PAGE> 12
7
entry of an order for relief under the federal Bankruptcy Code with respect to
such Partner, (iv) the filing of any petition or the commencement of any case
or proceeding against such Partner under the federal Bankruptcy Code unless
such petition and the case or proceeding initiated thereby are dismissed within
ninety (90) days from the date of such filing or commencement, (v) the filing
of an answer by such Partner admitting the allegations of any such petition,
(vi) the appointment of a trustee, receiver or custodian for all or
substantially all of the assets of such Partner unless such appointment is
vacated or dismissed within ninety (90) days from the date of such appointment
but not less than five (5) days before the proposed sale of any assets of such
Partner, (vii) the execution by such Partner of a general assignment for the
benefit of creditors, (viii) the convening by such Partner of a meeting of its
creditors, or any class thereof, for purposes of effecting a moratorium upon or
extension or composition of its debts, (ix) the failure of such Partner to pay
its debts as they mature, (x) the levy, attachment, execution or other seizure
of substantially all of the assets of such Partner
<PAGE> 13
8
where such seizure is not discharged within thirty (30) days thereafter, or
(xi) the admission by such Partner in writing of its inability to pay its debts
as they mature or that it is generally not paying its debts as they become due.
"Capital Account" shall have the meaning set forth in Section
4.8(a) hereof.
"Capital Contribution" shall mean, with respect to any
Partner, the amount of money and the initial Gross Asset Value of any property
other than money contributed to the Partnership with respect to the Partnership
Units held by such Partner (net of liabilities secured by such property which
the Partnership assumes or takes subject to).
"Certificate" shall mean the Certificate of Limited
Partnership establishing the Partnership, as filed with the office of the
Delaware Secretary of State on November 18, 1993, as it has or may hereafter be
amended from time to time in accordance with the terms of this Agreement and
the Act.
"Charter" shall mean the articles of incorporation of a
General Partner and all amendments, supplements and restatements thereof.
<PAGE> 14
9
"Closing Price" on any date shall mean the last sale price per
share, regular way, of the Shares or, in case no such sale takes place on such
day, the average of the closing bid and asked prices, regular way, of the
Shares in either case as reported in the principal consolidated transaction
reporting system with respect to securities listed or admitted to trading on
the New York Stock Exchange or, if the Shares are not listed or admitted to
trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Shares are listed or
admitted to trading or, if the Shares are not listed or admitted to trading on
any national securities exchange, the last quoted price, or if not so quoted,
the average of the high bid and low asked prices in the over-the-counter
market, as reported by the National Association of Securities Dealers, Inc.
Automated Quotations System for the Shares or, if such system is no longer in
use, the principal other automated quotations system that may then be in use
or, if the Shares are not quoted by any such organization, the average of the
<PAGE> 15
10
closing bid and asked prices as furnished by a professional market maker making
a market in the Shares selected from time to time by the Board of Directors of
the Non-Managing General Partner.
"Code" shall mean the Internal Revenue Code of 1986, as
amended, or any corresponding provisions of succeeding law.
"Computation Date" shall have the meaning set forth in Section
11.3 hereof.
"Consent of the DeBartolos" shall mean consent of those
Limited Partners who are "DeBartolos" as defined herein. ____________
(the "DeBartolo Designee") is hereby granted authority by those Limited
Partners who are DeBartolos to grant or withhold consent on behalf of the
DeBartolos whenever the Consent of the DeBartolos is required hereunder. The
DeBartolos shall have the right, from time to time, by written notice to the
Partnership signed by DeBartolos who hold in the aggregate more than fifty
percent (50%) of the Partnership Units then held by the DeBartolos, to
substitute a new Person as the DeBartolo Designee for the Person who is then
acting as such. The
<PAGE> 16
11
Partnership, the Partners and all Persons dealing with the Partnership shall be
fully protected in relying on any written consent of the DeBartolos which is
executed by the Person who is then acting as the DeBartolo Designee. In the
event that at any time there is no DeBartolo Designee, the consent of the
DeBartolos shall be given by those DeBartolos who hold in the aggregate more
than fifty percent (50%) of the Partnership Units then held by the DeBartolos.
"Consent of the Limited Partners" shall mean the written
consent of a Majority-In-Interest of the Limited Partners, which consent shall
be obtained prior to the taking of any action for which it is required by this
Agreement and may be given or withheld by a Majority-In-Interest of the Limited
Partners, unless otherwise expressly provided herein, in their sole and
absolute discretion. Whenever the Consent of the Limited Partners is sought by
a General Partner, the request for such consent, outlining in reasonable detail
the matter or matters for which such consent is being requested, shall be
submitted to all of the Limited Partners, and each Limited Partner shall have
at least 15 days to act upon such request.
<PAGE> 17
12
"Consent of the Simons" shall mean consent of those Limited
Partners who are "Simons" as defined herein. David Simon (the "Simon
Designee") is hereby granted authority by those Limited Partners who are Simons
to grant or withhold consent on behalf of the Simons whenever the Consent of
the Simons is required hereunder. The Simons shall have the right from time to
time, by written notice to the Partnership signed by Simons who hold in the
aggregate more than fifty percent (50%) of the Partnership Units then held by
the Simons, to substitute a new Person as the Simon Designee for the Person who
is then acting as such. The Partnership, the Partners and all Persons dealing
with the Partnership shall be fully protected in relying on any written consent
of the Simons which is executed by the Person who is then acting as the Simon
Designee. In the event that at any time there is no Simon Designee, the
Consent of the Simons shall be given by those Simons who hold in the aggregate
more than fifty percent (50%) of the Partnership Units then held by the Simons.
"Contributed Funds" shall have the meaning set forth in
Section 4.3(b) hereof.
<PAGE> 18
13
"Contributed General Partner Interest" shall mean Partnership
Units and interests in the profits of Simon, L.P. contributed by the
Non-Managing General Partner pursuant to the Contribution Agreement executed by
it.
"Contributed Limited Partner Interests" shall mean Partnership
Units in Simon, L.P. contributed by the Limited Partners to the Partnership
pursuant to the Contribution Agreement.
"Contribution Agreement" shall mean the agreement or
agreements between the Partnership and the several partners of Simon, L.P.
pursuant to which such partners agree to contribute their partnership interests
in Simon, L.P., or portions thereof, to the Partnership in exchange for Units.
"Contribution Date" shall have the meaning set forth in
Section 9.4 hereof.
"Control" shall mean the ability, whether by the direct or
indirect ownership of shares or other equity interests, by contract or
otherwise, to elect a majority of the directors of a corporation, to select the
managing partner of a partnership or otherwise to select, or have the
<PAGE> 19
14
power to remove and then select, a majority of those Persons exercising
governing authority over an Entity. In the case of a limited partnership, the
sole general partner, all of the general partners to the extent each has equal
management control and authority, or the managing general partner or managing
general partners thereof shall be deemed to have control of such partnership
and, in the case of a trust, any trustee thereof or any Person having the right
to select or remove any such trustee shall be deemed to have control of such
trust.
"Covered Sale" shall have the meaning set forth in Section
6.2(d) hereof.
"Current Per Share Market Price" on any date shall mean the
average of the Closing Prices for the five consecutive Trading Days ending on
such date.
"DeBartolos" shall mean (i) the Estate of Edward J. DeBartolo,
(ii) Edward J. DeBartolo, Jr., Marie Denise DeBartolo York, members of the
Immediate Family of either of the foregoing, any other members of the Immediate
Family of Edward J. DeBartolo, any other lineal descendants of any of the
foregoing and any trusts established for the benefit of
<PAGE> 20
15
any of the foregoing, and (iii) EJDC and any other Entity Controlled by any one
or more of the Persons listed or specified in clauses (i) and (ii) above.
"Deemed Partnership Unit Value" as of any date shall mean the
Current Per Share Market Price as of the Trading Day immediately preceding such
date; provided, however, that Deemed Partnership Unit Value shall be adjusted
as described in Section 11.7(d) hereof in the event of any stock dividend,
stock split, stock distribution or similar transaction.
"Depreciation" shall mean for each Partnership Fiscal Year or
other period, an amount equal to the depreciation, amortization, or other cost
recovery deduction allowable under the Code with respect to a Partnership asset
for such year or other period, except that if the Gross Asset Value of a
Partnership asset differs from its adjusted basis for federal income tax
purposes at the beginning of such year or other period, Depreciation shall be
an amount which bears the same ratio to such beginning Gross Asset Value as the
federal income tax depreciation, amortization or other cost recovery deduction
for such year or other period bears
<PAGE> 21
16
to such beginning adjusted tax basis; provided, however, that if the federal
income tax depreciation, amortization or other cost recovery deduction for such
year is zero, Depreciation shall be determined with reference to such beginning
Gross Asset Value using any reasonable method selected by the General Partner.
"Development Land" shall mean any vacant land suitable for
development as a Project.
"Directors" shall mean the Board of Directors of the
Non-Managing General Partner.
"Effective Time" shall have the meaning set forth in the
Merger Agreement.
"EJDC" shall mean The Edward J. DeBartolo Corporation, an Ohio
corporation.
"EJDC Lender" shall mean the Persons described as lenders in
Exhibit F.
"EJDC Loan Transaction" shall mean the loans provided for in
the documents listed in Exhibit F, together with assignments and refinancings
thereof to the extent permitted by Exhibit F.
<PAGE> 22
17
"EJDC Option" shall have the meaning set forth in Section 12.1
hereof.
"EJDC Option Termination Date" shall have the meaning set
forth in Section 12.1(e) hereof.
"Entity" shall mean any general partnership, limited
partnership, limited liability company, limited liability partnership,
corporation, joint venture, trust, business trust, cooperative or association.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time (or any corresponding provisions of
succeeding laws).
"Excess Stock" shall mean the shares of Excess Stock, par
value $0.0001 per share, of the Non-Managing General Partner.
"Exercise Notice" shall have the meaning set forth in Section
11.1 hereof.
"GAAP" shall mean generally accepted accounting principles
consistently applied.
"General Partner" shall mean the Managing General Partner, the
Non-Managing General Partner and their respective duly admitted successors and
assigns and any
<PAGE> 23
18
other Person who is a general partner of the Partnership at the time of
reference thereto.
"Gross Asset Value" shall have the meaning set forth in
Section 4.8(b) hereof.
"Gross Income" shall mean the income of the Partnership
determined pursuant to Section 61 of the Code before deduction of items of
expense or deduction.
"Immediate Family" shall mean, with respect to any Person,
such Person's spouse, parents, parents-in-law, descendants by blood or
adoption, nephews, nieces, brothers, sisters, brothers-in-law, sisters-in-law
and children-in-law (in each case by whole or half-blood).
"Incurrence" shall have the meaning set forth in Section
10.5(a) hereof.
"Independent Directors" shall mean members of the Board of
Directors of the Non-Managing General Partner, none of whom is either employed
by the Non-Managing General Partner or a member (or an Affiliate of a member)
of the Simons.(1)
__________
(1)In the event the requisite stockholder approval is obtained to amend the
Charter of Simon-DeBartolo Group, Inc. to provide for a 13-person board,
directors elected by the
(continued)
<PAGE> 24
19
"Initial EJDC Notice" shall have the meaning set forth in
Section 12.1(a) hereof.
"Institutional Investors" shall have the meaning set forth in
Rule 501(a)(1)-(3), (7) and (8) of Regulation D promulgated under the
Securities Act.
"Institutional Lender" shall mean a commercial bank or trust
company, a savings and loan association or an insurance company.
"JCP" shall mean JCP Realty, Inc., a Delaware corporation, or
Brandywine Realty, Inc., a Delaware corporation, or any of its or their
Affiliates that becomes a Limited Partner hereunder and that is an "accredited
investor" as defined in Regulation D under the Securities Act, as amended.
"JCP Limited Partner" shall mean JCP, in its capacity as a
Limited Partner or Partners hereunder.
"JCP Property Liabilities" means any liabilities encumbering
the assets of Treasure Coast-JCP Associates, Ltd., Melbourne-JCP Associates,
Ltd., Boynton-JCP
__________
(1) (continued)
DeBartolo holders of Class C Common Stock will also be excluded from the
definition of Independent Directors.
<PAGE> 25
20
Associates, Ltd., Chesapeake-JCP Associates, Ltd., Mall of the Mainland
Associates, L.P., Port Charlotte-JCP Associates and Northfield Center Limited
Partnership, and any liability of the Partnership, Simon, L.P. or any
Subsidiary Partnership with respect to which JCP has incurred the "economic
risk of loss" within the meaning of Treasury Regulation Section 1.752-2.
"Lien" shall mean any liens, security interests, mortgages,
deeds of trust, charges, claims, encumbrances, restrictions, pledges, options,
rights of first offer or first refusal and any other rights or interests of
others of any kind or nature, actual or contingent, or other similar
encumbrances of any nature whatsoever.
"Limited Partner Liability" shall mean, with respect to each
Limited Partner, each liability (or portion thereof) included in the basis of
such Limited Partner (other than as an "excess nonrecourse liability" within
the meaning of Regulations Section 1.752-3(a)(3)) for federal income tax
purposes.
"Limited Partners" shall mean those Persons whose names are
set forth on Exhibit A hereto as Limited Partners,
<PAGE> 26
21
their permitted successors or assigns as limited partners hereof, and/or any
Person who, at the time of reference thereto, is a limited partner of the
Partnership.
"Liquidating Agent" shall mean such Person as is selected as
the Liquidating Agent hereunder by the Managing General Partner, which Person
may be the Managing General Partner or an Affiliate of the Managing General
Partner, provided such Liquidating Agent agrees in writing to be bound by the
terms of this Agreement. The Liquidating Agent shall be empowered to give and
receive notices, reports and payments in connection with the dissolution,
liquidation and/or winding-up of the Partnership and shall hold and exercise
such other rights and powers as are necessary or required to permit all parties
to deal with the Liquidating Agent in connection with the dissolution,
liquidation and/or winding-up of the Partnership.
"Liquidation Transaction" shall mean any sale of assets of the
Partnership in contemplation of, or in connection with, the liquidation of the
Partnership.
"Losses" shall have the meaning set forth in Section 6.1(a)
hereof.
<PAGE> 27
22
"Major Decisions" shall have the meaning set forth in Section
7.3(b) hereof.
"Majority-In-Interest of the Limited Partners" shall mean
Limited Partner(s) who hold in the aggregate more than fifty percent (50%) of
the Partnership Units then held by all the Limited Partners, as a class
(excluding any Partnership Units held by the Non-Managing General Partner or by
the Managing General Partner, any Person Controlled by either of such General
Partners or any Person holding as nominee for either of such General Partners).
"Managing General Partner" shall mean the DeBartolo Realty
Corporation, an Ohio corporation.
"Merger Agreement" shall mean the Agreement and Plan of Merger
among the Non-Managing General Partner, Day Acquisition Corp. and the Managing
General Partner dated as of March 26, 1996, as amended.
"Minimum Gain" shall have the meaning set forth in Section
6.1(d)(1) hereof.
"Minimum Gain Chargeback" shall have the meaning set forth in
Section 6.1(d)(1) hereof.
<PAGE> 28
23
"Net Financing Proceeds" shall mean the cash proceeds received
by the Partnership in connection with any borrowing by or on behalf of the
Partnership (whether or not secured), or distributed to the Partnership in
respect of any such borrowing by any Subsidiary Entity, after deduction of all
costs and expenses incurred by the Partnership in connection with such
borrowing, and after deduction of that portion of such proceeds used to repay
any other indebtedness of the Partnership, or any interest or premium thereon.
"Net Operating Cash Flow" shall mean, with respect to any
fiscal period of the Partnership, the aggregate amount of all cash received by
the Partnership from any source for such fiscal period (including Net Sale
Proceeds and Net Financing Proceeds but excluding Contributed Funds), less the
aggregate amount of all expenses or other amounts paid with respect to such
period and such additional cash reserves as of the last day of such period as
the Managing General Partner deems necessary for any capital or operating
expenditure permitted hereunder.
<PAGE> 29
24
"Net Sale Proceeds" shall mean the cash proceeds received by
the Partnership in connection with a sale or other disposition of any asset by
or on behalf of the Partnership or a sale or other disposition of any asset by
or on behalf of any Subsidiary Entity, after deduction of any costs or expenses
incurred by the Partnership, or payable specifically out of the proceeds of
such sale or other disposition (including, without limitation, any repayment of
any indebtedness required to be repaid as a result of such sale or other
disposition or which the Managing General Partner elects to repay out of the
proceeds of such sale or other disposition, together with accrued interest and
premium, if any, thereon and any sales commissions or other costs and expenses
due and payable to any Person), in connection with such sale or other
disposition.
"Non-Managing General Partner" shall mean the Simon Property
Group, Inc., a Maryland corporation.
"Nonrecourse Liabilities" shall have the meaning set forth in
Section 6.1(d)(1) hereof.
<PAGE> 30
25
"Offered Units" shall have the meaning set forth in Section
11.1 hereof.
"Ownership Limit" shall have the meaning set forth in Article
Ninth of the Charter of the Non-Managing General Partner.
"Partner Nonrecourse Debt" shall have the meaning set forth in
Section 6.1(d)(2) hereof.
"Partner Nonrecourse Debt Minimum Gain" shall have the meaning
set forth in Section 6.1(d)(2) hereof.
"Partner Nonrecourse Deduction" shall have the meaning set
forth in Section 6.1(d)(2) hereof.
"Partners" shall mean the Managing General Partner, the
Non-Managing General Partner and the Limited Partners, their duly admitted
successors or assigns or any Person who is a partner of the Partnership at the
time of reference thereto.
"Partnership" shall mean Simon-DeBartolo Group, L.P. (formerly
known as DeBartolo Realty Partnership, L.P.), a Delaware limited partnership,
as such limited partnership may from time to time be constituted.
<PAGE> 31
26
"Partnership Fiscal Year" shall mean the calendar year.
"Partnership Interest" shall mean the interest of a Partner in
the Partnership.
"Partnership Minimum Gain" shall have the meaning set forth in
Section 1.704-2(b)(2) of the Regulations.
"Partnership Record Date" shall mean the record date
established by the Managing General Partner for a distribution of Net Operating
Cash Flow pursuant to Section 6.2 hereof, which record date shall be the same
as the record date established by the Non-Managing General Partner for
distribution to its shareholders of some or all of its share of such
distribution.
"Partnership Units" or "Units" shall mean the interest in the
Partnership of any Partner which entitles a Partner to the allocations (and
each item thereof) specified in Section 6.1(b) hereof and all distributions
from the Partnership, and its rights of management, consent, approval, or
participation, if any, as provided in this Agreement. Partnership Units do not
include Preferred Units. Each Partner's percentage ownership interest in the
<PAGE> 32
27
Partnership shall be determined by dividing the number of Partnership Units
then owned by each Partner by the total number of Partnership Units then
outstanding. The number of Partnership Units held by each Partner at the date
hereof is as set forth opposite its name on attached Exhibit A.
"Payment Period" shall have the meaning set forth in Section
12.1(a) hereof.
"Person" shall mean any individual or Entity.
"Pledge" shall mean granting of a Lien on a Partnership
Interest.
"Post-Exchange Distribution" shall have the meaning set forth
in Section 6.2(a) hereof.
"Preferred Contributed Funds" shall have the meaning set forth
in Section 4.3(c) hereof.
"Preferred Distribution Requirement" shall have the meaning
set forth in Section 4.3(c) hereof.
"Preferred Distribution Shortfall" shall have the meaning set
forth in Section 6.2(b)(i) hereof.
"Preferred Redemption Amount" shall mean, with respect to any
class or series of Preferred Units, the sum of (i) the amount of any
accumulated Preferred Distribution
<PAGE> 33
28
Shortfall with respect to such class or series of Preferred Units, (ii) the
Preferred Distribution Requirement with respect to such class or series of
Preferred Units to the date of redemption and (iii) the Preferred Redemption
Price indicated in the Preferred Unit Designation with respect to such class or
series of Preferred Units.
"Preferred Redemption Price" shall have the meaning set forth
in Section 4.3(c) hereof.
"Preferred Shares" shall mean any class of equity securities
of the Non-Managing General Partner now or hereafter authorized or
reclassified, other than the Shares or the Excess Stock, having dividend rights
that are superior or prior to dividends payable on the Shares.
"Preferred Unit Designation" shall have the meaning set forth
in Section 4.3(c) hereof.
"Preferred Unit Issue Price" shall mean the amount of the
Required Funds contributed or deemed to have been contributed by the
Non-Managing General Partner in exchange for a Preferred Unit.
"Preferred Units" shall mean interests in the Partnership
issued to the Non-Managing General Partner
<PAGE> 34
29
pursuant to Sections 4.1(c) and 4.3(c) hereof. The holder of Preferred Units
shall have such rights to the allocations of Profits and Losses as specified in
Section 6.1 hereof and to distributions pursuant to Section 6.2 hereof, but
shall not, by reason of its ownership of such Preferred Units, be entitled to
participate in the management of the Partnership or to consent to or approve any
action which is required by the Act or this Agreement to be approved by any or
all of the Partners.
"Profits" shall have the meaning set forth in Section 6.1(a)
hereof.
"Project" shall mean any property that is or is planned to be
used primarily for retail purposes, and shall include, but is not limited to, a
regional mall, a community shopping center, a specialty retail center and a
mixed-use property which contains a major retail component.
"Property or Properties" shall mean any Development Land or
Project in which the Partnership acquires ownership of (a) the fee or leasehold
interest or (b) an indirect fee or leasehold interest through an interest in
any other Entity.
<PAGE> 35
30
"Purchase Price" shall have the meaning set forth in Section
11.3 hereof.
"Qualified REIT Subsidiaries" shall have the meaning set forth
in Section 856(i)(2) of the Code.
"Registration Rights Agreements" shall mean the agreements, in
effect as of the Effective Time, among the Non-Managing General Partner,
certain of its stockholders and certain holders of Units.
"Regulations" shall mean the final, temporary or proposed
income tax regulations promulgated under the Code, as such regulations may be
amended from time to time (including corresponding provisions of succeeding
regulations).
"Regulatory Allocations" shall have the meaning set forth in
Section 6.1(d)(5) hereof.
"REIT" shall mean a real estate investment trust as defined in
Section 856 of the Code.
"REIT Expenses" shall mean (i) costs and expenses relating to
the continuity of existence of the Managing General Partner and the
Non-Managing General Partner and their respective subsidiaries, including
taxes, fees and
<PAGE> 36
31
assessments associated therewith, and any and all costs, expenses or fees
payable to any director or trustee of the Managing General Partner, the
Non-Managing General Partner or such subsidiaries, (ii) costs and expenses
relating to any offer or registration of securities by the General Partner or
the Non-Managing General Partner and all statements, reports, fees and expenses
incidental thereto, including underwriting discounts, selling commissions and
placement fees applicable to any such offer of securities (provided, however,
that in the case of any registration of securities effectuated by the Managing
General Partner or the Non-Managing General Partner on behalf of one or more of
its security holders, REIT Expenses shall not include underwriting discounts or
selling commissions), (iii) costs and expenses associated with the preparation
and filing of any periodic reports by the Managing General Partner or the
Non-Managing General Partner under federal, state or local laws or regulations,
including tax returns and filings with the SEC and any stock exchanges on which
the Shares are listed, (iv) costs and expenses associated with compliance by
the Managing General Partner or the Non-Managing General
<PAGE> 37
32
Partner with laws, rules and regulations promulgated by any regulatory body,
including the SEC, (v) costs and expenses associated with any 401(k) Plan,
incentive plan, bonus plan or other plan providing for compensation for the
employees of the Managing General Partner, the Non-Managing General Partner or
Simon Property Group (Delaware), Inc., and (vi) all operating, administrative
and other costs incurred by the Managing General Partner or the Non-Managing
General Partner (including attorney's and accountant's fees, income and
franchise taxes and salaries paid to officers of the Managing General Partner
or the Non-Managing General Partner, but excluding costs of any repurchase by
the General Partners of any of their securities); provided, however, that
amounts described herein shall be considered REIT Expenses hereunder only if
and to the extent during the fiscal year in question the aggregate amount of
such expenses for such fiscal year and all prior fiscal years exceeds the
aggregate of (a) all amounts theretofore distributed or distributable to the
Managing General Partner or the Non-Managing General Partner by any
wholly-owned subsidiary thereof (including, without limitation, in the
<PAGE> 38
33
case of the Non-Managing General Partner, by Simon Property (Delaware), Inc.)
and (b) all amounts theretofore paid to the Managing General Partner or the
Non-Managing General Partner pursuant to Section 7.1 hereof or Section 7.1 of
the limited partnership agreement of Simon, L.P., as amended.
"REIT Requirements" shall mean all actions or omissions as may
be necessary (including making appropriate distributions from time to time) to
permit each of the Managing General Partner and the Non-Managing General
Partner to qualify or continue to qualify as a real estate investment trust
within the meaning of Section 856 et seq. of the Code, as such provisions may
be amended from time to time, or the corresponding provisions of succeeding
law.
"Related Issue" shall mean, with respect to a class or series
of Preferred Units, the class or series of Preferred Shares the sale of which
provided the Non-Managing General Partner with the proceeds to contribute to
the Partnership in exchange for such Preferred Units.
"Required Funds" shall have the meaning set forth in Section
4.3(a) hereof.
<PAGE> 39
34
"Response Notice" shall have the meaning set forth in Section
12.1(b).
"Rights" shall have the meaning set forth in Section 11.1
hereof.
"SEC" shall mean the United States Securities and Exchange
Commission.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Shares" shall mean the shares of Common Stock, par value
$.0001 per share, of the Non-Managing General Partner.
"Simon, L.P." shall mean Simon Property Group, L.P., a
Delaware limited partnership.
"Simons" shall mean Melvin Simon, Herbert Simon and David
Simon, other members of the Immediate Family of any of the foregoing, any other
lineal descendants of any of the foregoing, any trusts established for the
benefit of any of the foregoing, and any Entity Controlled by any one or more
of the foregoing.
"Subsequent EJDC Notice" shall have the meaning set forth in
Section 12.1(c) hereof.
<PAGE> 40
35
"Subsidiary Entity" shall mean any Entity in which the
Partnership (or when used in respect of Simon, L.P., in which Simon, L.P.) owns
a direct or indirect equity interest.
"Subsidiary Partnership" shall mean any partnership in which
the Partnership owns a direct or indirect equity interest.
"Substituted Limited Partner" shall have the meaning set forth
in the Act.
"Tax Matters Partner" shall have the meaning set forth in
Section 6.7 hereof.
"Third Party" or "Third Parties" shall mean a Person or
Persons who is or are neither a Partner or Partners nor an Affiliate or
Affiliates of a Partner or Partners.
"Third Party Financing" shall mean financing or refinancing
obtained from a Third Party by the Partnership.
"Trading Day" shall mean a day on which the principal national
securities exchange on which the Shares are listed or admitted to trading is
open for the transaction of business or, if the Shares are not listed or
admitted to
<PAGE> 41
36
trading on any national securities exchange, shall mean any day other than a
Saturday, a Sunday or a day on which banking institutions in the State of New
York are authorized or obligated by law or executive order to close.
"Transfer" shall mean any assignment, sale, transfer,
conveyance or other disposition or act of alienation (other than a Pledge),
whether voluntary or involuntary or by operation of law.
1.2 EXHIBIT, ETC. References in this Agreement to an
"Exhibit" are, unless otherwise specified, to one of the Exhibits attached to
this Agreement, and references in this Agreement to an "Article" or a "Section"
are, unless otherwise specified, to one of the Articles or Sections of this
Agreement. Each Exhibit attached hereto and referred to herein is hereby
incorporated herein by reference.
ARTICLE II
CONTINUATION OF PARTNERSHIP
2.1 CONTINUATION. The parties hereto do hereby agree to
continue the Partnership as a limited partnership pursuant to the provisions of
the Act, and all other
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37
pertinent laws of the State of Delaware, for the purposes and upon the terms
and conditions hereinafter set forth. The Partners agree that the rights and
liabilities of the Partners shall be as provided in the Act except as otherwise
herein expressly provided. Promptly upon the execution and delivery of this
Agreement, the Managing General Partner shall cause each notice, instrument,
document or certificate as may be required by applicable law, and which may be
necessary to enable the Partnership to continue to conduct its business, and to
own its properties, under the Partnership name to be filed or recorded in all
appropriate public offices. Upon request of the Managing General Partner, the
Partners shall execute any assumed or fictitious name certificate or
certificates required by law to be filed in connection with the Partnership.
The Managing General Partner shall properly cause the execution and delivery of
such additional documents and shall perform such additional acts consistent
with the terms of this Agreement as may be necessary to comply with the
requirements of law for the continued operation of a limited partnership under
the laws of the State of Delaware (it
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38
being understood that the Managing General Partner shall be required to provide
the Non-Managing General Partner and Limited Partners with copies of any
amended Certificates of Limited Partnership required to be filed under such
laws only upon request) and for the continued operation of a limited
partnership in each other jurisdiction in which the Partnership shall conduct
business.
2.2 NAME. The name of the Partnership is hereby changed
to Simon-DeBartolo Group, L.P., and henceforth all business of the Partnership
shall be conducted under the name of Simon-DeBartolo Group, L.P. or such other
name as the Managing General Partner may select; provided, however, that the
Managing General Partner may not choose the name (or any derivative thereof) of
any Limited Partner (other than the names "DeBartolo" or "Simon") without the
prior written consent of such Limited Partner. All transactions of the
Partnership, to the extent permitted by applicable law, shall be carried on and
completed in such name (it being understood that the Partnership may adopt
assumed or fictitious names in certain jurisdictions).
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39
2.3 CHARACTER OF THE BUSINESS. The purpose of the
Partnership is and shall be to acquire, hold, own, develop, redevelop,
construct, reconstruct, alter, improve, maintain, operate, sell, lease,
Transfer, encumber, convey, exchange and otherwise dispose of or deal with the
Properties and any other real and personal property of all kinds; to undertake
such other activities as may be necessary, advisable, desirable or convenient
to the business of the Partnership; and to engage in such other ancillary
activities as shall be necessary or desirable to effectuate the foregoing
purposes. The Partnership shall have all powers necessary or desirable to
accomplish the purposes enumerated. In connection with the foregoing, but
subject to all of the terms, covenants, conditions and limitations contained in
this Agreement and any other agreement entered into by the Partnership, the
Partnership shall have full power and authority to enter into, perform and
carry out contracts of any kind, to borrow or lend money and to issue evidences
of indebtedness, whether or not secured by mortgage, trust deed, pledge or
other Lien and, directly or
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40
indirectly, to acquire and construct additional Properties necessary or useful
in connection with its business.
2.4 LOCATION OF THE PRINCIPAL PLACE OF BUSINESS. The
location of the principal place of business of the Partnership shall be at
__________________________________ or such other location as shall be selected
from time to time by the Managing General Partner in its sole discretion;
provided, however, that the Managing General Partner shall promptly notify the
Partners of any change in the location of the principal place of business of
the Partnership.
2.5 REGISTERED AGENT AND REGISTERED OFFICE. The
Registered Agent of the Partnership shall be The Prentice-Hall Corporation
System, Inc. or such other Person as the Managing General Partner may select in
its sole discretion. The Registered Office of the Partnership in the State of
Delaware shall be c/o Prentice-Hall Corporation System, Inc., 32 Loockerman
Square, Suite L-100, Dover, DE 19901, or such other location as the Managing
General Partner may select in its sole and absolute discretion. The Managing
General Partner shall promptly notify the Partners of any
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41
change in the Registered Agent or Registered Office of the Partnership.
ARTICLE III
TERM
3.1 COMMENCEMENT. The Partnership commenced business as
a limited partnership on November 18, 1993 upon the filing of the Certificate
with the Secretary of State of the State of Delaware.
3.2 DISSOLUTION. The Partnership shall continue until
dissolved and terminated upon the earlier of (i) December 31, 2096, or (ii) the
earliest to occur of the following events:
(a) the dissolution, termination, withdrawal,
retirement or Bankruptcy of a General Partner unless the Partnership is
continued as provided in Section 9.1 hereof;
(b) the election to dissolve the Partnership made
in writing by the Managing General Partner, but only if the consent required by
Section 7.3 and the consent of the Non-Managing General Partner are obtained;
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(c) the sale or other disposition of all or
substantially all the assets of the Partnership; or
(d) dissolution required by operation of law.
ARTICLE IV
CONTRIBUTIONS TO CAPITAL
4.1 GENERAL PARTNER CAPITAL CONTRIBUTIONS.
(a) Simultaneously with the execution and
delivery hereof, the Non-Managing General Partner is contributing to the
Partnership Simon, L.P. units representing 10.5% of the outstanding Simon, L.P.
units (excluding preferred units) and a 49.5% interest in the profits of Simon,
L.P., both in exchange for a non-managing general partnership interest in the
Partnership with the number of Units set forth on Exhibit A.
(b) The Non-Managing General Partner shall
hereafter contribute to the capital of the Partnership, in exchange for Units
as provided in Section 4.3(b) hereof, the proceeds of the sale of any Shares.
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(c) The Non-Managing General Partner may
contribute to the Partnership, in exchange for Preferred Units having the same
terms as the Simon, L.P. preferred units being exchanged, any Simon, L.P.
preferred units on a one-for-one basis. Upon such contribution, any such
Preferred Units shall be subject in all respects to the provisions of Section
4.3(c) and the Related Issue for any such Preferred Units issued under this
section shall be the class or series of Preferred Stock of the Non-Managing
General Partner related to the Simon, L.P. preferred units so contributed.
(d) All transfer, stamp or similar taxes payable
upon any contribution provided for in this Section 4.1 shall be paid by the
Partnership.
4.2 LIMITED PARTNER CAPITAL CONTRIBUTIONS. Concurrently
herewith, the Limited Partners identified on Exhibit A as limited partners of
Simon, L.P. are contributing or causing to be contributed, to the capital of
the Partnership, in exchange for Partnership Units, their limited partnership
interests in Simon, L.P. All transfer, stamp or similar taxes payable upon
such contribution, if
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any, shall be paid by the Partnership. Except as expressly provided in
Sections 4.3, 4.4, 4.5 and 4.8 below, no Partner may make, and no Partner shall
have the obligation to make, additional contributions to the capital of the
Partnership without the consent of the General Partners.
4.3 ADDITIONAL FUNDS.
(a) The Partnership may obtain funds ("Required
Funds") which it considers necessary to meet the needs, obligations and
requirements of the Partnership, or to maintain adequate working capital or to
repay Partnership indebtedness, and to carry out the Partnership's purposes,
from the proceeds of Third Party Financing or Affiliate Financing, in each case
pursuant to such terms, provisions and conditions and in such manner (including
the engagement of brokers and/or investment bankers to assist in providing such
financing) and amounts as the Managing General Partner and as the Non-Managing
General Partner shall determine to be in the best interests of the Partnership,
subject to the terms and conditions of this Agreement. Any and all funds
required or expended, directly or indirectly, by the Partnership for capital
expenditures may be obtained or
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45
replenished through Partnership borrowings. Any Third Party Financing
or Affiliate Financing obtained by the General Partners for and on
behalf of the Partnership may be convertible in whole or in part into
Additional Units (to be issued in accordance with Section 9.4 hereof),
may be unsecured, may be secured by mortgage(s) or deed(s) of trust
and/or assignments on or in respect of all or any portion of the
assets of the Partnership or any other security made available by the
Partnership, may include or be obtained through the public or private
placement of debt and/or other instruments, domestic and foreign, may
include provision for the option to acquire Additional Units (to be
issued in accordance with Section 9.4 hereof), and may include the
acquisition of or provision for interest rate swaps, credit enhancers
and/or other transactions or items in respect of such Third Party
Financing or Affiliate Financing; provided, however, that in no event
may the Partnership obtain any Affiliate Financing or Third Party
Financing that is recourse to any Partner or any Affiliate, partner,
shareholder, beneficiary, principal, officer or director of any
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Partner without the consent of the affected Partner and any other Person or
Persons to whom such recourse may be had.
(b) To the extent the Partnership does not borrow
all of the Required Funds (and whether or not the Partnership is able to borrow
all or part of the Required Funds), the Managing General Partner or the
Non-Managing General Partner (or an Affiliate thereof) (i) may itself borrow
such Required Funds, in which case the Managing General Partner or the
Non-Managing General Partner shall lend such Required Funds to the Partnership
on the same economic terms and otherwise on substantially identical terms, or
(ii) may raise such Required Funds in any other manner, in which case, unless
such Required Funds are raised by the Non-Managing General Partner through the
sale of Preferred Shares, the Managing General Partner or the Non-Managing
General Partner shall contribute to the Partnership as an additional Capital
Contribution the amount of the Required Funds so raised ("Contributed Funds")
(hereinafter, each date on which the Managing General Partner or the
Non-Managing General Partner so contributes Contributed Funds pursuant to this
Section 4.3(b) is referred to as an
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"Adjustment Date"). Any Required Funds raised from the sale of Preferred
Shares shall either be contributed to the Partnership as Contributed Funds or
loaned to the Partnership pursuant to Section 4.3(c) below. In the event the
Managing General Partner or the Non-Managing General Partner advances Required
Funds to the Partnership pursuant to this Section 4.3(b) as Contributed Funds,
then the Partnership shall assume and pay (or reflect on its books as
additional Contributed Funds) the expenses (including any applicable
underwriting discounts) incurred by the Managing General Partner or the
Non-Managing General Partner (or such Affiliate) in connection with raising
such Required Funds through a public offering of its securities or otherwise.
If the Managing General Partner or the Non-Managing General Partner advances
Required Funds to the Partnership as Contributed Funds pursuant to this Section
4.3(b), additional Partnership Units shall be issued to the Managing General
Partner or the Non-Managing General Partner to reflect its contribution of the
Contributed Funds. The number of Partnership Units so issued shall be
determined by dividing the amount of Contributed Funds by the Deemed
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Partnership Unit Value, computed as of the Trading Day immediately preceding
the Adjustment Date. The Managing General Partner or the Non- Managing General
Partner shall promptly give each Limited Partner written notice of the number
of Partnership Units so issued.
(c) In the event the Non-Managing General Partner
contributes to the Partnership any Required Funds obtained from the sale of
Preferred Shares ("Preferred Contributed Funds"), then the Partnership shall
assume and pay the expenses (including any applicable underwriter discounts)
incurred by the Non-Managing General Partner in connection with raising such
Required Funds. In addition, the Non- Managing General Partner shall be issued
Preferred Units of a designated class or series to reflect its contribution of
such funds. Each class or series of Preferred Units so issued shall be
designated by the Non-Managing General Partner to identify such class or series
with the class or series of Preferred Shares which constitutes the Related
Issue. Each class or series of Preferred Units shall be described in a written
document (the "Preferred Unit Designation") attached as Exhibit B
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49
that shall set forth, in sufficient detail, the economic rights, including
dividend, redemption and conversion rights and sinking fund provisions, of the
class or series of Preferred Units and the Related Issue. The number of
Preferred Units of a class or series shall be equal to the number of shares of
the Related Issue sold. The Preferred Unit Designation shall provide for such
terms for the class or series of Preferred Units that shall entitle the
Non-Managing General Partner to substantially the same economic rights as the
holders of the Related Issue. Specifically, the Non-Managing General Partner
shall receive distributions on the class or series of Preferred Units pursuant
to Section 6.2 equal to the aggregate dividends payable on the Related Issue at
the times such dividends are paid (the "Preferred Distribution Requirement").
The Partnership shall redeem the class or series of Preferred Units for a
redemption price per Preferred Unit equal to the redemption price per share of
the Related Issue, exclusive of any accrued unpaid dividends (the "Preferred
Redemption Price") upon the redemption of any shares of the Related Issue.
Each class or series of Preferred Units shall also be
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50
converted into additional Partnership Units at the time and on such economic
terms and conditions as the Related Issue is converted into Shares. Upon the
issuance of any class or series of Preferred Units pursuant to this Section
4.3(c), the Non-Managing General Partner shall provide the Limited Partners
with a copy of the Preferred Unit Designation relating to such class or series.
The Non-Managing General Partner shall have the right, in lieu of contributing
to the Partnership proceeds from the sale of Preferred Shares as Preferred
Contributed Funds, to lend such proceeds to the Partnership. Any such loan
shall be on the same terms and conditions as the Related Issue except that
dividends payable on the Related Issue shall be payable by the Partnership to
the Non-Managing General Partner as interest, any mandatory redemptions shall
take the form of principal payments and no Preferred Units shall be issued to
the Non-Managing General Partner. If any such loan is made, the Partnership
shall promptly reimburse the Non-Managing General Partner for all expenses
(including any applicable underwriter discounts) incurred by the Non-Managing
General Partner in connection with raising the Required Funds. Any
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51
such loan made by the Non-Managing General Partner to the Partnership may at
any time be contributed to the Partnership as Preferred Contributed Funds in
exchange for Preferred Units as above provided; and if the Related Issue is by
its terms convertible into Shares, such loan shall be so contributed to the
Partnership prior to the effectuation of such conversion.
4.4 STOCK OPTION PLAN. The stock option plan of Simon,
L.P. and all obligations thereunder have been assumed by the Partnership. If
at any time a stock option granted by Simon, L.P. in connection with such plan
or a stock option granted by the Partnership in connection with the Stock
Option Plan is exercised in accordance with its terms, and the Partnership
chooses not to acquire any or all of the stock required to satisfy such option
through open market purchases, the Non-Managing General Partner shall, as soon
as practicable after such exercise, sell to the Partnership for use in
satisfying such stock option, at a purchase price equal to the Current Per
Share Market Price on the date such stock option is exercised, the number of
newly issued Shares for which such option is exercised (or, if such stock
option
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52
is to be satisfied in part through open market purchases, the remaining number
of newly issued Shares) and the Non-Managing General Partner shall contribute
to the capital of the Partnership, in exchange for additional Partnership
Units, an amount equal to the price paid to the Non- Managing General Partner
by the Partnership in connection with the Partnership's purchase of newly
issued Shares upon exercise of such stock option. The number of Partnership
Units to be so issued shall be determined by dividing the amount of such
capital contribution by the Deemed Partnership Unit Value, computed as of the
Trading Day immediately preceding the date of such capital contribution. The
Non-Managing General Partner shall promptly give each Limited Partner written
notice of the number of Partnership Units so issued. The Partnership shall
retain the exercise or purchase price paid by the holder of such option for the
Shares such holder is entitled to receive upon such exercise.
4.5 DIVIDEND REINVESTMENT PLAN. All amounts received by
the Non-Managing General Partner in respect of its dividend reinvestment plan,
if any, either (a) shall be utilized by the Non-Managing General Partner to
effect open
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53
market purchases of its stock, or (b) if the Non-Managing General Partner
elects instead to issue new shares with respect to such amounts, shall be
contributed by the Non-Managing General Partner to the Partnership in exchange
for additional Partnership Units. The number of Partnership Units so issued
shall be determined by dividing the amount of funds so contributed by the
Deemed Partnership Unit Value, computed as of the Trading Day immediately
preceding the date such funds are contributed. The Non-Managing General
Partner shall promptly give each Limited Partner written notice of the number
of Partnership Units so issued.
4.6 NO THIRD PARTY BENEFICIARY. No creditor or other
Third Party having dealings with the Partnership shall have the right to
enforce the right or obligation of any Partner to make Capital Contributions or
to pursue any other right or remedy hereunder or at law or in equity, it being
understood and agreed that the provisions of this Agreement shall be solely for
the benefit of, and may be enforced solely by, the parties hereto and their
respective successors and assigns. None of the rights or obligations of the
Partners herein set forth to make Capital Contributions to
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54
the Partnership shall be deemed an asset of the Partnership for any purpose by
any creditor or other third party, nor may such rights or obligations be sold,
transferred or assigned by the Partnership or pledged or encumbered by the
Partnership to secure any debt or other obligation of the Partnership or of any
of the Partners.
4.7 NO INTEREST; NO RETURN. No Partner shall be entitled
to interest on its Capital Contribution or on such Partner's Capital Account.
Except as provided herein or by law, no Partner shall have any right to
withdraw any part of its Capital Account or to demand or receive the return of
its Capital Contribution from the Partnership.
4.8 CAPITAL ACCOUNTS.
(a) The Partnership shall establish and maintain
a separate capital account ("Capital Account") for each Partner, including a
Partner who shall pursuant to the provisions hereof acquire a Partnership
Interest, which Capital Account shall be:
(1) credited with the amount of cash contributed
by such Partner to the capital of the Partnership; the initial Gross
Asset Value (net of
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liabilities secured by such contributed property that the Partnership
assumes or takes subject to) of any other property contributed by such
Partner to the capital of the Partnership; such Partner's distributive
share of Profits; and any other items in the nature of income or gain
that are allocated to such Partner pursuant to Section 6.1 hereof, but
excluding tax items described in Regulations Section 1.704-1(b)(4)(i);
and
(2) debited with the amount of cash distributed
to such Partner pursuant to the provisions of this Agreement; the
Gross Asset Value (net of liabilities secured by such distributed
property that such Partner assumes or takes subject to) of any
Partnership property distributed to such Partner pursuant to any
provision of this Agreement; the amount of unsecured liabilities of
such Partner assumed by the Partnership; such Partner's distributive
share of Losses; in the case of the General Partners, payments of REIT
Expenses by the Partnership; and any other items in the nature of
expenses or losses that are allocated to such Partner pursuant to
Section 6.1
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hereof, but excluding tax items described in Regulations Section
1.704-1(b)(4)(i).
In the event that any or all of a Partner's Partnership Units
or Preferred Units are transferred within the meaning of Regulations Section
1.704-1(b)(2)(iv)(l), the transferee shall succeed to the Capital Account of
the transferor to the extent that it relates to the Units so transferred.
In the event that the Gross Asset Values of Partnership assets
are adjusted pursuant to Section 4.8(b)(ii) hereof, the Capital Accounts of the
Partners shall be adjusted to reflect the aggregate net adjustments as if the
Partnership sold all of its properties for their fair market values and
recognized gain or loss for federal income tax purposes equal to the amount of
such aggregate net adjustment.
A Limited Partner shall be liable unconditionally to the
Partnership for all or a portion of any deficit in its Capital Account if it so
elects to be liable for such deficit or portion thereof. Such election may be
for either a limited or unlimited amount and may be amended or with-
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drawn at any time. The election, and any amendment thereof, shall be made by
written notice to the Managing General Partner (and the Managing General
Partner shall promptly upon receipt deliver copies thereof to the other
Partners) stating that the Limited Partner elects to be liable, and specifying
the limitations, if any, on the maximum amount or duration of such liability.
Said election, or amendment thereof, shall be effective only from the date 25
days after written notice thereof is received by the Managing General Partner,
and shall terminate upon the date, if any, specified therein as a termination
date or upon delivery to the Managing General Partner of a subsequent written
notice terminating such election. A termination of any such election, or an
amendment reducing the Limited Partner's maximum liability thereunder or the
duration thereof, shall not be effective to avoid responsibility for any loss
incurred prior to such termination or the effective date of such amendment.
Except as provided in this Section 4.8 or as required by law, no Limited
Partner shall be liable for any deficit in its Capital Account or be obligated
to return any distributions of any kind received from the Partnership.
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The foregoing provisions and the other provisions of this
Agreement relating to the maintenance of Capital Accounts are intended to
comply with Section 1.704-1(b) of the Regulations, and shall be interpreted and
applied as provided in the Regulations.
(b) The term "Gross Asset Value" or "Gross Asset
Values" means, with respect to any asset of the Partnership, such asset's
adjusted basis for federal income tax purposes, except as follows:
(i) the initial Gross Asset Value of any asset
contributed by a Partner to the Partnership shall be the gross fair
market value of such asset as reasonably determined by the Managing
General Partner;
(ii) the Gross Asset Values of all Partnership
assets shall be adjusted to equal their respective gross fair market
values, as reasonably determined by the General Partner, immediately
prior to the following events:
(A) a Capital Contribution (other than a
de minimis Capital Contribution, within the meaning of Section
1.704-1(b)(2)(iv)(f)(5)(i) of
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the Regulations) to the Partnership by a new or existing Partner as
consideration for Partnership Units;
(B) the distribution by the Partnership
to a Partner of more than a de minimis amount (within the
meaning of Section 1.704-1(b)(2)(iv)(f)(5)(ii) of the
Regulations) of Partnership property as consideration for the
redemption of Partnership Units; and
(C) the liquidation of the Partnership
within the meaning of Section 1.704-1(b)(2)(ii)(g) of the
Regulations; and
(iii) the Gross Asset Values of Partnership assets
distributed to any Partner shall be the gross fair market values of
such assets as reasonably determined by the Managing General Partner
as of the date of distribution.
At all times, Gross Asset Values shall be adjusted by any Depreciation taken
into account with respect to the Partnership's assets for purposes of computing
Profits and Losses. Any adjustment to the Gross Asset Values of
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Partnership property shall require an adjustment to the Partners' Capital
Accounts as described in Section 4.8(a) above.
ARTICLE V
REPRESENTATIONS, WARRANTIES AND ACKNOWEDGEMENT
5.1 REPRESENTATIONS AND WARRANTIES BY MANAGING GENERAL
PARTNER. The Managing General Partner represents and warrants to the Limited
Partners, the Non-Managing General Partner and to the Partnership that (i) it
is a corporation duly formed, validly existing and in good standing under the
laws of the State of Ohio, with full right, corporate power and authority to
fulfill all of its obligations hereunder or as contemplated herein; (ii) all
transactions contemplated by this Agreement to be performed by it have been
duly authorized by all necessary action; (iii) this Agreement has been duly
executed and delivered by and is the legal, valid and binding obligation of the
Managing General Partner and is enforceable against it in accordance with its
terms, except as such enforcement may be limited by (a) bankruptcy, insolvency,
reorganization,
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moratorium, fraudulent conveyance or transfer or other laws of general
application affecting the rights and remedies of creditors and (b) general
principles of equity (regardless of whether such enforcement is considered in a
proceeding in equity or at law); (iv) no authorization, approval, consent or
order of any court or governmental authority or agency or any other Entity is
required in connection with the execution and delivery of this Agreement by the
Managing General Partner, except as may have been received prior to the date of
this Agreement; (v) the execution and delivery of this Agreement by the
Managing General Partner and the consummation of the transactions contemplated
hereby will not conflict with or constitute a breach or violation of, or a
default under, any contract, indenture, mortgage, loan agreement, note, lease,
joint venture or partnership agreement or other instrument or agreement to
which either the Managing General Partner or the Partnership is a party; and
(vi) the Partnership Units, upon payment of the consideration therefore
pursuant to this Agreement, will be validly issued, fully paid and, except as
otherwise provided in accordance with applicable law, non-assessable.
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5.2 REPRESENTATIONS AND WARRANTIES BY NON-MANAGING
GENERAL PARTNER. The Non-Managing General Partner represents and warrants to
the Limited Partners, the Managing General Partner and to the Partnership that
(i) it is a corporation duly formed, validly existing and in good standing
under the laws of the State of Maryland, with full right, corporate power and
authority to fulfill all of its obligations hereunder or as contemplated
herein; (ii) all transactions contemplated by this Agreement to be performed by
it have been duly authorized by all necessary action; (iii) this Agreement has
been duly executed and delivered by and is the legal, valid and binding
obligation of the Non-Managing General Partner and is enforceable against it in
accordance with its terms, except as such enforcement may be limited by (a)
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
transfer or other laws of general application affecting the rights and remedies
of creditors and (b) general principles of equity (regardless of whether such
enforcement is considered in a proceeding in equity or at law); (iv) no
authorization, approval, consent or order of any court or governmental
authority or agency or
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any other Entity is required in connection with the execution and delivery of
this Agreement by the Non-Managing General Partner, except as may have been
received prior to the date of this Agreement; and (v) the execution and
delivery of this Agreement by the Non-Managing General Partner and the
consummation of the transactions contemplated hereby will not conflict with or
constitute a breach or violation of, or default under, any contract, indenture,
mortgage, loan agreement, note, lease, joint venture or partnership agreement
or other instrument or agreement to which either the Non-Managing General
Partner or Simon, L.P. is a party.
5.3 REPRESENTATIONS AND WARRANTIES BY THE LIMITED
PARTNERS. Each Limited Partner, for itself only, represents and warrants to
the General Partners, the other Limited Partners and the Partnership that (i)
all transactions contemplated by this Agreement to be performed by such Limited
Partner have been duly authorized by all necessary action; and (ii) this
Agreement is binding upon, and enforceable against, such Limited Partner in
accordance with its terms, except as such enforcement may be limited by
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(a) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance
or transfer or other laws of general application affecting the rights and
remedies of creditors and (b) general principles of equity (regardless of
whether such enforcement is considered in a proceeding in equity or at law).
5.4 ACKNOWLEDGMENT BY EACH PARTNER. Each Partner hereby
acknowledges that no representations as to potential profit, cash flows or
yield, if any, in respect of the Partnership, Simon, L.P., or any one or more
or all of the Projects owned, directly or indirectly, by the Partnership or
Simon, L.P., have been made to it by any other Partner or its Affiliates or any
employee or representative of any other Partner or its Affiliates, and that
projections and any other information, including, without limitation, financial
and descriptive information and documentation, which may have been in any
manner submitted to such Partner shall not constitute a representation or
warranty, express or implied.
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ARTICLE VI
ALLOCATIONS, DISTRIBUTIONS AND OTHER
TAX AND ACCOUNTING MATTERS
6.1 ALLOCATIONS.
(a) For the purpose of this Agreement, the terms
"Profits" and "Losses" mean, respectively, for each Partnership Fiscal Year or
other period, the Partnership's taxable income or loss for such Partnership
Fiscal Year or other period, determined in accordance with Section 703(a) of
the Code (for this purpose, all items of income, gain, loss or deduction
required to be stated separately pursuant to Section 703(a)(1) of the Code
shall be included in taxable income or loss), adjusted as follows:
(1) any income of the Partnership
that is exempt from federal income tax and not otherwise taken into
account in computing Profits or Losses pursuant to this Section 6.1(a)
shall be added to such taxable income or loss;
(2) in lieu of the depreciation,
amortization and other cost recovery deductions taken into account in
computing such taxable income or loss,
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there shall be taken into account Depreciation for such Partnership
Fiscal Year or other period;
(3) any items that are specially
allocated pursuant to Section 6.1(d) hereof shall not be taken into
account in computing Profits or Losses; and
(4) any expenditures of the
Partnership described in Section 705(a)(2)(B) of the Code (or treated
as such under Regulation Section 1.704-1(b)(2)(iv)(i)) and not
otherwise taken into account in computing Profits or Losses pursuant
to this Section 6.1(a) shall be deducted in calculating such taxable
income or loss.
(b) Except as otherwise provided in Section
6.1(d) hereof and this Section 6.1(b), the Profits and Losses of the
Partnership (and each item thereof) for each Partnership Fiscal Year shall be
allocated among the Partners in the following order of priority:
(1) First, Profits shall be allocated to
the holder of Preferred Units in an amount equal to the excess of (A)
the amount of Net Operating Cash Flow
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67
distributed to such holder pursuant to Sections 6.2(b)(i) and (ii) and
Section 6.2(c)(but only to the extent of the Preferred Distribution
Requirement and Preferred Distribution Shortfalls) for the current and
all prior Partnership Fiscal Years over (B) the amount of Profits
previously allocated to such holder pursuant to this subparagraph (1).
(2) Second, for any Partnership Fiscal
Year ending on or after a date on which Preferred Units are redeemed,
Profits (or Losses) shall be allocated to the holder of such Preferred
Units in an amount equal to the excess (or deficit) of the sum of the
applicable Preferred Redemption Amounts for the Preferred Units that
have been or are being redeemed during such Partnership Fiscal Year
over the Preferred Unit Issue Price of such Preferred Units. In
addition, in the event that the Partnership is liquidated pursuant to
Article VIII, the allocation described above shall be made to the
holder of Preferred Units with respect to all Preferred Units then
outstanding.
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68
(3) Third, any remaining Profits and
Losses shall be allocated among the Partners in accordance with their
proportionate ownership of Partnership Units except as otherwise
required by the Regulations.
(4) Notwithstanding subparagraphs (1),
(2) and (3), Profits and Losses from a Liquidation Transaction shall
be allocated as follows:
First, Profits (or Losses) shall be allocated to the
holder of Preferred Units in an amount equal to the excess (or
deficit) of the sum of the applicable Preferred Redemption
Amounts of the Preferred Units which have been or will be
redeemed with the proceeds of the Liquidation Transaction over
the Preferred Unit Issue Price of such Preferred Units;
Second, Profits or Losses shall be allocated among
the Partners so that the Capital Accounts of the Partners
(excluding from the Capital Account of any Partner the amount
attributable to its
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69
Preferred Units) are proportional to the number of Partnership Units
held by each Partner; and
Third, any remaining Profits and Losses shall be
allocated among the Partners in accordance with their
proportionate ownership of Partnership Units.
(c) For the purpose of Section 6.1(b) hereof,
gain or loss resulting from any disposition of Partnership property shall be
computed by reference to the Gross Asset Value of the property disposed of,
notwithstanding that the adjusted tax basis of such property for federal income
tax purposes differs from its Gross Asset Value.
(d) Notwithstanding the foregoing provisions of
this Section 6.1, the following provisions shall apply:
(1) A Partner shall not receive an
allocation of any Partnership deduction that would result in total
loss allocations attributable to "Nonrecourse Liabilities" (as defined
in Regulations Section 1.704-2(b)(3)) in excess of such Partner's
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70
share of Minimum Gain (as determined under Regulations Section
1.704-2(g)). The term "Minimum Gain" means an amount determined in
accordance with Regulations Section 1.704-2(d) by computing, with
respect to each Nonrecourse Liability of the Partnership, the amount
of gain, if any, that the Partnership would realize if it disposed of
the property subject to such liability for no consideration other than
full satisfaction thereof, and by then aggregating the amounts so
computed. If the Partnership makes a distribution allocable to the
proceeds of a Nonrecourse Liability, in accordance with Regulation
Section 1.704-2(h) the distribution will be treated as allocable to an
increase in Partnership Minimum Gain to the extent the increase
results from encumbering Partnership property with aggregate
Nonrecourse Liabilities that exceeds the property's adjusted tax
basis. If there is a net decrease in Partnership Minimum Gain for a
Partnership Fiscal Year, in accordance with Regulations Section
1.704-2(f) and the exceptions contained therein, the Partners shall be
allocated items of Partnership income and gain for such
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71
Partnership Fiscal Year (and, if necessary, for subsequent Partnership
Fiscal Years) equal to the Partners' respective shares of the net
decrease in Minimum Gain within the meaning of Regulations Section
1.704-2(g)(2) (the "Minimum Gain Chargeback"). The items to be
allocated pursuant to this Section 6.1(d)(1) shall be determined in
accordance with Regulations Section 1.704-2(f) and (j).
(2) Any item of "Partner Nonrecourse
Deduction" (as defined in Regulations Section 1.704-2(i)) with respect
to a "Partner Nonrecourse Debt" (as defined in Regulations Section
1.704-2(b)(4)) shall be allocated to the Partner or Partners who bear
the economic risk of loss for such Partner Nonrecourse Debt in
accordance with Regulations Section 1.704-2(i)(1). If the Partnership
makes a distribution allocable to the proceeds of a Partner
Nonrecourse Debt, in accordance with Regulation Section 1.704- 2(i)(6)
the distribution will be treated as allocable to an increase in
Partner Minimum Gain to the extent the increase results from
encumbering Partnership property
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72
with aggregate Partner Nonrecourse Debt that exceeds the property's
adjusted tax basis. Subject to Section 6.1(d)(1) hereof, but
notwithstanding any other provision of this Agreement, in the event
that there is a net decrease in Minimum Gain attributable to a Partner
Nonrecourse Debt (such Minimum Gain being hereinafter referred to as
"Partner Nonrecourse Debt Minimum Gain") for a Partnership Fiscal
Year, then after taking into account allocations pursuant to Section
6.1(d)(1) hereof, but before any other allocations are made for such
taxable year, and subject to the exceptions set forth in Regulations
Section 1.704-2(i)(4), each Partner with a share of Partner
Nonrecourse Debt Minimum Gain at the beginning of such Partnership
Fiscal Year shall be allocated items of income and gain for such
Partnership Fiscal Year (and, if necessary, for subsequent Partnership
Fiscal Years) equal to such Partner's share of the net decrease in
Partner Nonrecourse Debt Minimum Gain as determined in a manner
consistent with the provisions of Regulations Section 1.704-2(g)(2).
The items to be allocated
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73
pursuant to this Section 6.1(d)(2) shall be determined in accordance
with Regulations Section 1.704-2(i)(4) and (j).
(3) Pursuant to Regulations Section
1.752-3(a)(3), for the purpose of determining each Partner's share of
excess nonrecourse liabilities of the Partnership, and solely for such
purpose, each Partner's interest in Partnership profits is hereby
specified to be the quotient of (i) the number of Partnership Units
then held by such Partner, and (ii) the aggregate amount of
Partnership Units then outstanding.
(4) No Limited Partner shall be allocated
any item of deduction or loss of the Partnership if such allocation
would cause such Limited Partner's Capital Account to become negative
by more than the sum of (i) any amount such Limited Partner is
obligated to restore upon liquidation of the Partnership, plus (ii)
such Limited Partner's share of the Partnership's Minimum Gain and
Partner Nonrecourse Debt Minimum Gain. An item of deduction or loss
that cannot be allocated
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74
to a Limited Partner pursuant to this Section 6.1(d)(4) shall be
allocated to the General Partners in accordance with the number of
Partnership Units held by each General Partner. For this purpose, in
determining the Capital Account balance of such Limited Partner, the
items described in Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5),
and (6) shall be taken into account. In the event that (A) any
Limited Partner unexpectedly receives any adjustment, allocation, or
distribution described in Regulations Sections 1.704-
1(b)(2)(ii)(d)(4), (5), or (6), and (B) such adjustment, allocation,
or distribution causes or increases a deficit balance (net of amounts
which such Limited Partner is obligated to restore or deemed obligated
to restore under Regulations Section 1.704-2(g)(1) and 1.704-2(i)(5)
and determined after taking into account any adjustments, allocations,
or distributions described in Regulations Sections
1.704-1(b)(2)(ii)(d)(4), (5), or (6) that, as of the end of the
Partnership Fiscal Year, reasonably are expected to be made to such
Limited Partner) in such Limited Part-
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75
ner's Capital Account as of the end of the Partnership Fiscal Year to
which such adjustment, allocation, or distribution relates, then items
of Gross Income (consisting of a pro rata portion of each item of
Gross Income) for such Partnership Fiscal Year and each subsequent
Partnership Fiscal Year shall be allocated to such Limited Partner
until such deficit balance or increase in such deficit balance, as the
case may be, has been eliminated. In the event that this Section
6.1(d)(4) and Section 6.1(d)(1) and/or (2) hereof apply, Section
6.1(d)(1) and/or (2) hereof shall be applied prior to this Section
6.1(d)(4).
(5) The Regulatory Allocations shall be
taken into account in allocating other items of income, gain, loss,
and deduction among the Partners so that, to the extent possible, the
cumulative net amount of allocations of Partnership items under this
Section 6.1 shall be equal to the net amount that would have been
allocated to each Partner if the Regulatory Allocations had not been
made. This Section 6.1(d)(5) is intended to minimize to the extent
possible and to the extent
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76
necessary any economic distortions which may result from application
of the Regulatory Allocations and shall be interpreted in a manner
consistent therewith. For purposes hereof, "Regulatory Allocations"
shall mean the allocations provided under this Section 6.1(d)(other
than this Section 6.1(d)(5)).
(e) In accordance with Sections 704(b) and 704(c) of
the Code and the Regulations thereunder, income, gain, loss and deduction with
respect to any property contributed to the capital of the Partnership shall,
solely for federal income tax purposes, be allocated among the Partners on a
property by property basis so as to take account of any variation between the
adjusted basis of such property to the Partnership for federal income tax
purposes and the initial Gross Asset Value of such property. If the Gross
Asset Value of any Partnership property is adjusted as described in the
definition of Gross Asset Value, subsequent allocations of income, gains or
losses from taxable sales or other dispositions and deductions with respect to
such asset shall take account of any variation between the adjusted basis of
such asset for federal income tax purposes and the
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77
Gross Asset Value of such asset in the manner prescribed under Sections 704(b)
and 704(c) of the Code and the Regulations thereunder. In furtherance of the
foregoing, the Partnership shall employ the method prescribed in Regulation
Section 1.704-3(b) (the "traditional method") or the equivalent successor
provision(s) of proposed, temporary or final Regulations. The Partnership
shall allocate items of income, gain, loss and deduction allocated to it by a
Subsidiary Entity to the Partner or Partners contributing the interest or
interests in such Subsidiary Entity, so that, to the greatest extent possible
and consistent with the foregoing, such contributing Partner or Partners are
allocated the same amount and character of items of income, gain, loss and
deduction with respect to such Subsidiary Entity that they would have been
allocated had they contributed undivided interests in the assets owned by such
Subsidiary Entity to the Partnership in lieu of contributing the interest or
interests in the Subsidiary Entity to the Partnership.
(f) Notwithstanding anything to the contrary contained
in this Section 6.1, the allocation of Profits and
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78
Losses for any Partnership Fiscal Year during which a Person acquires a
Partnership Interest (other than upon formation of the Partnership) pursuant to
Section 4.3(b) or otherwise, shall take into account the Partners' varying
interests for such Partnership Fiscal Year pursuant to any method permissible
under Section 706 of the Code that is selected by the Managing General Partner
(notwithstanding any agreement between the assignor and assignee of such
Partnership Interest although the Managing General Partner may recognize any
such agreement), which method may take into account the date on which the
Transfer or an agreement to Transfer becomes irrevocable pursuant to its terms,
as determined by the Managing General Partner.
(g) If any portion of gain from the sale of
property is treated as gain which is ordinary income by virtue of the
application of Code Sections 1245 or 1250 ("Affected Gain"), then (A) such
Affected Gain shall be allocated among the Partners in the same proportion that
the depreciation and amortization deductions giving rise to the Affected Gain
were allocated and (B) other tax items of gain of the same character that would
have been recognized, but
<PAGE> 84
79
for the application of Code Sections 1245 and/or 1250, shall be allocated away
from those Partners who are allocated Affected Gain pursuant to clause (A) so
that, to the extent possible, the other Partners are allocated the same amount,
and type, of capital gain that would have been allocated to them had Code
Sections 1245 and/or 1250 not applied. For purposes hereof, in order to
determine the proportionate allocations of depreciation and amortization
deductions for each Fiscal Year or other applicable period, such deductions
shall be deemed allocated on the same basis as Profits or Losses for such
respective period.
(h) The Profits, Losses, gains, deductions and
credits of the Partnership (and all items thereof) for each Partnership Fiscal
Year shall be determined in accordance with the accounting method followed by
the Partnership for federal income tax purposes.
(i) Except as provided in Sections 6.1(e) and
6.1(g) hereof, for federal income tax purposes, each item of income, gain,
loss, or deduction shall be allocated among the Partners in the same manner as
its correlative
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80
item of "book" income, gain, loss or deduction has been allocated pursuant to
this Section 6.1.
(j) To the extent permitted by Regulations
Sections 1.704-2(h)(3) and 1.704-2(i)(6), the Managing General Partner shall
endeavor to treat distributions as having been made from the proceeds of
Nonrecourse Liabilities or Partner Nonrecourse Debt only to the extent that
such distributions would cause or increase a deficit balance in any Partner's
Capital Account that exceeds the amount such Partner is otherwise obligated to
restore (within the meaning of Regulations Section 1.704-1(b)(2)(ii)(c)) as of
the end of the Partnership's taxable year in which the distribution occurs.
(k) If any Partner sells or otherwise disposes of
any property, directly or indirectly, to the Partnership, and as a result
thereof, gain on a subsequent disposition of such property by the Partnership
is reduced pursuant to Section 267(d) of the Code, then, to the extent
permitted by applicable law, gain for federal income tax purposes attributable
to such subsequent disposition shall first be allocated among the Partners
other than the selling
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81
Partner in an amount equal to such Partners' allocations of "book" gain on the
property pursuant to this Section 6.1, and any remaining gain for federal
income tax purposes shall be allocated to the selling Partner.
6.2 DISTRIBUTIONS. (a) Except with respect to the
liquidation of the Partnership and subject to the priority set forth in
Sections 6.2(b) and (c), the Managing General Partner shall cause the
Partnership to distribute all or a portion of Net Operating Cash Flow to the
Partners who are such on the relevant Partnership Record Date from time to time
as determined by the Managing General Partner, but in any event not less
frequently than quarterly, in such amounts as the Managing General Partner
shall determine in its sole discretion; provided, however, that, except as
provided in Sections 6.2(b) and (c) below, all such distributions shall be made
pro rata in accordance with the outstanding Partnership Units on the relevant
Partnership Record Date. In no event may a Limited Partner receive a
distribution of Net Operating Cash Flow with respect to a Partnership Unit that
such Partner has exchanged on or prior to the relevant Partnership Record Date
for a Share,
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82
pursuant to the Rights granted under Section 11.1 or the EJDC Option granted
under Section 12.1 (a "Post-Exchange Distribution"); rather, all such
Post-Exchange Distributions shall be distributed to the Non-Managing General
Partner.
(b) Except to the extent Net Operating Cash Flow
is distributed pursuant to Section 6.2(c), and except with respect to the
liquidation of the Partnership, distributions of Net Operating Cash Flow shall
be made in the following order of priority:
(i) First, to the extent that the amount of
Net Operating Cash Flow distributed to the holder of Preferred Units
for any prior quarter was less than the Preferred Distribution
Requirement for such quarter, and has not been subsequently
distributed pursuant to this Section 6.2(b)(i) (a "Preferred
Distribution Shortfall"), Net Operating Cash Flow shall be distributed
to the holder of Preferred Units in an amount necessary to satisfy
such Preferred Distribution Shortfall for the current and all prior
Partnership Fiscal Years. In the event that the Net Operating Cash
Flow distributed for a particular quarter is less than
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83
the Preferred Distribution Shortfall, then all Net Operating Cash Flow
for the current quarter shall be distributed to the holder of
Preferred Units.
(ii) Second, Net Operating Cash Flow shall
be distributed to the holder of Preferred Units in an amount equal to
the Preferred Distribution Requirement for the then current quarter
for each outstanding Preferred Unit. In the event that the amount of
Net Operating Cash Flow distributed for a particular quarter pursuant
to this subparagraph (b)(ii) is less than the Preferred Distribution
Requirement for such quarter, then all such Net Operating Cash Flow
for such quarter shall be distributed to the holder of Preferred
Units.
(iii) The balance of the Net Operating Cash
Flow to be distributed, if any, shall be distributed to holders of
Partnership Units, in proportion to their ownership of Partnership
Units.
(c) If in any quarter the Partnership redeems any
outstanding Preferred Units, unless and except to the extent that such
redemption is effected out of
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84
borrowed funds, Capital Contributions or other sources, Net Operating Cash Flow
shall be distributed to the Non-Managing General Partner in an amount equal to
the applicable Preferred Redemption Amount for the Preferred Units being
redeemed before being distributed pursuant to Section 6.2(b).
(d) Notwithstanding the provision of the first
sentence of Section 6.2(a), (i) the Managing General Partner shall use its best
efforts to cause the Partnership to distribute sufficient amounts, in
accordance with Section 6.2(a) above, to enable the Managing General Partner
and the Non-Managing General Partner to pay shareholder dividends that will (A)
satisfy the REIT Requirements, and (B) avoid any federal income or excise tax
liability of the Managing General Partner or the Non-Managing General Partner;
and (ii) in the event of a Covered Sale which occurs on a date on or after the
Effective Time, and before but not including the fifth anniversary of the
Effective Time, and which gives rise to a special allocation of taxable income
or gain to one or more Limited Partners pursuant to Section 6.1(e), (A) the
Managing General Partner shall cause the Partnership
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85
to distribute to all of the Partners, pro rata in accordance with ownership of
Partnership Units, the Net Sale Proceeds therefrom up to an amount sufficient
to enable each such Limited Partner, from the share of such distribution made
to it, to pay in full any income tax liability, computed at the maximum
applicable federal and state statutory rates, with respect to the income or
gain so specially allocated and on the distribution required by this Section
6.2(d) (or, if any such Limited Partner is a partnership or Subchapter S
corporation, to enable such Limited Partner to distribute sufficient amounts to
its equity owners to enable such owners to pay in full any income tax
liability, computed at the maximum applicable federal and state statutory
rates, with respect to their share of such taxable income or gain and such
distributions) and (B) if the amounts distributed to each such Limited Partner
in accordance with the preceding clause (A) are insufficient to enable it to
pay in full such income tax liabilities, the Managing General Partner shall
cause the Partnership to distribute sufficient funds from other sources to all
of the Partners, pro rata in accordance with ownership of Partnership Units, in
an amount
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86
sufficient to enable each such Limited Partner to pay in full such income tax
liabilities and any income tax liabilities of such Limited Partner(s) with
respect to such additional distribution. As used in this Section 6.2, the term
"Covered Sale" means a sale or other taxable disposition of any Property
described on Exhibit C.
6.3 BOOKS OF ACCOUNT; SEGREGATION OF FUNDS.
(a) At all times during the continuance of the
Partnership, the Managing General Partner shall maintain or cause to be
maintained full, true, complete and correct books of account in accordance with
GAAP wherein shall be entered particulars of all monies, goods or effects
belonging to or owing to or by the Partnership, or paid, received, sold or
purchased in the course of the Partnership's business, and all of such other
transactions, matters and things relating to the business of the Partnership as
are usually entered in books of account kept by Persons engaged in a business
of a like kind and character. In addition, the Partnership shall keep all
records as required to be kept pursuant to the Act. The books and records of
account shall be kept at the principal office of the
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87
Partnership, and each Partner and its representatives shall at all reasonable
times have access to such books and records and the right to inspect and copy
the same.
(b) The Partnership shall not commingle its funds
with those of any other Person or Entity; funds and other assets of the
Partnership shall be separately identified and segregated; all of the
Partnership's assets shall at all times be held by or on behalf of the
Partnership and, if held on behalf of the Partnership by another Entity, shall
at all times be kept identifiable (in accordance with customary usages) as
assets owned by the Partnership; and the Partnership shall maintain its own
separate bank accounts, payroll and books of account. The foregoing provisions
of this Section 6.3(b) shall not apply with respect to funds or assets of
Simon, L.P. or any other Subsidiary Entities of the Partnership.
6.4 REPORTS. Within ninety (90) days after the end of
each Partnership Fiscal Year, the Partnership shall cause to be prepared and
transmitted to each Partner an annual report of the Partnership relating to the
previous Partnership Fiscal Year containing a balance sheet as of the
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88
year then ended, a statement of financial condition as of the year then ended,
and statements of operations, cash flow and Partnership equity for the year
then ended, which annual statements shall be prepared in accordance with GAAP
and shall be audited by the Accountants. The Partnership shall also cause to
be prepared and transmitted to each Partner within forty-five (45) days after
the end of each of the first three (3) quarters of each Partnership Fiscal Year
a quarterly unaudited report containing a balance sheet, a statement of the
Partnership's financial condition and statements of operations, cash flow and
Partnership equity, in each case relating to the fiscal quarter then just
ended, and prepared in accordance with GAAP. The Partnership shall further
cause to be prepared and transmitted to the Managing General Partner and the
Non-Managing General Partner (i) such reports and/or information as are
necessary for each to fulfill its obligations under the Securities Act of 1933,
the Securities and Exchange Act of 1934 and the applicable stock exchange
rules, and under any other regulations to which such Partners or the
Partnership may be subject, and (ii) such other reports and/or information as
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89
are necessary for each of the Managing General Partner and the Non-Managing
General Partner to determine and maintain its qualification as a REIT under the
REIT Requirements, its earnings and profits derived from the Partnership, its
liability for a tax as a consequence of its Partnership Interest and
distributive share of taxable income or loss and items thereof, in each case in
a manner that will permit the Managing General Partner and the Non-Managing
General Partner to comply with their respective obligations to file federal,
state and local tax returns and information returns and to provide their
shareholders with tax information. The Non-Managing General Partner shall
provide to each Partner copies of all reports it provides to its stockholders
at the same time such reports are distributed to such stockholders. The
Managing General Partner shall also promptly notify the Partners of all actions
taken by the Managing General Partner for which it has obtained the Consent of
the Limited Partners.
6.5 AUDITS. Not less frequently than annually, the books
and records of the Partnership shall be audited by the Accountants.
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90
6.6 TAX RETURNS.
(a) Consistent with all other provisions of this
Agreement, the Managing General Partner shall determine the methods to be used
in the preparation of federal, state, and local income and other tax returns
for the Partnership in connection with all items of income and expense,
including, but not limited to, valuation of assets, the methods of Depreciation
and cost recovery, credits and tax accounting methods and procedures and, with
the consent of the Non-Managing General Partner, all tax elections.
(b) The Managing General Partner shall, at least
30 days prior to the due dates (as extended) for such returns, but in no event
later than July 15 of each year, cause the Accountants to prepare and submit to
the DeBartolo Designee, the Simon Designee and the JCP Limited Partner for
their review, drafts of all federal and state income tax returns of the
Partnership and Simon, L.P. for the preceding year, and the Managing General
Partner shall consult in good faith with the DeBartolo Designee, the Simon
Designee and the JCP Limited Partner regarding any proposed modifications to
such tax returns of the Partnership.
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91
(c) The Partnership shall timely cause to be
prepared and transmitted to the Partners federal and appropriate state and
local Partnership Income Tax Schedules "K-1," or any substitute therefor, with
respect to each Partnership Fiscal Year on appropriate forms prescribed. The
Partnership shall make reasonable efforts to prepare and submit such forms
before the due date for filing federal income tax returns for the fiscal year
in question (determined without extensions), and shall in any event prepare and
submit such forms on or before July 15 of the year following the fiscal year in
question.
6.7 TAX MATTERS PARTNER.
(a) The Managing General Partner is hereby
designated as the Tax Matters Partner within the meaning of Section 6231(a)(7)
of the Code for the Partnership; provided, however, that (i) in exercising its
authority as Tax Matters Partner it shall be limited by the provisions of this
Agreement affecting tax aspects of the Partnership; (ii) the Managing General
Partner shall give prompt notice to the Partners of the receipt of any written
notice that the Internal Revenue Service or any state or local taxing
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92
authority intends to examine Partnership or Simon, L.P. income tax returns for
any year, receipt of written notice of the beginning of an administrative
proceeding at the Partnership or Simon, L.P. level relating to the Partnership
under Section 6223 of the Code, receipt of written notice of the final
Partnership administrative adjustment relating to the Partnership pursuant to
Section 6223 of the Code, and receipt of any request from the Internal Revenue
Service for waiver of any applicable statute of limitations with respect to the
filing of any tax return by the Partnership; (iii) the Managing General Partner
shall promptly notify the Partners if it does not intend to file for judicial
review with respect to the Partnership or Simon, L.P.; and (iv) as Tax Matters
Partner, the Managing General Partner shall not be entitled to bind a Partner
by any settlement agreement (within the meaning of Section 6224 of the Code)
unless such Partner consents thereto in writing and shall notify the Partners
in a manner and at such time as is sufficient to allow the Partners to exercise
their rights pursuant to Section 6224(c)(3) of the Code; (v) the Managing
General Partner shall consult in good faith with the Simon Designee,
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93
the DeBartolo Designee and the JCP Limited Partner regarding the filing of a
Code Section 6227(b) administrative adjustment request with respect to the
Partnership or a Property before filing such request, it being understood,
however, that the provisions hereof shall not be construed to limit the ability
of any Partner, including the Managing General Partner, to file an
administrative adjustment request on its own behalf pursuant to Section 6227(a)
of the Code; and (vi) the Managing General Partner shall consult in good faith
with the Simon Designee, the DeBartolo Designee and the JCP Limited Partner
regarding the filing of a petition for judicial review of an administrative
adjustment request under Section 6228 of the Code, or a petition for judicial
review of a final partnership administrative judgment under Section 6226 of the
Code relating to the Partnership before filing such petition.
(b) Under the terms of the agreement of limited
partnership of Simon, L.P., as amended, the Non-Managing General Partner acts
as the tax matters partner for such partnership. The Non-Managing General
Partner agrees to comply with all of the obligations imposed on the
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94
Managing General Partner in Section 6.7(a) (including notification and
consultation obligations) insofar as the matters or events giving rise to such
obligations occur with respect to Simon, L.P.
6.8 WITHHOLDING. Each Partner hereby authorizes the
Partnership to withhold or pay on behalf of or with respect to such Partner any
amount of federal, state, local or foreign taxes that the Managing General
Partner determines the Partnership is required to withhold or pay with respect
to any amount distributable or allocable to such Partner pursuant to this
Agreement, including, without limitation, any taxes required to be withheld or
paid by the Partnership pursuant to Code Section 1441, 1442, 1445, or 1446.
Any amount paid on behalf of or with respect to a Partner shall constitute a
loan by the Partnership to such Partner, which loan shall be due within fifteen
(15) days after repayment is demanded of the Partner in question, and shall be
repaid through withholding of subsequent distributions to such Partner.
Nothing in this Section 6.8 shall create any obligation on the Managing General
Partner to advance funds to the Partnership or to borrow funds from Third
Parties in
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95
order to make payments on account of any liability of the Partnership under a
withholding tax act. Any amounts payable by a Limited Partner hereunder shall
bear interest at the lesser of (i) the base rate on corporate loans at large
United States money center commercial banks, as published from time to time in
The Wall Street Journal, or (ii) the maximum lawful rate of interest on such
obligation, such interest to accrue from the date such amount is due (i.e.,
fifteen (15) days after demand) until such amount is paid in full. To the
extent the payment or accrual of withholding tax results in a federal, state or
local tax credit to the Partnership, such credit shall be allocated to the
Partner to whose distribution the tax is attributable.
ARTICLE VII
RIGHTS, DUTIES AND RESTRICTIONS OF THE
GENERAL PARTNERS
7.1 EXPENDITURES BY PARTNERSHIP. The Managing General
Partner is hereby authorized to pay compensation for accounting,
administrative, legal, technical, management and other services rendered to the
Partnership. All of the aforesaid expenditures shall be made on behalf of the
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Partnership and the Managing General Partner shall be entitled to reimbursement
by the Partnership for any expenditures incurred by it on behalf of the
Partnership which shall have been made other than out of the funds of the
Partnership. The Partnership shall also assume, and pay when due, the
Administrative Expenses and such portion of the Managing General Partner's and
the Non-Managing General Partner's REIT Expenses as shall be appropriately
allocated to the Partnership by the Managing General Partner in the exercise of
its reasonable business judgment, it being understood that the portion of such
Expenses not so allocated to the Partnership shall be assumed and paid when due
by Simon, L.P.
7.2 POWERS AND DUTIES OF THE GENERAL PARTNERS. The
Managing General Partner shall be responsible for the management of the
Partnership's business and affairs. Except as otherwise herein expressly
provided, and subject to the limitations contained in Section 7.3 hereof with
respect to Major Decisions, the Managing General Partner shall have, and is
hereby granted, full and complete power, authority and discretion to take such
action for and on
<PAGE> 102
97
behalf of the Partnership and in its name as the Managing General Partner
shall, in its sole and absolute discretion, deem necessary or appropriate to
carry out the purposes for which the Partnership was organized. Any action by
the Managing General Partner relating to (i) transactions between the
Partnership or a Subsidiary Entity and M.S. Management Associates, Inc., Simon
MOA Management Company, Inc. and/or M.S. Management Associates (Indiana), Inc.,
(ii) transactions between the Partnership or a Subsidiary Entity and DeBartolo
Properties Management, Inc. or (iii) transactions involving the Partnership or
a Subsidiary Entity in which the Simons, the DeBartolos or any Affiliate of the
Simons or the DeBartolos has an interest (other than a non-controlling minority
equity interest, which has no management or veto powers, in a Person, other
than the Partnership or a Subsidiary Entity, which is engaged in such
transaction) other than through ownership of Partnership Units, shall require
the prior approval of a majority of the Independent Directors. Except as
otherwise expressly provided herein and subject to Section 7.3 hereof, the
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98
Managing General Partner shall have, for and on behalf of the Partnership, the
right, power and authority:
(a) To manage, control, hold, invest, lend,
reinvest, acquire by purchase, lease, sell, contract to purchase or sell,
grant, obtain, or exercise options to purchase, options to sell or conversion
rights, assign, transfer, convey, deliver, endorse, exchange, pledge, mortgage
or otherwise encumber, abandon, improve, repair, construct, maintain, operate,
insure, lease for any term and otherwise deal with any and all property of
whatsoever kind and nature, and wheresoever situated, in furtherance of the
purposes of the Partnership, and in addition, without limiting the foregoing,
upon the affirmative vote of no fewer than three (3) of the Independent
Directors of the Non-Managing General Partner who are not Affiliates of the
DeBartolos, the Managing General Partner shall authorize and require the sale
of any property owned by the Partnership or a Subsidiary Entity and upon the
affirmative vote of at least four (4)/2 of the Independent Directors of the
Non-
- ----------
2/In the event that the requisite stockholder approval is obtained to
amend the charter of the Simon-DeBartolo Group to provide for a 13 person Board
of Directors, these
(continued...)
<PAGE> 104
99
Managing General Partner (at least three (3) of whom are not Affiliates of the
DeBartolos), the Managing General Partner shall authorize and require the
Partnership, as special limited partner, to consent to the sale of any property
owned by the Simon, L.P. or a Subsidiary Entity of Simon, L.P.;
(b) To acquire, directly or indirectly, interests
in real or personal property (collectively, "property") of any kind and of any
type, and any and all kinds of interests therein, and to determine the manner
in which title thereto is to be held; to manage, insure against loss, protect
and subdivide any property, interests therein or parts thereof; to improve,
develop or redevelop any property; to participate in the ownership and
development of any property; to dedicate for public use, to vacate any
subdivisions or parts thereof, to resubdivide, to contract to sell, to grant
options to purchase or lease and to sell on any terms; to convey, to mortgage,
pledge or otherwise encumber any property, or any part thereof; to lease any
- --------------------------
2/ (...continued)
provisions will require four out of six and five Independent
Directors, respectively.
<PAGE> 105
100
property or any part thereof from time to time, upon any terms and for any
period of time, and to renew or extend leases, to amend, change or modify the
terms and provisions of any leases and to grant options to lease and options to
renew leases and options to purchase; to partition or to exchange any property,
or any part thereof, for other property; to grant easements or charges of any
kind; to release, convey or assign any right, title or interest in or about or
easement appurtenant to any property or any part thereof; to construct and
reconstruct, remodel, alter, repair, add to or take from buildings on any
property; to insure any Person having an interest in or responsibility for the
care, management or repair of any property; to direct the trustee of any land
trust to mortgage, lease, convey or contract to convey any property held in
such land trust or to execute and deliver deeds, mortgages, notes and any and
all documents pertaining to the property subject to such land trust or in any
matter regarding such trust; and to execute assignments of all or any part of
the beneficial interest in such land trust;
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101
(c) To employ, engage or contract with or dismiss
from employment or engagement Persons to the extent deemed necessary by the
Managing General Partner for the operation and management of the Partnership
business, including but not limited to, employees, contractors, subcontractors,
engineers, architects, surveyors, mechanics, consultants, accountants,
attorneys, insurance brokers, real estate brokers and others;
(d) To enter into contracts on behalf of the
Partnership;
(e) To borrow or lend money, procure loans and
advances from any Person for Partnership purposes, and to apply for and secure
from any Person credit or accommodations; to contract liabilities and
obligations, direct or contingent and of every kind and nature with or without
security; and to repay, discharge, settle, adjust, compromise or liquidate any
such loan, advance, credit, obligation or liability (including by deeding
property to a lender in lieu of foreclosure);
(f) To Pledge, hypothecate, mortgage, assign,
deposit, deliver, enter into sale and leaseback
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102
arrangements or otherwise give as security or as additional or substitute
security or for sale or other disposition any and all Partnership property,
tangible or intangible, including, but not limited to, real estate and
beneficial interests in land trusts, and to make substitutions thereof, and to
receive any proceeds thereof upon the release or surrender thereof; to sign,
execute and deliver any and all assignments, deeds and other contracts and
instruments in writing; to authorize, give, make, procure, accept and receive
moneys, payments, property, notices, demands, vouchers, receipts, releases,
compromises and adjustments; to waive notices, demands, protests and authorize
and execute waivers of every kind and nature; to enter into, make, execute,
deliver and receive written agreements, undertakings and instruments of every
kind and nature; to give oral instructions and make oral agreements; and
generally to do any and all other acts and things incidental to any of the
foregoing or with reference to any dealings or transactions which any attorney
for the Partnership may deem necessary, proper or advisable;
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103
(g) To acquire and enter into any contract of
insurance which the Managing General Partner deems necessary or appropriate for
the protection of the Partnership or any Affiliate thereof, for the
conservation of the Partnership's assets (or the assets of any Affiliate
thereof) or for any purpose convenient or beneficial to the Partnership or any
Affiliate thereof;
(h) To conduct any and all banking transactions
on behalf of the Partnership; to adjust and settle checking, savings and other
accounts with such institutions as the Managing General Partner shall deem
appropriate; to draw, sign, execute, accept, endorse, guarantee, deliver,
receive and pay any checks, drafts, bills of exchange, acceptances, notes,
obligations, undertakings and other instruments for or relating to the payment
of money in, into or from any account in the Partnership's name; to execute,
procure, consent to and authorize extensions and renewals of the same; to make
deposits and withdraw the same and to negotiate or discount commercial paper,
acceptances, negotiable instruments, bills of exchange and dollar drafts;
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104
(i) To demand, sue for, receive, and otherwise
take steps to collect or recover all debts, rents, proceeds, interests,
dividends, goods, chattels, income from property, damages and all other
property to which the Partnership may be entitled or which are or may become
due the Partnership from any Person; to commence, prosecute or enforce, or to
defend, answer or oppose, contest and abandon all legal proceedings in which
the Partnership is or may hereafter be interested; and to settle, compromise or
submit to arbitration any accounts, debts, claims, disputes and matters which
may arise between the Partnership and any other Person and to grant an
extension of time for the payment or satisfaction thereof on any terms, with or
without security;
(j) To make arrangements for financing, including
the taking of all action deemed necessary or appropriate by the Managing
General Partner to cause any approved loans to be closed;
(k) To take all reasonable measures necessary to
insure compliance by the Partnership with contractual obligations and other
arrangements entered into
<PAGE> 110
105
by the Partnership from time to time in accordance with the provisions of this
Agreement, including periodic reports as required to lenders and using all due
diligence to insure that the Partnership is in compliance with its contractual
obligations;
(l) To maintain the Partnership's books and
records;
(m) To create or maintain Affiliates engaged in
activities that the Partnership could itself undertake; and
(n) To prepare and deliver, or cause to be
prepared and delivered by the Accountants, all financial and other reports with
respect to the operations of the Partnership, and preparation and filing of all
federal, state and local tax returns and reports.
Except as otherwise provided herein, to the extent the duties
of the Managing General Partner require expenditures of funds to be paid to
Third Parties, the Managing General Partner shall not have any obligations
hereunder except to the extent that Partnership funds are reasonably available
to it for the performance of such
<PAGE> 111
106
duties, and nothing herein contained shall be deemed to authorize or require
the Managing General Partner, in its capacity as such, to expend its individual
funds for payment to Third Parties or to undertake any individual liability or
obligation on behalf of the Partnership.
Notwithstanding any other provisions of this Agreement or the
Act, any action of the Managing General Partner on behalf of the Partnership or
any decision of the Managing General Partner to refrain from acting on behalf
of the Partnership, undertaken in the good faith belief that such action or
omission is necessary or advisable in order (i) to protect or further the
ability of the Managing General Partner and the Non-Managing General Partner to
continue to qualify as REITs or (ii) to avoid the Managing General Partner's or
the Non-Managing General Partner's incurring any taxes under Section 857 or
Section 4981 of the Code, is expressly authorized under this Agreement and is
deemed approved by all of the Limited Partners. Nothing, however, in this
Agreement shall be deemed to give rise to any liability on the part of a
Limited Partner for the Managing General Partner's or the Non-Managing General
<PAGE> 112
107
Partner's failure to qualify or continue to qualify as a REIT or a failure to
avoid incurring any taxes under the foregoing sections of the Code, unless such
failure or failures result from an act of the Limited Partner which constitutes
a breach of this Agreement (including, without limitation, Section 10.4(b)).
7.3 MAJOR DECISIONS.
(a) The Managing General Partner shall not,
without the Consent of the Limited Partners, and the consent of the
Non-Managing General Partner, (y) on behalf of the Partnership, amend, modify
or terminate this Agreement other than to reflect (A) the admission of
Additional Limited Partners pursuant to Section 9.4 hereof, (B) the making of
additional Capital Contributions and the issuance of additional Partnership
Units by reason thereof, all in accordance with the terms of this Agreement,
(C) the withdrawal or assignment of the interest of any Partner in accordance
with the terms of this Agreement, or (D) any changes necessary to satisfy the
REIT Requirements, or (z) permit the Partnership, on behalf of any Subsidiary
Partnership, to amend, modify or terminate the organizing
<PAGE> 113
108
agreement pursuant to which such Subsidiary Partnership operates other than to
reflect (A) the admission of additional limited partners therein pursuant to
the terms thereof, (B) the making of additional capital contributions thereto
pursuant to the terms thereof, (C) the withdrawal or assignment of the interest
of any partner thereof pursuant to the terms thereof, or (D) any changes
necessary to satisfy the REIT Requirements. Notwithstanding the foregoing,
this Agreement shall not be modified or amended without the prior written
consent of each Partner adversely affected if such modification or acquisition
would (i) convert a Limited Partner's interest in the Partnership to a general
partnership interest, (ii) modify the limited liability of a Limited Partner,
(iii) reduce the interest of any Partner in the Partnership, (iv) reduce any
Partner's share of distributions made by the Partnership, (v) amend this
Section 7.3 or Section 7.5, or (vi) create any obligations for any Limited
Partner or deprive any Limited Partner of (or otherwise impair) any other
rights it may have under this Agreement (including in respect of tax
allocations, rights to indemnification under Section 7.8,
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109
rights of the Limited Partner or a Secured Creditor of a Limited Partner under
Section 9.3 (which rights are subject to the restrictions set forth in Section
9.5), rights of a Limited Partner under Section 9.6 or Article XI, rights of
EJDC under Article XII or the rights of a Limited Partner under Section 10.4(a)
or 10.5); provided, however, that an amendment that reduces the percentage
ownership interest of any Partner in the Partnership or reduces any Partner's
share of distributions made by the Partnership (including tax allocations in
respect of such distributions) shall not require the consent of any Partner if
such change is made on a uniform or pro-rata basis with respect to all Partners.
(b) The Managing General Partner shall not,
without the consent of the Non-Managing General Partner, and for all periods
during which the Simons hold at least ten percent of the Partnership Units then
outstanding, the Managing General Partner shall not, without the prior Consent
of the Simons, and for all periods during which the DeBartolos hold at least
ten percent of the Partnership Units then outstanding, the Managing General
Partner shall not, without the prior Consent of the DeBartolos, on behalf
<PAGE> 115
110
of the Partnership, undertake any of the following actions (together with any
act described in paragraph (a) hereof, the "Major Decisions"):
(i) make a general assignment for the benefit of
creditors (or cause or permit (if permission of the Partnership or any
Subsidiary Partnership is required) such an assignment to be made on behalf of
a Subsidiary Partnership) or appoint or acquiesce in the appointment of a
custodian, receiver or trustee for all or any part of the assets of the
Partnership (or any Subsidiary Partnership);
(ii) take title to any personal or real property,
other than in the name of the Partnership or a Subsidiary Entity or pursuant to
Section 7.7 hereof;
(iii) institute any proceeding for Bankruptcy on behalf
of the Partnership, or cause or permit (if permission of the Partnership or any
Subsidiary Partnership is required) the institution of any such proceeding on
behalf of any Subsidiary Partnership;
(iv) act or cause the taking or refraining of any
action with respect to the dissolution and winding up of the Partnership (or
any Subsidiary Partnership) or an
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election to continue the Partnership (or any Subsidiary Partnership) or to
continue the business of the Partnership (or any Subsidiary Partnership); or
(v) sell, exchange, Transfer or otherwise dispose
of all or substantially all of the Partnership's assets.
(c) The Managing General Partner shall not, without the
prior Consent of the Limited Partners,
(i) after the Effective Time, amend Article NINTH
of the Charter of Simon Property Group, Inc. to increase or decrease the
Ownership Limit or alter any other provision of said Article NINTH or of any of
the definitions of defined terms contained in such article which would have the
effect of changing the Ownership Limit in any way;
(ii) except in connection with the dissolution and
winding-up of the Partnership by the liquidating agent, agree to or consummate
the merger or consolidation of the Partnership or the voluntary sale or other
Transfer of all or substantially all of the Partnership's assets in a single
transaction or related series of transactions (without limiting the
transactions which will not be deemed
<PAGE> 117
112
to be a voluntary sale or Transfer, the foreclosure of a mortgage lien on any
Property or the grant by the Partnership of a deed in lieu of foreclosure for
such Property shall not be deemed to be such a voluntary sale or other
Transfer);
(iii) dissolve the Partnership; or
(iv) issue additional shares other than to the
Non-Managing General Partner or as may be necessary or desirable in
order for the Managing General Partner to comply with REIT
Requirements.
Without the consent of all the Limited Partners, the Managing
General Partner shall have no power to do any act in contravention of this
Agreement or applicable law.
7.4 MANAGING GENERAL PARTNER AND NON-MANAGING GENERAL
PARTNER PARTICIPATION. The Managing General Partner and the Non-Managing
General Partner agree (a) that all activities and business operations of the
Managing General Partner and the Non-Managing General Partner, including but
not limited to, activities pertaining to the acquisition, development,
redevelopment and ownership of properties, shall be conducted directly or
indirectly through the
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Partnership or Simon, L.P. or any Subsidiary Partnership, (b) any property
acquisitions shall henceforth be made through the Partnership or any Subsidiary
Partnership and not through Simon, L.P. or any subsidiary of such partnership,
and (c) except as provided below any funds raised by the Managing General
Partner or the Non-Managing General Partner, whether by issuance of stock,
borrowing or otherwise, will be made available to the Partnership whether as
capital contributions, loans or otherwise, as appropriate. Notwithstanding the
provisions of the preceding sentence, (i) each of the Managing General Partner
and the Non-Managing General Partner shall have the right to form Qualified REIT
subsidiaries to act as general partners of Subsidiary Partnerships of the
Partnership or Simon, L.P.; (ii) the Non-Managing General Partner shall have
the right to borrow money or issue Preferred Shares and lend the proceeds of
such borrowing or lend or contribute in exchange for preferred units the
proceeds of such Preferred Shares issue to Simon, L.P. for the purpose of
enabling Simon, L.P. or any of its Subsidiary Entities to maintain, renovate or
expand any Property or to refinance any of its indebtedness; provided, however,
that if such Preferred Shares are
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114
convertible into Shares, the Non-Managing General Partner shall comply with its
obligations under Section 4.1(c) of the Third Amended and Restated Agreement of
Limited Partnership of Simon, L.P., as the same may be amended, which are
applicable if such conversion is effectuated; and (iii) the Managing General
Partner and the Non-Managing General Partner shall together have the right to
make capital contributions to Simon, L.P. for any purpose, provided that such
capital contributions are made in the ratio of 99% by the Managing General
Partner and 1% by the Non-Managing General Partner. Without the Consent of the
Limited Partners neither the Managing General Partner nor the Non-Managing
General Partner shall, directly or indirectly, participate in or otherwise
acquire any interest in any real or personal property other than in accordance
with this Section 7.4. In addition, the Managing General Partner and the
Non-Managing General Partner agree to conduct their respective affairs, to the
extent they are so able to do, in a manner which will preserve the equivalence
in value between a Share and a Partnership Unit.
7.5 PROSCRIPTIONS. The Managing General Partner shall
not have the authority to:
(a) Do any act in contravention of this
Agreement;
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115
(b) Possess any Partnership property or assign
rights in specific Partnership property for other than Partnership
purposes; or
(c) Do any act in contravention of applicable
law.
Nothing herein contained shall impose any obligation on any Person doing
business with the Partnership to inquire as to whether or not the Managing
General Partner has properly exercised its authority in executing any contract,
lease, mortgage, deed or any other instrument or document on behalf of the
Partnership, and any such Person shall be fully protected in relying upon such
authority.
7.6 ADDITIONAL PARTNERS. Additional Partners may be
admitted to the Partnership only as provided in Section 9.4 hereof.
7.7 TITLE HOLDER. To the extent allowable under
applicable law, title to all or any part of the Properties of the Partnership
may be held in the name of the Partnership or any other individual,
corporation, partnership, trust or otherwise, the beneficial interest in which
shall at all times be vested in the Partnership. Any such title
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holder shall perform any and all of its respective functions to the extent and
upon such terms and conditions as may be determined from time to time by the
Managing General Partner.
7.8 WAIVER AND INDEMNIFICATION. Neither the Managing General
Partner, the Non-Managing General Partner nor any of their Affiliates,
directors, trust managers, officers, shareholders, nor any Person acting on
their behalf pursuant hereto, shall be liable, responsible or accountable in
damages or otherwise to the Partnership or to any Partner for any acts or
omissions performed or omitted to be performed by them within the scope of the
authority conferred upon the Managing General Partner or the Non-Managing
General Partner by this Agreement and the Act, provided that the Managing
General Partner's, the Non-Managing General Partner's or such other Person's
conduct or omission to act was taken in good faith and in the belief that such
conduct or omission was in the best interests of the Partnership and, provided
further, that the Managing General Partner, the Non-Managing General Partner or
such other Person shall not be guilty of fraud, willful
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misconduct or gross negligence. The Non-Managing General Partner acknowledges
that it owes fiduciary duties both to its shareholders and to the Limited
Partners and it shall use its reasonable efforts to discharge such duties to
each; provided, however, that in the event of a conflict between the interests
of the shareholders of the Non-Managing General Partner and the interests of
the Limited Partners, the Limited Partners agree that the Non-Managing General
Partner shall discharge its fiduciary duties to the Limited Partners by acting
in the best interests of the Non-Managing General Partner's shareholders.
Nothing contained in the preceding sentence shall be construed as entitling
either the Managing General Partner or the Non-Managing General Partner to
realize any profit or gain from any transaction between such Partner and the
Partnership (except as may be required by law upon a distribution to the
Managing General Partner or the Non-Managing General Partner), including from
the lending of money by the Managing General Partner or the Non-Managing
General Partner to the Partnership or the contribution of property by the
Managing General Partner or the Non-Managing General Partner to the
Partnership, it
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being understood that in any such transaction the Managing General Partner or
the Non-Managing General Partner, as the case may be, shall be entitled to cost
recovery only. The Partnership shall, and hereby does, indemnify and hold
harmless each of the Managing General Partner and the Non-Managing General
Partner and its Affiliates, their respective directors, officers, shareholders
and any other individual acting on its or their behalf to the extent such
Persons would be indemnified by the Non-Managing General Partner pursuant to
Article Eighth of the Charter of the Non-Managing General Partner if such
persons were directors, officers, agents or employees of the Non-Managing
General Partner (or Article __ of the Charter of the Managing General Partner,
if such Persons were directors, officers, agents or employees of the Managing
General Partner); provided, however, that no Partner shall have any personal
liability with respect to the foregoing indemnification, any such
indemnification to be satisfied solely out of the assets of the Partnership.
The Partnership shall, and hereby does, indemnify each Limited Partner and its
Affiliates, their respective directors, officers,
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shareholders and any other individual acting on its or their behalf, from and
against any costs (including costs of defense) incurred by it as a result of
any litigation or other proceeding in which any Limited Partner is named as a
defendant or any claim threatened or asserted against any Limited Partner, in
either case which relates to the operations of the Partnership or any
obligation assumed by the Partnership or Simon, L.P., unless such costs are the
result of misconduct on the part of, or a breach of this Agreement by, such
Limited Partner; provided, however, no Partner shall have any personal
liability with respect to the foregoing indemnification, any such
indemnification to be satisfied solely out of the assets of the Partnership.
7.9 LIMITATION OF LIABILITY OF DIRECTORS, SHAREHOLDERS
AND OFFICERS OF THE MANAGING GENERAL PARTNER AND THE NON-MANAGING GENERAL
PARTNER. Any obligation or liability whatsoever of either of the Managing
General Partner or the Non-Managing General Partner which may arise at any time
under this Agreement or any other instrument, transaction, or undertaking
contemplated hereby shall be satisfied, if at all, out of the assets of the
Managing
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General Partner, the Non-Managing General Partner or the Partnership only. No
such obligation or liability shall be personally binding upon, nor shall resort
for the enforcement thereof be had to, any of either of the Managing General
Partner's or the Non-Managing General Partner's directors, shareholders,
officers, employees, or agents, regardless of whether such obligation or
liability is in the nature of contract, tort or otherwise.
ARTICLE VIII
DISSOLUTION, LIQUIDATION AND WINDING-UP
8.1 ACCOUNTING. In the event of the dissolution,
liquidation and winding-up of the Partnership, a proper accounting (which shall
be certified by the Accountants) shall be made of the Capital Account of each
Partner and of the Profits or Losses of the Partnership from the date of the
last previous accounting to the date of dissolution. Financial statements
presenting such accounting shall include a report of the Accountants.
8.2 DISTRIBUTION ON DISSOLUTION. In the event of the
dissolution and liquidation of the Partnership for any
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reason, the assets of the Partnership shall be liquidated for distribution in
the following rank and order:
(a) Payment of creditors of the Partnership (other than
Partners) in the order of priority as provided by law;
(b) Establishment of reserves as determined by the
Managing General Partner to provide for contingent liabilities, if any;
(c) Payment of debts of the Partnership to Partners, if
any, in the order of priority provided by law;
(d) To the Partners in accordance with the positive
balances in their Capital Accounts after giving effect to all
contributions, distributions and allocations for all periods,
including the period in which such distribution occurs (other than
those distributions made pursuant to this Section 8.2(d), Section 8.3
or Section 8.4 hereof).
If upon dissolution and termination of the Partnership the Capital Account of
any Partner is less than zero, then such Partner shall have no obligation to
restore the negative balance in its Capital Account unless and except to the
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122
extent that such Partner has so elected under Section 4.8. Whenever the
Liquidating Agent reasonably determines that any reserves established pursuant
to paragraph (b) above are in excess of the reasonable requirements of the
Partnership, the amount determined to be excess shall be distributed to the
Partners in accordance with the above provisions.
8.3 SALE OF PARTNERSHIP ASSETS. In the event of the
liquidation of the Partnership in accordance with the terms of this Agreement,
the Liquidating Agent may sell Partnership property; provided, however, that
all sales, leases, encumbrances or transfers of Partnership assets shall be
made by the Liquidating Agent solely on an "arm's-length" basis, at the best
price and on the best terms and conditions as the Liquidating Agent in good
faith believes are reasonably available at the time and under the circumstances
and on a non- recourse basis to the Limited Partners. The liquidation of the
Partnership shall not be deemed finally terminated until the Partnership shall
have received cash payments in full with respect to obligations such as notes,
purchase money mortgages, installment sale contracts or other similar
receivables received by the
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Partnership in connection with the sale of Partnership assets and all
obligations of the Partnership have been satisfied or assumed by the Managing
General Partner or the Non-Managing General Partner. The Liquidating Agent
shall continue to act to enforce all of the rights of the Partnership pursuant
to any such obligations until paid in full or otherwise discharged or settled.
8.4 DISTRIBUTIONS IN KIND. In the event that it becomes
necessary to make a distribution of Partnership property in kind in connection
with the liquidation of the Partnership, the Managing General Partner may, if
it determines that to do so would be in the best interest of the Partners and
obtains the Consent of the Limited Partners and consent of the Non-Managing
General Partner, transfer and convey such property to the distributees as
tenants in common, subject to any liabilities attached thereto, so as to vest
in them undivided interests in the whole of such property in proportion to
their respective rights to share in the proceeds of the sale of such property
(other than as a creditor) in accordance with the provisions of Section 8.2
hereof. Immediately prior to the distribution of
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Partnership property in kind, the Capital Account of each Partner shall be
increased or decreased, as the case may be, to reflect the manner in which the
unrealized income, gain, loss and deduction inherent in such property (to the
extent not previously reflected in the Capital Accounts) would be allocated
among the Partners if there were a taxable disposition of such property for its
fair market value as of the date of the distribution.
8.5 DOCUMENTATION OF LIQUIDATION. Upon the completion of
the dissolution and liquidation of the Partnership, the Partnership shall
terminate and the Liquidating Agent shall have the authority to execute and
record any and all documents or instruments required to effect the dissolution,
liquidation and termination of the Partnership.
8.6 LIABILITY OF THE LIQUIDATING AGENT. The Liquidating
Agent shall be indemnified and held harmless by the Partnership from and
against any and all claims, demands, liabilities, costs, damages and causes of
action of any nature whatsoever arising out of or incidental to the Liquidating
Agent's taking of any action authorized under or
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within the scope of this Agreement; and provided, however, that no Partner
shall have any personal liability with respect to the foregoing
indemnification, any such indemnification to be satisfied solely out of the
assets of the Partnership; and provided further, however, that the Liquidating
Agent shall not be entitled to indemnification, and shall not be held harmless,
where the claim, demand, liability, cost, damage or cause of action at issue
arose out of:
(a) A matter entirely unrelated to the Liquidating
Agent's action or conduct pursuant to the provisions of this
Agreement; or
(b) The proven misconduct or gross negligence of the
Liquidating Agent.
ARTICLE IX
TRANSFER OF PARTNERSHIP INTERESTS AND RELATED MATTERS
9.1 MANAGING GENERAL PARTNER TRANSFERS AND DEEMED
TRANSFERS. The Managing General Partner shall not (i) withdraw from the
Partnership, (ii) merge, consolidate or engage in any combination with another
Person, (iii) sell all or
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substantially all of its assets or (iv) sell, assign, pledge, encumber or
otherwise dispose of all or any portion of its Partnership Units except where
such merger, consolidation, sale, assignment, pledge or other disposal is to
the Non-Managing General Partner, as its sole successor. In the event of the
withdrawal by a General Partner from the Partnership, in violation of this
Agreement or otherwise, or the dissolution, termination or Bankruptcy of a
General Partner, within 90 days after the occurrence of any such event, the
remaining General Partners or a majority in interest of the remaining Partners
may elect in writing to continue the Partnership business and may, or if there
is then no General Partner other than one that has withdrawn or as to
which dissolution, termination or Bankruptcy has occurred shall, select a
substitute general partner effective as of the date of the occurrence of any
such event.
9.2 NON-MANAGING GENERAL PARTNER TRANSFERS AND DEEMED
TRANSFERS. The Non-Managing General Partner shall not (i) withdraw from the
Partnership, (ii) merge, consolidate or engage in any combination with another
Person
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127
other than the Managing General Partner, (iii) sell all or substantially all of
its assets or (iv) sell, assign, pledge, encumber or otherwise dispose of all
or any portion of its Partnership Units or Preferred Units or its partnership
units or preferred units in Simon, L.P. except to the Partnership, in each case
without the Consent of the Limited Partners. Upon any transfer of any
Partnership Units (not Preferred Units) in accordance with the provisions of
this Section 9.2, the transferee Non-Managing General Partner shall become
vested with the powers and rights of the transferor Non-Managing General
Partner with respect to the Partnership Units transferred, and shall be liable
for all obligations and responsible for all duties of the Transferor
Non-Managing General Partner, once such transferee has executed such
instruments as may be necessary to effectuate such admission and to confirm the
agreement of such transferee to be bound by all the terms and provisions of
this Agreement with respect to the Partnership Units so acquired. It is a
condition to any transfer otherwise permitted hereunder that the transferee
assumes by operation of law or express agreement all of the obligations of the
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128
transferor Non-Managing General Partner under this Agreement with respect to
such transferred Partnership Units and no such transfer (other than pursuant to
a statutory merger or consolidation wherein all obligations and liabilities of
the transferor Non-Managing General Partner are assumed by a successor
corporation by operation of law) shall relieve the transferor Non-Managing
General Partner of its obligations under this Agreement accruing prior to the
date of such transfer.
9.3 TRANSFERS BY LIMITED PARTNERS. Except as otherwise
provided in this Section 9.3, the Limited Partners shall not Transfer all or
any portion of their Partnership Units to any transferee without the consent of
the Managing General Partner and the Non- Managing General Partner, which
consent may be withheld in their sole and absolute discretion; provided,
however, that the foregoing shall not be considered a limitation on the ability
of the Limited Partners to exercise their Rights pursuant to Article XI hereof
or their EJDC Options pursuant to Article XII hereof.
(a) Notwithstanding the foregoing, but subject to
the provisions of Section 9.5 hereof, any Limited
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129
Partner may at any time, without the consent of the Managing General Partner or
the Non-Managing General Partner, (i) Transfer all or a portion of its
Partnership Units to an Affiliate of such Limited Partner, or (ii) Pledge some
or all of its Partnership Units to any Institutional Lender (and, in the case
of EJDC and its Affiliates, any EJDC Lender). Any Transfer to an Affiliate
pursuant to clause (i) and any Transfer to a pledgee of Partnership Units
Pledged pursuant to clause (ii) may be made without the consent of the Managing
General Partner or the Non-Managing General Partner but, except as provided in
Article XII or in subsequent provisions of this Section 9.3, such transferee or
such pledgee shall hold the Units so transferred to it (and shall be admitted
to the Partnership as a Substitute Limited Partner) subject to all the
restrictions set forth in this Section 9.3. It is a condition to any Transfer
otherwise permitted under any provision of this Section 9.3 that the transferee
assumes by operation of law or express agreement all of the obligations of the
transferor Limited Partner under this Agreement with respect to such
transferred Partnership Units arising after the effective date of
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130
the Transfer and no such Transfer (other than pursuant to a statutory merger or
consolidation wherein all obligations and liabilities of the transferor Partner
are assumed by a successor corporation by operation of law, and other than
pursuant to an exercise of the Rights pursuant to Article XI wherein all
obligations and liabilities of the transferor Partner arising from and after
the date of such Transfer shall be assumed by the Non-Managing General Partner)
shall relieve the transferor Partner of its obligations under this Agreement
prior to the effective date of such Transfer. Upon any such Transfer or Pledge
permitted under this Section 9.3, the transferee or, upon foreclosure on the
Pledged Partnership Units, each Institutional Lender which is the pledgee shall
be admitted as a Substituted Limited Partner as such term is defined in the Act
and shall succeed to all of the rights, including rights with respect to the
Rights, of the transferor Limited Partner under this Agreement in the place and
stead of such transferor Limited Partner; provided, however, that
notwithstanding the foregoing, any transferee of any transferred Partnership
Unit shall, unless the Ownership Limit is waived in writing by the Non-
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131
Managing General Partner, be subject to the Ownership Limit applicable to
Persons other than the Limited Partners and/or their Affiliates which may limit
or restrict such transferee's ability to exercise the Limited Partner's Rights,
if any. Any transferee, whether or not admitted as a Substituted Limited
Partner, shall take subject to the obligations of the transferor hereunder. No
transferee pursuant to a Transfer which is not expressly permitted under this
Section 9.3 and is not consented to by the General Partners, whether by a
voluntary Transfer, by operation of law or otherwise, shall have any rights
hereunder, other than the right to receive such portion of the distributions
and allocations of Profits and Losses made by the Partnership as are allocable
to the Partnership Units so transferred.
(b) Any exercise of the EJDC Option by any
DeBartolo other than EJDC must be consented to in writing by EJDC (or,
following written notice to the Managing General Partner from the EJDC Lenders
or their designated administrative agent (a "Secured Creditor") that there
exists an uncured Monetary Event of Default under the EJDC Loan Transaction or
that such Secured Creditor has acquired
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132
Partnership Units from the DeBartolos in connection with the EJDC Loan
Transaction, such Secured Creditor). Upon any such notice to the Managing
General Partner from such Secured Creditor that it is authorized to consent, no
further written instrument shall be required under this Agreement to evidence
such authority and the Managing General Partner shall not be required to
determine the validity or sufficiency, whether in form or in substance, of any
notice from any EJDC Lender that it is authorized to provide such notice and
shall be fully protected in relying upon such authority in acting or not acting
upon any consent or refusal to consent by any EJDC Lender. Any such exercise
not so consented to shall be void ab initio. Any EJDC Lender to which
Partnership Units have been transferred by a DeBartolo in connection with a
Pledge given in connection with the EJDC Loan Transaction shall have the right
freely to transfer such Partnership Units (and any EJDC Lender to which the
Partnership Units have been Pledged in connection with the EJDC Loan
Transaction shall have the right to cause a Transfer of such Partnership Units
owned by DeBartolos pursuant to such Pledge in accordance with the terms
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133
thereof), subject to the provisions of Section 9.5 hereof, to third parties
without the consent of the Managing General Partner or the Non- Managing
General Partner, and any transferee of an EJDC Lender shall be admitted as
Substitute Limited Partner, subject to all rights and obligations of this
Agreement. Any such transferee so admitted as a Substitute Limited Partner
shall be subject to all of the restrictions set forth in Section 9.3(a) above.
(c) In addition to the Rights granted to the JCP
Limited Partner and any other Transfers permitted under this Article IX, the
JCP Limited Partner shall have the right to transfer all of its Partnership
Units to a single accredited investor, as defined in Rule 501 promulgated under
the Securities Act, subject to the provisions of Section 9.5, and such
transferee shall be admitted to the Partnership as a Substitute Limited
Partner. Any transferee of the Partnership Units owned by the JCP Limited
Partner shall be subject to all of the restrictions set forth in Section 9.3(a)
above; provided, however, that if the JCP Limited Partner hereafter Pledges its
Partnership Units pursuant to Section 9.3(a), then provided that the JCP
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134
Limited Partner has not previously exercised the right provided for above in
this Section 9.3(c), the Institutional Lender or Lenders which are the
pledgee(s) may exercise such right, whether by taking title to the JCP Limited
Partner's Partnership Units and then transferring the same or by effecting
such transfer upon foreclosure of the Pledge.
(d) The Limited Partners acknowledge that the
Partnership Units have not been registered under any federal or state
securities laws and, as a result thereof, they may not be sold or otherwise
transferred, except in accordance with Article XI or otherwise in compliance
with such laws. Notwithstanding anything to the contrary contained in this
Agreement, no Partnership Units may be sold or otherwise transferred except
pursuant to Article XI unless such Transfer is exempt from registration under
any applicable securities laws or such Transfer is registered under such laws,
it being acknowledged that the Partnership has no obligation to take any action
which would cause any such interests to be registered.
9.4 ISSUANCE OF ADDITIONAL PARTNERSHIP UNITS AND
PREFERRED UNITS. At any time after the date hereof, subject
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135
to the provisions of Section 9.5 hereof, the Managing General Partner may, with
the consent of the Non-Managing General Partner, upon its determination that
the issuance of additional Partnership Units ("Additional Units") is in the
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136
best interests of the Partnership, cause the Partnership to issue Additional
Units to any existing Partner or issue Additional Units to and admit as a
partner in the Partnership any Person (i) in exchange for units in Simon, L.P.
outstanding at the Effective Time on a basis not more favorable to the holder
of such units than on a unit for unit basis or (ii) in exchange for the
contribution by such Person of cash and/or property which the Managing General
Partner determines is desirable to further the purposes of the Partnership
under Section 2.3 hereof and which the Managing General Partner determines has
a value that justifies the issuance of such Additional Units. In the event
that Additional Units are issued by the Partnership pursuant to clause (ii) of
this Section 9.4, the number of Partnership Units issued shall be determined by
dividing the Gross Asset Value of the property contributed (reduced by the
amount of any indebtedness assumed by the Partnership or to which such property
is subject) as of the date of contribution to the Partnership (the
"Contribution Date") by the Deemed Partnership Unit Value, computed as of the
Trading Day immediately preceding the Contribution Date.
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137
In addition, the Managing General Partner may, upon its
determination that the issuance of Preferred Units is in the best interests of
the Partnership, issue Preferred Units in accordance with Sections 4.1(c) and
4.3(c) hereof.
The Managing General Partner shall be authorized on behalf of
each of the Partners to amend this Agreement to reflect the admission of any
Partner or any increase in the Partnership Units or Preferred Units of any
Partner in accordance with the provisions of this Section 9.4, and the Managing
General Partner shall promptly deliver a copy of such amendment to the
Non-Managing General Partner and each Limited Partner. The Limited Partners
hereby irrevocably appoint the Managing General Partner as their
attorney-in-fact, coupled with an interest, solely for the purpose of executing
and delivering such documents, and taking such actions, as shall be reasonably
necessary in connection with the provisions of this Section 9.4 or making any
modification to this Agreement permitted by Section 7.3 (including, without
limitation, any modification which, under Section 7.3 hereof, requires the
Consent of the Limited Partners where such consent has been obtained). Nothing
contained in this Section 9.4 shall be construed as authorizing the Managing
General Partner to grant any consent on behalf of the Limited Partners, or any
of them.
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138
9.5 RESTRICTIONS ON TRANSFER.
(a) In addition to any other restrictions on
Transfer herein contained, in no event may any Transfer or assignment of a
Partnership Unit or Preferred Unit by any Partner be made nor may any new
Partnership Unit or Preferred Unit be issued by the Partnership (i) to any
Person which lacks the legal right, power or capacity to own a Partnership Unit
or Preferred Unit; (ii) in violation of applicable law; (iii) if such Transfer
would immediately or with the passage of time cause either the Managing General
Partner or the Non- Managing General Partner to fail to comply with the REIT
Requirements, such determination to be made assuming that such Partners do
comply with the REIT Requirements immediately prior to the proposed Transfer;
(iv) if such Transfer would cause the Partnership to become, with respect to
any employee benefit plan subject to Title I of ERISA, a "party-in-interest"
(as defined in Section 3(14) of ERISA) or a "disqualified person" (as defined
in Section 4975(e) of the Code); (v) if such Transfer would, in the opinion of
counsel to the Partnership, cause any portion of the underlying assets of the
Partnership to constitute
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139
assets of any employee benefit plan pursuant to Department of Labor Regulations
Section 2510.3-101; (vi) if such Transfer would result in a deemed distribution
to any Partner attributable to a failure to meet the requirements of
Regulations Section 1.752-2(d)(1), unless such Partner consents thereto, (vii)
if such Transfer would cause any lender to the Partnership (except the EJDC
Lenders) to hold in excess of ten (10) percent of the Partnership Interest that
would, pursuant to the regulations under Section 752 of the Code or any
successor provision, cause a loan by such a lender to constitute Partner
Nonrecourse Debt, (viii) if such Transfer, other than to an Affiliate, is of a
Partnership Interest the value of which would have been less than $20,000 when
issued,(ix) if such Transfer would, in the opinion of counsel to the
Partnership, cause the Partnership to cease to be classified as a Partnership
for federal income tax purposes or (x) if such Transfer is effectuated through
an "established securities market" or a "secondary market (or the substantial
equivalent thereof)" within the meaning of Section 7704(b) of the Code.
Nothing contained in this Section 9.5 is intended to nullify or impair any
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140
Pledges of Units under the EJDC Loan Transaction (it being understood, however,
that Transfers or assignments of Units made after the Effective Time in
connection with the EJDC Loan Transaction must satisfy the requirements of this
Section 9.5).
(b) No Preferred Unit may be transferred by the
Non-Managing General Partner to any Person who is not a General Partner of the
Partnership.
9.6 SHELF REGISTRATION RIGHTS. The Non-Managing General
Partner agrees that, upon the request of any Limited Partner that has not
entered into a Registration Rights Agreement with the Non-Managing General
Partner substantially in the form of Exhibit D hereto (each, a "Shelf Rights
Holder"), made at any time, the Non-Managing General Partner will, if it has
not already done so, within 60 days thereafter file a "shelf" registration
statement (the "Shelf Registration"), on an appropriate form pursuant to Rule
415 under the Securities Act of 1933, as amended (the "Securities Act"), or any
similar rule that may be adopted by the SEC, with respect to the sale of
Registrable Securities (as defined below) by the Shelf Rights Holders in
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141
ordinary course brokerage or dealer transactions not involving an underwritten
public offering. The Non-Managing General Partner shall use all reasonable
efforts to have the Shelf Registration declared effective as soon as
practicable after such filing and to keep such Shelf Registration continuously
effective following the date on which such Shelf Registration is declared
effective for so long as any Units are outstanding. The Non-Managing General
Partner further agrees, if necessary, to supplement or make amendments to the
Shelf Registration, if required by the registration form used by the
Non-Managing General Partner for the Shelf Registration or by the instructions
applicable to such registration form or by the Securities Act or the rules and
regulations thereunder, and the Non-Managing General Partner agrees to furnish
to each Shelf Rights Holder copies of any such supplement or amendment at least
three days prior to its being used and/or filed with the SEC. Notwithstanding
the foregoing, if the Non-Managing General Partner shall furnish to the Unit
holder a certificate signed by the Chief Executive Officer of the Non-Managing
General Partner stating that in the good faith
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142
judgment of the Directors it would be significantly disadvantageous to the
Non-Managing General Partner and its stockholders for any such Shelf
Registration to be amended or supplemented, the Non-Managing General Partner
may defer such amending or supplementing of such Shelf Registration for not
more than 45 days and in such event the Unit holder shall be required to
discontinue disposition of any Registrable Securities covered by such Shelf
Registration during such period. Notwithstanding the foregoing, if the
Non-Managing General Partner irrevocably elects, or the Partnership is so
required under Section 11.3, prior to the filing of any Shelf Registration to
issue all cash in lieu of Shares upon the exchange of Units by the holder
requesting the filing of such Shelf Registration, the Non-Managing General
Partner shall not be obligated to file such Shelf Registration Statement. The
Non-Managing General Partner shall make available to its security holders, as
soon as reasonably practicable, a statement of operations covering a period of
twelve (12) months, commencing on the first day of the fiscal quarter next
succeeding each sale of any Registrable Securities pursuant to the Shelf
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143
Registration, in a manner which shall satisfy the provisions of Section 11(a)
of the Securities Act.
(a) SECURITIES SUBJECT TO THIS SECTION 9.6. The
securities entitled to the benefits of this Section 9.6 are the Shares that
have been or may be issued from time to time upon the exchange of Units
pursuant to Article XI hereof and any other securities issued by the
Non-Managing General Partner in accordance with the terms of this Agreement in
exchange for any of the Shares (collectively, the "Registrable Securities")
but, with respect to any particular Registrable Security, only so long as it
continues to be a Registrable Security. Registrable Securities shall include
any securities issued in accordance with the terms of this Agreement as a
dividend or distribution on account of Registrable Securities or resulting from
a subdivision of the outstanding Shares of Registrable Securities into a
greater number of shares (by reclassification, stock split or otherwise). For
the purposes of this Agreement, a security that was at one time a Registrable
Security shall cease to be a Registrable Security when (i) such security has
been effectively regis-
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144
tered under the Securities Act, and either (A) the registration statement with
respect thereto has remained continuously effective for 150 days or (B) such
security has been disposed of pursuant to such registration statement, (ii)
such security is or can be immediately sold to the public in reliance on Rule
144 (or any similar provision then in force) under the Securities Act, (iii)
such security has been otherwise transferred (except in connection with the
exercise of the EJDC Option) and (a) the Non-Managing General Partner has
delivered a new certificate or other evidence of ownership not bearing the
legend set forth on the Shares upon the initial issuance thereof (or other
legend of similar import) and (b) in the opinion of counsel to the Non-Managing
General Partner, the subsequent disposition of such security would not require
the registration or qualification under the Securities Act or any similar state
law then in force, or (iv) such security has ceased to be outstanding.
(b) REGISTRATION EXPENSES. The Non-Managing
General Partner shall pay, as REIT Expenses, all expenses incident to the Shelf
Registration, including, without
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145
limitation, (i) all SEC, stock exchange and National Association of Securities
Dealers, Inc. registration, filing and listing fees, (ii) all fees and expenses
incurred in complying with securities or "blue sky" laws (including reasonable
fees and disbursements of counsel in connection with "blue sky" qualifications
of the Registrable Securities), (iii) all printing, messenger and delivery
expenses, (iv) all fees and disbursements of the Non-Managing General Partner's
independent public accountants and counsel and (v) all fees and expenses of any
special experts retained by the Non-Managing General Partner in connection with
the Shelf Registration pursuant to the terms of this Section 9.6, regardless of
whether such Shelf Registration becomes effective, unless such Shelf
Registration fails to become effective as a result of the fault of the Shelf
Rights Holders; provided, however, that the Non-Managing General Partner shall
not pay the costs and expenses of any Shelf Rights Holder relating to brokerage
or dealer fees, transfer taxes or the fees or expenses of any counsel,
accountants or other representatives retained by the Shelf Rights Holders,
individually or in the aggregate.
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ARTICLE X
RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNERS
10.1 NO PARTICIPATION IN MANAGEMENT. Except as expressly
permitted hereunder, the Limited Partners shall not take part in the management
of the Partnership's business, transact any business in the Partnership's name
or have the power to sign documents for or otherwise bind the Partnership;
provided, that the foregoing shall not be deemed to limit the ability of a
Limited Partner (or any officer or director thereof) who is an officer,
director or employee of the Partnership, either the Managing General Partner or
Non-Managing General Partner, or any Affiliate thereof, to act in such
capacity.
10.2 BANKRUPTCY OF A LIMITED PARTNER. The Bankruptcy of any
Limited Partner shall not cause a dissolution of the Partnership, but the
rights of such Limited Partner to share in the Profits or Losses of the
Partnership and to receive distributions of Partnership funds shall, on the
happening of such event, devolve to its successors or assigns, subject to the
terms and conditions of this Agree-
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147
ment, and the Partnership shall continue as a limited partnership. However, in
no event shall such assignee(s) become a Substituted Limited Partner except in
accordance with Article IX.
10.3 NO WITHDRAWAL. No Limited Partner may withdraw from the
Partnership without the prior written consent of the Managing General Partner
and of the Non-Managing General Partner, other than as expressly provided in
this Agreement.
10.4 DUTIES AND CONFLICTS. (a) The Partners recognize that
each of the other Partners and their Affiliates have or may have other business
interests, activities and investments, some of which may be in conflict or
competition with the business of the Partnership, and that such Persons are
entitled to carry on such other business interests, activities and investments.
In addition, the Partners recognize that certain of the Limited Partners and
their Affiliates are and may in the future be tenants of the Partnership,
Simon, L.P., Subsidiary Entities or other Persons or own anchor or other stores
in the Properties of the Partnership, Simon, L.P. or Subsidiary
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148
Entities or other properties and in connection therewith may have interests
that conflict with those of the Partnership, Simon, L.P. or Subsidiary
Entities. In deciding whether to take any actions in such capacity, such
Limited Partners and their Affiliates shall be under no obligation to consider
the separate interests of the Partnership, Simon, L.P. or Subsidiary Entities
and shall have no fiduciary obligations to the Partnership, Simon, L.P. or
Subsidiary Entities and shall not be liable for monetary damages for losses
sustained, liabilities incurred or benefits not derived by the other Partners
in connection with such acts; nor shall the Partnership, the Non-Managing
General Partner, the Managing General Partner, Simon, L.P. or any Subsidiary
Entities be under any obligation to consider the separate interests of the
Limited Partners and their Affiliates in such Limited Partners' independent
capacities or have any fiduciary obligations to the Limited Partners and their
Affiliates in such capacity or be liable for monetary damages for losses
sustained, liabilities incurred or benefits not derived by the Limited Partners
and their Affiliates in such independent capacities arising from
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149
actions or omissions taken by the Partnership, Simon, L.P. or Subsidiary
Entities. The Limited Partners and their Affiliates may engage in or possess
an interest in any other business or venture of any kind, independently or with
others, on their own behalf or on behalf of other Entities with which they are
affiliated or associated, and such Persons may engage in any activities,
whether or not competitive with the Partnership, Simon, L.P. or Subsidiary
Entities, without any obligation to offer any interest in such activities to
the Partnership, Simon, L.P. or Subsidiary Entities or to any Partner or
otherwise. Neither the Partnership nor any Partner shall have any right, by
virtue of this Agreement, in or to such activities, or the income or profits
derived therefrom, and the pursuit of such activities, even if competitive with
the business of the Partnership, Simon, L.P. or Subsidiary Entities, shall not
be deemed wrongful or improper.
(b) Notwithstanding the foregoing, without the
prior consents of the Managing General Partner and the Non- Managing General
Partner, no Limited Partner shall knowingly take any action, including
acquiring, directly or
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indirectly, an interest in any tenant of a Property which would have, through
the actual or constructive ownership of any tenant of any Property, the effect
of causing the percentage of the gross income of either of the Managing General
Partner or the Non-Managing General Partner that fails to be treated as "rents
from real property" within the meaning of Section 856(d) of the Code to exceed
such percentage on the date hereof. Each Limited Partner shall have a duty to
notify the Managing General Partner and the Non-Managing General Partner on a
timely basis of any potential acquisition or change in ownership that could
reasonably be expected to have such effect.
10.5 GUARANTY AND INDEMNIFICATION AGREEMENTS.
(a) The Partnership shall notify the Limited
Partners no less than 45 days (or, if the Partnership itself has less than 45
days' prior notice, as promptly as practicable) prior to the occurrence of any
event that the Partnership reasonably expects will reduce the amount of
Partnership liabilities (including liabilities of Simon, L.P. and any other
Subsidiary Partnership) that the Limited Partners may include in their
individual tax bases of their
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151
respective Partnership Interests pursuant to Treasury Regulation Section
1.752-2 and Treasury Regulations Section Section 1.752-3(a)(2) and (3). Upon
receipt of such notice, each Limited Partner shall inform the Partnership of
any action it desires to take in its sole and absolute discretion in order to
increase the "economic risk of loss" (within the meaning of Treasury Regulation
Section 1.752-2) (the "Incurrence") that it has with respect to liabilities of
the Partnership, Simon, L.P. or any other Subsidiary Partnerships. The
Partnership shall cooperate with each Limited Partner to facilitate the
Incurrence by such Limited Partner with respect to Partnership Liabilities or
liabilities of Simon, L.P. or any other Subsidiary Partnerships in such a way
that the Incurrence has the least amount of real economic risk to such Limited
Partner and provided that the Incurrence does not have a material adverse
impact on any other Partner in the Partnership or any such Partner's
Affiliates.
No direct or indirect Partner in the Partnership or any
partnership which is the obligor on a JCP Property Liability shall incur the
"economic risk of loss" (within the meaning of Treasury Regulation Section
752-2) with respect to
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152
any JCP Property Liability without the prior written consent of the JCP Limited
Partner.
(b) Notwithstanding the provisions of Section
10.5(a) above, no Limited Partners shall have any right to negotiate directly
with any lender of the Partnership, Simon, L.P. or any other Subsidiary
Partnership, any such negotiation to be undertaken in good faith by the
Managing General Partner or the Non-Managing General Partner on behalf of, and
at the request of, all affected Limited Partners.
ARTICLE XI
GRANT OF RIGHTS TO THE LIMITED PARTNERS
11.1 GRANT OF RIGHTS. The Non-Managing General Partner does
hereby grant to each of the Limited Partners and each of the Limited Partners
does hereby accept the right, but not the obligation (hereinafter such right
sometimes referred to as the "Rights"), to convert all or a portion of such
Limited Partner's Partnership Units into Shares or cash, as selected by the
Non-Managing General Partner, at any time or from time to time, on the terms
and
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153
subject to the conditions and restrictions contained in this Article XI. The
Rights granted hereunder may be exercised by a Limited Partner, on the terms
and subject to the conditions and restrictions contained in this Article XI,
upon delivery to the Non-Managing General Partner of a notice in the form of
Exhibit E (an "Exercise Notice"), which notice shall specify the number of such
Limited Partner's Partnership Units to be converted by such Limited Partner
(the "Offered Units"). Once delivered, the Exercise Notice shall be
irrevocable, subject to payment by the Non-Managing General Partner or the
Partnership of the Purchase Price for the Offered Units in accordance with the
terms hereof and subject to Section 1 of the Registration Rights Agreements.
In the event the Non-Managing General Partner elects to cause the Offered Units
to be converted into cash, the Non-Managing General Partner shall effect such
conversion by causing the Partnership to redeem the Offered Units for cash.
11.2 LIMITATION ON EXERCISE OF RIGHTS. If an Exercise Notice
is delivered to the Non-Managing General Partner but, as a result of the
Ownership Limit or as a
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154
result of other restrictions contained in the Charter of the Non-Managing
General Partner, the Rights cannot be exercised in full for Shares, the
Exercise Notice, if the Purchase Price is to be payable in Shares, shall be
deemed to be modified such that the Rights shall be exercised only to the
extent permitted under the Ownership Limit or under other restrictions in the
Charter of the Non-Managing General Partner. Notwithstanding the foregoing,
any Person shall be permitted to exercise its Rights hereunder during the first
half of a taxable year of the Non-Managing General Partner even if upon
conversion of the Offered Units into Shares, the Shares held by such Person
will exceed the Ownership Limit, so long as such Person shall immediately
following such conversion sell so many of such Shares as shall cause the
Ownership Limit not to be exceeded upon consummation of such sale. The
Non-Managing General Partner hereby agrees to exercise its right pursuant to
Article Ninth of its Charter to permit the Ownership Limit to be exceeded in
the circumstances described in the preceding sentence.
11.3 COMPUTATION OF PURCHASE PRICE/FORM OF PAYMENT. The
purchase price ("Purchase Price") payable to a
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155
tendering Limited Partner shall be equal to the Deemed Partnership Unit Value
multiplied by the number of Offered Units computed as of the date on which the
Exercise Notice was delivered to the Non-Managing General Partner (the
"Computation Date"). Subject to the following paragraph, the Purchase Price
for the Offered Units shall be payable, at the option of the Non-Managing
General Partner, by causing the Partnership to redeem the Offered Units for
cash in the amount of the Purchase Price, or by the issuance by the
Non-Managing General Partner of the number of Shares equal to the number of
Offered Units (adjusted as appropriate to account for stock splits, stock
dividends or other similar transactions between the Computation Date and the
closing of the purchase and sale of the Offered Units in the manner specified
in Section 11.7(d) below).
Where a Limited Partner exercising its rights pursuant to this
Section on or after the fifth anniversary of the Effective Time, up to, but not
including, the eighth anniversary of the Effective Time, is a DeBartolo, and
such Limited Partner has received a special allocation of taxable income or
gain from a Covered Sale pursuant to Section
<PAGE> 161
156
6.1(e) within 90 days prior to the date of such exercise, then to the extent of
any tax due on such allocation and on the redemption of such Limited Partner's
Units, the Managing General Partner shall, if such Limited Partner so requests
in the Exercise Notice, cause the Partnership to redeem its Units for cash in
accordance with this Section 11.3.
11.4 CLOSING. The closing of the acquisition or redemption
of Offered Units shall, unless otherwise mutually agreed, be held at the
principal offices of the Non-Managing General Partner, on the date agreed to by
the Non-Managing General Partner and the relevant Limited Partner, which date
(the "Settlement Date") shall in no event be on a date which is later than the
later of (i) ten (10) days after the date of the Exercise Notice and (ii) five
(5) days after the expiration or termination of the waiting period applicable
to the Limited Partner, if any, under the Hart-Scott-Rodino Act (the "HSR
Act"). The Non-Managing General Partner agrees to use its best efforts to
obtain an early termination of the waiting period applicable to any such
acquisition, if any, under the HSR Act. Until the Settlement Date, each
tendering Partner shall continue to
<PAGE> 162
157
own his Offered Units, and will continue to be treated as the holder of such
Offered Units for all purposes of this Agreement, including, without
limitation, for purposes of voting, consent, allocations and distributions.
Offered Units will be transferred to the Non-Managing General Partner only upon
receipt by the tendering Partner of Shares or cash in payment in full therefor.
11.5 CLOSING DELIVERIES. At the closing of the purchase and
sale or redemption of Offered Units, payment of the Purchase Price shall be
accompanied by proper instruments of transfer and assignment and by the
delivery of (i) representations and warranties of (A) the tendering Limited
Partner with respect to its due authority to sell all of the right, title and
interest in and to such Offered Units to the Non-Managing General Partner or
the Partnership, as applicable, and with respect to the ownership by of the
Limited Partner of such Units, free and clear of all Liens, and (B) the
Non-Managing General Partner with respect to its due authority to acquire such
Units for Shares or to cause the Partnership to redeem such Units for cash and,
in the case of payment by Shares, (ii)(A) an
<PAGE> 163
158
opinion of counsel for the Non-Managing General Partner, reasonably
satisfactory to such Limited Partner, to the effect that such Shares have been
duly authorized, are validly issued, fully-paid and non-assessable, and (B) a
stock certificate or certificates evidencing the Shares to be issued and
registered in the name of the Limited Partner or its designee.
11.6 TERM OF RIGHTS. The rights of the parties with respect
to the Rights shall remain in effect, subject to the terms hereof, throughout
the existence of the Partnership.
11.7 COVENANTS OF THE NON-MANAGING GENERAL PARTNER. To
facilitate the Non-Managing General Partner's ability fully to perform its
obligations hereunder, the Non-Managing General Partner covenants and agrees as
follows:
(a) At all times while the Rights are in
existence, the Non-Managing General Partner shall reserve for issuance such
number of Shares as may be necessary to enable the Non-Managing General Partner
to issue such Shares in full payment of the Purchase Price in regard to all
<PAGE> 164
159
Partnership Units which are from time to time outstanding and held by the
Limited Partners.
(b) As long as the Non-Managing General Partner
shall be obligated to file periodic reports under the Exchange Act, the
Non-Managing General Partner will timely file such reports in such manner as
shall enable any recipient of Shares issued to a Limited Partner hereunder in
reliance upon an exemption from registration under the Securities Act to
continue to be eligible to utilize Rule 144 promulgated by the SEC pursuant to
the Securities Act, or any successor rule or regulation or statute thereunder,
for the resale thereof.
(c) During the pendency of the Rights, the
relevant Limited Partners shall receive in a timely manner all reports filed by
the Non-Managing General Partner with the SEC and all other communications
transmitted from time to time by the Non-Managing General Partner to the owners
of its Shares.
(d) Under no circumstances shall the Non-Managing
General Partner declare any stock dividend, stock split, stock distribution or
the like, unless fair and
<PAGE> 165
160
equitable arrangements are provided, to the extent necessary, fully to adjust,
and to avoid any dilution in, the Rights of any Limited Partner under this
Agreement.
11.8 LIMITED PARTNERS' COVENANT. Each of the Limited
Partners covenants and agrees with the Non-Managing General Partner that all
Offered Units tendered to the Non-Managing General Partner or the Partnership,
as the case may be, in accordance with the exercise of Rights herein provided
shall be delivered free and clear of all Liens and should any Liens exist or
arise with respect to such Offered Units, the Non-Managing General Partner or
the Partnership, as the case may be, shall be under no obligation to acquire
the same unless, in connection with such acquisition, the Non-Managing General
Partner has elected to cause the Partnership to pay such portion of the
Purchase Price in the form of cash consideration in circumstances where such
consideration will be sufficient to cause such existing Lien to be discharged
in full upon application of all or a part of such consideration and the
Partnership is expressly authorized to apply such portion of the Purchase Price
as may be necessary to satisfy any indebtedness in full and to
<PAGE> 166
161
discharge such Lien in full. In the event any transfer tax is payable by the
Limited Partner as a result of a transfer of Partnership Units pursuant to the
exercise by a Limited Partner of the Rights, the Limited Partner shall pay such
transfer tax.
11.9 DIVIDENDS. If a Limited Partner shall exchange any
Partnership Units for Shares pursuant to this Article XI on or prior to the
Partnership Record Date for any distribution to be made on such Partnership
Units, in accordance with the Charter of the Non- Managing General Partner such
Limited Partner will be entitled to receive the corresponding distribution to
be paid on such Shares and shall not be entitled to receive the distribution
made by the Partnership in respect of the exchanged Partnership Units.
ARTICLE XII
EJDC OPTION
12.1 GRANT AND TERMS OF OPTION. In addition to the rights
granted in Article XI, the Non-Managing General Partner does hereby grant to
EJDC and its Affiliates (which for purposes of this Article XII shall include
the DeBartolos), and
<PAGE> 167
162
EJDC and its Affiliates do hereby accept the right, but not the obligation (the
"EJDC Option"), to dispose of a certain number of Partnership Units held by
EJDC and its Affiliates, in certain circumstances and at certain times, subject
to the terms and conditions set forth below:
(a) If, prior to the EJDC Option Termination Date
(as defined in Section 12.1(e) below), EJDC elects to dispose of Partnership
Units (other than by exchanging them for Shares or cash pursuant to Article XI)
to satisfy any Amortization Requirements (as defined in Section 12.1(d) below),
EJDC shall provide a written Notice (an "Initial EJDC Notice") to the
Non-Managing General Partner with respect to the period (a "Payment Period"),
commencing upon the Non-Managing General Partner's receipt of an Initial EJDC
Notice and ending on the earlier of (x) the first anniversary of the date of
such receipt and (y) the date on which the next Amortization Requirement is
satisfied specifying:
(i) the number of Partnership Units (which number
shall not, in any event, exceed 30% of the number of Partnership Units owned by
EJDC and its Affiliates at the
<PAGE> 168
163
Effective Time) that are required to be disposed of solely to pay taxes and
expenses payable on or in connection with such disposition and to satisfy the
Amortization Requirement for the Payment Period in respect of which the Initial
EJDC Notice is being given; and
(ii) the date on which such Amortization
Requirement is required to be satisfied.
(b) Within 10 days of its receipt of an Initial EJDC
Notice, the Non-Managing General Partner shall provide written notice (a
"Response Notice") to EJDC specifying the Non-Managing General Partner's
election to take one (but not more than one) of the following actions in the
Non-Managing General Partner's sole discretion:
(i) agree not to exercise any "blackout" or
"carveback" rights or other Non-Managing General Partner imposed limitations on
the availability or exercise of registration rights of EJDC and its Affiliates
under the Registration Rights Agreement so as to permit EJDC and its Affiliates
to exchange up to the number of Partnership Units specified in the Initial EJDC
Notice with the Non-Managing General Partner for Shares and sell the Shares in
a
<PAGE> 169
164
registered offering in time for EJDC to satisfy the Amortization Requirement
specified in the Initial EJDC Notice and pay the taxes and expenses payable on
or in connection with such exchange; provided, that the Non-Managing General
Partner shall not have the right to elect the option specified in this
paragraph (i) in any Payment Period commencing in 1996;
(ii) pay on a date specified by EJDC cash to EJDC
and its Affiliates upon tender by EJDC and its Affiliates of up to the number
of Partnership Units specified in the Initial EJDC Notice at a Purchase Price
per Partnership Unit and in accordance with the closing procedures that would
be applicable upon the exercise of Rights as specified in Sections 11.3, 11.4
and 11.5 above; or
(iii) permit EJDC and its Affiliates to sell up to
the number of Partnership Units specified in the Initial EJDC Notice to up to
three Institutional Investors in the then current Payment Period.
<PAGE> 170
165
Failure by the Non-Managing Partner to provide a timely notice shall be deemed
to constitute an election of the option set forth in paragraph (iii) above.
(c) If the sale of Partnership Units permitted to be sold
under paragraph (iii) of Section 12.1(b) above does not occur or is not
completed within 120 days of receipt by EJDC of the Response Notice, then EJDC
and its Affiliates may not sell Partnership Units after the expiration of such
120-day period except as hereinafter provided in this Section 12.1(c). In
order for EJDC and its Affiliates to dispose of Partnership Units in such
Payment Period after the expiration of such 120-day period, a new written
notice (a "Subsequent EJDC Notice") shall be delivered by EJDC to the
Non-Managing General Partner, which Subsequent EJDC Notice shall specify the
same information as shall have been specified in the Initial EJDC Notice for
the then current Payment Period, except that the number of Partnership Units
specified for disposition shall not exceed 30% of the number of Partnership
Units held by EJDC and its Affiliates at the Effective Time minus the number of
Partnership Units previously disposed of by EJDC and its Affiliates in such
<PAGE> 171
166
Payment Period. Upon receipt of a Subsequent EJDC Notice the Non-Managing
General Partner shall within 10 days of receipt thereof deliver to EJDC a
Response Notice (a new Subsequent EJDC Notice being required at each 120 day
interval in order for Partnership Units to continue to be disposed of by EJDC
and its Affiliates during the then current Payment Period). In any event, upon
the end of a Payment Period, EJDC shall be required to deliver to the
Non-Managing General Partner a new Initial EJDC Notice with respect to the
disposition of Partnership Units in the new Payment Period, subject to the same
limitations as were set forth in the original Initial EJDC Notice as to such
new Payment Period.
(d) EJDC covenants that the proceeds from the disposition
of Partnership Units pursuant to the exercise of the EJDC Option will be used
only to pay any taxes or expenses payable on or in connection with the sale,
tender or exchange of the Partnership Units in connection with any such
exercise and to satisfy amortization payments (the "Amortization Requirements")
to the EJDC Lenders in the EJDC Loan Transaction actually due, but only to the
extent of
<PAGE> 172
167
indebtedness to such Lenders as of the Effective Time, which shall not exceed
in the aggregate the following amounts for each Payment Period:
(i) a Payment Period commencing in 1996 - up to
$180,000,000;
(ii) a Payment Period commencing in 1997 - up to
$180,000,000 less the amount of the
Amortization Requirement actually satisfied
in a Payment Period commencing in 1996 (such
that, by way of example, (x) if a
$180,000,000 payment is made by EJDC to
satisfy the Amortization Requirement for a
Payment Period commencing in 1996 then the
Amortization Requirement for any Payment
Period commencing in 1997 would be zero and
no EJDC Option would be exercisable by EJDC
in 1997 and (y) if a $90,000,000 payment is
made by EJDC to satisfy the Amortization
Requirement for a Payment Period commencing
in 1996
<PAGE> 173
168
then the Amortization Requirement for a
Payment Period commencing in 1997 would be
$90,000,000, etc.);
(iii) a Payment Period commencing in 1998 - up to
$189,000,000.
No other use of such proceeds shall be permitted.
(e) The EJDC Option shall terminate at the earlier to
occur of (i) the date on which the indebtedness outstanding under the EJDC Loan
Transaction having the Amortization Requirements is repaid and (ii) December
31, 1998 (the "EJDC Option Termination Date"), and at such time the disposition
of Partnership Units by EJDC and its Affiliates pursuant to an Initial EJDC
Notice or a Subsequent EJDC Notice shall terminate.
ARTICLE XIII
GENERAL PROVISIONS
13.1 INVESTMENT REPRESENTATIONS.
(a) Each Limited Partner acknowledges that it (i)
has been given full and complete access to the Partnership and those person who
will manage the Partnership
<PAGE> 174
169
in connection with this Agreement and the transactions contemplated hereby,
(ii) has had the opportunity to review all documents relevant to its decision
to enter into this Agreement, and (iii) has had the opportunity to ask
questions of the Partnership and those persons who will manage the Partnership
concerning its investment in the Partnership and the transactions contemplated
hereby.
(b) Each Limited Partner acknowledges that it
understands that the Partnership Units to be purchased or otherwise acquired by
it hereunder will not be registered under the Securities Act of 1933 in reliance
upon the exemption afforded by Section 4(2) thereof for transactions by an
issuer not involving any public offering, and will not be registered or
qualified under any applicable state securities laws. Each Limited Partner
represents that (i) it is acquiring such Partnership Units for investment only
and without any view toward distribution thereof, and it will not sell or
otherwise dispose of such Partnership Units except pursuant to the exercise of
the Rights or otherwise in accordance with the terms hereof and in compliance
with the registration requirements or exemption provisions of any
<PAGE> 175
170
applicable state securities laws, (ii) its economic circumstances are such that
it is able to bear all risks of the investment in the Partnership Units for an
indefinite period of time including the risk of a complete loss of its
investment in the Units and (iii) it has knowledge and experience in financial
and business matters sufficient to evaluate the risks of investment in the
Partnership Units. Each Limited Partner further acknowledges and represents
that it has made its own independent investigation of the Partnership and the
business conducted and proposed to be conducted by the Partnership, and that
any information relating thereto furnished to the Limited Partner was supplied
by or on behalf of the Partnership.
13.2 NOTICES. All notices, offers or other communications
required or permitted to be given pursuant to this Agreement shall be in
writing and may be personally delivered or sent by United States mail or by
reputable overnight delivery service and shall be deemed to have been given
when delivered in person, upon receipt when delivered by overnight delivery
service or three business days after deposit in United States mail, registered
or certified,
<PAGE> 176
171
postage prepaid, and properly addressed, by or to the appropriate party. For
purposes of this Section 13.2, the addresses of the parties hereto shall be as
set forth on Exhibit A hereof. The address of any party hereto may be changed
by a notice in writing given in accordance with the provisions hereof.
13.3 SUCCESSORS. This Agreement and all the terms and
provisions hereof shall be binding upon and shall inure to the benefit of all
Partners, and their legal representatives, heirs, successors and permitted
assigns, except as expressly herein otherwise provided.
13.4 LIABILITY OF LIMITED PARTNERS. The liability of the
Limited Partners for their obligations, covenants, representations and
warranties under this Agreement shall be several and not joint.
13.5 EFFECT AND INTERPRETATION. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN CONFORMITY WITH THE LAWS OF THE STATE OF DELAWARE.
13.6 COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be an
<PAGE> 177
172
original, but all of which shall constitute one and the same instrument.
13.7 PARTNERS NOT AGENTS. Nothing contained herein shall be
construed to constitute any Partner the agent of another Partner, except as
specifically provided herein, or in any manner to limit the Partners in the
carrying on of their own respective businesses or activities.
13.8 ENTIRE UNDERSTANDING; ETC. This Agreement and the other
agreements referenced herein or therein or to which the signatories hereto or
thereto are parties constitute the entire agreement and understanding among the
Partners and supersede any prior understandings and/or written or oral
agreements among them respecting the subject matter within.
13.9 SEVERABILITY. If any provision of this Agreement, or
the application of such provision to any Person or circumstance, shall be held
invalid by a court of competent jurisdiction, the remainder of this Agreement,
or the application of such provision to Persons or circumstances other than
those to which it is held invalid by such court, shall not be affected thereby.
<PAGE> 178
173
13.10 TRUST PROVISION. This Agreement, to the extent
executed by the trustee of a trust, is executed by such trustee solely as
trustee and not in a separate capacity. Nothing herein contained shall create
any liability on, or require the performance of any covenant by, any such
trustee individually, nor shall anything contained herein subject the
individual property of any trustee to any liability.
13.11 PRONOUNS AND HEADINGS. As used herein, all pronouns
shall include the masculine, feminine and neuter, and all defined terms shall
include the singular and plural thereof wherever the context and facts require
such construction. The headings, titles and subtitles herein are inserted for
convenience of reference only and are to be ignored in any construction of the
provisions hereof. Any references in this Agreement to "including" shall be
deemed to mean "including without limitation."
13.12 NON-EFFECT ON CERTAIN LIMITED PARTNERS. As to any
Limited Partner who was a Limited Partner of the Partnership prior to the
Effective Time and who does not execute this Agreement, the provisions of the
Fourth Amended
<PAGE> 179
174
and Restated Partnership Agreement of the Partnership dated April 21, 1994, as
heretofore amended, which, under the terms thereof, cannot, in certain
circumstances, be Amended without the consent of such non-signing Limited
Partner, shall continue in effect as to such Limited Partner to the extent such
provisions are inconsistent with this Agreement.
13.13 ASSUMPTION OF LIABILITIES. Nothing contained in this
Agreement shall have the effect of terminating, negating or modifying in any
respect the assumption of liabilities by the Partnership set forth in Section
10.8 of the Fourth Amended and Restated Limited Partnership Agreement of the
Partnership dated as of April 21, 1994 and the Partnership reaffirms its
obligations thereunder.
13.14 ASSURANCES. Each of the Partners shall hereafter
execute and deliver such further instruments (provided such instruments are in
form and substance reasonably satisfactory to the executing Partner) and do
such further acts and things as may be reasonably required or useful to carry
out the intent and purpose of this Agreement and as are not inconsistent with
the terms hereof.
<PAGE> 180
176
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement or caused this Agreement to be executed as of the date and year first
above written, which Agreement shall be effective on the date it is executed
and delivered by the parties hereto.
GENERAL PARTNER:
DeBARTOLO REALTY CORPORATION,
an Ohio Corporation
7655 Market Street
P.O. Box 3287
Youngstown, OH 44513-3287
By:__________________________
Name:
Title:
SIMON PROPERTY GROUP, INC.,
a Maryland corporation
Merchants Plaza
115 West Washington Street
Suite 15 East
Indianapolis, IN 46204
By:__________________________
Name:
Title:
<PAGE> 181
177
LIMITED PARTNERS:
By:__________________________
<PAGE> 182
EXHIBIT "A"
PARTNERSHIP UNITS
<TABLE>
<CAPTION>
GENERAL PARTNER(S) NUMBER OF UNITS PERCENTAGE INTEREST
<S> <C> <C>
Simon Property Group, Inc., a
Maryland corporation
DeBartolo Realty Corporation,
an Ohio corporation
</TABLE>
LIMITED PARTNER(S)
This exhibit will identify which Limited Partners were former limited partners
of Simon Property Group, L.P. and which Limited Partners were former limited
partners of DeBartolo Realty Partnership, L.P.
The number of Units and Percentage Interests for each Partner shall be
calculated in accordance with the Formula, attached hereto.
<PAGE> 183
EXHIBIT "B"
PREFERRED UNIT DESIGNATIONS
None.
<PAGE> 184
EXHIBIT "C"
COVERED SALES
<TABLE>
<S> <C>
Mission Viejo Mall Aventura Mall
Boynton Beach Mall Coral Square
Florida Mall Grove at Lakeland Square
Gulf View Square Highland Lakes Plaza
Lakeland Square Melbourne Square
Miami International Mall Paddock Mall
Palm Beach Mall Port Charlotte Town Center
Terrace at Florida Mall Treasure Coast Square
Northfield Square Castleton Square
Lafayette Square University Park Mall
Ward Plaza Washington Plaza
Great Lakes Mall Great Lakes Plaza
Lima Plaza Lima Mall
Century III Mall Randall Park Mall
Mainland Crossing Philadelphia Center
Chesapeake Square Chesapeake Center
Northgate Shopping Center Columbia Center
Bay Park Tacoma Mall
Tyrone Square Summit Mall
Washington Square Upper Valley Mall
Brunswick Square Richardson Square
New Orleans Centre/CNG Tower* Eastern Hills
Biltmore Square Woodville Mall
Cheltenham Square Glen Burnie Mall
</TABLE>
<PAGE> 185
2
<TABLE>
<S> <C>
TC Peripheral Richmond Mall
(Mainland Peripheral)
</TABLE>
* If sold together, such properties will not constitute "Covered
Properties."
EXHIBIT "D"
REGISTRATION RIGHTS AGREEMENT
<PAGE> 186
EXHIBIT "E"
FORM OF EXERCISE NOTICE
[Limited Partner], as of [date of exercise], hereby
irrevocably (except as set forth in the Agreement referred to below) elects,
pursuant to the rights granted to it in Section 11.1 of the Agreement of
Limited Partnership of Simon-DeBartolo Group, L.P. (the "Agreement") to convert
______ of its Partnership Units (as such term is defined in the Agreement) into
shares of common stock of Simon Property Group, Inc. or cash, as selected by
Simon Property Group, Inc.
[Limited Partner]
By:___________________________
Name:
Title:
<PAGE> 187
EXHIBIT "F"
EJDC LENDERS AND EJDC LOAN DOCUMENTATION
The EJDC Lenders are each and every lender (and their trustees
or agents) party from time to time to:
1. the SECOND AMENDED AND RESTATED NEW FACILITY CREDIT
AGREEMENT, dated as of March 31, 1994 by and among DeBARTOLO, INC. and THE
EDWARD J. DeBARTOLO CORPORATION, as the borrowers, WELLS FARGO BANK, N.A., as
the issuing bank, and the co-lenders specified therein, and WELLS FARGO REALTY
ADVISORS FUNDING, INCORPORATED as the administrative agent, as the same may be
modified, supplemented or amended from time to time; or
2. the SECOND AMENDED AND RESTATED RESTRUCTURING
FACILITY CREDIT AGREEMENT, dated as of March 31, 1994 by and among DeBARTOLO,
INC. and THE EDWARD J. DeBARTOLO CORPORATION, as the borrowers, and the
co-lenders specified therein, and WELLS FARGO REALTY ADVISORS FUNDING,
<PAGE> 188
INCORPORATED, as the administrative agent, as the same may be modified,
supplemented or amended from time to time.
The EJDC Loan Documentation are the aforementioned credit
agreements and the other loan and collateral documents delivered in connection
therewith.
The EJDC Loan Transaction includes assignments and
refinancings, provided, however, that the EJDC Loan Transaction shall not
include the incurrence of new indebtedness (through refinancings or by
amendment of the aforementioned credit agreements) which would operate to
increase the aggregate principal amount of debt then outstanding under the EJDC
Loan Transaction other than increases (i) to reflect the realization of
contingent claims provided for under the EJDC Loan Transaction as of the
Effective Time or (ii) in amounts from time to time outstanding under the
revolving credit facility extended by the EJDC Lenders for ordinary working
capital purposes, provided that the aggregate amount at any time outstanding
under such revolving credit facility shall not exceed the sum of $40 million.
<PAGE> 1
Exhibit 10.1.2
FORM OF
THIRD AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
SIMON PROPERTY GROUP, L.P
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I Definitions; Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.2 Exhibit, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE II Continuation of Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.1 Continuation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.2 Name. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.3 Character of the Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.4 Location of the Principal Place of Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.5 Registered Agent and Registered Office. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE III Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.1 Commencement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.2 Dissolution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE IV Contributions to Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.1 Additional Funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.2 No Obligation to Make Further Capital Contributions; No Third Party Beneficiary. . . . . . . . . . . 29
4.3 No Interest; No Return. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4.4 Capital Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE V Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.1 Representations and Warranties by the General Partner. . . . . . . . . . . . . . . . . . . . . . . . 33
5.2 Representations and Warranties by the Limited Partner. . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE VI Allocations, Distributions and Other Tax and Accounting Matters . . . . . . . . . . . . . . . . . . 35
6.1 Allocations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.2 Distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
6.3 Books of Account. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
6.4 Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
6.5 Audits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
6.6 Tax Returns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
6.7 Tax Matters Partner. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
6.8 Withholding. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE VII Rights, Duties and Restrictions of the General Partner . . . . . . . . . . . . . . . . . . . . . . . 53
7.1 Expenditures by Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
7.2 Powers and Duties of General Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
7.3 Major Decisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
7.4 General Partner and Limited Partner Participation . . . . . . . . . . . . . . . . . . . . . . . . . 63
7.5 Proscriptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
7.6 Title Holder. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
7.7 Waiver and Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
7.8 Limitation of Liability of Directors, Shareholders and
Officers of the General Partner. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
ARTICLE VIII Dissolution, Liquidation and Winding-Up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
8.1 Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
8.2 Distribution on Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
8.3 Sale of Partnership Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
8.4 Distributions in Kind. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
8.5 Documentation of Liquidation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
8.6 Liability of the Liquidating Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
ARTICLE IX Transfer of Partnership Interests and Related Matters . . . . . . . . . . . . . . . . . . . . . . . 70
9.1 General Partner Transfers and Deemed Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
9.2 Limited Partner Transfers and Deemed Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
9.3 Issuance of Additional Partnership Units and Preferred Units. . . . . . . . . . . . . . . . . . . . 72
9.4 Restrictions on Transfer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
ARTICLE X Rights and Obligations of the Limited Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
10.1 No Participation in Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
10.2 Bankruptcy of the Limited Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
10.3 No Withdrawal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
10.4 Guaranty and Indemnification Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
ARTICLE XI General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
11.1 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
11.2 Successors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
11.3 Effect and Interpretation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
11.4 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
11.5 Partners Not Agents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
11.6 Entire Understanding; Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
11.7 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
11.8 Trust Provision. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
11.9 Pronouns and Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
11.10 Assurances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
</TABLE>
<PAGE> 4
THIRD AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
SIMON PROPERTY GROUP, L.P.
THIS THIRD AMENDED AND RESTATED AGREEMENT OF LIMITED
PARTNERSHIP, dated as of ________________ ____, 1996, is made by and between
SIMON DeBARTOLO GROUP, INC. (formerly known as Simon Property Group, Inc.), a
Maryland corporation having an office at Merchant's Plaza, 115 West Washington
Street, Indianapolis, Indiana 46204, as general partner (the "General
Partner"), and SIMON-DeBARTOLO GROUP, L.P., a Delaware limited partnership
having an office at ____________________________________________, as limited
partner (the "Limited Partner").
WITNESSETH :
WHEREAS, Simon Property Group, L.P., a Delaware Limited
Partnership (the "Partnership"), was formed on November 19, 1993 as a
partnership between M.S. Management Associates (Indiana), Inc. as general
partner and LaGrange Simon, Inc. as limited partner, and a Certificate of
Limited Partnership reflecting the foregoing was filed in the Office of the
Secretary of State of the State of Delaware on November 19, 1993; and
WHEREAS, as of December 1, 1993, (i) certain persons
(including the General Partner) made or agreed to make contributions to the
Partnership in exchange
<PAGE> 5
2
for Partnership Units (as hereinafter defined) pursuant to Contribution
Agreements dated as of December 1, 1993 and were admitted as Limited Partners,
(ii) M.S. Management Associates (Indiana), Inc. assigned its interest in the
Partnership and ceased to be the general partner thereof, and (iii) the
agreement of limited partnership of the Partnership was amended and restated;
and
WHEREAS, on December 30, 1995, the Agreement of Limited
Partnership of the Partnership was amended and restated by a second amendment
and restatement thereof to provide for the creation of one or more classes or
series of Preferred Units (as hereinafter defined) that may be issued to the
General Partner under certain circumstances; and
WHEREAS, on the date hereof, pursuant to Contribution
Agreements among the General Partner, the Limited Partner and the former
limited partners of the Partnership, the General Partner and the former limited
partners of the Partnership are contributing certain of their interests in the
Partnership to the Limited Partner; and
WHEREAS, the parties hereto wish to provide for the further
amendment and restatement of the Agreement of Limited Partnership of the
Partnership to provide for the admission of the Limited Partner and the
withdrawal of the former limited partners of the Partnership, and to make
various other changes provided for below;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained and other good and valuable consideration, the
receipt,
<PAGE> 6
3
adequacy and sufficiency of which are hereby acknowledged, the parties hereto,
intending legally to be bound, hereby agree that the Agreement of Limited
Partnership of the Partnership, as heretofore modified, amended and restated,
is hereby superseded, amended and restated in its entirety to read as follows:
ARTICLE I
Definitions; Etc.
1.1 Definitions. Except as otherwise herein expressly
provided, the following terms and phrases shall have the meanings set forth
below:
"Accountants" shall mean the firm or firms of independent
certified public accountants selected by the General Partner from time to time
on behalf of the Partnership to audit the books and records of the Partnership
and to prepare statements and reports in connection therewith.
"Act" shall mean the Revised Uniform Limited Partnership Act
as enacted in the State of Delaware, and as the same may hereafter be amended
from time to time.
"Adjustment Date" shall have the meaning set forth in Section
4.1(b) hereof.
"Administrative Expenses" shall mean (i) all administrative
and operating costs and expenses incurred by the Partnership, and (ii) those
administrative costs and expenses and accounting and legal expenses incurred by
the General Partner on behalf or for the benefit of the Partnership.
<PAGE> 7
4
"Affiliate" shall mean, with respect to any Partner (or as to
any other Person the affiliates of which are relevant for purposes of any of
the provisions of this Agreement), (i) any member of the Immediate Family of
such Partner or Person; (ii) any partner, trustee, beneficiary or shareholder
of such Partner or Person; (iii) any legal representative, successor or
assignee of such Partner or any Person referred to in the preceding clauses (i)
and (ii); (iv) any trustee or trust for the benefit of such Partner or any
Person referred to in the preceding clauses (i) through (iii); or (v) any
entity which, directly or indirectly through one or more intermediaries,
Controls, is Controlled by, or is under common Control with, such Partner or
any Person referred to in the preceding clauses (i) through (iv).
"Affiliate Financing" shall mean financing or refinancing
obtained from a Partner or an Affiliate of a Partner by the Partnership.
"Agreement" shall mean this Third Amended and Restated
Agreement of Limited Partnership, as originally executed and as amended,
modified, supplemented or restated from time to time, as the context requires.
"Bankruptcy" shall mean, with respect to any Partner, (i) the
commencement by such Partner of any proceeding seeking relief under any
provision or chapter of the federal Bankruptcy Code or any other federal or
state law relating to insolvency, bankruptcy or reorganization, (ii) an
adjudication that such Partner is insolvent or bankrupt; (iii) the entry of an
order for relief under the federal Bankruptcy Code with respect to such
Partner, (iv) the filing of any petition or the commencement
<PAGE> 8
5
of any case or proceeding against such Partner under the federal Bankruptcy
Code unless such petition and the case or proceeding initiated thereby are
dismissed within ninety (90) days from the date of such filing, (v) the filing
of an answer by such Partner admitting the allegations of any such petition,
(vi) the appointment of a trustee, receiver or custodian for all or
substantially all of the assets of such Partner unless such appointment is
vacated or dismissed within ninety (90) days from the date of such appointment
but not less than five (5) days before the proposed sale of any assets of such
Partner, (vii) the execution by such Partner of a general assignment for the
benefit of creditors, (viii) the convening by such Partner of a meeting of its
creditors, or any class thereof, for purposes of effecting a moratorium upon or
extension or composition of its debts, (ix) the failure of such Partner to pay
its debts as they mature, (x) the levy, attachment, execution or other seizure
of substantially all of the assets of such Partner where such seizure is not
discharged within thirty (30) days thereafter, or (xi) the admission by such
Partner in writing of its inability to pay its debts as they mature or that it
is generally not paying its debts as they become due.
"Capital Account" shall have the meaning set forth in Section
4.4 hereof.
"Capital Contribution" shall mean, with respect to any
Partner, the amount of money and the initial Gross Asset Value of any property
other than money contributed to the Partnership with respect to the Partnership
Units or Preferred Units held by such Partner (net of liabilities to which such
property is subject).
<PAGE> 9
6
"Certificate" shall mean the Certificate of Limited
Partnership establishing the Partnership, as filed with the Office of the
Delaware Secretary of State on November 19, 1993, as it heretofore has been
amended and as it may be amended from time to time in accordance with the terms
of this Agreement and the Act.
"Charter" shall mean the articles of incorporation of the
General Partner and all amendments, supplements and restatements thereof.
"Closing Price" on any date shall mean the last sale price,
regular way, of the Shares or, in case no such sale takes place on such day,
the average of the closing bid and asked prices, regular way, of the Shares in
either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the New York
Stock Exchange or, if the Shares are not listed or admitted to trading on the
New York Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which the Shares are listed or admitted to trading or,
if the Shares are not listed or admitted to trading on any national securities
exchange, the last quoted price, or if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported by the
National Association of Securities Dealers, Inc. Automated Quotations System
for the Shares or, if such system is no longer in use, the principal other
automated quotations system that may then be in use or, if the Shares are not
quoted by any such organization, the average of the closing
<PAGE> 10
7
bid and asked prices as furnished by a professional market maker making a
market in the Shares selected from time to time by the Board of Directors of
the General Partner.
"Code" shall mean the Internal Revenue Code of 1986, as
amended, or any corresponding provisions of succeeding law.
"Contributed Funds" shall have the meaning set forth in
Section 4.1(b) hereof.
"Control" shall mean the ability, whether by the direct or
indirect ownership of shares or other equity interests, by contract or
otherwise, to elect a majority of the directors of a corporation, to select the
managing partner of a partnership, or otherwise to select, or have the power to
remove and then select, a majority of those Persons exercising governing
authority over an Entity. In the case of a limited partnership, the sole
general partner, all of the general partners to the extent each has equal
management control and authority, or the managing general partner or managing
general partners thereof shall be deemed to have Control of such partnership
and, in the case of a trust, any trustee thereof or any Person having the right
to select any such trustee shall be deemed to have Control of such trust.
"Current Per Share Market Price" on any date shall mean the
average of the Closing Price for the five consecutive Trading Days ending on
such date.
"DeBartolos" shall mean (i) the Estate of Edward J. DeBartolo,
(ii) Edward J. DeBartolo, Jr., Marie Denise DeBartolo York, members of the
Immediate Family of either of the foregoing, any other members of the Immediate
<PAGE> 11
8
Family of Edward J. DeBartolo, any other lineal descendants of any of the
foregoing, and any trusts established for the benefit of any of the foregoing
and (iii) The Edward J. DeBartolo Corporation and any other Entity Controlled
by any one or more of the Persons listed or specified in clauses (i) and (ii)
above.
"Deemed Partnership Unit Value" as of any date shall mean the
Current Per Share Market Price as of the Trading Day immediately preceding such
date; provided, however, that Deemed Partnership Unit Value shall be adjusted
in the event of any stock dividend, stock split, stock distribution or similar
transaction.
"Depreciation" shall mean for each Partnership Fiscal Year or
other period an amount equal to the depreciation, amortization or other cost
recovery deduction allowable under the Code with respect to a Partnership asset
for such year or other period, except that if the Gross Asset Value of a
Partnership asset differs from its adjusted basis for federal income tax
purposes at the beginning of such year or other period, Depreciation shall be
an amount which bears the same ratio to such beginning Gross Asset Value as the
federal income tax depreciation, amortization or other cost recovery deduction
for such year or other period bears to such beginning adjusted tax basis;
provided, however, that if the federal income tax depreciation, amortization or
other cost recovery deduction for such year is zero, Depreciation shall be
determined with reference to such beginning Gross Asset Value using any
reasonable method selected by the General Partner.
<PAGE> 12
9
"Development Land" shall mean any vacant land suitable for
development as a Project.
"Directors" shall mean the Board of Directors of the General
Partner.
"Effective Time" shall have the meaning set forth in the
Agreement and Plan of Merger among the General Partner, the Limited Partner and
Day Acquisition Corp. dated as of March 26, 1996 (the "Merger Agreement").
"Entity" shall mean any general partnership, limited
partnership, limited liability company, corporation, joint venture, trust,
business trust, cooperative or association.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time (or any corresponding provisions of
succeeding laws).
"GAAP" shall mean generally accepted accounting principles
consistently applied.
"General Partner" shall mean Simon DeBartolo Group, Inc., a
Maryland corporation, its duly admitted successors and assigns and any other
Person who is a general partner of the Partnership at the time of reference
thereto.
"Gross Asset Value" shall have the meaning set forth in
Section 4.4(b).
"Gross Income" shall mean the income of the Partnership
determined pursuant to Section 61 of the Code before deduction of items of
expense or deduction.
<PAGE> 13
10
"Immediate Family" shall mean, with respect to any Person,
such Person's spouse, parents, parents-in-law, descendants by blood or
adoption, nephews, nieces, brothers, sisters, brothers-in-law, sisters-in-law
and children-in-law (in each case by whole or half blood).
"Independent Directors" shall mean members of the Board of
Directors of the General Partner who are not employed by or Affiliates of the
Simons.
"Institutional Lender" shall mean a commercial bank or trust
company, a savings and loan association or an insurance company.
"Lien" shall mean any liens, security interests, mortgages,
deeds of trust, charges, claims, encumbrances, restrictions, pledges, options,
rights of first offer or first refusal and any other rights or interests of
others of any kind or nature, actual or contingent, or other similar
encumbrances of any nature whatsoever.
"Limited Partner" shall mean Simon-DeBartolo Group, L.P., its
permitted successors or assigns as limited partners hereof, and/or any Person
who, at the time of reference thereto, is a limited partner of the Partnership.
"Limited Partner Liability" shall mean, with respect to each
limited partner of the Limited Partner, each liability (or portion thereof)
included in the basis of such limited partner (other than as an "excess
nonrecourse liability" within the meaning of Regulations Section 1.752-3(a)(3))
for federal income tax purposes.
"Liquidating Agent" shall mean such individual or Entity as is
selected as the Liquidating Agent hereunder by the General Partner, which
individual or Entity
<PAGE> 14
11
may be the General Partner or an Affiliate of the General Partner, provided
such Liquidating Agent agrees in writing to be bound by the terms of this
Agreement. The Liquidating Agent shall be empowered to give and receive
notices, reports and payments in connection with the dissolution, liquidation
and/or winding-up of the Partnership and shall hold and exercise such other
rights and powers as are necessary or required to permit all parties to deal
with the Liquidating Agent in connection with the dissolution, liquidation
and/or winding-up of the Partnership.
"Liquidation Transaction" shall mean any sale of assets of the
Partnership in contemplation of, or in connection with, the liquidation of the
Partnership.
"Losses" shall have the meaning set forth in Section 6.1(a)
hereof.
"Major Decisions" shall have the meaning set forth in Section
7.3(b) hereof.
"Minimum Gain" shall have the meaning set forth in Section
6.1(d)(1) hereof.
"Minimum Gain Chargeback" shall have the meaning set forth in
Section 6.1(d)(1) hereof.
"Net Financing Proceeds" shall mean the cash proceeds received
by the Partnership in connection with any borrowing by or on behalf of the
Partnership (whether or not secured), or distributed to the Partnership in
respect of any such borrowing by any Subsidiary Entity, after deduction of all
costs and expenses incurred
<PAGE> 15
12
by the Partnership in connection with such borrowing, and after deduction of
that portion of such proceeds used to repay any other indebtedness of the
Partnership, or any interest or premium thereon.
"Net Operating Cash Flow" shall mean, with respect to any
fiscal period of the Partnership, the aggregate amount of all cash received by
the Partnership from any source for such fiscal period (including Net Sale
Proceeds and Net Financing Proceeds but excluding Contributed Funds), less the
aggregate amount of all expenses or other amounts paid with respect to such
period and such additional cash reserves as of the last day of such period as
the General Partner deems necessary for any capital or operating expenditure
permitted hereunder.
"Net Sale Proceeds" shall mean the cash proceeds received by
the Partnership in connection with a sale or other disposition of any asset by
or on behalf of the Partnership or a sale or other disposition of any asset by
or on behalf of any Subsidiary Entity, after deduction of any costs or expenses
incurred by the Partnership, or payable specifically out of the proceeds of
such sale or other disposition (including, without limitation, any repayment of
any indebtedness required to be repaid as a result of such sale or other
disposition or which the General Partner elects to repay out of the proceeds of
such sale or other disposition, together with accrued interest and premium, if
any, thereon and any sales commissions or other costs and expenses due and
payable to any Person) in connection with a sale or other disposition.
<PAGE> 16
13
"Nonrecourse Liabilities" shall have the meaning set forth in
Section 6.1(d)(1) hereof.
"Ownership Limit" shall have the meaning set forth in Article
Ninth of the Charter of Simon DeBartolo Group, Inc.
"Partner Nonrecourse Debt" shall have the meaning set forth in
Section 6.1(d)(2) hereof.
"Partner Nonrecourse Debt Minimum Gain" shall have the meaning
set forth in Section 6.1(d)(2) hereof.
"Partner Nonrecourse Deduction" shall have the meaning set
forth in Section 6.1(d)(2) hereof.
"Partners" shall mean the General Partner, the Limited
Partner, their duly admitted successors or assigns or any Person who is a
partner of the Partnership at the time of reference thereto.
"Partnership" shall mean Simon Property Group, L.P., a
Delaware limited partnership, as such limited partnership may from time to time
be constituted.
"Partnership Fiscal Year" shall mean the calendar year.
"Partnership Interest" shall mean the interest of a Partner in
the Partnership.
"Partnership Minimum Gain" shall have the meaning set forth in
Section 1.704-2(b)(2) of the Regulations.
<PAGE> 17
14
"Partnership Record Date" shall mean the record date
established by the General Partner for a distribution of Net Operating Cash
Flow pursuant to Section 6.2 hereof, which record date shall be the same as the
record date established by the General Partner for distribution to its
shareholders of some or all of its share of such distribution.
"Partnership Units" or "Units" shall mean interests in the
Partnership which entitle a Partner to the allocations (and each item thereof)
specified in Section 6.1(b) hereof and all distributions from the Partnership,
and its rights of management, consent, approval or participation as provided in
this Agreement. Partnership Units or Units do not include Preferred Units. The
number of Partnership Units held by each Partner at the date hereof is set forth
opposite its name on attached Exhibit A.
"Percentage of Units" shall mean, with respect to any Partner,
the number of Partnership Units held by such Partner as of a certain date
divided by the total number of Partnership Units outstanding as of such date.
"Person" shall mean any individual or Entity.
"Pledge" shall mean the granting of a Lien on a Partnership
Interest.
<PAGE> 18
15
"Preferred Contributed Funds" shall mean proceeds of an issue
of Preferred Shares contributed by the General Partner to the Partnership in
exchange for Preferred Units.
"Preferred Distribution Requirement" shall have the meaning
set forth in Section 4.1(c) hereof.
"Preferred Distribution Shortfall" shall have the meaning set
forth in Section 6.2(b)(i) hereof.
"Preferred Redemption Amount" shall mean, with respect to any
class or series of Preferred Units, the sum of (i) the amount of any accumulated
Preferred Distribution Shortfall with respect to such class or series of
Preferred Units, (ii) the current but unpaid Preferred Distribution Requirement
with respect to such class or series of Preferred Units to the date of
redemption and (iii) the Preferred Redemption Price indicated in the Preferred
Unit Designation with respect to such class or series of Preferred Units.
"Preferred Redemption Price" shall have the meaning set forth
in Section 4.1(c) hereof.
"Preferred Shares" shall mean any class of equity securities
of the General Partner now or hereafter authorized or reclassified, other than
the Shares or the Excess Stock (as defined in the Charter), having dividends
rights that are superior or prior to dividends payable on the Shares.
"Preferred Unit Designation" shall have the meaning set forth
in Section 4.1(c) hereof.
<PAGE> 19
16
"Preferred Unit Issue Price" shall mean the amount of the
Required Funds contributed or deemed to have been contributed by the General
Partner in exchange for a Preferred Unit.
"Preferred Units" shall mean interests in the Partnership
issued to the General Partner pursuant to Section 4.1(c) hereof. The holder of
Preferred Units shall have such rights to the allocations of Profits and Losses
as specified in Section 6.1 hereof and to distributions pursuant to Section 6.2
hereof, but shall not, by reason of ownership of such Preferred Units, be
entitled to participate in the management of the Partnership or to consent to
or approve any action which is required to be approved by the Act or this
Agreement by any or all of the Partners.
"Profits" shall have the meaning set forth in Section 6.1(a)
hereof.
"Project" shall mean any property that is or is planned to be
used primarily for retail purposes, and shall include, but is not limited to, a
regional mall, a community shopping center, a specialty retail center and a
mixed-use property which contains a major retail component.
"Property or Properties" shall mean any Development Land or
Project in which the Partnership acquires ownership of (a) the fee or leasehold
interest or (b) an indirect fee or leasehold interest through an interest in
any other Entity.
"Regulations" shall mean the final, temporary or proposed
Income Tax Regulations promulgated under the Code, as such regulations may be
amended from time to time (including corresponding provisions of succeeding
regulations).
<PAGE> 20
17
"REIT" shall mean a real estate investment trust as defined in
Section 856 of the Code.
"REIT Expenses" shall mean (i) costs and expenses relating to
the continuity of existence of the General Partner and the Limited Partner and
their respective subsidiaries, including taxes, fees and assessments associated
therewith, and any and all costs, expenses or fees payable to any director or
trustee of the General Partner, the Limited Partner or such subsidiaries, (ii)
costs and expenses relating to any offer or registration of securities by the
General Partner or the Limited Partner and all statements, reports, fees and
expenses incidental thereto, including underwriting discounts and selling
commissions applicable to any such offer of securities (provided, however, that
in the case of any registration of securities effectuated by the General
Partner or the Limited Partner on behalf of one or more of its security
holders, REIT Expenses shall not include underwriting discounts or selling
commissions), (iii) costs and expenses associated with the preparation and
filing of any periodic reports by the General Partner or the Limited Partner
under federal, state or local laws or regulations, including tax returns and
filings with the SEC and any stock exchanges on which the Shares are listed,
(iv) costs and expenses associated with compliance by the General Partner or
the Limited Partner with laws, rules and regulations promulgated by any
regulatory body, including the SEC, (v) costs and expenses associated with any
401(K) Plan, incentive plan, bonus plan or other plan providing for
compensation for the employees of the General Partner, the Limited Partner or
Simon Property Group
<PAGE> 21
18
(Delaware), Inc., and (vi) all operating, administrative and other costs
incurred by the General Partner or the Limited Partner (including attorney's
and accountant's fees, income and franchise taxes and salaries paid to officers
of the General Partner or the Limited Partner, but excluding costs of any
repurchase by the General Partner of any of its securities); provided,
however, that amounts described herein shall be considered REIT Expenses
hereunder only if and to the extent during the fiscal year in question the
aggregate amount of such expenses for such fiscal year and all prior fiscal
years exceeds the aggregate of (a) all amounts distributed or distributable to
the General Partner or the Limited Partner by any wholly-owned subsidiary
thereof (including, without limitation, in the case of the General Partner, by
Simon Property Group (Delaware), Inc.) and (b) all amounts theretofore paid to
the General Partner or the Limited Partner pursuant to Section 7.1 hereof or
Section 7.1 of the limited partnership agreement of Simon-DeBartolo Group,
L.P., as amended.
"REIT Requirements" shall mean all actions or omissions as may
be necessary (including making appropriate distributions from time to time) to
permit the General Partner and the Limited Partner to qualify or continue to
qualify as a real estate investment trust within the meaning of Section 856 et
seq. of the Code, as such provisions may be amended from time to time, or
corresponding provisions of succeeding law.
"Related Issue" shall mean, with respect to a class or series
of Preferred Units, the class or series of Preferred Shares the sale of which
provided the General
<PAGE> 22
19
Partner with the proceeds to contribute to the Partnership in exchange for such
Preferred Units.
"Required Funds" shall have the meaning set forth in Section
4.1(a) hereof.
"SEC" shall mean the United States Securities and Exchange
Commission.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Shares" shall mean the shares of Common Stock, par value
$.0001 per share, of the General Partner.
"Simons" shall mean Melvin Simon, Herbert Simon and David
Simon, other members of the Immediate Family of any of the foregoing, any other
lineal descendants of any of the foregoing, any trusts established for the
benefit of any of the foregoing, and any Entity Controlled by any of the
foregoing.
"Subsidiary Entity" shall mean any Entity in which the
Partnership owns a direct or indirect equity interest.
"Subsidiary Partnership" shall mean any partnership in which
the Partnership owns a direct or indirect equity interest.
"Substituted Limited Partner" shall have the meaning set forth
in the Act.
"Tax Matters Partner" shall have the meaning set forth in
Section 6.7 hereof.
<PAGE> 23
20
"Third Party" or "Third Parties" shall mean a Person or
Persons who is or are neither a Partner or Partners nor an Affiliate or
Affiliates of a Partner or Partners.
"Third Party Financing" shall mean financing or refinancing
obtained from a Third Party by the Partnership.
"Trading Day" shall mean a day on which the principal national
securities exchange on which the Shares are listed or admitted to trading is
open for the transaction of business or, if the Shares are not listed or
admitted to trading on any national securities exchange, shall mean any day
other than a Saturday, a Sunday or a day on which banking institutions in the
State of New York are authorized or obligated by law or executive order to
close.
"Transfer" means any assignment, sale, transfer, conveyance or
other disposition or act of alienation (other than a Pledge), whether voluntary
or involuntary, or by operation of law.
1.2 Exhibit, Etc. References in this Agreement to
"Exhibit" are, unless otherwise specified, to one of the Exhibits attached to
this Agreement, and references in this Agreement to an "Article" or a "Section"
are, unless otherwise specified, to one of the Articles or Sections of this
Agreement. Each Exhibit attached hereto and referred to herein is hereby
incorporated herein by reference.
<PAGE> 24
21
ARTICLE II
Continuation of Partnership
2.1 Continuation. The parties hereto do hereby agree to
continue the Partnership as a limited partnership pursuant to the provisions of
the Act, and all other pertinent laws of the State of Delaware, for the
purposes and upon the terms and conditions hereinafter set forth. The Partners
of the Partnership shall consist of the General Partner and the Limited Partner
with the respective Partnership Interests set forth on Exhibit A annexed
hereto. The Partners agree that the rights and liabilities of the Partners
shall be as provided in the Act except as otherwise herein expressly provided.
Promptly upon the execution and delivery hereof, the General Partner shall
cause each notice, instrument, document or certificate as may be required by
applicable law, and which may be necessary to enable the Partnership to
continue to conduct its business and to own its properties under the
Partnership name, to be filed or recorded in all appropriate public offices.
Upon request of the General Partner, the Limited Partner shall execute any
assumed or fictitious name certificate or certificates required by law to be
filed in connection with the Partnership. The General Partner shall properly
cause the execution and delivery of such additional documents and shall perform
such additional acts consistent with the terms of this Agreement as may be
necessary to comply with the requirements of law for the continued operation of
a limited partnership under the laws of the State of Delaware (it being
understood that the General Partner shall be required to provide the Limited
Partner with copies of any
<PAGE> 25
22
amended Certificates of Limited Partnership required to be filed under such
laws and for the continued operation of a limited partnership in each other
jurisdiction in which the Partnership shall conduct business.
2.2 Name. The business of the Partnership shall continue
to be conducted under the name of Simon Property Group, L.P. or such other name
as the General Partner may select. All transactions of the Partnership, to the
extent permitted by applicable law, shall be carried on and completed in such
name (it being understood that the Partnership may adopt assumed or fictitious
names in certain jurisdictions).
2.3 Character of the Business. The purpose of the
Partnership shall be to hold, own, develop, redevelop, construct, reconstruct,
alter, improve, maintain, operate, lease, Transfer, encumber, exchange, and
otherwise dispose of or deal with Properties and any personal property; to hold,
own, Transfer, encumber, exchange and otherwise dispose of or deal with
mortgages on real property; to hold, own, Transfer, encumber, exchange and
otherwise dispose of or deal with the stock or debt obligations of M.S.
Management Associates, Inc., or partnership or other interests in any other
Entity engaged, directly or indirectly, in the ownership, management or
development of interests in real property; to deal with any other assets and to
undertake all activities as may be permitted for a REIT pursuant to the
provisions of Section 856, et seq. of the Code as amended from time to time; to
hold, own, Transfer, encumber, exchange and otherwise dispose of or deal with
interests in any Entity engaged in any of the foregoing
<PAGE> 26
23
activities; to undertake such other activities as may be necessary, advisable,
desirable or convenient to the business of the Partnership, and to engage in
such other ancillary activities as shall be necessary or desirable to
effectuate the foregoing purposes. The Partnership shall have all powers
necessary or desirable to accomplish the purposes enumerated. In connection
with the foregoing, but subject to all of the terms, covenants, conditions and
limitations contained in this Agreement and any other agreement entered into by
the Partnership, the Partnership shall have full power and authority to enter
into, perform, and carry out contracts of any kind and to borrow or lend money
and to issue evidences of indebtedness, whether or not secured by a Lien.
2.4 Location of the Principal Place of Business. The
location of the principal place of business of the Partnership shall be at 115
West Washington Street, Indianapolis, Indiana 46204, or such other location as
shall be selected from time to time by the General Partner in its sole
discretion; provided, however, that the General Partner shall promptly notify
the Limited Partner of any change in the location of the principal place of
business of the Partnership.
2.5 Registered Agent and Registered Office. The
Registered Agent of the Partnership shall be The Corporation Trust Company or
such other Person as the General Partner may select in its sole discretion.
The Registered Office of the Partnership shall be c/o The Corporation Trust
Company, 1209 Orange Street, Wilmington, Delaware 19801, or such other location
as the General Partner may select
<PAGE> 27
24
in its sole and absolute discretion. The General Partner shall promptly notify
the Limited Partner of any change in the Registered Agent or Registered Office
of the Partnership.
ARTICLE III
Term
3.1 Commencement. The Partnership commenced business as
a limited partnership on November 19, 1993 upon the filing of the Certificate
with the Secretary of State of the State of Delaware.
3.2 Dissolution. The Partnership shall continue until
dissolved and terminated upon the earlier of (i) December 31, 2096, and (ii)
the occurrence of any of the following events:
(a) the dissolution, termination, retirement or
Bankruptcy of a General Partner unless the Partnership is continued as provided
in Section 9.1 hereof;
(b) the election to dissolve the Partnership made
in writing by the General Partner, but only if the consent required by Section
7.3(b) is obtained;
(c) the sale or other disposition of all or
substantially all the assets of the Partnership; or
(d) dissolution required by operation of law.
<PAGE> 28
25
ARTICLE IV
Contributions to Capital
4.1 Additional Funds.
(a) The Partnership may obtain funds ("Required
Funds") which it considers necessary to meet the needs, obligations and
requirements of the Partnership, or to maintain adequate working capital or to
repay Partnership indebtedness, and to carry out the Partnership's purposes,
from the proceeds of Third Party Financing or Affiliate Financing, in each case
pursuant to such terms, provisions and conditions and in such manner (including
the engagement of brokers and/or investment bankers to assist in providing such
financing) and amounts as the General Partner and the Limited Partner shall
determine to be in the best interests of the Partnership, and subject to the
terms and conditions of this Agreement. Any and all funds required or
expended, directly or indirectly, by the Partnership for capital expenditures
may be obtained or replenished through Partnership borrowings. Any Third Party
Financing or Affiliate Financing obtained by the General Partner for and on
behalf of the Partnership may be unsecured, may be secured by a mortgage or
mortgages, or deed(s) of trust and/or assignments on or in respect of all or
any portion of the assets of the Partnership or any other security made
available by the Partnership, may include or be obtained through the public or
private placement of debt and/or other instruments, domestic and foreign, and
may include the acquisition of or provision for interest rate swaps, credit
enhancers and/or other transactions or items in
<PAGE> 29
26
respect of such Third Party Financing or Affiliate Financing; provided,
however, that in no event may the Partnership obtain any Affiliate Financing or
Third Party Financing that is recourse to any Partner or any Affiliate,
partner, shareholder, beneficiary, principal officer, or director of any
Partner without the consent of the affected Partner and any other Person or
Persons to whom such recourse may be had.
(b) To the extent the Partnership does not borrow
all of the Required Funds (and whether or not the Partnership is able to borrow
all or part of the Required Funds), the General Partner or the Limited Partner
(or an Affiliate thereof) (i) may itself borrow such Required Funds, in which
case such Partner shall lend such Required Funds to the Partnership on the same
economic terms and otherwise on substantially identical terms, or (ii) may, if
they both so agree, raise such Required Funds in any other manner, in which
case, unless such Required Funds are raised through the sale of Preferred
Shares, the General Partner and the Limited Partner shall contribute to the
Partnership as Capital Contributions the amount of the Required Funds so
raised, with the General Partner to contribute 1% and the Limited Partner 99%
thereof ("Contributed Funds") (hereinafter, each date on which the General
Partner and the Limited Partner so contribute Contributed Funds pursuant to
this Section 4.1(b) is referred to as an "Adjustment Date"). Any Required
Funds raised from the sale of Preferred Shares may be contributed to the
Partnership as Preferred Contributed Funds or loaned to the Partnership
pursuant to Section 4.1(c) below. In the event that either the General Partner
or the Limited Partner advances Required
<PAGE> 30
27
Funds to the Partnership pursuant to this Section 4.1(b) as Contributed Funds,
then the Partnership shall assume and pay the expenses (including any
applicable underwriting discounts) incurred by the General Partner or the
Limited Partner (or such Affiliate) in connection with raising such Required
Funds through a public offering of the General Partner's securities or
otherwise. If the General Partner and the Limited Partner advance Required
Funds to the Partnership as Contributed Funds pursuant to this Section 4.1(b),
additional Partnership Units shall be issued to the General Partner and the
Limited Partner to reflect their contributions of the Contributed Funds. The
number of Partnership Units so issued shall be determined by dividing the
amount of Contributed Funds by the Deemed Partnership Unit Value, computed as
of the Trading Day immediately preceding the Adjustment Date.
(c) In the event the General Partner contributes
to the Partnership any Required Funds obtained from the sale of Preferred
Shares as Preferred Contributed Funds, then the Partnership shall assume and
pay the expenses (including any applicable underwriter discounts) incurred by
the General Partner in connection with raising such Required Funds. In
addition, the General Partner shall be issued Preferred Units of a designated
class or series to reflect its contribution of such funds. Each class or
series of Preferred Units so issued shall be designated by the General Partner
to identify such class or series with the class or series of Preferred Shares
which constitutes the Related Issue. Each class or series of Preferred Units
shall be described in a written document (the "Preferred Unit Designation"),
attached
<PAGE> 31
28
as Exhibit B, that shall set forth, in sufficient detail, the economic rights,
including dividend, redemption, and conversion rights and sinking fund
provisions, of the class or series of Preferred Units and the Related Issue.
The number of Preferred Units of a class or series shall be equal to the number
of shares of the Related Issue sold. The Preferred Unit Designation shall
provide for such terms for the class or series of Preferred Units that shall
entitle the General Partner to substantially the same economic rights as the
holders of the Related Issue. Specifically, the General Partner shall receive
distributions on the class or series of Preferred Units pursuant to Section 6.2
equal to the aggregate dividends paid on the Related Issue at the times such
dividends are paid (the "Preferred Distribution Requirement"). The Partnership
shall redeem the class or series of Preferred Units for a redemption price per
Preferred Unit equal to the redemption price per share of the Related Issue,
exclusive of any accrued unpaid dividends (the "Preferred Redemption Price")
upon the redemption of any shares of the Related Issue. No Related Issue shall
provide for conversion of Preferred Shares into Shares prior to December 1,
1997. If the terms of any Related Issue provide for conversion of Preferred
Shares into Shares, (i) the Preferred Units shall be converted into Partnership
Units at the time and on such economic terms and conditions as the Related
Issue is converted into Shares and (ii) the General Partner shall contribute to
the Limited Partner 99% of the Partnership Units so received by the General
Partner in exchange for a like number of partnership units of the Limited
Partner. Upon the issuance of any class or series of Preferred Units pursuant
to this Section 4.1(c), the
<PAGE> 32
29
General Partner shall provide the Limited Partner with a copy of the Preferred
Unit Designation relating to such class or series. In the event that the
General Partner hereafter contributes any Preferred Units to the Limited
Partner in exchange for preferred units of the Limited Partner, the Preferred
Units received by the Limited Partner shall be converted into Partnership Units
on such economic terms and conditions as if the Related Issue had been
converted into Shares.
The General Partner shall have the right, in lieu of contributing to the
Partnership proceeds from the sale of Preferred Shares as Preferred Contributed
Funds, to lend such proceeds to the Partnership. Any such loan shall be on the
same terms and conditions as the Related Issue except that dividends payable on
the Related Issue shall be payable by the Partnership to the General Partner as
interest, any mandatory redemptions shall take the form of principal payments
and no Preferred Units shall be issued to the General Partner. If any such
loan is made, the Partnership shall promptly reimburse the General Partner for
all expenses (including any applicable underwriter discounts) incurred by the
General Partner in connection with raising the Required Funds. Any such loan
made by the General Partner to the Partnership may at any time be contributed
by the General Partner to the Partnership as Preferred Contributed Funds in
exchange for Preferred Units as above provided; and if the terms of the Related
Issue provide for conversion of Preferred Shares into Shares, prior to the
effectuation of such conversion the General Partner shall contribute such loan
to the Partnership in exchange for Preferred Units, which Preferred Units
shall, upon such
<PAGE> 33
30
conversion, be exchanged for Partnership Units and contributed to the Limited
Partner as and to the extent provided above.
(d) Notwithstanding anything to the contrary set
forth in this Section 4.1, the General Partner shall have the right to borrow
money or to issue Preferred Shares and lend the proceeds of such borrowing or
lend or contribute in exchange for Preferred Units the proceeds of such
Preferred Shares (as opposed to lending or contributing such proceeds to the
Limited Partner) only for the purpose of enabling the Partnership or any of its
Subsidiary Entities or Affiliates to maintain, renovate or expand any Property
or to refinance any of its indebtedness.
4.2 No Obligation to Make Further Capital Contributions;
No Third Party Beneficiary. Except as set forth above, no Partner shall have
any obligation to make Capital Contributions to the Partnership. No creditor
or other Third Party having dealings with the Partnership shall have the right
to enforce the right or obligation of any Partner to make Capital Contributions
or to pursue any other right or remedy hereunder or at law or in equity, it
being understood and agreed that the provisions of this Agreement shall be
solely for the benefit of, and may be enforced solely by, the parties hereto
and their respective successors and assigns. None of the rights or obligations
of the Partners herein set forth to make Capital Contributions to the
Partnership shall be deemed an asset of the Partnership for any purpose by any
creditor or other third party, nor may such rights or obligations be sold,
transferred or
<PAGE> 34
31
assigned by the Partnership or pledged or encumbered by the Partnership to
secure any debt or other obligation of the Partnership or of any of the
Partners.
4.3 No Interest; No Return. No Partner shall be entitled
to interest on its Capital Contribution or on such Partner's Capital Account.
Except as provided herein or by law, no Partner shall have any right to
withdraw any part of its Capital Account or to demand or receive the return of
its Capital Contribution from the Partnership.
4.4 Capital Accounts.
(a) The Partnership shall establish and maintain
a separate capital account ("Capital Account") for each Partner, including a
Partner who shall pursuant to the provisions hereof acquire a Partnership
Interest, which Capital Account shall be:
(1) credited with the amount of cash
contributed by such Partner to the capital of the Partnership; the
initial Gross Asset Value (net of liabilities secured by such
contributed property that the Partnership assumes or takes subject to)
of any other property contributed by such Partner to the capital of
the Partnership; such Partner's distributive share of Profits; and any
other items in the nature of income or gain that are allocated to such
Partner pursuant to Section 6.1 hereof, but excluding tax items
described in Regulations Section 1.704-1(b)(4)(i); and
<PAGE> 35
32
(2) debited with the amount of cash
distributed to such Partner pursuant to the provisions of this
Agreement; the Gross Asset Value (net of liabilities secured
by such distributed property that such Partner assumes or
takes subject to) of any Partnership property distributed to
such Partner pursuant to any provision of this Agreement; the
amount of unsecured liabilities of such Partner assumed by the
Partnership; such Partner's distributive share of Losses;
payments by the Partnership of REIT Expenses allocated to such
Partner; and any other items in the nature of expenses or
losses that are allocated to such Partner pursuant to
Section 6.1 hereof, but excluding tax items described in
Regulations Section 1.704- 1(b)(4)(i).
In the event that any or all of a Partner's Partnership Units
or Preferred Units are transferred within the meaning of Regulations Section
1.704-1(b)(2)(iv)(1), the transferee shall succeed to the Capital Account of
the transferor to the extent that it relates to the Units so transferred.
In the event that the Gross Asset Values of Partnership assets
are adjusted pursuant to Section 4.4(b)(ii) hereof, the Capital Accounts of the
Partners shall be adjusted to reflect the aggregate net adjustments as if the
Partnership sold all of its properties for their fair market values and
recognized gain or loss for federal income tax purposes equal to the amount of
such aggregate net adjustment.
The foregoing provisions and the other provisions of this
Agreement relating to the maintenance of Capital Accounts are intended to
comply with Section
<PAGE> 36
33
1.704-1(b) of the Regulations, and shall be interpreted and applied as provided
in the Regulations.
(b) The term "Gross Asset Value" or "Gross Asset
Values" means, with respect to any asset of the Partnership, such asset's
adjusted basis for federal income tax purposes, except as follows:
(i) the initial Gross Asset Value of any
asset contributed by a Partner to the Partnership shall be the gross
fair market value of such asset;
(ii) the Gross Asset Values of all
Partnership assets shall be adjusted to equal their respective gross
fair market values, as reasonably determined by the General Partner,
immediately prior to the following events:
(A) a Capital Contribution (other
than a de minimis Capital Contribution, within the meaning of Section
1.704-1(b)(2)(iv)(f)(5)(i) of the Regulations) to the Partnership by a
new or existing Partner as consideration for Partnership Units;
(B) the distribution by the
Partnership to a Partner of more than a de minimis amount (within the
meaning of Section 1.704-1(b) (2) (iv) (f) (5) (ii) of the
Regulations) of Partnership property as consideration for the
redemption of Partnership Units; and
<PAGE> 37
34
(C) the liquidation of the
Partnership within the meaning of Section 1.704-
1(b)(2)(ii)(g) of the Regulations; and
(iii) the Gross Asset Values of
Partnership assets distributed to any Partner shall be the gross fair
market values of such assets as reasonably determined by the General
Partner as of the date of distribution. At all times, Gross Asset
Values shall be adjusted by any Depreciation taken into account with
respect to the Partnership's assets for purposes of computing Profits
and Losses. Any adjustment to the Gross Asset Values of Partnership
property shall require an adjustment to the Partners' Capital Accounts
as described in Section 4.4(a) above.
ARTICLE V
Representations and Warranties
5.1 Representations and Warranties by the General
Partner. The General Partner represents and warrants to the Limited Partner
and to the Partnership that (i) it is a corporation duly formed, validly
existing and in good standing under the laws of the State of Maryland, with
full right, corporate power and authority to fulfill all of its obligations
hereunder or as contemplated herein; (ii) all transactions contemplated by this
Agreement to be performed by it have been duly authorized by all necessary
action; (iii) this Agreement has been duly executed and delivered by and is the
legal, valid and binding obligation of the General Partner, and is enforceable
against it in accordance with its terms, except as such enforcement may be
limited by
<PAGE> 38
35
(a) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance
or transfer or other laws of general application affecting the rights and
remedies of creditors and (b) general principles of equity (regardless of
whether such enforcement is considered in a proceeding in equity or at law);
(iv) no authorization, approval, consent or order of any court or governmental
authority or agency or any other Entity is required in connection with the
execution and delivery of this Agreement by the General Partner, except as may
have been received prior to the date of this Agreement; and (v) the execution
and delivery of this Agreement by the General Partner and the consummation of
the transactions contemplated hereby will not conflict with or constitute a
breach or violation of, or default under, any contract, indenture, mortgage,
loan agreement, note, lease, joint venture or partnership agreement or other
instrument or agreement to which the General Partner or the Partnership is a
party.
5.2 Representations and Warranties by the Limited
Partner. The Limited Partner represents and warrants to the General Partner
and the Partnership that (i) it is a limited partnership validly existing and
in good standing under the laws of the State of Delaware, with full power and
authority to fulfill all of its obligations hereunder or as contemplated
herein; (ii) all transactions contemplated by this Agreement to be performed by
it have been duly authorized by all necessary action; (iii) this Agreement has
been duly executed and delivered by and is the legal, valid and binding
obligation of the Limited Partner, and is enforceable against it in accordance
with its terms, except as such enforcement may be limited by (a) bankruptcy,
<PAGE> 39
36
insolvency, reorganization, moratorium, fraudulent conveyance or transfer or
other laws of general application affecting the rights and remedies of
creditors and (b) general principles of equity (regardless of whether such
enforcement is considered in a proceeding in equity or at law); (iv) no
authorization, approval, consent or order of any court or governmental
authority or agency or any other Entity is required in connection with the
execution and delivery of this Agreement by the Limited Partner, except as may
have been received prior to the date of this Agreement; and (v) the execution
and delivery of this Agreement by the Limited Partner and the consummation of
the transactions contemplated hereby will not conflict with or constitute a
breach or violation of, or default under, any contract, indenture, mortgage,
loan agreement, note, lease, joint venture or partnership agreement to which
the Limited Partner is a party.
ARTICLE VI
Allocations, Distributions and
Other Tax and Accounting Matters
6.1 Allocations.
(a) For the purpose of this Agreement, the terms
"Profits" and "Losses" mean, respectively, for each Partnership Fiscal Year or
other period, the Partnership's taxable income or loss for such Partnership
Fiscal Year or other period, determined in accordance with Section 703(a) of
the Code (for this purpose, all items of income, gain, loss, or deduction
required to be stated separately pursuant to Section 703(a)(1) of the Code
shall be included in taxable income or loss), adjusted as follows:
<PAGE> 40
37
(1) any income of the Partnership that
is exempt from federal income tax and not otherwise taken into account
in computing Profits or Losses pursuant to this Section 6.1(a) shall
be added to such taxable income or loss;
(2) in lieu of the depreciation,
amortization and other cost recovery deductions taken into account in
computing such taxable income or loss, there shall be taken into
account Depreciation for such Partnership Fiscal Year or other period;
(3) any items that are specially
allocated pursuant to Section 6.1(d) hereof shall not be taken into
account in computing Profits or Losses; and
(4) any expenditures of the Partnership
described in Section 705(a)(2)(B) of the Code (or treated as such
under Regulation Section 1.704-1(b)(2)(iv)(i)) and not otherwise taken
into account in computing Profits or Losses pursuant to this Section
6.1(a) shall be deducted from such taxable income or loss.
(b) Except as otherwise provided in Section
6.1(d) hereof and this Section 6.1(b), the Profits and Losses of the
Partnership (and each item thereof) for each Partnership Fiscal Year shall be
allocated between the Partners in the following order of priority:
<PAGE> 41
38
(1) First, Profits shall be allocated to
the holder of Preferred Units in an amount equal to the excess of
(A) the amount of Net Operating Cash Flow distributed to such holder
pursuant to Sections 6.2(b) (i) and (ii) and Section 6.2(c) (but only
to the extent of the Preferred Distribution Requirement and Preferred
Distribution Shortfalls) for the current and all prior Partnership
Fiscal Years over (B) the amount of Profits previously allocated to
such holder pursuant to this subparagraph (1).
(2) Second, for any Partnership Fiscal
Year ending on or after a date on which Preferred Units are redeemed,
Profits (or Losses) shall be allocated to the holder of such Preferred
Units in an amount equal to the excess (or deficit) of the sum of the
applicable Preferred Redemption Amounts for the Preferred Units that
have been or are being redeemed during the Partnership Fiscal Year
over the Preferred Unit Issue Price of such Preferred Units. In
addition, in the event that the Partnership is liquidated pursuant to
Article VIII, the allocation described above shall be made to the
General Partner with respect to all Preferred Units then outstanding.
(3) Third, any remaining Profits and
Losses shall be allocated among the Partners as follows:
(A) One percent to the General
Partner; and
(B) 99 percent to the Limited
Partner.
<PAGE> 42
39
(4) Notwithstanding subparagraphs
(1), (2) and (3) above, Profits and Losses from a Liquidation
Transaction shall be allocated as follows:
First, Profits (or Losses) shall be allocated
to the holder of Preferred Units in an amount equal to the
excess (or deficit) of the sum of the applicable Preferred
Redemption Amounts of the Preferred Units which have been or
will be redeemed with the proceeds of the Liquidation
Transaction over the Preferred Unit Issue Price of such
Preferred Units; and
Second, any remaining Profits and Losses
shall be allocated among the Partners in accordance with the
percentages set forth in (3) above.
(c) For the purpose of Sections 6.1(b) hereof,
gain or loss resulting from any disposition of Partnership property shall be
computed by reference to the Gross Asset Value of the property disposed of,
notwithstanding that the adjusted tax basis of such property for federal income
tax purposes differs from its Gross Asset Value.
(d) Notwithstanding the foregoing provisions of
this Section 6.1, the following provisions shall apply:
(1) A Partner shall not receive an
allocation of any Partnership deduction that would result in
total loss allocations attributable to
<PAGE> 43
40
"Nonrecourse Liabilities" (as defined in Regulations Section
1.704-2(b)(3)) in excess of such Partner's share of Minimum Gain (as
determined under Regulations Section 1.704-2(g)). The term "Minimum
Gain" means an amount determined in accordance with Regulations
Section 1.704-2(d) by computing, with respect to each Nonrecourse
Liability of the Partnership, the amount of gain, if any, that the
Partnership would realize if it disposed of the property subject to
such liability for no consideration other than full satisfaction
thereof, and by then aggregating the amount so computed. If the
Partnership makes a distribution allocable to the proceeds of a
Nonrecourse Liability, in accordance with Regulation Section
1.704-2(h) the distribution will be treated as allocable to an
increase in Partnership Minimum Gain to the extent the increase
results from encumbering Partnership property with aggregate
Nonrecourse Liabilities that exceed the property's adjusted tax basis.
If there is a net decrease in Partnership Minimum Gain for a
Partnership Fiscal Year, in accordance with Regulations Section
1.704-2(f) and the exceptions contained therein, the Partners shall be
allocated items of Partnership income and gain for such Partnership
Fiscal Year (and, if necessary, for subsequent Partnership Fiscal
Years) equal to the Partners' respective shares of the net decrease in
Minimum Gain within the meaning of Regulations Section 1.704-2(g)(2)
(the "Minimum Gain Chargeback"). The items to be allocated pursuant
to this Section 6.1(d)(1) shall be determined in accordance with
Regulations Section 1.704-2(f) and (j).
<PAGE> 44
41
(2) Any item of "Partner Nonrecourse
Deduction" (as defined in Regulations Section 1.704-2(i)) with respect
to a "Partner Nonrecourse Debt" (as defined in Regulations Section
1.704-2(b)(4)) shall be allocated to the Partner or Partners who bear
the economic risk of loss for such Partner Nonrecourse Debt in
accordance with Regulations Section 1.704-2(i)(1). If the Partnership
makes a distribution allocable to the proceeds of a Partner
Nonrecourse Debt, in accordance with Regulation Section 1.704- 2(i)(6)
the distribution will be treated as allocable to an increase in
Partner Minimum Gain to the extent the increase results from
encumbering Partnership property with aggregate Partner Nonrecourse
Debt that exceeds the property's adjusted tax basis. Subject to
Section 6.1(d)(1) hereof, but notwithstanding any other provision of
this Agreement, in the event that there is a net decrease in Minimum
Gain attributable to a Partner Nonrecourse Debt (such Minimum Gain
being hereinafter referred to as "Partner Nonrecourse Debt Minimum
Gain") for a Partnership Fiscal Year, then after taking into account
allocations pursuant to Section 6.1(d)(1) hereof, but before any other
allocations are made for such taxable year, and subject to the
exceptions set forth in Regulations Section 1.704- 2(i)(4), each
Partner with a share of Partner Nonrecourse Debt Minimum Gain at the
beginning of such Partnership Fiscal Year shall be allocated items of
income and gain for such Partnership Fiscal Year (and, if necessary,
for subsequent Partnership Fiscal Years) equal to such Partner's share
of the net
<PAGE> 45
42
decrease in Partner Nonrecourse Debt Minimum Gain as determined in a
manner consistent with the provisions of Regulations Section
1.704-2(g)(2). The items to be allocated pursuant to this Section
6.1(d)(2) shall be determined in accordance with Regulations Section
1.704-2(i)(4) and (j).
(3) Pursuant to Regulations Section
1.752-3(a)(3), for the purpose of determining each Partner's share of
excess nonrecourse liabilities of the Partnership, and solely for such
purpose, each Partner's interest in Partnership profits is hereby
specified to be equal to the applicable percentage set forth in (b)(3)
above.
(4) The Limited Partner shall not be
allocated any item of deduction or loss of the Partnership if such
allocation would cause such Partner's Capital Account to become
negative by more than the sum of (i) any amount such Partner is
obligated to restore upon liquidation of the Partnership, plus (ii)
such Partner's share of the Partnership's Minimum Gain and Partner
Nonrecourse Debt Minimum Gain. An item of deduction or loss that
cannot be allocated to the Limited Partner pursuant to this Section
6.1(d)(4) shall be allocated to the General Partner. For this
purpose, in determining the Capital Account balance of such Partner,
the items described in Regulations Section 1.704-1(b)(2)(ii)(d)(4),
(5), and (6) shall be taken into account. In the event that (A) the
Limited Partner unexpectedly receives any adjustment, allocation, or
distribution described in Regulations Sections 1.704-
1(b)(2)(ii)(d)(4), (5), or
<PAGE> 46
43
(6), and (B) such adjustment, allocation or distribution causes or
increases a deficit balance (net of amounts which such Partner is
obligated to restore or deemed obligated to restore under Regulations
Section 1.704-2(g)(1) and 1.704-2(i)(5) and determined after taking
into account any adjustments, allocations or distributions described
in Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5), or (6) that, as
of the end of the Partnership Fiscal Year, reasonably are expected to
be made to such Partner) in such Partner's Capital Account as of the
end of the Partnership Fiscal Year to which such adjustment,
allocation, or distribution relates, then items of Gross Income
(consisting of a pro rata portion of each item of Gross Income) for
such Partnership Fiscal Year and each subsequent Partnership Fiscal
Year shall be allocated to such Partner until such deficit balance or
increase in such deficit balance, as the case may be, has been
eliminated. In the event that this Section 6.1(d)(4) and Section
6.1(d)(1) and/or (2) hereof apply, Section 6.1(d)(1) and/or (2) hereof
shall be applied prior to this Section 6.1(d)(4).
(e) In accordance with Sections 704(b) and 704(c)
of the Code and the Regulations thereunder, income, gain, loss and deduction
with respect to any property contributed to the capital of the Partnership
shall, solely for federal income tax purposes, be allocated between the
Partners so as to take account of any variation between the adjusted basis of
such property to the Partnership for federal income tax purposes and the
initial Gross Asset Value of such property. If the Gross
<PAGE> 47
44
Asset Value of any Partnership property is adjusted as described in the
definition of Gross Asset Value, subsequent allocations of income, gain, loss,
and deduction with respect to such asset shall take account of any variation
between the adjusted basis of such asset for federal income tax purposes and
the Gross Asset Value of such asset in the manner prescribed under Sections
704(b) and 704(c) of the Code and the Regulations thereunder. In furtherance
of the foregoing, the Partnership shall employ the method prescribed in
Regulation Section 1.704-3(b) (the "traditional method") or the equivalent
successor provision(s) of proposed, temporary or final Regulations.
(f) Notwithstanding anything to the contrary
contained in this Section 6.1, the allocation of Profits and Losses for any
Partnership Fiscal Year during which a Person acquires a Partnership Interest
(other than upon formation of the Partnership) pursuant to Section 4.1(b) or
otherwise, shall take into account the Partners' varying interests for such
Partnership Fiscal Year pursuant to any method permissible under Section 706 of
the Code that is selected by the General Partner with the consent of the
Limited Partner (notwithstanding any agreement between the assignor and
assignee of such Partnership Interest although the General Partner (with the
consent of the Limited Partner) may recognize any such agreement), which method
may take into account the date on which the Transfer or an agreement to
Transfer becomes irrevocable pursuant to its terms, as determined by the
General Partner.
(g) In the event of a sale or exchange of any
outstanding Partnership Unit or Preferred Unit or upon the death of a Partner,
if the Partnership
<PAGE> 48
45
has not theretofore elected, pursuant to Section 754 of the Code, to adjust the
basis of Partnership property, the General Partner may, in the exercise of its
reasonable discretion and with the consent of the Limited Partner, cause the
Partnership to elect pursuant to Section 754 of the Code, to adjust the basis
of Partnership property. In addition, in the event of a distribution referred
to in Section 734(b) of the Code, if the Partnership has not theretofore
elected, the General Partner may, in the exercise of its reasonable discretion
and with the consent of the Limited Partner, cause the Partnership to elect,
pursuant to Section 754 of the Code, to adjust the basis of Partnership
property. Except as provided in Regulations Section 1.704-1(b)(2)(iv)(m), such
adjustment shall not be reflected in the Partners' Capital Accounts and shall
be effective solely for federal and (if applicable) state and local income tax
purposes. Each Partner hereby agrees to provide the Partnership with all
information necessary to give effect to such election. With respect to such
election:
(1) Any change in the amount of the
Depreciation deducted by the Partnership and any change in the gain or
loss of the Partnership, for federal income tax purposes, resulting
from an adjustment pursuant to Section 743(b) of the Code shall be
allocated entirely to the transferee of the Partnership Units or
Preferred Units so transferred. Neither the Capital Contribution
obligations of, nor the Partnership Units or Preferred Units of, nor
the amount of any cash distributions to, the Partners shall be
affected as a result of such election, and except as provided in
Regulations
<PAGE> 49
46
Section 1.704-1(b)(2)(iv)(m), the making of such election shall have
no effect except for federal and (if applicable) state and local
income tax purposes.
(2) Solely for federal and (if
applicable) state and local income tax purposes and not for the
purpose of maintaining the Partners' Capital Accounts (except as
provided in Regulations Section 1.704-1(b)(2)(iv)(m)), the Partnership
shall keep a written record for those assets, the basis of which are
adjusted as a result of such election, and the amount at which such
assets are carried on such record shall be debited (in the case of an
increase in basis) or credited (in the case of a decrease in basis) by
the amount of such basis adjustment. Any change in the amount of the
Depreciation deducted by the Partnership and any change in the gain or
loss of the Partnership, for federal and (if applicable) state and
local income tax purposes, attributable to the basis adjustment made
as a result of such election shall be debited or credited, as the case
may be, on such record.
(h) The Profits, Losses, gains, deductions, and
credits of the Partnership (and all items thereof) for each Partnership Fiscal
Year shall be determined in accordance with the accounting method followed by
the Partnership for federal income tax purposes.
(i) Except as provided in Section 6.1(e) and
6.1(g) hereof, for federal income tax purposes, each item of income, gain,
loss or deduction shall be
<PAGE> 50
47
allocated among the Partners in the same manner as its correlative item of
"book" income, gain, loss or deduction has been allocated pursuant to this
Section 6.1.
(j) To the extent permitted by Regulations
Sections 1.704-2(h)(3) and 1.704-2(i)(6), the General Partner shall endeavor to
treat distributions as having been made from the proceeds of Nonrecourse
Liabilities or Partner Nonrecourse Debt only to the extent that such
distributions would cause or increase a deficit balance in any Partner's
Capital Account that exceeds the amount such Partner is otherwise obligated to
restore (within the meaning of Regulations Section 1.704-1(b)(2)(ii)(c)) as of
the end of the Partnership's taxable year in which the distribution occurs.
(k) If any Partner sells or otherwise disposes of
any property, directly or indirectly, to the Partnership, and as a result
thereof, gain on a subsequent disposition of such property by the Partnership
is reduced pursuant to Section 267(d) of the Code, then, to the extent
permitted by applicable law, gain for federal income tax purposes attributable
to such subsequent disposition shall first be allocated to the Partner other
than the selling Partner in an amount equal to such Partner's allocation of
"book" gain on the property pursuant to this Section 6.1, and any remaining
gain for federal income tax purposes shall be allocated to the selling Partner.
6.2 Distributions.
(a) Except with respect to a liquidation of the
Partnership pursuant to Section 3.2 hereof and subject to the priority set
forth in Sections 6.2 (b)
<PAGE> 51
48
and (c), the General Partner shall cause the Partnership to distribute all or a
portion of Net Operating Cash Flow to the Partners from time to time as
determined by the General Partner, but in any event not less frequently than
quarterly in such amounts as the General Partner shall determine in its sole
discretion. All such distributions shall be made in accordance with the
provisions of Section 6.2(b), (c) and (d) hereof.
(b) Except to the extent Net Operating Cash Flow
is distributed pursuant to Section 6.2(c), distributions of Net Operating Cash
Flow shall be made in the following order of priority:
(i) First, to the extent that the amount
of Net Operating Cash Flow distributed to the holder of Preferred
Units for any prior quarter was less than the Preferred Distribution
Requirement for such quarter, and has not been subsequently distributed
pursuant to this subparagraph (b)(i) (a "Preferred Distribution
Shortfall"), Net Operating Cash Flow shall be distributed to the holder
of Preferred Units in an amount necessary to satisfy such Preferred
Distribution Shortfall for the current and all prior Partnership Fiscal
Years. In the event that the Net Operating Cash Flow distributed for a
particular quarter is less than the Preferred Distribution Shortfall,
then all Net Operating Cash Flow for the current quarter shall be
distributed to the holder of Preferred Units.
<PAGE> 52
49
(ii) Second, Net Operating Cash Flow
shall be distributed to the holder of Preferred Units in an amount
equal to the Preferred Distribution Requirement for the then current
quarter for each outstanding Preferred Unit. In the event that the
amount of Net Operating Cash Flow distributed for a particular quarter
pursuant to this subparagraph (b)(ii) is less than the Preferred
Distribution Requirement for such quarter, then all Net Operating Cash
Flow shall be distributed to the holder of Preferred Units in
proportion to their Preferred Distribution Requirements for such
quarter.
(iii) The balance of the Net Operating
Cash Flow to be distributed, if any, shall be distributed to the
Partners as follows:
(A) To the Limited Partner and the
General Partner in amounts equal to the Profits allocated to
such Partners under Section 6.1(b)(3) above.
(B) To the extent that there are
distributions in excess of the amounts described in (A) above,
such distributions shall be distributed in the following
priority:
(I) First to the Limited Partner
and the General Partner in the percentages described
in Section 6.1(b)(3) above until the capital account
of the Limited Partner equals zero.
<PAGE> 53
50
(II) Second, to the General Partner
to the extent of the remaining balance in its
capital account, until the General Partner's
capital account equals zero.
(III) Third, to the Limited Partner
and the General Partner in the percentages described
in Section 6.1(b)(3) above.
(c) Notwithstanding the provisions of Section
6.2(b), in any quarter during which the Partnership redeems any outstanding
Preferred Units, unless and except to the extent that such redemption is
effectuated out of borrowed funds, Capital Contributions or other sources, Net
Operating Cash Flow shall first be distributed to the General Partner in an
amount equal to the applicable Preferred Redemption Amount for the Preferred
Units being redeemed before being distributed pursuant to Section 6.2(b).
(d) Notwithstanding the provisions of the first
sentence of Section 6.2(a), the General Partner shall use its best efforts to
cause the Partnership to distribute sufficient amounts, in accordance with
Section 6.2 above, to enable the General Partner and the Limited Partner to pay
shareholder dividends that will (i) satisfy the REIT Requirements, and (ii)
avoid any federal income or excise tax on the General Partner or the Limited
Partner.
6.3 Books of Account. At all times during the
continuance of the Partnership, the General Partner shall maintain or cause to
be maintained full, true,
<PAGE> 54
51
complete and correct books of account in accordance with GAAP wherein shall be
entered particulars of all monies, goods or effects belonging to or owing to or
by the Partnership, or paid, received, sold or purchased in the course of the
Partnership's business, and all of such other transactions, matters and things
relating to the business of the Partnership as are usually entered in books of
account kept by Persons engaged in a business of a like kind and character. In
addition, the Partnership shall keep all records as required to be kept
pursuant to the Act. The books and records of account shall be kept at the
principal office of the Partnership, and each Partner, the limited partners of
the Limited Partner and its and their representatives shall at all reasonable
times have access to such books and records and the right to inspect and copy
the same.
6.4 Reports. Within ninety (90) days after the end of
each Partnership Fiscal Year, the Partnership shall cause to be prepared and
transmitted to each Partner and the limited partners of the Limited Partner an
annual report of the Partnership relating to the previous Partnership Fiscal
Year containing a balance sheet as of the year then ended, a statement of
financial condition as of the year then ended, and statements of operations,
cash flow and Partnership equity for the year then ended, which annual
statements shall be prepared in accordance with GAAP and shall be audited by
the Accountants. The Partnership shall also cause to be prepared and
transmitted to each Partner and the limited partners of the Limited Partner
within forty-five (45) days after the end of each of the first three (3)
quarters of each Partnership Fiscal Year a quarterly unaudited report
containing a balance sheet, a statement of the
<PAGE> 55
52
Partnership's financial condition and statements of operations, cash flow and
Partnership equity, in each case relating to the fiscal quarter then just
ended, and prepared in accordance with GAAP. The Partnership shall further
cause to be prepared and transmitted to the General Partner and the Limited
Partner (i) such reports and/or information as are necessary for the General
Partner to fulfill its obligations under the Securities Act of 1933, the
Securities and Exchange Act of 1934 and the applicable stock exchange rules,
and under any other regulations to which the General Partner, the Limited
Partner or the Partnership may be subject, and (ii) such other reports and/or
information as are necessary for each of the General Partner and the Limited
Partner to determine and maintain its qualification as a REIT under the REIT
Requirements, its earnings and profits derived from the Partnership, its
liability for a tax as a consequence of its Partnership Interest and
distributive share of taxable income or loss and items thereof, in each case in
a manner that will permit the General Partner and the Limited Partner to comply
with their respective obligations to file federal, state and local tax returns
and information returns and to provide their shareholders with tax information.
The General Partner shall provide to the Limited Partner and the limited
partners of the Limited Partner copies of all reports it provides to its
stockholders at the same time such reports are distributed to such
stockholders.
6.5 Audits. Not less frequently than annually, the books
and records of the partnership shall be audited by the Accountants.
<PAGE> 56
53
6.6 Tax Returns.
(a) Consistent with all other provisions of this
Agreement and subject to the provisions of Section 7.3(b)(ix), the General
Partner shall determine the methods to be used in the preparation of federal,
state, and local income and other tax returns for the Partnership in connection
with all items of income and expense, including, but not limited to, valuation
of assets, the methods of Depreciation and cost recovery, elections, credits,
and tax accounting methods and procedures.
(b) The Partnership shall timely cause to be
prepared and transmitted to the Partners federal and appropriate state and
local Partnership Income Tax Schedules "K-1", or any substitute therefor, with
respect to each Partnership Fiscal Year on appropriate forms prescribed. The
Partnership shall make reasonable efforts to prepare and submit such forms
before the due date for filing federal income tax returns for the fiscal year
in question (determined without extensions), and shall in any event prepare and
submit such forms on or before July 15 of the year following the fiscal year in
question.
6.7 Tax Matters Partner. The General Partner is hereby
designated as the Tax Matters Partner within the meaning of Section 6231(a)(7)
of the Code for the Partnership; provided, however, that (i) in exercising its
authority as Tax Matters Partner it shall be limited by the provisions of this
Agreement affecting tax aspects of the Partnership; (ii) the General Partner
shall give prompt notice to the Limited Partner and each limited partner of the
Limited Partner of its receipt of any written notice that
<PAGE> 57
54
the Internal Revenue Service or any state or local taxing authority intends to
examine Partnership income tax returns for any year, its receipt of written
notice of the beginning of an administrative proceeding at the Partnership
level relating to the Partnership under Section 6223 of the Code, its receipt
of written notice of the final Partnership administrative adjustment relating
to the Partnership pursuant to Section 6223 of the Code, and its receipt of any
request from the Internal Revenue Service for waiver of any applicable statute
of limitations with respect to the filing of any tax return by the Partnership;
(iii) the General Partner shall promptly notify the Limited Partner and each
limited partner of the Limited Partner if the General Partner does not intend
to file for judicial review with respect to the Partnership; and (iv) the Tax
Matters Partner shall not be entitled to bind the Limited Partner or any
limited partner of the Limited Partner by any settlement agreement (within the
meaning of Section 6224 of the Code) unless the Limited Partner or limited
partner of the Limited Partner consents thereto in writing and the General
Partner shall notify the Limited Partner and each limited partner of the
Limited Partner in a manner and at such time as is sufficient to allow the
Limited Partner and each limited partner of the Limited Partner to exercise
their rights pursuant to Section 6224(c)(3) of the Code.
6.8 Withholding. Each Partner hereby authorizes the
Partnership to withhold from or pay on behalf of or with respect to such
Partner any amount of federal, state, local or foreign taxes that the General
Partner determines the Partnership is required to withhold or pay with respect
to any amount distributable or allocable to
<PAGE> 58
55
such Partner pursuant to this Agreement, including, without limitation, any
taxes required to be withheld or paid by the Partnership pursuant to Code
Section 1441, 1442, 1445, or 1446. Any amount paid on behalf of or with
respect to a Partner shall constitute a loan by the Partnership to such
Partner, which loan shall be due within fifteen (15) days after repayment is
demanded of the Partner in question, and shall be repaid through withholding of
subsequent distributions to such Partner. Any amounts payable by such Partner
hereunder shall bear interest at the lesser of (i) the base rate on corporate
loans at large United States money center commercial banks, as published from
time to time in The Wall Street Journal or (ii) the maximum lawful rate of
interest on such obligation, such interest to accrue from the date such amount
is due (i.e., fifteen (15) days after demand) until such amount is paid in
full. To the extent the payment or accrual of withholding tax results in a
federal, state or local tax credit to the Partnership, such credit shall be
allocated to the Partner to whose distribution the tax is attributable.
ARTICLE VII
Rights, Duties and Restrictions of the General Partner
7.1 Expenditures by Partnership. The General Partner is
hereby authorized to pay compensation for accounting, administrative, legal,
technical, management and other services rendered to the Partnership. All of
the aforesaid expenditures shall be made on behalf of the Partnership and the
General Partner shall be entitled to reimbursement by the Partnership for any
expenditures incurred by it on
<PAGE> 59
56
behalf of the Partnership which shall have been made other than out of the
funds of the Partnership. The Partnership shall also assume and pay when due
the Administration Expenses and such portion of REIT Expenses as shall be
appropriately allocated to the Partnership by the Limited Partner in the
exercise or its reasonable business judgment, it being understood that the
portion of such REIT Expenses not so allocated to the Partnership shall be
assumed and paid when due by the Limited Partner.
7.2 Powers and Duties of General Partner. The General
Partner shall be responsible for the management of the Partnership's business
and affairs. Except as otherwise herein expressly provided, and subject to the
limitations contained in Section 7.3 hereof with respect to Major Decisions,
the General Partner shall have, and is hereby granted, full and complete power,
authority and discretion to take such action for and on behalf of the
Partnership and in its name as the General Partner shall, in its sole and
absolute discretion, deem necessary or appropriate to carry out the purposes
for which the Partnership was organized. Any action by the General Partner
relating to (i) transactions between the Partnership or a Subsidiary Entity and
M.S. Management Associates, Inc., Simon MOA Management Company, Inc., and/or
M.S. Management Associates (Indiana), Inc., (ii) transactions between the
Partnership or a Subsidiary Entity and DeBartolo Properties Management, Inc.,
or (iii) transactions involving the Partnership or a Subsidiary Entity in which
the Simons, the DeBartolos or any Affiliate of the Simons or the DeBartolos
have an interest (other than a non-controlling minority equity interest, which
has no management or veto powers, in a
<PAGE> 60
57
Person, other than the Partnership or Subsidiary Entity, which is engaged in
such transaction) other than through ownership of Partnership Units, shall
require the prior approval of a majority of the Independent Directors. Except
as otherwise expressly provided herein, and subject to Section 7.3 hereof, the
General Partner shall have the right, power and authority:
(a) To manage, control, hold, invest, lend,
reinvest, lease, contract, grant, obtain or exercise options to sell or
conversion rights, assign, Transfer, convey, deliver, endorse, exchange,
Pledge, mortgage or otherwise encumber, abandon, improve, repair, maintain,
operate, insure, and otherwise deal with any and all property of whatsoever kind
and nature, and wheresoever situated, in furtherance of the purposes of the
Partnership. In addition, without limiting the foregoing, with the consent of
the Limited Partner and upon (i) the affirmative vote of four (4) of the
Independent Directors (at least three (3) of whom are not Affiliates of the
DeBartolos) or (ii) in the event that the Board of Directors of the General
Partner is enlarged by the requisite shareholder approval, by the affirmative
vote of five (5) of the Independent Directors (none of whom are Affiliates of
the DeBartolos), the General Partner shall authorize and require the sale of any
property owned by the Partnership or a Subsidiary Entity;
(b) To manage, insure against loss, protect and
subdivide any of the real or personal property (collectively, "property"),
interests therein or parts thereof; to improve, develop or redevelop any
property; to participate in the ownership
<PAGE> 61
58
and development of any property; to dedicate for public use, to vacate any
subdivisions or parts thereof, to resubdivide, to contract to sell, to grant
options to purchase or lease, to sell on any terms; to convey, to mortgage,
pledge or otherwise encumber any property, or any part thereof; to lease any
property or any part thereof from time to time, upon any terms and for any
period of time, and to renew or extend leases, to amend, change or modify the
terms and provisions of any leases and to grant options to lease and options to
renew leases and options to purchase; to partition or to exchange any property,
or any part thereof, for other property; to grant easements or charges of any
kind; to release, convey or assign any right, title or interest in or about or
easement appurtenant to any property or any part thereof; to construct and
reconstruct, remodel, alter, repair, add to or take from buildings on any
property; to insure any Person having an interest in or responsibility for the
care, management or repair of any property; to direct the trustee of any land
trust to mortgage, lease, convey or contract to convey any property held in
such land trust or to execute and deliver deeds, mortgages, notes and any and
all documents pertaining to the property subject to such land trust or in any
matter regarding such trust; and to execute assignments of all or any part of
the beneficial interest in such land trust;
(c) To employ, engage or contract with or dismiss
from employment or engagement Persons to the extent deemed necessary by the
General Partner for the operation and management of the Partnership business,
including but not limited to, employees, contractors, subcontractors,
engineers, architects, surveyors,
<PAGE> 62
59
mechanics, consultants, accountants, attorneys, insurance brokers, real estate
brokers and others;
(d) To enter into contracts on behalf of the
Partnership;
(e) To borrow or lend money, procure loans and
advances from any Person for Partnership purposes and to apply for and secure
from any Person credit or accommodations; to contract liabilities and
obligations, direct or contingent and of every kind and nature with or without
security; and to repay, discharge, settle, adjust, compromise or liquidate any
such loan, advance, credit, obligation or liability (including by deeding
property to a lender in lieu of foreclosure);
(f) To Pledge, hypothecate, mortgage, assign,
deposit, deliver, enter into sale and leaseback arrangements or otherwise give
as security or as additional or substitute security, or for sale or other
disposition any and all Partnership property, tangible or intangible,
including, but not limited to, real estate and beneficial interests in land
trusts, and to make substitutions thereof, and to receive any proceeds thereof
upon the release or surrender thereof; to sign, execute and deliver any and all
assignments, deeds and other contracts and instruments in writing; to
authorize, give, make, procure, accept and receive moneys, payments, property,
notices, demands, vouchers, receipts, releases, compromises and adjustments; to
waive notices, demands, protests and authorize and execute waivers of every
kind and nature; to enter into, make, execute, deliver and receive written
agreements, undertakings and instruments of every kind and nature; to give oral
instructions and make oral agreements; and
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60
generally to do any and all other acts and things incidental to any of the
foregoing or with reference to any dealings or transactions which any attorney
for the Partnership may deem necessary, proper or advisable;
(g) To acquire and enter into any contract of
insurance which the General Partner deems necessary or appropriate for the
protection of the Partnership or any Subsidiary Entity, for the conservation of
the Partnership's assets (or the assets of any Subsidiary Entity) or for any
purpose convenient or beneficial to the Partnership or any Subsidiary Entity;
(h) To conduct any and all banking transactions
on behalf of the Partnership; to adjust and settle checking, savings, and other
accounts with such institutions as the General Partner shall deem appropriate;
to draw, sign, execute, accept, endorse, guarantee, deliver, receive and pay
any checks, drafts, bills of exchange, acceptances, notes, obligations,
undertakings and other instruments for or relating to the payment of money in,
into or from any account in the Partnership's name; to execute, procure,
consent to and authorize extensions and renewals of the same; to make deposits
and withdraw the same and to negotiate or discount commercial paper,
acceptances, negotiable instruments, bills of exchange and dollar drafts;
(i) To demand, sue for, receive, and otherwise
take steps to collect or recover all debts, rents, proceeds, interests,
dividends, goods, chattels, income from property, damages and all other
property to which the Partnership may be entitled or which are or may become
due the Partnership from any Person; to
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61
commence, prosecute or enforce, or to defend, answer or oppose, contest and
abandon all legal proceedings in which the Partnership is or may hereafter be
interested; and to settle, compromise or submit to arbitration any accounts,
debts, claims, disputes and matters which may arise between the Partnership and
any other Person and to grant an extension of time for the payment or
satisfaction thereof on any terms, with or without security;
(j) To make arrangements for financing, including
the taking of all action deemed necessary or appropriate by the General Partner
to cause any approved loans to be closed;
(k) To take all reasonable measures necessary to
insure compliance by the Partnership with contractual obligations and other
arrangements entered into by the Partnership from time to time in accordance
with the provisions of this Agreement, including periodic reports as required
to lenders and using all due diligence to insure that the Partnership is in
compliance with its contractual obligations;
(l) To maintain the Partnership's books and
records;
(m) To create or maintain Affiliates engaged in
activities that the Partnership could itself undertake; and
(n) To prepare and deliver, or cause to be
prepared and delivered by the Accountants, all financial and other reports with
respect to the operations of the Partnership, and to prepare and file all
federal, state and local tax returns and reports.
<PAGE> 65
62
Except as otherwise provided herein, to the extent the duties of the General
Partner require expenditures of funds to be paid to Third Parties, the General
Partner shall not have any obligations hereunder except to the extent that
Partnership funds are reasonably available to it for the performance of such
duties, and nothing herein contained shall be deemed to authorize or require
the General Partner, in its capacity as such, to expend its individual funds
for payment to Third Parties or to undertake any individual liability or
obligation on behalf of the Partnership.
7.3 Major Decisions.
(a) The General Partner shall not, without the
prior consent of the Limited Partner, (i) on behalf of the Partnership, amend,
modify or terminate this Agreement other than to reflect (A) the making of
additional Capital Contributions or and the issuance of additional Partnership
Units or Preferred Units by reason thereof, all in accordance with the terms of
this Agreement, (B) the withdrawal or assignment of the interest of any Partner
in accordance with the terms of this Agreement, or (C) any changes necessary to
satisfy the REIT Requirements, or (ii) permit the Partnership, on behalf of any
Subsidiary Partnership, to amend, modify or terminate the organizing agreement
pursuant to which such Subsidiary Partnership operates other than to reflect
(A) the admission of additional limited partners therein pursuant to the terms
thereof, (B) the making of additional capital contributions thereto pursuant to
the terms thereof, (C) the withdrawal or assignment of the interest of any
partner thereof pursuant to the terms thereof, or (D) any changes necessary to
satisfy
<PAGE> 66
63
the REIT Requirements. Notwithstanding the foregoing, this Agreement shall not
be modified or amended in such manner as to reduce the interest of any Partner
in the Partnership, to reduce any Partner's share of distributions made by the
Partnership, to create any obligations for any Partner or to deprive any
Partner of (or otherwise impair) any other rights it may have under this
Agreement (including in respect of tax allocations) unless such reduction,
deprivation or impairment shall apply to all Partners of the Partnership on a
uniform or pro rata basis, as applicable, or unless the affected Partner shall
execute or consent in writing to the modification or amendment in question.
(b) The General Partner shall not, without the
prior consent of the Limited Partner, on behalf of the Partnership, undertake
any of the following actions (together with any act described in paragraph (a)
hereof, the "Major Decisions"):
(i) make a general assignment for the
benefit of creditors (or cause or permit (if permission of the
Partnership or any Subsidiary Partnership is required) such an
assignment to be made on behalf of a Subsidiary Partnership) or
appoint or acquiesce in the appointment of a custodian, receiver or
trustee for all or any part of the assets of the Partnership (or any
Subsidiary Partnership);
(ii) take title to any personal or real
property, other than in the name of the Partnership or pursuant to
Section 7.6 hereof;
<PAGE> 67
64
(iii) institute any proceeding for
Bankruptcy on behalf of the Partnership, or cause or permit (if
permission of the Partnership or any Subsidiary Partnership is
required) the institution of any such proceeding on behalf of any
Subsidiary Partnership;
(iv) act or cause the taking or
refraining of any action with respect to the dissolution and winding
up of the Partnership (or any Subsidiary Partnership) or an election
to continue the Partnership (or any Subsidiary Partnership) or to
continue the business of the Partnership (or any Subsidiary
Partnership);
(v) exchange, Transfer or
otherwise dispose of all or substantially all of the Partnership's
assets or cause or permit (if permission of the Partnership or any
Subsidiary Partnership is required) any exchange, Transfer or
other disposition of all or substantially all of the assets of Simon
Property Group (Texas), L.P. or Simon Property Group (Illinois), L.P.
(including, in each case, by way of merger, consolidation or other
combination in one or a series of transactions);
(vi) Transfer or encumber any Property;
(vii) borrow or lend any funds;
(viii) cause the issuance of any Preferred
Units; or
(ix) make, withdraw or modify any federal
income tax elections.
<PAGE> 68
65
7.4 General Partner and Limited Partner Participation.
The General Partner and the Limited Partner agree that (a) all
activities and business operations of the General Partner and
the Limited Partner, including but not limited to, activities
pertaining to the acquisition, development, redevelopment and
ownership of properties, shall be conducted directly or indirectly
through the Partnership, the Limited Partner or any Subsidiary
Partnership of either partnership; provided, however, that each of the
General Partner and the Managing General Partner of the Limited Partner
shall have the right to form wholly-owned subsidiaries (which shall be
qualified REIT subsidiaries within the meaning of the Code) to act as
general partners of Subsidiary Partnerships, (b) any property
acquisitions shall henceforth be made through Simon-DeBartolo Group,
L.P. or any Subsidiary Partnership of Simon-DeBartolo Group, L.P. and
not through the Partnership or any subsidiary of the Partnership and
(c) except as permitted under Section 4.1, any funds raised by the
General Partner, whether by issuance of stock, borrowing or otherwise,
will be made available to Simon-DeBartolo Group, L.P. as capital
contributions, loans or otherwise. Without the consent of the Limited
Partner the General Partner shall not, directly or indirectly,
participate in or otherwise acquire any interest in any real or
personal property other than in accordance with this Section 7.4. In
addition, the General Partner and the Limited Partner agree to conduct
their respective affairs, to the extent they are so able to do, in a
manner which will preserve the equivalence in value between a Share and
a Partnership Unit.
7.5 Proscriptions. The General Partner shall have not
have the authority to:
<PAGE> 69
66
(a) Do any act in contravention of this
Agreement;
(b) Possess any Partnership property or assign
rights in specific Partnership property for other than Partnership purposes; or
(c) Do any act in contravention of applicable
law.
Nothing herein contained shall impose any obligation on any Person or firm
doing business with the Partnership to inquire as to whether or not the General
Partner has properly exercised its authority in executing any contract, lease,
mortgage, deed or any other instrument or document on behalf of the
Partnership, and any such third Person shall be fully protected in relying upon
such authority.
7.6 Title Holder. To the extent allowable under
applicable law, title to all or any part of the Properties of the Partnership
may be held in the name of the Partnership or any other individual,
corporation, partnership, trust or otherwise, the beneficial interest in which
shall at all times be vested in the Partnership. Any such title holder shall
perform any and all of its respective functions to the extent and upon such
terms and conditions as may be determined from time to time by the General
Partner.
7.7 Waiver and Indemnification. Neither the General
Partner nor any of its Affiliates, directors, trust managers, officers,
shareholders, nor any Person acting on its or their behalf pursuant hereto,
shall be liable, responsible or accountable in damages or otherwise to the
Partnership or to any Partner for any acts or omissions performed or omitted to
be performed by them within the scope of the authority
<PAGE> 70
67
conferred upon the General Partner by this Agreement and the Act, provided that
the General Partner's or such other Person's conduct or omission to act was
taken in good faith and in the belief that such conduct or omission was in the
best interests of the Partnership and, provided further, that the General
Partner or such other Person shall not be guilty of fraud, willful misconduct
or gross negligence. The General Partner acknowledges that it owes fiduciary
duties both to its shareholders and to the Limited Partner and it shall use its
reasonable efforts to discharge such duties to each; provided, however, that in
the event of a conflict between the interests of the shareholders of the
General Partner and the interests of the Limited Partner, the Limited Partner
agrees that the General Partner shall discharge its fiduciary duties to the
Limited Partner by acting in the best interests of the General Partner's
shareholders. Nothing contained in the preceding sentence shall be construed
as entitling the General Partner to realize any profit or gain from any
transaction between the General Partner and the Partnership (except as may be
required by law upon a distribution to the General Partner), including from the
lending of money by the General Partner to the Partnership or the contribution
of property by the General Partner to the Partnership, it being understood that
in any such transaction the General Partner shall be entitled to cost recovery
only. The Partnership shall, and hereby does, indemnify and hold harmless the
General Partner and its Affiliates, their respective directors, officers,
shareholders and any other individual acting on its or their behalf to the
extent such Persons would be indemnified by the General Partner pursuant to
Article Eighth of the Charter of the
<PAGE> 71
68
General Partner if such persons were directors, officers, agents or employees
of the General Partner; provided, however, that no Partner shall have any
personal liability with respect to the foregoing indemnification, any such
indemnification to be satisfied solely out of the assets of the Partnership.
The Partnership shall, and hereby does, indemnify the Limited Partner, its
Affiliates, and its and their respective directors, officers, shareholders and
any other individual acting on its or their behalf, from and against any costs
(including costs of defense) incurred by it or them as a result of any
litigation in which the Limited Partner is named as a defendant and relating to
the operations of the Partnership, unless such costs are the result of
misconduct on the part of, or a breach of this Agreement by, the Limited
Partner; provided, however, that no Partner shall have any personal liability
with respect to the foregoing indemnification, any such indemnification to be
satisfied solely out of the assets of the Partnership.
7.8 Limitation of Liability of Directors, Shareholders
and Officers of the General Partner. Any obligation or liability whatsoever of
the General Partner which may arise at any time under this Agreement or any
other instrument, transaction or undertaking contemplated hereby shall be
satisfied, if at all, out of the assets of the General Partner or the
Partnership only. No such obligation or liability shall be personally binding
upon, nor shall resort for the enforcement thereof be had to, any of the
General Partner's directors, shareholders, officers, employees or agents,
regardless of whether such obligation or liability is in the nature of
contract, tort or otherwise.
<PAGE> 72
69
ARTICLE VIII
Dissolution, Liquidation and Winding-Up
8.1 Accounting. In the event of the dissolution,
liquidation and winding-up of the Partnership, a proper accounting (which shall
be certified) shall be made of the Capital Account of each Partner and of the
Profits or Losses of the Partnership from the date of the last previous
accounting to the date of dissolution. Financial statements presenting such
accounting shall include a report of the Accountants.
8.2 Distribution on Dissolution. In the event of the
dissolution and liquidation of the Partnership for any reason, the assets of
the Partnership shall be liquidated for distribution in the following rank and
order:
(a) Payment of creditors of the Partnership
(other than Partners) in the order of priority as provided by law;
(b) Establishment of reserves as determined by
the General Partner to provide for contingent liabilities, if any;
(c) Payment of debts of the Partnership to
Partners, if any, in the order of priority provided by law;
(d) To the Partners in accordance with the
positive balances in their Capital Accounts after giving effect to all
contributions, distributions and allocations for all periods, including the
period in which such distribution occurs (other
<PAGE> 73
70
than those distributions made pursuant to this Section 8.2(d), Section 8.3 or
Section 8.4 hereof).
If upon dissolution and termination of the Partnership the
Capital Account of any Partner is less than zero, then such Partner shall have
no obligation to restore the negative balance in its Capital Account. Whenever
the Liquidating Agent reasonably determines that any reserves established
pursuant to paragraph (b) above are in excess of the reasonable requirements of
the Partnership, the amount determined to be excess shall be distributed to the
Partners in accordance with the above provisions.
8.3 Sale of Partnership Assets. In the event of the
liquidation of the Partnership in accordance with the terms of this Agreement,
the Liquidating Agent may sell Partnership property; provided, however, that
all leases, encumbrances or Transfers of the Partnership assets shall be
made by the Liquidating Agent solely on an "arm's-length" basis, at the best
price and on the best terms and conditions as the Liquidating Agent in good
faith believes are reasonably available at the time and under the circumstances
and on a non- recourse basis to the Limited Partner. The liquidation of the
Partnership shall not be deemed finally terminated until the Partnership shall
have received cash payments in full with respect to obligations such as notes,
purchase money mortgages, installment sale contracts or other similar
receivables received by the Partnership in connection with the sale of
Partnership assets and all obligations of the Partnership have been satisfied
or assumed by the General Partner. The
<PAGE> 74
71
Liquidating Agent shall continue to act to enforce all of the rights of the
Partnership pursuant to any such obligations until paid in full or otherwise
discharged or settled.
8.4 Distributions in Kind. In the event that it becomes
necessary to make a distribution of Partnership property in kind, the General
Partner may, with the consent of the Limited Partner, transfer and convey such
property to the distributees as tenants in common, subject to any liabilities
attached thereto, so as to vest in them undivided interests in the whole of
such property in proportion to their respective rights to share in the proceeds
of the sale of such property (other than as a creditor) in accordance with the
provisions of Section 8.2 hereof. Immediately prior to the distribution of
Partnership property in kind to a Partner, the Capital Account of each Partner
shall be increased or decreased, as the case may be, to reflect the manner in
which the unrealized income, gain, loss and deduction inherent in such property
(to the extent not previously reflected in the Capital Accounts) would be
allocated between the Partners if there were a taxable disposition of such
property for its fair market value as of the date of the distribution.
8.5 Documentation of Liquidation. Upon the completion of
the dissolution and liquidation of the Partnership, the Partnership shall
terminate and the Liquidating Agent shall have the authority to execute and
record any and all documents or instruments required to effect the dissolution,
liquidation and termination of the Partnership.
<PAGE> 75
72
8.6 Liability of the Liquidating Agent. The Liquidating
Agent shall be indemnified and held harmless by the Partnership from and
against any and all claims, demands, liabilities, costs, damages and causes of
action of any nature whatsoever arising out of or incidental to the Liquidating
Agent's taking of any action authorized under or within the scope of this
Agreement; provided, however, that no Partner shall have any personal liability
with respect to the foregoing indemnification, any such indemnification to be
satisfied solely out of the assets of the Partnership; and provided further,
however, that the Liquidating Agent shall not be entitled to indemnification,
and shall not be held harmless, where the claim, demand, liability, cost,
damage or cause of action at issue arose out of:
(a) A matter entirely unrelated to the
Liquidating Agent's action or conduct pursuant to the provisions of this
Agreement; or
(b) The proven misconduct or negligence of the
Liquidating Agent.
ARTICLE IX
Transfer of Partnership Interests and Related Matters
9.1 General Partner Transfers and Deemed Transfers. The
General Partner shall not (i) withdraw from the Partnership, (ii) merge,
consolidate or engage in any combination with another Person, (iii) sell all or
substantially all of its assets or (iv) Transfer or Pledge all or any portion
of its Partnership Units or Preferred Units except to the Limited Partner, in
each case
<PAGE> 76
73
without the consent of the Limited Partner. In the event of the withdrawal by
a General Partner from the Partnership, in violation of this Agreement or
otherwise, or the dissolution, termination or Bankruptcy of a General Partner,
within 90 days after the occurrence of any such event, the remaining General
Partners, if any, or a majority in interest of the remaining Partners may elect
in writing to continue the Partnership business and may, or if there is then no
General Partner other than the one which has withdrawn or as to which
dissolution, termination or Bankruptcy has occurred shall, select a substitute
general partner effective as of the date of the occurrence of any such event.
9.2 Limited Partner Transfers. Without the consent
of the General Partner, the Limited Partner shall not (i) withdraw from the
Partnership, (ii) merge, consolidate or engage in any combination with
another Person other than the General Partner, (iii) sell all or substantially
all of its assets or (iv) Pledge all or any portion of its Partnership Units
or Preferred Units. In addition, the Limited Partner shall not Transfer
any of its Partnership Units and if it does so, the Partnership shall
immediately terminate.
<PAGE> 77
74
9.3 Issuance of Additional Partnership Units and
Preferred Units.
(a) The General Partner may, with the consent of
the Limited Partner and upon its determination that the issuance of Preferred
Units is in the best interests of the Partnership, issue Preferred Units in
accordance with Sections 4.1(c) and 4.1(d) hereof.
(b) The General Partner shall be authorized on
behalf of each of the Partners to amend this Agreement to reflect the admission
of any Partner or any increase in the Partnership Units or Preferred Units of
any Partner in accordance with the provisions of this Agreement, and the
General Partner shall promptly deliver a copy of such amendment to the Limited
Partner.
<PAGE> 78
75
9.4 Restrictions on Transfer.
(a) In addition to any other restrictions on
Transfer herein contained, in no event may any Transfer or assignment of a
Partnership Unit or Preferred Unit by any Partner be made nor may any new
Partnership Unit or Preferred Unit be issued by the Partnership (i) to any
Person who lacks the legal right, power or capacity to own a Partnership Unit
or Preferred Unit; (ii) in violation of applicable law; (iii) if such Transfer
would immediately or with the passage of time cause the General Partner or the
Limited Partner to fail to comply with the REIT Requirements, such
determination to be made assuming that the General Partner and the Limited
Partner each does comply with the REIT Requirements immediately prior to the
proposed Transfer; (iv) if such Transfer would cause the Partnership to become,
with respect to any employee benefit plan subject to Title I of ERISA, a
"party-in-interest" (as defined in Section 3(14) of ERISA) or a "disqualified
person" (as defined in Section 4975(e) of the Code), (v) if such Transfer
would, in the opinion of counsel to the Partnership, cause any portion of the
underlying assets of the Partnership to constitute assets of any employee
benefit plan pursuant to Department of Labor Regulations Section 2510.3-101, or
(vi) if such Transfer would result in a deemed distribution to any Partner
attributable to a failure to meet the requirements of Regulations Section
1.752-2(d)(1), unless such Partner consents thereto.
(b) No Partnership Unit or Preferred Unit may be
transferred by the General Partner to any Person other than the Limited
Partner.
<PAGE> 79
76
ARTICLE X
Rights and Obligations of the Limited Partner
10.1 No Participation in Management. Except as expressly
permitted hereunder, the Limited Partner shall not take part in the management
of the Partnership's business, transact any business in the Partnership's name
or have the power to sign documents for or otherwise bind the Partnership;
provided, that the foregoing shall not be deemed to limit the ability of the
Limited Partner (or any officer or director thereof) who is an officer,
director or employee of the Partnership, the General Partner, or any Affiliate
thereof, to act in such capacity.
10.2 Bankruptcy of the Limited Partner. The Bankruptcy of
the Limited Partner shall not cause a dissolution of the Partnership, but the
rights of such Partner to share in the Profits or Losses of the Partnership and
to receive distributions of Partnership funds shall, on the happening of such
event, devolve to its successors or assigns, subject to the terms and
conditions of this Agreement, and the Partnership shall continue as a limited
partnership. However, in no event shall such assignee(s) become a Substituted
Limited Partner without the consent of the General Partner.
10.3 No Withdrawal. The Limited Partner may not withdraw
from the Partnership without the prior written consent of the General Partner,
other than as expressly provided in this Agreement.
<PAGE> 80
77
10.4 Guaranty and Indemnification Agreements.
(a) In the event that the Partnership incurs any
additional financings, the limited partners of the Limited Partner shall have
the right, but not the obligation, on not less than 30 days prior notice to all
such limited partners, to guarantee repayment of all or a part thereof or to
indemnify the General Partner or the Partnership to the extent that the assets
of the Partnership available to satisfy the obligation are not sufficient (and
to the extent such right is exercised by a limited partner of the Limited
Partner, such liability will become a Limited Partner Liability of such limited
partner); provided, however, that no limited partner of the Limited Partner may
guarantee (or indemnify the General Partner or the Partnership against) any
liability to the extent the proceeds thereof are utilized to repay a Limited
Partner Liability of another limited partner of the Limited Partner unless such
other limited partner of the Limited Partner consents in writing to such
guaranty or indemnity; and provided further, however, that in the event of a
conflict among limited partners of the Limited Partner over which limited
partners of the Limited Partner will guarantee or indemnify against any portion
of such additional financing, each such limited partner shall guarantee or
indemnify against a pro-rata portion of such liability determined in accordance
with its interest in the Limited Partner.
(b) Notwithstanding anything else to the contrary
in this Agreement, the General Partner shall give each limited partner of the
Limited Partner thirty (30) days prior notice of any sale, refinancing, debt
modification, release or
<PAGE> 81
78
pledge of additional collateral or unscheduled repayment of debt that will
result in more than a de minimis reduction of such limited partner's Limited
Partner Liabilities (it being understood that the General Partner shall use
best efforts to so notify the affected limited partners of the Limited Partner
at least forty-five (45) days prior to such event). Upon receipt of each such
notice, each such limited partner of the Limited Partner shall be entitled to
take such action as it may deem appropriate to protect against any loss of tax
basis that will result from such event, so long as (i) such action does not
result in a loss by any other limited partner of the Limited Partner of its
ability to include its Limited Partner Liabilities in its basis for federal
income tax purposes, or otherwise have a material adverse effect on any other
limited partner of the Limited Partner, and (ii) such action does not, in the
reasonable opinion of the General Partner, materially interfere with the
Partnership's operations, and does not have any other material adverse effect
on the Partnership or the Partners (it being understood that, for purposes of
this sentence, the loss of basis attributable to "excess nonrecourse
liabilities" of the Partnership that does not cause gain to a limited partner
of the Limited Partner under Section 731 of the Code shall not be considered a
material adverse effect). The Partners agree to cooperate in good faith to
take, or cause the Partnership to take, any action described in the preceding
sentence.
(c) Notwithstanding the provisions of paragraphs
(a) and (b) hereof, no limited partner of the Limited Partner shall have any
right to negotiate directly with any lender of the Partnership, any such
negotiation to be undertaken by
<PAGE> 82
79
the General Partner on behalf of, and at the request of, such limited partner of
the Limited Partner.
ARTICLE XI
General Provisions
11.1 Notices. All notices, offers or other communications
required or permitted to be given pursuant to this Agreement shall be in
writing and may be personally delivered or sent by United States mail or by
reputable overnight delivery service and shall be deemed to have been given
when delivered in person, upon receipt when delivered by overnight delivery
service or three business days after deposit in United States mail, registered
or certified, postage prepaid, and properly addressed, by or to the appropriate
party. For purposes of this Section 11.1, the addresses of the parties hereto
shall be as set forth on Exhibit B hereof. The address of any party hereto may
be changed by a notice in writing given in accordance with the provisions
hereof.
11.2 Successors. This Agreement and all the terms and
provisions hereof shall be binding upon and shall inure to the benefit of the
Partners, and their legal representatives, heirs, successors and permitted
assigns, except as expressly herein otherwise provided.
11.3 Effect and Interpretation. This agreement shall be
governed by and construed in conformity with the laws of the State of Delaware.
<PAGE> 83
80
11.4 Counterparts. This Agreement may be executed in
counterparts, each of which shall be an original, but all of which shall
constitute one and the same instrument.
11.5 Partners Not Agents. Nothing contained herein shall
be construed to constitute any Partner the agent of another Partner, except as
specifically provided herein, or in any manner to limit the Partners in the
carrying on of their own respective businesses or activities.
11.6 Entire Understanding; Etc. This Agreement and the
other agreements referenced herein or therein or to which the signatories
hereto or thereto are parties constitute the entire agreement and understanding
between the Partners and supersede any prior understandings and/or written or
oral agreements among them respecting the subject matter within.
11.7 Severability. If any provision of this Agreement, or
the application of such provision to any Person or circumstance, shall be held
invalid by a court of competent jurisdiction, the remainder of this Agreement,
or the application of such provision to Persons or circumstances other than
those to which it is held invalid by such court, shall not be affected thereby.
11.8 Trust Provision. This Agreement, to the extent
executed by the trustee of a trust, is executed by such trustee solely as
trustee and not in a separate capacity. Nothing herein contained shall create
any liability on, or require the
<PAGE> 84
81
performance of any covenant by, any such trustee individually, nor shall
anything contained herein subject the individual personal property of any
trustee to any liability.
11.9 Pronouns and Headings. As used herein, all pronouns
shall include the masculine, feminine and neuter, and all defined terms shall
include the singular and plural thereof wherever the context and facts require
such construction. The headings, titles and subtitles herein are inserted for
convenience of reference only and are to be ignored in any construction of the
provisions hereof. Any references in this Agreement to "including" shall be
deemed to mean "including without limitation."
11.10 Assurances. Each of the Partners shall hereafter
execute and deliver such further instruments (provided such instruments are in
form and substance reasonably satisfactory to the executing Partner) and do
such further acts and things as
<PAGE> 85
82
may be reasonably required or useful to carry out the intent and purpose of
this Agreement and as are not inconsistent with the terms hereof.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement or caused this Agreement to be executed as of the date and year first
above written, which Agreement shall be effective on the date it is executed
and delivered by the parties hereto.
GENERAL PARTNER:
SIMON DeBARTOLO GROUP, INC.,
a Maryland corporation
115 West Washington Street
Indianapolis, Indiana 46204
By:________________________________________________
Name:
Title:
LIMITED PARTNER:
SIMON-DeBARTOLO GROUP, L.P.
a Delaware limited partnership
By: SD Property Group, Inc.,
Managing General Partner
By: ____________________________
Name:
Title:
<PAGE> 1
EXHIBIT 10.2
EXECUTION COPY
===============================================================================
STOCK PURCHASE AGREEMENT
between
M.S. MANAGEMENT ASSOCIATES, INC.
and
THE EDWARD J. DeBARTOLO CORPORATION
--------------
March 26, 1996
--------------
===============================================================================
<PAGE> 2
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 1 SALE AND PURCHASE............................................................. 1
SECTION 1.1 Shares................................................................... 1
SECTION 1.2 Purchase Price........................................................... 1
SECTION 1.3 Delivery................................................................. 1
ARTICLE 2 CLOSINGS...................................................................... 2
ARTICLE 3 REPRESENTATIONS AND WARRANTIES ............................................... 2
SECTION 3.1 Mutual................................................................... 2
SECTION 3.2 Buyer.................................................................... 3
SECTION 3.3 Seller................................................................... 3
ARTICLE 4 COVENANTS..................................................................... 4
SECTION 4.1 Conduct of Business...................................................... 4
SECTION 4.2 Access to Information.................................................... 4
ARTICLE 5 CLOSING CONDITIONS............................................................ 5
ARTICLE 6 TERMINATION................................................................... 5
SECTION 6.1 Termination.............................................................. 5
SECTION 6.2 Effects of Termination................................................... 6
ARTICLE 7 MISCELLANEOUS.................................................................. 6
SECTION 7.1 Survival.................................................................. 6
SECTION 7.2 Governing Law............................................................. 6
SECTION 7.3 Consent to Jurisdiction and Service of Process............................ 6
SECTION 7.4 Notices................................................................... 7
SECTION 7.5 Waivers and Amendments; Remedies.......................................... 8
SECTION 7.6 Binding Effect; No Assignment; Third Party
Beneficiary...................................................... 8
SECTION 7.7 Headings.................................................................. 8
SECTION 7.8 Counterparts.............................................................. 8
ARTICLE 8 DEFINITIONS.................................................................... 9
SECTION 8.1 Glossary.................................................................. 9
SECTION 8.2 Certain Definitions....................................................... 9
SECTION 8.3 Other Definitional Provisions............................................. 11
</TABLE>
Schedule 3.1(c)
Schedule 3.1(d)
i
<PAGE> 3
STOCK PURCHASE AGREEMENT, dated March 26, 1996, between
M.S.Management Associates, Inc., a Delaware corporation (the "Buyer"), and The
Edward J. DeBartolo Corporation, an Ohio corporation (the "Seller").
A Glossary of the defined terms used in this Agreement appears
in Section 8.1.
Simon Property Group, Inc., a Maryland corporation ("Parent"),
Day Acquisition Corp., an Ohio corporation and a wholly owned Subsidiary of
Parent ("Sub"), and DeBartolo Realty Corporation, an Ohio corporation
("DeBartolo"), have on the date hereof entered into an Agreement and Plan of
Merger (the "Merger Agreement") pursuant to which, among other things, Sub is
expected to be merged (the "Merger") with and into DeBartolo.
The Buyer is an Affiliate of Parent and Sub and the Seller and
DeBartolo Properties Management, Inc., an Ohio corporation (the "Company"), are
Affiliates of DeBartolo.
The Seller is the beneficial and record owner of 665 issued
and outstanding shares of Common Stock of the Company. The Seller wishes to
sell, and the Buyer wishes to purchase, such 665 shares of Common Stock (the
"Shares"), as part of the transactions contemplated by, and concurrently with,
the Merger.
The parties agree as follows:
ARTICLE 1
SALE AND PURCHASE
SECTION 1.1 Shares. Subject to the terms and conditions of
this Agreement, at the Closing, the Seller shall sell, and the Buyer shall
purchase, the Shares.
SECTION 1.2 Purchase Price. The purchase price for the Shares
shall be $2,500,000 (the "Purchase Price"). At the Closing, the Buyer shall pay
the Purchase Price in immediately available funds to the Seller.
SECTION 1.3 Delivery. At the Closing, the Seller shall deliver
or cause to be delivered to the Buyer stock certificates representing the
Shares, duly endorsed in blank or accompanied by stock powers duly executed in
blank, in proper form for transfer, with all appropriate stock transfer tax
stamps affixed.
<PAGE> 4
2
ARTICLE 2
CLOSINGS
The closing of the sale and purchase of the Shares (the
"Closing") shall take place concurrently with, and at the same time and place
as, the closing of the Merger. The time and date of the Closing shall be
referred to as the "Closing Date."
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Mutual.
Each of the Buyer and the Seller represents and warrants to
the other as follows:
(a) Organization. It is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation. It has all corporate power and authority
necessary to execute, deliver and perform its obligations under this Agreement,
and to consummate the transactions contemplated hereby.
(b) Authorization. The execution and delivery by
it of this Agreement, the performance by it of its obligations hereunder and the
consummation by it of the transactions contemplated hereby have been duly
authorized by all necessary corporate actions on its part. This Agreement has
been duly executed and delivered by it and constitutes its legal, valid and
binding obligation, enforceable against it in accordance with the terms of this
Agreement.
(c) No Breach. The execution, delivery or
performance by it of this Agreement will not (i) violate any provision of its
certificate of incorporation or by-laws, each as amended to date, (ii) except,
with respect to the Seller, as set forth on Schedule 3.1(c), constitute a
default under or result in a violation or breach of any material Contract to
which it is a party, or (iii) subject to the compliance with the applicable
requirements, if any, of the HSR Act, result in a violation of or conflict with
any Law applicable to it, in each case, which conflict, violation, default or
breach would have a material adverse effect on the consummation by it of the
Closing.
(d) Consents. Subject to the compliance with the
applicable requirements, if any, of the HSR Act, no consent, approval, exemption
or authorization is required to be obtained from, no notice is required to be
given to, no action is required to be taken by, and no filing is required to be
made with, any
<PAGE> 5
3
Person by it in order (i) for this Agreement to constitute its legal, valid and
binding obligation or (ii) to authorize or permit the consummation of the
Closing, in each case, other than such consent, approval, exemption,
authorization, notice, action or filing (A) in the case of the Seller, as set
forth on Schedule 3.1(c) or 3.1(d), or (B) (x) the absence of which would not
have a material adverse effect on its ability to consummate the Closing, and (y)
the absence of which would not have a material adverse effect on the Company or
the title to the Shares to be delivered by the Seller.
SECTION 3.2 Buyer. The Buyer further represents and warrants
to the Seller that it is purchasing the Shares for its own account for
investment and not with a view toward, or for resale in connection with, any
distribution thereof.
SECTION 3.3 Seller.
The Seller further represents and warrants to the Buyer as
follows:
(a) Title. All of the Shares have been duly
authorized and validly issued and are fully paid and nonassessable. It is the
legal, beneficial and record owner of the Shares, free and clear of any Lien. At
the Closing, it shall convey good and valid title to the Shares, free and clear
of any Lien, to the Buyer.
(b) Capital Stock of the Company. The Company is
authorized to issue 700 shares of Common Stock, all of which are issued and
outstanding and no shares of Common Stock are held by the Company as treasury
stock. 665 of the issued and outstanding shares of Common Stock are owned by the
Seller. The Company is authorized to issue 750 shares of non-voting Preferred
Stock, all of which are issued and outstanding, and no shares of Preferred Stock
are held by the Company as treasury stock. All of the issued and outstanding
shares of capital stock of the Company have been duly authorized and validly
issued and are fully paid and nonassessable. No other class of capital stock or
other ownership interests of the Company is authorized, issued or outstanding.
Except as described in Article Fourth, Section (B)(6) of the Company's Amended
and Restated Articles of Incorporation (a complete and accurate copy of which
has been delivered to the Buyer), or as required by law, the shares of Preferred
Stock do not carry voting rights. Other than the Common Stock, and except as
described in the immediately preceding sentence, no other class of voting
securities of the Company is authorized, issued or outstanding. The Seller is
not a party or subject to any Contract with any Person (including DeBartolo
Realty Partnership, L.P.) that may be applicable to or may affect or otherwise
restrict the Shares or any exercise of rights (including transfer and voting
rights) thereunder.
(c) Options or Other Rights. Except as set forth
in this Agreement, there is no outstanding right, subscription, warrant, call,
unsatisfied preemptive right, option or other agreement of any kind to purchase
or otherwise to receive from the Company or the Seller any of the outstanding,
authorized but
<PAGE> 6
4
unissued, unauthorized or treasury shares of the capital stock or any other
security of the Company, and there is no outstanding security of any kind
convertible into or exchangeable for any such stock or security.
ARTICLE 4
COVENANTS
SECTION 4.1 Conduct of Business. From the date hereof through
the Closing Date, the Seller shall cause the Company to conduct its business in
the ordinary course. Without limiting the generality of the foregoing, from the
date hereof through the Closing Date, the Seller shall cause the Company not to:
(i) with respect to the Common Stock,
declare or pay any dividends or declare or make any other distributions of any
kind, or make any direct or indirect redemption, retirement, purchase or other
acquisition or issuance of the Common Stock;
(ii) discharge or pay, directly or
indirectly, any material obligation or liability to any non-Affiliate before the
same becomes due in accordance with its terms or otherwise than in the ordinary
course of business; or
(iii) terminate or fail to renew, or
waive any material right under, any Contract, including any management
Contracts; provided that nothing in this Section 4.1 shall prohibit or be deemed
to prohibit the Company from terminating any Contract in the ordinary course of
business if officers or directors of the Company in their day-to-day management
of the affairs of the Company consider it necessary or appropriate to do so.
The Seller shall give the Buyer prompt notice of any event, condition or
circumstance occurring from the date hereof through the Closing Date that would
constitute a violation or breach of any representation or warranty contained in
this Agreement, whether made as of the date hereof or as of the Closing Date, or
that would constitute a violation or breach of any covenant or agreement of the
Seller contained in this Agreement.
SECTION 4.2 Access to Information. Subject to the requirements
of confidentiality agreements with third parties, the Seller shall, and shall
cause the Company to, afford to the Buyer and to its officers, employees,
accountants, counsel, financial advisors and other representatives reasonable
access during normal business hours during the period prior to the Closing Date
to all properties, books, contracts, commitments, personnel and records of the
Company and, during such period, the Seller shall furnish promptly to the Buyer
all information concerning the Company's business, properties and personnel as
the Buyer may reasonably request. The Buyer
<PAGE> 7
5
will hold, and will cause its officers, employees, accountants, counsel,
financial advisors and other representatives and affiliates to hold, any
nonpublic information in confidence to the extent required by, and in accordance
with, and will comply with the provisions of the letter agreement dated as of
February 29, 1996, between DeBartolo and Parent.
ARTICLE 5
CLOSING CONDITIONS
The obligations of each of the Buyer and the Seller under this
Agreement to enter into and complete the Closing are subject to the following
conditions precedent:
(a) Representations and Covenants. Each of the
representations and warranties of the Buyer or the Seller to the other contained
herein shall be true in all material respects with the same force and effect as
though made on, at and as of the Closing Date. Each party shall have, in all
material respects, performed all obligations and agreements and complied with
all covenants and conditions contained in this Agreement and required to be
performed and complied with by it at or prior to the Closing Date. Each party
shall have delivered to the other a certificate, signed by an authorized
representative of its and dated the Closing Date, to the foregoing effect.
(b) Consents and Approvals. All material consents and
approvals required for the consummation of the transactions contemplated by the
Closing, including those set forth on Schedule 3.1(c) or 3.1(d), shall have been
obtained and are in full force and effect.
(c) Closing of the Merger. All of the conditions
precedent to the Merger shall have been satisfied or waived and the Merger shall
have been consummated.
ARTICLE 6
TERMINATION
SECTION 6.1 Termination. This Agreement may be terminated
prior to the Closing:
(a) at the election of the Buyer, if the Seller has
breached in any material respect any representation, warranty, covenant or
agreement in this Agreement, which breach cannot be or is not cured by the
Closing Date;
<PAGE> 8
6
(b) at the election of the Seller, if the Buyer has
breached in any material respect any representation, warranty, covenant or
agreement in this Agreement, which breach cannot be or is not cured by the
Closing Date;
(c) at the election of either the Buyer or the
Seller, if (i) any condition to its obligation to close has not been fulfilled
as of the Closing Date or (ii) the Closing shall not have occurred on or prior
to December 31, 1996, except that a party that has wilfully and materially
breached a representation, warranty or covenant of such party set forth in this
Agreement shall not be entitled to exercise its rights to terminate under this
Section 6.1(c); or
(d) automatically and concurrently upon the
termination of the Merger Agreement.
SECTION 6.2 Effects of Termination. If this Agreement is
terminated in accordance with Section 6.1 and the transactions contemplated
hereby are not consummated, this Agreement shall become void and of no further
force and effect; provided that nothing in this Section 6.2 shall relieve a
party of any liability if the termination of this Agreement is caused by its own
breach hereof or the inten tional or willful failure of such party to fulfill
the conditions precedent to the Closing set forth in Article 5.
ARTICLE 7
MISCELLANEOUS
SECTION 7.1 Survival. The representations, warranties,
covenants and agreements set forth herein shall survive the execution and
delivery of this Agreement and the Closing.
SECTION 7.2 Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York applicable to
agreements made and to be performed entirely in New York.
SECTION 7.3 Consent to Jurisdiction and Service of Process.
Any legal action, suit or proceeding arising out of or relating to this
Agreement or the transactions contemplated hereby shall be instituted in a
federal court of the Southern District of New York or a state court located in
New York County, State of New York, and each party agrees not to assert, by way
of motion, as a defense or otherwise, in any such action, suit or proceeding,
any claim that it is not subject personally to the jurisdiction of such court,
that the action, suit or proceeding is brought in an inconvenient forum, that
the venue of the action, suit or proceeding is improper or that this Agreement
or the subject matter hereof may not be enforced in or by such court. Each party
further irrevocably submits to the jurisdiction of such
<PAGE> 9
7
court in any such action, suit or proceeding. Any and all service of process and
any other notice in any such action, suit or proceeding shall be effective
against any party if given personally or by registered or certified mail, return
receipt requested, or by any other means of mail that requires a signed receipt,
postage prepaid, mailed to such party as herein provided. Nothing herein
contained shall be deemed to affect the right of any party to serve process in
any manner permitted by law.
SECTION 7.4 Notices. All notices required or permitted to be
given pursuant to this Agreement shall be given in the manner required by
Section 9.2 of the Merger Agreement and shall be addressed as follows:
if to the Buyer, to:
M.S. Management Associates, Inc.
Merchants Plaza
115 West Washington Street
Suite 15 East
Indianapolis, IN 46204
Attention: David Simon
James M. Barkley, Esq.
Telecopy number: 317-685-7221
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attention: Edwin S. Maynard, Esq.
Toby S. Myerson, Esq.
Telecopy number (212) 757-3990
if to the Seller, to:
The Edward J. DeBartolo Corporation
7655 Market Street
P.O. Box 3287
Youngstown, OH 44513-3287
Attention: Executive Vice President
Telecopy number: 216-758-1183
with a copy to:
Willkie Farr & Gallagher
153 East 53rd Street
New York, New York 10022
Attention: Richard L. Posen, Esq.
William N. Dye, Esq.
<PAGE> 10
8
Telecopy number: (212) 821-8111
SECTION 7.5 Waivers and Amendments; Remedies. This Agreement
may be amended, superseded, renewed or extended, and the terms hereof may be
waived, only by a written instrument signed by the Buyer and the Seller or, in
the case of a waiver, by the party waiving compliance. No delay on the part of
any party in exercising any right, power or privilege hereunder shall operate as
a waiver thereof, nor shall any waiver on the part of any party of any such
right, power or privilege, nor any single or partial exercise of any such right,
power or privilege, preclude any further exercise thereof or the exercise of any
other such right, power or privilege. The rights and remedies herein provided
are cumulative and are not exclusive of any rights or remedies that any party
may otherwise have at law or in equity.
SECTION 7.6 Binding Effect; No Assignment; Third Party
Beneficiary. This Agreement shall be binding upon and inure to the benefit of
the parties and their respective successors and legal representatives. This
Agreement is not assignable except by operation of law, and except that the
Buyer may assign its rights (but not its obligations) hereunder to any of its
wholly owned, direct or indirect, Subsidiaries acceptable to the Seller in its
reasonable judgment. No Person shall be, or deemed to be, a third party
beneficiary of this Agreement. Nothing expressed or implied in this Agreement is
intended or shall be construed to give any Person other than the parties hereto
any rights or remedies under or by reason of this Agreement or any transaction
contemplated hereby.
SECTION 7.7 Headings. The headings in this Agreement are for
reference only, and shall not affect the interpretation of this Agreement.
SECTION 7.8 Counterparts. This Agreement may be executed by
the parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute one and the same instrument.
<PAGE> 11
9
ARTICLE 8
DEFINITIONS
SECTION 8.1 Glossary. The following capitalized terms are
defined in the following Sections of this Agreement:
Term Section
Affiliate 8.2
Agreement 8.2
Buyer Preamble
Closing 2
Closing Date 2
Common Stock 8.2
Company Recitals
Contract 8.2
DeBartolo Recitals
Governmental Authority 8.2
HSR Act 8.2
Law 8.2
Lien 8.2
Merger Recitals
Merger Agreement Recitals
Order 8.2
Parent Recitals
Person 8.2
Preferred Stock 8.2
Purchase Price 1.2
Shares Recitals
Sub Recitals
Subsidiary 8.2
SECTION 8.2 Certain Definitions. As used in this Agreement,
the following terms have the following meanings:
"Affiliate" means, with respect to any Person, any
other Person controlling, controlled by or under common control with such
Person; provided that DeBartolo, DeBartolo Realty Partnership, L.P. and their
Affiliates shall be considered Affiliates of the Company.
"Agreement" means this Stock Purchase Agreement,
including any Schedule thereto, as amended or supplemented in accordance with
the provisions hereof.
<PAGE> 12
10
"Common Stock" means the common stock, par value
$0.01 per share, of the Company and any other share of capital stock of the
Company into which such common stock is exchanged, reclassified or
reconstituted.
"Contract" means any contract, agreement, indenture,
note, bond, loan, instrument, lease, conditional sale contract, mortgage,
license, trust, franchise, sales order, purchase order, commitment or other
binding arrangement, whether or not in writing.
"Governmental Authority" means any government or
political subdivision thereof, whether foreign, domestic, federal, state,
provincial, county, local, municipal or regional, any agency, department,
division or instrumentality of any such government or subdivision, any court,
arbitral tribunal or arbitrator, and any non-governmental regulating body to the
extent that the rules, regulations or orders of such body have the force of law.
"HSR Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"Law" means any law, statute, code, ordinance, rule,
regulation or other requirement, of any Governmental Authority, or any Order.
"Lien" means any lien, pledge, mortgage, security
interest, claim, lease, sublease, deed or trust, charge, option, right of first
refusal, easement, restrictive covenant, encroachment or other survey defect,
transfer restriction under any stockholder or similar agreement, or encumbrance.
"Order" means any order, directive, writ, injunction,
judgment, ruling, award, edict, or decree, of any Governmental Authority.
"Person" means any individual, corporation,
partnership, firm, joint venture, association, joint-stock company, trust,
unincorporated organization, limited liability company, or other organization,
whether or not a legal entity, or any Governmental Authority.
"Preferred Stock" means the preferred stock, par
value $0.01 per share, of the Company and any other share of capital stock of
the Company into which such preferred stock is exchanged, reclassified or
reconstituted.
"Subsidiary" means, with respect to any Person,
another Person in which such first-mentioned Person directly or indirectly owns
or has the power to vote shares of capital stock or other ownership interest
having ordinary voting power to elect a majority of the directors (or other
persons performing similar functions) of such Person.
<PAGE> 13
11
SECTION 8.3 Other Definitional Provisions.
(a) The word "hereby," "hereof," "herein" and
"hereunder," and words of like import, refer to this Agreement as a whole and
not to any particular Section or Article hereof. The words "including" and
"include" mean including without limiting the generality of any description
preceding such term.
(b) All dollar amounts herein are stated in United
States dollars.
<PAGE> 14
12
IN WITNESS WHEREOF, the parties have executed this Agreement
on the date first above written.
M.S. MANAGEMENT ASSOCIATES, INC.
By /S/ David Simon
---------------------------
Name: DAVID SIMON
Title: PRESIDENT
THE EDWARD J. DeBARTOLO CORPORATION
By /s/ Larry T. Thrailkill
---------------------------
Name: LARRY T. THRAILKILL
Title: EXECUTIVE VICE PRESIDENT
<PAGE> 15
Schedule 3.1(c)
Second Amended and Restated New Facility Credit Agreement, dated as of March 31,
1994, by and among DeBartolo, Inc. and The Edward J. DeBartolo Corporation, as
borrowers, the lenders party thereto and Wells Fargo Realty Advisors Funding,
Incorporated, as Administrative Agent
Second Amended and Restated Restructuring Facility Credit Agreement, dated as of
March 31, 1994, by and among DeBartolo, Inc. and The Edward J. DeBartolo
Corporation, as borrowers, the lenders party thereto and Wells Fargo Realty
Advisors Funding, Incorporated, as Administrative Agent
<PAGE> 16
Schedule 3.1(d)
CS Partners, Ltd. (a partner in Coral-CS/LTD Associates, which owns the Coral
Square Mall)
JMB/Miami International Associates (a partner in West Dade County Associates,
which owns the Miami International Mall)
TR Avenues Corp., The Teachers' Retirement System of the State of Illinois and
CBL/Avenues CBL/Avenues G.P. Limited Partnership II (partners in Jackson Avenues
Limited Partnership, which owns Mall of the Avenues).
<PAGE> 1
EXHIBIT 10.3
EXECUTION COPY
- --------------------------------------------------------------------------------
STOCKHOLDERS AGREEMENT
Dated as of March 26, 1996,
Among
SIMON PROPERTY GROUP, INC.,
DeBARTOLO REALTY CORPORATION,
THE PARENT PRINCIPALS
And
THE COMPANY PRINCIPALS
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 1. Parent Special Meeting; Company
Special Meeting; Parent Board of
Directors; Voting of Voting Securities...................... 3
Section 2. Representations, Warranties and
Covenants of the Company Principals.......................... 10
Section 3. Representations, Warranties and
Covenants of the Parent Principals........................... 19
Section 4. Parent Obligation to Elect Company
Board of Directors........................................... 23
Section 5. Company Principal Agreement to Vote.......................... 23
Section 6. Parent Principal Agreement to Vote........................... 25
Section 7. Additional Shares............................................ 26
Section 8. Further Assurances........................................... 27
Section 9. Termination.................................................. 28
Section 10. Specific Enforcement......................................... 29
Section 11. Definitions.................................................. 29
Section 12. Miscellaneous................................................ 35
</TABLE>
i
<PAGE> 3
STOCKHOLDERS AGREEMENT
STOCKHOLDERS AGREEMENT, dated as of March 26, 1996, among SIMON
PROPERTY GROUP, INC., a Maryland corporation (the "PARENT"), DeBARTOLO REALTY
CORPORATION, an Ohio corporation (the "COMPANY"), the persons listed on SCHEDULE
A (collectively, the "PARENT PRINCIPALS"), and the persons listed on SCHEDULE
B-1 and SCHEDULE B-2 (collectively, the "COMPANY PRINCIPALS"). Capitalized and
certain other terms used herein have the respective meanings ascribed to them in
Section 11.
RECITALS
The Parent Principals own beneficially and of record certain of the
Parent Common Stock, Class B Stock and Parent Units.
The Company Principals own beneficially and of record certain of the
Common Stock and Company Units.
Pursuant to the Merger Agreement, a subsidiary of Parent will be merged
with and into the Company, and the Company will be the Surviving Corporation of
such merger, and will thereby become a majority-owned subsidiary of Parent.
The Parent Board of Directors has approved the Merger Agreement, the
transactions provided for therein and this Agreement and will call the Parent
Special Meeting, as required by the Merger Agreement, at which the stockholders
of Parent will vote to approve the Merger, to amend the
<PAGE> 4
2
Articles of Incorporation and the By-Laws (as set forth in the Merger Agreement)
and to take certain other actions related thereto.
The Company Board of Directors has approved the Merger Agreement, the
transactions provided for therein and this Agreement and will call the Company
Special Meeting, as required by the Merger Agreement, at which the stockholders
of the Company will vote to approve the Merger and to take certain other actions
related thereto.
In connection with the Merger, the Company Principals will acquire
shares of Class C Stock and the Parent Principals will exchange their Parent
Units for Company Units. The Company, in its capacity as the general partner of
DeBartolo Realty Partnership, L.P., has agreed to solicit written consent of the
limited partners of DeBartolo Realty Partnership, L.P. to, or call a meeting of
limited partners of DeBartolo Realty Partnership, L.P. at which the limited
partners of DeBartolo Realty Partnership, L.P. will vote to, approve certain
amendments to the partnership agreement of DeBartolo Realty Partnership, L.P. In
addition, simultaneously with the execution of this Agreement, the Parent
Principals are delivering an irrevocable proxy to the Company in the form
attached hereto as EXHIBIT B.
The parties desire to execute and deliver this Agreement for the
purpose of regulating certain aspects of
<PAGE> 5
3
the relationship between the Parent Principals and the Company Principals as
holders of Parent Common Stock, Class B Stock, Class C Stock and Company Units,
as the case may be.
NOW THEREFORE, in consideration of the foregoing premises and the
mutual covenants and agreements contained herein, the parties hereto covenant
and agree as follows:
Section 1. Parent Special Meeting; Company Special Meeting; Parent
Board of Directors; Voting of Voting Securities.
(a) At the Parent Special Meeting, Parent shall nominate the
Persons set forth on SCHEDULE 1(a) for election to the Parent Board of
Directors, such election to take place at the Parent Special Meeting and to be
effective at the Effective Time. Edward J. DeBartolo, Jr. ("EJD, JR.") and Marie
Denise DeBartolo York ("MDDY") each consents to be so nominated and, upon being
so elected and subject to reelection by the stockholders in each annual meeting
thereafter, both agree that neither will resign (except if disabled as defined
in Section 1(c) below) as such a director prior to the fourth anniversary date
of the Effective Time and one of them shall not resign (except if disabled as
defined in Section 1(c) below) as such a director prior to the fifth anniversary
date of the Effective Time.
<PAGE> 6
4
(b) At the Parent Special Meeting, the Parent Principals shall
vote or cause to be voted all of the Voting Securities of Parent owned
beneficially by them (i) to approve the Merger and the issuance of stock in
connection therewith, (ii) to amend the Articles of Incorporation and By-Laws
(as set forth in the Merger Agreement), effective as of the Effective Time,
(iii) to approve the election to the Parent Board of Directors of the Persons
set forth on SCHEDULE 1(a) to constitute the Parent Board of Directors,
effective as of the Effective Time, and (iv) to authorize and approve such other
acts, documents and transactions as may be contemplated by, or reasonably
necessary or desirable in order to give effect to the consummation of the
transactions contemplated by, the Merger Agreement. Parent and the Parent
Principals shall use their best efforts (including retention of proxy
solicitors) to ensure that at the Parent Special Meeting the stockholders of
Parent (i) approve the Merger, (ii) amend the Articles of Incorporation and
By-Laws (as set forth in the Merger Agreement), effective as of the Effective
Time, (iii) elect the Persons set forth on SCHEDULE 1(a) to constitute the
Parent Board of Directors, effective as of the Effective Time and (iv) authorize
and approve such other acts, documents and transactions as may be contemplated
by, or reasonably necessary or desirable in order to give effect to
<PAGE> 7
5
the consummation of the transactions contemplated by, the Merger Agreement.
(c) In the event the proposed amendments to the Articles of
Incorporation and By-Laws (and consequently the election of directors) referred
to in Section 1(b)(ii) and (iii) above are not adopted because of the failure to
obtain the requisite stockholder approval at the Parent Special Meeting but the
Merger is consummated in accordance with the Merger Agreement, then the Parent
shall promptly obtain the resignations of four of its directors (one of whom
shall be a director elected by the holders of the Class B Stock), and thereafter
until such time as such proposed amendments are adopted:
(i) The Parent Principals shall vote all their Class B Stock to
elect MDDY as one of the directors elected by holders of Class B Stock,
voting as a separate class, for so long as she is alive and not
disabled (as defined below) and until she resigns (the "DeBartolo
Seat").
(ii) Parent shall nominate EJD, Jr. for so long as he is alive
and not disabled and until he resigns as one of the directors to be
elected by holders of all capital stock of Parent voting as a single
class (the "Other Seat"). The Parent Principals shall vote all their
Class B Stock and other voting securities, if any, in the Parent in
favor of the election of EJD, Jr.
(iii) For so long as the DeBartolo Seat is occupied by a director
selected by the Company Principals, a director occupying either the
DeBartolo Seat or the Other Seat shall serve on all committees
(including the Nominating Committee) of the Board other than the Audit
Committee and the Special Committee (or any other committee on which
only Outside Directors may be members). Parent and the Parent
Principals agree that the Nominating Committee shall have five members,
with two being Outside Directors of Parent, two elected
<PAGE> 8
6
by Class B Stock, and one being the director occupying either the
DeBartolo Seat or the Other Seat.
(iv) For the remaining directors designated in the Parent Special
Meeting to be elected by holders of all capital stock of Parent voting
as a single class, Parent shall designate Richard Sokolov, G. William
Miller and two other individuals from the current Parent Outside
Directors.
(v) Any vacancy on the Board of Directors with respect to a
director occupying the DeBartolo Seat or the Other Seat shall be filled
as follows:
(w) at any time prior to the fourth anniversary date of the
Effective Time, any vacancy other than one resulting from a death or
disability ("disability" and words of similar import, for purposes of
this Section 1(c) shall mean illness, physical or mental disability or
other incapacity) shall thereupon eliminate the rights of EJDC, or a
Company Principal designated by it, with respect to the first such
vacancy, to have a designee nominated to the Other Seat (and the Parent
Principals shall vote all their Class B Stock to elect the director
occupying the Other Seat (if then occupied) to the DeBartolo Seat) and,
with respect to the second such vacancy, to have a designee elected to
the DeBartolo Seat and the obligations of Parent and the Parent
Principals with respect to both such Seats shall thereupon be
discharged;
(x) at any time during the period from and including the
fourth anniversary date to but not including the fifth anniversary date
of the Effective Time, any vacancy other than one resulting from a
death or disability shall be filled:
(A) with respect to the DeBartolo Seat, (1) the Parent
Principals shall vote all their Class B Stock to elect the director
holding the Other Seat (if then occupied) to the DeBartolo Seat and (2)
the Parent shall nominate a replacement candidate for the Other Seat
(or the DeBartolo Seat if EJDC and its designees then no longer have
the right to have a designee nominated to the Other Seat) selected by
EJDC, or a Company Principal designated by it, which replacement
candidate has similar experience and standing in the business community
to the members of the Special Committee and who has been approved by a
majority of the Special Committee of the Board. If the Special
Committee does not approve such candidate, EJDC or a Company Principal
designated by EJDC may propose
<PAGE> 9
7
another candidate. The right of EJDC or a Company Principal designated
by EJDC to so propose candidates shall continue until one such
candidate is approved, and the Parent Principals shall vote all their
Class B Stock to elect such approved candidate to such Seat; and
(B) with respect to the Other Seat, in accordance with
the procedures outlined in clause (A)(2) of Section 1(c)(v)(x) but
excluding the text of the parenthetical contained in such clause;
provided, however, that if during such period vacancies result other
than from the death or disability with respect to both of the directors
who were directors on said fourth anniversary date, then the rights of
EJDC or a Company Principal designated by EJDC to have a designee
nominated to the Other Seat shall be eliminated, and the obligations of
Parent and the Parent Principals with respect to the Other Seat shall
thereupon be discharged;
(y) at any time from and after the fifth anniversary date
of the Effective Time, any vacancy, other than one resulting from a
death or disability, occurring at a time when immediately prior to such
vacancy:
(A) both the DeBartolo Seat and the Other Seat were
occupied, shall be filled in accordance with the procedures outlined in
clause (A) or (B) of Section 1(c)(v)(x), as applicable, but excluding
the text of the parenthetical in clause (A)(2) and the proviso
following clause (B) in such Section 1(c)(v)(x), or
(B) only the DeBartolo Seat was occupied, then Parent
shall nominate a replacement candidate for the DeBartolo Seat selected
by EJDC, or a Company Principal designated by it, which replacement
candidate has similar experience and standing in the business community
to the members of the Special Committee and who has been approved by a
majority of the Special Committee. If the Special Committee does not
approve such candidate, EJDC or a Company Principal designated by EJDC
may propose another candidate. The right of EJDC or a Company Principal
designated by EJDC to so propose candidates shall continue until such
candidate is approved, and the Parent Principals shall vote all their
Class B Stock to elect such approved candidate to such Seat; and
<PAGE> 10
8
(z) at any time after the Effective Time, any vacancy
resulting from a death or disability shall be filled in accordance with the
procedures outlined in clause (A) or (B) of Section 1(c)(v)(x), as
applicable, but excluding the proviso following clause (B) in such Section
1(c)(v)(x), provided, however, that a vacancy resulting from the death or
disability of EJD, Jr. or MDDY shall at the election of EJDC or a Company
Principal designated by EJDC be filled by a replacement candidate who is
the Chief Executive Officer of EJDC (or any successor to such corporation),
and provided, further, that the right granted pursuant to the immediately
preceding proviso may be exercised only once.
(vi) Notwithstanding the foregoing provisions of this Section
1(c):
(x) the parties' obligations under this Section 1(c) shall
be discharged if the Aggregate Assumed Equity Interest in the Corporation
of the DeBartolo Family Group is for any reason reduced to less than 5%
and, thereafter, EJDC and its designees shall not have the right to have
any designee nominated or elected with respect to the DeBartolo Seat and
the Other Seat; and
(y) the rights of EJDC and its designees to have a designee
nominated to the Other Seat shall be eliminated if the DeBartolo Family
Group shall sell or transfer a portion of its Common Stock and Company
Units so that it shall own less than 50% of its Aggregate Assumed Equity
Interest in the Corporation calculated as if the Effective Time had
occurred on the date hereof.
(d) If the proposed amendments to the Articles of Incorporation and
By-Laws (and consequently the election of directors) described in Section 5.6(a)
of the Merger Agreement are not adopted because of the failure to obtain the
requisite stockholder approval in the first or second annual meetings following
the Parent Special Meeting, the parties agree that EJDC or a Company Principal
designated by EJDC shall have the right at the first annual meeting
<PAGE> 11
9
following the Parent Special Meeting to nominate a candidate for Outside
Director for the seat initially occupied by Mr. Miller, which candidate for
election at such first annual meeting following the Parent Special Meeting must
be approved by a majority of the Special Committee and must be a person of
similar experience and standing in the business community to the other Outside
Directors of Parent. If the Special Committee does not approve any such
candidate for election at such first annual meeting, the Company Principals may
propose another candidate with such experience and standing. EJDC or a Company
Principal designated by EJDC to so propose candidates shall continue until such
candidate is approved. EJDC or a Company Principal designated by EJDC shall have
the right to renominate such approved candidate for Outside Director at the
second annual meeting following the Parent Special Meeting without the approval
of the Special Committee. The Parent will comply with its obligations under
Section 5.6 of the Merger Agreement, and each Parent Principal hereby
irrevocably and unconditionally agrees to vote or to cause to be voted all such
Parent Principal's capital stock of the Parent entitled to vote thereon in favor
of the matters so proposed by the Parent in the first (and, if applicable,
second) annual meeting after the Parent Special Meeting pursuant to the Parent's
compliance with such obligations under such Section 5.6. In addition, each
Parent Principal
<PAGE> 12
10
hereby irrevocably and unconditionally agrees to vote or cause to be voted all
such Parent Principal's capital stock of the Parent entitled to vote thereon in
favor of each nominee designated pursuant to Section 1(c) and this Section 1(d)
so long as such Sections remain effective in accordance with its respective
terms.
(e) At the Company Special Meeting, the Company Principals shall vote
or cause to be voted all of Voting Securities of the Company owned beneficially
by them (i) to approve the Merger, and (ii) to authorize and approve such other
acts, documents and transactions as may be contemplated by, or reasonably
necessary or desirable in order to give effect to the consummation of the
transactions contemplated by, the Merger Agreement. The Company Principals shall
support all reasonable efforts to secure the affirmative vote, at the Company
Special Meeting of the stockholders of the Company to (i) approve the Merger,
and (ii) authorize and approve such other acts, documents and transactions as
may be contemplated by, or reasonably necessary or desirable in order to give
effect to the consummation of the transactions contemplated by, the Merger
Agreement.
(f) At or prior to the Effective Time, Parent and the Parent Principals
that own Parent Units shall execute and deliver the Contribution Agreements. At
or prior to the Effective Time, the Company Principals, the Parent
<PAGE> 13
11
Principals that are to be parties to Contribution Agreements, the Company and
Parent shall, and shall cause their affiliates that they control to, duly
execute and deliver the Amended and Restated Operating Partnership Agreement and
the Amended and Restated Parent Operating Partnership Agreement to, among other
things, create a special limited partnership interest to be held by DeBartolo
Realty Partnership, L.P. following the Effective Time, and at the Effective Time
Parent and the Parent Principals shall make the contributions that are required
to be made by them pursuant to the terms of the Contribution Agreements and the
Amended and Restated Parent Operating Partnership Agreement. At the Effective
Time, the Parent shall execute and deliver the Registration Rights Agreement in
the form attached to the Merger Agreement.
Section 2. Representations, Warranties and Covenants of the Company
Principals. Each Company Principal hereby represents, warrants and covenants to
Parent and the Parent Principals as follows:
(a) Title. As of the date hereof, such Company Principal owns
beneficially and of record the shares of the Common Stock and the Company Units
set forth opposite its name on SCHEDULE B-1 and SCHEDULE B-2 (for each such
Company Principal, the "COMPANY STOCK"), except as set forth on SCHEDULE 2(a),
such Company Principal has the sole right to vote its Company Stock, and there
are no restrictions on
<PAGE> 14
12
rights of disposition or other liens, claims, options, charges or other
encumbrances pertaining to its Company Stock.
(b) Right to Vote. Subject to Section 2(h), such Company
Principal has full legal power, authority and right to vote its Company Stock in
favor of approval and adoption of the Merger Agreement without the consent or
approval of, or any other action on the part of, any other Person. Without
limiting the generality of the foregoing, such Company Principal has not entered
into any voting agreement with respect to any of its Company Stock, granted any
Person any proxy (revocable or irrevocable) or power of attorney with respect to
any of its Company Stock, deposited any of its Company Stock in a voting trust
or entered into any arrangement or agreement limiting or affecting such Company
Principal's legal power, authority or right to vote its Company Stock in favor
of the approval and adoption of the Merger Agreement (other than this Agreement
and the pledges, agreements and other arrangements identified on SCHEDULE 2(a)).
As of the date of the Company Special Meeting, except for this Agreement and
subject to receipt of the consent referred to in Section 2(h), such Company
Principal will have full legal power, authority and right to vote all its
Company Stock in favor of the approval and adoption of the Merger Agreement
without the consent or approval of, or any other action on the part of, any
other
<PAGE> 15
13
Person. From and after the date hereof and prior to the Effective Time, such
Company Principal will not commit any act that could impose additional
restrictions on, or otherwise affect, such legal power, authority and right to
vote all its Company Stock in favor of the approval and adoption of the Merger
Agreement. Without limiting the generality of the foregoing, from and after the
date hereof and prior to the Effective Time, such Company Principal will not
enter into any voting agreement with any Person with respect to any of its
Company Stock, grant any Person any proxy (revocable or irrevocable) or power of
attorney with respect to any of its Company Stock, deposit any of its Company
Stock in a voting trust or otherwise enter into any agreement or arrangement
restricting or affecting such Company Principal's legal power, authority or
right to vote in favor of the approval and adoption of the Merger Agreement
(other than this Agreement).
(c) Authority. Subject to receipt of the consent referred to in
Section 2(h), such Company Principal has full legal power, authority and right
to execute and deliver, and to perform its obligations under, this Agree ment.
This Agreement (i) has been duly executed by such Company Principal and (ii)
constitutes a valid and binding agreement of such Company Principal enforceable
against such Company Principal in accordance with its terms, subject to (1)
bankruptcy, insolvency, moratorium and other similar
<PAGE> 16
14
laws now or hereafter in effect relating to or affecting creditors' rights
generally and (2) general principles of equity (regardless of whether considered
in a proceeding at law or in equity).
(d) Conflicting Instruments. Subject to receipt of the consent
referred to in Section 2(h), neither the execution and delivery of this
Agreement nor the performance by such Company Principal of its obligations
hereunder will violate or result in any breach or violation of or be in conflict
with or constitute a default under any term of (i) any agreement, judgment,
injunction, order, decree, law, regulation or arrangement to which such Company
Principal is a party or by which such Company Principal (or any of its assets)
is bound, (ii) the Articles of Incorporation of the Company or By-Laws of the
Company or (iii) any agreement, judgment, injunction, order, decree, law,
regulation or arrangement to which any of the Company Principals, the Company,
any of the Company Subsidiaries or any of the Company Joint Ventures is a party
or by which any such Person (or any of its assets) is bound.
(e) No Transfer. After the date hereof and prior to the Effective
Time, except as the result of the exercise by a secured creditor of remedies
arising from the pledges and other documents listed on SCHEDULE 2(a), the
Company Principals shall not, and shall not agree to, (i) sell, assign, convey,
dispose of, encumber, mortgage,
<PAGE> 17
15
hypothecate or otherwise transfer any of the Company Stock or the Company Units
that they beneficially own as of the date hereof or (ii) convert or exchange (or
allow the conversion or exchange of) any Company Units that they beneficially
own as of the date hereof into or for shares of Common Stock; provided, however,
that DeBartolo, Inc. or its Significant Affiliates shall have the right (the
"DEBARTOLO RIGHT"), but not the obligation to dispose of, subject to the
covenant set forth below in clause (y), up to thirty percent (30%) (the
"SPECIFIED PERCENTAGE") of the number of Company Units held by the Company
Principals on the date of this Agreement, by selling up to the Specified
Percentage of Company Units to no more than three institutional investors on the
following additional terms and conditions:
(x) The DeBartolo Right may only be exercised to the extent
necessary to enable DeBartolo, Inc. or its Significant Affiliates to make
amortization payments not in excess of $150,000,000 with respect to certain
indebtedness of DeBartolo, Inc. or its Significant Affiliates (the
"AMORTIZATION REQUIREMENT");
(y) The proceeds from a disposition of Company Units pursuant to
the exercise by DeBartolo, Inc. or its Significant Affiliates of the
DeBartolo Right shall be used solely for the payment of any taxes due on
and expenses incurred in connection with such disposition or to satisfy the
Amortization Requirement and no other use of such proceeds shall be made.
(f) Use of Name. After the Effective Time and until such time as the
DeBartolo family name ceases to be used in connection with a material portion of
the opera tions or assets of Parent and, except with respect to
<PAGE> 18
16
certain excluded properties set forth on SCHEDULE 2(f), the Company Principals
shall not use or license to any third party the DeBartolo family name, and shall
not permit any third party (other than third parties who are not Significant
Affiliates and who otherwise have the legal right to use the DeBartolo family
name other than through permission granted by the DeBartolo family members) to
use or license the DeBartolo family name, in connection with (i) any of the
businesses of owning, managing, leasing or developing regional shopping malls or
(ii) purchasing land initially intended to be held for regional shopping mall
development; provided, however, that the foregoing shall not require that (A)
any Person existing on the date hereof cease using the DeBartolo family name in
any activity not permitted by clauses (i) or (ii) above; or (B) DeBartolo
Entertainment, Inc. or its successors and assigns ("DEI") cease or restrict or
change its current use of the DeBartolo family name in connection with the
businesses currently conducted by it (including the businesses that would be
prohibited by clause (i) or (ii) above from using the DeBartolo family name, but
for this clause (B), that are currently conducted by DEI in support of or as an
adjunct to its existing activities), including arranging for the creation and
leasing of retail properties located on or adjacent to office, hotel, casino or
entertainment facilities. Subject to the foregoing restrictions, the
<PAGE> 19
17
activities permitted to be conducted or continued, as the case may be, without
restriction on the use of the DeBartolo family name under this Section 2(f),
include, without limitation, purchasing, owning, managing and operating sports
teams or sports franchises, racetracks, casinos, office buildings, and
commercial facilities (other than regional shopping malls).
(g) Standstill. Each Company Principal covenants and agrees, for itself
and on behalf of each of its Significant Affiliates, agents and representatives,
for the benefit of Parent and the Parent Principals, that, for a period of seven
(7) years after the date hereof, without the express prior written consent of
Parent and the Parent Principals, it will not, and it will cause each of its
Significant Affiliates, agents and representatives not to, singly or as part of
a partnership, limited partnership, syndicate or other group (as such terms are
used within the meaning of Section 13(d)(3) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")), directly or indirectly, through one or
more intermediaries or otherwise, except with respect to any action taken in
furtherance of approving certain amendments to the Articles of Incorporation and
By-Laws as contemplated by the Merger Agreement, (i) make, or in any way
participate in, any solicitation of proxies (as such terms are defined or used
in Regulation 14A of the Exchange Act) with respect to the
<PAGE> 20
18
Parent Voting Securities (including by the execution of action by written
consent), become a participant in any election contest (as such terms are
defined or used in Rule 14a-11 of the Exchange Act) with respect to Parent, seek
to advise, encourage or influence any person or entity with respect to the
voting of any Parent Voting Securities or demand a copy of Parent's stock
ledger, list of its stockholders, or other books and records, (ii) participate
in or encourage the formation of any group which owns or seeks or offers to
acquire beneficial ownership of securities of Parent or rights to acquire such
securities or which seeks or offers, and in any of such cases, to affect control
of Parent or for the purpose of circumventing any provision of this Agreement,
(iii) otherwise act, alone or in concert with others (including by providing
financing for another party), to seek to exercise a controlling influence over
the management, Parent Board of Directors or policies of Parent, (iv) deposit
any Parent Voting Securities into a voting trust or subject any Parent Voting
Securities to any arrangement or agreement with respect to voting of any Parent
Voting Securities, other than any trust for relatives or family members over
which the Company Principals retain sole voting power or any charitable trust or
charitable foundation otherwise in compliance with this Agreement, (v) make a
request to Parent (or its directors, officers, shareholders, employees or
agents) to amend or waive any
<PAGE> 21
19
provision of this Agreement, the Articles of Incorporation or By-Laws, including
without limitation any request to permit the Company Principals or any other
person to take any action in respect of the matters referred to in this Section
2(g) or (vi) disclose any intention, plan or arrangement inconsistent with the
foregoing; provided, however, that nothing in this Section 2(g) shall prohibit
any person who is serving as a director of Parent from, solely in his or her
capacity as such director, (A) taking any action or making any statement at any
meeting of the Parent Board of Directors or any committee thereof; (B) making
any statement to any officer, director or agent of Parent; or (C) making any
statement or disclosure required under the federal securities laws or other
applicable laws.
(h) Consent of Certain Lenders. To the extent any of the
representations, warranties or covenants of the Company Principals under this
Agreement could violate or result in any breach or violation of or be in
conflict with or constitute a default under the terms of the credit agreements
or related documents referred in SCHEDULE 2(a), such representations, warranties
and covenants are hereby expressly conditioned upon, and made subject to the
receipt of the consent of the requisite parties to such credit agreements and
related documents; provided, however, that this Section shall not apply to
Sections 2(f) and 2(g).
<PAGE> 22
20
(i) Severalty of Obligations. The obligations under this
Agreement of each Company Principal are the separate and several obligations of
such Person, and are not joint obligations with respect to any other Person. No
failure by any Company Principal to perform its obligations under this Agreement
shall relieve any other Person of any of its obligations hereunder, and no
Company Principal shall be responsible or liable for the obligations of, or any
action taken or omitted by, any other Person hereunder.
(j) Company Principals. SCHEDULE B-1 AND SCHEDULE B-2 set forth a
complete and accurate list of all the shares of Common Stock and Company Units
owned beneficially and of record by the DeBartolo Family Group at the date
hereof. No member of the DeBartolo Family Group that owns beneficially or of
record any shares of Common Stock or Company Units is not a Company Principal.
Section 3. Representations, Warranties and Covenants of the Parent
Principals. Each Parent Principal hereby represents, warrants and covenants to
the Company Principals and the Company as follows:
(a) Title. As of the date hereof, such Parent Principal owns
beneficially and of record the shares of the Parent Common Stock, Class B Stock
and the Parent Units set forth opposite its name on SCHEDULE A (for each such
Parent Principal, the "PARENT STOCK"), such Parent
<PAGE> 23
21
Stockholder has the sole right to vote its Parent Stock and, except as set forth
on SCHEDULE 3(a), there are no restrictions on rights of disposition or other
liens, claims, options, charges or other encumbrances pertaining to its Parent
Stock.
(b) Right to Vote. Such Parent Principal has full legal power,
authority and right to vote its Parent Stock in favor of approval and adoption
of the Merger Agree ment without the consent or approval of, or any other action
on the part of, any other Person. Without limiting the generality of the
foregoing, except as set forth on SCHEDULE 3(b), such Parent Principal has not
entered into any voting agreement with respect to any of its Parent Stock,
granted any Person any proxy (revocable or irrevocable) or power of attorney
with respect to any of its Parent Stock, deposited any of its Parent Stock in a
voting trust or entered into any arrangement or agreement limiting or affecting
such Parent Stockholder's legal power, authority or right to vote its Parent
Stock in favor of the approval and adoption of the Merger Agreement (other than
this Agreement and the pledges, agreements and other arrangements identified on
SCHEDULE 3(a)). As of the date of the Parent Special Meeting, except for this
Agreement, and, except as set forth on SCHEDULE 3(b), such Parent Principal will
have full legal power, authority and right to vote all its Parent Stock in favor
of the approval and
<PAGE> 24
22
adoption of the Merger Agreement without the consent or approval of, or any
other action on the part of, any other Person. From and after the date hereof
and prior to the Effective Time, such Parent Principal will not commit any act
that could impose additional restrictions on, or otherwise affect, such legal
power, authority and right to vote all its Parent Stock in favor of the approval
and adoption of the Merger Agreement. Without limiting the generality of the
foregoing, from and after the date hereof and prior to the Effective Time, such
Parent Principal will not enter into any voting agreement with any Person with
respect to any of its Parent Stock, grant any Person any proxy (revocable or
irrevocable) or power of attorney with respect to any of its Parent Stock,
deposit any of its Parent Stock in a voting trust or otherwise enter into any
agreement or arrangement restricting or affecting such Parent Principal's legal
power, authority or right to vote in favor of the approval and adoption of the
Merger Agreement (other than this Agreement). The Parent Principals have
delivered to the Company a true, complete and accurate copy of the voting trust
agreement referred to in SCHEDULE 3(b).
(c) Authority. Such Parent Principal has full legal power,
authority and right to execute and deliver, and to perform its obligations
under, this Agree ment. This Agreement (i) has been duly executed by such
<PAGE> 25
23
Parent Principal and (ii) constitutes a valid and binding agreement of such
Parent Principal enforceable against such Parent Principal in accordance with
its terms, subject to (1) bankruptcy, insolvency, moratorium and other similar
laws now or hereafter in effect relating to or affecting creditors' rights
generally and (2) general principles of equity (regardless of whether considered
in a proceeding at law or in equity).
(d) Conflicting Instruments. Neither the execution and delivery
of this Agreement nor the performance by such Parent Principal of its
obligations hereunder will violate or result in any breach or violation of or be
in conflict with or constitute a default under any term of (i) any agreement,
judgment, injunction, order, decree, law, regulation or arrangement to which
such Parent Principal is a party or by which such Parent Principal (or any of
its assets) is bound, (ii) the Articles of Incorporation or ByLaws or (iii) any
agreement, judgment, injunction, order, decree, law, regulation or arrangement
to which any of the Parent Principals, the Parent, any of the Parent
Subsidiaries or any of the Parent Joint Ventures is a party or by which any such
Person (or any of its assets) is bound.
(e) No Transfer. Prior to the Effective Time, the Parent
Principals shall not, and shall not agree to, (i) sell, assign, convey, dispose
of, encumber, mort gage, hypothecate or otherwise transfer any of the Parent
<PAGE> 26
24
Common Stock, Class B Stock or the Parent Units that they beneficially own as of
the date hereof or (ii) convert (or allow the conversion of) any Parent Units
that they beneficially own as of the date hereof into shares of Parent Common
Stock.
(f) Severalty of Obligations. The obligations under this
Agreement of each Parent Principal are the separate and several obligations of
such Person, and are not joint obligations with respect to any other Person. No
failure by any Parent Principal to perform its obligations under this Agreement
shall relieve any other Person of any of its obligations hereunder, and no
Parent Principal shall be responsible or liable for the obligations of, or any
action taken or omitted by, any other Person hereunder.
(g) Parent Principals. SCHEDULE A sets forth a complete and
accurate list of all the shares of Parent Common Stock and Parent Units owned
beneficially and of record by the Simon Family Group at the date hereof. No
member of the Simon Family Group that owns beneficially or of record any shares
of Parent Common Stock or Parent Units is not a Parent Principal.
Section 4. Parent Obligation to Elect Company Board of Directors. The
Parent covenants and agrees that at or immediately after the Effective Time (as
required by the Merger Agreement), it will, and for so long as the Company
<PAGE> 27
25
Principals continue to have representatives on the Parent Board of Directors it
will, vote or cause to be voted all of the Company Voting Securities it holds or
acquires so as to cause the Company Board of Directors to be composed of the
same individuals as the Parent Board of Directors.
Section 5. Company Principal Agreement to Vote. Except as otherwise
permitted or required under Sections 4.1 of the Merger Agreement and subject to
obtaining any required consents referred to in Section 2(h), each Company
Principal hereby irrevocably and unconditionally agrees to vote or to cause to
be voted all its Common Stock at the Company Special Meeting and at any other
annual or special meeting of the stockholders of the Company where such matters
arise (a) in favor of the approval and adoption of the Merger Agreement and the
transactions contemplated thereby, (b) against (i) approval of any proposal made
in opposition to or in competition with the Merger and the other transactions
contemplated by the Merger Agreement, (ii) any merger, consolidation, sale of
assets, business combination, share exchange, reorganization or recapitaliza
tion of the Company or any of its subsidiaries, with or involving any party
other than Parent or one of its affiliates, (iii) any liquidation or winding up
of the Company, (iv) any extraordinary dividend by the Company and (v) any other
action that would impede, interfere with, delay, postpone or attempt to
discourage the Merger or other
<PAGE> 28
26
transactions contemplated by the Merger Agreement or result in a breach of any
of the covenants, representations, warranties or other obligations or agreements
of the Company under the Merger Agreement. In furtherance of the foregoing, each
Company Principal hereby irrevocably and unconditionally agrees, subject to
obtaining any required consents referred to in Section 2(h), to vote (or grant a
consent with respect to) the Company Units held by such Person in favor of the
proposed amendments to the partnership agreement of DeBartolo Realty Partners,
L.P. effected by the Amended and Restated Operating Partnership Agreement to be
entered into pursuant to the Merger Agreement.
Section 6. Parent Principal Agreement to Vote. Except as otherwise
permitted or required under Section 4.2 of the Merger Agreement, each Parent
Principal hereby irrevocably and unconditionally agrees to vote or to cause to
be voted all its Parent Stock at the Parent Special Meeting and at any other
annual or special meeting of the stockholders of Parent where such matters arise
(a) in favor of the matters referred to in Section 1(b) and (b) against (i)
approval of any proposal made in opposition to or in competition with the Merger
and the other transactions contemplated by the Merger Agreement, (ii) any
merger, consolidation, sale of assets, business combination, share exchange,
reorganization or recapitalization of Parent or
<PAGE> 29
27
any of its subsidiaries, with or involving any party other than the Company or
one of its affiliates, (iii) any liquidation or winding up of Parent, (iv) any
extraordinary dividend by Parent and (v) any other action that would impede,
interfere with, delay, postpone or attempt to discourage the Merger or other
transactions contemplated by the Merger Agreement or result in a breach of any
of the covenants, representations, warranties or other obligations or agreements
of Parent under the Merger Agreement. In furtherance of the foregoing, each
Parent Principal hereby irrevocably and unconditionally agrees to vote (or grant
a consent with respect to) the Parent Units held by such Person in favor of the
proposed amendments to the partnership agreement of Simon Property Group, L.P.
effected by the Amended and Restated Parent Operating Partnership Agreement to
be entered into pursuant to the Merger Agreement.
Section 7. Additional Shares. If, after the date hereof, (i) any
Company Principal acquires beneficial owner ship of any shares of Common Stock
or Company Units, or after the Effective Time acquires beneficial ownership of
any shares of Class C Stock or Parent Common Stock or (ii) any Parent Principal
acquires beneficial ownership of any shares of Parent Common Stock, Class B
Stock or Parent Units (for such Parent Principal or Company Principal, as the
case may be, any such shares described in clause (i) or (ii) are
<PAGE> 30
28
referred to as "ADDITIONAL SHARES"), including in each case, without limitation,
upon exercise of any option, warrant or right to acquire Common Stock, Company
Units, Parent Common Stock, Class B Stock, Class C Stock or Parent Units, as the
case may be, or through any stock dividend or stock split, the provisions of
this Agreement applicable to securities owned beneficially by such Parent
Principal or Company Principal, as the case may be, shall be applicable to such
Additional Shares as if such Additional Shares had been beneficially owned by
such Parent Principal or Company Principal, as the case may be, as of the date
hereof. The provisions of the immediately preceding sentence shall be effective
with respect to Additional Shares without action by any Person immediately upon
the acquisition by the relevant Parent Principal or Company Principal of
beneficial ownership of such Additional Shares.
Section 8. Further Assurances. Prior to the Effective Time, the Parent
Principals and the Company Principals shall use their reasonable efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, and to
assist and cooperate with Parent and the Company in doing, all things necessary,
proper or advisable to consummate and make effective, in the most expeditious
manner practicable, the Merger and the other transactions contemplated by the
Merger Agreement and this Agreement, including, without limitation, (i) the
obtaining of all
<PAGE> 31
29
necessary actions or non-actions, waivers, consents and approvals from
Governmental Entities and the making of all necessary registrations and filings
and the taking of all reasonable steps as may be necessary to obtain an approval
or waiver from, or to avoid an action or proceeding by, any Governmental Entity,
(ii) the obtaining of all necessary consents, approvals or waivers from third
parties, (iii) the defending of any lawsuits or other legal proceedings, whether
judicial or administrative, challenging the Merger Agreement or this Agreement
or the consummation of any of the transactions contemplated by the Merger
Agreement or this Agreement, including seeking to have any stay or temporary
restraining order entered by any court or other Governmental Entity vacated or
reversed, and (iv) the execution and delivery of any additional instruments
reasonably necessary to consummate the transactions contemplated by, and to
fully carry out the purposes of, the Merger Agreement, this Agreement and the
other agreements entered into in connection therewith; provided, however, that
the Parent Principals and the Company Principals shall not be required to
convert any Parent Units or Company Units to Parent Common Stock or Common
Stock, respectively, or to purchase any additional Parent Common Stock or Common
Stock, respectively, pursuant to this Agreement. Notwithstanding the foregoing
provisions of this Section 8, EJDC shall use its reasonable best efforts to
obtain all consents and
<PAGE> 32
30
waivers of lenders to EJDC contemplated by Section 6.1(i) of the Merger
Agreement.
Section 9. Termination. This Agreement and all of the obligations of
the parties hereunder shall terminate, and be of no further force and effect, on
the earliest of (i) the occurrence of the Termination Date (as defined in the
Merger Agreement) as such date may be extended by the parties to the Merger
Agreement, (ii) such time after the Effective Time as no Company Principal holds
any Class C Stock, Parent Common Stock or Company Units, (iii) such time after
the Effective Time as no Parent Principal holds any Parent Common Stock, Class B
Stock, or Company Units, (iv) such time as may be set forth in a mutual written
agreement of the Parent Principals and the Company Principals or (v) upon
failure of Parent and the Company to consummate the Merger on or before December
31, 1996.
Section 10. Specific Enforcement. The parties hereto recognize and
agree that, in the event that any of the terms or the provisions of this
Agreement are not per formed or complied with in accordance with their specific
terms or are otherwise breached, immediate irreparable injury would be caused
for which there is no adequate remedy at law. Accordingly, it is agreed that in
the event of a failure by a party to perform its obligations hereunder, the
other parties shall be entitled to specific performance
<PAGE> 33
31
through injunctive relief to prevent breaches of the terms hereof and
specifically to enforce this Agreement and the terms and provisions hereof in
any action instituted in any court of the United States or any state thereof
having subject matter jurisdiction, in addition to any other remedy to which
such other parties may be entitled, at law or in equity.
Section 11. Definitions. As used herein the following terms shall have
the following respective definitions:
"Additional Shares" shall have the meaning ascribed thereto in Section
7.
"Aggregate Assumed Equity Interest in the Corporation" shall have the
meaning ascribed thereto in the Articles of Incorporation.
"Amended and Restated Operating Partnership Agreement" shall have the
meaning ascribed thereto in the Merger Agreement.
"Amended and Restated Parent Operating Partnership Agreement" shall
have the meaning ascribed thereto in the Merger Agreement.
"Amortization Requirement" shall have the meaning ascribed thereto in
Section 2(e).
"Articles of Incorporation" shall mean the Articles of Incorporation of
Parent as in effect from time to time.
<PAGE> 34
32
"beneficial ownership," "beneficially owns," "beneficial owner" and
terms of similar import and the calculation of ownership or voting power of
Voting Securities shall be determined in accordance with Rule 13d-3 under the
Exchange Act as in effect on the date hereof.
"Bound Transferee" shall mean any transferee that, with respect to the
Parent Principals, is a member of the Simon Family Group, and with respect to
the Company Principals, is a member of the DeBartolo Family Group, in each case
at the time of such transfer.
"By-Laws" shall mean the By-Laws of Parent as in effect from time to
time.
"Class B Stock" shall mean the Class B Stock of Parent, having the
terms, rights and designation specified in the Articles of Incorporation.
"Class C Stock" shall mean the Class C Stock of Parent, having the
terms, rights and designation specified in the Articles of Incorporation.
"Common Stock" shall mean the common stock, par value $0.01 per share,
of the Company.
"Company" shall mean DeBartolo Realty Corporation, an Ohio corporation.
"Company Board of Directors" shall mean the board of directors of the
Company.
"Company Joint Ventures" shall have the meaning ascribed thereto in the
Merger Agreement.
<PAGE> 35
33
"Company Principal" shall mean each Person set forth on SCHEDULE B-1
and SCHEDULE B-2.
"Company Principal Nominee" shall mean a Person nominated to be elected
to the Parent Board of Directors by the Company Principals in accordance with
Section 1(d).
"Company Special Meeting" shall mean the special meeting of the
stockholders of the Company called, among other things, to approve the Merger,
including any postponement or adjournment thereof.
"Company Stock" shall have the meaning ascribed thereto in Section
2(a).
"Company Subsidiaries" shall have the meaning ascribed thereto in the
Merger Agreement.
"Company Units" shall mean units representing limited partnership
interests in DeBartolo Realty Partnership, L.P.
"Contribution Agreement" shall have the meaning ascribed thereto in the
Merger Agreement.
"DeBartolo Family Group" shall mean the Persons set forth on SCHEDULE
B-2, other members of the immediate family of any of any such Person, any other
lineal descendants of any such Person, any estates of any such Person, any trust
established for the benefit of any such Person, and any other entity controlled,
directly or indirectly, by any such Person.
<PAGE> 36
34
"DeBartolo Right" shall have the meaning ascribed thereto in Section
2(e).
"DeBartolo Seat" shall have the meaning ascribed thereto in Section
1(c).
"Effective Time" shall have the meaning ascribed thereto in the Merger
Agreement.
"EJDC" shall mean The Edward J. DeBartolo Corporation, an Ohio
Corporation.
"EJD, Jr." shall have the meaning ascribed thereto in Section 1(c).
"Governmental Entity" shall mean any Federal, state or local
government, or any court, administrative agency or commission or other
governmental authority or agency, domestic or foreign.
"Merger" shall mean the merger effected pursuant to the Merger
Agreement.
"Merger Agreement" shall mean the Agreement and Plan of Merger, dated
as of March 26, 1996 (as the same may be amended or modified from time to time),
among Simon Property Group, Inc., Day Acquisition Corp. and DeBartolo Realty
Corporation, substantially in the form attached hereto as EXHIBIT A, as amended
from time to time.
"MDDY" shall have the meaning ascribed thereto in Section 1(c).
"Other Seat" shall have the meaning ascribed thereto in Section 1(c).
<PAGE> 37
35
"Outside Director" shall mean a director of Parent who is neither
employed by Parent nor a member (or an affiliate of a member) of the Simon
Family Group or the DeBartolo Family Group.
"Parent" shall mean Simon Property Group, Inc., a Maryland corporation.
"Parent Board of Directors" shall mean the Board of Directors of
Parent.
"Parent Common Stock" shall mean the common stock of Parent, par value
$0.0001 per share, .
"Parent Joint Venture" shall have the meaning ascribed thereto in the
Merger Agreement.
"Parent Preferred Stock" shall have the meaning ascribed thereto in the
Merger Agreement.
"Parent Principal" shall mean each Person set forth on SCHEDULE A.
"Parent Principal Nominee" shall mean a Person nominated to be elected
to the Parent Board of Directors by the Parent Principals in accordance with the
Articles of Incorporation.
"Parent Special Meeting" shall mean the special meeting of the
stockholders of Parent called, among other things, to approve the Merger,
including any postponement or adjournment thereof or the next annual meeting of
Parent if such matters are to be voted upon at such meeting.
<PAGE> 38
36
"Parent Stock" shall have the meaning ascribed thereto in Section 3(a).
"Parent Subsidiaries" shall have the meaning ascribed thereto in the
Merger Agreement.
"Parent Units" shall mean units representing limited partnership
interests in Simon Property Group, L.P.
"Person" shall mean any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or association, government or any agency or
political subdivision thereof or any other entity of whatever nature.
"Significant Affiliate" shall mean any corporation, partnership or
other legal entity controlled, directly or indirectly, by any Company Principal.
"Specified Percentage" shall have the meaning ascribed thereto in
Section 2(e).
"Special Committee" shall have the meaning ascribed to it in the
By-Laws.
"Simon Family Group" shall mean the Persons set forth on SCHEDULE A
hereto, other members of the immediate family of any of any such Person, any
other lineal descen dants of any such Person, any estates of any such Person,
any trust established for the benefit of any such Person, and any other entity
controlled, directly or indirectly, by any such Person.
<PAGE> 39
37
"Surviving Corporation" shall have the meaning ascribed thereto in the
Merger Agreement.
"Voting Securities" shall mean in respect of any Person, any securities
of such Person entitling the holder thereof to vote as a stockholder or other
equity holder for any purpose or under any circumstance.
Section 12. Miscellaneous.
(a) Notices. Any notice or other communica tion required or
permitted hereunder shall be in writing and shall be delivered personally,
telegraphed, sent by facsimile transmission or sent by express mail, postage
prepaid. Any such notice shall be deemed given when so delivered personally,
telegraphed, or when a legible copy is received by facsimile transmission, or if
mailed by express mail one business day after the date of mailing, in each case
(i) if to a Parent Principal, to the appropriate address set forth on SCHEDULE
A, (ii) if to a Company Principal, to the appropriate address set forth on
SCHEDULE B, and (iii):
if to Parent to:
Simon Property Group, Inc.
Merchants Plaza
115 West Washington Street
Suite 15 East
Indianapolis, IN 46204
Attention: Mr. David Simon
Telephone: (317) 636-1600
Facsimile: (317) 685-7221
<PAGE> 40
38
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, NY 10019-6064
Attention: Edwin S. Maynard, Esq.
Toby S. Myerson, Esq.
Telephone: (212) 373-3000
Facsimile: (212) 757-3990
if to the Company to:
DeBartolo Realty Corporation
7655 Market Street
P.O. Box 3287
Youngstown, Ohio 44513-3287
Attention: Richard S. Sokolov
James M. Barkley, Esq.
Telephone: (216) 758-7292
Facsimile: (317) 758-1610
with a copy to:
Wilkie, Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, NY 10022
Attention: Richard L. Posen, Esq.
William, N. Dye, Esq.
Telephone: (212) 821-8000
Facsimile: (212) 821-1111
Any party may, by notice given in accordance with this Section to the other
parties, designate another address or person for receipt of notices hereunder.
(b) Waivers and Amendments; Noncontractual Remedies, Preservation
of Remedies. This Agreement may be amended, superseded, canceled, renewed or
extended, and the terms hereof may be waived, only by a written instrument
signed by all the parties hereto or, in the case of a waiver, by the party
waiving compliance who will be burdened or bound thereby; provided, however,
that any amendment to
<PAGE> 41
39
Section 1(a), 1(b) or 1(c) shall not increase or substantially change the rights
of the Company Principals and the Parent Principals set forth therein without
the written consent of all of the parties hereto. No delay on the part of any
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any waiver on the part of any party of any such right,
power or privilege, nor any single or partial exercise of any such right, power
or privilege, preclude any further exercise thereof or the exercise of any other
such right, power or privilege. The rights and remedies herein provided are
cumulative and are not exclusive of any rights or reme dies that any party may
otherwise have at law or in equity. The rights and remedies of any party based
upon, arising out of or otherwise in respect of any breach of any provision of
this Agreement shall in no way be limited by the fact that the act, omission,
occurrence or other state of facts upon which any claim of any such breach is
based may also be the subject matter of any other provision of this Agreement
(or of any other agreement between the parties) as to which there is no breach.
(c) Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York
applicable to agreements made and to be performed entirely in such State except
to the extent that any provisions hereof modify or affect
<PAGE> 42
40
rights or obligations arising exclusively under the corporation laws of the
State of Maryland and the State of Ohio, in which case the respective laws of
such jurisdictions shall govern with respect to such provisions, but only to the
extent necessary to give effect thereto.
(d) Severability. If any provision of this Agreement or the
applicability of any such provision to any Person or circumstance shall be
determined by any court of competent jurisdiction to be invalid or unenforceable
to any extent, the remainder of this Agreement or the application of such
provision to Persons or circumstances other than those for which it is so
determined to be invalid and unenforceable, shall not be affected thereby, and
each provision of this Agreement shall be valid and shall be enforced to the
fullest extent permitted by law. To the extent permitted by applicable law, each
party hereto hereby waives any provision or provisions of law which would other
wise render any provision of this Agreement invalid, illegal or unenforceable in
any respect.
(e) Successors and Assigns. This Agreement shall be binding upon,
and shall inure to the benefit of the Company Principals and the Parent
Principals and their respective Bound Transferees and their personal
representatives. No Parent Principal or Company Principal shall sell, assign,
transfer, convey or otherwise dispose of, directly or indirectly, any Voting
Securities to a
<PAGE> 43
41
Person who would, after giving effect to such transfer, be a Bound Transferee,
unless, prior thereto, such Person shall agree in writing to be bound by this
Agreement. Prior to the Effective Time, other than any sale, assignment or
transfer made in connection with or as the result of, any foreclosure, deed in
lieu of foreclosure or other action taken by any of the secured creditors and
pledgees under the documents referred to in SCHEDULE 2(a) with respect to any
Company Stock or Parent Stock pledged to such secured creditor on the date
hereof, no Company Principals or Parent Principals may sell, assign or transfer
any of its rights or delegate any of its obligations to a third party not a
Bound Transferee without the prior written consent of EJDC in the case of a
Parent Principal or David Simon in the case of a Company Principal.
(f) Variations of Pronouns and Defined Terms. All pronouns and
any variations thereof refer to the masculine, feminine or neuter, singular or
plural, as the context may require. All terms defined in this Agreement in their
singular or plural forms have correlative meanings when used herein in their
plural or singular forms, respectively.
(g) Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts and when so executed shall constitute one
Agreement, notwith-
<PAGE> 44
42
standing that all parties are not signatories to the same counterpart.
(h) Headings; Sections; Schedules. The headings in this Agreement
are for reference only, and shall not affect the interpretation of this
Agreement. References to Sections and Schedules contained in this Agreement are
references to the Sections hereof and the Schedules hereto.
(i) Changes in Capitalization. Without duplication of any other
provision of this Agreement, if any stock dividend, stock split,
recapitalization, combination or exchange of shares, merger, consolidation,
acquisition of property or stock, reorganization, liquidation or other similar
change or transaction of or by Parent occurs as a result of which shares of any
class of any corporation are issued in respect of outstanding securities of
Parent, or outstanding securities of Parent are changed into the same or a
different number of shares of the same or another class or classes, all
references to Parent's securities hereunder shall be deemed to be references to
the securities received by holders of Parent's securities in exchange for or in
respect of their Parent securities pursuant to such transaction.
(j) No Inconsistent Action. The Company Principals, Parent
Principals and Parent shall not take any action that would render performance by
such person of its
<PAGE> 45
43
obligations hereunder impossible or unreasonably impractical.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first above written.
<PAGE> 46
/s/ MELVIN SIMON
-----------------------------------------
MELVIN SIMON
/s/ HERBERT SIMON
-----------------------------------------
HERBERT SIMON
/s/ DAVID SIMON
-----------------------------------------
DAVID SIMON
/s/ DEBORAH J. SIMON
-----------------------------------------
DEBORAH J. SIMON
/s/ CYNTHIA SIMON SKJODT
-----------------------------------------
CYNTHIA SIMON SKJODT
/s/ IRWIN KATZ
-----------------------------------------
IRWIN KATZ, as Successor Trustee Under
Declaration of Trust and Trust Agreement
Dated August 4, 1970
/s/ IRWIN KATZ
-----------------------------------------
IRWIN KATZ, as Trustee of the
Melvin Simon Trust No. 1, the Melvin
Simon Trust No. 6, the Melvin Simon Trust
No. 7 and the Herbert Simon Trust No. 3
MELVIN SIMON & ASSOCIATES, INC.
By: /s/ DAVID SIMON
-------------------------------------
Name: DAVID SIMON
Title: VICE PRESIDENT
<PAGE> 47
PENN SIMON CORPORATION
By: /s/ DAVID SIMON
------------------------------------
Name: DAVID SIMON
Title: Vice President
NACO SIMON CORP.
By: /s/ DAVID SIMON
------------------------------------
Name: DAVID SIMON
Title: Vice President
SANDY SPRINGS PROPERTIES, INC.
By: /s/ DAVID SIMON
------------------------------------
Name: DAVID SIMON
Title: Vice President
SIMON ENTERPRISES, INC.
By: /s/ DAVID SIMON
------------------------------------
Name: DAVID SIMON
Title: Vice President
S.F.G. COMPANY, L.L.C.
By: MELVIN SIMON & ASSOICATES, INC.,
its manager
By: /s/ DAVID SIMON
------------------------------------
Name: DAVID SIMON
Title: Vice President
<PAGE> 48
MELVIN SIMON, HERBERT SIMON AND
DAVID SIMON, NOT INDIVIDUALLY BUT
AS VOTING TRUSTEES UNDER THAT
CERTAIN VOTING TRUST AGREEMENT,
VOTING AGREEMENT AND PROXY
DATED AS OF DECEMBER 1, 1993,
BETWEEN MELVIN SIMON &
ASSOCIATES, INC., AND MELVIN SIMON,
HERBERT SIMON AND DAVID SIMON:
/s/ Melvin Simon
-------------------------------------
Melvin Simon
/s/ Herbert Simon
-------------------------------------
Herbert Simon
/s/ David Simon
-------------------------------------
David Simon
DeBARTOLO REALTY
CORPORATION
By: /s/ Kim A. Rieck
-------------------------------------
Name: Kim A. Rieck
Title: Senior Vice President
THE EDWARD J. DeBARTOLO
CORPORATION
By: /s/ Larry T. Thrailkill
-------------------------------------
Name: Larry T. Thrailkill
Title: Executive Vice President
<PAGE> 49
/s/ Edward J. DeBartolo, Jr.
--------------------------------------
Edward J. DeBartolo, Jr., individually,
and in his capacity as Trustee under (i)
the Lisa Marie DeBartolo Revocable
Trust, (ii) the Tiffanie Lynne DeBartolo
Revocable Trust and (iii) Edward J.
DeBartolo Trust No. 7 for the Benefit of
Nicole Anne DeBartolo
/s/ Cynthia R. DeBartolo
---------------------------------------
Cynthia R. DeBartolo
/s/ Marie Denise DeBartolo York
---------------------------------------
Marie Denise DeBartolo York,
individually, and in her capacity as
Trustee under (i) Edward J. DeBartolo
Trust No. 8 for the benefit of John
Edward York, (ii) Edward J. DeBartolo
Trust No. 9 for the benefit of Anthony
John York, (iii) Edward J. DeBartolo
Trust No. 10 for the benefit of Mara
Denise York and (iv) Edward J. DeBartolo
Trust No. 11 for the benefit of Jenna
Marie York
CORAL SQUARE ASSOCIATES
By: /s/ Edward J. DeBartolo, Jr.
-----------------------------------
Name: Edward J. DeBartolo, Jr.
Title:
By: /s/ Marie Denise DeBartolo York
-----------------------------------
Name: Marie Denise DeBartolo York
Title:
<PAGE> 50
SOUTH BEND ASSOCIATES
By: DeBartolo, Inc.
By: /s/ Larry T. Thrailkill
------------------------------------
Name: Larry T. Thrailkill
Title: Executive Vice President
By: the Estate of Edward J. DeBartolo
By: /s/ Edward J. DeBartolo, Jr.
------------------------------------
Name:
Title:
By: /s/ Marie Denise DeBartolo York
------------------------------------
Name:
Title:
WASHINGTON SQUARE ASSOCIATES
By: The Edward J. DeBartolo
Corporation
By: Larry T. Thrailkill
------------------------------------
Name: Larry T. Thrailkill
Title: Executive Vice President
H-CASTLETON
By: Altamonte, Inc.
By: Larry T. Thrailkill
------------------------------------
Name: Larry T. Thrailkill
Title: Executive Vice President
<PAGE> 51
THE ESTATE OF EDWARD J.
DeBARTOLO
By: /s/ Edward G. DeBartolo, Jr.
---------------------------------------
Name: Edward G. DeBartolo, Jr.
Title:
By: /s/ Marie Denise DeBartolo
---------------------------------------
Name: Marie Denise DeBartolo York
Title:
<PAGE> 52
BAY PARK, INC.
WARD PLAZA ASSOCIATES
CHELTENHAM SHOPPING CENTER
ASSOCIATES
SUMMIT MALL, INC.
TYRONE SQUARE, INC.
UPPER VALLEY MALL, INC.
MISSION VIEJO MALL, INC.
PINELLAS SQUARE, INC.
GREAT LAKES MALL, INC.
PALM BEACH MALL, INC.
LAFAYETTE SQUARE, INC.
LIMA MALL, INC.
RICHMOND MALL, INC.
WOODVILLE MALL, INC.
DeBARTOLO ADVENTURA, INC.
BOYNTON BEACH, INC.
THE FLORIDA MALL CORPORATION
DeBARTOLO, INC.
D.L. GROVE, INC.
TC MALL II, INC.
PADDOCK MALL, INC.
NATIONAL INDUSTRIAL
DEVELOPMENT CORPORATION
GREAT NORTHEAST MALL, INC.
By: /s/ Larry T. Thrailkill
-------------------------------------
Name: Larry T. Thrailkill
Title: Executive Vice President
RUES PROPERTIES, INC.
By: /s/ Larry T. Thrailkill
-------------------------------------
Name: Larry T. Thrailkill
Title: Executive Vice President
<PAGE> 53
COLUMBIA SC I, INC.
COLUMBIA SC II, INC.
NORTHGATE I REAL ESTATE
CORPORATION
NORTHGATE II REAL ESTATE
CORPORATION
TACOMA SC I, INC.
TACOMA SC II, INC.
By: /s/ Larry T. Thrailkill
---------------------------------
Name: Larry T. Thrailkill
Title: Executive Vice President
<PAGE> 1
Exhibit 10.4.1
FORM OF REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of _______, 1996 (the
"Agreement"), by and among the persons set forth on Schedule 1 (the "Simon
Family Members"), SIMON PROPERTY GROUP, INC., a Maryland corporation (the
"Company"), MELVIN SIMON & ASSOCIATES, INC., an Indiana corporation ("MSA"),
JCP REALTY, INC., a Delaware corporation ("JCP"), BRANDYWINE REALTY, INC., a
Delaware corporation ("Brandywine"), and the Estate of Edward J. DeBartolo,
Sr., Edward J. DeBartolo, Jr., Marie Denise DeBartolo York, and the Trusts and
other entities listed on Schedule 2 and (collectively, the "DeBartolo Group"),
and any of their respective successors-in-interest and permitted assigns. MSA
and the Simon Family Members are hereinafter referred to as the "Simon Family
Entities." The Simon Family Entities, JCP, Brandywine and each member of the
DeBartolo Group are hereinafter sometimes referred to as the "Limited
Partners." With respect to any request pursuant to Section 2.1 on behalf of
any party hereto that is a member of the DeBartolo Group, The Edward J.
DeBartolo Corporation
<PAGE> 2
2
shall act as the sole representative (in such capacity the "DeBartolo
Representative") of all the members of the DeBartolo Group for the purpose of
making such request. The Limited Partners are hereinafter sometimes referred
to as the "Rights Holders." The Rights Holders and their respective
successors-in-interest and permitted assigns are hereinafter sometimes referred
to as the "Holders."
Upon execution of the Fifth Amended and Restated Agreement of
Limited Partnership (the "Partnership Agreement") of DeBartolo Realty
Partnership, L.P., a Delaware limited partnership (the "Operating
Partnership"), dated as of the date hereof, among DeBartolo Realty Corporation,
as its managing general partner (the "General Partner"), the Company, as its
non-managing general partner, and its limited partners, and the consummation of
the transactions contemplated thereby, each of the Limited Partners will be a
limited partner holding (individually or together with its affiliates) in
excess of 1.5% of the units of partnership interest (the "Units") in the
Operating Partnership. Pursuant to the Partnership Agreement, the Limited
Partners now have the right at any time to exchange all or any portion of their
Units for shares (the "Shares")
<PAGE> 3
3
of the Company's common stock, par value $.0001 per share (the "Common Stock"),
or cash, at the election of the Company, and, except as provided herein, any
Shares issued upon such exchange will not be registered under the Securities
Act of 1933, as amended (the "Securities Act").
In order to induce the Limited Partners to enter into the
Partnership Agreement, the Company has agreed to provide certain registration
rights with respect to the Shares as set forth in this Agreement.
In consideration of the mutual covenants and agreements set
forth herein and for good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereto agree as follows:
1. Securities Subject to this Agreement. The securities
entitled to the benefits of this Agreement are (a) the Shares issued by the
Company to the Holders upon exchange of Units, (b) the Shares issued by the
Company to the Holders upon conversion of the Class B Common Stock, par value
$.0001 per share, if any of the Company (c) the Shares issued by the Company
held by said Holders upon the conversion of Class C Common Stock, par value
$.0001 per share, if any, of the Company and (d) any other securities
<PAGE> 4
4
issued by the Company in exchange for or upon conversion of any such Shares (it
being understood that Units do not constitute Registrable Securities)
(collectively, the "Registrable Securities") but, with respect to any
particular Registrable Security, only so long as it continues to be a
Registrable Security. Registrable Securities shall include any securities
issued as a dividend or distribution on account of Registrable Securities or
resulting from a subdivision of the outstanding shares of Registrable
Securities into a greater number of shares (by reclassification, stock split or
otherwise). For the purposes of this Agreement, a security that was at one
time a Registrable Security shall cease to be a Registrable Security when (a)
such security has been effectively registered under the Securities Act other
than pursuant to Section 4 of this Agreement, and either (i) the registration
statement with respect thereto has remained continuously effective for 150 days
or (ii) such security has been disposed of pursuant to such registration
statement, (b) such security is sold to the public in reliance on Rule 144 (or
any similar provision then in force) under the Securities Act, (c) such
security has been otherwise
<PAGE> 5
5
transferred, except in connection with the exercise of the EJDC Option (as
defined in the Partnership Agreement), and (i) the Company has delivered a new
certificate or other evidence of ownership not bearing the legend set forth on
the Shares upon the initial issuance thereof (or other legend of similar
import) and (ii) in the opinion of counsel to the Company reasonably acceptable
to the Holders and addressed to the Company and the holder of such security,
the subsequent disposition of such security shall not require the registration
or qualification under the Securities Act, or (d) such security has ceased to
be outstanding.
Notwithstanding anything to the contrary herein, any Limited
Partner may exercise any of its rights hereunder prior to its receipt of
Shares, provided that such Limited Partner, simultaneously with the delivery of
any notice requesting registration hereunder, shall deliver an Exercise Notice
to the Company requesting exchange of Units exchangeable into such number of
Shares as such Limited Partner has requested to be registered. Any such
Exercise Notice so delivered shall be (a) conditioned on the effectiveness of
the requested registration in connection
<PAGE> 6
6
with which it was delivered and (b) deemed to cover only such number of Units
as are exchangeable into the number of Shares actually sold pursuant to the
requested registration. Any Shares to be issued in connection with any such
Exercise Notice shall be issued upon the closing of the requested registration.
In the event that the Company elects to issue all cash in lieu of Shares upon
the exchange of the Units covered by any such Exercise Notice, the registration
requested by the Limited Partner that delivered such Exercise Notice, if a
Demand Registration, shall not constitute a Demand Registration under Section
2.1 hereof.
Nothing contained herein shall create any obligation on the
part of the Company to issue Shares, rather than cash, upon the exchange of any
Units.
2. Demand Registration.
2.1 Request for Registration. At any time, each
Holder (or, with respect to each Holder that is a member of the DeBartolo
Group, the DeBartolo Representative) may make a written request per 12-month
period (specifying the intended method of disposition) for registration under
the Securities Act (each, a "Demand Registration") of all or part of such
Holder's Registrable Securities (but such part,
<PAGE> 7
7
together with the number of securities requested by other Holders to be
included in such Demand Registration pursuant to this Section 2.1, shall have
an estimated market value at the time of such request (based upon the then
market price of a share of Common Stock of the Company) of at least
$10,000,000). Notwithstanding the foregoing, the Company shall not be required
to file any registration statement on behalf of any Holder within six months
after the effective date of any earlier registration statement so long as the
Holder requesting the Demand Registration was given a notice offering it the
opportunity to sell Registrable Securities under the earlier registration
statement and such Holder did not request that all of its Registrable
Securities be included; provided, however, that if a Holder requested that all
of its Registrable Securities be included in the earlier registration statement
but not all were so included through no fault of the Holder, such Holder may,
but shall not be obligated to, require the Company to file another registration
statement pursuant to a Demand Registration (subject, in the event of a Demand
Registration for less than all such remaining Registrable Securities, to the
same $10,000,000 limitation set forth above) exercised by such
<PAGE> 8
8
Holder within six months of the effective date of such earlier registration
statement. Within ten days after receipt of a request for a Demand
Registration, the Company shall give written notice (the "Notice") of such
request to all other Holders and shall include in such registration all
Registrable Securities that the Company has received written requests for
inclusion therein within 15 days after the Notice is given (the "Requested
Securities"). Thereafter, the Company may elect to include in such
registration additional shares of Common Stock to be issued by the Company. In
such event for purposes only of Section 2.3 (other than the first sentence
thereof) and not for purposes of any other provision or Section hereof
(including, without limitation, Section 3), (a) such shares to be issued by the
Company in connection with a Demand Registration shall be deemed to be
Registrable Securities and (b) the Company shall be deemed to be a Holder
thereof. All requests made pursuant to this Section 2.1 shall specify the
aggregate number of Registrable Securities to be registered.
2.2 Effective Registration and Expenses. A
registration shall not constitute a Demand Registration under Section 2.1
hereof until it has become effective. In
<PAGE> 9
9
any registration initiated as a Demand Registration, the Company shall pay all
Registration Expenses (as defined in Section 8) incurred in connection
therewith, whether or not such Demand Registration becomes effective, unless
such Demand Registration fails to become effective as a result of the fault of
one or more Holders other than the Company, in which case the Company will not
be required to pay the Registration Expenses incurred with respect to the
offering of such Holder or Holders' Registrable Securities. The Registration
Expenses incurred with respect to the offering of such Holder or Holders'
Registrable Securities shall be the product of (a) the aggregate amount of all
Registration Expenses incurred in connection with such registration and (b) the
ratio that the number of such Registrable Securities bears to the total number
of Registrable Securities included in the registration.
2.3 Priority on Demand Registrations. The Holder
making the Demand Registration may elect whether the offering of such
Registrable Securities pursuant to such Demand Registration shall be in the
form of a firm commitment underwritten offering or otherwise; provided,
however, that such Holder may not elect that such offering be made on
<PAGE> 10
10
a delayed or continuous basis pursuant to Rule 415 under the Securities Act.
In any case in which an offering is in the form of a firm commitment
underwritten offering, if the managing underwriter or underwriters of such
offering advise the Company in writing that in its or their opinion the number
of Registrable Securities proposed to be sold in such offering exceeds the
number of Registrable Securities that can be sold in such offering without
adversely affecting the market for the Company's common stock, the Company will
include in such registration the number of Registrable Securities that in the
opinion of such managing underwriter or underwriters can be sold without
adversely affecting the market for the Company's common stock. In such event,
the number of Registrable Securities, if any, to be offered for the accounts of
Holders (including the Holder making the Demand Registration) shall be reduced
pro rata on the basis of the relative number of any Registrable Securities
requested by each such Holder to be included in such registration to the extent
necessary to reduce the total number of Registrable Securities to be included
in such offering to the number recommended by such managing underwriter or
underwriters. In the event the Holder making
<PAGE> 11
11
the Demand shall receive notice pursuant to this Section 2.3 that the amount of
Registrable Securities to be offered for the account of such Holder shall be
reduced, such Holder shall be entitled to withdraw the Demand by written notice
to the Company within 7 days after receipt of such notice, with the effect that
such Demand shall be deemed not to have been made. In this connection, it is
understood that Teachers' Retirement System of the State of Illinois
("Teachers'") and Homart San Antonio Investment Co. ("Homart") have entered
into a Registration Rights Agreement dated December 1, 1993, as amended (the
"First Agreement"), providing for rights to register certain securities held by
Teachers' and Homart on similar terms to the terms hereof. The Company hereby
agrees to use its commercially reasonable efforts to secure the consent of
Teachers' (a) to waive the provisions of the following two sentences with
respect to the securities held by it, and (b) to participate pro rata with the
Holders in any reduction of the Registrable Securities to be offered hereunder
as provided in the preceding sentence above in this Section 2.3. In the event
Teachers' (if no such consent is secured) or Homart have exercised their rights
pursuant to the First Agreement to
<PAGE> 12
12
have any of their shares of Common Stock included in such registration
statement and in the opinion of the managing underwriter the number of
Registrable Securities proposed to be sold in such offering plus the number of
shares of Common Stock to be sold by Teachers' and/or Homart exceeds the total
number of shares of Common Stock that can be sold in such offering without
adversely affecting the market for the Company's Common Stock, then the number
of Registrable Securities to be offered for the account of the Holders shall be
reduced pro rata as aforesaid to zero before any reduction in the number of
shares of Common Stock to be offered by Teachers' and/or Homart. Each of the
Holders agrees and acknowledges that Teachers' and Homart are third party
beneficiaries of this Agreement and that this Section 2.3 cannot be amended in
a manner adverse to Teachers' or Homart without the consent of Teachers' and
Homart.
2.4 Selection of Underwriters. If any of the
Registrable Securities covered by a Demand Registration are to be sold in an
underwritten offering, the Holders, in the aggregate, that own or will own a
majority of the Registrable Securities that the Company has been requested to
register (including the Requested Securities but
<PAGE> 13
13
excluding any securities to be issued by the Company), shall have the right to
select the investment banker or investment bankers and manager or managers that
will underwrite the offering; provided, however, that such investment bankers
and managers must be reasonably satisfactory to the Company.
3. Piggyback Registration. Whenever the Company
proposes to file a registration statement under the Securities Act with respect
to an underwritten public offering of common stock by the Company for its own
account or for the account of any stockholders of the Company (other than a
registration statement filed pursuant to either Section 2 or 4 hereof), the
Company shall give written notice (the "Offering Notice") of such proposed
filing to each of the Holders at least 30 days before the anticipated filing
date. Such Offering Notice shall offer all such Holders the opportunity to
register such number of Registrable Securities as each such Holder may request
in writing, which request for registration (each, a "Piggyback Registration")
must be received by the Company within 15 days after the Offering Notice is
given. The Company shall use all reasonable efforts to cause the managing
underwriter or underwriters of a proposed underwritten
<PAGE> 14
14
offering, if any, to permit the holders of the Registrable Securities requested
to be included in the registration for such offering to include such
Registrable Securities in such offering on the same terms and conditions as the
common stock of the Company or, if such offering is for the account of other
stockholders, the common stock of such stockholders included therein.
Notwithstanding the foregoing, if the managing underwriter or underwriters of a
proposed underwritten offering advise the Company in writing that in its or
their opinion the number of Registrable Securities proposed to be sold in such
offering exceeds the number of Registrable Securities that can be sold in such
offering without adversely affecting the market for the Company's common stock,
the Company will include in such registration the number of Registrable
Securities that in the opinion of such managing underwriter or underwriters can
be sold without adversely affecting the market for the Company's common stock.
In such event, the number of Registrable Securities, if any, to be offered for
the accounts of Holders shall be reduced pro rata on the basis of the relative
number of any Registrable Securities requested by each such Holder to be
included in such registration to the extent necessary to
<PAGE> 15
15
reduce the total number of Registrable Securities to be included in such
offering to the number recommended by such managing underwriter or
underwriters. The Company shall pay all Registration Expenses incurred in
connection with any Piggyback Registration. In this connection, it is
understood that if Teachers' and/or Homart have exercised their rights pursuant
to the First Agreement to have any of their shares of Common Stock included in
such registration statement and in the opinion of the managing underwriter the
number of Registrable Securities proposed to be sold in such offering plus the
number of shares of Common Stock to be offered by Teachers' and/or Homart
exceeds the total number of shares of Common Stock that can sold in such
offering without adversely affecting the market for the Company's Common Stock,
then the number of Registrable Securities to be offered for the account of the
Holders shall be reduced pro rata as aforesaid to zero before any reduction in
the number of shares of Common Stock to be offered by Teachers' and/or Homart.
4. Shelf Registration. The Company agrees that, upon
the request of any Holder, the Company shall promptly after receipt of such
request notify each other Holder of
<PAGE> 16
16
receipt of such request and shall cause to be filed on or as soon as
practicable thereafter, but not sooner than 35 days after the receipt of such
notice from such Holder, a registration statement (a "Shelf Registration
Statement") on Form S-3 or any other appropriate form under the Securities Act
for an offering to be made on a delayed or continuous basis pursuant to Rule
415 thereunder or any similar rule that may be adopted by the Securities and
Exchange Commission (the "Commission") and permitting sales in any manner not
involving an underwritten public offering (and shall register or qualify the
shares to be sold in such offering under such other securities or "blue sky"
laws as would be required pursuant to Section 7(g) hereof) covering up to the
aggregate number of (a) Shares to be issued to such Holder and all other
Holders who request that the shares to be issued to them upon the exchange of
Units held by them be included in the shelf registration statement upon the
exchange of Units so that the Shares issuable upon the exchange of such Units
will be registered pursuant to the Securities Act and (b) Registrable
Securities held by such Holders. The Company shall use its best efforts to
cause the Shelf Registration Statement to be declared effective by
<PAGE> 17
17
the Commission within three months after the filing thereof. The Company shall
use its reasonable efforts to keep the Shelf Registration Statement
continuously effective (and to register or qualify the shares to be sold in
such offering under such other securities or "blue sky" laws as would be
required pursuant to Section 7(g) hereof) for so long as any Holder holds any
Units that may be exchanged for Shares under the Partnership Agreement or until
the Company has caused to be delivered to each Holder an opinion of counsel,
which counsel must be reasonably acceptable to such Holders, stating that the
Shares issued upon exchange of Units may be sold by the Holders pursuant to
Rule 144 promulgated under the Securities Act without regard to any volume
limitations and that the Company has satisfied the informational requirements
of Rule 144. The Company shall file any necessary listing applications or
amendments to existing applications to cause the Shares issuable upon exchange
of Units to be listed on the primary exchange on which the Common Stock is then
listed, if any. Notwithstanding the foregoing, if the Company determines that
it is necessary to amend or supplement such Shelf Registration Statement and if
the Company shall furnish to the Holders a certificate
<PAGE> 18
18
signed by the Chief Executive Officer of the Company stating that in the good
faith judgment of the Board of Directors of the Company it would be
significantly disadvantageous to the Company and its stockholders for any such
Shelf Registration Statement to be amended or supplemented, the Company may
defer such amending or supplementing of such Shelf Registration Statement for
not more than 45 days and in such event the Holders shall be required to
discontinue disposition of any Registrable Securities covered by such Shelf
Registration Statement during such period. Notwithstanding the foregoing, if
the Company irrevocably elects prior to the filing of any Shelf Registration
Statement to issue all cash in lieu of Shares upon the exchange of Units by the
Holder requesting the filing of such Shelf Registration Statement, the Company
shall not be obligated to file such Shelf Registration Statement.
5. Rights of Other Stockholders. The Company shall not
grant any person, for so long as any securities convertible into or
exchangeable for Registrable Securities are outstanding, any rights to have
their securities included in any registration statement to be filed by the
Company if such rights are greater than the rights of the
<PAGE> 19
19
Holders granted herein without extending such greater rights to the Holders.
Subject to the penultimate sentence of Section 2.3 and the last sentence of
Section 3, to the extent the securities of such other stockholders are entitled
to be included in any such registration statement and the managing underwriter
or underwriters believe that the number of securities proposed to be sold in
such offering exceeds the number of securities that can be sold in such
offering without adversely affecting the market for the Company's common stock,
the number of securities to be offered for the accounts of such other
stockholders shall be reduced to zero before the number of securities to be
offered for the accounts of the Holders is reduced. It is understood that the
Company has heretofore granted registration rights pursuant to the First
Agreement to Teachers' and Homart which rights will remain outstanding
following the execution of this Agreement and that under the terms of the First
Agreement, the Company is not permitted to grant to any person for so long as
any securities convertible into or exchangeable for shares of Common Stock held
by Teachers' and/or Homart are outstanding registration rights which are
greater than the rights granted to
<PAGE> 20
20
Teachers' and Homart in the First Agreement. In this connection, the Simon
Family Entities, JCP and Brandywine, each of whom is also a signatory to the
First Agreement, hereby irrevocably waive all of their rights under such First
Agreement, it being understood that all of their rights to have their
securities included in any registration statement filed by the Company shall
flow from this Agreement. Except as set forth in this Agreement, the First
Agreement (as to Teachers' and Homart only) and the Operating Partnership
Agreement, the Company has not granted to any Person rights to have their
securities included in any registration statement to be filed by the Company
following the date hereof. No Person who was a partner of the Operating
Partnership immediately preceding the date of this Agreement has any rights to
cause the Company to register any securities held or to be acquired by that
person except for any such rights under this Agreement or the Operating
Partnership Agreement.
6. Holdback Agreements.
6.1 Restrictions on Public Sale by Holders of
Registrable Securities. Each Holder (a) participating in an underwritten
offering covered by any Demand Registration
<PAGE> 21
21
or Piggyback Registration or (b) in the event the Company is issuing shares of
its capital stock to the public in an underwritten offering, agrees, if
requested by the managing underwriter or underwriters for such underwritten
offering, not to effect (except as part of such underwritten offering or
pursuant to Article XII of the Partnership Agreement) any public sale or
distribution of Registrable Securities or any securities convertible into or
exchangeable or exercisable for such Registrable Securities, including a sale
pursuant to Rule 144 (or any similar provision then in force) under the
Securities Act, during the period (a "Lock-Out Period") commencing 14 days
prior to and ending no more than 90 days subsequent to the date (an "Execution
Date") specified in the Lock-Out Notice (as defined below) as the anticipated
date of the execution and delivery of the underwriting agreement (or, if later,
a pricing or terms agreement signed pursuant to such underwriting agreement) to
be entered into in connection with such Demand Registration or Piggyback
Registration or other underwritten offering. The Execution Date shall be no
fewer than 21 days subsequent to the date of delivery of written notice (a
"Lock-Out Notice") by the Company to each Holder of the anticipated execution
of an
<PAGE> 22
22
underwriting agreement (or pricing or terms agreement), and the Execution Date
shall be specified in the Lock-Out Notice. The Company may not deliver a
Lock-Out Notice unless it is making a good faith effort to effect the offering
with respect to which such Lock-Out Notice has been delivered. Notwithstanding
the foregoing, the Company may not (a) establish Lock-Out Periods in effect for
more than 208 days in the aggregate within either of the two consecutive
twelve-month periods commencing on August 7, 1995,(b) establish Lock-Out
Periods in effect for more than 208 days in the aggregate within any of the
consecutive fifteen-month periods commencing on August 7, 1997 and (c) cause
any Lock-Out Period to commence (i) during the 45-day period immediately
following the expiration of any Lock-Out Period, such 45-day period to be
extended by one day for each day of delay pursuant to Section 7(a) provided,
however, that in no event shall such extension exceed 90 days, provided,
further, however, that such 90-day limit on extensions shall terminate on
December 31, 1998; or (ii) if the Company shall have been requested to file a
Registration Statement pursuant to Section 2 during such 45-day period (as
extended), until the earlier of (x) the date on which
<PAGE> 23
23
all Registrable Securities thereunder shall have been sold and (y) 45 days
after the effective date of such Registration Statement. Notwithstanding the
foregoing, any Lock-Out Period may be shortened at the Company's sole
discretion by written notice to the Holders, and the applicable Lock-Out Period
shall be deemed to have ended on the date such notice is received by the
Holders. For the purposes of this Section 6.1, a Lock-Out Period shall be
deemed to not have occurred, and a Lock-Out Notice shall be deemed to not have
been delivered, if, within 30 days of the delivery of a Lock-Out Notice, the
Company delivers a written notice (the "Revocation Notice") to the Holders
stating that the offering (the "Aborted Offering") with respect to which such
Lock-Out Notice was delivered has not been, or shall not be, consummated;
provided, however, that any Lock-Out Period that the Company causes to commence
within 45 days of the delivery of such Revocation Notice shall be reduced by
the number of days pursuant to which the Holders were subject to restrictions
on transfer pursuant to this Section 6.1 with respect to such Aborted Offering.
6.2 Restrictions on Public Sale by the Company.
If, but only if, the managing underwriter or
<PAGE> 24
24
underwriters for any underwritten offering of Registrable Securities made
pursuant to a Demand Registration so request, the Company agrees not to effect
any public sale or distribution of any of its securities similar to those being
registered, or any securities convertible into or exchangeable or exercisable
for such securities (except pursuant to registrations on Form S-4 or S-8 or any
successor or similar forms thereto) during the 14 days prior to, and during the
180-day period beginning on, the effective date of such Demand Registration.
7. Registration Procedures. Whenever the Holders have
requested that any Registrable Securities be registered pursuant to Section 2
or 3, the Company shall use its best efforts to effect the registration of
Registrable Securities in accordance with the intended method of disposition
thereof as expeditiously as practicable, and in connection with any such
request, the Company shall as expeditiously as possible:
(a) in connection with a request pursuant to
Section 2, prepare and file with the Commission, not later than 40 days (or
such longer period as may be required in order for the Company to comply with
the provisions of
<PAGE> 25
25
Regulation S-X under the Securities Act) after receipt of a request to file a
registration statement with respect to Registrable Securities, a registration
statement on any form for which the Company then qualifies or which counsel for
the Company shall deem appropriate and which form shall be available for the
sale of such Registrable Securities in accordance with the intended method of
distribution thereof and, if the offering is an underwritten offering, shall be
reasonably satisfactory to the managing underwriter or underwriters, and use
its best efforts to cause such registration statement to become effective;
provided, however, that if the Company shall within five (5) Business Days
after receipt of such request furnish to the Holders making such a request a
certificate signed by the Chief Executive Officer of the Company stating that
in the good faith judgment of the Board of Directors of the Company it would be
significantly disadvantageous to the Company and its stockholders for such a
registration statement to be filed on or before the date filing would be
required, the Company shall have an additional period of not more than 45 days
within which to file such registration statement (provided that only one such
notice may be given during any
<PAGE> 26
26
12 month period); and provided, further, that before filing a registration
statement or prospectus or any amendments or supplements thereto, the Company
shall (a) furnish to the counsel selected by the Holder making the demand, or
if no demand, then, by the Holders, in the aggregate, that own or will own a
majority of the Registrable Securities covered by such registration statement,
copies of all such documents proposed to be filed, which documents will be
subject to the review of such counsel, and (b) notify each seller or
prospective seller of Registrable Securities of any stop order issued or
threatened by the Commission or withdrawal of any state qualification and take
all reasonable actions required to prevent such withdrawal or the entry of such
stop order or to remove it if entered;
(b) in connection with a registration pursuant to
Section 2, prepare and file with the Commission 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 for a period
of not less than 150 days (or such shorter period that will terminate when all
Registrable Securities covered by such registration statement have been sold,
but
<PAGE> 27
27
not before the expiration of the applicable period referred to in Section 4(3)
of the Securities Act and Rule 174 thereunder, if applicable), and comply with
the provisions of the Securities Act applicable to it with respect to the
disposition of all securities covered by such registration statement during
such period in accordance with the intended method of disposition by the
sellers thereof set forth in such registration statement;
(c) notify each seller of Registrable Securities
and the managing underwriter, if any, promptly, and (if requested by any such
Person) confirm such advice in writing,
(i) when the prospectus or any
supplement thereto or amendment or post-effective amendment to the
registration statement has been filed, and, with respect to the
registration statement or any post-effective amendment, when the same
has become effective,
(ii) of any request by the Commission for
amendments or post-effective amendments to the registration statement
or supplements to the prospectus or for additional information,
<PAGE> 28
28
(iii) of the issuance by the Commission of
any stop order suspending the effectiveness of the registration
statement or the initiation or threatening of any proceedings for that
purpose,
(iv) if at any time during the
distribution of securities by the managing underwriter the
representations and warranties of the Company to be contained in the
underwriting agreement cease to be true and correct in all material
respects, and
(v) of the receipt by the Company of any
notification with respect to the suspension of the qualification of
the Registrable Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose;
(d) use its best efforts to prevent the issuance
of any stop order suspending the effectiveness of the registration statement or
any state qualification or any order preventing or suspending the use of any
preliminary prospectus, and use its best efforts to obtain the withdrawal of
any order suspending the effectiveness of the registration statement or any
state qualification or of any
<PAGE> 29
29
order preventing or suspending the use of any preliminary prospectus at the
earliest possible moment;
(e) if requested by the managing underwriter or a
seller of Registrable Securities, promptly incorporate in a prospectus
supplement or post-effective amendment to the registration statement such
information as the managing underwriter or a seller of Registrable Securities
reasonably request to have included therein relating to the plan of
distribution with respect to the Registrable Securities, including, without
limitation, information with respect to the amount of Registrable Securities
being sold to such underwriters, the purchase price being paid therefor by such
underwriters and with respect to any other terms of the underwritten offering
of the Registrable Securities to be sold in such offering; and make all
required filings of such prospectus supplement or post-effective amendment
promptly after being notified of the matters to be incorporated in such
prospectus supplement or post-effective amendment;
(f) furnish to each seller of Registrable
Securities and the managing underwriter one signed copy of the registration
statement and each amendment thereto as filed with the Commission, and such
number of copies of such
<PAGE> 30
30
registration statement, each amendment (including post-effective amendments)
and supplement thereto (in each case including all documents incorporated by
reference and all exhibits thereto whether or not incorporated by reference),
the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as each seller may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such seller;
(g) use reasonable efforts to register or qualify
such Registrable Securities under such other securities or "blue sky" laws of
such jurisdictions as any seller or underwriter reasonably requests in writing
and to do any and all other acts and things that may be reasonably necessary or
advisable to register or qualify for sale in such jurisdictions the Registrable
Securities owned by such seller; provided, however, that the Company shall not
be required to (a) qualify generally to do business in any jurisdiction where
it is not then so qualified, (b) subject itself to taxation in any such
jurisdiction, (c) consent to general service of process in any such
jurisdiction or (d) provide any undertaking required by such other
<PAGE> 31
31
securities or "blue sky" laws or make any change in its charter or bylaws that
the Board of Directors determines in good faith to be contrary to the best
interest of the Company and its stockholders;
(h) use reasonable efforts to cause the
Registrable Securities covered by such registration statement to be registered
with or approved by such other governmental agencies or authorities as may be
necessary by virtue of the business and operations of the Company to enable the
seller or sellers thereof or the underwriters, if any, to consummate the
disposition of such Registrable Securities;
(i) notify each seller of such Registrable
Securities at any time when a prospectus relating thereto 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 contains an untrue
statement of a material fact or omits to state any 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, and prepare and file
with the Commission a supplement or amendment to such prospectus so that, as
thereafter delivered to the pur-
<PAGE> 32
32
chasers of such Registrable Securities, such 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, in light of
the circumstances under which they were made, not misleading;
(j) enter into customary agreements (including an
underwriting agreement in customary form, if the offering is an underwritten
offering) and take such other actions as are reasonably required in order to
expedite or facilitate the disposition of such Registrable Securities and in
such connection:
(i) make such representations and
warranties to the underwriters in form, substance and scope,
reasonably satisfactory to the managing underwriter, as are
customarily made by issuers to underwriters in primary underwritten
offerings on the form of registration statement used in such offering;
(ii) obtain opinions and updates thereof
of counsel, which counsel and opinions to the Company (in form, scope
and substance) shall be reasonably satisfactory to the managing
underwriter, addressed to the managing underwriter, covering the
matters
<PAGE> 33
33
customarily covered in opinions requested in primary underwritten
offerings on the form of registration statement used in such offering
and such other matters as may be reasonably requested by the managing
underwriter;
(iii) obtain so-called "cold comfort"
letters and updates thereof from the Company's independent public
accountants addressed to the managing underwriter in customary form
and covering matters of the type customarily covered in "cold comfort"
letters to underwriters in connection with primary underwritten
offerings and such other matters as may be reasonably requested by the
managing underwriter;
(iv) cause the underwriting agreements to
set forth in full the indemnification provisions and procedures of
Section 9 (or such other substantially similar provisions and
procedures as the managing underwriter shall reasonably request) with
respect to all parties to be indemnified pursuant to said Section; and
<PAGE> 34
34
(v) deliver such documents and
certificates as may be reasonably requested by the Participating
Holder or Holders to evidence compliance with the provisions of this
Section 7(j) and with any customary conditions contained in the
underwriting agreement or other agreement entered into by the Company.
The above shall be done at the effectiveness of such
registration statement (when consistent with customary industry practice), each
closing under any underwriting or similar agreement as and to the extent
required thereunder and from time to time as may reasonably be requested by the
sellers of Registrable Securities, all in a manner consistent with customary
industry practice.
(k) make available for inspection by any seller
of Registrable Securities, any underwriter participating in any disposition
pursuant to such registration statement, the counsel referred to in clause (a)
of Section 7(a) and any attorney, accountant or other agent retained by any
such seller or underwriter (collectively, the "Inspectors"), all financial and
other records, pertinent corporate documents and properties of the Company
<PAGE> 35
35
(collectively, the "Records") as shall be reasonably necessary to enable them
to exercise their due diligence responsibility, and cause the Company's
officers, directors, employees and agents to supply all information reasonably
requested by any such Inspector in connection with such registration statement.
Records that the Company determines, in good faith, to be confidential and that
it notifies the Inspectors are confidential shall not be disclosed by the
Inspectors unless (a) the disclosure of such Records is, in the reasonable
judgment of any Inspector, necessary to avoid or correct a misstatement or
omission of a material fact in the registration statement or (b) the release of
such Records is ordered pursuant to a subpoena or other order from a court or
governmental agency of competent jurisdiction or required (in the written
opinion of counsel to such seller or underwriter, which counsel shall be
reasonably acceptable to the Company) pursuant to applicable state or federal
law. Each seller of Registrable Securities agrees that it will, upon learning
that disclosure of such Records are sought by a court or governmental agency,
give notice to the Company and allow the Company, at the Com-
<PAGE> 36
36
pany's expense, to undertake appropriate action to prevent disclosure of the
Records deemed confidential;
(l) if such sale is pursuant to an underwritten
offering, use reasonable efforts to obtain a "cold comfort" letter and updates
thereof from the Company's independent public accountants in customary form and
covering such matters of the type customarily covered by "cold comfort" letters
as the holders, in the aggregate, of a majority of the Registrable Securities
being sold and the managing underwriter or underwriters reasonably request;
(m) otherwise use reasonable efforts to comply
with the Securities Act, the Exchange Act, all applicable rules and regulations
of the Commission and all applicable state securities and real estate
syndication laws, and make generally available to its security holders, as soon
as reasonably practicable, an earnings statement covering a period of 12
months, beginning within three months after the effective date of the
registration statement, which earnings statement shall satisfy the provisions
of Section 11(a) of the Securities Act;
(n) use reasonable efforts to cause all
Registrable Securities covered by the registration statement
<PAGE> 37
37
to be listed on each securities exchange, if any, on which similar securities
issued by the Company are then listed, provided that the applicable listing
requirements are satisfied;
(o) cooperate with the sellers of Registrable
Securities and the managing underwriter to facilitate the timely preparation
and delivery of certificates representing Registrable Securities to be sold and
not bearing any restrictive legends; and enable such Registrable Securities to
be in such denominations and registered in such names as the managing
underwriter may reasonably request at least 2 business days prior to any sale
of Registrable Securities to the underwriters;
(p) cooperate and assist in any filings required
to be made with the NASD and in the performance of any due diligence
investigation by any underwriter;
(q) prior to the filing of any document which is
to be incorporated by reference into the registration statement or the
prospectus (after the initial filing of the registration statement) provide
copies of such document to the sellers of Registrable Securities, the
underwriters and their respective counsel, make the Company
<PAGE> 38
38
representatives available for discussion of such document with such persons
and, to the extent changes may be made to such document without the consent of
a third party (other than the Company's accountants or any affiliate of the
Company), make such changes in such document prior to the filing thereof as any
such persons may reasonably request to the extent and only to the extent that
such changes relate to a description of a DeBartolo Group Holder or the Plan or
Distribution being effected by a DeBartolo Group Holder; and
(r) participate, if so requested, in a "road
show" in connection with the sale of the Registrable Securities but only to the
extent reasonably requested by the managing underwriter, if such sale is
pursuant to an underwritten offering.
The Company may require each seller or prospective seller of
Registrable Securities as to which any registration is being effected to
furnish to the Company such information regarding the distribution of such
securities and other matters as may be required to be included in the
registration statement.
Each holder of Registrable Securities agrees that, upon
receipt of any notice from the Company of the happening
<PAGE> 39
39
of any event of the kind described in Paragraph (i) of this Section 7, such
holder shall forthwith discontinue disposition of Registrable Securities
pursuant to the registration statement covering such Registrable Securities
until such holder's receipt of the copies of the supplemented or amended
prospectus contemplated by Paragraph (i) of this Section 7, and, if so directed
by the Company, such holder shall deliver to the Company (at the Company's
expense) all copies, other than permanent file copies then in such holder's
possession, of the prospectus covering such Registrable Securities current at
the time of receipt of such notice. If the Company shall give any such notice,
the Company shall extend the period during which such registration statement
shall be maintained effective pursuant to this Agreement (including the period
referred to in Paragraph (b) of this Section 7) by the number of days during
the period from and including the date of the giving of such notice pursuant to
Paragraph (i) of this Section 7 to and including the date when each seller of
Registrable Securities covered by such registration statement shall have
received the copies of the supplemented or amended prospectus contemplated by
Paragraph (i) of this Section 7.
<PAGE> 40
40
The Company shall keep the sellers of Registrable Securities
to be offered in a given registration advised of the status of any registration
in which they are participating. In addition, the Company and each such seller
of Registrable Securities may enter into understandings in writing whereby such
seller of Registrable Securities will agree in advance as to the acceptability
of the price or range of prices per share at which the Registrable Securities
included in such registration are to be offered to the public. Furthermore,
the Company shall establish pricing notification procedures reasonably
acceptable to each such seller of Registrable Securities and shall, as promptly
as practicable after learning the same from the managing underwriter, use
reasonable efforts to give oral notice to each such seller of Registrable
Securities of the anticipated date on which the Company expects to receive a
notification from the managing underwriter (and any changes in such anticipated
date) of the price per share at which the Registrable Securities included in
such registration are to be offered to the public.
<PAGE> 41
41
8. Registration Expenses. The Company shall pay all
expenses incident to its performance of or compliance with this Agreement,
including, without limitation, (a) all Commission, stock exchange and National
Association of Securities Dealers, Inc. registration, filing and listing fees,
(b) all fees and expenses incurred in complying with securities or "blue sky"
laws (including reasonable fees and disbursements of counsel in connection with
"blue sky" qualifications of the Registrable Securities), (c) all printing,
messenger and delivery expenses, (d) all fees and disbursements of the
Company's independent public accountants and counsel and (e) all fees and
expenses of any special experts retained by the Company in connection with any
Demand Registration or Piggyback Registration pursuant to the terms of this
Agreement, regardless of whether such registration becomes effective; provided,
however, that the Company shall not pay the costs and expenses of any Holder
relating to underwriters' commissions and discounts relating to Registrable
Securities to be sold by such Holder (but such costs and expenses shall be paid
by the Holders on a pro rata basis), brokerage fees, transfer taxes, or the
fees or expenses of any counsel, accountants or other repre-
<PAGE> 42
42
sentatives retained by the Holders, individually or in the aggregate. All of
the expenses described in this Section 8 that are to be paid by the Company are
herein called "Registration Expenses."
9. Indemnification; Contribution.
9.1 Indemnification by the Company. The Company
agrees to indemnify, to the fullest extent permitted by law, each Holder and
each secured creditor referred to in Section 12.4(c)(ii) hereof (a "Secured
Creditor"), each of their respective officers, directors, agents, advisors,
employees and trustees, and each person, if any, who controls such Holder or
Secured Creditor (within the meaning of the Securities Act), against any and
all losses, claims, damages, liabilities and expenses caused by any untrue or
alleged untrue statement of material fact contained in any registration
statement, prospectus or preliminary prospectus or any amendment thereof or
supplement thereto or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein (in the case of a prospectus, in light of the circumstances under which
they were made) not misleading, except insofar as the same are caused by or
<PAGE> 43
43
contained in any information with respect to such Holder or Secured Creditor
furnished in writing to the Company by such Holder or Secured Creditor
expressly for use therein or by such Holder's or Secured Creditor's failure to
deliver a copy of the prospectus or any supplements thereto after the Company
has furnished such Holder or Secured Creditor with a sufficient number of
copies of the same or by the delivery of prospectuses by such Holder or Secured
Creditor after the Company notified such Holder or Secured Creditor in writing
to discontinue delivery of prospectuses. The Company also shall indemnify any
underwriters of the Registrable Securities, their officers and directors and
each person who controls such underwriters (within the meaning of the
Securities Act) to the same extent as provided above with respect to the
indemnification of the Holders.
9.2 Indemnification by Holders. In connection with any
registration statement in which a Holder is participating, each such Holder
shall furnish to the Company in writing such information and affidavits with
respect to such Holder as the Company reasonably requests for use in connection
with any such registration statement or prospectus and agrees to indemnify,
severally and not
<PAGE> 44
44
jointly, to the fullest extent permitted by law, the Company, its officers,
directors and agents and each person, if any, who controls the Company (within
the meaning of the Securities Act) against any and all losses, claims, damages,
liabilities and expenses resulting from any untrue or alleged untrue statement
of a material fact or any omission or alleged omission of a material fact
required to be stated in any registration statement, prospectus or preliminary
prospectus or any amendment thereof or supplement thereto or necessary to make
the statements therein (in the case of a prospectus, in light of the
circumstances under which they were made) not misleading, to the extent, but
only to the extent, that such untrue or alleged untrue statement or omission is
contained in or omitted from, as the case may be, any information or affidavit
with respect to such Holder so furnished in writing by such Holder specifically
for use in the Registration Statement. Each Holder also shall indemnify any
underwriters of the Registrable Securities, their officers and directors and
each person who controls such underwriters (within the meaning of the
Securities Act) to the same extent as provided above with respect to the
indemnification of the Company.
<PAGE> 45
45
9.3 Conduct of Indemnification Proceedings. Any party
that proposes to assert the right to be indemnified under this Section 9 shall,
promptly after receipt of notice of commencement of any action against such
party in respect of which a claim is to be made against an indemnifying party
or parties under this Section 9, notify each such indemnifying party of the
commencement of such action, enclosing a copy of all papers served, but the
omission so to notify such indemnifying party will not relieve it from any
liability that it may have to any indemnified party under the foregoing
provisions of this Section 9 unless, and only to the extent that, such omission
results in the forfeiture of substantive rights or defenses by the indemnifying
party. If any such action is brought against any indemnified party and it
notifies the indemnifying party of its commencement, the indemnifying party
will be entitled to participate in and, to the extent that it elects by
delivering written notice to the indemnified party promptly after receiving
notice of the commencement of the action from the indemnified party, jointly
with any other indemnifying party similarly notified, to assume the defense of
the action, with counsel reasonably satisfactory to the indemnified
<PAGE> 46
46
party, and after notice from the indemnifying party to the indemnified party of
its election to assume the defense, the indemnifying party will not be liable
to the indemnified party for any legal or other expenses except as provided
below and except for the reasonable costs of investigation subsequently
incurred by the indemnified party in connection with the defense. If the
indemnifying party assumes the defense, the indemnifying party shall have the
right to settle such action without the consent of the indemnified party;
provided, however, that the indemnifying party shall be required to obtain such
consent (which consent shall not be unreasonably withheld) if the settlement
includes any admission of wrongdoing on the part of the indemnified party or
any decree or restriction on the indemnified party or its officers or
directors; provided, further, that no indemnifying party, in the defense of any
such action, shall, except with the consent of the indemnified party (which
consent shall not be unreasonably withheld), consent to entry of any judgment
or enter into any settlement that 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 with respect to such action. The
<PAGE> 47
47
indemnified party will have the right to employ its own counsel in any such
action, but the fees, expenses and other charges of such counsel will be at the
expense of such indemnified party unless (a) the employment of counsel by the
indemnified party has been authorized in writing by the indemnifying party, (b)
the indemnified party has reasonably concluded (based on advice of counsel)
that there may be legal defenses available to it or other indemnified parties
that are different from or in addition to those available in the indemnifying
party, (c) a conflict or potential conflict exists (based on advice of counsel
to the indemnified party) between the indemnified party and the indemnifying
party (in which case the indemnifying party will not have the right to direct
the defense of such action on behalf of the indemnified party) or (d) the
indemnifying party has not in fact employed counsel to assume the defense of
such action within a reasonable time after receiving notice of the commencement
of the action, in each of which cases the reasonable fees, disbursements and
other charges of counsel will be at the expense of the indemnifying party or
parties. It is understood that the indemnifying party or parties shall not, in
connection with any proceeding or related
<PAGE> 48
48
proceedings in the same jurisdiction, be liable for the reasonable fees,
disbursements and other charges of more than one separate firm admitted to
practice in such jurisdiction at any one time from all such indemnified party
or parties unless (a) the employment of more than one counsel has been
authorized in writing by the indemnifying party or parties, (b) an indemnified
party has reasonably concluded (based on advice of counsel) that there may be
legal defenses available to it that are different from or in addition to those
available to the other indemnified parties or (c) a conflict or potential
conflict exists (based on advice of counsel to an indemnified party) between
such indemnified party and the other indemnified parties, in each of which
cases the indemnifying party shall be obligated to pay the reasonable fees and
expenses of such additional counsel or counsels. An indemnifying party will
not be liable for any settlement of any action or claim effected without its
written consent (which consent shall not be unreasonably withheld).
9.4 Contribution. If the indemnification provided for in
this Section 9 from the indemnifying party is unavailable to an indemnified
party hereunder in respect
<PAGE> 49
49
of any losses, claims, damages, liabilities or expenses referred to herein,
then the indemnifying party, to the extent such indemnification is unavailable,
in lieu of indemnifying such indemnified party, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages, liabilities or expenses in such proportion as is appropriate to
reflect the relative fault of the indemnifying party and indemnified parties in
connection with the actions that resulted in such losses, claims, damages,
liabilities or expenses. The relative fault of such indemnifying party and
indemnified parties shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a
material fact, has been made by, or relates to information supplied by, such
indemnifying party or indemnified parties, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action. The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in Sec-
<PAGE> 50
50
tion 9.3, any legal or other fees or expenses reasonably incurred by such party
in connection with any investigation or proceeding.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 9.4 were determined by pro
rata allocation or by any other method of allocation that does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. 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.
If indemnification is available under this Section 9, the
indemnifying parties shall indemnify each indemnified party to the full extent
provided in Section 9.1 and 9.2 without regard to the relative fault of said
indemnifying parties or indemnified party.
10. Participation in Underwritten Registrations. No
person may participate in any underwritten registration hereunder unless such
person (i) agrees to sell such person's securities on the basis provided in any
underwriting agreements approved by the persons entitled hereunder to
<PAGE> 51
51
approve such arrangements and (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
reasonably required under the terms of such underwriting arrangements.
11. Rule 144. The Company covenants that it shall use
its best efforts to file the reports required to be filed by it under the
Securities Exchange Act of 1934, as amended, and the rules and regulations of
the Commission thereunder if and when the Company becomes obligated to file
such reports (or, if the Company ceases to be required to file such reports, it
shall, upon the request of any Holder, make publicly available other
information), and it shall, if feasible, take such further action as any Holder
may reasonably request, all to the extent required from time to time to enable
such Holder to sell Registrable Securities without registration under the
Securities Act within the limitation of the exemptions provided by (i) Rule 144
under the Securities Act, as such Rule may be amended from time to time or (ii)
any similar rules or regulations hereafter adopted by the Commission. Upon the
written request of any Holder, the Company shall deliver to such Holder a
written statement as to whether it has complied with such requirements.
<PAGE> 52
52
12. Miscellaneous.
12.1 Remedies. Each Holder, in addition to being
entitled to exercise all rights granted by law, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement.
The Company agrees that monetary damages would not be adequate compensation for
any loss incurred by reason of a breach by it of the provisions of this
Agreement and hereby agrees to waive the defense in any action for specific
performance that a remedy at law would be adequate.
12.2 Amendments and Waivers. Except as otherwise
provided herein, the provisions of this Agreement may not be amended, modified
or supplemented, and waivers or consents to departures from the provisions
hereof may not be given unless the Company has obtained the written consent of
all Holders.
12.3 Notices. Any notice or other communication
required or permitted hereunder shall be in writing and shall be delivered
personally, or sent by certified or registered or express mail, postage
prepaid. Any such notice shall be deemed given when so delivered personally,
or, if mailed, five days (or, in the case of express mail,
<PAGE> 53
53
one day) after the date of deposit in the United States mail, as follows:
(i) if to the Company, to:
Simon Property Group, Inc.
Merchants Plaza
115 West Washington Street
Suite 15 East
Indianapolis, IN 46204
Attention: David Simon
James M. Barkley, Esq.
Facsimile No.: (317) 685-7221
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attention: Toby S. Myerson, Esq.
Edwin S. Maynard, Esq.
Facsimile: (212) 757-3990
(ii) if to any Holder, to the most current address
of such Holder given by such Holder to the
Company in writing.
Any party may by notice given in accordance with this Section
12.3 to the other parties designate another address or person for receipt of
notice hereunder.
12.4 Successors and Assigns.
(a) This Agreement shall inure to the benefit of
and be binding upon the Holders and their respective successors and assigns and
the successors and assigns of the Company; provided, however, that, except as
<PAGE> 54
54
otherwise provided in Sections 12.4(b) and (c) hereof, no Holder may assign its
rights hereunder to any person who is not a permitted transferee of such Holder
pursuant to the terms of the Partnership Agreement; provided further, that,
except as otherwise provided in Section 12.4(b) or (c) hereof, no Holder may
assign its rights hereunder to any person who does not acquire all or
substantially all of such Holder's Registrable Securities or Units, as the case
may be, or, (i) in the case of the Simon Family Entities, to any person who
does not acquire at least $10,000,000 worth of the Simon Family Entities'
Registrable Securities or Units and (ii) in the case of the DeBartolo Group to
any person who does not acquire at least $10,000,000 worth of DeBartolo Group's
Registrable Securities or Units.
(b) Affiliates. It is understood that JCP and
Brandywine are affiliates and that under the terms of the Partnership
Agreement, Limited Partners have the right to assign their partnership
interests, in whole or in part, to their affiliates. The provisions of this
Agreement shall inure to the benefit of all such affiliates and, for all
purposes of this Agreement, a party to this Agreement (other than the Company)
and all of its affiliates which at the
<PAGE> 55
55
time in question are Limited Partners of the Operating Partnership shall be
deemed to be one party, with the consequence that (i) they may aggregate their
Units for the purpose of exercising their rights under this Agreement and (ii)
to assign the benefits of this Agreement to a third party which is not an
affiliate of them, except as otherwise provided with respect to the Simon
Family Entities in Section 12.4(a) above, they must together assign to such
third party all or substantially all of the aggregate amount of Units held by
all of them.
(c) Transfer of Exchange and Registration Rights.
(i) The rights of each DeBartolo Group Holder to make a request and to cause
the Company to register Registrable Securities owned by such Holder under
Section 2 hereof and the right to cause the Company to include Registrable
Securities in a registration for the account of the Company under Section 3
hereof (the "Rights") may be assigned, from time to time and reassigned, in
whole or in part, to a transferee or assignee receiving (except as provided in
Section 12.4(c)(ii) below) at least three percent (3%) of the outstanding
shares of Common Stock or Units exchangeable into at least such number of
shares of
<PAGE> 56
56
Common Stock (the "Three Percent Requirement") in connection with a transfer or
assignment of shares of Common Stock received upon exchange of Units in
connection with a substantially contemporaneous resale of all such Units or
Units which is not prohibited under any other agreement to which the transferor
or assignor is a party or any pledge of Units or Common Stock which is not
prohibited under any other agreement to which the transferor or assignor is a
party, provided that (x) such transfer may otherwise be effected in accordance
with applicable securities law, (y) the Company is given written notice of such
assignment prior to such assignment or promptly thereafter, and (z) the
transferee or assignee by written agreement acknowledges that he is bound by
the terms of this Agreement. From and after the occurrence of any such
transfer, the defined term "Holder" shall include such transferees or
assignees.
(ii) The Rights granted to each member of the
DeBartolo Group hereunder may be assigned pursuant to this Section 12.4(c) to a
secured creditor to whom such Holder has pledged Units (or other securities
exchangeable or convertible into Registrable Securities) or Registrable
Securities prior to the date hereof, which pledge shall be
<PAGE> 57
57
permitted hereunder, and the Three Percent Requirement shall not apply to any
such assignment. Such rights may, to the extent provided in the pledge,
security or other agreement or instrument pursuant to which such rights have
been assigned and to the extent permitted by the Securities Act and the rules
and regulations thereunder, be exercised by any such secured creditor even
though it does not become an assignee of the pledged Units of such Holder
pursuant to Section 12.4(c)(i) hereof. Each of the Estate of Edward J.
DeBartolo, Edward J. DeBartolo, Jr., The Edward J. DeBartolo Corporation and
each corporate or other person or legal entity, other than Marie Denise
DeBartolo York specified on Schedule B to the Stockholders Agreement does
hereby grant the rights, as described in the two preceding sentences, to the
institution from time to time serving as the Administrative Agent under (A) the
Second Amended and Restated New Facility Credit Agreement, dated as of March
31, 1994, by and among DeBartolo, Inc. and The Edward J. DeBartolo Corporation,
as the Borrowers, Wells Fargo Bank, N.A., as the Issuing Bank, the Co-Lenders
from time to time party thereto, and Wells Fargo Realty Advisors Funding,
Incorporated, as the Administrative Agent (and its
<PAGE> 58
58
successors and assigns), as such agreement may be modified, supplemented or
amended from time to time and (B) the Second Amended and Restated Restructuring
Facility Credit Agreement, dated as of March 31, 1994, by and among DeBartolo,
Inc. and The Edward J. DeBartolo Corporation, as the Borrowers, the Co-Lenders
from time to time party thereto, and Wells Fargo Realty Advisors Funding,
Incorporated, in its capacity as the Administrative Agent (together with its
successors and assigns), as such agreement may be modified, supplemented or
amended from time to time. Upon notice to the Company by any such secured
creditor that it has become authorized to exercise such Rights, no further
written instrument shall be required under this Agreement; provided that such
secured creditor provides the Company at the time it exercises any rights with
such indemnification and certifications as are reasonably satisfactory to the
Company in form and substance as to its authorization to exercise such rights.
It is further expressly understood and agreed that (i) the Company shall not be
required in any way to determine the validity or sufficiency, whether in form
or in substance, of any certification from a secured creditor that it is
authorized
<PAGE> 59
59
to exercise Rights so transferred to it, (ii) the Company shall have no
liability to any Holder for acting in accordance with any such certification
and (iii) no further indemnification to the Company shall be required pursuant
to this Section 12.4(c). The Company shall not be required in any way to
determine the validity or sufficiency, whether in form or in substance, of any
written instrument referred to in the second sentence of this Section
12.4(c)(ii), and it shall be sufficient if any writing purporting to be such an
instrument is delivered to the Company and purports on its face to be correct
in form and signed or otherwise executed by such Holder. The Company may
continue to rely on such written instrument until such time, if any, that it
receives a written instrument from the secured creditor named therein (or its
successor) revoking, or acknowledging the revocation or other termination of,
the authority granted by such written instrument.
(iii) The rights of each of JCP and Brandywine to
make a request and cause the Company to register Registrable Securities owned
by such Holder under Section 2 hereof and the right of such Holder to cause the
Company to include Registrable Securities in a registration
<PAGE> 60
60
for the account of the Company under Section 3 hereof (the "JCP Rights") may be
assigned (i) to a secured creditor to whom such Holder has pledged Units or, if
such Holder has not previously exercised the right provided for in the first
sentence of Section 9.3(c) of the Operating Partnership, to any Person to whom
the secured creditor has transferred the pledged Units pursuant to Section
9.3(c) of the Operating Partnership Agreement (such secured creditor or such
transferee being referred to as the "Assignee"), in each case subject to the
further terms and provision of this Section 12.4(c)(iii). The JCP Rights may
be exercised by the Assignee after the Assignee has become a substitute Limited
Partner of the Operating Partnership and only if the Assignee provides the
Company at the time it exercises the JCP Rights with such indemnification and
certifications as are reasonably satisfactory to the Company in form and
substance as to its authorization to exercise such JCP Rights. It is further
expressly understood and agreed that (i) the Company shall not be required in
any way to determine the validity or sufficiency, whether in form or in
substance, of any certification from the Assignee that it is authorized to
exercise the JCP Rights so transferred to it,
<PAGE> 61
61
(ii) the Company shall have no liability to such Holder for acting in
accordance with any such certification and (iii) except as set forth above in
this paragraph, no further indemnification to the Company shall be required
pursuant to this Section 12.4(c).
12.5 Mergers, Etc. In addition to any other restriction on
mergers, consolidations and reorganizations contained in the articles of
incorporation, by-laws, code of regulations or agreements of the Company, the
Company covenants and agrees that it shall not, directly or indirectly, enter
into any merger, consolidation or reorganization in which the Company shall not
be the surviving corporation unless all the Registrable Securities and all of
the outstanding shares of Common Stock of the Company and Units are exchanged
or purchased upon substantially equivalent economic terms for cash or freely
marketable securities of the surviving corporation unless the surviving
corporation shall, prior to such merger, consolidation or reorganization, agree
in a writing to assume in full and without modification other than conforming
changes necessary to reflect the new issuer of the Registrable Securities all
of the obligations of the
<PAGE> 62
62
Company under this Agreement, and for that purpose references hereunder to
"Registrable Securities" shall be deemed to include the securities which
holders of Common Stock would be entitled to receive in exchange for
Registrable Securities pursuant to any such merger, consolidation, sale of all
or substantially all of its assets or business, liquidation, dissolution or
reorganization.
12.6 Consent of Teachers'. Notwithstanding anything to the
contrary contained herein, the Company hereby agrees to use its commercially
reasonable best efforts to cause Teachers' to execute this Agreement at the
Closing and to waive all of its rights under the First Agreement.
12.7 BJS Registration Rights Agreement. The parties hereto
agree that the provisions of Section 5 hereof shall not apply to the
Registration Rights Agreement, dated March 26, 1996, between the Company and
BJS Capital Partners L.P. ("BJS"), copies of which have been delivered to the
parties hereto.
12.8 Counterparts. This Agreement may be executed in any
number of counterparts and by the parties
<PAGE> 63
63
hereto in separate counterparts, each of which when so executed shall be deemed
to be an original and all of which taken together shall constitute one and the
same agreement.
12.9 Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
12.10 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
12.11 Severability. If any one or more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired, it being
intended that all of the rights of the Holders shall be enforceable to the full
extent permitted by law.
12.12 Entire Agreement. This Agreement is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties
<PAGE> 64
64
hereto in respect of the subject matter contained herein. There are no
restrictions, promises, warranties or undertakings other than those set forth
or referred to herein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
<PAGE> 65
65
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed as of the date first written above.
SIMON PROPERTY GROUP, INC.
By:_____________________________
Name:
Title:
MELVIN SIMON & ASSOCIATES, INC.
By:_____________________________
Name:
Title:
JCP REALTY, INC.
By:_____________________________
Name:
Title: Executive Vice President
BRANDYWINE REALTY, INC.
By:_____________________________
Name:
Title: Executive Vice President
<PAGE> 66
66
_______________________________
MELVIN SIMON
______________________________
HERBERT SIMON
______________________________
DAVID SIMON
______________________________
DEBORAH J. SIMON
______________________________
CYNTHIA J. SIMON
______________________________
IRWIN KATZ, as Successor Trustee
Under Declaration of Trust and
Trust Agreement Dated August 4,
1970
______________________________
IRWIN KATZ, as Trustee of the
Melvin Simon Trust No. 1, the
Melvin Simon Trust No. 6, the
Melvin Simon Trust No. 7
and the Herbert Simon Trust No. 3
<PAGE> 67
67
MELVIN SIMON & ASSOCIATES, INC.
By: ________________________
Name:
Title:
PENN SIMON CORPORATION
By: ________________________
Name:
Title:
NACO SIMON CORP.
By: ________________________
Name:
Title:
SANDY SPRINGS PROPERTIES, INC.
By: ________________________
Name:
Title:
<PAGE> 68
68
SIMON ENTERPRISES, INC.
By: _______________________
Name:
Title:
S.F.G. COMPANY, L.L.C.
By: MELVIN SIMON & ASSOCIATES,
INC., its manager
By: __________________
Name:
Title:
<PAGE> 69
69
MELVIN SIMON, HERBERT SIMON AND
DAVID SIMON, NOT INDIVIDUALLY BUT
AS VOTING TRUSTEES UNDER THAT
CERTAIN VOTING TRUST AGREEMENT,
VOTING AGREEMENT AND PROXY DATED AS
OF DECEMBER 1, 1993, BETWEEN MELVIN
SIMON & ASSOCIATES, INC., AND
MELVIN SIMON, HERBERT SIMON AND
DAVID SIMON:
____________________________
Melvin Simon
____________________________
Herbert Simon
____________________________
David Simon
THE EDWARD J. DeBARTOLO CORPORATION
By: ________________________
Name:
Title:
<PAGE> 70
70
THE ESTATE OF EDWARD J. DeBARTOLO
By: ________________________
Name:
Title:
By: ________________________
Name:
Title:
________________________________
Edward J. DeBartolo, Jr.,
individually, and in his capacity
as Trustee under (i) the Lisa Marie
DeBartolo Revocable Trust-
successor by assignment from
Edward J. DeBartolo Trust No. 5,
(ii) the Tiffanie Lynne DeBartolo
Revocable Trust-successor by
assignment from Edward J. DeBartolo
Trust No. 6 and (iii) Edward J.
DeBartolo Trust No. 7 for the
Benefit of Nicole Anne DeBartolo
________________________________
Cynthia R. DeBartolo
________________________________
Marie Denise DeBartolo York,
individually, and in her capacity
as Trustee under (i) Edward J.
DeBartolo Trust No. 8 for the
benefit of John Edward York, (ii)
Edward J. DeBartolo Trust No. 9 for
the benefit of Anthony John York,
(iii) Edward J. DeBartolo Trust No.
10 for the benefit of Mara Denise
York and (iv) Edward J. DeBartolo
Trust No. 11 for the benefit of
Jenna Marie York
<PAGE> 71
71
CORAL SQUARE ASSOCIATES
By: __________________________
Name:
Title:
By: __________________________
Name:
Title:
SOUTH BEND ASSOCIATES
By: DeBartolo, Inc.
By: _____________________
Name:
Title:
By: The Estate of Edward J.
DeBartolo
By: ______________________
Name:
Title:
By: ______________________
Name:
Title:
<PAGE> 72
72
WASHINGTON SQUARE ASSOCIATES
By: The Edward J. DeBartolo
Corporation
By: ______________________
Name:
Title:
H-CASTLETON
By: Altamonte, Inc.
By: ______________________
Name:
Title:
<PAGE> 73
73
BAY PARK, INC.
WARD PLAZA ASSOCIATES
CHELTENHAM SHOPPING CENTER
ASSOCIATES
SUMMIT MALL, INC.
TYRONE SQUARE, INC.
UPPER VALLEY MALL, INC.
MISSION VIEJO MALL, INC.
PINELLAS SQUARE, INC.
GREAT LAKES MALL, INC.
PALM BEACH MALL, INC.
LAFAYETTE SQUARE, INC.
LIMA MALL, INC.
RICHMOND MALL, INC.
WOODVILLE MALL, INC.
DeBARTOLO AVENTURA, INC.
BOYNTON BEACH, INC.
THE FLORIDA MALL CORPORATION
DeBARTOLO, INC.
D.L. GROVE, INC.
TC MALL II, INC.
PADDOCK MALL, INC.
NATIONAL INDUSTRIAL DEVELOPMENT
CORPORATION
GREAT NORTHEAST MALL, INC.
By: __________________________
Name:
Title:
RUES PROPERTIES, INC.
By: __________________________
Name:
Title:
COLUMBIA SC I, INC.
COLUMBIA SC II, INC.
<PAGE> 74
74
NORTHGATE I REAL ESTATE CORPORATION
NORTHGATE II REAL ESTATE
CORPORATION
TACOMA SC I, INC.
TACOMA SC II, INC.
By: __________________________
Name:
Title:
<PAGE> 1
EXHIBIT 10.4.2
AGREEMENT
This Agreement (the "Agreement") is entered into as of March 26, 1996
between BJS CAPITAL PARTNERS L.P. ("BJS") and SIMON PROPERTY GROUP, INC., a
Maryland corporation ("Simon" or the "Company").
DeBartolo Realty Corporation, an Ohio corporation ("DRC"), BJS, The
Edward J. DeBartolo Corporation, an Ohio corporation ("EJDC"), and certain other
stockholders of DRC are parties to a Registration Rights Agreement dated as of
April 21, 1994 (the "DRC Registration Rights Agreement").
DRC and Simon are parties to a Merger Agreement dated as of March 26,
1996 (the "Merger Agreement") providing for the merger of a subsidiary of Simon
with DRC (the "Merger").
The parties hereto agree as follows:
1. Simon agrees to cause its Registration Statement on Form S-4
referred to in the Merger Agreement (as amended and supplemented from time to
time, the "S-4") to register the resale by BJS and its affiliates from time to
time of all shares of common stock, par value $ .0001 per share, of Simon
("Simon Common Stock") issued to BJS and its affiliates in the Merger (the "BJS
Stock"). BJS agrees that it will not be permitted to utilize this Form S-4 for
an underwritten public offering but rather only for an offering to be made on a
delayed or continuous basis permitting sales in ordinary course broker or dealer
transactions not involving an underwritten public offering. If the Securities
and Exchange Commission (the "Commission") does not permit the Form S-4 to be so
utilized, then Simon shall
<PAGE> 2
2
forthwith file a Registration Statement on Form S-3 or other appropriate form
for an offering of BJS Stock to be made on a delayed or continuous basis
pursuant to Rule 415 thereunder or any similar rule that may be adopted by the
Commission permitting sales in ordinary course broker or dealer transactions not
involving an underwritten public offering, and Simon shall use its best efforts
to cause such Registration Statement to be declared effective by the Commission
as soon as practicable.
2. Except for (a) transfers pursuant to a tender or exchange offer for
Simon Common Stock or a business combination transaction involving Simon, (b)
transfers of BJS Stock to affiliates of BJS, (c) sales of BJS Stock pursuant to
Rule 144 under the Securities Act of 1933, as amended, in conformity with the
requirements of that Rule, and (d) as otherwise may be consented to in writing
by Simon, BJS agrees that neither BJS nor its affiliates will engage in any
sales of any BJS Stock during the 90-day period following the closing date of
the Merger.
3. Simon shall maintain the effectiveness of the S-4 so long as BJS and
its affiliates beneficially own BJS Stock and will supplement or amend the S-4
as soon as practicable (subject to the 45-day deferral periods specified in
Section 4 of the Company Registration Rights Agreement (as defined in Section 4
below), which Section is being incorporated by reference herein) to set forth
any plan of distribution of BJS Stock provided to it by BJS in writing other
than any plan of distribution providing for or describing an underwritten public
offering.
<PAGE> 3
3
4. Simultaneously herewith Simon is entering into a Registration Rights
Agreement (the "Company Registration Rights Agreement") with various persons,
including certain of the parties to the DRC Registration Rights Agreement other
than BJS. Simon and BJS hereby agree that the provisions of Paragraphs 4, 7, 8,
9, 11, 12.1, 12.2 and 12.5 of the Company Registration Rights Agreement shall be
applied to and deemed to be incorporated into this Agreement with such changes
therein as the context may require. In this connection the provisions of
Paragraph 7 of the Company Registration Rights Agreement shall apply to the
extent that said provisions are applicable to non-underwriting offerings.
Defined terms used in the Company Registration Rights Agreement shall be deemed
modified for purposes of this Agreement as the context of this Agreement
requires, including without limitation that "Holders" shall refer to BJS and its
affiliates and "Registrable Securities" shall refer to BJS Stock.
5. The rights ad obligations of BJS under the DRC Registration Rights
Agreement shall terminate and shall have no further force or effect upon the
occurrence of the closing date of the Merger, provided the 5-4 (assuming the
Commission permits it to be utilized as contemplated hereby) has become
effective by that date, and if it does not become effective by that date or the
Commission does not permit it to be utilized as contemplated hereby, shall
terminate when the S-4 or the alternative
<PAGE> 4
4
Registration Statement contemplated by Paragraph 1 of this Agreement becomes
effective.
6. THIS AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS BY THE LAWS OF THE
STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICTS OF LAW PRINCIPLES THEREOF.
This Agreement constitutes the entire agreement among the parties hereto with
regard to the subject matter hereof. This Agreement may be amended only by a
writing executed and delivered by each of the parties hereto. The provisions of
this Agreement may be waived only by a writing executed and delivered by the
party or parties hereto entitled to the benefits thereof. This Agreement may be
executed in one or more counterparts, which together shall constitute one
instrument. This Agreement shall be binding upon the parties hereto and their
successors and permitted assigns.
7. Each notice, request or other communication (each a "Notice")
required or desired to be given hereunder shall be in writing and shall be
effective and deemed to have been received (i) when delivered in person, (ii)
when sent by facsimile transmission with receipt confirmed by the machine
sending the transmission (provided that a copy thereof also shall be delivered
as soon as practicable in person or by a nationally recognized overnight mail or
courier service, receipt requested), (iii) three days after having been mailed
by registered or certified United States mail, postage prepaid, return receipt
requested or (iv) the next business day after having been sent by
<PAGE> 5
5
a nationally recognized overnight mail or courier service, receipt requested.
Notices shall be addressed as follows:
(a) if to Simon, to it at:
Merchants Plaza
115 West Washington Street, Suite 15 East
Indianapolis, IN 46204
Telecopier No.: (317) 685-7221
Attention: David Simon
James M. Barkley, Esq.
(b) if to any of BJS and its affiliates, to them care of:
The Blackstone Group L.P.
345 Park Avenue
31st Floor
New York, NY 10154
Telecopier No.: (212) 754-8704
Attention: Mark Gallogly
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Telecopier No.: (212) 455-2502
Attention: Robert L. Friedman, Esq.
or at such other address or to such other telecopier number as such party shall
have furnished to the other parties hereto.
<PAGE> 6
6
IN WITNESS WHEREOF the parties hereto have executed this Agreement as
of the date first written above.
SIMON PROPERTY GROUP, INC.
By: /s/ David Simon
-------------------------------
Name: David Simon
Title: President
BJS CAPITAL PARTNERS L.P.
By: BLACKSTONE REAL ESTATE, INC.,
a General Partner
By: /s/ Thomas Saylak
-------------------------------
Name: Thomas Saylak
Title:
<PAGE> 1
EXHIBIT 10.5
EXECUTION COPY
CONTRIBUTION AGREEMENT
CONTRIBUTION AGREEMENT, dated as of June 25, 1996 (the
"AGREEMENT"), by and among DeBartolo Realty Corporation, an Ohio corporation
("DEBARTOLO"), as the general partner of DeBartolo Realty Partnership, L.P., a
Delaware limited partnership ("DRP"), and, after the consummation of the
transactions contemplated hereby and by the Merger Agreement referred to below,
as a general partner of SDG (as hereinafter defined) (DRP simultaneously
herewith will change its name to Simon DeBartolo Group, L.P. ("SDG")), Simon
Property Group, Inc., a Maryland corporation ("SIMON"), in its individual
capacity and as the general partner of Simon Property Group, L.P., a Delaware
limited partnership ("SPG L.P."), and the limited partners of SPG L.P. listed
on SCHEDULE A (as supplemented from time to time pursuant to Section 1.2(c)
hereof) hereto ("SIMON", and, together with Simon, the "SUBSCRIBERS").
RECITALS
(a) Simultaneously with the consummation of the merger of
Day Acquisition Corp. ("SUBCO") with and into DeBartolo (the "MERGER") and the
other transactions contemplated by the Agreement and Plan of Merger (the
"MERGER AGREEMENT"), dated as of March 26, 1996, among Simon, Subco and
DeBartolo, each Subscriber shall contribute to SDG, and SDG shall accept from
each such Subscriber, certain of its respective interests in SPG L.P.
(collectively, the "SIMON INTERESTS") specified pursuant to Recital (b) below,
and in consideration for such contributions by
<PAGE> 2
each Subscriber, and in exchange therefor, SDG shall issue to each Subscriber,
and each Subscriber shall receive from SDG, certain partnership interests in
SDG ("UNITS").
(b) Each Subscriber shall contribute to SDG, and SDG
shall accept from each such Subscriber, the Simon Interests set forth opposite
the name of each such Subscriber on SCHEDULE B hereto (as supplemented from
time to time pursuant to Section 1.2(c) hereof). SDG shall issue to each
Subscriber, and such Subscriber shall receive from SDG, the number of Units set
forth opposite the name of each such Subscriber on SCHEDULE C hereto (as
supplemented from time to time pursuant to Section 1.2(c) hereof).
(c) In order to consummate the transactions contemplated
by this Agreement at the Closing (as hereinafter defined), (i) the Fourth
Amended and Restated Agreement of Limited Partnership of DRP, dated as of April
21, 1994 as heretofore amended (the "DEBARTOLO PARTNERSHIP AGREEMENT"), which,
among other things, will change the name of DRP to "Simon DeBartolo Group,
L.P.," shall be amended and restated substantially in the form attached hereto
as ANNEX A (the "NEW SDG PARTNERSHIP AGREEMENT"), and (ii) the Second Amended
and Restated Agreement of Limited Partnership of SPG L.P., dated as of December
30, 1995 (the "OLD SPG PARTNERSHIP AGREEMENT"), shall be amended and restated
substantially in the form attached hereto as ANNEX B (the "NEW SPG PARTNERSHIP
AGREEMENT").
(d) Capitalized terms used but not defined herein shall
have the respective meanings ascribed to such terms in the Merger Agreement.
<PAGE> 3
3
NOW THEREFORE, in consideration of the mutual agreements
contained herein, the parties hereby agree as follows:
SECTION 1
CONTRIBUTION AND EXCHANGE; CLOSING
1.1 Contribution and Exchange. Subject to the receipt of
the consents specified on SCHEDULE D hereto prior to the Closing in form and
substance satisfactory to DeBartolo and Simon, upon the terms and subject to
the other conditions of this Agreement, each Subscriber shall contribute to
SDG, and SDG shall accept from each such Subscriber, its respective Simon
Interests, as set forth opposite the name of each such Subscriber on SCHEDULE B
hereto.1 SDG shall issue to each Subscriber, and each Subscriber shall receive
from SDG, the number of Units set forth opposite the name of each such
Subscriber on SCHEDULE C hereto.2 Each of SDG and SPG L.P. shall make a cash
flow distribution to their respective partners, the record
__________________________________
1/ SCHEDULE B sets forth (i) the limited partner interest of each SPG L.P.
Limited Partner in SPG L.P. being transferred to SDG and (ii) with
respect to Simon s general partner interest in SPG L.P. being transferred
to SDG, units representing 10.5% of the total outstanding units in
SPG L.P. plus the assignment of 49.5% of the interest in the profits of
SPG L.P.
2/ SCHEDULE C sets forth the Units being issued to each SPG L.P. Limited
Partner in SDG as well as the non managing general partner interest being
issued to Simon in SDG. It is anticipated that subsequent to the first
anniversary of the Closing, Simon will transfer to SDG for no additional
consideration, all of its remaining economic interest in SPG L.P. other
than units constituting 1% of the total issued and outstanding units in
SPG L.P. It is also anticipated that 13 months after the Closing, all
Preferred Units owned by Simon will be transferred to SDG in
exchange for the same number of Preferred Units in SDG.
<PAGE> 4
4
date for which shall be the close of business on the last day prior to the
Effective Time. The amount of each such distribution shall be equal to the
amount of each partnership's most recent prior cash flow distribution,
multiplied by the number of days elapsed since the record date for such prior
distribution through and including the Effective Time and divided by 91, which
distribution shall constitute the only cash flow distribution to be paid in
respect of the period from such prior record date through and including the
Effective Time. Such distributions shall be paid in accordance with the
respective past practices of the partnerships.
1.2 The Closing. The closing for the contribution of
Simon Interests in exchange for Units as provided for hereunder (the
"CLOSING") shall take place concurrently with the consummation of the Merger at
the offices of Paul, Weiss, Rifkind, Wharton & Garrison, 1285 Avenue of the
Americas, New York, New York. At the Closing:
(a) Each Subscriber shall deliver to SDG such
good and sufficient instruments of conveyance and assignment as SDG and its
counsel shall deem reasonably necessary or appropriate to vest in SDG good
title in and to the Simon Interests, respectively owned by each such
Subscriber, free and clear of all Liens.
(b) Simon, as the general partner of SPG L.P.,
DeBartolo, as the managing general partner of SDG, and, to the extent
necessary, existing limited partners of SPG L.P. shall deliver a duly executed
counterpart of the New SPG Partnership Agreement, pursuant to which (i) SDG
agrees to be bound by the terms and
<PAGE> 5
5
conditions of the New SDG Partnership Agreement, and (ii) SDG becomes a limited
partner of SPG L.P.
(c) The New SDG Partnership Agreement shall be
executed and delivered by (i) DeBartolo, as managing general partner of SDG,
(ii) the Simon Limited Partners who become limited partners of SDG (to the
extent their signatures are required), (iii) Simon, as non-managing general
partner of SDG, and (iv) by existing partners of SDG to the extent required,
but in any event, at least a Majority-in- Interest (as such terms is defined in
the DeBartolo Partnership Agreement) of the limited partners of DRP. In this
connection, it is anticipated that other limited partners of SPG L.P. will
execute contribution agreements substantially in the form hereof and that at
the Closing, Units will be issued to such other limited partners of SPG L.P. in
exchange for their respective limited partnership units in SPG L.P. in the
same ratio as Units are being issued to the Simon Limited Partners hereunder.
Simon shall provide from time to time modified Schedules A, B, C, E and F to
reflect the execution and delivery from time to time of additional contribution
agreements, whereupon such holders of interests in SPG L.P. shall become SDG
Limited Partners for the purposes hereof. Each such additional contribution
agreement shall be deemed to constitute a counterpart pursuant to Section 6.7
below. Not less than ten business days prior to the Closing, Simon shall
deliver to DeBartolo, SDG and SPG L.P. a final, accurate composite of all
counterpart contribution agreements signed by all of the Simon Limited Partners
who have signed contribution agreements together with the final forms of
Schedules A, B, C, E and F reflecting all of the Simon Limited Partners that
<PAGE> 6
6
have signed Contribution Agreements, the aggregate Simon Interests to be
exchanged by such Simon Limited Partners and other aggregate information called
for by said Schedules. To the extent such composite Contribution Agreement
only reflects the information called for by the preceding sentence, it shall
not be deemed to constitute an amendment, waiver or modification of this
Agreement for the purposes of Section 6.5 below.
(d) Any other documents or agreements required to
admit the Subscribers as partners of SDG shall be executed and delivered as
necessary.
SECTION 2
REPRESENTATION AND WARRANTIES; INDEMNIFICATION
2.1 Representations and Warranties of SDG. SDG
represents and warrants to each Subscriber that:
(a) Due Organization and Good Standing. SDG is a
limited partnership duly organized, validly existing and in good standing under
the laws of its jurisdiction of organization and has the requisite power and
authority to carry on its business as now being conducted. SDG is duly
qualified or licensed to do business and is in good standing in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification or licensing necessary, other than in
such jurisdictions where the failure to be so qualified or licensed,
individually or in the aggregate, would not have a material adverse effect on
the business, financial condition or results of operations of SDG or on the
ability of SDG
<PAGE> 7
7
to consummate the transactions contemplated in this Agreement. The DeBartolo
Partnership Agreement, a copy of which has been delivered to Simon, as general
partner of SPG L.P., has not been amended or modified (except as permitted by
the Merger Agreement), annulled, rescinded or revoked since such delivery, and
is in full force and effect as of the date hereof; it being understood by the
parties hereto that upon the Closing, the DeBartolo Partnership Agreement shall
be amended and restated and the agreements and relationships among the partners
of SDG shall thereafter be governed by the New SDG Partnership Agreement.
(b) Authorization and Validity of Agreement. SDG
has the requisite partnership power and authority to enter into this Agreement
and consummate the transactions contemplated thereby. The execution, delivery
and performance of this Agreement by SDG and the consummation by SDG of the
transactions contemplated hereby have been duly authorized on behalf of SDG by
DeBartolo, as the general partner of SDG. This Agreement has been duly
authorized, executed and delivered by DeBartolo, as the general partner of SDG,
and, subject to the consent of certain limited partners of SDG as required by
the DeBartolo Partnership Agreement (the "S-D CONSENT"), it constitutes a
legal, valid and binding obligation of SDG, enforceable against SDG in
accordance with its terms, except that (i) such enforcement may be subject to
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
similar laws at the time in effect affecting the enforceability of rights of
creditors and (ii) the remedy of specific performance and injunctive and other
forms of equitable
<PAGE> 8
8
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
(c) Non-Contravention. The execution, delivery
and performance by SDG of this Agreement and the issuance of the Units pursuant
to the New SDG Partnership Agreement do not and will not (i) subject to the
obtaining of the S-D Consent, contravene or conflict with the DeBartolo
Partnership Agreement or the New SDG Partnership Agreement, (ii) contravene or
conflict with or constitute a violation of any provision of any Laws binding
upon or applicable to SDG, (iii) require any consent, approval or other action
by any Governmental Entity or any other person other than those consents or
approvals set forth on SCHEDULE D hereto, (iv) constitute a default under or
give rise to any right of termination, cancellation or acceleration of any
right or obligation of SDG under any provision of any agreement, contract,
indenture, lease or other instrument binding upon SDG or any license,
franchise, permit or other similar authorization held by SDG or by which any of
SDG's assets may be bound or (v) result in the creation or imposition of any
Liens on SDG; provided, however, it is understood that the right of SDG to
execute, deliver and perform this Agreement may be deemed to require the
consents set forth on SCHEDULE D hereto.
(d) Litigation. There are no pending actions,
suits or proceedings pending or, to the knowledge of DRP, threatened in
writing, against or affecting DRP or any of its properties, assets or
operations, or with respect to which
<PAGE> 9
9
DRP is responsible by way of indemnity or otherwise that could, individually or
in the aggregate, reasonably be likely to have a material adverse effect.
(e) Units Issued Free and Clear of Liens. All of
the Units required to be issued to each Subscriber pursuant to this Agreement
shall be validly issued free and clear of any Liens, and each Subscriber shall
have all of its respective rights and privileges as provided in the New SDG
Partnership Agreement.
(f) Capitalization. Following the consummation
of the transactions contemplated in this Agreement, the number of Units held by
each partner of SDG shall be calculated as set forth on SCHEDULE E hereto and
the results of such calculation shall be set forth on Exhibit A to the New SDG
Partnership Agreement.
(g) SEC Documents. The Annual Report on Form
10-K of DeBartolo for the year ended December 31, 1995 as filed with the SEC, a
copy of which has been delivered to each Subscriber, contains no untrue
statement of material fact and does not omit to state any 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.
2.2 Representations and Warranties of Simon
(a) SEC Documents. The Annual Report on Form
10-K of Simon for the year ended December 31, 1995 as filed with the SEC, a
copy of which has been delivered to SDG, contains no untrue statement of
material fact and does not omit to state any material fact required to be
stated therein or necessary to make the
<PAGE> 10
10
statements therein, in light of the circumstances under which they were made,
not misleading.
2.3 Representations and Warranties of Each Subscriber
that Is Not a Natural Person. Each Subscriber which is not a natural person
represents and warrants to SDG and DeBartolo, as general partner of SDG, and to
each other Subscriber that:
(a) it is an organization duly organized and
validly existing in good standing under the laws of its jurisdiction of
organization and
(b) the execution, delivery and performance by
such Subscriber of this Agreement and the New SDG Partnership Agreement (i) are
within its power and authority and do not and will not contravene or conflict
with the certificate or articles of incorporation, by-laws, partnership
agreement or other organizational or governance documents of such Subscriber
and (ii) have been duly authorized by all necessary action by such Subscriber.
2.4 Representations and Warranties of All Subscribers.
Each Subscriber represents and warrants to SDG and to each other Subscriber as
follows:
(a) Authorization and Validity of Agreement.
This Agreement has been duly executed and delivered by such Subscriber and
constitutes a legal, valid and binding obligation of such Subscriber,
enforceable against such Subscriber in accordance with its terms and the New
SDG Partnership Agreement shall be duly executed and delivered by such
Subscriber and shall constitute legal, valid and binding obligations of such
Subscriber, enforceable against such Subscriber in accordance with its terms,
except in each case that (i) such enforcement may be subject
<PAGE> 11
11
to bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
similar laws at the time in effect affecting the enforceability of rights of
creditors and (ii) the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.
(b) Non-Contravention. The execution, delivery
and performance by such Subscriber of this Agreement and the New SDG
Partnership Agreement and the consummation of the transactions contemplated
herein and therein by such Subscriber do not and will not (i) contravene or
conflict with or constitute a violation of any provision of any Laws binding
upon or applicable to such Subscriber, (ii) require any consent, approval or
other action by any Governmental Entity or any other person other than those
consents or approvals as set forth on SCHEDULE F, or (iii) result in the
creation or imposition of any Lien on any of the Simon Interests held by such
Subscriber.
(c) Litigation. There are no pending actions,
suits or proceedings pending or, to the knowledge of such Subscriber,
threatened in writing, against or affecting such Subscriber or any of its
properties, assets or operations, or with respect to which such Subscriber is
responsible by way of indemnity or otherwise that could or in any way limit the
ability of such Subscriber to consummate the transaction contemplated hereby.
(d) Access to Information. Such Subscriber
acknowledges that it or its representative or agent (i) has been given full and
complete access to SDG
<PAGE> 12
12
in connection with this Agreement and the transactions contemplated hereby,
(ii) has had the opportunity to review all documents relevant to its decision
to enter into this Agreement and (iii) has had the opportunity to ask questions
of SDG and its management concerning its investment in SDG and the transactions
contemplated hereby.
(e) Investment Intent of Each Subscriber. Such
Subscriber acknowledges that it understands that the Units to be issued to such
Subscriber in exchange for the Simon Interests to be contributed by Subscriber
as provided herein (i) shall not be registered under the Securities Act in
reliance upon the exemption afforded by Section 4(2) thereof for transactions
by an issuer not involving any public offering and (ii) shall not be registered
or qualified under any applicable state securities laws. Such Subscriber
represents that (i) it is acquiring such Units for investment only and without
any view toward distribution thereof and it shall not sell or otherwise dispose
of such Units except in compliance with the registration requirements or
exemption provisions of any applicable federal or state securities laws and in
accordance with the terms of such securities contained in the New SDG
Partnership Agreement, as amended, (ii) its economic circumstances are such
that it is able to bear all risks of the investment in the Units for an
indefinite period of time, including the risk of a complete loss of its
investment in the Units, (iii) it has knowledge and experience in financial and
business matters sufficient to evaluate the risks of investment in the Units
and (iv) it has consulted with its own counsel and tax advisor, to the extent
deemed necessary by it, as to all legal and taxation matters covered by this
<PAGE> 13
13
Agreement and has not relied upon DRP, DeBartolo, Simon or any of their
respective affiliates, officers and representatives for any explanation of the
application of the various federal or state securities laws or tax laws with
regard to its acquisition of the Units. Such Subscriber further acknowledges
and represents that it has made its own independent investigation of SDG and
the business proposed to be conducted by SDG, and that any information relating
thereto furnished to such Subscriber was supplied by or on behalf of SDG.
(f) Ownership and Encumbrance of the Assets.
(i) Such Subscriber has all right, title
and interest in the respective Simon Interests to be contributed to SDG by it
free and clear of any Liens. Except as disclosed on SCHEDULE G, such
Subscriber has not granted any rights, options or rights of first refusal, or
entered into any agreements of any kind that are currently in effect or that
have not been waived, to purchase or otherwise acquire such Simon Interests, or
any part thereof or any interest therein, except the rights of SDG under this
Agreement.
(ii) Upon consummation of the Closing, SDG
shall be the legal owner of the Simon Interests delivered by each such
Subscriber free and clear of all Liens.
(g) Advisors. Such Subscriber has consulted with
its own counsel and tax advisor, to the extent such Subscriber deemed
necessary, as to the legal and taxation matters associated with this Agreement
and the transactions contemplated hereby and has not relied upon DRP,
DeBartolo, Simon or any of their respective
<PAGE> 14
14
affiliates, officers and representatives for any explanation of the application
of federal or state securities or tax laws with regard to its contribution of
the Simon Interests or its receipt of the Units pursuant to the terms hereof.
2.5 Indemnification. Each Subscriber shall, subject to
the limitations hereinafter set forth, indemnify and hold SDG and its partners
free and harmless of and from any claim, loss, damage, expense, cost or
liability (including, without limitation, reasonable attorneys' fees and
disbursements) resulting from its respective breach of any representation or
warranty in made by it in Sections 2.3 and 2.4. SDG shall, subject to the
limitations hereinafter set forth, indemnify and hold each Subscriber, and its
partners, officers and directors (if applicable), free and harmless of and from
any claim, loss, damage, expense, cost or liability (including without
limitation, reasonable attorneys' fees and disbursements) resulting from a
breach of any representation and warranty in Section 2.1. Simon shall, subject
to the limitations hereinafter set forth, indemnify and hold SDG and its
partners free and harmless of and from any claim, loss, damage, expense, cost
or liability (including, without limitation, reasonable attorneys' fees and
disbursements) resulting from a breach of any representation or warranty in
Section 2.2. SPG L.P. shall, subject to the limitations hereinafter set forth,
indemnify and hold SDG and its partners free and harmless of and from any
claim, loss, damage, expense, cost or liability (including, without limitation,
reasonable attorneys' fees and disbursements) resulting from a breach of any
representation or warranty in Section 2.3. Notwithstanding anything to the
contrary contained herein, (i) in no event shall the amount that SDG may
recover against any
<PAGE> 15
15
Subscriber or that any Subscriber may recover against SDG under or in respect
of this Section 2.5 for a breach of any representation or warranty in Sections
2.2, 2.4 or 2.5 hereof exceed the fair market value of the Units issued to such
Subscriber, (ii) all obligations and liabilities of each Subscriber under this
Agreement are enforceable solely against such Subscriber's Units and not
against any of such Subscriber's other assets, any other Subscriber or any
assets of any other Subscriber.
2.6 Transfer Taxes. SDG shall be solely responsible for
the payment of any transfer taxes or similar charges imposed by any state,
county or municipality in which any of the Simon Interests is located in
connection with the contribution of the Simon Interests to SDG. Also at the
Closing, and in addition to the delivery of any documents required to be
delivered in connection therewith, each Subscriber and SDG shall execute,
acknowledge and deliver such returns, questionnaires, certificates, affidavits,
declarations and other documents which may be required in connection with the
sales taxes and other taxes, fees or charges imposed by any governmental agency
in connection with the transactions contemplated hereby, and shall complete,
sign and swear to the same as may be necessary.
SECTION 3
CONDITIONS TO CLOSING
3.1 Conditions to Obligations of All Parties. The
obligations of DRP and each Subscriber to consummate the Closing are subject to
the simultaneous consummation of the Merger, the simultaneous execution and
delivery of the New SDG
<PAGE> 16
16
Partnership Agreement (by DeBartolo, as managing general partner of SDG, Simon,
as non-managing general partner of SDG, and to the extent required by those
limited partners of SPG L.P. who become limited partners of SDG pursuant to the
performance of this Agreement and the other Contribution Agreements) and to the
simultaneous execution and delivery of the New SPG Partnership Agreement.
3.2 Conditions to Obligations of SDG. The obligations of
DRP to consummate the Closing with respect to a particular Subscriber is
subject to the satisfaction of the further conditions that: (i) the
representations and warranties of such Subscriber as set forth herein shall be
true and correct as of the Closing Date in all material respects with the same
force and effect as if made on the Closing Date, (ii) the S-D Consent shall
have been obtained and (iii) each Subscriber shall have performed in all
material respects all of its obligations hereunder required to be performed by
such Subscriber on or prior to the Closing Date.
3.3 Conditions to Obligations of Each Subscriber. The
obligations of each Subscriber to consummate the Closing is subject to the
further conditions that: (i) the representations and warranties of DRP set
forth in this agreement shall be true and correct in all material respects as
of the Closing Date as though made on the Closing Date, (ii) DRP shall have
performed in all material respects all of its obligations hereunder required to
be performed by DRP at or prior to the Closing Date, (iii) the requisite
partners of DRP shall have consented the execution and delivery of the New SDG
Partnership Agreement and to the extent required shall have executed and
delivered counterparts of the New SDG Partnership Agreement at the Closing and
<PAGE> 17
17
(iv) each consent set forth opposite the name of each Subscriber on SCHEDULE F
shall have been obtained.
SECTION 4
COVENANTS
4.1 Further Assurances. SDG and each Subscriber agree,
at any time and from time to time after the Closing, to execute, acknowledge
where appropriate and deliver such further instruments and documents and to
take such other action as the other of them may reasonably request in order to
carry out the intents and purposes of this Agreement. The provisions of this
Section 4 shall survive the Closing.
SECTION 5
CONSENTS TO TRANSFER
5.1 Consent of Simon Limited Partners. Pursuant to
Section 9.1 of the Old SPG Partnership Agreement, the Simon Limited Partners
who are parties hereto hereby (i) consent to the contribution to SDG of the
Simon Interests of Simon as provided herein and (ii) consents to the admission
of SDG as a special limited partner of SPG L.P. pursuant to the Partnership
Agreement.
5.2 Consent of Simon. Pursuant to Section 9.2 of the Old
SPG Partnership Agreement, Simon, as the general partner of SPG L.P., hereby
(i) consents to the contribution to SDG of the respective Simon Interests of
each Simon Limited Partner as provided herein and (ii) consents to the
admission of SDG as a limited partner of SPG L.P.
<PAGE> 18
18
SECTION 6
MISCELLANEOUS
6.1 Notices. All notices and other communications given
or made under this Agreement shall be in writing and shall be deemed to have
been duly given or made if delivered personally or sent by registered or
certified mail (postage prepaid, return receipt requested) or by telecopier (if
written confirmation of receipt is available and provided) to the parties at
the following addresses:
(a) If to SPG to:
Simon Realty Corporation
Merchants Plaza
115 West Washington Street, Suite 15 East
Indianapolis, IN 46204
Attention: David Simon
James M. Barkley, Esq.
Telecopy: (317) 685-7221
With a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attention: Toby S. Myerson, Esq.
Edwin S. Maynard, Esq.
Telecopy: (212) 757-3990
(b) If to each Subscriber, to the
address or telecopy number
thereof that each Subscriber shall
have previously indicated in writing.
<PAGE> 19
19
or such other addresses as shall be furnished by the parties hereto by like
notice, and such notice or communication shall be deemed to have been given or
made as of the date so delivered or made.
6.2 Entire Agreement. This Agreement (together with each
other Contribution Agreement referred to in Section 1.2(c) above) constitutes
the entire agreement among the parties hereto with respect to the subject
matter hereof and supersedes all prior agreements and understandings, oral and
written, among the parties hereto with respect to such subject matter.
6.3 Binding Effect; Benefit. Subject to Section 6.4
hereof, this Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and permitted assigns. Nothing
in this Agreement, expressed or implied, is intended to confer on any person
other than the parties hereto, and their respective successors and permitted
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement.
6.4 Assignability. This Agreement (a) shall not be
assignable by SDG without prior written consent of each Subscriber and (b)
shall not be assignable by any Subscriber without the prior written consent of
SDG.
6.5 Amendment; Waiver. No provision of this Agreement
may be amended, waived or otherwise modified except by an instrument in writing
executed by the parties hereto.
6.6 Headings. The headings contained in this Agreement
are for convenience only and shall not affect the meaning or interpretation of
this Agreement.
<PAGE> 20
20
6.7 Counterparts. This Agreement may be executed in any
number of counterparts, including those executed from time to time by the
holders of partnership interests in SPG L.P. referred to in Section 1.2(c)
above each of which shall be deemed to be an original and all of which together
shall be deemed to be one and the same instrument. Delivery of executed
signature pages by telecopier shall be acceptable evidence of delivery to the
parties hereto. Delivery of executed signature pages by telecopier shall be
followed immediately by delivery of the original signature pages by overnight
courier.
6.8 Limitation of Liability. Any obligation or liability
whatsoever of either DeBartolo or Simon or any Subscriber which is a
corporation or a partnership which may arise at any time under this Agreement
or any other instrument, transaction, or undertaking contemplated hereby shall
be satisfied, if at all, out of the assets of the DeBartolo, Simon, SDG or any
such other corporation or partnership only. No such obligation or liability
shall be personally binding upon, nor shall resort for the enforcement thereof
be had to, any of DeBartolo, Simon or SDG's any such other corporation's or
partnership's directors, partners, shareholders, officers, employees, or
agents, regardless of whether such obligation or liability is in the nature of
contract, tort or otherwise.
<PAGE> 21
21
6.9 APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.
<PAGE> 22
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
DEBARTOLO REALTY PARTNERSHIP, L.P.
By: DEBARTOLO REALTY CORPORATION,
as General Partner
By: /s/ KIM A. RIECK
-------------------------------
Name: Kim A. Rieck
Title: Senior Vice President
SIMON PROPERTY GROUP, INC.
By: /s/DAVID SIMON
-------------------------------
Name:David Simon
Title:President
SUBSCRIBER:
By: /s/ JOSEPH BEALE
------------------------------------
BNW-Rosemont Limited Partnership
c/o Hawthorn Realty
2 N. LaSalle Street
Chicago, IL 60602
<PAGE> 23
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
DEBARTOLO REALTY PARTNERSHIP, L.P.
By: DEBARTOLO REALTY CORPORATION,
as General Partner
By: /s/ KIM A. RIECK
-------------------------------
Name: Kim A. Rieck
Title: Senior Vice President
SIMON PROPERTY GROUP, INC.
By: /s/ DAVID SIMON
-------------------------------
Name:David Simon
Title:President
SUBSCRIBER:
By: /s/ D. ANDREW BELL
-------------------------------
D. Andrew Bell
15570 N. Dallas Parkway, Suite 902
Dallas, TX 75248
<PAGE> 24
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
DEBARTOLO REALTY PARTNERSHIP, L.P.
By: DEBARTOLO REALTY CORPORATION,
as General Partner
By: /s/ KIM A. RIECK
-------------------------------
Name: Kim A. Rieck
Title: Senior Vice President
SIMON PROPERTY GROUP, INC.
By: /s/ DAVID SIMON
-------------------------------
Name:David Simon
Title:President
SUBSCRIBER:
By: /s/ DONALD E. BOELKE
-------------------------------
Donald E. Boelke
11134 Estancia Way
Carmel, IN 46032
<PAGE> 25
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
DEBARTOLO REALTY PARTNERSHIP, L.P.
By: DEBARTOLO REALTY CORPORATION,
as General Partner
By: /s/ KIM A. RIECK
-------------------------------
Name: Kim A. Rieck
Title: Senior Vice President
SIMON PROPERTY GROUP, INC.
By: /s/ DAVID SIMON
-------------------------------
Name:David Simon
Title:President
SUBSCRIBER:
By: /s/ MELVIN SIMON
-------------------------------
Brightwood Plaza, Inc.
115 W. Washington Street
Indianapolis, IN 46204
<PAGE> 26
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
DEBARTOLO REALTY PARTNERSHIP, L.P.
By: DEBARTOLO REALTY CORPORATION,
as General Partner
By: /s/ KIM A. RIECK
-------------------------------
Name: Kim A. Rieck
Title: Senior Vice President
SIMON PROPERTY GROUP, INC.
By: /s/ DAVID SIMON
-------------------------------
Name:David Simon
Title:President
SUBSCRIBER:
By: /s/ ADRIAN F. BROWN
-------------------------------
Adrian F. Brown
4964 Jennings Drive
Carmel, IN 46032
<PAGE> 27
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
DEBARTOLO REALTY PARTNERSHIP, L.P.
By: DEBARTOLO REALTY CORPORATION,
as General Partner
By: /s/ KIM A. RIECK
-------------------------------
Name: Kim A. Rieck
Title: Senior Vice President
SIMON PROPERTY GROUP, INC.
By: /s/ DAVID CORDISH
-------------------------------
Name:David Simon
Title:President
SUBSCRIBER:
By: /s/ DAVID CORDISH
--------------------------------
Cordish SPG Investments, LC
c/o The Cordish Co.
300 Water Street
Baltimore, MD 21202
<PAGE> 28
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
DEBARTOLO REALTY PARTNERSHIP, L.P.
By: DEBARTOLO REALTY CORPORATION,
as General Partner
By: /s/ KIM A. RIECK
-------------------------------
Name: Kim A. Rieck
Title: Senior Vice President
SIMON PROPERTY GROUP, INC.
By: /s/ DAVID SIMON
-------------------------------
Name:David Simon
Title:President
SUBSCRIBER:
By: /s/ S. CODY ENGLE
-------------------------------
S. Cody Engle
610 W. Belden Avenue
Chicago, IL 60614
<PAGE> 29
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
DEBARTOLO REALTY PARTNERSHIP, L.P.
By: DEBARTOLO REALTY CORPORATION,
as General Partner
By: /s/ KIM A. RIECK
-------------------------------
Name: Kim A. Rieck
Title: Senior Vice President
SIMON PROPERTY GROUP, INC.
By: /s/ DAVID SIMON
-------------------------------
Name:David Simon
Title:President
SUBSCRIBER:
By: /s/ MEYER STEINBERG
-------------------------------
Enterprise-Hutchinson
Associates, L.P.
c/o EDA Hutchinson, Inc.
11 E. 44th Street, Suite 1700
New York, NY 10017
<PAGE> 30
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
DEBARTOLO REALTY PARTNERSHIP, L.P.
By: DEBARTOLO REALTY CORPORATION,
as General Partner
By: /s/ KIM A. RIECK
-------------------------------
Name: Kim A. Rieck
Title: Senior Vice President
SIMON PROPERTY GROUP, INC.
By: /s/ DAVID SIMON
-------------------------------
Name:David Simon
Title:President
SUBSCRIBER:
By: /s/ ARTHUR A. GREENBERG
-------------------------------
Equity-Simon OP LP
2 N. Riverside Plaza, Suite 600
Chicago, IL 60606
<PAGE> 31
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
DEBARTOLO REALTY PARTNERSHIP, L.P.
By: DEBARTOLO REALTY CORPORATION,
as General Partner
By: /s/ KIM A. RIECK
-------------------------------
Name: Kim A. Rieck
Title: Senior Vice President
SIMON PROPERTY GROUP, INC.
By: /s/ DAVID SIMON
-------------------------------
Name:David Simon
Title:President
SUBSCRIBER:
By: /s/ DAVID N. ESKENAZI
-------------------------------
David N. Eskenazi
2220 N. Meridian Street
Indianapolis, IN 46208
<PAGE> 32
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
DEBARTOLO REALTY PARTNERSHIP, L.P.
By: DEBARTOLO REALTY CORPORATION,
as General Partner
By: /s/ KIM A. RIECK
-------------------------------
Name: Kim A. Rieck
Title: Senior Vice President
SIMON PROPERTY GROUP, INC.
By: /s/ DAVID SIMON
-------------------------------
Name:David Simon
Title:President
SUBSCRIBER:
By: /s/ DORI L. ESKENAZI
-------------------------------
Dori L. Eskenazi
2220 N. Meridian Street
Indianapolis, IN 46208
<PAGE> 33
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
DEBARTOLO REALTY PARTNERSHIP, L.P.
By: DEBARTOLO REALTY CORPORATION,
as General Partner
By: /s/ KIM A. RIECK
-------------------------------
Name: Kim A. Rieck
Title: Senior Vice President
SIMON PROPERTY GROUP, INC.
By: /s/ DAVID SIMON
-------------------------------
Name:David Simon
Title:President
SUBSCRIBER:
By: /s/ SIDNEY ESKENAZI
-------------------------------
Sidney Eskenazi
2220 N. Meridian Street
Indianapolis, IN 46208
<PAGE> 34
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
DEBARTOLO REALTY PARTNERSHIP, L.P.
By: DEBARTOLO REALTY CORPORATION,
as General Partner
By: /s/ KIM A. RIECK
-------------------------------
Name: Kim A. Rieck
Title: Senior Vice President
SIMON PROPERTY GROUP, INC.
By: /s/ DAVID SIMON
-------------------------------
Name:David Simon
Title:President
SUBSCRIBER:
By: /s/ SANDRA A. ESKENAZI
-------------------------------
Sandra A. Eskenazi
2220 N. Meridian Street
Indianapolis, IN 46208
<PAGE> 35
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
DEBARTOLO REALTY PARTNERSHIP, L.P.
By: DEBARTOLO REALTY CORPORATION,
as General Partner
By: /s/ KIM A. RIECK
-------------------------------
Name: Kim A. Rieck
Title: Senior Vice President
SIMON PROPERTY GROUP, INC.
By: /s/ DAVID SIMON
-------------------------------
Name:David Simon
Title:President
SUBSCRIBER:
By: /s/ RANDOLPH L. FOXWORTHY
-------------------------------
Randolph L. Foxworthy
10565 Coppergate
Carmel, IN 46032
<PAGE> 36
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
DEBARTOLO REALTY PARTNERSHIP, L.P.
By: DEBARTOLO REALTY CORPORATION,
as General Partner
By: /s/ KIM A. RIECK
-------------------------------
Name: Kim A. Rieck
Title: Senior Vice President
SIMON PROPERTY GROUP, INC.
By: /s/ DAVID SIMON
-------------------------------
Name:David Simon
Title:President
SUBSCRIBER:
By: /s/ RUTH FREED
-------------------------------
Ruth Freed
7564 Noel Road
Indianapolis, IN 46278
<PAGE> 37
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
DEBARTOLO REALTY PARTNERSHIP, L.P.
By: DEBARTOLO REALTY CORPORATION,
as General Partner
By: /s/ KIM A. RIECK
-------------------------------
Name: Kim A. Rieck
Title: Senior Vice President
SIMON PROPERTY GROUP, INC.
By: /s/ DAVID SIMON
-------------------------------
Name:David Simon
Title:President
SUBSCRIBER:
By: /s/ WILLIAM J. GARVEY
-------------------------------
William J. Garvey
1118 Laurelwood
Carmel, IN 46032
<PAGE> 38
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
DEBARTOLO REALTY PARTNERSHIP, L.P.
By: DEBARTOLO REALTY CORPORATION,
as General Partner
By: /s/ KIM A. RIECK
-------------------------------
Name: Kim A. Rieck
Title: Senior Vice President
SIMON PROPERTY GROUP, INC.
By: /s/ DAVID SIMON
-------------------------------
Name:David Simon
Title:President
SUBSCRIBER:
By: /s/ JEROME L. GERSHMAN
-------------------------------
Jerome L. Gershman
10621 Winterwood
Carmel, IN 46032
<PAGE> 39
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
DEBARTOLO REALTY PARTNERSHIP, L.P.
By: DEBARTOLO REALTY CORPORATION,
as General Partner
By: /s/ KIM A. RIECK
-------------------------------
Name: Kim A. Rieck
Title: Senior Vice President
SIMON PROPERTY GROUP, INC.
By: /s/ DAVID SIMON
-------------------------------
Name:David Simon
Title:President
SUBSCRIBER:
By: /s/ ARTHUR A. GREENBERG
-------------------------------
Arthur A. Greenberg
2 N. Riverside Plaza, Suite 600
Chicago, IL 60606
<PAGE> 40
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
DEBARTOLO REALTY PARTNERSHIP, L.P.
By: DEBARTOLO REALTY CORPORATION,
as General Partner
By: /s/ KIM A. RIECK
-------------------------------
Name: Kim A. Rieck
Title: Senior Vice President
SIMON PROPERTY GROUP, INC.
By: /s/ DAVID SIMON
-------------------------------
Name:David Simon
Title:President
SUBSCRIBER:
By: /s/ LAWRENCE GREENWALD
--------------------------------
Lawrence Greenwald
9220 Promentory Road
Indianapolis, IN 46236
<PAGE> 41
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
DEBARTOLO REALTY PARTNERSHIP, L.P.
By: DEBARTOLO REALTY CORPORATION,
as General Partner
By: /s/ KIM A. RIECK
-------------------------------
Name: Kim A. Rieck
Title: Senior Vice President
SIMON PROPERTY GROUP, INC.
By: /s/ DAVID SIMON
-------------------------------
Name:David Simon
Title:President
SUBSCRIBER:
By: /s/ IRVING KATZ
-------------------------------
Irving Katz
10640 Winterwood
Carmel, IN 46032
<PAGE> 42
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
DEBARTOLO REALTY PARTNERSHIP, L.P.
By: DEBARTOLO REALTY CORPORATION,
as General Partner
By: /s/ KIM A. RIECK
-------------------------------
Name: Kim A. Rieck
Title: Senior Vice President
SIMON PROPERTY GROUP, INC.
By: /s/ DAVID SIMON
-------------------------------
Name:David Simon
Title:President
SUBSCRIBER:
By: /s/ ADELE KRAFT
-------------------------------
Adele Kraft, Trustee, under the
Gerald and Adele Kraft Living Trust,
dated 7/31/91
432 Pine Drive
Indianapolis, IN 46260
<PAGE> 43
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
DEBARTOLO REALTY PARTNERSHIP, L.P.
By: DEBARTOLO REALTY CORPORATION,
as General Partner
By: /s/ KIM A. RIECK
-------------------------------
Name: Kim A. Rieck
Title: Senior Vice President
SIMON PROPERTY GROUP, INC.
By: /s/ DAVID SIMON
-------------------------------
Name:David Simon
Title:President
SUBSCRIBER:
By: /s/ GERALD KRAFT
-------------------------------
Gerald Kraft, Trustee, under the
Gerald and Adele Kraft Living Trust,
dated 7/31/91
432 Pine Drive
Indianapolis, IN 46260
<PAGE> 44
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
DEBARTOLO REALTY PARTNERSHIP, L.P.
By: DEBARTOLO REALTY CORPORATION,
as General Partner
By: /s/ KIM A. RIECK
-------------------------------
Name: Kim A. Rieck
Title: Senior Vice President
SIMON PROPERTY GROUP, INC.
By: /s/ DAVID SIMON
-------------------------------
Name:David Simon
Title:President
SUBSCRIBER:
By: /s/ JAMES P. LEE
-------------------------------
James P. Lee
4567 William Penn Place
Indianapolis, IN 46256
<PAGE> 45
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
DEBARTOLO REALTY PARTNERSHIP, L.P.
By: DEBARTOLO REALTY CORPORATION,
as General Partner
By: /s/ KIM A. RIECK
-------------------------------
Name: Kim A. Rieck
Title: Senior Vice President
SIMON PROPERTY GROUP, INC.
By: /s/ DAVID SIMON
-------------------------------
Name:David Simon
Title:President
SUBSCRIBER:
By: /s/ PETER K. LEEDS
-------------------------------
Peter K. Leeds
9802 Summerlakes Drive
Carmel, IN 46032
<PAGE> 46
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
DEBARTOLO REALTY PARTNERSHIP, L.P.
By: DEBARTOLO REALTY CORPORATION,
as General Partner
By: /s/ KIM A. RIECK
-------------------------------
Name: Kim A. Rieck
Title: Senior Vice President
SIMON PROPERTY GROUP, INC.
By: /s/ DAVID SIMON
-------------------------------
Name:David Simon
Title:President
SUBSCRIBER:
By: /s/ CHARLES LEIBLER
-------------------------------
Charles Leibler
21 Hawthorne Way
Hartsdale, NY 10530
<PAGE> 47
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
DEBARTOLO REALTY PARTNERSHIP, L.P.
By: DEBARTOLO REALTY CORPORATION,
as General Partner
By: /s/ KIM A. RIECK
-------------------------------
Name: Kim A. Rieck
Title: Senior Vice President
SIMON PROPERTY GROUP, INC.
By: /s/ DAVID SIMON
-------------------------------
Name:David Simon
Title:President
SUBSCRIBER:
By: /s/ T. BARRETT LINDSEY
-------------------------------
T. Barrett Lindsey Trust
3536 Twin Lake Ridge
Westlake Village, CA 91361
<PAGE> 48
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
DEBARTOLO REALTY PARTNERSHIP, L.P.
By: DEBARTOLO REALTY CORPORATION,
as General Partner
By: /s/ KIM A. RIECK
-------------------------------
Name: Kim A. Rieck
Title: Senior Vice President
SIMON PROPERTY GROUP, INC.
By: /s/ DAVID SIMON
-------------------------------
Name:David Simon
Title:President
SUBSCRIBER:
By: /s/ SHELI Z. ROSENBERG
-------------------------------
Sheli Z. Rosenberg
2 N. Riverside Plaza, Suite 600
Chicago, IL 60606
<PAGE> 49
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
DEBARTOLO REALTY PARTNERSHIP, L.P.
By: DEBARTOLO REALTY CORPORATION,
as General Partner
By: /s/ KIM A. RIECK
-------------------------------
Name: Kim A. Rieck
Title: Senior Vice President
SIMON PROPERTY GROUP, INC.
By: /s/ DAVID SIMON
-------------------------------
Name:David Simon
Title:President
SUBSCRIBER:
By: /s/ SANFORD SHKOLNIK
-------------------------------
Sanford Shkolnik
2 N. Riverside Plaza, Suite 600
Chicago, IL 60606
<PAGE> 50
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
DEBARTOLO REALTY PARTNERSHIP, L.P.
By: DEBARTOLO REALTY CORPORATION,
as General Partner
By: /s/ KIM A. RIECK
-------------------------------
Name: Kim A. Rieck
Title: Senior Vice President
SIMON PROPERTY GROUP, INC.
By: /s/ DAVID SIMON
-------------------------------
Name:David Simon
Title:President
SUBSCRIBER:
By: /s/ GERALD SPECTOR
-------------------------------
Gerald Spector
2 N. Riverside Plaza, Suite 400
Chicago, IL 60606
<PAGE> 51
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
DEBARTOLO REALTY PARTNERSHIP, L.P.
By: DEBARTOLO REALTY CORPORATION,
as General Partner
By: /s/ KIM A. RIECK
-------------------------------
Name: Kim A. Rieck
Title: Senior Vice President
SIMON PROPERTY GROUP, INC.
By: /s/ DAVID SIMON
-------------------------------
Name:David Simon
Title:President
SUBSCRIBER:
By: /s/ LEONARD J. WEINMAN
-------------------------------
Leonard J. Weinman
449 Bent Tree Lane
Indianapolis, IN 46620
<PAGE> 52
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
DEBARTOLO REALTY PARTNERSHIP, L.P.
By: DEBARTOLO REALTY CORPORATION,
as General Partner
By: /s/ KIM A. RIECK
-------------------------------
Name: Kim A. Rieck
Title: Senior Vice President
SIMON PROPERTY GROUP, INC.
By: /s/ DAVID SIMON
-------------------------------
Name:David Simon
Title:President
SUBSCRIBER:
By: /s/ CARROLL WEISIGER
-------------------------------
Carroll Weisiger
832 Wedgewood Lane
Carmel, IN 46033
<PAGE> 53
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
DEBARTOLO REALTY PARTNERSHIP, L.P.
By: DEBARTOLO REALTY CORPORATION,
as General Partner
By: /s/ KIM A. RIECK
-------------------------------
Name: Kim A. Rieck
Title: Senior Vice President
SIMON PROPERTY GROUP, INC.
By: /s/ DAVID SIMON
-------------------------------
Name:David Simon
Title:President
SUBSCRIBER:
By: /s/ STEPHEN B. COHEN
-------------------------------
WRC Limited Partnership
420 E. 6th Street
P.O. Box 1598
Topeka, KS 66601
<PAGE> 54
Schedule A
LIST OF SUBSCRIBERS
i. Mr. Donald Boelke
ii. Mr. Adrian F. Brown
iii. Mr. Randolph L. Foxworthy
iv. Mr. William J. Garvey
v. Mr. Jerome L. Gershman
vi. Mr. Lawrence Greenwald
vii. Mr. Irving Katz
viii. Mrs. Adele Kraft
ix. Mr. Gerald Kraft
x. Mr. James P. Lee
xi. Mr. Peter K. Leeds
xii. T. Barrett Lindsey Trust
xiii. Mrs. Ruth Freed
xiv. Mr. Leonard J. Weinman
xv. Mr. Carroll Weisiger
xvi. Enterprise-Hutchinson Associates, L.P.
xvii. Mr. D. Andrew Beal
xviii. Mr. Sidney Eskenazi
xix. Ms. Dori L. Eskenazi
xx. Ms. Sandra A. Eskenazi
xxi. Mr. David N. Eskenazi
xxii. Brightwood Plaza, Inc.
xxiii. WRC Limited Partnership
xxiv. Cordish SPG Investments, LC
xxv. BNW-Rosemont Limited Partnership
xxvi. Mr. S. Cody Engle
xxvii. Mr. Arthur A. Greenberg
xxviii. Mr. Charles Leibler
xxix. Ms. Sheli Z. Rosenberg
xxx. Mr. Sanford Shkolnik
<PAGE> 55
25
xxxi. Mr. Gerald Spector
xxxii. Equity-Simon OP LP
<PAGE> 56
Schedule B
SIMON INTERESTS OF EACH SUBSCRIBER
LIMITED PARTNERS
<TABLE>
<CAPTION>
SIMON INTEREST
NAME OF SUBSCRIBER (NUMBER OF UNITS)
<S> <C>
Donald E. Boelke 32,571
Adrian F. Brown 2,022
Randolph L. Foxworthy 71,463
William J. Garvey 21,200
Jerome L. Gershman 158,611
Lawrence Greenwald 23,056
Irving Katz 67,957
Adele Kraft 9,798
Gerald Kraft 220,225
James P. Lee 10,054
Peter K. Leeds 5,303
T. Barrett Lindsey Trust 16,301
Ruth Freed 170,143
Leonard J. Weinman 28,539
Carroll Weisiger 10,578
Enterprise-Hutchinson Associates, L.P., a 89,888
Kansas limited partnership
D. Andrew Beal 217,416
Sidney D. Eskenazi 19,011
Dori L. Eskenazi 11,236
Sandra A. Eskenazi 11,236
David N. Eskenazi 11,236
Brightwood Plaza, Inc., an Indiana 10,112
corporation
</TABLE>
<PAGE> 57
2
LIMITED PARTNERS
<TABLE>
<CAPTION>
SIMON INTEREST
NAME OF SUBSCRIBER (NUMBER OF UNITS)
<S> <C>
WRC Limited Partnership, a Kansas limited 29,213
partnership
Cordish SPG Investments, LC, a Maryland 44,944
limited liability company
BNW-Rosemont Limited Partnership, an 4,494
Illinois limited partnership
S. Cody Engle 2,120
Arthur A. Greenberg 2,120
Charles Leibler 3,181
Sheli Z. Rosenberg 2,120
Sanford Shkolnik 4,241
Gerald Spector 2,120
Equity-Simon OP LP 195,153
</TABLE>
<PAGE> 58
Schedule C
UNITS OF EACH SUBSCRIBER IN SIMON DEBARTOLO GROUP, L.P.
UNITS
<TABLE>
<CAPTION>
NAME OF SUBSCRIBER NUMBER OF UNITS
<S> <C>
Donald E. Boelke 32,571
Adrian F. Brown 2,022
Randolph L. Foxworthy 71,463
William J. Garvey 21,200
Jerome L. Gershman 158,611
Lawrence Greenwald 23,056
Irving Katz 67,957
Adele Kraft 9,798
Gerald Kraft 220,225
James P. Lee 10,054
Peter K. Leeds 5,303
T. Barrett Lindsey Trust 16,301
Ruth Freed 170,143
Leonard J. Weinman 28,539
Carroll Weisiger 10,578
D. Andrew Beal 19,011
Sidney D. Eskenazi 11,236
Dori L. Eskenazi 11,236
David N. Eskenazi 11,236
Brightwood Plaza, Inc., an Indiana 10,112
corporation
WRC Limited Partnership, a Kansas limited 29,213
partnership
Cordish SPG Investments, LC, a Maryland 44,944
limited liability company
</TABLE>
<PAGE> 59
2
<TABLE>
<CAPTION>
NAME OF SUBSCRIBER NUMBER OF UNITS
<S> <C>
BNW-Rosemont Limited Partnership, an 4,494
Illinois limited partnership
S. Cody Engle 2,120
Arthur A. Greenberg 2,120
Charles Leibler 3,181
Sheli Z. Rosenberg 2,120
Sanford Shkolnik 4,241
Gerald Spector 2,120
Equity-Simon OP LP 195,153
</TABLE>
<PAGE> 60
Schedule D
Required Consents of SDG
1. Consent required pursuant to (a) the SECOND AMENDED
AND RESTATED NEW FACILITY CREDIT AGREEMENT, dated as of March 31, 1994 by and
among DeBARTOLO, INC. and THE EDWARD J. DeBARTOLO CORPORATION, as the
Borrowers, WELLS FARGO BANK, N.A., as the Issuing Bank, and the Co-Lenders
specified therein, and WELLS FARGO REALTY ADVISORS FUNDING, INCORPORATED as the
Administrative Agent and (b) the pledge agreements and other documents
delivered pursuant thereto.
2. Consents required pursuant to (a) the SECOND AMENDED
AND RESTATED RESTRUCTURING FACILITY CREDIT AGREEMENT, dated as of March 31,
1994 by and among DeBARTOLO, INC. and THE EDWARD J. DeBARTOLO CORPORATION, as
the borrowers, and the Co-Lenders specified therein, and WELLS FARGO REALTY
ADVISORS FUNDING, INCORPORATED, as the Administrative Agent and (b) the pledge
agreements and other documents delivered pursuant thereto.
3. Consents required to be obtained prior to the
consummation of the merger as specified in the Merger Agreement.
<PAGE> 61
Schedule E
FORMULA FOR DETERMINATION OF SIMON
DeBARTOLO GROUP, L.P. UNITS TO BE
OUTSTANDING AFTER THE MERGER
1. The DeBartolo Realty Partnership, L.P. General and
Limited Partners shall receive a number of Units in Simon DeBartolo Group, L.P.
equal to the total number of shares of Simon Property Group, Inc. issued in the
Merger to the shareholders DeBartolo Realty Corporation plus the additional
number of shares that would have been issued had all Limited Partnership
interests outstanding at the Effective Time been exchanged for shares of
DeBartolo Realty Corporation pursuant to the Exchange Rights Agreement dated as
of April 21, 1994 with a Valuation Date (as defined in the Exchange Rights
Agreement) for such hypothetical exercise being the business day preceding
Effective Time. Were the closing to have occurred on March 26, 1996, this
number would be 61,076,480.1
2. The total number of Units in Simon DeBartolo Group,
L.P. to be issued to Simon Property Group, L.P. General and Limited Partners
shall be a maximum of 99% of the total number of outstanding Units in Simon
Property Group, L.P. as at the date of the Merger. At March 26, 1996, the
total number of outstanding units is 95,843,000 and 99% of this number is
94,884,570. The total number of Units issuable to the DeBartolo Realty
Partnership, L.P. General and Limited Partners are herein referred to as
"DeBartolo Units" and the total number of Units issuable to the Simon Property
Group, L.P. General and Limited Partners are herein called the "SPG Units."1/
__________________________________
1/ The methodology used to arrive at this formula and these numbers is as
follows. The 61,076,480 Unit number is equal to the total number of shares
of Simon Property Group, Inc. that would be issued in the Merger at the
exchange ratio if the Merger took place on March 26, 1996 and if all
outstanding limited partnership interests in DeBartolo Realty Partnership,
L.P. had been exercised in full. The 95,843,000 Unit number is equal to
the total number of shares of stock of Sunny that would be outstanding
immediately prior to the Merger if it took place on March 26, 1996 if all
outstanding Units in the Simon Property Group, L.P. were exercised in
full. Since all or almost all of the assets of DeBartolo Realty
Corporation and Simon Property Group, Inc. consist of their general
partnership interests in the two operating partnerships, the relationship
between the shares which would be issued in the Merger if all outstanding
limited partnership interests in DeBartolo Realty Corporation were
exercised in full to the shares of Simon Property Group, Inc. that would
be outstanding immediately prior to the Merger if all Units were converted
prior to the Merger establishes the relative values of the two partnerships
on March 26, 1996. As a matter of convenience the Simon Property Group,
L.P. Units will be exchanged on a 1-for-1 basis.
<PAGE> 62
3. Of the DeBartolo Units, a percentage equal to its
then percentage interest in the DeBartolo Realty Partnership, L.P. (at present
61.8424%) will be allocated to DeBartolo Realty Corporation as general partner
and the remaining Units will be allocated to the DeBartolo Realty Partnership,
L.P. limited partners. The number of Units to be issued to each DeBartolo
Realty Partnership, L.P. limited partner will be a percentage of the total
number of Units to be allocated to the DeBartolo Realty Partnership, L.P.
partners equal to the percentage interest that each such limited partner had in
the DeBartolo Realty Partnership, L.P. immediately prior to the Merger.
Accordingly, if the Closing took place March 26, 1996, 37,771,158 Units will be
allocated to DeBartolo Realty Corporation as general managing partner and
23,305,322 Units will be issued in the aggregate to the DeBartolo Realty
Partnership, L.P. limited partners.
4. The number of Units issued to the Simon Property
Group, L.P. general and limited partners will be as follows: (x) one Unit will
be issued for each Simon Property Group, L.P. Unit exchanged by a Simon
Property Group, L.P. Limited partner and (y) Simon Property Group, Inc., as
the general partner of Simon Property Group, L.P., will receive for the
economic interests being transferred by it a number of Units equal to the
number of Simon Property Group, L.P. Units then owned by it less a number equal
to 1% of the then outstanding Simon Property Group, L.P. Units. Accordingly,
if the Closing took place on March 26, 1996, this number would be 58,579,241.
(This number is derived by multiplying 95,843,000 by 61.22%, the present
percentage interest held by Simon Property Group, Inc. in Simon Property Group,
L.P. and subtracting 95,843 Units being 1% of the outstanding Units). To the
extent that Simon Property Group, L.P. limited partners do not exchange Simon
Property Group, L.P. Units, the Simon Property Group, L.P. Units that would
have been issued in respect thereof will not be issued. This would have the
effect of increasing the percentage interest in Simon DeBartolo Group, L.P. by
DeBartolo Realty Partnership, L.P. partners.
<PAGE> 63
Schedule F
Required Consents of Subscribers
Partner Consents:
Circle Centre Partners, Ltd.
Re: Circle Centre Mall, Indianapolis, Indiana
Lender Consents:
CIGNA
1. Ingram Creek
2. Ingram Park Mall
3. LaPlaza Mall
Metropolitan Life Insurance Company
1. Bloomingdale Court
2. Forest Plaza
3. Fox River Plaza
4. Lake View Plaza
5. Lincoln Crossing
6. Matteson Plaza
7. Regency Plaza
8. St. Charles Towne Plaza
9. West Ridge Plaza
10. White Oaks Plaza
Union Bank of Switzerland
1. Circle Centre Mall
2. $400 Million Revolving Credit Facility
Marine Midland, Trustee
1. Jefferson Valley Mall
Citicorp
1. Eastland Mall
2. St. Charles Towne Center
<PAGE> 64
2
Lender Consents cont.:
Principal Group
1. Cobblestone Court
2. Crystal Court
3. Fairfax Court
4. Gaitway Plaza
5. Ridgewood Court
6. Royal Eagle Plaza
7. The Plaza at Buckland Hills
8. The Yards Plaza
9. Village Park Plaza
10. West Town Corners
11. Westland Park Plaza
12. Willow Knolls Court
REVOLVING CREDIT AGREEMENT DATED AS OF FEBRUARY 27, 1996, BETWEEN MELVIN SIMON
ASSOCIATES, INC. AND MORGAN GUARANTY TRUST COMPANY OF NEW YORK AND PLEDGE AND
SECURITY AGREEMENT, ALSO DATED AS OF FEBRUARY 27, 1966, AMONG MELVIN SIMON &
ASSOCIATES, INC., PENN SIMON CORPORATION, NACO SIMON CORP., SANDY SPRINGS
PROPERTIES, INC., SIMON ENTERPRISES, INC. AND MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, PURSUANT TO WHICH THE PLEDGORS PLEDGED TO THE BANK THEIR RIGHT TO
RECEIVE CASH DISTRIBUTIONS ATTRIBUTABLE TO THEIR RESPECTIVE LIMITED PARTNERSHIP
UNITS IN SIMON PROPERTY GROUP, L.P. AND CLASS B COMMON STOCK OF SIMON PROPERTY
GROUP, INC.
Pledge and Security Agreement dated as of December 16, 1993, made by Melvin
Simon and Herbert Simon (collectively "Simon Pledgors") to Chemical Bank, and
additional documents executed in connection therewith, pursuant to which the
Simon Pledgors pledged to the Bank 392,135 limited partnership units owned by
them in Simon Property Group, L.P.
<PAGE> 65
Schedule G
Rights, Options, Etc.
Revolving Credit Agreement dated as of February 27, 1996, between Melvin Simon
Associates, Inc. And Morgan Guaranty Trust Company of New York and Pledge and
Security Agreement, also dated as of February 27, 1966, among Melvin Simon &
Associates, Inc., Penn Simon Corporation, Naco Simon Corp., Sandy Springs
Properties, Inc., Simon Enterprises, Inc. And Morgan Guaranty Trust Company of
New York, pursuant to which the Pledgors pledged to the Bank their right to
receive cash distributions attributable to their respective limited partnership
units in Simon Property Group, L.P. and Class B common stock of Simon Property
Group, Inc.
Pledge and Security Agreement dated as of December 16, 1993, made by Melvin
Simon and Herbert Simon (collectively "Simon Pledgors") to Chemical Bank, and
additional documents executed in connection therewith, pursuant to which the
Simon Pledgors pledged to the Bank 392,135 limited partnership units owned by
them in Simon Property Group, L.P.
<PAGE> 1
EXHIBIT 10.6
EXECUTION COPY
EMPLOYMENT AGREEMENT
This Employment Agreement is made and entered into by and among SIMON
PROPERTY GROUP, Inc., a Maryland corporation (the "Parent"), SIMON PROPERTY
GROUP ADMINISTRATIVE SERVICES PARTNERSHIP, L.P., an indirect majority owned
subsidiary of the Parent (the "Company") and RICHARD S. SOKOLOV (the
"Executive"), as of March 26, 1996 and made effective as of the Effective Date,
as defined in Section 3.1 hereof, subject to Section 3.2 hereof.
WHEREAS, Executive previously served as President and Chief Executive
Officer of DeBartolo Realty Corporation ("DC") and DeBartolo Properties
Management, Inc. ("DC SUB");
WHEREAS, pursuant to the Agreement and Plan of Merger (the "Merger
Agreement") dated as of March 26, 1996 among the Parent, DAY Acquisition Corp.
and DC, DC will, as of the Effective Date, become a wholly-owned subsidiary of
the Parent (the "Merger");
WHEREAS, each of the Parent and the Company considers it essential to
its best interests and the best interests of its stockholders to foster the
continued employment of Executive by the Parent and the Company from and after
the Effective Date;
WHEREAS, Executive is willing so to continue his employment on the
terms hereinafter set forth in this agreement (the "Agreement"); and
WHEREAS, Executive has agreed that from and after the Effective Date,
this Agreement shall supersede in all respects the Employment Agreement among
DC, DC SUB and the Executive dated as of April 15, 1994 (the "Prior Agreement")
and any other agreements, arrangements or understandings relating to the subject
matter hereof.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein and for other good and valuable consideration, the parties agree as
follows:
<PAGE> 2
2
ARTICLE I
Executive Representations
1.1 Executive Representations and Agreement
(a) Executive represents and warrants that, as of the date hereof
and as of the Effective Date, no event has occurred that constitutes grounds for
"Good Reason" under the Prior Agreement and Executive agrees and acknowledges
that as of the Effective Date (i) this Agreement shall supersede the Prior
Agreement in all respects and (ii) except as otherwise expressly provided in
this Agreement, neither the Executive nor the Parent, the Company or their
affiliates shall have any further rights, claims or obligations under any
provisions of the Prior Agreement or any other existing agreements, arrangements
or understandings relating to the subject matter hereof.
(b) Executive represents and warrants to the Parent and the
Company, that to the best of his knowledge, neither the execution and delivery
of this Agreement nor the performance of his duties hereunder violates or will
violate the provisions of any other agreement to which he is a party or by which
he is bound.
ARTICLE II
Employment, Duties and Responsibilities
2.1 Employment. During the term of Executive's employment hereunder,
Executive shall serve as the President and Chief Operating Officer of the Parent
and agrees to serve, if elected, for no additional compensation as a trustee or
director of the Parent and/or in the position of officer, trustee or director of
any subsidiary or affiliate of the Parent. Executive hereby accepts such
employment. Executive agrees to devote his full time and efforts to promote the
interests of the Parent and its affiliates. In addition, during the term of
Executive's employment hereunder, the Parent shall use its best efforts to
nominate Executive for election to, and to cause Executive to be elected to, the
Board of Directors of Parent (the "Board") and to the Executive Committee of the
Board and shall nominate Executive for re-election to the Board at each annual
meeting of the Parent's shareholders at which directors of the Parent are to be
elected.
2.2 Duties and Responsibilities. During the term of Executive's
employment hereunder, Executive shall perform such duties and exercise such
supervision and authority over and with regard to the business of the Parent as
are similar in nature to those duties and services customarily associated with
the position of President and Chief Operating Officer, including authority,
subject to the oversight of the Chief Executive Officer of the Parent and the
Board, with respect to the day-to-day operations of the Parent, and development
and implementation of business strategies. In exercising such authority the
Executive shall routinely consult with, and report directly and only to the
Chief Executive Officer of the Parent and the Board.
<PAGE> 3
3
2.3 Base of Operation. Executive's principal base of operation for the
performance of his duties and responsibilities under this Agreement shall
initially be in Youngstown, Ohio; provided, however that Executive shall perform
such duties and responsibilities not involving a permanent transfer of his base
of operation outside of Youngstown, Ohio at such other places as shall from time
to time be reasonably necessary to fulfill his obligations hereunder; and
provided further that, at any time after the first anniversary of the Effective
Date, the Executive may, if requested by the Chief Executive Officer of Parent,
be required to devote at least a majority of his business time to duties
performed by Executive at the Parent's corporate offices in Indianapolis,
Indiana.
ARTICLE III
Term, Effectiveness
3.1 Term. The term of this Agreement (the "Term") shall commence as of
the closing date of the merger contemplated by Section 1.2 of the Merger
Agreement (the "Effective Date") and shall continue for a period of one year
thereafter; provided, however, that the Term shall be automatically renewed for
successive one-year periods on each of the first two anniversaries of the
Effective Date unless either party hereto gives at least 90 days prior written
notice to the other of its election not to so renew the Term. Unless earlier
terminated by either party as described in the immediately preceding sentence or
pursuant to Article VI below, the Term shall expire on the third anniversary of
the Effective Date.
3.2 Effectiveness. Except for the representations and warranties made
by Executive in Section 1.1 above which shall be deemed effective as of the date
hereof, this Agreement shall become effective only upon the Effective Date. In
the event the Merger Agreement is terminated for any reason without the
Effective Time (as defined therein) having occurred, this Agreement shall be
terminated without further obligation or liability of either party.
ARTICLE IV
Compensation and Expenses
4.1 Salary, Bonuses and Benefits. As compensation and consideration for
the performance by Executive of his obligations under this Agreement, Executive
shall be entitled to the following (subject, in each case, to the provisions of
ARTICLE VI hereof):
(a) Base Salary. The Company shall pay Executive a base salary
during the Term, payable in accordance with the normal payment procedures of the
Company, at the rate of $508,500 per annum. The Parent and the Company agree to
review such compensation not less frequently than annually during the Term.
(b) Retirement, Welfare and Other Benefits. Executive shall
participate during the Term in such pension, savings, profit sharing, life
insurance,
<PAGE> 4
4
health, disability and major medical insurance plans, and in such other employee
benefit plans and programs, for the benefit of the employees of the Parent and
its affiliates, as may be maintained from time to time during the Term, in each
case to the extent and in the manner available to other officers of the Parent
and subject to the terms and provisions of such plans or programs. In addition,
Executive will be afforded the same indemnity provisions regarding directors and
officers liability that the Parent provides to its other senior executive
officers and directors and Executive will be covered by any directors and
officers liability policy generally in force for the Parent's senior executive
officers and directors.
(c) Equity Arrangements.
(i) Executive shall participate during each calendar year during
the Term commencing with fiscal year 1999, in the Parent's stock and performance
incentive plans (or such plans of the Parent's affiliates maintained for the
benefit of other officers of Parent) on the same basis as is made available to
other executives of the Parent; it being understood that Executive's entitlement
to performance based compensation in respect of fiscal years 1996, 1997 and 1998
shall be as set forth in Section 4.1(c)(iii)(2) and (3) below.
(ii) Executive and the Parent hereby acknowledge and agree that
the Deferred Stock award with respect to 15,868 shares of DC's common stock
granted to Executive under the DC 1994 Stock Incentive Plan (the "DC Incentive
Plan") in connection with DC's initial public offering which will not have
vested prior to the Effective Date shall be deemed fully vested immediately
prior to the Effective Date, such shares to be converted into shares of common
stock of Parent pursuant to the Merger Agreement.
(iii) Executive and Parent hereby acknowledge and agree that with
respect to the Long-Term Incentive Deferred Stock award relating to 533,000
shares of DC's common stock previously granted to Executive under the DC
Incentive Plan, of which 35,634 shares have previously vested and been issued:
(1) an aggregate of 97,616 shares of DC common stock,
(relating to 1994 and 1995 fiscal year performance) shall be deemed fully vested
immediately prior to the Effective Date, such shares to be converted into shares
of common stock of Parent pursuant to the Merger Agreement; provided that if
Executive determines that such vesting would result in the imposition of any
excise tax on Executive under Section 4999 of the Internal Revenue Code of 1986,
as amended, at Executive's request, Parent will provide that such shares will be
deemed to vest over a period of time, as agreed by Parent and Executive, in
consideration of Executive's future performance of services so as to avoid the
imposition of any such excise tax by the Executive;
(2) 106,600 shares of DC common stock (relating to 1996
fiscal year performance), subject to conversion into shares of common stock of
Parent pursuant to the Merger Agreement, will no longer be subject to vesting on
the basis of performance but will vest, subject to Executive's continued
<PAGE> 5
5
employment with the Parent, in equal 1/3 portions on each of the first, second
and third anniversaries of the Effective Date; and
(3) the remaining 293,150 shares of DC common stock, 133,250
relating to 1997 fiscal year performance and 159,900 shares relating to 1998
fiscal year performance, shall be converted into shares of common stock of
Parent pursuant to the Merger Agreement and shall be earned upon the Parent's
achievement of Funds From Operations growth targets for fiscal years 1997 and
1998, respectively, established by the committee then administering the DC
Incentive Plan which, as provided in Section 5.12 of the Merger Agreement, shall
not exceed $2.58 per share for fiscal year 1997 and $2.79 per share for fiscal
year 1998, (the "FFO Targets"), calculated in a manner consistent with that
proposed by the National Association of Real Estate Investment Trusts. Once
earned, such shares shall vest, subject to Executive's continued employment with
the Parent, in equal 1/3 portions on each of the first three April 1sts that
occur after the last day of the fiscal year to which such earned shares relate.
(d) Bonus Opportunity. Executive shall participate during the Term
in the Parent's (or its affiliates') annual cash bonus plan for senior
executives of the Parent as in effect from time to time, with a maximum annual
bonus for each year during the Term equal to at least 75% of Executive's base
salary.
(e) Vacation. Executive shall be entitled to a reasonable paid
vacation period (but not necessarily consecutive vacation weeks) during the
Term.
(f) Car Lease Assignment. Parent shall assign or cause to be
assigned to Executive the existing automobile lease relating to the automobile
currently made available to Executive by DC; provided that Executive shall
reimburse Parent for any costs incurred by Parent or its affiliates in
connection with such assignment.
4.2 Expenses. The Parent will reimburse, or will cause the Company to
reimburse, Executive for reasonable business-related expenses incurred by him in
connection with the performance of his duties hereunder during the Term,
subject, however, to the Parent's and the Company's policies relating to
business-related expenses as in effect from time to time during the Term.
ARTICLE V
Exclusivity, Etc.
5.1 Exclusivity. Executive agrees to perform his duties,
responsibilities and obligations hereunder efficiently and to the best of his
ability. Executive agrees that he will devote his entire working time, care and
attention and best efforts to such duties, responsibilities and obligations
throughout the Term. Executive also agrees that he will not engage in any other
business activities, whether charitable or pursued for gain, profit, other
pecuniary advantage or otherwise, that are competitive with the activities of
the Parent or its affiliates or that would adversely
<PAGE> 6
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effect Executive's ability to perform his duties hereunder. Executive agrees
that all of his activities as an employee and/or trustee or director of the
Parent or its affiliates shall be in conformity with all present and future
policies, rules and regulations and directions of the Parent and its affiliates
not inconsistent with this Agreement.
5.2 Other Business Ventures. Executive agrees that for so long as he is
employed by the Parent, and for a period of one year thereafter, he will not,
directly or indirectly, become an employee, shareholder, owner, officer, agent,
director of, or otherwise associate with, any firm, person, business enterprise
or other entity which is engaged in or competitive with, any business engaged in
by the Parent or its affiliates. Notwithstanding the foregoing, Executive may
own, directly or indirectly, up to 5% of the outstanding capital stock of any
business having a class of capital stock which is traded on any national stock
exchange or in the over-the-counter market.
5.3 Confidentiality; Non-solicitation. (a) Executive agrees that he
will not, at any time during or after the Term, make use of or divulge to any
other person, firm, business enterprise or other entity, any trade or business
secret, process, method or means, or any other confidential information
concerning the business or policies of the Parent or its affiliates including,
without limitation, any information, data, or other confidential information
relating to customers, development programs, costs, marketing, trading,
investment, sales activities, promotion, credit and financial data,
manufacturing processes, financing methods, plans or the business and affairs of
the Parent or its affiliates generally; provided that the foregoing shall not
apply to information which is not unique to the Parent or its affiliates or
which is generally known to the industry or the public other than as a result of
the Executive's breach of this covenant. Executive agrees not to remove from the
premises of the Parent or its affiliates, except as an employee of the Parent or
its affiliates in pursuit of the business of the Parent or its affiliates or
except as specifically permitted in writing by the Parent, any document or other
object containing or reflecting any such confidential information. Executive
recognizes that all such documents and objects, whether developed by him or by
someone else, will be the sole exclusive property of the Parent and its
affiliates. Upon termination of his employment hereunder, Executive shall
forthwith deliver to the Parent all such confidential information, including
without limitation all lists of customers, correspondence, accounts, records and
any other documents or property made or held by him or under his control in
relation to the business or affairs of the Parent or its affiliates, and no copy
of any such confidential information shall be retained by him.
(b) Executive agrees that for so long as he is employed by the
Parent and for a period of one year thereafter, Executive shall not, directly or
indirectly, whether as an employee, consultant, independent contractor, partner,
joint venturer or otherwise, (A) solicit or induce, or in any manner attempt to
solicit or induce, any person employed by, or as agent of, the Parent or its
affiliates to terminate such person's contract of employment or agency, as the
case may be, with the Parent or its affiliates, (B) employ or offer employment
to any person who was employed by the Parent or its affiliates in other than a
purely administrative capacity unless such person shall have ceased to be
employed by the Parent or its affiliates for
<PAGE> 7
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a period of at least 12 months, or (C) divert, or attempt to divert, any person,
concern, or entity from doing business with the Parent or its affiliates, nor
will he attempt to induce any such person, concern or entity to cease being a
customer or supplier of the Parent or its affiliates.
(c) Executive agrees that, at any time and from time to time during
and after the Term, he will execute any and all documents which the Parent may
deem reasonably necessary or appropriate to effectuate the provisions of this
Section 5.3.
5.4 Specific Performance. Executive acknowledges and agrees that the
Parent's remedies at law for a breach or threatened breach of any of the
provisions of this Article V would be inadequate and, in recognition of this
fact, Executive agrees that, in the event of such a breach or threatened breach,
in addition to any remedies at law, the Parent, without posting any bond, shall
be entitled to seek equitable relief in the form of specific performance,
temporary restraining order, temporary or permanent injunction or any other
equitable remedy which may then be available.
ARTICLE VI
Termination
6.1 Termination by the Parent. The Parent shall have the right to
terminate this Agreement and Executive's employment hereunder at any time during
the Term with or without "Cause." For purposes of this Agreement, "Cause" shall
mean (i) a substantial and continued failure by Executive to perform his duties
hereunder or (ii) Executive's conviction of a felony; provided that no
termination for Cause as a result of any of the events described in clause (i)
shall be deemed effective unless and until the Parent shall have provided
Executive with written notice specifying in detail the action(s) or event(s)
allegedly constituting grounds for the Cause termination and the Executive shall
have failed to cure such action(s) or event(s) within 10 days of receipt of such
notice. Any such termination without cause or due to Executive's conviction of a
felony shall be effective upon the giving of notice thereof to Executive in
accordance with Section 7.3 hereof, and any termination which is based on any of
the action(s) or event(s) described in clause (i) shall be effective as of the
10th day following Executive's receipt of such notice if Executive shall have
failed to cure the applicable action(s) or event(s).
6.2 Death. In the event Executive dies during the Term, this Agreement
shall automatically terminate, such termination to be effective on the date of
Executive's death.
6.3 Disability. In the event that Executive shall suffer a disability
during the Term which shall have prevented him from performing satisfactorily
his obligations hereunder for a period of at least 90 consecutive days, the
Parent shall have the right to terminate this Agreement and Executive's
employment hereunder, such termination to be effective upon the giving of notice
thereof to Executive in accordance with Section 7.3 hereof.
<PAGE> 8
8
6.4 Termination by Executive for Good Reason. This Agreement and
Executive's employment hereunder may be terminated during the Term by Executive
with or without Good Reason, by giving 30 days advance written notice to the
Parent in accordance with Section 7.3. For purposes of this Agreement, the
following circumstances shall constitute "Good Reason":
(a) the assignment to Executive of any duties inconsistent in any
material respect with Executive's position (including status, offices, titles
and reporting requirements), or with his authority, duties or responsibilities
as contemplated by Sections 2.1 and 2.2 of this Agreement, or any other action
by the Parent or its successor which results in a material diminution or
material adverse change in Executive's titles, position, status, authority,
duties or responsibilities (including, without limitation, removal of Executive
from, or failure to secure the Executive's election or appointment to, the Board
or the Executive Committee of the Board without the Executive's written consent
during any period when the number of directors constituting the entire Board
equals or exceeds 13, other than as a result of Executive's death or
disability);
(b) any material breach by the Parent or its successor of the
provisions of this Agreement;
(c) any failure by the Parent to comply with and satisfy Section
7.2(b) of this Agreement; or
(d) a relocation of Executive's principal base of operation to any
location other than Youngstown, Ohio during the term of Executive's employment
hereunder; provided that the requirement that Executive devote at least a
majority of his business time to duties performed at the Parent's corporate
offices in Indianapolis, Indiana at any time after the first anniversary of the
Effective Date shall not constitute a relocation of Executive's principal base
of operation for purposes of this Agreement;
provided that no termination by Executive for Good Reason shall be
deemed effective unless and until the Executive shall have provided the Parent
with written notice specifying in detail the action(s) or event(s) allegedly
constituting grounds for the Good Reason termination and the Parent shall have
failed to cure such action(s) or event(s) within 10 days of receipt of such
notice.
6.5 Effect of Termination.
(a) In the event of termination of this Agreement during the Term
by either party for any reason, or by reason of the Executive's death, the
Company shall pay to Executive (or his beneficiary in the event of his death)
any base salary earned but not paid to Executive prior to the effective date of
such termination, together with any other earned and currently payable, but then
unpaid, compensation.
(b) In the event of the termination of this Agreement during the
Term (i) by the Parent without Cause (other than due to Executive's death or
<PAGE> 9
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disability), (ii) by Executive for Good Reason or (iii) by reason of the
Parent's election not to renew the Term through the third anniversary of the
Effective Date as provided in Section 3.1 hereof (each, a "Wrongful
Termination"), the Company shall pay to Executive, in addition to the amounts
described in Section 6.5(a) hereof, an amount equal to one-year's then current
base salary and bonus, in twelve equal monthly installments following the date
of such termination (the "Cash Severance"). For this purpose, Executive's then
current bonus shall be Executive's maximum target bonus for the Parent's fiscal
year within which such termination occurs. In addition, the deferred stock award
shares described in Section 4.1(c)(iii)(2) shall (to the extent not then vested)
be deemed fully vested as of the date of such termination of employment and (x)
the deferred stock award shares described in Section 4.1(c)(iii)(3) which have
been earned as of the date of such termination, if any, shall (to the extent not
then vested) be deemed fully vested as of the date of such termination of
employment and (y) the deferred stock award shares described in Section
4.1(c)(iii)(3) which are "deemed" earned as described in the next succeeding
sentence shall be deemed fully vested as of the last day of the fiscal year in
which such Wrongful Termination occurs. For purposes of this Section 6.5(b),
deferred stock awards described in Section 4.1(c)(iii)(3) shall be "deemed"
earned with respect to a fiscal year if the Wrongful Termination occurs after
August 31 of such fiscal year and the FFO Targets for such fiscal year are
subsequently determined to have been met.
(c) Unless otherwise agreed among the parties in writing, in the
event of the termination of this Agreement due to the expiration of the Term (i)
on the third anniversary of the Effective Date or (ii) as a result of
Executive's notice to the Parent electing not to renew the Term pursuant to
Section 3.1, Executive shall be entitled to no further benefits hereunder, other
than those described in Section 6.5(a), and any continuation of Executive's
employment with the Parent beyond the expiration of the Term shall be deemed an
employment at will and shall not be deemed to extend any of the provisions of
this Agreement, and Executive's employment may thereafter be terminated at will
by Executive or the Parent; provided that (x) if Executive shall remain employed
with the Parent through the third anniversary of the Effective Date and
Executive shall resign his employment upon the expiration of the Term due to the
Parent's failure to offer Executive continued employment with the Parent for at
least an additional one year period (the "Extension Period") on terms
substantially equivalent in all material respects to those set forth in this
Agreement (other than principal base of operation for performance), including,
without limitation, each of the termination provisions set forth in this Section
6.5 (including this Section 6.5(c) which shall apply at the expiration of the
Extension Period should Executive remain employed by the Parent through the
conclusion of such Extension Period) (such terms of continued employment being
hereinafter referred to a "Substantially Equivalent Terms"), then such
resignation shall be treated under this Agreement as a Wrongful Termination and
the provisions of Section 6.5(b) shall apply and (y) if the Executive shall
remain employed with the Parent through the third anniversary of the Effective
Date and the Executive shall resign his employment upon the expiration of the
Term due to the Parent's offer to Executive of continued employment on
Substantially Equivalent Terms but which would require Executive's relocation to
an area outside of Youngstown, Ohio, then Executive shall be entitled to elect,
by delivery of written notice to the Parent coincident with, or within 15 days
<PAGE> 10
10
following, such resignation of employment, either (A) to cause the Parent to
provide that the vesting of the deferred stock award shares described in Section
4.1(c)(iii)(2) and Section 4.1(c)(iii)(3) shall be accelerated in the same
manner and to the same extent described in Section 6.5(b) or (B) to require that
the Company pay Executive the Cash Severance.
(d) In the event of Executive's termination of employment by Parent
due to Executive's disability or as a result of Executive's death, in addition
to Executive's entitlement to the amounts described in Section 6.5(a), the
vesting of the deferred stock award shares described in Section 4.1(c)(iii)(2)
and Section 4.1(c)(iii)(3) shall be accelerated in the same manner and to the
same extent described in Section 6.5(b).
(e) Except as expressly provided in this Article VI, the Parent
shall have no further obligations to Executive under this Agreement following
Executive's termination of employment with the Parent. Any other benefits due
Executive following Executive's termination of employment with the Parent shall
be determined in accordance with the plans, policies and practices of the
Parent; provided that any severance benefits otherwise payable to Executive in
connection with Executive's termination of employment under any plan or policy
of the Parent or its affiliates shall be reduced by the aggregate amount payable
to Executive pursuant to Section 6.5(b).
(f) Upon the termination of Executive's employment with the Parent
for any reason, Executive agrees to promptly resign, effective as of the date of
such termination of employment, from the Board (and any committee thereof) as
well as from participation as a member of the Board of Directors or trustee or
committee member of any of the Parent's affiliates and will take all action
reasonably requested by the Parent in order to evidence such resignation.
ARTICLE VII
Miscellaneous
7.1 Life Insurance. Executive agrees that the Parent and/or its
affiliates may apply for and secure and own insurance on Executive's life (in
amounts determined by the Parent or its affiliates). Executive agrees to
cooperate fully in the application for and securing of such insurance, including
the submission by Executive to such physical and other examinations, and the
answering of such questions and furnishing of such information by Executive, as
may be required by the carrier(s) of such insurance. Notwithstanding anything to
the contrary contained herein, the Parent and its affiliates shall not be
required to obtain any insurance for or on behalf of Executive, except as
provided in Section 4.1(b) hereof.
7.2 Benefit of Agreement; Assignment; Beneficiary.
(a) This Agreement shall inure to the benefit of and be binding
upon the Parent, the Company and its successors and assigns, including
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without limitation, any corporation or person which may acquire all or
substantially all of the Parent's assets or business, or with or into which the
Parent may be consolidated or merged. This Agreement shall also inure to the
benefit of, and be enforceable by, the Executive and his personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If Executive should die while any amount would still be
payable to the Executive pursuant to Section 6.5(a), all such amounts shall be
paid in accordance with the terms of this Agreement to the Executive's
beneficiary, devisee, legatee or other designee, or if there is no such
designee, to the Executive's estate.
(b) The Parent shall require any successor (whether direct or
indirect, by operation of law, by purchase, merger, consolidation or otherwise)
to all or substantially all of the business and/or assets of the Parent to
expressly assume and agree to perform this Agreement in the same manner and to
the same extent that the Parent would be required to perform it if no such
succession had taken place.
7.3 Notices. Any notice required or permitted hereunder shall be in
writing and shall be sufficiently given if personally delivered or if sent by
telegram or telex or by registered or certified mail, postage prepaid, with
return receipt requested, addressed: (a) in the case of the Parent to its
principal corporate offices in Indianapolis, Indiana, Attention: General
Counsel, or to such other address and/or to the attention of such other person
as the Parent shall designate by written notice to Executive; and (b) in the
case of Executive, to the then most current address of the Executive as recorded
in the personnel records of the Parent, or to such other address as Executive
shall designate by written notice to the Parent. Any notice given hereunder
shall be deemed to have been given at the time of receipt thereof by the person
to whom such notice is given.
7.4 Entire Agreement; Amendment.
(a) As of the Effective Date, this Agreement shall constitute the
entire agreement of the parties hereto with respect to the terms and conditions
of Executive's employment during the Term and supersedes any and all prior
agreements and understandings, whether written or oral, between the parties
hereof with respect to compensation due for services rendered hereunder.
Executive, the Parent and the Company further hereby expressly agree that from
and after the Effective Date, (i) this Agreement shall supersede the Prior
Agreement in all respects, (ii) Executive's rights with respect to the vesting
and payment of awards under the DC Incentive Plan shall be limited to those
expressly provided in Section 4.1(c), and (iii) neither the Executive nor the
Parent or its affiliates shall have any further rights, claims or obligations
under any provisions of the Prior Agreement or any then existing agreements,
arrangements or understandings relating to the subject matter hereof.
(b) This Agreement may not be changed or modified except by an
instrument in writing signed by both of the parties hereto.
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7.5 Waiver. The waiver by either party of a breach of any provision of
this Agreement shall not operate or be construed as a continuing waiver or as a
consent to or waiver of any subsequent breach hereof.
7.6 Headings. The Article and Section headings herein are for
convenience of reference only, do not constitute a part of this Agreement and
shall not be deemed to limit or affect any of the provisions hereof.
7.7 Governing Law. This Agreement shall be governed by, and construed
and interpreted in accordance with, the internal laws of the State of Indiana
without reference to the principles of conflict in laws.
7.8 Agreement to Take Actions. Each party hereto shall execute and
deliver such documents, certificates, agreements and other instruments, and
shall take such other actions, as may be reasonably necessary or desirable in
order to perform his or its obligations under this Agreement or to effectuate
the purposes hereof.
7.9 Arbitration. Except for disputes with respect to Article V hereof,
any dispute between the parties hereto respecting the meaning and intent of this
Agreement or any of its terms and provisions shall be submitted to arbitration
in Indianapolis, Indiana in accordance with the Commercial Rules of the American
Arbitration Association then in effect, and the arbitration determination
resulting from any such submission shall be final and binding upon the parties
hereto. Judgment upon any arbitration award may be entered in any court of
competent jurisdiction.
7.10 Attorneys' Fees. In the event of any arbitration or legal
proceeding between the parties hereto arising out of the subject matter of this
Agreement, including any such proceeding to enforce any right or provision
hereunder, which proceeding shall result in the rendering by an arbitration
panel or court of a decision in favor of Executive, the Parent shall pay to
Executive all costs and expenses incurred therein by Executive, including,
without limitation, reasonable attorneys' fees, which costs, expenses and
attorneys' fees shall be included in and as a part of any award or judgment
rendered in such arbitration or legal proceeding.
7.11 Notification Requirement. During the term of Executive's
employment hereunder and for the one year period following Executive's
termination of employment with the Parent for any reason, the Executive shall
give notice to the Parent of any change in the Executive's address and of each
new employment that the Executive plans to undertake, at least seven (7) days
prior to beginning any such new employment. Such notice shall state the nature
of the new employment, the name and address of the person for whom such new
employment is undertaken and the Executive shall provide the Parent with such
other pertinent information concerning such new employment as the Parent may
reasonably request in order to determine the Executive's continued compliance
with the Executive's obligations under Article V.
7.12 Withholding Taxes. The Parent and its affiliates may withhold from
any amounts payable under this Agreement such Federal, state and local taxes as
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are required to be withheld pursuant to any applicable law or regulation and the
Parent and its affiliates shall be authorized to take such action as may be
necessary in the opinion of the Parent's counsel (including, without limitation,
withholding amounts from any compensation or other amount owing from the Parent
(or its affiliates) to the Executive) to satisfy all obligations for the
payment.
7.13 Survivorship. The respective rights and obligations of the parties
hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.
7.14 Validity. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision or provisions of this Agreement, which shall remain in full
force and effect.
7.15 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
<PAGE> 14
IN WITNESS WHEREOF, each of the parties hereto has duly executed this
Agreement as of this 26th day of March, 1996.
SIMON PROPERTY GROUP, INC.
By: /s/ DAVID SIMON
------------------------------
Name: DAVID SIMON
Title: PRESIDENT
SIMON PROPERTY GROUP
ADMINISTRATIVE
SERVICES PARTNERSHIP, L.P.
By its General Partner:
M.S. MANAGEMENT ASSOCIATES
(INDIANA), INC.
By: /s/ DAVID SIMON
------------------------------
Name: DAVID SIMON
Title: PRESIDENT
/s/ RICHARD S. SOKOLOV
------------------------------
RICHARD S. SOKOLOV
Agreed and acknowledged
as of the date first above
written.
DEBARTOLO REALTY CORPORATION
By: /s/ KIM A. RIECK
---------------------------------
Name: KIM A. RIECK
Title: SENIOR VICE PRESIDENT
DEBARTOLO PROPERTIES MANAGEMENT, INC.
By: /s/ KIM A. RIECK
---------------------------------
Name: KIM A. RIECK
Title: SENIOR VICE PRESIDENT
<PAGE> 1
EXHIBIT 10.7
Execution Copy
TERMINATION AGREEMENT
TERMINATION AGREEMENT, dated as of March 26, 1996 (the "Agreement"),
among DeBartolo Realty Corporation, an Ohio corporation (the "Company"),
DeBartolo Properties Management, Inc., an Ohio corporation ("DPMI"), DeBartolo
Realty Partnership, L.P., a Delaware limited partnership (the "Operating
Partnership"), DeBartolo Capital Partnership, L.P., a Delaware general
partnership ("DCP"), The Edward J. DeBartolo Corporation, an Ohio corporation
("EJDC"), Edward J. DeBartolo, Jr., Mary Denise DeBartolo York and such other
limited partners of the Operating Partnership identified on the signature page
hereto (EJDC, Edward J. DeBartolo, Jr., Mary Denise DeBartolo York and such
other limited partners are herein collectively referred to as the "Limited
Partners"). Capitalized and certain other terms used herein have the respective
meanings ascribed to such terms in the Merger Agreement as defined below.
RECITALS
(a) The Company, the Operating Partnership, the Limited Partners and
certain other parties are parties to an Exchange Rights Agreement, dated April
21, 1994 (the "Exchange Rights Agreement"), pursuant to which the Company has
granted to such Limited Partners and others the right to cause the Company to
acquire any or all of the limited partnership interests in the Operating
Partnership (the "Partnership Interests") owned by each such Limited Partner in
exchange for shares of Common Stock of the Company (the "Exchange Rights").
(b) The Company, EJDC, the Operating Partnership, and certain Limited
Partners and others are parties to a Cash Tender Agreement, dated April 21, 1994
(the "Cash Tender Agreement"), pursuant to which the Company has granted to such
Limited Partners the right to cause the Company to acquire any or all of the
Partnership Interests owned by each such Limited Partner in exchange for cash
(the "Cash Tender Rights").
(c) The Company, the Limited Partners and others are parties to a
Registration Rights Agreement, dated April 21, 1994 (the "Registration Rights
Agreement"), pursuant to which the Company has granted to such Limited Partners
certain registration rights (the "Registration Rights") with respect to Common
Stock of the Company acquired in connection with the Exchange Rights Agreement.
(d) The Company, EJDC, the Operating Partnership, certain Limited
Partners and others are parties to a Noncompetition Agreement, dated
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2
April 21, 1994 (the "Noncompetition Agreement"), pursuant to which the Company
and such Limited Partners have agreed to restrict the activities of the
DeBartolo Group (as such term is defined in the Noncompetition Agreement).
(e) Simultaneously with the execution and delivery of this Agreement,
the Company, Simon Property Group, Inc. ("SPG") and Day Acquisition Corp.
("Subco") have entered into a Merger Agreement, dated as of March 26, 1996 (the
"Merger Agreement"), pursuant to which SPG, Subco and the Company have approved
the merger of Subco with and into the Company with Subco being the surviving
entity (the "Merger"). This Agreement is being entered into pursuant to the
Merger Agreement.
(f) Simultaneously with the Merger and pursuant to the Contribution
Agreements, the form of which is attached as Exhibit A to the Merger Agreement,
certain partners of Simon Property Group, L.P. ("SPG L.P."), including the
Parent Principals, shall contribute all their respective interests in SPG L.P.
to the Operating Partnership and, in consideration and exchange therefor, the
Operating Partnership shall issue such partners of SPG L.P. certain interests in
the Operating Partnership ("Units").
(g) Simultaneously with the Merger, the partnership agreement of the
Operating Partnership shall be amended and restated to provide, among other
things, that the partners to the Operating Partnership shall have certain rights
to exchange Units for shares of Common Stock of SPG which shares of Common Stock
may be registered under certain circumstances pursuant to the Registration
Rights Agreement, the form of which is attached as Exhibit K to the Merger
Agreement.
NOW, THEREFORE, in consideration of the premises set forth herein and
for other good and valuable consideration, the receipt and the sufficiency of
which are hereby acknowledged, the parties agree hereto as follows:
1. Termination of the Agreements; Releases. At the Effective Time and
without further act or deed by any party thereto, (a) the Cash Tender Agreement,
the Registration Rights Agreement and the Noncompetition Agreement
(collectively, the "Rights Agreements") shall terminate and be of no further
force and effect, and (b) all rights of the Limited Partners under the Exchange
Rights Agreement shall terminate and be of no further force and effect. At the
Effective Time, (a) the parties hereto hereby and without any further act or
deed unconditionally and irrevocably release, acquit and forever discharge each
other, and their respective successors, assigns, heirs and representatives from
their mutual obligations under the Rights Agreements and from any and all claims
which each of them ever had, now has or may in the future have arising out of
the Rights Agreements, and (b) the Company and the Limited Partners hereby and
without any further act or deed unconditionally and irrevocably release, acquit
and forever discharge each other from their mutual obligations under the
Exchange Rights
<PAGE> 3
3
Agreement and from any and all claims which each of them ever had, now has or
may in the future have arising out of the Exchange Rights Agreement.
2. Restrictions on Exercise of Rights. Subject to Paragraph 6 below and
the receipt of all required lender consents and except as permitted pursuant to
Section 2(e) of the Stockholders Agreement, dated as of the date hereof, among
SPG, the Company and the other persons and entities party thereto, the Limited
Partners shall not exercise their Exchange Rights, Tender Rights or Registration
Rights from the date of the execution of this Agreement to the Effective Time,
or the termination of this Agreement, whichever is earlier.
3. Representations and Warranties. In order to induce SPG to enter into
the Merger Agreement, the Company and EJDC hereby warrant to and for the benefit
of SPG that:
(a) At the Effective Time, the Cash Tender Agreement and the
Registration Rights Agreement shall each terminate in its entirety
pursuant to this Agreement and be of no further force and effect;
(b) No person shall have any continuing rights under the Exchange
Rights Agreement following the Effective Time except (i) a maximum of
approximately 35 employees of the Company, whose partnership interests
in the aggregate do not exceed 1% of the total partnership interests in
the Operating Partnership and (ii) JCP Realty, Inc. ("JCP"), whose
partnership interests do not exceed 2% of the total partnership units
in the Operating Partnership. The Company shall request that such
employees and JCP, respectively, execute and deliver, or otherwise
agree to be bound by, this Agreement (or one or more agreements to the
same effect as this Agreement in respect of the termination of the
rights of such employees under the Exchange Rights Agreement as of the
Effective Time);
(c) BJS (as such term is defined in the Cash Tender Agreement) does
not own any partnership interests in the Operating Partnership;
(d) No limited partner of the Operating Partnership or stock holder
of the Company not a party hereto has any exchange, cash tender or
registration rights equivalent or similar in nature to the rights
granted under the Exchange Rights Agreement, the Cash Tender Agreement
and the Registration Rights Agreement (other than as described in
Section 3(b) above and pursuant to the MSREF Registration Rights
Agreement, dated as of April 21, 1994, by and between the Company and
The Morgan Stanley Real Estate Fund L.P., and the Registration Rights
Agreement,); and
<PAGE> 4
4
(e) The Limited Partners who are signatories to this Agreement
constitute a Majority-In-Interest of the Holders (as such terms are
defined in the Cash Tender Agreement) under the Cash Tender Agreement.
4. Amendments. This Agreement may not be amended or supplemented, and
no provision hereof shall be deemed waived, except by an instrument in writing
signed by the parties hereto.
5. Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties hereto (whether
by operation of law or otherwise) without the prior written consent of the other
parties. This Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors, assigns, heirs and
personal representatives.
6. Termination. This Agreement shall terminate and be of no further
force or effect upon the (i) termination of the Merger Agreement or (ii)
December 31, 1996, whichever is earlier.
7. Notices. All notices, requests, claims and demands and other
communications under this Agreement shall be in writing and shall be deemed to
have been duly given or made if delivered personally or sent by registered or
certified mail (postage prepaid, return receipt requested) or by telecopier (if
written confirmation of receipt is available and provided) to the parties at the
address or telecopier number thereof that each such party shall have previously
indicated in writing to the Company or such other addresses as shall be
furnished by the parties hereto by like notice, and such notice or communication
shall be deemed to have been given or made as of the date so delivered or made.
8. Governing Law. This Agreement shall be construed and interpreted in
accordance with and governed by the law of the State of New York applicable to
agreements made and to be performed entirely within such state.
9. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be one original, and all of
which, taken together, shall constitute one and the same agreement.
[THIS PORTION INTENTIONALLY LEFT BLANK]
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day first above written.
DeBARTOLO REALTY CORPORATION
By: /s/ Richard S. Sokolov
______________________________
Name: Richard S. Sokolov
Title: Chief Executive Officer
THE EDWARD J. DeBARTOLO
CORPORATION
By: /s/ Larry T. Thrailkill
______________________________
Name: Larry T. Thrailkill
Title: Executive Vice President
THE ESTATE OF EDWARD J. DeBARTOLO
By: Edward J. DeBartolo, Jr.
______________________________
Name: Edward J. DeBartolo, Jr.
Title:
By: /s/ Marie Denise DeBartolo York
______________________________
Name: Marie Denise DeBartolo York
Title:
<PAGE> 6
/s/ Edward J. DeBartolo, Jr.
____________________________________________
Edward J. DeBartolo, Jr., individually,
and in his capacity as Trustee under (i) the
Lisa Marie DeBartolo Revocable Trust -
successor by assignment from Edward J.
DeBartolo Trust No. 5, (ii) the Tiffanie
Lynne DeBartolo Revocable Trust -
successor by assignment from Edward J.
DeBartolo Trust No. 6 and (iii) Edward J.
DeBartolo Trust No. 7 for the Benefit of
Nicole Anne DeBartolo
/s/ Cynthia R. DeBartolo
____________________________________________
Cynthia R. DeBartolo
/s/ Marie Denise DeBartolo York
____________________________________________
Marie Denise DeBartolo York,
individually, and in her capacity as Trustee
under (i) Edward J. DeBartolo Trust No. 8
for the benefit of John Edward York,
(ii) Edward J. DeBartolo Trust No. 9 for
the benefit of Anthony John York,
(iii) Edward J. DeBartolo Trust No. 10 for
the benefit of Mara Denise York and
(iv) Edward J. DeBartolo Trust No. 11 for
the benefit of Jenna Marie York
CORAL SQUARE ASSOCIATES
/s/ Edward J. DeBartolo, Jr.
By: ________________________________________
Name: Edward J. DeBartolo, Jr.
Title:
/s/ Marie Denise DeBartolo York
By: ________________________________________
Name: Marie Denise DeBartolo York
Title:
<PAGE> 7
SOUTH BEND ASSOCIATES
By: DeBartolo Inc.
By: /s/ LARRY T. THRAILKILL
_______________________________
Name: LARRY T. THRAILKILL
Title: EXECUTIVE VICE PRESIDENT
By: The Estate of Edward J. DeBartolo
By: /s/ EDWARD J. DEBARTOLO, JR.
_______________________________
Name: EDWARD J. DEBARTOLO, JR.
Title:
By: /s/ MARIE DENISE DEBARTOLO YORK
_______________________________
Name: MARIE DENISE DEBARTOLO YORK
Title: EXECUTIVE VICE PRESIDENT
WASHINGTON SQUARE ASSOCIATES
By: The Edward J. DeBartolo
Corporation
By: /s/ LARRY T. THRAILKILL
_______________________________
Name: LARRY T. THRAILKILL
Title: EXECUTIVE VICE PRESIDENT
H-CASTLETON
By: Altamonte, Inc.
By: LARRY T. THRAILKILL
_______________________________
Name: LARRY T. THRAILKILL
Title: EXECUTIVE VICE PRESIDENT
<PAGE> 8
BAY PARK, INC.
WARD PLAZA ASSOCIATES
CHELTENHAM SHOPPING CENTER ASSOCIATES
SUMMIT MALL, INC.
TYRONE SQUARE, INC.
UPPER VALLEY MALL, INC.
MISSION VIEJO MALL, INC.
PINELLAS SQUARE, INC.
GREAT LAKES MALL, INC.
PALM BEACH MALL, INC.
LAFAYETTE SQUARE, INC.
LIMA MALL, INC.
RICHMOND MALL, INC.
WOODVILLE MALL, INC.
DeBARTOLO AVENTURA, INC.
BOYNTON BEACH, INC.
THE FLORIDA MALL CORPORATION
DeBARTOLO, INC.
D.L. GROVE, INC.
TC MALL II, INC.
PADDOCK MALL, INC.
NATIONAL INDUSTRIAL DEVELOPMENT CORPORATION
GREAT NORTHEAST MALL, INC
By: /s/ LARRY T. THRAILKILL
_______________________________
Name: LARRY T. THRAILKILL
Title: EXECUTIVE VICE PRESIDENT
RUES PROPERTIES, INC.
By: /s/ LARRY T. THRAILKILL
_______________________________
Name: LARRY T. THRAILKILL
Title: EXECUTIVE VICE PRESIDENT
<PAGE> 9
COLUMBIA SC I, INC.
COLUMBIA SC II, INC.
NORTHGATE I REAL ESTATE CORPORATION
NORTHGATE II REAL ESTATE CORPORATION
TACOMA SC I, INC.
TACOMA SC II, INC.
By: /s/ LARRY T. THRAILKILL
_______________________________
Name: LARRY T. THRAILKILL
Title: EXECUTIVE VICE PRESIDENT
DeBARTOLO PROPERTIES
MANAGEMENT, INC.
By: /s/ RICHARD S. SOKOLOV
_______________________________
Name: RICHARD S. SOKOLOV
Title: CHIEF EXECUTIVE OFFICER
DeBARTOLO REALTY PARTNERSHIP, L.P.
By: DeBartolo Realty Corporation, as
General Partner
By: /s/ RICHARD S. SOKOLOV
____________________________
Name: RICHARD S. SOKOLOV
Title: CHIEF EXECUTIVE OFFICER
<PAGE> 10
DeBARTOLO CAPITAL PARTNERSHIP
By: DeBartolo Properties, Inc., as
Managing General Partner
/s/ Richard S. Sokolov
By: ________________________
Name: Richard S. Sokolov
Title: President
<PAGE> 1
EXHIBIT 23.4
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement of our reports dated February 14,
1996 included in Simon Property Group, Inc.'s Form 10-K for the year ended
December 31, 1995 and to all references to our Firm included in this
registration statement.
/s/ ARTHUR ANDERSEN LLP
------------------------------------------
ARTHUR ANDERSEN LLP
Indianapolis, Indiana,
June 25, 1996.
<PAGE> 1
EXHIBIT 23.5
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4) of Simon Property Group, Inc. for the
registration of shares and the Prospectus/Joint Proxy Statement, related to
the proposed merger and to the incorporation by reference therein of our report
dated February 14, 1996, except for Note 16, first paragraph, as to which the
date is March 1, 1996, with respect to the consolidated financial statements
and schedules of DeBartolo Realty Corporation included in its Annual Report
(Form 10-K) for the year ended December 31, 1995, filed with the Securities and
Exchange Commission.
/s/ Ernst & Young LLP
New York, New York
June 21, 1996
<PAGE> 1
EXHIBIT 23.6
[LETTERHEAD OF MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED]
We hereby consent to the use of the references to our opinion letter dated
March 25, 1996 to the Board of Directors of Simon Property Group Inc. ("SPG")
under the captions "Summary" and "The Proposed Merger and Related Matters" of
the Proxy Statement/Prospectus which forms a part of the Registration Statement
on Form S-4 relating to the proposed merger of DeBartolo Realty Corporation
with and into Day Acquisition Corp., a subsidiary of SPG, and to the use of our
name in such Proxy Statement/Prospectus in conjunction therewith. In giving
such consent, we do not admit that we come within the category of persons whose
consent is required under Section 7 of the Securities Act of 1933, as amended,
or the rules and regulations of the Securities and Exchange Commission
thereunder, nor do we thereby admit that we are experts with respect to any
part of such Registration Statement within the meaning of the term "experts" as
used in the Securities Act of 1933, as amended, or the rules and regulations of
the Securities and Exchange Commission thereunder.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
BY: /s/ MARTIN J. CICCO
----------------------------------
Martin J. Cicco
June 26, 1996
<PAGE> 2
EXHIBIT 23.6
[LETTERHEAD OF MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED]
We hereby consent to the use of our opinion letter to be dated as of the date of
the Proxy Statement/Prospectus which forms a part of the Registration Statement
on Form S-4 relating to the proposed merger of DeBartolo Realty Corporation with
and into Day Acquisition Corp., a subsidiary of Simon Property Group, Inc.
("SPG"), to the Board of Directors of SPG to be included as Annex II to such
Proxy Statement/Prospectus, subject to the issuance of such opinion by us. In
giving such consent, we do not admit that we come within the category of
persons whose consent is required under Section 7 of the Securities Act of
1933, as amended, or the rules and regulations of the Securities and Exchange
Commission thereunder, nor do we thereby admit that we are experts with respect
to any part of such Registration Statement within the meaning of the term
"experts" as used in the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission thereunder.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: /s/ MARTIN J. CICCO
__________________________________
MARTIN J. CICCO
June 26, 1996
<PAGE> 1
EXHIBIT 23.7
[LETTERHEAD OF MORGAN STANLEY & CO. INCORPORATED]
June 26, 1996
DeBartolo Realty Corporation
7655 Market Street
Youngstown, OH 44513
Attention: Board of Directors
Mr. Richard Sokolov
Chief Executive Officer
Dear Sirs:
We hereby consent to the references to our firm and the
references to and discussion of our opinion letter dated March 25, 1996 in the
Prospectus/Joint Proxy Statement of the Company to be filed with the Securities
and Exchange Commission on June 27, 1996, including amendment thereto. In
giving the foregoing consent, we do not admit that we come within the category
of persons whose consent is required under Section 7 of the Securities Act of
1933, or the rules or regulations of the Securities and Exchange Commission
thereunder.
Very Truly Yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/ Christopher J. Niehaus
--------------------------------
Name: Christopher J. Niehaus
Title: Principal
<PAGE> 1
EXHIBIT 23.8
[LETTERHEAD OF THE BLACKSTONE GROUP L.P.]
June 26, 1996
DeBartolo Realty Corporation
7655 Market Street
Youngstown, OH 44513
Attention: Board of Directors
Mr. Richard Sokolov
Chief Executive Officer
Dear Sirs:
We hereby consent to the references to our firm and to the
references to and discussion of our opinion letter dated March 25, 1996 in the
Prospectus/Joint Proxy Statement (the "Prospectus") of DeBartolo Realty
Corporation (the "Company") to be filed with the Securities and Exchange
Commission on June 27, 1996, including amendments thereto. In giving the
foregoing consent, we do not admit that we come within the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, or the
rules or regulations of the Securities and Exchange Commission thereunder. Nor
do we admit that we are experts within the meaning of the term "experts" as used
under the Securities Act of 1933, as amended, or the rules and regulations of
the Securities and Exchange Commission.
Very Truly Yours,
THE BLACKSTONE GROUP L.P.
By: /s/ Michael Hoffman
--------------------------------
Name: Michael Hoffman
Title: Senior Managing Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This financial data schedule is prepared for use by the United States Securities
and Exchange Commission only, and is unaudited.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 45,145
<SECURITIES> 0
<RECEIVABLES> 138,901<F1>
<ALLOWANCES> 0<F1>
<INVENTORY> 0
<CURRENT-ASSETS> 0<F2>
<PP&E> 2,190,944
<DEPRECIATION> 175,094
<TOTAL-ASSETS> 2,532,548
<CURRENT-LIABILITIES> 0<F2>
<BONDS> 1,995,620
0
99,923
<COMMON> 7
<OTHER-SE> 116,152
<TOTAL-LIABILITY-AND-EQUITY> 2,532,548<F3>
<SALES> 0
<TOTAL-REVENUES> 139,444
<CGS> 0
<TOTAL-COSTS> 78,371
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 38,566
<INCOME-PRETAX> 23,832
<INCOME-TAX> 23,832
<INCOME-CONTINUING> 23,832
<DISCONTINUED> 0
<EXTRAORDINARY> (265)
<CHANGES> 0
<NET-INCOME> 15,185
<EPS-PRIMARY> 0.23
<EPS-DILUTED> 0.23
<FN>
<F1>Receivables are stated net of allowances and also include accrued revenues.
<F2>The Company does not report using a classified balance sheet.
<F3>Includes limited partners' interest in SPG Operating Partnership of $78,366.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This financial data schedule is prepared for use by the United States Securities
and Exchange Commission only, and is unaudited.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 62,721
<SECURITIES> 0
<RECEIVABLES> 144,400<F1>
<ALLOWANCES> 0<F1>
<INVENTORY> 0
<CURRENT-ASSETS> 0<F2>
<PP&E> 2,162,161
<DEPRECIATION> 152,817
<TOTAL-ASSETS> 2,009,344
<CURRENT-LIABILITIES> 0<F2>
<BONDS> 1,980,759
0
99,923
<COMMON> 7
<OTHER-SE> 133,016
<TOTAL-LIABILITY-AND-EQUITY> 2,556,436<F3>
<SALES> 0
<TOTAL-REVENUES> 553,657
<CGS> 0
<TOTAL-COSTS> 302,521
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 150,224
<INCOME-PRETAX> 101,505
<INCOME-TAX> 101,505
<INCOME-CONTINUING> 101,505
<DISCONTINUED> 0
<EXTRAORDINARY> (3,285)
<CHANGES> 0
<NET-INCOME> 59,271
<EPS-PRIMARY> 1.04
<EPS-DILUTED> 1.04
<FN>
<F1>Receivables are stated net of allowances and also include accrued revenues.
<F2>The Company does not report using a classified balance sheet.
<F3>Includes limited partners' interest in SPG Operating Partnership of $86,692.
</FN>
</TABLE>
<PAGE> 1
EXHIBIT 99.4
FORMS OF PROXY
<PAGE> 2
PROXY
SIMON PROPERTY GROUP, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS
SPECIAL MEETING OF STOCKHOLDERS,
AUGUST 6, 1996
The undersigned hereby appoints David Simon, Herbert Simon and Melvin
Simon, and each of them, with full power of substitution, the true and lawful
attorneys in fact, agents and proxies of the undersigned to vote at the Special
Meeting (the "Special Meeting") of Stockholders of Simon Property Group, Inc.
(the "Company"), to be held at the Indianapolis Hyatt Regency, One South Capitol
Avenue, Indianapolis, Indiana, on August 6, 1996, at 10:00 a.m., Indianapolis
time, and any and all adjournments thereof, all of the shares of common stock,
par value $.0001 per share (the "Common Stock"), of the Company according to the
number of votes which the undersigned would possess if personally present, for
the purposes of considering and taking action upon the following.
1. To adopt a single proposal (the "SPG Proposal"), as more fully described
in the Prospectus/Joint Proxy Statement of the Company and DeBartolo Realty
Corporation ('DRC"), dated June , 1996, approving:
(i) the Agreement and Plan of Merger (the "Merger Agreement"), dated
as of March 26, 1996, as amended, among the Company, Day Acquisition Corp.,
a wholly-owned subsidiary of the Company ("Sub"), and DRC, pursuant to
which Sub will merge with and into DRC and the Company will issue Common
Stock to shareholders of DRC in exchange for their shares of DRC, such that
DRC will become a subsidiary of the Company;
(ii) Subject to approval by at least 80% of the aggregate votes
entitled to be cast by holders of the outstanding Common Stock, Class B
common stock and Series A preferred stock (the "Equity Stock"), voting
together as a single class, and a majority of the votes entitled to be cast
by holders of Class B common stock, voting separately (the "Required
Vote"), certain amendments to the Charter and By-laws of the Company
providing for, among other things, a change in the name of the Company, an
increase in the amount of authorized common stock, the creation of a new
class of common stock, to be designated Class C Common Stock, all
outstanding shares of which will be issued to The Edward J. DeBartolo
Corporation ("EJDC") (a corporation controlled by members of the DeBartolo
family), which shares will entitle EJDC to elect two members of the Board
of Directors of the Company, an increase in the size of the Board of
Directors of the Company from nine to 13 persons and the election of a
slate of 13 persons thereto, the adoption of a limited system of classified
terms for directors ending in 1999 and the changing of certain limits to
the maximum ownership interests that may be held by certain stockholders;
and
(iii) if the SPG Proposal does not receive the Required Vote but does
receive a majority of the aggregate votes entitled to be cast by holders of
the outstanding Equity Stock, voting together as a single class, certain
amendments to the Charter providing for a change in the name of the
Company, an increase in the amount of authorized capital, the changing of
certain limits to the maximum ownership interest that may be held by
certain stockholders, and the election of a slate of nine persons to the
Board of Directors whose service will commence at the effective time of the
Merger;
all as more fully described in the Joint Proxy.
FOR / / AGAINST / / ABSTAIN / /
<PAGE> 3
2. To transact such other business as may properly come before the Special
Meeting or any and all adjournments thereof.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE
BOXES, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN ACCORDANCE WITH
THE BOARD OF DIRECTORS' RECOMMENDATIONS. THIS PROXY, WHEN PROPERLY EXECUTED,
WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER(S).
IF NO DIRECTION IS GIVEN HEREIN, THIS PROXY WILL BE VOTED "FOR" THE PROPOSAL
LISTED ABOVE.
DATED: , 1996
----------
-----------------------------------
SIGNATURE
-----------------------------------
SIGNATURE IF HELD JOINTLY
PLEASE SIGN EXACTLY AS NAME(S) APPEAR
ON THIS PROXY CARD. WHEN SHARES ARE
HELD BY JOINT TENANTS, BOTH SHOULD
SIGN. WHEN SIGNING AS
ATTORNEY-IN-FACT, EXECUTOR,
ADMINISTRATOR, PERSONAL
REPRESENTATIVE, TRUSTEE, OR GUARDIAN,
PLEASE GIVE FULL TITLE AS SUCH. IF A
CORPORATION, PLEASE SIGN IN FULL
CORPORATE NAME BY PRESIDENT OR OTHER
AUTHORIZED OFFICER. IF A PARTNERSHIP,
PLEASE SIGN IN PARTNERSHIP NAME BY
AUTHORIZED PERSON.
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
<PAGE> 4
PROXY
SIMON PROPERTY GROUP, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS
AUGUST 6, 1996
The undersigned hereby appoints David Simon, Herbert Simon and Melvin
Simon, and each of them, with full power of substitution, the true and lawful
attorneys in fact, agents and proxies of the undersigned to vote at the Annual
Meeting (the "Annual Meeting") of Stockholders of Simon Property Group, Inc.
(the "Company"), to be held at the Indianapolis Hyatt Regency, One South Capitol
Avenue, Indianapolis, Indiana, on August 6, 1996, immediately following the
Special Meeting of Stockholders of the Company which will begin at 10:00 a.m.,
Indianapolis time, and any and all adjournments thereof, all of the shares of
common stock, par value $.0001 per share, of the Company according to the number
of votes which the undersigned would possess if personally present, for the
purposes of considering and taking action upon the following.
1. To elect five directors to serve until the earlier to occur of (i) the
effective time of the merger (the "Merger") of Day Acquisition Corp., a
wholly-owned subsidiary of the Company ("Sub"), with and into DeBartolo
Realty Corporation ("DRC"), as more fully set forth in the
Prospectus/Joint Proxy Statement of the Company and DRC, dated June ,
1996, and (ii) the next annual meeting of the Company or until their
successors are elected and have qualified:
Nominees: Birch Bayh, William Dillard, II, Joseph R. Perella, Terry
S. Prindiville, J. Albert Smith, Jr.
/ / Vote for all nominees listed above
/ / Vote withheld for all nominees listed above
/ / Vote for all nominees listed above except
2. To approve the appointment of Arthur Andersen LLP as independent
accountants of the Company for the 1996 fiscal year:
/ / FOR / / AGAINST / /ABSTAIN
3. To transact such other business as may properly come before the Annual
Meeting or any and all adjournments thereof.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE
BOXES, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN ACCORDANCE WITH
THE BOARD OF DIRECTORS' RECOMMENDATIONS. THIS PROXY, WHEN PROPERLY EXECUTED,
WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER(S).
IF NO DIRECTION IS GIVEN HEREIN, THIS PROXY WILL BE VOTED "FOR" THE ELECTION OF
THE NOMINEES LISTED IN PROPOSAL NO. 1 AND "FOR" PROPOSAL NO. 2. IF A NOMINEE FOR
ELECTION AS A DIRECTOR NAMED IN THE PROXY STATEMENT IS UNABLE TO SERVE OR FOR
GOOD CAUSE WILL NOT SERVE, THIS PROXY WILL BE VOTED FOR SUCH SUBSTITUTE
NOMINEE(S) AS THE DIRECTORS MAY RECOMMEND.
DATED: , 1996
---------
-----------------------------------
SIGNATURE
-----------------------------------
SIGNATURE IF HELD JOINTLY
PLEASE SIGN EXACTLY AS NAME(S) APPEAR
ON THIS PROXY CARD. WHEN SHARES ARE
HELD BY JOINT TENANTS, BOTH SHOULD
SIGN. WHEN SIGNING AS ATTORNEY-IN-
FACT, EXECUTOR, ADMINISTRATOR,
PERSONAL REPRESENTATIVE, TRUSTEE, OR
GUARDIAN, PLEASE GIVE FULL TITLE AS
SUCH. IF A CORPORATION, PLEASE SIGN
IN FULL CORPORATE NAME BY PRESIDENT
OR OTHER AUTHORIZED OFFICER. IF A
PARTNERSHIP, PLEASE SIGN IN
PARTNERSHIP NAME BY AUTHORIZED
PERSON.
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
<PAGE> 5
PROXY
DEBARTOLO REALTY CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
SPECIAL MEETING OF SHAREHOLDERS, AUGUST 6, 1996
The undersigned hereby appoints Richard S. Sokolov and Kim A. Rieck, and
each of them, with full power of substitution, the true and lawful attorneys in
fact, agents and proxies of the undersigned to vote at the special meeting (the
"Special Meeting") of Shareholders of DeBartolo Realty Corporation (the
"Company"), to be held on August 6, 1996, commencing at 11:00 a.m., local time,
at 7655 Market Street, Youngstown, Ohio 44513, and any and all adjournments
thereof, all of the shares of common stock, par value $0.01 per share, of the
Company according to the number of votes which the undersigned would possess if
personally present, for the purposes of considering and taking action upon the
following.
1. To approve a proposal to adopt an Agreement and Plan of Merger, dated as
of March 26, 1996, as amended, among Simon Property Group, Inc. ("SPG"), Day
Acquisition Corp. ("Sub," a wholly-owned subsidiary of SPG) and the Company,
providing for the merger (the "Merger") of Sub with and into the Company, and to
authorize the Merger and certain related transactions, as more fully set forth
in the Prospectus /Joint Proxy Statement of the Company and SPG, dated June ,
1966.
FOR / / AGAINST / / ABSTAIN / /
2. To transact such other business as may properly come before the Special
Meeting or any and all adjournments thereof.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES,
BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD
OF DIRECTORS' RECOMMENDATIONS. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED
IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION
IS GIVEN HEREIN, THIS PROXY WILL BE VOTED "FOR" PROPOSAL 1 LISTED ABOVE.
Dated: , 1996
----------------------------
Signature
----------------------------
Signature if held jointly
PLEASE SIGN EXACTLY AS
NAME(S) APPEAR ON THIS PROXY
CARD. WHEN SHARES ARE HELD
BY JOINT TENANTS, BOTH
SHOULD SIGN. WHEN SIGNING AS
ATTORNEY-IN-FACT, EXECUTOR,
ADMINISTRATOR, PERSONAL
REPRESENTATIVE, TRUSTEE, OR
GUARDIAN, PLEASE GIVE FULL
TITLE AS SUCH. IF A
CORPORATION, PLEASE SIGN IN
FULL CORPORATE NAME BY
PRESIDENT OR OTHER
AUTHORIZED OFFICER. IF A
PARTNERSHIP, PLEASE SIGN IN
PARTNERSHIP NAME BY
AUTHORIZED PERSON.
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
<PAGE> 1
EXHIBIT 99.5
June 26, 1996
DeBartolo Realty Corporation
7655 Market Street
P.O. Box 3287
Youngstown, Ohio 44513
Attn: Kim A. Rieck
Simon Property Group, Inc.
Merchants Plaza
115 West Washington Street
Suite 15 East
Indianapolis, Indiana 46204
Attn: James M. Barkley
I, M. Denise DeBartolo York, hereby consent to the use of my name in connection
with my being nominated for election and serving as a director of Simon
DeBartolo Group, Inc. in the Registration Statement on Form S-4 of Simon
DeBartolo Group, Inc., including the joint proxy statement/prospectus of
DeBartolo Realty Corporation and Simon Property Group, Inc., and in other
materials related to the merger of Day Acquisition Corp., a subsidiary of Simon
Property Group Inc., with and into DeBartolo Realty Corporation, and any
amendments or modifications to any of the foregoing.
/s/ M. Denise DeBartolo York
- -------------------------------------
M. Denise DeBartolo York
<PAGE> 2
EXHIBIT 99.5
June 26, 1996
DeBartolo Realty Corporation
7655 Market Street
P.O. Box 3287
Youngstown, Ohio 44513
Attn: Kim A. Rieck
Simon Property Group, Inc.
Merchants Plaza
115 West Washington Street
Suite 15 East
Indianapolis, Indiana 46204
Attn: James M. Barkley
I, Richard S. Sokolov, hereby consent to the use of my name in connection with
my being nominated for election and serving as a director of Simon DeBartolo
Group, Inc. in the Registration Statement on Form S-4 of Simon DeBartolo Group,
Inc., including the joint proxy statement/prospectus of DeBartolo Realty
Corporation and Simon Property Group, Inc., and in other materials related to
the merger of Day Acquisition Corp., a subsidiary of Simon Property Group Inc.,
with and into DeBartolo Realty Corporation, and any amendments or modifications
to any of the foregoing.
/s/ Richard S. Sokolov
- -------------------------------------
Richard S. Sokolov
<PAGE> 3
EXHIBIT 99.5
June 26, 1996
DeBartolo Realty Corporation
7655 Market Street
P.O. Box 3287
Youngstown, Ohio 44513
Attn: Kim A. Rieck
Simon Property Group, Inc.
Merchants Plaza
115 West Washington Street
Suite 15 East
Indianapolis, Indiana 46204
Attn: James M. Barkley
I, Edward J. DeBartolo, Jr., hereby consent to the use of my name in connection
with my being nominated for election and serving as a director of Simon
DeBartolo Group, Inc. in the Registration Statement on Form S-4 of Simon
DeBartolo Group, Inc., including the joint proxy statement/prospectus of
DeBartolo Realty Corporation and Simon Property Group, Inc., and in other
materials related to the merger of Day Acquisition Corp., a subsidiary of Simon
Property Group Inc., with and into DeBartolo Realty Corporation, and any
amendments or modifications to any of the foregoing.
/s/ Edward J. DeBartolo, Jr.
- -------------------------------------
Edward J. DeBartolo, Jr.
<PAGE> 4
EXHIBIT 99.5
June 19, 1996
DeBartolo Realty Corporation
7655 Market Street
P.O. Box 3287
Youngstown, Ohio 44513
Attn: Kim A. Rieck
Simon Property Group, Inc.
Merchants Plaza
115 West Washington Street
Suite 15 East
Indianapolis, Indiana 46204
Attn: James M. Barkley
I, G. William Miller, hereby consent to the use of my name in connection with
my being nominated for election and serving as a director of Simon DeBartolo
Group, Inc. in the Registration Statement on Form S-4 of Simon DeBartolo Group,
Inc., including the joint proxy statement/prospectus of DeBartolo Realty
Corporation and Simon Property Group, Inc., and in other materials related to
the merger of Day Acquisition Corp., a subsidiary of Simon Property Group Inc.,
with and into DeBartolo Realty Corporation, and any amendments or modifications
to any of the foregoing.
/s/ G. William Miller
- -------------------------------------
G. William Miller
<PAGE> 5
EXHIBIT 99.5
June 19, 1996
DeBartolo Realty Corporation
7655 Market Street
P.O. Box 3287
Youngstown, Ohio 44513
Attn: Kim A. Rieck
Simon Property Group, Inc.
Merchants Plaza
115 West Washington Street
Suite 15 East
Indianapolis, Indiana 46204
Attn: James M. Barkley
I, Philip J. Ward, hereby consent to the use of my name in connection with my
being nominated for election and serving as a director of Simon DeBartolo
Group, Inc. in the Registration Statement on Form S-4 of Simon DeBartolo Group,
Inc., including the joint proxy statement/prospectus of DeBartolo Realty
Corporation and Simon Property Group, Inc., and in other materials related to
the merger of Day Acquisition Corp., a subsidiary of Simon Property Group Inc.,
with and into DeBartolo Realty Corporation, and any amendments or modifications
to any of the foregoing.
/s/ Philip J. Ward
- -------------------------------------
Philip J. Ward
<PAGE> 6
EXHIBIT 99.5
June 20, 1996
DeBartolo Realty Corporation
7655 Market Street
P.O. Box 3287
Youngstown, Ohio 44513
Attn: Kim A. Rieck
Simon Property Group, Inc.
Merchants Plaza
115 West Washington Street
Suite 15 East
Indianapolis, Indiana 46204
Attn: James M. Barkley
I, Frederick W. Petri, hereby consent to the use of my name in connection with
my being nominated for election and serving as a director of Simon DeBartolo
Group, Inc. in the Registration Statement on Form S-4 of Simon DeBartolo Group,
Inc., including the joint proxy statement/prospectus of DeBartolo Realty
Corporation and Simon Property Group, Inc., and in other materials related to
the merger of Day Acquisition Corp., a subsidiary of Simon Property Group Inc.,
with and into DeBartolo Realty Corporation, and any amendments or modifications
to any of the foregoing.
/s/ Frederick W. Petri
- -------------------------------------
Frederick W. Petri
