UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(AMENDMENT NO. 2)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
Commission file number 1-12618
SIMON DEBARTOLO GROUP, INC.
(Exact name of registrant as specified in its charter)
MARYLAND 35-1901999
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
115 WEST WASHINGTON STREET
INDIANAPOLIS, INDIANA 46204
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(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (317) 636-1600
SECURITIES REGISTERED PURSUANT TO SECTION 12 (B) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
Common stock, $0.0001 par value New York Stock Exchange
8 3/4% Series B Cumulative Redeemable
Preferred Stock, $.0001 par value New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12 (G) OF THE ACT: NONE
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]
The aggregate market value of voting stock held by non-affiliates of the
Registrant was approximately $3,258 million based on the closing market price
on the New York Stock Exchange for such stock on March 6, 1998. As of March 6,
1998, 106,484,009; 3,200,000 and 4,000 shares of common stock, Class B common
stock and Class C common stock were outstanding, respectively.
Documents Incorporated By Reference
NONE.
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Simon DeBartolo Group, Inc. hereby amends its Annual Report on Form 10-K for
the year ended December 31, 1997, to include supplementary disclosure to the
funds from operations discussion on page 45, footnotes 4 and 11 of the
consolidated financial statements on pages 69 and 81, respectively, and the
Notes to Schedule III on page 91.
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this amended report to be signed on its behalf by
the undersigned, hereunto duly authorized.
SIMON DEBARTOLO GROUP, INC.
By: /s/ James M. Barkley
---------------------
James M. Barkley,
Secretary/General Counsel
<PAGE>
PART I
ITEM 1. BUSINESS
BACKGROUND
Simon DeBartolo Group, Inc. (the "Company"), a Maryland corporation,
formerly known as Simon Property Group, Inc., is a self-administered and self-
managed real estate investment trust ("REIT") under the Internal Revenue Code
of 1986, as amended (the "Code"). The Company's majority owned subsidiary
partnership is Simon DeBartolo Group, L.P. ("the Operating Partnership"). The
Company, through the Operating Partnership, is engaged primarily in the
ownership, operation, management, leasing, acquisition, expansion and
development of real estate properties, primarily regional malls and community
shopping centers.
As of December 31, 1997, the Operating Partnership owns or holds an
interest in 202 income-producing properties, which consist of 120 regional
malls, 72 community shopping centers, three specialty retail centers, four
mixed-use properties and three value-oriented super-regional malls located in 33
states (the "Properties"). The Operating Partnership also owns interests in one
specialty retail center and two community centers currently under construction
and nine parcels of land either in preconstruction development or held for
future development (collectively, the "Development Properties", and together
with the Properties, the "Portfolio Properties"). The Operating Partnership
also holds substantially all of the economic interest in M.S. Management
Associates, Inc. (the "Management Company"), while substantially all of the
voting stock is held by Melvin Simon, Herbert Simon and David Simon. The
Management Company manages Properties generally not wholly-owned by the
Operating Partnership and certain other properties, and also engages in certain
property development activities. The Operating Partnership also holds
substantially all of the economic interest in, and the Management Company holds
substantially all of the voting stock of, DeBartolo Properties Management, Inc.
("DPMI"), which provides architectural, design, construction and other services
to substantially all of the Portfolio Properties, as well as certain other
regional malls and community shopping centers owned by third parties. At
December 31, 1997, 1996 and 1995, the Company's ownership interest in the
Operating Partnership was 63.9%, 61.4%, and 61.0%, respectively.
THE DRC MERGER
On August 9, 1996, the Company acquired the national shopping center
business of DeBartolo Realty Corporation ("DRC") for an aggregate value of $3.0
billion (the "DRC Merger"). The acquired portfolio consisted of 49 regional
malls, 11 community centers and 1 mixed-use Property. These Properties included
47,052,267 square feet of retail space gross leasable area ("GLA") and 558,636
of office GLA. Pursuant to the DRC Merger, the Company issued a total of
37,873,965 shares of common stock, to the DRC shareholders. DRC became a 99.9%
subsidiary of the Company. The Company changed its name to Simon DeBartolo
Group, Inc. In addition, the Management Company purchased from The Edward J.
DeBartolo Corporation all of the voting stock of DPMI, for $2.5 million in
cash.
For additional information concerning the DRC Merger, please see Note 3 to
the consolidated financial statements.
THE PARTNERSHIP MERGER
On December 31, 1997, Simon Property Group, L.P., a Delaware limited
partnership ("SPG, LP"), merged (the "Partnership Merger") into the Operating
Partnership. Prior to the Partnership Merger, the Operating Partnership and the
Company held all of the partnership interests of SPG, LP, which held interests
in certain of the Portfolio Properties. As a result of the Partnership Merger,
the Operating Partnership now directly or indirectly owns or holds interests in
all of the Portfolio Properties and directly holds substantially all of the
economic interest in the Management Company. Prior to the DRC Merger,
references to the Operating Partnership refer to SPG, LP only.
DEFINITIVE MERGER AGREEMENT
The Company, Corporate Property Investors ("CPI") and Corporate Realty
Consultants, Inc. ("CRC") entered into an Agreement and Plan of Merger, dated
as of February 18, 1998 (the "Merger Agreement") , pursuant to which a
subsidiary of CPI shall be merged with and into the Company (the "Merger").
Upon consummation of the Merger, CPI will be renamed and holders of the
Company's common stock will receive shares of CPI common stock on a one-for-one
<PAGE>
basis and beneficial interests in shares of CRC common stock. Based upon the
capitalization of the Company and CPI as of December 31, 1997, the Company's
stockholders would own in the aggregate approximately 67% of the outstanding
shares of the new entity's common stock. Even though the Company's
stockholders will receive shares of common stock of a new entity, substantially
all the members of the current Board of Directors and senior management of the
Company will be members of the new Board of Directors and senior management of
the new entity. All of the Company's policies, including investment and
financing policies, and practices are expected to continue as the new entity's
policies and practices.
The Merger Agreement provides that prior to the Merger each holder of CPI
common stock will receive consideration of $179 per share, consisting of a
dividend of : (i) the Cash Amount (as defined below) ; (ii) 1.0818 shares of
CPI common stock; and (iii) 0.19 shares of CPI 6.5% convertible preferred
stock. The "Cash Amount" is equal to $90.00 per share of CPI common stock,
subject to adjustment as follows: (i) if the Market Price (as defined below)
for the Company's common stock at the effective time of the Merger exceeds
$38.67, then the Cash Amount shall be reduced by an amount equal to such excess
multiplied by 2.0818 and (ii) if the Market Price for the Company's common
stock at the effective time of the Merger is less than $28.58, then the Cash
Amount shall be increased by an amount equal to such deficiency multiplied by
2.0818. The "Market Price" shall be the average of the closing prices per share
for the Company's common stock on the New York Stock Exchange for the 20
consecutive trading days ending on the fifth trading day prior to the effective
time of the Merger.
The transaction is expected to be consummated during the third quarter of
1998 and is subject to the approval of the Company's stockholders, as well as
customary regulatory and other conditions. The requisite number of CPI
stockholders already have agreed to approve the transaction. The foregoing
description of the Merger Agreement does not purport to be complete and is
qualified in its entirety by reference to the Merger Agreement, which appears
as Exhibit 10.1 to the Company's Form 8-K dated February 19, 1998 and is
incorporated herein by reference.
GENERAL
As of December 31, 1997, the Operating Partnership owned or held interests
in a diversified portfolio of 202 income-producing Properties, including 120
enclosed regional malls, 72 community shopping centers, three specialty retail
centers, four mixed-use Properties and three value-oriented super-regional
malls, located in 33 states. Regional malls, community centers and the
remaining portfolio comprised 82.8%, 8.3%, and 8.9%, respectively of total rent
revenues and tenant reimbursements in 1997. The value-oriented super-regional
malls are not included in consolidated rent revenues and tenant reimbursements
as they are each accounted for using the equity method of accounting. The
Properties contain an aggregate of approximately 128.8 million square feet of
GLA, of which 78.0 million square feet is owned by the Operating Partnership
("Owned GLA"). Approximately 3,600 different retailers occupy more than 14,000
stores in the Properties. Total estimated retail sales at the Properties
exceeded $25 billion in 1997.
The Company and certain of its subsidiaries are taxed as REITs under
sections 856 through 860 of the Code, and applicable Treasury regulations
relating to REIT qualification. The Company is self-administered and self-
managed and does not engage or pay a REIT advisor. The Company provides
management, development, leasing, accounting, finance and legal, design and
construction expertise through its own personnel or, where appropriate, through
outside professionals.
OPERATING STRATEGIES
The Company's primary business objectives are to increase per share cash
generated from operations and the value of the Operating Partnership's
Properties and operations. The Company plans to achieve these objectives
through a variety of methods discussed below, although no assurance can be made
that such objectives will be achieved.
Leasing. The Operating Partnership pursues an active leasing strategy,
which includes aggressively marketing available space; renewing existing
leases at higher base rents per square foot; and continuing to sign leases
that provide for percentage rents and/or regular or periodic fixed
contractual increases in base rents.
Management. Drawing upon the expertise gained through management of
approximately 140 million square feet of retail and mixed-use Properties,
the Operating Partnership seeks to maximize cash flow through a
combination of an active merchandising program to maintain its shopping
centers as inviting shopping destinations, continuation of its successful
efforts to minimize overhead and operating costs, coordinated marketing
and promotional activities, and systematic planning and monitoring of
results.
<PAGE>
Acquisitions. The Operating Partnership intends to selectively acquire
individual properties and portfolios of properties that meet its
investment criteria as opportunities arise. Management believes that
consolidation will continue to occur within the shopping center industry,
creating opportunities for the Operating Partnership to acquire additional
portfolios of shopping centers and increase operating profit margins.
Management also believes that its extensive experience in the shopping
center business, access to capital markets, national operating scope,
familiarity with real estate markets and advanced management systems will
allow it to evaluate and execute acquisitions competitively. Additionally,
the Operating Partnership may be able to acquire properties on a tax-
advantaged basis for the transferors.
During 1997, the Operating Partnership, through the acquisition of The
Retail Property Trust ("RPT"), and other related transactions, acquired a
portfolio of ten wholly-owned Properties and one 50%-owned Property
comprising approximately twelve million square feet of GLA in eight
states. RPT is also a REIT. In addition, the Operating Partnership made
several other single-Property ownership acquisitions in 1997. The
Operating Partnership acquired a 50% ownership interest in Dadeland Mall
and an additional 48% ownership interest in West Town Mall, increasing its
ownership in that Property to 50%. In addition, the Operating Partnership
acquired The Fashion Mall at Keystone at the Crossing, a 597,000 square-
foot regional mall, along with an adjacent community center. Also acquired
in 1997 was the remaining 30% ownership interest in Virginia Center
Commons. On December 29, 1997, the Operating Partnership formed a joint
venture partnership with The Macerich Company ("Macerich") to acquire a
portfolio of twelve regional malls comprising approximately 10.7 million
square feet of GLA. This transaction closed on February 27, 1998, with the
Operating Partnership assuming leasing and management responsibilities for
six of the regional malls and Macerich assuming leasing and management for
the remaining properties.
Development. The Operating Partnership's focus is to selectively develop
new Properties in major metropolitan areas that exhibit strong population
and economic growth. During 1997, the Operating Partnership opened one new
regional mall, two value-oriented super-regional malls and one new
community shopping center. On September 5, 1997, the Operating Partnership
opened The Source, a 730,000 square-foot regional mall in Westbury (Long
Island), New York. On October 31, 1997 the Operating Partnership opened
Grapevine Mills, a 1.2 million square feet value-oriented super-regional
mall in Grapevine (Dallas/Fort Worth), Texas, and on November 20, 1997,
the Operating Partnership opened Arizona Mills, a 1.2 million square-foot
value-oriented super-regional mall in Tempe, Arizona. In March 1997, the
Operating Partnership opened Indian River Commons, a 260,000 square-foot
community shopping center in Vero Beach, Florida, which is immediately
adjacent to an existing regional mall Property.
Development activities are ongoing at several other locations including
the following projects, which have an aggregate construction cost of
approximately $200 million:
* The Shops at Sunset Place, a destination-oriented retail and
entertainment project containing approximately 510,000 square feet of
GLA is scheduled to open in October of 1998 in South Miami, Florida.
* Muncie Plaza, a 196,000 square-foot community center project, is
scheduled to open in April of 1998 in Muncie, Indiana, adjacent to
Muncie Mall.
* Lakeline Plaza, a 380,000 square-foot community center project, is
scheduled to open in two phases in May and November of 1998 in Austin,
Texas, adjacent to Lakeline Mall.
The Operating Partnership also has direct or indirect interests in nine
other parcels of land either in preconstruction development or being held
for future development in eight states totaling approximately 677 acres.
Management believes the Operating Partnership is well positioned to pursue
future development opportunities as conditions warrant.
The Operating Partnership is in the preconstruction development phase on
one new value-oriented super-regional mall, a factory outlet center and
one new community center project. Concord Mills, an approximately $200
million development, is scheduled to open in 1999. This 1.4 million square-
foot value-oriented super-regional mall development project is 50%-owned
by the Operating Partnership. Houston Premium Outlets is a 462,000 square-
foot factory outlet project in Houston, Texas. This approximately $89
million project, of which the Operating Partnership has a 50% ownership
interest in, is scheduled to begin construction in 1998 and open in 1999.
The Shops at North East Mall, which is immediately adjacent to an existing
<PAGE>
regional mall in the Company's portfolio, is an approximately $55 million
development. This 391,000 square-foot wholly-owned development project is
scheduled to open in Hurst, Texas, in 1999.
Strategic Expansions and Renovations. A key objective of the Operating
Partnership is to increase the profitability and market share of the
Properties through the completion of strategic renovations and expansions.
In 1997, the Operating Partnership completed construction and opened
fourteen expansion and/or renovation projects: Alton Square in Alton,
Illinois; Aventura Mall in Miami, Florida; Chautauqua Mall in Jamestown,
New York; Columbia Center in Kennewick, Washington; The Forum Shops at
Caesar's in Las Vegas, Nevada; Knoxville Center in Knoxville, Tennessee;
La Plaza in McAllen, Texas; Muncie Mall in Muncie, Indiana; Northfield
Square in Bradley, Illinois; Northgate Mall in Seattle, Washington; Orange
Park Mall in Jacksonville, Florida; Paddock Mall in Ocala, Florida;
Richmond Square in Richmond, Indiana; and Southern Park Mall in
Youngstown, Ohio.
The Operating Partnership has a number of renovation and/or expansion
projects currently under construction, or in preconstruction development.
The Operating Partnership expects to commence construction on many of
these projects in the next 12 to 24 months.
COMPETITION
The Operating Partnership believes that it has a competitive advantage in
the retail real estate business as a result of (i) its use of innovative
retailing concepts, (ii) its management and operational expertise, (iii) its
extensive experience and relationship with retailers and lenders, (iv) the
size, quality and diversity of its Properties and (v) through the mall
marketing initiatives of Simon Brand Ventures, which the Company believes is
the world's largest and most sophisticated mall marketing initiative.
Management believes that the Properties are the largest, as measured by GLA, of
any publicly traded REIT, with more regional malls than any other publicly
traded REIT. For these reasons, management believes the Operating Partnership
to be the leader in the industry.
All of the Portfolio Properties are located in developed areas. With
respect to certain of such properties, there are other properties of the same
type within the market area. The existence of competitive properties could have
a material effect on the Operating Partnership's ability to lease space and on
the level of rents the Operating Partnership can obtain.
There are numerous commercial developers, real estate companies and other
owners of real estate that compete with the Operating Partnership in its trade
areas. This results in competition for both acquisition of prime sites
(including land for development and operating properties) and for tenants to
occupy the space that the Operating Partnership and its competitors develop and
manage.
ENVIRONMENTAL MATTERS
General Compliance. Management believes that the Portfolio Properties are
in compliance, in all material respects, with all Federal, state and local
environmental laws, ordinances and regulations regarding hazardous or toxic
substances (see Item 3. Legal Proceedings). Substantially all of the Portfolio
Properties have been subjected to Phase I or similar environmental audits
(which generally involve only a review of records and visual inspection of the
property without soil sampling or ground water analysis) by independent
environmental consultants. The Phase I environmental audits are intended to
discover information regarding, and to evaluate the environmental condition of,
the surveyed properties and surrounding properties. The environmental audits
have not revealed, nor is management aware of, any environmental liability that
management believes will have a material adverse effect on the Company. No
assurance can be given that existing environmental studies with respect to the
Portfolio Properties reveal all potential environmental liabilities; that any
previous owner, occupant or tenant of a Portfolio Property did not create any
material environmental condition not known to management; that the current
environmental condition of the Portfolio Properties will not be affected by
tenants and occupants, by the condition of nearby properties, or by unrelated
third parties; or that future uses or condition (including, without limitation,
changes in applicable environmental laws and regulations or the interpretation
thereof) will not result in imposition of additional environmental liability.
Asbestos-containing materials. Asbestos-containing materials are present
in most of the Properties, primarily in the form of vinyl asbestos tile,
mastics and roofing materials, which are generally in good condition.
Fireproofing and insulation containing asbestos is also present in certain
<PAGE>
Properties in limited concentrations or in limited areas. The presence of such
asbestos-containing materials does not violate currently applicable laws.
Asbestos-containing materials will be removed by the Operating Partnership in
the ordinary course of any renovation, reconstruction and expansion, and in
connection with the retenanting of space.
Underground Storage Tanks. Several of the Portfolio Properties contain or
at one time contained underground storage tanks used to store waste oils or
other petroleum products primarily related to the operation of auto service
center establishments. All such tanks had been removed or previously abandoned
in place and filled with inert materials in accordance with applicable
environmental laws. Site assessments have revealed seven Properties contain
certain soil and/or groundwater contamination associated with such tanks.
Subsurface investigations (Phase II assessments) and remediation work are
either ongoing or scheduled to be conducted at such Properties. The costs of
remediation with respect to such matters have not been and are not expected to
be material.
Properties to be Developed or Acquired. Land being held for shopping mall
development or that may be acquired for development may contain residues or
debris associated with the use of the land by prior owners or third parties. In
certain instances, such residues or debris could be or contain hazardous wastes
or hazardous substances. Prior to exercising any option to acquire any of the
optioned properties, the Operating Partnership will conduct environmental due
diligence consistent with past practice.
EMPLOYEES
The Company, the Operating Partnership and its affiliates employ
approximately, 6,300 persons at various centers and offices throughout the
United States. Approximately 730 of such employees are located at the Company's
headquarters in Indianapolis, Indiana, and approximately 3,400 of all employees
are part-time.
INSURANCE
The Operating Partnership has comprehensive liability, fire, flood,
extended coverage and rental loss insurance with respect to its Properties.
Management believes that such insurance provides adequate coverage.
CORPORATE HEADQUARTERS
The Company's executive offices are located at National City Center, 115
West Washington Street, Indianapolis, Indiana 46204, and its telephone number
is (317) 636-1600.
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information with respect to the
executive officers of the Company as of December 31, 1997.
Name Age Position
Melvin Simon (1) 71 Co-Chairman
Herbert Simon (1) 63 Co-Chairman
David Simon (1) 36 Chief Executive Officer
Richard S. Sokolov 48 President and Chief Operating Officer
Randolph L. Foxworthy 53 Executive Vice President - Corporate
Development
William J. Garvey 59 Executive Vice President - Property
Development
James A. Napoli 51 Executive Vice President - Leasing
John R. Neutzling 45 Executive Vice President - Property
Management
James M. Barkley 46 General Counsel; Secretary
Stephen E. Sterrett 42 Treasurer
John Rulli 41 Senior Vice President - Human Resources &
Corporate Operations
James R. Giuliano, III 40 Senior Vice President
(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 the Company. The executive officers of the Company serve at the
pleasure of the Board of Directors and have served in such capacities since the
formation of the Company in 1993, with the exception of Mr. Sokolov and Mr.
Giuliano who have held their offices since the DRC Merger. For biographical
information of Melvin Simon, Herbert Simon, David Simon, and Richard Sokolov,
see Item 10 of this report.
Mr. Foxworthy is the Executive Vice President - Corporate Development of
the Company. Mr. Foxworthy joined Melvin Simon & Associates, Inc. ("MSA") in
1980 and has been an Executive Vice President in charge of Corporate
Development of MSA since 1986 and has held the same position with the Company
since its formation in 1993.
Mr. Garvey is the Executive Vice President - Property Development of the
Company. Mr. Garvey, who was Executive Vice President and Director of
Development at MSA, joined MSA in 1979 and held various positions with MSA.
Mr. Napoli is the Executive Vice President - Leasing of the Company. Mr.
Napoli also served as Executive Vice President and Director of Leasing of MSA,
which he joined in 1989.
Mr. Neutzling is the Executive Vice President - Property Management of the
Company. Mr. Neutzling has also been an Executive Vice President of MSA since
1992 overseeing all property and asset management functions. He joined MSA in
1974 and has held various positions with MSA.
Mr. Barkley serves as the Company's General Counsel and Secretary. Mr.
Barkley holds the same position for MSA. He joined MSA in 1978 as Assistant
General Counsel for Development Activity.
Mr. Sterrett serves as the Company's Treasurer. He joined MSA in 1989 and
has held various positions with MSA.
Mr. Rulli holds the position of Senior Vice President - Human Resources
and Corporate Operations. He joined MSA in 1988 and has held various positions
with MSA.
Mr. Giuliano has served as Senior Vice President since the DRC Merger. He
joined DRC in 1993, where he served as Senior Vice President and Chief
Financial Officer up to the DRC Merger.
<PAGE>
ITEM 2. PROPERTIES
PORTFOLIO PROPERTIES
The Properties primarily consist of two types: regional malls and
community shopping centers. Regional malls contain two or more anchors and a
wide variety of smaller stores ("Mall" stores) located in enclosed malls
connecting the anchors. Additional stores ("Freestanding" stores) are usually
located along the perimeter of the parking area. The 120 regional malls in the
Properties range in size from approximately 200,000 to 1.6 million square feet
of GLA, with 116 regional malls over 400,000 square feet. These regional malls
contain in the aggregate nearly 11,600 occupied stores, including 480 anchors
which are mostly national retailers. As of December 31, 1997, regional malls
(including specialty retail centers, and retail space in the mixed-use
Properties) represented 81.8% of total GLA, 76.5% of Owned GLA and 81.5% of
total annualized base rent of the Properties.
Community shopping centers are generally unenclosed and smaller than
regional malls. Most of the 72 community shopping centers in the Properties
range in size from approximately 100,000 to 400,000 square feet of GLA.
Community shopping centers generally are of two types: (i) traditional
community centers, which focus primarily on value-oriented and convenience
goods and services, are usually anchored by a supermarket, drugstore or
discount retailer and are designed to service a neighborhood area; and (ii)
power centers, which are designed to serve a larger trade area and contain at
least two anchors that are usually national retailers among the leaders in
their markets and occupy more than 70% of the GLA in the center. As of December
31, 1997, community shopping centers represented 13.5% of total GLA, 16.1% of
Owned GLA and 8.7% of the total annualized base rent of the Properties.
The Operating Partnership also has an interest in three specialty retail
centers, four mixed-use Properties and three value-oriented super-regional
malls. The specialty retail centers contain approximately 760,000 square feet
of GLA and do not have anchors; instead, they feature retailers and
entertainment facilities in a distinctive shopping environment and location.
The four mixed-use Properties range in size from approximately 500,000 to
1,025,000 square feet of GLA. Two of these Properties are regional malls with
connected office buildings, and two are located in mixed-use developments and
contain primarily office space. The value-oriented super-regional malls are
each joint venture partnerships ranging in size from approximately 1.2 million
to 1.3 million square feet of GLA. These include Arizona Mills, Grapevine Mills
and Ontario Mills. These Properties combine retail outlets, manufacturers, off-
price stores and other value-oriented tenants. As of December 31, 1997, value-
oriented super-regional malls represented 2.9% of total GLA, 4.6% of Owned GLA
and 5.6% of the total annualized base rent of the Properties.
As of December 31, 1997, approximately 87.3% of the Mall and Freestanding
Owned GLA in regional malls, specialty retail centers and the retail space in
the mixed use Properties was leased, approximately 93.8% of the Owned GLA in
the value-oriented super-regional malls was leased, and approximately 91.3% of
Owned GLA in the community shopping centers was leased.
Of the 202 Properties, 154 are owned 100% by the Operating Partnership and
the remainder are held as joint venture interests. The Operating Partnership is
the managing or co-managing general partner of all but eight of the Properties
held as joint venture interests.
<PAGE>
Additional Information
The following table sets forth certain information, as of December
31, 1997, regarding the Properties:
<TABLE>
<CAPTION>
The Operating
Ownership Partnership's
Interest (Expiration Percentage Year Built or Total
Name/Location if Lease)(1) Interest(2) Acquired GLA Anchors/Specialty/Anchors
REGIONAL MALLS
<C> <S> <S> <C> <S> <C> <S> <C>
1. Alton Square Fee 100.0 Acquired 641,145 Famous Barr, JCPenney,
Alton, IL 1993 Sears
2. Amigoland Mall Fee 100.0 Built 560,318 Beall's, Dillard's, JCPenney,
Brownsville, TX 1974 Montgomery Ward
3. Anderson Mall Fee 100.0 Built 637,872 Gallant Belk, JCPenney,
Anderson, SC 1972 Sears, Uptons
4. Aventura Mall(3) Fee 33.3 Built 1,459,397 AMC Theatre (4), Bloomingdales,
Miami, FL 1983 Burdines (4), JCPenney, Lord &
Taylor, Macy's, Sears
5. Avenues, The Fee 25.0 Built 1,113,651 Dillard's, Gayfers,
Jacksonville, FL 1990 Sears, Parisian, JCPenney
6. Barton Creek Fee 100.0 Built 1,374,794 Dillard's (5), Foley's,
Square 1981 JCPenney, Sears,
Austin, TX Montgomery Ward
7. Battlefield Fee and Ground 100.0 Built 1,156,592 Dillard's, Famous Barr,
Mall Lease (2056) 1970 Montgomery Ward, Sears,
Springfield, MO JCPenney
8. Bay Park Square Fee 100.0 Built 641,929 Kohl's, Montgomery Ward,
Green Bay, WI 1980 Shopko, Elder-Beerman
9. Bergen Mall Fee and Ground 100.0 Acquired 1,013,718 Value City, Stern's,
Paramus, NJ Lease (6)(2061) 1987 Marshall's, Off 5th-Saks Fifth
Avenue Outlet
10. Biltmore Square Fee (7) 66.7 Built 494,436 Belk, Dillard's, Proffitt's,
Asheville, NC 1989 Goody's
11. Boynton Beach Mall Fee 100.0 Built 1,064,072 Burdines, Macy's, Sears,
Boynton Beach, FL 1985 Dillard's (4) (5)
JCPenney
12. Broadway Square Fee 100.0 Acquired 571,429 Dillard's, JCPenney, Sears
Tyler, TX 1994
13. Brunswick Square Fee 100.0 Built 736,479 Brunswick Square Movies,
East Brunswick, NJ 1973 Macy's, JCPenney
14. Castleton Square Fee 100.0 Built 1,352,729 LS Ayres, Lazarus, Montgomery
Indianapolis, IN 1972 Ward (8), JCPenney, Sears
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15. Century III Mall Fee 50.0 Built 1,287,251 Lazarus, Kaufmann's, JCPenney
Pittsburgh, PA 1979 Sears, T.J. Maxx, Wickes
Furniture
16. Charlottesville Ground Lease 50.0 Acquired 573,614 Belk, JCPenney, Sears
Fashion Square (2076) 1997 Stone & Thomas
Charlottesville, VA
17. Chautauqua Mall Fee 100.0 Built 428,285 The Bon Ton (4), Sears,
Jamestown, NY 1971 JCPenney, Office Max
18. Cheltenham Square Fee 100.0 Built 624,790 Burlington Coat Factory,
Philadelphia, PA 1981 Movies at Cheltenham, Home
Depot, Value City,
Seaman's Furniture, Shop Rite
19. Chesapeake Square Fee and Ground (7)75.0 Built 704,463 Dillard's, Belk, JCPenney, Sears,
Chesapeake, VA Lease (2062) 1989 Montgomery Ward
20. Cielo Vista Mall Fee and Ground 100.0 Built 1,196,102 Dillard's (5), JCPenney, Montgomery
El Paso, TX Lease (9)(2027) 1974 Ward, Sears
21. Circle Centre Property Lease 14.7 Built 793,234 Nordstrom, Parisian,
Indianapolis, IN (2097) 1995 United Artists
22. College Mall Fee and Ground 100.0 Built 707,220 JCPenney, Lazarus,
Bloomington, IN Lease (10)(2048) 1965 L.S. Ayres, Sears, Target
23. Columbia Center Fee 100.0 Acquired 772,894 Barnes & Noble,
Kennewick, WA 1987 The Bon Marche, Lamonts,
JCPenney, Sears
24. Coral Square Fee 50.0 Built 941,370 Burdines (5), Dillard's,
Coral Springs, FL 1984 JCPenney, Sears
25. Cottonwood Mall Fee 100.0 Built 1,022,835 Dillard's, Foley's,
Albuquerque, NM 1996 JCPenney, Mervyn's,
Montgomery Ward
United Artists
26. Crossroads Mall Fee 100.0 Acquired 871,356 Dillard's, Sears,
Omaha, NE 1994 Younkers
27. Crystal River Mall Fee 100.0 Built 425,277 Belk, Kmart,
Crystal River, FL 1990 JCPenney, Regal Cinema,
Sears
28. Dadeland Mall Fee 50.0 Acquired 1,403,416 Burdine's, Burdine's Home
Miami, FL 1997 Gallery, JCPenney, Limited
Lord & Taylor, Saks Fifth
Avenue
29. DeSoto Square Fee 100.0 Built 686,408 Burdines, JCPenney,
Bradenton, FL 1973 Sears, Dillard's
<PAGE>
30. Eastern Hills Mall Fee 100.0 Built 997,172 Sears, The Bon Ton,
Buffalo, NY 1971 JCPenney, Kaufmann's,
Burlington Coat Factory (4),
Waccamaw (11)
31. Eastland Mall Fee 100.0 Built 702,496 Dillard's, General Cinema,
Tulsa, OK 1986 JCPenney, Mervyn's,
Service Merchandise
32. Edison Mall Fee 100.0 Acquired 987,103 Burdines (5), Dillard's,
Fort Meyers, FL 1997 JCPenney, Sears
33. Fashion Mall at Ground Lease 100.0 Acquired 651,671 Jacobsons, Parisian
Keystone at the (2067) 1997
Crossing, The
Indianapolis, IN
34. Florida Mall, The Fee 50.0 Built 1,119,871 Burdines (4), Dillard's (5),
Orlando, FL 1986 Gayfers, JCPenney, Saks Fifth
Avenue, Sears
35. Forest Mall Fee 100.0 Built 484,131 JCPenney, Kohl's,
Fond Du Lac, WI 1973 Younkers, Sears, Staples
36. Forest Village Fee 100.0 Built 417,344 JCPenney, Kmart
Park Mall 1980
Forestville, MD
37. Fremont Mall Fee 100.0 Built 199,266 1/2 Price Store, JCPenney
Fremont, NE 1966
38. Golden Ring Mall Fee 100.0 Built 719,625 Caldor, Hecht's,
Baltimore, MD 1974 Montgomery Ward,
United Artists
39. Great Lakes Mall Fee 100.0 Built 1,295,872 Dillard's (5), Great Lakes
Cleveland, OH 1961 Mall Theatres, Kaufmann's,
JCPenney, Sears
40. Greenwood Park Fee 100.0 Acquired 1,273,258 JCPenney, Lazarus,
Mall 1979 L.S. Ayres, Sears,
Greenwood, IN Montgomery Ward (8),
Service Merchandise
41. Gulf View Square Fee 100.0 Built 809,913 Burdines, Dillard's,
Port Richey, FL 1980 Montgomery Ward,
JCPenney, Sears
42. Heritage Park Mall Fee 100.0 Built 634,178 Dillard's, Sears,
Midwest City, OK 1978 Montgomery Ward,
Service Merchandise
43. Hutchinson Mall Fee 100.0 Built 525,702 Cinema 8, Dillard's,
Hutchinson, KS 1985 JCPenney,
Sears, Wal-Mart (12),
Service Merchandise
44. Independence Center Fee 100.0 Acquired 1,030,462 The Jones Store Co.,
Independence, MO 1994 Dillard's, Sears
<PAGE>
45. Indian River Mall Fee 50.0 Built 749,613 AMC Theatre, Burdines, Sears,
Vero Beach, FL 1996 JCPenney, Dillard's
46. Ingram Park Mall Fee 100.0 Built 1,133,183 Dillard's (5), Foley's,
San Antonio, TX 1979 JCPenney, Sears, Beall's
47. Irving Mall Fee 100.0 Built 1,040,628 Barnes & Noble (4),
Irving, TX 1971 Dillard's, Foley's,
General Cinema (4) JCPenney,
Mervyn's, Sears,
48. Jefferson Valley Fee 100.0 Built 589,601 Macy's, Sears,
Mall 1983 Service Merchandise
Yorktown Heights, NY
49. Knoxville Center Fee 100.0 Built 970,673 Dillard's, JCPenney,
Knoxville, TN 1984 Proffitt's, Sears,
Service Merchandise
50. La Plaza Fee and Ground 100.0 Built 987,645 Dillard's, JCPenney, Beall's,
McAllen, TX Lease (6)(2040) 1976 Foley's, Sears,
Service Merchandise,
Joe Brand-Lady Brand
51. Lafayette Square Fee 100.0 Built 1,220,043 JCPenney, LS Ayres, Sears,
Indianapolis, IN 1968 Lazarus, Waccamaw,
Montgomery Ward (11)
52. Laguna Hills Mall Fee 100.0 Acquired 812,581 JCPenney,
Laguna Hills, CA 1997 Macy's, Sears
53. Lakeland Square Fee 50.0 Built 900,556 Belk, Burdines,
Lakeland, FL 1988 Dillard's (5),
JCPenney, Sears
54. Lakeline Mall Fee 50.0(14) Built 1,102,670 Dillard's, Foley's, Sears,
N. Austin, TX 1995 JCPenney, Mervyn's, United
Artists
55. Lima Mall Fee 100.0 Built 753,127 Elder-Beerman, Sears,
Lima, OH 1965 Lazarus, JCPenney
56. Lincolnwood Town Fee 100.0 Built 441,085 Carson Pirie Scott,
Center 1990 JCPenney
Lincolnwood, IL
57. Longview Mall Fee 100.0 Built 617,025 Dillard's (5), JCPenney,
Longview, TX 1978 Sears, Service Merchandise,
Beall's
58. Machesney Park Mall Fee 100.0 Built 555,860 Kohl's, JCPenney,
Rockford, IL 1979 Bergners, (13)
59. Markland Mall Ground Lease 100.0 Built 391,284 Lazarus, Sears,
Kokomo, IN (2041) 1968 Target
60. McCain Mall Ground Lease 100.0 Built 776,516 Dillard's, JCPenney,
N. Little Rock, AR (15)(2032) 1973 M.M. Cohn, Sears
61. Melbourne Square Fee 100.0 Built 734,323 Belk, Burdines,
Melbourne, FL 1982 Dillard's (5), JCPenney
<PAGE>
62. Memorial Mall Fee 100.0 Built 416,698 JCPenney, Kohl's,
Sheboygan, WI 1969 Sears
63. Menlo Park Mall Fee 100.0 Acquired 1,296,127 Macy's, Nordstrom,
Edison, New Jersey 1997 (16) Cineplex Odeon
64. Miami Fee 60.0 Built 972,296 Burdines (5), Sears,
International Mall 1982 Dillard's, JCPenney
Miami, FL
65. Midland Park Mall Fee 100.0 Built 618,924 Dillard's (5), JCPenney,
Midland, TX 1980 Sears, Beall's
66. Miller Hill Mall Fee 100.0 Built 801,511 Glass Block, JCPenney,
Duluth, MN 1973 Montgomery Ward, Sears
67. Mission Viejo Mall Fee 100.0 Built 817,167 Macy's,
Mission Viejo, CA 1979 Robinsons - May (5),
Nordstrom (4)
68. Mounds Mall Ground Lease 100.0 Built 407,233 Elder-Beerman, JCPenney,
Anderson, IN (2033) 1965 Sears
69. Muncie Mall Fee 100.0 Built 658,672 JCPenney, L.S. Ayres,
Muncie, IN 1970 Sears, Elder Beerman, (5)
70. North East Mall Fee 100.0 Built 1,142,147 Dillard's (5), JCPenney,
Hurst, TX 1971 Montgomery Ward, Sears
71. North Towne Square Fee 100.0 Built 761,659 Lion, Montgomery Ward, (13)
Toledo, OH 1980
72. Northfield Square Fee (7)31.6 Built 558,420 Cinemark Movies 10, Carson
Bradley, IL 1990 Pirie Scott, JCPenney, Sears,
Venture
73. Northgate Mall Fee 100.0 Acquired 1,123,787 The Bon Marche, Lamonts,
Seattle, WA 1987 (17) Nordstrom, JCPenney
74. Northwoods Mall Fee 100.0 Acquired 667,937 Famous Barr, JCPenney,
Peoria, IL 1983 Sears (4)
75. Oak Court Mall Fee 100.0 Acquired 847,964 Dillard's (5), Goldsmith's
Memphis, TN 1997 (18)
76. Orange Park Mall Fee 100.0 Acquired 916,174 AMC 24 Theatre, Dillard's,
Jacksonville, FL 1994 Gayfer's, JCPenney, Sears
77. Orland Square Fee 100.0 Acquired 1,224,962 Carson Pirie Scott, JCPenney,
Orland Park, IL 1997 Marshall Field, Plitt
Theatres, Sears
78. Paddock Mall Fee 100.0 Built 559,414 Belk, Burdines,
Ocala, FL 1980 JCPenney, Sears
<PAGE>
79. Palm Beach Mall Fee 50.0 Built 1,200,692 JCPenney, Sears,
West Palm Beach, FL 1967 Lord & Taylor,
Dillards, Burdines
80. Port Charlotte Ground Lease (7)80.0 Built 716,149 Burdines, Dillard's,
Town Center (2064) 1989 Montgomery Ward,
Port Charlotte, FL JCPenney, Regal Cinema (4),
Sears
81. Prien Lake Mall Fee and Ground 100.0 Built 455,550 Dillards (4), JCPenney,
Lake Charles, LA Lease (6)(2025) 1972 Montgomery Ward,
Sears (4), The White House
82. Promenade, The Fee 100.0 Acquired 600,437 Macy's, Macy's Home,
Woodland Hills, CA 1997 AMC Theatre
83. Raleigh Springs Fee and Ground 100.0 Built 907,976 Dillard's, Goldsmith's
Mall Lease (6)(2018) 1979 JCPenney, Sears
Memphis, TN
84. Randall Park Mall Fee 100.0 Built 1,572,080 Dillard's, Kaufmann's,
Cleveland, OH 1976 LaSalle Interiors (5),
JCPenney, Sears,
Burlington Coat Factory
85. Richardson Square Fee 100.0 Built 723,365 Barnes & Noble, Dillard's,
Dallas, TX 1977 Ross Dress for Less (4),
Sears, Stein Mart (4),
Montgomery Ward
86. Richmond Town Fee 100.0 Built 872,989 JCPenney, Kaufmann's (4),
Square 1966 Sears, Sony Theatres
Cleveland, OH
87. Richmond Square Fee 100.0 Built 393,388 Dillard's, JCPenney,
Richmond, IN 1966 Sears, Office Max
88. River Oaks Center Fee 100.0 Acquired 1,341,165 Carson Pirie Scott,
Calumet City, IL 1997 (19) Cineplex Odeon, JCPenney,
Marshall Field, Sears
89. Rolling Oaks Mall Fee 49.9 Built 758,939 Dillard's, Foley's,
North San Antonio, TX 1988 Sears
90. Ross Park Mall Fee (7)100.0 Built 1,274,883 Lazarus, JCPenney,
Pittsburgh, PA 1986 Kaufmann's, Sears,
Service Merchandise
91. St. Charles Towne Fee 100.0 Built 1,053,244 Cineplex Odeon, Hecht's,
Center 1990 JCPenney, Kohl's, Sears,
Waldorf, MD Montgomery Ward,
92. Seminole Towne Fee 45.0 Built 1,153,861 Burdines, Dillard's,
Center 1995 JCPenney, Parisian, Sears
Sanford, FL United Artists
93. Smith Haven Mall Fee 25.0 Acquired 1,341,959 Sterns, Macy's,
Lake Grove, NY 1995 Sears, JCPenney
<PAGE>
94. Source, The Fee 50.0 Built 732,820 ABC Home, Cheesecake Factory,
Long Island, NY 1997 Circuit City, Fortunoff,
Loehmann's, Nordstrom Rack,
Off 5th- Saks Fifth Avenue,
Old Navy, Rainforest Cafe,
Virgin Megastore
95. South Hills Fee 100.0 Acquired 1,107,269 Carmike Cinemas, Kaufmann's,
Village 1997 Lazarus, Sears
Pittsburgh, PA
96. South Park Mall Fee 100.0 Built 857,337 Burlington Coat Factory,
Shreveport, LA 1975 Dillard's, JCPenney,
Montgomery Ward,
Regal Cinema, Stage
97. Southtown Mall Fee 100.0 Built 858,202 Kohl's, JCPenney (11),
Ft. Wayne, IN 1969 L.S. Ayres (11), Sears,
Service Merchandise (11)
98. Southern Park Mall Fee 100.0 Built 1,210,446 Dillard's, Kaufmann's,
Youngstown, OH 1970 JCPenney, Sears
99. Southgate Mall Fee 100.0 Acquired 321,336 Albertson's (12), Sears,
Yuma, AZ 1988 Dillard's, JCPenney
100. Summit Mall Fee 100.0 Built 717,774 Kaufmann's, Dillard's (5) (4)
Akron, OH 1965
101. Sunland Park Mall Fee 100.0 Built 920,882 General Cinemas, JCPenney,
El Paso, TX 1988 Mervyn's, Sears, Dillard's,
Montgomery Ward
102. Tacoma Mall Fee 100.0 Acquired 1,280,841 The Bon Marche, Sears,
Tacoma, WA 1987 Nordstrom, JCPenney,
Mervyn's, Plitt Theatres
103. Tippecanoe Mall Fee 100.0 Built 865,341 Kohl's, Lazarus, Sears,
Lafayette, IN 1973 L.S. Ayres, JCPenney
104. Towne East Square Fee 100.0 Built 1,152,772 Dillard's, JCPenney,
Wichita, KS 1975 Sears, Service Merchandise
105. Towne West Square Fee 100.0 Built 938,536 Dillard's, Sears, JCPenney,
Wichita, KS 1980 Montgomery Ward,
Service Merchandise
106. Treasure Coast Square Fee 100.0 Built 884,720 Burdines, Dillard's (5),
Jenson Beach, FL 1987 Sears,
JCPenney
107. Tyrone Square Fee 100.0 Built 1,091,641 Burdines, Dillard's,
St. Petersburg, FL 1972 JCPenney, Sears
108. University Mall Ground Lease 100.0 Built 565,953 JCPenney, M.M. Cohn,
Little Rock, AR (20)(2026) 1967 Montgomery Ward
<PAGE>
109. University Mall Fee 100.0 Acquired 711,327 McRae's, JCPenney,
Pensacola, FL 1994 Sears, United Artists
110. University Park Mall Fee 60.0 Built 941,094 LS Ayres, JCPenney, Sears,
South Bend, IN 1979 Marshall Fields
111. Upper Valley Mall Fee 100.0 Built 751,062 Lazarus, JCPenney,
Springfield, OH 1971 Sears, Elder-Beerman
112. Valle Vista Mall Fee 100.0 Built 647,603 Dillard's, Mervyn's,
Harlingen, TX 1983 Sears, JCPenney, Marshalls,
Beall's
113. Virginia Center Fee 100.0 Built 791,130 Belk, Dillard's, Hecht's,
Commons 1991 JCPenney, Sears
Richmond, VA
114. Washington Square Fee 100.0 Built 1,172,130 L.S. Ayres, Lazarus,
Indianapolis, IN 1974 Montgomery Ward (11),
JCPenney, Sears
115. West Ridge Mall Fee 100.0 Built 1,040,337 Dillard's, JCPenney,
Topeka, KS (21) 1988 Jones, Sears,
Montgomery Ward
116. West Town Mall Fee 50.0 Acquired 1,337,046 Dillard's, JCPenney,
Knoxville, TN 1991 Parisian, Proffitt's,
Regal Cinema (4), Sears
117. Westchester, The (3) Fee 50.0 Acquired 827,470 Neiman Marcus, Nordstrom
(22) 1997
White Plains, NY
118. White Oaks Mall Fee 77.0 Built 904,127 Bergner's, Famous Barr,
Springfield, IL 1977 Montgomery Ward, Sears
119. Windsor Park Mall Fee 100.0 Built 1,095,248 Dillard's (5), JCPenney,
San Antonio, TX 1976 Mervyn's, Beall's,
Montgomery Ward
120. Woodville Mall Fee 100.0 Built 794,005 Andersons, Sears,
Toledo, OH 1969 Elder-Beerman, (13)
<PAGE>
VALUE-ORIENTED REGIONAL MALLS
1. Arizona Mills(3) Fee 26.3 Built 1,157,159 Burlington Coat Factory,
1997 Harkins Theater, Mikasa,
Oshman's Supersport, Off
5th- Saks Fifth Avenue Outlet,
JCPenney Outlet, Mikasa,
Rainforest Cafe, GameWorks,
Hi Health, Linens `N Things
2. Grapevine Mills (3) Fee 37.5 Built 1,213,779 Books-A-Million,
Grapevine (Dallas/Ft. 1997 Burlington Coat Factory,
Worth), TX Off 5th- Saks, Fifth Avenue
Outlet, JCPenney Outlet,
Rainforest Cafe, Group USA,
Bed, Bath & Beyond, AMC Theatres,
GameWorks, American
Wilderness (4)
3. Ontario Mills Fee 25.0 Built 1,326,284
(3) 1996 JCPenney Outlet,
Ontario, CA Burlington Coat Factory,
Marshall's, Sports
Authority, Dave & Busters,
Group USA, IWERKS, American
Wilderness Experience, T.J.Maxx,
Foozles, Totally for Kids, Bed,
Bath & Beyond, Off Rodeo, Mikasa,
Virgin, GameWorks, Off
5th-Saks Fifth Avenue Outlet
SPECIALTY RETAIL CENTERS
- -------------------------
1. Forum Shops at Ground (23) Built 477,584 -
Caesars, The Lease 1992
Las Vegas, NV (2050)
2. Tower Shops, Space 50.0 Built 59,810 -
The Lease 1996
Las Vegas, NV (2051)
3. Trolley Square Fee and 90.0 Acquired 223,793 -
Salt Lake City, Ground 1986
UT Lease (24)
<PAGE>
MIXED-USE PROPERTIES
- --------------------
1. Fashion Centre Fee 21.0 Built 988,517 Lowe's Theatres,
at Pentagon 1989 (25) Macy's,
City, The Nordstrom
Arlington, VA
2. New Orleans Fee and 100.0 Built 1,023,690 Macy's,
Centre/CNG Ground 1988 (26) Lord & Taylor
Tower Lease
New Orleans, LA (2084)
3. O'Hare Fee 100.0 Built 496,058 -
International 1988 (27)
Center
Rosemont, IL
4. Riverway Fee 100.0 Acquired 818,278 -
Rosemont, IL 1991 (28)
COMMUNITY SHOPPING CENTERS
- --------------------------
1. Arvada Plaza Fee 100.0% Built 96,831 King Soopers
Arvada, CO 1966
2. Aurora Plaza Ground 100.0 Built 150,209 King Soopers,
Aurora, CO Lease 1965 MacFrugel's
(2058) Bargains,
Super Saver
Cinema
3. Bloomingdale Fee 100.0 Built 598,521 Builders Square,
Court 1987 T.J. Maxx,
Bloomingdale, Cineplex Odeon,
IL Frank's Nursery,
Marshalls,
Office Max, Old
Navy,
Service
Merchandise,
Wal-Mart, (13)
4. Boardman Plaza Fee 100.0 Built 651,181 Burlington Coat
Youngstown, OH 1951 Factory,
Giant Eagle,
Stein Mart,
T.J. Maxx,
Reyers Outlet
Hills
5. Bridgeview Fee 100.0 Built 280,299 Omni, Venture
Court 1988
Bridgeview, IL
6. Brightwood Fee 100.0 Built 41,893 Revco Drug,
Plaza 1965 Safeway
Indianapolis,
IN
7. Buffalo Grove Fee 92.5 Built 134,131 Buffalo Grove
Towne Center 1988 Theatres
Buffalo Grove,
IL
8. Celina Plaza Fee and 100.0 Built 32,622 General Cinema
El Paso, TX Ground 1978
Lease (29)
(2027)
<PAGE>
9. Century Mall Fee 100.0 Acquired 415,245 Burlington Coat
(30) 1982 Factory,
Merrillville, Montgomery Ward
IN
10. Charles Towne Fee 100.0 Built 130,399 Montgomery Ward,
Square (31) 1976 Regal Cinema (4)
Charleston, SC
11. Chesapeake Fee 100.0 Built 305,904 Movies 10, Phar
Center 1989 Mor,
Chesapeake, VA K-Mart, Service
Merchandise
12. Cobblestone Fee and 35.0 Built 261,107 Dick's Sporting
Court Ground 1993 Goods,
Victor, NY Lease (10) Kmart, Office
(2038) Max
13. Cohoes Commons Fee and 100.0 Built 262,959 Bryant &
Rochester, NY Ground 1984 Stratton
Lease (6) Business
(2032) Institute,
Cohoes,
Xerox (32)
14. Countryside Fee and 100.0 Built 435,543 Best Buy,
Plaza Ground 1977 Builders Square,
Countryside, IL Lease (10) Frank's Nursery,
(2058) Old Country
Buffet,
Venture, (13)
15. Crystal Court Fee 35.0 Built 284,816 Cub Foods,
Crystal Lake, 1989 Wal-Mart,
IL Service
Merchandise,
(13)
16. Eastgate Fee 100.0 Acquired 462,510 Builder's
Consumer Mall 1981 Square,
(30) Burlington Coat
Indianapolis, Factory, Cub
IN Foods,
General Cinema
17. Eastland Plaza Fee 100.0 Built 188,229 Marshalls,
Tulsa, OK 1986 Target,
Toys "R" Us
18. Fairfax Court Ground 26.3 Built 249,305 Circuit City
Fairfax, VA Lease 1992 Superstore,
(2052) Montgomery Ward,
Today's Man
19. Forest Plaza Fee 100.0 Built 422,689 Builders Square
Rockford, IL 1985 (12), Kohl's,
Marshalls,
Factory Card
Outlet, Office
Max,
T.J. Maxx
20. Fox River Plaza Fee 100.0 Built 324,956 Builders Square,
Elgin, IL 1985 Venture,
Service
Merchandise,
(13) (13)
21. Gaitway Plaza Fee 23.3 Built 229,909 Books-A-Million,
Ocala, FL 1989 Montgomery Ward,
Office Depot,
T.J. Maxx
22. Glen Burnie Fee 100.0 Built 459,219 Montgomery Ward,
Mall (30) 1963 Best Buy, Toys
Glen Burnie, MD "R" Us, Dick's
Clothing and
Sporting Goods
23. Great Lakes Fee 100.0 Built 163,919 Best Buy,
Plaza 1976 Circuit City,
Cleveland, OH Home Place,
Michael's
24. Great Northeast Fee 50.0 Acquired 298,242 Sears, Phar Mor
Plaza 1989
Philadelphia,
PA
<PAGE>
25. Greenwood Plus Fee 100.0 Built 226,297 Best Buy, Cinema
Greenwood, IN 1979 I-IV,
Kohl's
26. Griffith Park Ground 100.0 Built 274,230 General Cinema,
Plaza Lease 1979 Service
Griffith, IN (2060) Merchandise,
Venture
27. Grove at Fee 100.0 Built 215,591 Lakeland Square
Lakeland 1988 10 Theatre,
Square, The Sports
Lakeland, FL Authority,
Wal-Mart
28. Hammond Square Space 100.0 Built 87,705 Burlington Coat
Sandy Springs, Lease 1974 Factory,
GA (2011) Service
Merchandise
29. Highland Lakes Fee 100.0 Built 477,324 Bed, Bath &
Center 1991 Beyond,
Orlando, FL Goodings,
Marshalls,
Ross Dress for
Less,
Movies 12,
Service
Merchandise,
Office Max,
Target
30. Indian River Fee 50.0 Built 263,507 HomePlace,
Commons 1997 Lowe's,
Vero Beach, FL Office Max
Service
Merchandise
31. Ingram Plaza Fee 100.0 Built 111,518 _
San Antonio, TX 1980
32. Keystone Ground 100.0 Acquired 29,140 _
Shoppes Lease 1997
Indianapolis, (2067)
IN
33. Knoxville Fee 100.0 Built 180,463 Circuit City,
Commons 1987 Office Max, (13)
Knoxville, TN
34. Lake Plaza Fee 100.0 Built 218,208 Builders Square
Waukegan, IL 1986 (11),
Venture
35. Lake View Plaza Fee 100.0 Built 388,358 Best Buy (33),
Orland Park, IL 1986 Dominick's,
Ultra 3 (33),
Factory Card
Outlet,
Linens-N-Things
(33),
Marshalls,
Pet Care
Plus (33),
Service
Merchandise,
(13)
36. Lima Center Fee 100.0 Built 201,154 Regal Cinema,
Lima, OH 1978 Hills,
Service
Merchandise
37. Lincoln Fee 100.0 Built 161,337 PetsMart,
Crossing 1990 Wal-Mart
O'Fallon, IL
38. Mainland Fee (7) Built 390,986 Sam's Club, Wal-
Crossing 80.0 1991 Mart,
Galveston, TX Hobby Lobby
39. Maplewood Fee 100.0 Built 130,780 Bag `N Save, Big
Square 1970 Lots
Omaha, NE
<PAGE>
40. Markland Plaza Fee 100.0 Built 108,296 Service
Kokomo, IN 1974 Merchandise,
Spiece
41. Martinsville Space 100.0 Built 102,162 Food Lion,
Plaza Lease 1967 Rose's
Martinsville, (2036)
VA
42. Marwood Plaza Fee 100.0 Built 105,785 Kroger, Revco
Indianapolis, 1962 Drug
IN
43. Matteson Plaza Fee 100.0 Built 275,455 Dominick's,
Matteson, IL 1988 Michael's Arts &
Crafts, Kmart,
Service
Merchandise
44. Memorial Plaza Fee 100.0 Built 129,202 Dunham's
Sheboygan, WI 1966 Sporting Goods,
Marcus Theatre,
Office Max
(13)
45. Mounds Mall Fee 100.0 Built 7,500 Kerasotes
Cinema 1974 Theater
Anderson, IN
46. New Castle Fee 100.0 Built 91,648 Goody's
Plaza 1966
New Castle, IN
47. North Ridge Fee 100.0 Built 323,672
Plaza 1985 Hobby Lobby, The
Joliet, IL TJX
Companies(12),
Service
Merchandise
48. North Riverside Fee 100.0 Built 119,608 Dominick's
Park Plaza 1977
North
Riverside, IL
49. Northland Plaza Fee and 100.0 Built 205,775 Marshalls,
Columbus, OH Ground 1988 Phar-Mor,
Lease (6) Service
(2085) Merchandise
50. Northwood Plaza Fee 100.0 Built 211,840 Kroger, Target,
Fort Wayne, IN 1974 (13)
51. Park Plaza Fee and 100.0 Built 114,458 Wal-Mart (11)
Hopkinsville, Ground 1968
KY Lease (6)
(2039)
52. Plaza at Fee 35.0 Built 337,966 Toys "R" Us,
Buckland 1993 Kids "R" Us,
Hills, The Service
Manchester, CT Merchandise,
Comp USA,
Linens-N-Thing',
Filene's
Basement, (13)
53. Regency Plaza Fee 100.0 Built 277,521 Sam's Wholesale,
St. Charles, MO 1988 Wal-Mart
54. Ridgewood Court Fee 35.0 Built 240,843 Home Quarters,
Jackson, MS 1993 T.J. Maxx,
Service
Merchandise,
(13)
55. Royal Eagle Fee 35.0 Built 203,140 Kmart,
Plaza 1989 Stein Mart
Coral Springs,
FL
<PAGE>
56. Sherwood Fee 100.0 Acquired 187,000 _
Gardens (34) 1997
Salinas, CA
57. St. Charles Fee 100.0 Built 435,035 Ames, Hechinger,
Towne Plaza 1987 Jo Ann Fabrics,
Waldorf, MD CVS, T.J. Maxx,
Service
Merchandise,
Shoppers Food
Warehouse
58. Teal Plaza Fee and 100.0 Built 100,831 Circuit City
Lafayette, IN Ground 1962 (4), Hobby-
Lease Lobby, The Pep
(2007) (6) Boys (4)
59. Terrace at The Fee 100.0 Built 332,980 J.J. Byrons
Florida Mall 1989 (11), Marshalls,
Orlando, FL Service
Merchandise,
Target, Waccamaw
60. Tippecanoe Fee 100.0 Built 94,739 Barnes & Noble
Plaza 1974 Bookseller,
Lafayette, IN Service
Merchandise
61. University Fee 60.0 Built 150,548 Best Buy,
Center 1980 Michaels,
South Bend, IN Service
Merchandise
62. Village Park Fee 35.0 Built 503,052 Frank's Nursery,
Plaza 1990 Gaylan's,
Westfield, IN Jo-Ann Fabrics,
Kohl's,
Marsh, Regal
Cinemas,
Wal-Mart
63. Wabash Village Ground 100.0 Built 124,748 Kmart
West Lafayette, Lease 1970
IN (2063)
64. Washington Fee (7) Built 50,302 Kids "R" Us
Plaza 85.0 1976
Indianapolis,
IN
65. West Ridge Fee 100.0 Built 237,650 Magic Forest,
Plaza 1988 Target,
Topeka, KS TJ Maxx, Toys
"R" Us
66. West Town Fee 23.3 Built 384,832 PetsMart,
Corners 1989 Wal-Mart,
Altamonte Service
Springs, FL Merchandise,
Sports
Authority, (13)
67. Westland Park Fee 23.3 Built 163,154 Burlington Coat
Plaza 1989 Factory,
Orange Park, FL PetsMart, Sports
Authority
68. White Oaks Fee 100.0 Built 389,063 Cub Foods, Kids
Plaza 1986 "R" Us,
Springfield, IL Kohl's, Office
Max,
T.J. Maxx, Toys
"R" Us
69. Wichita Mall Ground 100.0 Built 379,461 Cinema III,
(30) Lease 1969 Office Max,
Wichita, KS (2022) Montgomery Ward
70. Willow Knolls Fee 35.0 Built 383,230 Kohl's,
Court 1990 Phar-Mor,
Peoria, IL Sam's Wholesale
Club,
Willow Knolls
Theaters 14
71. Wood Plaza Ground 100.0 Built 94,993 Country General
Fort Dodge, IA Lease 1968
(2045)
72. Yards Plaza, Fee 35.0 Built 273,097 Burlington Coat
The 1990 Factory,
Chicago, IL Omni Superstore,
Montgomery Ward
<PAGE>
PROPERTIES UNDER CONSTRUCTION
- -----------------------------
1. Lakeline Plaza Fee 50.0 (35) 381,000 Linens `N
Austin, TX (14) Things, Office
Max, Old Navy,
Ross Dress for
Less, T.J. Maxx,
Party City, Toys
"R" Us
2. Muncie Plaza Fee 100.0 (36) 195,500 Factory Card
Muncie, IN Outlet, Kohl's,
OfficeMax, Shoe
Carnival,
T.J. Maxx
3. Shops at Sunset Fee 75.0 (37) 500,000 Nike Town, AMC
Place, The Theatres Virgin
Miami, FL Megastore,
Z Gallerie, IMAX
Theatre, Barnes
& Noble, Twin
Palms
</TABLE>
<PAGE>
(1) The date listed is the expiration date of the last renewal option
available to the Operating Partnership under the ground lease. In a
majority of the ground leases, the lessee has either a right of first
refusal or the right to purchase the lessor's interest. Unless otherwise
indicated, each ground lease listed in this column covers at least 50% of
its respective property.
(2) The Operating Partnership's interests in some of the Properties held as
joint venture interests are subject to preferences on distributions in
favor of other partners.
(3) This property is managed by a third party.
(4) Indicates anchor is currently under construction.
(5) This retailer operates two stores at this property.
(6) Indicates ground lease covers less than 15% of the acreage of this
property.
(7) The Operating Partnership receives substantially all of the economic
benefit of these properties.
(8) Retailer vacated subsequent to December 31, 1997 and the space was sold to
Von Maur, which is scheduled to open in the fourth quarter of 1998.
(9) Indicates two ground leases which taken together, cover less than 50% of
the acreage of the property
(10) Indicates ground lease covers less than 50% of the acreage of the
property.
(11) Indicates anchor has closed, but the Operating Partnership still collects
rents and/or fees under an agreement
(12) Indicates this anchor is currently subleasing the space to other
retailers.
(13) Includes an anchor space currently vacant.
(14) Effective January 30, 1998, the Operating Partnership acquired an
additional 15% interest in Lakeline Mall and Lakeline Plaza.
(15) Indicates ground lease covers all of the property except for parcels owned
in fee by anchors.
(16) Primarily retail space with approximately 54,884 square feet of office
space.
(17) Primarily retail space with approximately 69,876 square feet of office
space.
(18) Primarily retail space with approximately 126,190 square feet of office
space.
(19) Primarily retail space with approximately 70,991 square feet of office
space.
(20) Indicates one ground lease covers substantially all of the property and a
second ground lease covers the remainder.
(21) Includes outlots in which the Operating Partnership has an 85% interest
and which represent less than 3% of the GLA and total annualized base rent
for the property.
(22) The Operating Partnership purchased the management contract on this
property during 1998.
(23) The Operating Partnership owns 60% of the original phase of this Property
and 55% of phase II, which opened in August 1997.
(24) Indicates a ground lease covers a pedestrian walkway and steps at this
property. The Operating Partnership, as ground lessee, has the right to
successive five-year renewal options, subject to specified exceptions.
(25) Primarily retail space with approximately 167,150 square feet of office
space.
(26) Primarily retail space with 486,723 square feet of office space.
(27) Primarily office space with approximately 12,800 square feet of retail
space.
(28) Primarily office space with approximately 24,300 square feet of retail
space.
(29) Indicates ground lease covers outparcel.
(30) Effective December 31, 1997, Eastgate Consumer Mall, Glen Burnie Mall,
Century Mall and Wichita Mall have been reclassified as community centers.
These Properties are currently being operated and marketed to tenant
operations which are typically included in community centers.
(31) The Operating Partnership demolished the previously existing regional
mall, Charles Towne Square, and is in the process of rebuilding this
community center and a cinema on the land.
(32) Lease was terminated subsequent to December 31, 1997.
(33) Subleased from TJX Companies.
(34) This Property was sold in 1998.
(35) Phase I is scheduled to open during May 1998 and phase II is scheduled to
open during November 1998.
(36) This center is scheduled to open during April 1998, however the OfficeMax
and T.J. Maxx opened in 1997.
(37) Scheduled to open during October 1998.
<PAGE>
LAND HELD FOR DEVELOPMENT
The Operating Partnership has direct or indirect ownership interests in
nine parcels of land either in preconstruction development or being held for
future development, containing an aggregate of approximately 677 acres located
in eight states, and, through the Management Company, interest in a mortgage on
a parcel of land held for development containing approximately 134 acres.
Management believes that the Operating Partnership's significant base of
commercially zoned land, together with the Operating Partnership's status as a
fully integrated real estate firm, gives it a competitive advantage in future
development activities over other commercial real estate development companies
in its principal markets.
The following table describes the acreage of the parcels of land either in
preconstruction development or being held for future development in which the
Operating Partnership has an ownership interest, as well as the ownership
percentage of the Operating Partnership's interest in each parcel:
OWNERSHIP
LOCATION ACREAGE INTEREST (1)
Bowie, MD 93.74 100%
Concord, NC 187.48 50%
Duluth, MN 11.17 100%
Hurst, TX 36.09 100%
Lafayette, IN 22.87 100%
Little Rock, AR 97.00 50%
Mt. Juliet, TN 109.26 100%
Sanford, FL 77.24 22.5%
Miami, FL 41.71 60%
676.56
(1)The Operating Partnership has a direct ownership interest in each
parcel except Duluth, MN and Mt. Juliet, TN. The Operating Partnership
has the option to acquire those parcels from the Management Company.
The Management Company has granted options to the Operating Partnership
(for no additional consideration) to acquire for a period of ten years
(expiring December 2003) the Management Company's interest in the two parcels
of land held for development, indicated in footnote (1) to the above table, at
a price equal to the actual cost incurred to acquire and carry such properties.
The Management Company may not sell its interest in any parcel subject to
option through December 1998 without the consent of the Operating Partnership,
and thereafter, may only sell its interest subject to certain notice and first
purchase rights of the Operating Partnership.
The Management Company also holds indebtedness secured by 134 acres of
land held for development, Lakeview at Gwinnett ("Lakeview") in Gwinnett
County, Georgia, in which Melvin Simon, Herbert Simon and certain of their
affiliates (the "Simons") hold a 64% partnership interest. In addition, the
Management Company holds unsecured debt owed by the Simons as partners of this
partnership. The Management Company has an option to acquire the Simons'
partnership interests in Lakeview for nominal consideration in the event the
requisite partner consents to such transfers are obtained. The Management
Company is required to fund certain operating expenses and carrying costs of
the partnership that are owed by the Simons as partners thereof. The Management
Company has granted to the Operating Partnership the option to acquire (i) the
Simons' partnership interests and the secured debt or (ii) the property, if the
Management Company forecloses the secured indebtedness, for nominal
consideration plus the amount of all advances and outstanding debt.
<PAGE>
JOINT VENTURES
At certain of the Properties held as joint-ventures, the Operating
Partnership and its partners each have rights of first refusal, subject to
certain conditions, to acquire additional ownership in the Property should the
other partner decide to sell its ownership interest. In addition, certain of
the Properties held as joint ventures contain "buy-sell" provisions, which
gives the partners the right to trigger a purchase or sale of ownership
interest amongst the partners.
MORTGAGE FINANCING ON PROPERTIES
The following table sets forth certain information regarding the mortgages
and other debt encumbering the Properties. All mortgage and property related
debt is nonrecourse, although certain Unitholders have guaranteed a portion of
the property related debt in the aggregate amount of $583.2 million.
<PAGE>
MORTGAGE AND OTHER DEBT ON PORTFOLIO PROPERTIES
(Dollars in thousands)
<TABLE>
<CAPTION>
Annual
Interest Face Amount Debt Maturity
Property Name Rate @ 12/31/97 Service Date
- -------------------------------- -------- ----------- --------- --------
Consolidated Properties:
- ------------------------
Secured Indebtness
<S> <C> <C> <C> <C> <C> <C> <C>
Anderson Mall (1) 6.57% $ 19,000 $ 1,248 (2) 9/15/02
Barton Creek Square 8.10% 62,868 5,867 12/30/99
Battlefield Mall 7.50% 49,730 4,765 6/1/03
Biltmore Square 7.15% 27,534 2,795 1/1/01
Bloomingdale Court (3) 8.75% 29,009 2,538 (2) 12/1/00
Chesapeake Center 8.44% 6,563 554 (2) 5/15/15
Chesapeake Square 7.28% 49,490 4,883 1/1/01
Cielo Vista Mall - 1 (4) 9.38% 55,615 5,828 5/1/07
Cielo Vista Mall - 2 8.13% 2,323 189 (2) 7/1/04
College Mall (5) 7.00% 42,936 3,563 7/1/04
Columbia Center 7.62% 42,867 3,789 3/15/02
Crossroads Mall 7.75% 41,440 3,212 (2) 7/31/02
Crystal River 7.72% (6) 16,000 1,235 (2) 1/1/01
Eastgate Consumer Mall 6.00% (7) (8) 22,929 1,376 (2) 12/31/98
Eastland Mall 7.22% (9) 30,000 2,166 (2) 3/1/98
Edison Mall 6.37% (10) (11) 41,000 2,611 (2) 3/19/98
Forest Mall (1) 6.57% 12,800 841 (2) 9/15/02
Forest Plaza (3) 8.75% 16,904 1,479 (2) 12/1/00
Forest Village Park Mall (1) 6.57% 20,600 1,353 (2) 9/15/02
Forum Phase I - Class A-1 7.13% 46,997 3,349 (2) 5/15/04
Forum Phase I - Class A-2 6.02% (12) (13) 44,385 2,671 (2) 5/15/04
Forum Phase II - Class A-1 7.13% 43,004 3,064 (2) 5/15/04
Forum Phase II - Class A-2 6.02% (12) (13) 40,614 2,444 (2) 5/15/04
Fox River Plaza (3) 8.75% 12,654 1,107 (2) 12/1/00
Golden Ring Mall (1) 6.57% 29,750 1,955 (2) 9/15/02
Great Lakes Mall - 1 6.74% 53,410 4,354 3/1/01
Great Lakes Mall - 2 7.07% 8,608 724 3/1/99
Greenwood Park Mall (5) 7.00% 35,960 2,984 7/1/04
Grove at Lakeland Square, The 8.44% 3,750 317 (2) 5/15/15
Gulf View Square 8.25% 38,157 3,652 10/1/06
Highland Lakes Center 7.22% (9) 14,377 1,038 (2) 3/1/02
Hutchinson Mall (1) 8.44% 11,523 973 (2) 10/1/02
Ingram Park Mall - 1 8.10% 48,580 4,533 12/1/99
Ingram Park Mall - 2 9.63% 7,000 674 (2) 11/1/99
Jefferson Valley Mall 6.27% (14) (15) 50,000 3,134 (2) 1/12/00
Keystone at the Crossing 7.85% 64,772 5,085 7/1/27
La Plaza Mall 8.25% 50,044 4,677 12/30/99
Lake View Plaza (3) 8.75% 22,169 1,940 (2) 12/1/00
Lima Mall - 1 7.12% 14,377 1,215 3/1/02
Lima Mall - 2 7.12% 4,789 405 3/1/02
Lincoln Crossing (3) 8.75% 997 87 (2) 12/1/00
Longview Mall (1) 6.57% 22,100 1,452 (2) 9/15/02
Mainland Crossing 7.22% (9) 2,226 161 (2) 3/31/02
Markland Mall (1) 6.57% 10,000 657 (2) 9/15/02
Matteson Plaza (3) 8.75% 11,159 976 (2) 12/1/00
McCain Mall (4) 9.38% 26,059 2,721 5/1/07
Melbourne Square 7.42% 39,841 3,374 2/1/05
Miami International Mall 6.91% 47,009 3,758 12/21/03
Midland Park Mall (1) 6.57% 22,500 1,478 (2) 9/15/02
North East Mall 10.00% 22,201 2,475 9/1/00
North Riverside Park Plaza - 1 9.38% 4,054 452 9/1/02
North Riverside Park Plaza - 2 10.00% 3,617 420 9/1/02
North Towne Square (1) 6.57% 23,500 1,544 (2) 9/15/02
Northgate Shopping Center 7.62% 80,046 7,075 3/15/02
Orland Square 7.74% (16) (17) 50,000 3,871 (2) 9/1/01
Paddock Mall 8.25% 30,347 2,905 10/1/06
Port Charlotte Town Center 7.28% 46,102 3,857 1/1/01
Randall Park Mall 9.25% 33,879 4,338 1/1/11
Regency Plaza (3) 8.75% 1,878 164 (2) 12/1/00
River Oaks Center 8.67% 32,500 2,818 (2) 6/1/02
Riverway - 1 6.38% (18) (8) 85,571 5,455 (2) 12/31/98
<PAGE>
Riverway - 2 6.38% (18) (8) 45,880 2,925 (2) 12/31/98
Ross Park Mall 6.14% 60,000 3,684 (2) 8/15/98
Shops at Sunset Place, The 6.97% (19) 23,546 1,641 (2) 6/30/00
South Park Mall (1) 7.25% 24,748 1,794 (2) 6/15/03
St. Charles Towne Plaza (3) 8.75% 30,742 2,690 (2) 12/1/00
Sunland Park Mall (20) 8.63% 39,855 3,773 1/1/26
Tacoma Mall 7.62% 93,656 8,278 3/15/02
Terrace at Florida Mall, The 8.44% 4,688 396 (2) 5/15/15
Tippecanoe Mall (5) 8.45% 46,961 4,647 7/1/04
Towne East Square (5) 7.00% 56,767 4,711 7/1/04
Treasure Coast Square 7.42% 53,953 4,714 1/1/06
Trolley Square - 1 5.81% 19,000 1,104 (2) 7/23/00 (21)
Trolley Square - 2 7.22% (9) 4,641 335 (2) 7/23/00 (21)
Trolley Square - 3 7.22% (9) 3,500 253 (2) 7/23/00 (21)
University Park Mall 7.43% 59,500 4,421 (2) 10/1/07
Valle Vista Mall (4) 9.38% 34,514 3,604 5/1/07
West Ridge Plaza (3) 8.75% 4,612 404 (2) 12/1/00
White Oaks Mall - 55%/50% 7.70% 16,500 1,271 (2) 3/1/98
White Oaks Plaza (3) 8.75% 12,345 1,080 (2) 12/1/00
Windsor Park Mall - 1 8.00% 5,948 544 6/1/00
Windsor Park Mall - 2 8.00% 8,863 811 5/1/12
Cross - Collaterized Mortgages (22) 7.27% 175,000 12,720 (2) 12/19/04
Cross - Collaterized Mortgages (22) 6.08% (23) (24) 50,000 3,042 (2) 12/19/04
----------
Total Secured Indebtedness $ 2,705,333
Unsecured Indebtness
Simon DeBartolo Group, L.P.:
Unsecured Revolving Credit
Facility (25) 6.56% 952,000 62,490 (2) 9/27/99
Unsecured Notes - 1 6.88% 250,000 17,188 (26) 11/15/06
Putable Asset Trust Securities 6.75% 100,000 6,750 (26) 11/15/03
Medium Term Notes - 1 7.13% 100,000 7,125 (26) 6/24/05
Medium Term Notes - 2 7.13% 180,000 12,825 (26) 9/20/07
Unsecured Term Loan (Knoxville) 6.47% (27) 70,000 4,528 (2) 9/25/98
Unsecured Term Loan (Lincolnwood) 6.47% (28) 63,000 4,075 (2) 1/31/99
Unsecured Notes - 2A 6.75% 100,000 6,750 (26) 7/15/04
Unsecured Notes - 2B 7.00% 150,000 10,500 (26) 7/15/09
Unsecured Notes - 3 6.88% 150,000 10,313 (26) 10/27/05
-----------
2,115,000
Shopping Center Associates:
Unsecured Notes - SCA 1 6.75% 150,000 10,125 (26) 1/15/04
Unsecured Notes - SCA 2 7.63% 110,000 8,388 (26) 5/15/05
-----------
260,000
Total Unsecured Indebtedness $2,375,000
-----------
Total Indebtedness-Consolidated $5,080,333 (29)
===========
<PAGE>
Joint Venture Properties (30):
- ------------------------------
Arizona Mills 7.02% (31) (13) 121,991 8,562 (2) 2/1/02
Aventura Mall - 1 7.68% (32) 100,000 7,680 (2) 8/8/98
Aventura Mall - 2 9.75% (33) 5,500 1,678 8/8/98
Aventura Mall - 3 6.82% (34) 43,766 2,984 (2) 8/8/98
Avenues, The 8.36% 58,408 5,555 5/15/03
Century III Mall - 1 6.78% 66,000 4,475 (2) 7/1/03
Circle Centre Mall 6.16% (35) (36) 60,000 3,695 (2) 1/31/04
Cobblestone Court 7.22% (37) 6,180 446 (2) 11/30/05
Coral Square 7.40% 53,300 3,944 (2) 12/1/00
Crystal Court 7.22% (37) 3,570 258 (2) 11/30/05
Dadeland Mall 6.42% (38) 140,000 8,986 (2) 12/10/99
Fairfax Court 7.22% (37) 10,320 745 (2) 11/30/05
Florida Mall, The 8.65% (39) 75,000 6,488 (2) 12/1/98
Gaitway Plaza 7.22% (37) 7,350 531 (2) 11/30/05
Grapevine Mills 7.07% (40) 112,096 7,924 (2) 4/25/01
Great Northeast Plaza 9.04% 17,812 1,744 6/1/06
Indian River Commons 7.58% 8,399 637 (41) 11/1/04
Indian River Mall 7.58% 46,602 3,532 (41) 11/1/04
Lakeland Square 7.26% 52,961 4,368 12/22/03
Lakeline Mall 7.65% 73,620 6,300 5/1/07
Lakeline Plaza - 1 6.09% (42) 14,000 853 (2) 6/6/02
Northfield Square 9.52% 24,330 2,575 4/1/00
Ontario Mills - 1 7.37% (7) (43) 50,000 3,685 (2) 5/7/02
Ontario Mills - 2 7.21% (7) (44) 20,000 1,442 (2) 5/7/02
Ontario Mills - 3 7.46% (19) (44) 50,000 3,730 (2) 5/7/02
Ontario Mills - 4 0.00% (45) 4,450 0 (2) 12/28/09
Palm Beach Mall 8.21% 51,360 5,072 12/15/02
Plaza at Buckland Hills, The 7.22% (37) 17,680 1,276 (2) 11/30/05
Ridgewood Court 7.22% (37) 7,980 576 (2) 11/30/05
Royal Eagle Plaza 7.22% (37) 7,920 572 (2) 11/30/05
Seminole Towne Center 6.88% 70,500 4,850 (2) 1/1/06
Smith Haven Mall 7.86% 115,000 9,039 (2) 6/1/06
Source, The 7.07% (40) 108,428 7,665 (2) 7/16/01
Tower Shops, The 7.72% (6) 15,755 1,216 (2) 3/13/99
Village Park Plaza 7.22% (37) 8,960 647 (2) 11/30/05
West Town Corners 7.22% (37) 10,330 746 (2) 11/30/05
West Town Mall 6.90% 76,000 5,244 (2) 5/1/08
Westchester, The 8.74% 153,234 14,478 9/1/05
Westland Park Plaza 7.22% (37) 4,950 357 (2) 11/30/05
Willow Knolls Court 7.22% (37) 6,490 469 (2) 11/30/05
Yards Plaza, The 7.22% (37) 8,270 597 (2) 11/30/05
-----------
Total Joint Venture Properties
Indebtedness $1,888,512 (46)
===========
</TABLE>
<PAGE>
<TABLE>
<C> <S>
(1) Loans secured by these ten properties are cross-collateralized and cross-defaulted. The aggregate
principal amount of the loans is $196,521, with an annual debt service of $13,295, and weighted
average interest rate of 6.77%. The interest rate and maturity date of eight of these loans were
reset in October 1997 and all ten require monthly payments of interest only.
(2) Requires monthly payments of interest only.
(3) These ten properties are cross-defaulted.
(4) On January 31, 1997, the Operating Partnership closed on a restructure of these loans, which included
repaying the Irving Mall loan, paying $21,000 to remove the contingent interest feature and paying
down a total of $3,900 on two other Property loans with the same lender.
(5) Loans secured by these four properties are cross-collateralized and cross-defaulted. The aggregate
principal amount of the loans is $182,624, with an annual debt service of $15,905, and an interest
rate of 7.0% except for Tippecanoe Mall, which bears interest at 8.45%. During the term of these
loans, there is amortization of a portion of the principal amount.
(6) LIBOR + 2.000%.
(7) LIBOR + 1.000%.
(8) LIBOR Capped at 5.000%.
(9) LIBOR + 1.500%.
(10) LIBOR + 0.650%.
(11) LIBOR Capped at 8.350%.
(12) LIBOR + 0.300%.
(13) LIBOR Capped at 11.530%. On January 6, 1998, through an interest rate protection agreement, the
interest rate was effectively fixed at an all-in-one rate of 6.19%.
(14) LIBOR + 0.550%.
(15) LIBOR Capped at 8.700%.
(16) LIBOR + 0.500%.
(17) LIBOR Swapped at 7.242%.
(18) LIBOR + 1.375%.
(19) LIBOR + 1.250%.
(20) Lender also participates in a percentage of gross revenues above a
specified base.
(21) July 23, 2000 is the earliest date on which the lender may call the bonds.
(22) On September 2, 1997, a refinancing was completed of $453 million of
commercial mortgage pass through certificates and a $48 million mortgage
loan, resulting in releases of mortgages encumbering 18 of the Properties.
The refinancing was funded, in part, with the proceeds of this $225
million loan, which is secured by cross-collateralized mortgages
encumbering seven of the Properties (Bay Park Square, Boardman Plaza,
Cheltenham Square, De Soto Square, Upper Valley Mall, Washington Square
and West Ridge Mall).
(23) LIBOR + 0.365%.
(24) Minimum LIBOR Cap at 12.553%.
(25) $1,250,000 unsecured revolving credit facility. Currently, bears interest at LIBOR + 0.65% and
provides for different pricing based upon the Operating Partnership's investment grade rating. As of
12/31/97 $284,300 was available, after outstanding borrowings and letters of credit.
(26) Requires semi-annual payments of interest only.
(27) LIBOR + 0.750%. In March of 1998, the interest rate was reduced to LIBOR + 0.65%.
(28) LIBOR + 0.750%. In January 1998, through an interest rate protection agreement, the interest rate was
effectively fixed at 6.14% through maturity.
(29) Includes minority interest partners' share ($132,824) of total consolidated indebtedness.
(30) As defined in the accompanying consolidated financial statments, Joint Venture Properties are those
accounted for using the equity method of accounting.
(31) LIBOR + 1.300%.
(32) Bank of Tokyo CD Rate + 0.900%.
(33) PRIME + 1.250%.
(34) LIBOR + 1.100%.
(35) LIBOR + 0.440%.
(36) LIBOR Capped at 8.810%.
(37) Rate is fixed at 7.22% through December 1998 and thereafter the rate is the greater of 7.22% or 2.0%
over the then current yield of a six month treasury bill selected by the lender.
(38) LIBOR + 0.700%.
(39) Commercial Paper rate + 0.750%.
(40) LIBOR + 1.350%.
(41) Loans require monthly interest payments only until they begin amortizing November, 2000.
(42) LIBOR + 0.375%.
(43) LIBOR Swapped at 6.370%.
(44) LIBOR Swapped at 6.210%.
(45) Beginning January 2000, this note will bear interest at 6.00%.
(46) Includes outside partners' share ($1,117,736) of indebtedness.
</TABLE>
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
Carlo Angostinelli et al. v. DeBartolo Realty Corp. et al. On October 16,
1996, a complaint was filed in the Court of Common Pleas of Mahoning County,
Ohio, captioned Carlo Angostinelli et al. v. DeBartolo Realty Corp. et al. The
named defendants are SD Property Group, Inc., a 99%-owned subsidiary of the
Company, and DPMI, and the plaintiffs are 27 former employees of the
defendants. In the complaint, the plaintiffs allege that they were recipients
of deferred stock grants under the DRC stock incentive plan (the "DRC Plan")
and that these grants immediately vested under the DRC Plan's "change in
control" provision as a result of the DRC Merger. Plaintiffs assert that the
defendants' refusal to issue them approximately 661,000 shares of DRC common
stock, which is equivalent to approximately 450,000 shares of common stock of
the Company computed at the 0.68 Exchange Ratio used in the DRC Merger,
constitutes a breach of contract and a breach of the implied covenant of good
faith and fair dealing under Ohio law. Plaintiffs seek damages equal to such
number of shares of DRC common stock, or cash in lieu thereof, equal to all
deferred stock ever granted to them under the DRC Plan, dividends on such stock
from the time of the grants, compensatory damages for breach of the implied
covenant of good faith and fair dealing, and punitive damages. The complaint
was served on the defendants on October 28, 1996. The plaintiffs and the
Company each filed motions for summary judgment. On October 31, 1997, the Court
entered a judgment in favor of the Company granting the Company's motion for
summary judgment. The plaintiffs have appealed this judgment and the appeal is
pending. While it is difficult for the Company to predict the ultimate outcome
of this action, based on the information known to the Company to date, it is
not expected that this action will have a material adverse effect on the
Company.
Roel Vento et al v. Tom Taylor et al. An affiliate of the Company is a
defendant in litigation entitled Roel Vento et al v. Tom Taylor et al, in the
District Court of Cameron County, Texas, in which a judgment in the amount of
$7.8 million has been entered against all defendants. This judgment includes
approximately $6.5 million of punitive damages and is based upon a jury's
findings on four separate theories of liability including fraud, intentional
infliction of emotional distress, tortuous interference with contract and civil
conspiracy arising out of the sale of a business operating under a temporary
license agreement at Valle Vista Mall in Harlingen, Texas. The Company is
seeking to overturn the award and has appealed the verdict. The Company's
appeal is pending. Although the Company is optimistic that it may be able to
reverse or reduce the verdict, there can be no assurance thereof. Management,
based upon the advice of counsel, believes that the ultimate outcome of this
action will not have a material adverse effect on the Company.
Browning-Ferris Industries of Illinois, et al. v. Richard Ter Maat, et al.
v. Craig J. Cain, et al., Case No. 92 C 20259. On April 4, 1994, a third-party
action was filed by Richard Ter Maat and five other parties (collectively
referred to as "Third-Party Plaintiffs") named as defendants in the above
referenced litigation, which had begun in 1992, against Machesney Park
Associates (the "Affiliate") and approximately 74 other parties (collectively
referred to as "Third-Party Defendants"). That third-party action alleged
generally that the Third-Party Defendants are liable under the Comprehensive
Environmental response, Compensation and Liability Act of 1980, 42 U.S.C.
section 9601 et seq., and under Illinois statutory and common law for certain
response costs expended and to be expended by Third-Party Plaintiffs in
connection with the claims asserted by Browning-Ferris Industries of Illinois
and approximately 20 other parties (collectively referred to as "Plaintiffs")
against the Third-Party Plaintiffs. In the original lawsuit, Plaintiffs sought
reimbursement of response costs they allegedly incurred and will incur in
response to the release or threat of release of hazardous substances from the
M.I.G./Dewane Landfill located one mile east of the City of Belvidere, in Boone
County, Illinois (the "Site"), and declaratory judgment on liability against
Defendants for such response costs. To date, the Plaintiffs have alleged
response costs in excess of $5.0 million in connection with the Site. In
February 1996, the Affiliate settled this pending litigation by the payment
of $40,000 to the original Plaintiffs. Pursuant to that settlement, the
Company agreed that it would take part in a nonbinding arbitration or mediation
at sometime in the future to allocate expenses incurred in remediating the
Site. No such arbitration or mediation has yet been instituted. In addition,
the Company has made a demand upon its insurer for indemnification with respect
to the claims asserted against the Company in this matter. Management, based
upon the advice of counsel, believes that the ultimate outcome of this action
will not have a material adverse effect on the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
MARKET INFORMATION
The Company's common stock trades on the New York Stock Exchange ("NYSE")
under the symbol "SPG". The quarterly price range for the shares on the NYSE
and the distributions declared per share for each quarter in the last two
fiscal years are shown below:
Declared
High Low Close Distribution
--------- --------- --------- -------------
1996
-----------
1st Quarter 24 5/8 21 1/8 23 1/8 $0.4925
2nd Quarter 24 3/4 22 1/8 24 1/2 $0.4925
3rd Quarter 25 3/4 22 7/8 25 1/2 $0.1515 (1)
4th Quarter 31 25 3/8 31 $0.4925
1997
-----------
1st Quarter 32 3/4 28 3/8 30 1/4 $0.4925
2nd Quarter 32 27 7/8 32 $0.5050
3rd Quarter 34 3/8 29 33 $0.5050
4th Quarter 33 15/16 28 7/8 32 11/16 $0.5050
(1) Represents a distribution declared in the third quarter of 1996
related to the DRC Merger, designated to align the time periods of
distribution payments of the merged companies. The current annual
distribution rate is $2.02 per share.
There is no established public trading market for the Company's Class B
common stock or Class C common stock. Distributions per share of the Class B
and Class C common stock were identical to those for the Company's common
stock.
HOLDERS
The number of holders of record of the shares of common stock was 2,838 as
of March 6, 1998. The Class B common stock is held entirely by a voting trust
to which the Simons are parties and are exchangeable on a one-for-one basis
into common stock. The Class C common stock is held entirely by The Edward J.
DeBartolo Corporation and are also exchangeable on a one-for-one basis into
common stock.
DISTRIBUTIONS
The Company qualifies as a REIT under the Code. To maintain its status as
a REIT, the Company is required each year to distribute to its shareholders at
least 95% of its taxable income after certain adjustments.
Future distributions paid by the Company will be at the discretion of the
Board of Directors and will depend on the actual cash flow of the Company, its
financial condition, capital requirements, the annual REIT distribution
requirements and such other factors as the Board of Directors of the Company
deem relevant.
The Company has an Automatic Dividend Reinvestment Plan (the "Plan") which
allows shareholders to acquire additional shares of common stock by
automatically reinvesting cash dividends. Common stock is acquired pursuant to
the Plan at a price equal to the prevailing market price of such common stock,
without payment of any brokerage commission or service charge. Shareholders who
do not participate in the Plan continue to receive cash dividends, as declared.
UNREGISTERED SALES OF EQUITY SECURITIES
The Company did not issue any equity securities that were not required to
be registered under the Securities Act of 1933, as amended (the "Act") during
the fourth quarter of 1997, except as follows: On December 5, 1997, the Company
issued 1,534,330 shares of common stock to an institutional investor in
connection with a property acquisition. The foregoing transaction was exempt
from registration under the Act in reliance on Section 4 (2).
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected consolidated financial data for
the Company and combined historical financial data of Simon Property Group (the
"Predecessor"). The financial data should be read in conjunction with the
financial statements and notes thereto and with Management's Discussion and
Analysis of Financial Condition and Results of Operations.
Other data management believes is important in understanding trends in the
Company's business is also included in the table.
<TABLE>
<CAPTION>
THE COMPANY PREDECESSOR
------------------------------------------------------------ -----------
DECEMBER 20
TO DECEMBER JANUARY 1
31, TO DECEMBER
FOR THE YEAR ENDED DECEMBER 31, 19,
------------------------------------------------ ---------- -----------
1997(1) 1996(1) 1995(1) 1994 1993 1993
----------- ----------- ----------- ---------- ---------- ----------
OPERATING DATA: (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Total revenue $1,054,167 $747,704 $553,657 $473,676 $18,424 $405,869
Income of the Operating
Partnership before
extraordinary items 203,133 134,663 101,505 60,308 8,707 6,912
Net income (loss) available
to common shareholders
$107,989 $72,561 $57,781 $23,377 $(11,366) $33,101
BASIC EARNINGS PER COMMON
SHARE (2):
Income before extraordinary
items $1.08 $1.02 $1.08 $0.71 $0.11 N/A
Extraordinary items -- (0.03) (0.04) (0.21) (0.39) N/A
----------- ----------- ----------- ---------- ----------
Net income (loss) $1.08 $0.99 $1.04 $0.50 $(0.28) N/A
Weighted average shares
outstanding 99,920 73,586 55,312 47,012 40,950 N/A
DILUTED EARNINGS PER COMMON
SHARE (2):
Income before extraordinary $1.08 $1.01 $1.08 $0.71 $0.11 N/A
items
Extraordinary items -- (0.03) (0.04) (0.21) (0.39) N/A
----------- ----------- ----------- ---------- ----------
Net income (loss) $1.08 $0.98 $1.04 $0.50 $(0.28) N/A
Diluted weighted average
shares outstanding 100,304 73,721 55,422 47,214 40,957 N/A
DISTRIBUTIONS PER COMMON
SHARE (3) $2.01 $1.63 $1.97 $1.90 _ N/A
BALANCE SHEET DATA:
Cash and cash equivalents $109,699 $64,309 $62,721 $105,139 $110,625 N/A
Total assets 7,662,667 5,895,910 2,556,436 2,316,860 1,793,654 N/A
Mortgages and other
indebtedness 5,077,990 3,681,984 1,980,759 1,938,091 1,455,884 N/A
Shareholders' equity $1,556,862 $1,304,891 $232,946 $57,307 $29,521 N/A
OTHER DATA:
Cash flow provided by (used
in):
Operating activities $370,907 $236,464 $194,336 $128,023 N/A N/A
Investing activities (1,243,804) (199,742) (222,679) (266,772) N/A N/A
Financing activities 918,287 (35,134) (14,075) 133,263 N/A N/A
Funds from Operations (FFO)
of the Operating
Partnership (4) $415,128 $281,495 $197,909 $167,761 N/A N/A
FFO allocable to Company $258,049 $172,468 $118,376 $92,604 N/A N/A
NOTES
(1) Note 3 to the accompanying financial statements describes the DRC Merger,
which occurred on August 9, 1996, and the 1997, 1996, and 1995 real estate
acquisitions and development.
(2) Per share data is reflected only for the Company, because the historical
combined financial statements of the Predecessor are a combined
presentation of partnerships and corporations.
(3) Represents distributions declared per period. A distribution of $0.1515
per share was declared on August 9, 1996, in connection with the DRC
Merger, designated to align the time periods of distributions of the
merged companies. The current annual distribution rate is $2.02 per share.
(4) Please refer to Management's Discussion and Analysis of Financial
Condition and Results of Operations for a definition of Funds from
Operations.
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the Selected
Financial Data, and all of the financial statements and notes thereto included
elsewhere herein. Certain statements made in this report may constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements involve known
and unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Operating Partnership 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
terms and availability of financing; adverse changes in the real estate markets
including, among other things, competition with other companies and technology;
risks of real estate development and acquisition; governmental actions and
initiatives; and environmental/safety requirements.
OVERVIEW
The financial results reported reflect the merger completed on August 9,
1996 (the "DRC Merger") of Simon Property Group, Inc. and DeBartolo Realty
Corporation ("DRC"), in accordance with the purchase method of accounting,
valued at $3.0 billion. The DRC Merger resulted in the addition of 49 regional
malls, 11 community centers and 1 mixed-use property. These properties included
47,052,267 square feet of retail space gross leasable area ("GLA") and 558,636
of office GLA. Of these properties, 40 regional malls, 10 community centers and
the mixed-use property are being accounted for using the consolidated method of
accounting. The remaining properties are being accounted for using the equity
method of accounting.
On September 29, 1997, the Operating Partnership completed its cash tender
offer for all of the outstanding shares of beneficial interests of The Retail
Property Trust ("RPT"). RPT owned 98.8% of Shopping Center Associates ("SCA"),
which owned or had interests in twelve regional malls and one community center,
comprising approximately twelve million square feet of GLA in eight states.
Following the completion of the tender offer, the SCA portfolio was
restructured. The Operating Partnership exchanged its 50% interests in two SCA
properties to a third party for similar interests in two other SCA properties,
in which it had 50% interests, with the result that SCA now owns interests in a
total of eleven properties. Effective November 30, 1997, the Operating
Partnership also acquired the remaining 50% ownership interest in another of
the SCA properties. In addition, an affiliate of the Operating Partnership
acquired the remaining 1.2% interest in SCA. At the completion of these
transactions, the Operating Partnership directly or indirectly now owns 100% of
ten of the eleven SCA properties, and 50% of the remaining property.
In addition, the Operating Partnership acquired ownership interests in or
commenced operations of several other Properties throughout the comparative
periods and, as a result, increased the number of Properties it accounts for
using the consolidated method of accounting (the "Property Transactions"). The
following is a listing of such transactions: On February 23, 1995, the
Operating Partnership acquired an additional 50% interest in White Oaks Mall,
increasing its ownership to 77%. On August 1, 1995, the Operating Partnership
purchased the remaining 50% ownership in Crossroads Mall. On September 25,
1995, the Operating Partnership acquired the remaining 55% ownership in
Knoxville Center. On April 11, 1996, the Operating Partnership acquired the
remaining 50% economic ownership interest in Ross Park Mall. On July 31, 1996,
the Operating Partnership opened the wholly-owned Cottonwood Mall in
Albuquerque, New Mexico. On August 29, 1997, the Operating Partnership opened
the 55%-owned, $89 million phase II expansion of The Forum Shops at Caesar's.
(See "Liquidity and Capital Resources" for additional information regarding
these transactions.)
RESULTS OF OPERATIONS
Year Ended December 31, 1997 vs. Year Ended December 31, 1996
Total revenue increased $306.5 million or 41.0% in 1997 as compared to
1996. This increase is primarily the result of the DRC Merger ($234.1 million),
the RPT acquisition ($30.6 million) and the Property Transactions ($28.4
million). Excluding these transactions, total revenues increased $13.4 million,
which includes a $15.4 million increase in minimum rent and a $7.1 million
increase in tenant reimbursements, partially offset by a $7.5 million decrease
in other income. The $15.4 million increase in minimum rents results from
increased occupancy levels, the replacement of expiring tenant leases with
renewal leases at higher minimum base rents, and a $4.4 million increase in
<PAGE>
rents from tenants operating under license agreements. The $7.1 million
increase in tenant reimbursements is partially offset by a net increase in
recoverable expenses. The $7.5 million decrease in other income is primarily
the result of decreases in lease settlement income ($3.0 million), interest
income ($1.3 million) and gains from sales of peripheral properties ($1.7
million).
Total operating expenses increased $160.9 million, or 38.7%, in 1997 as
compared to 1996. This increase is primarily the result of the DRC Merger
($113.5 million), the RPT acquisition ($15.9 million), the Property
Transactions ($17.3 million), and the increase in depreciation and amortization
($10.1 million), primarily due to an increase in depreciable real estate
realized through renovation and expansion activities.
Interest expense increased $85.6 million, or 42.4% in 1997 as compared to
1996. This increase is primarily as a result of the DRC Merger ($61.1 million),
the RPT acquisition ($13.9 million) and the Property Transactions ($9.1
million).
The $0.1 million gain from extraordinary items in 1997 is the net result
of gains realized on the forgiveness of debt ($31.1 million) and the write-off
of net unamortized debt premiums ($8.4 million), partially offset by the
acquisition of the contingent interest feature on four loans ($21.0 million)
and prepayment penalties and write-offs of mortgage costs associated with early
extinguishments of debt ($18.4 million). The $3.5 million extraordinary loss in
1996 is the result of write-offs of mortgage costs associated with early
extinguishments of debt.
Income (loss) from unconsolidated entities increased from $9.5 million in
1996 to $19.2 million in 1997, resulting from an increase in the Operating
Partnership's share of M.S. Management Associates Inc.'s (the "Management
Company") income ($5.0 million) and an increase in its share of income from
partnerships and joint ventures ($4.6 million). The increase in Management
Company income is primarily the result of income realized through marketing
initiatives ($2.0 million) and the Operating Partnership's share of the
Management Company's gains on sales of peripheral property ($1.9 million). The
increase in the Operating Partnership's share of income from partnerships and
joint ventures is primarily the result of the DRC Merger ($4.9 million), the
RPT acquisition ($3.2 million), and the nonconsolidated joint-venture
Properties acquired or commencing operations during 1997 ($5.0 million),
partially offset by the increase in the amortization of the excess of the
Operating Partnership's investment over its share of the equity in the
underlying net assets of unconsolidated joint-venture Properties ($8.8
million).
Income of the Operating Partnership was $203.2 million in 1997, as
compared to $131.1 million in 1996, reflecting an increase of $72.0 million,
for the reasons discussed above, and was allocated to the Company based on the
Company's preferred unit preference and ownership interest in the Operating
Partnership during the period.
Preferred distributions increased by $16.6 million to $29.2 million in
1997 as a result of the Company's issuance of $200 million of 8 3/4% Series B
cumulative redeemable preferred stock on September 27, 1996 and $150 million of
7.89% Series C Cumulative Step-Up Premium RateSM Preferred Stock on July 9,
1997, partially offset by a reduction in preferred distributions ($2.0 million)
resulting from the conversion of the $100 million 8 1/8% Series A convertible
preferred stock into 3,809,523 shares of common stock on November 11, 1997.
Year Ended December 31, 1996 vs. Year Ended December 31, 1995
Total revenue increased $194.0 million, or 35.0%, in 1996 as compared to
1995. Of this increase, $155.7 million and $37.7 million are attributable to
the DRC Merger and the Property Transactions, respectively. The remaining
increase includes net increases in minimum rent, lease settlements and
miscellaneous income of $9.3 million, $1.8 million and $2.3 million,
respectively, partially offset by a net decrease in tenant reimbursements of
$11.8 million. The minimum rent increase results from increases of $1.50 and
$0.36 in average base minimum rents per square foot for regional mall stores
and community shopping centers, respectively. Regional mall store leases
executed during 1996 were $4.86 per square foot greater than leases expiring;
community shopping center leases were $2.02 greater.
Total operating expenses increased $113.7 million, or 37.6%, in 1996 as
compared to 1995. Of this increase, $85.1 million and $18.6 million are the
result of the DRC Merger (including $7.2 million of integration costs) and the
Property Transactions, respectively. The remaining $10.0 million increase is
primarily the result of a net increase in depreciation and amortization ($8.9
million).
Interest expense increased $52.0 million, or 34.6%, to $202.2 million for
1996 as compared to $150.2 million for 1995. Of this increase, $41.1 million
and $15.4 million are attributable to the DRC Merger and the Property
Transactions, respectively. In addition, the Operating Partnership realized
incremental interest expenses in 1996 related to borrowings used to acquire
additional ownership interests in and/or make equity investments in
<PAGE>
unconsolidated joint venture properties of $4.9 million. Offsetting these
increases were interest savings realized as a result of restructuring the
Operating Partnership's credit facilities, from the proceeds of the Company's
6,000,000 share common stock offering on April 19, 1995, and from the proceeds
of the Series A preferred stock offering and a portion ($34.4 million) of the
proceeds of the Series B preferred stock offering, which were used to pay down
debt (described under "Financing and Debt").
Income (loss) from unconsolidated entities increased from $1.4 million in
1995 to $9.5 million in 1996, primarily resulting from an increase in the
Operating Partnership's share of the Management Company income ($9.2 million),
partially offset by a decrease in its share of income from partnerships and
joint ventures ($1.1 million). The increase in Management Company income is
primarily the result of the DRC Merger ($4.4 million) and the Management
Company's losses in 1995 related to the settlement of a mortgage receivable
($3.9 million) and the liquidation of a partnership investment ($1.0 million).
Extraordinary items of $3.5 million in 1996 and $3.3 million in 1995
result from write-offs of mortgage costs associated with early extinguishments
of debt.
Income of the Operating Partnership increased from $98.2 million in 1995
to $131.1 million in 1996, an increase of $32.9 million, for the reasons
discussed above, and was allocated to the Company based on the Company's
ownership interest during the period.
Preferred dividends increased by $11.2 million in 1996 as a result of the
Company's issuance of $100 million of
8 1/8% Series A convertible preferred stock on October 27, 1995, and $200
million of 8 3/4% Series B cumulative redeemable preferred stock on September
27, 1996.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1997, the Operating Partnership's balance of
unrestricted cash and cash equivalents was $109.7 million. In addition to its
cash balance, the Operating Partnership has a $1.25 billion unsecured revolving
credit facility (the "Credit Facility") which had $284.3 million available
after outstanding borrowings and letters of credit at December 31, 1997. The
Company and the Operating Partnership also have access to public equity and
debt markets. The Company has an equity shelf registration statement currently
effective, under which $950 million in equity securities may be issued. The
Operating Partnership has a debt shelf registration statement currently
effective, under which $850 million in debt securities may be issued.
Management anticipates that cash generated from operating performance will
provide the necessary funds on a short- and long-term basis for its operating
expenses, interest expense on outstanding indebtedness, recurring capital
expenditures, and distributions to shareholders in accordance with REIT
requirements. Sources of capital for nonrecurring capital expenditures, such as
major building renovations and expansions, as well as for scheduled principal
payments, including balloon payments, on outstanding indebtedness are expected
to be obtained from: (i) excess cash generated from operating performance; (ii)
working capital reserves; (iii) additional debt financing; and (iv) additional
equity raised in the public markets.
Sensitivity Analysis. The Operating Partnership's future earnings, cash
flows and fair values relating to financial instruments is primarily dependent
upon prevalent market rates of interest, such as LIBOR. Based upon consolidated
indebtedness and interest rates at December 31, 1997, a 1% increase in the
market rates of interest would decrease future earnings and cash flows by
approximately $14 million, and would decrease the fair value of debt by
approximately $505 million. A 1% decrease in the market rates of interest would
increase future earnings and cash flows by approximately $14 million, and would
increase the fair value of debt by approximately $683 million.
Financing and Debt
At December 31, 1997, the Operating Partnership had consolidated debt of
$5,078.0 million, of which $3,467.6 million is fixed-rate debt bearing interest
at a weighted average rate of 7.4% and $1,610.4 million is variable-rate debt
bearing interest at a weighted average rate of 6.4%. As of December 31, 1997,
the Operating Partnership had interest rate protection agreements related to
$430.4 million of consolidated variable-rate debt. In addition, swap
arrangements on an additional $148 million of consolidated variable-rate debt
were obtained in January of 1998. The Operating Partnership's hedging activity
as a result of these interest rate protection agreements resulted in net
interest savings of $1.6 million for the year ended December 31, 1997. This did
not materially impact the Operating Partnership's weighted average borrowing
rates.
<PAGE>
Scheduled principal payments of consolidated mortgage indebtedness over
the next five years is $2,638 million, with $2,442 million thereafter. The
Company's ratio of consolidated debt-to-market capitalization was 46.0% and
41.5% at December 31, 1997 and 1996, respectively.
The following summarizes significant financing and refinancing transactions
completed in 1997:
Secured Indebtedness. On January 31, 1997, the Operating Partnership
completed a refinancing transaction involving debt on four wholly-owned
Properties. The transaction consisted of the payoff of one loan totaling $43.4
million, a restatement of the interest rate on the three remaining loans, the
acquisition of the contingent interest feature on all four loans for $21.0
million, and $3.9 million of principal reductions on two additional loans. This
transaction, which was funded using the Credit Facility, resulted in an
extraordinary loss of $23.2 million, including the write-off of deferred
mortgage costs of $2.2 million.
On May 15, 1997, the Operating Partnership refinanced approximately $140
million in existing debt on The Forum Shops at Caesar's. The new debt consists
of three classes of notes totaling $180 million, with $90 million bearing
interest at 7.125% and the other $90 million bearing interest at LIBOR plus
0.30%, all of which will mature on May 15, 2004. Approximately $40 million of
the borrowings were placed in escrow to pay for construction costs required in
connection with the development of the expansion of this project, which opened
on August 29, 1997. As of December 31, 1997, $8.6 million remains in escrow.
On June 5, 1997, the Operating Partnership closed a $115 million
construction loan for The Shops at Sunset Place. The loan initially bears
interest at LIBOR plus 1.25% and matures on June 30, 2000, with two one-year
extensions available.
On September 2, 1997, the Operating Partnership completed a refinancing of
$453 million of commercial mortgage pass through certificates and a $48 million
mortgage loan, resulting in releases of mortgages encumbering 18 of the
Properties. The Operating Partnership funded this refinancing with the proceeds
of a $225 million secured loan and borrowings of $294 million under the Credit
Facility, which were later reduced with the proceeds from the sale of $180
million of notes issued on September 10, 1997, as described below.
Subsequently, on December 22, 1997, the Operating Partnership retired the $225
million secured loan with the net proceeds from a $225 million series of
multiclass mortgage pass-through certificates. This new facility includes six
classes of certificates cross-collaterallized by the same seven Properties as
the original $225 million secured loan and matures on December 19, 2004. Five
of the six classes covering $175 million bear fixed interest rates ranging from
6.716% to 8.233%, with the remaining $50 million class bearing interest at
LIBOR plus 0.365%.
On September 4, 1997, the Operating Partnership transferred ownership of
one Property and paid $6.6 million to its lender, fully satisfying the
property's mortgage note payable of $42 million. This property no longer met
the Operating Partnership's criteria for its ongoing strategic plan. The
Operating Partnership recognized a gain on this transaction of approximately
$31.1 million in the third quarter of 1997.
Credit Facility. During 1997, the Operating Partnership obtained several
improvements to its Credit Facility. The Credit Facility agreement was amended
to increase the borrowing limit to $1.25 billion and reduce the interest rate
from LIBOR plus 0.90% to LIBOR plus 0.65%. In addition, the Credit Facility's
competitive bid feature, which has further reduced interest costs, was
increased from $150 million to $625 million.
Medium Term Notes. On May 15, 1997, the Operating Partnership established
a Medium-Term Note ("MTN") program. On June 24, 1997, the Operating Partnership
completed the sale of $100 million of notes under the MTN program. The notes
sold bear interest at 7.125% and have a stated maturity of June 24, 2005. The
net proceeds of this sale were used primarily to pay down the Credit Facility.
On September 10, 1997, the Operating Partnership issued an additional $180
million principal amount of notes under its MTN program, which mature on
September 20, 2007 and bear interest at 7.125% per annum. The Operating
Partnership used the net proceeds of this offering to pay down the borrowings
made under the Credit Facility.
Equity Financings. On July 9, 1997 the Company sold 3,000,000 shares of
7.89% Series C Cumulative Step-Up Premium RateSM Preferred Stock (the "Series C
Preferred Shares") in a public offering at $50.00 per share. Beginning October
1, 2012, the rate increases to 9.89% per annum. The Company intends to redeem
the Series C Preferred Shares prior to October 1, 2012. The Company contributed
the net proceeds of this offering of approximately $146 million to the
Operating Partnership in exchange for preferred units. The Operating
Partnership used the net proceeds for the purchase of additional ownership
interest in West Town Mall, to pay down the Credit Facility and for general
working capital purposes.
<PAGE>
During 1997, the Company and the Operating Partnership issued 8,051,924
additional shares of common stock and 876,712 additional Units, respectively,
in public and private offerings, at prices ranging from $30.09 to $33.25 per
share, and generating net proceeds of approximately $286 million. The proceeds
of such offerings were used primarily to acquire additional ownership interests
in Properties and to repay existing indebtedness.
Unsecured Notes. On July 17, 1997, the Operating Partnership completed a
$250 million public offering, of two tranches of its seven-year and twelve-year
non-convertible senior unsecured debt securities. The first tranche was for
$100 million at 6 3/4% with a maturity of July 15, 2004. The second tranche was
for $150 million at 7% with a maturity of July 15, 2009. The notes pay interest
semi-annually, and contain covenants relating to minimum leverage, EBITDA and
unencumbered EBITDA ratios.
On October 15, 1997, the SEC declared effective the Operating
Partnership's registration statement, which provides for the offering, from
time to time, of up to $1 billion aggregate public offering price of
nonconvertible investment grade unsecured debt securities of the Operating
Partnership. The net proceeds of such offerings may be used to fund property
acquisition or development activity, retire existing debt or for any other
purpose deemed appropriate by the Operating Partnership. Subsequently, on
October 22, 1997, the Operating Partnership completed the sale of $150 million
of its eight-year non-convertible senior unsecured debt securities under this
new $1 billion debt shelf registration. The notes bear interest at 6 7/8%, and
mature on October 27, 2005. The notes pay interest semi-annually, and contain
covenants relating to minimum leverage, EBITDA and unencumbered EBITDA ratios.
The Operating Partnership used $114.8 million of the net proceeds of
approximately $147 million, along with an escrow refund of approximately $4
million to retire existing mortgages on Miller Hill Mall, Muncie Mall, and
Towne West Square, with the remaining proceeds going to reduce the amount
outstanding on the Credit Facility.
Other. During 1997, in connection with the RPT acquisition, the Operating
Partnership assumed consolidated mortgages of $123.5 million, unsecured debt
totaling $275.0 million and a pro-rata share of joint venture mortgage
indebtedness of $76.8 million.
Acquisitions and Investment
Management continues to actively review and evaluate a number of
individual property and portfolio acquisition opportunities. Management
believes that funds on hand, amounts available under the Credit Facility,
together with the ability to issue shares of common stock and/or Units, provide
the means to finance certain acquisitions. No assurance can be given that the
Company will not be required to, or will not elect to, even if not required to,
obtain funds from outside sources, including through the sale of debt or equity
securities, to finance significant acquisitions, if any.
On June 16, 1997, the Operating Partnership purchased 1,408,450 shares of
common stock of Chelsea GCA Realty, Inc. ("Chelsea"), a publicly traded REIT,
for approximately $50 million using borrowings from the Credit Facility. The
shares purchased represent approximately 9.2% of Chelsea's outstanding common
stock, and had a market value of $53.8 million at December 31, 1997. In
connection with this transaction the Operating Partnership and Chelsea have
formed a strategic alliance to develop and acquire manufacturer's outlet
shopping centers with 500,000 square feet or more of GLA in the United States.
On July 10, 1997, the Operating Partnership acquired an additional 48%
interest in West Town Mall in Knoxville, Tennessee for $67.4 million and 35,598
Units valued at approximately $1.1 million. This transaction increased the
Operating Partnership's ownership of West Town Mall to 50%.
On August 8, 1997, a subsidiary of the Operating Partnership acquired a
50% interest in a trust that owns Dadeland Mall, a 1.4 million square-foot
super-regional mall in Miami, Florida for approximately $128 million. A portion
of the purchase price was paid in the form of 658,707 shares of the Company's
common stock, valued at approximately $20 million. The remaining portion of the
purchase price was financed using borrowings from the Credit Facility.
As described previously, during 1997 the Operating Partnership completed
the purchase of RPT and its subsidiary SCA, which owned or had interests in
twelve regional malls and one community center, comprising approximately twelve
million square feet of GLA in eight states. The Operating Partnership exchanged
its 50% interests in two SCA properties to a third party for similar interests
in two other SCA properties, in which it had 50% interests, with the result
that SCA now owns interests in a total of eleven properties. Effective November
30, 1997, the Operating Partnership also acquired the remaining 50% ownership
interest in another of the SCA properties. The Operating Partnership now owns
100% of ten of the eleven SCA properties acquired, and a noncontrolling 50%
interest in the remaining property. The total cost for the acquisition of RPT
and related transactions is estimated at $1.3 billion, including shares of
<PAGE>
common stock valued at approximately $50 million, Units valued at approximately
$25.3 million, the assumption of $398.5 million of consolidated indebtedness
and the Operating Partnership's $76.8 million pro rata share of joint venture
indebtedness.
On December 29, 1997, the Operating Partnership formed a joint venture
partnership with The Macerich Company ("Macerich") to acquire a portfolio of
twelve regional malls comprising approximately 10.7 million square feet of GLA.
This transaction closed on February 27, 1998 at a total purchase price of
$974.5 million, including the assumption of $485.0 million of indebtedness. The
Operating Partnership and Macerich were each responsible for one half of the
purchase price, including indebtedness assumed and each assumed leasing and
management responsibilities for six of the regional malls. The Operating
Partnership funded its share of the cash due at closing with a new six-month
$242.0 million unsecured loan which bears interest at 6.42%. The Operating
Partnership owns 50% of this joint venture.
On December 30, 1997, the Operating Partnership acquired The Fashion Mall
at Keystone at the Crossing, a 651,671 square-foot regional mall, along with an
adjacent 29,140 square-foot community center, in Indianapolis, Indiana for
$124.5 million, including the assumption of a $64.8 million mortgage. These
Properties are wholly-owned by the Operating Partnership.
On December 31, 1997, the Operating Partnership acquired the remaining 30%
ownership interest in Virginia Center Commons as well as the management
contract on that Property for a total of $2.3 million. The Operating
Partnership now owns 100% of this Property.
On January 26, 1998, the Operating Partnership acquired Cordova Mall in
Pensacola, Florida for $87.3 million, which included the assumption of a $28.9
million mortgage and 1,713,016 Units, valued at approximately $55.5 million.
This 874,000 square-foot regional mall is wholly-owned by the Operating
Partnership.
See Note 3 to the consolidated financial statements for 1996 and 1995
acquisition activity.
Development Activity
Development activities are an ongoing part of the Operating Partnership's
business. The Operating Partnership opened one new regional mall, two value-
oriented super-regional malls and one new community shopping center during
1997. On September 5, 1997, the Operating Partnership opened The Source, a
730,000 square-foot regional mall in Westbury (Long Island), New York. On
October 31, 1997 the Operating Partnership opened Grapevine Mills, a 1.2
million square feet value-oriented super-regional mall in Grapevine
(Dallas/Fort Worth), Texas, and on November 20, 1997, the Operating Partnership
opened Arizona Mills, a 1.2 million square-foot value-oriented super-regional
mall in Tempe, Arizona. In March 1997, the Operating Partnership opened Indian
River Commons, a 260,000 square-foot community shopping center in Vero Beach,
Florida, which is immediately adjacent to an existing regional mall Property.
The Operating Partnership has joint venture partners on each of these
Properties and accounts for them using the equity method of accounting.
Construction also continues on the following projects:
* The Shops at Sunset Place, a destination-oriented retail and entertainment
project containing approximately 510,000 square feet of GLA is scheduled to
open in October of 1998 in South Miami, Florida. The Operating Partnership
owns 75% of this $149 million project. Construction financing of $115 million
closed on this property in June 1997. The loan initially bears interest at
LIBOR plus 125 basis points and matures on June 30, 2000.
* Muncie Plaza, a 196,000 square-foot community center project, is scheduled
to open in April of 1998 in Muncie, Indiana, adjacent to Muncie Mall. This
approximately $14 million project is wholly-owned by the Operating
Partnership.
* Lakeline Plaza, a 380,000 square-foot community center project, is
scheduled to open in two phases in May and November of 1998 in Austin, Texas,
adjacent to Lakeline Mall. On January 30, 1998, the Operating Partnership
increased its ownership interest in this approximately $34 million project
from 50% to 65%.
In addition, the Operating Partnership is in the preconstruction
development phase on a new value-oriented super-regional mall, a factory outlet
center and a new community center project. Concord Mills, an approximately $200
million development, is scheduled to open in 1999. This 1,400,000 square-foot
<PAGE>
value-oriented super-regional mall development project is 50%-owned by the
Operating Partnership. Houston Premium Outlets is a 462,000 square-foot factory
outlet project in Houston, Texas. This approximately $89 million project, of
which the Operating Partnership has a 50% ownership interest in, is scheduled
to begin construction in 1998 and open in 1999. The Shops at North East Mall,
an approximately $55 million development, which is immediately adjacent to
North East Mall, an existing regional mall in the Company's portfolio, is
scheduled to open in Hurst, Texas, in 1999. This 391,000 square-foot
development project is wholly-owned by the Operating Partnership.
Strategic Expansions and Renovations
A key objective of the Operating Partnership is to increase the
profitability and market share of the Properties through the completion of
strategic renovations and expansions. In 1997, the Operating Partnership
completed construction and opened fourteen major expansion and/or renovation
projects: Alton Square in Alton, Illinois; Aventura Mall in Miami, Florida;
Chautauqua Mall in Jamestown, New York; Columbia Center in Kennewick,
Washington; The Forum Shops at Caesar's in Las Vegas, Nevada; Knoxville Center
in Knoxville, Tennessee; La Plaza in McAllen, Texas; Muncie Mall in Muncie,
Indiana; Northfield Square in Bradley, Illinois; Northgate Mall in Seattle,
Washington; Orange Park Mall in Jacksonville, Florida; Paddock Mall in Ocala,
Florida; Richmond Square in Richmond, Indiana; and Southern Park Mall in
Youngstown, Ohio.
The Operating Partnership currently has four major expansion projects
under construction, and is in the preconstruction development stage with two
additional major expansion projects. The aggregate cost of the projects is
approximately $208 million.
* A 255,000 square-foot small shop expansion and the addition of a 24-screen
AMC Theatre complex to Aventura Mall in Miami, Florida, are scheduled to open
in March 1998. Lord & Taylor, Macy's, JCPenney and Sears are also expanding
at this Property. In addition, the Operating Partnership added a Bloomingdales
to this project in November of 1997. The Operating Partnership has a 33%
ownership interest in this project.
* A 180,000 square-foot small shop expansion of The Florida Mall in Orlando,
Florida, as well as the addition of Burdines, is scheduled for completion in
the winter of 1999. The Operating Partnership has a 50% ownership interest in
this project. Dillard's, Gayfers, JCPenney and Sears are also expanding.
* A 68,000 square-foot small shop expansion of Prien Lake Mall in Lake
Charles, Louisiana, as well as the addition of Dillard's and Sears, is
scheduled for completion in the winter of 1998. The Operating Partnership owns
100% of Prien Lake Mall.
The Operating Partnership has a number of smaller renovation and/or
expansion projects currently under construction aggregating approximately $105
million, of which the Operating Partnership's share is approximately $100
million. In addition, preconstruction development continues on a number of
project expansions, renovations and anchor additions at additional properties.
The Operating Partnership expects to commence construction on many of these
projects in the next 12 to 24 months.
It is anticipated that these projects will be financed principally with
access to debt and equity markets, existing corporate credit facilities and
cash flow from operations.
Capital Expenditures
Capital expenditures, excluding acquisitions, were $330.9 million, $211.4
million and $102.9 million for the periods ended December 31, 1997, 1996 and
1995, respectively.
1997 1996 1995
----- ----- -----
New Developments $79.9 $80.1 $29.7
Renovations and Expansions 196.6 86.3 38.9
Tenant Allowances--Retail 36.7 24.0 17.2
Tenant Allowances--Offices 1.2 6.1 4.3
Capital Expenditures
Recoverable from Tenants 12.9 11.4 8.0
Other 3.6 3.5 4.8
Total $330.9 $211.4 $102.9
<PAGE>
Distributions
The Company declared distributions on its common stock in 1997 aggregating
$2.01 per share. On January 23, 1998, the Company declared a distribution of
$0.5050 per share of common stock payable on February 20, 1998, to shareholders
of record on February 6, 1998. The current annual distribution rate is $2.02
per share of common stock. For federal income tax purposes, 35% of the 1997
common stock distributions and 64% of the 1996 common stock distributions
represented a return of capital. Future distributions will be determined based
on actual results of operations and cash available for distribution.
Investing and Financing Activities
Cash used in investing activities for the year ended December 31, 1997 of
$1,243.8 million is primarily the result of acquisitions of $980.4 million,
$305.2 million of capital expenditures, advances to the Management Company of
$18.4 million and other investing activities of $55.4 million, including $50.0
million for the purchase of Chelsea stock, partially offset by net
distributions from unconsolidated entities of $97.7 million and cash received
from the acquisition of RPT of $19.7 million. Cash paid for acquisitions
includes $745.5 million for the RPT acquisition and related transactions,
$108.0 million for Dadeland Mall, $66.3 million for West Town Mall and $60.6
million for the acquisition of The Fashion Mall at Keystone at the Crossing and
Keystone Shoppes. Capital expenditures includes development costs of $62.6
million, including $31.0 million at The Shops at Sunset Place, $11.3 million at
Muncie Plaza, $7.0 million at Cottonwood Mall and $11.2 million for the
acquisition of the land ($9.2 million) and other development costs ($2.0
million) at The Shops at North East Mall. Also included in capital expenditures
is renovation and expansion costs of approximately $191.6 million, including
$34.7 million, $15.6 million, $15.1 million, $12.2 million, and $10.6 million
for the phase II expansion of Forum Shops at Caesar's, Miami International
Mall, Northgate Mall, Charles Towne Square and Knoxville Center, respectively,
and tenant costs and other operational capital expenditures of approximately
$51.0 million. Net distributions from unconsolidated entities is primarily due
to reimbursements of $70.1 million and $38.8 million from Dadeland Mall and
West Town Mall, respectively, as a result of mortgages obtained on those
Properties during 1997.
Cash received from financing activities for the year ended December 31,
1997 of $918.3 million includes net proceeds from the sales of the Company's
common stock and Series C preferred stock of $344.4 million and net borrowings
of $945.5 million, partially offset by distributions to shareholders and
limited partners of $350.4 million and $21.0 million for the retirement of a
contingent interest feature on four mortgage loans. Net borrowings were used
primarily to fund the acquisition of RPT and the related transactions ($757.0
million), other acquisitions ($180.0 million) and development and investment
activity.
<PAGE>
EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION ("EBITDA")
Management believes that there are several important factors that
contribute to the ability of the Operating Partnership to increase rent and
improve profitability of its shopping centers, including aggregate tenant sales
volume, sales per square foot, occupancy levels and tenant costs. Each of these
factors has a significant effect on EBITDA. Management believes that EBITDA is
an effective measure of shopping center operating performance because: (i) it
is industry practice to evaluate real estate properties based on operating
income before interest, taxes, depreciation and amortization, which is
generally equivalent to EBITDA; and (ii) EBITDA is unaffected by the debt and
equity structure of the property owner. 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
the Company's operating performance; (iii) is not indicative of cash flows from
operating, investing and financing activities; and (iv) is not an alternative
to cash flows as a measure of the Company's liquidity.
Total EBITDA for the Properties increased from $346.7 million in 1993 to
$940.0 million in 1997, representing a compound annual growth rate of 28.2%. Of
this growth, $336.8 million, or 56.8%, is a result of the DRC Merger and $34.5
million or 5.8% is a result of the RPT acquisition. The remaining growth in
total EBITDA reflects the addition of GLA to the Portfolio Properties through
property acquisitions, developments and expansions, increased rental rates,
increased tenant sales, improved occupancy levels and effective control of
operating costs. During this period, the operating profit margin increased from
58.6% to 64.4%. This improvement is also primarily attributable to aggressive
leasing of new and existing space and effective control of operating costs.
The following summarizes total EBITDA for the Portfolio Properties and the
operating profit margin of such properties, which is equal to total EBITDA
expressed as a percentage of total revenue:
For the Year Ended December 31,
1997 1996 1995 1994 1993
(in thousands)
EBITDA of consolidated
Properties $677,930 $467,292 $343,875 $290,243 $244,397
EBITDA of unconsolidated
Properties 262,098 148,030 93,673 96,592 102,282
Total EBITDA of Portfolio
Properties (1) $940,028 $615,322 $437,548 $386,835 $346,679
EBITDA after minority
interest (2) $746,842 $497,215 $357,158 $307,372 $256,169
Increase in total EBITDA
from prior period 52.8% 40.6% 13.1% 11.6% 9.5%
Increase in EBITDA after
minority interest from
prior period 50.2% 39.2% 16.2% 20.0% 12.4%
Operating profit margin of
the Portfolio Properties
64.4% 62.5% (3) 63.1% 61.9% 58.6%
(1) On a pro forma basis, assuming the DRC Merger and the RPT acquisition
and related transactions had occurred on January 1, 1996, EBITDA would
be $1,019 million and $911 million in 1997 and 1996, respectively,
representing an 11.8% growth.
(2) EBITDA after minority interest represents earnings before interest,
taxes, depreciation and amortization for all Properties after
distribution to the third-party joint ventures' partners.
(3) The 1996 operating profit margin, excluding the $7.2 million merger
integration costs, is 63.2%.
<PAGE>
FUNDS FROM OPERATIONS ("FFO")
FFO, as defined by NAREIT, means the consolidated net income of the
Operating Partnership and its subsidiaries without giving effect to real estate
related 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 Operating Partnership's
ownership interest, of funds from operations of unconsolidated joint ventures,
all determined on a consistent basis in accordance with generally accepted
accounting principles. Management believes that FFO is an important and widely
used measure of the operating performance of REITs which provides a relevant
basis for comparison among REITs. FFO is presented to assist investors in
analyzing the performance of the Company. The Operating Partnership's method
of calculating FFO may be different from the methods used by other REITS.
FFO: (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 the Company's 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 the Company's liquidity. In March
1995, NAREIT modified its definition of FFO. 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
FFO. This modification was adopted by the Company beginning in 1996.
Additionally the FFO for prior periods has been restated to reflect the
modification in order to make the amounts comparative. Under the previous
definition, FFO for the year ended December 31, 1995 was $208.3 million.
The following summarizes FFO of the Operating Partnership and the Company
and reconciles income of the Operating Partnership before extraordinary items
to FFO for the periods presented:
For the Year Ended December 31,
1997 1996 1995
(in thousands)
FFO of the Operating Partnership $415,128 $281,495 $197,909
========= ========= =========
Increase in FFO from prior period 47.5% 42.2% 18.0%
========= ========= =========
Reconciliation:
Income of the Operating Partnership
before extraordinary items $203,133 $134,663 $101,505
Plus:
Depreciation and amortization from
consolidated properties 200,084 135,226 92,274
The Operating Partnership's share of
depreciation and amortization and
extraordinary items from
unconsolidated affiliates 46,760 20,159 6,466
Merger integration costs -- 7,236 --
The Operating Partnership's share of
(gains) or losses on sales of real
estate (20) (88) 2,054
Less:
Minority interest portion of
depreciation, and amortization and
extraordinary items (5,581) (3,007) (2,900)
Preferred dividends (29,248) (12,694) (1,490)
--------- --------- ---------
FFO of the Operating Partnership $415,128 $281,495 $197,909
========= ========= =========
FFO allocable to the Company $258,049 $172,468 $118,376
========= ========= =========
PORTFOLIO DATA
Operating statistics give effect to the DRC Merger and are based upon the
business and properties of the Operating Partnership and DRC on a combined
basis for all periods presented. The purpose of this presentation is to provide
a more comparable set of statistics on the portfolio as a whole. The following
statistics exclude Charles Towne Square, Richmond Town Square and Mission Viejo
Mall, which are all undergoing extensive redevelopment. The value-oriented
super-regional mall category consists of Arizona Mills, Grapevine Mills and
Ontario Mills.
Aggregate Tenant Sales Volume and Sales per Square Foot. From 1994 to
1997, total reported retail sales at mall and freestanding GLA owned by the
Operating Partnership ("Owned GLA") in the regional malls and value-oriented
super-regional malls, and all reporting tenants at community shopping centers
<PAGE>
increased 25.3% from $7,611 million to $9,539 million, a compound annual growth
rate of 7.8%. Retail sales at Owned GLA affect revenue and profitability levels
because they determine the amount of minimum rent that can be charged, the
percentage rent realized, and the recoverable expenses (common area
maintenance, real estate taxes, etc.) the tenants can afford to pay.
The following illustrates the total reported sales of tenants at Owned
GLA:
Total Tenant Annual
Sales (in Percentage
Year Ended December 31, millions) Increase
------------------------- -------------- --------------
1997 $9,539 20.4%
1996 7,921 3.6
1995 7,649 0.5
1994 7,611 4.7
Regional mall sales per square foot increased 8.8% in 1997 to $315 as
compared to $290 in 1996. In addition, sales per square foot of reporting
tenants operating for at least two consecutive years ("Comparable Sales")
increased from $298 to $318, or 6.7%, from 1996 to 1997. The Company believes
its strong sales growth in 1997 is the result of its aggressive retenanting
efforts and the redevelopment of many of the Properties. Sales per square foot
at the community shopping centers decreased in 1997 to $183 as compared to $187
in 1996. Sales statistics for value-oriented super-regional malls are not
provided as this category is comprised of new malls with insufficient history
to provide meaningful comparisons.
Occupancy Levels. Occupancy levels for regional malls increased from 84.7%
at December 31, 1996, to 87.3% at December 31, 1997. Occupancy levels for value-
oriented super-regional malls was 93.8% at December 31, 1997. Occupancy levels
for community shopping centers decreased slightly, from 91.6% at December 31,
1996, to 91.3% at December 31, 1997. Owned GLA has increased 10.7 million
square feet from December 31, 1996, to December 31, 1997, primarily as a result
of the RPT acquisition, the acquisitions of Dadeland Mall, The Fashion Center
at Keystone at the Crossing, and Keystone Shoppes and the 1997 Property
openings.
Occupancy Levels
--------------------------------------------------
Value-Oriented Community
Regional Regional Shopping
December 31, Malls Malls Centers
------------- ----------- -------------- -----------
1997 87.3% 93.8% 91.3%
1996 84.7 N/A 91.6
1995 85.5 N/A 93.6
1994 85.6 N/A 93.9
Tenant Occupancy Costs. Tenant occupancy costs as a percentage of sales
increased slightly from 11.4% in 1996 to 11.5% in 1997 in the regional mall
portfolio, excluding the SCA Properties. A tenant's ability to pay rent is
affected by the percentage of its sales represented by occupancy costs, which
consist of rent and expense recoveries. As sales levels increase, if expenses
subject to recovery are controlled, the tenant can pay higher rent. Management
believes the Operating Partnership is one of the lowest-cost providers of
retail space, which has permitted the rents in both regional malls and
community shopping centers to increase without raising a tenant's total
occupancy cost beyond its ability to pay. Management believes continuing
efforts to increase sales while controlling property operating expenses will
continue the trend of increasing rents at the Properties.
Average Base Rents. Average base rents per square foot of mall and
freestanding Owned GLA at regional malls increased 28.7%, from $18.37 in 1994
to $23.65 in 1997. Average base rents per square foot of Owned GLA at value-
oriented super-regional malls was $16.20 in 1997. In community shopping
centers, average base rents of Owned GLA increased 4.5%, from $7.12 in 1994 to
$7.44 in 1997.
<PAGE>
The following highlights this trend:
Average Base Rent per Square Foot
Mall and Freestanding Stores at:
-------------------------------------
Value-
Oriented Community
Year Ended Regional % Regional % Shopping %
December 31, Malls Change Malls Change Centers Change
-------------- -------- ------- --------- ------- --------- -------
1997 $23.65 14.4% $16.20 N/A $7.44 (2.7%)
1996 20.68 7.8 N/A N/A 7.65 4.9
1995 19.18 4.4 N/A N/A 7.29 2.4
1994 18.37 3.8 N/A N/A 7.12 N/A
INFLATION
Inflation has remained relatively low during the past four years and has
had a minimal impact on the operating performance of the Properties.
Nonetheless, substantially all of the tenants' leases contain provisions
designed to lessen the impact of inflation. Such provisions include clauses
enabling the Operating Partnership to receive percentage rentals based on
tenants' gross sales, which generally increase as prices rise, and/or
escalation clauses, which generally increase rental rates during the terms of
the leases. In addition, many of the leases are for terms of less than ten
years, which may enable the Operating Partnership to replace existing leases
with new leases at higher base and/or percentage rentals if rents of the
existing leases are below the then-existing market rate. Substantially all of
the leases, other than those for anchors, require the tenants to pay a
proportionate share of operating expenses, including common area maintenance,
real estate taxes and insurance, thereby reducing the Operating Partnership's
exposure to increases in costs and operating expenses resulting from inflation.
However, inflation may have a negative impact on some of the Operating
Partnership's other operating items. Interest and general and administrative
expenses may be adversely affected by inflation as these specified costs could
increase at a rate higher than rents. Also, for tenant leases with stated rent
increases, inflation may have a negative effect as the stated rent increases in
these leases could be lower than the increase in inflation at any given time.
YEAR 2000 COSTS
Management continues to assess the impact of the Year 2000 Issue on its
reporting systems and operations. The Year 2000 Issue exists because many
computer systems and applications abbreviate dates by eliminating the first two
digits of the year, assuming that these two digits would always be "19". Unless
corrected, this shortcut would cause problems when the century date occurs. On
that date, some computer programs may misinterpret the date January 1, 2000 as
January 1, 1900. This could cause systems to incorrectly process critical
financial and operational information, or stop processing altogether.
To help facilitate the Operating Partnership's continued growth,
substantially all of the computer systems and applications in use in its home
office in Indianapolis have been, or are in the process of being,
upgraded and modified. The Operating Partnership is of the opinion that, in
connection with those upgrades and modifications, it has addressed applicable
Year 2000 Issues as they might affect the computer systems and applications
located in its home office. The Operating Partnership continues to evaluate
what effect, if any, the Year 2000 Issue might have at its Portfolio Properties.
The Operating Partnership anticipates that the process of reviewing this issue
at the Portfolio Properties and the implementation of solutions to any Year 2000
Issue which it may discover will require the expenditure of sums which the
Operating Partnership does not expect to be material. Management expects to have
all systems appropriately modified before any significant processing
malfunctions could occur and does not expect the Year 2000 Issue will materially
impact the financial condition or operations of the Operating Partnership.
DEFINITIVE MERGER AGREEMENT
On February 19, 1998, the Company and Corporate Property Investors ("CPI")
signed a definitive agreement to merge the two companies. The merger is
expected to be completed in the third quarter of 1998 and is subject to
approval by the shareholders of the Company as well as customary regulatory and
other conditions. A majority of the CPI shareholders have already approved the
transaction. Under the terms of the agreement, the shareholders of CPI will
receive, in a reverse triangular merger, consideration valued at $179 for each
share of CPI common stock held consisting of $90 in cash, $70 in the Company's
common stock and $19 worth of 6.5% convertible preferred stock. The common
stock component of the consideration is based upon a fixed exchange ratio using
the Company's February 18, 1998 closing price of $33 5/8 per share, and is
subject to a 15% symmetrical collar based upon the price of the Company's
<PAGE>
common stock determined at closing. In the event the Company's common stock
price at closing is outside the parameters of the collar, an adjustment will be
made in the cash component of consideration. The total purchase price,
including indebtedness which would be assumed, is estimated at $5.8 billion.
SEASONALITY
The shopping center industry is seasonal in nature, particularly in the
fourth quarter during the holiday season, when tenant occupancy and retail
sales are typically at their highest levels. In addition, shopping malls
achieve most of their temporary tenant rents during the holiday season. As a
result of the above, earnings are generally highest in the fourth quarter of
each year.
ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISK
Reference is made to Item 7 of this Form 10-K under the caption "Liquidity
and Capital Resources".
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to the Index to Financial Statements contained in Item 14.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
<PAGE>
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS
The following twelve persons are the directors of the Company as
of March 31, 1997:
Birch Bayh, 70, has been a director of the Company since 1993. He has been
the senior partner in the Washington, D.C. law firm of Bayh, Connaughton, &
Malone, P.C. for more than five years. He served as a United States Senator
from Indiana from 1963 to 1981. Mr. Bayh also serves as a director of
ICN Pharmaceuticals, Inc. and Acordia, Inc.
William T. Dillard, II, 53, has been a director of the Company since 1993.
He is President and Chief Operating Officer of Dillard's, Inc., a retailing
chain, a position he has held since 1977. Mr. Dillard also serves as a
director of Dillard's, Inc., Chase Bank of Texas, N.A., Acxiom Corporation and
Barnes & Noble, Inc.
G. William Miller, 73, has been a director of the Company since the DRC
Merger. He 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, 51, has been a director of the Company since the DRC
Merger. He 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.
Terry S. Prindiville, 62, has been a director of the Company since 1993.
He 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 was also the Chairman of the Board of Directors of JCP Realty,
Inc., a wholly-owned subsidiary of J.C. Penney Company, Inc. which is a Unit
holder, and a director of Eckerd Corporation.
David Simon, 36, is the Chief Executive Officer of the Company and has been
a director since the Company's incorporation. Mr. Simon served as President of
the Company from the Company's incorporation until 1996 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 since
1990. From 1988-1990, Mr. Simon was Vice President of Wasserstein Perella &
Company, a firm specializing in mergers and acquisitions. In addition,
Mr. Simon serves as a member of the Board of Governors of the National
Association of Real Estate Investment Trusts, Inc. ("NAREIT") and the Urban
Land Institute and is a trustee and member of the International Council of
Shopping Centers. He is the son of Melvin Simon, the nephew of Herbert Simon
and a director of Healthcare Compare Corp.
Herbert Simon, 63, is the Co-Chairman of the Board of the Company and has
been a director since the Company's incorporation. Mr. Simon served as Chief
Executive Officer from the Company's incorporation through January 2, 1995,
when he was appointed Co-Chairman of the Board. In addition, Mr. Simon is the
Co-Chairman of the Board of MSA. Mr. Simon is also a director of Kohl's
Corporation, a specialty retailer.
Melvin Simon, 71, is the Co-Chairman of the Board of the Company and has
been a director since the Company's incorporation. In addition, he is the
Co-Chairman of the Board of MSA, a company he founded in 1960 with his brother,
Herbert Simon.
<PAGE>
J. Albert Smith, Jr., 57, has been a director of the Company since 1993.
He is the President of Bank One, Indiana, 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.
Richard S. Sokolov, 48, has been a director of the Company since the DRC
Merger. He served as the President and Chief Executive Officer and a director
of DRC from its incorporation until the DRC Merger. 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, member and the incoming Chairman (commencing in May of 1998) of the
Executive Committee of the International Council of Shopping Centers.
Philip J. Ward, 49, has been a director of the Company since the DRC
Merger. He 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
Investment Fund and Wyndham Hotel Corporation.
Denise DeBartolo York, 47, has been a director of the Company since the DRC
Merger. She served as a director of DRC from its incorporation until the DRC
Merger. She serves as Chairman of the Board and Chief Executive Officer of
EJDC and DeBartolo, Inc. Ms. DeBartolo 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.
Melvin Simon, Herbert Simon, David Simon and Richard Sokolov are the four
persons elected as directors by the holders of the Class B Common Stock. M.
Denise DeBartolo York was elected by the holder of the Class C Common Stock.
In addition, there is one vacancy on the board of directors, which will be
filled at the next Annual Meeting of Shareholders by the holders of the Class B
Common Stock.
Executive Officers
The information required by this item with respect to executive officers is
included in Part 1 of this report under the caption "Executive Officers of the
Company."
SECTION 16(A) REPORTING
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors, executive officers and beneficial owners of more than
10% of the Company's capital stock to file reports of ownership and changes of
ownership with the Securities and Exchange Commission and the New York Stock
Exchange. Based solely on its review of the copies of such forms received by
it, and/or written representations from certain reporting persons, the Company
believes that, during the year ended December 31, 1997, its directors,
executive officers and beneficial owners of more than 10% of the Company's
Common Stock have complied with all filing requirements applicable to them.
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation for
services in all capacities to the Company for the year ended December 31, 1997,
for the Chief Executive Officer and the four other most highly compensated
executive officers of the Company for the year ended December 31, 1997 (the
"Named Executives"):
SUMMARY COMPENSATION TABLE
Annual Long-Term
Compensation Compensation
------------------- ---------------------
Name and Restricted Securities All Other
Principal Stock Underlying Compen-
Position Year Salary Bonus Awards (1) Options sation (2)
- ----------------- ----- -------- -------- ---------- ---------- -----------
David Simon 1997 $600,000(3) (4) -- -- $11,012
Chief Executive 1996 400,000 $300,000 -- -- 11,056
Officer 1995 400,000 102,735 $1,365,000 -- 10,996
Richard S. 1997 $515,083 (4) -- -- $ 8,302
Sokolov (5) 1996 202,134 $175,000 -- -- --
President and
Chief
Operating Officer
William J. Garvey 1997 $395,833 $100,000 -- -- $15,563
Executive Vice 1996 375,000 85,000 -- -- 12,362
President- 1995 353,846 75,000 $1,365,000 -- 12,450
Property
Development
James A. Napoli 1997 $365,833 $125,000 -- -- $12,807
Executive Vice 1996 316,154 110,000 -- -- 11,684
President-Leasing 1995 300,000 100,000 $1,365,000 -- 11,773
James M. Barkley 1997 $291,667 $115,000 -- -- $11,463
General Counsel 1996 246,154 100,000 -- -- 11,660
and Secretary 1995 228,269 75,000 $ 830,000 -- 11,468
- ----------------------
(1) Pursuant to the Company's five-year Stock Incentive Program, a total of
1,000,000 restricted shares of Common Stock were allocated to certain key
employees of the Company on March 22, 1995, having a total value at the date
of grant of $25.0 million. A portion of the restricted shares allocated are
awarded and earned only if the Company attains annual and cumulative targets
for growth in Funds From Operations. See "_Employee Plan_Stock Incentive
Program," below. The amounts indicated in the table represent the total
amount of restricted shares allocated to the Chief Executive Officer and
other named executive officers, which are subject to performance-based
conditions before they are awarded and earned, and to subsequent vesting
requirements. Dividends are paid on restricted shares that are earned.
Earned shares vest in four equal annual installments beginning on January 1
of the year following the year in which the restricted shares are deemed
earned and awarded; provided that the participant remains an employee
immediately prior to the vesting date. At December 31, 1997, 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: David
Simon-32,760 restricted shares ($1,070,843); William J.
Garvey-32,760 restricted shares ($1,070,843); and James A.
Napoli-29,560 restricted shares ($966,243); James M. Barkley- 29,920
restricted shares ($978,010); and Richard S. Sokolov-24,163 restricted shares
($789,828).
(2) Represents annualized amounts of (i) employer paid contributions to the
Company's 401(k) retirement plan and (ii) Company 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.
(3) Effective May 1, 1997, the Compensation Committee approved an annual
salary for Mr. Simon of $600,000. Mr. Simon elected not to accept payment of
this increased salary in 1997, and therefore received an annual salary of
$400,000.
(4) Bonus awards are accrued in the year indicated, but paid in the
following year. The Compensation Committee is reviewing David Simon and
Richard Sokolov's compensation, and, as part of that review, may determine to
award cash bonus compensation to them based on the Company's 1997
performance.
(5) Does not include compensation paid by DRC prior to the DRC Merger.
<PAGE>
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 Employee Plan and held
by them at December 31, 1997. No stock options were granted to the Named
Executives in 1997.
Shares Number of Securities Value of Unexercised
Acquired Underlying In-the-Money Options
on Value Unexercised Options at December 31, 1997
Name Exercise Realized at December 31, 1997 (1)
- --------------- --------- --------- -------------------- ---------------------
Exercis- Unexercis- Exercis- Unexercis-
able able able able
------- ----------- ---------- ---------
David Simon -- -- 200,000 -- $2,087,500 --
William J. Garvey 20,000 $180,000 55,000 -- 574,063 --
James A. Napoli -- -- 50,000 -- 521,875 --
James M. Barkley -- -- 75,000 -- 782,813 --
Richard S. Sokolov -- -- -- -- -- --
____________
(1)The closing price of the Company's Common Stock as reported by the New York
Stock Exchange on December 31, 1997 was $32.6875. Value is calculated on
the basis of the difference between the exercise price and $32.6875,
multiplied by the number of shares of Common Stock underlying "in-the-money"
options.
EMPLOYEE PLAN
General. Under the Operating Partnership's Employee Stock Plan (the
"Employee Plan") a maximum of 4,595,000 shares of Common Stock (subject to
adjustment) are available for issuance to eligible officers and key employees.
The Employee Plan is administered by the Compensation Committee of the Board of
Directors (the "Committee") which consists of persons not eligible to
participate in the Employee Plan. During the ten-year period following the
adoption of the Employee Plan, the Committee may, subject to the terms of the
Employee Plan, grant to key employees (including officers and directors who are
employees) of the Operating Partnership or its "affiliates" (as defined in the
Employee Plan) the following types of awards: incentive stock options ("ISOs")
within the meaning of section 422 of the Code, "nonqualified stock options"
("NQSOs"), stock appreciation rights ("SARs"), performance units and shares of
restricted or unrestricted Common Stock.
Any stock option granted under the Employee Plan may be exercised over a
period determined by the Committee in its discretion. The exercise price of an
option (the "Option Price") may not be less than the fair market value of the
shares of the Common Stock on the date of grant. The 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 grant,
provided however, that no option may be exercisable more than ten years after
the date of grant. The Board of Directors of the Company in its capacity as a
general partner of the Operating Partnership may amend, suspend or discontinue
the Employee Plan at any time. Certain specified amendments must be approved
by shareholders.
Option Grants. No options were granted under the Employee Plan during
1997. All options granted to date under the Employee Plan are exercisable at
the fair market value of the 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.
<PAGE>
Stock Incentive Program.
Two stock incentive programs are currently in effect.
In October 1994, under the Employee Plan of the Company and the Operating
Partnership, the Company's Compensation Committee approved a five-year stock
incentive program (the "Stock Incentive Program"), under which shares of
restricted common stock of the Company were granted to certain employees at no
cost to those employees. A percentage of each of these restricted stock grants
can be earned and awarded each year if the Company attains certain growth
targets measured in Funds From Operations, as those growth targets may be
established by the Company's Compensation Committee from time to time. Any
restricted stock earned and awarded vests in four installments of 25% each on
January 1 of each year following the year in which the restricted stock is
deemed earned and awarded.
In 1994, and prior to the DRC Merger, DRC also established a five-year
stock incentive program (the "DRC Plan") under which shares of restricted
common stock were granted to certain DRC employees at no cost to those
employees. The DRC Plan also provided that this restricted stock would be
earned and awarded based upon DRC's attainment of certain economic goals
established by the Compensation Committee of DRC's Board of Directors. At the
time of the DRC Merger, the Company and the Operating Partnership agreed to
assume the terms and conditions of the DRC Plan and the economic criteria upon
which restricted stock under both the Stock Incentive Program and the DRC Plan
would be deemed earned and awarded were aligned with one another. Further,
other terms and conditions of the DRC Plan and Stock Incentive Program were
modified so that beginning with calendar year 1996, the terms and conditions of
these two programs are substantially the same. It should be noted that the
terms and conditions concerning vesting of the restricted stock grant to the
Company's President and Chief Operating Officer, a former DRC employee, are
different from those established by the DRC Plan and are specifically set forth
in the employment contract between the Company and such individual.
In March 1995, an aggregate of 1,000,000 shares of restricted stock was
granted to 50 executives pursuant to the Stock Incentive Program, subject to
the performance standards, vesting requirements and other terms of the Stock
Incentive Program. Prior to the DRC Merger, 2,108,000 shares of DRC common
stock were deemed available for grant pursuant to the DRC Plan to certain
designated employees of DRC, also subject to certain performance standards,
vesting requirements and other terms of the DRC Plan. During 1997, 1996 and
1995, a total of 448,753; 200,030; and 144,196 shares of common stock of the
Company, respectively, net of forfeitures, were deemed earned and awarded under
the Stock Incentive Program and the DRC Plan.
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 the Company, 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 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
The Operating Partnership has a non-qualified deferred compensation plan
(the "Deferred Compensation Plan") that provides deferred compensation to
certain executives and key employees. Under the Deferred Compensation Plan, a
participant may defer all or a part of his compensation. The Company, at its
discretion, may contribute a matching amount equal to a rate selected by the
Company, and an additional incentive contribution amount on such terms as the
Company may specify. All participant deferrals and Company matching and
incentive contributions are credited to a participant's account and remain
general assets of the Company. 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 the Company, a participant becomes vested
in Company 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 the Company, a
participant becomes 100% vested in his account.
<PAGE>
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 the Company's general
creditors in the event of the Company'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 the Company.
OTHER RETIREMENT PLANS
The Operating Partnership and certain related entities maintain a tax-
qualified retirement savings plan for eligible employees which contains a cash
or deferred arrangement described in section 401(k) of the Code. Under the
plan, eligible employees may defer up to a maximum of 12% of their compensation
(as defined in the plan), subject to certain limits imposed by the Code.
Participants' salary deferrals are matched by participating employers in an
amount equal to 100% of the first 2% of such deferrals and 50% of the next 4%
of such deferrals. In addition, participating employers contribute annually 3%
of eligible employees' compensation (as defined in the plan). Amounts deferred
by employees are immediately vested; amounts contributed by participating
employers 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
No member of the Compensation Committee during 1997 was an officer,
employee or former officer of the Company or any of its subsidiaries or had any
relationship requiring disclosure herein pursuant to regulations of the
Securities and Exchange Commission. No executive officer of the Company served
as a member of a compensation committee or a director of another entity under
circumstances requiring disclosure herein pursuant to regulations of the
Securities and Exchange Commission.
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock, Class A Common Stock and
Class C Common Stock ("Voting Stock") and the units of limited partnership
interest ("Units") of the Company's majority-owned subsidiary, Simon
DeBartolo Group, L.P. (the "Operating Partnership") as of March 31, 1998
by (1) each director and nominee for director, (2) the executive officers named
in the Summary Compensation Table and (3) the directors and executive officers
of the Company, as a group. Unless otherwise indicated in the footnotes,
shares or Units are owned directly, and the indicated person has sole voting
and investment power.
Number of
Shares of Percent of Number of Percent of
Voting Stock Voting Stock Units Units
NAME OF Beneficially Beneficially Beneficially Beneficially
BENEFICIAL OWNER Owned(1)(2)(3) Owned (4) Owned Owned (5)
- ----------------- -------------- ------------ ------------ -----------
Birch Bayh 17,000 * -- --
William T. 20,200 (7) * -- --
Dillard, II
G. William Miller 10,440 * -- --
Fredrick W. Petri 14,520 * -- --
Terry S. 13,000 * -- --
Prindiville
David Simon 2,250,420 (8) 2.0 2,013,010 1.3%
Herbert Simon 5,597,851 (9) 4.9 5,554,250 (9) 3.5%
Melvin Simon 7,153,795 (9) 6.1 7,116,385 (9) 4.5%
J. Albert Smith, Jr. 15,000 * -- -
Richard S. Sokolov 191,960 * 60,835 *
Denise DeBartolo York 1,318,062 (6) 1.2 1,290,439 (6) *
Philip J. Ward 6,802 * -- --
James M. Barkley 104,920 * -- --
William J. Garvey 111,130 * 21,200 *
James A. Napoli 79,560 * -- --
All directors and
executive
officers as a
group (10)
(20 persons) 51,403,696 32.7% 46,932,423 29.6%
__________
* Less than one percent
(1) Includes the following shares of Common Stock that may be purchased pursuant
to stock options that are exercisable within 60 days: Birch Bayh-17,000;
William T. Dillard, II-14,000; G. William Miller-6,360; Fredrick W.
Petri-6,360; Terry S. Prindiville-11,000; David Simon-200,000; Denise
DeBartolo York-3,000; J. Albert Smith, Jr.-14,000; Philip J. Ward-6,360;
William J. Garvey-55,000; James A. Napoli-50,000; James M. Barkley-75,000;
and all directors and executive officers as a group-680,580.
(2) Includes the following shares of Common Stock that may be received upon
exchange of Units held by the following persons on March 31, 1998: David
Simon-2,013,010; Melvin Simon-7,116,385; Herbert Simon-5,554,250; Richard S.
Sokolov-60,835; Denise DeBartolo York-1,290,439; William J. Garvey
-21,200; and all directors and executive officers as a group-46,932,423.
Units held by limited partners are exchangeable either for shares of Common
Stock (on a one-to-one basis) or for cash as selected by the independent d
directors.
(3) Includes the following restricted shares which are subject to vesting
requirements: David Simon-32,760; William J. Garvey-32,760; James A.
Napoli-29,560; James M. Barkley-29,920; Richard S. Sokolov-24,163; and all
directors and executive officers as a group-291,443.
(4) At March 31, 1998, there were 106,484,009 shares of Common Stock,
3,200,000 shares of Class B Common Stock, and 4,000 shares of Class C Common
Stock. Upon the occurrence of certain events, shares of Class B Common Stock
and Class C Common Stock convert automatically into Common Stock (on a
share-for-share basis). The percentages in this column assume the
exercise of stock options and exchange of Units for shares of Common Stock.
(5) At March 31, 1998, there were 173,747,714 outstanding Units of which the
Company owned, directly or indirectly, 109,688,009 or 63.1%. The
percentages in this column assume that no Units are exchanged for shares of
Common Stock.
(6) Does not include shares of Voting Stock and Units held by DeBartolo, Inc.
and certain related persons and entities. See "PRINCIPAL SHAREHOLDERS."
(7) Does not include 10,000 shares of Common Stock owned by Mr. Dillard's spouse
who has sole voting and investment power of such shares.
(8) Includes Units owned by trusts of which David Simon is a beneficiary.
(9) Does not include shares of Voting Stock and Units held by Melvin Simon &
Associates, Inc. See "PRINCIPAL SHAREHOLDERS."
(10)Includes shares of Voting Stock and Units held by DeBartolo, Inc. and Melvin
Simon & Associates, Inc. See "PRINCIPAL SHAREHOLDERS."
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information concerning each person
(including any group) known to the Company to beneficially own more than five
percent (5%) of any class of Voting Stock as of March 31, 1997. Unless
otherwise indicated in the footnotes, shares are owned directly, and the
indicated person has sole voting and investment power.
Amount and Percent of
Name and Address of Nature of Voting Stock
Beneficial Owner Beneficial Beneficially
Ownership (1) Owned (2)
---------------------------- -------------- ------------
DeBartolo, Inc. et al. (3) 19,357,260 (4) 15.7%
7620 Market Street
Youngstown, OH 44513
Melvin Simon & Associates, Inc.(5) 14,651,581 (6) 12.1%
115 W. Washington Street
Indianapolis, IN 46204
Princeton Services, Inc. 9,059,375 (7) 8.3%
800 Scudders Mill Road
Plainsboro, New Jersey 08536
Stichting Pensionfonds ABP 6,107,192 (8) 5.6%
P.O. Box 2889
6401 D J Harleen
The Netherlands
(1) Voting Stock includes shares of Common Stock, Class B Common Stock and
Class C Common Stock. Upon the occurrence of certain events, shares of Class
B Common Stock and Class C Common Stock convert automatically into Common
Stock (on a share-for-share basis). The amounts in the table also include
shares of Common Stock that may be issued upon the exchange of Units. Units
held by limited partners are exchangeable either for shares of Common Stock
(on a one-to-one basis) or for cash as selected by the independent directors.
(2) The percentages in this column assumes the exercise of stock options
and exchange of Units for shares of Common Stock.
(3) According to a Schedule 13D dated August 9, 1996, the beneficial owners
of the securities are DeBartolo, Inc. ("DI"), certain subsidiaries of DI,
held directly or indirectly through The Edward J. DeBartolo Corporation, the
estate of the late Edward J. DeBartolo, members of the DeBartolo family,
including Edward J. DeBartolo, Jr. and M. Denise DeBartolo York, or trusts
established for the benefit of members of the DeBartolo family or
partnerships in which the foregoing persons hold partnership interests.
(4) Includes 22,207,888 shares of Common Stock issuable upon exchange of
Units and 4,000 shares of Class C Common Stock.
(5) Melvin Simon & Associates, Inc., is owned 69% by Melvin Simon and 31%
by Herbert Simon.
(6) Includes 11,451,581 shares of Common Stock issuable upon exchange of
Units and 3,200,000 shares of Class B Common Stock.
(7) According to a Schedule 13G dated January 26, 1998, the reporting
person, who is the managing general partner of Merrill Lynch Asset
Management, L.P. and Fund Asset Management, L.P., owns 9,059,375 shares of
Common Stock.
(8) According to a Schedule 13G filed for the period ended December 31,
1997, the reporting person beneficially owns 6,107,192 shares of Common
Stock.
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH THE SIMONS
The Company has entered into noncompetition agreements with Melvin Simon,
Herbert Simon and David Simon (collectively, the "Simons"), all of whom are
executive officers of the Company. 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 the Company 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 the Company, and David Simon
is prohibited from engaging in the shopping center business in North America
other than through the Company 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 properties in which the Simons previously
owned an interest that were not contributed to the Company or Simon Property
Group, L.P. ("SPG, LP") (the "Excluded Properties") and in M.S. Management
Associates, Inc. (the "Management Company"), and serving as directors and
officers of the 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 Management Company has entered into management agreements with the
partnerships that hold the Excluded Properties, some of which agreements were
not negotiated on an arms-length basis. Management believes, however, that the
terms of such management agreements are fair to the Company.
In connection with the use of the aggregate proceeds of the initial public
offering and related financing to repay certain indebtedness encumbering the
Operating Partnership's properties, the Company 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 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 the Company, or the provision by the
Company of back-up guaranties in favor of the Simons, on approximately $111
million of such debt.
MANAGEMENT COMPANY
The Management Company manages regional malls and community shopping
centers not wholly-owned by the Operating Partnership and certain other
properties and also engages in certain property development activities. Of the
outstanding voting common stock of the Management Company, 95% is owned by the
Simons, which will enable the Simons to control the election of the board of
directors of the Management Company. The Operating Partnership owns common
stock representing 80% of the value of the outstanding stock of the Management
Company, all of the outstanding participating preferred stock of the Management
Company and a mortgage note of the Management Company, which entitles the
Company to more than 90% of the anticipated after-tax economic benefits, in the
form of dividends and interest, of the Management Company. The Management
Company must receive the approval of a majority of the Independent Directors in
order to provide services for any property not currently managed by the
Management Company unless the Company owns at least a 25% interest in such
property. The Management Company has agreed with the Company that, if in the
future the Company is permitted by applicable tax law and regulations to
conduct any or all of the activities that are now being conducted by the
Management Company, the Management Company will not compete with the Company
with respect to new or renewal business of this nature.
RELATIONSHIP WITH BAYH, CONNAUGHTON & MALONE, P.C.
During 1997, the Company engaged the Washington, D.C. law firm of Bayh,
Connaughton & Malone, P.C. to provide certain legal services. Birch Bayh, a
director of the Company, is a shareholder of such firm. As of April 1, 1998,
such firm merged with another law firm and is now known as Oppenheimer, Wolff,
Donnelly & Bayh, LLP.
<PAGE>
OTHER TRANSACTIONS
<PAGE>
Phillip J. Ward, a director of the Company is the Head of Real Estate
Investments for CIGNA Investments, Inc., which has, or its affiliates have,
made mortgage loans to the Company or its affiliates totaling approximately
$290 million. These loans are considered to be arm's length agreements.
An affiliate of the Company is a general partner in Lakeline Developers
and Lakeline Plaza Developers, both Texas general partnerships in which
Dillard's, Inc. is the other general partner. Mr. William Dillard II, a member
of the Company's Board of Directors, is an officer, director and shareholder of
Dillard's, Inc. On January 31, 1998, Dillard's, Inc. contributed a fifteen
percent (15%) interest in both Lakeline Developers and Lakeline Plaza
Developers to the Operating Partnership in exchange for 191,634 Units.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
Reports on Form 8-K
Four Forms 8-K were filed during the fourth quarter ended
December 31, 1997.
On October 14, 1997. Under Item 5 - Other Events, the
Company reported that its primary operating partnership and
subsidiary, Simon DeBartolo Group, L.P., had completed its
cash tender offer to purchase all of the outstanding
beneficial interests in The Retail Property Trust. In
addition, under Item 7 - Financial Statements and Exhibits,
the Company included, as an exhibit, a press release which
outlined additional information regarding the offer.
On November 21, 1997. Under Item 5 - Other Events, the
Company reported that it made available additional
ownership and operational information concerning the
Company, Simon DeBartolo Group, L.P. and the properties
owned or managed as of September 30, 1997, in the form of a
Supplemental Information package. A copy of the package was
included as an exhibit to the 8-K filing.
On November 24, 1997. Under Item 5 - Other Events, the
Company announced the sale of 310,000 shares of its common
stock to an institutional investor for $33.125 per share.
In addition, under Item 7 - Financial Statements and
Exhibits, the Company made available, in the form of
exhibits, certain documents relating to the sale.
On December 23, 1997. Under Item 5 - Other Events, the
Company announced the sale of 301,887 shares of its common
stock to Legg Mason Wood Walker, Incorporated for $31.6344
per share. In addition, under Item 7 - Financial Statements
and Exhibits, the Company made available, in the form of
exhibits, certain documents relating to the sale.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Simon DeBartolo Group, Inc.:
We have audited the accompanying consolidated balance sheets of SIMON DeBARTOLO
GROUP, INC. (a Maryland corporation) and subsidiaries as of December 31, 1997
and 1996, and the related consolidated statements of operations, shareholders'
equity and cash flows for each of the three years in the period ended December
31, 1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Simon DeBartolo
Group, Inc. and subsidiaries as of December 31, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Indianapolis, Indiana
February 17, 1998
<TABLE>
Balance Sheets
Simon DeBartolo Group, Inc. Consolidated
(Dollars in thousands, except per share amounts)
<CAPTION>
December 31, December 31,
1997 1996
----------- -----------
<S> <C> <C>
ASSETS:
Investment properties, at cost $6,867,354 $5,301,021
Less - accumulated depreciation 461,792 279,072
----------- -----------
6,405,562 5,021,949
Cash and cash equivalents 109,699 64,309
Restricted cash 8,553 6,110
Tenant receivables and accrued revenue, net 188,359 166,119
Notes and advances receivable from Management Company
and affiliate 93,809 75,452
Investment in partnerships and joint ventures, at equity 612,140 394,409
Investment in Management Company and affiliates 3,192 -
Other investment 53,785 -
Deferred costs and other assets 164,413 138,492
Minority interest 23,155 29,070
----------- -----------
Total assets $7,662,667 $5,895,910
=========== ===========
LIABILITIES:
Mortgages and other indebtedness $5,077,990 $3,681,984
Accounts payable and accrued expenses 245,121 170,203
Cash distributions and losses in partnerships and joint
ventures, at equity 20,563 17,106
Investment in Management Company and affiliates - 8,567
Other liabilities 67,694 72,876
----------- -----------
Total liabilities 5,411,368 3,950,736
----------- -----------
COMMITMENTS AND CONTINGENCIES (Note 13)
LIMITED PARTNERS' INTEREST IN THE OPERATING PARTNERSHIP 694,437 640,283
SHAREHOLDERS' EQUITY:
Series A convertible preferred stock, 0 and 4,000,000 shares
issued and outstanding, respectively - 99,923
Series B cumulative redeemable preferred stock, 9,200,000 shares
authorized, 8,000,000 issued and outstanding 192,989 192,989
Series C cumulative redeemable preferred stock, 3,000,000 and 0,
shares authorized issued and outstanding, respectively 146,072 -
Common stock, $.0001 par value, 375,796,000 and 374,796,000,
shares authorized and 106,439,001 and 93,676,415 issued and
outstanding, respectively 10 9
Class B common stock, $.0001 par value, 12,000,000 shares
authorized, 3,200,000issued and outstanding 1 1
Class C common stock, $.0001 par value, 4,000 shares authorized,
issued and outstanding - -
Capital in excess of par value 1,491,908 1,189,919
Accumulated deficit (263,308) (172,596)
Unrealized gain on long-term investment 2,420 -
Unamortized restricted stock award (13,230) (5,354)
------------ ------------
Total shareholders' equity 1,556,862 1,304,891
------------ ------------
Total liabilities, limited partners' interest and
shareholders' equity $7,662,667 $5,895,910
============ ============
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
Statements of Operations
Simon DeBartolo Group, Inc. Consolidated
(Dollars in thousands, except per share amounts)
<CAPTION>
For the Year Ended December 31,
1997 1996 1995
<S> <C> <C> <C>
REVENUE:
Minimum rent $641,352 $438,089 $307,857
Overage rent 38,810 30,810 23,278
Tenant reimbursements 322,416 233,974 192,994
Other income 51,589 44,831 29,528
--------- --------- --------
Total revenue 1,054,167 747,704 553,657
--------- --------- --------
EXPENSES:
Property operating 176,846 129,094 96,851
Depreciation and amortization 200,900 135,780 92,739
Real estate taxes 98,830 69,173 53,941
Repairs and maintenance 43,000 31,779 24,614
Advertising and promotion 32,891 24,756 18,888
Merger integration costs 0 7,236 0
Provision for credit losses 5,992 3,460 2,858
Other 18,678 14,914 12,630
--------- --------- ---------
Total operating expenses 577,137 416,192 302,521
--------- --------- ---------
OPERATING INCOME 477,030 331,512 251,136
INTEREST EXPENSE 287,823 202,182 150,224
--------- --------- ---------
INCOME BEFORE MINORITY INTEREST 189,207 129,330 100,912
MINORITY INTEREST (5,270) (4,300) (2,681)
GAINS ON SALES OF ASSETS, NET 20 88 1,871
--------- --------- ---------
INCOME BEFORE UNCONSOLIDATED ENTITIES 183,957 125,118 100,102
INCOME FROM UNCONSOLIDATED ENTITIES 19,176 9,545 1,403
--------- --------- ---------
INCOME BEFORE EXTRAORDINARY ITEMS 203,133 134,663 101,505
EXTRAORDINARY ITEMS 58 (3,521) (3,285)
--------- --------- ---------
INCOME OF THE OPERATING PARTNERSHIP 203,191 131,142 98,220
LESS--LIMITED PARTNERS' INTEREST IN
THE OPERATING PARTNERSHIP 65,954 45,887 38,949
--------- --------- ---------
NET INCOME 137,237 85,255 59,271
PREFERRED DIVIDENDS (29,248) (12,694) (1,490)
--------- --------- ---------
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $107,989 $72,561 $57,781
========= ========= =========
BASIC EARNINGS PER COMMON SHARE:
Income before extraordinary items $1.08 $1.02 $1.08
Extraordinary items 0.00 (0.03) (0.04)
--------- --------- ---------
Net income $1.08 $0.99 $1.04
========= ========= =========
DILUTED EARNINGS PER COMMON SHARE:
Income before extraordinary items $1.08 $1.01 $1.08
Extraordinary items 0.00 (0.03) (0.04)
--------- --------- ---------
Net income $1.08 $0.98 $1.04
========= ========= =========
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
Statements of Shareholders' Equity
Simon DeBartolo Group, Inc. Consolidated
(Dollars in thousands)
<CAPTION>
All Unrealized
Classes of Capital in Gain on Unamortized Total
Preferred Common Excess of Accumulated Long-Term Restricted Shareholders'
Stock Stock Par Value Deficit Investment Stock Award Equity
----------- ----------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994 $- $6 $135,565 ($78,264) $- $- $57,307
Stock options exercised (6,876 shares) 164 164
Common stock issued, net
of issuance costs (9,797,563 shares) 1 221,416 - 221,417
Series A Preferred stock issued, net of
issuance costs (4,000,000 shares) 99,923 99,923
Stock incentive program (143,311 shares) 3,608 (3,605) 3
Amortization of stock incentive 918 918
Transfer out of limited partners' interest
in the Operating Partnership (94,035) (94,035)
Net income 59,271 59,271
Distributions (112,022) (112,022)
----------- ----------- ----------- ----------- ----------- ----------- ------------
Balance at December 31, 1995 99,923 7 266,718 (131,015) - (2,687) 232,946
Stock options exercised (372,151 shares) 8,677 8,677
Common stock issued in connection
with DRC Merger (37,873,965 shares) 3 922,276 922,279
Class C Common stock issued in
connection with DRC Merger (4,000 shares) 100 100
Common stock issued in connection with
severance program (70,074 shares) 1,841 1,841
Series B Preferred stock issued, net of
issuance costs (8,000,000 shares) 192,989 192,989
Stock incentive program (200,030 shares) 4,751 (4,751) -
Amortization of stock incentive 2,084 2,084
Transfer out of limited partners' interest
in the Operating Partnership (14,382) (14,382)
Net income 85,255 85,255
Distributions (126,836) (126,836)
Other (62) (62)
----------- ----------- ----------- ----------- ----------- ----------- ------------
Balance at December 31, 1996 292,912 10 1,189,919 (172,596) - (5,354) 1,304,891
Common stock issued to the public
(5,858,887 shares) 1 190,026 190,027
Common stock issued in connection
with acquisitions (2,193,037 shares) 70,000 70,000
Stock options exercised (369,902 shares) 8,625 8,625
Other common stock issued(82,484 shares) 2,268 2,268
Stock incentive program (448,753 shares) 14,016 (13,262) 754
Amortization of stock incentive 5,386 5,386
Series C Preferred stock issued
(3,000,000 shares) 146,072 146,072
Conversion of Series A Preferred stock
into 3,809,523 shares of common stock (99,923) 99,923 -
Transfer out of limited partners' interest
in the Operating Partnership (82,869) (82,869)
Unrealized gain on long-term investment 2,420 2,420
Net income 137,237 137,237
Distributions (227,949) (227,949)
----------- ----------- ----------- ----------- ----------- ----------- ------------
Balance at December 31, 1997 $339,061 $11 $1,491,908 ($263,308) $2,420 ($13,230) $1,556,862
=========== =========== =========== =========== =========== =========== ============
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
Statements of Cash Flows
Simon DeBartolo Group, Inc. Consolidated
(Dollars in thousands)
<CAPTION>
For the Year Ended December 31,
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $137,237 $85,255 $59,271
Adjustments to reconcile net income to net cash
provided by operating activities_
Depreciation and amortization 208,539 143,582 101,262
Extraordinary items (58) 3,521 3,285
Gains on sales of assets, net (20) (88) (1,871)
Limited partners' interest in Operating Partnership 65,954 45,887 38,949
Straight-line rent (9,769) (3,502) (1,126)
Minority interest 5,270 4,300 2,681
Equity in income of unconsolidated entities (19,176) (9,545) (1,403)
Changes in assets and liabilities_
Tenant receivables and accrued revenue (23,284) (6,422) 5,502
Deferred costs and other assets (30,203) (12,756) (14,290)
Accounts payable, accrued expenses and other
liabilities 36,417 (13,768) 2,076
----------- ----------- -----------
Net cash provided by operating activities 370,907 236,464 194,336
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions (980,427) (56,069) (88,272)
Capital expenditures (305,178) (195,833) (98,220)
Cash from DRC Merger, acquisitions and consolidation
of joint ventures, net 19,744 37,053 4,346
Change in restricted cash (2,443) 1,474 0
Proceeds from sale of assets 599 399 2,550
Investments in unconsolidated entities (47,204) (62,096) (22,180)
Distributions from unconsolidated entities 144,862 36,786 6,214
Investments in and advances (to)/from Management
Company (18,357) 38,544 (27,117)
Other investing activities (55,400) 0 0
----------- ----------- ------------
Net cash used in investing activities (1,243,804) (199,742) (222,679)
------------ ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sales of common and preferred
stock, net 344,438 201,704 242,377
Minority interest distributions, net (219) (5,115) (3,680)
Distributions to shareholders (227,949) (166,640) (104,785)
Distributions to limited partners (122,442) (90,763) (72,941)
Mortgage and other note proceeds, net of
transaction costs 2,976,222 1,293,582 456,520
Mortgage and other note principal payments (2,030,763) (1,267,902) (531,566)
Other refinancing transaction (21,000) 0 0
------------ ----------- -----------
Net cash provided by (used in) financing activities 918,287 (35,134) (14,075)
------------ ----------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 45,390 1,588 (42,418)
CASH AND CASH EQUIVALENTS, beginning of period 64,309 62,721 105,139
------------ ----------- -----------
CASH AND CASH EQUIVALENTS, end of period $109,699 $64,309 $62,721
============ =========== ===========
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
SIMON DEBARTOLO GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1. ORGANIZATION
Simon DeBartolo Group, Inc. (the "Company"), formerly known as Simon
Property Group, Inc., is a self-administered and self-managed real estate
investment trust ("REIT") under the Internal Revenue Code of 1986, as amended
(the "Code"). On August 9, 1996, the Company acquired the national shopping
center business of DeBartolo Realty Corporation ("DRC"), The Edward J.
DeBartolo Corporation and their affiliates as the result of the DRC Merger.
(see Note 3)
Simon DeBartolo Group, L.P. ("the Operating Partnership") is a subsidiary
partnership of the Company. The Company, through the Operating Partnership, is
engaged primarily in the ownership, operation, management, leasing,
acquisition, expansion and development of real estate properties, primarily
regional malls and community shopping centers. On December 31, 1997, Simon
Property Group, L.P., a Delaware limited partnership ("SPG, LP"), merged (the
"Partnership Merger") into the Operating Partnership. Prior to the Partnership
Merger, the Operating Partnership and the Company held all of the partnership
interests of SPG, LP, which held interests in certain of the Portfolio
Properties (as defined below). As a result of the Partnership Merger, the
Operating Partnership now directly or indirectly owns or holds interests in all
of the Portfolio Properties and directly holds substantially all of the
economic interest in the Management Company (described below).
As of December 31, 1997, the Operating Partnership owns or holds an
interest in 202 income-producing properties, which consist of 120 regional
malls, 72 community shopping centers, three specialty retail centers, four
mixed-use properties and three value-oriented super-regional malls in 33 states
(the "Properties"). The Operating Partnership also owns interests in one
specialty retail center and two community centers currently under construction
and nine parcels of land held for future development (collectively, the
"Development Properties", and together with the Properties, the "Portfolio
Properties"). At December 31, 1997 and 1996, the Company's ownership interest
in the Operating Partnership was 63.9% and 61.4%, respectively. The Operating
Partnership also holds substantially all of the economic interest in M.S.
Management Associates, Inc. (the "Management Company"). See Note 7 for a
description of the activities of the Management Company.
The Operating Partnership is subject to risks incidental to the ownership
and operation of commercial real estate. These include, among others, the risks
normally associated with changes in the general economic climate, trends in the
retail industry, creditworthiness of tenants, competition for tenants, changes
in tax laws, interest rate levels, the availability of financing, and potential
liability under environmental and other laws. Like most retail properties, the
Operating Partnership's regional malls and community shopping centers rely
heavily upon anchor tenants. As of December 31, 1997, 248 of the approximately
715 anchor stores in the Properties were occupied by three retailers. An
affiliate of one of these retailers is a limited partner in the Operating
Partnership and the Chief Operating Officer of another of these retailers is a
director of the Company.
2. BASIS OF PRESENTATION
The accompanying consolidated financial statements of the Company include
all accounts of the Company, its wholly-owned qualified REIT subsidiaries and
its majority-owned subsidiary, the Operating Partnership. All significant
intercompany amounts have been eliminated. The accompanying consolidated
financial statements have been prepared in accordance with generally accepted
accounting principles, which requires management to make estimates and
assumptions that affect the reported amounts of the Company's assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and revenues and expenses during the reported periods.
Actual results could differ from these estimates.
Properties which are wholly-owned ("Wholly-Owned Properties") or owned
less than 100% and are controlled by the Operating Partnership ("Minority
Interest Properties") are accounted for using the consolidated method of
accounting. Control is demonstrated by the ability of the general partner to
manage day-to-day operations, refinance debt and sell the assets of the
partnership without the consent of the limited partner and the inability of the
limited partner to replace the general partner. Investments in partnerships and
joint ventures which represent noncontrolling 14.7% to 50.0% ownership
interests ("Joint Venture Properties") and the investment in the Management
<PAGE>
Company (see Note 7) are accounted for using the equity method of accounting.
These investments are recorded initially at cost and subsequently adjusted for
net equity in income (loss) and cash contributions and distributions.
Net operating results of the Operating Partnership are allocated after
preferred distributions (see Note 11), based on its partners' ownership
interests. The Company's weighted average ownership interest in the Operating
Partnership during 1997, 1996 and 1995 was 62.1%, 61.2% and 60.3%,
respectively. At December 31, 1997 and 1996, the Company's ownership interest
was 63.9% and 61.4%, respectively.
The deficit minority interest balance in the accompanying Consolidated
Balance Sheets represents outside partners' interests in the net equity of
certain Properties. Deficit minority interests were recorded when a partnership
agreement provided for the settlement of deficit capital accounts before
distributing the proceeds from the sale of partnership assets and/or from the
intent (legal or otherwise) and ability of the partner to fund additional
capital contributions.
3. THE DRC MERGER AND REAL ESTATE ACQUISITIONS AND DEVELOPMENTS
THE DRC MERGER
On August 9, 1996, the Company acquired the national shopping center
business of DRC for an aggregate value of $3.0 billion (the "DRC Merger"). The
acquired portfolio consisted of 49 regional malls, 11 community centers and 1
mixed-use Property. These Properties included 47,052,267 square feet of retail
space gross leasable area ("GLA") and 558,636 of office GLA. Pursuant to the
DRC Merger, the Company acquired all the outstanding common stock of DRC
(55,712,529 shares), at an exchange ratio of 0.68 shares of the Company's
common stock for each share of DRC common stock (the "Exchange Ratio"). A total
of 37,873,965 shares of the Company's common stock was issued by the Company,
to the DRC shareholders. DRC and the acquisition subsidiary merged. DRC became
a 99.9% subsidiary of the Company and changed its name to SD Property Group,
Inc. This portion of the transaction was valued at approximately $923,179,
based upon the number of DRC shares of common stock acquired (55,712,529
shares), the Exchange Ratio and the last reported sales price of the Company's
common stock on August 9, 1996 ($24.375). In connection therewith, the Company
changed its name to Simon DeBartolo Group, Inc.
In connection with the DRC Merger, the general and limited partners of
SPG, LP contributed 49.5% (47,442,212 units of partnership interest) of the
total outstanding units of partnership interest ("Units") in SPG, LP to the
operating partnership of DRC, DeBartolo Realty Partnership, L.P. ("DRP, LP") in
exchange for 47,442,212 Units of partnership interest in DRP, LP, whose name
was changed to Simon DeBartolo Group, L.P. ("SDG, LP"). The Company retained a
50.5% partnership interest (48,400,641 Units) in SPG, LP but assigned its
rights to receive distributions of profits on 49.5% (47,442,212 Units) of the
outstanding Units of partnership interest in SPG, LP to SDG, LP. The limited
partners of DRP, LP approved the contribution made by the partners of SPG, LP
and simultaneously exchanged their 38.0% (34,203,623 Units) partnership
interest in DRP, LP, adjusted for the Exchange Ratio, for a smaller partnership
interest in SDG, LP. The exchange of the limited partners' 38.0% partnership
interest in DRP, LP for Units of SDG, LP has been accounted for as an
acquisition of minority interest by the Company and is valued based on the
estimated fair value of the consideration issued (approximately $566,900). The
Units of SDG, LP may under certain circumstances be exchangeable for common
stock of the Company on a one-for-one basis. Therefore, the value of the
acquisition of the DRP, LP limited partners' interest acquired was based upon
the number of DRP, LP Units exchanged (34,203,623), the Exchange Ratio and the
last reported sales price per share of the Company's common stock on August 9,
1996 ($24.375). The limited partners of SPG, LP received a 23.7% partnership
interest in SDG, LP (37,282,628 Units) for the contribution of their 38.9%
partnership interest in SPG, LP (37,282,628 Units) to SDG, LP. The interests
transferred by the partners of SPG, LP to DRP, LP have been appropriately
reflected at historical costs.
Upon completion of the DRC Merger, the Company became a general partner of
SDG, LP with 36.9% (57,605,796 Units) of the outstanding partnership Units in
SDG, LP and became the managing general partner of SPG, LP with 24.3%
(37,873,965 Units in SPG, LP) of the outstanding partnership Units in SPG, LP.
The Company remained the sole general partner of SPG, LP with 1% of the
outstanding partnership Units (958,429 Units) and 49.5% interest in the capital
of SPG, LP, and SDG, LP became a special limited partner in SPG, LP with 49.5%
(47,442,212 Units) of the outstanding partnership Units in SPG, LP and an
additional 49.5% interest in the profits of SPG, LP. SPG, LP did not acquire
any interest in SDG, LP. Upon completion of the DRC Merger, the Company
directly and indirectly owned a controlling 61.2% (95,479,761 Units)
partnership interest in SDG, LP.
<PAGE>
For financial reporting purposes, the completion of the DRC Merger
resulted in a reverse acquisition by the Company, using the purchase method of
accounting, directly or indirectly, of 100% of the net assets of DRP, LP for
consideration valued at $1.5 billion, including related transaction costs. The
purchase price was allocated to the fair value of the assets and liabilities.
Final adjustments to the purchase price allocation were not completed until
1997, however no material changes were recorded in 1997.
Although the Company was the accounting acquirer, SDG, LP (formerly DRP,
LP) became the primary operating partnership through which the business of the
Company is being conducted. As a result of the DRC Merger, the Company's
initial operating partnership, SPG, LP, became a subsidiary of SDG, LP with 99%
of the profits allocable to SDG, LP and 1% of the profits allocable to the
Company. Cash flow allocable to the Company's 1% profit interest in SDG, LP was
absorbed by public company costs and related expenses incurred by the Company.
However, because the Company was the accounting acquirer and, upon completion
of the DRC Merger, acquired majority control of SDG, LP; SPG, LP is the
predecessor to SDG, LP for financial reporting purposes. Accordingly, the
financial statements of SDG, LP for the post-Merger periods reflect the reverse
acquisition of DRP, LP by the Company and for all pre-Merger comparative
periods, the financial statements of SDG, LP reflect the financial statements
of SPG, LP as the predecessor to SDG, LP for financial reporting purposes.
As described in Note 1, on December 31, 1997, SPG, LP merged into the
Operating Partnership and as a result, the Operating Partnership now directly
or indirectly owns or holds interests in all of the Portfolio Properties and
directly holds substantially all of the economic interest in the Management
Company.
ACQUISITIONS
On January 26, 1998, the Operating Partnership acquired a regional mall in
Pensacola, Florida for $87,283, which included Units valued at $55,523 and the
assumption of $28,935 of mortgage indebtedness.
On September 29, 1997, the Operating Partnership completed its cash tender
offer for all of the outstanding shares of beneficial interests of The Retail
Property Trust ("RPT"). RPT owned 98.8% of Shopping Center Associates ("SCA"),
which owned or had interests in twelve regional malls and one community center,
comprising approximately twelve million square feet of GLA in eight states.
Following the completion of the tender offer, the SCA portfolio was
restructured. The Operating Partnership exchanged its 50% interests in two SCA
properties to a third party for similar interests in two other SCA properties,
in which it had 50% interests, with the result that SCA now owns interests in a
total of eleven properties. Effective November 30, 1997, the Operating
Partnership also acquired the remaining 50% ownership interest in another of
the SCA properties. In addition, an affiliate of the Operating Partnership
acquired the remaining 1.2% interest in SCA. At the completion of these
transactions, the Operating Partnership now owns 100% of ten of the eleven SCA
properties, and a noncontrolling 50% ownership interest in the remaining
property. The total cost for the acquisition of RPT and related transactions is
estimated at $1,300,000, which includes shares of common stock of the Company
valued at approximately $50,000, Units valued at approximately $25,300, the
assumption of $398,500 of consolidated indebtedness and the Operating
Partnership's pro rata share of joint venture indebtedness of $76,750. Final
adjustments to the purchase price allocation were not completed at December 31,
1997. While no material changes to the allocation are anticipated, changes will
be recorded in 1998.
Also in 1997, the Operating Partnership acquired a 100% ownership interest
in the Fashion Mall at Keystone at the Crossing, along with an adjacent
community center, the remaining 30% ownership interest and management contract
of Virginia Center Commons, a noncontrolling 50% ownership of Dadeland Mall and
an additional noncontrolling 48% ownership interest of West Town Mall,
increasing its total ownership interest to 50%. The Operating Partnership paid
an aggregate purchase price of approximately $322,000 for these Properties,
which included Units valued at $1,100, common stock of the Company valued at
approximately $20,000 and the assumption of $64,772 of mortgage indebtedness,
with the remainder paid in cash.
In 1996, the Operating Partnership acquired the remaining 50% ownership
interest in two regional malls at an aggregate purchase price of $113,100 plus
472,410 Units.
During 1995, the Operating Partnership acquired the remaining ownership
interest in two regional malls, an additional controlling 50% interest in a
third mall and a controlling 75% ownership interest in a joint venture
redevelopment project. The aggregate purchase price for the regional mall
interests acquired included $18,500; 2,142,247 Units; and the assumption of
$41,250 of mortgage indebtedness. The 75% interest in the redevelopment project
was acquired for $11,406.
<PAGE>
DEVELOPMENTS
During 1997, the Operating Partnership opened four new Joint Venture
Properties at an aggregate cost of approximately $550,000 (of which the
Operating Partnership's share was approximately $206,000): Indian River
Commons, an approximately 265,000 square-foot community center, which is
immediately adjacent to an existing regional mall Property, opened in March of
1997; The Source, an approximately 730,000 square-foot regional mall opened in
September; Grapevine Mills, a 1.2 million square-foot value-oriented super-
regional mall, opened in October; and Arizona Mills, a 1.2 million square-foot
value-oriented super-regional mall, opened in November.
During 1996, the Operating Partnership opened one new approximately
$75,000 Wholly-Owned Property and three Joint Venture Properties at an
aggregate cost of approximately $250,000 (of which the Operating Partnership's
share was approximately $83,000): Cottonwood Mall, an approximately 750,000
square-foot wholly-owned regional mall opened in July; Ontario Mills, an
approximately 1.3 million square-foot value oriented super-regional mall,
opened in November; Indian River Mall, an approximately 750,000 square-foot
regional mall, also opened in November; and The Tower Shops, an approximately
60,000 square-foot specialty retail center, opened in November as well.
The Operating Partnership also opened three new Joint Venture Properties
during 1995 at an aggregate cost of approximately $370,000 (of which the
Operating Partnership's share was approximately $133,000): Circle Centre, an
approximately 800,000 square-foot regional mall, opened in September; Seminole
Towne Center, an approximately 1.1 million square-foot regional mall, also
opened in September; and Lakeline Mall, an approximately 1.1 million square-
foot regional mall, opened in October.
PRO FORMA
The following unaudited pro forma summary financial information combines
the consolidated results of operations of the Company as if the DRC Merger and
the RPT acquisition had occurred as of January 1, 1996, and were carried
forward through December 31, 1997. Preparation of the pro forma summary
information was based upon assumptions deemed appropriate by the Company. The
pro forma summary information is not necessarily indicative of the results
which actually would have occurred if the DRC Merger and the RPT acquisition
had been consummated at January 1, 1996, nor does it purport to represent the
future financial position and results of operations for future periods.
YEAR ENDED DECEMBER 31,
------------------------
1997 1996
----------- -----------
Revenue $1,172,082 $1,099,903
Net income of the Operating Partnership 195,372 154,229
Net income available to holders of common stock 103,118 86,845
Net income per share $1.02 $0.89
Net income per share - assuming dilution $1.02 $0.89
Weighted average number of shares of common
stock outstanding 101,353,723 97,991,599
Weighted average number of shares of common
stock outstanding - assuming dilution 101,737,787 98,127,131
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVESTMENT PROPERTIES
Investment Properties are recorded at cost (predecessor cost for
Properties acquired from Melvin Simon, Herbert Simon and certain of their
affiliates (the "Simons")). Investment Properties for financial reporting
purposes are reviewed for impairment on a Property-by-Property basis whenever
events or changes in circumstances indicate that the carrying value of
investment Properties may not be recoverable. Impairment of investment
Properties is recognized when estimated undiscounted operating income is less
than the carrying value of the Property. To the extent an impairment has
occurred, the excess of carrying value of the Property over its estimated fair
value will be charged to income. The Operating Partnership adopted Statement of
Financial Accounting Standards ("SFAS") No. 121 (Accounting for Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of) on January 1,
1996. The adoption of this pronouncement had no impact on the accompanying
consolidated financial statements.
<PAGE>
Investment Properties include costs of acquisitions, development and
predevelopment, construction, tenant allowances and improvements, interest and
real estate taxes incurred during construction, certain capitalized
improvements and replacements, and certain allocated overhead. Depreciation on
buildings and improvements is provided utilizing the straight-line method over
an estimated original useful life, which is generally 35 years or the term of
the applicable tenant's lease in the case of tenant inducements. Depreciation
on tenant allowances and improvements is provided utilizing the straight-line
method over the term of the related lease.
Certain improvements and replacements are capitalized when they extend the
useful life, increase capacity, or improve the efficiency of the asset. All
other repair and maintenance items are expensed as incurred.
CAPITALIZED INTEREST
Interest is capitalized on projects during periods of construction.
Interest capitalized by the Company during 1997, 1996 and 1995 was $11,589,
$5,831 and $1,515, respectively.
DEFERRED COSTS
Deferred costs consist primarily of financing fees incurred to obtain long-
term financing, costs of interest rate protection agreements, and internal and
external leasing commissions and related costs. Deferred financing costs,
including interest rate protection agreements, are amortized on a straight-line
basis over the terms of the respective loans or agreements. Deferred leasing
costs are amortized on a straight-line basis over the terms of the related
leases. Deferred costs consist of the following:
DECEMBER 31,
------------------------
1997 1996
---------- ----------
Deferred financing costs $72,348 $64,931
Leasing costs and other 121,060 97,380
---------- ----------
193,408 162,311
Lessaccumulated amortization 87,666 70,386
---------- ----------
Deferred costs, net $105,742 $91,925
========== ==========
Interest expense in the accompanying Consolidated Statements of Operations
includes amortization of deferred financing costs of $8,338, $8,434 and $8,523
for 1997, 1996 and 1995, respectively, and has been reduced by amortization of
debt premiums and discounts of $699, $632 and $0 for 1997, 1996 and 1995,
respectively.
REVENUE RECOGNITION
The Operating Partnership, as a lessor, has retained substantially all of
the risks and benefits of ownership of the investment Properties and accounts
for its leases as operating leases. Minimum rents are accrued on a straight-
line basis over the terms of their respective leases. Overage rents are
recognized when earned.
Reimbursements from tenants for real estate taxes and other recoverable
operating expenses are recognized as revenue in the period the applicable
expenditures are incurred.
<PAGE>
ALLOWANCE FOR CREDIT LOSSES
A provision for credit losses is recorded based on management's judgment
of tenant creditworthiness. The activity in the allowance for credit losses
during 1997, 1996 and 1995 was as follows:
Balance at Provision Accounts Balance at
Beginning for Credit Written End of
Year Ended of Year Losses Off Year
December 31, l997 $7,918 $5,992 $(106) $13,804
December 31, l996 $5,485 $3,460 $(1,027) $7,918
December 31, l995 $4,169 $2,858 $(1,542) $5,485
INCOME TAXES
The Company and certain of its subsidiaries are taxed as REITs under
Sections 856 through 860 of the Code and applicable Treasury regulations
relating to REIT qualification for 1994 and subsequent years. In order to
maintain qualification as a REIT, the Company is required to distribute at
least 95% of its taxable income to shareholders and meet certain other asset
and income tests as well as other requirements. It is the intention of
management to continue to adhere to these requirements and maintain the
Company's REIT status. As a REIT, the Company will generally not be liable for
federal corporate income taxes. Thus, no provision for federal income taxes has
been included in the accompanying consolidated financial statements. If the
Company fails to qualify as a REIT in any taxable year, it will be subject to
federal income taxes on its taxable income at regular corporate tax rates.
State income taxes were not significant in 1997, 1996, or 1995.
PER SHARE DATA
The Company adopted SFAS No. 128 (Earnings Per Share) in the current
period. Basic earnings per share is based on the weighted average number of
shares of common stock outstanding during the period. The weighted average
number of shares used in the computation for 1997, 1996 and 1995 was
99,920,280; 73,585,602; and 55,312,078, respectively. In accordance with SFAS
No. 128, diluted earnings per share is based on the weighted average number of
shares of common stock outstanding combined with the incremental weighted
average shares that would have been outstanding if all dilutive potential
common shares would have been converted into shares at the earliest date
possible. The diluted weighted average number of shares used in the computation
for 1997, 1996 and 1995 was 100,304,344; 73,721,134; and 55,421,692,
respectively. Units held by limited partners in the Operating Partnership may
be exchanged for shares of common stock of the Company on a one-for-one basis
in certain circumstances and therefore are not dilutive (see Note 11). The
Company's Series A, Series B and Series C preferred stock have not been
considered in the computations of diluted earnings per share for any of the
periods presented, as they did not have a dilutive effect. Accordingly, the
increase in weighted average shares outstanding under the diluted method over
the basic method in every period presented for the Company is due entirely to
the effect of outstanding options under both the Employee Plan and the Director
Plan (see Note 11). There were no changes in earnings from basic earnings per
share to diluted earnings per share for any of the periods presented.
It is the Company's policy to accrue distributions when they are declared.
The Company declared distributions in 1997 aggregating $2.01 per share. In 1996
accrued distributions totaled $1.63 per share, which included a $0.1515
distribution on August 9, 1996, in connection with the DRC Merger, designated
to align the time periods of distribution payments of the merged companies. The
current annual distribution rate is $2.02 per share. The following is a summary
of distributions per share declared in 1997 and 1996, which represented a
return of capital measured using generally accepted accounting principles:
FOR THE YEAR ENDED
DECEMBER 31,
------- --------
DISTRIBUTIONS PER SHARE 1997 1996
------- --------
From book net income $1.08 $0.99
Representing return of capital 0.93 0.64
------- --------
Total distributions $2.01 $1.63
======= ========
<PAGE>
On a federal income tax basis, 35% of the 1997 distributions and 64% of
the 1996 distributions represented return of capital.
STATEMENTS OF CASH FLOWS
For purposes of the Statements of Cash Flows, all highly liquid
investments purchased with an original maturity of 90 days or less are
considered cash and cash equivalents. Cash equivalents are carried at cost,
which approximates market value. Cash equivalents generally consist of
commercial paper, bankers acceptances, Eurodollars, repurchase agreements and
Dutch auction securities. Cash and cash equivalents do not include restricted
cash of $8,553 and $6,110 as of December 31, 1997 and 1996, respectively. Cash
is restricted at December 31, 1997 primarily to pay for construction costs for
the phase II expansion of The Forum Shops at Caesar's, and in 1996 cash was
restricted primarily for renovations, redevelopment and other activities of the
17 properties which collateralized the commercial pass-through certificates
that were retired in 1997 (see Note 9).
Cash paid for interest, net of any amounts capitalized, during 1997, 1996
and 1995 were $282,501; $197,796; and $142,345, respectively.
NONCASH TRANSACTIONS
Please refer to Notes 3 and 11 for a discussion of noncash transactions.
RECLASSIFICATIONS
Certain reclassifications have been made to the prior year financial
statements to conform to the current year presentation. These reclassifications
have no impact on net operating results previously reported.
5. INVESTMENT PROPERTIES
Investment properties consist of the following:
DECEMBER 31,
1997 1996
----------- -----------
Land $1,253,953 $1,003,221
Buildings and improvements 5,560,112 4,270,244
----------- -----------
Total land, buildings and improvements 6,814,065 5,273,465
Furniture, fixtures and equipment 53,289 27,556
----------- -----------
Investment properties at cost 6,867,354 5,301,021
Less_accumulated depreciation 461,792 279,072
----------- -----------
Investment properties at cost, net $6,405,562 $5,021,949
=========== ===========
Building and improvements includes $158,609 and $86,461 of construction in
progress at December 31, 1997 and 1996, respectively.
6. INVESTMENT IN PARTNERSHIPS AND JOINT VENTURES
As of December 31, 1997 and 1996, the unamortized excess of the Operating
Partnership's investment over its share of the equity in the underlying net
assets of the partnerships and joint ventures ("Excess Investment") was
approximately $364,119 and $232,927, respectively. This Excess Investment is
being amortized generally over the life of the related Properties. Amortization
included in income from unconsolidated entities for the years ended December
31, 1997 and 1996 was $13,878 and $5,127, respectively.
<PAGE>
Summary financial information of partnerships and joint ventures accounted
for using the equity method and a summary of the Operating Partnership's
investment in and share of income from such partnerships and joint ventures
follows.
DECEMBER 31,
-------------------------
BALANCE SHEETS 1997 1996
ASSETS: ---------- ----------
Investment properties at cost, net $2,734,686 $1,887,555
Cash and cash equivalents 101,582 61,267
Tenant receivables 87,008 58,548
Other assets 71,873 69,365
---------- ----------
Total assets $2,995,149 $2,076,735
========== ==========
LIABILITIES AND PARTNERS' EQUITY:
Mortgages and other notes payable $1,888,512 $1,121,804
Accounts payable, accrued expenses and other
liabilities 212,543 213,394
---------- ----------
Total liabilities 2,101,055 1,335,198
Partners' equity 894,094 741,537
---------- ----------
Total liabilities and partners' equity $2,995,149 $2,076,735
========== ==========
THE OPERATING PARTNERSHIP'S SHARE OF:
Total assets $1,009,691 $602,084
========== ==========
Partners' equity $227,458 $144,376
Add: Excess Investment 364,119 232,927
---------- ----------
Operating Partnership's net Investment in Joint
Ventures $591,577 $377,303
========== ==========
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------
STATEMENTS OF OPERATIONS 1997 1996 1995
REVENUE: -------- -------- --------
Minimum rent $256,100 $144,166 $83,905
Overage rent 10,510 7,872 2,754
Tenant reimbursements 120,380 73,492 39,500
Other income 19,364 11,178 13,980
-------- -------- --------
Total revenue 406,354 236,708 140,139
OPERATING EXPENSES:
Operating expenses and other 144,256 88,678 46,466
Depreciation and amortization 85,423 50,328 26,409
-------- -------- --------
Total operating expenses 229,679 139,006 72,875
-------- -------- --------
OPERATING INCOME 176,675 97,702 67,264
INTEREST EXPENSE 96,675 48,918 28,685
EXTRAORDINARY ITEMS (1,925) (1,314) (2,687)
-------- -------- --------
NET INCOME $78,075 $47,470 $35,892
======== ======== ========
THIRD-PARTY INVESTORS' SHARE OF NET INCOME
55,507 38,283 30,752
-------- -------- --------
THE OPERATING PARTNERSHIP'S SHARE
OF NET INCOME $22,568 $9,187 $5,140
AMORTIZATION OF EXCESS INVESTMENT 13,878 5,127 --
-------- -------- --------
INCOME FROM UNCONSOLIDATED ENTITIES $8,690 $4,060 $5,140
======== ======== ========
The net income or net loss for each partnership and joint venture is
allocated in accordance with the provisions of the applicable partnership or
joint venture agreement. The allocation provisions in these agreements are not
always consistent with the ownership interests held by each general or limited
partner or joint venturer, primarily due to partner preferences. The Operating
Partnership receives substantially all of the economic benefit of Biltmore
Square, Chesapeake Square, Northfield Square and Port Charlotte Town Center,
resulting from advances made to these joint ventures.
<PAGE>
7. INVESTMENT IN MANAGEMENT COMPANY
The Operating Partnership holds 80% of the outstanding common stock, 5% of
the outstanding voting common stock, and all of the preferred stock of the
Management Company. The remaining 20% of the outstanding common stock of the
Management Company (representing 95% of the voting common stock) is owned
directly by Melvin Simon, Herbert Simon and David Simon. The Management
Company, including its consolidated subsidiaries, provides management, leasing,
development, accounting, legal, marketing and management information systems
services to one Wholly-Owned Property and 27 Minority Interest and Joint
Venture Properties, Melvin Simon & Associates, Inc. ("MSA"), and certain other
nonowned properties. Because the Operating Partnership exercises significant
influence over the financial and operating policies of the Management Company,
it is reflected in the accompanying statements using the equity method of
accounting.
In connection with the DRC Merger, the Management Company purchased 95% of
the voting stock (665 shares of common stock) of DeBartolo Properties
Management, Inc. ("DPMI"), a DRC management company, for $2,500 in cash. DPMI
provides architectural, design, construction and other services primarily to
the Properties. During 1996, DPMI formed a captive insurance company, which
provided property damage and general liability insurance for certain Properties
in 1997 and 1996. The Operating Partnership paid a total of $9,628 and $2,383
to this wholly-owned subsidiary of the Management Company for insurance
coverage during 1997 and 1996, respectively. The Management Company accounts
for both DPMI and the captive insurance company using the consolidated method
of accounting.
During 1995, the Management Company liquidated its interest in a
partnership investment which held a 9.8-acre parcel of land, resulting in a
loss of $958 to the Management Company. Further, an undeveloped two-acre parcel
of land, for which the Management Company held a mortgage, was sold in December
1995, resulting in a loss of $3,949 for the Management Company.
Management, development and leasing fees charged to the Operating
Partnership relating to the Minority Interest Properties were $8,343, $6,916
and $5,353 for the years ended December 31, 1997, 1996 and 1995, respectively.
Architectural, contracting and engineering fees charged to the Operating
Partnership for 1997 and 1996 were $67,258 and $21,650, respectively. Fees for
services provided by the Management Company to MSA were $3,073, $4,000 and
$4,572 for the years ended December 31, 1997, 1996 and 1995, respectively.
At December 31, 1997 and 1996, total notes receivable and advances due
from the Management Company and consolidated affiliates were $93,809 and
$75,452, respectively, which included $11,474 due from DPMI in 1997 and 1996.
Unpaid interest income receivable from the Management Company at December 31,
1997 and 1996, was $485 and $0, respectively. All preferred dividends due from
the Management Company were paid by December 31, 1997 and 1996.
Summarized consolidated financial information of the Management Company
and a summary of the Operating Partnership's investment in and share of income
(loss) from the Management Company follows.
DECEMBER 31,
--------------------
BALANCE SHEET DATA: 1997 1996
-------- --------
Total assets $137,750 $110,263
Notes payable to the Operating Partnership at 11%, 66,859 63,978
due 2008
Shareholders' equity (deficit) 482 (11,879)
THE OPERATING PARTNERSHIP'S SHARE OF:
Total assets $128,596 $96,316
======== ========
Shareholders' equity (deficit) $3,088 $(13,567)
======== ========
<PAGE>
<TABLE>
FOR THE YEAR ENDED DECEMBER 31,
OPERATING DATA: 1997 1996 1995
------- ------- --------
<S> <C> <C> <C>
Total revenue 85,542 78,665 43,118
Operating Income 13,766 9,073 1,986
------- ------- --------
Net Income (Loss) Available for
Common Shareholders $12,366 $7,673 $(4,321)
======= ======= ========
The Operating Partnership's Share of Net Income
(Loss) after intercompany profit elimination
$10,486 $5,485 $(3,737)
======= ======= ========
</TABLE>
The Operating Partnership manages substantially all Wholly-Owned
Properties and substantially all of the Minority Interest and Joint Venture
Properties that were owned by DRC prior to the DRC Merger, and, accordingly, it
reimburses the Administrative Services Partnership ("ASP"), a subsidiary of the
Management Company, for costs incurred, including management, leasing,
development, accounting, legal, marketing, and management information systems.
Substantially all employees (other than direct field personnel) are employed by
ASP which is owned 1% by the Operating Partnership and 99% by the Management
Company. The Management Company records costs net of amounts reimbursed by the
Operating Partnership. Common costs are allocated based on payroll and related
costs. In management's opinion, allocations under the cost-sharing arrangement
are reasonable. The Operating Partnership's share of allocated common costs was
$35,341, $29,262 and $21,874 for 1997, 1996 and 1995, respectively.
Amounts payable by the Operating Partnership under the cost-sharing
arrangement and management contracts were $1,725 and $3,288 at December 31,
1997 and 1996, respectively, and are reflected in accounts payable and accrued
expenses in the accompanying Consolidated Balance Sheets.
8. OTHER INVESTMENT
On June 16, 1997, the Operating Partnership purchased 1,408,450 shares of
common stock of Chelsea GCA Realty, Inc. ("Chelsea"), a publicly traded REIT,
for $50,000 using borrowings from the Operating Partnership's Credit Facility
(see below). The shares purchased represent approximately 9.2% of Chelsea's
outstanding common stock. In addition, the Operating Partnership and Chelsea
announced that they have formed a strategic alliance to develop and acquire
manufacturer's outlet shopping centers with 500,000 square feet or more of GLA
in the United States. In accordance with SFAS No. 115 "Accounting for Certain
Investments in Debt and Equity Securities", the Operating Partnership's shares
of Chelsea stock are classified as `available-for-sale securities'.
Accordingly, the investment is being reflected at its market value of $53,785,
as of December 31, 1997, in the accompanying consolidated balance sheets in
other investments. Management currently does not intend to sell these
securities. The unrealized gain of $3,785, of which the Company's share was
$2,420, is reflected in shareholders' equity, with the remaining $1,365 being
reflected in the limited partners' interest in the Operating Partnership.
<PAGE>
9. INDEBTEDNESS
Mortgages and other notes payable consist of the following:
December 31,
1997 1996
FIXED-RATE DEBT ----------- ----------
Mortgages, net $2,006,552 $2,076,428
Unsecured public notes, net 905,547 249,161
Medium-term notes, net 279,229 --
Commercial mortgage pass-through
certificates, net 175,000 377,650
6 3/4% Putable Asset Trust
Securities, net 101,297 101,472
----------- ----------
Total fixed-rate debt 3,467,625 2,804,711
VARIABLE-RATE DEBT
Mortgages, net 451,820 561,985
Credit facility 952,000 230,000
Unsecured term loans 133,000 --
Commercial mortgage pass-through 50,000 85,288
certificates, net
Construction loan 23,545 --
----------- ----------
Total variable-rate debt 1,610,365 877,273
----------- ----------
Total mortgages and other notes
payable $5,077,990 $3,681,984
=========== ==========
FIXED-RATE DEBT
Mortgage Loans & Other Notes. The fixed-rate mortgage loans bear interest
ranging from 5.81% to 10.00% (weighted average of 7.71% at December 31, 1997),
require monthly payments of principal and/or interest and have various due
dates through 2027 (average maturity of 6.5 years). Certain of the Properties
are pledged as collateral to secure the related mortgage note. The fixed and
variable mortgage notes are nonrecourse and certain ones have partial
guarantees by affiliates of approximately $583,158. Certain of the Properties
are cross-defaulted and cross-collateralized as part of a group of properties.
Under certain of the cross-default provisions, a default under any mortgage
included in the cross-defaulted package may constitute a default under all
such mortgages and may lead to acceleration of the indebtedness due on each
Property within the collateral package. Certain of the Properties are subject
to financial performance covenants relating to debt-to-market capitalization,
minimum earnings before interest, taxes, depreciation and amortization
("EBITDA") ratios and minimum equity values.
Unsecured Notes. The Operating Partnership has consolidated nonconvertible
investment-grade unsecured debt securities aggregating $905,547 (the "Notes")
at December 31, 1997. The Notes pay interest semiannually, and bear interest
rates ranging from 6.75% to 7.625% (weighted average of 6.95%), and have
various due dates through 2009 (average maturity of 8.2 years). Certain of the
Notes are guaranteed by the Operating Partnership and contain leverage ratios
and minimum EBITDA and unencumbered EBITDA ratios.
The Operating Partnership currently has $850,000 remaining available for
issuance on its $1,000,000 shelf registration with the SEC, which became
effective in October 1997.
<PAGE>
Medium-Term Notes. On May 15, 1997, the Operating Partnership established
a Medium-Term Note ("MTN") program. On June 24, 1997, the Operating Partnership
completed the sale of $100,000 of notes under the MTN program, which bear
interest at 7.125% and have a stated maturity of June 24, 2005. On September
10, 1997, the Operating Partnership issued an additional $180,000 principal
amount of notes under its MTN program. These notes mature on September 20, 2007
and bear interest at 7.125% per annum. The net proceeds from each of these
sales were used primarily to pay down the Credit Facility (defined below).
Commercial Mortgage Pass-Through Certificates. Prior to September 2, 1997,
DeBartolo Capital Partnership ("DCP"), a Delaware general partnership whose
interest is owned 100% by affiliated entities, held commercial mortgage pass-
through certificates in the face amount of approximately $453,000. This debt
was secured by assets of 17 of the Wholly-Owned Properties. On September 2,
1997, the Operating Partnership refinanced these certificates along with a
$48,000 mortgage loan, resulting in releases of mortgages encumbering 18 of the
Properties.
The Operating Partnership subsequently issued a series of six classes of
commercial mortgage pass-through certificates cross-collaterallized by seven of
such Properties, which matures on December 19, 2004. Five of the six classes
totaling $175,000 bear fixed interest rates ranging from 6.716% to 8.233%, with
the remaining $50,000 class bearing interest at LIBOR plus 0.365%. In addition,
the Operating Partnership used the net proceeds from the sale of the $180,000
MTN's described above and net borrowings under the Credit Facility of
approximately $114,000 to retire the original certificates and the $48,000
mortgage loan.
6 3/4% Putable Asset Trust Securities (PATS). The PATS, issued December
1996, pay interest semiannually at 6.75% and mature in 2003. These notes
contain leverage ratios and minimum EBITDA and unencumbered EBITDA ratios.
VARIABLE-RATE DEBT
Mortgages and Other Notes. The variable-rate mortgage loans and other
notes bear interest ranging from 6.00% to 7.74% (weighted average of 6.58% at
December 31, 1997) and are due at various dates through 2004 (average maturity
of 2.5 years). Certain of the Properties are subject to collateral, cross-
default and cross-collateral agreements, participation agreements or other
covenants relating to debt-to-market capitalization, minimum EBITDA ratios and
minimum equity values.
Credit Facility. The Operating Partnership has a $1,250,000 unsecured
revolving credit facility (the "Credit Facility") which initially matures in
September of 1999, with a one-year extension available at the option of the
Operating Partnership. The Credit Facility bears interest at LIBOR plus 65
basis points. The maximum and average amounts outstanding during 1997 under the
Credit Facility were $952,000 and $461,362, respectively. The Credit Facility
is primarily used for funding acquisition, renovation and expansion and
predevelopment opportunities. At December 31, 1997, the Credit Facility had an
effective interest rate of 6.56%, with $284,300 available after outstanding
borrowings and letters of credit. The Credit Facility contains financial
covenants relating to a capitalization value, minimum EBITDA and unencumbered
EBITDA ratios and minimum equity values.
Unsecured Term Loans. The Operating Partnership has two unsecured term
loans outstanding at December 31, 1997. On June 30, 1997, the Operating
Partnership closed a $70,000 unsecured term loan which bears interest at LIBOR
plus 0.75% and matures on September 29, 1998. On September 17, 1997, the
Operating Partnership retired a $63,000 mortgage loan secured by Lincolnwood
Towne Center with a second unsecured term loan, which bears interest at LIBOR
plus 0.75% and matures on January 31, 1999.
<PAGE>
DEBT MATURITY AND OTHER
As of December 31, 1997, scheduled principal repayments on indebtedness
were as follows:
1998 $390,835
1999 1,209,011
2000 291,740
2001 250,091
2002 496,321
Thereafter 2,442,335
-----------
Total principal maturities 5,080,333
Net unamortized debt premiums (2,343)
-----------
Total mortgages and other notes payable $5,077,990
===========
Debt premiums and discounts are being amortized over the terms of the
related debt instruments. Certain mortgages and notes payable may be prepaid
but are generally subject to a prepayment of a yield-maintenance premium.
The unconsolidated partnerships and joint ventures have $1,888,512 and
$1,121,804 of mortgages and other notes payable at December 31, 1997 and 1996,
respectively. The Operating Partnership's share of this debt was $770,776 and
$448,218 at December 31, 1997 and 1996, respectively. This debt becomes due in
installments over various terms extending to December 28, 2009, with interest
rates ranging from 6.09% to 9.75% (weighted average rate of 7.34% at December
31, 1997). The debt matures $228,626 in 1998; $20,490 in 1999; $222,076 in
2000; $228,475 in 2001; $310,681 in 2002; and $878,164 thereafter.
The $58 net extraordinary gain in 1997 results from a $31,136 gain
realized on the forgiveness of debt and an $8,409 gain from write-offs of net
unamortized debt premiums, partially offset by the $21,000 acquisition of the
contingent interest feature on four loans, and $18,487 of prepayment penalties
and write-offs of mortgage costs associated with early extinguishments of debt.
In addition, net extraordinary losses resulting from the early extinguishment
or refinancing of debt of $3,521 and $3,285 were incurred for the years ended
December 31, 1996 and 1995, respectively.
INTEREST RATE PROTECTION AGREEMENTS
The Operating Partnership has entered into certain interest rate
protection agreements, in the form of "cap" or "swap" arrangements, with
respect to the majority of its variable-rate mortgages and other notes payable.
Cap arrangements, which effectively limit the amount by which variable interest
rates may rise, have been entered into for $380,379 principal amount of
consolidated debt and cap LIBOR at rates ranging from 5.0% to 16.765% through
the related debt's maturity. One swap arrangement, which effectively fixes the
Operating Partnership's interest rate on the respective borrowings, has been
entered into for $50,000 principal amount of consolidated debt, which matures
September 2001. In addition, swap arrangements on an additional $148,000 of
consolidated variable-rate debt were obtained in January of 1998. Costs of the
caps and swaps ($7,580) are amortized over the life of the agreements. The
unamortized balance of the cap and swap arrangements was $2,006 as of December
31, 1997. The Operating Partnership's hedging activity as a result of interest
swaps and caps resulted in net interest savings of $1,586, $2,165 and $3,528
for the years ended December 31, 1997, 1996 and 1995, respectively. This did
not materially impact the Operating Partnership's weighted average borrowing
rate.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of variable-rate mortgages and other loans represents
their fair values. The fair value of fixed-rate mortgages and other notes
payable was approximately $3,900,000 and $3,000,000 at December 31, 1997 and
1996, respectively. The fair value of the interest rate protection agreements
at December 31, 1997 and 1996, was ($692) and $5,616, respectively. At December
31, 1997 and 1996, the estimated discount rates were 6.66% and 7.25%,
respectively.
<PAGE>
10. RENTALS UNDER OPERATING LEASES
The Operating Partnership receives rental income from the leasing of
retail and mixed-use space under operating leases. Future minimum rentals to be
received under noncancelable operating leases for each of the next five years
and thereafter, excluding tenant reimbursements of operating expenses and
percentage rent based on tenant sales volume, as of December 31, 1997, are as
follows:
1998 $623,652
1999 580,561
2000 521,398
2001 469,331
2002 420,169
Thereafter 1,768,777
----------
$4,383,888
Approximately 2.9% of future minimum rents to be received are attributable
to leases with JCPenney Company, Inc., an affiliate of a limited partner in the
Operating Partnership.
11. CAPITAL STOCK
Under its Charter, as supplemented, the Company is authorized to issue
650,000,000 shares, par value $0.0001 per share, of capital stock. The
authorized shares of capital stock consist of 9,200,000 shares of Series B
preferred stock, 3,000,000 shares of Series C preferred stock, 375,796,000
shares of common stock, 12,000,000 shares of Class B common stock, 4,000 shares
of Class C common stock, and 250,000,000 shares of excess stock.
The Board of Directors is authorized to reclassify the excess stock into
one or more additional classes and series of capital stock 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, and
qualifications and terms and conditions of redemption of such class or series,
without any further vote or action by the shareholders. The issuance of
additional classes or series of capital stock may have the effect of delaying,
deferring or preventing a change in control of the Company without further
action of the shareholders. The ability of the 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 the Company. The Company has no current plans to issue any additional
classes or series of stock, except as described in Note 15.
The holders of common stock of the Company are entitled to one vote for
each share held of record on all matters submitted to a vote of shareholders,
other than for the election of directors. The holders of Class B common stock
are entitled to elect four of the thirteen members of the board. The holder of
the Class C common stock, which was issued in connection with the DRC Merger,
as described below, is entitled to elect two of the thirteen members of the
board. The Class B and Class C shares can be converted into shares of common
stock at the option of the holders. Shares of Class B common stock convert
automatically into an equal number of shares of common stock upon the sale or
transfer thereof to a person not affiliated with the Simons. Shares of Class C
common stock convert automatically into an equal number of shares of common
stock upon the sale or transfer thereof to a person not affiliated with the
members of the DeBartolo family or entities controlled by them. The Company has
reserved 3,200,000 and 4,000 shares of common stock for the possible conversion
of the outstanding Class B and Class C shares, respectively.
As described in Note 3, in connection with the DRC Merger on August 9,
1996, the Company issued 37,873,965 shares of common stock and 4,000 shares of
Class C common stock.
On September 19, 1997, the Company issued 4,500,000 shares of its common
stock in a public offering. The Company contributed the net proceeds of
approximately $146,800 to the Operating Partnership in exchange for an equal
number of Units. The Operating Partnership used the net proceeds to retire a
portion of the outstanding balance on the Credit Facility.
<PAGE>
On November 11, 1997, the Company issued 3,809,523 shares of its common
stock upon the conversion of all of the outstanding shares of the Company's
8.125% Series A Preferred Stock, $.0001 par value per share.
On September 27, 1996, the Company completed a $200,000 public offering of
8,000,000 shares of Series B cumulative redeemable preferred stock, generating
net proceeds of approximately $193,000. Dividends on the preferred stock are
paid quarterly in arrears at 8.75% per annum. The Company may redeem the
preferred stock any time on or after September 29, 2006, at a redemption price
of $25.00 per share, plus accrued and unpaid dividends. The redemption price
(other than the portion thereof consisting of accrued and unpaid dividends) is
payable solely out of the sale proceeds of other capital shares of the Company,
which may include other series of preferred shares. The Company contributed the
proceeds to the Operating Partnership in exchange for preferred Units. The
Operating Partnership pays a preferred distribution to the Company equal to the
dividends paid on the preferred stock.
On July 9, 1997, the Company sold 3,000,000 shares of 7.89% Series C
Cumulative Step-Up Premium RateSM Preferred Stock (the "Series C Preferred
Shares") in a public offering at $50.00 per share. Beginning October 1, 2012,
the rate increases to 9.89% per annum. The Company intends to redeem the Series
C Preferred Shares prior to October 1, 2012. The Series C Preferred Shares are
not redeemable prior to September 30, 2007. Beginning September 30, 2007, the
Series C Preferred Shares may be redeemed at the option of the Company in whole
or in part, at a redemption price of $50.00 per share, plus accrued and unpaid
distributions, if any, thereon. The redemption price of the Series C Preferred
Shares may only be paid from the sale proceeds of other capital stock of the
Company, which may include other classes or series of preferred stock.
Additionally, the Series C Preferred Shares have no stated maturity and are not
subject to any mandatory redemption provisions, nor are they convertible into
any other securities of the Company. The Company contributed the net proceeds
of this offering of approximately $146,000 to the Operating Partnership in
exchange for preferred units, the economic terms of which are substantially
identical to the Series C Preferred Shares. The Operating Partnership used the
proceeds to increase its ownership interest in West Town Mall (see Note 3), to
pay down the Credit Facility and for general working capital purposes.
STOCK OPTION PLANS
The Company and the Operating Partnership adopted an Employee Stock Plan
(the "Employee Plan"). The Company also adopted a Director Stock Option Plan
(the "Director Plan" and, together with the Employee Plan, the "Stock Option
Plans") for the purpose of attracting and retaining eligible officers,
directors and employees. The Company has reserved for issuance 4,595,000 shares
of common stock under the Employee Plan and 100,000 shares of common stock
under the Director Plan. If stock options granted in connection with the Stock
Option Plans are exercised at any time or from time to time, the partnership
agreement requires the Company to sell to the Operating Partnership, at fair
market value, shares of the Company's common stock sufficient to satisfy the
exercised stock options. The Company also is obligated to purchase Units for
cash in an amount equal to the fair market value of such shares.
EMPLOYEE PLAN
The Employee Plan is currently administered by the Company's Compensation
Committee (the "Committee"). During the ten-year period following the adoption
of the Employee Plan, the Committee may, subject to the terms of the Employee
Plan and in certain instances subject to board approval, grant to key employees
(including officers and directors who are employees) of the Operating
Partnership or its "affiliates" (as defined in the 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
common stock. Awards granted under the Employee Plan become exercisable over
the period determined by the Committee. The exercise price of an option may not
be less than the fair market value of the shares of the common stock on the
date of grant. The options vest 40% on the first anniversary of the date of
grant, an additional 30% on the second anniversary of the grant date and become
fully vested three years after the grant date. The options expire ten years
from the date of grant.
DIRECTOR PLAN
Directors of the Company who are not also employees of the Company or its
"affiliates" (as defined in the Director Plan) participate in the Director
Plan. Under the Director Plan, each eligible director is automatically granted
options ("Director Options") to purchase 5,000 shares of common stock upon the
director's initial election to the Board of Directors and 3,000 shares of
common stock upon each reelection of the director to the Board of Directors.
The exercise price of the options is equal to 100% of the fair market value of
the Company's common stock on the date of grant. Director Options become
exercisable on the first anniversary of the date of grant or at such earlier
<PAGE>
time as a "change in control" of the Company occurs and will remain exercisable
through the tenth anniversary of the date of grant (the "Expiration Date").
Prior to their Expiration Dates, Director Options will terminate 30 days after
the optionee ceases to be a member of the Board of Directors.
SFAS No. 123, "Accounting for Stock-Based Compensation," requires entities
to measure compensation costs related to awards of stock-based compensation
using either the fair value method or the intrinsic value method. Under the
fair value method, compensation expense is measured at the grant date based on
the fair value of the award. Under the intrinsic value method, compensation
expense is equal to the excess, if any, of the quoted market price of the stock
at the grant date over the amount the employee must pay to acquire the stock.
Entities electing to measure compensation costs using the intrinsic value
method must make pro forma disclosures of net income and earnings per share as
if the fair value method had been applied. The Operating Partnership has
elected to account for stock-based compensation programs using the intrinsic
value method consistent with existing accounting policies. The impact on pro
forma net income and earnings per share as a result of applying the fair value
method was not material.
The fair value at date of grant for options granted during the years ended
December 31, 1997, 1996 and 1995 was $3.18, $2.13 and $2.06 per option,
respectively. The fair value of the options at the date of grant was estimated
using the Black-Scholes option pricing model with the following assumptions:
December 31,
--------------------------------------------
1997 1996 1995
------------ ------------ ------------
Expected Volatility 17.63% 17.48% 17.86%
Risk-Free Interest Rate 6.82% 6.63% 6.82%
Dividend Yield 6.9% 7.5% 7.9%
Expected Life 10 years 10 years 10 years
The weighted average remaining contract life for options outstanding as of
December 31, 1997 was 6.1 years.
Information relating to the Stock Option Plans from January 1, 1995
through December 31, 1997 is as follows:
Director Plan Employee Plan
------------------ ----------------------
OPTION OPTION
PRICE PER PRICE PER
OPTIONS SHARE OPTIONS SHARE
------- ----------- ----------- -----------
SHARES UNDER OPTION AT $22.25 - $22.25 -
DECEMBER 31, 1994 40,000 $27.00 2,070,147 $25.25
Granted 15,000 24.9375 -- N/A
Exercised -- -- (6,876) 23.44
Forfeited -- -- (49,137) 23.60 (1)
------- ----------- ----------- -----------
SHARES UNDER OPTION AT $22.25 - $22.25 -
DECEMBER 31, 1995 55,000 27.00 2,014,134 25.25
Granted 44,080 23.50 (1) -- N/A
Exercised (5,000) 22.25 (367,151) 23.33 (1)
Forfeited (9,000) 25.52 (1) (24,000) 24.21 (1)
------- ----------- ----------- -----------
SHARES UNDER OPTION AT $22.25 -
DECEMBER 31, 1996 85,080 $15 - 27.38 1,622,983 25.25
Granted 9,000 29.3125 -- N/A
Exercised (8,000) 23.62 (1) (361,902) 23.29 (1)
Forfeited -- N/A (13,484) 23.99 (1)
------- ----------- ----------- -----------
SHARES UNDER OPTION AT $22.25 -
DECEMBER 31, 1997 86,080 $15 - 27.38 1,247,597 25.25
======= =========== =========== ===========
OPTIONS EXERCISABLE AT
DECEMBER 31, 1997 77,080 23.96 (1) 1,247,597 $22.90 (1)
======= =========== =========== ===========
SHARES AVAILABLE FOR GRANT AT
DECEMBER 31, 1997 920 1,611,474
======= ===========
(1) Represents the weighted average price.
STOCK INCENTIVE PROGRAMS
Two stock incentive programs are currently in effect.
In October 1994, under the Employee Plan of the Company and the Operating
Partnership, the Company's Compensation Committee approved a five-year stock
incentive program (the "Stock Incentive Program"), under which shares of
restricted common stock of the Company were granted to certain employees at no
cost to those employees. A percentage of each of these restricted stock grants
can be earned and awarded each year if the Company attains certain growth
targets measured in Funds From Operations, as those growth targets may be
established by the Company's Compensation Committee from time to time. Any
restricted stock earned and awarded vests in four installments of 25% each on
January 1 of each year following the year in which the restricted stock is
deemed earned and awarded.
<PAGE>
In 1994, and prior to the DRC Merger, DRC also established a five-year
stock incentive program (the "DRC Plan") under which shares of restricted
common stock were granted to certain DRC employees at no cost to those
employees. The DRC Plan also provided that this restricted stock would be
earned and awarded based upon DRC's attainment of certain economic goals
established by the Compensation Committee of DRC's Board of Directors. At the
time of the DRC Merger, the Company and the Operating Partnership agreed to
assume the terms and conditions of the DRC Plan and the economic criteria upon
which restricted stock under both the Stock Incentive Program and the DRC Plan
would be deemed earned and awarded were aligned with one another. Further,
other terms and conditions of the DRC Plan and Stock Incentive Program were
modified so that beginning with calendar year 1996, the terms and conditions of
these two programs are substantially the same. It should be noted that the
terms and conditions concerning vesting of the restricted stock grant to the
Company's President and Chief Operating Officer, a former DRC employee, are
different from those established by the DRC Plan and are specifically set forth
in the employment contract between the Company and such individual.
In March 1995, an aggregate of 1,000,000 shares of restricted stock was
granted to 50 executives, subject to the performance standards, vesting
requirements and other terms of the Stock Incentive Program. Prior to the DRC
Merger, 2,108,000 shares of DRC common stock were deemed available for grant to
certain designated employees of DRC, also subject to certain performance
standards, vesting requirements and other terms of the DRC Plan. During 1997,
1996 and 1995, a total of 448,753, 200,030; and 144,196 shares of common stock
of the Company, respectively, net of forfeitures, were deemed earned and
awarded under the Stock Incentive Program and the DRC Plan. Approximately
$5,386; $2,084; and $918 relating to these programs were amortized in 1997,
1996 and 1995, respectively. The cost of restricted stock grants, based upon
the stock's fair market value at the time such stock is earned, awarded and
issued, is charged to shareholders' equity and subsequently amortized against
earnings of the Operating Partnership over the vesting period.
EXCHANGE RIGHTS
Limited partners in the Operating Partnership have the right to exchange
all or any portion of their Units for shares of common stock on a one-for-one
basis or cash, as selected by the Company's Board of Directors. The amount of
cash to be paid if the exchange right is exercised and the cash option is
selected will be based on the trading price of the Company's common stock at
that time. The Company has reserved 61,850,762 shares of common stock for
possible issuance upon the exchange of Units.
12. EMPLOYEE BENEFIT PLANS
The Operating Partnership and affiliated entities maintain a tax-qualified
retirement 401(k) savings plan. Under the plan, eligible employees can
participate in a cash or deferred arrangement permitting them to defer up to a
maximum of 12% of their compensation, subject to certain limitations.
Participants' salary deferrals are matched at specified percentages, and the
plan provides annual contributions of 3% of eligible employees' compensation.
The Operating Partnership contributed $2,727; $2,350; and $1,716 to the plans
in 1997, 1996 and 1995, respectively.
Except for the 401(k) plan, the Company offers no other postretirement or
postemployment benefits to its employees.
13. COMMITMENTS AND CONTINGENCIES
LITIGATION
Carlo Angostinelli et al. v. DeBartolo Realty Corp. et al. On October 16,
1996, a complaint was filed in the Court of Common Pleas of Mahoning County,
Ohio, captioned Carlo Angostinelli et al. v. DeBartolo Realty Corp. et al. The
named defendants are SD Property Group, Inc., a 99%-owned subsidiary of the
Company, and DPMI, and the plaintiffs are 27 former employees of the
defendants. In the complaint, the plaintiffs alleged that they were recipients
of deferred stock grants under the DRC Plan and that these grants immediately
vested under the DRC Plan's "change in control" provision as a result of the
DRC Merger. Plaintiffs asserted that the defendants' refusal to issue them
approximately 661,000 shares of DRC common stock, which is equivalent to
approximately 450,000 shares of common stock of the Company computed at the
0.68 Exchange Ratio used in the DRC Merger, constituted a breach of contract
and a breach of the implied covenant of good faith and fair dealing under Ohio
law. Plaintiffs sought damages equal to such number of shares of DRC common
stock, or cash in lieu thereof, equal to all deferred stock ever granted to
them under the DRC Plan, dividends on such stock from the time of the grants,
compensatory damages for breach of the implied covenant of good faith and fair
dealing, and punitive damages. The complaint was served on the defendants on
October 28, 1996. The plaintiffs and the Company each filed motions for summary
<PAGE>
judgment. On October 31, 1997, the Court entered a judgment in favor of the
Company granting the Company's motion for summary judgment. The plaintiffs have
appealed this judgment and the matter is pending. While it is difficult for the
Company to predict the ultimate outcome of this action, based on the
information known to the Company to date, it is not expected that this action
will have a material adverse effect on the Company.
Roel Vento et al v. Tom Taylor et al. An affiliate of the Company is a
defendant in litigation entitled Roel Vento et al v. Tom Taylor et al, in the
District Court of Cameron County, Texas, in which a judgment in the amount of
$7,800 has been entered against all defendants. This judgment includes
approximately $6,500 of punitive damages and is based upon a jury's findings on
four separate theories of liability including fraud, intentional infliction of
emotional distress, tortuous interference with contract and civil conspiracy
arising out of the sale of a business operating under a temporary license
agreement at Valle Vista Mall in Harlingen, Texas. The Company is seeking to
overturn the award and has appealed the verdict. The Company's appeal is
pending. Although the Company is optimistic that it may be able to reverse or
reduce the verdict, there can be no assurance thereof. Management, based upon
the advice of counsel, believes that the ultimate outcome of this action will
not have a material adverse effect on the Company.
The Company currently is not subject to any other material litigation
other than routine litigation and administrative proceedings arising in the
ordinary course of business. On the basis of consultation with counsel,
management believes that these items will not have a material adverse impact on
the Company's financial position or results of operations.
LEASE COMMITMENTS
As of December 31, 1997, a total of 31 of the Properties are subject to
ground leases. The termination dates of these ground leases range from 1998 to
2087. These ground leases generally require payments by the Operating
Partnership of a fixed annual rent, or a fixed annual rent plus a participating
percentage over a base rate. Ground lease expense incurred by the Operating
Partnership for the years ended December 31, 1997, 1996 and 1995, was $10,511,
$8,506 and $6,700, respectively.
Future minimum lease payments due under such ground leases for each of the
next five years ending December 31 and thereafter are as follows:
1998 $7,208
1999 7,218
2000 7,280
2001 7,378
2002 7,658
Thereafter 492,270
--------
$529,012
========
ENVIRONMENTAL MATTERS
Substantially all of the Properties have been subjected to Phase I
environmental audits. Such audits have not revealed nor is management aware of
any environmental liability that management believes would have a material
adverse impact on the Company's financial position or results of operations.
Management is unaware of any instances in which it would incur significant
environmental costs if any or all Properties were sold, disposed of or
abandoned.
<PAGE>
14. QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly 1997 and 1996 data is as follows:
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter (1) Quarter Total
---------- ---------- ---------- ---------- ----------
1997
------------------------------
<S> <C> <C> <C> <C> <C>
Total revenue $242,414 $245,055 $259,783 $310,222 $1,057,474
Operating income 111,706 114,455 117,572 133,297 477,030
Income of the Operating
Partnership before
extraordinary items 43,062 48,413 54,286 57,372 203,133
Net income available to common
shareholders 8,233 24,951 44,642 30,163 107,989
Net income before extraordinary
items per common share (2) 0.23 0.27 0.28 0.29 1.08
Net income per common share (2) 0.08 0.26 0.45 0.28 1.08
Weighted Average Common Shares
Outstanding 96,972,858 97,520,174 98,785,776 106,312,139 99,920,280
Net income before extraordinary
items per common share -
assuming dilution (2) 0.23 0.27 0.28 0.29 1.08
Net income per common share -
assuming dilution (2) $0.08 $0.26 0.45 0.28 $1.08
Weighted Average Common Shares
Outstanding - Assuming Dilution 97,369,777 97,363,839 99,170,829 106,698,238 100,304,344
1996
- ------------------------------
Total revenue $139,444 $143,761 $202,436 $262,063 $747,704
Operating income 61,073 63,051 82,715 124,673 331,512
Income of the Operating
Partnership before
extraordinary items 23,832 23,968 28,839 58,024 134,663
Net income available to common
shareholders 13,154 13,412 14,784 31,211 72,561
Net income before extraordinary
items per common share (2) 0.23 0.23 0.20 0.33 1.02
Net income per common share (2) 0.23 0.23 0.18 0.32 0.99
Weighted Average Common Shares
Outstanding 58,382,176 58,560,225 80,397,469 96,673,964 73,585,602
Net income before extraordinary
items per common share -
assuming dilution (2)
0.23 0.23 0.20 0.33 1.01
Net income per common share -
assuming dilution (2) $0.23 $0.23 $0.18 $0.32 $0.98
Weighted Average Common Shares
Outstanding - Assuming Dilution 58,404,318 58,599,582 80,515,223 96,988,085 73,721,134
</TABLE>
(1) The third quarter of 1997 reflects the amounts as amended in Form 10-Q/A.
(2) Primarily due to the cyclical nature of earnings available for common
stock and the issuance of additional shares of common stock during the
periods, the sum of the quarterly earnings per share varies from the
annual earnings per share.
<PAGE>
15. SUBSEQUENT EVENTS (UNAUDITED)
PROPOSED CPI MERGER
On February 19, 1998, the Company and Corporate Property Investors ("CPI")
signed a definitive agreement to merge the two companies. The merger is
expected to be completed by the end of the third quarter of 1998 and is subject
to approval by the shareholders of the Company as well as customary regulatory
and other conditions. A majority of the CPI shareholders have already approved
the transaction. Under the terms of the agreement, the shareholders of CPI will
receive, in a reverse triangular merger, consideration valued at $179 for each
share of CPI common stock held consisting of $90 in cash, $70 in the Company's
common stock and $19 worth of 6.5% convertible preferred stock. The common
stock component of the consideration is based upon a fixed exchange ratio using
the Company's February 18, 1998 closing price of $33 5/8 per share, and is
subject to a 15% symmetrical collar based upon the price of the Company's
common stock determined at closing. In the event the Company's common stock
price at closing is outside of the parameters of the collar, an adjustment will
be made in the cash component of consideration. The total purchase price,
including indebtedness which would be assumed, is estimated at $5.8 billion.
MACERICH PARTNERSHIP
On February 27, 1998, the Operating Partnership, in a joint venture
partnership with The Macerich Company ("Macerich"), acquired a portfolio of
twelve regional malls comprising approximately 10.7 million square feet of GLA
at a purchase price of $974,500, including the assumption of $485,000 of
indebtedness. The Operating Partnership and Macerich, as 50/50 partners in the
joint venture, were each responsible for one half of the purchase price,
including indebtedness assumed and each assumed leasing and management
responsibilities for six of the regional malls.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON SCHEDULE
To the Board of Directors of
Simon DeBartolo Group, Inc.:
We have audited, in accordance with generally accepted auditing standards, the
consolidated financial statements of SIMON DeBARTOLO GROUP, INC. included in
this Form 10-K, and have issued our report thereon dated February 17, 1998. Our
audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedule, "Schedule III: Real Estate and
Accumulated Depreciation", as of December 31, 1997, is the responsibility of
the Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. The schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Indianapolis, Indiana,
February 17, 1998
<PAGE>
<TABLE>
SIMON DeBARTOLO GROUP, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997 SCHEDULE III
(Dollars in thousands)
<CAPTION>
Cost Capitalized Gross Amounts At
Subsequent to Which Carried At
Initial Cost Acquisition Close of Period
-------------------- ---------------- -------------------
Buildings Build- Buildings Accum-
and ings and and ulated
Encum- Improv- Improv- Improv- Depre- Date of
Name, Location brances Land ements Land ements Land ements Total ciation Construction
REGIONAL MALLS
- ------------------------- ---------- ---------- ---------- ------- -------- ---------- ---------- ---------- -------- -------------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <S>
Alton Square, Alton, IL $0 $154 $7,641 $0 $11,825 $154 $19,466 $19,620 $1,508 1993 (Note 3)
Amigoland Mall, 0 1,045 4,518 0 986 1,045 5,504 6,549 1,426 1974
Brownsville, TX
Anderson Mall, Anderson, SC 19,000 1,838 18,122 1,363 2,197 3,201 20,319 23,520 3,698 1972
Barton Creek Square, 62,868 4,413 20,699 771 18,893 5,184 39,592 44,776 6,659 1981
Austin, TX
Battlefield Mall, 49,730 4,040 29,783 3,225 32,636 7,265 62,419 69,684 9,131 1976
Springfield, MO
Bay Park Square, Green Bay, 24,848 6,997 25,623 0 193 6,997 25,816 32,813 1,051 1996 (Note 4)
WI
Bergen Mall, Paramus, NJ 0 11,020 92,541 0 4,569 11,020 97,110 108,130 3,471 1996 (Note 4)
Biltmore Square, Asheville, 27,534 10,907 19,315 0 793 10,907 20,108 31,015 831 1996 (Note 4)
NC
Boynton Beach Mall, Boynton 0 33,758 67,710 0 1,789 33,758 69,499 103,257 2,805 1996 (Note 4)
Beach, FL
Broadway Square, Tyler, TX 0 11,470 32,450 0 1,586 11,470 34,036 45,506 3,133 1994 (Note 3)
Brunswick Square, East 0 8,436 55,838 0 935 8,436 56,773 65,209 2,284 1996 (Note 4)
Brunswick, NJ
Castleton Square, 0 45,011 80,963 0 1,234 45,011 82,197 127,208 3,309 1996 (Note 4)
Indianapolis, IN
Charlottesville Fashion 0 0 55,115 0 0 0 55,115 55,115 393 1997 (Note 4)
Square, Charlottesville,
VA
Chautauqua Mall, Jamestown, 0 3,258 9,641 0 10,106 3,258 19,747 23,005 474 1996 (Note 4)
NY
Cheltenham Square, 34,226 14,226 43,799 0 1,371 14,226 45,170 59,396 1,883 1996 (Note 4)
Philadelphia, PA
Chesapeake Square, 49,490 11,533 70,461 0 398 11,533 70,859 82,392 2,866 1996 (Note 4)
Chesapeake, VA
Cielo Vista Mall, El Paso, 57,938 1,307 18,512 608 13,461 1,915 31,973 33,888 7,087 1974
TX
College Mall, Bloomington, 42,936 1,012 16,245 722 16,995 1,734 33,240 34,974 6,530 1965
IN
Columbia Center, Kennewick, 42,867 27,170 58,185 0 4,522 27,170 62,707 89,877 2,416 1996 (Note 4)
WA
Cottonwood Mall, 0 14,010 69,173 0 983 14,010 70,156 84,166 5,507 1993
Albuquerque, NM
Crossroads Mall, Omaha, NE 41,440 884 37,293 409 22,290 1,293 59,583 60,876 4,547 1994 (Note 3)
Crystal River Mall, Crystal 16,000 11,679 14,252 0 2,376 11,679 16,628 28,307 574 1996 (Note 4)
River, FL
DeSoto Square, Bradenton, 38,880 9,531 52,716 0 2,658 9,531 55,374 64,905 2,235 1996 (Note 4)
FL
Eastern Hills Mall, 0 15,444 47,604 0 468 15,444 48,072 63,516 1,952 1996 (Note 4)
Buffalo, NY
Eastland Mall, Tulsa, OK 30,000 3,124 24,035 518 6,106 3,642 30,141 33,783 4,525 1986
Edison Mall, Fort Myers, FL 41,000 13,618 108,215 0 0 13,618 108,215 121,833 773 1997 (Note 4)
Fashion Mall at Keystone at 64,772 0 112,952 0 0 0 112,952 112,952 0 1997 (Note 4)
the Crossing,
Indianapolis, IN
Forest Mall, Fond Du Lac, 12,800 754 4,498 0 2,334 754 6,832 7,586 1,431 1973
WI
Forest Village Park, 20,600 1,212 4,625 757 3,694 1,969 8,319 10,288 1,562 1980
Forestville, MD
Fremont Mall, Fremont, NE 0 26 1,280 265 2,156 291 3,436 3,727 392 1983
Golden Ring Mall, 29,750 1,130 8,955 572 8,459 1,702 17,414 19,116 3,523 1974 (Note 3)
Baltimore, MD
Great Lakes Mall, 62,018 14,608 100,362 0 2,166 14,608 102,528 117,136 4,152 1996 (Note 4)
Cleveland, OH
Greenwood Park Mall, 35,960 2,606 23,500 5,275 52,357 7,881 75,857 83,738 11,534 1977
Greenwood, IN
Gulf View Square, Port 38,157 13,689 39,997 0 401 13,689 40,398 54,087 1,633 1996 (Note 4)
Richey, FL
Heritage Park, Midwest 0 598 6,213 0 1,487 598 7,700 8,298 1,581 1978
City, OK
Hutchinson Mall, Hutchison, 11,523 1,777 18,427 0 2,903 1,777 21,330 23,107 3,658 1985
KS
Independence Center, 0 5,539 45,822 0 2,888 5,539 48,710 54,249 4,386 1994 (Note 3)
Independence, MO
Ingram Park Mall, San 55,580 820 17,182 169 13,083 989 30,265 31,254 5,832 1979
Antonio, TX
Irving Mall, Irving, TX 0 6,736 17,479 2,539 12,858 9,275 30,337 39,612 7,248 1971
Jefferson Valley Mall,
Yorktown
Heights, NY 50,000 4,869 30,304 0 2,910 4,869 33,214 38,083 5,690 1983
Knoxville Center, 0 5,269 22,965 3,712 30,601 8,981 53,566 62,547 4,064 1984
Knoxville, TN
La Plaza, McAllen, TX 50,044 2,194 9,828 0 2,763 2,194 12,591 14,785 2,157 1976
Lafayette Square, 0 25,546 43,294 0 4,503 25,546 47,797 73,343 1,813 1996 (Note 4)
Indianapolis, IN
Laguna Hills Mall, Laguna 0 28,074 56,436 0 0 28,074 56,436 84,510 401 1997 (Note 4)
Hills, CA
Lima Mall, Lima, OH 19,166 7,910 35,495 0 586 7,910 36,081 43,991 1,476 1996 (Note 4)
<PAGE>
Lincolnwood Town Center, 0 11,197 63,490 28 138 11,225 63,628 74,853 8,583 1990
Lincolnwood, IL
Longview Mall, Longview, TX 22,100 278 3,602 124 3,459 402 7,061 7,463 1,679 1978
Machesney Park Mall, 0 613 7,460 120 3,101 733 10,561 11,294 2,319 1979
Rockford, IL
Markland Mall, Kokomo, IN 10,000 0 7,568 0 1,111 0 8,679 8,679 1,317 1983
Mc Cain Mall, N. Little 26,059 0 9,515 0 6,326 0 15,841 15,841 3,873 1973
Rock, AR
Melbourne Square, 39,841 20,552 51,110 0 1,439 20,552 52,549 73,101 2,096 1996 (Note 4)
Melbourne, FL
Memorial Mall, Sheboygan, 0 175 4,881 0 784 175 5,665 5,840 1,025 1980
WI
Menlo Park Mall, Edison, NJ 65,684 225,131 0 0 65,684 225,131 290,815 1,606 1997 (Note 4)
Miami International Mall, 47,009 18,685 69,959 12,687 3,146 31,372 73,105 104,477 13,352 1996 (Note 4)
Miami, FL
Midland Park Mall, Midland, 22,500 704 9,613 0 4,646 704 14,259 14,963 2,818 1980
TX
Miller Hill Mall, Duluth, 0 2,537 18,114 0 1,893 2,537 20,007 22,544 3,443 1973
MN
Mission Viejo Mall, Mission 0 9,139 54,445 0 12,536 9,139 66,981 76,120 2,206 1996 (Note 4)
Viejo, CA
Mounds Mall, Anderson, IN 0 0 2,689 0 1,702 0 4,391 4,391 1,077 1964
Muncie Mall, Muncie, IN 0 210 5,964 49 18,913 259 24,877 25,136 2,152 1975
North East Mall, Hurst, TX 22,201 1,440 13,473 784 16,158 2,224 29,631 31,855 1,942 1996 (Note 4)
North Towne Square, Toledo, 23,500 579 8,382 0 1,798 579 10,180 10,759 3,156 1980
OH
Northgate Mall, Seattle, WA 80,046 89,991 57,873 0 15,802 89,991 73,675 163,666 2,471 1996 (Note 4)
Northwoods Mall, Peoria, IL 0 1,202 12,779 1,449 19,429 2,651 32,208 34,859 6,078 1983 (Note 3)
Oak Court Mall, Memphis, TN 15,673 57,392 0 0 15,673 57,392 73,065 410 1997 (Note 4)
Orange Park Mall, 0 13,345 65,173 0 10,759 13,345 75,932 89,277 5,986 1994 (Note 3)
Jacksonville, FL
Orland Square, Orland Park, 50,000 36,770 131,054 0 0 36,770 131,054 167,824 545 1997 (Note 4)
IL
Paddock Mall, Ocala, FL 30,347 20,420 30,490 0 3,713 20,420 34,203 54,623 1,265 1996 (Note 4)
Port Charlotte Town Center,
Port Charlotte, FL 46,102 5,561 59,381 0 34 5,561 59,415 64,976 2,404 1996 (Note 4)
Prien Lake Mall, Lake 0 1,926 2,829 731 11,386 2,657 14,215 16,872 1,187 1972
Charles, LA
Promenade, Woodland Hills, 0 13,072 14,487 0 0 13,072 14,487 27,559 103 1997 (Note 4)
CA
Raleigh Springs Mall, 0 9,137 28,604 0 554 9,137 29,158 38,295 1,193 1996 (Note 4)
Memphis, TN
Randall Park Mall, 33,879 4,421 52,456 0 2,106 4,421 54,562 58,983 2,170 1996 (Note 4)
Cleveland, OH
Richardson Square, Dallas, 0 4,867 6,329 1,075 1,866 5,942 8,195 14,137 353 1996 (Note 4)
TX
Richmond Square, Richmond, 0 3,410 11,343 0 7,928 3,410 19,271 22,681 566 1996 (Note 4)
IN
Richmond Towne Square, 0 2,666 12,112 0 1,050 2,666 13,162 15,828 490 1996 (Note 4)
Cleveland, OH
River Oaks Center, Calumet 32,500 30,884 102,357 0 0 30,884 102,357 133,241 413 1997 (Note 4)
City, IL
Ross Park Mall, Pittsburgh, 60,000 14,557 50,995 9,617 46,014 24,174 97,009 121,183 6,089 1996 (Note 4)
PA
South Hills Village, 0 23,453 126,887 0 0 23,453 126,887 150,340 302 1997 (Note 4)
Pittsburgh, PA
South Park Mall, 24,748 855 13,691 74 2,531 929 16,222 17,151 3,615 1975
Shreveport, LA
Southern Park Mall, 0 16,982 77,774 97 11,506 17,079 89,280 106,359 3,387 1996 (Note 4)
Youngstown, OH
Southgate Mall, Yuma, AZ 0 1,817 7,974 0 2,969 1,817 10,943 12,760 1,741 1988 (Note 3)
Southtown Mall, Ft. Wayne, 0 2,059 13,288 0 974 2,059 14,262 16,321 6,244 1969
IN
St Charles Towne Center 0 9,328 52,974 1,180 9,412 10,508 62,386 72,894 10,611 1990
Waldorf, MD
Summit Mall, Akron, OH 0 25,037 45,036 0 9,551 25,037 54,587 79,624 2,133 1996 (Note 4)
Sunland Park Mall, El Paso, 39,855 2,896 28,900 0 2,291 2,896 31,191 34,087 6,571 1988
TX
Tacoma Mall, Tacoma, WA 93,656 39,504 125,826 0 2,441 39,504 128,267 167,771 5,177 1996 (Note 4)
Tippecanoe Mall, Lafayette, 46,961 4,320 8,474 5,517 31,314 9,837 39,788 49,625 6,816 1973
IN
Towne East Square, Wichita, 56,767 9,495 18,479 2,042 8,372 11,537 26,851 38,388 6,082 1975
KS
Towne West Square, Wichita, 0 988 21,203 76 4,584 1,064 25,787 26,851 5,477 1980
KS
Treasure Coast Square, 53,953 11,124 73,108 0 1,296 11,124 74,404 85,528 2,972 1996 (Note 4)
Jenson Beach, FL
Tyrone Square, St. 0 15,638 120,962 0 1,418 15,638 122,380 138,018 4,939 1996 (Note 4)
Petersburg, FL
University Mall, Little 0 123 17,411 0 714 123 18,125 18,248 3,815 1967
Rock, AR
<PAGE>
University Mall, Pensacola, 0 4,741 26,657 0 1,700 4,741 28,357 33,098 2,610 1994 (Note 3)
FL
University Park Mall, South 59,500 15,105 61,466 0 6,539 15,105 68,005 83,110 14,721 1996 (Note 4)
Bend, IN
Upper Valley Mall, 30,940 8,422 38,745 0 439 8,422 39,184 47,606 1,607 1996 (Note 4)
Springfield, OH
Valle Vista Mall, 34,514 1,398 17,266 372 6,899 1,770 24,165 25,935 4,305 1983
Harlingen, TX
Virginia Center Commons, 0 9,765 63,098 1,839 397 11,604 63,495 75,099 2,853 1996 (Note 4)
Richmond, VA
Washington Square, 33,541 20,146 41,248 0 546 20,146 41,794 61,940 1,703 1996 (Note 4)
Indianapolis, IN
West Ridge Mall, Topeka, KS 44,288 5,775 34,132 197 3,892 5,972 38,024 43,996 6,070 1988
White Oaks Mall, 16,500 3,024 35,692 1,153 13,579 4,177 49,271 53,448 5,088 1977
Springfield, IL
Windsor Park Mall, San 14,811 1,194 16,940 130 3,285 1,324 20,225 21,549 4,189 1976
Antonio, TX
Woodville Mall, Toledo, OH 0 1,830 4,454 0 339 1,830 4,793 6,623 221 1996 (Note 4)
COMMUNITY SHOPPING CENTERS
- -------------------------
Arvada Plaza, Arvada, CO 0 70 342 608 581 678 923 1,601 207 1966
Aurora Plaza, Aurora, CO 0 35 5,754 0 1,004 35 6,758 6,793 1,381 1966
Bloomingdale Court, 29,009 9,735 26,184 0 1,323 9,735 27,507 37,242 3,218 1987
Bloomingdale, IL
Boardman Plaza, Youngstown, 18,277 8,189 26,355 0 1,479 8,189 27,834 36,023 1,087 1996 (Note 4)
OH
Bridgeview Court, 0 308 3,638 0 50 308 3,688 3,996 596 1988
Bridgeview, IL
Brightwood Plaza, 0 65 128 0 256 65 384 449 93 1965
Indianapolis, IN
Buffalo Grove Towne Center,
Buffalo
Grove, IL 0 2,044 6,602 0 270 2,044 6,872 8,916 468 1988
Celina Plaza, El Paso, TX 0 138 815 0 13 138 828 966 144 1977
Century Mall, Merrillville, 0 2,190 9,589 0 1,376 2,190 10,965 13,155 2,792 1992 (Note 3)
IN
Charles Towne Square, 0 446 1,768 500 8,655 946 10,423 11,369 0 1976
Charleston, SC
Chesapeake Center, 6,563 5,500 12,279 0 23 5,500 12,302 17,802 498 1996 (Note 4)
Chesapeake, VA
Cohoes Commons, Rochester, 0 1,698 8,426 0 80 1,698 8,506 10,204 1,765 1984
NY
Countryside Plaza, 0 1,243 8,507 0 548 1,243 9,055 10,298 1,856 1977
Countryside, IL
Eastgate Consumer Mall, 22,929 425 4,722 187 2,868 612 7,590 8,202 2,935 1991 (Note 3)
Indianapolis, IN
Eastland Plaza, Tulsa, OK 0 908 3,709 0 11 908 3,720 4,628 506 1987
Forest Plaza, Rockford, IL 16,904 4,270 16,818 453 455 4,723 17,273 21,996 1,782 1985
Fox River Plaza, Elgin, IL 12,654 2,907 9,453 0 60 2,907 9,513 12,420 1,016 1985
Glen Burnie Mall, Glen 0 7,422 22,778 0 2,265 7,422 25,043 32,465 930 1996 (Note 4)
Burnie, MD
Great Lakes Plaza, 0 1,027 2,025 0 3,073 1,027 5,098 6,125 226 1996 (Note 4)
Cleveland, OH
Greenwood Plus, Greenwood, 0 1,350 1,792 0 4,221 1,350 6,013 7,363 766 1979 (Note 3)
IN
Griffith Park Plaza, 0 0 2,412 0 110 0 2,522 2,522 533 1979
Griffith, IN
Grove at Lakeland Square, 3,750 5,237 6,016 0 892 5,237 6,908 12,145 305 1996 (Note 4)
The, Lakeland, FL
Hammond Square, Sandy 0 0 27 0 1 0 28 28 5 1974
Springs, GA
Highland Lakes Center, 14,377 13,950 18,490 0 314 13,950 18,804 32,754 769 1996 (Note 4)
Orlando, FL
Ingram Plaza, San Antonio, 0 421 1,802 4 22 425 1,824 2,249 449 1980
TX
Keystone Shoppes , 0 0 12,550 0 0 0 12,550 12,550 0 1997 (Note 4)
Indianapolis, IN
Knoxville Commons, 0 3,730 5,345 0 1,608 3,730 6,953 10,683 869 1990
Knoxville, TN
Lake Plaza, Waukegan, IL 0 2,868 6,420 0 267 2,868 6,687 9,555 654 1986
Lake View Plaza, Orland 22,169 4,775 17,586 0 445 4,775 18,031 22,806 1,806 1986
Park, IL
Lima Center Lima, OH 0 1,808 5,151 0 9 1,808 5,160 6,968 204 1996 (Note 4)
Lincoln Crossing, O'Fallon, 997 1,079 2,692 0 268 1,079 2,960 4,039 408 1990
IL
Mainland Crossing, 2,226 1,850 1,737 0 124 1,850 1,861 3,711 81 1996 (Note 4)
Galveston, TX
Maplewood Square, Omaha, NE 0 466 1,249 0 157 466 1,406 1,872 303 1987
Markland Plaza, Kokomo, IN 0 210 1,258 0 475 210 1,733 1,943 385 1975
Martinsville Plaza, 0 0 584 0 45 0 629 629 266 1980
Martinsville, VA
Marwood Plaza, 0 52 3,597 0 107 52 3,704 3,756 558 1962
Indianapolis, IN
Matteson Plaza, Matteson, 11,159 1,830 9,737 0 1,557 1,830 11,294 13,124 1,218 1988
IL
<PAGE>
Memorial Plaza, Sheboygan, 0 250 436 0 871 250 1,307 1,557 230 1966
WI
Mounds Mall Cinema, 0 88 158 0 1 88 159 247 40 1975
Anderson, IN
New Castle Plaza, New 0 128 1,621 0 547 128 2,168 2,296 460 1966
Castle, IN
North Ridge Plaza, Joliet, 0 2,831 7,699 0 374 2,831 8,073 10,904 898 1985
IL
North Riverside Park Plaza,
N. Riverside, IL 7,671 1,062 2,490 0 254 1,062 2,744 3,806 617 1977
Northland Plaza, Columbus, 0 4,490 8,893 0 360 4,490 9,253 13,743 897 1988
OH
Northwood Plaza, Fort 0 304 2,922 0 362 304 3,284 3,588 670 1977
Wayne, IN
Park Plaza, Hopkinsville, 0 300 1,572 0 24 300 1,596 1,896 299 1968
KY
Regency Plaza, St. Charles, 1,878 616 4,963 0 150 616 5,113 5,729 478 1988
MO
Sherwood Gardens, Salinas, 0 0 9,106 0 0 0 9,106 9,106 136 1997 (Note 4)
CA
St. Charles Towne Plaza, 30,742 8,780 18,993 0 117 8,780 19,110 27,890 2,067 1987
Waldorf, MD
Teal Plaza, Lafayette, IN 0 99 878 0 2,712 99 3,590 3,689 148 1986
Terrace at The Florida 4,688 5,647 4,126 0 956 5,647 5,082 10,729 272 1996 (Note 4)
Mall, Orlando, FL
Tippecanoe Plaza, 0 265 440 305 4,728 570 5,168 5,738 579 1962
Lafayette, IN
University Center, South 0 2,388 5,214 0 46 2,388 5,260 7,648 2,197 1996 (Note 4)
Bend, IN
Wabash Village, West 0 0 976 0 203 0 1,179 1,179 232 1976
Lafayette, IN
Washington Plaza, 0 942 1,697 0 0 942 1,697 2,639 434 1996 (Note 4)
Indianapolis, IN
West Ridge Plaza, Topeka, 4,612 1,491 4,620 0 508 1,491 5,128 6,619 504 1988
KS
White Oaks Plaza, 12,345 3,265 14,267 0 188 3,265 14,455 17,720 1,460 1986
Springfield, IL
Wichita Mall, Wichita, KS 0 0 4,535 0 1,635 0 6,170 6,170 1,184 1981
Wood Plaza, Fort Dodge, IA 0 45 380 0 760 45 1,140 1,185 216 1967
SPECIALTY RETAIL CENTERS
- ------------------------
The Forum Shops at Caesars,
Las Vegas, NV 175,000 0 72,866 0 57,655 0 130,521 130,521 12,508 1992
Trolley Square, Salt Lake 27,141 4,899 27,539 263 3,661 5,162 31,200 36,362 4,353 1986 (Note 3)
City, UT
MIXED-USE PROPERTIES
- ------------------------
New Orleans Centre/CNG
Plaza,
New Orleans, LA 0 3,679 41,231 0 725 3,679 41,956 45,635 1,670 1996 (Note 4)
O Hare International
Center,
Rosemont, IL 0 125 60,287 1 8,796 126 69,083 69,209 14,771 1986
Riverway, Rosemont, IL 131,451 8,738 129,175 16 6,560 8,754 135,735 144,489 28,737 1988
DEVELOPMENT PROJECTS
- -------------------------
Bowie Town Center, Bowie, 6,000 570 0 0 6,000 570 6,570 0
MD
Indian River Peripheral, 826 57 0 0 826 57 883 0 1996 (Note 4)
Vero
Beach, FL
Muncie Plaza, Muncie, IN 625 10,626 625 10,626 11,251 0
North East Plaza, Hurst, TX 8,988 2,198 0 0 8,988 2,198 11,186 0
The Shops at Sunset Place,
Miami, FL 23,546 12,297 68,111 0 0 12,297 68,111 80,408 0
Victoria Ward, Honolulu, HI 0 0 1,400 0 0 0 1,400 1,400 0
Waterford Lakes, Orlando, 0 0 1,114 0 0 0 1,114 1,114 0
FL
Other 0 0 314 0 0 0 314 314
---------- ---------- ---------- ------- -------- ---------- ---------- ---------- --------
$2,705,333 $1,191,370 $4,802,609 $62,583 $757,503 $1,253,953 $5,560,112 $6,814,065 $448,353
========== ========== ========== ======= ======== ========== ========== ========== ========
</TABLE>
<PAGE>
SIMON DEBARTOLO GROUP, INC.
NOTES TO SCHEDULE III AS OF DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
(1) Reconciliation of Real Estate Properties:
The changes in real estate assets for the years ended December 31, 1997,
1996 and 1995 are as follows:
1997 1996 1995
Balance, beginning of year $5,273,465 $2,143,925 $1,887,122
Acquisitions 1,238,909 2,843,287 32,547
Improvements 312,558 224,605 73,097
Disposals (10,867) (19,579) (12,722)
Consolidation -- 81,227 163,881
Balance, close of year $6,814,065 $5,273,465 $2,143,925
The aggregate net book value for federal income tax purposes as of
December 31, 1997 was $4,745,605.
(2) Reconciliation of Accumulated Depreciation:
The changes in accumulated depreciation and amortization for the years
ended December 31, 1997, 1996 and 1995 are as follows:
1997 1996 1995
Balance, beginning of year $270,637 $147,341 $ 68,222
Carryover of minority partners'
interest in accumulated
depreciation of DeBartolo
Properties -- 13,505 --
Depreciation expense 183,357 120,565 79,126
Disposals (5,641) (10,774) (7)
Balance, close of year $448,353 $270,637 $147,341
Depreciation of the Company's investment in buildings and improvements
reflected in the statements of operations is calculated over the estimated
original lives of the assets as follows:
Buildings and Improvements - typically 35 years
Tenant Inducements - shorter of lease term or useful life
(3) Initial cost represents net book value at December 20, 1993.
(4) Not developed/constructed by the Operating Partnership or the Simons. The
date of construction represents acquisition date.
<PAGE>
INDEX TO EXHIBITS
Exhibits
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 Form S-4 of Simon Property Group, Inc.
(Registration No. 333-06933))
2.2 Amendment and supplement to Offer to Purchase for Cash all Outstanding
Beneficial Interests in The Retail Property Trust (incorporated by
reference to Exhibit 99.1 of the Form 8-K filed by the Operating
Partnership on September 12, 1997)
2.3 Merger Agreement Between SDC, LP And SPG, LP
2.4 Purchase and Sale Agreement between the The Equitable Life Assurance
Society of the United States and SM Portfolio Partners
2.5 Agreement and Plan of Merger among the Company and Corporate Property
Investors and Corporate Realty Consultants, Inc. (incorporated by
reference to Exhibit 10.1 in the Form 8-K filed by the Company on
February 24, 1998)
3.1 (c) Amended and Restated Charter
3.2 (c) Amended and Restated Bylaws, incorporated by reference to Annex VIII of
the Company's Schedule 14A on May 8, 1996.
3.3 (c) Articles Supplementary with respect to the Series B Preferred Stock of
the Company to the Amended and Restated Charter.
3.4 Articles Supplementary with respect to the Series C Preferred Stock of
the Company to the Amended and Restated Charter. (incorporated by
reference to Exhibit 4.1 of the Form 8-K filed by the Company on July
8, 1997)
3.5 Articles Supplementary with respect to the conversion of the Series A
Preferred Stock of the Company into Common Stock.
4.2 (a) Secured Promissory Note and Open-End Mortgage and Security Agreement
from Simon Property Group, L.P. in favor of Principal Mutual Life
Insurance Company (Pool 2).
4.3 Second Amended and Restated Credit Agreement dated as of December 22,
1997 among the Operating Partnership and Morgan Guaranty Trust Company
of New York, Union Bank of Switzerland and Chase Manhattan Bank as Lead
Agents.
9.1 (a) Voting Trust Agreement, Voting Agreement and Proxy between MSA, on the
one hand, and Melvin Simon, Herbert Simon and David Simon, on the other
hand.
10.1 Fifth Amended and Restated Limited Partnership Agreement of Simon
DeBartolo Group, L.P. (Incorporated by Reference to Exhibit 10.1.1 of
the Company's Form S-4 (Registration No. 333-06933))
10.3 (a)Noncompetition Agreement dated as of December 1, 1993 between the
Company and each of Melvin Simon and Herbert Simon.
10.4 (a)Noncompetition Agreement dated as of December 1, 1993 between the
Company and David Simon.
10.5 (a)Restriction and Noncompetition Agreement dated as of December 1, 1993
among the Company and the Management Companies.
10.6 (a)Simon Property Group, L.P. Employee Stock Plan.
10.7 (a)Simon DeBartolo Group, Inc. Director Stock Option Plan.
10.8 (c)Restated Indemnity Agreement dated as of August 9, 1996 between the
Company and its directors and officers.
10.9 (a)Option Agreement to acquire the Excluded Retail Properties. (Previously
filed as Exhibit 10.10.)
10.10(a)Option Agreement to acquire the Excluded PropertiesLand. (Previously
filed as Exhibit 10.11.)
10.11(a)Registration Rights Agreement dated as of December 1, 1993 between the
Company, certain Limited Partners and certain other parties.
(Previously filed as Exhibit 10.12.)
10.12(a)Option Agreements dated as of December 1, 1993 between the Management
Company and Simon Property Group, L.P. (Previously filed as Exhibit
10.20.)
<PAGE>
10.13(a)Option Agreement dated as of December 1, 1993 to acquire Development
Land. (Previously filed as Exhibit 10.22.)
10.14(a)Option Agreement dated December 1, 1993 between the Management Company
and Simon Property Group, L.P. (Previously filed as Exhibit 10.25.)
10.15(a)Option Agreement dated December 1, 1993 between Simon Enterprises,
Inc. and Simon Property Group, L.P. (Previously filed as Exhibit
10.26.)
10.16(a)Lock-Up Agreement dated December 20, 1993 between MSA and Simon
Property Group, L.P. (Previously filed as Exhibit 10.27.)
10.17(b)Operating Agreement of Summit Mall Company, L.L.C. dated February 23,
1995.
10.19 Partnership Agreement of DeBartolo Capital Partnership (the "Financing
Partnership") (Incorporated by reference to the 1994 DRC Form 10-K
Exhibit 10(b).)
10.20 Amended and Restated Articles of Incorporation of DPMI (Incorporated by
reference to the 1994 DRC Form 10-K Exhibit 10(c).)
10.21 Amended and Restated Code of Regulations of DPMI (Incorporated by
reference to the 1994 DRC Form 10-K Exhibit 10(d).)
10.25 First Amendment to the Corporate Services Agreement between DRC and
DPMI (Incorporated by reference to the 1995 DRC Form 10-K Exhibit
10.17.)
10.26 Service Agreement between EJDC and DPMI (Incorporated by reference to
the 1994 DRC Form 10-K Exhibit 10.(f).)
10.27 Master Services Agreement between DRP, LP and DPMI (Incorporated by
reference to the 1994 DRC Form 10-K Exhibit 10(g).)
10.28 First Amendment to Master Services Agreement between DRP, LP and DPMI
(Incorporated by reference to the 1995 DRC Form 10-K Exhibit 10.20.)
10.33 DRC 1994 Stock Incentive Plan (Incorporated by reference to the 1994
DRC Form 10-K Exhibit 10(k).)
10.34 Purchase Option and Right of First Refusal Agreement between DRP, LP
and Edward J. DeBartolo (for Northfield Square) (Incorporated by
reference to the 1994 DRC Form 10-K Exhibit 10(o).)
10.35 Indemnification Agreement between DRC and its directors and officers
(Incorporated by reference to the 1994 DRC Form 10-K Exhibit 10(u).)
10.36 Amendment to Indemnification Agreement between DRP, LP and the
directors and officers of DPMI (Incorporated by reference to the 1995
DRC Form 10-K Exhibit 10.49.)
10.37 Indemnification Agreement between DRP, LP and the directors and
officers of DPMI (Incorporated by reference to the 1995 DRC Form 10-K
Exhibit 10.50.)
10.38 Indemnification Agreement between DPMI and its directors and officers
(Incorporated by reference to the 1995 DRC Form 10-K Exhibit 10.51.)
10.43 Office Lease between DRP, LP and an affiliate of EJDC (Southwoods
Executive Center) (Incorporated by reference to the 1995 DRC Form 10-K
Exhibit 10.69.)
10.44 Sublease between DRP, LP and DPMI (Incorporated by reference to the
1995 DRC Form 10-K Exhibit 10.70.)
10.45 Purchase Option and Right of First Refusal Agreement between DRP, LP
and Robinson Mall, Inc. (for The Mall at Robinson Town Center)
(Incorporated by reference to the 1994 DRC Form 10-K Exhibit 10(p)(1).)
10.46 Purchase Option and Right of First Refusal Agreement between DRP, LP
and EJDC (for SouthPark Center Development Site) (Incorporated by
reference to the 1994 DRC Form 10-K Exhibit 10(p)(2).)
10.47 Purchase Option and Right of First Refusal Agreement between DRP, LP
and Washington Mall Associates (for Washington, Pennsylvania Site)
(Incorporated by reference to the 1994 DRC Form 10-K Exhibit 10(p)(3).)
10.48 Purchase Option and Right of First Offer Agreement between DRP, LP and
Cutler Ridge Mall, Inc. (for Cutler Ridge Mall) (Incorporated by
reference to the 1994 DRC Form 10-K Exhibit 10(q)(1).)
10.49 Purchase Option and Right of First Offer Agreement between DRP, LP and
Almonte, Inc. (for Red Bird Mall) (Incorporated by reference to the
1994 DRC Form 10-K Exhibit 10(q)(2).)
<PAGE>
10.50 Purchase Option and Right of First Refusal Agreement between DRP, LP
and DeBartolo-Stow Associates (for University Town Center)
(Incorporated by reference to the 1994 DRC Form 10-K Exhibit 10(r).)
10.51 Acquisition Option Agreement between DRP, LP and Coral Square
Associates (for Coral Square) (Incorporated by reference to the 1994
DRC Form 10-K Exhibit 10(s)(1).)
10.52 Acquisition Option Agreement between DRP, LP and Lakeland Square
Associates (for Lakeland Square) (Incorporated by reference to the 1994
DRC Form 10-K Exhibit 10(s)(2).)
10.53 (c)Amended and Restated Articles of Incorporation of SD Property Group,
Inc.
10.54 (c)Amended and Restated Regulations of SD Property Group, Inc.
10.55 (c)Indemnity Agreement by and between the Company and its new Directors,
dated as of August 9, 1996
10.56 (c)Contribution Agreement, dated as of June 25, 1996, by and among DRC
and the former limited partners of SPG, LP., excluding JCP Realty, Inc.
and Brandywine Realty, Inc.
10.57 (c)JCP Contribution Agreement, dated as of August 8, 1996, by and among
DRC and JCP Realty, Inc., and Brandywine Realty, Inc.
10.58 (c)Subscription Agreement by and between Day Acquisition Corp., and the
Purchaser (as defined in this Exhibit)
10.59 (c)Amendment to Service Agreement dated as of August 9, 1996, between
EJDC and DPMI
10.60 (c)Registration Rights Agreement (the "Agreement"), dated as of August 9,
1996, by and among the "Simon Family Members" (As defined in the
Agreement), SPG, Inc., JCP Realty, Inc., Brandywine Realty, Inc., 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 of the Agreement, and any of their respective successors-in-
interest and permitted assigns.
10.61 (c)Fourth Amendment to Purchase Option Agreement, dated as of July 15,
1996, between JCP Realty, Inc., and DRP, LP.
10.62 Partnership Agreement of SM Portfolio Limited Partnership
10.63 Limited Partnership Agreement of SDG Macerich Properties, L.P.
10.64 Agreement of Limited Partnership of Simon Capital Limited Partnership
21.1 List of Subsidiaries of the Company.
23.1 Consent of Arthur Andersen LLP.
99.1 Agreement dated November 13, 1996 between Simon DeBartolo Group, Inc.
and Simon DeBartolo Group, L.P. (Incorporated by reference to Amendment
No. 3 of Form S-3 filed by Simon DeBartolo Group, L.P. and Simon
Property Group, L.P. on November 20, 1996 under Registration No. 333-
11491)
(a) Incorporated by reference to the exhibit with the same number (or as
indicated) that was filed with Form 10-K for the fiscal year ended
December 31, 1993.
(b) Incorporated by reference to the exhibit numbered as indicated that
was filed with Form 10-K for the fiscal year ended December 31, 1995.
(c) Incorporated by reference to the exhibit numbered as indicated that
was filed with Form 10-K for the fiscal year ended December 31, 1996.
<PAGE>
EXHIBIT 21.1
List of Subsidiaries of the Company
List of Subsidiary Jurisdiction
- --------------------- ------------
Charles Mall Company Limited Partnership Maryland
DeBartolo Capital Partnership Delaware
DeBartolo Properties, Inc. Delaware
DeBartolo Properties II, Inc. Delaware
DeBartolo Properties III, Inc. Delaware
East Towne Mall Company Limited Partnership Tennessee
Forestville Associates Maryland
Forum Finance Corp Delaware
Golden Ring Mall Company Limited Partnership Indiana
Jefferson Valley Mall Limited Partnership Delaware
Knoxville Developers Limited Partnership Indiana
The Retail Property Trust Massachusetts
Shopping Center Associates Delaware
Simon Property Group (Delaware), Inc. Delaware
Simon Property Group (Illinois), L.P. Illinois
Simon Property Group (Texas), L.P. Texas
Simon DeBartolo Group, L.P. Delaware
SD Property Group, Inc. Ohio
SDG Properties VII, Inc. Delaware
SDG Dadeland Associates, Inc. Delaware
SDG Dadeland Developers, Inc. Delaware
SDG EQ Associates, Inc. Delaware
SDG Orland, Inc. Delaware
SDG Fashion Mall, Inc. Delaware
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our reports, included in this Form 10-K, into Simon DeBartolo Group, Inc.'s
(formerly Simon Property Group, Inc.) previously filed Registration Statement
File Nos. 33-79884, 33-87764, 33-87766, 333-06933, 333-43235, 333-33627 and 333-
43681.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Indianapolis, Indiana,
July 17, 1998
============================================================================
Exhibit 2.3
AGREEMENT OF MERGER
This Agreement of Merger is made as of December 19, 1997, by
and between Simon Property Group, L.P., a Delaware limited partnership
("SPG"), and Simon DeBartolo Group, L.P., a Delaware limited partnership
(the "Operating Partnership").
Recitals
1. Each of the general partners of the parties hereto deem
it advisable that SPG merge with and into the Operating Partnership
pursuant to Section 7-211 of the Delaware Revised Uniform Limited
Partnership Act, all on the terms and conditions hereof (the "Merger").
Agreement
In consideration of the premises and mutual covenants set
forth herein, the parties hereto agree as follows:
1. Effective Time. The Merger shall be effective at
11:59 p.m., Eastern time, on December 31, 1997 (the "Effective Time").
2. Effects of Merger. At the Effective Time, SPG shall be
merged with and into the Operating Partnership and the separate
existence of SPG shall cease. The Operating Partnership shall continue
to be governed by the laws of the State of Delaware. In addition, the
Merger shall have such other effects as are specified by Delaware law.
3. Cancellation of Units. At the Effective Time, each of
the issued and outstanding partnership units in SPG, by virtue of the
Merger and without any action on the part of the holder thereof, shall
be extinguished and cancelled automatically, without any payment or
other distribution in respect thereof.
4. Termination. Subject to applicable law, this Agreement
of Merger may be amended, modified, supplemented or abandoned by mutual
consent of the parties hereto, before or after approval hereof by the
limited partners of the parties hereto.
5. Counterparts. This Agreement of Merger may be executed
in one or more counterparts, each of which shall be deemed to be an
original, but all of which together shall constitute one agreement.
6. Governing Law. This Agreement of Merger shall be
governed in all respects, including, but not limited to, validity,
interpretation, effect and performance, by the internal laws of the
State of Delaware without regard to the principles of conflicts of law
thereof.
<PAGE> 01
7. Section Headings. The section headings in this Agreement
of Merger have been inserted for convenience of reference only and shall
not affect the meaning or interpretation of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement of Merger to be executed on its behalf.
SIMON PROPERTY GROUP, L.P.
By: SIMON DeBARTOLO GROUP, INC.,
as General Partner of Simon Property
Group, L.P.
By: \s\David Simon
Title: Chief Executive Officer
SIMON DeBARTOLO GROUP, L.P.
By: SD PROPERTY GROUP, INC.,
as Managing General Partner of Simon
DeBartolo Group, L.P.
By: \s\David Simon
Title: Chief Executive Officer
<PAGE> 02
============================================================================
Exhibit 2.4
THE EQUITABLE LIFE ASSURANCE
SOCIETY OF THE UNITED STATES,
Seller,
and
SM PORTFOLIO PARTNERS
Purchaser.
_____________________
PURCHASE AND SALE AGREEMENT
_____________________
December 12, 1997
Premises
Eastland Mall NorthPark Mall
Evansville, Indiana Davenport, Iowa
Empire East Rushmore Mall
Sioux Falls, South Dakota Rapid City, South Dakota
Empire Mall Southern Hills Mall
Sioux Falls, South Dakota Sioux City, Iowa
Granite Run Mall SouthPark Mall
Media, Pennsylvania Moline, Illinois
Lake Square Mall Southridge Mall
Leesburg, Florida Des Moines, Iowa
Lindale Mall Valley Mall
Cedar Rapids, Iowa Harrisonburg, Virginia
Mesa Mall
Grand Junction, Colorado
TABLE OF CONTENTS
Article Page
1. Definitions 2
2. Agreement to Sell and Purchase 10
3. Purchase Price; Existing Financing 10
3.1 Purchase Price. 10
3.2 Escrow Provisions 11
3.3 Existing Financing 13
4. Permitted Encumbrances 14
5. The Closing 15
5.1 Closing Date 15
5.2 Actions at Closing 16
6. Apportionments 16
6.1 Rents 16
6.2 Leasing Costs 21
6.3 Ancillary Income. 22
6.4 Additional Items 22
6.5 Adjustment Statement 25
6.6 Tenant Note Obligations 25
6.7 Survival 26
7. Actions to be Taken and Documents to be Delivered at or Prior
to the Closing 26
7.1 Equitable's Deliveries 26
7.2 Purchaser's Deliveries 30
7.3 Access to Records 31
8. Malls Conveyed As Is; Representations and Warranties of Equitable 31
8.1 No Implied Representations 31
8.2 "As-Is" Purchase 32
8.3 Representations and Warranties of Equitable 33
8.4 Effect of Estoppels 40
8.6 Survival of Equitable's Warranties, etc. 41
9. Representations and Warranties of Purchaser 43
9.1 Purchaser's Warranties 43
9.2 Remaking of Warranties; Survival 44
10. Conditions to the Obligation of Equitable to Close 44
10.1 Purchase Price 44
10.2 Representations and Warranties 44
10.3 Performance of Obligations 44
10.4 Required Consents 44
10.5 Rating Agency Approval 44
11. Conditions to the Obligation of Purchaser to Close 45
11.1 Representations and Warranties 45
11.2 Performance of Obligations 45
11.3 Title 45
11.4 Estoppels 45
11.5 Required Consents 45
11.6 Rating Agency Approval 45
12. Risk of Loss 45
12.1 Substantial Casualty 45
12.2 Substantial Taking 46
12.3 Other Casualty or Taking 47
13. Operation of the Malls Until Closing 47
13.1 Standard of Operation 47
13.2 Leasing 48
14. Title to the Mall 49
14.1 Title Defects 49
14.2 Waiver by Purchaser 50
14.3 Deeds Full Performance; Survival 50
15. Brokers, etc. 50
15.1 Equitable's Representation 50
15.2 Purchaser's Representation 50
15.3 Survival 51
16. Default; Remedies 51
16.1 Purchaser's Default 51
16.2 Equitable's Default 51
16.3 Survival 52
17. Estoppels. 52
17.1 Required Estoppels. 52
17.2 Additional Estoppels 53
17.3 No Default. 53
17.4 Seller's Estoppels 53
18. Notices 55
19. Further Assurances 56
20. Captions 57
21. Governing Law; Construction 57
22. Entire Agreement; No Third Party Beneficiary, etc. 57
23. Waivers; Extensions 58
24. Pronouns 58
25. Transaction Expenses; Fees and Disbursements of Counsel, etc. 58
25.1 Transaction Expenses 58
25.2 Other Expenses 58
25.3 Financial Statements; Appraisals 59
25.4 Survival 59
26. Assignment 59
27. Counterparts 59
28. No Recording 59
29. Unitary Transaction 60
30. Prevailing Party's Attorneys' Fees. 60
31. Radon Gas Notification. 60
32. Energy-Efficiency Rating Disclosure. 60
33. Waiver of Jury Trial. 60
Schedule of Exhibits
Exhibit A-1 Description of Land - Eastland Mall
Exhibit A-2 Description of Land - Empire East
Exhibit A-3 Description of Land - Empire Mall
Exhibit A-4 Description of Land - Granite Run Mall
Exhibit A-5 Description of Land - Lake Square Mall
Exhibit A-6 Description of Land - Lindale Mall
Exhibit A-7 Description of Land - Mesa Mall
Exhibit A-8 Description of Land - NorthPark Mall
Exhibit A-9 Description of Land - Rushmore Mall
Exhibit A-10 Description of Land - Southern Hills Mall
Exhibit A-11 Description of Land - SouthPark Mall
Exhibit A-12 Description of Land - Southridge Mall
Exhibit A-13 Description of Land - Valley Mall
Exhibit B List of Documents Comprising the Mortgage
Exhibit C List of Documents Comprising the Ground Leases
Exhibit D List of Documents Comprising the Operating Agreements
Exhibit E List of Documents Comprising the Other Agreements
Exhibit F Permitted Encumbrances
Exhibit G Surveys
Exhibit H [reserved]
Exhibit I Tenant Notes
Exhibit J Environmental Reports
Exhibit K Schedule of Leases
Exhibit L Schedule of Violations
Exhibit M Schedule of Pending Litigation
Exhibit N Form of Assignment of Ground Lease
Exhibit O Form of Assignment of Operating Agreements
Exhibit P Form of Assignment of Leases
Exhibit Q Form of Assignment of Other Agreements
Exhibit R Form of General Assignment
Exhibit S Schedule of Delinquencies
Exhibit T Pending Condemnation
Exhibit U Anchor Estoppel Letter (Operating Agreements)
Exhibit V Tenant Estoppel Letter
Exhibit W Required Consents
Exhibit X Schedule of Material Personal Property
Exhibit Y Seller's Representation Certificate
Exhibit Z Pending Lease Transactions
Exhibit AA Ground Lessor Estoppel Letter
THIS PURCHASE AND SALE AGREEMENT (this "Agreement") is made as
of the 12th day of December, 1997, by and between THE EQUITABLE LIFE
ASSURANCE SOCIETY OF THE UNITED STATES, a New York corporation with an
office at 1290 Avenue of the Americas, New York, New York 10104
("Equitable"), as Seller, and SM PORTFOLIO PARTNERS, a Delaware general
partnership with an office at 115 West Washington Street, Indianapolis,
Indiana 46204 ("Purchaser"), as Purchaser.
W I T N E S S E T H :
WHEREAS, Equitable is owner in fee (other than the portions
thereof owned by Anchors and the portions of Eastland Mall, Empire Mall
and Southridge Mall that are leasehold interests) of (i) Eastland Mall,
a regional shopping mall located in Evansville, Indiana, (ii) Empire
East, a community shopping center located in Sioux Falls, South Dakota,
(iii) Empire Mall, a regional shopping mall located in Sioux Falls,
South Dakota, (iv) Granite Run Mall, a regional shopping mall located in
Media, Pennsylvania, (v) Lake Square Mall, a regional shopping mall
located in Leesburg, Florida, (vi) Lindale Mall, a regional shopping
mall located in Cedar Rapids, Iowa, (vii) Mesa Mall, a regional shopping
mall located in Grand Junction, Colorado, (viii) NorthPark Mall, a
regional shopping mall located in Davenport, Iowa, (ix) Rushmore Mall, a
regional shopping mall located in Rapid City, South Dakota, (x) Southern
Hills Mall, a regional shopping mall located in Sioux City, Iowa, (xi)
SouthPark Mall, a regional shopping mall located in Moline, Illinois,
(xii) Southridge Mall, a regional shopping mall located in Des Moines,
Iowa, and (xiii) Valley Mall, a regional shopping mall located in
Harrisonburg, Virginia, each of which is more particularly described in
and is the subject of this Agreement.
WHEREAS, Equitable desires to sell such shopping malls and
center to Purchaser, and Purchaser desires to purchase such shopping
malls and center from Equitable, subject to and upon all of the terms,
covenants and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and the
mutual undertakings in this Agreement, the parties hereto agree as
follows:
<PAGE> 01
1. Definitions.
Wherever used in this Agreement, the following terms shall
have the meanings set forth in this Article 1 unless the context of this
Agreement clearly requires another interpretation:
"Adjoining Owners" - shall mean, with respect to each Mall,
all owners of stores on sites at such Mall or adjacent to such Mall
which are owned or ground leased by such owners, which stores are
operated in conjunction with the Mall pursuant to an Operating
Agreement.
"Adjoining Properties" - shall mean, with respect to each
Mall, the land and/or the improvements thereon of Adjoining Owners which
are not part of but are operated in conjunction with such Mall under the
terms of one or more Operating Agreements.
"Adjustment Point" - shall have the meaning set forth in
Article 6.
"Allocated Price" - shall have the meaning set forth in
Section 12.1.
"Anchor" - shall mean a Tenant or Adjoining Owner occupying a
store containing more than 50,000 square feet of gross leasable area.
"Appurtenances" - shall mean, with respect to each Mall
and the applicable Land, all right, title and interest, if any, of
Equitable in and to the following: all land lying in the bed of
any street, highway, road or avenue, open or proposed, public or
private, in front of or adjoining the Land, to the center line
thereof; all rights of way, highways, public places, easements,
appendages, appurtenances, sidewalks, alleys, strips and gores of
land adjoining or appurtenant to the Land which are now or
hereafter used in connection with the Mall; all awards to be made
in lieu of any of the foregoing (other than any condemnation award
made as a result of the pending condemnation (or agreement in lieu
thereof) of a portion of the Lindale Mall), or for damages to the
Land by reason of the change of grade of any street, highway, road
or avenue; and (d) all easements, rights and privileges benefiting
the applicable Land, including, without limitation, those under the
applicable Operating Agreements.
"Bill of Sale" - shall mean each bill of sale to the Personal
Property to be delivered at the Closing as provided in subsection 7.1.3.
"Broker" - shall have the meaning set forth in Section 15.1.
"Business Day" - shall mean any day other than a Saturday, a
Sunday or a day on which national banking institutions located in New
York City are authorized or required to close.
<PAGE> 02
"Casualty" - shall mean any damage to or destruction of any
Mall or any portion thereof caused by fire or other casualty, whether or
not insured.
"Closing" - shall mean the closing of the sale of the Malls by
Equitable to Purchaser provided for in Article 5.
"Closing Date" - shall have the meaning set forth in Section
5.1.
"Deed"- shall have the meaning set forth in subsection 7.1.1.
"Eastland Mall" - shall mean, with respect to the premises
described in Exhibit A-1 hereto, collectively, the Land (or, in the case
of that portion of the Land which is leased by Equitable under a Ground
Lease, Equitable's leasehold interest therein), the Appurtenances, the
Improvements, the Personal Property, the Leases, the Operating
Agreements, the Other Agreements and the Intangible Personal Property.
"Empire East" - shall mean, with respect to the premises
described in Exhibit A-2 hereto, collectively, the Land, the
Appurtenances, the Improvements, the Personal Property, the Leases, the
Operating Agreements, the Other Agreements and the Intangible Personal
Property.
"Empire Mall" - shall mean, with respect to the premises
described in Exhibit A-3 hereto, collectively, the Land (or, in the case
of that portion of the Land what is leased by Equitable under a Ground
Lease, Equitable's leasehold interest therein), the Appurtenances, the
Improvements, the Personal Property, the Leases, the Operating
Agreements, the Other Agreements and the Intangible Personal Property.
"Equitable's Copy" or "Equitable's Copies" - shall mean
Equitable's executed counterpart of the instrument in question or, if an
executed counterpart is not in Equitable's or the Managing Agent's
possession, such conformed or photostatic copies as may be in
Equitable's, ERE's or the Managing Agent's possession.
"ERE" - shall mean ERE Yarmouth, a member of the Lend Lease
Group and the name under which Equitable Real Estate Investment
Management, Inc. now conducts business.
"Excepted Items" - shall mean, with respect to each Mall: (i)
all items of personal property owned by Tenants, subtenants, independent
contractors, business invitees, utilities or Adjoining Owners; (ii) all
items of personal property used in connection with the Mall which are
not owned but are leased by Equitable, it being understood that at the
Closing such leases are to be assigned by Equitable to Purchaser without
additional consideration to Equitable beyond the Purchase Price; and
<PAGE> 03
(iii) all cash on hand, checks, money orders, accounts receivable
(subject to the provisions of Article 6) and prepaid postage in postage
meters.
"Exhibits" - shall mean the exhibits attached to this
Agreement, each of which shall be deemed to form part of this Agreement
whether or not so stated in this Agreement.
"Existing Financing" - shall mean that certain financing with
respect to all of the Malls evidenced by those certain collateralized
fixed and floating rate notes in the aggregate principal sum of
$485,000,000 issued by Equitable, which notes are secured by, inter
alia, those documents and instruments more particularly described on
Exhibit B hereto.
"Governmental Authorities" - shall mean all agencies, bureaus,
departments and officials of federal, state, county, municipal and local
governments and public authorities having jurisdiction over the
applicable Mall or any part thereof.
"Granite Run Mall" - shall mean, with respect to the premises
described in Exhibit A-4 hereto, collectively, the Land, the
Appurtenances, the Improvements, the Personal Property, the Leases, the
Operating Agreements, the Other Agreements and the Intangible Personal
Property.
"Ground Leases " - shall means those certain ground leases
pursuant to which Equitable leases the land underlying portions of the
Eastland Mall, the Empire Mall and the Southridge Mall, which ground
leases are described in Exhibit C annexed hereto.
"Impositions" - shall mean, with respect to each Mall, all
real estate and personal property taxes, general and special
assessments, water and sewer charges, license fees and other fees and
charges assessed or imposed by Governmental Authorities upon the
applicable Property, Intangible Personal Property and/or Personal
Property.
"Improvements" - shall mean, with respect to each Mall, all
buildings, facilities, structures and improvements now located or
hereafter erected on the Land, and all fixtures constituting a part
thereof; provided, however, that in the case of buildings or other
improvements owned by Adjoining Owners and erected on a portion of the
Land leased by Equitable to such Adjoining Owner, "Improvements" shall
mean Equitable's reversionary interest as ground lessor in and to such
buildings and improvements.
"Income" - shall have the meaning set forth in subsection
3.2.1
<PAGE> 04
"Intangible Personal Property" - shall mean, with respect to
each Mall, all right, title and interest of Equitable in and to all
intangible personal property used in connection with the operation of
the Mall and including, without limitation, good will, going concern
value, radius restriction and operating agreements of Tenants and
Anchors, all telephone numbers listed after the name of the Mall, all
names, trade names, designations, logos and service marks, and the
appurtenant good will, used in connection with operation of the Mall
(other than the names or variations thereof of Equitable, the Managing
Agent, Adjoining Owners and Tenants), the right to own, develop, lease
and manage the Malls and all similar items of intangible personal
property owned by Equitable and utilized solely in connection with the
operation of the Mall (excluding items which would be treated as
Excepted Items).
"knowledge" or "notice" - with respect to Equitable shall
mean, without independent investigation other than inquiry of and review
of Equitable's warranties and representations set forth herein with the
Managing Agent, the actual knowledge of or written notice received by
any of William Horvath, Suman Gera and Douglas Healy.
"Lake Square Mall" - shall mean, with respect to the premises
described in Exhibit A-5 hereto, collectively, the Land, the
Appurtenances, the Improvements, the Personal Property, the Leases, the
Operating Agreements, the Other Agreements and the Intangible Personal
Property.
"Land" - shall mean the following: with respect to Eastland
Mall, all those certain lots, pieces or parcels of land situate, lying
and being in the County of Vanderburgh, State of Indiana, more
particularly described in Exhibit A-1 annexed hereto and made a part
hereof; with respect to Empire East, all those certain lots, pieces or
parcels of land situate, lying and being in the County of Minnehaha,
State of South Dakota, more particularly described in Exhibit A-2
annexed hereto and made a part hereof; with respect to Empire Mall, all
those certain lots, pieces or parcels of land situate, lying and being
in the County of Minnehaha, State of South Dakota, more particularly
described in Exhibit A-3 annexed hereto and made a part hereof; with
respect to Granite Run Mall, all those certain lots, pieces or parcels
of land situate, lying and being in the County of Delaware, State of
Pennsylvania, more particularly described in Exhibit A-4 annexed hereto
and made a part hereof; with respect to Lake Square Mall, all those
certain lots, pieces or parcels of land situate, lying and being in the
County of Lake, State of Florida, more particularly described in Exhibit
<PAGE> 05
A-5 annexed hereto and made a part hereof; with respect to Lindale Mall,
all those certain lots, pieces or parcels of land situate, lying and
being in the County of Linn, State of Iowa, more particularly described
in Exhibit A-6 annexed hereto and made a part hereof; with respect to
Mesa Mall, all those certain lots, pieces or parcels of land situate,
lying and being in the County of Mesa, State of Colorado, more
particularly described in Exhibit A-7 annexed hereto and made a part
hereof; with respect to NorthPark Mall, all those certain lots, pieces
or parcels of land situate, lying and being in the County of Scott,
State of Iowa, more particularly described in Exhibit A-8 annexed hereto
and made a part hereof; with respect to Rushmore Mall, all those certain
lots, pieces or parcels of land situate, lying and being in the County
of Pennington, State of South Dakota, more particularly described in
Exhibit A-9 annexed hereto and made a part hereof; with respect to
Southern Hills Mall, all those certain lots, pieces or parcels of land
situate, lying and being in the County of Woodbury, State of Iowa, more
particularly described in Exhibit A-10 annexed hereto and made a part
hereof; with respect to SouthPark Mall, all those certain lots, pieces
or parcels of land situate, lying and being in the County of Rock
Island, State of Illinois, more particularly described in Exhibit A-11
annexed hereto and made a part hereof; with respect to Southridge Mall,
all those certain lots, pieces or parcels of land situate, lying and
being in the County of Polk, State of Iowa, more particularly described
in Exhibit A-12 annexed hereto and made a part hereof; and with respect
to Valley Mall, all those certain lots, pieces or parcels of land
situate, lying and being in the City of Harrisonburg, State of Virginia,
more particularly described in Exhibit A-13 annexed hereto and made a
part hereof; in each case together with the Appurtenances.
"Leases" - shall mean, with respect to each Mall, all leases,
licenses, concessions and other forms of agreement, written or oral,
however denominated, wherein Equitable (as a party named therein or the
successor thereto) grants to any party or parties, other than the
Managing Agent, the right of exclusive use or occupancy of any portion
of the Mall, and all renewals, modifications, amendments, guaranties and
other agreements affecting the same, but expressly excluding the
Operating Agreements.
"Leasing Costs" - shall have the meaning set forth in Section
6.2.
"Legal Requirements" - shall mean, with respect to each Mall,
all statutes, laws, ordinances, rules, regulations, executive orders and
requirements of all Governmental Authorities which are applicable to
<PAGE> 06
such Mall or any part thereof or the use or manner of use thereof, or to
the owner, Tenants or occupants thereof in connection with such owner
ship, occupancy or use.
"Letter(s) of Credit" - shall have the meaning set forth in
subsection 3.1.1.
"Lindale Mall" - shall mean, with respect to the premises
described in Exhibit A-6 hereto, collectively, the Land, the
Appurtenances, the Improvements, the Personal Property, the Leases, the
Operating Agreements, the Other Agreements and the Intangible Personal
Property.
"Mall" - shall mean any of Eastland Mall, Empire East, Empire
Mall, Granite Run Mall, Lake Square Mall, Lindale Mall, Mesa Mall,
NorthPark Mall, Rushmore Mall, Southern Hills Mall, SouthPark Mall,
Southridge Mall and Valley Mall, and "Malls" shall mean all of the
foregoing.
"Management Agreement" - shall mean the agreement for the
management and leasing of the Malls dated as of February 1, 1994 between
Seller and the Managing Agent, as heretofore amended.
"Managing Agent" - shall mean General Growth Management Inc.
"Mesa Mall" - shall mean, with respect to the premises
described in Exhibit A-7 hereto, collectively, the Land, the
Appurtenances, the Improvements, the Personal Property, the Leases, the
Operating Agreements, the Other Agreements and the Intangible Personal
Property.
"Mortgage" - shall mean that certain Mortgage, Deed of Trust,
Security Agreement, Assignment of Leases and Rents, Fixture Filing and
Financing Statement dated and effective as of May 29, 1996 among
Equitable, as Mortgagor, W. Allen Ames, Jr., as Deed Trustee (solely
with respect to Valley Mall), Mesa County Public Trustee, as Deed
Trustee (solely with respect with Mesa Mall) and State Street Bank and
Trust Company, as Trustee, which encumbers each of the Malls, and
related agreements and instruments which evidence or secure the Existing
Financing, the documents comprising which are listed in Exhibit B.
"NorthPark Mall" - shall mean, with respect to the premises
described in Exhibit A-8 hereto, collectively, the Land, the
Appurtenances, the Improvements, the Personal Property, the Leases, the
Operating Agreements, the Other Agreements and the Intangible Personal
Property.
"Operating Agreement" - shall mean, with respect to each Mall,
each reciprocal easement and operating agreement or ground lease, as
amended, by and between Equitable or its predecessor in title to the
<PAGE> 07
Mall and an Adjoining Owner, the documents comprising which are listed
in Exhibit D.
"Other Agreements" - shall mean, with respect to each Mall,
all contracts, agreements and documents pertaining to the Mall to which
Equitable or its predecessor in interest is a party and by which
Equitable is bound, other than the Ground Leases, the Operating
Agreements, the Management Agreement, the Mortgage and the Leases, and
including without limitation, all service contracts, construction
contracts, leases of personal property and utility agreements, the
documents comprising which are listed in Exhibit E.
"Permitted Encumbrances" - shall have the meaning set forth in
Section 4.1.
"Personal Property" - shall mean, with respect to each Mall,
all apparatus, machinery, devices, appurtenances, equipment, furniture,
furnishings, promotional and marketing fund accounts and other items of
personal property (other than Intangible Personal Property and the
Excepted Items) owned by Equitable and located at and used in connection
with the ownership, operation or maintenance of the Mall.
"Property" - shall mean, with respect to each Mall, the Land,
the Appurtenances and the Improvements.
"Purchase Price" - shall have the meaning set forth in Section
3.1.
"Rating Agencies - shall mean Moody's Investors Service, Inc.
and Fitch Investors Service, L.P.
"Rating Agency Approval" - shall mean the approval, pursuant
to Section 19.1 of the Mortgage, by each of the Rating Agencies of the
conveyance of the Malls to Purchaser subject to, and the assumption by
Purchaser of, the Existing Financing.
"Recording Office" - shall mean, with respect to each Mall,
the appropriate office or offices in the state in which the Mall is
located for the recording or filing of the documents to be delivered at
Closing which are to be recorded or filed therein.
"Rents" - shall mean all fixed, minimum, additional,
percentage, overage and escalation rents, common area and/or mall mainte
nance charges, advertising and promotional charges, insurance charges,
rubbish removal charges, sprinkler charges, shoppers aid charges, water
charges, utility charges, HVAC charges and other amounts payable under
the Leases or the Operating Agreements.
<PAGE> 08
"Required Consents" shall have the meaning specified in
subsection 8.3.3.
"Rushmore Mall" - shall mean, with respect to the premises
described in Exhibit A-9 hereto, collectively, the Land, the
Appurtenances, the Improvements, the Personal Property, the Leases, the
Operating Agreements, the Other Agreements and the Intangible Personal
Property.
"Southern Hills Mall" - shall mean, with respect to the
premises described in Exhibit A-10 hereto, collectively, the Land, the
Appurtenances, the Improvements, the Personal Property, the Leases, the
Operating Agreements, the Other Agreements and the Intangible Personal
Property.
"SouthPark Mall" - shall mean, with respect to the premises
described in Exhibit A-11 hereto, collectively, the Land, the
Appurtenances, the Improvements, the Personal Property, the Leases, the
Operating Agreements, the Other Agreements and the Intangible Personal
Property.
"Southridge Mall" - shall mean, with respect to the premises
described in Exhibit A-12 hereto, collectively, the Land (or, in the
case of this portion of the Land which is leased by Equitable under a
Ground Lease, Equitable's leasehold interest therein), the
Appurtenances, the Improvements, the Personal Property, the Leases, the
Operating Agreements, the Other Agreements and the Intangible Personal
Property.
"Substantial Casualty" - shall mean a Casualty with respect to
which the cost to repair or restore the affected Improvements
substantially to their condition prior to such Casualty exceeds
$2,000,000.
"Substantial Taking" - shall mean a Taking which shall have a
material adverse effect on the value of the Malls taken as a whole.
"Taking" shall mean a taking of all or any portion of the Land
and/or improvements in condemnation or by exercise of the power of
eminent domain or by an agreement in lieu thereof.
"Tenants" - shall mean the tenants, licensees, concessionaires
or other users or occupants under Leases.
"Title Company" shall mean Commonwealth Land Title Insurance
Company, Interstate Title Services, as agent.
<PAGE> 09
"Valley Mall" - shall mean, with respect to the premises
described in Exhibit A-13 hereto, collectively, the Land, the
Appurtenances, the Improvements, the Personal Property, the Leases, the
Operating Agreements, the Other Agreements and the Intangible Personal
Property.
"Violations" - shall mean, with respect to each Mall,
violations of Legal Requirements existing with respect to the Mall.
2. Agreement to Sell and Purchase. Upon and subject to the terms
and conditions of this Agreement, Equitable agrees to sell and convey
the Malls to Purchaser and Purchaser agrees to purchase the Malls from
Equitable.
3. Purchase Price; Existing Financing.
3.1 Purchase Price. The aggregate purchase price (the "Purchase
Price") for the Malls is Nine Hundred Seventy-Four Million Five Hundred
Thousand and No/100 Dollars ($974,500,000), and shall be payable as
follows:
3.1.1 Twenty-Five Million and No/100 Dollars ($25,000,000)
(the "Deposit") shall be paid by Purchaser to Escrow Agent
simultaneously herewith, by wire transfer of immediately available
federal funds to an account designated by Escrow Agent or by Purchaser's
delivering to Equitable one or more clean, irrevocable letters of credit
with Equitable as the beneficiary, the form of each of which is
reasonably acceptable to Equitable (the "Letter(s) of Credit"). If
Letter(s) of Credit are delivered by Purchaser to Equitable: (i) if the
Closing occurs the Letter(s) of Credit shall be redelivered by Equitable
to Purchaser and the "Remaining Balance" (as defined in subsection
3.1.2) shall in such case be increased by the amount of the Letter(s) of
Credit; and (ii) if Equitable shall be holding any Letter of Credit
thirty (30) days prior to the expiration date thereof and Purchaser
shall not theretofore have delivered to Equitable an endorsement to such
Letter of Credit signed by the issuer thereof extending such expiration
date for a minimum of thirty (30) days or a replacement Letter of Credit
bearing an expiration date at least thirty (30) days following the
expiration date of the original Letter of Credit, Equitable shall have
the right to draw the full amount of such Letter of Credit and, unless
Equitable is then entitled to retain the proceeds of such Letter of
Credit pursuant to the terms of this Agreement, such proceeds shall be
paid to Escrow Agent (as hereinafter defined) to be held and disposed of
in accordance with Section 3.2.
<PAGE> 10
3.1.2 The balance of the Purchase Price, plus or minus
adjustments and credits provided for in Article 6 and any other
applicable provisions of this Agreement (the "Remaining Balance") shall
be paid as follows: (i) that portion of the Remaining Balance which
equals the outstanding principal balance of the Existing Financing on
the Closing Date shall be paid by Purchaser's accepting title to the
Malls subject to and assuming the Existing Financing; and (ii) the
balance of the Remaining Balance shall be paid in cash at the Closing,
by wire transfer of immediately available federal funds to an account
designated by Equitable.
3.2 Escrow Provisions.
3.2.1 If the Deposit is paid in cash, the Title Company
(referred to in this Section and sometimes in other sections hereof as
"Escrow Agent") shall hold the Deposit in escrow in an interest-bearing
bank account in an institution acceptable to Equitable and Purchaser, or
in such other type or types of investments as may be agreed to in
writing by Equitable and Purchaser, until the Closing or such other time
as is specified herein, and shall pay over or apply the Deposit in
accordance with the terms of this Section 3.2. All interest or other
income earned on the Deposit (the "Income") shall be paid to or applied
for the benefit of Purchaser unless the Deposit is to be paid to
Equitable as provided in Section 16.1, in which case the Income shall be
paid to Equitable. The party that receives the Income or the benefit
thereof shall be responsible for paying any income taxes thereon. The
tax identification numbers of the parties hereto shall be furnished to
Escrow Agent upon request.
3.2.2 If the Closing occurs, the Deposit shall be paid to
Equitable and credited against the Purchase Price and the Income shall
be paid to or at the direction of Purchaser. If this Agreement is
terminated pursuant to Section 16.1, the Deposit and the Income shall be
paid to Equitable as liquidated and agreed upon damages for Purchaser's
default. If the Closing does not occur for any reason other than
termination of this Agreement pursuant to Section 16.1, then, subject to
the provisions of Section 16.2, the Deposit and the Income shall be paid
to Purchaser.
3.2.3 Escrow Agent shall not be required to make any
disposition of the Deposit or the Income unless (i) Escrow Agent is
directed to do so in writing by Equitable and Purchaser or (ii) Escrow
Agent is directed to do so in writing by the party which claims to be
entitled to receive the Deposit and the Income and the other party does
<PAGE> 11
not object to such disposition within ten (10) days after written notice
of such direction is given by Escrow Agent to the other party or (iii)
Escrow Agent is directed to do so by a final order or judgment of a
court as hereinafter provided. The notice given by Escrow Agent
pursuant to clause (ii) above shall state in capital letters that
failure of the addressee to object to the disposition of the Deposit and
the Income described in such notice within ten (10) days after the
giving thereof shall constitute a waiver of the addressee's right to
contest or object to such disposition. In the event that any dispute
shall arise with respect to the entitlement of either party to the
Deposit or the Income, Escrow Agent shall continue to hold the Deposit
and the Income until otherwise directed by written instruction from
Equitable and Purchaser or a final order or judgment of a court of
competent jurisdiction entered in an action or proceeding to which
Escrow Agent is a party. In addition, in the event of any such dispute,
Escrow Agent shall have the right at any time to commence an action in
interpleader and to deposit the Deposit and/or the Income with the clerk
of a court of appropriate jurisdiction in the State of New York. Upon
the commencement of such action and the making of such deposit, Escrow
Agent shall be released and discharged from and of all further
obligations and responsibilities hereunder. For the purposes of this
subsection 3.2.3, no dispute shall be deemed to exist as to entitlement
of either party to the Deposit and the Income if the party receiving
notice from Escrow Agent pursuant to clause (ii) of this subsection
3.2.3 objects to the disposition of the Deposit and the Income provided
for in such notice more than ten (10) days after the giving of such
notice by Escrow Agent.
3.2.4 The parties hereto acknowledge that Escrow Agent is
acting solely as a stakeholder at their request and for their
convenience, that with respect to the Deposit and the Income Escrow
Agent shall not be deemed to be the agent of any of the parties hereto
and that Escrow Agent shall not be liable to either of the parties
hereto for any act or omission on its part unless taken or suffered in
bad faith, in willful disregard of this Agreement or involving gross
negligence on the part of Escrow Agent. Escrow Agent may act upon any
instrument or other writing and upon signatures believed by it to be
genuine, without any duty of independent verification. Escrow Agent
shall not be bound by any modification of this Agreement unless the same
is in writing and signed by the parties hereto and a counterpart thereof
is delivered to Escrow Agent and, if Escrow Agent's duties, rights or
liabilities hereunder are affected, unless Escrow Agent shall have given
its prior consent thereto in writing. Escrow Agent shall not be
<PAGE> 12
required or obligated to determine any questions of law or fact. The
parties hereto shall jointly and severally indemnify and hold harmless
Escrow Agent from and against all costs, claims and expenses, including
reasonable attorneys' fees and litigation costs, incurred by Escrow
Agent in connection with the performance of its duties under this
Section 3.2 (including, without limitation, in an interpleader action or
other litigation regarding the disposition of the Deposit and the
Income), except with respect to acts or omissions taken or suffered by
Escrow Agent in bad faith, in willful disregard of this Agreement or
involving gross negligence on the part of Escrow Agent.
3.2.5 Escrow Agent shall have no liability for the selection
of any particular account or investment made by the parties hereto, for
fluctuations in the value of said account or investment, for the amount
of interest or other income earned on said account or investment or for
any loss incurred in connection therewith.
3.2.6 Escrow Agent has acknowledged its agreement to the
provisions of this Section 3.2 by signing this Agreement, and Escrow
Agent has executed this Agreement solely for such purpose.
3.2.7 References in succeeding provisions of this
Agreement to the Deposit shall be deemed to be references both to the
Deposit and the Income.
3.3 Existing Financing.
3.3.1 As provided in Sections 10.5 and 11.6, it shall be a
condition precedent to Equitable's and Purchaser's respective
obligations to close title hereunder that the Rating Agency Approval
shall have been obtained, it being agreed, however, that Purchaser may
elect, in its sole discretion, to satisfy this condition by repaying in
full the Existing Financing, including any prepayment penalty or premium
required to be paid in connection with such repayment and, if Purchaser
does so, the amount of the Purchase Price payable by Purchaser to
Equitable at Closing shall be the amount provided for in Section 3.1 as
if Purchaser had taken title to the Malls subject to the Existing
Financing. Purchaser and Seller each shall, in a timely manner, provide
such information, execute and deliver such documents and take such other
actions as are required in order that the Rating Agencies may determine
whether Purchaser is qualified under the Mortgage to take title to the
Malls subject to the Existing Financing. If the Rating Agencies
determine that Purchaser is so qualified, Purchaser shall, at (or, if
appropriate, prior to) the Closing, execute and deliver such additional
documents, and take such other actions, as shall be required under the
<PAGE> 13
Mortgage in connection with Purchaser's assumption of the Existing
Financing. Without limiting the generality of the foregoing, if
required by the Rating Agencies, Purchaser shall submit copies of its
organizational documents and shall make such modifications thereto as
shall be required by the Rating Agencies, deliver a substantive
nonconsolidation opinion from Purchaser's counsel and such other legal
opinions of Purchaser's counsel as may be required by the Rating
Agencies, and execute and deliver an assumption of the Mortgage and the
other loan documents in the form required thereunder.
3.3.2 If prior to the Closing Purchaser desires to
communicate or meet with the Trustee for the Existing Financing or the
Rating Agencies with respect to the Existing Financing or Purchaser's
ability to qualify as a party entitled to take title to the Malls
subject thereto, Purchaser shall so advise Equitable and afford
Equitable the right to participate in each meeting or communication.
3.3.3 The terms and conditions of the Existing Financing
require that Equitable complete certain maintenance, repair and
replacement work at the Malls. To the extent that such work has not
heretofore been completed by Equitable, Purchaser shall be solely
responsible for the performance of, and payment for, such work following
Closing.
4. Permitted Encumbrances.
4.1 Definitions. At the Closing title to the Malls shall be
subject only to the following matters ("Permitted Encumbrances"):
4.1.1 the matters set forth in Exhibit F annexed hereto and
made a part hereof;
4.1.2 liens for Impositions which are not due and payable as
of the Closing Date or which are apportioned in accordance with Article
6;
4.1.3 liens for Impositions which are paid directly by
Tenants in occupancy on the Closing Date or by Adjoining Owners to the
entity imposing same;
4.1.4 the state of facts shown on the surveys described in
Exhibit G annexed hereto and made a part hereof, which surveys, to the
extent not already so updated, shall be updated by surveys dated no
earlier than October 23, 1997, which are certified to Purchaser and the
Title Company and are accompanied by an affidavit by Equitable, in the
form required by the Title Company, that, except in the case of
Southridge Mall and any other Mall where material exterior construction
<PAGE> 14
is now in progress, there have been no exterior physical changes at the
Malls since the date of such updated surveys; and any state of facts a
physical inspection of the Malls would show;
4.1.5 zoning, subdivision, environmental, building and all
other Legal Requirements applicable to the ownership, use or development
of or the right to maintain or operate the Malls, or have space therein
used and occupied by Tenants or Adjoining Owners, presently existing or
enacted prior to the Closing;
4.1.6 all Leases in effect on the date of this Agreement, any
extensions or renewals of Leases pursuant to options contained therein
which do not require the consent of Equitable thereunder, and any
extensions, renewals or amendments of Leases or additional or
substituted Leases made between the date hereof and the Closing Date in
accordance with the provisions of Article 13;
4.1.7 mechanics liens, lis pendens and notices of
commencement arising from work or other obligations, the payment for
which is the responsibility of any Tenant in occupancy on the Closing
Date under a Lease then in effect and in good standing or any Adjoining
Owner and not Equitable, it being agreed that a Lease shall be deemed in
"good standing" if on the Closing Date the Tenant thereunder is not more
than sixty (60) days delinquent in the payment of minimum rent due under
its Lease and is not at that time the subject of any petition for relief
under the Bankruptcy Code;
4.1.8 the Mortgage and the applicable loan documents
relating thereto;
4.1.9 the applicable Operating Agreements;
4.1.10 the applicable Other Agreements; and
4.1.11 all other matters affecting title to the Malls
which are hereafter accepted or required to be accepted or are waived by
Purchaser as provided in Article 14.
5. The Closing.
5.1 Closing Date. The closing of the transactions provided for
in this Agreement (the "Closing") shall be held at 10:00 A.M. on
February 2, 1998 (as the same may be adjourned or advanced pursuant to
the terms of this Agreement, the "Closing Date"), at the offices of
Paul, Weiss, Rifkind, Wharton & Garrison, 1285 Avenue of the Americas,
New York, New York 10019. Time shall be of the essence with respect to
the Closing Date, provided that (i) Equitable shall have the right to
<PAGE> 15
adjourn the Closing Date one or more times for a combined aggregate of
not more than sixty (60) days, which shall run concurrently with any
adjournment effected by Purchaser pursuant to clause (ii) below, to cure
exceptions to title, obtain the Required Consents, enable the parties to
obtain the Rating Agency Approval, obtain estoppel certificates or
satisfy other closing conditions; and (ii) Purchaser shall have the
right to adjourn the Closing Date one or more times for an aggregate of
not more than sixty (60) days, which shall run concurrently with any
adjournment effected by Equitable pursuant to clause (i) above, to
enable the parties to obtain the Rating Agency Approval or to allow
additional time for Equitable to satisfy its closing conditions.
5.2 Actions at Closing. At the Closing, the parties shall
deliver and accept the documents and instruments and take all other
action required of them pursuant to this Agreement.
6. Apportionments. At the Closing (except where a later date is
specifically provided for in this Article), the items set forth below
shall be adjusted as of 11:59 P.M. on the day preceding the Closing Date
(the "Adjustment Point"); provided, however, that if the Closing occurs
on February 2, 1998, the Adjustment Point shall be 11:59 PM on January
31, 1998 and at the Closing, Purchaser shall pay to Seller an amount
equal to interest on the cash portion of the Purchase Price at the rate
of 10% per annum for one day.
6.1 Rents. Rents as and when collected. Any Rents collected by
or on behalf of Purchaser (which, for purposes of this Section 6.1,
shall include Rents collected by any property manager or other agent
acting for Purchaser) subsequent to the Closing (whether due and payable
prior to or subsequent to the Adjustment Point) shall be adjusted as of
the Adjustment Point, and any portion thereof properly allocable to
periods prior to the Adjustment Point, net of costs of collection
properly allocable thereto, if any, shall be paid by Purchaser to
Equitable promptly after the collection thereof by or on behalf of
Purchaser, but subject to the further provisions of this Section 6.1 in
the case of Rents due prior to the Adjustment Point. If prior to the
Closing Equitable shall have collected, or if subsequent to the Closing
Equitable shall collect, any Rents (which, for the purposes of this
Section 6.1, shall include Rents collected by the Managing Agent or
other agent acting for Equitable) which are properly allocable in whole
or in part to periods subsequent to the Adjustment Point, the portion
thereof so allocable to periods subsequent to the Adjustment Point, net
of costs of collection properly allocable thereto, if any, shall be
<PAGE> 16
credited to Purchaser by Equitable at the Closing or, if collected after
the Closing, shall be promptly remitted by Equitable to Purchaser. As
used in this Section 6.1 the term "costs of collection" shall mean and
include reasonable attorneys' fees and other costs incurred by or on
behalf of Purchaser or Equitable in collecting any Rents, but shall not
include the regular fees payable to any property manager for the Malls,
the payroll costs of any of Equitable's or Purchaser's employees or any
other internal costs or overhead of Equitable or Purchaser.
6.1.1 Equitable shall deliver to Purchaser at Closing a list
of all Tenants and Adjoining Owners at each Mall that are delinquent in
payment of Rents as of the Adjustment Point, which list shall set forth
the amount of each such delinquency, the period to which each such
delinquency relates and the nature of the amount due, itemizing
separately fixed monthly rent, tax reimbursements, common area
maintenance, electric charges, charges for tenant services, charges for
overtime services, percentage rent and other charges, if any. The first
amounts collected by or on behalf of Purchaser from each delinquent
Tenant or Adjoining Owner, net of costs of collection, if any, shall be
deemed to be in payment of Rents (or the specific components of Rents)
for the month in which the Closing occurs, next in payment of Rents (or
the specific components of Rents) then due on account of any month after
the month in which the Closing occurs and finally in payment of
delinquent Rents (or the specific components of Rents) which are in
arrears as of the first day of the month in which the Closing occurs, as
set forth on such list; provided, however, that if at the Closing Date
any Tenant or Adjoining Owner is more than thirty (30) days in arrears
in payment of Rents (or any component of Rents), the first amounts
collected by or on behalf of Purchaser from each such Tenant or
Adjoining Owner on account of the Rents (or the specific component of
Rents) as to which it is so delinquent, net of costs of collection, if
any, shall be deemed in payment of such Rents (or such specific
component of Rents) then due on account of any month after the month in
which the Closing occurs, next in payment of such Rents (or such
specific component of Rents) for the month in which the Closing occurs
and finally in payment of such Rents (or such specific component of
Rents) which are in arrears as of the first day of the month in which
the Closing occurs, as set forth on such list. Any amounts collected by
or on behalf of Purchaser from each delinquent Tenant or Adjoining Owner
which, in accordance with the preceding sentence, are allocable to the
month in which the Closing occurs (as adjusted as of the Adjustment
<PAGE> 17
Point) or any prior month, net of costs of collection properly allocable
thereto, if any, shall be paid promptly by Purchaser to Equitable.
6.1.2 Purchaser shall exert reasonable efforts for a period
of one (1) year after the Closing to bill and collect any delinquencies
set forth on the list delivered by Equitable pursuant to subsection
6.1.1 and the amount thereof, as, when and to the extent collected by or
on behalf of Purchaser shall, if due to Equitable pursuant to the
provisions of subsection 6.1.1, be paid by Purchaser to Equitable, net
of costs of collection, if any, properly allocable thereto, promptly
after the collection thereof by Purchaser. In no event shall Purchaser
be obligated to institute any actions or proceedings or to seek the
eviction of any Tenant or Adjoining Owner in order to collect any such
delinquencies.
6.1.3 Following the Closing, Purchaser shall submit or cause
to be submitted to Equitable, within 30 days after the end of each
calendar quarter up to and including the calendar quarter ending on
March 31, 1999, but only so long as any delinquencies shall be owed to
Equitable, a statement which sets forth all collections made by or on
behalf of Purchaser from the Tenants and Adjoining Owners which owe such
delinquencies through the end of such calendar quarter. Equitable shall
have the right from time to time following the Closing until 90 days
after receipt by Equitable of the last quarterly statement required
hereunder, at Equitable's expense during business hours and on
reasonable prior notice to Purchaser, to examine and audit so much of
the books and records of Purchaser as relate to such delinquencies in
order to verify the collections reported by Purchaser in such quarterly
statements.
6.1.4 Nothing contained in this Section 6.1 shall be deemed
to prohibit Equitable, at its own expense, from instituting any actions
or proceedings in its own name against any Tenant or Adjoining Owner
after the Closing in order to collect the amount of any delinquencies
due in whole or in part to Equitable from such Tenant or Adjoining
Owner; provided, however, that in no event shall Equitable be entitled
in any such action or proceeding to seek to evict any Tenant or
Adjoining Owner or to recover possession of its space. If requested by
Equitable, Purchaser shall join in any such action or proceeding, or
permit the same to be bought in Purchaser's name or in the names of
Equitable and Purchaser, all at Equitable's sole cost and expense.
Purchaser shall not waive or settle any delinquency owed in whole or in
part to Equitable without the prior written consent of Equitable.
<PAGE> 18
6.1.5 With respect to that portion of the Rents which
constitute percentage or overage rents, or other amounts payable by
Tenants or Adjoining Owners based upon sales, receipts or income of such
entities, the following shall apply: (i) at the Closing and/or, in the
case of percentage or overage rents which are in arrears or are payable
in other than monthly installments, subsequent to the Closing,
percentage or overage rents shall be apportioned as provided in the
other subsections of this Section 6.1 in the case of Rents generally;
and (ii) following the end of the fiscal year on account of which such
percentage or overage rents are payable by each Tenant or Adjoining
Owner and receipt by Purchaser of any final payment on account thereof
due from such Tenant or Adjoining Owner, Purchaser shall pay to
Equitable, net of costs of collection, if any, the excess, if any, of
(a) the amount of percentage or overage rents paid by such Tenant or
Adjoining Owner on account of such entire fiscal year multiplied by a
fraction, the numerator of which is the number of months (including any
fraction of a month expressed as a fraction) of such fiscal year which
occurred prior to the Adjustment Point and the denominator of which is
12 or such lesser number of months (including any fraction of a month
expressed as a fraction) as may have elapsed in such fiscal year prior
to the expiration of the Lease or Operating Agreement in question over
(b) all amounts theretofore received by Equitable on account of the
percentage or overage rents in question for such fiscal year. If in any
case the amount provided for in (b) above exceeds the amount provided
for in (a) above, Equitable shall pay the amount of such excess to
Purchaser upon demand. Upon request of Purchaser, Equitable shall
advise Purchaser of the amount of percentage or overage rents collected
by Equitable from each Tenant or Adjoining Owner prior to the Closing
Date. If on the Closing Date Equitable shall be conducting any audits
of payments of percentage or overage rents previously made by Tenants or
Adjoining Owners for fiscal years prior to the ones in effect on the
Closing Date, Equitable shall have the right to continue all such audits
until completion thereof and to collect and retain any amounts payable
by reason thereof. In addition, Equitable shall have the right to
initiate such audits subsequent to the Closing in respect of any fiscal
years prior to the ones in effect on the Closing Date, and in respect of
the fiscal year in which the Closing Date occurs if more than eight
months shall have elapsed in such fiscal year as of the Closing Date.
Equitable shall provide Purchaser with copies of the results of such
audits promptly after the completion thereof.
<PAGE> 19
6.1.6 With respect to that portion of Rents which are payable
on an annual, semi-annual or other non-monthly basis, Purchaser shall
use its reasonable efforts to bill and collect or cause to be billed and
collected all such payments which become due after the Closing, which
payments, to the extent allocable to periods prior to the Adjustment
Point, shall be paid by Purchaser to Equitable promptly after receipt
thereof, net of costs of collection, if any, properly allocable thereto.
With respect to that portion of Rents which are billed on an estimated
basis during the fiscal or other period for which paid, at the end of
such fiscal or other period Purchaser shall determine or cause to be
determined whether the items in question have been overbilled or under
billed in accordance with provisions of the applicable Leases and the
method of billing previously followed by Equitable. If Purchaser
determines or causes to be determined that there has been an overbilling
and an overbilled amount has been received, Purchaser shall reimburse or
cause to be reimbursed such amount to the Tenants and/or Adjoining
Owners which paid the excess amount and Equitable shall pay to Purchaser
the portion of such reimbursement which is properly allocable to the
period prior to the Adjustment Point. If Purchaser determines that
there has been an underbilling, the additional amount shall be billed or
caused to be billed by Purchaser to the Tenants and Adjoining Owners, as
applicable, and any amount received by Purchaser, net of costs of
collection, if any, to the extent properly allocable to periods prior to
the Adjustment Point shall promptly be paid by Purchaser to Equitable.
Purchaser's determination of any amounts underbilled or overbilled shall
in each case be subject to Equitable's approval. In connection with any
annual true-up of estimated common area maintenance or other charges
paid during the course of any fiscal year, Equitable shall have the
right to furnish to Purchaser schedules and other information to be
utilized in calculating amounts due in connection with such true-up for
the portion of the fiscal year elapsed prior to the Closing Date
(and/or, if applicable, the prior fiscal year), and Purchaser agrees to
calculate amounts due on the basis of the schedules and information
furnished by Equitable.
6.1.7 Notwithstanding anything to the contrary set forth in
this Section 6.1, Equitable shall be entitled to receive, and Purchaser
shall pay to Equitable promptly after receipt thereof, net of costs of
collection, if any, properly allocable thereto, (i) subject to the
provisions of subsection 6.4.1, all amounts payable by Tenants and
Adjoining Owners on account of Impositions which, pursuant to the terms
of subsection 6.4.1, it is Equitable's obligation to pay and discharge,
<PAGE> 20
which amounts shall be apportioned between Equitable and Purchaser in
the same manner as the Impositions to which they relate, and (ii) all
amounts payable by Tenants and Adjoining Owners on account of utilities
which, pursuant to the terms of subsections 6.4.2 and 6.4.3, it is
Equitable's obligation to pay and discharge, which amounts shall be
apportioned between Equitable and Purchaser in the same manner as the
utilities to which they relate.
6.1.8 Any advance rental deposits or payments held by
Equitable on the Closing Date and applicable to periods of time
subsequent to the Adjustment Point, and any security deposits held by
Equitable on the Closing Date, together with interest thereon, if any,
which, under the terms of the applicable Leases, is payable to the
Tenants thereunder, shall be paid to Purchaser at the Closing.
6.1.9 Each of Equitable and Purchaser shall be responsible
for paying any sales tax on the Rent paid to it.
6.2 Leasing Costs. Equitable shall pay and indemnify Purchaser
in respect of all leasing commissions, costs of tenant alterations and
improvements performed or to be performed for Tenants at the expense of
the landlord thereof (or allowances payable by the landlord in lieu
thereof), moving and other allowances, if any, and fees and
disbursements of architects, engineers and attorneys (collectively
"Leasing Costs") in respect of (i) all Leases executed by or on behalf
of all parties thereto on or before December 15, 1997, (ii) any renewal
of any Lease resulting from the exercise by the Tenant of an option or
from an agreement executed by or on behalf of all parties thereto on or
before December 15, 1997 and (iii) any increase of the space demised by
any Lease resulting from the exercise of an option by the Tenant or from
an agreement executed by all of the parties thereto on or before
December 15, 1997. Purchaser shall assume and pay and indemnify
Equitable in respect of all Leasing Costs payable in respect of Leases,
renewals, expansions and amendments of the nature described in clauses
(i), (ii) and (iii) above which are executed by all parties thereto or
the options for which are exercised after December 15, 1997 (including,
without limitation, any leasing commissions which may become payable to
the Managing Agent with respect to Leases executed after the Closing
Date with Tenants with whom the Managing Agent had been negotiating
prior to the Closing Date, which commissions shall be payable by
Purchaser to the Managing Agent pursuant to the terms of the Management
Agreement). If any Leasing Costs shall be paid by Equitable prior to
<PAGE> 21
the Closing, which, in accordance with this Section 6.2, it is
Purchaser's obligation to pay, Purchaser shall reimburse Equitable for
the documented amount thereof at the Closing.
6.3 Ancillary Income. Ancillary income received by Equitable in
connection with the licensing of the name of the Malls, the furnishing
of utilities from the Mall to third parties and the like shall be
adjusted as of the Adjustment Point between Equitable and Purchaser.
6.4 Additional Items. At the Closing, the following additional
items shall be apportioned between Equitable and Purchaser as of the
Adjustment Point for each Mall:
6.4.1 Impositions payable by Equitable in respect of each
Mall shall be adjusted on the basis of the fiscal year for which the
same are imposed, whether or not yet due and payable as of the Closing
Date. If an Imposition is not due and payable until after the Closing
Date and the assessed valuation or the tax rate or any other factor upon
which the amount of the Imposition will be based has not been fixed at
the Closing Date, then the parties shall at the Closing apportion such
Imposition based on the most recently available assessed valuation and
tax rate, and shall make a final adjustment of such item within 30 days
following the date on which the actual assessed valuation and tax rate
or any other factor applicable to such Imposition becomes known.
Notwithstanding the foregoing, in the case of real estate taxes which
are payable in arrears, at the Closing, Purchaser shall pay to Equitable
one-half of the estimated aggregate amount of such real estate taxes
which will be payable after the Closing Date, which are properly
allocable to any period prior to the Adjustment Point and which are
otherwise credited to Purchaser at Closing, such payment being the
estimated aggregate amount of payments to be (and not previously) made
by Tenants and Adjoining Owners in reimbursement of such taxes, which
payments, when made, and notwithstanding the provisions of subsection
6.1.7, shall be retained by Purchaser. Such estimates shall be subject
to readjustment at such time as the actual amounts of the real estate
taxes and reimbursement payments have been determined. In the case of
special assessments payable in installments, the installment for the
fiscal year in which the Adjustment Point occurs shall be apportioned by
Equitable and Purchaser as provided above and Purchaser shall be
responsible for paying all subsequent installments thereof. If any
Tenant in occupancy at the Closing Date or Adjoining Owner is obligated
to pay any Impositions directly to the applicable taxing authority, such
Impositions shall not be apportioned.
<PAGE> 22
6.4.2 Water and sewer charges, if any, payable by Equitable
on the basis of the period or periods for which the same are payable.
If there are water meters at any Mall, Equitable shall furnish readings
to a date not more than thirty (30) days prior to the Closing Date, and
the unfixed meter charges and the unfixed sewer charges, if any, based
thereon for the intervening time shall be apportioned on the basis of
such last readings. Any water and sewer charges payable by Tenants in
occupancy on the Closing Date or Adjoining Owners directly to the entity
or entities furnishing such services shall not be apportioned.
6.4.3 Utilities and fuel payable by Equitable, including
without limitation electricity and gas. Equitable shall endeavor to have
the meters for such utilities read the day on which the Adjustment Point
occurs and will pay the bills rendered to it on the basis of such
readings. If Equitable does not obtain such a meter reading with
respect to any such utility, the adjustment therefor shall be made on
the basis of the most recently issued bills therefor which are based on
meter readings not earlier than thirty (30) days prior to the Adjustment
Point. Equitable will receive a credit in an amount equal to any cash
security deposits held by any utility companies (with interest thereon,
if any, in the amount equal to the amount accrued on such security
deposits), and shall assign to Purchaser at the Closing all of
Equitable's right, title and interest in and to such security deposits.
Purchaser will make its own arrangements for any surety bonds required
by any utility companies within 10 Business Days following the Closing
Date, and Equitable will thereafter cancel any bonds previously
furnished. If fuel oil, propane or other fuel is used at any Mall,
Equitable shall deliver to Purchaser at the Closing statements of the
suppliers of such fuel dated within three days of the Adjustment Point
setting forth the quantity of fuel on hand and the cost paid by
Equitable therefor, and Purchaser shall pay to Equitable at the Closing
the cost of such fuel (including taxes thereon, if any) as shown on such
statements. Charges for any utilities payable by Tenants in occupancy
on the Closing Date and Adjoining Owners directly to the utility
companies furnishing the same shall not be apportioned.
6.4.4 Charges payable by Equitable under the Other Agreements.
6.4.5 Contributions payable by Equitable to merchants' and
other associations, and to promotional and marketing funds and
activities at the Malls, it being understood that Equitable shall be
required to fund any share of pre-Closing marketing and promotion costs.
<PAGE> 23
6.4.6 If on the Closing Date, there are pending any tax
certiorari proceedings and/or protests of real estate tax assessments of
any Mall in respect of the real estate taxes payable for the then-
current tax fiscal year, then (i) Equitable shall have the right to
continue the prosecution of such proceedings or protests and collect any
refunds payable in respect thereof if on the Closing Date more than half
of such fiscal year shall have elapsed, and (ii) Purchaser shall have
the right to take over the prosecution of such proceedings or protests
and collect any refunds payable in respect thereof if on the Closing
Date half of such fiscal year or less shall have elapsed; provided,
however, that no such settlement shall be made without the prior written
approval of the other party hereto, such approval not to be unreasonably
withheld or delayed. Equitable shall have the right to continue to
prosecute any such proceedings or protests with respect to any prior
periods without the participation or approval of Purchaser, and
Purchaser shall have the right to prosecute any such proceedings or
protests for any subsequent periods without the participation or
approval of Equitable. Within 30 days after receipt by Equitable of a
refund for the fiscal year in which the Closing occurs or any prior
period, Equitable shall submit to Purchaser a schedule showing the
amount of such refund, net of the costs and expenses of obtaining the
same, which is payable to each Tenant then in possession at such Mall
and each Adjoining Owner, and shall remit to Purchaser the aggregate of
all amounts so payable. From time to time after the Closing Purchaser
shall, upon request, advise Equitable of the names of any Tenants which
are in occupancy at the Closing but cease to be in occupancy thereafter.
Purchaser shall promptly pay any amounts so received from Equitable to
the Tenants in possession and Adjoining Owners pursuant to and in
accordance with the schedule submitted to it by Equitable and shall
indemnify and hold Equitable harmless from and against all claims,
demands, liabilities and expenses (including, without limitation,
reasonable attorneys' fees and disbursements) asserted against, imposed
on or incurred by Equitable by reason of Purchaser's failure to make any
such payment to a Tenant in possession or an Adjoining Owner. Equitable
shall indemnify and hold Purchaser harmless from and against all claims,
demands, liabilities and expenses (including, without limitation,
reasonable attorneys' fees) asserted against, imposed on or incurred by
Purchaser by reason of (i) any claim by a Tenant no longer in possession
at the applicable Mall that it is entitled to a portion of any such
refund and (ii) any claim by a Tenant in possession or Adjoining Owner
at the applicable Mall that it is entitled to more than the amount paid
<PAGE> 24
to it by Purchaser in accordance with the schedule furnished by
Equitable to Purchaser. The amount of any refund obtained by Equitable
or Purchaser in respect of the fiscal year in which the Closing occurs
as a result of any such proceeding or protest, or the settlement
thereof, net of costs and expenses payable by Equitable or Purchaser in
connection therewith and the amount of such refund payable to Tenants
and Adjoining Owners, shall be apportioned between Purchaser and
Equitable in the manner that real estate taxes for such year were
apportioned pursuant to subsection 6.4.1, and the portion of such amount
properly allocable to the period prior to the Adjustment Point shall be
paid by Purchaser to Equitable or the amount properly allocable to the
period subsequent to the Adjustment Point shall be paid by Equitable to
Purchaser, as applicable.
6.4.7 Any accrued but unpaid interest and Trustee's and
Rating Agency fees in connection with the Existing Financing, but
excluding fees payable in connection with the obtaining of the Rating
Agency Approval.
6.4.8 Any amounts deposited with the Trustee pursuant to the
terms of the Existing Financing.
6.4.9 Rent under the Ground Leases, including, without
limitation, percentage or overage rent, real estate taxes, insurance
premiums and any other amounts paid or to be paid by the ground lessee
thereunder.
6.4.10 Any other items of income or expense of the Malls
which, in accordance with generally accepted business practices, should
be apportioned between Equitable and Purchaser.
6.5 Adjustment Statement. Equitable will deliver to Purchaser
prior to the Closing a copy of a proposed adjustment statement showing
all adjustments to be made at the Closing. The parties shall then
endeavor to agree upon such statement or any modification thereof so
that it or such modification can be executed by them at the Closing. To
the extent that there is an error or omission in any of the adjustments
made pursuant to such statement and the same is discovered following the
Closing, the parties agree to rectify the same as promptly as possible
following such discovery.
6.6 Tenant Note Obligations. As listed and described on Exhibit
I, certain Tenants have executed promissory notes, in the amounts and
having terms as described therein, in payment of certain back Rent
obligations. Anything hereinabove contained to the contrary
<PAGE> 25
notwithstanding, Equitable shall retain said notes as its sole property,
shall be entitled, at its election and discretion, to take whatever
action it deems appropriate for the enforcement thereof or collection of
amounts due thereunder, all at Equitable's sole cost and expense, and
shall be entitled to retain, as its sole property, any amount received
by Equitable with respect thereto or as is otherwise paid by any such
Tenant and identified as having been paid with respect to its note
obligations. Any amounts collected by Purchaser following Closing with
respect to said Tenant note obligations shall promptly be remitted to
Equitable; provided, however, that no amounts received by Purchaser from
any such Tenant following the Closing shall be deemed to have been paid
with respect to any of such notes unless specifically identified by the
Tenant as being paid with respect thereto. Notwithstanding the
provisions of any Lease or the provisions of any such note (or any
instrument or document further evidencing or securing the obligations of
the Tenant under any such note), in no event shall Equitable have the
right to seek cancellation of any such Tenant's Lease, or the
repossession of the premises demised to the Tenant, or the eviction of
the Tenant therefrom, in connection with any action or proceeding taken
for the enforcement or collection of any amount due from any Tenant
under or with respect to said notes.
6.7 Survival. The provisions of this Article 6 shall survive
the Closing.
7. Actions to be Taken and Documents to be Delivered at or Prior
to the Closing.
7.1 Equitable's Deliveries. At or prior to the Closing,
Equitable will deliver or cause to be delivered to Purchaser each of the
instruments and documents listed in the following provisions of this
Section 7.1, executed and acknowledged where appropriate by Equitable
and/or the other party or parties thereto:
7.1.1 A special or limited warranty deed (each, a "Deed")
with respect to each Property, in proper statutory form for recording,
conveying such Property from Equitable to Purchaser, subject only to
Permitted Encumbrances.
7.1.2 An assignment by Equitable to Purchaser with respect to
each Ground Lease of the tenant's interest under such Ground Lease in
proper form for recording and otherwise in the form of Exhibit N,
subject to any modifications required pursuant to the applicable Ground
Lease.
7.1.3 A bill of sale with respect to each Mall conveying the
applicable Personal Property to Purchaser, which bill of sale shall
contain no warranties, express or implied, by Equitable except that
<PAGE> 26
Equitable is the owner of and has not previously sold, transferred or
encumbered (other than for the Existing Financing) the Personal
Property.
7.1.4 An assignment, in proper form for recording and
otherwise in the form of Exhibit O (subject to any modifications
required pursuant to the applicable Operating Agreement), by Equitable
to Purchaser of all of Equitable's right, title and interest in, to and
under each of the Operating Agreements.
7.1.5 An assignment, in the form attached as Exhibit P, by
Equitable to Purchaser with respect to each Mall of all of Equitable's
right, title and interest in, to and under all the applicable Leases,
and in and to all security deposits and any interest thereon which,
under the terms of the applicable Leases, is payable to the Tenants
thereunder.
7.1.6 An assignment by Equitable to Purchaser with respect to
each Mall in the form attached as Exhibit Q of all of Equitable's right,
title and interest in, to and under the applicable Other Agreements.
7.1.7 A "General Assignment" by Equitable to Purchaser with
respect to each Mall in the form attached as Exhibit R of all of
Equitable's right, title and interest in and to the following, if any:
(i) all warranties and guaranties of manufacturers, suppliers and
contractors, to the extent the same are assignable, (ii) all permits of
Governmental Authorities, and licenses and approvals of private
utilities and others, required for or necessary to the operation and
maintenance of such Mall, to the extent the same are assignable, (iii)
all cash security deposits held by any utility with respect to such Mall
(plus the interest accrued thereon, if any), (iv) all names, trade
names, trademarks, service marks and logos (and all good will associated
therewith) by which the Mall or any part thereof may be known or which
may be used in connection therewith, together with all registrations, if
any, for the same and other intangible property relating thereto, and
all telephone numbers and listings employed in connection with the Mall,
(v) all site plans, surveys, plans or specifications and floor plans
relating to the Mall, (vi) all catalogues, booklets, manuals, files,
logs, records, correspondence, Tenant lists, Tenant prospect lists,
Tenant histories, brochures and materials, advertisements and other
items with respect to the Mall and (vii) all promotional and marketing
fund accounts.
7.1.8 Equitable's Copies of the Mortgage and other documents
listed in Exhibit B comprising the Mortgage.
<PAGE> 27
7.1.9 Equitable's Copies of the Operating Agreements.
7.1.10 The Required Consents and any consents required under
the Other Agreements for the assignment thereof by Equitable to
Purchaser; provided, however, that it shall not be a condition to
Purchaser's obligations under this Agreement that any consent required
under any Other Agreement for the assignment thereof to Purchaser shall
be obtained, but Equitable shall be obligated to pay and indemnify
Purchaser from and against any damages, penalties or other sums that may
be payable to the other party to such Other Agreement by reason of
Equitable's failure to assign the same to Purchaser or to obtain the
consent of such other party to such assignment, which obligation shall
survive the Closing.
7.1.11 Equitable's Copies of the Leases and the Ground Leases.
7.1.12 Equitable's Copies of the Other Agreements.
7.1.13 An executed copy of an agreement between Equitable and
the Managing Agent terminating the Management Agreement as of the
Closing Date, the form and content of which shall be reasonably
satisfactory to Purchaser and shall in any event provide that Purchaser
shall have no liability with respect to any employees of Managing Agent
at any Mall or who render services with respect to any Mall.
7.1.14 A notice to Tenants, and a notice to Adjoining Owners,
notifying each of the sale of the applicable Mall to Purchaser as of the
Closing Date, in form reasonably satisfactory to Purchaser.
7.1.14 The certificate of Equitable provided for in subsection
8.6.3.
7.1.16 A certificate that Equitable is not a "foreign person"
within the meaning of 1445 of the Internal Revenue Code of 1986, as
amended.
7.1.17 Counterparts of an adjustment statement summarizing all
adjustments in respect of the Purchase Price made at the Closing
pursuant to Article 6.
7.1.18 All sales tax, transfer tax and other tax returns, if
any, which Equitable is required by law to execute and deliver, either
individually or together with Purchaser, to any Governmental Authority
as a result of the sale.
7.1.19 A copy of the resolutions of the Investment or Separate
Account Committee of Equitable, certified to by the secretary or an
assistant secretary of Equitable, which authorize (i) the transactions
contemplated by this Agreement, and (ii) the execution by Equitable of
<PAGE> 28
this Agreement and the documents, instruments and agreements to be
executed and delivered by Equitable pursuant hereto, together with an
incumbency certificate as to the authority of the person(s) executing
and delivering this Agreement and such documents, instruments and
agreements on behalf of Equitable.
7.1.20 A good standing certificate from the Insurance
Department of the State of New York for Equitable, dated within 15 days
of the Closing Date, and good standing certificates issued in respect of
Equitable by the Secretary of State, Insurance Commission or State
Corporation Commission, as the case may be, of each State in which a
Mall is located, dated within 30 days of the Closing Date.
7.1.21 All records and files which are in the possession of
Equitable, ERE or the Managing Agent relating to the current operation
and maintenance of the Malls, including without limitation, to the
extent in the possession of such parties, current tax bills, current
water, sewer, utility and fuel bills, payroll records, billing records
for Tenants and Adjoining Owners, repair and maintenance records and the
like which affect or relate to the Malls, plans, drawings, blue prints
and specifications for each of the Malls, all warranties and guaranties
of manufacturers, suppliers and contractors in effect on the Closing
Date, certificates of occupancy and other licenses and permits and keys
to the Malls. Delivery of such materials, as well as the documents
referred to in subsections 7.1.9, 7.1.11 and 7.1.12, shall be
effectuated pursuant to arrangements made by the Managing Agent and the
property manager or managers retained by Purchaser to operate the Malls.
7.1.22 An assignment by Equitable to Purchaser of all of
Equitable's right, title and interest in, to and under the interest rate
cap agreements dated May 24, 1996 between Equitable and Goldman Sachs
Capital Markets, L.P., as assigned by Goldman Sachs Capital Markets,
L.P. to Goldman Sachs Mitsui Marine Derivative Products, L.P., in form
reasonably acceptable to Purchaser.
7.1.23 All vehicle titles assigned to Purchaser, duly endorsed
by Equitable or the Managing Agent, as required.
7.1.24 If applicable, a written direction to Escrow Agent to
deliver the Deposit to Equitable and the Income to Purchaser.
<PAGE> 29
7.1.25 A letter from the Managing Agent to Purchaser in which
the Managing Agent agrees to honor all gift certificates issued at the
Malls prior to the Closing Date and presented to Tenants and Adjoining
Owners after the Closing Date.
7.1.26 All other instruments and documents, if any, to be
executed, acknowledged and/or delivered by Equitable pursuant to any of
the other provisions of this Agreement.
7.2 Purchaser's Deliveries. At or prior to the Closing,
Purchaser shall deliver or cause to be delivered to Equitable or the
other parties indicated below each of the payments, documents and
instruments listed in this Section 7.2, such instruments and documents
to be executed and acknowledged where appropriate:
7.2.1 The cash portion of the Remaining Balance, as set forth
in Section 3.1.
7.2.2 All sales tax, transfer tax and other tax returns, if
any, certificates of value and similar documents which Purchaser is
required by law to execute and deliver, either individually or together
with Equitable, to any Governmental Authority as a result of the sale.
7.2.3 Counterparts of each of the instruments and documents
listed in subsections 7.1.2, 7.1.4, 7.1.5 and 7.1.6 (in order to
evidence Purchaser's assumption of the Ground Leases, Operating
Agreements, Leases and Other Agreements) and in subsections 7.1.17,
7.1.18 and, if applicable, 7.1.24.
7.2.4 Such instruments and documents as are required by the
Mortgage or any of the other loan documents, or as may be required by
the Rating Agencies, in connection with Purchaser's assumption of the
Mortgage.
7.2.5 A copy of resolutions of the board of directors of each
general partner of Purchaser's general partners, in each case certified
by a Secretary or an Assistant Secretary, which authorize (both on
behalf of Purchaser and partners of Purchaser) (i) the transactions
contemplated by this Agreement, and (ii) the execution of this Agreement
and the documents, instruments and agreements to be executed and
delivered by Purchaser pursuant hereto, together with an incumbency
certificate as to the authority of the person(s) executing and
delivering this Agreement and such documents, instruments and agreements
on behalf of Purchaser. In addition, copies of resolutions of the board
<PAGE> 30
of directors of each of Simon DeBartolo Group, Inc. and The Macerich
Company approving the transaction provided for in this Agreement.
7.2.6 A good standing certificate for each of the general
partners of Purchaser, and each general partner of such general partners
from the Secretaries of State of the states of their respective
incorporation, dated within fifteen days of the Closing Date.
7.2.7 All other payments, instruments and documents, if any,
to be executed, acknowledged and/or delivered by Purchaser pursuant to
any of the other provisions of this Agreement.
7.3 Access to Records. Purchaser agrees for a period of seven
years following the Closing it will retain and make available to
Equitable or to any Governmental Authority having jurisdiction over
Equitable for inspection and copying, at Equitable's expense, on
reasonable advance notice at reasonable times at the place in the
continental United States where Purchaser then maintains its records in
respect of the Malls, all documents and records concerning the Malls
delivered by Equitable, ERE or the Managing Agent in connection with the
Closing. If Purchaser shall desire to destroy any such records prior to
the expiration of such seven-year period, Purchaser shall first notify
Equitable and permit Equitable to take delivery of the records in
question; and if Equitable fails to do so within 90 days after such
notice from Purchaser, Purchaser shall then be free to destroy the same.
The provisions of this Section 7.3 shall survive the Closing.
8. Malls Conveyed As Is; Representations and Warranties of
Equitable.
8.1 No Implied Representations. Purchaser acknowledges that
except as expressly set forth in this Agreement and in the documents and
instruments delivered by Equitable at the Closing, neither Equitable nor
any agent or representative or purported agent or representative of
Equitable has made, and Equitable is not liable for or bound in any
manner by, any express or implied warranties, guaranties, promises,
statements, inducements, representations or information (including,
without limitation, any information set forth in offering materials
heretofore furnished to Purchaser) pertaining to the Malls or any of
them, the physical condition thereof, environmental matters, the income,
expenses or operation thereof or the Personal Property or Intangible
Personal Property, the uses which can be lawfully made of any Property
under applicable zoning or other laws or any other matter or thing with
respect to the Malls, including, without limitation, any existing or
<PAGE> 31
prospective Leases, Operating Agreements or Other Agreements. Without
limiting the foregoing, Purchaser acknowledges and agrees that, except
as expressly set forth in this Agreement and in the documents and
instruments delivered by Equitable at the Closing, Equitable is not
liable for or bound by (and Purchaser has not relied upon) any verbal or
written statements, representations, real estate brokers' "set-ups" or
offering materials or any other information respecting the Malls
furnished by Equitable or any broker, employee, agent, consultant or
other person representing or purportedly representing Equitable.
8.2 "As-Is" Purchase. Purchaser represents that it has
inspected the Malls, the physical and environmental condition and the
uses thereof and the fixtures, equipment and Personal Property included
in this sale to its satisfaction, that it has independently inves
tigated, analyzed and appraised the value and profitability thereof, the
creditworthiness of Tenants and Adjoining Owners and the presence of
hazardous materials, if any, in or on the Malls, that it has reviewed
the Ground Leases, the Mortgage, all other documents and instruments
that evidence or secure the Existing Financing, the Leases listed on
Exhibit K annexed hereto, the Operating Agreements, the Other Agreements
and all other documents referred to herein, that it is thoroughly
acquainted with all of the foregoing and that Purchaser, in purchasing
the Malls, is relying upon its own investigations, analyses, studies and
appraisals and not upon any information provided to Purchaser by or on
behalf of Equitable with respect thereto (except to the extent covered
by any warranties or representations of Equitable set forth in this
Agreement, in any Seller's Estoppel Letter or in any other document or
instrument delivered by Equitable in connection with the Closing).
Purchaser agrees to accept the Malls "as is" and in their condition as
at the date hereof, reasonable wear and tear between the date hereof and
the Closing Date excepted, and Purchaser shall assume the risk that
adverse matters, including but not limited to, construction defects and
adverse physical and environmental conditions may not have been revealed
by Purchaser's investigations; and Purchaser, upon closing, shall be
deemed to have waived, relinquished and released Equitable from and
against any and all claims, demands, causes of action, losses, damages,
liabilities, costs and expenses (including, attorneys' fees and court
costs) of any and every kind or character, known or unknown, which
Purchaser might have asserted or alleged against Equitable by reason of
or arising out of any latent or patent construction defects or physical
<PAGE> 32
conditions, violations of applicable laws (including, without
limitation, environmental laws) and any and all other acts, omissions,
events, circumstances or matters with respect to the Malls, subject, how
ever, to Purchaser's rights and remedies provided for in this Agreement
in the event of the breach of any of Equitable's warranties and
representations contained herein, in any Seller's Estoppel Letter or in
any other document or instrument delivered by Equitable in connection
with the Closing, and subject to the next to last sentence of this
Section 8.2. Nothing contained in this Section 8.2 shall be deemed to
constitute a waiver by Purchaser of its rights at law or in equity, if
any, to seek contribution or other recourse against Equitable in the
event of a claim asserted against Purchaser by a third party with
respect to liabilities arising from or relating to any circumstances or
conditions which exist at or in respect of the Malls prior to the
Closing. The provisions of this Section 8.2 shall survive the Closing.
8.3 Representations and Warranties of Equitable. Equitable
hereby represents and warrants to Purchaser as follows:
8.3.1 Equitable is a corporation duly organized, validly
existing and in good standing under the laws of the State of New York.
Equitable has full power and authority to enter into this Agreement and
to perform its obligations hereunder in accordance with the terms
hereof. The execution, delivery and performance by Equitable of this
Agreement and the documents to be executed by Equitable pursuant hereto
have been duly and validly authorized by all necessary corporate action
on the part of Equitable. This Agreement constitutes the legal, valid
and binding obligation of Equitable, enforceable against Equitable in
accordance with its terms, subject as to enforceability to the effect of
applicable bankruptcy, insolvency, reorganization, arrangement,
moratorium, fraudulent conveyance or other similar laws affecting the
rights of creditors generally and to general principles of equity. No
bankruptcy, insolvency, reorganization, arrangement or moratorium
proceeding or allegation of fraudulent conveyance is now pending or
threatened against Equitable or any of the Malls.
8.3.2 Equitable is not a "foreign person" as defined in
Section 1445 of the Internal Revenue Code of 1986, as amended.
8.3.3 Execution by Equitable of this Agreement and all
documents provided for herein to be executed by Equitable, and
performance by Equitable of the provisions hereof and thereof, will not
violate or result in any breach of, or constitute a default under, any
law, regulation, rule, order or judgment of any governmental authority
<PAGE> 33
to which Equitable is subject, or any agreement, indenture, mortgage,
deed of trust, bank loan, credit agreement or other instrument to which
Equitable is a party or by which Equitable is bound (subject to
Purchaser's qualifying to take title to the Malls subject to the
Mortgage thereon in accordance with the terms thereof, and to
Equitable's obtaining the consents listed on Exhibit W annexed hereto
(the "Required Consents") and any consents required under the Other
Agreements, subject to the provisions of Section 7.1.10), where such
breach or default might adversely affect Equitable's ability to perform
its obligations hereunder or under such other documents. Equitable is
not in default under any note, evidence of indebtedness, lease,
contract, license, undertaking or other agreement where the liability
thereunder might adversely affect Equitable's ability to perform its
obligations under this Agreement or any document executed by Equitable
pursuant hereto.
8.3.4 With respect to the Existing Financing:
8.3.4.1 Exhibit B annexed hereto is a true, correct and
complete list of all documents which evidence and secure the Existing
Financing.
8.3.4.2 The copies of such documents which have been
made available or delivered to Purchaser for review are true, correct
and complete copies thereof.
8.3.4.3 The Existing Financing is in full force and
effect on the date hereof. Equitable is current in all payments of
principal and interest due under the Existing Financing as of the
date hereof. Equitable has complied in all material respects with
the terms of the documents which evidence and secure the Existing
Financing. Equitable has received no written notice that is still
outstanding from the mortgagee thereunder or any holder of notes
evidencing the same that any default on the part of Equitable exists
thereunder. None of the documents which evidence and secure the
Existing Financing has heretofore been amended or supplemented
(whether orally or in writing) except as shown in Exhibit B.
8.3.5 With respect to the Leases:
8.3.5.1 Exhibit K annexed hereto is a true, correct and
complete list of all of the Leases in effect on December 15, 1997
(except those Leases consisting of licenses and concession agreements
which have terms, including any rights to renew or extend, not in
excess of four (4) months), setting forth, with respect to each
Lease: (i) the date thereof and the date of each amendment or
supplement thereto; (ii) the name of the current Tenant thereunder;
(iii) the premises demised thereby; (iv) the commencement and
<PAGE> 34
expiration dates of the current term thereof; (v) the monthly amount
of minimum rent currently payable thereunder; (vi) the monthly amount
of common area maintenance and real estate tax contributions
currently payable thereunder; and (vii) the amount, if any, of the
security deposit held by Equitable thereunder. As of the date
hereof, there are no leases, licenses or other rights of occupancy or
use of any portion of the Malls other than the Leases set forth in
Exhibit K, except subleases, concessions or license agreements which
may have been entered into by Tenants or subtenants of Tenants (as
sublessor, grantor or licensor, as the case may be), Leases
consisting of licenses and concession agreements which have terms,
including any rights to renew or extend, not in excess of four (4)
months and Operating Agreements. None of the Leases has been
modified, amended or supplemented (whether orally or in writing)
except as set forth in Exhibit K. No Tenant or Adjoining Owner has
the option to purchase any Mall or a right of first refusal in
respect of the sale of any Mall to a third party.
8.3.5.2 True, correct and complete copies of all of the
Leases, and all amendments and supplements thereto, listed in Exhibit
K annexed hereto have heretofore been made available and/or delivered
to Purchaser for review.
8.3.5.3 Exhibit S annexed hereto is a true, correct and
complete list of Tenants and Adjoining Owners that are delinquent in
the payment of Rents as of December 15, 1997, which schedule sets
forth the information specified in subsection 6.1.1.
8.3.5.4 Except as set forth in Exhibit K annexed
hereto, to Equitable's knowledge each of the Leases listed in Exhibit
K is in full force and effect as of the date hereof. Equitable has
received no written notice from any Tenant under a Lease listed in
Exhibit K which is still outstanding (i) that Equitable has defaulted
in performing any of its material obligations under such Lease or
(ii) that such Tenant is entitled to any reduction in, refund of or
counterclaim or offset against, or is otherwise disputing, any Rents
paid, payable or to become payable by such Tenant thereunder or is
entitled to cancel or terminate such Lease or to be released of any
of its material obligations thereunder, except as set forth in
Exhibit K. With the exception of delinquencies in the payment of
Rents, to Equitable's knowledge no material default exists under any
Lease by the Tenant thereunder except as set forth in Exhibit K.
<PAGE> 35
8.3.5.5 All leasing commissions in respect of the
current terms of Leases listed in Exhibit K which were entered into
on or before the date hereof have been, or by the Closing Date will
have been, paid in full by Equitable.
8.3.5.6 All tenant alterations which Equitable is
obligated to perform at its expense pursuant to its obligations under
the Leases listed in Exhibit K on or prior to the date hereof in
order to prepare space for occupancy by Tenants have been performed
by Equitable, and all allowances payable to such Tenants in lieu of
such work which were payable in respect of such Leases prior to the
date hereof have been paid.
8.3.6 With respect to the Operating Agreements:
8.3.6.1 Exhibit D annexed hereto is a true, correct and
complete list of all documents which comprise all of the Operating
Agreements, setting forth the date of each such Operating Agreement
and each amendment or supplement thereto and the names of the parties
thereto.
8.3.6.2 True, correct and complete copies of all of the
Operating Agreements, and all amendments and supplements thereto,
listed on Exhibit D annexed hereto have heretofore been made
available and/or delivered to Purchaser for review.
8.3.6.3 Each Operating Agreement is in full force and
effect as of the date hereof. None of the Operating Agreements has
been modified, amended or supplemented (whether orally or in writing)
except as set forth in Exhibit D. Equitable has received no written
notice from any party to an Operating Agreement which is still
outstanding (i) that Equitable has defaulted in performing any of its
material obligations under such Operating Agreement, or (ii) that
such party is entitled to any reduction in, refund of or counterclaim
or offset against, or is otherwise disputing, any Rents paid, payable
or to become payable thereunder by such party or is entitled to
cancel or terminate such Operating Agreement or to be relieved of any
of its material obligations thereunder, except as set forth in
Exhibit D. With the exception of delinquencies in the payment of
Rents which are listed in Exhibit S, to Equitable's knowledge no
material default exists under any Operating Agreement on the part of
the other parties thereto, except as set forth in Exhibit D.
<PAGE> 36
8.3.6.4 There is no unpaid obligations of Equitable
under or in respect of any of the Operating Agreements for leasing or
similar commissions or for the performance of work (or payment of
allowances in lieu thereof) in the nature of tenant alterations.
8.3.7 With respect to the Other Agreements:
8.3.7.1 Exhibit E annexed hereto is a true, correct and
complete list of all material Other Agreements affecting each Mall,
setting forth, with respect to such Other Agreements, the date
thereof and of each amendment or supplement thereto, the name of each
party thereto (other than Equitable) and a brief description of the
services provided thereunder or property covered thereby. Except as
set forth in Exhibit E, there are no material Other Agreements,
except those that can be terminated by Equitable on not more than
thirty (30) days' notice without penalty.
8.3.7.2 True, correct and complete copies of all of the
Other Agreements, and all amendments and supplements thereto, listed
on Exhibit E have heretofore been made available and/or delivered to
Purchaser for review.
8.3.7.3 To Equitable's knowledge, each of the material
Other Agreements is in full force and effect on the date hereof, and
Equitable has received no written notice from any party to any
material Other Agreement which is still outstanding that Equitable
has defaulted in performing any of its material obligations under
such Other Agreement. None of the Other Agreements listed on Exhibit
E has heretofore been amended or supplemented (whether orally or in
writing) except as set forth on Exhibit E.
8.3.8 With respect to the Ground Leases:
8.3.8.1 Exhibit C annexed hereto is a true, correct and
complete list of all documents which comprise all of the Ground
Leases, setting forth the date of each such Ground Leases and each
amendment or supplement thereto and the names of the parties thereto.
8.3.8.2 The copies of the Ground Leases and all
amendments and supplements thereto heretofore made available and/or
delivered to Purchaser for review are true, correct and complete
copies thereof.
8.3.8.3 Each Ground Lease is in full force and effect
as of the date hereof. None of the Ground Leases has been modified,
amended or supplemented (whether orally or in writing) except as set
<PAGE> 37
forth in Exhibit C. Equitable has complied in all material respects
with the terms of the Ground Leases. Equitable has received no
written notice from the lessor under any Ground Lease that Equitable
has defaulted in performing any of its obligations under such Ground
Lease.
8.3.9 Equitable has not received (i) any written notice of
any Violation with respect to any Mall from any Governmental Authority
which has not heretofore been complied with except as set forth in
Exhibit L, or (ii) any written notice from any Governmental Authority
which is still outstanding of any failure by Equitable to obtain any
certificate, permit, license or approval with respect to any Mall, or
any intended revocation, modification or cancellation of any of the
same.
8.3.10 Except as set forth in Exhibit T, no condemnation,
eminent domain or similar proceeding in which Equitable has been served
with process or of which Equitable has otherwise received written notice
is pending with respect to all or any part of any Mall, and Equitable
has no knowledge that any such proceeding is threatened or contemplated.
8.3.11 Equitable has not received any written notice which is
still outstanding of any violation of any restriction, condition,
covenant or agreement contained in any easement, restrictive covenant or
any similar instrument or agreement which constitutes a Permitted
Encumbrance.
8.3.12 There is no pending litigation against Equitable
affecting any Mall in respect of which Equitable has been served with
process or otherwise received written notice except for (i) claims for
personal injury, property damage or worker's compensation for which the
insurance carrier has not disclaimed liability and in which the amounts
claimed do not exceed the applicable insurance policy limits, and (ii)
other litigation shown on Exhibit M annexed hereto. Equitable has no
knowledge of any threatened litigation affecting any Mall except
litigation of the nature described in clause (i) above. Equitable shall
be responsible for indemnifying and holding Purchaser harmless from and
against all costs, expenses, damages and other amounts payable in
connection with such litigation and claims; provided, however, that if
Equitable collects any Rents in any such litigation which are allocable
to periods after the Adjustment Point, the amount payable to Purchaser
in respect of such Rents shall be net of costs of collection properly
allocable thereto.
<PAGE> 38
8.3.13 All fixtures, equipment and articles of personal
property attached or appurtenant to or used in connection with any Mall
and located thereat, except those belonging to Tenants, subtenants of
Tenants, Adjoining Owners and independent contractors or utility
companies, and items which are leased by Equitable, are owned by
Equitable, free from all liens and encumbrances. A schedule of the
material items of personal property included in the sale, which in any
event includes all items of personal property having a cost of $5,000 or
more, is attached hereto as Exhibit X, which Exhibit separately
identifies any leased personal property, the leases for which are listed
on Exhibit E annexed hereto.
8.3.14 Equitable has no employees or agreements with any
employees who will continue performing services after the Closing in
connection with the operation of the Mall. All persons who regularly
perform services at the Mall are employees of the Managing Agent or
other independent contractors.
8.3.15 Exhibit J annexed hereto lists all environmental
reports relating to Hazardous Materials at the Malls which Equitable
caused to be prepared and heretofore delivered to Purchaser. As used
herein, the term "Hazardous Materials" means (i) toxic wastes, hazardous
materials, hazardous substances or other substances which are prohibited
or regulated by any federal, state or local law or regulation addressing
environmental protection or pollution control matters, (ii) hazardous
levels of asbestos, (iii) polychlorinated biphenyls (PCBs) and (iv) oil,
petroleum and their by-products. Except as disclosed or as may be
disclosed in the reports listed on Exhibit J, and except with respect to
cleaning fluids and similar substances which may be used in the routine
operation or maintenance of the Malls, (a) Equitable has not itself
caused any Hazardous Materials to be utilized or stored in or on any
Mall, or to be disposed of therefrom, except in accordance with the
provisions of Legal Requirements applicable to Hazardous Materials and
(b) to Equitable's knowledge, no Hazardous Materials are present in, on
or under any Mall in quantities or amounts which would be in violation
of Legal Requirements applicable thereto. Equitable has not received
any written notice from any Governmental Authority or other person or
entity that any condition exists at any Mall which constitutes or has
resulted in a violation of any Legal Requirement relating to Hazardous
Materials or that any claim is being asserted against Equitable by
reason of any such violation.
<PAGE> 39
8.3.16 Equitable has not received any written notice from any
insurer of the Malls requiring any work to be performed as a condition
to the renewal of any insurance policy carried by Equitable in respect
thereof which has not heretofore been complied with.
8.3.17 The audited financial statements for Separate Account
174 for the calendar years 1994 through 1996 were prepared in accordance
with generally accepted accounting principles, consistently applied, and
fairly and accurately reflected in all material respects the financial
condition of the Malls for the periods covered thereby. All unaudited
interim statements of operation of the Malls for any portion of 1997
heretofore or hereafter delivered by Equitable to Purchaser fairly and
accurately reflect, or will reflect, in all material respects the
revenues and expenses of each of the Malls for the periods covered
thereby, subject to year-end adjustments made in the ordinary course in
connection with the preparation of the audited financial statements for
1997.
8.4 Effect of Estoppels. If prior to the Closing the lessor
under any Ground Lease, the Trustee under the Existing Financing, a
Tenant or an Adjoining Owner has provided an estoppel letter to
Purchaser which sets forth information with respect to any item as to
which Equitable has made a representation or warranty, then Equitable's
representation and warranty in respect of such information shall
thereafter be null and void and of no further force or effect, such
representation and warranty shall not be deemed to have been remade as
of the Closing and Purchaser shall rely solely on the information set
forth in such estoppel letter, subject to Section 17.3.
8.5 Condition of the Malls. Notwithstanding anything to the
contrary set forth in subsection 8.3.4.3 or 8.3.8.3, the representations
and warranties contained therein to the effect that Equitable has
complied in all material respects with the documents which evidence or
secure the Existing Financing or with the terms of the Ground Leases not
apply to any obligation on the part of Equitable, or any default or
alleged default based on Equitable's failure, to maintain the Malls, or
any of them, in good repair and condition or to make any replacements or
improvements thereto, it being understood that Purchaser has agreed to
accept the Malls in their "as-is" physical condition, although nothing
in this Section 8.5 shall be deemed to constitute a waiver by Purchaser
of its rights at law or in equity, if any, to seek contribution or other
recourse against Equitable in the event of a claim asserted against
Purchaser by a third party with respect to liabilities arising from or
<PAGE> 40
relating to any circumstances or conditions which exist at or in respect
of the Malls prior to closing. The provisions of this Section 8.5 shall
survive the Closing.
8.6 Survival of Equitable's Warranties, etc.
8.6.1 All of Equitable's representations and warranties
contained in this Article 8 (other than those contained in subsections
8.3.1, 8.3.2 and 8.3.3, which shall survive the Closing without
limitation as to time), and all certifications, representations and
warranties made by Equitable in Equitable's certificate delivered
pursuant to Section 8.6.3 or in any Seller's Estoppel Letter delivered
by Equitable to Purchaser, shall (except as otherwise provided in
Section 8.4) survive until one (1) year after the date of the Closing;
provided, however, that Equitable's liability for any breach of such
warranties, representations and certifications shall not expire as to
any breach or alleged breach thereof if notice of such breach or alleged
breach is given by Purchaser to Equitable prior to one (1) year after
the date of the Closing and, if such notice is given, legal proceedings
are instituted in respect of such breach or alleged breach within six
(6) months after such notice is given.
8.6.2 Notwithstanding anything to the contrary set forth in
this Article 8, Equitable shall have no liability to Purchaser for
breach of any warranty and representation set forth in this Article 8 or
in any Seller's Estoppel Letter or in the certificate provided for in
subsection 8.6.3 unless and except to the extent that the damages due to
Purchaser by reason of all such breaches together with damages resulting
from any adverse facts and matters described in Section 17.3, exceed
$5,000,000, and in no event shall Equitable be liable to Purchaser for
consequential or punitive damages in respect of any such breach. For
the purposes of this subsection 8.6.2, matters disclosed in any estoppel
letter which, under the terms of this Agreement or any instrument or
document delivered pursuant hereto, it is Equitable's obligation to pay
or rectify, shall not be applied against said $5,000,000.
8.6.3 All of Equitable's representations and warranties set
forth in this Article 8 shall be deemed to have been remade on and as of
the Closing Date and Equitable shall deliver to Purchaser at the Closing
a certificate in the form of Exhibit Y, which certificate shall be
subject to all limitations on liability and survival, limitations on
Equitable's knowledge and other matters set forth elsewhere in this
Agreement (to the same effect as if the statements made in such
certificate were included in Section 8.3). Notwithstanding the
<PAGE> 41
foregoing, if any matter or event shall have occurred between the date
hereof and the date of the Closing which does not result from any
intentional act or omission of Equitable, that is not permitted under
any provisions of this Agreement and which makes any such warranty or
representation untrue in any material respect, Equitable shall have the
right to disclose such matter or event in the certificate above provided
for, and if Equitable does so, Equitable shall not be liable to
Purchaser following the Closing for the breach of the warranty or
representation in question which results from the occurrence of such
matter or thing, but in no event shall Purchaser be obligated to close
hereunder unless the conditions precedent to Purchaser's obligation to
close set forth in this Agreement (including, without limitation, in
Section 11.1) shall have been fulfilled.
8.6.4 Notwithstanding anything to the contrary set forth in
this Article 8 or elsewhere in the Agreement, if prior to the Closing
Purchaser has or obtains knowledge that any of Equitable's warranties or
representations set forth in this Article 8, or any of Equitable's
certifications, warranties or representations made in Equitable's
representation certificate pursuant to Section 8.6.3 or in any Seller's
Estoppel Letter, is untrue in any respect, and Purchaser nevertheless
proceeds with the Closing, then the breach by Equitable of the
warranties, representations or certifications as to which Purchaser
shall have such knowledge shall be waived by Purchaser and Equitable
shall have no liability to Purchaser or its successors or assigns in
respect thereof. For the purposes of this subsection 8.6.4, Purchaser
shall be deemed to have or to have obtained knowledge of any such matter
or thing only if such matter or thing (i) was set forth in written
studies, reports, memoranda, letters or other documents furnished to
Purchaser by or on behalf of Equitable (including, without limitation,
by Equitable's attorneys, ERE or the Managing Agent), by any affiliates,
agents or representatives of Purchaser, by third-party consultants
retained by Purchaser or by Purchaser's attorneys (including in-house
attorneys), or (ii) was otherwise known to any of Bruce Gobeyn, Arthur
Massing, Donald Gandolf and Cheryl Arnold.
9. Representations and Warranties of Purchaser.
9.1 Purchaser's Warranties. Purchaser warrants and represents
to Equitable as follows:
9.1.1 Purchaser is a general partnership duly organized,
validly existing and in good standing under the laws of the State of
Delaware.
<PAGE> 42
9.1.2 Each of Purchaser and its general partner has full
power and authority to enter into this Agreement and perform its
obligations hereunder in accordance with the terms hereof. The
execution, delivery and performance of this Agreement by Purchaser and
the documents to be executed by Purchaser pursuant hereto have been duly
and validly authorized by all necessary partnership action on the part
of Purchaser and by all necessary partnership action on the part of its
partners and by all necessary corporate action on behalf of the general
partner of each of its partners. This Agreement constitutes the legal,
valid and binding obligation of Purchaser, enforceable against Purchaser
in accordance with its terms, subject as to enforceability to the effect
of applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or similar laws affecting the rights of creditors
generally and to general principles of equity. No bankruptcy,
insolvency, reorganization, arrangement or moratorium proceeding, or
allegation of fraudulent conveyance, is now pending or threatened
against Purchaser.
9.1.3 Execution by Purchaser of this Agreement and all
documents provided for herein to be executed by Purchaser, and
performance by Purchaser of the provisions hereof and thereof, will not
violate or result in any breach of, or constitute a default under, any
law, regulation, order or judgment of any governmental authority to
which Purchaser or either of its partners is subject, or any agreement,
indenture, mortgage, deed of trust, bank loan, credit agreement or any
other instrument to which Purchaser or either of its partners is a party
or by which Purchaser or either of its partners is bound, where such
breach or default might adversely affect Purchaser's or either of its
partners' ability to perform its or their obligations hereunder or under
such other documents. None of Purchaser or its partners is in default
under any note, evidence of indebtedness, lease, contract, license,
undertaking or other agreement where the liability thereunder might
adversely affect Purchaser's or its partners' ability to perform its or
their obligations under this Agreement or such other documents.
9.1.4 Purchaser is not utilizing the assets of any employee
benefit plan (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended) for or in connection with its
acquisition of the Malls.
9.2 Remaking of Warranties; Survival. All of Purchaser's
representations and warranties set forth in this Article 9 shall be
deemed to have been remade on and as of the Closing Date. Such
<PAGE> 43
representations and warranties, as remade, shall survive the Closing
without limitation as to time.
10. Conditions to the Obligation of Equitable to Close. The
obligation of Equitable to close under this Agreement is expressly
conditioned upon the fulfillment by and as of the Closing Date of each
of the conditions listed below, provided that Equitable, at its
election, may waive all or any of such conditions, which election shall
be conclusively evidenced by Equitable's proceeding with and completing
the closing of the transaction provided for herein:
10.1 Purchase Price. Purchaser shall have paid to Equitable the
Purchase Price as provided in Article 3 hereof and all other amounts due
to Equitable hereunder.
10.2 Representations and Warranties. All representations and
warranties of Purchaser set forth in Article 9 shall be true and correct
in all material respects on and as of the Closing Date as if made on and
as of such date.
10.3 Performance of Obligations. Purchaser shall have executed
and/or delivered or caused to be delivered at the Closing all documents
and executed counterparts of documents and instruments required by this
Agreement to be executed and/or delivered by Purchaser and shall have
taken all other actions and fulfilled all other covenants and conditions
required of Purchaser under this Agreement.
10.4 Required Consents. All of the Required Consents shall have
been obtained, to the extent failure to obtain the same would result in
any material liability to Equitable.
10.5 Rating Agency Approval. Subject to the provisions of
subsection 3.3.1, the parties shall have received the Rating Agency
Approval, to the extent failure to obtain the same would result in any
material liability to Equitable.
If any of the foregoing conditions is not satisfied and, as a
result, the Closing does not occur, the Deposit or Letter(s) of Credit
shall be returned to Purchaser, this Agreement shall terminate and
neither party shall have any further rights or obligations under this
Agreement except as otherwise specifically provided herein; provided,
however, that if any such condition is not satisfied due to Purchaser's
default, Equitable shall have the rights provided for in Section 16.1.
11. Conditions to the Obligation of Purchaser to Close. The
obligation of Purchaser to close under this Agreement is expressly
conditioned upon the fulfillment by and as of the Closing Date of each
<PAGE> 44
of the conditions listed below, provided that Purchaser, at its
election, may waive all or any of such conditions, which election shall
be conclusively evidenced by Purchaser's proceeding with and completing
the closing of the transaction provided for herein:
11.1 Representations and Warranties. All representations and
warranties of Equitable set forth in Section 8.3 shall be true and
correct on and as of the Closing Date as if made on and as of such date
(without reference to any modifications thereof contained in the
certificate delivered by Equitable to Purchaser pursuant to subsection
8.6.3), except for breaches thereof, if any, which do not in the
aggregate have a material adverse affect on the value of the Malls taken
as a whole.
11.2 Performance of Obligations. Equitable shall have executed
and/or delivered or caused to be delivered at Closing all of the
documents and instruments required by this Agreement to be executed
and/or delivered by Equitable and shall have taken all other actions and
fulfilled all other covenants and conditions required of Equitable under
this Agreement in all material respects.
11.3 Title. Purchaser shall not elect or be entitled to elect to
terminate this Agreement pursuant to Section 14.1 and the Title Company
shall be prepared to issue to Purchaser one or more owner's policies of
title insurance for the Malls in an aggregate amount equal to the
Purchase Price, subject only to the Permitted Encumbrances.
11.4 Estoppels. Purchaser shall have received the estoppels
required by subsections 17.1.1, 17.1.2 and 17.1.4 and the condition set
forth in Section 17.3 shall be satisfied.
11.5 Required Consents. All of the Required Consents shall have
been obtained.
11.6 Rating Agency Approval. Subject to the provisions of
subsection 3.3.1, the parties shall have received the Rating Agency
Approval.
If any of the foregoing conditions is not satisfied and, as a
result, the Closing does not occur, the Deposit or Letter(s) of Credit
shall be returned to Purchaser, this Agreement shall terminate and
neither party shall have any further rights or obligations under the
Agreement except as otherwise specifically provided herein; provided,
however, that if any such condition is not satisfied due to Equitable's
default, Purchaser shall have the rights provided for in Section 16.2.
<PAGE> 45
12. Risk of Loss.
12.1 Substantial Casualty. If prior to the Closing any Mall
shall suffer any Substantial Casualty, Purchaser shall nevertheless be
required to close title to all Malls hereunder. In the event of any
such Substantial Casualty Equitable shall provide prompt written notice
thereof to Purchaser, and Purchaser shall give written notice to
Equitable within twenty (20) business days after Purchaser receives
Equitable's written notice that Purchaser elects on the Closing Date
either (i) to purchase all of the Malls, in which event Section 12.3
shall apply, or (ii) to purchase all of the Malls other than the Mall
affected by such Substantial Casualty, in which event the Purchase Price
payable at the Closing shall be reduced by that portion thereof which is
allocated to the damaged Mall, as agreed by Equitable and Purchaser (the
"Allocated Price") and Purchaser shall remain obligated to purchase the
damaged Mall as hereinafter provided. If Purchaser shall make the
election set forth in clause (ii) above, (a) the Closing shall take
place as to all of the Malls other than the damaged Mall, (b) Escrow
Agent shall retain in escrow pursuant to the terms of this Agreement
that portion of the Deposit which bears the same proportion thereto as
the Allocated Price bears to the Purchase Price (or the Letter(s) of
Credit held by Equitable shall be reduced to such aggregate amount), (c)
Equitable shall proceed with reasonable diligence to repair and restore
the damaged Mall substantially to its condition immediately prior to
such Substantial Casualty at Equitable's sole cost and expense, (d)
Equitable shall be entitled to all insurance proceeds payable by reason
of such Substantial Casualty, and (e) upon completion of such repair and
restoration, Equitable and Purchaser shall consummate the sale of the
affected Mall on the terms and conditions set forth in this Agreement
applicable thereto.
12.2 Substantial Taking. If prior to the Closing any Mall shall
be subject to a Substantial Taking (it being agreed that the
condemnation of a portion of the Lindale Mall referred to in Exhibit T
shall not be deemed to be a Substantial Taking under this Section 12.2),
Equitable shall promptly deliver written notice thereof to Purchaser,
and Purchaser shall have the right to terminate this Agreement by giving
written notice to Equitable within twenty (20) business days after
Purchaser receives Equitable's written notice of such taking. If this
Agreement is so terminated by Purchaser, Escrow Agent shall return the
Deposit and the Income to Purchaser (and Equitable and Purchaser shall
execute a written instruction to Escrow Agent to do so), or Equitable
shall return the Letter(s) of Credit to Purchaser, and neither party
<PAGE> 46
shall have any further obligations or liabilities hereunder, or
otherwise with respect to the subject matter hereof, except as otherwise
expressly provided herein to the contrary. If Purchaser shall fail to
deliver timely the aforesaid notice of termination, then Purchaser shall
irrevocably be deemed to have elected to proceed to the Closing and to
waive such termination right, in which event the provisions of Section
12.3 shall apply.
12.3 Other Casualty or Taking. Notwithstanding the foregoing, in
the event of any Casualty or Taking that does not constitute a
Substantial Casualty or a Substantial Taking, as the case may be, or if
Purchaser shall, notwithstanding a Substantial Casualty or a Substantial
Taking, elect or be deemed to have elected to proceed to Closing
pursuant to clause (i) of Section 12.1 or pursuant to Section 12.2, as
the case may be, this Agreement and the obligations of Equitable and
Purchaser hereunder shall remain in full force and effect except that
(i) Purchaser shall accept the Malls notwithstanding such damage or
taking and shall pay the full Purchase Price therefor and (ii) at the
Closing (a) Equitable shall assign to Purchaser all of its right, title
and interest in and to all insurance proceeds (including, without
limitation, business interruption or rent insurance proceeds) payable by
reason of such Casualty or all awards payable by reason of such Taking
(other than any such award payable in respect of the pending
condemnation of a portion of the Lindale Mall, which shall be retained
by and payable to Equitable), and, in the case of insurance proceeds,
shall credit against the Purchase Price the amount of any deductible
under Equitable's insurance policies, and (b) Equitable shall pay over
to Purchaser the amount of such proceeds or award, if any, received by
Equitable prior to the date of the Closing, and (c) Equitable shall not
settle or compromise any claim for such proceeds or award without the
prior consent of Purchaser, which consent shall not be unreasonably
withheld or delayed. Notwithstanding the foregoing, Equitable shall be
entitled to receive or retain out of any such insurance proceeds or
award (i) any amounts expended by Equitable to restore or protect the
Malls, with the prior reasonable approval of Purchaser, and (ii) in the
case of insurance proceeds, loss of rents by reason of the fire or other
casualty suffered by Equitable prior to the Closing, which entitlement
shall survive the Closing.
13. Operation of the Malls Until Closing.
13.1 Standard of Operation. From the date hereof until the
Closing, Equitable shall (a) use reasonable efforts to maintain, for the
benefit of Purchaser following the Closing, the good will of Tenants,
prospective tenants, vendors and other parties having business relations
<PAGE> 47
with Equitable in respect of the Malls; (b) pay its debts (or in good
faith contest the same) and perform its obligations in respect of the
Malls as they become due; (c) maintain all of the Malls in the same
manner and condition that exists on the date hereof, as such condition
shall be altered by reason of Casualty, Taking and/or normal wear and
tear (provided, that Equitable shall not be obligated to make any
capital improvements, repairs or replacements to any Mall); (d) without
the express written consent of Purchaser, not (i) modify any Lease, (ii)
enter into any new Lease or extend or renew an existing Lease unless
either the terms thereof are set forth in the list of pending lease
transactions annexed hereto as Exhibit Z, or the provisions of Section
13.2 are complied with (other than renewals or extensions resulting from
the exercise by a Tenant of a currently existing renewal or extension
option), (iii) cancel or terminate any Lease or take any action to
enforce any Lease which would have the effect of canceling or
terminating the same, (iv) enter into a new reciprocal easement and
operating agreement or similar agreement or amend or modify, consent to
the assignment of or waive any material right under the Operating
Agreements, (v) make any material alterations to any Mall or enter into
any new contracts or extend or renew or cancel any Other Agreement
relating to material capital expenditures, (vi) enter into any other new
contracts or extend, renew or cancel any of the Other Agreements, except
for contracts executed in the ordinary and usual course and business and
in accordance with past practices and policies which can be terminated
without penalty or payment upon not more than thirty (30) days prior
notice, (vii) amend, modify or terminate any of the Ground Leases,
(viii) terminate the Management Agreement. (ix) modify any of the
documents which evidence or secure the Existing Financing or prepay the
Existing Financing in whole or in part, or (x) enter into any material
agreement the effect of which is to cause Equitable to be unable to
convey title to the Malls to Purchaser subject only to the Permitted
Encumbrances; and (e) otherwise operate the Malls in the ordinary course
of business and consistent with current practice.
13.2 Leasing. If between December 15, 1997 and the Closing Date,
Equitable desires to enter into any new Lease, or renewal of an existing
Lease of space in a Mall which is not set forth in the list of pending
lease transactions annexed hereto as Exhibit Z, Equitable shall give
Purchaser notice (the "New Lease Notice") which sets forth with respect
to such proposed new Lease or Lease renewal, (i) the name of the
prospective tenant, (ii) the term of the Lease, (iii) the Rents payable
under the Lease, (iv) the location and size of the premises, (v) the
<PAGE> 48
permitted uses under the Lease, (vi) the expenses associated with the
consummation of the Lease, including without limitation leasing
commissions, tenant improvement costs, tenant allowances and the like,
and (vii) any concessions or free Rent being granted, and which sets
forth on its face the substance of the last sentence of this Section
13.2. No such Lease shall be entered into by Equitable without the
prior written consent of Purchaser, which consent shall not be
unreasonably withheld. If Purchaser does not respond to any New Lease
Notice within five (5) Business Days after its receipt thereof,
Purchaser shall be conclusively deemed to have approved the new Lease or
Lease renewal which is the subject of such New Lease Notice and
Equitable shall have the right to enter into such new Lease or Lease
renewal.
14. Title to the Mall.
14.1 Title Defects. If on the Closing Date Equitable shall be
unable to cause title to the Malls to be in accordance with the terms of
this Agreement as a result of any exception to title that is not a
Permitted Exception, Purchaser may terminate this Agreement by notice to
Equitable delivered on or prior to the Closing Date, as the same may
have been extended, in which event this Agreement shall be terminated
and of no further force or effect, the Deposit or Letter(s) of Credit
shall be returned to Purchaser, and neither party shall have any
obligations of any nature to the other hereunder or by reason hereof,
except as to those obligations hereunder that are specifically stated to
survive such termination. Equitable shall be under no obligation to
take any steps or to institute or prosecute any action or proceedings,
or expend any sums of money, to remove from title to the Mall any
defect, encumbrance or objection to title; provided, however, that
Equitable shall be responsible for discharging any liens or encumbrances
which do not constitute Permitted Encumbrances, which can be discharged
solely by the payment of a sum of money not in excess of the sum of
$5,000,000 in the aggregate which arise solely on account of obligations
undertaken or actions performed by Equitable. Equitable may use any
part of the Purchase Price to discharge the same, provided that
Equitable shall deliver to Purchaser at the Closing instruments in
recordable form sufficient to discharge such liens and encumbrances of
record. Except for Equitable's failure to discharge such liens or
encumbrances as aforesaid up to an aggregate amount of $5,000,000,
Equitable shall not be deemed in default of this Agreement, and
Purchaser shall not be entitled to damages of any kind, if Equitable
shall fail or be unable to cause title to the Mall to be in the
condition called for by this Agreement, nor shall Purchaser in such
<PAGE> 49
circumstances be entitled to specific performance of this Agreement. In
no event shall Equitable be obligated to discharge any mechanic's or
similar lien created by a Tenant in occupancy at the Closing whose Lease
is in full force and effect and in good standing (as described in
subsection 4.1.7) or an Adjoining Owner, but Equitable shall use
reasonable efforts to cause such Tenant or Adjoining Owner to do so.
14.2 Waiver by Purchaser. Purchaser, at its election, may at the
Closing accept such title as Equitable can convey, without reduction of
the Purchase Price or any credit or allowance on account thereof or any
claim against Equitable by reason thereof.
14.3 Deeds Full Performance; Survival. The acceptance of the
Deeds and other closing documents by Purchaser from Equitable shall be
deemed full performance on the part of Equitable of all of its
obligations under this Agreement, except as to any such obligation which
is specifically stated in this Agreement to survive the Closing or is
expressly contained in documents delivered at Closing. Except where
otherwise expressly provided in this Agreement, none of the provisions
of this Agreement shall survive the Closing.
15. Brokers, etc.
15.1 Equitable's Representation. Equitable represents and
warrants to Purchaser that Equitable dealt with no broker, finder or
like agent who might claim a commission or fee in connection with the
transaction contemplated in this Agreement or on account of introducing
the parties, the preparation or submission of brochures, the negotiation
or execution of this Agreement or the closing of the transaction
contemplated herein other than Goldman, Sachs & Co. ("Broker"). The
fees of Broker shall be paid by Equitable pursuant to a separate
agreement between Equitable and Broker. Equitable agrees to indemnify
and hold harmless Purchaser and its successors and assigns from and
against any and all claims, losses, liabilities and expenses, including
without limitation reasonable attorneys' fees, disbursements and
charges, arising out of any claim or demand for commissions or other
compensation for bringing about this transaction by any broker, finder
or similar agent or party, including, without limitation, Broker, who
claims to have dealt with Equitable or any affiliate thereof in
connection with this transaction.
15.2 Purchaser's Representation. Purchaser represents and
warrants to Equitable that neither Purchaser, nor any affiliate thereof,
has dealt with any broker, finder or like agent who might claim a
commission or fee in connection with the transaction contemplated in
<PAGE> 50
this Agreement or on account of introducing the parties, the preparation
or submission of brochures, the negotiation or execution of this
Agreement or the closing of the transaction contemplated herein, other
than Broker. Purchaser agrees to indemnify and hold harmless Equitable
and its successors and assigns from and against any and all claims,
losses, liabilities and expenses, including without limitation
reasonable attorneys' fees, disbursements and charges, arising out of
any claim or demand for commissions or other compensation for bringing
about this transaction by any broker, finder or similar agent or party
other than Broker who claims to have dealt with Purchaser or any
affiliate thereof in connection with this transaction.
15.3 Survival. The provisions of this Article 15 shall survive
the Closing or the termination of this Agreement.
16. Default; Remedies.
16.1 Purchaser's Default. If at the Closing Date the conditions
to the obligation of Equitable to close title as set forth in Article 10
have not been fulfilled on account of the default of Purchaser in
performing any of its obligations hereunder, and the Closing does not
occur as a result thereof, then Equitable shall be entitled as its sole
and exclusive remedy to terminate this Agreement and receive the Deposit
from the Escrow Agent or draw upon the full amount of the Letter(s) of
Credit as liquidated damages for Purchaser's default (and in such
circumstances Purchaser shall, if applicable, join with Equitable in a
written instrument to Escrow Agent to pay the Deposit to Equitable).
Purchaser and Equitable agree that such liquidated damages are based in
part upon the following damages which Equitable will suffer on account
of a default by Purchaser and the failure of the Closing to occur, which
damages Purchaser and Equitable agree are incapable of an exact
determination of amount: the removal of the Malls from the real estate
market and the loss of the possibility of obtaining a new purchaser
during such time at a higher amount; the possibility of being unable to
find a new purchaser for the amount of the Purchase Price after
Purchaser's default; various restrictions related to the management and
maintenance of the Malls during the period of this Agreement; the
inconvenience and expense of remarketing the Malls for sale; and the
expense of negotiating and documenting a new transaction; and that the
Deposit is a reasonable estimate of Equitable's damages.
16.2 Equitable's Default. If at the Closing Date the conditions
to the obligation of Purchaser to close title as set forth in Article 11
have not been fulfilled on account of the default of Equitable
<PAGE> 51
hereunder, and the Closing shall not occur as a result thereof, then
Purchaser shall be entitled to pursue, at its election, either of the
following as its sole and exclusive remedy: (i) terminate this
Agreement and have the Deposit returned to it by the Escrow Agent or the
Letter(s) of Credit returned to it by Equitable, or (ii) seek specific
performance of Equitable's obligations under this Agreement. Purchaser
hereby waives any right to sue Equitable for damages (including
consequential damages) for any default by Equitable hereunder but if the
Closing occurs such waiver shall not apply to damages to which Purchaser
may be entitled hereunder by reason of any breach by Equitable of any of
its warranties or representations hereunder which survive the Closing;
provided, however, that in the event of a willful default by Equitable
which would render the remedy of specific performance unavailable to
Purchaser, Purchaser may seek damages (but not consequential damages)
from Equitable provided that Purchaser has sought and been unable to
pursue the remedy of specific performance within six months after the
occurrence of such default.
16.3 Survival. The provisions of this Article 16 shall survive
the termination of this Agreement.
17. Estoppels.
17.1 Required Estoppels. At or before the Closing Equitable
shall deliver to Purchaser the following estoppel letters:
17.1.1 estoppel letters from all Anchors which are parties to
Operating Agreements, such estoppel letters to be in substantially the
form annexed hereto as Exhibit U; provided, however, that if any
Operating Agreement provides for the form or content of an estoppel
letter, Purchaser shall accept an estoppel letter as called for therein
if an Anchor refuses to execute one in the form annexed hereto as
Exhibit U after being requested to do so by Equitable;
17.1.2 estoppel letters from (i) all Anchors which are Tenants
under Leases, if any, and (ii) from 70% of all other Tenants at each
Mall (other than Tenants under Leases consisting of licenses and
concession agreements which have terms, including any rights to renew or
extend, not in excess of six (6) months), such estoppel letters to be in
substantially the form annexed hereto as Exhibit V; provided, however,
that if any Lease provides for the form or content of an estoppel
letter, Purchaser shall accept an estoppel letter as called for therein
<PAGE> 52
if any Tenant refuses to execute one in the form annexed hereto as
Exhibit V after being requested to do so by Equitable; and
17.1.3 estoppel letters from the lessors under the Ground
Leases listed in paragraphs 1 and 3 of Exhibit C annexed hereto, such
estoppel letters to be in substantially the form annexed hereto as
Exhibit AA or in the form, if any, provided for in the applicable Ground
Lease.
17.2 Additional Estoppels. Equitable shall request and shall use
reasonable efforts to obtain and deliver to Purchaser at or before the
Closing the following additional estoppel letters:
17.2.1 an estoppel letter from the lessor under the Ground
Lease listed in paragraph 2 of Exhibit C annexed hereto, such estoppel
letter to be in substantially the form annexed hereto as Exhibit AA; and
17.2.2 an estoppel letter from the Trustee under the Existing
Financing containing the information required of the Trustee under
Section 41 of the Mortgage;
provided, that the delivery of any of such estoppel letters shall not be
a condition to Purchaser's obligation to close title hereunder.
17.3 No Default. Equitable shall not be in default under this
Agreement if one or more estoppel letters signed by Anchors, Tenants or
other third parties set forth allegations or facts at variance with
statements in the forms annexed hereto as exhibits, but it shall be a
condition to Purchaser's obligation to close the transaction provided
for herein that such estoppel letters, taken as a whole, do not in
Purchaser's reasonable judgment reveal facts which when aggregated with
those matters revealed in the certificate delivered pursuant to
subsection 8.6.3, and the knowledge obtained by Purchaser as described
in subsection 8.6.4, have a material adverse effect on the value of the
Malls, taken as a whole. For purposes of this Section 17.3, matters
disclosed in any estoppel letter which, under the terms of this
Agreement or any instrument or document delivered pursuant hereto, it is
Equitable's obligation to pay or rectify shall not be deemed to have an
adverse effect on the value of the Malls.
17.4 Seller's Estoppels. If Equitable shall be unable to deliver
any such estoppel certificate from any Anchor pursuant to Sections
17.1.1 or 17.1.2 currently in bankruptcy, then Equitable may, at its
option, deliver to Purchaser at Closing, and, if so delivered, Purchaser
shall accept in lieu of the Anchor estoppel certificate in question, in
<PAGE> 53
respect of the applicable Lease or Operating Agreement, as the case may
be (but in no event more than one for each Anchor at a Mall which is
currently in bankruptcy), a certificate of Equitable ("Seller's Estoppel
Letter") with respect to those matters set forth in the applicable form
of estoppel certificate attached hereto, which Seller's Estoppel Letter
may be limited to Equitable's knowledge as appropriate, and which shall
contain the same limitations on survival, liability, knowledge and other
matters set forth elsewhere in this Agreement as if the representations
set forth therein were set forth in Section 8.3 hereof. In addition,
(i) if Equitable shall be unable to deliver up to two (2) such estoppel
certificates from any Anchor pursuant to Sections 17.1.1 or 17.1.2 not
currently in bankruptcy, then Equitable may, at its option, deliver to
Purchaser at Closing and if so delivered Purchaser shall accept in lieu
of each of the two (2) or fewer Anchor estoppel certificates in
question, in respect of the applicable Lease or Operating Agreement, as
the case may be, a Seller's Estoppel Letter with respect to those
matters set forth in the applicable form of estoppel certificate
attached hereto, which Seller's Estoppel Letter may be limited to
Equitable's knowledge as appropriate, and which shall contain the same
limitations on survival, liability, knowledge and other matters set
forth elsewhere in this Agreement as if the representations set forth
therein were set forth in Section 8.3; or (ii)if Equitable shall be
unable to deliver more than two (2) such estoppel certificates from any
Anchor pursuant to Sections 17.1.1 or 17.1.2 not currently in
bankruptcy, then Equitable may, at its option, deliver to Purchaser at
Closing, and if so delivered Purchaser shall accept in lieu of each of
the Anchor estoppel certificates in question, in respect of the
applicable Lease or Operating Agreement, as the case may be, a
certificate of Equitable ("DS Estoppel Certificate") with respect to
those matters set forth in the applicable form of estoppel certificate
attached hereto, which DS Estoppel Certificate may be limited to
Equitable's knowledge as appropriate and which shall contain the same
limitations on knowledge and other matters as set forth elsewhere in
this Agreement as if the representation set forth therein were set forth
in Section 8.3; provided, however, that Equitable may in no event
deliver more than six (6) DS Estoppel Certificates as provided in this
subsection 17.4, there shall be no more than one (1) DS Estoppel
Certificate for any one Mall and the limitation on survival set forth in
subsection 8.6.1 and the provisions of subsection 8.6.2 shall not apply
to any DS Estoppel Certificate.
17.5 If Equitable elects not to deliver any Seller's
Estoppel Certificate or DS Estoppel Certificate, Equitable shall not
thereby be deemed to be in default hereunder and Purchaser's sole remedy
<PAGE> 54
shall be that which is set forth in Article 11. At Equitable's request
and expense, Purchaser shall cooperate with Equitable and provide
Equitable with reasonable assistance in its attempt to obtain estoppel
letters from Anchors and Tenants required hereunder.
18. Notices. Except as otherwise provided in this Agreement, all
notices, demands, requests, consents, approvals or other communications
which are required or permitted to be given under this Agreement or
which either party desires to give with respect to this Agreement shall
be in writing and shall be delivered by hand or sent by telecopy (with
the original sent by first-class mail, postage prepaid), or sent postage
prepaid, by registered or certified mail, return receipt requested, or
by reputable overnight courier service addressed to the party to be
notified as follows (or to such other address as such party shall have
specified at least ten (10) days prior thereto by like notice) and shall
be deemed given when so delivered by hand, telecopied, or if mailed,
three (3) Business Days after mailing (one (1) Business Day in case of
overnight courier service), as follows:
if to Equitable, to:
ERE Yarmouth
3424 Peachtree Road, N.E.
Suite 800
Atlanta, Georgia 30326
Attn: Douglas T. Healy
Telecopier: (404) 848-8916
with copies at the same time to:
ERE Yarmouth
3424 Peachtree Road, N.E.
Suite 800
Atlanta, Georgia 30326
Attn: Suman P. Gera
Telecopier: (404) 848-8916
with copies at the same time to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attn: Walter F. Leinhardt, Esq.
Telecopier: (212) 373-2771
<PAGE> 55
if to Purchaser, to:
115 West Washington Street
Indianapolis, Indiana 46204
Attn: Bruce Gobeyn
Telecopier: (317) 685-7221
and
The Macerich Company
2 Galleria Tower
13455 Noel Rd., Suite 1480
Dallas, Texas 75240
Attn: Edward Coppola
Telecopier: (972) 458-7021
with copies at the same time to:
115 West Washington Street
Indianapolis, Indiana 46204
Attn: James M. Barkley, Esq.
Telecopier: (317) 685-7221
and
The Macerich Company
233 Wilshire Blvd., Suite 700
Santa Monica, California 90401
Attn: Richard Bayer, Esq.
Telecopier: (310) 395-2791
19. Further Assurances. Each of Equitable and Purchaser agrees, 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 party may
reasonably request in order to carry out the intents and purposes of
this Agreement, provided that such request is made by notice given
within two (2) years after the Closing Date. If required by the other
party, the party making the request will bear the reasonable cost
involved. Neither party shall be required to execute any instrument or
document pursuant to this Article 19 which would increase the liability
or obligations of such party over that provided for in this Agreement
<PAGE> 56
and the instruments and documents executed by such party pursuant
hereto. The provisions of this Article 19 shall survive the Closing.
20. Captions. The article and section titles or captions in this
Agreement and the Table of Contents and the Schedule of Exhibits
prefixed hereto are for convenience only and shall not be deemed to be
part of this Agreement.
21. Governing Law; Construction. This Agreement shall be construed,
interpreted and enforced in accordance with the laws of the State of New
York applicable to contracts negotiated, executed and to be performed
wholly within such State; provided, however, that matters relating to
title to a Mall or instruments conveying or affecting such title shall
be governed by the laws of the state in which such Mall is located.
Each party hereto acknowledges that it was represented by counsel in
connection with this Agreement and the transactions contemplated herein,
that it and its counsel reviewed and participated in the preparation and
negotiation of this Agreement and the documents and instruments to be
delivered hereunder, and that any rule of construction to the effect
that ambiguities are to be resolved against the drafting party shall not
be employed in the interpretation of this Agreement or the documents and
instruments to be delivered hereunder.
22. Entire Agreement; No Third Party Beneficiary, etc. This
Agreement, including all Exhibits, contains the entire agreement between
the parties with respect to the subject matter hereof and supersedes all
prior understandings, if any, with respect thereto. The parties have
made no representations with respect to the subject matter of this
Agreement and have given no warranties with respect to the subject
matter hereof except as expressly provided herein and/or expressly
provided in the documents delivered at Closing. This Agreement may not
be modified, changed, supplemented or terminated, nor may any
obligations hereunder be waived, except by written instrument signed by
the party to be charged or by its agent duly authorized in writing or as
otherwise expressly permitted herein. The parties do not intend to
confer any benefit hereunder on any person, firm, corporation or other
entity other than the parties hereto. The provisions of this Article 22
shall survive the Closing or termination of this Agreement.
23. Waivers; Extensions. No waiver of any breach of any agreement or
provision herein contained shall be deemed a waiver of any preceding or
succeeding breach thereof or of any other agreement or provision herein
contained. No extension of time for performance of any obligations or
acts shall be deemed an extension of the time for performance of any
other obligations or acts. Whenever in this Agreement it is provided
that a document, such as an estoppel letter or good standing
certificate, must be dated within a specified number of days prior to
the Closing Date, the reference to the Closing Date in each such
provision shall be deemed to be February 2, 1998 and not any date to
which such Closing Date may be adjourned by agreement of the parties
hereto. The provisions of this Article 23 shall survive the Closing or
termination of this Agreement.
24. Pronouns. All pronouns and any variations thereof shall be
deemed to refer to the masculine, feminine or neuter, singular or
plural, as the identity of the parties may require.
25. Transaction Expenses; Fees and Disbursements of Counsel, etc.
25.1 Transaction Expenses. Equitable shall pay recording fees
and charges for documents required to remove exceptions to title which
do not constitute Permitted Exceptions and/or the cost of causing the
Title Company to omit or insure over any such exceptions, the cost of
updating the survey for each Mall, the fees of the Broker and all costs
incurred in connection with obtaining the Required Consents. Equitable
and Purchaser shall each pay one-half of all recording charges and
escrow fees (except as provided in the preceding sentence) and one-half
of any documentary stamp taxes and surtaxes, transfer taxes and similar
charges payable in connection with the conveyance of the Malls by
Equitable to Purchaser. Purchaser shall pay the premiums for the owners
policies of title insurance issued to Purchaser at Closing. Equitable
shall pay all costs necessary to obtain the Rating Agency Approval
(exclusive of Purchaser's attorneys' fees, which shall be paid by
Purchaser).
25.2 Other Expenses. Subject to Section 25.1, each party shall
pay its own expenses in connection with the transaction contemplated in
this Agreement, including the fees, disbursements and charges of its own
counsel, accountants, consultants, experts and other advisors in
connection with the negotiation and preparation of this Agreement and
the Closing.
25.3 Financial Statements; Appraisals. Equitable shall, at its
sole cost and expense, cause to be prepared and delivered to Purchaser
the audited financial statements and appraisals of the Malls for 1997
which are required pursuant to the Existing Financing, as well as common
area maintenance expense calculations for each of the Malls for 1997,
such calculations to be in the form utilized in previous years are to be
<PAGE> 58
audited if the calculations for previous years were audited. Further,
Equitable shall assist Purchaser in obtaining comfort letters and
similar documentation as may be required to permit Purchaser and its
affiliates to comply with applicable public reporting requirements
including Regulation Sx.
25.4 Survival. The provisions of this Article 25 shall survive
the Closing or (except for Section 25.3) the termination of this
Agreement.
26. Assignment. Purchaser shall not, without the prior written
consent of Equitable, assign this Agreement or its rights hereunder, in
whole or in part, to any other person or entity; provided, however, that
Purchaser may designate a nominee to take title to the Malls at Closing
so long as such nominee is controlled by or under common control with
Purchaser and Rating Agency Approval has been obtained with respect to
such nominee.
27. Counterparts. This Agreement may be executed in counterparts,
each of which (or any combination of which, signed by all of the
parties) shall be deemed an original, but all of which, taken together,
shall constitute one and the same instrument.
28. No Recording. The parties agree that neither this Agreement nor
any memorandum or notice hereof shall be recorded or filed in any public
records except as required by law. If Purchaser violates the terms of
this Article, Equitable, in addition to any other rights or remedies it
may have, may immediately terminate this Agreement by giving notice to
Purchaser of its election so to do and receive and retain the Deposit or
draw upon the Letter(s) of Credit as liquidated damages in accordance
with Section 16.1. The provisions of this Article shall not be
construed as preventing Purchaser from filing a lis pendens against the
Malls in the event it institutes any litigation against Equitable with
respect to the transaction provided for herein and, under applicable
law, it is entitled to file such lis pendens. The provisions of this
Article shall survive the Closing or any termination of this Agreement.
29. Unitary Transaction. The parties hereto agree that if the
Closing is to occur, it must be in respect of all thirteen Malls,
subject to Article 12, and unless the parties hereafter otherwise agree,
Purchaser shall not have the right to acquire, and Equitable shall not
have the right to require Purchaser to acquire, fewer than all of the
Malls.
30. Prevailing Party's Attorneys' Fees. In connection with any
litigation, including appellate proceedings, initiated by a party hereto
against the other party hereto and arising out of this Agreement or any
<PAGE> 59
instrument or document executed pursuant hereto, the party adjudicated
to be the substantially prevailing party shall be entitled to recover
reasonable attorneys' fees and disbursements from the other party. The
provisions of this Article shall survive the Closing or the termination
of this Agreement.
31. Radon Gas Notification. In accordance with Florida Statutes
Section 404.056, Equitable hereby notifies Purchaser that radon is a
naturally occurring radioactive gas that, when it has accumulated in a
building in sufficient quantities, may present health risks to persons
who are exposed to it over time. Levels of radon that exceed federal
and state guidelines have been found in buildings in Florida.
Additional information regarding radon and radon testing may be obtained
from the county public health unit.
32. Energy-Efficiency Rating Disclosure. In accordance with Florida
Statutes Section 553.996, Purchaser may have the energy-efficiency
rating of Lake Square Mall determined. Purchaser acknowledges that it
has received from Seller a copy of The Florida Building Energy-
Efficiency Rating System Brochure as provided by the State of Florida
Department of Community Affairs.
33. Waiver of Jury Trial. THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY WAIVE ANY RIGHT THAT EITHER PARTY MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER OR IN CONNECTION WITH, THE MALL, THE CONVEYANCE INSTRUMENT OR ANY
OTHER DOCUMENTS EXECUTED IN CONNECTION HEREWITH, OR IN RESPECT OF ANY
COURSE OF CONDUCT, STATEMENTS (WHETHER ORAL OR WRITTEN), OR ACTIONS OF
EITHER PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR EACH OF THE
PARTIES TO ENTER INTO THIS TRANSACTION AND SHALL SURVIVE THE CLOSING OR
THE TERMINATION OF THIS AGREEMENT.
<PAGE> 60
IN WITNESS WHEREOF, the parties have duly executed this Agreement
as of the day and year first above written.
SELLER:
THE EQUITABLE LIFE ASSURANCE
SOCIETY OF THE UNITED STATES
By:
Name:_____________________________________
Title:____________________________________
PURCHASER:
SM PORTFOLIO PARTNERS, a
Delaware general partnership
By: MACERICH EQ LIMITED PARTNERSHIP, a California
limited partnership, a general partner
By: MACERICH EQ GP CORP., a Delaware corporation,
its general partner
By:
Its:
By: SDG EQ DEVELOPERS
LIMITED PARTNERSHIP, a Delaware limited
partnership, a general partner
By: SDG EQ ASSOCIATES, INC., a Delaware
corporation, its general partner
By:
Its:
The undersigned has executed this Agreement solely for the purpose of
agreeing to be bound by the provisions of Section 3.2
COMMONWEALTH LAND TITLE INSURANCE COMPANY
By:
<PAGE> 61
============================================================================
Exhibit 3.5
SIMON DEBARTOLO GROUP, INC.
ARTICLES SUPPLEMENTARY
Simon DeBartolo Group, Inc., a Maryland corporation, having its
principal office in Baltimore, Maryland (hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments
and Taxation of Maryland (the "Department") that:
FIRST: The terms of the 4,000,000 shares of Series A Preferred Stock,
par value $.0001 per share, of the Company contained in Article SIXTH,
paragraph (c-2)(1) of the Articles of Amendment and Restatement dated
and filed with the Department on October 26, 1995 are as follows:
"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."
All of the issued shares of Series A Preferred Stock having been since
redeemed, purchased or otherwise acquired by the Corporation, the Board
of Directors has approved the filing of these Articles Supplementary to
reclassify such shares (together with any unissued shares of Series A
Preferred Stock) back into 4,000,000 shares of Common Stock, par value
$.0001 per share.
SECOND: As a result of the redemption of Series A Preferred Stock
and the reclassification described herein, the Corporation's authorized
capital stock currently consists of the following:
375,796,000 shares of Common Stock, par value $.0001 per share
12,000,000 shares of Class B Common Stock, par value $.0001 per
share
4,000 shares of Class C Common Stock, par value $.0001 per share
250,000,000 shares of Excess Stock, par value $.0001 per share
9,200,000 shares of 8-3/4% Series B Cumulative Redeemable Preferred
Stock, par value $.0001 per share
3,000,000 shares of 7.89% Series C Cumulative Step-up Premium Rate
Preferred Stock, par value $.0001 per share
THIRD: No amendment to the Charter of the Corporation is effected
by these Articles Supplementary, the purpose hereof being to record the
reclassification of the shares of Series A Preferred Stock of the
Corporation.
<PAGE> 01
IN WITNESS WHEREOF, the Corporation has caused these presents to be
signed in its name and on its behalf by its Chief Executive Officer and
witnessed by it Secretary on January 28, 1998.
WITNESS: SIMON DeBARTOLO GROUP, INC.
/s/ James M. Barkley By:/s/ David Simon
- -------------------- ---------------------
James M. Barkley David Simon
Secretary Chief Executive Officer
THE UNDERSIGNED, Chief Executive Officer of Simon DeBartolo Group, Inc.,
who executed on behalf of the Corporation Articles Supplementary of
which this Certificate is made a part, hereby acknowledges in the name
and on behalf of said Corporation the foregoing Articles Supplementary
to be the corporate act of said Corporation and hereby certifies that
the matters and facts set forth herein with respect to the authorization
and approval thereof are true in all material respects under the
penalties of perjury.
/s/ David Simon
------------------------------
David Simon
Chief Executive Officer
<PAGE> 02
============================================================================
EXHIBIT 4.3
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of December 22, 1997
among
SIMON PROPERTY GROUP, L.P.
SIMON DeBARTOLO GROUP, L.P.
THE INSTITUTIONS FROM TIME TO TIME
PARTY HERETO AS LENDERS
THE INSTITUTIONS FROM TIME TO TIME
PARTY HERETO AS CO-AGENTS
and
UNION BANK OF SWITZERLAND, NEW YORK BRANCH
AS ARRANGER
and
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
AS ARRANGER
and
THE CHASE MANHATTAN BANK
AS ARRANGER
=================================================================
TABLE OF CONTENTS
ARTICLE IDEFINITIONS 2
1.1. Certain Defined Terms 2
1.2. Computation of Time Periods 36
1.3. Accounting Terms 36
1.4. Other Terms 36
ARTICLE IIAMOUNTS AND TERMS OF LOANS 36
2.1. Committed Loans 36
2.2. Money Market Loans 39
2.3. Use of Proceeds of Loans and Letters of Credit 45
2.4. Revolving Credit Termination Date; Maturity of Money Market
Loans 45
2.5. Extension Option 46
2.6. Maximum Credit Facility 46
2.7. Authorized Agents 46
ARTICLE IIILETTERS OF CREDIT 47
3.1. Letters of Credit 47
3.2. Obligations Several 56
ARTICLE IVPAYMENTS AND PREPAYMENTS 56
4.1. Prepayments; Reductions in Revolving Credit Commitments 56
4.2. Payments 58
4.3. Promise to Repay; Evidence of
Indebtedness 62
ARTICLE VINTEREST AND FEES 64
5.1. Interest on the Loans and other Obligations 64
5.2. Special Provisions Governing Eurodollar Rate Loans, IBOR
Rate Loans, and Money Market Loans 68
5.3. Fees 75
ARTICLE VICONDITIONS TO LOANS AND LETTERS OF CREDIT 77
6.1. Conditions Precedent to the Initial Loans and Letters of Credit 77
6.2. Conditions Precedent to All Subsequent Loans and Letters of
Credit 79
ARTICLE VIIREPRESENTATIONS AND WARRANTIES 81
7.1. Representations and Warranties of the Borrower 81
ARTICLE VIIIREPORTING COVENANTS 93
8.1. Borrower Accounting Practices 93
8.2. Financial Reports 93
8.3. Events of Default 98
8.4. Lawsuits 98
8.5. Insurance 99
8.6. ERISA Notices 99
8.7. Environmental Notices 101
8.8. Labor Matters 103
8.9. Notices of Asset Sales and/or
Acquisitions 103
8.10. Tenant Notifications 103
8.11. Other Reports 103
8.12. Other Information 104
ARTICLE IXAFFIRMATIVE COVENANTS 104
9.1. Existence, Etc. 104
9.2. Powers; Conduct of Business 104
9.3. Compliance with Laws, Etc. 104
9.4. Payment of Taxes and Claims 105
9.5. Insurance 105
9.6. Inspection of Property; Books and Records; Discussions 105
9.7. ERISA Compliance 106
9.8. Maintenance of Property 106
9.9. Hedging Requirements 107
9.10. Company Status 107
9.11. Ownership of Projects, Minority Holdings and Property 107
ARTICLE XNEGATIVE COVENANTS 107
10.1. Indebtedness 107
10.2. Sales of Assets 108
10.3. Liens 108
10.4. Investments 108
10.5. Conduct of Business 109
10.6. Transactions with Partners and
Affiliates 109
10.7. Restriction on Fundamental Changes 110
10.8. Margin Regulations; Securities Laws 110
10.9. ERISA 110
10.10. Organizational Documents 111
10.11. Fiscal Year 112
10.12. Other Financial Covenants 112
10.13. Pro Forma Adjustments 113
ARTICLE XIEVENTS OF DEFAULT; RIGHTS AND REMEDIES 114
11.1. Events of Default 114
11.2. Rights and Remedies 120
ARTICLE XIITHE AGENTS 121
12.1. Appointment 121
12.2. Nature of Duties 122
12.3. Right to Request Instructions 123
12.4. Reliance 123
12.5. Indemnification 123
12.6. Agents Individually 124
12.7. Successor Agents 124
12.8. Relations Among the Lenders 125
ARTICLE XIIIYIELD PROTECTION 126
13.1. Taxes 126
13.2. Increased Capital 129
13.3. Changes; Legal Restrictions 129
13.4. Replacement of Certain Lenders 130
ARTICLE XIVTHE SDG REORGANIZATION TRANSACTIONS 131
14.1. The SDG Reorganization Transactions 131
14.2. Release of Simon Property
Group, L.P. 132
ARTICLE XVMISCELLANEOUS 133
15.1. Assignments and Participations 133
15.2. Expenses 137
15.3. Indemnity 138
15.4. Change in Accounting Principles 140
15.5. Setoff 140
15.6. Ratable Sharing 141
15.7. Amendments and Waivers 142
15.8. Notices 144
15.9. Survival of Warranties and
Agreements 145
15.10. Failure or Indulgence Not Waiver; Remedies Cumulative 145
15.11. Marshalling; Payments Set Aside 145
15.12. Severability 146
15.13. Headings 146
15.14. Governing Law 146
15.15. Limitation of Liability 146
15.16. Successors and Assigns 147
15.17. Certain Consents and Waivers of the Borrower 147
15.18. Counterparts; Effectiveness; Inconsistencies 148
15.19. Limitation on Agreements 149
15.20. Confidentiality 149
15.21. Disclaimers 150
15.22. No Bankruptcy Proceedings. 150
15.23. Entire Agreement 151
<PAGE>
LIST OF EXHIBITS AND SCHEDULES
Exhibit A-- Form of Assignment and Acceptance
Exhibit B-- Form of Note
Exhibit B-1-- Form of Designated Bank Note
Exhibit C-- Form of Notice of Borrowing
Exhibit D-- Form of Notice of Conversion/Continuation
Exhibit E-- List of Closing Documents
Exhibit F-- Form of Officer's Certificate
Exhibit G-- Sample Calculations of Financial Covenants
Exhibit H-- Form of Money Market Quote Request
Exhibit I-- Form of Invitation for Money Market Quote
Exhibit J-- Form of Money Market Quote
Exhibit K-- Form of Designation Agreement
Schedule 1.1.4 -- Permitted Securities Options
Schedule 7.1-A -- Organizational Documents
Schedule 7.1-C -- Corporate Structure; Outstanding Capital Stock and
Partnership Interests; Partnership Agreement
Schedule 7.1-H -- Indebtedness for Borrowed Money; Contingent Obligations
Schedule 7.1-I -- Pending Actions
Schedule 7.1-P -- Environmental Matters
Schedule 7.1-Q -- ERISA Matters
Schedule 7.1-T -- Insurance Policies
<PAGE>
SECOND AMENDED AND RESTATED
CREDIT AGREEMENT
This Second Amended and Restated Credit Agreement dated as of
December 22, 1997 (as amended, supplemented or modified from time to time, the
"Agreement") is entered into among SIMON PROPERTY GROUP, L.P., a Delaware
limited partnership ("SPGLP"), SIMON DeBARTOLO GROUP, L.P., a Delaware limited
partnership ("SDGLP"), the institutions from time to time a party hereto as
Lenders, whether by execution of this Agreement or an Assignment and Accep
tance, the institutions from time to time a party hereto as Co-Agents, whether
by execution of this Agreement or an Assignment and Acceptance, and UNION BANK
OF SWITZERLAND, NEW YORK BRANCH, as Arranger, MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, as Arranger, and THE CHASE MANHATTAN BANK, as Arranger.
R E C I T A L S
WHEREAS, SPGLP, SDGLP, the Arrangers, the Co-Agents and certain of
the other Lenders entered into that certain Credit Agreement, dated as of
September 27, 1996, as amended by First Amendment to Credit Agreement, dated as
of April 14, 1997, and as amended and restated in its entirety pursuant to that
certain First Amended and Restated Credit Agreement, dated as of June 20, 1997
(as so amended and restated, the "Existing Credit Agreement"); and
WHEREAS, the parties hereto have agreed to amend and restate the
terms and conditions contained in the Existing Credit Agreement in their entire
ty as hereinafter set forth.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as fol
lows:
I. The Existing Credit Agreement is hereby modified so that all of
the terms and conditions of the aforesaid Existing Credit Agreement shall be re
stated in their entirety as set forth herein, and the Borrower agrees to comply
with and be subject to all of the terms, covenants and conditions of this Agree
ment.
II. This Agreement shall be binding upon and inure to the benefit of
the parties hereto, and their respective successors and assigns, and shall be
deemed to be effective as of the date hereof.
III. Any reference in the Notes, any other Loan Document or any
other document executed in connection with this Agreement to the Existing
Credit Agreement shall be deemed to refer to this Agreement.
ARTICLE I
DEFINITIONS
1.1 Certain Defined Terms. The following terms used in this Agreement
shall have the following meanings, applicable both to the singular and the
plural forms of the terms defined:
"Affiliate", as applied to any Person, means any other Person that
directly or indirectly controls, is controlled by, or is under common control
with, that Person. For purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling", "controlled by" and "under
common control with"), as applied to any Person, means the possession, directly
or indirectly, of the power to vote fifteen percent (15.0%) or more of the
equity Securities having voting power for the election of directors of such
Person or otherwise to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting equity
Securities or by contract or otherwise.
"Agent" means UBS in its capacity as Payment and Disbursement Agent,
each Arranger, each Co-Agent, and each successor agent appointed pursuant to
the terms of Article XII of this Agreement.
"Agreement" is defined in the preamble hereto.
"Annual EBITDA" means, with respect to any Project or Minority
Holding, as of the first day of each fiscal quarter for the immediately
preceding consecutive four fiscal quarters, an amount equal to (i) total reve
nues relating to such Project or Minority Holding for such period, less (ii)
total operating expenses relating to such Project or Minority Holding for such
period (it being understood that the foregoing calculation shall exclude non-
cash charges as determined in accordance with GAAP). Each of the foregoing
amounts shall be determined by reference to the Borrower's Statement of
Operations for the applicable periods. An example of the foregoing calculation
is set forth on Exhibit G hereto.
"Applicable Lending Office" means, with respect to a particular
Lender, (i) its Eurodollar Lending Office in respect of provisions relating to
Eurodollar Rate Loans, (ii) its Domestic Lending Office in respect of provi
sions relating to Base Rate Loans and (iii) its Money Market Lending Office in
respect of provisions relating to Money Market Loans.
"Applicable Margin" means, with respect to each Loan, the respective
percentages per annum determined, at any time, based on the range into which
Borrower's Credit Rating then falls, in accordance with the following tables.
Any change in the Applicable Margin shall be effective immediately as of the
date on which any of the rating agencies announces a change in the Borrower's
Credit Rating or the date on which the Borrower has no Credit Rating, whichever
is applicable.
The Applicable Margin, from time to time, depending on Borrower's Credit Rating
shall be as follows:
Range of Borrower's Applicable Margin for Applicable Margin for
Credit Rating Eurodollar Rate Loans Base Rate
S&P/Moody's and IBOR Rate Loans Loans
(Ratings) (% per annum) (% per annum)
below BBB-/Baa3 1.350% 0.00%
BBB-/Baa3 0.900% 0.00%
BBB/Baa2 0.750% 0.00%
BBB+/Baa1 0.650% 0.00%
A-/A3 0.500% 0.00%
If at any time the Borrower has a Credit Rating by both Moody's and S&P
which Credit Ratings are split, then: if the difference between such
Credit Ratings is one ratings category (e.g. Baa2 by Moody's and BBB- by
S&P), the Applicable Margin shall be the rate per annum that would be
applicable if the highest of the Credit Ratings were used; and if the
difference between such Credit Ratings is two ratings category (e.g. Baa1
by Moody's and BBB- by S&P), the Applicable Margin shall be the rate per
annum that would be applicable if the median of the applicable Credit Rat
ings is used. The Borrower's "Credit Rating" shall be deemed to be the
higher of (i) the Credit Rating (if any) of SPGLP and (ii) the Credit
Rating (if any) of SDGLP; provided that, in the event that the Credit Ratings
of either entity from Moody's or S&P are split, such entity's Credit
Rating shall be calculated as set forth above.
"Arrangers" means UBS, MGT and Chase and each successor Arranger
appointed pursuant to the terms of Article XII of this Agreement.
"Assignment and Acceptance" means an Assignment and Acceptance in
substantially the form of Exhibit A attached hereto and made a part hereof
(with blanks appropriately completed) delivered to the Payment and Disbursement
Agent in connection with an assignment of a Lender's interest under this
Agreement in accordance with the provisions of Section 15.1.
"Authorized Financial Officer" means a chief executive officer, chief
financial officer, treasurer or other qualified senior officer acceptable to
the Payment and Disbursement Agent.
"Base Eurodollar Rate" means, with respect to any Eurodollar Interest
Period applicable to a Borrowing of Eurodollar Rate Loans, an interest rate per
annum determined by the Payment and Disbursement Agent to be the rate per annum
at which deposits in Dollars are offered by the principal office of the Refer
ence Bank in London, England to major banks in the London interbank market at
approximately 11:00 a.m. (London time) on the Eurodollar Interest Rate Deter
mination Date for such Eurodollar Interest Period for a period equal to such
Eurodollar Interest Period and in an amount substantially equal to the amount
of the Eurodollar Rate Loan.
"Base Rate" means, for any period, a fluctuating interest rate per
annum as shall be in effect from time to time, which rate per annum shall at
all times be equal to the higher of:
(i) the rate of interest announced publicly by UBS in New York, New
York from time to time, as UBS's prime rate; and
(ii) the sum of (A) one-half of one percent (0.50%) per annum plus (B)
the Federal Funds Rate in effect from time to time during such period.
"Base Rate Loan" means (i) a Committed Loan which bears interest
at a rate determined by reference to the Base Rate and the Applicable Margin as
provided in Section 5.1(a) or (ii) an overdue amount which was a Base Rate Loan
immediately before it became due.
"Borrower" means (i) each of SPGLP and SDGLP, jointly and severally,
or (ii) in the event that SPGLP is released pursuant to Section 14.2 hereof,
SDGLP. For purposes of this Agreement, where action is required or contemplated
to be taken hereunder by the "Borrower," "Borrower" shall mean both of SPGLP
and SDGLP, unless SPGLP is released pursuant to Section 14.2 hereof, in which
case "Borrower" shall mean SDGLP.
"Borrower Partnership Agreement" means the SDGLP Partnership
Agreement and the SPGLP Partnership Agreement, as such agreements may be
amended, restated, modified or supplemented from time to time with the consent
of the Payment and Disbursement Agent or as permitted under Section 10.10.
"Borrowing" means a borrowing consisting of Loans of the same type
made, continued or converted on the same day.
"Business Activity Report" means (i) an Indiana Business Activity
Report from the Indiana Department of Revenue, Compliance Division, or (ii) a
Notice of Business Activities Report from the State of New Jersey Division of
Taxation, (iii) a Minnesota Business Activity Report from the Minnesota
Department of Revenue, or (iv) a similar report to those referred to in clauses
(i) through (iii) hereof with respect to any jurisdiction where the failure to
file such report would have a Material Adverse Effect.
"Business Day" means a day, in the applicable local time, which is
not a Saturday or Sunday or a legal holiday and on which banks are not required
or permitted by law or other governmental action to close (i) in New York, New
York and (ii) in the case of Eurodollar Rate Loans, in London, England and/or
New York, New York and (iii) in the case of Letter of Credit transactions for a
particular Lender, in the place where its office for issuance or administration
of the pertinent Letter of Credit is located and/or New York, New York.
"Capital Expenditures" means, for any period, the aggregate of all
expenditures (whether payable in cash or other Property or accrued as a
liability (but without duplication)) during such period that, in conformity
with GAAP, are required to be included in or reflected by the Company's, the
Borrower's or any of their Subsidiaries' fixed asset accounts as reflected in
any of their respective balance sheets; provided, however, (i) Capital
Expenditures shall include, whether or not such a designation would be in
conformity with GAAP, (a) that portion of Capital Leases which is capitalized
on the consolidated balance sheet of the Company, the Borrower and their Sub
sidiaries and (b) expenditures for Equipment which is purchased simultaneously
with the trade-in of existing Equipment owned by either General Partner, the
Borrower or any of their Subsidiaries, to the extent the gross purchase price
of the purchased Equipment exceeds the book value of the Equipment being traded
in at such time; and (ii) Capital Expenditures shall exclude, whether or not
such a designation would be in conformity with GAAP, expenditures made in con
nection with the restoration of Property, to the extent reimbursed or financed
from insurance or condemnation proceeds.
"Capitalization Value" means the sum of (i) Combined EBITDA
capitalized at an annual interest rate equal to 8.25%, and (ii) Cash and Cash
Equivalents, and (iii) Construction Asset Cost.
"Capital Lease" means any lease of any property (whether real,
personal or mixed) by a Person as lessee which, in conformity with GAAP, is
accounted for as a capital lease on the balance sheet of that Person.
"Capital Stock" means, with respect to any Person, any capital stock
of such Person, regardless of class or designation, and all warrants, options,
purchase rights, conversion or exchange rights, voting rights, calls or claims
of any character with respect thereto.
"Cash and Cash Equivalents" means (i) cash, (ii) marketable direct
obligations issued or unconditionally guaranteed by the United States govern
ment and backed by the full faith and credit of the United States government;
and (iii) domestic and Eurodollar certificates of deposit and time deposits,
bankers' acceptances and floating rate certificates of deposit issued by any
commercial bank organized under the laws of the United States, any state there
of, the District of Columbia, any foreign bank, or its branches or agencies
(fully protected against currency fluctuations), which, at the time of
acquisition, are rated A-1 (or better) by Standard & Poor's Corporation or P-1
(or better) by Moody's Investors Services, Inc.; provided that the maturities
of such Cash and Cash Equivalents shall not exceed one year.
"Cash Interest Expense" means, for any period, total interest
expense, whether paid or accrued, but without duplication, (including the
interest component of Capital Leases) of the Borrower, which is payable in
cash, all as determined in conformity with GAAP.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, 42 U.S.C. 9601 et seq., any amendments thereto,
any successor statutes, and any regulations or guidance promulgated thereunder.
"Chase" means The Chase Manhattan Bank.
"Claim" means any claim or demand, by any Person, of whatsoever kind
or nature for any alleged Liabilities and Costs, whether based in contract,
tort, implied or express warranty, strict liability, criminal or civil statute,
Permit, ordinance or regulation, common law or otherwise.
"Closing Date" means December 22, 1997.
"Co-Agents" means the Arrangers, Dresdner Bank AG, New York and Grand
Cayman Branches, The First National Bank of Chicago, NationsBank of Texas,
N.A., and Bayerische Hypotheken- und Wechsel-Bank Aktiengesellschaft, acting
through its New York Branch.
"Combined Debt Service" means, for any period, the sum of (i)
regularly scheduled payments of principal and interest of the Consolidated
Businesses paid during such period and (ii) the portion of the regularly sched
uled payments of principal and interest of Minority Holdings allocable to the
Borrower in accordance with GAAP, paid during such period, in each case includ
ing participating interest expense and excluding balloon payments of principal
and extraordinary interest payments and net of amortization of deferred costs
associated with new financings or refinancings of existing Indebtedness.
"Combined EBITDA" means the sum of (i) 100% of the Annual EBITDA from
the Consolidated Businesses; and (ii) the portion of the Annual EBITDA of the
Minority Holdings allocable to the Borrower in accordance with GAAP; and (iii)
for so long as the Borrower owns a majority economic interest in the Management
Company, 100% of the Borrower's share of the actual Annual EBITDA of the Manage
ment Company; provided, however that the Borrower's share of the Annual EBITDA
of the Management Company shall in no event constitute in excess of five
percent (5%) of Combined EBITDA. For purposes of newly opened Projects which
are no longer capitalized, the Annual EBITDA shall be based upon twelve-month
projections of contractual rental revenues multiplied by the EBITDA profit
margin of the Borrower property type (i.e. regional mall or community center)
as such profit margin is reported in the most recently published annual report
or 10-K for the Company, until such time as actual performance data for a
twelve-month period is available.
"Combined Equity Value" means Capitalization Value minus Total A
djusted Outstanding Indebtedness.
"Combined Interest Expense" means, for any period, the sum of (i)
interest expense of the Consolidated Businesses paid during such period and
(ii) interest expense of the Consolidated Businesses accrued for such period
and (iii) the portion of the interest expense of Minority Holdings allocable to
the Borrower in accordance with GAAP and paid during such period and (iv) the
portion of the interest expense of Minority Holdings allocable to the Borrower
in accordance with GAAP and accrued for such period, in each case including par
ticipating interest expense but excluding extraordinary interest expense, and
net of amortization of deferred costs associated with new financings or
refinancings of existing Indebtedness.
"Commercial Letter of Credit" means any documentary letter of credit
issued by an Issuing Bank pursuant to Section 3.1 for the account of the Borrow
er, which is drawable upon presentation of documents evidencing the sale or
shipment of goods purchased by the Borrower in the ordinary course of its busi
ness.
"Commission" means the Securities and Exchange Commission and any
Person succeeding to the functions thereof.
"Committed Loan" means a Loan made by a Lender pursuant to Section
2.1; provided that, if any such Loan or Loans (or portions thereof) are
combined or subdivided pursuant to a Notice of Conversion/Continuation, the
term "Committed Loan" shall refer to the combined principal amount resulting
from such combination or to each of the separate principal amounts resulting
from such subdivision, as the case may be.
"Company" means Simon DeBartolo Group, Inc., a Maryland corporation.
"Compliance Certificate" is defined in Section 8.2(b).
"Consolidated" means consolidated, in accordance with GAAP.
"Consolidated Businesses" means the General Partners, the Borrower
and their wholly-owned Subsidiaries.
"Construction Asset Cost" means, with respect to Property on which
construction of improvements has commenced (such commencement evidenced by
foundation excavation) but has not yet been completed (as such completion shall
be evidenced by such Property being opened for business to the general public),
the aggregate sums expended on the construction of such improvements (including
land acquisition costs).
"Contaminant" means any waste, pollutant, hazardous substance, toxic
substance, hazardous waste, special waste, petroleum or petroleum-derived
substance or waste, radioactive materials, asbestos (in any form or condition),
polychlorinated biphenyls (PCBs), or any constituent of any such substance or
waste, and includes, but is not limited to, these terms as defined in federal,
state or local laws or regulations.
"Contingent Obligation" as to any Person means, without duplication,
(i) any contingent obligation of such Person required to be shown on such
Person's balance sheet in accordance with GAAP, and (ii) any obligation
required to be disclosed in the footnotes to such Person's financial statements
in accordance with GAAP, guaranteeing partially or in whole any non-recourse
Indebtedness, lease, dividend or other obligation, exclusive of contractual
indemnities (including, without limitation, any indemnity or price-adjustment
provision relating to the purchase or sale of securities or other assets) and
guarantees of non-monetary obligations (other than guarantees of completion)
which have not yet been called on or quantified, of such Person or of any other
Person. The amount of any Contingent Obligation described in clause (ii) shall
be deemed to be (a) with respect to a guaranty of interest or interest and
principal, or operating income guaranty, the sum of all payments required to be
made thereunder (which in the case of an operating income guaranty shall be
deemed to be equal to the debt service for the note secured thereby), calculat
ed at the interest rate applicable to such Indebtedness, through (i) in the
case of an interest or interest and principal guaranty, the stated date of
maturity of the obligation (and commencing on the date interest could first be
payable thereunder), or (ii) in the case of an operating income guaranty, the
date through which such guaranty will remain in effect, and (b) with respect to
all guarantees not covered by the preceding clause (a) an amount equal to the
stated or determinable amount of the primary obligation in respect of which
such guaranty is made or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof (assuming such Person is required to
perform thereunder) as recorded on the balance sheet and on the footnotes to
the most recent financial statements of the applicable Borrower required to be
delivered pursuant hereto. Notwithstanding anything contained herein to the
contrary, guarantees of completion shall not be deemed to be Contingent Obliga
tions unless and until a claim for payment has been made thereunder, at which
time any such guaranty of completion shall be deemed to be a Contingent Obliga
tion in an amount equal to any such claim. Subject to the preceding sentence,
(i) in the case of a joint and several guaranty given by such Person and
another Person (but only to the extent such guaranty is recourse, directly or
indirectly to the applicable Borrower), the amount of the guaranty shall be
deemed to be 100% thereof unless and only to the extent that (X) such other
Person has delivered Cash or Cash Equivalents to secure all or any part of such
Person's guaranteed obligations or (Y) such other Person holds an Investment
Grade Credit Rating from either Moody's or S&P, and (ii) in the case of a guar
anty, (whether or not joint and several) of an obligation otherwise consti
tuting Debt of such Person, the amount of such guaranty shall be deemed to be
only that amount in excess of the amount of the obligation constituting
Indebtedness of such Person. Notwithstanding anything contained herein to the
contrary, "Contingent Obligations" shall not be deemed to include guarantees of
loan commitments or of construction loans to the extent the same have not been
drawn.
"Contractual Obligation", as applied to any Person, means any
provision of any Securities issued by that Person or any indenture, mortgage,
deed of trust, security agreement, pledge agreement, guaranty, contract,
undertaking, agreement or instrument to which that Person is a party or by
which it or any of its properties is bound, or to which it or any of its
properties is subject.
"Credit Rating" means the publicly announced rating of a Person given
by Moody's or S&P.
"Cure Loans" is defined in Section 4.2(b)(v)(C).
"Customary Permitted Liens" means
(i) Liens (other than Environmental Liens and Liens in favor of
the PBGC) with respect to the payment of taxes, assessments or
governmental charges in all cases which are not yet due or which are
being contested in good faith by appropriate proceedings in
accordance with Section 9.4 and with respect to which adequate
reserves or other appropriate provisions are being maintained in
accordance with GAAP;
(ii) statutory Liens of landlords against any Property of the Borrower
or any of its Subsidiaries and Liens against any Property of the Borrower
or any of its Subsidiaries in favor of suppliers, mechanics, carriers,
materialmen, warehousemen or workmen and other Liens against any Property
of the Borrower or any of its Subsidiaries imposed by law created in the
ordinary course of business for amounts which, if not resolved in favor of
the Borrower or such Subsidiary, could not result in a Material Adverse
Effect;
(iii) Liens (other than any Lien in favor of the PBGC) incurred or
deposits made in the ordinary course of business in connection with
worker's compensation, unemployment insurance or other types of
social security benefits or to secure the performance of bids,
tenders, sales, contracts (other than for the repayment of borrowed
money), surety, appeal and performance bonds; provided that (A) all
such Liens do not in the aggregate materially detract from the value
of the Borrower's or such Subsidiary's assets or Property or
materially impair the use thereof in the operation of their
respective businesses, and (B) all Liens of attachment or judgment
and Liens securing bonds to stay judgments or in connection with
appeals do not secure at any time an aggregate amount of recourse
Indebtedness exceeding $10,000,000; and
(iv) Liens against any Property of the Borrower or any Subsidiary
of the Borrower arising with respect to zoning restrictions,
easements, licenses, reservations, covenants, rights-of-way, utility
easements, building restrictions and other similar charges or encum
brances on the use of Real Property which do not interfere with the
ordinary conduct of the business of the Borrower or any of its Subsid
iaries to the extent it could not result in a Material Adverse
Effect.
"Debt Yield" is defined in Section 10.12(d).
"Designated Bank" means a special purpose corporation that (i) shall
have become a party to this Agreement pursuant to Section 15.1(f), and (ii) is
not otherwise a Lender.
"Designated Bank Notes" means promissory notes of the Borrower,
substantially in the form of Exhibit B-1 hereto, evidencing the obligation of
the Borrower to repay Money Market Loans made by Designated Banks, as the same
may be amended, supplemented, modified or restated from time to time, and
"Designated Bank Note" means any one of such promissory notes issued under
Section 15.1(f) hereof.
"Designating Lender" shall have the meaning set forth in Section
15.1(f) hereof.
"Designation Agreement" means a designation agreement in
substantially the form of Exhibit K attached hereto, entered into by a Lender
and a Designated Bank and accepted by the Payment and Disbursement Agent.
"Designee Lender" is defined in Section 13.4.
"DOL" means the United States Department of Labor and any Person
succeeding to the functions thereof.
"Dollars" and "$" mean the lawful money of the United States.
"Domestic Lending Office" means, with respect to any Lender, such
Lender's office, located in the United States, specified as the "Domestic Lend
ing Office" under its name on the signature pages hereof or on the Assignment
and Acceptance by which it became a Lender or such other United States office
of such Lender as it may from time to time specify by written notice to the Bor
rower and the Payment and Disbursement Agent.
"Eligible Assignee" means (i) a Lender or any Affiliate thereof;
(ii) a commercial bank having total assets in excess of $2,500,000,000;
(iii) the central bank of any country which is a member of the Organization for
Economic Cooperation and Development; or (iv) a finance company or other
financial institution reasonably acceptable to the Payment and Disbursement
Agent, which is regularly engaged in making, purchasing or investing in loans
and having total assets in excess of $300,000,000 or is otherwise reasonably
acceptable to the Payment and Disbursement Agent.
"Environmental, Health or Safety Requirements of Law" means all
Requirements of Law derived from or relating to any federal, state or local
law, ordinance, rule, regulation, Permit, license or other binding deter
mination of any Governmental Authority relating to, imposing liability or
standards concerning, or otherwise addressing the environment, health and/or
safety, including, but not limited to the Clean Air Act, the Clean Water Act,
CERCLA, RCRA, any so-called "Superfund" or "Superlien" law, the Toxic Sub
stances Control Act and OSHA, and public health codes, each as from time to
time in effect.
"Environmental Lien" means a Lien in favor of any Governmental
Authority for any (i) liabilities under any Environmental, Health or Safety
Requirement of Law, or (ii) damages arising from, or costs incurred by such
Governmental Authority in response to, a Release or threatened Release of a Con
taminant into the environment.
"Environmental Property Transfer Act" means any applicable
Requirement of Law that conditions, restricts, prohibits or requires any
notification or disclosure triggered by the transfer, sale, lease or closure of
any Property or deed or title for any Property for environmental reasons,
including, but not limited to, any so-called "Environmental Cleanup
Responsibility Act" or "Responsible Property Transfer Act".
"Equipment" means equipment used in connection with the maintenance
of Projects and Properties.
"ERISA" means the Employee Retirement Income Security Act of 1974, 29
U.S.C. 1000 et seq., any amendments thereto, any successor statutes, and any
regulations or guidance promulgated thereunder.
"ERISA Affiliate" means (i) any corporation which is a member of the
same controlled group of corporations (within the meaning of Section 414(b) of
the Internal Revenue Code) as the Borrower; (ii) a partnership or other trade
or business (whether or not incorporated) which is under common control (within
the meaning of Section 414(c) of the Internal Revenue Code) with the Borrower;
and (iii) a member of the same affiliated service group (within the meaning of
Section 414(m) of the Internal Revenue Code) as the Borrower, any corporation
described in clause (i) above or any partnership or trade or business described
in clause (ii) above.
"ERISA Termination Event" means (i) a Reportable Event with respect
to any Benefit Plan; (ii) the withdrawal of the Borrower or any ERISA Affiliate
from a Benefit Plan during a plan year in which the Borrower or such ERISA
Affiliate was a "substantial employer" as defined in Section 4001(a)(2) of
ERISA or the cessation of operations which results in the termination of employ
ment of 20% of Benefit Plan participants who are employees of the Borrower or
any ERISA Affiliate; (iii) the imposition of an obligation on the Borrower or
any ERISA Affiliate under Section 4041 of ERISA to provide affected parties
written notice of intent to terminate a Benefit Plan in a distress termination
described in Section 4041(c) of ERISA; (iv) the institution by the PBGC of
proceedings to terminate a Benefit Plan; (v) any event or condition which might
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Benefit Plan; or (vi) the partial
or complete withdrawal of the Borrower or any ERISA Affiliate from a
Multiemployer Plan.
"Eurodollar Affiliate" means, with respect to each Lender, the
Affiliate of such Lender (if any) set forth below such Lender's name under the
heading "Eurodollar Affiliate" on the signature pages hereof or on the Assign
ment and Acceptance by which it became a Lender or such Affiliate of a Lender
as it may from time to time specify by written notice to the Borrower and the
Payment and Disbursement Agent.
"Eurodollar Interest Period" is defined in Section 5.2(b)(i).
"Eurodollar Interest Rate Determination Date" is defined in Section
5.2(c)(i).
"Eurodollar Lending Office" means, with respect to any Lender, such
Lender's office (if any) specified as the "Eurodollar Lending Office" under its
name on the signature pages hereof or on the Assignment and Acceptance by which
it became a Lender or such other office or offices of such Lender as it may
from time to time specify by written notice to the Borrower and the Payment and
Disbursement Agent.
"Eurodollar Money Market Loan" means a Loan to be made by a Lender
pursuant to a LIBOR Auction (including such a Loan bearing interest at the Base
Rate pursuant to Section 5.2).
"Eurodollar Rate" means, with respect to any Eurodollar Interest
Period applicable to a Eurodollar Rate Loan or a Money Market Loan, an interest
rate per annum obtained by dividing (i) the Base Eurodollar Rate applicable to
that Eurodollar Interest Period by (ii) a percentage equal to 100% minus the
Eurodollar Reserve Percentage in effect on the relevant Eurodollar Interest
Rate Determination Date.
"Eurodollar Rate Loan" means (i) a Committed Loan which bears
interest at a rate determined by reference to the Eurodollar Rate and the
Applicable Margin for Eurodollar Rate Loans, as provided in Section 5.1(a) or
(ii) an overdue amount which was a Eurodollar Rate Loan immediately before it
became due.
"Eurodollar Reserve Percentage" means, for any day, that percentage
which is in effect on such day, as prescribed by the Federal Reserve Board for
determining the maximum reserve requirement (including, without limitation, any
emergency, supplemental or other marginal reserve requirement) for a member
bank of the Federal Reserve System in New York, New York with deposits ex
ceeding five billion Dollars in respect of "Eurocurrency Liabilities" (or in
respect of any other category of liabilities which includes deposits by
reference to which the interest rate on Eurodollar Rate Loans is determined or
any category of extensions of credit or other assets which includes loans by a
non-United States office of any bank to United States residents).
"Event of Default" means any of the occurrences set forth in Section
11.1 after the expiration of any applicable grace period and the giving of any
applicable notice, in each case as expressly provided in Section 11.1.
"Existing Credit Agreement" is defined in the Recitals.
"Existing UBS Credit Agreement" means that certain Credit Agreement,
dated as of September 26, 1997, by and among SPGLP, SDGLP and UBS.
"Extension Fee" means an amount equal to ten (10) basis points on the
Maximum Revolving Credit Amount.
"Extension Notice" is defined in Section 2.5.
"Extension Option" is defined in Section 2.5.
"Facility Fee" is defined in Section 5.3(a).
"Facility Fee Percentage" means the applicable percentage per annum
determined, at any time, based on the range into which Borrower's Credit Rating
(if any) then falls, in accordance with the following tables. Any change in
the Facility Fee Percentage shall be effective immediately as of the date on
which any of the rating agencies announces a change in the Borrower's Credit
Rating or the date on which the Borrower has no Credit Rating, whichever is
applicable. The Facility Fee shall not be payable during the time, from time
to time, that the Borrower does not maintain an Investment Grade Credit Rating.
The Facility Fee Percentage during the time, from time to time, that
the Borrower maintains an Investment Grade Credit Rating by either Moody's or
S&P shall be as follows:
Range of Borrower's Percentage of
Credit Rating Maximum Revolving
S&P/Moody's Ratings Credit Commitments
BBB-/Baa3 0.20%
BBB/Baa2 0.20%
BBB+/Baa1 0.15%
A-/A3 0.15%
If at any time the Borrower has a Credit Rating by both Moody's and
S&P which Credit Ratings are split, then: if the difference between such
Credit Ratings is one ratings category (e.g. Baa2 by Moody's and BBB- by
S&P), the Facility Fee Percentage shall be the rate per annum that would
be applicable if the highest of the Credit Ratings were used; and if the
difference between such Credit Ratings is two ratings category (e.g. Baa1
by Moody's and BBB- by S&P), the Facility Fee Percentage shall be the rate
per annum that would be applicable if the median of the applicable Credit
Ratings is used. The Borrower's "Credit Rating" shall be deemed to be the
higher of (i) the Credit Rating (if any) of SPGLP and (ii) the Credit
Rating (if any) of SDGLP; provided that, in the event that the Credit Rat
ings of either entity from Moody's or S&P are split, such entity's Credit
Rating shall be calculated as set forth above.
"Federal Funds Rate" means, for any period, a fluctuating interest
rate per annum equal for each day during such period to the weighted average of
the rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published for such day
(or, if such day is not a Business Day in New York, New York, for the next
preceding Business Day) in New York, New York by the Federal Reserve Bank of
New York, or if such rate is not so published for any day which is a Business
Day in New York, New York, the average of the quotations for such day on
transactions by the Reference Bank, as determined by the Payment and
Disbursement Agent.
"Federal Reserve Board" means the Board of Governors of the Federal
Reserve System or any Governmental Authority succeeding to its functions.
"Financial Statements" means (i) quarterly and annual consolidated
statements of income and retained earnings, statements of cash flow, and
balance sheets, (ii) such other financial statements as any General Partner
shall routinely and regularly prepare on a quarterly or annual basis, and (iii)
such other financial statements of the Consolidated Businesses or Minority
Holdings as the Arrangers or the Requisite Lenders may from time to time reason
ably specify; provided, however, that the Financial Statements referenced in
clauses (i) and (ii) above shall be prepared in form satisfactory to the
Payment and Disbursement Agent.
"Fiscal Year" means the fiscal year of the Company and the Borrower
for accounting and tax purposes, which shall be the 12-month period ending on
December 31 of each calendar year.
"Funding Date" means, with respect to any Loan, the date of funding
of such Loan.
"GAAP" means generally accepted accounting principles set forth in
the opinions and pronouncements of the American Institute of Certified Public
Accountants' Accounting Principles Board and Financial Accounting Standards
Board or in such other statements by such other entity as may be in general use
by significant segments of the accounting profession as in effect on the
Closing Date (unless otherwise specified herein as in effect on another date or
dates).
"General Partner" or "General Partners" means the Company and SD and
any successor general partner(s) of the Borrower.
"Governmental Approval" means all right, title and interest in any
existing or future certificates, licenses, permits, variances, authorizations
and approvals issued by any Governmental Authority having jurisdiction with
respect to any Project.
"Governmental Authority" means any nation or government, any federal,
state, local or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Holder" means any Person entitled to enforce any of the Obligations,
whether or not such Person holds any evidence of Indebtedness, including,
without limitation, the Payment and Disbursement Agent, each Arranger, and each
other Lender.
"IBOR Auction" means a solicitation of Money Market Quotes setting
forth Money Market Margins based on the IBOR Rate pursuant to Section 2.2.;
provided, however, that no IBOR Auction shall occur during any IBOR Black-Out
Period.
"IBOR Black-Out Period" means the calendar days during each calendar
year commencing on March 15 through and including March 31 and commencing on
December 15 through and including December 31.
"IBOR Interest Period" is defined in Section 5.2 (b)(v).
"IBOR Interest Rate Determination Date" is defined in Section 5.2
(c)(ii).
"IBOR Money Market Loan" means a Loan to be made by a Lender pursuant
to an IBOR Auction (including such a Loan bearing interest at the Base Rate
pursuant to Section 5.2).
"IBOR Rate" means, for each IBOR Interest Period, a rate of interest
per annum equal to the arithmetic average (rounded to the nearest 0.01%) of the
rates at which deposits in Dollars in the approximate amount of the relevant
Loan and having a maturity nearest to the applicable IBOR Interest Period are
offered by the IBOR Reference Banks to major banks in Dollars, as determined on
the applicable IBOR Interest Rate Determination Date.
"IBOR Rate Loan" means (i) a Committed Loan which bears interest at a
rate determined by reference to the IBOR Rate and the Applicable Margin for
IBOR Rate Loans, as provided in Section 5.1(a) or (ii) an overdue amount which
was an IBOR Rate Loan immediately before it became due.
"IBOR Reference Banks" means, as of the Closing Date, each of the
Arrangers, Dresdner Bank AG, The Sumitomo Bank, Limited, and thereafter any
Lender designated by the Payment and Disbursement Agent.
"Improvements" means all buildings, fixtures, structures, parking
areas, landscaping and all other improvements whether existing now or hereafter
constructed, together with all machinery and mechanical, electrical, HVAC and
plumbing systems presently located thereon and used in the operation thereof,
excluding (a) any such items owned by utility service providers, (b) any such
items owned by tenants or other third-parties unaffiliated with the Borrower
and (c) any items of personal property.
"Indebtedness", as applied to any Person, means, at any time, without
duplication, (a) all indebtedness, obligations or other liabilities of such
Person (whether consolidated or representing the proportionate interest in any
other Person) (i) for borrowed money (including construction loans) or
evidenced by debt securities, debentures, acceptances, notes or other similar
instruments, and any accrued interest, fees and charges relating thereto, (ii)
under profit payment agreements or in respect of obligations to redeem,
repurchase or exchange any Securities of such Person or to pay dividends in
respect of any stock, (iii) with respect to letters of credit issued for such
Person's account, (iv) to pay the deferred purchase price of property or
services, except accounts payable and accrued expenses arising in the ordinary
course of business, (v) in respect of Capital Leases, (vi) which are Contingent
Obligations or (vii) under warranties and indemnities; (b) all indebtedness,
obligations or other liabilities of such Person or others secured by a Lien on
any property of such Person, whether or not such indebtedness, obligations or
liabilities are assumed by such Person, all as of such time; (c) all indebted
ness, obligations or other liabilities of such Person in respect of interest
rate contracts and foreign exchange contracts, net of liabilities owed to such
Person by the counterparties thereon; (d) all preferred stock subject (upon the
occurrence of any contingency or otherwise) to mandatory redemption; and (e)
all contingent Contractual Obligations with respect to any of the foregoing.
"Indemnified Matters" is defined in Section 15.3.
"Indemnitees" is defined in Section 15.3.
"Initial Funding Date" means the date on or after December 22, 1997,
on which all of the conditions described in Section 6.1 have been satisfied (or
waived) in a manner satisfactory to the Payment and Disbursement Agent and the
Lenders and on which the initial Loans under this Agreement are made by the
Lenders to the Borrower.
"Interest Period" is defined in Section 5.2(b).
"Interest Rate Hedges" is defined in Section 9.9.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended to the date hereof and from time to time hereafter, any successor
statute and any regulations or guidance promulgated thereunder.
"Investment" means, with respect to any Person, (i) any purchase or
other acquisition by that Person of Securities, or of a beneficial interest in
Securities, issued by any other Person, (ii) any purchase by that Person of all
or substantially all of the assets of a business conducted by another Person,
and (iii) any loan, advance (other than deposits with financial institutions
available for withdrawal on demand, prepaid expenses, accounts receivable,
advances to employees and similar items made or incurred in the ordinary course
of business) or capital contribution by that Person to any other Person,
including all Indebtedness to such Person arising from a sale of property by
such Person other than in the ordinary course of its business. The amount of
any Investment shall be the original cost of such Investment, plus the cost of
all additions thereto less the amount of any return of capital or principal to
the extent such return is in cash with respect to such Investment without any
adjustments for increases or decreases in value or write-ups, write-downs or
write-offs with respect to such Investment.
"Investment Grade" means (i) with respect to Moody's a Credit Rating
of Baa3 or higher and (ii) with respect to S&P, a Credit Rating of BBB- or
higher.
"Investment Grade Credit Rating" means (i) a Credit Rating of Baa3 or
higher given by Moody's or (ii) a Credit Rating of BBB- or higher given by S&P.
"IRS" means the Internal Revenue Service and any Person succeeding to
the functions thereof.
"Issuing Bank" is defined in Section 3.1.
"knowledge" with reference to any General Partner, the Borrower or
any Subsidiary of the Borrower, means the actual knowledge of such Person after
reasonable inquiry (which reasonable inquiry shall include, without limitation,
interviewing and questioning such other Persons as such General Partner, the
Borrower or such Subsidiary of the Borrower, as applicable, deems reasonably
necessary).
"Lease" means a lease, license, concession agreement or other
agreement providing for the use or occupancy of any portion of any Project,
including all amendments, supplements, modifications and assignments thereof
and all side letters or side agreements relating thereto.
"Lender" means (i) each of the Arrangers, the Co-Agents, and each
financial institution a signatory hereto as a Lender as of the Closing Date
and, at any other given time, each financial institution which is a party
hereto as a Arranger, Co-Agent or Lender, whether as a signatory hereto or
pursuant to an Assignment and Acceptance, and regardless of the capacity in
which such entity is acting (i.e. whether as Payment and Disbursement Agent,
Arranger, Co-Agent or Lender) and (ii) each Designated Bank; provided, however,
that the term "Lender" shall exclude each Designated Bank when used in
reference to a Committed Loan, the Commitments or terms relating to the
Committed Loans and the Commitments and shall further exclude each Designated
Bank for all other purposes hereunder (including, without limitation, for
purposes of Section 13.4 hereof) except that any Designated Bank which funds a
Money Market Loan shall, subject to Section 15.1(f), have the rights (includ
ing, without limitation, the rights given to a Lender contained in Section 15.2
and otherwise in Article XV) and obligations of a Lender associated with
holding such Money Market Loan.
"Letter of Credit" means any Commercial Letter of Credit or Standby
Letter of Credit.
"Letter of Credit Obligations" means, at any particular time, the sum
of (i) all outstanding Reimbursement Obligations, and (ii) the aggregate
undrawn face amount of all outstanding Letters of Credit, and (iii) the aggre
gate face amount of all Letters of Credit requested by the Borrower but not yet
issued.
"Letter of Credit Reimbursement Agreement" means, with respect to a
Letter of Credit, such form of application therefor and form of reimbursement
agreement therefor (whether in a single or several documents, taken together)
as an Issuing Bank may employ in the ordinary course of business for its own ac
count, with such modifications thereto as may be agreed upon by such Issuing
Bank and the Borrower and as are not materially adverse (in the judgment of
such Issuing Bank and the Payment and Disbursement Agent) to the interests of
the Lenders; provided, however, in the event of any conflict between the terms
of any Letter of Credit Reimbursement Agreement and this Agreement, the terms
of this Agreement shall control.
"Liabilities and Costs" means all liabilities, obligations,
responsibilities, losses, damages, personal injury, death, punitive damages,
economic damages, consequential damages, treble damages, intentional, willful
or wanton injury, damage or threat to the environment, natural resources or
public health or welfare, costs and expenses (including, without limitation,
attorney, expert and consulting fees and costs of investigation, feasibility or
Remedial Action studies), fines, penalties and monetary sanctions, interest,
direct or indirect, known or unknown, absolute or contingent, past, present or
future.
"LIBOR Auction" means a solicitation of Money Market Quotes setting
forth Money Market Margins based on the Eurodollar Rate pursuant to Section
2.2.
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
assignment, conditional sale agreement, deposit arrangement, security interest,
encumbrance, lien (statutory or other and including, without limitation, any
Environmental Lien), preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever in respect of any
property of a Person, whether granted voluntarily or imposed by law, and
includes the interest of a lessor under a Capital Lease or under any financing
lease having substantially the same economic effect as any of the foregoing and
the filing of any financing statement or similar notice (other than a financing
statement filed by a "true" lessor pursuant to 9-408 of the Uniform Commer
cial Code), naming the owner of such property as debtor, under the Uniform
Commercial Code or other comparable law of any jurisdiction.
"Limited Minority Holdings" means Minority Holdings in which (i)
Borrower has a less than fifty percent (50%) ownership interest and (ii)
neither the Borrower nor the Company controls the management of such Minority
Holdings, whether as the general partner or managing member of such Minority
Holding, or otherwise. As used in this definition only, the term "control"
shall mean the authority to make major management decisions or the management
of day-to-day operations of such entity and shall include instances in which
the Management Company manages the day-to-day leasing, management, control or
development of the Properties of such Minority Interest pursuant to the terms
of a management agreement.
"Limited Partners" means those Persons who from time to time are
limited partners of the Borrower; and "Limited Partner" means each of the
Limited Partners, individually.
"Loan Account" is defined in Section 4.3(b).
"Loan Documents" means this Agreement, the Notes and all other
instruments, agreements and written Contractual Obligations between the
Borrower and any of the Lenders pursuant to or in connection with the transac
tions contemplated hereby.
"Loans" means Committed Loans and Money Market Loans.
"Management Company" means, collectively, (i) M.S. Management Associ
ates, Inc., a Delaware corporation and its wholly-owned or controlled
Subsidiaries and (ii) such other property management companies controlled
(directly or indirectly) by the Company for which the Borrower has previously
provided the Payment and Disbursement Agent with: (1) notice of such property
management company, and (2) evidence reasonably satisfactory to the Payment and
Disbursement Agent that such property management company is controlled (direct
ly or indirectly) by the Company.
"Margin Stock" means "margin stock" as such term is defined in
Regulation U and Regulation G.
"Material Adverse Effect" means a material adverse effect upon (i)
the financial condition or assets of the Borrower and its Subsidiaries taken as
a whole, (ii) the ability of the Borrower to perform its obligations under the
Loan Documents, or (iii) the ability of the Lenders or the Payment and
Disbursement Agent to enforce any of the Loan Documents.
"Maximum Revolving Credit Amount" means, at any particular time, the
Revolving Credit Commitments at such time.
"Merger" is defined in Section 14.1.
"MGT" means Morgan Guaranty Trust Company of New York.
"MIS" means a computerized management information system for
recording and maintenance of information regarding purchases, sales, aging,
categorization, and locations of Properties, creation and aging of receivables,
and accounts payable (including agings thereof).
"Minority Holdings" means partnerships, joint ventures and corpo
rations held or owned by the Borrower or a General Partner which are not wholly-
owned by the Borrower or a General Partner.
"Money Market Lender" means, as to each Money Market Loan, the Lender
funding such Money Market Loan.
"Money Market Lending Office" means, as to each Lender, its Domestic
Lending Office or such other office, branch or affiliate of such Lender as it
may hereafter designate as its Money Market Lending Office by notice to the
Borrower and the Payment and Disbursement Agent.
"Money Market Loan" means a loan to be made by a Lender pursuant to a
LIBOR Auction or an IBOR Auction (including such a loan bearing interest at the
Base Rate pursuant to Section 5.2).
"Money Market Margin" has the meaning set forth in Section 2.2.
"Money Market Quote" means an offer by a Lender to make a Money
Market Loan in accordance with Section 2.2.
"Money Market Rate" has the meaning set forth in Section 2.2.
"Moody's" means Moody's Investor Services, Inc.
"Multiemployer Plan" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA which is, or within the immediately preceding six
(6) years was, contributed to by either the Borrower or any ERISA Affiliate or
in respect of which the Borrower or any ERISA Affiliate has assumed any
liability.
"Non Pro Rata Loan" is defined in Section 4.2 (b)(v).
"Note" means a promissory note in the form attached hereto as Exhibit
B payable to a Lender, evidencing certain of the joint and several Obligations
of SPGLP and SDGLP to such Lender and executed by the Borrower as required by
Section 4.3(a), as the same may be amended, supplemented, modified or restated
from time to time, together with the Designated Bank Notes; "Notes" means,
collectively, all of such Notes outstanding at any given time.
"Notice of Borrowing" means a Notice of Committed Borrowing or a
Notice of Money Market Borrowing.
"Notice of Committed Borrowing" means a notice substantially in the
form of Exhibit C attached hereto and made a part hereof.
"Notice of Conversion/Continuation" means a notice substantially in
the form of Exhibit D attached hereto and made a part hereof with respect to a
proposed conversion or continuation of a Loan pursuant to Section 5.1(c).
"Notice of Money Market Borrowing" has the meaning set forth in
Section 2.2.
"Obligations" means all Loans, advances, debts, liabilities,
obligations, covenants and duties owing by the Borrower to the Payment and
Disbursement Agent, any Arranger, any other Lender, any Affiliate of the
Payment and Disbursement Agent, the Arrangers, any other Lender, or any Person
entitled to indemnification pursuant to Section 15.3 of this Agreement, of any
kind or nature, arising under this Agreement, the Notes or any other Loan Docu
ment. The term includes, without limitation, all interest, charges, expenses,
fees, reasonable attorneys' fees and disbursements and any other sum chargeable
to the Borrower under this Agreement or any other Loan Document.
"Officer's Certificate" means, as to a corporation, a certificate
executed on behalf of such corporation by the chairman of its board of
directors (if an officer of such corporation) or its chief executive officer,
president, any of its vice-presidents, its chief financial officer, or its
treasurer and, as to a partnership, a certificate executed on behalf of such
partnership by the chairman of the board of directors (if an officer of such
corporation) or chief executive officer, president, any vice-president, or
treasurer of the general partner of such partnership.
"Operating Lease" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) by that Person as lessee which is
not a Capital Lease.
"Organizational Documents" means, with respect to any corporation,
limited liability company, or partnership (i) the articles/certificate of
incorporation (or the equivalent organizational documents) of such corporation
or limited liability company, (ii) the partnership agreement executed by the
partners in the partnership, (iii) the by-laws (or the equivalent governing
documents) of the corporation, limited liability company or partnership, and
(iv) any document setting forth the designation, amount and/or relative rights,
limitations and preferences of any class or series of such corporation's
Capital Stock or such limited liability company's or partnership's equity or
ownership interests.
"OSHA" means the Occupational Safety and Health Act of 1970, 29
U.S.C. 651 et seq., any amendments thereto, any successor statutes and any
regulations or guidance promulgated thereunder.
"Payment and Disbursement Agent" is UBS, and each successor payment
and disbursement agent appointed pursuant to the terms of Article XII of this
Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation and any Person
succeeding to the functions thereof.
"Permits" means any permit, consent, approval, authorization license,
variance, or permission required from any Person, including any Governmental
Approvals.
"Permitted Securities Options" means the subscriptions, options,
warrants, rights, convertible Securities and other agreements or commitments
relating to the issuance of the Borrower's Securities or the Company's Capital
Stock identified as such on Schedule 1.1.4.
"Person" means any natural person, corporation, limited liability
company, limited partnership, general partnership, joint stock company, joint
venture, association, company, trust, bank, trust company, land trust, business
trust or other organization, whether or not a legal entity, and any
Governmental Authority.
"Plan" means an employee benefit plan defined in Section 3(3) of
ERISA in respect of which the Borrower or any ERISA Affiliate is, or within the
immediately preceding six (6) years was, an "employer" as defined in
Section 3(5) of ERISA or the Borrower or any ERISA Affiliate has assumed any
liability.
"Potential Event of Default" means an event which, with the giving of
notice or the lapse of time, or both, would constitute an Event of Default.
"Prepayment Date" is defined in Section 4.1(d).
"Process Agent" is defined in Section 15.17(a).
"Project" means any shopping center, retail property and mixed-use
property owned, directly or indirectly, by any of the Consolidated Businesses
or Minority Holdings.
"Property" means any Real Property or personal property, plant,
building, facility, structure, underground storage tank or unit, equipment,
General Intangible, Receivable, or other asset owned, leased or operated by any
Consolidated Business or any Minority Holding (including any surface water
thereon or adjacent thereto, and soil and groundwater thereunder).
"Pro Rata Share" means, with respect to any Lender, the percentage
obtained by dividing (i) the sum of such Lender's Revolving Credit Commitment
(in each case, as adjusted from time to time in accordance with the provisions
of this Agreement or any Assignment and Acceptance to which such Lender is a
party) by (ii) the aggregate amount of all of the Revolving Credit Commitments.
"RCRA" means the Resource Conservation and Recovery Act of 1976, 42
U.S.C. 6901 et seq., any amendments thereto, any successor statutes, and any
regulations or guidance promulgated thereunder.
"Real Property" means all of the Borrower's present and future right,
title and interest (including, without limitation, any leasehold estate) in (i)
any plots, pieces or parcels of land, (ii) any Improvements of every nature
whatsoever (the rights and interests described in clauses (i) and (ii) above
being the "Premises"), (iii) all easements, rights of way, gores of land or any
lands occupied by streets, ways, alleys, passages, sewer rights, water courses,
water rights and powers, and public places adjoining such land, and any other
interests in property constituting appurtenances to the Premises, or which
hereafter shall in any way belong, relate or be appurtenant thereto, (iv) all
hereditaments, gas, oil, minerals (with the right to extract, sever and remove
such gas, oil and minerals), and easements, of every nature whatsoever, located
in, on or benefitting the Premises and (v) all other rights and privileges
thereunto belonging or appertaining and all extensions, additions,
improvements, betterments, renewals, substitutions and replacements to or of
any of the rights and interests described in clauses (iii) and (iv) above.
"Reference Bank" means UBS.
"Register" is defined in Section 15.1(c).
"Regulation A" means Regulation A of the Federal Reserve Board as in
effect from time to time.
"Regulation G" means Regulation G of the Federal Reserve Board as in
effect from time to time.
"Regulation T" means Regulation T of the Federal Reserve Board as in
effect from time to time.
"Regulation U" means Regulation U of the Federal Reserve Board as in
effect from time to time.
"Regulation X" means Regulation X of the Federal Reserve Board as in
effect from time to time.
"Reimbursement Date" is defined in Section 3.1(d)(i)(A).
"Reimbursement Obligations" means the aggregate non-contingent
reimbursement or repayment obligations of the Borrower with respect to amounts
drawn under Letters of Credit.
"REIT" means a domestic trust or corporation that qualifies as a real
estate investment trust under the provisions of Sections 856, et seq. of the
Internal Revenue Code.
"Release" means any release, spill, emission, leaking, pumping,
pouring, dumping, injection, deposit, disposal, abandonment, or discarding of
barrels, containers or other receptacles, discharge, emptying, escape, dispers
al, leaching or migration into the indoor or outdoor environment or into or out
of any Property, including the movement of Contaminants through or in the air,
soil, surface water, groundwater or Property.
"Remedial Action" means actions required to (i) clean up, remove,
treat or in any other way address Contaminants in the indoor or outdoor
environment; (ii) prevent the Release or threat of Release or minimize the
further Release of Contaminants; or (iii) investigate and determine if a
remedial response is needed and to design such a response and post-remedial
investigation, monitoring, operation and maintenance and care.
"Reportable Event" means any of the events described in Section
4043(b) of ERISA and the regulations promulgated thereunder as in effect from
time to time but not including any such event as to which the thirty (30) day
notice requirement has been waived by applicable PBGC regulations.
"Requirements of Law" means, as to any Person, the charter and by-
laws or other organizational or governing documents of such Person, and any
law, rule or regulation, or determination of an arbitrator or a court or other
Governmental Authority, in each case applicable to or binding upon such Person
or any of its property or to which such Person or any of its property is
subject including, without limitation, the Securities Act, the Securities
Exchange Act, Regulations G, T, U and X, ERISA, the Fair Labor Standards Act,
the Worker Adjustment and Retraining Notification Act, Americans with
Disabilities Act of 1990, and any certificate of occupancy, zoning ordinance,
building, environmental or land use requirement or Permit and Environmental,
Health or Safety Requirement of Law.
"Requisite Lenders" means Lenders whose Pro Rata Shares, in the
aggregate, are greater than sixty-six and two-thirds percent (66.67%);
provided, however, that, in the event any of the Lenders shall have failed to
fund its Pro Rata Share of any Loan requested by the Borrower which such
Lenders are obligated to fund under the terms of this Agreement and any such
failure has not been cured as provided in Section 4.2(b)(v)(B), then for so
long as such failure continues, "Requisite Lenders" means Lenders (excluding
all Lenders whose failure to fund their respective Pro Rata Shares of such
Loans have not been so cured) whose Pro Rata Shares represent more than sixty-
six and two-thirds percent (66.67%) of the aggregate Pro Rata Shares of such
Lenders; provided, further, however, that, in the event that the Revolving
Credit Commitments have been terminated pursuant to the terms of this Agree
ment, "Requisite Lenders" means Lenders (without regard to such Lenders'
performance of their respective obligations hereunder) whose aggregate ratable
shares (stated as a percentage) of the aggregate outstanding principal balance
of all Loans are greater than sixty-six and two-thirds percent (66.67%).
"Revolving Credit Availability" means, at any particular time, the
amount by which the Maximum Revolving Credit Amount at such time exceeds the Re
volving Credit Obligations at such time.
"Revolving Credit Commitment" means, with respect to any Lender, the
obligation of such Lender to make Committed Loans and to participate in Letters
of Credit pursuant to the terms and conditions of this Agreement, and which
shall not exceed the principal amount set forth opposite such Lender's name
under the heading "Revolving Credit Commitment" on the signature pages hereof
or the signature page of the Assignment and Acceptance by which it became a
Lender, as modified from time to time pursuant to the terms of this Agreement
or to give effect to any applicable Assignment and Acceptance, and "Revolving
Credit Commitments" means the aggregate principal amount of the Revolving
Credit Commitments of all the Lenders, the maximum amount of which shall be
$1,250,000,000, as reduced from time to time pursuant to Section 4.1.
"Revolving Credit Obligations" means, at any particular time, the sum
of (i) the outstanding principal amount of the Committed Loans at such time,
plus (ii) the Letter of Credit Obligations at such time, plus (iii) the
outstanding principal amount of the Money Market Loans at such time.
"Revolving Credit Period" means the period from the Initial Funding
Date to the Business Day next preceding the Revolving Credit Termination Date.
"Revolving Credit Termination Date" means the earlier to occur of (i)
September 27, 1999 (or, if not a Business Day, the next preceding Business
Day), provided, however, that the Revolving Credit Termination Date may be ex
tended until September 27, 2000 (or, if not a Business Day, the next preceding
Business Day) in accordance with the provisions of Section 2.5 hereof; and (ii)
the date of termination of the Revolving Credit Commitments pursuant to the
terms of this Agreement.
"S&P" means Standard & Poor's Ratings Service.
"SD" means SD Property Group, Inc., an Ohio corporation (formerly
known as DeBartolo Realty Corporation).
"SDGLP" means Simon DeBartolo Group, L.P., a Delaware limited
partnership.
"SDGLP Partnership Agreement" means that certain Fifth Amended and
Restated Limited Partnership Agreement of SDGLP, dated as of August 9, 1996.
"SDG Reorganization Transactions" means the transactions, including
the Merger, which shall occur over time to effect the consolidation of the
businesses, operations, assets and liabilities of the Company and SD and their
respective Subsidiaries, including, without limitation, any transfers and con
tributions by SPGLP or the Company which may be made, directly or indirectly,
to SDGLP or its wholly-owned Subsidiaries to effect such consolidation (but
specifically excluding the transfer of any assets from either SDGLP or SPGLP to
any General Partner).
"Secured Indebtedness" means any Indebtedness secured by a Lien.
"Securities" means any stock, shares, voting trust certificates,
partnership interests, bonds, debentures, notes or other evidences of
indebtedness, secured or unsecured, convertible, subordinated or otherwise, or
in general any instruments commonly known as "securities", including, without
limitation, any "security" as such term is defined in Section 8-102 of the
Uniform Commercial Code, or any certificates of interest, shares, or partici
pations in temporary or interim certificates for the purchase or acquisition
of, or any right to subscribe to, purchase or acquire any of the foregoing, but
shall not include the Notes or any other evidence of the Obligations.
"Securities Act" means the Securities Act of 1933, as amended from
time to time, and any successor statute.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended from time to time, and any successor statute.
"Solvent", when used with respect to any Person, means that at the
time of determination:
(i) the fair saleable value of its assets is in excess of the
total amount of its liabilities (including, without limitation,
contingent liabilities); and
(ii) the present fair saleable value of its assets is greater than
its probable liability on its existing debts as such debts become
absolute and matured; and
(iii) it is then able and expects to be able to pay its debts (including,
without limitation, contingent debts and other commitments) as they
mature; and
(iv) it has capital sufficient to carry on its business as conducted and
as proposed to be conducted.
"SPGLP" means Simon Property Group, L.P., a Delaware limited
partnership.
"SPGLP Partnership Agreement" means that certain Third Amended and
Restated Agreement of Limited Partnership of Simon Property Group, L.P., dated
as of August 9, 1996.
"Standby Letter of Credit" means any letter of credit issued by an
Issuing Bank pursuant to Section 3.1 for the account of the Borrower, which is
not a Commercial Letter of Credit.
"Subsidiary" of a Person means any corporation, limited liability
company, general or limited partnership, or other entity of which securities or
other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions are at the
time directly or indirectly owned or controlled by such Person, one or more of
the other subsidiaries of such Person or any combination thereof.
"Taxes" is defined in Section 13.1(a).
"Tenant Allowance" means a cash allowance paid to a tenant by the
landlord pursuant to a Lease.
"TI Work" means any construction or other "build-out" of tenant
leasehold improvements to the space demised to such tenant under Leases
(excluding such tenant's furniture, fixtures and equipment) performed pursuant
to the terms of such Leases, whether or not such tenant improvement work is
performed by or on behalf of the landlord or as part of a Tenant Allowance.
"Total Adjusted Outstanding Indebtedness" means, for any period, the
sum of (i) the amount of Indebtedness of the Consolidated Businesses set forth
on the then most recent quarterly financial statements of the Borrower and (ii)
the outstanding amount of Minority Holding Indebtedness allocable in accordance
with GAAP to any of the Consolidated Businesses as of the time of determination
and (iii) the Contingent Obligations of the Consolidated Businesses and, to the
extent allocable to the Consolidated Businesses in accordance with GAAP, of the
Minority Holdings.
"Total Unsecured Outstanding Indebtedness" means that portion of
Total Adjusted Outstanding Indebtedness that is not secured by a Lien.
"UBS" means Union Bank of Switzerland, New York Branch.
"Unencumbered Combined EBITDA" means that portion of Combined EBITDA
which represents revenues earned from the Management Company (up to 5% of
Combined EBITDA) or from Real Property that is not subject to or encumbered
by Secured Indebtedness and is not subject to any agreements, the effect of
which would be to restrict, directly or indirectly, the ability of the owner of
such Property from granting Liens thereon, calculated on the first day of each
fiscal quarter for the four immediately preceding consecutive fiscal quarters.
"Uniform Commercial Code" means the Uniform Commercial Code as
enacted in the State of New York, as it may be amended from time to time.
"Unsecured Debt Yield" is defined in Section 10.12(e).
"Unsecured Interest Expense" means the interest expense incurred on
the Total Unsecured Outstanding Indebtedness.
"Unused Commitment Fee" is defined in Section 5.3 (b).
"Unused Commitment Fee Percentage" shall be 0.25%. The Unused
Commitment Fee shall not be payable during the time, from time to time, that
the Borrower maintains an Investment Grade Credit Rating.
"Unused Facility" shall mean the amount, calculated daily, by which
the Revolving Credit Commitments exceed the sum of (i) the outstanding
principal amount of the Committed Loans, plus (ii) the outstanding Reimburse
ment Obligations, plus (iii) the aggregate undrawn face amount of all out
standing Letters of Credit.
1.2 Computation of Time Periods. In this Agreement, in the computation
of periods of time from a specified date to a later specified date, the word
"from" means "from and including" and the words "to" and "until" each mean "to
but excluding". Periods of days referred to in this Agreement shall be counted
in calendar days unless Business Days are expressly prescribed. Any period
determined hereunder by reference to a month or months or year or years shall
end on the day in the relevant calendar month in the relevant year, if applica
ble, immediately preceding the date numerically corresponding to the first day
of such period, provided that if such period commences on the last day of a
calendar month (or on a day for which there is no numerically corresponding day
in the calendar month during which such period is to end), such period shall,
unless otherwise expressly required by the other provisions of this Agreement,
end on the last day of the calendar month.
1.3 Accounting Terms. Subject to Section 15.4, for purposes of this
Agreement, all accounting terms not otherwise defined herein shall have the
meanings assigned to them in conformity with GAAP.
1.4 Other Terms. All other terms contained in this Agreement shall,
unless the context indicates otherwise, have the meanings assigned to such
terms by the Uniform Commercial Code to the extent the same are defined
therein.
ARTICLE II
AMOUNTS AND TERMS OF LOANS
2.1 Committed Loans.
(a) Availability. Subject to the terms and conditions set forth in
this Agreement, each Lender hereby severally and not jointly agrees to make
revolving loans, in Dollars (each individually, a "Committed Loan" and, collec
tively, the "Committed Loans") to the Borrower from time to time during the
Revolving Credit Period, in an amount not to exceed such Lender's Pro Rata
Share of the Revolving Credit Availability at such time. All Committed Loans
comprising the same Borrowing under this Agreement shall be made by the Lenders
simultaneously and proportionately to their then respective Pro Rata Shares, it
being understood that no Lender shall be responsible for any failure by any
other Lender to perform its obligation to make a Committed Loan hereunder nor
shall the Revolving Credit Commitment of any Lender be increased or decreased
as a result of any such failure. Subject to the provisions of this Agreement,
the Borrower may repay any outstanding Committed Loan on any day which is a
Business Day and any amounts so repaid may be reborrowed, up to the amount
available under this Section 2.1(a) at the time of such Borrowing, until the
Business Day next preceding the Revolving Credit Termination Date. Each
requested Borrowing of Committed Loans funded on any Funding Date shall be in a
principal amount of at least $1,500,000; provided, however, that if the Revolv
ing Credit Availability at the time of such requested Borrowing is less than
$1,500,000, then the requested Borrowing shall be for the total amount of the
Revolving Credit Availability.
(b) Notice of Committed Borrowing. When the Borrower desires to
borrow under this Section 2.1, it shall deliver to the Payment and Disbursement
Agent a Notice of Committed Borrowing, signed by it (i) no later than 12:00
noon (New York time) on the Business Day immediately preceding the proposed
Funding Date, in the case of a Borrowing of Base Rate Loans, (ii) no later than
10:00 a.m. (New York time) on the Business Day immediately preceding the pro
posed Funding Date, in the case of a Borrowing of IBOR Rate Loans and (iii) no
later than 11:00 a.m. (New York time) at least three (3) Business Days in ad
vance of the proposed Funding Date, in the case of a Borrowing of Eurodollar
Rate Loans; provided, however, that no Borrowing may be made within less than
two (2) Business Days after any given Borrowing. Such Notice of Committed
Borrowing shall specify (i) the proposed Funding Date (which shall be a
Business Day), (ii) the amount of the proposed Borrowing, (iii) the Revolving
Credit Availability as of the date of such Notice of Borrowing, (iv) whether
the proposed Borrowing will be of Base Rate Loans, Eurodollar Rate Loans or
IBOR Rate Loans, (v) in the case of Eurodollar Rate Loans or IBOR Rate Loans,
the requested Eurodollar Interest Period or IBOR Interest Period, as
applicable, and (vi) instructions for the disbursement of the proceeds of the
proposed Borrowing. In lieu of delivering such a Notice of Committed Borrowing
(except with respect to a Borrowing of Committed Loans on the Initial Funding
Date), the Borrower may give the Payment and Disbursement Agent telephonic
notice of any proposed Borrowing by the time required under this Section
2.1(b), if the Borrower confirms such notice by delivery of the Notice of
Borrowing to the Payment and Disbursement Agent by facsimile transmission
promptly, but in no event later than 3:00 p.m. (New York time) on the same day.
Any Notice of Borrowing (or telephonic notice in lieu thereof) given pursuant
to this Section 2.1(b) shall be irrevocable.
(c) Making of Loans. Promptly after receipt of a Notice of
Committed Borrowing under Section 2.1(b) (or telephonic notice in lieu
thereof), the Payment and Disbursement Agent shall notify each Lender by
facsimile transmission, or other similar form of transmission, of the
proposed Borrowing (which notice to the Lenders, in the case of a Borrow
ing of Eurodollar Rate Loans, shall be at least three (3) Business Days in
advance of the proposed Funding Date for such Loans). Each Lender shall
deposit an amount equal to its Pro Rata Share of the Borrowing requested
by the Borrower with the Payment and Disbursement Agent at its office in
New York, New York, in immediately available funds, not later than 12:00
noon (New York time) on the respective Funding Date therefor. Subject to
the fulfillment of the conditions precedent set forth in Section 6.1 or
Section 6.2, as applicable, the Payment and Disbursement Agent shall make
the proceeds of such amounts received by it available to the Borrower at
the Payment and Disbursement Agent's office in New York, New York on such
Funding Date (or on the date received if later than such Funding Date) and
shall disburse such proceeds in accordance with the Borrower's disburse
ment instructions set forth in the applicable Notice of Borrowing. The
failure of any Lender to deposit the amount described above with the
Payment and Disbursement Agent on the applicable Funding Date shall not
relieve any other Lender of its obligations hereunder to make its
Committed Loan on such Funding Date. In the event the conditions precedent
set forth in Section 6.1 or 6.2 are not fulfilled as of the proposed
Funding Date for any Borrowing, the Payment and Disbursement Agent shall
promptly return, by wire transfer of immediately available funds, the
amount deposited by each Lender to such Lender.
(ii) Unless the Payment and Disbursement Agent shall have been
notified by any Lender on the Business Day immediately preceding the
applicable Funding Date in respect of any Borrowing that such Lender does
not intend to fund its Committed Loan requested to be made on such Funding
Date, the Payment and Disbursement Agent may assume that such Lender has
funded its Committed Loan and is depositing the proceeds thereof with the
Payment and Disbursement Agent on the Funding Date therefor, and the
Payment and Disbursement Agent in its sole discretion may, but shall not
be obligated to, disburse a corresponding amount to the Borrower on the
applicable Funding Date. If the Loan proceeds corresponding to that
amount are advanced to the Borrower by the Payment and Disbursement Agent
but are not in fact deposited with the Payment and Disbursement Agent by
such Lender on or prior to the applicable Funding Date, such Lender agrees
to pay, and in addition the Borrower agrees to repay, to the Payment and
Disbursement Agent forthwith on demand such corresponding amount, together
with interest thereon, for each day from the date such amount is disbursed
to or for the benefit of the Borrower until the date such amount is paid
or repaid to the Payment and Disbursement Agent, at the interest rate
applicable to such Borrowing. If such Lender shall pay to the Payment and
Disbursement Agent the corresponding amount, the amount so paid shall con
stitute such Lender's Committed Loan, and if both such Lender and the Bor
rower shall pay and repay such corresponding amount, the Payment and
Disbursement Agent shall promptly pay to the Borrower such corresponding
amount. This Section 2.1(c)(ii) does not relieve any Lender of its obli
gation to make its Committed Loan on any applicable Funding Date.
2.2 Money Market Loans.
(a) The Money Market Option. From time to time during the Revolving
Credit Period, and provided that at such time the Borrower maintains an In
vestment Grade Credit Rating, the Borrower may, as set forth in this Section
2.2, request the Lenders during the Revolving Credit Period to make offers to
make Money Market Loans to the Borrower, provided that the aggregate
outstanding amount of such Money Market Loans shall not exceed, at any time,
the lesser of (i) fifty percent (50%) of the Maximum Revolving Credit Amount
and (ii) the Revolving Credit Availability. Subject to the provisions of this
Agreement, the Borrower may repay any outstanding Money Market Loan on any day
which is a Business Day and any amounts so repaid may be reborrowed, up to the
amount available under this Section 2.2(a) at the time of such Borrowing, until
the Business Day next preceding the Revolving Credit Termination Date. The
Lenders may, but shall have no obligation to, make such offers and the Borrower
may, but shall have no obligation to, accept any such offers in the manner set
forth in this Section 2.2.
(b) Money Market Quote Request. When the Borrower wishes to request
offers to make Money Market Loans under this Section, it shall transmit to the
Payment and Disbursement Agent by telex or facsimile transmission a Money
Market Quote Request substantially in the form of Exhibit H hereto so as to be
received not later than 10:30 A.M. (New York City time) on the fifth (5th) Busi
ness Day prior to the date of Borrowing proposed therein (or such other time or
date as the Borrower and the Payment and Disbursement Agent shall have mutually
agreed and shall have notified to the Lenders not later than the date of the
Money Market Quote Request for the first LIBOR Auction or IBOR Auction (as
applicable) for which such change is to be effective) specifying:
whether the proposed Borrowing is to be of Eurodollar Money Market
Loans or IBOR Money Market Loans,
the proposed date of Borrowing, which shall be a Business Day,
the aggregate amount of such Borrowing, which shall be $25,000,000
or a larger multiple of $1,000,000,
the duration of the Eurodollar Interest Period applicable
thereto, or the IBOR Interest Period applicable thereto (as applicable),
subject, in each case, to the provisions of Section 5.2(b), and
(iv) the amount of all Money Market Loans then outstanding (which,
together with the requested Borrowing shall not exceed, in the aggregate, the
lesser of (A) fifty percent (50%) of the Maximum Revolving Credit Amount and
(B) the Revolving Credit Availability).
The Borrower may request offers to make Money Market Loans for more than one
Eurodollar Interest Period or IBOR Interest Period in a single Money Market
Quote Request. Borrower may not make more than three (3) Money Market Quote Re
quests in any thirty-day Eurodollar Interest Period.
(c) Invitation for Money Market Quotes. Promptly upon receipt of a
Money Market Quote Request, the Payment and Disbursement Agent shall send to
the Lenders by telex or facsimile transmission an Invitation for Money Market
Quotes substantially in the form of Exhibit I hereto, which shall constitute an
invitation by the Borrower to each Lender to submit Money Market Quotes
offering to make the Money Market Loans to which such Money Market Quote
Request relates in accordance with this Section.
(d) Submission and Contents of Money Market Quotes. Each
Lender may submit a Money Market Quote containing an offer or offers to
make Money Market Loans in response to any Invitation for Money Market
Quotes. Each Money Market Quote must comply with the requirements of this
subsection (d) and must be submitted to the Payment and Disbursement Agent
by telex or facsimile transmission not later than 2:00 P.M. (New York City
time) on the fourth (4th) Business Day prior to the proposed date of
Borrowing, in the case of a LIBOR Auction or an IBOR Auction (or such
other time or date as the Borrower and the Payment and Disbursement Agent
shall have mutually agreed and shall have notified to the Lenders not
later than the date of the Money Market Quote Request for the first LIBOR
Auction or IBOR Auction (as applicable) for which such change is to be
effective); provided that Money Market Quotes submitted by the Payment and
Disbursement Agent (or any affiliate of the Payment and Disbursement
Agent) in the capacity of a Lender may be submitted, and may only be
submitted, if the Payment and Disbursement Agent or such affiliate noti
fies the Borrower of the terms of the offer or offers contained therein
not later than one hour prior to the deadline for the other Lenders. Any
Money Market Quote so made shall be irrevocable except with the written
consent of the Payment and Disbursement Agent given on the instructions of
the Borrower. All or any portion of Money Market Loans to be funded
pursuant to a Money Market Quote may, as provided in Section 15.1(f), be
funded by a Lender's Designated Bank. A Lender making a Money Market
Quotes may, but shall not be required to, specify in its Money Market
Quote whether all or any portion of the related Money Market Loans are in
tended to be funded by such Lender's Designated Bank, as provided in
Section 15.1(f).
(ii) Each Money Market Quote shall be in substantially the form of
Exhibit J hereto and shall in any case specify:
(A) the proposed date of Borrowing,
(B) the principal amount of the Money Market Loan for which each
such offer is being made, which principal amount (w) may be greater
than or less than the Revolving Credit Commitment of the quoting
Lender, (x) must be $5,000,000 or a larger multiple of $1,000,000,
(y) may not exceed theprincipal amount of Money Market Loans for which
offers were requested and (z) may be subject to an aggregate limitation
as to the principal amount of Money Market Loans for which offers being
made by such quoting Lender may be accepted,
(C) either (1) the margin above or below the applicable Eurodollar Rate
or IBOR Rate (each, a "Money Market Margin") offered for each such Money
Market Loan, expressed as a percentage (specified to the nearest
1/10,000th of 1%) to be added to or subtracted from such base rate, or (2)
a flat rate of interest (each, a "Money Market Rate") offered for each
Money Market Loan, and
(D) the identity of the quoting Lender.
A Money Market Quote may set forth up to five separate offers by the quoting
Lender with respect to each Eurodollar Interest Period or IBOR Interest Period
specified in the related Invitation for Money Market Quotes.
(iii) Any Money Market Quote shall be disregarded if it:
(A) is not substantially in conformity with Exhibit J hereto or does
not specify all of the information required by subsection (d)(ii) above;
(B) proposes terms other than or in addition to those set forth in the
applicable Invitation for Money Market Quotes; or
(C) arrives after the time set forth in subsection (d)(i).
(e) Notice to Borrower. The Payment and Disbursement Agent shall
promptly notify the Borrower of the terms (x) of any Money Market Quote
submitted by a Lender that is in accordance with subsection (d) and (y) of any
Money Market Quote that amends, modifies or is otherwise inconsistent with a
previous Money Market Quote submitted by such Lender with respect to the same
Money Market Quote Request. Any such subsequent Money Market Quote shall be
disregarded by the Payment and Disbursement Agent unless such subsequent Money
Market Quote is submitted solely to correct a manifest error in such former
Money Market Quote. The Payment and Disbursement Agent's notice to the
Borrower shall specify (A) the aggregate principal amount of Money Market Loans
for which offers have been received for each Interest Period specified in the
related Money Market Quote Request, (B) the principal amounts and Money Market
Margin or Money Market Rate, as the case may be, so offered and (C) if applica
ble, limitations on the aggregate principal amount of Money Market Loans for
which offers in any single Money Market Quote may be accepted.
(f) Acceptance and Notice by Borrower. Not later than 6:00 P.M.
(New York City time) on the fourth Business Day prior to the proposed date of
Borrowing (or such other time or date as the Borrower and the Payment and
Disbursement Agent shall have mutually agreed and shall have notified to the
Lenders not later than the date of the Money Market Quote Request for the first
LIBOR Auction or IBOR Auction (as applicable) for which such change is to be
effective), the Borrower shall telephonically notify the Payment and Disburse
ment Agent of its acceptance or non-acceptance of the offers so notified to it
pursuant to subsection (e), and the Borrower shall confirm such telephonic
notification in writing not later than the third Business Day prior to the
proposed date of Borrowing. In the case of acceptance, such notice (a "Notice
of Money Market Borrowing"), whether telephonic or in writing, shall specify
the aggregate principal amount of offers for each Eurodollar Interest Period
and/or each IBOR Interest Period that are accepted. The Borrower may accept
any Money Market Quote in whole or in part; provided that:
(i)the aggregate principal amount of each Money Market Borrowing may
not exceed the applicable amount set forth in the related Money Market
Quote Request;
(ii)the principal amount of each Money Market Borrowing must be
$5,000,000 or a larger multiple of $1,000,000;
(iii)acceptance of offers may only be made on the basis of ascending Money
Market Quotes; and
(iv) the Borrower may not accept any offer that is described in
subsection (d)(iii) or that otherwise fails to comply with the
requirements of this Agreement.
(g) Allocation by Payment and Disbursement Agent. If offers are
made by two or more Lenders with the same Money Market Margins and/or Money
Market Rates, for a greater aggregate principal amount than the amount in re
spect of which such offers are accepted for the related Eurodollar Interest
Period and/or IBOR Interest Period, as applicable, the principal amount of
Money Market Loans in respect of which such offers are accepted shall be allo
cated by the Payment and Disbursement Agent among such Lenders as nearly as
possible (in multiples of $1,000,000, as the Payment and Disbursement Agent may
deem appropriate) in proportion to the aggregate principal amounts of such of
fers. Determinations by the Payment and Disbursement Agent of the amounts of
Money Market Loans shall be conclusive in the absence of manifest error.
(h) Notification by Payment and Disbursement Agent. Upon receipt of
the Borrower's Notice of Money Market Borrowing in accordance with Section
2.2(f) hereof, the Payment and Disbursement Agent shall, on the date such
Notice of Money Market Borrowing is received by the Payment and Disbursement
Agent, notify each Lender of the principal amount of the Money Market Borrowing
accepted by the Borrower and of such Lender's share (if any) of such Money
Market Borrowing and such Notice of Money Market Borrowing shall not thereafter
be revocable by the Borrower. A Lender who is notified that it has been select
ed to make a Money Market Loan may designate its Designated Bank (if any) to
fund such Money Market Loan on its behalf, as described in Section 15.1(f).
Any Designated Bank which funds a Money Market Loan shall on and after the time
of such funding become the obligee under such Money Market Loan and be entitled
to receive payment thereof when due. No Lender shall be relieved of its obliga
tion to fund a Money Market Loan, and no Designated Bank shall assume such
obligation, prior to the time the applicable Money Market Loan is funded.
2.3 Use of Proceeds of Loans and Letters of Credit. The proceeds of
the Loans and the Letters of Credit issued for the account of the Borrower
hereunder may be used for the purposes of:
(a) acquisition of Projects, portfolios of Projects, or interests in
Projects, similar to and consistent with the types of Projects owned and/or
operated by the Borrower on the Closing Date;
(b) acquisition of Persons or interests in Persons that own or have
direct or indirect interests in Projects or portfolios of Projects similar to
and consistent with the types of Projects owned and/or operated by the Borrower
on the Closing Date;
(c) renovation of Properties owned and operated by the Borrower;
(d) funding of TI Work and Tenant Allowances;
(e) financing construction related to Properties owned and operated
by the Borrower; and
(f) other general corporate, partnership and working capital needs
of the Borrower, inclusive of repayment of Indebtedness for borrowed money;
each of which purposes described in clauses (a) through (f) above shall be
lawful general corporate, partnership and working capital purposes of the Bor
rower.
2.4 Revolving Credit Termination Date; Maturity of Money Market Loans.
(a)The Revolving Credit Commitments shall terminate, and all outstanding
Revolving Credit Obligations shall be paid in full (or, in the case of
unmatured Letter of Credit Obligations, provision for payment in cash
shall be made to the satisfaction of the Lenders actually issuing Letters
of Credit and the Requisite Lenders), on the Revolving Credit Termination
Date. Each Lender's obligation to make Loans shall terminate on the
Business Day next preceding the Revolving Credit Termination Date.
(b)Each Money Market Loan included in any Money Market Borrowing
shall mature, and the principal amount thereof shall be due and payable,
together with the accrued interest thereon, on the last day of the Euro
dollar Interest Period or, as applicable, IBOR Interest Period,
applicable to such Borrowing.
2.5 Extension Option.
(a) The Borrower shall have one option (the "Extension Option") to
extend the maturity of the Revolving Credit Commitments for a period of one (1)
year. Subject to the conditions set forth in clause (b) below, Borrower may
exercise the Extension Option by delivering written notice (the "Extension No
tice"), together with the payment of the Extension Fee for the account of the
Lenders (based on their respective Pro Rata Shares), to the Payment and Dis
bursement Agent on or before August 12, 1999, stating that Borrower will extend
the Revolving Credit Termination Date for one (1) year. Borrower's delivery of
the Extension Notice shall be irrevocable. In no event shall the Revolving
Credit Termination Date occur later than September 26, 2000.
(b) The Borrower's right to exercise the Extension Option shall be
subject to the following terms and conditions: (i) no Potential Event of
Default or Event of Default shall have occurred and be continuing either on the
date Borrower delivers the Extension Notice to the Payment and Disbursement
Agent or on the date that this Agreement would otherwise have terminated, (ii)
the Borrower shall be in full compliance with all covenants and conditions set
forth in this Agreement as of the date Borrower delivers the Extension Notice
to the Agent or on the date that this Agreement would otherwise have
terminated, and (iii) the Borrower shall have paid the Extension Fee to the
Payment and Disbursement Agent for the account of the Lenders (based on their
respective Pro Rata Shares).
2.6 Maximum Credit Facility. Notwithstanding anything in this
Agreement to the contrary, in no event shall the aggregate principal Revolving
Credit Obligations exceed the Maximum Revolving Credit Amount.
2.7 Authorized Agents. On the Closing Date and from time to time there
after, the Borrower shall deliver to the Payment and Disbursement Agent an
Officer's Certificate setting forth the names of the employees and agents autho
rized to request Loans and Letters of Credit and to request a conversion/con
tinuation of any Loan and containing a specimen signature of each such employee
or agent. The employees and agents so authorized shall also be authorized to
act for the Borrower in respect of all other matters relating to the Loan Docu
ments. The Payment and Disbursement Agent, the Arrangers, the Co-Agents, the
Lenders and any Issuing Bank shall be entitled to rely conclusively on such
employee's or agent's authority to request such Loan or Letter of Credit or
such conversion/continuation until the Payment and Disbursement Agent and the
Arrangers receive written notice to the contrary. None of the Payment and
Disbursement Agent or the Arrangers shall have any duty to verify the authen
ticity of the signature appearing on any written Notice of Borrowing or Notice
of Conversion/Continuation or any other document, and, with respect to an oral
request for such a Loan or Letter of Credit or such conversion/continuation,
the Payment and Disbursement Agent and the Arrangers shall have no duty to
verify the identity of any person representing himself or herself as one of the
employees or agents authorized to make such request or otherwise to act on
behalf of the Borrower. None of the Payment and Disbursement Agent, the
Arrangers or the Lenders shall incur any liability to the Borrower or any other
Person in acting upon any telephonic or facsimile notice referred to above
which the Payment and Disbursement Agent or the Arrangers believes to have been
given by a person duly authorized to act on behalf of the Borrower and the
Borrower hereby indemnifies and holds harmless the Payment and Disbursement
Agent, each Arranger and each other Lender from any loss or expense the Payment
and Disbursement Agent, the Arrangers or the Lenders might incur in acting in
good faith as provided in this Section 2.7.
ARTICLE III
LETTERS OF CREDIT
3.1 Letters of Credit. Subject to the terms and conditions set forth
in this Agreement, including, without limitation, Section 3.1(c)(ii), each
Arranger hereby severally agrees to issue for the account of the Borrower one
or more Letters of Credit (any Arranger actually issuing a Letter of Credit, an
"Issuing Bank"), subject to the following provisions:
(a) Types and Amounts. An Issuing Bank shall not have any
obligation to issue, amend or extend, and shall not issue, amend or extend, any
Letter of Credit at any time:
(i) if the aggregate Letter of Credit Obligations with respect
to such Issuing Bank, after giving effect to the issuance, amendment
or extension of the Letter of Credit requested hereunder, shall
exceed any limit imposed by law or regulation upon such Issuing Bank;
(ii) if, immediately after giving effect to the issuance, amendment
or extension of such Letter of Credit, (1) the Letter of Credit
Obligations at such time would exceed $100,000,000 or (2) the
Revolving Credit Obligations at such time would exceed the Maximum Re
volving Credit Amount at such time, or (3) one or more of the
conditions precedent contained in Sections 6.1 or 6.2, as applicable,
would not on such date be satisfied, unless such conditions are
thereafter satisfied and written notice of such satisfaction is given
to such Issuing Bank by the Payment and Disbursement Agent (and such
Issuing Bank shall not otherwise be required to determine that, or
take notice whether, the conditions precedent set forth in Sections
6.1 or 6.2, as applicable, have been satisfied);
(iii) which has an expiration date later than the earlier of (A) the
date one (1) year after the date of issuance (without regard to any
automatic renewal provisions thereof) or (B) the Business Day next
preceding the scheduled Revolving Credit Termination Date; or
(iv) which is in a currency other than Dollars.
(b) Conditions. In addition to being subject to the satisfaction of
the conditions precedent contained in Sections 6.1 and 6.2, as applicable, the
obligation of an Issuing Bank to issue, amend or extend any Letter of Credit is
subject to the satisfaction in full of the following conditions:
(i) if the Issuing Bank so requests, the Borrower shall have
executed and delivered to such Issuing Bank and the Payment and
Disbursement Agent a Letter of Credit Reimbursement Agreement and
such other documents and materials as may be required pursuant to the
terms thereof; and
(ii) the terms of the proposed Letter of Credit shall be
satisfactory to the Issuing Bank in its sole discretion.
(c) Issuance of Letters of Credit. The Borrower shall give
the Payment and Disbursement Agent written notice that it requires the
issuance a Letter of Credit not later than 11:00 a.m. (New York time) on
the third (3rd) Business Day preceding the requested date for issuance
thereof under this Agreement. Such notice shall be irrevocable unless and
until such request is denied by the applicable Arranger and shall specify
(A) that the requested Letter of Credit is either a Commercial Letter of
Credit or a Standby Letter of Credit, (B) that such Letter of Credit is
solely for the account of the Borrower, (C) the stated amount of the
Letter of Credit requested, (D) the effective date (which shall be a Busi
ness Day) of issuance of such Letter of Credit, (E) the date on which such
Letter of Credit is to expire (which shall be a Business Day and no later
than the Business Day immediately preceding the scheduled Revolving Credit
Termination Date), (F) the Person for whose benefit such Letter of Credit
is to be issued, (G) other relevant terms of such Letter of Credit, (H)
the Revolving Credit Availability at such time, and (I) the amount of the
then outstanding Letter of Credit Obligations.
(ii) The Arrangers shall jointly select one Arranger to act as Issu
ing Bank with respect to such Letter of Credit, which selection shall be in the
sole discretion of the Arrangers. If such Arranger declines to issue the
Letter of Credit, the Arrangers shall jointly select an alternative Lender to
issue such Letter of Credit.
(iii) The selected Arranger (if not the Payment and Disbursement
Agent) shall give the Payment and Disbursement Agent written notice, or
telephonic notice confirmed promptly thereafter in writing, of the issuance,
amendment or extension of a Letter of Credit (which notice the Payment and
Disbursement Agent shall promptly transmit by telegram, facsimile transmission,
or similar transmission to each Lender).
(d) Reimbursement Obligations; Duties of Issuing Banks and other
Lenders.
(i) Notwithstanding any provisions to the contrary in any Letter
of Credit Reimbursement Agreement:
(A) the Borrower shall reimburse the Issuing Bank for amounts
drawn under its Letter of Credit, in Dollars, no later than the date
(the "Reimbursement Date") which is the earlier of (I) the time
specified in the applicable Letter of Credit Reimbursement Agreement
and (II) three (3) Business Days after the Borrower receives written
notice from the Issuing Bank that payment has been made under such
Letter of Credit by the Issuing Bank; and
(B) all Reimbursement Obligations with respect to any Letter of
Credit shall bear interest at the rate applicable to Base Rate Loans
in accordance with Section 5.1(a) from the date of the relevant
drawing under such Letter of Credit until the Reimbursement Date and
thereafter at the rate applicable to Base Rate Loans in accordance
with Section 5.1(d).
(ii) The Issuing Bank shall give the Payment and Disbursement Agent
written notice, or telephonic notice confirmed promptly thereafter in
writing, of all drawings under a Letter of Credit and the payment (or the
failure to pay when due) by the Borrower on account of a Reimbursement
Obligation (which notice the Payment and Disbursement Agent shall promptly
transmit by telegram, facsimile transmission or similar transmission to
each Lender).
(iii) No action taken or omitted in good faith by an Issuing Bank
under or in connection with any Letter of Credit shall put such Issuing
Bank under any resulting liability to any Lender, the Borrower or, so long
as it is not issued in violation of Section 3.1(a), relieve any Lender of
its obligations hereunder to such Issuing Bank. Solely as between the
Issuing Banks and the other Lenders, in determining whether to pay under
any Letter of Credit, the Issuing Bank shall have no obligation to the
other Lenders other than to confirm that any documents required to be
delivered under a respective Letter of Credit appear to have been deliv
ered and that they appear on their face to comply with the requirements of
such Letter of Credit.
(e) Participations. Immediately upon issuance by an Issuing
Bank of any Letter of Credit in accordance with the procedures set forth
in this Section 3.1, each Lender shall be deemed to have irrevocably and
unconditionally purchased and received from that Issuing Bank, without re
course or warranty, an undivided interest and participation in such Letter
of Credit to the extent of such Lender's Pro Rata Share, including,
without limitation, all obligations of the Borrower with respect thereto
(other than amounts owing to the Issuing Bank under Section 3.1(g)) and
any security therefor and guaranty pertaining thereto.
(ii) If any Issuing Bank makes any payment under any Letter of
Credit and the Borrower does not repay such amount to the Issuing Bank on
the Reimbursement Date, the Issuing Bank shall promptly notify the Payment
and Disbursement Agent, which shall promptly notify each other Lender, and
each Lender shall promptly and unconditionally pay to the Payment and
Disbursement Agent for the account of such Issuing Bank, in immediately
available funds, the amount of such Lender's Pro Rata Share of such
payment (net of that portion of such payment, if any, made by such Issuing
Bank in its capacity as an issuer of a Letter of Credit), and the Payment
and Disbursement Agent shall promptly pay to such Issuing Bank such
amounts received by it, and any other amounts received by the Payment and
Disbursement Agent for such Issuing Bank's account, pursuant to this Sec
tion 3.1(e). If a Lender does not make its Pro Rata Share of the amount
of such payment available to the Payment and Disbursement Agent, such
Lender agrees to pay to the Payment and Disbursement Agent for the account
of the Issuing Bank, forthwith on demand, such amount together with inter
est thereon at the interest rate then applicable to Base Rate Loans in
accordance with Section 5.1(a). The failure of any Lender to make avail
able to the Payment and Disbursement Agent for the account of an Issuing
Bank its Pro Rata Share of any such payment shall neither relieve any
other Lender of its obligation hereunder to make available to the Payment
and Disbursement Agent for the account of such Issuing Bank such other
Lender's Pro Rata Share of any payment on the date such payment is to be
made nor increase the obligation of any other Lender to make such payment
to the Payment and Disbursement Agent.
(iii) Whenever an Issuing Bank receives a payment on account of a
Reimbursement Obligation, including any interest thereon, as to which the
Payment and Disbursement Agent has previously received payments from any
other Lender for the account of such Issuing Bank pursuant to this Section
3.1(e), such Issuing Bank shall promptly pay to the Payment and
Disbursement Agent and the Payment and Disbursement Agent shall promptly
pay to each other Lender an amount equal to such other Lender's Pro Rata
Share thereof. Each such payment shall be made by such reimbursed Issuing
Bank or the Payment and Disbursement Agent, as the case may be, on the
Business Day on which such Person receives the funds paid to such Person
pursuant to the preceding sentence, if received prior to 11:00 a.m. (New
York time) on such Business Day, and otherwise on the next succeeding Busi
ness Day.
(iv) Upon the written request of any Lender, the Issuing Banks
shall furnish such requesting Lender copies of any Letter of Credit,
Letter of Credit Reimbursement Agreement, and related amendment to which
such Issuing Bank is party and such other documentation as reasonably may
be requested by the requesting Lender.
(v) The obligations of a Lender to make payments to the Payment
and Disbursement Agent for the account of any Issuing Bank with respect to
a Letter of Credit shall be irrevocable, shall not be subject to any quali
fication or exception whatsoever except willful misconduct or gross negli
gence of such Issuing Bank, and shall be honored in accordance with this
Article III (irrespective of the satisfaction of the conditions described
in Sections 6.1 and 6.2, as applicable) under all circumstances, includ
ing, without limitation, any of the following circumstances:
(A) any lack of validity or enforceability of this Agreement or
any of the other Loan Documents;
(B) the existence of any claim, setoff, defense or other right
which the Borrower may have at any time against a beneficiary named
in a Letter of Credit or any transferee of a beneficiary named in a
Letter of Credit (or any Person for whom any such transferee may be
acting), any Lender, or any other Person, whether in connection with
this Agreement, any Letter of Credit, the transactions contemplated
herein or any unrelated transactions (including any underlying trans
actions between the account party and beneficiary named in any Letter
of Credit);
(C) any draft, certificate or any other document presented
under the Letter of Credit having been determined to be forged,
fraudulent, invalid or insufficient in any respect or any statement
therein being untrue or inaccurate in any respect;
(D) the surrender or impairment of any security for the
performance or observance of any of the terms of any of the Loan
Documents;
(E) any failure by that Issuing Bank to make any reports
required pursuant to Section 3.1(h) or the inaccuracy of any such
report; or
(F) the occurrence of any Event of Default or Potential Event
of Default.
(f) Payment of Reimbursement Obligations. The Borrower
unconditionally agrees to pay to each Issuing Bank, in Dollars, the amount
of all Reimbursement Obligations, interest and other amounts payable to
such Issuing Bank under or in connection with the Letters of Credit when
such amounts are due and payable, irrespective of any claim, setoff,
defense or other right which the Borrower may have at any time against any
Issuing Bank or any other Person.
(ii) In the event any payment by the Borrower received by an Issuing
Bank with respect to a Letter of Credit and distributed by the Payment and
Disbursement Agent to the Lenders on account of their participations is
thereafter set aside, avoided or recovered from such Issuing Bank in con
nection with any receivership, liquidation or bankruptcy proceeding, each
Lender which received such distribution shall, upon demand by such Issuing
Bank, contribute such Lender's Pro Rata Share of the amount set aside,
avoided or recovered together with interest at the rate required to be
paid by such Issuing Bank upon the amount required to be repaid by it.
(g) Letter of Credit Fee Charges. In connection with each Letter of
Credit, Borrower hereby covenants to pay to the Payment and Disbursement Agent
the following fees each payable quarterly in arrears (on the first Banking Day
of each calendar quarter following the issuance of each Letter of Credit): (1)
a fee for the account of the Lenders, computed daily on the amount of the
Letter of Credit issued and outstanding at a rate per annum equal to the
"Banks' L/C Fee Rate" (as hereinafter defined) and (2) a fee, for the Issuing
Bank's own account, computed daily on the amount of the Letter of Credit issued
and outstanding at a rate per annum equal to 0.125%. For purposes of this
Agreement, the "Banks' L/C Fee Rate" shall mean, at any time, a rate per annum
equal to the Applicable Margin for Eurodollar Rate Loans less 0.125% per annum.
It is understood and agreed that the last installment of the fees provided for
in this paragraph (g) with respect to any particular Letter of Credit shall be
due and payable on the first day of the fiscal quarter following the return,
undrawn, or cancellation of such Letter of Credit. In addition, the Borrower
shall pay to each Issuing Bank, solely for its own account, the standard
charges assessed by such Issuing Bank in connection with the issuance, admin
istration, amendment and payment or cancellation of Letters of Credit and such
compensation in respect of such Letters of Credit for the Borrower's account as
may be agreed upon by the Borrower and such Issuing Bank from time to time.
(h) Letter of Credit Reporting Requirements. Each Issuing Bank
shall, no later than the tenth (10th) Business Day following the last day of
each calendar month, provide to the Payment and Disbursement Agent, the
Borrower, and each other Lender separate schedules for Commercial Letters of
Credit and Standby Letters of Credit issued as Letters of Credit, in form and
substance reasonably satisfactory to the Payment and Disbursement Agent,
setting forth the aggregate Letter of Credit Obligations outstanding to it at
the end of each month and, to the extent not otherwise provided in accordance
with the provisions of Section 3.1(c)(ii), any information requested by the
Payment and Disbursement Agent or the Borrower relating to the date of issue,
account party, amount, expiration date and reference number of each Letter of
Credit issued by it.
(i) Indemnification; Exoneration. In addition to all other
amounts payable to an Issuing Bank, the Borrower hereby agrees to defend,
indemnify, and save the Payment and Disbursement Agent, each Issuing Bank,
and each other Lender harmless from and against any and all claims, de
mands, liabilities, penalties, damages, losses (other than loss of prof
its), costs, charges and expenses (including reasonable attorneys' fees
but excluding taxes) which the Payment and Disbursement Agent, the Issuing
Banks, or such other Lender may incur or be subject to as a consequence,
direct or indirect, of (A) the issuance of any Letter of Credit other than
as a result of the gross negligence or willful misconduct of the Issuing
Bank, as determined by a court of competent jurisdiction, or (B) the
failure of the Issuing Bank to honor a drawing under such Letter of Credit
as a result of any act or omission, whether rightful or wrongful, of any
present or future de jure or de facto government or Governmental Au
thority.
(ii) As between the Borrower on the one hand and the Lenders on the
other hand, the Borrower assumes all risks of the acts and omissions of,
or misuse of Letters of Credit by, the respective beneficiaries of the
Letters of Credit. In furtherance and not in limitation of the foregoing,
subject to the provisions of the Letter of Credit Reimbursement
Agreements, the Payment and Disbursement Agent, the Issuing Banks and the
other Lenders shall not be responsible for: (A) the form, validity,
legality, sufficiency, accuracy, genuineness or legal effect of any docu
ment submitted by any party in connection with the application for and
issuance of the Letters of Credit, even if it should in fact prove to be
in any or all respects invalid, insufficient, inaccurate, fraudulent or
forged; (B) the validity, legality or sufficiency of any instrument trans
ferring or assigning or purporting to transfer or assign a Letter of
Credit or the rights or benefits thereunder or proceeds thereof, in whole
or in part, which may prove to be invalid or ineffective for any reason;
(C) failure of the beneficiary of a Letter of Credit to duly comply with
conditions required in order to draw upon such Letter of Credit; (D)
errors, omissions, interruptions or delays in transmission or delivery of
any messages, by mail, cable, telegraph, telex or otherwise, whether or
not they be in cipher; (E) errors in interpretation of technical terms;
(F) any loss or delay in the transmission or otherwise of any document
required in order to make a drawing under any Letter of Credit or of the
proceeds thereof; (G) the misapplication by the beneficiary of a Letter of
Credit of the proceeds of any drawing under such Letter of Credit; and (H)
any consequences arising from causes beyond the control of the Payment and
Disbursement Agent, the Issuing Banks or the other Lenders.
3.2 Obligations Several. The obligations of the Payment and
Disbursement Agent, each Issuing Bank, and each other Lender under this Article
III are several and not joint, and no Issuing Bank or other Lender shall be re
sponsible for the obligation to issue Letters of Credit or participation obliga
tion hereunder, respectively, of any other Issuing Bank or other Lender.
ARTICLE IV
PAYMENTS AND PREPAYMENTS
4.1 Prepayments; Reductions in Revolving Credit Commitments.
(a) Voluntary Prepayments. The Borrower may, at any time and from
time to time, prepay the Loans in part or in their entirety, subject to the
following limitations. The Borrower shall give at least five (5) Business Days'
prior written notice to the Payment and Disbursement Agent (which the Payment
and Disbursement Agent shall promptly transmit to each Lender) of any prepay
ment in the entirety to be made prior to the occurrence of an Event of Default,
which notice of prepayment shall specify the date (which shall be a Business
Day) of prepayment. When notice of prepayment is delivered as provided herein,
the outstanding principal amount of the Loans on the prepayment date specified
in the notice shall become due and payable on such prepayment date. Each volun
tary partial prepayment of the Loans shall be in a minimum amount of $1,000,000
and in integral multiples of $1,000,000 in excess of that amount. Eurodollar
Rate Loans, IBOR Rate Loans, and Money Market Loans may be prepaid in part or
in their entirety only upon payment of the amounts described in Section 5.2(f).
(b) Voluntary Reductions In Revolving Credit Commitments. The
Borrower may, upon at least fifteen (15) days' prior written notice to the
Payment and Disbursement Agent (which the Payment and Disbursement Agent shall
promptly transmit to each Lender), at any time and from time to time, terminate
in whole or permanently reduce in part the Revolving Credit Commitments,
provided that the Borrower shall have made whatever payment may be required to
reduce the Revolving Credit Obligations to an amount less than or equal to the
Revolving Credit Commitments as reduced or terminated, which amount shall
become due and payable on the date specified in such notice. Any partial
reduction of the Revolving Credit Commitments shall be in an aggregate minimum
amount of $1,000,000 and integral multiples of $1,000,000 in excess of that
amount, and shall reduce the Revolving Credit Commitment of each Lender pro
portionately in accordance with its Pro Rata Share. Any notice of termination
or reduction given to the Payment and Disbursement Agent under this Sec
tion 4.1(b) shall specify the date (which shall be a Business Day) of such
termination or reduction and, with respect to a partial reduction, the
aggregate principal amount thereof.
(c) No Penalty. The prepayments and payments in respect of
reductions and terminations described in clauses (a) and (b) of this Section
4.1 may be made without premium or penalty (except as provided in Section
5.2(f)).
(d) Mandatory Prepayment. If at any time from and after the Closing
Date: (i) the Borrower merges or consolidates with another Person (other than
pursuant to the SDG Reorganization Transactions, which are expressly permitted
subject to the terms of Article XIV hereof) and the Borrower is not the sur
viving entity, or (ii) the Borrower or any Consolidated Subsidiary sells, trans
fers, assigns or conveys assets, the book value of which (computed in accor
dance with GAAP but without deduction for depreciation), in the aggregate of
all such sales, transfers, assignments, foreclosures, or conveyances exceeds
30% of the Capitalization Value, or (iii) the portion of Capitalization Value
attributable to the aggregate Limited Minority Holdings (but excluding the
Borrower's interest in Pentagon Fashion Center) of the Borrower and its Consoli
dated Subsidiaries exceed 20% of Capitalization Value, or (iv) the Borrower or
the Management Company ceases to provide property management and leasing servic
es to 33% of the total number of Shopping Centers in which the Borrower has an
ownership interest (the date any such event shall occur being the "Prepayment
Date"), the Revolving Credit Commitment shall be terminated and the Borrower
shall be required to prepay the Loans in their entirety as if the Prepayment
Date were the Revolving Credit Termination Date. The Borrower shall immedi
ately make such prepayment together with interest accrued to the date of the
prepayment on the principal amount prepaid and shall return or cause to be re
turned all Letters of Credit to the applicable Lender. In connection with the
prepayment of any Loan prior to the maturity thereof, the Borrower shall also
pay any applicable expenses pursuant to Section 5.2(f). Each such prepayment
shall be applied to prepay ratably the Loans of the Lenders. Amounts prepaid
pursuant to this Section 4.1(d) may not be reborrowed. As used in this Section
4.1(d) only, the phrase "sells, transfers, assigns or conveys" shall not
include (i) sales or conveyances among Borrower and any Consolidated Subsidiar
ies, or (ii) mortgages secured by Real Property.
4.2 Payments.
(a) Manner and Time of Payment. All payments of principal of and
interest on the Loans and Reimbursement Obligations and other Obligations
(including, without limitation, fees and expenses) which are payable to the
Payment and Disbursement Agent, the Arrangers or any other Lender shall be made
without condition or reservation of right, in immediately available funds,
delivered to the Payment and Disbursement Agent (or, in the case of
Reimbursement Obligations, to the pertinent Arranger) not later than 12:00 noon
(New York time) on the date and at the place due, to such account of the Payme
nt and Disbursement Agent (or such Arranger) as it may designate, for the
account of the Payment and Disbursement Agent, an Arranger, or such other Lend
er, as the case may be; and funds received by the Payment and Disbursement
Agent (or such Arranger), including, without limitation, funds in respect of
any Loans to be made on that date, not later than 12:00 noon (New York time) on
any given Business Day shall be credited against payment to be made that day
and funds received by the Payment and Disbursement Agent (or such Arranger)
after that time shall be deemed to have been paid on the next succeeding Busi
ness Day. Payments actually received by the Payment and Disbursement Agent for
the account of the Lenders, or any of them, shall be paid to them by the Payme
nt and Disbursement Agent promptly after receipt thereof.
(b) Apportionment of Payments. Subject to the provisions of
Section 4.2(b)(v), all payments of principal and interest in respect of
outstanding Loans, all payments in respect of Reimbursement Obligations,
all payments of fees and all other payments in respect of any other Obliga
tions, shall be allocated among such of the Lenders as are entitled
thereto, in proportion to their respective Pro Rata Shares or otherwise as
provided herein. Subject to the provisions of Section 4.2(b)(ii), all
such payments and any other amounts received by the Payment and
Disbursement Agent from or for the benefit of the Borrower shall be
applied in the following order:
(A) to pay principal of and interest on any portion of the Loans which
the Payment and Disbursement Agent may have advanced on behalf of any
Lender other than UBS for which the Payment and Disbursement Agent has not
then been reimbursed by such Lender or the Borrower,
(B) to pay all other Obligations then due and payable and
(C) as the Borrower so designates.
Unless otherwise designated by the Borrower, all principal payments in respect
of Committed Loans shall be applied first, to repay outstanding Base Rate
Loans, and then to repay outstanding Eurodollar Rate Loans and IBOR Rate Loans,
with those Eurodollar Rate Loans and IBOR Rate Loans which have earlier
expiring Interest Periods being repaid prior to those which have later expiring
Interest Periods.
(ii) After the occurrence of an Event of Default and while the same
is continuing, the Payment and Disbursement Agent shall apply all payments
in respect of any Obligations in the following order:
(A) first, to pay principal of and interest on any portion of
the Loans which the Payment and Disbursement Agent may have advanced
on behalf of any Lender other than UBS for which the Payment and
Disbursement Agent has not then been reimbursed by such Lender or the
Borrower;
(B) second, to pay Obligations in respect of any fees, expense
reimbursements or indemnities then due to the Payment and
Disbursement Agent;
(C) third, to pay principal of and interest on Letter of Credit
Obligations (or, to the extent such Obligations are contingent, depos
ited with the Payment and Disbursement Agent to provide cash collater
al in respect of such Obligations);
(D) fourth, to pay Obligations in respect of any fees, expense
reimbursements or indemnities then due to the Lenders and the Co-
Agents;
(E) fifth, to pay interest due in respect of Loans;
(F) sixth, to the ratable payment or prepayment of principal
outstanding on Loans; and
(G) seventh, to the ratable payment of all other Obligations.
The order of priority set forth in this Section 4.2(b)(ii) and the related
provisions of this Agreement are set forth solely to determine the rights and
priorities of the Payment and Disbursement Agent, the Arrangers, the other Lend
ers and other Holders as among themselves. The order of priority set forth in
clauses (C) through (G) of this Section 4.2(b)(ii) may at any time and from
time to time be changed by the Requisite Lenders without necessity of notice to
or consent of or approval by the Borrower, any Holder which is not a Lender, or
any other Person. The order of priority set forth in clauses (A) and (B) of
this Section 4.2(b)(ii) may be changed only with the prior written consent of
the Payment and Disbursement Agent.
(iii) The Payment and Disbursement Agent, in its sole discretion
subject only to the terms of this Section 4.2(b)(iii), may pay from the
proceeds of Loans made to the Borrower hereunder, whether made following a
request by the Borrower pursuant to Section 2.1 or a deemed request as
provided in this Section 4.2(b)(iii), all amounts payable by the Borrower
hereunder, including, without limitation, amounts payable with respect to
payments of principal, interest, Reimbursement Obligations and fees and
all reimbursements for expenses pursuant to Section 15.2. The Borrower
hereby irrevocably authorizes the Lenders to make Loans, which Loans shall
be Base Rate Loans, in each case, upon notice from the Payment and
Disbursement Agent as described in the following sentence for the purpose
of paying principal, interest, Reimbursement Obligations and fees due from
the Borrower, reimbursing expenses pursuant to Section 15.2 and paying any
and all other amounts due and payable by the Borrower hereunder or under
the Notes, and agrees that all such Loans so made shall be deemed to have
been requested by it pursuant to Section 2.1 as of the date of the afore
mentioned notice. The Payment and Disbursement Agent shall request Loans
on behalf of the Borrower as described in the preceding sentence by noti
fying the Lenders by facsimile transmission or other similar form of
transmission (which notice the Payment and Disbursement Agent shall
thereafter promptly transmit to the Borrower), of the amount and Funding
Date of the proposed Borrowing and that such Borrowing is being requested
on the Borrower's behalf pursuant to this Section 4.2(b)(iii). On the
proposed Funding Date, the Lenders shall make the requested Loans in accor
dance with the procedures and subject to the conditions specified in Sec
tion 2.1.
(iv) Subject to Section 4.2(b)(v), the Payment and Disbursement
Agent shall promptly distribute to each Arranger and each other Lender at
its primary address set forth on the appropriate signature page hereof or
the signature page to the Assignment and Acceptance by which it became a
Lender, or at such other address as a Lender or other Holder may request
in writing, such funds as such Person may be entitled to receive, subject
to the provisions of Article XII; provided that the Payment and
Disbursement Agent shall under no circumstances be bound to inquire into
or determine the validity, scope or priority of any interest or entitle
ment of any Holder and may suspend all payments or seek appropriate relief
(including, without limitation, instructions from the Requisite Lenders or
an action in the nature of interpleader) in the event of any doubt or
dispute as to any apportionment or distribution contemplated hereby.
(v) In the event that any Lender fails to fund its Pro Rata Share
of any Loan requested by the Borrower which such Lender is obligated to
fund under the terms of this Agreement (the funded portion of such Loan
being hereinafter referred to as a "Non Pro Rata Loan"), until the earlier
of such Lender's cure of such failure and the termination of the Revolving
Credit Commitments, the proceeds of all amounts thereafter repaid to the
Payment and Disbursement Agent by the Borrower and otherwise required to
be applied to such Lender's share of all other Obligations pursuant to the
terms of this Agreement shall be advanced to the Borrower by the Payment
and Disbursement Agent on behalf of such Lender to cure, in full or in
part, such failure by such Lender, but shall nevertheless be deemed to
have been paid to such Lender in satisfaction of such other Obligations.
Notwithstanding anything in this Agreement to the contrary:
(A) the foregoing provisions of this Section 4.2(b)(v) shall apply
only with respect to the proceeds of payments of Obligations and
shall not affect the conversion or continuation of Loans pursuant to
Section 5.1(c);
(B) a Lender shall be deemed to have cured its failure to fund its
Pro Rata Share of any Loan at such time as an amount equal to such
Lender's original Pro Rata Share of the requested principal portion
of such Loan is fully funded to the Borrower, whether made by such
Lender itself or by operation of the terms of this Section 4.2(b)(v),
and whether or not the Non Pro Rata Loan with respect thereto has
been repaid, converted or continued;
(C) amounts advanced to the Borrower to cure, in full or in part,
any such Lender's failure to fund its Pro Rata Share of any Loan
("Cure Loans") shall bear interest at the Base Rate in effect from
time to time, and for all other purposes of this Agreement shall be
treated as if they were Base Rate Loans; and
(D) regardless of whether or not an Event of Default has occurred
or is continuing, and notwithstanding the instructions of the Borrow
er as to its desired application, all repayments of principal which,
in accordance with the other terms of this Section 4.2, would be
applied to the outstanding Base Rate Loans shall be applied first,
ratably to all Base Rate Loans constituting Non Pro Rata Loans,
second, ratably to Base Rate Loans other than those constituting Non
Pro Rata Loans or Cure Loans and, third, ratably to Base Rate Loans
constituting Cure Loans.
(c) Payments on Non-Business Days. Whenever any payment to be made
by the Borrower hereunder or under the Notes is stated to be due on a day which
is not a Business Day, the payment shall instead be due on the next succeeding
Business Day (or, as set forth in Section 5.2(b)(iii), the next preceding
Business Day).
4.3 Promise to Repay; Evidence of Indebtedness.
(a) Promise to Repay. The Borrower hereby agrees to pay when due
the principal amount of each Loan which is made to it, and further agrees to
pay all unpaid interest accrued thereon, in accordance with the terms of this
Agreement and the Notes. The Borrower shall execute and deliver to each Lender
on the Closing Date, a promissory note, in form and substance acceptable to the
Payment and Disbursement Agent and such Lender, evidencing the Loans and there
after shall execute and deliver such other promissory notes as are necessary to
evidence the Loans owing to the Lenders after giving effect to any assignment
thereof pursuant to Section 15.1, all in form and substance acceptable to the
Payment and Disbursement Agent and the parties to such assignment (all such
promissory notes and all amendments thereto, replacements thereof and
substitutions therefor being collectively referred to as the "Notes"; and
"Note" means any one of the Notes).
(b) Loan Account. Each Lender shall maintain in accordance with its
usual practice an account or accounts (a "Loan Account") evidencing the
Indebtedness of the Borrower to such Lender resulting from each Loan owing to
such Lender from time to time, including the amount of principal and interest
payable and paid to such Lender from time to time hereunder and under the
Notes.
(c) Control Account. The Register maintained by the Payment and
Disbursement Agent pursuant to Section 15.1(c) shall include a control account,
and a subsidiary account for each Lender, in which accounts (taken together)
shall be recorded (i) the date and amount of each Borrowing made hereunder, the
type of Loan comprising such Borrowing and any Eurodollar Interest Period or
IBOR Interest Period applicable thereto, (ii) the effective date and amount of
each Assignment and Acceptance delivered to and accepted by it and the parties
thereto, (iii) the amount of any principal or interest due and payable or to
become due and payable from the Borrower to each Lender hereunder or under the
Notes and (iv) the amount of any sum received by the Payment and Disbursement
Agent from the Borrower hereunder and each Lender's share thereof.
(d) Entries Binding. The entries made in the Register and each Loan
Account shall be conclusive and binding for all purposes, absent manifest
error.
(e) No Recourse to Limited Partners or General Partners.
Notwithstanding anything contained in this Agreement to the contrary, it is
expressly understood and agreed that nothing herein or in the Notes shall be
construed as creating any liability on any Limited Partner, any General
Partner, or any partner, officer, shareholder or director of any Limited
Partner or any General Partner to pay any of the Obligations other than liabili
ty arising from or in connection with (i) fraud or (ii) the misappropriation or
misapplication of proceeds of the Loans; but nothing contained in this Section
4.3(e) shall be construed to prevent the exercise of any remedy allowed to the
Payment and Disbursement Agent, the Arrangers, the Co-Agents or the Lenders by
law or by the terms of this Agreement or the other Loan Documents which does
not relate to or result in such an obligation by any Limited Partner or any
General Partner to pay money.
ARTICLE V
INTEREST AND FEES
5.1 Interest on the Loans and other Obligations.
(a) Rate of Interest. All Loans and the outstanding principal
balance of all other Obligations shall bear interest on the unpaid principal
a2mount thereof from the date such Loans are made and such other Obligations are
due and payable until paid in full, except as otherwise provided in Section
5.1(d), as follows:
(i) If a Base Rate Loan or such other Obligation, at a rate per
annum equal to the sum of (A) the Base Rate, as in effect from time
to time as interest accrues, plus (B) the then Applicable Margin for
Base Rate Loans; and
(ii) If a Eurodollar Rate Loan, at a rate per annum equal to
the sum of (A) the Eurodollar Rate determined for the applicable
Eurodollar Interest Period, plus (B) the then Applicable Margin for
Eurodollar Rate Loans;
(iii) If an IBOR Rate Loan, at a rate per annum equal to the sum of
(A) the IBOR Rate determined for the applicable IBOR Interest Period,
plus (B) the then Applicable Margin for IBOR Rate Loans;
(iv) If a Eurodollar Money Market Loan, at a rate per annum equal to
either (A) the sum of (1) the Eurodollar Rate determined for the
applicable Eurodollar Interest Period (determined as if the related
Money Market Borrowing were a Committed Eurodollar Rate Borrowing)
plus (or minus) (2) the Money Market Margin quoted by the Lender
making such Money Market Loan in accordance with Section 2.2. or (B)
the Money Market Rate, as applicable; and
(v) If an IBOR Money Market Loan, at a rate per annum equal to either
(A) the sum of (1) the IBOR Rate determined for the applicable IBOR
Interest Period (determined as if the related Money Market Borrowing were
a Committed IBOR Rate Borrowing) plus (or minus) (2) the Money Market
Margin quoted by the Lender making such Money Market Loan in accordance
with Section 2.2. or (B) the Money Market Rate, as applicable.
The applicable basis for determining the rate of interest on the Loans shall be
selected by the Borrower at the time a Notice of Borrowing or a Notice of
Conversion/Continuation is delivered by the Borrower to the Payment and
Disbursement Agent; provided, however, the Borrower may not select the Euro
dollar Rate or the IBOR Rate as the applicable basis for determining the rate
of interest on such a Loan if at the time of such selection an Event of Default
or a Potential Event of Default would occur or has occurred and is continuing
and further provided that, from and after the occurrence of an Event of Default
or a Potential Event of Default, each Eurodollar Rate Loan and IBOR Rate Loan
then outstanding may, at the Payment and Disbursement Agent's option, convert
to a Base Rate Loan. If on any day any Loan is outstanding with respect to
which notice has not been timely delivered to the Payment and Disbursement
Agent in accordance with the terms of this Agreement specifying the basis for
determining the rate of interest on that day, then for that day interest on
that Loan shall be determined by reference to the Base Rate.
(b) Interest Payments. (i) Interest accrued on each Committed
Loan shall be calculated on the last day of each calendar month and shall
be payable in arrears (A) on the first day of each calendar month, com
mencing on the first such day following the making of such Committed Loan,
and (B) if not theretofore paid in full, at maturity (whether by accelera
tion or otherwise) of such Committed Loan.
(ii) Interest accrued on each Money Market Loan shall be calculat
ed on the last day of each calendar month during the Interest Period
applicable thereto (or, if such Interest Period is for a period one month
or less, on the last day of such Interest Period) and shall be payable in
arrears (A) if such Money Market Loan has an Interest Period longer than
one month (1) on the first day of each calendar month, commencing on the
first such day following the making of such Money Market Loan, and (2) if
not theretofore paid in full, at maturity (whether by acceleration or
otherwise) of such Money Market Loan; and (B) if such Money Market Loan
has an Interest Period of one month or less, at maturity (whether by accel
eration or otherwise) of such Money Market Loan.
(iii) Interest accrued on the principal balance of all other
Obligations shall be calculated on the last day of each calendar month and
shall be payable in arrears (A) on the first day of each calendar month,
commencing on the first such day following the incurrence of such
Obligation, (B) upon repayment thereof in full or in part, and (C) if not
theretofore paid in full, at the time such other Obligation becomes due
and payable (whether by acceleration or otherwise).
(c) Conversion or Continuation. The Borrower shall have the
option (A) to convert at any time all or any part of outstanding Base Rate
Loans to Eurodollar Rate Loans or IBOR Rate Loans; (B) to convert all or
any part of outstanding Eurodollar Rate Loans having Eurodollar Interest
Periods which expire on the same date to Base Rate Loans or IBOR Rate
Loans on such expiration date; (C) to convert all or any part of
outstanding IBOR Rate Loans having IBOR Interest Periods which expire on
the same date to Base Rate Loans or Eurodollar Rate Loans on such expira
tion date; (D) to continue all or any part of outstanding Eurodollar Rate
Loans having Eurodollar Interest Periods which expire on the same date as
Eurodollar Rate Loans, and the succeeding Eurodollar Interest Period of
such continued Loans shall commence on such expiration date; (E) to
continue all or any part of outstanding IBOR Rate Loans having IBOR
Interest Periods which expire on the same date as IBOR Rate Loans, and the
succeeding IBOR Interest Period of such continued Loans shall commence on
such expiration date; provided, however, no such outstanding Loan may be
continued as, or be converted into, a Eurodollar Rate Loan or an IBOR Rate
Loan (i) if the continuation of, or the conversion into, would violate any
of the provisions of Section 5.2 or (ii) if an Event of Default or a
Potential Event of Default would occur or has occurred and is continuing.
Any conversion into or continuation of Eurodollar Rate Loans or IBOR Rate
Loans under this Section 5.1(c) shall be in a minimum amount of $1,000,000
and in integral multiples of $100,000 in excess of that amount, except in
the case of a conversion into or a continuation of an entire Borrowing of
Non Pro Rata Loans.
(ii) To convert or continue a Loan under Section 5.1(c)(i), the
Borrower shall deliver a Notice of Conversion/Continuation to the Payment
and Disbursement Agent no later than 11:00 a.m. (New York time) at least
three (3) Business Days in advance of the proposed conversion/continuation
date. A Notice of Conversion/Continuation shall specify (A) the proposed
conversion/continuation date (which shall be a Business Day), (B) the prin
cipal amount of the Loan to be converted/continued, (C) whether such Loan
shall be converted and/or continued, (D) in the case of a conversion to,
or continuation of, a Eurodollar Rate Loan, the requested Eurodollar
Interest Period, and (E) in the case of a conversion to, or continuation
of, an IBOR Rate Loan, the requested IBOR Interest Period. In lieu of
delivering a Notice of Conversion/Continuation, the Borrower may give the
Payment and Disbursement Agent telephonic notice of any proposed conver
sion/continuation by the time required under this Section 5.1(c)(ii), if
the Borrower confirms such notice by delivery of the Notice of Conver
sion/Continuation to the Payment and Disbursement Agent by facsimile
transmission promptly, but in no event later than 3:00 p.m. (New York
time) on the same day. Promptly after receipt of a Notice of Conver
sion/Continuation under this Section 5.1(c)(ii) (or telephonic notice in
lieu thereof), the Payment and Disbursement Agent shall notify each Lender
by facsimile transmission, or other similar form of transmission, of the
proposed conversion/continuation. Any Notice of Conversion/Continuation
for conversion to, or continuation of, a Loan (or telephonic notice in
lieu thereof) given pursuant to this Section 5.1(c)(ii) shall be irrevoca
ble, and the Borrower shall be bound to convert or continue in accordance
therewith. In the event no Notice of Conversion/Continuation is delivered
as and when specified in this Section 5.1(c)(ii) with respect to out
standing Eurodollar Rate Loans or IBOR Rate Loans, upon the expiration of
the Interest Period applicable thereto, such Loans shall automatically be
continued as Eurodollar Rate Loans with a Eurodollar Interest Period of
thirty (30) days; provided, however, no such outstanding Loan may be
continued as, or be converted into, a Eurodollar Rate Loan or an IBOR Rate
Loan (i) if the continuation of, or the conversion into, would violate any
of the provisions of Section 5.2 or (ii) if an Event of Default or a
Potential Event of Default would occur or has occurred and is continuing.
(d) Default Interest. Notwithstanding the rates of interest
specified in Section 5.1(a) or elsewhere in this Agreement, effective
immediately upon the occurrence of an Event of Default, and for as long there
after as such Event of Default shall be continuing, the principal balance of
all Loans and other Obligations shall bear interest at a rate equal to the sum
of (A) the Base Rate, as in effect from time to time as interest accrues, plus
(B) four percent (4.0%) per annum.
(e) Computation of Interest. Interest on all Obligations shall be
computed on the basis of the actual number of days elapsed in the period during
which interest accrues and a year of 360 days. In computing interest on any
Loan, the date of the making of the Loan or the first day of a Eurodollar
Interest Period, as the case may be, shall be included and the date of payment
or the expiration date of a Eurodollar Interest Period, as the case may be,
shall be excluded; provided, however, if a Loan is repaid on the same day on
which it is made, one (1) day's interest shall be paid on such Loan.
(f) Eurodollar Rate Information. Upon the reasonable request of
the Borrower from time to time, the Payment and Disbursement Agent shall
promptly provide to the Borrower such information with respect to the
applicable Eurodollar Rate as may be so requested.
(g) IBOR Rate Information. Upon the reasonable request of the
Borrower from time to time, the Payment and Disbursement Agent shall promptly
provide to the Borrower such information with respect to the applicable IBOR
Rate as may be so requested.
5.2 Special Provisions Governing Eurodollar Rate Loans, IBOR Rate
Loans, and Money Market Loans.
(a) Amount of Eurodollar Rate Loans and IBOR Rate Loans. Each Euro
dollar Rate Loan shall be in a minimum principal amount of $1,500,000 and in
integral multiples of $100,000 in excess of that amount. Each IBOR Rate Loan
shall be in a minimum principal amount of $1,500,000 and in integral multiples
of $100,000 in excess of that amount. IBOR Rate Loans shall not, in the
aggregate outstanding at any time, exceed the lesser of (i) $150,000,000 and
(ii) the Revolving Credit Availability.
(b) Determination of Eurodollar Interest Period. By giving notice
as set forth in Section 2.1(b) (with respect to a Borrowing of Eurodollar Rate
Loans or IBOR Rate Loans), Section 2.2 (with respect to a Borrowing of Money
Market Loans), or Section 5.1(c) (with respect to a conversion into or continua
tion of Eurodollar Rate Loans), the Borrower shall have the option, subject to
the other provisions of this Section 5.2, to select an interest period (each,
an "Interest Period") to apply to the Loans described in such notice, subject
to the following provisions:
(i) The Borrower may only select, as to a particular Borrowing of
Eurodollar Rate Loans, an Interest Period (each, a "Eurodollar
Interest Period") of one, two, three or six months in duration or,
with the prior written consent of the Arrangers, a shorter or a
longer duration;
(ii) The Borrower may only select, as to a particular Borrowing of
Eurodollar Money Market Loans, a Eurodollar Interest Period of one,
two, or three months in duration;
(iii) In the case of immediately successive Eurodollar Interest
Periods applicable to a Borrowing of Eurodollar Rate Loans, each suc
cessive Eurodollar Interest Period shall commence on the day on which
the next preceding Eurodollar Interest Period expires;
(iv) If any Eurodollar Interest Period would otherwise expire on a
day which is not a Business Day, such Eurodollar Interest Period
shall be extended to expire on the next succeeding Business Day if
the next succeeding Business Day occurs in the same calendar month,
and if there will be no succeeding Business Day in such calendar
month, the Eurodollar Interest Period shall expire on the immediately
preceding Business Day;
(v) The Borrower may only select, as to a particular Borrowing of
IBOR Rate Loans, an Interest Period (each, an "IBOR Interest Period")
of fourteen (14) days in duration, provided that no IBOR Interest
Period shall exist during any IBOR Black-Out Period;
(vi) The Borrower may only select, as to a particular Borrowing of
IBOR Money Market Loans, an IBOR Interest Period of fourteen (14)
days in duration, provided that no IBOR Interest Period shall exist
during any IBOR Black-Out Period;
(vii) In the case of immediately successive IBOR Interest Periods
applicable to a Borrowing of IBOR Rate Loans, each successive IBOR
Interest Period shall commence on the day on which the next preceding
IBOR Interest Period expires;
(viii) If any IBOR Interest Period would otherwise expire on a day
which is not a Business Day, such IBOR Interest Period shall be
extended to expire on the next succeeding Business Day if the next
succeeding Business Day occurs in the same calendar month, and if
there will be no succeeding Business Day in such calendar month, the
IBOR Interest Period shall expire on the immediately preceding
Business Day;
(ix) The Borrower may not select an IBOR Interest Period as to any
IBOR Rate Loan or IBOR Money Market Loan if such IBOR Interest Period
terminates during any IBOR Black-Out Period;
(x) The Borrower may not select an Interest Period as to any Loan
if such Interest Period terminates later than the Revolving Credit
Termination Date;
(xi) The Borrower may not select an Interest Period with respect to
any portion of principal of a Loan which extends beyond a date on
which the Borrower is required to make a scheduled payment of such
portion of principal; and
(xii) There shall be no more than twelve (12) Interest Periods in
effect at any one time with respect to Eurodollar Rate Loans or IBOR
Rate Loans.
(C) Determination of Eurodollar Interest Rate and IBOR Rate.
(i) As soon as practicable on the second Business Day prior to the
first day of each Eurodollar Interest Period (the "Eurodollar Interest
Rate Determination Date"), the Payment and Disbursement Agent shall
determine (pursuant to the procedures set forth in the definition of
"Eurodollar Rate") the interest rate which shall apply to the Eurodollar
Rate Loans or Eurodollar Money Market Loans for which an interest rate is
then being determined for the applicable Eurodollar Interest Period and
shall promptly give notice thereof (in writing or by telephone confirmed
in writing) to the Borrower and to each Lender. The Payment and
Disbursement Agent's determination shall be presumed to be correct, absent
manifest error, and shall be binding upon the Borrower.
(ii) As soon as practicable on (A) the Business Day prior to the
first day of each IBOR Interest Period, with respect to an IBOR Rate Loan
and (B) the second Business Day prior to the first day of each IBOR
Interest Period with respect to an IBOR Money Market Loan (each, an "IBOR
Interest Rate Determination Date"), the Payment and Disbursement Agent
shall determine (pursuant to the procedures set forth in the definition of
"IBOR Rate") the interest rate which shall apply to the IBOR Rate Loans or
IBOR Money Market Loans for which an interest rate is then being deter
mined for the applicable IBOR Interest Period and shall promptly give
notice thereof (in writing or by telephone confirmed in writing) to the
Borrower and to each Lender. The Payment and Disbursement Agent's determi
nation shall be presumed to be correct, absent manifest error, and shall
be binding upon the Borrower and each Lender.
(d) Interest Rate Unascertainable, Inadequate or Unfair. In the
event that at least one (1) Business Day before a Eurodollar Interest Rate
Determination Date or an IBOR Interest Rate Determination Date:
(i) the Payment and Disbursement Agent is advised (A) by the
Reference Bank that deposits in Dollars (in the applicable amounts)
are not being offered by the Reference Bank in the London interbank
market for such Eurodollar Interest Period, or (B) by the IBOR Refer
ence Banks that deposits in Dollars (in the applicable amounts) are
not being offered by the Reference Banks in the interbank market for
such IBOR Interest Period; or
(ii) the Payment and Disbursement Agent determines that adequate
and fair means do not exist for ascertaining the applicable interest
rates by reference to which the Eurodollar Rate or the IBOR Rate (as
applicable)then being determined is to be fixed; or
(iii) the Requisite Lenders advise the Payment and Disbursement
Agent that (A) the Eurodollar Rate for Eurodollar Rate Loans
comprising such Borrowing will not adequately reflect the cost to
such Requisite Lenders of obtaining funds in Dollars in the London
interbank market in the amount substantially equal to such Lenders'
Eurodollar Rate Loans in Dollars and for a period equal to such Euro
dollar Interest Period, or (B) the IBOR Rate for IBOR Rate Loans
comprising such Borrowing will not adequately reflect the cost to
such Requisite Lenders of obtaining funds in Dollars in the interbank
market in the amount substantially equal to such Lenders' IBOR Rate
Loans in Dollars and for a period equal to such IBOR Interest Period;
or
(iv) (A) the applicable Lender(s) advise the Payment and
Disbursement Agent that the Eurodollar Rate for Eurodollar Money
Market Loans comprising such Borrowing will not adequately reflect
the cost to such Lender(s) of obtaining funds in Dollars in the
London Interbank market in the amount substantially equal to such
Lender(s)' Money Market Loans in Dollars and for a period equal to
such Eurodollar Interest Period, or (B) the applicable Lender(s)
advise the Payment and Disbursement Agent that the IBOR Rate for IBOR
Money Market Loans comprising such Borrowing will not adequately
reflect the cost to such Lender(s) of obtaining funds in Dollars in
the interbank market in the amount substantially equal to such
Lender(s)' IBOR Money Market Loans in Dollars and for a period equal
to such IBOR Interest Period;
then the Payment and Disbursement Agent shall forthwith give notice thereof to
the Borrower, whereupon (until the Payment and Disbursement Agent notifies the
Borrower that the circumstances giving rise to such suspension no longer exist)
the right of the Borrower to elect to have Loans bear interest based upon the
Eurodollar Rate or the IBOR Rate, as applicable, shall be suspended and each
outstanding Eurodollar Rate Loan and Eurodollar Money Market Loan or IBOR Rate
Loan and IBOR Money Market Loan, as applicable, shall be converted into a Base
Rate Loan on the last day of the then current Interest Period therefor, notwith
standing any prior election by the Borrower to the contrary.
(e) Illegality. If at any time any Lender determines (which
determination shall, absent manifest error, be final and conclusive and
binding upon all parties) that the making or continuation of any Eurodol
lar Rate Loan, IBOR Rate Loan or Money Market Loan has become unlawful or
impermissible by compliance by that Lender with any law, governmental
rule, regulation or order of any Governmental Authority (whether or not
having the force of law and whether or not failure to comply therewith
would be unlawful or would result in costs or penalties), then, and in any
such event, such Lender may give notice of that determination, in writing,
to the Borrower and the Payment and Disbursement Agent, and the Payment
and Disbursement Agent shall promptly transmit the notice to each other
Lender.
(ii) When notice is given by a Lender under Section 5.2(e)(i),
(A) the Borrower's right to request from such Lender and such Lender's
obligation, if any, to make Eurodollar Rate Loans or IBOR Rate Loans, as
applicable, shall be immediately suspended, and such Lender shall make a
Base Rate Loan as part of any requested Borrowing of Eurodollar Rate Loans
or IBOR Rate Loans (as applicable) and (B) if the affected Eurodollar Rate
Loans, IBOR Rate Loans, Eurodollar Money Market Loans, or IBOR Money
Market Loans are then outstanding, the Borrower shall immediately, or if
permitted by applicable law, no later than the date permitted thereby,
upon at least one (1) Business Day's prior written notice to the Payment
and Disbursement Agent and the affected Lender, convert each such Loan
into a Base Rate Loan.
(iii) If at any time after a Lender gives notice under Section
5.2(e)(i) such Lender determines that it may lawfully make Eurodollar Rate
Loans and/or IBOR Rate Loans (as applicable), such Lender shall promptly
give notice of that determination, in writing, to the Borrower and the
Payment and Disbursement Agent, and the Payment and Disbursement Agent
shall promptly transmit the notice to each other Lender. The Borrower's
right to request, and such Lender's obligation, if any, to make Eurodollar
Rate Loans and/or IBOR Rate Loans(as applicable) shall thereupon be
restored.
(f) Compensation. In addition to all amounts required to be paid by
the Borrower pursuant to Section 5.1 and Article XIII, the Borrower shall
compensate each Lender, upon demand, for all losses, expenses and liabilities
(including, without limitation, any loss or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by such Lender
to fund or maintain such Lender's Eurodollar Rate Loans, IBOR Rate Loans and/or
Money Market Loans to the Borrower but excluding any loss of Applicable Margin
on the relevant Loans) which that Lender may sustain (i) if for any reason a
Borrowing, conversion into or continuation of Eurodollar Rate Loans and/or
Eurodollar Money Market Loans or IBOR Rate Loans and/or IBOR Rate Money Market
Loans does not occur on a date specified therefor in a Notice of Borrowing or a
Notice of Conversion/Continuation given by the Borrower or in a telephonic
request by it for borrowing or conversion/ continuation or a successive Euro
dollar Interest Period or IBOR Interest Period does not commence after notice
therefor is given pursuant to Section 5.1(c), including, without limitation,
pursuant to Section 5.2(d), (ii) if for any reason any Eurodollar Rate Loan,
IBOR Rate Loan or Money Market Loan is prepaid (including, without limitation,
mandatorily pursuant to Section 4.1(d)) on a date which is not the last day of
the applicable Interest Period, (iii) as a consequence of a required conversion
of a Eurodollar Rate Loan, IBOR Rate Loan or Money Market Loan to a Base Rate
Loan as a result of any of the events indicated in Section 5.2(d), or (iv) as a
consequence of any failure by the Borrower to repay a Eurodollar Rate Loan,
IBOR Rate Loan or Money Market Loan when required by the terms of this Agree
ment. The Lender making demand for such compensation shall deliver to the
Borrower concurrently with such demand a written statement in reasonable detail
as to such losses, expenses and liabilities, and this statement shall be con
clusive as to the amount of compensation due to that Lender, absent manifest
error.
(g) Booking of Eurodollar Rate Loans, IBOR Rate Loans and Money
Market Loans. Any Lender may make, carry or transfer Eurodollar Rate Loans,
IBOR Rate Loans and Money Market Loans at, to, or for the account of, its Euro
dollar Lending Office or Eurodollar Affiliate or its other offices or
Affiliates. No Lender shall be entitled, however, to receive any greater
amount under Sections 4.2 or 5.2(f) or Article XIII as a result of the transfer
of any such Eurodollar Rate Loan, IBOR Rate Loan or Money Market Loan to any
office (other than such Eurodollar Lending Office) or any Affiliate (other than
such Eurodollar Affiliate) than such Lender would have been entitled to receive
immediately prior thereto, unless (i) the transfer occurred at a time when
circumstances giving rise to the claim for such greater amount did not exist
and (ii) such claim would have arisen even if such transfer had not occurred.
(h) Affiliates Not Obligated. No Eurodollar Affiliate or other
Affiliate of any Lender shall be deemed a party to this Agreement or shall have
any liability or obligation under this Agreement.
(i) Adjusted Eurodollar Rate. Any failure by any Lender to take
into account the Eurodollar Reserve Percentage when calculating interest due on
Eurodollar Rate Loans or Money Market Loans shall not constitute, whether by
course of dealing or otherwise, a waiver by such Lender of its right to collect
such amount for any future period.
5.3 Fees.
(a) Facility Fee. During the time, from time to time, that the
Borrower maintains an Investment Grade Credit Rating, the Borrower shall pay to
the Payment and Disbursement Agent, for the account of the Lenders based on
their respective Pro Rata Shares, a fee (the "Facility Fee"), accruing at a per
annum rate equal to the then applicable Facility Fee Percentage on the Maximum
Revolving Credit Amount, such fee being payable quarterly, in arrears, commenc
ing on the first day of the fiscal quarter next succeeding the Closing Date and
on the first day of each fiscal quarter thereafter for so long as the Borrower
maintains an Investment Grade Credit Rating; provided, however, that in the
event that the Borrower loses its Investment Grade Credit Rating during any
fiscal quarter, the Facility Fee shall be payable only for the portion of such
fiscal quarter during which Borrower maintained an Investment Grade Credit
Rating. Notwithstanding the foregoing, in the event that any Lender fails to
fund its Pro Rata Share of any Loan requested by the Borrower which such Lender
is obligated to fund under the terms of this Agreement, (A) such Lender shall
not be entitled to any portion of the Facility Fee with respect to its Revolv
ing Credit Commitment until such failure has been cured in accordance with
Section 4.2(b)(v)(B) and (B) until such time, the Facility Fee shall accrue in
favor of the Lenders which have funded their respective Pro Rata Shares of such
requested Loan, shall be allocated among such performing Lenders ratably based
upon their relative Revolving Credit Commitments, and shall be calculated based
upon the average amount by which the aggregate Revolving Credit Commitments of
such performing Lenders exceeds the sum of (I) the outstanding principal amount
of the Loans owing to such performing Lenders, and (II) the outstanding Reim
bursement Obligations owing to such performing Lenders, and (III) the aggregate
participation interests of such performing Lenders arising pursuant to Section
3.1(e) with respect to undrawn and outstanding Letters of Credit.
(b) Unused Commitment Fee. During the time, from time to time, that
the Borrower fails to maintain an Investment Grade Credit Rating, the Borrower
shall pay to the Payment and Disbursement Agent, for the account of the Lenders
based on their respective Pro Rata Shares, a fee (the "Unused Commitment Fee"),
accruing at a per annum rate equal to the then applicable Unused Commitment Fee
Percentage on the Unused Facility, such fee being payable quarterly, in ar
rears, commencing on the first day of the fiscal quarter next succeeding the
date that the Borrower fails to maintain an Investment Grade Credit Rating and
on the first day of each fiscal quarter thereafter, until the Borrower regains
an Investment Grade Credit Rating; provided, however, that in the event that
the Borrower regains an Investment Grade Credit Rating during any fiscal
quarter, the Unused Commitment Fee shall be payable only for the portion of
such fiscal quarter during which Borrower failed to maintain an Investment
Grade Credit Rating. Notwithstanding the foregoing, in the event that any
Lender fails to fund its Pro Rata Share of any Loan requested by the Borrower
which such Lender is obligated to fund under the terms of this Agreement, (A)
such Lender shall not be entitled to any portion of the Unused Commitment Fee
with respect to its Revolving Credit Commitment until such failure has been
cured in accordance with Section 4.2(b)(v)(B) and (B) until such time, the
Unused Commitment Fee shall accrue in favor of the Lenders which have funded
their respective Pro Rata Shares of such requested Loan, shall be allocated
among such performing Lenders ratably based upon their relative Revolving
Credit Commitments, and shall be calculated based upon the average amount by
which the aggregate Revolving Credit Commitments of such performing Lenders
exceeds the sum of (I) the outstanding principal amount of the Loans owing to
such performing Lenders, and (II) the outstanding Reimbursement Obligations
owing to such performing Lenders, and (III) the aggregate participation inter
ests of such performing Lenders arising pursuant to Section 3.1(e) with respect
to undrawn and outstanding Letters of Credit.
(c) Calculation and Payment of Fees. All fees shall be calculated
on the basis of the actual number of days elapsed in a 360-day year. All fees
shall be payable in addition to, and not in lieu of, interest, compensation,
expense reimbursements, indemnification and other Obligations. Fees shall be
payable to the Payment and Disbursement Agent at its office in New York, New
York in immediately available funds. All fees shall be fully earned and nonre
fundable when paid. All fees due to any Arranger or any other Lender, includ
ing, without limitation, those referred to in this Section 5.3, shall bear
interest, if not paid when due, at the interest rate specified in Sec
tion 5.1(d) and shall constitute Obligations.
ARTICLE VI
CONDITIONS TO LOANS AND LETTERS OF CREDIT
6.1 Conditions Precedent to the Initial Loans and Letters of Credit.
The obligation of each Lender on the Initial Funding Date to make any Loan
requested to be made by it, and to issue Letters of Credit, shall be subject to
the satisfaction of all of the following conditions precedent:
(a) Documents. The Payment and Disbursement Agent shall have
received on or before the Initial Funding Date all of the following:
(i) this Agreement, the Notes, and, to the extent not otherwise
specifically referenced in this Section 6.1(a), all other Loan
Documents and agreements, documents and instruments described in the
List of Closing Documents attached hereto as Exhibit E and made a
part hereof, each duly executed and in recordable form, where
appropriate, and in form and substance satisfactory to the Payment
and Disbursement Agent; without limiting the foregoing, the Borrower
hereby directs its legal counsel to prepare and deliver to the
Agents, the Lenders, and Skadden, Arps, Slate, Meagher & Flom LLP the
legal opinions referred to in such List of Closing Documents; and
(ii) such additional documentation as the Payment and Disbursement
Agent may reasonably request.
(b) No Legal Impediments. No law, regulation, order, judgment or
decree of any Governmental Authority shall, and the Payment and Disbursement
Agent shall not have received any notice that litigation is pending or threat
ened which is likely to (i) enjoin, prohibit or restrain the making of the
Loans and/or the issuance of Letters of Credit on the Initial Funding Date or
(ii) impose or result in the imposition of a Material Adverse Effect.
(c) No Change in Condition. No change in the business, assets,
management, operations, financial condition or prospects of the Borrower or any
of its Properties shall have occurred since September 30, 1997, which change,
in the judgment of the Payment and Disbursement Agent, will have or is
reasonably likely to have a Material Adverse Effect.
(d) Interim Liabilities and Equity. Except as disclosed to the
Arrangers and the Lenders, since September 30, 1997, neither the Borrower nor
the Company shall have (i) entered into any material (as determined in good
faith by the Payment and Disbursement Agent) commitment or transaction, in
cluding, without limitation, transactions for borrowings and capital
expenditures, which are not in the ordinary course of the Borrower's business,
(ii) declared or paid any dividends or other distributions, (iii) established
compensation or employee benefit plans, or (iv) redeemed or issued any equity
Securities.
(e) No Loss of Material Agreements and Licenses. Since September
30, 1997, no agreement or license relating to the business, operations or
employee relations of the Borrower or any of its Properties shall have been
terminated, modified, revoked, breached or declared to be in default, the
termination, modification, revocation, breach or default under which, in the
reasonable judgment of the Payment and Disbursement Agent, would result in a
Material Adverse Effect.
(f) No Market Changes. Since September 30, 1997, no material
adverse change shall have occurred in the conditions in the capital markets or
the market for loan syndications generally.
(g) No Default. No Event of Default or Potential Event of Default
shall have occurred and be continuing or would result from the making of the
Loans or the issuance of any Letter of Credit.
(h) Representations and Warranties. All of the representations and
warranties contained in Section 7.1 and in any of the other Loan Documents
shall be true and correct in all material respects on and as of the Initial
Funding Date.
(i) Fees and Expenses Paid. There shall have been paid to the
Payment and Disbursement Agent, for the accounts of the Agents and the other
Lenders, as applicable, all fees due and payable on or before the Initial
Funding Date and all expenses due and payable on or before the Initial Funding
Date, including, without limitation, reasonable attorneys' fees and expenses,
and other costs and expenses incurred in connection with the Loan Documents.
(j) Termination of Existing UBS Credit Agreement. The Existing UBS
Credit Agreement shall be terminated by the Borrower and all amounts owed by
the Borrower thereunder shall be paid in full on or before the Initial Funding
Date.
6.2 Conditions Precedent to All Subsequent Loans and Letters of
Credit. The obligation of each Lender to make any Loan requested to be made
by it on any date after the Initial Funding Date and the agreement of each
Lender to issue any Letter of Credit on any date after the Initial Funding Date
is subject to the following conditions precedent as of each such date:
(a) Representations and Warranties. As of such date, both before
and after giving effect to the Loans to be made or the Letter of Credit to be
issued on such date, all of the representations and warranties of the Borrower
contained in Section 7.1 and in any other Loan Document (other than
representations and warranties which expressly speak as of a different date)
shall be true and correct in all material respects.
(b) No Defaults. No Event of Default or Potential Event of Default
shall have occurred and be continuing or would result from the making of the re
quested Loan or issuance of the requested Letter of Credit.
(c) No Legal Impediments. No law, regulation, order, judgment or
decree of any Governmental Authority shall, and the Payment and Disbursement
Agent shall not have received from such Lender notice that, in the judgment of
such Lender, litigation is pending or threatened which is likely to, enjoin,
prohibit or restrain, or impose or result in the imposition of any material
adverse condition upon, such Lender's making of the requested Loan or
participation in or issuance of the requested Letter of Credit.
(d) No Material Adverse Effect. The Borrower has not received
written notice from the Requisite Lenders that an event has occurred since the
date of this Agreement which has had and continues to have, or is reasonably
likely to have, a Material Adverse Effect.
Each submission by the Borrower to the Payment and Disbursement Agent of a
Notice of Borrowing with respect to a Loan or a Notice of Con
version/Continuation with respect to any Loan, each acceptance by the Borrower
of the proceeds of each Loan made, converted or continued hereunder, each
submission by the Borrower to a Lender of a request for issuance of a Letter of
Credit and the issuance of such Letter of Credit, shall constitute a representa
tion and warranty by the Borrower as of the Funding Date in respect of such
Loan, the date of conversion or continuation and the date of issuance of such
Letter of Credit, that all the conditions contained in this Section 6.2 have
been satisfied or waived in accordance with Section 15.7.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
7.1 Representations and Warranties of the Borrower. In order to induce
the Lenders to enter into this Agreement and to make the Loans and the other
financial accommodations to the Borrower and to issue the Letters of Credit
described herein, the Borrower hereby represents and warrants to each Lender
that the following statements are true, correct and complete:
(a) Organization; Powers. Each of SDGLP and SPGLP (A) is a
limited partnership duly organized, validly existing and in good standing
under the laws of the State of Delaware, (B) is duly qualified to do
business and is in good standing under the laws of each jurisdiction in
which failure to be so qualified and in good standing will have or is
reasonably likely to have a Material Adverse Effect, (C) has filed and
maintained effective (unless exempt from the requirements for filing) a
current Business Activity Report with the appropriate Governmental
Authority in each state in which failure to do so would have a Material
Adverse Effect, (D) has all requisite power and authority to own, operate
and encumber its Property and to conduct its business as presently con
ducted and as proposed to be conducted in connection with and following
the consummation of the transactions contemplated by this Agreement and
(E) is a partnership for federal income tax purposes.
(ii) The Company (A) is a corporation duly organized, validly
existing and in good standing under the laws of the State of Maryland, (B)
is duly authorized and qualified to do business and is in good standing
under the laws of each jurisdiction in which failure to be so qualified
and in good standing will have or is reasonably likely to have a Material
Adverse Effect, and (C) has all requisite corporate power and authority to
own, operate and encumber its Property and to conduct its business as
presently conducted.
(iii) SD (A) is a corporation duly organized, validly existing and
in good standing under the laws of the State of Ohio, (B) is duly
authorized and qualified to do business and is in good standing under the
laws of each jurisdiction in which failure to be so qualified and in good
standing will have or is reasonably likely to have a Material Adverse Ef
fect, and (C) has all requisite corporate power and authority to own,
operate and encumber its Property and to conduct its business as presently
conducted.
(iv) True, correct and complete copies of the Organizational
Documents identified on Schedule 7.1-A have been delivered to the Payment
and Disbursement Agent, each of which is in full force and effect, has not
been modified or amended except to the extent set forth indicated therein
and, to the best of the Borrower's knowledge, there are no defaults under
such Organizational Documents and no events which, with the passage of
time or giving of notice or both, would constitute a default under such
Organizational Documents.
(v) Neither the Borrower, the Company nor any of their Affiliates
are "foreign persons" within the meaning of Section 1445 of the Internal
Revenue Code.
(b) Authority. (i) Each General Partner has the requisite power
and authority to execute, deliver and perform this Agreement on behalf of
the Borrower and each of the other Loan Documents which are required to be
executed on behalf of the Borrower as required by this Agreement. Each
General Partner is the Person who has executed this Agreement and such
other Loan Documents on behalf of the Borrower and are the sole general
partners of the Borrower.
(ii) The execution, delivery and performance of each of the Loan
Documents which must be executed in connection with this Agreement by the
Borrower and to which the Borrower is a party and the consummation of the
transactions contemplated thereby are within the Borrower's partnership
powers, have been duly authorized by all necessary partnership action
(and, in the case of the General Partners acting on behalf of the Borrower
in connection therewith, all necessary corporate action of such General
Partner) and such authorization has not been rescinded. No other
partnership or corporate action or proceedings on the part of the Borrower
or either General Partner is necessary to consummate such transactions.
(iii) Each of the Loan Documents to which the Borrower is a party
has been duly executed and delivered on behalf of the Borrower and
constitutes the Borrower's legal, valid and binding obligation,
enforceable against the Borrower in accordance with its terms, is in full
force and effect and all the terms, provisions, agreements and conditions
set forth therein and required to be performed or complied with by the
Company, the Borrower and the Borrower's Subsidiaries on or before the
Initial Funding Date have been performed or complied with, and no
Potential Event of Default, Event of Default or breach of any covenant by
any of the Company, the Borrower or any Subsidiary of the Borrower exists
thereunder.
(c) Subsidiaries; Ownership of Capital Stock and Partnership
Interests. (i) Schedule 7.1-C (A) contains a diagram indicating the
corporate structure of the Company, the Borrower, and any other Person in
which the Company or the Borrower holds a direct or indirect partnership,
joint venture or other equity interest indicating the nature of such
interest with respect to each Person included in such diagram; and
(B) accurately sets forth (1) the correct legal name of such Person, the
jurisdiction of its incorporation or organization and the jurisdictions in
which it is qualified to transact business as a foreign corporation, or
otherwise, and (2) the authorized, issued and outstanding shares or
interests of each class of Securities of the Company, the Borrower and the
Subsidiaries of the Borrower and the owners of such shares or interests.
None of such issued and outstanding Securities is subject to any vesting,
redemption, or repurchase agreement, and there are no warrants or options
(other than Permitted Securities Options) outstanding with respect to such
Securities, except as noted on Schedule 7.1-C. The outstanding Capital
Stock of the Company is duly authorized, validly issued, fully paid and
nonassessable and the outstanding Securities of the Borrower and its
Subsidiaries are duly authorized and validly issued. Attached hereto as
part of Schedule 7.1-C is a true, accurate and complete copy of the
Borrower Partnership Agreement as in effect on the Closing Date and such
Partnership Agreement has not been amended, supplemented, replaced,
restated or otherwise modified in any respect since the Closing Date.
(ii) Except where failure may not have a Material Adverse Effect on
the Borrower, each Subsidiary: (A) is a corporation or partnership, as
indicated on Schedule 7.1-C, duly organized, validly existing and, if
applicable, in good standing under the laws of the jurisdiction of its
organization, (B) is duly qualified to do business and, if applicable, is
in good standing under the laws of each jurisdiction in which failure to
be so qualified and in good standing would limit its ability to use the
courts of such jurisdiction to enforce Contractual Obligations to which it
is a party, and (C) has all requisite power and authority to own, operate
and encumber its Property and to conduct its business as presently con
ducted and as proposed to be conducted hereafter.
(d) No Conflict. The execution, delivery and performance of each of
the Loan Documents to which the Borrower is a party do not and will not (i)
conflict with the Organizational Documents of the Borrower or any Subsidiary of
the Borrower, (ii) constitute a tortious interference with any Contractual
Obligation of any Person or conflict with, result in a breach of or constitute
(with or without notice or lapse of time or both) a default under any
Requirement of Law or Contractual Obligation of the Borrower, the General
Partners, any Limited Partner, any Subsidiary of the Borrower, or any general
or limited partner of any Subsidiary of the Borrower, or require termination of
any such Contractual Obligation which may subject the Payment and Disbursement
Agent or any of the other Lenders to any liability, (iii) result in or require
the creation or imposition of any Lien whatsoever upon any of the Property or
assets of the Borrower, any General Partner, any Limited Partner, any
Subsidiary of the Borrower, or any general partner or limited partner of any
Subsidiary of the Borrower, or (iv) require any approval of shareholders of the
Company or any general partner (or equity holder of any general partner) of any
Subsidiary of the Borrower.
(e) Governmental Consents. The execution, delivery and performance
of each of the Loan Documents to which the Borrower is a party do not and will
not require any registration with, consent or approval of, or notice to, or
other action to, with or by any Governmental Authority, except filings,
consents or notices which have been made, obtained or given.
(f) Governmental Regulation. Neither the Borrower nor either
General Partner is subject to regulation under the Public Utility Holding
Company Act of 1935, the Federal Power Act, the Interstate Commerce Act, or the
Investment Company Act of 1940, or any other federal or state statute or
regulation which limits its ability to incur indebtedness or its ability to
consummate the transactions contemplated by this Agreement.
(g) Financial Position. Complete and accurate copies of the
following financial statements and materials have been delivered to the Payment
and Disbursement Agent: (i) annual audited financial statements of the
Borrower and its Subsidiaries for the fiscal year ended December 31, 1996, and
(ii) quarterly financial statements for the Borrower and its Subsidiaries for
the fiscal quarter ending September 30, 1997. All financial statements
included in such materials were prepared in all material respects in conformity
with GAAP, except as otherwise noted therein, and fairly present in all mate
rial respects the respective consolidated financial positions, and the consoli
dated results of operations and cash flows for each of the periods covered
thereby of the Borrower and its Subsidiaries as at the respective dates
thereof. Neither the Borrower nor any of its Subsidiaries has any Contingent
Obligation, contingent liability or liability for any taxes, long-term leases
or commitments, not reflected in its audited financial statements delivered to
the Payment and Disbursement Agent on or prior to the Closing Date or otherwise
disclosed to the Payment and Disbursement Agent and the Lenders in writing,
which will have or is reasonably likely to have a Material Adverse Effect.
(h) Indebtedness. Schedule 7.1-H sets forth, as of September 30,
1997, all Indebtedness for borrowed money of each of the Borrower, Company and
their respective Subsidiaries and, except as set forth on Schedule 7.1-H, there
are no defaults in the payment of principal or interest on any such Indebt
edness and no payments thereunder have been deferred or extended beyond their
stated maturity and there has been no material change in the type or amount of
such Indebtedness (except for the repayment of certain Indebtedness) since
September 30, 1997.
(i) Litigation; Adverse Effects. Except as set forth in
Schedule 7.1-I, as of the Closing Date, there is no action, suit, proceeding,
Claim, investigation or arbitration before or by any Governmental Authority or
private arbitrator pending or, to the knowledge of the Borrower, threatened
against the Company, the Borrower, or any of their respective Subsidiaries, or
any Property of any of them (i) challenging the validity or the enforceability
of any of the Loan Documents, (ii) which will or is reasonably likely to result
in any Material Adverse Effect, or (iii) under the Racketeering Influenced and
Corrupt Organizations Act or any similar federal or state statute where such
Person is a defendant in a criminal indictment that provides for the forfeiture
of assets to any Governmental Authority as a potential criminal penalty. There
is no material loss contingency within the meaning of GAAP which has not been
reflected in the consolidated financial statements of the Company and the
Borrower. None of the Company, the Borrower or any Subsidiary of the Borrower
is (A) in violation of any applicable Requirements of Law which violation will
have or is reasonably likely to have a Material Adverse Effect, or (B) subject
to or in default with respect to any final judgment, writ, injunction,
restraining order or order of any nature, decree, rule or regulation of any
court or Governmental Authority which will have or is reasonably likely to have
a Material Adverse Effect.
(j) No Material Adverse Effect. Since September 30, 1997, there has
occurred no event which has had or is reasonably likely to have a Material
Adverse Effect.
(k) Tax Examinations. The IRS has examined (or is foreclosed from
examining by applicable statutes) the federal income tax returns of any of the
Company's, the Borrower's or its Subsidiaries' predecessors in interest with
respect to the Projects for all tax periods prior to and including the taxable
year ending December 31, 1990 and the appropriate state Governmental Authority
in each state in which the Company's, the Borrower's or its Subsidiaries'
predecessors in interest with respect to the Projects were required to file
state income tax returns has examined (or is foreclosed from examining by
applicable statutes) the state income tax returns of any of such Persons with
respect to the Projects for all tax periods prior to and including the taxable
year ending December 31, 1990. All deficiencies which have been asserted
against such Persons as a result of any federal, state, local or foreign tax
examination for each taxable year in respect of which an examination has been
conducted have been fully paid or finally settled or are being contested in
good faith, and no issue has been raised in any such examination which, by
application of similar principles, reasonably can be expected to result in
assertion of a material deficiency for any other year not so examined which has
not been reserved for in the financial statements of such Persons to the
extent, if any, required by GAAP. No such Person has taken any reporting
positions for which it does not have a reasonable basis nor anticipates any
further material tax liability with respect to the years which have not been
closed pursuant to applicable law.
(l) Payment of Taxes. All tax returns, reports and similar
statements or filings of each of the Persons described in Section 7.1(k), the
Company, the Borrower and its Subsidiaries required to be filed have been
timely filed, and, except for Customary Permitted Liens, all taxes, assess
ments, fees and other charges of Governmental Authorities thereupon and upon or
relating to their respective Properties, assets, receipts, sales, use, payroll,
employment, income, licenses and franchises which are shown in such returns or
reports to be due and payable have been paid, except to the extent (i) such
taxes, assessments, fees and other charges of Governmental Authorities are
being contested in good faith by an appropriate proceeding diligently pursued
as permitted by the terms of Section 9.4 and (ii) such taxes, assessments, fees
and other charges of Governmental Authorities pertain to Property of the
Borrower or any of its Subsidiaries and the non-payment of the amounts thereof
would not, individually or in the aggregate, result in a Material Adverse
Effect. All other taxes (including, without limitation, real estate taxes),
assessments, fees and other governmental charges upon or relating to the re
spective Properties of the Borrower and its Subsidiaries which are due and
payable have been paid, except for Customary Permitted Liens and except to the
extent described in clauses (i) and (ii) hereinabove. The Borrower has no
knowledge of any proposed tax assessment against the Borrower, any of its
Subsidiaries, or any of the Projects that will have or is reasonably likely to
have a Material Adverse Effect.
(m) Performance. Neither the Company, the Borrower nor any of their
Affiliates has received any notice, citation or allegation, nor has actual
knowledge, that (i) it is in default in the performance, observance or
fulfillment of any of the obligations, covenants or conditions contained in any
Contractual Obligation applicable to it, (ii) any of its Properties is in
violation of any Requirements of Law or (iii) any condition exists which, with
the giving of notice or the lapse of time or both, would constitute a default
with respect to any such Contractual Obligation, in each case, except where
such default or defaults, if any, will not have or is not reasonably likely to
have a Material Adverse Effect.
(n) Disclosure. The representations and warranties of the Borrower
contained in the Loan Documents, and all certificates and other documents
delivered to the Payment and Disbursement Agent pursuant to the terms thereof,
do not contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements contained herein or
therein, in light of the circumstances under which they were made, not mis
leading. The Borrower has not intentionally withheld any fact from the Payment
and Disbursement Agent, the Arrangers, the Co-Agents or the other Lenders in
regard to any matter which will have or is reasonably likely to have a Material
Adverse Effect. Notwithstanding the foregoing, the Lenders acknowledge that the
Borrower shall not have liability under this clause (o) with respect to its pro
jections of future events.
(o) Requirements of Law. The Borrower and each of its Subsidiaries
is in compliance with all Requirements of Law applicable to it and its
respective businesses and Properties, in each case where the failure to so
comply individually or in the aggregate will have or is reasonably likely to
have a Material Adverse Effect.
(p) Environmental Matters.
(i) Except as disclosed on Schedule 7.1-P:
(A) the operations of the Borrower, each of its
Subsidiaries, and their respective Properties comply with all applicable
Environmental, Health or Safety Requirements of Law;
(B) the Borrower and each of its Subsidiaries have
obtained all material environmental, health and safety Permits necessary
for their respective operations, and all such Permits are in good standing
and the holder of each such Permit is currently in compliance with all
terms and conditions of such Permits;
(C) none of the Borrower or any of its Subsidiaries or
any of their respective present or past Property or operations are subject
to or are the subject of any investigation, judicial or administrative pro
ceeding, order, judgment, decree, dispute, negotiations, agreement or set
tlement respecting (I) any Environmental, Health or Safety Requirements of
Law, (II) any Remedial Action, (III) any Claims or Liabilities and Costs
arising from the Release or threatened Release of a Contaminant into the
environment, or (IV) any violation of or liability under any
Environmental, Health or Safety Requirement of Law;
(D) none of Borrower or any of its Subsidiaries has
filed any notice under any applicable Requirement of Law (I) reporting a
Release of a Contaminant; (II) indicating past or present treatment,
storage or disposal of a hazardous waste, as that term is defined under 40
C.F.R. Part 261 or any state equivalent; or (III) reporting a violation of
any applicable Environmental, Health or Safety Requirement of Law;
(E) none of the Borrower's or any of its Subsidiaries'
present or past Property is listed or proposed for listing on the National
Priorities List ("NPL") pursuant to CERCLA or on the Comprehensive Envi
ronmental Response Compensation Liability Information System List
("CERCLIS") or any similar state list of sites requiring Remedial Action;
(F) neither the Borrower nor any of its Subsidiaries has
sent or directly arranged for the transport of any waste to any site
listed or proposed for listing on the NPL, CERCLIS or any similar state
list;
(G) to the best of Borrower's knowledge, there is not
now, and to Borrower's knowledge there has never been on or in any Project
(I) any treatment, recycling, storage or disposal of any hazardous waste,
as that term is defined under 40 C.F.R. Part 261 or any state equivalent;
(II) any landfill, waste pile, or surface impoundment; (III) any under
ground storage tanks the presence or use of which is or, to Borrower's
knowledge, has been in violation of applicable Environmental, Health or
Safety Requirements of Law, (IV) any asbestos-containing material which
such Person has any reason to believe could subject such Person or its
Property to Liabilities and Costs arising out of or relating to environmen
tal, health or safety matters that would result in a Material Adverse
Effect; or (V) any polychlorinated biphenyls (PCB) used in hydraulic oils,
electrical transformers or other Equipment which such Person has any
reason to believe could subject such Person or its Property to Liabilities
and Costs arising out of or relating to environmental, health or safety
matters that would result in a Material Adverse Effect;
(H) neither the Borrower nor any of its Subsidiaries has
received any notice or Claim to the effect that any of such Persons is or
may be liable to any Person as a result of the Release or threatened
Release of a Contaminant into the environment;
(I) neither the Borrower nor any of its Subsidiaries has
any contingent liability in connection with any Release or threatened
Release of any Contaminants into the environment;
(J) no Environmental Lien has attached to any Property
of the Borrower or any Subsidiary of the Borrower;
(K) no Property of the Borrower or any Subsidiary of the
Borrower is subject to any Environmental Property Transfer Act, or to the
extent such acts are applicable to any such Property, the Borrower and/or
such Subsidiary whose Property is subject thereto has fully complied with
the requirements of such acts; and
(L) neither the Borrower nor any of its Subsidiaries
owns or operates, or, to Borrower's knowledge has ever owned or operated,
any underground storage tank, the presence or use of which is or has been
in violation of applicable Environmental, Health or Safety Requirements of
Law, at any Project.
(ii) the Borrower and each of its Subsidiaries are conducting
and will continue to conduct their respective businesses and operations
and maintain each Project in compliance with Environmental, Health or
Safety Requirements of Law and no such Person has been, and no such Person
has any reason to believe that it or any Project will be, subject to
Liabilities and Costs arising out of or relating to environmental, health
or safety matters that would result in a Material Adverse Effect.
(q) ERISA. Neither the Borrower nor any ERISA Affiliate maintains or
contributes to any Benefit Plan or Multiemployer Plan other than those listed
on Schedule 7.1-Q hereto. Each such Plan which is intended to be qualified
under Section 401(a) of the Internal Revenue Code as currently in effect has
been determined by the IRS to be so qualified, and each trust related to any
such Plan has been determined to be exempt from federal income tax under Sec
tion 501(a) of the Internal Revenue Code as currently in effect. Except as
disclosed in Schedule 7.1-Q, neither the Borrower nor any of its Subsidiaries
maintains or contributes to any employee welfare benefit plan within the
meaning of Section 3(1) of ERISA which provides benefits to employees after
termination of employment other than as required by Section 601 of ERISA. The
Borrower and each of its Subsidiaries is in compliance in all material respects
with the responsibilities, obligations and duties imposed on it by ERISA, the
Internal Revenue Code and regulations promulgated thereunder with respect to
all Plans. No Benefit Plan has incurred any accumulated funding deficiency (as
defined in Sections 302(a)(2) of ERISA and 412(a) of the Internal Revenue Code)
whether or not waived. Neither the Borrower nor any ERISA Affiliate nor any
fiduciary of any Plan which is not a Multiemployer Plan (i) has engaged in a
nonexempt prohibited transaction described in Sections 406 of ERISA or 4975 of
the Internal Revenue Code or (ii) has taken or failed to take any action which
would constitute or result in a Termination Event. Neither the Borrower nor
any ERISA Affiliate is subject to any liability under Sections 4063, 4064,
4069, 4204 or 4212(c) of ERISA. Neither the Borrower nor any ERISA Affiliate
has incurred any liability to the PBGC which remains outstanding other than the
payment of premiums, and there are no premium payments which have become due
which are unpaid. Schedule B to the most recent annual report filed with the
IRS with respect to each Benefit Plan and furnished to the Payment and
Disbursement Agent is complete and accurate in all material respects. Since
the date of each such Schedule B, there has been no material adverse change in
the funding status or financial condition of the Benefit Plan relating to such
Schedule B. Neither the Borrower nor any ERISA Affiliate has (i) failed to
make a required contribution or payment to a Multiemployer Plan or (ii) made a
complete or partial withdrawal under Sections 4203 or 4205 of ERISA from a
Multiemployer Plan. Neither the Borrower nor any ERISA Affiliate has failed to
make a required installment or any other required payment under Section 412 of
the Internal Revenue Code on or before the due date for such installment or
other payment. Neither the Borrower nor any ERISA Affiliate is required to
provide security to a Benefit Plan under Section 401(a)(29) of the Internal
Revenue Code due to a Benefit Plan amendment that results in an increase in
current liability for the plan year. Except as disclosed on Schedule 7.1-Q,
neither the Borrower nor any of its Subsidiaries has, by reason of the
transactions contemplated hereby, any obligation to make any payment to any
employee pursuant to any Plan or existing contract or arrangement.
(r) Securities Activities. The Borrower is not engaged in the
business of extending credit for the purpose of purchasing or carrying Margin
Stock.
(s) Solvency. After giving effect to the Loans to be made on the
Initial Funding Date or such other date as Loans requested hereunder are made,
and the disbursement of the proceeds of such Loans pursuant to the Borrower's
instructions, the Borrower is Solvent.
(t) Insurance. Schedule 7.1-T accurately sets forth as of the
Closing Date all insurance policies and programs currently in effect with
respect to the respective Property and assets and business of the Borrower and
its Subsidiaries, specifying for each such policy and program, (i) the amount
thereof, (ii) the risks insured against thereby, (iii) the name of the insurer
and each insured party thereunder, (iv) the policy or other identification
number thereof, and (v) the expiration date thereof. The Borrower has delivered
to the Payment and Disbursement Agent copies of all insurance policies set
forth on Schedule 7.1-T. Such insurance policies and programs are currently in
full force and effect, in compliance with the requirements of Section 9.5
hereof and, together with payment by the insured of scheduled deductible
payments, are in amounts sufficient to cover the replacement value of the
respective Property and assets of the Borrower and/or its Subsidiaries.
(u) REIT Status. The Company qualifies as a REIT under the Internal
Revenue Code.
(v) Ownership of Projects, Minority Holdings and Property. Owner
ship of substantially all wholly-owned Projects, Minority Holdings and other
Property of the Consolidated Businesses is held by the Borrower and its Subsid
iaries and is not held directly by any General Partner.
ARTICLE VIII
REPORTING COVENANTS
The Borrower covenants and agrees that so long as any Revolving
Credit Commitments are outstanding and thereafter until payment in full of all
of the Obligations (other than indemnities pursuant to Section 15.3 not yet
due), unless the Requisite Lenders shall otherwise give prior written consent
thereto:
8.1 Borrower Accounting Practices. The Borrower shall maintain, and
cause each of its Subsidiaries to maintain, a system of accounting established
and administered in accordance with sound business practices to permit prepara
tion of consolidated and consolidating financial statements in conformity with
GAAP, and each of the financial statements and reports described below shall be
prepared from such system and records and in form satisfactory to the Payment
and Disbursement Agent.
8.2 Financial Reports. The Borrower shall deliver or cause to be
delivered to the Payment and Disbursement Agent and the Lenders:
(a) Quarterly Reports.
(i) Borrower Quarterly Financial Reports. As soon as practicable,
and in any event within fifty (50) days after the end of each fiscal
quarter in each Fiscal Year (other than the last fiscal quarter in each
Fiscal Year), a consolidated balance sheet of the Borrower and the related
consolidated statements of income and cash flow of the Borrower (to be
prepared and delivered quarterly in conjunction with the other reports
delivered hereunder at the end of each fiscal quarter) for each such
fiscal quarter, in each case in form and substance satisfactory to the
Payment and Disbursement Agent and, in comparative form, the corresponding
figures for the corresponding periods of the previous Fiscal Year, certi
fied by an Authorized Financial Officer of the Borrower as fairly pre
senting the consolidated and consolidating financial position of the
Borrower as of the dates indicated and the results of their operations and
cash flow for the months indicated in accordance with GAAP, subject to
normal quarterly adjustments.
(ii) Company Quarterly Financial Reports. As soon as practicable,
and in any event within fifty (50) days after the end of each fiscal
quarter in each Fiscal Year (other than the last fiscal quarter in each
Fiscal Year), the Financial Statements of the Company, the Borrower and
its Subsidiaries on Form 10-Q as at the end of such period and a report
setting forth in comparative form the corresponding figures for the
corresponding period of the previous Fiscal Year, certified by an
Authorized Financial Officer of the Company as fairly presenting the
consolidated and consolidating financial position of the Company, the Bor
rower and its Subsidiaries as at the date indicated and the results of
their operations and cash flow for the period indicated in accordance with
GAAP, subject to normal adjustments.
(iii) Quarterly Compliance Certificates. Together with each
delivery of any quarterly report pursuant to paragraph (a)(i) of this
Section 8.2, the Borrower shall deliver Officer's Certificates of the
Borrower and the Company (the "Quarterly Compliance Certificates"), signed
by the Borrower's and the Company's respective Authorized Financial
Officers representing and certifying (1) that the Authorized Financial
Officer signatory thereto has reviewed the terms of the Loan Documents,
and has made, or caused to be made under his/her supervision, a review in
reasonable detail of the transactions and consolidated and consolidating
financial condition of the Company, the Borrower and its Subsidiaries,
during the fiscal quarter covered by such reports, that such review has
not disclosed the existence during or at the end of such fiscal quarter,
and that such officer does not have knowledge of the existence as at the
date of such Officer's Certificate, of any condition or event which
constitutes an Event of Default or Potential Event of Default or mandatory
prepayment event, or, if any such condition or event existed or exists,
and specifying the nature and period of existence thereof and what action
the General Partners and/or the Borrower or any of its Subsidiaries has
taken, is taking and proposes to take with respect thereto; (2) the
calculations (with such specificity as the Payment and Disbursement Agent
may reasonably request) for the period then ended which demonstrate compli
ance with the covenants and financial ratios set forth in Articles IX and
X and, when applicable, that no Event of Default described in Section 11.1
exists, (3) a schedule of the Borrower's outstanding Indebtedness, includ
ing the amount, maturity, interest rate and amortization requirements, as
well as such other information regarding such Indebtedness as may be
reasonably requested by the Payment and Disbursement Agent, (4) a schedule
of Combined EBITDA, (5) a schedule of Unencumbered Combined EBITDA, (6)
calculations, in the form of Exhibit G attached hereto, evidencing com
pliance with each of the financial covenants set forth in Article X
hereof, and (7) a schedule of the estimated taxable income of the Borrower
for such fiscal quarter.
(iv) Hedging Status Report. The Borrower shall deliver, within
fifty (50) days after the end of each fiscal quarter of each Fiscal Year,
a written report which sets forth the details of the "Interest Rate
Hedges" required under Section 9.9.
(b) Annual Reports.
(i) Borrower Financial Statements. As soon as practicable, and in any
event within ninety-five (95) days after the end of each Fiscal Year, (i) the
Financial Statements of the Borrower and its Subsidiaries as at the end of such
Fiscal Year, (ii) a report with respect thereto of Arthur Andersen & Co. or
other independent certified public accountants acceptable to the Payment and
Disbursement Agent, which report shall be unqualified and shall state that such
financial statements fairly present the consolidated and consolidating finan
cial position of each of the Borrower and its Subsidiaries as at the dates
indicated and the results of their operations and cash flow for the periods
indicated in conformity with GAAP applied on a basis consistent with prior
years (except for changes with which Arthur Andersen & Co. or any such other
independent certified public accountants, if applicable, shall concur and which
shall have been disclosed in the notes to the financial statements), and (iii)
in the event that the report referred to in clause (ii) above is qualified, a
copy of the management letter or any similar report delivered to the General
Partners or to any officer or employee thereof by such independent certified
public accountants in connection with such financial statements (which letter
or report shall be subject to the confidentiality limitations set forth
herein). The Payment and Disbursement Agent and each Lender (through the Payme
nt and Disbursement Agent) may, with the consent of the Borrower (which consent
shall not be unreasonably withheld), communicate directly with such accoun
tants, with any such communication to occur together with a representative of
the Borrower, at the expense of the Payment and Disbursement Agent (or the
Lender requesting such communication), upon reasonable notice and at reasonable
times during normal business hours.
(ii) Company Financial Statements. As soon as practicable, and in
any event within ninety-five (95) days after the end of each Fiscal Year,
(i) the Financial Statements of the Company and its Subsidiaries on Form
10-K as at the end of such Fiscal Year and a report setting forth in
comparative form the corresponding figures from the consolidated Financial
Statements of the Company and its Subsidiaries for the prior Fiscal Year;
(ii) a report with respect thereto of Arthur Andersen & Co. or other
independent certified public accountants acceptable to the Payment and Dis
bursement Agent, which report shall be unqualified and shall state that
such financial statements fairly present the consolidated and consoli
dating financial position of each of the Company and its Subsidiaries as
at the dates indicated and the results of their operations and cash flow
for the periods indicated in conformity with GAAP applied on a basis
consistent with prior years (except for changes with which Arthur Andersen
& Co. or any such other independent certified public accountants, if
applicable, shall concur and which shall have been disclosed in the notes
to the financial statements)(which report shall be subject to the confi
dentiality limitations set forth herein); and (iii) in the event that the
report referred to in clause (ii) above is qualified, a copy of the manage
ment letter or any similar report delivered to the Company or to any offi
cer or employee thereof by such independent certified public accountants
in connection with such financial statements. The Payment and
Disbursement Agent and each Lender (through the Payment and Disbursement
Agent) may, with the consent of the Company (which consent shall not be
unreasonably withheld), communicate directly with such accountants, with
any such communication to occur together with a representative of the
Company, at the expense of the Payment and Disbursement Agent (or the
Lender requesting such communication), upon reasonable notice and at
reasonable times during normal business hours.
(iii) Annual Compliance Certificates. Together with each delivery
of any annual report pursuant to clauses (i) and (ii) of this Section
8.2(b), the Borrower shall deliver Officer's Certificates of the Borrower
and the Company (the "Annual Compliance Certificates" and, collectively
with the Quarterly Compliance Certificates, the "Compliance
Certificates"), signed by the Borrower's and the Company's respective
Authorized Financial Officers, representing and certifying (1) that the
officer signatory thereto has reviewed the terms of the Loan Documents,
and has made, or caused to be made under his/her supervision, a review in
reasonable detail of the transactions and consolidated and consolidating
financial condition of the General Partners, the Borrower and its Subsid
iaries, during the accounting period covered by such reports, that such
review has not disclosed the existence during or at the end of such ac
counting period, and that such officer does not have knowledge of the
existence as at the date of such Officer's Certificate, of any condition
or event which constitutes an Event of Default or Potential Event of De
fault or mandatory prepayment event, or, if any such condition or event
existed or exists, and specifying the nature and period of existence there
of and what action the General Partners and/or the Borrower or any of its
Subsidiaries has taken, is taking and proposes to take with respect
thereto; (2) the calculations (with such specificity as the Payment and
Disbursement Agent may reasonably request) for the period then ended which
demonstrate compliance with the covenants and financial ratios set forth
in Articles IX and X and, when applicable, that no Event of Default de
scribed in Section 11.1 exists, (3) a schedule of the Borrower's out
standing Indebtedness including the amount, maturity, interest rate and
amortization requirements, as well as such other information regarding
such Indebtedness as may be reasonably requested by the Payment and
Disbursement Agent, (4) a schedule of Combined EBITDA, (5) a schedule of
Unencumbered Combined EBITDA, (6) calculations, in the form of Exhibit G
attached hereto, evidencing compliance with each of the financial
covenants set forth in Article X hereof, and (7) a schedule of the estimat
ed taxable income of the Borrower for such fiscal year.
(iv) Tenant Bankruptcy Reports. As soon as practicable, and in any
event within ninety-five (95) days after the end of each Fiscal Year, the
Borrower shall deliver a written report, in form reasonably satisfactory
to the Payment and Disbursement Agent, of all bankruptcy proceedings filed
by or against any tenant of any of the Projects, which tenant occupies 3%
or more of the gross leasable area in the Projects in the aggregate. The
Borrower shall deliver to the Payment and Disbursement Agent and the Lend
ers, immediately upon the Borrower's learning thereof, of any bankruptcy
proceedings filed by or against, or the cessation of business or opera
tions of, any tenant of any of the Projects which tenant occupies 3% or
more of the gross leasable area in the Projects in the aggregate.
(v) Property Reports. When reasonably requested by the Payment
and Disbursement Agent or any other Arranger or Co-Agent, a rent roll,
tenant sales report and income statement with respect to any Project.
8.3 Events of Default. Promptly upon the Borrower obtaining knowledge
(a) of any condition or event which constitutes an Event of Default or
Potential Event of Default, or becoming aware that any Lender or the Payment
and Disbursement Agent has given any notice with respect to a claimed Event of
Default or Potential Event of Default under this Agreement; (b) that any Person
has given any notice to the Borrower or any Subsidiary of the Borrower or taken
any other action with respect to a claimed default or event or condition of the
type referred to in Section 11.1(e); or (c) or of any condition or event which
has or is reasonably likely to have a Material Adverse Effect, the Borrower
shall deliver to the Payment and Disbursement Agent and the Lenders an
Officer's Certificate specifying (i) the nature and period of existence of any
such claimed default, Event of Default, Potential Event of Default, condition
or event, (ii) the notice given or action taken by such Person in connection
therewith, and (iii) what action the Borrower has taken, is taking and proposes
to take with respect thereto.
8.4 Lawsuits. Promptly upon the Borrower's obtaining knowledge
of the institution of, or written threat of, any action, suit, proceeding,
governmental investigation or arbitration against or affecting the
Borrower or any of its Subsidiaries not previously disclosed pursuant to
Section 7.1(i), which action, suit, proceeding, governmental investigation
or arbitration exposes, or in the case of multiple actions, suits,
proceedings, governmental investigations or arbitrations arising out of
the same general allegations or circumstances which expose, in the
Borrower's reasonable judgment, the Borrower or any of its Subsidiaries to
liability in an amount aggregating $1,000,000 or more and is not covered
by Borrower's insurance, the Borrower shall give written notice thereof to
the Payment and Disbursement Agent and the Lenders and provide such other
information as may be reasonably available to enable each Lender and the
Payment and Disbursement Agent and its counsel to evaluate such matters;
(ii) as soon as practicable and in any event within fifty (50) days after
the end of each fiscal quarter of the Borrower, the Borrower shall provide
a written quarterly report to the Payment and Disbursement Agent and the
Lenders covering the institution of, or written threat of, any action,
suit, proceeding, governmental investigation or arbitration (not previ
ously reported) against or affecting the Borrower or any of its Subsid
iaries or any Property of the Borrower or any of its Subsidiaries not
previously disclosed by the Borrower to the Payment and Disbursement Agent
and the Lenders, and shall provide such other information at such time as
may be reasonably available to enable each Lender and the Payment and
Disbursement Agent and its counsel to evaluate such matters; and (iii) in
addition to the requirements set forth in clauses (i) and (ii) of this Sec
tion 8.4, the Borrower upon request of the Payment and Disbursement Agent
or the Requisite Lenders shall promptly give written notice of the status
of any action, suit, proceeding, governmental investigation or arbitration
covered by a report delivered pursuant to clause (i) or (ii) above and pro
vide such other information as may be reasonably available to it to enable
each Lender and the Payment and Disbursement Agent and its counsel to
evaluate such matters.
8.5 Insurance. As soon as practicable and in any event by January 1st
of each calendar year, the Borrower shall deliver to the Payment and
Disbursement Agent and the Lenders (i) a report in form and substance
reasonably satisfactory to the Payment and Disbursement Agent and the Lenders
outlining all insurance coverage maintained as of the date of such report by
the Borrower and its Subsidiaries and the duration of such coverage and (ii)
evidence that all premiums with respect to such coverage have been paid when
due.
8.6 ERISA Notices. The Borrower shall deliver or cause to be delivered
to the Payment and Disbursement Agent and the Lenders, at the Borrower's
expense, the following information and notices as soon as reasonably possible,
and in any event:
(a) within fifteen (15) Business Days after the Borrower or any
ERISA Affiliate knows or has reason to know that a Termination Event
has occurred, a written statement of the chief financial officer of
the Borrower describing such Termination Event and the action, if
any, which the Borrower or any ERISA Affiliate has taken, is taking
or proposes to take with respect thereto, and when known, any action
taken or threatened by the IRS, DOL or PBGC with respect thereto;
(b) within fifteen (15) Business Days after the Borrower knows
or has reason to know that a prohibited transaction (defined in Sec
tions 406 of ERISA and Section 4975 of the Internal Revenue Code) has
occurred, a statement of the chief financial officer of the Borrower
describing such transaction and the action which the Borrower or any
ERISA Affiliate has taken, is taking or proposes to take with respect
thereto;
(c) within fifteen (15) Business Days after the filing of the
same with the DOL, IRS or PBGC, copies of each annual report (form
5500 series), including Schedule B thereto, filed with respect to
each Benefit Plan;
(d) within fifteen (15) Business Days after receipt by the
Borrower or any ERISA Affiliate of each actuarial report for any
Benefit Plan or Multiemployer Plan and each annual report for any
Multiemployer Plan, copies of each such report;
(e) within fifteen (15) Business Days after the filing of the
same with the IRS, a copy of each funding waiver request filed with
respect to any Benefit Plan and all communications received by the
Borrower or any ERISA Affiliate with respect to such request;
(f) within fifteen (15) Business Days after the occurrence any
material increase in the benefits of any existing Benefit Plan or
Multiemployer Plan or the establishment of any new Benefit Plan or
the commencement of contributions to any Benefit Plan or
Multiemployer Plan to which the Borrower or any ERISA Affiliate to
which the Borrower or any ERISA Affiliate was not previously contrib
uting, notification of such increase, establishment or commencement;
(g) within fifteen (15) Business Days after the Borrower or any
ERISA Affiliate receives notice of the PBGC's intention to terminate
a Benefit Plan or to have a trustee appointed to administer a Benefit
Plan, copies of each such notice;
(h) within fifteen (15) Business Days after the Borrower or any
of its Subsidiaries receives notice of any unfavorable determination
letter from the IRS regarding the qualification of a Plan under
Section 401(a) of the Internal Revenue Code, copies of each such
letter;
(i) within fifteen (15) Business Days after the Borrower or any
ERISA Affiliate receives notice from a Multiemployer Plan regarding
the imposition of withdrawal liability, copies of each such notice;
(j) within fifteen (15) Business Days after the Borrower or any
ERISA Affiliate fails to make a required installment or any other re
quired payment under Section 412 of the Internal Revenue Code on or
before the due date for such installment or payment, a notification
of such failure; and
(k) within fifteen (15) Business Days after the Borrower or any
ERISA Affiliate knows or has reason to know (i) a Multiemployer Plan
has been terminated, (ii) the administrator or plan sponsor of a
Multiemployer Plan intends to terminate a Multiemployer Plan, or
(iii) the PBGC has instituted or will institute proceedings under
Section 4042 of ERISA to terminate a Multiemployer Plan, notification
of such termination, intention to terminate, or institution of
proceedings.
For purposes of this Section 8.6, the Borrower and any ERISA Affiliate shall be
deemed to know all facts known by the "Administrator" of any Plan of which the
Borrower or any ERISA Affiliate is the plan sponsor.
8.7 Environmental Notices. The Borrower shall notify the Payment and
Disbursement Agent and the Lenders in writing, promptly upon any representative
of the Borrower or other employee of the Borrower responsible for the environ
mental matters at any Property of the Borrower learning thereof, of any of the
following (together with any material documents and correspondence received or
sent in connection therewith):
(a) notice or claim to the effect that the Borrower or any of
its Subsidiaries is or may be liable to any Person as a result of the
Release or threatened Release of any Contaminant into the envi
ronment, if such liability would result in a Material Adverse
Effect;
(b) notice that the Borrower or any of its Subsidiaries is
subject to investigation by any Governmental Authority evaluating
whether any Remedial Action is needed to respond to the Release or
threatened Release of any Contaminant into the environment;
(c) notice that any Property of the Borrower or any of its
Subsidiaries is subject to an Environmental Lien if the claim to
which such Environmental Lien relates would result in a Material
Adverse Effect;
(d) notice of violation by the Borrower or any of its Subsid
iaries of any Environmental, Health or Safety Requirement of Law;
(e) any condition which might reasonably result in a violation
by the Borrower or any Subsidiary of the Borrower of any Environmen
tal, Health or Safety Requirement of Law, which violation would
result in a Material Adverse Effect;
(f) commencement or threat of any judicial or administrative
proceeding alleging a violation by the Borrower or any of its Subsid
iaries of any Environmental, Health or Safety Requirement of Law,
which would result in a Material Adverse Effect;
(g) new or proposed changes to any existing Environmental,
Health or Safety Requirement of Law that could result in a Material
Adverse Effect; or
(h) any proposed acquisition of stock, assets, real estate, or
leasing of Property, or any other action by the Borrower or any of
its Subsidiaries that could subject the Borrower or any of its
Subsidiaries to environmental, health or safety Liabilities and Costs
which could result in a Material Adverse Effect.
8.8 Labor Matters. The Borrower shall notify the Payment and
Disbursement Agent and the Lenders in writing, promptly upon the Borrower's
learning thereof, of any labor dispute to which the Borrower or any of its
Subsidiaries may become a party (including, without limitation, any strikes,
lockouts or other disputes relating to any Property of such Persons' and other
facilities) which could result in a Material Adverse Effect.
8.9 Notices of Asset Sales and/or Acquisitions. The Borrower shall
deliver to the Payment and Disbursement Agent and the Lenders written notice of
each of the following upon the occurrence thereof: (a) a sale, transfer or
other disposition of assets, in a single transaction or series of related
transactions, for consideration in excess of $50,000,000, (b) an acquisition of
assets, in a single transaction or series of related transactions, for consider
ation in excess of $50,000,000, and (c) the grant of a Lien with respect to
assets, in a single transaction or series of related transactions, in
connection with Indebtedness aggregating an amount in excess of $50,000,000.
8.10 Tenant Notifications. The Borrower shall promptly notify the
Payment and Disbursement Agent upon obtaining knowledge of the bankruptcy or
cessation of operations of any tenant to which greater than 3% of the
Borrower's share of consolidated minimum rent is attributable.
8.11 Other Reports. The Borrower shall deliver or cause to be delivered
to the Payment and Disbursement Agent and the other Lenders copies of all
financial statements, reports, notices and other materials, if any, sent or
made available generally by any General Partner and/or the Borrower to its re
spective Securities holders or filed with the Commission, all press releases
made available generally by any General Partner and/or the Borrower or any of
its Subsidiaries to the public concerning material developments in the business
of any General Partner, the Borrower or any such Subsidiary and all notifica
tions received by the General Partners, the Borrower or its Subsidiaries
pursuant to the Securities Exchange Act and the rules promulgated thereunder.
8.12 Other Information. Promptly upon receiving a request therefor from
the Payment and Disbursement Agent or any Arranger or Co-Agent, the Borrower
shall prepare and deliver to the Payment and Disbursement Agent and the other
Lenders such other information with respect to either General Partner, the Bor
rower, or any of its Subsidiaries, as from time to time may be reasonably
requested by the Payment and Disbursement Agent or any Arranger.
ARTICLE IX
AFFIRMATIVE COVENANTS
Borrower covenants and agrees that so long as any Revolving Credit
Commitments are outstanding and thereafter until payment in full of all of the
Obligations (other than indemnities pursuant to Section 15.3 not yet due),
unless the Requisite Lenders shall otherwise give prior written consent:
9.1 Existence, Etc. The Borrower shall, and shall cause each of its
Subsidiaries to, at all times maintain its corporate existence or existence as
a limited partnership or joint venture, as applicable, and preserve and keep,
or cause to be preserved and kept, in full force and effect its rights and
franchises material to its businesses, except where the loss or termination of
such rights and franchises is not likely to have a Material Adverse Effect.
9.2 Powers; Conduct of Business. The Borrower shall remain qualified,
and shall cause each of its Subsidiaries to qualify and remain qualified, to do
business and maintain its good standing in each jurisdiction in which the
nature of its business and the ownership of its Property requires it to be so
qualified and in good standing.
9.3 Compliance with Laws, Etc. The Borrower shall, and shall cause
each of its Subsidiaries to, (a) comply with all Requirements of Law and all
restrictive covenants affecting such Person or the business, Property, assets
or operations of such Person, and (b) obtain and maintain as needed all Permits
necessary for its operations (including, without limitation, the operation of
the Projects) and maintain such Permits in good standing, except where
noncompliance with either clause (a) or (b) above is not reasonably likely to
have a Material Adverse Effect; provided, however, that the Borrower shall, and
shall cause each of its Subsidiaries to, comply with all Environmental, Health
or Safety Requirements of Law affecting such Person or the business, Property,
assets or operations of such Person.
9.4 Payment of Taxes and Claims. The Borrower shall pay, and cause
each of its Subsidiaries to pay, (i) all taxes, assessments and other
governmental charges imposed upon it or on any of its Property or assets or in
respect of any of its franchises, licenses, receipts, sales, use, payroll,
employment, business, income or Property before any penalty or interest accrues
thereon, and (ii) all Claims (including, without limitation, claims for labor,
services, materials and supplies) for sums which have become due and payable
and which by law have or may become a Lien (other than a Lien permitted by
Section 10.3 or a Customary Permitted Lien for property taxes and assessments
not yet due upon any of the Borrower's or any of the Borrower's Subsidiaries'
Property or assets, prior to the time when any penalty or fine shall be
incurred with respect thereto; provided, however, that no such taxes, assess
ments, fees and governmental charges referred to in clause (i) above or Claims
referred to in clause (ii) above need be paid if being contested in good faith
by appropriate proceedings diligently instituted and conducted and if such
reserve or other appropriate provision, if any, as shall be required in
conformity with GAAP shall have been made therefor.
9.5 Insurance. The Borrower shall maintain for itself and its
Subsidiaries, or shall cause each of its Subsidiaries to maintain in full force
and effect the insurance policies and programs listed on Schedule 7.1-U or sub
stantially similar policies and programs or other policies and programs as are
reasonably acceptable to the Payment and Disbursement Agent. All such policies
and programs shall be maintained with insurers reasonably acceptable to the
Payment and Disbursement Agent.
9.6 Inspection of Property; Books and Records; Discussions. The
Borrower shall permit, and cause each of its Subsidiaries to permit, any
authorized representative(s) designated by either the Payment and Disbursement
Agent or any Arranger, Co-Agent or other Lender to visit and inspect any of the
Projects or inspect the MIS of the Borrower or any of its Subsidiaries which
relates to the Projects, to examine, audit, check and make copies of their
respective financial and accounting records, books, journals, orders, receipts
and any correspondence and other data relating to their respective businesses
or the transactions contemplated hereby (including, without limitation, in
connection with environmental compliance, hazard or liability), and to discuss
their affairs, finances and accounts with their officers and independent certi
fied public accountants, all with a representative of the Borrower present,
upon reasonable notice and at such reasonable times during normal business
hours, as often as may be reasonably requested. Each such visitation and in
spection shall be at such visitor's expense. The Borrower shall keep and main
tain, and cause its Subsidiaries to keep and maintain, in all material respects
on its MIS and otherwise proper books of record and account in which entries in
conformity with GAAP shall be made of all dealings and transactions in relation
to their respective businesses and activities.
9.7 ERISA Compliance. The Borrower shall, and shall cause each of its
Subsidiaries and ERISA Affiliates to, establish, maintain and operate all Plans
to comply in all material respects with the provisions of ERISA, the Internal
Revenue Code, all other applicable laws, and the regulations and interpreta
tions thereunder and the respective requirements of the governing documents for
such Plans.
9.8 Maintenance of Property. The Borrower shall, and shall cause each
of its Subsidiaries to, maintain in all material respects all of their
respective owned and leased Property in good, safe and insurable condition and
repair and in a businesslike manner, and not permit, commit or suffer any waste
or abandonment of any such Property and from time to time shall make or cause
to be made all material repairs, renewal and replacements thereof, including,
without limitation, any capital improvements which may be required to maintain
the same in a businesslike manner; provided, however, that such Property may be
altered or renovated in the ordinary course of business of the Borrower or such
applicable Subsidiary. Without any limitation on the foregoing, the Borrower
shall maintain the Projects in a manner such that each Project can be used in
the manner and substantially for the purposes such Project is used on the
Closing Date, including, without limitation, maintaining all utilities, access
rights, zoning and necessary Permits for such Project.
9.9 Hedging Requirements. The Borrower shall maintain "Interest Rate
Hedges" (as defined below) on a notional amount of Indebtedness of the Borrower
and its Subsidiaries which, when added to the aggregate principal amount of
Indebtedness of the Borrower and its Subsidiaries which bears interest at a
fixed rate, equals or exceeds 75% of the aggregate principal amount of all
Indebtedness of the Borrower and its Subsidiaries. "Interest Rate Hedges"
shall mean interest rate exchange, collar, cap, swap, adjustable strike cap,
adjustable strike corridor or similar agreements having terms, conditions and
tenors reasonably acceptable to the Payment and Disbursement Agent entered into
by the Borrower and/or its Subsidiaries in order to provide protection to, or
minimize the impact upon, the Borrower and/or such Subsidiaries of increasing
floating rates of interest applicable to Indebtedness.
9.10 Company Status. The Company shall at all times (1) remain a
publicly traded company listed on the New York Stock Exchange or other national
stock exchange; (2) maintain its status as a REIT under the Internal Revenue
Code, (3) retain direct or indirect management and control of the Borrower, and
(4) own, directly or indirectly, no less than ninety-nine percent (99%) of the
equity Securities of SD (or any other General Partner of the Borrower).
9.11 Ownership of Projects, Minority Holdings and Property. The owner
ship of substantially all wholly-owned Projects, Minority Holdings and other
Property of the Consolidated Businesses shall be held by the Borrower and its
Subsidiaries and shall not be held directly by any General Partner.
ARTICLE X
NEGATIVE COVENANTS
Borrower covenants and agrees that it shall comply with the following
covenants so long as any Revolving Credit Commitments are outstanding and
thereafter until payment in full of all of the Obligations (other than
indemnities pursuant to Section 15.3 not yet due), unless the Requisite Lenders
shall otherwise give prior written consent:
10.1 Indebtedness. Neither the Borrower nor any of its Subsidiaries
shall directly or indirectly create, incur, assume or otherwise become or
remain directly or indirectly liable with respect to any Indebtedness, except
Indebtedness which, when aggregated with Indebtedness of the General Partners,
the Borrower or any of their respective Subsidiaries and Minority Holdings
Indebtedness allocable in accordance with GAAP to the Borrower or any Sub
sidiary of the Borrower as of the time of determination, would not exceed (i)
sixty percent (60%) of Capitalization Value as of the date of incurrence, or
(ii) in the case of Secured Indebtedness of the Consolidated Businesses and the
Borrower's proportionate share of Secured Indebtedness of its Minority Hold
ings, fifty-five percent (55%) of the Capitalization Value. In addition, nei
ther the Borrower nor any of its Subsidiaries shall incur, directly or indi
rectly, Indebtedness for borrowed money from any of the General Partners,
unless such Indebtedness is unsecured and expressly subordinated to the payment
of the Obligations.
10.2 Sales of Assets. Neither the Borrower nor any of its Subsidiaries
shall sell, assign, transfer, lease, convey or otherwise dispose of any
Property, whether now owned or hereafter acquired, or any income or profits
therefrom, or enter into any agreement to do so which would result in a
Material Adverse Effect.
10.3 Liens. Neither the Borrower nor any of its Subsidiaries shall
directly or indirectly create, incur, assume or permit to exist any Lien on or
with respect to any Property, except:
(a) Liens with respect to Capital Leases of Equipment entered
into in the ordinary course of business of the Borrower pursuant to
which the aggregate Indebtedness under such Capital Leases does not
exceed $100,000 for any Project;
(b) Liens securing permitted Secured Indebtedness; and
(c) Customary Permitted Liens.
10.4 Investments. Neither the Borrower nor any of its Subsidiaries
shall directly or indirectly make or own any Investment except:
(a) Investments in Cash Equivalents;
(b) Subject to the limitations of clause (e) below, Investments in
the Borrower's Subsidiaries, the Borrower's Affiliates and the Management
Company;
(c) Investments in the form of advances to employees in the
ordinary course of business; provided that the aggregate principal
amount of all such loans at any time outstanding shall not exceed
$1,000,000;
(d) Investments received in connection with the bankruptcy or
reorganization of suppliers and lessees and in settlement of delin
quent obligations of, and other disputes with, lessees and suppliers
arising in the ordinary course of business;
(e) Investments (i) in any individual Project (other than Mall
of America), which when combined with like Investments of the General
Partners in such Project, do not exceed ten percent (10%) of the
Capitalization Value after giving effect to such Investments of the
Borrower or (ii) in a single Person owning a Project or Property, or
a portfolio of Projects or Properties, which when combined with like
Investments of the General Partners in such Person, do not exceed
thirty-three percent (33%) of the Capitalization Value after giving
effect to such Investments of the Borrower, it being understood that
no Investment in any individual Person will be permitted if the
Borrower's allocable share of the Investment of such Person in any
individual Project would exceed the limitation described in clause
(i) hereinabove.
10.5 Conduct of Business. Neither the Borrower nor any of its
Subsidiaries shall engage in any business, enterprise or activity other than
(a) the businesses of acquiring, developing, re-developing and managing predom
inantly retail and mixed use Projects and portfolios of like Projects and (b)
any business or activities which are substantially similar, related or
incidental thereto.
10.6 Transactions with Partners and Affiliates. Neither the Borrower
nor any of its Subsidiaries shall directly or indirectly enter into or permit
to exist any transaction (including, without limitation, the purchase, sale,
lease or exchange of any property or the rendering of any service) with any
holder or holders of more than five percent (5%) of any class of equity Securi
ties of the Borrower, or with any Affiliate of the Borrower which is not its
Subsidiary, on terms that determined by the respective Boards of Directors of
the General Partners to be less favorable to the Borrower or any of its
Subsidiaries, as applicable, than those that might be obtained in an arm's
length transaction at the time from Persons who are not such a holder or Affil
iate. Nothing contained in this Section 10.6 shall prohibit (a) increases in
compensation and benefits for officers and employees of the Borrower or any of
its Subsidiaries which are customary in the industry or consistent with the
past business practice of the Borrower or such Subsidiary, provided that no
Event of Default or Potential Event of Default has occurred and is continuing;
(b) payment of customary partners' indemnities; or (c) performance of any
obligations arising under the Loan Documents.
10.7 Restriction on Fundamental Changes. Neither the Borrower nor any
of its Subsidiaries shall enter into any merger or consolidation, or liquidate,
wind-up or dissolve (or suffer any liquidation or dissolution), or convey,
lease, sell, transfer or otherwise dispose of, in one transaction or series of
transactions, all or substantially all of the Borrower's or any such
Subsidiary's business or Property, whether now or hereafter acquired, except in
connection with issuance, transfer, conversion or repurchase of limited
partnership interests in Borrower. Notwithstanding the foregoing, (i) the
Borrower shall be permitted to merge with another Person so long as the
Borrower is the surviving Person following such merger, and (ii) the SDG
Reorganization Transactions shall be permitted, subject to the terms of Article
XIV hereof.
10.8 Margin Regulations; Securities Laws. Neither the Borrower nor any
of its Subsidiaries, shall use all or any portion of the proceeds of any credit
extended under this Agreement to purchase or carry Margin Stock.
10.9 ERISA. The Borrower shall not and shall not permit any of its
Subsidiaries or ERISA Affiliates to:
(a) engage in any prohibited transaction described in Sections
406 of ERISA or 4975 of the Internal Revenue Code for which a
statutory or class exemption is not available or a private exemption
has not been previously obtained from the DOL;
(b) permit to exist any accumulated funding deficiency (as
defined in Sections 302 of ERISA and 412 of the Internal Revenue
Code), with respect to any Benefit Plan, whether or not waived;
(c) fail to pay timely required contributions or annual install
ments due with respect to any waived funding deficiency to any
Benefit Plan;
(d) terminate any Benefit Plan which would result in any
liability of Borrower or any ERISA Affiliate under Title IV of ERISA;
(e) fail to make any contribution or payment to any
Multiemployer Plan which Borrower or any ERISA Affiliate may be
required to make under any agreement relating to such Multiemployer
Plan, or any law pertaining thereto;
(f) fail to pay any required installment or any other payment
required under Section 412 of the Internal Revenue Code on or before
the due date for such installment or other payment; or
(g) amend a Benefit Plan resulting in an increase in current
liability for the plan year such that the Borrower or any ERISA
Affiliate is required to provide security to such Plan under Section
401(a)(29) of the Internal Revenue Code.
10.10 Organizational Documents. Neither the General Partners, the Bor
rower nor any of its Subsidiaries shall amend, modify or otherwise change any
of the terms or provisions in any of their respective Organizational Documents
as in effect on the Closing Date, except amendments to effect (a) a change of
name of the Borrower or any such Subsidiary, provided that the Borrower shall
have provided the Payment and Disbursement Agent with sixty (60) days prior
written notice of any such name change, or (b) changes that would not affect
such Organizational Documents in any material manner not otherwise permitted
under this Agreement.
10.11 Fiscal Year. Neither the Company, the Borrower nor any of its
Consolidated Subsidiaries shall change its Fiscal Year for accounting or tax
purposes from a period consisting of the 12-month period ending on December 31
of each calendar year.
10.12 Other Financial Covenants.
(a) Minimum Combined Equity Value. The Combined Equity Value shall
at no time be less than $2,400,000,000.
(b) Consolidated Interest Coverage Ratio. As of the first day of
each fiscal quarter for the immediately preceding consecutive four fiscal quar
ters, the ratio of (i) Combined EBITDA to (ii) Combined Interest Expense shall
not be less than 1.8 to 1.0.
(c) Minimum Debt Service Coverage Ratio. As of the first day of
each fiscal quarter for the immediately preceding consecutive four fiscal quar
ters, the ratio of Combined EBITDA to Combined Debt Service shall not be less
than 1.60 to 1.00.
(d) Minimum Debt Yield. As of the first day of each fiscal quarter
for the immediately preceding consecutive four fiscal quarters, the ratio (ex
pressed as a percentage) (the "Debt Yield") of (1) Combined EBITDA to (2) Total
Adjusted Outstanding Indebtedness (less unrestricted Cash and Cash Equivalents
of the Borrower) shall not be less than 13.5%.
(e) Unencumbered Combined EBITDA to Total Unsecured Outstanding
Indebtedness. As of the first day of each fiscal quarter for the immediately
preceding consecutive four fiscal quarters, the ratio (expressed as a percent
age) (the "Unsecured Debt Yield") of (i) the Unencumbered Combined EBITDA to
(ii) Total Unsecured Outstanding Indebtedness (less unrestricted Cash and Cash
Equivalents of the Borrower) shall not be less than 11%.
(f) Unencumbered Combined EBITDA to Unsecured Interest Expense. As
of the first day of each fiscal quarter for the immediately preceding
consecutive four fiscal quarters, the ratio of (i) the Unencumbered Combined
EBITDA to (ii) Unsecured Interest Expense shall not be less than 1.5 to 1.0.
10.13 Pro Forma Adjustments. In connection with an acquisition of a
Project, a Property, or a portfolio of Projects or Properties, by any of the
Consolidated Businesses or any Minority Holding (whether such acquisition is
direct or through the acquisition of a Person which owns such Property), the
financial covenants contained in this Agreement shall be calculated as follows
on a pro forma basis (with respect to the pro rata share of the Borrower in the
case of an acquisition by a Minority Holding), which pro forma calculation
shall be effective until the last day of the fourth fiscal quarter following
such acquisition (or such earlier test period, as applicable), at which time
actual performance shall be utilized for such calculations.
(a) Annual EBITDA. Annual EBITDA for the acquired Property shall be
deemed to be an amount equal to (i) the net purchase price of the acquired
Property (or the Borrower's pro rata share of such net purchase price in the
event of an acquisition by a Minority Holding) for the first fiscal quarter
following such acquisition, multiplied by 8.25% and (ii) for the succeeding
three fiscal quarters, Annual EBITDA shall be deemed the greater of (A) the net
purchase price multiplied by 8.25%, or (B) the actual EBITDA from such acquired
Property during the period following Borrower's (direct or indirect) acquisi
tion, computed on an annualized basis, provided that such annualized EBITDA
shall in no event exceed the final product obtained after multiplying (1) the
net purchase price by (2) 1.1, and then by (3) 8.25%.
(b) Combined EBITDA. The pro forma calculation of Annual EBITDA for
the acquired Property shall be added to the calculation of Combined EBITDA.
(c) Unencumbered Combined EBITDA. If, after giving effect to the
acquisition, the acquired Property will not be encumbered by Secured
Indebtedness, then the pro forma Annual EBITDA for the acquired Property shall
be added to the calculation of Unencumbered Combined EBITDA.
(d) Secured Indebtedness. Any Indebtedness secured by a Lien in
curred and/or assumed in connection with such acquisition of a Property shall
be added to the calculation of Secured Indebtedness.
(e) Total Adjusted Outstanding Indebtedness. Any Indebtedness
incurred and/or assumed in connection with such acquisition shall be added to
the calculation of Total Adjusted Outstanding Indebtedness.
(f) Combined Interest Expense. If any Indebtedness is incurred or
assumed in connection with such acquisition, then the amount of interest
expense to be incurred on such Indebtedness during the period following such
acquisition, computed on an annualized basis during the applicable period,
shall be added to the calculation of Combined Interest Expense.
(g) Total Unsecured Outstanding Indebtedness. Any Indebtedness
which is not secured by a Lien and which is incurred and/or assumed in connec
tion with such acquisition shall be added to the calculation of Total Unsecured
Outstanding Indebtedness.
(h) Unsecured Interest Expense. If any unsecured Indebtedness is
incurred or assumed in connection with such acquisition, then the amount of
interest expense to be incurred on such Indebtedness during the period
following such acquisition, computed on an annualized basis during the
applicable period, shall be added to the calculation of Unsecured Interest
Expense.
(i) Debt Yield and Unencumbered Debt Yield. For purposes of
calculating Debt Yield and Unencumbered Debt Yield only, non-recourse
Indebtedness and completion guarantees incurred for the construction of new
Projects shall, until such time as the interest expense associated with such
financing need no longer be capitalized in accordance with GAAP, be excluded
from the calculation of Total Adjusted Outstanding Indebtedness (provided that
recourse Indebtedness and repayment guarantees shall be included in such calcu
lation).
ARTICLE XI
EVENTS OF DEFAULT; RIGHTS AND REMEDIES
11.1 Events of Default. Each of the following occurrences shall
constitute an Event of Default under this Agreement:
(a) Failure to Make Payments When Due. The Borrower shall fail to
pay (i) when due any principal payment on the Obligations which is due on the
Revolving Credit Termination Date or pursuant to the terms of Section 2.1(a),
Section 2.2, Section 2.4, or Section 4.1(d) or (ii) within five Business Days
after the date on which due, any interest payment on the Obligations or any
principal payment pursuant to the terms of Section 4.1(a) or (iii) when due,
any principal payment on the Obligations not referenced in clauses (i) or (ii)
hereinabove.
(b) Breach of Certain Covenants. The Borrower shall fail duly and
punctually to perform or observe any agreement, covenant or obligation binding
on such Person under Sections 8.3, 9.1, 9.2, 9.3, 9.4, 9.5, 9.6, or Article X.
(c) Breach of Representation or Warranty. Any representation or
warranty made by the Borrower to the Payment and Disbursement Agent, any
Arranger or any other Lender herein or by the Borrower or any of its Subsid
iaries in any of the other Loan Documents or in any statement or certificate at
any time given by any such Person pursuant to any of the Loan Documents shall
be false or misleading in any material respect on the date as of which made.
(d) Other Defaults. Except as set forth in the next sentence, the
Borrower shall default in the performance of or compliance with any term
contained in this Agreement (other than as identified in paragraphs (a), (b) or
(c) of this Section 11.1), or any default or event of default shall occur under
2any of the other Loan Documents, and such default or event of default shall con
tinue for twenty (20) days after receipt of written notice from the Payment and
Disbursement Agent thereof. With respect to any failure in the performance of
or compliance with the terms of Section 9.9, such failure or noncompliance
shall not constitute an Event of Default so long as the Borrower cures such
failure or noncompliance within one hundred eighty (180) days after the receipt
of written notice from the Payment and Disbursement Agent thereof.
(e) Acceleration of Other Indebtedness. Any breach, default or
event of default shall occur, or any other condition shall exist under any
instrument, agreement or indenture pertaining to any recourse Indebtedness
(other than the Obligations) of the Borrower or its Subsidiaries aggregating
$30,000,000 or more, and the effect thereof is to cause an acceleration,
mandatory redemption or other required repurchase of such Indebtedness, or
permit the holder(s) of such Indebtedness to accelerate the maturity of any
such Indebtedness or require a redemption or other repurchase of such Indebt
edness; or any such Indebtedness shall be otherwise declared to be due and
payable (by acceleration or otherwise) or required to be prepaid, redeemed or
otherwise repurchased by the Borrower or any of its Subsidiaries (other than by
a regularly scheduled required prepayment) prior to the stated maturity
thereof.
(f) Involuntary Bankruptcy; Appointment of Receiver, Etc.
(i) An involuntary case shall be commenced against any General
Partner, the Borrower, or any of its Subsidiaries to which $150,000,000 or
more of the Combined Equity Value is attributable, and the petition shall
not be dismissed, stayed, bonded or discharged within sixty (60) days
after commencement of the case; or a court having jurisdiction in the
premises shall enter a decree or order for relief in respect of any Gener
al Partner, the Borrower or any of its Subsidiaries in an involuntary
case, under any applicable bankruptcy, insolvency or other similar law now
or hereinafter in effect; or any other similar relief shall be granted
under any applicable federal, state, local or foreign law; or the
respective board of directors of any General Partner or Limited Partners
of the Borrower or the board of directors or partners of any of the
Borrower's Subsidiaries (or any committee thereof) adopts any resolution
or otherwise authorizes any action to approve any of the foregoing.
(ii) A decree or order of a court having jurisdiction in the
premises for the appointment of a receiver, liquidator, sequestrator,
trustee, custodian or other officer having similar powers over any of the
General Partners, the Borrower, or any of its Subsidiaries to which
$150,000,000 or more of the Combined Equity Value is attributable, or over
all or a substantial part of the Property of any of the General Partners,
the Borrower or any of such Subsidiaries shall be entered; or an interim
receiver, trustee or other custodian of any of the General Partners, the
Borrower or any of such Subsidiaries or of all or a substantial part of
the Property of any of the General Partners, the Borrower or any of such
Subsidiaries shall be appointed or a warrant of attachment, execution or
similar process against any substantial part of the Property of any of the
General Partners, the Borrower or any of such Subsidiaries shall be issued
and any such event shall not be stayed, dismissed, bonded or discharged
within sixty (60) days after entry, appointment or issuance; or the
respective board of directors of any of the General Partners, the General
Partner or Limited Partners of the Borrower or the board of directors or
partners of any of Borrower's Subsidiaries (or any committee thereof)
adopts any resolution or otherwise authorizes any action to approve any of
the foregoing.
(g) Voluntary Bankruptcy; Appointment of Receiver, Etc. Any of the
General Partners, the Borrower, or any of its Subsidiaries to which
$150,000,000 or more of the Combined Equity Value is attributable, shall
commence a voluntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or shall consent to the entry of an
order for relief in an involuntary case, or to the conversion of an involuntary
case to a voluntary case, under any such law, or shall consent to the appoint
ment of or taking possession by a receiver, trustee or other custodian for all
or a substantial part of its Property; or any of the General Partners, the
Borrower or any of such Subsidiaries shall make any assignment for the benefit
of creditors or shall be unable or fail, or admit in writing its inability, to
pay its debts as such debts become due.
(h) Judgments and Unpermitted Liens.
(i) Any money judgment (other than a money judgment covered
by insurance as to which the insurance company has acknowledged coverage),
writ or warrant of attachment, or similar process against the Borrower or
any of its Subsidiaries or any of their respective assets involving in any
case an amount in excess of $15,000,000 (other than with respect to Claims
arising out of non-recourse Indebtedness) is entered and shall remain
undischarged, unvacated, unbonded or unstayed for a period of sixty (60)
days or in any event later than five (5) days prior to the date of any
proposed sale thereunder; provided, however, if any such judgment, writ or
warrant of attachment or similar process is in excess of $30,000,000
(other than with respect to Claims arising out of non-recourse Indebted
ness), the entry thereof shall immediately constitute an Event of Default
hereunder.
(ii) A federal, state, local or foreign tax Lien is filed
against the Borrower which is not discharged of record, bonded over or
otherwise secured to the satisfaction of the Payment and Disbursement
Agent within fifty (50) days after the filing thereof or the date upon
which the Payment and Disbursement Agent receives actual knowledge of the
filing thereof for an amount which, either separately or when aggregated
with the amount of any judgments described in clause (i) above and/or the
amount of the Environmental Lien Claims described in clause (iii) below,
equals or exceeds $15,000,000.
(iii) An Environmental Lien is filed against any Project with
respect to Claims in an amount which, either separately or when aggregated
with the amount of any judgments described in clause (i) above and/or the
amount of the tax Liens described in clause (ii) above, equals or exceeds
$15,000,000.
(i) Dissolution. Any order, judgment or decree shall be entered
against the Borrower decreeing its involuntary dissolution or split up; or the
Borrower shall otherwise dissolve or cease to exist except as specifically
permitted by this Agreement.
(j) Loan Documents. At any time, for any reason, any Loan Document
ceases to be in full force and effect or the Borrower seeks to repudiate its
obligations thereunder.
(k) ERISA Termination Event. Any ERISA Termination Event occurs
which the Payment and Disbursement Agent believes could subject either the
Borrower or any ERISA Affiliate to liability in excess of $500,000.
(l) Waiver Application. The plan administrator of any Benefit Plan
applies under Section 412(d) of the Code for a waiver of the minimum funding
standards of Section 412(a) of the Internal Revenue Code and the Payment and
Disbursement Agent believes that the substantial business hardship upon which
the application for the waiver is based could subject either the Borrower or
any ERISA Affiliate to liability in excess of $500,000.
(m) Material Adverse Effect. An event shall occur which has a
Material Adverse Effect.
(n) Certain Defaults Pertaining to the General Partners. The
Company shall fail to (i) maintain its status as a REIT for federal income tax
purposes, (ii) continue as a general partner of the Borrower, (iii) maintain
ownership of no less than 99% of the equity Securities of SD (or any other
General Partner of the Borrower), (iv) comply with all Requirements of Law
applicable to it and its businesses and Properties, in each case where the
failure to so comply individually or in the aggregate will have or is
reasonably likely to have a Material Adverse Effect, (v) remain listed on the
New York Stock Exchange or other national stock exchange, or (vi) file all tax
returns and reports required to be filed by it with any Governmental Authority
as and when required to be filed or to pay any taxes, assessments, fees or
other governmental charges upon it or its Property, assets, receipts, sales,
use, payroll, employment, licenses, income, or franchises which are shown in
such returns, reports or similar statements to be due and payable as and when
due and payable, except for taxes, assessments, fees and other governmental
charges (A) that are being contested by the Company in good faith by an
appropriate proceeding diligently pursued, (B) for which adequate reserves have
been made on its books and records, and (C) the amounts the non-payment of
which would not, individually or in the aggregate, result in a Material Adverse
Effect.
SD shall fail to (i) continue as the managing general partner of SDGLP,
(ii) remain a Subsidiary of the Company, (iii) comply with all Requirements of
Law applicable to it and its businesses and Properties, in each case where the
failure to so comply individually or in the aggregate will have or is
reasonably likely to have a Material Adverse Effect, or (iv) file all tax re
turns and reports required to be filed by it with any Governmental Authority as
and when required to be filed or to pay any taxes, assessments, fees or other
governmental charges upon it or its Property, assets, receipts, sales, use,
payroll, employment, licenses, income, or franchises which are shown in such
returns, reports or similar statements to be due and payable as and when due
and payable, except for taxes, assessments, fees and other governmental charges
(A) that are being contested by the Company in good faith by an appropriate
proceeding diligently pursued, (B) for which adequate reserves have been made
on its books and records, and (C) the amounts the non-payment of which would
not, individually or in the aggregate, result in a Material Adverse Effect.
(o) Merger or Liquidation of the General Partners or the Borrower.
Except pursuant to the SDG Reorganization Transactions, any General Partner
shall merge or liquidate with or into any other Person and, as a result thereof
and after giving effect thereto, (i) such General Partner is not the surviving
Person or (ii) such merger or liquidation would effect an acquisition of or
Investment in any Person not otherwise permitted under the terms of this
Agreement. Except pursuant to the SDG Reorganization Transactions, the Borrow
er shall merge or liquidate with or into any other Person and, as a result
thereof and after giving effect thereto, (i) the Borrower is not the surviving
Person or (ii) such merger or liquidation would effect an acquisition of or
Investment in any Person not otherwise permitted under the terms of this
Agreement.
An Event of Default shall be deemed "continuing" until cured or waived in
writing in accordance with Section 15.7.
11.2 Rights and Remedies.
Acceleration and Termination. Upon the occurrence of any Event
of Default described in Sections 11.1(f) or 11.1(g), the Revolving Credit
Commitments shall automatically and immediately terminate and the unpaid
principal amount of, and any and all accrued interest on, the Obligations and
all accrued fees shall automatically become immediately due and payable,
without presentment, demand, or protest or other requirements of any kind (in
cluding, without limitation, valuation and appraisement, diligence, pre
sentment, notice of intent to demand or accelerate and of acceleration), all of
which are hereby expressly waived by the Borrower; and upon the occurrence and
during the continuance of any other Event of Default, the Payment and
Disbursement Agent shall at the request, or may with the consent, of the
Requisite Lenders, by written notice to the Borrower, (i) declare that the
Revolving Credit Commitments are terminated, whereupon the Revolving Credit
Commitments and the obligation of each Lender to make any Loan hereunder and of
each Lender to issue or participate in any Letter of Credit not then issued
shall immediately terminate, and/or (ii) declare the unpaid principal amount of
and any and all accrued and unpaid interest on the Obligations to be, and the
same shall thereupon be, immediately due and payable, without presentment,
demand, or protest or other requirements of any kind (including, without
limitation, valuation and appraisement, diligence, presentment, notice of
intent to demand or accelerate and of acceleration), all of which are hereby
expressly waived by the Borrower.
(b) Rescission. If at any time after termination of the Revolving
Credit Commitments and/or acceleration of the maturity of the Loans, the
Borrower shall pay all arrears of interest and all payments on account of prin
cipal of the Loans and Reimbursement Obligations which shall have become due
otherwise than by acceleration (with interest on principal and, to the extent
permitted by law, on overdue interest, at the rates specified in this
Agreement) and all Events of Default and Potential Events of Default (other
than nonpayment of principal of and accrued interest on the Loans due and
payable solely by virtue of acceleration) shall be remedied or waived pursuant
to Section 15.7, then upon the written consent of the Requisite Lenders and
written notice to the Borrower, the termination of the Revolving Credit Commit
ments and/or the acceleration and their consequences may be rescinded and
annulled; but such action shall not affect any subsequent Event of Default or
Potential Event of Default or impair any right or remedy consequent thereon.
The provisions of the preceding sentence are intended merely to bind the
Lenders to a decision which may be made at the election of the Requisite
Lenders; they are not intended to benefit the Borrower and do not give the
Borrower the right to require the Lenders to rescind or annul any acceleration
hereunder, even if the conditions set forth herein are met.
(c) Enforcement. The Borrower acknowledges that in the event the
Borrower or any of its Subsidiaries fails to perform, observe or discharge any
of their respective obligations or liabilities under this Agreement or any
other Loan Document, any remedy of law may prove to be inadequate relief to the
Payment and Disbursement Agent, the Arrangers and the other Lenders; therefore,
the Borrower agrees that the Payment and Disbursement Agent, the Arrangers and
the other Lenders shall be entitled to temporary and permanent injunctive
relief in any such case without the necessity of proving actual damages.
ARTICLE XII
THE AGENTS
12.1 Appointment. Each Lender hereby designates and appoints UBS as
the Payment and Disbursement Agent, the Arrangers as the Arrangers and the Co-
Agents as the Co-Agents of such Lender under this Agreement, and each Lender
hereby irrevocably authorizes Payment and Disbursement Agent, the Arrangers and
the Co-Agents to take such actions on its behalf under the provisions of this
Agreement and the Loan Documents and to exercise such powers as are set forth
herein or therein together with such other powers as are reasonably incidental
thereto. The Payment and Disbursement Agent, the Arrangers and the Co-Agents
each agrees to act as such on the express conditions contained in this Article
XII.
(b) The provisions of this Article XII are solely for the benefit of
the Payment and Disbursement Agent, the Arrangers, the Co-Agents and the other
Lenders, and neither the Borrower, the General Partners nor any Subsidiary of
the Borrower shall have any rights to rely on or enforce any of the provisions
hereof (other than as expressly set forth in Section 12.7). In performing its
respective functions and duties under this Agreement, the Payment and
Disbursement Agent, each Arranger and each Co-Agent shall act solely as agents
of the Lenders and do not assume and shall not be deemed to have assumed any
obligation or relationship of agency, trustee or fiduciary with or for any
General Partner, the Borrower or any Subsidiary of the Borrower. The Payment
and Disbursement Agent, each Arranger and each Co-Agent may perform any of
their respective duties hereunder, or under the Loan Documents, by or through
their respective agents or employees.
12.2 Nature of Duties. The Payment and Disbursement Agent, the
Arrangers and the Co-Agents shall not have any duties or responsibilities
except those expressly set forth in this Agreement or in the Loan Documents.
The duties of the Payment and Disbursement Agent, the Arrangers and the Co-
Agents shall be mechanical and administrative in nature. None of the Payment
and Disbursement Agent, any Arranger or any Co-Agent shall have by reason of
this Agreement a fiduciary relationship in respect of any Holder. Nothing in
this Agreement or any of the Loan Documents, expressed or implied, is intended
to or shall be construed to impose upon the Payment and Disbursement Agent or
any Arranger or Co-Agent any obligations in respect of this Agreement or any of
the Loan Documents except as expressly set forth herein or therein. The
Payment and Disbursement Agent and each Arranger and Co-Agent each hereby
agrees that its duties shall include providing copies of documents received by
such Agent from the Borrower which are reasonably requested by any Lender and
promptly notifying each Lender upon its obtaining actual knowledge of the occur
rence of any Event of Default hereunder.
12.3 Right to Request Instructions. The Payment and Disbursement Agent
and each Arranger and Co-Agent may at any time request instructions from the
Lenders with respect to any actions or approvals which by the terms of any of
the Loan Documents such Agent is permitted or required to take or to grant, and
such Agent shall be absolutely entitled to refrain from taking any action or to
withhold any approval and shall not be under any liability whatsoever to any
Person for refraining from any action or withholding any approval under any of
the Loan Documents until it shall have received such instructions from those
Lenders from whom such Agent is required to obtain such instructions for the
pertinent matter in accordance with the Loan Documents. Without limiting the
generality of the foregoing, such Agent shall take any action, or refrain from
taking any action, which is permitted by the terms of the Loan Documents upon
receipt of instructions from those Lenders from whom such Agent is required to
obtain such instructions for the pertinent matter in accordance with the Loan
Documents, provided, that no Holder shall have any right of action whatsoever
against the Payment and Disbursement Agent or any Arranger or Co-Agent as a
result of such Agent acting or refraining from acting under the Loan Documents
in accordance with the instructions of the Requisite Lenders or, where required
by the express terms of this Agreement, a greater proportion of the Lenders.
12.4 Reliance. The Payment and Disbursement Agent and each Arranger and
Co-Agent shall each be entitled to rely upon any written notices, statements,
certificates, orders or other documents or any telephone message believed by it
in good faith to be genuine and correct and to have been signed, sent or made
by the proper Person, and with respect to all matters pertaining to this Agree
ment or any of the Loan Documents and its duties hereunder or thereunder, upon
advice of legal counsel (including counsel for the Borrower), independent
public accountants and other experts selected by it.
12.5 Indemnification. To the extent that the Payment and Disbursement
Agent or any Arranger or Co-Agent is not reimbursed and indemnified by the Bor
rower, the Lenders will reimburse and indemnify such Agent for and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, and reasonable costs, expenses or disbursements of any kind
or nature whatsoever which may be imposed on, incurred by, or asserted against
it in any way relating to or arising out of the Loan Documents or any action
taken or omitted by such Agent under the Loan Documents, in proportion to each
Lender's Pro Rata Share. Such Agent agrees to refund to the Lenders any of the
foregoing amounts paid to it by the Lenders which amounts are subsequently
recovered by such Agent from the Borrower or any other Person on behalf of the
Borrower. The obligations of the Lenders under this Section 12.5 shall survive
the payment in full of the Loans, the Reimbursement Obligations and all other
Obligations and the termination of this Agreement.
12.6 Agents Individually. With respect to their respective Pro Rata
Share of the Revolving Credit Commitments hereunder, if any, and the Loans made
by them, if any, the Payment and Disbursement Agent, the Arrangers and the Co-
Agents shall have and may exercise the same rights and powers hereunder and is
subject to the same obligations and liabilities as and to the extent set forth
herein for any other Lender. The terms "Lenders" or "Requisite Lenders" or any
similar terms shall, unless the context clearly otherwise indicates, include
UBS, each Arranger and each other Co-Agent in its respective individual capac
ity as a Lender or as one of the Requisite Lenders. UBS and each other
Arranger and Co-Agent and each of their respective Affiliates may accept depos
its from, lend money to, and generally engage in any kind of banking, trust or
other business with the Borrower or any of its Subsidiaries as if UBS were not
acting as the Payment and Disbursement Agent and the other Arrangers and Co-
Agents were not acting as Arrangers and Co-Agents pursuant hereto.
12.7 Successor Agents.
(a) Resignation and Removal. Any Agent may resign from the perfor
mance of all its functions and duties hereunder at any time by giving at least
thirty (30) Business Days' prior written notice to the Borrower and the other
Lenders, unless applicable law requires a shorter notice period or that there
be no notice period, in which instance such applicable law shall control. Any
Agent may be removed (i) at the direction of Lenders whose Pro Rata Shares, in
the aggregate, are greater than fifty percent (50%), in the event the Agent is
not also a Lender having a Revolving Credit Commitment of at least $20,000,000
or six percent (6%) of the Revolving Credit Commitments of all of the Lenders
or (ii) at the direction of the Requisite Lenders, in the event such Agent
fails to perform its duties hereunder in any material respect. Such resigna
tion or removal shall take effect upon the acceptance by a successor Agent of
appointment pursuant to this Section 12.7.
(b) Appointment by Requisite Lenders. Upon any such resignation or
removal becoming effective, (i) if a Arranger or Co-Agent shall then be acting
with respect to this Agreement, such Arranger or Co-Agent shall become the
Payment and Disbursement Agent or (ii) if no Arranger or Co-Agent shall then be
acting with respect to this Agreement, the Lenders shall have the right to
appoint a successor Payment and Disbursement Agent selected from among the Lend
ers.
(c) Appointment by Retiring Agent. If a successor Payment and
Disbursement Agent shall not have been appointed within the thirty (30)
Business Day or shorter period provided in paragraph (a) of this Section 12.7,
the retiring Agent shall then appoint a successor Agent who shall serve as
Payment and Disbursement Agent until such time, if any, as the Lenders appoint
a successor Agent as provided above.
(d) Rights of the Successor and Retiring Agents. Upon the
acceptance of any appointment as Payment and Disbursement Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring
Agent, and the retiring Agent shall be discharged from its duties and obliga
tions under this Agreement. After any retiring Agent's resignation hereunder
as Agent, the provisions of this Article XII shall inure to its benefit as to
any actions taken or omitted to be taken by it while it was the Agent under
this Agreement.
12.8 Relations Among the Lenders. Each Lender agrees that it will not
take any legal action, nor institute any actions or proceedings, against the
Borrower or any other obligor hereunder with respect to any of the Obligations,
without the prior written consent of the Lenders. Without limiting the gener
ality of the foregoing, no Lender may accelerate or otherwise enforce its
portion of the Obligations, or unilaterally terminate its Revolving Credit Com
mitment except in accordance with Section 11.2(a).
ARTICLE XIII
YIELD PROTECTION
13.1 Taxes.
(a) Payment of Taxes. Any and all payments by the Borrower
hereunder or under any Note or other document evidencing any Obligations shall
be made, in accordance with Section 4.2, free and clear of and without
reduction for any and all present or future taxes, levies, imposts, deductions,
charges, withholdings, and all stamp or documentary taxes, excise taxes, ad
valorem taxes and other taxes imposed on the value of the Property, charges or
levies which arise from the execution, delivery or registration, or from
payment or performance under, or otherwise with respect to, any of the Loan
Documents or the Revolving Credit Commitments and all other liabilities with
respect thereto excluding, in the case of each Lender, taxes imposed on or mea
sured by net income or overall gross receipts and capital and franchise taxes
imposed on it by (i) the United States, (ii) the Governmental Authority of the
jurisdiction in which such Lender's Applicable Lending Office is located or any
political subdivision thereof or (iii) the Governmental Authority in which such
Person is organized, managed and controlled or any political subdivision
thereof (all such non-excluded taxes, levies, imposts, deductions, charges and
withholdings being hereinafter referred to as "Taxes"). If the Borrower shall
be required by law to withhold or deduct any Taxes from or in respect of any
sum payable hereunder or under any such Note or document to any Lender, (x) the
sum payable to such Lender shall be increased as may be necessary so that after
making all required withholding or deductions (including withholding or deduc
tions applicable to additional sums payable under this Section 13.1) such Lend
er receives an amount equal to the sum it would have received had no such
withholding or deductions been made, (y) the Borrower shall make such withhold
ing or deductions, and (z) the Borrower shall pay the full amount withheld or
deducted to the relevant taxation authority or other authority in accordance
with applicable law.
(b) Indemnification. The Borrower will indemnify each Lender
against, and reimburse each on demand for, the full amount of all Taxes (includ
ing, without limitation, any Taxes imposed by any Governmental Authority on
amounts payable under this Section 13.1 and any additional income or franchise
taxes resulting therefrom) incurred or paid by such Lender or any of their re
spective Affiliates and any liability (including penalties, interest, and out-
of-pocket expenses paid to third parties) arising therefrom or with respect
thereto, whether or not such Taxes were lawfully payable. A certificate as to
any additional amount payable to any Person under this Section 13.1 submitted
by it to the Borrower shall, absent manifest error, be final, conclusive and
binding upon all parties hereto. Each Lender agrees, within a reasonable time
after receiving a written request from the Borrower, to provide the Borrower
and the Payment and Disbursement Agent with such certificates as are reasonably
required, and take such other actions as are reasonably necessary to claim such
exemptions as such Lender may be entitled to claim in respect of all or a
portion of any Taxes which are otherwise required to be paid or deducted or
withheld pursuant to this Section 13.1 in respect of any payments under this
Agreement or under the Notes.
(c) Receipts. Within thirty (30) days after the date of any payment
of Taxes by the Borrower, it will furnish to the Payment and Disbursement
Agent, at its address referred to in Section 15.8, the original or a certified
copy of a receipt evidencing payment thereof.
(d) Foreign Bank Certifications. Each Lender that is not
created or organized under the laws of the United States or a political
subdivision thereof shall deliver to the Borrower and the Payment and
Disbursement Agent on the Closing Date or the date on which such Lender
becomes a Lender pursuant to Section 15.1 hereof a true and accurate
certificate executed in duplicate by a duly authorized officer of such
Lender to the effect that such Lender is eligible to receive payments here
under and under the Notes without deduction or withholding of United
States federal income tax (I) under the provisions of an applicable tax
treaty concluded by the United States (in which case the certificate shall
be accompanied by two duly completed copies of IRS Form 1001 (or any
successor or substitute form or forms)) or (II) under Sections 1442(c)(1)
and 1442(a) of the Internal Revenue Code (in which case the certificate
shall be accompanied by two duly completed copies of IRS Form 4224 (or any
successor or substitute form or forms)).
(ii) Each Lender further agrees to deliver to the Borrower and the
Payment and Disbursement Agent from time to time, a true and accurate
certificate executed in duplicate by a duly authorized officer of such
Lender before or promptly upon the occurrence of any event requiring a
change in the most recent certificate previously delivered by it to the
Borrower and the Payment and Disbursement Agent pursuant to this
Section 13.1(d). Each certificate required to be delivered pursuant to
this Section 13.1(d)(ii) shall certify as to one of the following:
(A) that such Lender can continue to receive payments hereunder
and under the Notes without deduction or withholding of United States
federal income tax;
(B) that such Lender cannot continue to receive payments here
under and under the Notes without deduction or withholding of United
States federal income tax as specified therein but does not require
additional payments pursuant to Section 13.1(a) because it is enti
tled to recover the full amount of any such deduction or withholding
from a source other than the Borrower; or
(c) that such Lender is no longer capable of receiving payments
hereunder and under the Notes without deduction or withholding of
United States federal income tax as specified therein and that it is
not capable of recovering the full amount of the same from a source
other than the Borrower.
Each Lender agrees to deliver to the Borrower and the Payment and Disbursement
Agent further duly completed copies of the above-mentioned IRS forms on or
before the earlier of (x) the date that any such form expires or becomes
obsolete or otherwise is required to be resubmitted as a condition to obtaining
an exemption from withholding from United States federal income tax and (y)
fifteen (15) days after the occurrence of any event requiring a change in the
most recent form previously delivered by such Lender to the Borrower and
Payment and Disbursement Agent, unless any change in treaty, law, regulation,
or official interpretation thereof which would render such form inapplicable or
which would prevent the Lender from duly completing and delivering such form
has occurred prior to the date on which any such delivery would otherwise be
required and the Lender promptly advises the Borrower that it is not capable of
receiving payments hereunder and under the Notes without any deduction or
withholding of United States federal income tax.
13.2 Increased Capital. If after the date hereof any Lender determines
that (i) the adoption or implementation of or any change in or in the inter
pretation or administration of any law or regulation or any guideline or
request from any central bank or other Governmental Authority or quasi-
governmental authority exercising jurisdiction, power or control over any
Lender or banks or financial institutions generally (whether or not having the
force of law), compliance with which affects or would affect the amount of
capital required or expected to be maintained by such Lender or any corporation
controlling such Lender and (ii) the amount of such capital is increased by or
based upon (A) the making or maintenance by any Lender of its Loans, any
Lender's participation in or obligation to participate in the Loans, Letters of
Credit or other advances made hereunder or the existence of any Lender's obliga
tion to make Loans or (B) the issuance or maintenance by any Lender of, or the
existence of any Lender's obligation to issue, Letters of Credit, then, in any
such case, upon written demand by such Lender (with a copy of such demand to
the Payment and Disbursement Agent), the Borrower shall immediately pay to the
Payment and Disbursement Agent for the account of such Lender, from time to
time as specified by such Lender, additional amounts sufficient to compensate
such Lender or such corporation therefor. Such demand shall be accompanied by
a statement as to the amount of such compensation and include a brief summary
of the basis for such demand. Such statement shall be conclusive and binding
for all purposes, absent manifest error.
13.3 Changes; Legal Restrictions. If after the date hereof any Lender
determines that the adoption or implementation of or any change in or in the
interpretation or administration of any law or regulation or any guideline or
request from any central bank or other Governmental Authority or quasi-
governmental authority exercising jurisdiction, power or control over any Lend
er, or over banks or financial institutions generally (whether or not having
the force of law), compliance with which:
(a) does or will subject a Lender (or its Applicable Lending
Office or Eurodollar Affiliate) to charges (other than taxes) of any
kind which such Lender reasonably determines to be applicable to the
Revolving Credit Commitments of the Lenders to make Eurodollar Rate
Loans or IBOR Rate Loans or issue and/or participate in Letters of
Credit or change the basis of taxation of payments to that Lender of
principal, fees, interest, or any other amount payable hereunder with
respect to Eurodollar Rate Loans, IBOR Rate Loans, Letters of Credit
or Money Market Loans; or
(b) does or will impose, modify, or hold applicable, in the
determination of a Lender, any reserve (other than reserves taken
into account in calculating the Eurodollar Rate), special deposit,
compulsory loan, FDIC insurance or similar requirement against assets
held by, or deposits or other liabilities (including those pertaining
to Letters of Credit) in or for the account of, advances or loans by,
commitments made, or other credit extended by, or any other acquisi
tion of funds by, a Lender or any Applicable Lending Office or Euro
dollar Affiliate of that Lender;
and the result of any of the foregoing is to increase the cost to that Lender
of making, renewing or maintaining the Loans or its Revolving Credit Commitment
or issuing or participating in the Letters of Credit or to reduce any amount
receivable thereunder; then, in any such case, upon written demand by such
Lender (with a copy of such demand to the Payment and Disbursement Agent), the
Borrower shall immediately pay to the Payment and Disbursement Agent for the
account of such Lender, from time to time as specified by such Lender, such
amount or amounts as may be necessary to compensate such Lender or its Euro
dollar Affiliate for any such additional cost incurred or reduced amount
received. Such demand shall be accompanied by a statement as to the amount of
such compensation and include a brief summary of the basis for such demand.
Such statement shall be conclusive and binding for all purposes, absent
manifest error.
13.4 Replacement of Certain Lenders. In the event a Lender (a "Designee
Lender") shall have requested additional compensation from the Borrower under
Section 13.2 or under Section 13.3, the Borrower may, at its sole election, (a)
make written demand on such Designee Lender (with a copy to the Payment and
Disbursement Agent) for the Designee Lender to assign, and such Designee Lender
shall assign pursuant to one or more duly executed Assignment and Acceptances
to one or more Eligible Assignees which the Borrower or the Payment and
Disbursement Agent shall have identified for such purpose, all of such Designee
Lender's right and obligations under this Agreement and the Notes (including,
without limitation, its Revolving Credit Commitment, all Loans owing to it, and
all of its participation interests in Letters of Credit) in accordance with Sec
tion 15.1 or (b) repay all Loans owing to the Designee Lender together with
interest accrued with respect thereto to the date of such repayment and all
fees and other charges accrued or payable under the terms of this Agreement for
the benefit of the Designee Lender to the date of such repayment and remit to
the Payment and Disbursement Agent to be held as cash collateral an amount
equal to the participation interest of the Designee Lender in Letters of
Credit. Any such repayment and remittance shall be for the sole credit of the
Designee Lender and not for any other Lender. Upon delivery of such repayment
and remittance in immediately available funds as aforesaid, the Designee Lender
shall cease to be a Lender under this Agreement. All expenses incurred by the
Payment and Disbursement Agent in connection with the foregoing shall be for
the sole account of the Borrower and shall constitute Obligations hereunder. In
no event shall Borrower's election under the provisions of this Section 13.4
affect its obligation to pay the additional compensation required under either
Section 13.2 or Section 13.3.
ARTICLE XIV
THE SDG REORGANIZATION TRANSACTIONS
14.1 The SDG Reorganization Transactions. The Company has informed the
Lenders that it has merged (the "Merger") a newly-formed Subsidiary with and
into SD Property Group, Inc. (formerly DeBartolo Realty Corporation) ("SD"), in
order, over time, to effect a consolidation of the operations of the Company
and SD and their respective subsidiaries. It is anticipated that, pursuant to
the other SDG Reorganization Transactions, future business of the combined
companies will be conducted by SDGLP, however, for some period of time fol
lowing the consummation of the Merger, business shall be conducted both by
SPGLP and by SDGLP. The Borrower and the Company have requested that the
Lenders consent to the Merger and to the other SDG Reorganization Transactions,
and the Lenders have agreed to consent thereto.
14.2 Release of Simon Property Group, L.P. In the event that, after the
Closing Date, the Company elects to conduct all of its business through SDGLP,
and SPGLP conducts no business and has no remaining assets or Subsidiaries,
then:
(a) the Borrower shall deliver to the Payment and Disbursement Agent
Officer's Certificates of the Borrower and the General Partners, signed by the
Borrower's and the General Partners' respective chief executive officers, finan
cial officers, treasurers or other qualified officer acceptable to the Payment
and Disbursement Agent, representing and certifying (1) that the officer
signatory thereto has reviewed the terms of the Loan Documents, and has made,
or caused to be made under his/her supervision, a review in reasonable detail
of the transactions and consolidated and consolidating financial condition of
the General Partners, the Borrower and its Subsidiaries, during the period cov
ered by such reports, that such review has not disclosed the existence during
or at the end of such period, and that such officer does not have knowledge of
the existence as at the date of such Officer's Certificate, of any condition or
event which constitutes an Event of Default or Potential Event of Default or
mandatory prepayment event, or, if any such condition or event existed or ex
ists, and specifying the nature and period of existence thereof and what action
the General Partners and/or the Borrower or any of its Subsidiaries has taken,
is taking and proposes to take with respect thereto; (2) calculations, in the
form of Exhibit G attached hereto, evidencing compliance with each of the finan
cial covenants set forth in Article X hereof for SDGLP, exclusive of SPGLP, and
(3) that the Company is conducting all of its business and operations through
SDGLP and its Subsidiaries and that SPGLP conducts no business or operations
and has no remaining assets or Subsidiaries; and
(b) upon the Payment and Disbursement Agent's receipt and approval
of such Officer's Certificates, SPGLP shall be released from its obligations
hereunder and the Payment and Disbursement Agent shall execute and deliver on
behalf of the Lenders, at the sole cost and expense of the Borrower, such
instruments as are necessary to evidence such release of SPGLP.
ARTICLE XV
MISCELLANEOUS
15.1 Assignments and Participations.
(a) Assignments. No assignments or participations of any Lender's
rights or obligations under this Agreement shall be made except in accordance
with this Section 15.1. Each Lender may assign to one or more Eligible
Assignees all or a portion of its rights and obligations under this Agreement
(including all of its rights and obligations with respect to the Loans and the
Letters of Credit) in accordance with the provisions of this Section 15.1.
(b) Limitations on Assignments. For so long as no Event of Default
has occurred and is continuing, each assignment shall be subject to the follow
ing conditions: (i) each assignment shall be of a constant, and not a varying,
ratable percentage of all of the assigning Lender's rights and obligations
under this Agreement and, in the case of a partial assignment, shall be in a
minimum principal amount of $15,000,000, (ii) each such assignment shall be to
an Eligible Assignee, (iii) the parties to each such assignment shall execute
and deliver to the Payment and Disbursement Agent, for its acceptance and
recording in the Register, an Assignment and Acceptance, (iv) each Arranger
shall maintain a minimum Revolving Credit Commitment in an amount greater than
the Revolving Credit Commitment of any other Lender (other than the other
Arrangers) or an amount sufficient to maintain such Arranger's Pro Rata Share
as of the Closing Date, whichever is less, and (v) each Co-Agent shall maintain
a minimum Revolving Credit Commitment in an amount greater than the Revolving
Credit Commitment of any other Lender (other than the other Co-Agents and the
Arrangers) or an amount sufficient to maintain such Co-Agent's Pro Rata Share
as of the Closing Date, whichever is less. Upon the occurrence and continuance
of an Event of Default, none of the foregoing restrictions on assignments shall
apply. Upon such execution, delivery, acceptance and recording in the Regis
ter, from and after the effective date specified in each Assignment and Accep
tance and agreed to by the Payment and Disbursement Agent, (A) the assignee
thereunder shall, in addition to any rights and obligations hereunder held by
it immediately prior to such effective date, if any, have the rights and obliga
tions hereunder that have been assigned to it pursuant to such Assignment and
Acceptance and shall, to the fullest extent permitted by law, have the same
rights and benefits hereunder as if it were an original Lender hereunder, (B)
the assigning Lender shall, to the extent that rights and obligations hereunder
have been assigned by it pursuant to such Assignment and Acceptance, relinquish
its rights and be released from its obligations under this Agreement (and, in
the case of an Assignment and Acceptance covering all or the remaining portion
of such assigning Lender's rights and obligations under this Agreement, the
assigning Lender shall cease to be a party hereto) and (C) the Borrower shall
execute and deliver to the assignee thereunder a Note evidencing its
obligations to such assignee with respect to the Loans.
(c) The Register. The Payment and Disbursement Agent shall maintain
at its address referred to in Section 15.8 a copy of each Assignment and
Acceptance delivered to and accepted by it and a register (the "Register") for
the recordation of the names and addresses of the Lenders, the Revolving Credit
Commitment of, and the principal amount of the Loans under the Revolving Credit
Commitments owing to, each Lender from time to time and whether such Lender is
an original Lender or the assignee of another Lender pursuant to an Assignment
and Acceptance. The entries in the Register shall be conclusive and binding
for all purposes, absent manifest error, and the Borrower and each of its Sub
sidiaries, the Payment and Disbursement Agent and the other Lenders may treat
each Person whose name is recorded in the Register as a Lender hereunder for
all purposes of this Agreement. The Register shall be available for inspection
by the Borrower or any Lender at any reasonable time and from time to time upon
reasonable prior notice.
(d) Fee. Upon its receipt of an Assignment and Acceptance executed
by the assigning Lender and an Eligible Assignee and a processing and
recordation fee of $2,500 (payable by the assignee to the Payment and
Disbursement Agent), the Payment and Disbursement Agent shall, if such
Assignment and Acceptance has been completed and is in compliance with this
Agreement and in substantially the form of Exhibit A hereto, (i) accept such
Assignment and Acceptance, (ii) record the information contained therein in the
Register and (iii) give prompt notice thereof to the Borrower and the other
Lenders.
(e) Participations. Each Lender may sell participations to one or
more other financial institutions in or to all or a portion of its rights and
obligations under and in respect of any and all facilities under this Agreement
(including, without limitation, all or a portion of any or all of its Revolving
Credit Commitment hereunder and the Committed Loans owing to it and its
undivided interest in the Letters of Credit); provided, however, that (i) such
Lender's obligations under this Agreement (including, without limitation, its
Revolving Credit Commitment hereunder) shall remain unchanged, (ii) such Lender
shall remain solely responsible to the other parties hereto for the performance
of such obligations, (iii) the Borrower, the Payment and Disbursement Agent and
the other Lenders shall continue to deal solely and directly with such Lender
in connection with such Lender's rights and obligations under this Agreement,
(iv) each participation shall be in a minimum amount of $10,000,000, and (v)
such participant's rights to agree or to restrict such Lender's ability to
agree to the modification, waiver or release of any of the terms of the Loan
Documents, to consent to any action or failure to act by any party to any of
the Loan Documents or any of their respective Affiliates, or to exercise or re
frain from exercising any powers or rights which any Lender may have under or
in respect of the Loan Documents, shall be limited to the right to consent to
(A) increase in the Revolving Credit Commitment of the Lender from whom such
participant purchased a participation, (B) reduction of the principal of, or
rate or amount of interest on the Loans subject to such participation (other
than by the payment or prepayment thereof), (C) postponement of any date fixed
for any payment of principal of, or interest on, the Loan(s) subject to such
participation and (D) release of any guarantor of the Obligations.
Participations by a Person in a Money Market Loan of any Lender shall not be
deemed "participations" for purposes of this Section 15.1(e) and shall not be
subject to the restrictions on "participations" contained herein.
(f) Any Lender (each, a "Designating Lender") may at any time designate
one Designated Bank to fund Money Market Loans on behalf of such Designating
Lender subject to the terms of this Section 15.1(f) and the provisions in Sec
tion 15.1 (b) and (e) shall not apply to such designation. No Lender may desig
nate more than one (1) Designated Bank. The parties to each such designation
shall execute and deliver to the Payment and Disbursement Agent for its accep
tance a Designation Agreement. Upon such receipt of an appropriately completed
Designation Agreement executed by a Designating Lender and a designee
representing that it is a Designated Bank, the Payment and Disbursement Agent
will accept such Designation Agreement and will give prompt notice thereof to
the Borrower, whereupon, (i) the Borrower shall execute and deliver to the
Designating Bank a Designated Bank Note payable to the order of the Designated
Bank, (ii) from and after the effective date specified in the Designation Agree
ment, the Designated Bank shall become a party to this Agreement with a right
to make Money Market Loans on behalf of its Designating Lender pursuant to Sec
tion 2.2 after the Borrower has accepted a Money Market Loan (or portion there
of) of the Designating Lender, and (iii) the Designated Bank shall not be re
quired to make payments with respect to any obligations in this Agreement
except to the extent of excess cash flow of such Designated Bank which is not
otherwise required to repay obligations of such Designated Bank which are then
due and payable; provided, however, that regardless of such designation and
assumption by the Designated Bank, the Designating Lender shall be and remain
obligated to the Borrower, the Arrangers, the Co-Agents and the other Lenders
for each and every of the obligations of the Designating Lender and its related
Designated Bank with respect to this Agreement, including, without limitation,
any indemnification obligations under Section 12.5 hereof and any sums other
wise payable to the Borrower by the Designated Bank. Each Designating Lender
shall serve as the administrative agent of the Designated Bank and shall on
behalf of, and to the exclusion of, the Designated Bank: (i) receive any and
all payments made for the benefit of the Designated Bank and (ii) give and re
ceive all communications and notices and take all actions hereunder, including,
without limitation, votes, approvals, waivers, consents and amendments under or
relating to this Agreement and the other Loan Documents. Any such notice,
communication, vote, approval, waiver, consent or amendment shall be signed by
the Designating Lender as administrative agent for the Designated Bank and
shall not be signed by the Designated Bank on its own behalf but shall be bind
ing on the Designated Bank to the same extent as if actually signed by the
Designated Bank. The Borrower, the Payment and Disbursement Agent, the other
Arrangers, Co-Agents and Lenders may rely thereon without any requirement that
the Designated Bank sign or acknowledge the same. No Designated Bank may
assign or transfer all or any portion of its interest hereunder or under any
other Loan Document, other than assignments to the Designating Lender which
originally designated such Designated Bank or otherwise in accordance with the
provisions of Section 15.1 (b) and (e).
(g) Information Regarding the Borrower. Any Lender may, in
connection with any assignment or participation or proposed assignment or
participation pursuant to this Section 15.1, disclose to the assignee or par
ticipant or proposed assignee or participant, any information relating to the
Borrower or its Subsidiaries furnished to such Lender by the Payment and
Disbursement Agent or by or on behalf of the Borrower; provided that, prior to
any such disclosure, such assignee or participant, or proposed assignee or
participant, shall agree, in writing, to preserve in accordance with Section
15.20 the confidentiality of any confidential information described therein.
(h) Payment to Participants. Anything in this Agreement to the
contrary notwithstanding, in the case of any participation, all amounts payable
by the Borrower under the Loan Documents shall be calculated and made in the
manner and to the parties required hereby as if no such participation had been
sold.
(i) Lenders' Creation of Security Interests. Notwithstanding any
other provision set forth in this Agreement, any Lender may at any time create
a security interest in all or any portion of its rights under this Agreement
(including, without limitation, Obligations owing to it and any Note held by
it) in favor of any Federal Reserve bank in accordance with Regulation A of the
Federal Reserve Board.
15.2 Expenses.
(a) Generally. The Borrower agrees upon demand to pay, or reimburse
the Payment and Disbursement Agent and each Arranger for all of their respec
tive reasonable external audit and investigation expenses and for the fees,
expenses and disbursements of Skadden, Arps, Slate, Meagher & Flom (but not of
other legal counsel) and for all other out-of-pocket costs and expenses of
every type and nature incurred by the Payment and Disbursement Agent or each
Arranger in connection with (i) the audit and investigation of the Consolidated
Businesses, the Projects and other Properties of the Consolidated Businesses in
connection with the preparation, negotiation, and execution of the Loan Docu
ments; (ii) the preparation, negotiation, execution and interpretation of this
Agreement (including, without limitation, the satisfaction or attempted satis
faction of any of the conditions set forth in Article VI), the Loan Documents,
and the making of the Loans hereunder; (iii) the ongoing administration of this
Agreement and the Loans, including consultation with attorneys in connection
therewith and with respect to the Payment and Disbursement Agent's rights and
responsibilities under this Agreement and the other Loan Documents; (iv) the
protection, collection or enforcement of any of the Obligations or the
enforcement of any of the Loan Documents; (v) the commencement, defense or
intervention in any court proceeding relating in any way to the Obligations,
any Project, the Borrower, any of its Subsidiaries, this Agreement or any of
the other Loan Documents; (vi) the response to, and preparation for, any sub
poena or request for document production with which the Payment and Disburse
ment Agent or any other Agents or any other Lender is served or deposition or
other proceeding in which any Lender is called to testify, in each case, relat
ing in any way to the Obligations, a Project, the Borrower, any of the
Consolidated Businesses, this Agreement or any of the other Loan Documents; and
(vii) any amendments, consents, waivers, assignments, restatements, or supple
ments to any of the Loan Documents and the preparation, negotiation, and
execution of the same.
(b) After Default. The Borrower further agrees to pay or reimburse
the Payment and Disbursement Agent, the Arrangers, the Co-Agents and each of
the Lenders upon demand for all out-of-pocket costs and expenses, including,
without limitation, reasonable attorneys' fees (including allocated costs of
internal counsel and costs of settlement) incurred by the such entity after the
occurrence of an Event of Default (i) in enforcing any Loan Document or
Obligation or any security therefor or exercising or enforcing any other right
or remedy available by reason of such Event of Default; (ii) in connection with
any refinancing or restructuring of the credit arrangements provided under this
Agreement in the nature of a "work-out" or in any insolvency or bankruptcy
proceeding; (iii) in commencing, defending or intervening in any litigation or
in filing a petition, complaint, answer, motion or other pleadings in any legal
proceeding relating to the Obligations, a Project, any of the Consolidated
Businesses and related to or arising out of the transactions contemplated
hereby or by any of the other Loan Documents; and (iv) in taking any other
action in or with respect to any suit or proceeding (bankruptcy or otherwise)
described in clauses (i) through (iii) above.
15.3 Indemnity. The Borrower further agrees (a) to defend, protect,
indemnify, and hold harmless the Payment and Disbursement Agent, the Arrangers,
the Co-Agents and each and all of the other Lenders and each of their respec
tive officers, directors, employees, attorneys and agents (including, without
limitation, those retained in connection with the satisfaction or attempted
satisfaction of any of the conditions set forth in Article VI) (collectively,
the "Indemnitees") from and against any and all liabilities, obligations,
losses (other than loss of profits), damages, penalties, actions, judgments,
suits, claims, costs, reasonable expenses and disbursements of any kind or
nature whatsoever (excluding any taxes and including, without limitation, the
reasonable fees and disbursements of counsel for such Indemnitees in connection
with any investigative, administrative or judicial proceeding, whether or not
such Indemnitees shall be designated a party thereto), imposed on, incurred by,
or asserted against such Indemnitees in any manner relating to or arising out
of (i) this Agreement or the other Loan Documents, or any act, event or
transaction related or attendant thereto, the making of the Loans and the issu
ance of and participation in Letters of Credit hereunder, the management of
such Loans or Letters of Credit, the use or intended use of the proceeds of the
Loans or Letters of Credit hereunder, or any of the other transactions contem
plated by the Loan Documents, or (ii) any Liabilities and Costs relating to
violation of any Environmental, Health or Safety Requirements of Law, the past,
present or future operations of the Borrower, any of its Subsidiaries or any of
their respective predecessors in interest, or, the past, present or future envi
ronmental, health or safety condition of any respective Property of the
Borrower or any of its Subsidiaries, the presence of asbestos-containing materi
als at any respective Property of the Borrower or any of its Subsidiaries, or
the Release or threatened Release of any Contaminant into the environment
(collectively, the "Indemnified Matters"); provided, however, the Borrower
shall have no obligation to an Indemnitee hereunder with respect to Indemnified
Matters caused by or resulting from the willful misconduct or gross negligence
of such Indemnitee, as determined by a court of competent jurisdiction in a
non-appealable final judgment; and (b) not to assert any claim against any of
the Indemnitees, on any theory of liability, for consequential or punitive
damages arising out of, or in any way in connection with, the Revolving Credit
Commitments, the Revolving Credit Obligations, or the other matters governed by
this Agreement and the other Loan Documents. To the extent that the undertak
ing to indemnify, pay and hold harmless set forth in the preceding sentence may
be unenforceable because it is violative of any law or public policy, the
Borrower shall contribute the maximum portion which it is permitted to pay and
satisfy under applicable law, to the payment and satisfaction of all
Indemnified Matters incurred by the Indemnitees.
15.4 Change in Accounting Principles. If any change in the accounting
principles used in the preparation of the most recent financial statements
referred to in Sections 8.1 or 8.2 are hereafter required or permitted by the
rules, regulations, pronouncements and opinions of the Financial Accounting
Standards Board or the American Institute of Certified Public Accountants (or
successors thereto or agencies with similar functions) and are adopted by any
General Partner or the Borrower, as applicable, with the agreement of its inde
pendent certified public accountants and such changes result in a change in the
method of calculation of any of the covenants, standards or terms found in
Article X, the parties hereto agree to enter into negotiations in order to
amend such provisions so as to equitably reflect such changes with the desired
result that the criteria for evaluating compliance with such covenants,
standards and terms by the Borrower shall be the same after such changes as if
such changes had not been made; provided, however, no change in GAAP that would
affect the method of calculation of any of the covenants, standards or terms
shall be given effect in such calculations until such provisions are amended,
in a manner satisfactory to the Payment and Disbursement Agent and the
Borrower, to so reflect such change in accounting principles.
15.5 Setoff. In addition to any Liens granted under the Loan Documents
and any rights now or hereafter granted under applicable law, upon the occur
rence and during the continuance of any Event of Default, each Lender and any
Affiliate of any Lender is hereby authorized by the Borrower at any time or
from time to time, without notice to any Person (any such notice being hereby
expressly waived) to set off and to appropriate and to apply any and all
deposits (general or special, including, but not limited to, indebtedness
evidenced by certificates of deposit, whether matured or unmatured (but not
including trust accounts)) and any other Indebtedness at any time held or owing
by such Lender or any of its Affiliates to or for the credit or the account of
the Borrower against and on account of the Obligations of the Borrower to such
Lender or any of its Affiliates, including, but not limited to, all Loans and
Letters of Credit and all claims of any nature or description arising out of or
in connection with this Agreement, irrespective of whether or not (i) such
Lender shall have made any demand hereunder or (ii) the Payment and
Disbursement Agent, at the request or with the consent of the Requisite
Lenders, shall have declared the principal of and interest on the Loans and
other amounts due hereunder to be due and payable as permitted by Article XI
and even though such Obligations may be contingent or unmatured. Each Lender
agrees that it shall not, without the express consent of the Requisite Lenders,
and that it shall, to the extent it is lawfully entitled to do so, upon the
request of the Requisite Lenders, exercise its setoff rights hereunder against
any accounts of the Borrower now or hereafter maintained with such Lender or
any Affiliate.
15.6 Ratable Sharing. The Lenders agree among themselves that (i) with
respect to all amounts received by them which are applicable to the payment of
the Obligations (excluding the repayment of Money Market Loans to a particular
Money Market Lender and the fees described in Sections 3.1(g), 5.2(f), and 5.3
and Article XIII) equitable adjustment will be made so that, in effect, all
such amounts will be shared among them ratably in accordance with their Pro
Rata Shares, whether received by voluntary payment, by the exercise of the
right of setoff or banker's lien, by counterclaim or cross-action or by the
enforcement of any or all of the Obligations (excluding the repayment of Money
Market Loans to a particular Money Market Lender and the fees described in
Sections 3.1(g), 5.2(f), and 5.3 and Article XIII), (ii) if any of them shall
by voluntary payment or by the exercise of any right of counterclaim, setoff,
banker's lien or otherwise, receive payment of a proportion of the aggregate
amount of the Obligations held by it, which is greater than the amount which
such Lender is entitled to receive hereunder, the Lender receiving such excess
payment shall purchase, without recourse or warranty, an undivided interest and
participation (which it shall be deemed to have done simultaneously upon the
receipt of such payment) in such Obligations owed to the others so that all
such recoveries with respect to such Obligations shall be applied ratably in
accordance with their Pro Rata Shares; provided, however, that if all or part
of such excess payment received by the purchasing party is thereafter recovered
from it, those purchases shall be rescinded and the purchase prices paid for
such participations shall be returned to such party to the extent necessary to
adjust for such recovery, but without interest except to the extent the
purchasing party is required to pay interest in connection with such recovery.
The Borrower agrees that any Lender so purchasing a participation from another
Lender pursuant to this Section 15.6 may, to the fullest extent permitted by
law, exercise all its rights of payment (including, subject to Section 15.5,
the right of setoff) with respect to such participation as fully as if such
Lender were the direct creditor of the Borrower in the amount of such participa
tion.
15.7 Amendments and Waivers.
(a) General Provisions. Unless otherwise provided for or required
in this Agreement, no amendment or modification of any provision of this
Agreement or any of the other Loan Documents shall be effective without the
written agreement of the Requisite Lenders (which the Requisite Lenders shall
have the right to grant or withhold in their sole discretion) and the Borrower;
provided, however, that the Borrower's agreement shall not be required for any
amendment or modification of Sections 12.1 through 12.8. No termination or
waiver of any provision of this Agreement or any of the other Loan Documents,
or consent to any departure by the Borrower therefrom, shall be effective
without the written concurrence of the Requisite Lenders, which the Requisite
Lenders shall have the right to grant or withhold in their sole discretion.
All amendments, waivers and consents not specifically reserved to the Payment
and Disbursement Agent, the Arrangers, the other Co-Agents or the other Lenders
in Section 15.7(b), 15.7(c), and in other provisions of this Agreement shall
require only the approval of the Requisite Lenders. Any waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which it was given. No notice to or demand on the Borrower in any case shall
entitle the Borrower to any other or further notice or demand in similar or
other circumstances. Notwithstanding the foregoing, no amendment, waiver or
consent shall, unless in writing and signed by the Designating Lender on behalf
of its Designated Bank affected thereby, (a) subject such Designated Bank to
any additional obligations, (b) reduce the principal of, interest on, or other
amounts due with respect to, the Designated Bank Note made payable to such
Designated Bank, or (c) postpone any date fixed for any payment of principal
of, or interest on, or other amounts due with respect to the Designated Bank
Note made payable to the Designated Bank.
(b) Amendments, Consents and Waivers by Affected Lenders. Any
amendment, modification, termination, waiver or consent with respect to any of
the following provisions of this Agreement shall be effective only by a written
agreement, signed by each Lender affected thereby as described below:
(i)waiver of any of the conditions specified in Sections 6.1 and 6.2
(except with respect to a condition based upon another provision of this
Agreement, the waiver of which requires only the concurrence of the
Requisite Lenders),
(ii)increase in the amount of such Lender's Revolving Credit Commitment,
(iii)reduction of the principal of, rate or amount of interest on the Loans,
the Reimbursement Obligations, or any fees or other amounts payable to
such Lender (other than by the payment or prepayment thereof), and
(iv)postponement or extension of any date (other than the Revolving Credit
Termination Date postponement or extension of which is governed by Section
15.7(c)(i)) fixed for any payment of principal of, or interest on, the
Loans, the Reimbursement Obligations or any fees or other amounts payable
to such Lender (except with respect to any modifications of the
application provisions relating to prepayments of Loans and other Obliga
tions which are governed by Section 4.2(b)).
(c) Amendments, Consents and Waivers by All Lenders. Any amendment,
modification, termination, waiver or consent with respect to any of the
following provisions of this Agreement shall be effective only by a written
agreement, signed by each Lender:
(i) postponement of the Revolving Credit Termination Date, or increase in
the Maximum Revolving Credit Amount to any amount in excess of
$1,250,000,000,
(ii) change in the definition of Requisite Lenders or in the aggregate Pro
Rata Share of the Lenders which shall be required for the Lenders or any
of them to take action hereunder or under the other Loan Documents,
(iii) amendment of Section 15.6 or this Section 15.7,
(iv) assignment of any right or interest in or under this Agreement or any of
the other Loan Documents by the Borrower, and
(v) waiver of any Event of Default described in Sections 11.1(a), (f), (g),
(i), (n), and (o).
(d)8 Payment and Disbursement Agent Authority. The Payment and
Disbursement Agent may, but shall have no obligation to, with the written
concurrence of any Lender, execute amendments, modifications, waivers or
consents on behalf of that Lender. Notwithstanding anything to the contrary
contained in this Section 15.7, no amendment, modification, waiver or consent
shall affect the rights or duties of the Payment and Disbursement Agent under
this Agreement and the other Loan Documents, unless made in writing and signed
by the Payment and Disbursement Agent in addition to the Lenders required above
to take such action. Notwithstanding anything herein to the contrary, in the
event that the Borrower shall have requested, in writing, that any Lender agree
to an amendment, modification, waiver or consent with respect to any particular
provision or provisions of this Agreement or the other Loan Documents, and such
Lender shall have failed to state, in writing, that it either agrees or
disagrees (in full or in part) with all such requests (in the case of its
statement of agreement, subject to satisfactory documentation and such other
conditions it may specify) within thirty (30) days after such request, then
such Lender hereby irrevocably authorizes the Payment and Disbursement Agent to
agree or disagree, in full or in part, and in the Payment and Disbursement
Agent's sole discretion, to such requests on behalf of such Lender as such
Lenders' attorney-in-fact and to execute and deliver any writing approved by
the Payment and Disbursement Agent which evidences such agreement as such
Lender's duly authorized agent for such purposes.
15.8 Notices. Unless otherwise specifically provided herein, any notice
or other communication herein required or permitted to be given shall be in
writing and may be personally served, sent by facsimile transmission or by
courier service or United States certified mail and shall be deemed to have
been given when delivered in person or by courier service, upon receipt of a
facsimile transmission, or four (4) Business Days after deposit in the United
States mail with postage prepaid and properly addressed. Notices to the
Payment and Disbursement Agent pursuant to Articles II, IV or XII shall not be
effective until received by the Payment and Disbursement Agent. For the
purposes hereof, the addresses of the parties hereto (until notice of a change
thereof is delivered as provided in this Section 15.8) shall be as set forth
below each party's name on the signature pages hereof or the signature page of
any applicable Assignment and Acceptance, or, as to each party, at such other
address as may be designated by such party in a written notice to all of the
other parties to this Agreement.
15.9 Survival of Warranties and Agreements. All representations and
warranties made herein and all obligations of the Borrower in respect of taxes,
indemnification and expense reimbursement shall survive the execution and
delivery of this Agreement and the other Loan Documents, the making and
repayment of the Loans, the issuance and discharge of Letters of Credit
hereunder and the termination of this Agreement and shall not be limited in any
way by the passage of time or occurrence of any event and shall expressly cover
time periods when the Payment and Disbursement Agent, any of the Co-Agents or
any of the other Lenders may have come into possession or control of any
Property of the Borrower or any of its Subsidiaries.
15.10 Failure or Indulgence Not Waiver; Remedies Cumulative. No failure
or delay on the part of the Payment and Disbursement Agent, any other Lender or
any other Co-Agent in the exercise of any power, right or privilege under any
of the Loan Documents shall impair such power, right or privilege or be
construed to be a waiver of any default or acquiescence therein, nor shall any
single or partial exercise of any such power, right or privilege preclude other
or further exercise thereof or of any other right, power or privilege. All
rights and remedies existing under the Loan Documents are cumulative to and not
exclusive of any rights or remedies otherwise available.
15.11 Marshalling; Payments Set Aside. None of the Payment and
Disbursement Agent, any other Lender or any other Co-Agent shall be under any
obligation to marshall any assets in favor of the Borrower or any other party
or against or in payment of any or all of the Obligations. To the extent that
the Borrower makes a payment or payments to the Payment and Disbursement Agent,
any Arranger or any other Lender or any such Person exercises its rights of
setoff, and such payment or payments or the proceeds of such enforcement or
setoff or any part thereof are subsequently invalidated, declared to be fraudu
lent or preferential, set aside or required to be repaid to a trustee, receiver
or any other party, then to the extent of such recovery, the obligation or part
thereof originally intended to be satisfied, and all Liens, right and remedies
therefor, shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not occurred.
15.12 Severability. In case any provision in or obligation under this
Agreement or the other Loan Documents shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and enforceability of
the remaining provisions or obligations, or of such provision or obligation in
any other jurisdiction, shall not in any way be affected or impaired thereby.
15.13 Headings. Section headings in this Agreement are included herein
for convenience of reference only and shall not constitute a part of this Agree
ment or be given any substantive effect.
15.14 Governing Law. THIS AGREEMENT SHALL BE INTERPRETED, AND THE RIGHTS
AND LIABILITIES OF THE PARTIES HERETO DETERMINED, IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ITS CONFLICT OF LAWS
PRINCIPLES.
15.15 Limitation of Liability. No claim may be made by any Lender, any
Co-Agent, any Arranger, the Payment and Disbursement Agent, or any other Person
against any Lender (acting in any capacity hereunder) or the Affiliates, direc
tors, officers, employees, attorneys or agents of any of them for any consequen
tial or punitive damages in respect of any claim for breach of contract or any
other theory of liability arising out of or related to the transactions
contemplated by this Agreement, or any act, omission or event occurring in con
nection therewith; and each Lender, each Co-Agent, each Arranger and the
Payment and Disbursement Agent hereby waives, releases and agrees not to sue
upon any such claim for any such damages, whether or not accrued and whether or
not known or suspected to exist in its favor.
15.16 Successors and Assigns. This Agreement and the other Loan
Documents shall be binding upon the parties hereto and their respective
successors and assigns and shall inure to the benefit of the parties hereto and
the successors and permitted assigns of the Lenders. The rights hereunder of
the Borrower, or any interest therein, may not be assigned without the written
consent of all Lenders, except in accordance with the provisions of Article XIV
hereof.
15.17 Certain Consents and Waivers of the Borrower.
(a) Personal Jurisdiction. EACH OF THE LENDERS AND THE
BORROWER IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS
PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF ANY NEW YORK STATE COURT OR
FEDERAL COURT SITTING IN NEW YORK, NEW YORK, AND ANY COURT HAVING JURIS
DICTION OVER APPEALS OF MATTERS HEARD IN SUCH COURTS, IN ANY ACTION OR PRO
CEEDING ARISING OUT OF, CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT,
WHETHER ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE, OR FOR RECOGNITION
OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO IRREVOCABLY
AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION
OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH STATE COURT OR, TO THE
EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT. THE BORROWER IRREVOCABLY
DESIGNATES AND APPOINTS CT CORPORATION SYSTEM, 1633 BROADWAY, NEW YORK,
NEW YORK 10019, AS ITS AGENT (THE "PROCESS AGENT") FOR SERVICE OF ALL PRO
CESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT, SUCH SERVICE BEING HEREBY
ACKNOWLEDGED TO BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. EACH
OF THE LENDERS AND THE BORROWER AGREES THAT A FINAL JUDGMENT IN ANY SUCH
ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY
LAW. THE BORROWER WAIVES IN ALL DISPUTES ANY OBJECTION THAT IT MAY HAVE
TO THE LOCATION OF THE COURT CONSIDERING THE DISPUTE.
(ii) THE BORROWER AGREES THAT THE PAYMENT AND DISBURSEMENT AGENT
SHALL HAVE THE RIGHT TO PROCEED AGAINST THE BORROWER OR ITS PROPERTY IN A
COURT IN ANY LOCATION NECESSARY OR APPROPRIATE TO ENABLE THE PAYMENT AND
DISBURSEMENT AGENT AND THE OTHER LENDERS TO ENFORCE A JUDGMENT OR OTHER
COURT ORDER ENTERED IN FAVOR OF THE PAYMENT AND DISBURSEMENT AGENT OR ANY
OTHER LENDER. THE BORROWER AGREES THAT IT WILL NOT ASSERT ANY PERMISSIVE
COUNTERCLAIMS IN ANY PROCEEDING BROUGHT BY THE PAYMENT AND DISBURSEMENT
AGENT, ANY LENDER OR ANY CO-AGENT TO ENFORCE A JUDGMENT OR OTHER COURT
ORDER IN FAVOR OF THE PAYMENT AND DISBURSEMENT AGENT, ANY LENDER OR ANY
CO-AGENT. THE BORROWER WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE
LOCATION OF THE COURT IN WHICH THE PAYMENT AND DISBURSEMENT AGENT, ANY
CO-AGENT OR ANY LENDER MAY COMMENCE A PROCEEDING DESCRIBED IN THIS
SECTION.
(b) Service of Process. THE BORROWER IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO THE PROCESS AGENT OR THE BORROWER'S NOTICE ADDRESS
SPECIFIED BELOW, SUCH SERVICE TO BECOME EFFECTIVE UPON RECEIPT. THE BORROWER
IRREVOCABLY WAIVES ANY OBJECTION (INCLUDING, WITHOUT LIMITATION, ANY OBJECTION
OF THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS) WHICH
IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING
WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY JURISDICTION
SET FORTH ABOVE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE PAYMENT AND
DISBURSEMENT AGENT OR THE OTHER LENDERS TO BRING PROCEEDINGS AGAINST THE BOR
ROWER IN THE COURTS OF ANY OTHER JURISDICTION.
(c) WAIVER OF JURY TRIAL. EACH OF THE PAYMENT AND DISBURSEMENT
AGENT AND THE OTHER LENDERS AND THE BORROWER IRREVOCABLY WAIVES TRIAL BY JURY
IN ANY ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT.
15.18 Counterparts; Effectiveness; Inconsistencies. This Agreement and
any amendments, waivers, consents, or supplements hereto may be executed in
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument. This Agreement shall become effective against the Borrower
and each Lender on the Closing Date. This Agreement and each of the other Loan
Documents shall be construed to the extent reasonable to be consistent one with
the other, but to the extent that the terms and conditions of this Agreement
are actually inconsistent with the terms and conditions of any other Loan
Document, this Agreement shall govern. In the event the Lenders enter into any
co-lender agreement with the Arrangers pertaining to the Lenders' respective
rights with respect to voting on any matter referenced in this Agreement or the
other Loan Documents on which the Lenders have a right to vote under the terms
of this Agreement or the other Loan Documents, such co-lender agreement shall
be construed to the extent reasonable to be consistent with this Agreement and
the other Loan Documents, but to the extent that the terms and conditions of
such co-lender agreement are actually inconsistent with the terms and
conditions of this Agreement and/or the other Loan Documents, such co-lender
agreement shall govern. Notwithstanding the foregoing, any rights reserved to
the Payment and Disbursement Agent or the Arrangers or the other Co-Agents
under this Agreement and the other Loan Documents shall not be varied or in any
way affected by such co-lender agreement and the rights and obligation of the
Borrower under the Loan Documents will not be varied.
15.19 Limitation on Agreements. All agreements between the Borrower, the
Payment and Disbursement Agent, each Arranger, each Co-Agent and each Lender in
the Loan Documents are hereby expressly limited so that in no event shall any
of the Loans or other amounts payable by the Borrower under any of the Loan
Documents be directly or indirectly secured (within the meaning of Regulation
U) by Margin Stock.
15.20 Confidentiality. Subject to Section 15.1(g), the Lenders shall
hold all nonpublic information obtained pursuant to the requirements of this
Agreement, and identified as such by the Borrower, in accordance with such
Lender's customary procedures for handling confidential information of this
nature and in accordance with safe and sound banking practices (provided that
such Lender may share such information with its Affiliates in accordance with
such Lender's customary procedures for handling confidential information of
this nature and provided further that such Affiliate shall hold such
information confidential) and in any event the Lenders may make disclosure rea
sonably required by a bona fide offeree, transferee or participant in connec
tion with the contemplated transfer or participation or as required or request
ed by any Governmental Authority or representative thereof or pursuant to legal
process and shall require any such offeree, transferee or participant to agree
(and require any of its offerees, transferees or participants to agree) to
comply with this Section 15.20. In no event shall any Lender be obligated or
required to return any materials furnished by the Borrower; provided, however,
each offeree shall be required to agree that if it does not become a transferee
or participant it shall return all materials furnished to it by the Borrower in
connection with this Agreement. Any and all confidentiality agreements entered
into between any Lender and the Borrower shall survive the execution of this
Agreement.
15.21 Disclaimers. The Payment and Disbursement Agent, the Arrangers,
the other Co-Agents and the other Lenders shall not be liable to any contrac
tor, subcontractor, supplier, laborer, architect, engineer, tenant or other
party for services performed or materials supplied in connection with any work
performed on the Projects, including any TI Work. The Payment and Disbursement
Agent, the Arrangers, the other Co-Agents and the other Lenders shall not be
liable for any debts or claims accruing in favor of any such parties against
the Borrower or others or against any of the Projects. The Borrower is not and
shall not be an agent of any of the Payment and Disbursement Agent, the
Arrangers, the other Co-Agents or the other Lenders for any purposes and none
of the Lenders, the Co-Agents, the Arrangers, nor the Payment and Disbursement
Agent shall be deemed partners or joint venturers with Borrower or any of its
Affiliates. None of the Payment and Disbursement Agent, the Arrangers, the
other Co-Agents or the other Lenders shall be deemed to be in privity of
contract with any contractor or provider of services to any Project, nor shall
any payment of funds directly to a contractor or subcontractor or provider of
services be deemed to create any third party beneficiary status or recognition
of same by any of the Payment and Disbursement Agent, the Arrangers, the other
Co-Agents or the other Lenders and the Borrower agrees to hold the Payment and
Disbursement Agent, the Arrangers, the other Co-Agents and the other Lenders
harmless from any of the damages and expenses resulting from such a construc
tion of the relationship of the parties or any assertion thereof.
15.22 No Bankruptcy Proceedings. Each of the Borrower, the Arrangers,
the Co-Agents and the other Lenders hereby agrees that it will not institute
against any Designated Bank or join any other Person in instituting against any
Designated Bank any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceeding under any federal or state bankruptcy or similar law,
until the later to occur of (i) one year and one day after the payment in full
of the latest maturing commercial paper note issued by such Designated Bank and
(ii) the Revolving Credit Termination Date.
15.23 Entire Agreement. This Agreement, taken together with all of the
other Loan Documents, embodies the entire agreement and understanding among the
parties hereto and supersedes all prior agreements and understandings, written
and oral, relating to the subject matter hereof.
IN WITNESS WHEREOF, this Agreement has been duly executed as of the
date first above written.
BORROWER: SIMON PROPERTY GROUP, L.P.,
a Delaware limited partnership
By: SIMON DeBARTOLO GROUP, INC.,
as General Partner
By: \s\ David Simon
David Simon
Chief Executive Officer
SIMON DeBARTOLO GROUP, L.P.,
a Delaware limited partnership
By: SD PROPERTY GROUP, INC.
its managing general partner
By: \s\ David Simon
David Simon
Chief Executive Officer
By: SIMON DeBARTOLO GROUP, INC.
its general partner
By: \s\ David Simon
David Simon
Chief Executive Officer
Notice Address:
Merchants Plaza
P.O. Box 7033
Indianapolis, Indiana 46207
Attn: Mr. David Simon
Telecopy: (317) 263-7037
with a copy to:
Simon Property Group, L.P.
Merchants Plaza
P.O. Box 7033
Indianapolis, Indiana 46207
Attn: General Counsel
Telecopy: (317) 685-7221
PAYMENT AND DISBURSEMENT AGENT
AND ARRANGER:
UNION BANK OF
SWITZERLAND, NEW YORK BRANCH
By: \s\ Joseph M. Bassil
Name: Joseph M. Bassil
Title: Director
By: \s\ Albert Rabel
Name: Albert Rabel
Title: Managing Director
Notice Address, Domestic
Lending Office and Eurodollar
Lending Office:
Union Bank of Switzerland
299 Park Avenue
New York, New York 10171
Attn: Ms. Xiomara Martez
Telecopy: (212) 821-4138
Pro Rata Share: 13.28000%
Revolving Credit Commitment: $166,000,000.00
ARRANGER: MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By: \s\ Timothy V. O'Donovan
Name: Timothy V. O'Donovan
Title: Vice President
Notice Address:
c/o J.P. Morgan Services Inc.
500 Stanton Christiana Road
Newark, Delaware 19713-2107
Attn: Ms. Nancy K. Dunbar
Telecopy: (302) 634-1092
Domestic and Eurodollar
Lending Office:
c/o J.P. Morgan Services Inc.
500 Stanton Christiana Road
Newark, Delaware 19713-2107
Attn: Ms. Linda Sheehan
Telecopy: (302) 634-1092
Pro Rata Share: 6.00000
Revolving Credit Commitment: $75,000,000.00
ARRANGER: THE CHASE MANHATTAN BANK
By: \s\ Fran Nuchims
Name: Fran Nuchims
Title: Vice President
Notice Address, Domestic and
Eurodollar Lending Office:
The Chase Manhattan Bank
380 Madison Avenue, 10th floor
New York, New York 10017
Attention: Nancy Szatny
Telecopy: (212) 622-3395
Reference: Simon DeBartolo
Group, L.P. Loan # 564-4773
For Money Market Loans:
The Chase Manhattan Bank
270 Park Avenue, 6th floor
New York, New York 10017
Attention: Frank Angelico
Albert Reynolds
Telecopy: (212) 834-6160
Reference: Simon DeBartolo
Group, L.P.
with copy of all Notices to:
The Chase Manhattan Bank
380 Madison Avenue, 10th floor
New York, New York 10017
Attention: Fran Nuchims
Telecopy: (212) 622-3395
Reference: Simon DeBartolo
Group, L.P. Loan # 564-4773
Pro Rata Share: 6.00000%
Revolving Credit Commitment: $75,000,000.00
CO-AGENT: DRESDNER BANK AG
NEW YORK AND GRAND CAYMAN BRANCHES
By: \s\Brigitte Sacin
Name: Brigitte Sacin
Title: Assistant Treasurer
By: \s\Beverly G. Cason
Name: Beverly G. Cason
Title: Vice President
Notice Address and Domestic and Eurodollar Lending Office:
Dresdner Bank AG, New York and Grand Cayman
Branches
75 Wall Street, 33rd Floor
New York, New York 10005
Attn: Mr. Thomas Nadramia
Telecopy: (212) 429-2130
Reference: Simon Property Group
With copy to: Dresdner Bank AG, Chicago Branch
190 South LaSalle Street
Suite 2700
Chicago, Illinois 60603
Attn: Mr. James Blessing
Telecopy: (312) 444-1305
Reference: Simon Property Group
Borrowing and other administrative and operational notices:
Dresdner Bank AG
75 Wall Street, 33rd Floor
New York, New York 10005
Attn: Mr. Robert Reddington
Telecopy: (212) 429-2130
Reference: Simon Property Group
Pro Rata Share: 5.20000%
Revolving Credit Commitment: $65,000,000.00
CO-AGENT: THE FIRST NATIONAL BANK OF CHICAGO
By: \s\ Kevin Gillen
Name: Kevin Gillen
Title: Assistant Vice President
Notice Address:
The First National
Bank of Chicago
One First National Plaza
Suite 0151
Chicago, Illinois 60670
Attention: Kevin Gillen
Telecopy: (312) 732-1117
Reference: Simon Property Group
Domestic Lending Office and
Eurodollar Lending Office or
Eurodollar Affiliate:
The First National
Bank of Chicago
One First National Plaza
Suite 0318
Chicago, Illinois 60670
Attention: Maria Torres
Telecopy: (312) 732-1582
Reference: Simon Property Group
Pro Rata Share: 5.20000%
Revolving Credit Commitment: $65,000,000.00
CO-AGENT: NATIONSBANK OF TEXAS, N.A., a
national banking association
By: \s\Cynthia C.Sanford
Name: Cynthia C. Sanford
Title: Senior Vice President
Notice Address and Domestic
Lending Office:
NationsBank
700 Louisiana, 5th Floor
Houston, Texas 77002
Attn: Cynthia Sanford
Telecopy: (713) 247-6124
Eurodollar Lending Office or
Eurodollar Affiliate:
NationsBank
700 Louisiana, 5th Floor
Houston, Texas 77002
Attn: Shelley Coppin
Telecopy: (713) 247-7321
Pro Rata Share: 5.20000%
Revolving Credit Commitment: $65,000,000.00
CO-AGENT: BAYERISCHE HYPOTHEKEN- UND WECHSEL-
BANK AKTIENGESELLSCHAFT ACTING THROUGH ITS NEW YORK
BRANCH
By: \s\Larney J. Bisbano
Name: Larney J. Bisbano
Title: Assistant Vice President
By: \s\Nina M. Levine
Name: Nina M. Levine
Title: Assistant Treasure
Notice Address, Domestic
Lending Office and Eurodollar Lending Office:
BAYERISCHE HYPOTHEKEN- UND WECHSEL-BANK
AKTIENGESELLSCHAFT NEW YORK BRANCH
Financial Square
32 Old Slip, 32nd Floor
New York, New York 10005
Attn: Mr. Peter T. Hannigan
First Vice President
Telecopy: 212-440-0824
and to:
Attn: Mr. Stephen Altman
Assistant Vice President
Telecopy: 212-440-0824
Pro Rata Share: 5.20000%
Revolving Credit Commitment: $65,000,000.00
LENDERS: BANK ONE, INDIANA, N.A.,
(formerly known as Bank One, Indianapolis,N.A.)
By: \s\Daniel H. Hatfield
Name: Daniel H. Hatfield
Title: Vice President
Notice Address and Domestic
Lending Office:
Bank One, Indiana, N.A.
111 Monument Circle, Suite 1241
Indianapolis, Indiana 46277
Attn: Mr. Daniel Hatfield
Telecopy: 317-321-7647
and to:
Attn: Jane Willis, Suite 203
Telecopy: 317-321-7467
Eurodollar Lending Office or
Eurodollar Affiliate:
Bank of Nova Scotia Trust Co. (Caymen) Ltd.
Cardinal Avenue
Georgetown, Grand Caymen
British West Indies
Attn: Carmen Thompson
Pro Rata Share: 4.0000%
Revolving Credit Commitment: $50,000,000.00
COMMERZBANK AG, New York Branch
By: \s\James J. Henry
Name: James J. Henry
Title: Senior Vice President
By: \s\E. Marcus Perry
Name: E. Marcus Perry
Title: Assistant Treasurer
Notice Address, Domestic
Lending Office and Eurodollar Lending Office:
Commerzbank AG
2 World Financial Center
New York, New York 10281
Attn: Ms. Christine H. Finkel
Telecopy: 212-266-7235
Pro Rata Share: 4.00000%
Revolving Credit Commitment: $50,000,000.00
FLEET NATIONAL BANK
By: \s\Margaret A. Mulcahy
Name: Margaret A. Mulcahy
Title: Senior Vice President
Notice Address, Domestic
Lending Office and Eurodollar Lending Office:
Fleet Bank
75 State Street
Mail Stop: MA/BO/F11A
Boston, Massachusetts 02109
Attn: Lillian Munoz
Telecopy: 617-346-3220
and to:
Attn: Margaret Mulcahy
Telecopy: 617-364-3220
Pro Rata Share: 4.00000%
Revolving Credit Commitment: $50,000,000.00
NATIONAL CITY BANK OF INDIANA
By: \s\Helen M. Ward
Name: Helen M. Ward
Title: Vice President
Notice Address, Domestic
Lending Office and Eurodollar lending Office:
National City Bank of Indiana
101 West Washington Street
Indianapolis, Indiana 46255
Attn: Kim Kord
Telecopy: 317-267-6249
and to:
Attn: Donna Huebner
Telecopy: 317-267-6249
Pro Rata Share: 4.00000%
Revolving Credit Commitment: $50,000,000.00
U.S. BANK NATIONAL ASSOCIATION
(formerly known as First Bank)
By: \s\Joseph C. Hoesley
Name: Joseph C. Hoesley
Title: Senior Vice President
Notice Address, Domestic
Lending Office and Eurodollar Lending Office:
U.S. Bank National Association
Real Estate - MPFP 0802
601 Second Avenue South
Minneapolis, Minnesota 55402
Attn: Tamila N. Taylor
Telecopy: 612-973-0830
Pro Rata Share: 2.24000%
Revolving Credit Commitment: $28,000,000.00
GUARANTY FEDERAL BANK, F.S.B.
By: \s\Lesa B. Balsley
Name: Lesa B. Balsley
Title: Division Manager/Vice President
Notice Address, Domestic
Lending Office and Eurodollar Lending Office:
Guaranty Federal Bank
8333 Douglas Avenue
Dallas, Texas 75225
Attn: Ms. Lesa Balsley
Telecopy: 214-360-1661
and to:
Attn: Clint Nanny
Telecopy: 214-360-5109
Pro Rata Share: 4.00000%
Revolving Credit Commitment: $50,000,000.00
CIBC INC.
By: \s\Joel Gershkon
Name: Joel Gershkon
Title: As Agent
Notice Address, Domestic
Lending Office and Eurodollar Lending Office:
CIBC Oppenheimer Corp.
200 West Madison Street
Suite 2300
Chicago, Illinois 60606
Attn: Joel Gershkon
Telecopy: 312-855-3235
and to:
CIBC Oppenheimer Corp.
Two Paces West
2727 Paces Ferry Road
Suite 1200
Atlanta, Georgia 30309
Attn: Elizabeth Jenkins
Telecopy: 770-319-4950
Pro Rata Share: 2.24000%
Revolving Credit Commitment: $28,000,000.00
UNION BANK OF CALIFORNIA, N.A
By: \s\Diana Giacomini
Name: Diana Giacomini
Title: Vice President
By: \s\D. Tim Mahoney
Name: D. Tim Mahoney
Title: Senior Vice President
Notice Address:
Union Bank of California
350 California Street
7th Floor
San Francisco, California 94104
Attn: Ms. Diana Giacomini
Telecopy: 415-433-7438
Domestic Lending and Eurodollar Lending
Office:
Union Bank of California
Real Estate Capital Markets
200 Pringle Avenue, Suite 250
Walnut Creek, California 94596
Attn: Ms. Hertha Warren
Telecopy: (510) 947-2497
Pro Rata Share: 2.00000%
Revolving Credit Commitment: $25,000,000.00
THE SUMITOMO BANK, LIMITED
By: \s\Takeo Yamori
Name: Takeo Yamori
Title: Joint General Manager
Notice Address, Domestic
Lending Office and Eurodollar Lending Office:
The Sumitomo Bank, Limited
233 South Wacker Drive
Suite 4800
Chicago, Illinois 60606-6448
Attn: Mr. Jim Horvath
Telecopy: 312-876-6436
and to:
Attn: Kwang Park
Telecopy: 312-876-1490
and to:
The Sumitomo Bank, Limited
277 Park Avenue
New York, New York 10172
Attn: Michael S. Leffelholz
Telecopy: 212-224-4887
Pro Rata Share: 1.84000%
Revolving Credit Commitment: $23,000,000.00
BANK OF MONTREAL
By: \s\Catherine Sahagian Mousseau
Name: Catherine Sahagian Mousseau
Title: Director
Notice Address and Domestic
Lending Office and Eurodollar Lending Office:
Bank of Montreal
115 South LaSalle Street
17th floor
Chicago, Illinois 60603
Attn: Mr. Thomas Batterham
Telecopy: 312-750-4352
and to:
Attn: Lora Benton
Telecopy: 312-750-4345
Pro Rata Share: 3.20000%
Revolving Credit Commitment: $40,000,000.00
KEYBANK, NATIONAL ASSOCIATION
By: \s\Laird Fairchild
Name: Laird Fairchild
Title: Assistant Vice President
Notice Address, Domestic
Lending Office and Eurodollar Lending Office:
KeyBank
127 Public Square, 6th floor
Cleveland, Ohio 44114-1306
Attn: Laird Fairchild
Telecopy: 216-289-3566
and to:
Attn: Ms. Maryann Michaels
Telecopy: 216-689-3566
Pro Rata Share: 4.00000%
Revolving Credit Commitment: $50,000,000.00
PNC BANK, NATIONAL ASSOCIATION
By: \s\Dina S. Muth
Name: Dina S. Muth
Title: Real Estate Officer
Notice Address, Domestic
Lending Office and Eurodollar Lending Office:
One PNC Plaza
P1-POPP-19-2
249 Fifth Avenue
Pittsburgh, Pennsylvania
15222-2707
Attn: Brad Carpenter
Telecopy: 412-762-6500
and to:
Attn: Matthew L. Koval
Loan Administrator
Telecopy: 412-762-6500
Pro Rata Share: 3.20000%
Revolving Credit Commitment: 40,000,000.00
LANDESBANK HESSEN-THURINGEN GIRONZENTRALE,
NEW YORK BRANCH
By: \s\Alfred R. Koch
Name: Alfred R. Koch
Title: Vice President
By: \s\ Michael A. Pierro
Name: Michael A. Pierro
Title: Assistant Vice President
Notice Address, Domestic
Lending Office and Eurodollar Lending Office:
Landesbank Hessen-Thuringen
420 Fifth Avenue, 24th floor
New York, New York 10018
Attn: Alfred Koch
Telecopy: 212-703-5296
and to:
Attn: Gudrun Dronca
Telecopy: 212-703-5256
Pro Rata Share: 1.60000%
Revolving Credit Commitment: $20,000,000.00
KREDIETBANK N.V.
By: \s\Robert Snauffer
Name: Robert Snauffer
Title: Vice President
By:
Name:
Title:
Notice Address and Domestic
Lending Office:
Kredietbank N.V., New York Branch
125 West 55th Street, 10th floor
New York, New York
Attn: John Thierfelder
Telecopy: 212-956-5580
and to:
Attn: Lynda Resuma
Telecopy: 212-956-5580
Eurodollar Lending Office or
Eurodollar Affiliate:
Kredietbank N.V., Grand Cayman Branch
125 West 55th Street, 10th floor
New York, New York
Attn: John Thierfelde
Telecopy: 212-956-5580
and to:
Attn: Lynda Resuma
Telecopy: 212-956-5580
Pro Rata Share: 2.80000%
Revolving Credit Commitment: $35,000,000.00
BAYERISCHE LANDESBANK, CAYMAN ISLANDS BRANCH
By:_______________________
Name:
Title:
By:_______________________
Name:
Title:
Notice Address and Domestic
Lending Office, and Eurodollar Lending Office:
Bayerische Landesbank
560 Lexington Avenue
New York, New York 10022
Attn: John Wain
Telecopy: 212-310-9868
and to:
Attn: Patricia Sanchez
Telecopy: 212-310-9930
Pro Rata Share: 2.00000%
Revolving Credit Commitment: $25,000,000.00
DG BANK DEUTSCHE GENOSSENSCHAFTSBANK
By: \s\Linda J. O'Connell
Name: Linda J. O'Connell
Title: Vice President
By: \s\Sabine Wendt
Name: Sabine Wendt
Title: Asst. Vice President
Notice Address and Domestic
Lending Office:
DG Bank
609 Fifth Avenue
New York, NY 10017-1021
Attn: Linda J. O'Connell
Telecopy: 212-745-1556
and to:
Edward A. Thome
Telecopy: 212-745-1422
Eurodollar Lending Office:
DG Bank, Cayman Island Branch
609 Fifth Avenue
New York, NY 10017-1021
Attn: Linda J. O'Connell
Telecopy: 212-745-1556
and to:
Edward A. Thome
Telecopy: 212-745-1422
Pro Rata Share: 1.60000%
Revolving Credit Commitment: $20,000,000.00
THE BANK OF TOKYO-MITSUBISHI, LTD. acting
through its New York Branch
By: \s\Akio Wada
Name: Akio Wada
Title: Senior Vice President & Manager
Notice Address and Domestic
Lending Office, and Eurodollar Lending
Office:
Bank of Tokyo - Mitsubishi
1251 Avenue of the Americas
New York, NY 10020-1104
Attn: Leonard J. Crann
Telecopy: 212-782-4934
and to:
John C. Ng
Telecopy: 212-782-5870
Pro Rata Share: 1.60000%
Revolving Credit Commitment: $20,000,000.00
SUMMIT BANCORP
By: \s\Gregory Haines
Name: Gregory Haines
Title: Regional Vice President
Notice Address and Domestic
Lending Office, and Eurodollar Lending
Office:
Summit Bancorp
750 Walnut Avenue
Cranford, NJ 07016
Attn: Gregory A. Haines
Telecopy: 908-706-6435
and to:
Stephanie Weiss
Telecopy: 908-709-6437
Pro Rata Share: 2.00000%
Revolving Credit Commitment: $25,000,000.00
COMERICA BANK
By: \s\David J. Campbell
Name: David J. Campbell
Title: Vice President
Notice Address and Domestic
Lending Office, and Eurodollar Lending
Office:
Comerica Bank
500 Woodward Avenue, 7th Floor
Detroit, Michigan 48226
Attn: David J. Campbell
Telecopy: 313-222-9295
and to:
Attn: Betsy Branson
Telecopy: 313-222-3697
U.S. Mail should be directed to:
Comerica Bank
P.O. Box 75000
Detroit Michigan 48275-3256
M/C 3256
Attn: David J. Campbell and
Attn: Betsy Branson
Pro Rata Share: 1.60000%
Revolving Credit Commitment: $20,000,000.00
LASALLE NATIONAL BANK
By: \s\John Co. Hein
Name: John C. Hein
Title: Vice President
Notice Address and Domestic
Lending Office, and Eurodollar Lending
Office:
LaSalle National Bank
135 South LaSalle St.
Chicago, IL 60674-9135
Attn: John C. Hein
Telecopy: 312-904-6467
Pro Rata Share: 2.00000%
Revolving Credit Commitment: $25,000,000.00
============================================================================
EXHIBIT 10.62
PARTNERSHIP AGREEMENT
OF
SM PORTFOLIO LIMITED PARTNERSHIP
By and Between
MACERICH EQ LIMITED PARTNERSHIP,
MACERICH EQ GP CORP.,
SDG EQ DEVELOPERS LIMITED PARTNERSHIP,
and
SDG EQ ASSOCIATES, INC.
Dated as of
February 24, 1998
________________________________________________________________________
TABLE OF CONTENTS
ARTICLE 1
Formation and Organization 1
1.1 Formation 1
1.2 Name 1
1.3 Character of the Business 1
1.4 Principal Office 2
1.5 Term 2
1.6 Title to Property 2
1.7 Payments of Individual Obligations 2
1.8 Other Business Interests 2
1.9 Transactions with Affiliates 3
ARTICLE 2
Capital Contributions and Other Financing Matters 3
2.1 Percentage Interests 3
2.2 Initial Capital Contributions 4
2.3 Additional Capital Contributions 6
2.5 Other Matters 9
2.6 No Third Party Beneficiary 9
2.7 Third Party Financing 10
ARTICLE 3
Distributions 10
3.1 Distributions 10
3.2 Distributions after Dissolution 10
3.3 Timing of Distributions Among Partners 10
ARTICLE 4
Allocations and Other Tax and Accounting Matters 10
4.1 Allocations 10
4.2 Accounting, Books and Records 10
4.3 Reports 11
4.4 Tax Returns; Information 11
4.5 Special Basis Adjustment 12
4.6 Tax Matters Partner 12
ARTICLE 5
Management 12
5.1 Executive Committee 12
5.2 No Individual Authority 15
5.3 Operating Committee. 16
5.4 Warranted Reliance by Executive Committee Members and
Operating Committee Members on Others 18
5.5 Intentionally Omitted 18
5.6 REIT Status 18
5.7 Budgets 20
5.8 Insurance 21
5.9 Unanimous Consent 21
5.10 Indemnification 21
5.11 Compensation and Reimbursement. 22
5.12 No Employees. 23
5.13 Personal Services Contract. 23
5.14 Defaults and Remedies 23
ARTICLE 6
Transfers of Interests 25
6.1 Restrictions on Transfers 25
6.2 Transferee Requirements 26
6.3 Partnership Interest Loans 26
6.4 Admission of Transferee as a Partner 31
6.5 Allocations and Distributions Upon Transfers 31
ARTICLE 7
Buy-Sell 32
7.1 Buy-Sell Offering Notice 32
7.2 Exercise of Buy-Sell 32
7.3 Closing 33
ARTICLE 8
Exit Call; Portfolio Sale 34
8.1 Call Rights 34
8.2 Procedures upon Call Exercise 34
8.3 Closing Procedure 35
8.5 Fair Market Value Appraisal Process 37
8.6 Portfolio Sale 37
8.7 Effect of Existing Financing 39
ARTICLE 9
Withdrawals; Actions for Partition 39
9.1 Waiver of Partition 39
9.2 Covenant Not to Withdraw or Dissolve 39
ARTICLE 10
Dissolution, Liquidation, Winding-Up and Termination 40
10.1 Causes of Dissolution 40
10.2 Winding Up and Liquidation 40
10.3 Timing Requirements; Deemed Distribution and Re-
contribution 41
10.4 Sales Receivables 42
10.5 Documentation of Dissolution and Termination 42
ARTICLE 11
Miscellaneous 42
11.1 Notices 42
11.2 Binding Effect 42
11.3 Construction of Agreement 43
11.4 Severability 43
11.5 Incorporation by Reference 43
11.6 Further Assurances 43
11.7 Governing Law 43
11.8 Counterpart Execution 43
11.9 Loans 43
11.10 No Third Party Rights 44
11.11 Estoppel Certificates 44
11.12 Usury 44
11.13 Business Day 44
11.14 Proposing and Adopting Amendments 44
11.15 Partners Not Agents 44
11.16 Entire Understanding; Etc. 44
11.17 Action Without Dissolution 45
11.18 Attorneys' Fees 45
11.19 Waiver of Jury Trial 45
11.20 Confidentiality 45
11.21 Press Releases 45
11.22 Existing Financing 46
Schedule 1 - Original Approved Pre-Closing Budget
Schedule 2 - Macerich Managed Properties
Schedule 3 - SDG Managed Properties
Schedule 4 - List of Properties
Schedule 5 - Noncompetition Area
PARTNERSHIP AGREEMENT
OF
SM PORTFOLIO LIMITED PARTNERSHIP
THIS PARTNERSHIP AGREEMENT (this "Agreement") is made and
entered into as of February 24, 1998, by and between SDG EQ DEVELOPERS
LIMITED PARTNERSHIP a Delaware limited partnership ("SDG"), SDG EQ
ASSOCIATES, INC., a Delaware corporation ("SSPE"), MACERICH EQ LIMITED
PARTNERSHIP, a Delaware limited partnership ("Macerich"), and MACERICH
EQ GP CORP., a Delaware corporation ("MSPE"), on the terms and
conditions set forth herein. Attached to this Agreement immediately
following the signature page is a glossary of defined terms (the
"Glossary of Defined Terms"). Each capitalized term used in this
Agreement either is defined in the Glossary of Defined Terms, or the
location of its definition is cross-referenced in the Glossary of
Defined Terms.
ARTICLE 1
Formation and Organization
1.1 Formation. SDG, Macerich, SSPE and MSPE hereby form a
limited partnership (the "Partnership") under the Act upon the terms and
conditions set forth in this Agreement. Each of SSPE and MSPE (and
their permitted successors-in-interest that are admitted as partners in
the Partnership) is a general partner in the Partnership and is referred
to herein individually as a "General Partner," and each of Macerich and
SDG (and their permitted successors-in-interest that are admitted as
partners in the Partnership) is a limited partner in the Partnership and
is referred to herein individually as a "Limited Partner." Each of the
General Partners and the Limited Partners are referred to herein
individually as a "Partner" and, collectively, as the "Partners." SSPE
and SDG, on the one hand, and MSPE and Macerich, on the other hand, are
jointly referred to herein as a "Party" and collectively as "Parties".
Any contributions by or distributions to a Party shall be deemed to have
been made to or by, as the case may be, the entities constituting such
Party in proportion to each such entity's Partnership Interest. The
General Partners shall promptly execute, publish or file all assumed or
fictitious name, or other similar, certificates required by law to be
published or filed, in connection with the formation and operation of
the Partnership in each state and locality where it is necessary or
desirable to publish or file such certificates in order to form and
operate the Partnership.
1.2 Name. The name of the Partnership shall be "SM Portfolio
Limited Partnership," and all business of the Partnership shall be
conducted in such name or such other name as the Executive Committee,
from time to time, shall unanimously select.
1.3 Character of the Business. The purpose of the
Partnership is to (a) hold a ninety-nine percent (99%) limited partner
interest in the Underlying Partnership, (b) conduct all activities
<PAGE> 01
reasonably related to the ownership of such interests, (c) acquire, own,
develop, finance, refinance, mortgage, encumber, hypothecate, lease,
sell, maintain, improve, alter, remodel, expand, manage, exchange,
dispose, and otherwise operate and deal with real property, (d) to
transact any and all other businesses for which limited partnerships may
be formed under Delaware law, and (e) to accomplish any of the foregoing
purposes for its own account or as nominee, agent or trustee for others;
provided, however, that such business shall be limited to and conducted
in such a manner as to permit any Persons owning any interests in any of
the Partners at all times to be classified as a "real estate investment
trust" within the meaning of Section 856 of the Code (a "REIT").
1.4 Principal Office. The principal office of the
Partnership shall be at 233 Wilshire Boulevard, Suite 700, Santa Monica,
California 90401, or at such other place as the Executive Committee may,
from time to time, determine (the "Principal Office").
1.5 Term. The Partnership shall commence on the date of this
Agreement and shall continue until the Partnership is dissolved and
terminated in accordance with the provisions of Article 10.
1.6 Title to Property. All real and personal property owned
by the Partnership shall be owned by the Partnership as an entity and no
Partner shall have any ownership interest in such property in its
individual name or right, and each Partner's interest in the Partnership
shall be personal property for all purposes. Except as otherwise
provided in this Agreement, the Partnership shall hold all of its real
and personal property in the name of the Partnership and not in the name
of any Partner.
1.7 Payments of Individual Obligations. The Partnership's
credit and assets shall be used solely for the benefit of the
Partnership, and no asset of the Partnership shall be transferred or
encumbered for, or in payment of, any individual obligation of a
Partner.
1.8 Other Business Interests.
(a) Each Partner shall be required to devote only such
time to the affairs of the Partnership as may be necessary for the
proper performance of such Partner's duties hereunder. Except to the
extent expressly provided to the contrary in this Section 1.8, nothing
in this Agreement shall: (i) limit the rights of each Partner and its
Affiliates, and such Partner's and Affiliate's respective officers,
directors, employees and stockholders ("Related Persons") to serve other
Persons in any capacity, to own interests in other businesses and
undertakings, to pursue and engage in other investments, opportunities
and activities, and to derive and enjoy profits, compensation and other
consideration in respect thereof, whether or not such services,
interests, businesses, undertakings, investments, opportunities and
activities (collectively, "Other Interests") are similar to or
competitive with the business or assets of the Partnership, (ii) afford
any Partner any right to share in the profits, compensation and other
consideration derived from the Other Interests of any other Partner or
any other Partner's Related Persons, or to participate in the Other
<PAGE> 02
Interests of any other Partner or any other Partner's Related Persons,
(iii) require any Partner to disclose to any other Partner or the
Partnership the existence or nature of any such Other Interest, or
(iv) obligate any Partner to first offer any such Other Interest to any
other Partner or the Partnership, or allow any other Partner or the
Partnership to participate therein.
(b) Notwithstanding the foregoing, until an individual
Property has been sold or otherwise transferred by the Underlying
Partnership or Partnership, respectively, a Party (or any Affiliate of a
Party) (each a "Proposing Party") shall not obtain an equity interest
(whether direct or indirect) in any real estate venture ("Real Estate
Activity") within the area described as the "Non-Competition Area" for
each Property on Schedule 5 attached hereto, as such Schedule 5 may be
amended from time to time, ("Non-Competition Area") unless it has first
provided the other Party (the "Nonproposing Party") with written notice
describing in reasonable detail the proposed transaction and offering
the transaction as a Partnership opportunity (the "Proposal") and the
Nonproposing Party has failed to notify the Proposing Party within
thirty (30) days of its receipt of such notice that such Nonproposing
Party desires that the Partnership, rather than the Proposing Party
individually, enter into and invest in such Real Estate Activity. In
the event that the Nonproposing Party delivers the notice described in
the immediately preceding sentence directing that the Partnership invest
in the Real Estate Activity, each Party shall make any Additional
Capital Contributions required by the Executive Committee to fund the
investment of the Partnership pursuant to the Proposal, the Real Estate
Activity will be an opportunity for the Partnership and the Real Estate
Activity shall be included as a business of the Partnership within
Section 1.3. The Proposal described above shall include all information
that the Proposing Party has with respect to the Real Estate Activity,
including proformas, plans and specifications and economic projections
relating to the Real Estate Activity. If the Nonproposing Party
consents to the Proposing Party's investment in the Real Estate Activity
individually or fails to respond to the Proposal within thirty (30) days
after its receipt thereof, the Proposing Party or its Affiliate shall be
permitted to invest in the Real Estate Activity in its individual
capacity.
1.9 Transactions with Affiliates. To the extent permitted by
applicable law and except as otherwise provided in this Agreement
(including Section 5.11 hereof), the Operating Committee and any
Property Manager, when acting through the Partnership , are hereby
authorized to purchase property and services from, sell property and
services to, or otherwise deal with any Partner, acting on its own
behalf, or any Affiliate of any Partner, provided that any such
purchase, sale, or other transaction (and any such Affiliates'
affiliation to a Partner) shall be fully disclosed to the Partners and
shall be made on market terms and conditions which are no less favorable
to the Partnership (including as to price, quality and payment terms)
than if the sale, purchase, or other transaction had been entered into
with an independent third party.
ARTICLE 2
Capital Contributions and Other Financing Matters
<PAGE> 03
2.1 Percentage Interests. The names, addresses, and
percentage interests ("Percentage Interests") of the Partners are as
follows:
NAME AND ADDRESS PERCENTAGE INTEREST
General Partners
Macerich EQ GP Corp.
233 Wilshire Boulevard, Suite 700
Santa Monica, California 90401
Telecopier No.: (310) 395-2791 .1%
SDG EQ Associates, Inc.
c/o Simon DeBartolo Group
National City Center
115 West Washington Street
Indianapolis, Indiana 46204
Telecopier No.: (317) 685-7221 .1%
Limited Partners
Macerich EQ Limited Partnership
233 Wilshire Boulevard, Suite 700
Santa Monica, California 90401
Telecopier No.: (310) 395-2791 49.9%
SDG EQ Developers Limited Partnership
c/o Simon DeBartolo Group
National City Center
115 West Washington Street
Indianapolis, Indiana 46204
Telecopier No.: (317) 685-7221 49.9%
2.2 Initial Capital Contributions. The initial Capital
Contributions ("Initial Capital Contributions") of the Parties shall be
made as follows:
(a) Concurrently with the execution of the Purchase
Agreement by the Underlying Partnership, each Party shall deliver to
Equitable (the seller of the Properties), as a contribution to the
Partnership, and as a contribution by the Partnership to the Underlying
Partnership, a clean, irrevocable letter of credit in the amount of
$12,500,000 each naming Equitable as beneficiary (such letters of credit
to satisfy the "Deposit" requirement under the Purchase Agreement). For
this purpose, each of SDG and Macerich shall be deemed to have
<PAGE> 04
contributed to each of SSPE and MSPE, respectively, a portion of each
such letter of credit representing each's proportionate interest in the
Partnership, which letters of credit shall be deemed contributed by to
the Partnership by SSPE and MSPE.
(b) Each Party hereby agrees to contribute to the
capital of the Partnership, as a Capital Contribution, an amount equal
to fifty percent (50%) of the Closing Funding Requirement (as defined
below), subject, however, to the remaining provisions of this
Section 2.2. As used herein, the term "Closing Funding Requirement"
shall mean the sum of (i) all amounts required to be deposited by the
Underlying Partnership with Escrow Agent pursuant to the Purchase
Agreement in order to close the transaction thereunder, including
amounts due to Equitable under the Purchase Agreement as the purchase
price consideration paid for the Underlying Properties and the
Underlying Partnership's share of all closing costs and expenses
required to be deposited with and paid through Escrow Agent pursuant to
the Purchase Agreement (the "Escrow Closing Requirement"), (ii) all out-
of-pocket costs and expenses paid or payable to Persons other than the
Underlying Partnership, any Partner or any Affiliate thereof (other than
those amounts described in Clause (i) above) that have been and/or will
be incurred by the Underlying Partnership, the Partnership, the Partners
and the Partners' respective Affiliates in connection with the formation
of the Partnership and the Underlying Partnership and investigating and
acquiring the Properties (including, without limitation, costs incurred
in connection with the negotiation of the Purchase Agreement and this
Agreement and all out-of-pocket due diligence costs and fees
(collectively, "Due Diligence, Formation and Acquisition Costs"), and
(iii) the amount set forth in the Original Approved Pre-Closing Budget
(as defined below) for the funding of the Underlying Partnership's
initial capital improvement and operating reserve (as such amount may be
adjusted by the mutual consent of the Partners in their sole and
absolute discretion) (the "Initial Reserve Requirements").
(c) Attached hereto as Schedule 1 is a budget (the
"Original Approved Pre-Closing Budget") reflecting the Partners' best
and good-faith estimate of all Due Diligence, Formation and Acquisition
Costs that will be incurred in connection with the Partnership and
Underlying Partnership's formation and the acquisition of the
Properties. In the event that any Party incurs Due Diligence, Formation
and Acquisition Costs in excess of that budgeted in the Original
Approved Pre-Closing Budget, the written approval of the other Party
shall be required before such additional amount may be included in the
Closing Funding Requirement. In the event that a Party requests in
writing that the other Party approve any such additional expenditure or
cost and the other Party fails to disapprove of the same in writing
(together with its specific written objections thereto) within five (5)
business days after its receipt of such request, such expenditure or
cost shall be deemed approved (but in each case only if such written
request specifically advises the Party that failure to respond within
such five (5) business day period will result in such deemed approval).
(d) Each of the Parties separately agrees to deposit its
portion of the Escrow Closing Requirement in escrow in good funds with
Escrow Agent at least one (1) business day prior to the Underlying
Partnership's acquisition of the Underlying Properties.
<PAGE> 05
Notwithstanding the foregoing, each Party shall be permitted to deposit
its portion of the Escrow Closing Requirement into a separate escrow
established with such Escrow Agent, which escrow shall be solely for
such Party's benefit until the closing of the acquisition of the
Underlying Properties, and shall be terminable solely by such Party
(provided that any such termination shall not relieve or release such
Party of its obligations hereunder, if any). Concurrently with such
Party's deposit of its portion of the Escrow Closing Requirement in
escrow, such Party shall enter into escrow instructions with Escrow
Agent authorizing Escrow Agent to transfer such amounts into the escrow
established for the purchase and sale of the Underlying Properties upon
the satisfaction of all conditions precedent for the closing of such
purchase and sale. Such escrow instructions shall also provide that if
the closing of the purchase and sale of the Underlying Properties does
not occur on or before the date set forth in Section 10.1(h), the escrow
shall terminate and all sums held therein (together with any interest
actually earned thereon) shall be immediately returned to such Party
(whereupon such Party shall have no further liability or duty hereunder
with respect to the making of such portion of the Escrow Closing
Requirement), unless Escrow Agent receives written instructions from
such Party to extend such escrow. Any interest earned on amounts placed
in escrow prior to such closing shall accrue for the benefit of the
Party depositing same. Each Party shall deposit into the Partnership
accounts designated by the Operating Committee prior to the acquisition
of the Underlying Properties such Party's share of the Initial Reserve
Requirement. The Parties shall meet and shall exchange invoices and
other evidence of Due Diligence, Formation and Acquisition Costs
incurred by each of them or their Affiliates in connection with the
purchase and sale transaction. Once the Parties have agreed upon all
Due Diligence, Formation and Acquisition Costs, the Party who incurred
the lesser amount of Due Diligence, Formation and Acquisition Costs
shall promptly pay to the other Party an amount sufficient to reimburse
such other Party for the share of Due Diligence, Formation and
Acquisition Costs incurred by such other Party in excess of its combined
50% share, it being the intention of the Parties that all Due Diligence,
Formation and Acquisition Costs be shared by the Parties equally.
(e) Notwithstanding anything else to the contrary
contained in this Agreement, if the Purchase Agreement is terminated or
the purchase and sale of the Underlying Properties fails to occur, each
Party shall bear fifty percent (50%) of the aggregate Due Diligence,
Formation and Acquisition Costs. If a Party has paid a disproportionate
share of the aggregate Due Diligence, Formation and Acquisition Costs,
the other Party shall pay to such Party the amount necessary such that
each Party bears such costs in the foregoing proportions, which payment
shall be made within fifteen (15) days after delivery of written notice,
together with reasonably detailed supporting documentation. Each Party
agrees to provide to the other Party such documentation as is reasonably
necessary to substantiate such costs incurred by such Party. Nothing
contained in this Section 2.2(e) shall limit or impair any right or
remedy that a Party may have against any other Party as a result of such
other Party's breach of any obligation such other Party may have under
this Agreement to make its Initial Capital Contribution.
<PAGE> 06
2.3 Additional Capital Contributions.
(a) Additional capital contributions ("Additional
Capital Contributions") may be called for in accordance with this
Section 2.3. The Executive Committee may call for Additional Capital
Contributions for any reason. Additional Capital Contributions may also
be called for by either Party if necessary in order to fund Cash Flow
Shortfalls or Budgeted Capital Items and for no other reason without the
approval of the Executive Committee. Except as otherwise provided in
subsection (b) below, Additional Capital Contributions shall be made
upon written demand by the requesting Party upon the other Party, or by
the Executive Committee upon the Parties, as the case may be, from time
to time, shall be payable in proportion to the Percentage Interests of
the Parties, and shall be contributed by the Parties within ten (10)
business days of the receipt of the notice hereinbefore described, which
notice shall state the amount of such Additional Capital Contribution
required from each Party.
(b) Each Party agrees to make all Additional Capital
Contributions required to be made in accordance with this Agreement
within the ten (10) business day period described in subsection (a)
above; provided that, any Party may, during such ten (10) business day
period, request that the Partnership seek third party financing (in lieu
of the Parties making Additional Capital Contributions) to satisfy the
Partnership's cash need. In the event that either Party makes such
request, the period of time within which the Additional Capital
Contributions must be made will be extended as hereinafter provided, and
the Partnership shall use its commercially reasonable efforts to secure
third party financing at commercially reasonable rates to satisfy the
Partnership's cash needs. If the Partnership is unable to secure any
such financing on terms that are mutually acceptable to and approved by
the Parties within thirty (30) days after any Party's request to fund
the required amounts via third party financing, the Additional Capital
Contributions shall immediately become due and payable within five (5)
business days after the expiration of such thirty (30) day period. If
any Party fails to make its share of the Additional Capital
Contributions within the said five (5) business day period, then the
terms and provisions of subsection (c) below shall apply.
(c) If a Party fails to make its share of any required
Additional Capital Contributions after the Partnership has been unable
to secure third party financing approved by both Parties pursuant to
subsection (b) above, then such Party (the "Noncontributing Party")
shall be a Defaulting Party hereunder, and the other Party (a
"Contributing Party") who has made its share of such Additional Capital
Contributions may elect to give notice to the Noncontributing Party of
its default hereunder. If such Noncontributing Party cures such default
within the cure period set forth in Section 5.14(a) hereof, it shall
thereupon become a Contributing Party. If such Noncontributing Party
fails to cure such default within the cure period set forth in
Section 5.14(a) hereof, then the Contributing Party may, in its sole
discretion and without limitation on its other rights and remedies under
this Agreement, elect to exercise its rights under the following
subsections (d) or (e) of this Section 2.3 (subject to the terms and
conditions set forth in said subsections (d) and (e)).
<PAGE> 07
(d) The Contributing Party shall have the right to
withdraw all of its Additional Capital Contribution immediately after
the expiration of the Noncontributing Party's cure period. Any
Contributing Party that withdraws its Additional Capital Contribution in
compliance with this provision shall not be deemed a Defaulting Party by
reason of such withdrawal.
(e) The Contributing Party shall have the right to make
a Default Loan to the Partnership pursuant to Section 2.4 equal to 100%
of the Noncontributing Party's share of the Additional Capital
Contributions that it failed to contribute.
2.4 Default Loans.
(a) Without limitation on any other rights and remedies
of the Partners, if a Noncontributing Party shall have failed to timely
pay its portion of the Closing Funding Requirement as provided in
Section 2.2 or to make any Additional Capital Contributions as required
pursuant to this Agreement, and fails to cure such default after
receiving notice thereof within the applicable cure period provided
under Section 5.14(a) hereof, the Contributing Party may advance the
amount of such delinquency to the Partnership and direct the Partnership
to pay the party or parties (which party or parties may be a Partner (or
Affiliate of a Partner) hereunder, including the Contributing Party (or
an Affiliate of the Contributing Party) making such advance, if such
amount is owed to such Person) to whom the same is owed. Any such
advance shall be treated as a loan (a "Default Loan") by such
Contributing Party to the Partnership, payable on demand, and shall bear
interest at the Base Rate plus three percent (3%) per annum (compounded
monthly as of the last day of each calendar month) from the date of such
loan to the date of payment in full. In addition and without limitation
on the foregoing, the making of such Default Loan shall also create an
obligation on the part of the Noncontributing Party to contribute to the
Partnership an amount equal to the amount of the Default Loan (together
with interest at the aforesaid rate) made by the Contributing Party to
the Partnership. As used herein, the term "Base Rate" shall mean the
commercial loan rate of interest announced publicly from time to time by
Chase Manhattan Bank in New York, New York as such bank's "prime rate",
as from time to time in effect, such interest rate to change monthly as
of the first day of the calendar month next succeeding the calendar
month in which a change in Base Rate occurs; provided that, if such rate
is unavailable for any reason, then the parties shall meet and agree
upon a different bank's "prime rate" or "reference rate" to serve as the
Base Rate hereunder.
(b) The Contributing Party shall give written notice to
the Noncontributing Party of the making of any Default Loan, and the
Noncontributing Party may contribute the amount of such advance (plus
all accrued interest) to the Partnership at any time (and shall
contribute such amount at the time prescribed by Section 10.2 hereof).
The Partnership shall immediately pay such amounts received from the
Noncontributing Party to the Contributing Party. Such payments by the
Noncontributing Party to the Partnership and from the Partnership to the
Contributing Party shall be applied first against accrued interest and
then against the principal of the Default Loan until the repayment in
full of principal and accrued interest on the Default Loan.
<PAGE> 08
Notwithstanding any provision to the contrary herein, at any time when a
Default Loan shall be outstanding, all distributions of Net Cash Flow by
the Partnership from and after the making of such Default Loan shall be
made as follows: first, all such distributions to which the Contributing
Party would normally (i.e., but for the effect and operation of the
provisions set forth in this Section 2.4) be entitled to receive under
Section 3.1 shall be calculated and made to such Contributing Party;
second, the balance, if any, shall be paid by the Partnership directly
to the Contributing Party to be applied first against interest and then
against principal of the Default Loan; and third, the balance, if any,
shall be paid to the Noncontributing Party in respect of the amounts to
which it would normally (i.e., but for the effect and operation of the
provisions set forth in this Section 2.4) be entitled to receive under
Section 3.1 (and to the extent such amounts, if any, paid to the
Noncontributing Party are less than the amounts which the
Noncontributing Party would normally be entitled to receive under
Section 3.1, such deficiency shall forever be forfeited by the
Noncontributing Party and it shall have no right to recoup or recover
the same out of future distributions hereunder). Only upon the payment
in full of the principal of and all accrued interest on a Default Loan
shall the Noncontributing Party's Event of Default with respect to which
the Default Loan was made be deemed cured and after such cure, provided
no other Event of Default of the Noncontributing Party then exists, the
Noncontributing Party's rights under this Agreement shall be immediately
reinstated.
(c) Upon request by the Contributing Party at any time
from the date of the Contributing Party's advance pursuant to subsection
(a) above until any such Default Loan shall be repaid in full by cash
payment, the Noncontributing Party shall, on its own behalf and/or on
behalf of the Partnership, execute any and all documents reasonably
requested by the Contributing Party, including, without limitation,
promissory notes or such other documentation as may be necessary to
reflect and perfect the Contributing Party's rights under this Section
2.4 (and for such purpose the Noncontributing Party hereby appoints the
Contributing Party its true and lawful attorney-in-fact with full power
of substitution to execute and deliver such documents on behalf of such
Noncontributing Party, which power of attorney shall be deemed to be a
power coupled with an interest which cannot be revoked by death,
dissolution or otherwise).
2.5 Other Matters.
(a) Except as otherwise provided in this Agreement, no
Party shall demand or receive a return of its Capital Contributions or
withdraw from the Partnership without the consent of all Partners.
Under circumstances requiring a return of any Capital Contributions, no
Partner shall have the right to receive property other than cash except
as may be specifically provided herein.
(b) No Partner shall receive any interest, salary, or
draw with respect to its Capital Contributions or its Capital Account or
for services rendered on behalf of the Partnership or otherwise in its
capacity as Partner, except as otherwise provided in this Agreement. No
Partner shall be entitled to interest on its Capital Contributions or on
such Partner's Capital Account.
<PAGE> 09
2.6 No Third Party Beneficiary. No creditor or other third
party having dealings with the Partnership shall have the right to
enforce the right or obligation of any Partner to make Capital
Contributions or loans or to pursue any other right or remedy hereunder
or at law or in equity, it being understood and agreed that the
provisions of this Agreement shall be solely for the benefit of, and may
be enforced solely by, the parties hereto and their respective
successors and assigns. None of the rights or obligations of the
Partners herein set forth to make Capital Contributions to the
Partnership shall be deemed asset of the Partnership for any purpose by
any creditor or other third party, nor may such rights or obligations be
sold, transferred or assigned by the Partnership or pledged or
encumbered by the Partnership to secure any debt or other obligation of
the Partnership or of any of the Partners. Without limiting the
generality of the foregoing, a deficit capital account of a Partner
shall not be deemed to be a liability of such Partner nor an asset or
property of the Partnership.
2.7 Third Party Financing. Except as otherwise provided
herein to the contrary, the Partnership may obtain, on its own behalf,
upon the approval of the Executive Committee, all additional money and
funds necessary, at any time, to develop, construct, acquire and operate
the Partnership Assets. No Partner or Affiliate of a Partner shall be
required to guaranty or make any other financial commitment with respect
to any debt or other obligation of the Partnership. The Operating
Committee shall use commercially reasonable efforts to obtain, on behalf
of the Partnership, all additional money and funds necessary, at any
time, to conduct the business of the Partnership that cannot be funded
through the resources of the Partnership.
ARTICLE 3
Distributions
3.1 Distributions. As soon as practicable after the approval
by the Executive Committee of the quarterly statements of Net Cash Flow
prepared and delivered pursuant to Section 4.3, the Partnership shall
distribute such portion of the Net Cash Flow of the Partnership for the
quarterly period covered by each such statement as the Executive
Committee or Operating Committee may elect to distribute (which shall
not, in any event, equal less than ninety percent (90%) of the total
Funds From Operations for such quarterly period), to the Partners pro
rata in accordance with their respective Percentage Interests, subject
to the alternative allocations set forth in Section 2.4(b) in the event
that a Default Loan is then outstanding. Notwithstanding the foregoing,
the Executive Committee shall approve for each period a distribution
sufficient to satisfy the requirements of Section 5.6(f) hereof.
3.2 Distributions after Dissolution. Notwithstanding the
provisions of Section 3.1 to the contrary, all distributions of Net Cash
Flow to be made from and after the dissolution of the Partnership shall
be made in accordance with the provisions of Article 10.
<PAGE> 10
3.3 Timing of Distributions Among Partners. Except as
provided in Section 6.3, all distributions of cash shall be distributed
to the Persons who are Partners on the day such distribution is made.
ARTICLE 4
Allocations and Other Tax and Accounting Matters
4.1 Allocations. The Net Income, Net Loss and/or other Tax
Items of the Partnership shall be allocated pursuant to the provisions
of the Allocations Exhibit.
4.2 Accounting, Books and Records. The Partnership shall
maintain or cause to be maintained at its Principal Office (with full
and complete copies thereof to be delivered to and maintained at the
offices of the Simon DeBartolo Group at 115 West Washington Street,
Indianapolis, Indiana 46204) separate books of account for the
Partnership which shall show a true and accurate record of all costs and
expenses incurred, all charges made, all credits made and received, and
all income derived in connection with the operation of the Partnership
business in accordance with generally accepted accounting principles
consistently applied and, to the extent inconsistent therewith, in
accordance with this Agreement. The Partnership shall use the accrual
method of accounting in preparation of its annual reports and for tax
purposes and shall keep its book accordingly. Each Partner shall, at
its sole expense, have the right, at any time, without notice to any
other Partner, to examine, copy, and audit the Partnership's books and
records during normal business hours.
4.3 Reports.
(a) In General. The Operating Committee shall be
responsible for the preparation of financial reports of the Partnership
and the coordination of financial matters of the Partnership with the
Accountants.
(b) Reports. Within sixty (60) days after the end of
each Fiscal Year and within thirty (30) days after the end of each of
the first three (3) fiscal quarters, and within thirty (30) days after
the end of each calendar month, the Operating Committee shall cause each
Executive Committee Member to be furnished with a copy of the balance
sheet of the Partnership as of the last day of the applicable period,
and a statement of income or loss for the Partnership for such period.
In addition, concurrently with the delivery of the quarterly and year-
end financial statements referred to in the preceding sentence, the
Operating Committee shall cause each Executive Committee Member to be
furnished with a copy of a statement setting forth the calculation of
the Net Cash Flow (if any) for such prior quarterly period, and setting
forth the calculation of all amounts to be distributed to the Partners
pursuant to Section 3.1 or Section 10.2, as the case may be. Annual
statements shall also include a statement of the Partners' Capital
<PAGE> 11
Accounts and changes therein for such Fiscal Year. Annual statements
shall be audited by the Accountants, and shall be in such form as shall
enable the Partners to comply with all reporting requirements applicable
to either of them or their Affiliates under the Securities Exchange Act
of 1934, as amended. All quarterly and annual statements shall be
subject to the approval of the Executive Committee, and no action shall
be taken with respect thereto until such approval has been given. The
Operating Committee shall also cause to be prepared such reports and/or
information as are necessary for the Partners (or any Persons who
directly or indirectly own interests in the Partners) to determine their
qualification as a REIT and their compliance with all requirements to
qualify as a REIT or as may be required by any lender of the
Partnership.
4.4 Tax Returns; Information. The Operating Committee shall
arrange for the preparation and timely filing of all income and other
tax returns of the Partnership. Within ninety (90) days after the end
of each Fiscal Year, the Operating Committee shall cause the Accountants
to prepare the Partnership's tax returns for approval and execution by
the Operating Committee. The Operating Committee shall furnish to each
Partner a copy of each approved return, together with any schedules or
other information which each Partner may require in connection with such
Partner's own tax affairs. The Partnership shall be treated and shall
file its tax returns as a partnership for federal, state and municipal
income tax and other tax purposes. Upon request of any Partner, any
elections made pursuant to this Agreement under the provisions of the
Code or similar provisions hereafter enacted shall be evidenced by
appropriate filings with the Internal Revenue Service on behalf of the
Partnership.
4.5 Special Basis Adjustment. In connection with any
Transfer of a Partnership Interest permitted under Article 6, the
Operating Committee shall cause the Partnership, at the written request
of the transferor or the Transferee, but only upon the approval of the
General Partners, on behalf of the Partnership and at the time and in
the manner provided in Regulations Section 1.754-1(b), to make an
election to adjust the basis of the Partnership's property in the manner
provided in Sections 734(b) and 743(b) of the Code, and the Transferee
shall pay all costs incurred by the Partnership in connection therewith,
including reasonable attorneys' and accountants' fees.
4.6 Tax Matters Partner. MSPE is specially authorized and
appointed to act as the "Tax Matters Partner" under the Code and in any
similar capacity under state or local law; provided, however, that it
shall exercise its authority in such capacity subject to all applicable
terms and limitations set forth in this Agreement. Notwithstanding the
foregoing, the Tax Matters Partner shall not, without the prior written
approval of the other General Partner, (i) make any tax election on
behalf of the Partnership, (ii) take any action with respect to any
federal, state or local contest of any partnership item (as defined in
Section 6231(a)(7) of the Code (or any successor thereto) (and
comparable provisions of state and local income tax laws) of the
Partnership, or (iii) take any action with respect to any audit of any
federal, state or local income tax return or income tax report filed by
or on behalf of the Partnership.
<PAGE> 12
ARTICLE 5
Management
5.1 Executive Committee. The Partnership shall at all times
have an executive committee (the "Executive Committee") composed of two
individuals (the "Executive Committee Members") who shall vote on Major
Decisions and oversee the performance of the Operating Committee.
(a) Membership and Voting.
(i) Membership. The Executive Committee will
consist of two (2) Executive Committee Members, with one (1)
Executive Committee Member appointed by each General Partner.
Concurrently with the execution and delivery of this Agreement, the
General Partners have notified one another in writing of their
respective initial appointed Executive Committee Member. Each
General Partner may, at any time, appoint an alternate Executive
Committee Member by prior written notice to the other General
Partner's appointed Executive Committee Member and such alternates
will have all the powers, authority and duties of a regular
Executive Committee Member in the absence or inability of a regular
Executive Committee Member to serve. In no event, however, shall
the other Executive Committee Member be under any obligation to
make inquiries as to, or verify or confirm, any such absence or
inability to serve of a regular Executive Committee Member, it
being understood and agreed that the Executive Committee Members
shall be entitled to rely upon and accept an alternate Executive
Committee Member's assertion of the absence or inability to serve
of the regular Executive Committee Member in question. Each
General Partner shall cause its appointed Executive Committee
Member and alternate Executive Committee Member to comply with the
terms of this Agreement. Each General Partner will have the power
to remove its Executive Committee Member or alternate Executive
Committee Member appointed by it by written notice to the other
General Partner's Executive Committee Member. Vacancies on the
Executive Committee will be filled by appointment by the General
Partner that appointed the Executive Committee Member previously
holding the position that is then vacant. The General Partners may
mutually agree to increase or decrease the size of the Executive
Committee proportionately, from time to time. Notices to an
Executive Committee Member shall be delivered to such Person's
attention at the address set forth in Section 2.1 for the General
Partner that appointed such Executive Committee Member, and in the
manner prescribed in Section 11.1. No appointment or removal by a
General Partner of an Executive Committee Member or alternate
Executive Committee Member shall be effective until written notice
of such action is received or deemed received pursuant to Section
11.1 by the Executive Committee Member of the other General
Partner. Each General Partner, its Limited Partner affiliate, and
its respective Executive Committee Member and alternate Executive
Committee Member, when dealing with the other General Partner's
<PAGE> 13
respective Executive Committee Member and alternate Executive
Committee Member, (i) shall be entitled to rely upon and accept the
written act, approval, consent or vote of each of such other
General Partner's then-appointed Executive Committee Member and
alternate Executive Committee Member, and (ii) shall be under no
obligation to make any inquiries in order to verify or confirm any
of such written acts, approvals, consents or votes.
(ii) Voting. Each Executive Committee Member shall have
one vote on any decision of the Executive Committee. An Executive
Committee Member may give a written proxy to another Executive
Committee Member to vote on such Executive Committee Member's
behalf in such Executive Committee Member's absence. Except as
expressly provided to the contrary in this Agreement, all actions,
decisions, capital calls, determinations, waivers, approvals and
consents to be taken or given by the Executive Committee must be
unanimously approved by the Executive Committee Members (whether or
not present at the meeting at which such vote occurs).
(b) Meetings of the Executive Committee; Time and Place.
Unless otherwise agreed by the Executive Committee, regular meetings of
the Executive Committee shall be held no less often than quarterly at
such time and at such place as the Executive Committee shall determine.
At such regular meetings, the Operating Committee shall report on the
financial performance and condition of the Partnership on a year-to-date
basis (including cash flows, reserves, outstanding loans, and compliance
efforts), progress on capital projects, material contracts entered into,
material litigation, marketing and leasing efforts, deviations from any
Budget and such other matters relevant to the management and operation
of the Partnership and the Properties. Special meetings of the
Executive Committee shall be held on the call of any Executive Committee
Member; provided that at least three (3) business days' notice is given
to all Executive Committee Members (unless written waiver of this
requirement by all Executive Committee Members is obtained). A quorum
for any Executive Committee meeting shall consist of not less than two
(2) Executive Committee Members (one appointed by each General Partner)
present either in person or by proxy. The Executive Committee may make
use of telephones and other electronic devices to hold meetings;
provided that the Executive Committee Members participating in such
meeting can hear one another. The Executive Committee may act without a
meeting if the action taken is reduced to writing and approved by the
Executive Committee in accordance with the other voting provisions of
this Agreement. Written minutes shall be taken at each meeting of the
Executive Committee. However, any action taken or matter agreed upon by
the Executive Committee shall be deemed final, whether or not written
minutes are ever prepared or finalized.
(c) Major Decisions. No action shall be taken, no sum
shall be expended and no obligation shall be incurred by the Operating
Committee or any Property Manager with respect to any matter affecting
the Partnership which is within the scope of a Major Decision unless
such Major Decision shall have been approved by the Executive Committee
in advance in writing. A "Major Decision" shall mean any decision:
<PAGE> 14
(i) to sell, assign, transfer, exchange, grant
easements over, or otherwise convey or dispose of, any of the
Partnership Properties, or any portion thereof or any material
interest therein, or to lease or license the Partnership's entire
interest in any of the Partnership Properties ;
(ii) to acquire any Partnership Property or any
option or interest therein, and to appoint the Property Manager
with respect to each such Partnership Property;
(iii) to approve or make any change to any
Budget or marketing plan for the Partnership or any of the
Partnership Properties;
(iv) to amend this Agreement ;
(v) to borrow money or to apply for, execute, grant
or modify any mortgage, pledge, deed of trust, financing statement,
encumbrance or other hypothecation or security agreement affecting
the Partnership Assets or any portion thereof or any interest
therein, except as otherwise may be provided in an approved Budget;
(vi) to approve proposals submitted to, or
agreements entered into, or to authorize or give any consent with
respect to any matter relating to zoning, rezoning variances,
compliance with environmental laws, subdivision, modification of
development rights or other land use matters which affect the
Partnership or any of the Partnership Properties;
(vii) to select and retain the Accountants;
(viii) to approve the Partnership's tax returns,
or to make proposals to or to conduct any actions, litigation or
other activities with federal or state taxing authorities;
(ix) to change or permit to be changed in any
substantial way the accounting process and procedures employed in
keeping the books of account or preparing financial statements with
respect to the operation or management of the Partnership pursuant
to this Agreement;
(x) to compromise or settle any claim for insurance
proceeds, or any claim for payment of awards or damages arising out
of the exercise of eminent domain by any public or governmental
authority;
(xi) to make, execute or deliver on behalf of the
Partnership any assignment for the benefit of creditors;
<PAGE> 15
(xii) to dissolve, terminate or liquidate the
Partnership, or to petition a court for the dissolution,
termination or liquidation of the Partnership, except in accordance
with this Agreement;
(xiii) to cause the Partnership, or any of the
Partnership Properties to be subject to the authority of any
trustee, custodian or receiver or to be subject to any proceeding
for bankruptcy, insolvency, reorganization, arrangement,
readjustment of debt, relief of debtors, or similar proceedings;
(xiv) to obligate the Partnership as a surety,
guarantor, indemnitor or accommodation party to any obligation;
(xv) to enter into, terminate, accept the surrender
of, modify, amend, supplement, or give any material approval,
consent or waiver on behalf of the Partnership under the Purchase
Agreement or any of the loan documents relating to the Existing
Financing; or
(xvi) to take any other action or decision that
this Agreement provides may only be taken or made by the Executive
Committee.
5.2 No Individual Authority. Except as otherwise expressly
provided in this Agreement, no Partner, acting alone, shall have any
authority to act for, or undertake or assume any obligation or
responsibility on behalf of, any other Partner or the Partnership.
5.3 Operating Committee. Unless otherwise agreed to by the
General Partners, the management of the Partnership, subject to the
restrictions on its authority set forth in Section 5.1, shall be vested
in the operating committee (the "Operating Committee"). The Operating
Committee shall be composed of two individuals (the "Operating Committee
Members") who shall vote on all management issues relating to the
business and operations of the Partnership.
(a) Membership and Voting.
(i) Membership. The Operating Committee will
consist of two (2) Operating Committee Members, with one (1)
Operating Committee Member appointed by each General Partner.
Concurrently with the execution and delivery of this Agreement, the
General Partners have notified one another in writing of their
respective initial appointed Operating Committee Member. Each
General Partner may, at any time, appoint one of its employees as
an alternate Operating Committee Member by prior written notice to
the other General Partner's appointed Operating Committee Member
and such alternates will have all the powers, authority and duties
of a regular Operating Committee Member in the absence or inability
of a regular Operating Committee Member to serve. In no event,
however, shall the other Operating Committee Member be under any
obligation to make inquiries as to, or verify or confirm, any such
absence or inability to serve of a regular Operating Committee
<PAGE> 16
Member, it being understood and agreed that the Operating Committee
Members shall be entitled to rely upon and accept an alternate
Operating Committee Member's assertion of the absence or inability
to serve of the regular Operating Committee Member in question.
Each General Partner shall cause its appointed Operating Committee
Member and alternate Operating Committee Member to comply with the
terms of this Agreement. Each General Partner will have the power
to remove its Operating Committee Member or alternate Operating
Committee Member appointed by it by written notice to the other
General Partner's Operating Committee Member. Vacancies on the
Operating Committee will be filled by appointment by the General
Partner that appointed the Operating Committee Member previously
holding the position that is then vacant. The General Partners may
mutually agree to increase or decrease the size of the Operating
Committee proportionately, from time to time. Notices to an
Operating Committee Member shall be delivered to such Person's
attention at the address set forth in Section 2.1 for the General
Partner that appointed such Operating Committee Member, and in the
manner prescribed in Section 11.1. No appointment or removal by a
General Partner of an Operating Committee Member or alternate
Operating Committee Member shall be effective until written notice
of such action is received or deemed received pursuant to Section
11.1 by the Operating Committee Member of the other General
Partner. Each General Partner, its Limited Partner affiliate, and
its respective Operating Committee Member and alternate Operating
Committee Member, when dealing with the other General Partner's
respective Operating Committee Member and alternate Operating
Committee Member, (i) shall be entitled to rely upon and accept the
written act, approval, consent or vote of each of such other
General Partner's then-appointed Operating Committee Member and
alternate Operating Committee Member, and (ii) shall be under no
obligation to make any inquiries in order to verify or confirm any
of such written acts, approvals, consents or votes.
(ii) Voting. Each Operating Committee Member shall
have one vote on any decision of the Operating Committee. An
Operating Committee Member may give a written proxy to another
Operating Committee Member or any Partner's employee to vote on
such Operating Committee Member's behalf in such Operating
Committee Member's absence. Except as expressly provided to the
contrary in this Agreement, all actions, decisions, capital calls,
determinations, waivers, approvals and consents to be taken or
given by the Operating Committee must be unanimously approved by
the Operating Committee Members (whether or not present at the
meeting at which such vote occurs).
(b) Reports and Meetings of the Operating Committee;
Time and Place. The Operating Committee shall report to the Executive
Committee on activities undertaken by the Operating Committee, as
required by the Executive Committee and this Agreement. Unless
otherwise agreed by the Operating Committee, regular meetings of the
Operating Committee shall be held monthly at such time and at such place
as the Operating Committee shall determine. Special meetings of the
Operating Committee shall be held on the call of any Operating Committee
<PAGE> 17
Member; provided that at least three (3) business days' notice is given
to all Operating Committee Members (unless written waiver of this
requirement by all Operating Committee Members is obtained). A quorum
for any Operating Committee meeting shall consist of not less than two
(2) Operating Committee Members (one appointed by each General Partner)
present either in person or by proxy. The Operating Committee may make
use of telephones and other electronic devices to hold meetings;
provided that the Operating Committee Members participating in such
meeting can hear one another. The Operating Committee may act without a
meeting if the action taken is reduced to writing and approved by the
Operating Committee in accordance with the other voting provisions of
this Agreement. Written minutes shall be taken at each meeting of the
Operating Committee. However, any action taken or matter agreed upon by
the Operating Committee shall be deemed final, whether or not written
minutes are ever prepared or finalized. Operating Committee meetings
may be attended by persons other than the Operating Committee Members
(including other employees of the Partners and their Affiliates).
(c) Duties of the Operating Committee. The Operating
Committee shall be generally responsible for overseeing and managing the
day-to-day business, operations and affairs of the Partnership and
carrying out the duties delegated to it by the Executive Committee, and
shall have fiduciary responsibility for the safekeeping and use of all
funds and assets of the Partnership, whether or not in its immediate
possession or control. The Operating Committee may, in carrying out its
duties, defend against lawsuits or other judicial or administrative
proceedings brought against the Partnership, provided that it promptly
notifies the Executive Committee of such action. The funds of the
Partnership shall not be commingled with the funds of any other Person,
and the Operating Committee shall not employ, or permit any other Person
to employ, such funds in any manner except for the benefit of the
Partnership. The bank accounts of the Partnership shall be maintained
in such banking institutions as are approved by the Operating Committee
and withdrawals shall be made only in the regular course of Partnership
business and as otherwise authorized in this Agreement on such signature
or signatures as the Operating Committee may determine. The Operating
Committee shall also have the duties imposed upon it elsewhere in this
Agreement. The Operating Committee shall devote sufficient time, effort
and managerial resources to the business of the Partnership as is
reasonably required to fulfill its obligations hereunder.
5.4 Warranted Reliance by Executive Committee Members and
Operating Committee Members on Others. In exercising their authority
and performing their duties under this Agreement, the Executive
Committee Members and the Operating Committee Members shall be entitled
to rely on information, opinions, reports, or statements of the
following persons or groups unless they have actual knowledge concerning
the matter in question that would cause such reliance to be unwarranted:
(a) one or more agents of the Partnership whom the
Executive Committee Member or Operating Committee Member, as the case
may be, reasonably believes to be reliable and competent in the matters
presented; and
<PAGE> 18
(b) any attorney, public accountant, or other person as
to matters which the Executive Committee Member or Operating Committee
Member, as the case may be, reasonably believes to be within such
person's professional or expert competence.
5.5 Intentionally Omitted.
5.6 REIT Status. The Partners hereby acknowledge that
Macerich and SDG (and/or certain Persons directly or indirectly owning
interests in Macerich or SDG) are and intend to qualify at all times as
a REIT, and that each such Partner's or other Person's ability to
qualify as such will depend principally upon the nature of the
Partnership's operations. Accordingly, the Partnership's operations
shall be conducted at all times in a manner that will enable each of
Macerich, SDG and each Person owning, directly or indirectly, interests
in either Macerich or SDG to satisfy all requirements for REIT status
under Sections 856 through 860 of the Code and the regulations
promulgated thereunder to the extent possible. In furtherance of the
foregoing (and not in limitation thereof), notwithstanding any other
provision herein to the contrary, the Partnership shall conduct its
operations in accordance with the following provisions at all times:
(a) The Partnership shall not render any services to
any lessee or sublessee or any customer thereof, either directly or
through an "independent contractor" within the meaning of Section
856(d)(3) of the Code, if the rendering of such services shall cause all
or any part of the rents received by the Partnership to fail to qualify
as "rents from real property" within the meaning of Section 856(d) of
the Code;
(b) The Partnership shall not own, directly or
indirectly (taking into account the attribution rules referred to in
Section 856(d)(5) of the Code), in the aggregate 10% or more of the
total number of shares of all classes of stock, 10% or more of the
voting power of all classes of voting stock or 10% or more of the assets
or net profits of any lessee or sublessee of all or any part of any of
the Properties or any Partnership Property;
(c) No lease or sublease of any space at the Properties
shall provide for any rent based in whole or in part on the "income or
profits" within the meaning of Section 856(d)(2)(A) of the Code derived
by any lessee or sublessee;
(d) The Partnership shall not own more than 10% of the
outstanding voting securities of any one issuer (as determined for
purposes of Section 856(c)(5)(B) of the Code);
(e) Neither the Partnership nor any Partner shall take
any action (or fail to take any action permitted under this Agreement)
that would otherwise cause the Partnership's and Underlying
Partnership's gross income to consist of more than one percent (1%) of
income not described in Section 856(c)(2) of the Code or more than ten
percent (10%) of income not described in Section 856(c)(3) of the Code,
or cause any significant part of the Partnership Assets to consist of
<PAGE> 19
assets other than "real estate assets" within the meaning of Section
856(c)(6)(B) of the Code;
(f) The Partnership shall distribute to the Partners
during each Fiscal Year an amount of cash such that the portion so
distributed will equal or exceed 100% of the amount of Partnership
taxable income, if any, to be allocated to Macerich and SDG,
respectively, with respect to such Fiscal Year distributed at the times
required to prevent the imposition of an excise tax under Section 4981
of the Code; provided, however, that if each such Partner's
distributable share of any Net Cash Flow of the Partnership and its
distributable share of any funds maintained in the Partnership reserves
are insufficient to meet the aforesaid distribution requirement with
respect to such Partner, then the Partnership shall have satisfied the
foregoing distribution requirement with respect to such Partner upon
distributing to it such distributable share of Net Cash Flow and funds
maintained in the Partnership reserves. In no event shall the
Partnership be required to borrow funds, or any Partner be required to
contribute funds to the Partnership, in order to permit the Partnership
to satisfy the foregoing distribution requirement. In no event shall
the foregoing provisions of this subsection (f) adversely affect the
allocation of, and Percentage Interest in, Net Cash Flow of any other
Partner.
(g) The Partnership shall not engage in any "prohibited
transactions" within the meaning of Section 857(b)(6)(B)(iii) of the
Code.
The Partners hereby acknowledge that the foregoing are the current
guidelines applicable to the qualification of REITs. If and to the
extent that any of the requirements to qualify for REIT status shall be
changed, altered, modified or added to, then such changes, alterations,
modifications or additions, as applicable, shall be deemed incorporated
herein, and this Section 5.6 shall be deemed to be amended and modified
as necessary to incorporate such changed, altered, modified or added
REIT requirements.
5.7 Budgets.
(a) Preparation and Approval. As soon as reasonably
possible hereafter, the Operating Committee shall prepare (or cause to
be prepared) and submit to the Executive Committee for approval an
interim operating budget (each an "Interim Operating Budget") for the
management, leasing and operation of each Partnership Property through
the end of Fiscal Year 1998. At least forty-five (45) days prior to the
beginning of each Fiscal Year, the Operating Committee shall prepare and
submit to the Executive Committee for approval a proposed budget (each
an "Annual Budget") for the management, leasing and operation of each
Partnership Property for the next Fiscal Year. The Interim Operating
Budgets and Annual Operating Budgets shall sometimes hereinafter be
collectively referred to individually as a "Budget" and collectively as
the "Budgets". The Executive Committee may approve or disapprove the
entire Budget or certain cost items or categories of each Budget. If
the Executive Committee disapproves any Budget or any cost item or
category thereof, the Operating Committee shall meet within five (5)
business days after the Executive Committee's disapproval and seek in
<PAGE> 20
good faith to agree upon an acceptable revision to such disapproved
Budget(s) or cost item or category, as the case may be. Once revised,
each such disapproved Budget shall be resubmitted to the Executive
Committee for approval and such process shall continue until the
Executive Committee has approved a Budget for each Partnership Property
for the Fiscal Year in question. Such Budgets will be prepared by the
Operating Committee and approved by the Executive Committee in good
faith based upon estimates taking into account the most recent
information then available to the Operating Committee. The Operating
Committee shall update each Budget no less frequently than quarterly,
and shall promptly submit any proposed revisions to such Budgets
resulting from such updates to the Executive Committee for approval in
the manner provided above for approval of the original Budgets.
(b) Operations. The approved Budget for each
Partnership Property shall be submitted to the Property Manager for
such Partnership Property for implementation. The Operating Committee
and Property Managers shall manage and operate each Property and each
Partnership Property consistent with the approved Budget therefor (as
may be updated from time to time in accordance with subsection (a)
above). If the Executive Committee has not approved a Budget or any
cost item or category of any Budget prior to the beginning of the next
Fiscal Year, the Operating Committee shall substitute the Budget or the
actual cost of such disapproved item or category incurred by the
Partnership during the preceding Fiscal Year, if any; provided that, if
any such item or category of expense is in the nature of utility
expenses, personal or real property taxes, insurance expenses to be
incurred in accordance with Section 5.8 hereof, debt service due and
payable under any loan of the Partnership , or any payments that the
Partnership is required to make by law, then the Operating Committee
shall substitute the reasonably anticipated costs of such items or
categories of expense (based on the previous year's bills therefor, if
available).
5.8 Insurance.
(a) Coverage. The Operating Committee shall procure and
maintain, or cause to be procured and maintained, insurance sufficient
to enable the Partnership to comply with applicable laws, regulations,
and contractual requirements (including the requirements of Persons
providing financing to the Partnership), including as a minimum, the
following:
(i) Comprehensive general liability insurance
covering each Partnership Property in the amounts and upon terms
customary for businesses and assets comparable to such Partnership
Property, and otherwise satisfactory to the Executive Committee;
(ii) With respect to completed improvements, fire
and extended coverage insurance, and, whenever construction of any
improvement is taking place, builders' risk insurance, in each
case, on a replacement cost basis of not less than one hundred
percent (100%) of the full replacement cost of such improvements;
<PAGE> 21
(iii) Worker's compensation insurance as
required by law including employer's liability;
(iv) Fidelity insurance in an amount to protect
against losses due to employee dishonesty, theft by any other
Partnership contractor, and mysterious disappearances; and
(v) Such additional insurance against other risks
of loss to the Partnership Properties as, from time to time, may
be required by any lender making a loan to the Partnership or which
may be required by law.
The Operating Committee shall furnish the Executive
Committee, no less frequently than annually, a schedule of such
insurance and copies of certificates evidencing the same. The Executive
Committee must consent to the establishment or modification of any self
insurance or deductibles which exposes the Partnership to uninsured
liability. Each Partner shall be named as an additional insured to the
Partnership's comprehensive general liability insurance policies.
5.9 Unanimous Consent. Notwithstanding anything to the
contrary in this Agreement, the Partnership may take any action
contemplated under this Agreement if approved by the unanimous consent
of the General Partners.
5.10 Indemnification.
(a) The Partnership shall, to the fullest extent
permitted by law, indemnify any and all Indemnitees from and against any
and all losses, claims, damages, liabilities, costs and expenses
(including attorneys' fees and costs), judgments, fines, settlements,
and other amounts arising from any and all claims, demands, actions,
suits or proceedings, civil, criminal, administrative or investigative,
that relate to the operations of the Partnership as set forth in this
Agreement in which any Indemnitee may be involved, or is threatened to
be involved, as a party or otherwise, unless it is established that:
(i) the act or omission of the Indemnitee was material to the matter
giving rise to the claim, demand, action, suit or proceeding and either
was committed in bad faith or was the result of active and deliberate
dishonesty; (ii) the Indemnitee actually received an improper personal
benefit in money, property or services; or (iii) in the case of any
criminal proceeding, the Indemnitee had reasonable cause to believe that
the act or omission was unlawful. Any indemnification pursuant to this
Section 5.10 shall be made only out of Partnership Assets, and no
Partner shall be required to contribute or advance funds to the
Partnership to enable the Partnership to satisfy its obligations under
this Section 5.10.
(b) Reasonable expenses incurred by an Indemnitee who is
a party to a proceeding shall be paid or reimbursed by the Partnership
in advance of the final disposition of the proceeding upon receipt by
the Partnership of (i) a written affirmation by the Indemnitee of the
Indemnitee's good faith belief that it is entitled to indemnification by
<PAGE> 22
the Partnership pursuant to this Section 5.10(b) with respect to such
expenses and proceeding, and (ii) a written undertaking by or on behalf
of the Indemnitee, to and in favor of the Partnership, wherein the
Indemnitee agrees to repay the amount if it shall ultimately be adjudged
not to have been entitled to indemnification under this Section 5.10.
(c) The indemnification provided by this Section 5.10
shall be in addition to any other rights to which an Indemnitee or any
other Person may be entitled under any agreement, as a matter of law or
otherwise.
(d) The Partnership may purchase and maintain insurance,
on behalf of the Indemnitees and such other Persons as the Partners
shall mutually determine, against any liability that may be asserted
against or expenses that may be incurred by such Person in connection
with the Partnership's activities, regardless of whether the Partnership
would have the obligation to indemnify such Person against such
liability under the provisions of this Agreement.
(e) The provisions of this Section 5.10 are for the
benefit of the Indemnitees, their heirs, successors, assigns and
administrators and shall not be deemed to create any rights for the
benefit of any other Persons.
5.11 Compensation and Reimbursement. The Partnership shall
not pay a Partner or an Affiliate of a Partner any fees or other
compensation except as set forth in this Agreement or except as
otherwise agreed by the Executive Committee. The Partnership will
reimburse a Partner and its Affiliates for all reasonable actual out-of-
pocket third party expenses incurred in connection with the carrying out
of the duties set forth in this Agreement imposed upon such Partner or
its Affiliates, provided such expenses are approved by the Executive
Committee or are reflected in a Budget that has been approved by the
Executive Committee, in each case upon the presentation of reasonable
supporting documentation of the amount and purpose of such expenses.
5.12 No Employees. The Partnership shall not have employees.
Each Partner shall be solely responsible for all wages, benefits,
insurance and payroll taxes with respect to any of its respective
Executive Committee Members, Operating Committee Members or other
employees.
5.13 Personal Services Contract. The Partners acknowledge and
agree that except for their respective economic interests in the
Partnership, each Partner's respective rights, powers and privileges as
a Partner hereunder shall be deemed to be in respect of a personal
services contract, and not an executory contract, under the United
States Bankruptcy Code and any state insolvency or bankruptcy laws.
Without limitation on the foregoing, each Partner confirms and agrees
that one of the major factors that caused the Partners to form this
Partnership and to enter into this Agreement was the personal trust and
confidence each Partner reposed in the personal services, management
skills and business experience of the other Partner. The Partners do
not desire to, and agree that they shall not be required to, accept the
<PAGE> 23
exercise of management or control rights (including rights to give
approvals or consents under this Agreement) by any party other than a
Partner. Accordingly, in the event of a Bankruptcy of a General Partner
or the withdrawal of a General Partner, such General Partner's Operating
Committee Members and Executive Committee Members shall immediately be
terminated and deemed removed from the Operating Committee and Executive
Committee, respectively, and such General Partner shall have no right
whatsoever to participate in the management or control of the
Partnership; provided, however, that such General Partner shall be
entitled to all of the rights and benefits of an assignee of a
partnership interest under the Act.
5.14 Defaults and Remedies.
(a) Events of Default. The occurrence of any of the
following events by or with respect to a Partner of one Party or such
Party (the "Defaulting Party"; and the other Party shall be referred to
herein as a "Non-defaulting Party," provided that neither a Partner of
the other Party nor the other Party itself is already a Defaulting
Party) shall be a default hereunder and if not cured within the
applicable notice and cure period provided below, if any, such default
shall constitute an "Event of Default" hereunder:
(i) The failure of a Partner or Party to make any
payment as required by this Agreement that is not cured within five
(5) business days of written notice to such Partner or Party;
(ii) The failure of a Partner or Party to perform
any of its other obligations under this Agreement or the breach by
a Partner or Party of any of the terms of this Agreement, and a
continuation of such failure or breach for more than thirty (30)
days after notice by a Non-defaulting Party to the Defaulting
Partner that such Defaulting Party has failed to perform any of its
obligations under, or has breached, this Agreement; provided that
if such failure or breach is of the nature that it can be cured but
cannot reasonably be cured within such thirty (30) day period, such
period shall be extended for up to an additional sixty (60) days so
long as the Defaulting Party in good faith commences all reasonable
curative efforts within ten (10) days of its receipt of such notice
from the Non-defaulting Party and diligently and expeditiously
continues its curative efforts to completion; or
(iii) The occurrence of a Bankruptcy with
respect to a Partner or the withdrawal by a Partner.
(b) Remedies. Upon the occurrence of any Event of
Default, the Non-defaulting Party may elect to do one or more of the
following:
(i) Exercise its rights under Section 5.14(c);
<PAGE> 24
(ii) Dissolve the Partnership and commence to
liquidate its assets as provided in Article 10;
(iii) Enforce any covenant by the Defaulting
Party to advance money or to take or forbear from any other action
hereunder; or
(iv) Pursue any other remedy permitted by this
Agreement or at law or in equity.
(c) Change of Governance of Partnership. In addition to
any other rights or remedies which a Non-defaulting Party may have under
this Agreement or under applicable laws with respect to an Event of
Default, a Non-defaulting Party shall have the option to exercise the
rights set forth below in this Section 5.14(c) in the event of the
occurrence of any Event of Default. Upon the occurrence of an Event of
Default, the General Partner of the Non-defaulting Party may elect, by
giving written notice to the Defaulting Party, to assume the role of the
"Controlling Party" of the Partnership, and shall remain as such unless
and until (i) the Partners otherwise agree, (ii) such Controlling Party
is removed as such pursuant to the foregoing provisions of this
Section 5.14(c) by reason of its having become a Defaulting Party, or
(iii) such Event of Default is cured. During the period of time that an
Event of Default has occurred and is continuing, the General Partner of
the Controlling Party shall have the authority to take exclusive charge
and control of the Partnership free and clear of any and all
restrictions (including any and all restrictions set forth in this
Article 5 and any and all consent, voting or approval rights granted the
Executive Committee, Operating Committee or any Partner, other than that
of the Controlling Party) imposed by this Agreement, and the Defaulting
Party's right to, acting alone, make certain decisions and take certain
actions with respect to matters concerning the Partnership's management
agreements with the Non-defaulting Party (or its Affiliates) as provided
in Section 5.5 shall be suspended and the General Partner of the
Controlling Party shall make all such decisions and take all such
actions thereunder. The General Partner of the Controlling Party shall
have the right to amend any fictitious business name statement,
certificate of partnership, or any similar document to reflect such
election and to provide that it is the sole Partner authorized to bind
the Partnership, and to file or record any such amended documents and
change the Partnership's Principal Office, and each Partner hereby
grants to the General Partner of the Controlling Party its irrevocable
power of attorney to do the same, which power of attorney shall be
deemed to be a power coupled with an interest which may not be revoked
until the termination and winding up of the Partnership. The provisions
of this Section 5.14(c) shall take precedence over any provision to the
contrary set forth in this Agreement.
(d) Remedies Not Exclusive. No remedy conferred upon
the Partnership or any Partner in this Agreement is intended to be
exclusive of any other remedy herein or by law provided or permitted,
but rather each shall be cumulative and shall be in addition to every
other remedy given hereunder or now or hereafter existing at law, in
equity or by statute.
<PAGE> 25
ARTICLE 6
Transfers of Interests
6.1 Restrictions on Transfers.
(a) Except as permitted in Section 6.1(b) or otherwise
expressly permitted or required by this Agreement, no Partner shall
Transfer all or any portion of its Partnership Interest, and no partner
or other controlling entity or Person of a Partner shall directly or
indirectly Transfer its ownership interest in such Partner or take any
action which would have such an effect, without the unanimous prior
written consent of the Partners, which consent may be withheld by a
Partner in its sole and absolute discretion. Any Transfer or attempted
Transfer by any Partner in violation of the preceding sentence shall be
null and void and of no force or effect whatsoever. Each Partner hereby
acknowledges the reasonableness of the restrictions on Transfer imposed
by this Agreement in view of the Partnership purposes and the
relationship of the Partners and the Partnership. Accordingly, the
restrictions on Transfer contained herein shall be specifically
enforceable. Each Partner hereby further agrees to hold the Partnership
and each Partner wholly and completely harmless from any cost,
liability, or damage (including liabilities for income taxes and costs
of enforcing this indemnity) incurred by any of such indemnified Persons
as a result of a Transfer or an attempted Transfer in violation of this
Agreement.
(b) Notwithstanding anything to the contrary contained
herein, the following Transfers shall be permitted under this Agreement
without any consent being required from any Partner ("Permitted
Transfers"):
(i) Any Transfer of the entire Partnership Interest
to an Affiliate of the respective Operating Partnership or the
Partner, provided that the applicable Operating Partnership has a
direct or indirect legal or beneficial ownership interest entitled
to receive at least 25% of the dividends, distributions or other
cash proceeds of such Affiliate;
(ii) Any transaction involving (1) the Transfer,
issuance or redemption of stock or other equity securities of any
direct or indirect corporate partner of a Partner, whether or not
such Transfer, issuance or redemption occurs on any public stock
exchange, (2) the Transfer, issuance or redemption of any
partnership units in the respective Operating Partnership or the
Partner, or (3) the direct or indirect Transfer, issuance or
redemption of limited partnership interests in any Partner;
provided that following any such transaction referred to in (1) -
(3) of this subsection (ii), the entire Partnership Interest is
owned by an Affiliate of the applicable Operating Partnership and
the applicable Operating Partnership continues to have a direct or
indirect legal or beneficial ownership interest entitled to receive
at least 25% of the dividends, distributions or other cash proceeds
of such Affiliate.
<PAGE> 26
6.2 Transferee Requirements. In no event may any Partner
Transfer its Partnership Interest pursuant to the provisions of this
Article 6 or otherwise (i) to any person who lacks the legal right,
power or capacity to own a Partnership Interest; (ii) in violation of
any provision of any mortgage or deed of trust (or note or bond secured
thereby) constituting a lien against any Partnership Property or any
part thereof, or of any other instrument, document or agreement to which
the Partnership is a party or otherwise bound; (iii) in violation of
applicable law; (iv) in the event such Transfer or issuance would cause
any Partner who is a REIT (or any Person who, directly or indirectly,
owns an interest in any Partner who is a REIT) to cease to comply with
the requirements necessary to achieve REIT status; (v) if such Transfer
would cause a termination of the Partnership for federal income tax
purposes or would cause a constructive distribution to any Partner or to
any partner of the Underlying Partnership under Section 752 of the Code;
(vi) if such Transfer would, in the opinion of counsel to the
Partnership, cause the Partnership to cease to be classified as a
partnership for federal income tax purposes; (vii) if such Transfer
would cause the Partnership to become, with respect to any employee
benefit plan subject to Title 1 of ERISA, a "party-in-interest" (as
defined in Section 3(14) of ERISA) or a "disqualified person" (as
defined in Section 4975(c) of the Code); or (xiii) if such Transfer
would, in the opinion of counsel to the Partnership, cause any portion
of the Partnership Properties to constitute assets of any employee
benefit plan pursuant to the Department of Labor Regulations Section
2510.2-101. As used in this Agreement, the term "Transferee" shall mean
any approved Transferee pursuant to Article 6 hereof.
6.3 Partnership Interest Loans.
(a) General Loan Provisions. Each Partner shall have
the right to pledge its entire Partnership Interest, and the proceeds
thereof as security for a loan or loans (or a guaranty of a loan or
loans to its partner or other controlling Entity or Person) under a
credit facility and all other obligations under the related loan
documents (collectively, a "Partnership Interest Loan Obligations") and
to obtain such loan or loans secured by its Partnership Interest and the
proceeds thereof (all loans under a single credit facility being,
collectively, a "Partnership Interest Loan") at any time during the term
of this Agreement upon the following terms and conditions:
(i) there shall never be more than one Partnership
Interest Loan with respect to each Partner's Partnership Interest
outstanding at any time;
(ii) the Partnership Interest Loan Obligations may
be secured by the Partner's Partnership Interest and the proceeds
thereof but shall not be secured by or in any way collateralized by
any of the Properties;
(iii) the Partnership Interest Loan shall be
prepayable in full at any time, subject to customary notice and
prepayment penalties;
<PAGE> 27
(iv) the Partner obtaining or guaranteeing any such
Partnership Interest Loan shall pay each other Partner's reasonable
attorneys' fees incurred in connection with the review of the loan
documents for each such Partnership Interest Loan with respect to
the compliance of such loan documents with the conditions set forth
in this Section 6.3;
(v) At the time such Partnership Interest Loan is
incurred, no default or Event of Default by or with respect to the
Partner obtaining the Partnership Interest Loan shall have occurred
and be continuing under this Agreement;
(vi) The lender or lenders under each such
Partnership Interest Loan shall be a bank, or other institutional
lender, provided that in the case of a Partnership Interest Loan
made by more than one lender (or in which there are one or more
participants), the Partners and the Partnership shall be entitled
to deal only with an agent or other representative for all such
lenders (and their participants, if any, or, in the case of a
Partnership Interest Loan held by a single lender in which there
are one or more participants, shall be entitled to deal only with
such lender) in connection with such Partnership Interest Loan and
any notice given to such representative (or lender) shall be deemed
notice to all lenders and participants, and any consent or approval
by such representative (or lender) shall be deemed given by all
lenders and participants);
(vii) The other Partners shall be reasonably
satisfied that any loan by a Partner will not result in any adverse
tax consequences to such Partners or the Partnership;
(viii) Any loan must be an arm's length "bridge"
or other financing on terms customary for financings of that type
or otherwise reasonably acceptable to the other Partners;
(ix) (a) The loan documents for each such
Partnership Interest Loan shall not include terms or conditions
which unreasonably (taking into account what is then customary in
loan documents for similar loans with similar lenders) and
adversely impact the Partnership's, the Underlying Partnership's,
the Partners' or any Property Manager's ability to operate, manage
or lease any Property or any Partnership Property; and (b) the loan
documents for each such loan shall not include terms or conditions
that grant the lender approval or consent rights with respect to
the operation, management or leasing of any Property or any
Partnership Property except, in the case of clauses (a) and (b)
immediately above, as approved by the other Partners, which
approval shall not be unreasonably withheld;
(x) The loan shall not include any participation,
contingent interest or equity conversion features (provided that
the foregoing limitations shall not preclude the calculation or
payment of any prepayment penalty based upon a yield maintenance or
<PAGE> 28
similar formula); interest on the loan shall be payable on a basis
no less frequently than monthly (or, in the case of LIBOR loans, at
the end of the interest period applicable thereto, but not less
frequently than every three months);
(xi) A Partnership Interest Loan shall not cause a
default under any agreement to which the Partnership or the Partner
incurring or guaranteeing such Partnership Interest Loan (the
"Pledging Partner") is a party or bound and the Pledging Partner
shall have obtained all third party consents to such loan required
to be obtained by it;
(xii) The loan documents shall provide that the
lender or lenders (or such representative) will not exercise
remedies thereunder except after giving written notice to the other
Partners and the Partnership of any default under the loan
documents concurrently with the giving of such notice to the
defaulting Partner; the Pledging Partner shall agree that the loan
documents shall not be amended, modified or supplemented without
the other Partners' prior written consent; and the lender or
representative shall, at any other Partner's request, enter into a
separate agreement in form reasonably satisfactory to such other
Partner, wherein the lender reasonably agrees to provide such other
Partner and the Partnership with such notice; and
(xiii) Neither the Person making the Partnership
Interest Loan, nor any Person participating in a Partnership
Interest Loan, shall have made a loan to the Partnership or to the
Underlying Partnership or secured by any Partnership Assets or any
Underlying Partnership Assets.
(b) Within a reasonable time after receipt of a request
by the Partner obtaining a Partnership Interest Loan accompanied by a
copy of the related loan documents, the other Partners shall certify
whether the Partnership Interest Loan and the loan documents relating to
such Partnership Interest Loan comply with the conditions set forth in
clauses (iii), (iv), (v), (vi), (vii), (viii), (ix), (x), (xi) as to the
Partnership only, (xii) and (xiii) of this Section 6.3(a), which
certification shall not be unreasonably withheld, and any such lender or
representative may conclusively rely on such certification.
(c) The Partnership shall notify the lender or
representative of any failure by the Pledging Partner to make any
payment to the Partnership or to any other Partner required under this
Agreement. Notwithstanding anything herein to the contrary, the lender
or lenders under the Partnership Interest Loan (or such representative)
shall have the right (but not the obligation) to cure such default
within 30 days after receipt of such notice by making such payment
(which shall have the same effect as if such payment had been made by
such Partner), and until the expiration of such 30 day period, the other
Partners shall not exercise any of their rights and remedies hereunder
or under the Act with respect to such default and, if and when such
secured party makes the payment, such default shall be considered cured
and shall cease to exist for all purposes of this Agreement and the Act.
<PAGE> 29
(d) Notwithstanding anything herein to the contrary, at
any time after the date on which the Partnership receives written notice
(a "Partnership Interest Loan Default Notice") from a lender or
representative that an "event of default" of the Pledging Partner has
occurred and exists under a Partnership Interest Loan and instructing
the Partnership to make all future distributions or other payments then
required to be made to the Pledging Partner under the Partnership
Agreement or any Default Loan to such lender or representative until
further notice from such lender or representative, such payments shall
be made to such lender or representative notwithstanding receipt by the
Partnership or any other Partner of any notice by the Pledging Partner
(or any trustee or other person acting on its behalf) to the contrary.
In addition, at any time after the date on which the Partnership
receives a Partnership Interest Loan Default Notice and until such
notice is rescinded by the lender or representative after all "events of
default" of the Pledging Partner have ceased to exist, the Partnership
shall provide to the lender or representative under the Partnership
Interest Loan copies of all notices and reports being provided hereunder
or under the Act to the Pledging Partner and such other information
regarding the Properties or the Partnership Property and the operations,
assets, liabilities and business of the Partnership as the lender or
representative may reasonably request.
(e) Upon any foreclosure of the security interest
securing any Partnership Interest Loan Obligations, or any transfer in
lieu thereof, (i) the secured party, purchaser, transferee or a designee
thereof shall have the rights of an "assignee" of such Partnership
Interest under the Act, including, without limitation, all rights of the
Pledging Partner to (A) share in profits and losses of the Partnership,
(B) receive distributions from the Partnership under Article 3 or 10 or
Section 7.3(b), 8.4 or 8.6(b) hereof or the other provisions of this
Agreement or the Act and (C) all other economic rights of such Pledging
Partner with respect to the Partnership Interest (including the right to
receive any and all sale proceeds of the Partnership Interest if and
when the Partnership Interest is sold in accordance with the provisions
of this Agreement), and (ii) in all other respects the Pledging Partner
shall continue as a Partner under this Agreement with all other rights
hereunder (including, without limitation, the right to exercise any
voting, management or other consensual rights), unless and until the
secured party, purchaser, transferee or designee is admitted as a
substitute Partner pursuant to Section 6.4 at such Person's request.
Upon satisfaction by such secured party, purchaser, transferee or
designee of the conditions set forth in Section 6.4, (i) such Person
shall be admitted as a Partner and (ii) the Pledging Partner shall cease
to be a Partner, in each case without the consent of any other Partner
or other Person being required. Unless and until such secured party,
purchaser, transferee or designee becomes a Partner under this
Agreement, such secured party, purchaser, transferee or designee shall
not be liable for any of the liabilities and obligations of the
Partnership or such Pledging Partner, whether under this Agreement, the
Act or otherwise, except as otherwise provided by law.
(f) Any partner or other controlling Person of a Partner
shall be entitled to grant a security interest to a lender or lenders
(or representative) referred to in clause (vi) of Section 6.3(a) under a
Partnership Interest Loan in the direct or indirect ownership interests
that such partner or other Person holds from time to time in such
Partner or the Partnership, provided that such security interest shall
<PAGE> 30
not be foreclosed (and no transfer in lieu thereof shall occur) at any
time prior to foreclosure of the security interest in the Partnership
Interest (or transfer in lieu thereof).
(g) Notwithstanding anything herein to the contrary, the
provisions of this Section 6 shall accrue to the benefit of all lenders
and representatives under Partnership Interest Loans.
(h) Right of Purchase. If any lender of a Partnership
Interest Loan or any third party (each a "Loan Default Transferee")
should become an assignee of any Partner's Partnership Interest as a
result of a default under any such Partnership Interest Loan, whether by
or through foreclosure of its security interest in and to such
Partnership Interest, assignment-in-lieu thereof, or otherwise, then a
Partner of the other Party shall have a one-time right to purchase from
the Loan Default Transferee such assignee's interest in the Partnership
Interest on the terms and conditions of this Section 6.3(h). No later
than five (5) business days after its acquisition of such assignee's
interest in the Partnership Interest, the Loan Default Transferee shall
deliver written notice (the "Loan Default Transfer Notice") to the
other Partners notifying such other Partners of the transfer, setting
forth such Loan Default Transferee's address for notices and stating the
credit bid, purchase price or other amount paid for the assignee's
interest in the Partnership Interest (which amount may include the
discharge of indebtedness in exchange therefor). The other Partners may
then exercise its rights under this subsection (h) by delivering to the
Loan Default Transferee, within 30 days after such other Partner's
receipt of the Loan Default Transfer Notice, written notice stating its
intention to purchase such assignee's interest in the Partnership
Interest. The purchase price for the assignee's interest in the
Partnership Interest shall equal the credit bid, purchase price or other
amount paid by such Loan Default Transferee for such assignee's interest
in the Partnership Interest as stated in the Loan Default Transfer
Notice, plus interest thereon from the date that the Loan Default
Transferee acquires title to the assignee's interest in the Partnership
Interest until the date that the sale of the assignee's interest in the
Partnership Interest to the other Partner is consummated at the default
rate stated in the loan documents. If any other Partner exercises its
option to purchase such assignee's interest in the Partnership Interest
hereunder to such other Partner or its designee, the transfer of the
assignee's interest in the Partnership Interest to the other Partner
shall be consummated no later than the sixtieth (60th) day after the
date of such Loan Default Transferee's receipt of the other Partner's
written notice exercising such purchase option. The other Partner may
designate an Affiliate of such Partner as the purchaser of such
assignee's interest in the Partnership Interest. Upon the consummation
of any transfer hereunder to such Partner or its designee, the Loan
Default Transferee shall be released from any and all obligations and
liability hereunder except for obligations, liabilities, duties and
rights arising before such transfer which have not been determined or
ascertained as of the date of transfer.
Upon request by a Partner who is obtaining a Partnership
Interest Loan in accordance with the provisions of this Section 6.3, the
Partnership and the other Partners shall each execute and deliver to the
lender or representative under such Partnership Interest Loan, in
<PAGE> 31
addition to the certifications contemplated by Section 6.3(b), such
agreements and other documents as may be reasonably requested by such
lender or representative in connection therewith, provided such
agreements and other documents are consistent with the provisions of
this Article 6.
6.4 Admission of Transferee as a Partner. No Transferee
pursuant to the provisions of this Article 6 above shall become a
substituted Partner until all of the following conditions have been
satisfied, as applicable:
(a) A certified copy of the instrument of transfer shall
have been filed with the Partnership. The Transferee shall agree in
writing for the benefit of the Partnership to be bound by all of the
terms of this Agreement and to assume and perform all obligations and
duties of the transferring Partner, and an executed, duplicate original
of said assumption shall be delivered to the Partnership.
(b) The proposed Partner shall have executed and
acknowledged for recordation an amendment to this Agreement and the
Statement of Partnership and such other instruments as the other
Partners may reasonably deem necessary or desirable to effect such
admission or substitution.
(c) A transfer fee sufficient to cover all expenses in
connection with such assignment and substitution (including reasonable
legal and accounting fees) shall have been paid to the Partnership
either by the Transferee or the transferring Partner.
(d) The admission of a Transferee as a substituted
Partner and any release of the transferring Partner shall not be a cause
for dissolution of the Partnership under the Delaware Uniform
Partnership Act. Each Partner hereby agrees in writing that the
Partnership shall continue after such admission.
6.5 Allocations and Distributions Upon Transfers. Upon the
occurrence of a Transfer during any Fiscal Year, Profits, Losses, each
item thereof, and all other items attributable to the Partnership
Interest so transferred for such Fiscal Year shall be divided and
allocated between the transferring Partner and the Transferee by taking
into account their varying interests during the Fiscal Year in
accordance with Code Section 706(d), using any conventions permitted by
law and selected by the Operating Committee. All distributions and
allocations on or before the date of a Transfer shall be made to the
transferring Partner, and all distributions and allocations thereafter
shall be made to the Transferee. The Operating Committee and the
Partnership shall incur no liability for making allocations and
distributions in accordance with the provisions of this Section 6.5,
whether or not the Operating Committee or the Partnership has knowledge
of any Transfer of ownership of any interest in the Partnership.
<PAGE> 32
ARTICLE 7
Buy-Sell
7.1 Buy-Sell Offering Notice. Either Party may exercise its
rights under this Article 7 at any time after a deadlock over a Buy-Sell
Major Decision relating to one (1) of the Underlying Properties or
Partnership Properties (the "Subject Property") is not resolved within
thirty (30) days after the Executive Committee meeting at which the same
is voted upon; provided, however, that in the case of an Underlying
Property (i) such rights may only be exercised in connection with an in-
kind distribution of such Underlying Property to the Partnership under
Section 5.3 of the Underlying Partnership Agreement, and (ii) in the
event of any such in-kind distribution, the Party whose Affiliate
elected to cause such in-kind distribution shall be required to become
the Initiating Party with respect to such Property hereunder. At any
such time, either Party (the "Initiating Party") may give written notice
(the "Offering Notice") to the other Party (the "Responding Party") of
its intent to purchase all, but not less than all, of the Subject
Property. The Offering Notice must be given within fifteen (15) days
after the expiration of the thirty (30) day period described immediately
above. In such event, the provisions set forth in this Article 7 shall
apply. The Initiating Party shall specify in its Offering Notice the
all cash purchase price ("Purchase Price") at which the Initiating
Party would be willing to purchase a fifty percent (50%) undivided
interest in the Subject Property free and clear of all debt secured by
mortgages, deeds of trust and other security instruments thereon as of
the date the Offering Notice is given ("Date of Value"). Once given, an
Offering Notice may not be revoked or withdrawn by an Initiating Party
without the written consent of the Responding Party, which consent may
be withheld in its sole and absolute discretion. In no event shall
either Party be permitted to give an Offering Notice initiating its buy-
sell rights under this Article 7 more often than once in any twelve (12)
successive month period.
7.2 Exercise of Buy-Sell. Upon receipt of the Offering
Notice, the Responding Party shall then be obligated either:
(a) To consent to the sale of a fifty percent (50%)
undivided interest in the Subject Property to the Initiating Party for
the Purchase Price; or
(b) To purchase a fifty percent (50%) undivided interest
in the Subject Property for the Purchase Price.
The Responding Party shall notify the Initiating Party of its election
within thirty (30) days after the Date of Value. Failure to give notice
within the required time period shall be deemed consent to the sale of
the Subject Property to the Initiating Party. For purposes of this
Article 7, the terms "Purchasing Party" and "Selling Party" shall mean,
respectively, the Party who is obligated to purchase and the Party who
is obligated to sell a fifty percent (50%) undivided interest in the
Subject Property pursuant to either Section 7.2(a) or 7.2(b) (regardless
of which Party is the Initiating Party and which Party is the Responding
Party).
<PAGE> 33
7.3 Closing.
(a) The Parties shall meet and exchange documents and
pay amounts due, and otherwise do all things necessary to conclude the
transaction set forth herein at the closing of such purchase (the "Buy-
Sell Closing"). The Buy-Sell Closing shall occur at the office of the
Purchasing Party's legal counsel at 9:00 a.m. on the first Wednesday
after the ninetieth (90th) day after the Date of Value unless the day is
a Saturday, Sunday, or national or state holiday and, in that event, on
the next business day. At the Buy-Sell Closing, the Partnership shall
distribute to each of the Initiating Party and the Responding Party a
fifty percent (50%) undivided fee simple interest in the Subject
Property. Immediately thereafter, the Purchasing Party shall purchase
the interest of the Selling Party in the Subject Property for cash in an
amount equal to the Purchase Price. At the Buy-Sell Closing, there
shall be delivered to the Purchasing Party a duly executed and
acknowledged deed in such form as may be appropriate and required to
legally transfer such fee simple title in and to the Subject Property to
the Purchasing Party, and shall also, upon the request of the Purchasing
Party, concurrently therewith (or at any time and from time to time
thereafter) be executed, acknowledged and delivered such other documents
and records as the Purchasing Party determines are reasonably necessary
or desirable to conclude the Buy-Sell Closing and to otherwise vest
title in and to the Subject Property in the Purchasing Party and allow
the Purchasing Party to develop, use, sell, rent, manage or operate the
Subject Property (including, without limitation, assignments of leases,
reciprocal easement and operating agreements, contracts, personal
property and other rights or property of the Partnership necessary or
useful in the management and operation of the Subject Property).
Additionally, the Selling Party shall execute, acknowledge and deliver
such other documents and records as the Purchasing Party determines are
reasonably necessary or desirable to provide the Purchasing Party with
the same rights and interests in the Subject Property as were granted to
the Selling Party by the Partnership. The management agreement for the
Subject Property shall be immediately terminated effective as of the day
of the Buy-Sell Closing. Further, from and after the date of the Buy-
Sell Closing, both the Partnership and the Selling Party shall be
released from all obligations and liabilities accruing in connection
with the Subject Property, and the Purchasing Party shall indemnify and
hold the Partnership and the Selling Party harmless from and against any
and all such obligations and liabilities accruing from and after the Buy-
Sell Closing.
(b) At the Buy-Sell Closing, each of the Purchasing
Party and the Selling Party shall be responsible for the satisfaction of
fifty percent (50%) of any debt secured by mortgages or deeds of trust
against the Subject Property as of the Value Date and, if applicable,
the "release price" necessary to release any mortgage or deed of trust
securing the Existing Financing as of the Value Date. It is expressly
understood and agreed that (i) the transfer of a Subject Property shall
be reflected on the books and records of the Partnership and the
Underlying Partnership as a partial transfer to the general partners of
the Underlying Partnership, in accordance with their respective
Percentage Interests therein, followed by a sale of such partial
interest by the general partner that is an Affiliate of the Selling
Party to the Purchasing Party (or its Assignee), and (ii) such
satisfaction may occur through the assumption of such debt by the
Purchasing Party, or the refinancing of such debt with new indebtedness
<PAGE> 34
secured by the Purchasing Party (in each case, with an appropriate
reduction of amounts otherwise owed by the Purchasing Party to the
Selling Party), or through other tax-efficient means agreed upon by the
Partners. It is also expressly understood and agreed that the Buy-Sell
Closing may be effected through the transfer of a duly executed and
acknowledged deed directly from the Partnership or the Underlying
Partnership, as the case may be, to the Purchasing Party (or its
designee). The Purchasing Party shall be responsible for and pay all
costs and expenses incurred in connection with the sale of the Subject
Property; provided that, each Party shall bear its own attorneys' fees
and further the Initiating Party shall pay any yield maintenance or
other interest premium on the pay-off of such debt.
(c) The Partners acknowledge and agree that each Subject
Property is extraordinary and unique, and the provisions of this
Article 7 shall be specifically enforceable.
ARTICLE 8
Exit Call; Portfolio Sale
8.1 Call Rights. At any time from and after the date which
is eighteen (18) months after the acquisition of the Underlying
Properties by the Underlying Partnership, either Party may, without
cause and in its sole and absolute discretion, elect to call for the
Partnership to dissolve and the distribution of all Partnership
Properties to the Partners in kind; provided, however, that such
election may only be made in connection with an election, pursuant to
Section 10.01(e) of the Underlying Partnership Agreement, to liquidate
the Underlying Partnership, in which case the Party whose Affiliate
elected such liquidation shall be the "Exercising Party" hereunder.
Such distribution by the Underlying Partnership shall be treated as
occurring as follows: (i) first, as a distribution to the partners in
the Underlying Partnership in accordance with their interests therein;
and (ii) as a distribution by the Partnership of its assets (including
its proportionate share of the Underlying Partnership Assets) to the
Partners in accordance with their Partnership Interests. Any Party may
exercise its right to call for the dissolution of the Partnership by
delivering to the other Party written notice stating that it is
exercising its call right under this Article 8 (a "Call Notice"). The
Party exercising its rights hereunder shall be referred to herein as the
"Exercising Party" and the other Party shall be referred as the "Non-
Exercising Party". Once a Call Notice is delivered, it cannot be
rescinded or withdrawn except with the prior written consent of the Non-
Exercising Party.
8.2 Procedures upon Call Exercise. Within fifteen (15)
business days after the delivery of a Call Notice requiring the
dissolution of the Partnership by the Exercising Party, the Partners
shall meet (a "Call Dissolution Meeting") in order to determine and
agree upon the fair market value of each Property (for purposes of this
Article 8, any such property being referred to, individually, as a "Call
Property," and collectively, as the "Call Properties"). It is expressly
acknowledged and agreed that the Call Dissolution Meeting may occur over
the course of a number of days and may be adjourned from time to time
and reconvened upon the agreement of the Parties. If the Parties are
<PAGE> 35
unable to agree upon the fair market value of any Call Property within
thirty (30) days after the first day of such Call Dissolution Meeting,
the fair market value of such Call Property shall be determined in
accordance with the appraisal process set forth in Section 8.5 below.
Upon the determination of the fair market value of each Call Property,
whether by agreement of the Parties or appraisal, the Call Properties
will be distributed to the Parties as follows:
(a) first, the Non-Exercising Party shall select a Call
Property for acquisition;
(b) second, the Exercising Party shall select a Call Property
for acquisition; and
(c) thereafter, the Non-Exercising Party shall select a Call
Property for acquisition and the Parties shall alternate choices in such
manner until all of the Call Properties have been allocated between the
Partners.
If the total number of Call Properties is an odd number, then the Non-
Exercising Party shall be permitted to elect, in its sole and absolute
discretion, whether to acquire the final Call Property or to mandate
that the Exercising Party acquire such final Call Property. The Call
Properties to be acquired by the Exercising Party pursuant to this
Section 8.2 shall be herein referred to each as an "Exercising Party's
Property" and collectively as the "Exercising Party's Properties", and
the Call Properties to be acquired by the Non-Exercising Party pursuant
to this Section 8.2 shall be herein referred to each as a "Non-
Exercising Party's Property" and collectively as the "Non-Exercising
Party's Properties"
8.3 Closing Procedure. The Partners shall meet and exchange
documents and pay amounts due, and otherwise do all things necessary to
conclude the transactions set forth in this Article 8 at the closing
(the "Call Closing"). The Call Closing shall occur at the office of the
Exercising Party's legal counsel at 9:00 a.m. on the first Wednesday
after the thirtieth (30th) day following the day that the selection
procedure described in Section 8.2 above shall have been completed
(unless such day is a Saturday, Sunday, or national or state holiday
and, in that event, on the next business day). At the Call Closing each
of the Exercising Party and the Non-Exercising Party shall be
responsible for the satisfaction of any debt secured by mortgages or
deeds of trust against the Exercising Party's Properties and the Non-
Exercising Party's Properties, respectively, as of such date and, if
applicable, the "release price" necessary to release any mortgage or
deed of trust securing the Existing Financing as of such date. It is
expressly understood and agreed that such satisfaction may occur through
the assumption of such debt, or the refinancing of such debt with new
indebtedness, or through other tax-efficient means agreed upon by the
Partners. Immediately thereafter, the Partnership shall (i) deliver to
the Exercising Party a duly executed and acknowledged deed in such form
as may be appropriate and required to legally transfer fee simple title
in and to each Exercising Party's Property to the Exercising Party, and
shall also, upon the request of the Exercising Party, concurrently
therewith (or at any time and from time to time thereafter) execute,
acknowledge and deliver such other documents and records as the
Exercising Party determines are reasonably necessary or desirable to
<PAGE> 36
conclude the Call Closing and to otherwise vest title in and to the
Exercising Party's Properties in the Exercising Party and allow the
Exercising Party to develop, use, sell, rent, manage or operate the
Exercising Party's Properties (including, without limitation,
assignments of leases, reciprocal easement and operating agreements,
contracts, personal property and other rights or property of the
Partnership necessary or useful in the management and operation of the
Exercising Partner's Properties), and (ii) deliver to the Non-Exercising
Party a duly executed and acknowledged deed in such form as may be
appropriate and required to legally transfer fee simple title in and to
each Non-Exercising Party's Property to the Non-Exercising Party, and
shall also, upon the request of the Non-Exercising Party, concurrently
therewith (or at any time and from time to time thereafter) execute,
acknowledge and deliver such other documents and records as the Non-
Exercising Party determines are reasonably necessary or desirable to
conclude the Call Closing and to otherwise vest title in and to the Non-
Exercising Party's Properties in the Non-Exercising Party and allow the
Non-Exercising Party to develop, use, sell, rent, manage or operate the
Non-Exercising Party's Properties (including, without limitation,
assignments of leases, reciprocal easement and operating agreements,
contracts, personal property and other rights or property of the
Partnership or the Underlying Partnership necessary or useful in the
management and operation of the Non-Exercising Party's Properties). The
Partnership shall distribute to the Exercising Party all of the
Exercising Party's Properties, and distribute to the Non-Exercising
Party all of the Non-Exercising Party's Properties. In the event that
the aggregate fair market value of the Exercising Party's Properties
(less any debt assumed by the Exercising Party) and the aggregate fair
market value of the Non-Exercising Party's Properties (less any debt
assumed by the Non-Exercising Party), as determined pursuant to Section
8.6 below, are unequal, the Partnership shall designate one Call
Property (the "Designated Property"), which Designated Property shall be
deemed to have been distributed to the Exercising and Non-Exercising
Parties in that proportion necessary to equate, as closely as possible,
the fair market values of the Call Properties distributed to the
Exercising and Non-Exercising Parties (less any debt assumed by the
Parties). If the Designated Property is an Exercising Party Property,
then the Exercising Party shall pay to the Non-Exercising Party cash, in
an amount equal to the fair market value of such Designated Property
multiplied by the percentage of the Designated Property distributed to
the Non-Exercising Party. If the Designated Property is a Non-
Exercising Party Property, then the Non-Exercising Party shall pay to
the Exercising Party cash in an amount equal to the fair market value of
such Designated Property multiplied by the percentage of the Designated
Property distributed to the Exercising Party. The Partnership shall be
responsible for and shall pay all costs and expenses incurred in
connection with the pay-off and satisfaction of all financing secured by
the Partnership Properties, or any of them (including, without
limitation, the Existing Financing) and the release of all liens created
thereby (including, without limitation, all prepayment penalties or
fees, recording charges and other such costs and expenses). Except as
otherwise provided in the immediately preceding sentence and in this
sentence below, the Exercising Party shall be responsible for and pay
all costs and expenses incurred in connection with the distribution of
the Exercising Party's Properties, and the Non-Exercising Party shall be
responsible for and pay all costs and expenses incurred in connection
with the distribution of the Non-Exercising Party's Properties; provided
that, each Party, the Partnership and the Underlying Partnership shall
bear its own attorneys' fees in connection with such transactions. Each
Party shall also, upon the request of the other Party, concurrently with
<PAGE> 37
the Call Closing (or at any time and from time to time thereafter)
execute, acknowledge and deliver such other documents and records as
such other Party determines are reasonably necessary or desirable to
conclude the Call Closing. The management agreements for all Call
Properties shall be terminated effective as of the day of the Call
Closing. Further, from and after the date of the Call Closing, the
Partnership shall be released from all obligations and liabilities
accruing to them in connection with the Call Properties, and each Party
shall indemnify and hold the Underlying Partnership, the Partnership and
the other Party harmless from and against any and all such obligations
and liabilities with respect to or relating to the Call Properties
distributed to such Party accruing from and after the Call Closing. It
is also expressly understood and agreed that (i) the transfer of
Partnership Properties shall be reflected on the books and records of
the Partnership and the Underlying Partnership so as to take into
account, as appropriate, the ownership interests of the general partners
of the Underlying Partnership, and (ii) the Call Closing may be effected
through the transfer of a duly executed and acknowledged deed directly
from the Partnership or the Underlying Partnership, as the case may be,
to the appropriate Parties (or their designees).
8.4 Winding Up; Distribution of Proceeds. Immediately
following the Call Closing, the Partnership and the Underlying
Partnership shall be wound up, and all remaining Partnership
Properties shall be distributed to the Partners, in accordance with the
terms and provisions of Article 10 hereof.
8.5 Fair Market Value Appraisal Process. If the Parties are
unable to agree upon the fair market value of any Call Property in
accordance with and within the time period set forth in Section 8.2
above, then the fair market value of such Call Property shall be
determined in accordance with the terms and provisions of this Section
8.5. Within twenty (20) days after the conclusion of the Call
Dissolution Meeting or the expiration of the thirty (30) day period
described in Section 8.2, whichever occurs first, each Party shall
appoint an appraiser and, within ten (10) days after their appointment,
the appraisers so appointed shall appoint a third appraiser. The
appraisers so appointed shall proceed to determine the fair market value
of the Call Property (determined assuming the Call Property was not
encumbered by any debt). The fair market value of the Call Property
shall be the average of the two (2) most proximate appraisals. If the
highest and the lowest of the three (3) appraisals are exactly
equidistant from the middle appraisal, however, the fair market value of
the Call Property shall be an amount equal to the middle appraisal.
Each appraiser appointed pursuant to this Section 8.5 shall be a real
estate appraiser with at least ten (10) years' professional experience
and with knowledge of the regional shopping center market (or knowledge
of any other relevant market with respect to any particular Call
Property) within the area where the Call Property is located. If either
Party fails to appoint an appraiser within such twenty (20) day period,
the determination of the fair market value of the Call Property shall be
made by the appraiser chosen by the other Party and such determination
shall be binding upon the Parties. If the first two (2) appraisers are
unable to agree upon the third appraiser within the ten (10) day period
following their appointment, then they shall notify the then chairman of
the chapter of the American Institute of Real Estate Appraisers that is
the closest to the Call Property geographically and request such person
to select a third appraiser. Each Party shall pay the expense of the
<PAGE> 38
appraiser that it appoints and the Parties shall share the expense of
the third appraiser.
8.6 Portfolio Sale.
(a) Any time after the date which is eighteen (18)
months after the date of the acquisition of the Properties by the
Underlying Partnership, a Party (for purposes of this Section 8.6, the
"Portfolio Selling Party") shall have the right to cause (i) the
Partnership to sell all (but not less than all) of the Partnership
Properties to any unaffiliated third-party Person, subject to compliance
with this Section 8.6; provided, however, that such right may only be
exercised in connection with an election, pursuant to Section 10.01(e)
of the Underlying Partnership Agreement, to liquidate the Underlying
Partnership, in which case the Party whose Affiliate elected such
liquidation shall be the "Portfolio Selling Party" hereunder. If the
Portfolio Selling Party desires to sell the Partnership Properties,
the Portfolio Selling Party shall give the other Party (for purposes of
this Section 8.6, the "Remaining Party") written notice of its desire to
do so (the "Portfolio Offer Notice"), which Portfolio Offer Notice shall
state the aggregate price, measured in dollars and payable solely in
cash or immediately available funds (but which may include a credit for
any existing mortgage debt to be assumed), at which the Properties as
a portfolio, will be offered for sale (the "Portfolio Offer Price").
The Remaining Party shall, within ninety (90) days after its receipt of
the Portfolio Offer Notice, notify the Portfolio Selling Party in
writing whether or not the Remaining Party will purchase the entire
Partnership Interest of the Portfolio Selling Party in the Partnership
for a purchase price equal to the amount that the Portfolio Selling
Party (and the Affiliate of such Portfolio Selling Party that is a
general portion of the Underlying Partnership) would receive if all of
the Properties were sold for cash (including a credit for any mortgage
debt to be assumed if included in the Portfolio Offer Notice) at the
Portfolio Offer Price, and the Partnership were liquidated, on a closing
date set forth in such notice which shall not be less than ten (10) nor
more than thirty (30) days after the date of delivery of the Remaining
Party's response notice. If the Remaining Party does not respond within
the said ninety (90) day period, the Remaining Party shall be deemed
conclusively to have declined to purchase the entire Partnership
Interest of the Portfolio Selling Party in the Partnership as provided
hereinabove and to have consented to the sale of the Properties to an
unaffiliated third-party Person on the terms hereinafter provided. If
the Remaining Party elects to purchase the entire Partnership Interest
of the Portfolio Selling Party in the Partnership, the Portfolio Offer
Notice and the Remaining Party's response notice shall constitute a
binding agreement of purchase and sale between the Portfolio Selling
Party and the Remaining Party and the Partnership Interest sale
transaction shall close on the date stated in the Remaining Party's
response notice. At the closing, the Parties will each execute and
deliver to one another such documents as may be necessary and
appropriate to consummate the transfer of the Selling Party's
Partnership Interest (including, without limitation, an Assignment of
Partnership Interest containing customary indemnity provisions), and the
Remaining Party shall pay to the Selling Party, in cash, the purchase
price for such Partnership Interest. All management agreements for the
Properties and Partnership Property managed by the Property Manager
affiliated with the Portfolio Selling Party shall be automatically
terminated upon the consummation of the sale of such Partnership
Interest.
<PAGE> 39
(b) If the Remaining Party does not elect to purchase the
entire Partnership Interest of the Portfolio Selling Party in the
Partnership, the Portfolio Selling Party shall have the right, subject
to this subsection (b), to cause the Partnership to sell the Partnership
Properties for a cash (with a credit for mortgage debt to be assumed)
purchase price equal to or greater than ninety-eight percent (98%) of
the Portfolio Offer Price; provided that, the Partnership Properties
must be listed with an investment banking firm experienced in the sales
of portfolio properties similar to the Partnership Properties for the
highest and best price recommended by such investment banking firm, but
not in any event less than the Project Offer Price. The closing of such
portfolio sale shall occur not later than nine (9) months after the
earlier of (x) the expiration of the Remaining Party's one hundred
twenty (120) day response period provided in subsection (a) above, and
(y) the date that the Remaining Party delivers written notice to the
Selling Party stating that it consents to the sale of the Partnership
Properties on the terms and conditions of this Section 8.6. If the
Portfolio Selling Party does not close such sale within such nine (9)
month period in accordance with the terms hereof, then the Partnership
Properties may not thereafter be sold as a portfolio under this Section
8.6 without again giving notice to the Remaining Party pursuant to
subsection (a) above. The Remaining Party shall cooperate with the
Portfolio Selling Party in order to sell the Partnership Properties on
the terms provided in this Section 8.6.
8.7 Effect of Existing Financing. Notwithstanding anything
in this Agreement to the contrary, the foregoing provisions of this
Article 8 shall not be effective unless, prior to or contemporaneously
with any transaction described herein, the Existing Financing has been
satisfied in full.
ARTICLE 9
Withdrawals; Actions for Partition
9.1 Waiver of Partition. No Partner shall, either directly
or indirectly, take any action to require partition of any Partnership
Properties, and notwithstanding any provisions of applicable law to the
contrary, each Partner hereby irrevocably waives any and all rights it
may have to maintain any action for partition or to compel any sale with
respect to its Partnership Interest or with respect to the Partnership's
interest in the Underlying Partnership, or with respect to any
Partnership Properties, except as expressly provided in this Agreement.
9.2 Covenant Not to Withdraw or Dissolve. Each Partner
hereby covenants and agrees that the Partners have entered into this
Agreement based on their mutual expectation that all Partners will
continue as Partners and carry out the duties and obligations undertaken
by them hereunder and that, except as otherwise expressly required or
permitted hereby, each Partner hereby covenants and agrees not to
(a) take any action to file a certificate of dissolution or its
equivalent with respect to itself, (b) take any action that would cause
a Bankruptcy of such Partner, (c) withdraw or attempt to withdraw from
the Partnership, (d) exercise any power under the Act to dissolve the
Partnership, (e) Transfer all or any portion of its Partnership Interest
<PAGE> 40
(other than pursuant to the terms and provisions of Article 6 hereof),
(f) petition for judicial dissolution of the Partnership or permit or
cause the Partnership to cause a dissolution of the Underlying
Partnership, or (g) demand a return of such Partner's contributions or
profits (or a bond or other security for the return of such
contributions or profits) without the unanimous consent of the Partners,
or except as otherwise specifically allowed under this Agreement.
ARTICLE 10
Dissolution, Liquidation, Winding-Up and Termination
10.1 Causes of Dissolution. The Partnership shall be
dissolved upon the first to occur of the following:
(a) January 1, 2095;
(b) The written agreement of the Partners or by any
Party upon the exercise of its call right pursuant to Article 8 of this
Agreement;
(c) The dissolution, termination, retirement, withdrawal
or Bankruptcy of a Partner, unless the business of the Partnership is
continued at the election of other Partners having at least a fifty
percent (50%) Partnership Interest, made by delivery of written notice
to the Partners and the Executive Committee given within ninety (90)
days of the discovery by such other Partners of such dissolution,
termination, retirement, withdrawal or Bankruptcy;
(d) The election of a Non-defaulting Party made at any
time during the continuation of an Event of Default with respect to the
other Party;
(e) The occurrence of any event that makes it unlawful
for the business of the Partnership to be carried on;
(f) The sale or other disposition of all of the
Partnership Properties;
(g) The decree of the dissolution of the Partnership by
a court of competent jurisdiction; and
(h) The failure of the Underlying Partnership to acquire
the Properties on or before April 1, 1998, unless such date is extended
in writing by all Partners.
To the fullest extent permitted by law, the Partners
agree that no act, thing, occurrence, event or circumstance shall cause
or result in the dissolution or termination of the Partnership except as
provided in this Section 10.1.
<PAGE> 41
10.2 Winding Up and Liquidation. Upon the dissolution of the
Partnership, the Partnership shall immediately commence to wind up its
affairs, and the Partners or the Liquidator, as the case may be, shall
proceed with reasonable promptness to liquidate the Partnership Assets.
Except as provided below, during the period of the winding up of the
affairs of the Partnership, the rights and obligations of the Partners
set forth in Article 5 with respect to the management and operation of
the Partnership and its business shall continue. Notwithstanding
anything contained in this Agreement to the contrary, if any event
described in Section 10.1(c) shall be continuing with respect to a
Partner of one Party at the time the Partnership is dissolved, a Partner
of the other Party (provided no such event is then continuing with
respect to it), shall be entitled to act as the liquidating Partner
hereunder or to appoint a liquidating trustee (in either event, such
Partner or trustee being referred to herein as the "Liquidator") and
(i) such Liquidator shall be fully empowered to act on behalf of the
Partnership and to wind up the Partnership's affairs and liquidate the
Partnership Properties, and (ii) the Liquidator shall be empowered to
make, perform and implement all Major Decisions hereunder without
obtaining the consent, approval or waiver of any Partner or Person. The
Liquidator shall be entitled to receive reasonable compensation for its
services, and shall be fully indemnified, defended and held harmless by
the Partnership from and against all claims, costs and expenses
(including reasonable attorneys' fees and costs) arising in the course
of it performing its duties hereunder, except for any such claims, costs
or expenses resulting from the gross negligence or wilful misconduct of
the Liquidator. From and after the dissolution of the Partnership, the
Partnership Assets shall be liquidated and reduced to cash or cash
equivalents as soon as practicable and the resulting Net Cash Flow, and
all other Net Cash Flow, shall be applied and distributed in the
following rank and order:
(a) To the payment of creditors of the Partnership
(other than in respect of Default Loans) in the order of priority as
provided by law;
(b) To the establishment and maintenance of a reserve of
cash or other assets of the Partnership to pay contingent liabilities of
the Partnership (other than any Default Loans) in such amounts as may be
reasonably and in good faith determined by the Partners or the
Liquidator, as the case may be;
(c) To repay the principal amount of, and to pay any
interest owing with respect to, any Default Loan; and
(d) To the Partners in accordance with their respective
Percentage Interests.
If, immediately prior to the liquidation of the Partnership in
accordance with the preceding provisions, there shall continue to be
outstanding any principal or accrued interest on any Default Loan (a
"Default Loan Deficiency"), the Noncontributing Party with respect to
such Default Loan shall contribute to the Partnership the amount of such
Default Loan Deficiency, which amount shall immediately thereafter be
<PAGE> 42
distributed to the Contributing Party in satisfaction of the Default
Loan.
10.3 Timing Requirements; Deemed Distribution and Re-
contribution. In the event that the Partnership is "liquidated" within
the meaning of Section 1.704-1(b)(2)(ii)(g) of the Regulations, any and
all distributions to the Partners pursuant to Section 10.2(c) hereof
shall be made no later than the later to occur of (i) the last day of
the taxable year of the Partnership in which such liquidation occurs or
(ii) ninety (90) days after the date of such liquidation. Subject to
the foregoing, a reasonable time shall be allowed for the orderly
winding up of the business and affairs of the Partnership and the
liquidation of its assets in order to minimize any losses otherwise
attendant upon such winding up. Notwithstanding any other provisions of
this Article 10 to the contrary, if the Partnership is liquidated within
the meaning of Regulations Section 1.704-1(b)(2)(ii)(g)(3), but no
dissolution event described in subsections (a) through (h) of Section
10.1 has occurred, the Partnership Properties shall not be liquidated,
the Partnership's liabilities shall not be paid or discharged, and the
Partnership's affairs shall not be wound up.
10.4 Sales Receivables. The winding up of the Partnership
shall not be deemed finally completed until the Partnership shall have
received cash payments in full with respect to obligations such as
notes, installment sale contracts and other similar receivables received
by the Partnership in connection with the sale of Partnership
Properties. The Partners or the Liquidator, as the case may be, shall
continue to act to enforce all of the rights of the Partnership pursuant
to any such obligations until paid in full.
10.5 Documentation of Dissolution and Termination. Upon the
dissolution of the Partnership and the appointment of a Liquidator in
accordance with Section 10.2, the Liquidator shall execute, file and
record such certificates, instruments and documents as it shall deem
necessary or appropriate in each state in which the Partnership or its
affiliates do business. Upon the completion of the winding-up of the
Partnership (including the application or distribution of all cash or
other assets placed in reserve in accordance with Section 10.2(b)), the
Partnership shall be terminated and the Partners or the Liquidator, as
the case may be, shall execute, file and record such certificates,
instruments and documents as it shall deem necessary or appropriate in
each state in which the Partnership or its affiliates do business in
order to reflect or effect the termination of the Partnership.
ARTICLE 11
Miscellaneous
11.1 Notices. Notices may be delivered either by private
messenger service, by mail, or facsimile transmission. Any notice or
document required or permitted hereunder to a Partner shall be in
writing and shall be deemed to be given on the date received by the
Partner; provided, however, that all notices and documents mailed to a
Partner in the United States Mail, postage prepaid, certified mail,
<PAGE> 43
return receipt requested, addressed to the Partner at its respective
address as shown in the records of the Partnership, shall be deemed to
have been received five (5) days after mailing and provided further,
that the sender of any such notice or document by facsimile transmission
shall bear the burden of proof as to proper transmission and date of
transmission of such facsimile. The address and the telecopier number
of each of the Partners shall for all purposes be as set forth at
Section 2.1 unless otherwise changed by the applicable Partner by notice
to the other as provided herein.
11.2 Binding Effect. Except as otherwise provided in this
Agreement, every covenant, term, and provision of this Agreement shall
be binding upon and inure to the benefit of the Partners and their
respective permitted successors, transferees, and assigns.
11.3 Construction of Agreement. As used herein, the singular
shall be deemed to include the plural, and the plural shall be deemed to
include the singular, and all pronouns shall include the masculine,
feminine and neuter, whenever the context and facts require such
construction. The headings, captions, titles and subtitles herein are
inserted for convenience of reference only and are to be ignored in any
construction of the provisions hereof. Except as otherwise indicated,
all section and exhibit references in this Agreement shall be deemed to
refer to the sections and exhibits of and to this Agreement, and the
terms "herein", "hereof", "hereto", "hereunder" and similar terms refer
to this Agreement generally rather than to the particular provision in
which such term is used. Whenever the words "including", "include" or
"includes" are used in this Agreement, they shall be interpreted in a
non-exclusive manner as though the words "but [is] not limited to"
immediately followed the same. Time is of the essence of this
Agreement. The language in all parts of this Agreement shall in all
cases be construed simply according to the fair meaning thereof and not
strictly against the party which drafted such language. Except as
otherwise provided herein, references in this Agreement to any
agreement, articles, by-laws, instrument or other document are to such
agreement, articles, by-laws, instrument or other document as amended,
modified or supplemented from time to time.
11.4 Severability. Every provision of this Agreement is
intended to be severable. If any term or provision hereof is illegal or
invalid for any reason whatsoever, such illegality or invalidity shall
not affect the validity or legality of the remainder of this Agreement.
11.5 Incorporation by Reference. The Glossary of Defined
Terms and every exhibit, schedule, and other appendix attached to this
Agreement and referred to herein is incorporated in this Agreement by
reference.
11.6 Further Assurances. Each of the Partners shall hereafter
execute and deliver such further instruments and do such further acts
and things as may be required or useful to carry out the intent and
purpose of this Agreement and as are not inconsistent with the terms
hereof.
<PAGE> 44
11.7 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without
regard to any conflict of laws rules thereof.
11.8 Counterpart Execution. This Agreement may be executed in
any number of counterparts with the same effect as if all of the
Partners had signed the same document. All counterparts shall be
construed together and shall constitute one agreement.
11.9 Loans. Any Partner may, with the approval of the
Executive Committee or as otherwise provided by this Agreement, lend or
advance money to the Partnership. If any Partner shall make any loan or
loans to the Partnership, the amount of any such loan or advance shall
not be treated as a contribution to the capital of the Partnership but
shall be a debt due from the Partnership. Except as otherwise provided
herein, no Partner shall be obligated to make any loan or advance to the
Partnership.
11.10 No Third Party Rights. This Agreement is intended
to create enforceable rights between the parties hereto only, and
creates no rights in, or obligations to, any other Persons whatsoever.
Without limiting the generality of the foregoing, as to any third party,
a deficit capital account of a Partner shall not be deemed to be a
liability of such Partner nor an asset or property of the Partnership.
11.11 Estoppel Certificates. Upon the written request of
a Partner, the other Partner shall, within fifteen (15) days of its
receipt of such request, execute and deliver a written statement
certifying: (a) that this Agreement is unmodified and in full force and
effect (or, if modified, that this Agreement is in full force and effect
as modified and, stating any and all modifications), (b) no Event of
Default has occurred with respect to such Partner that has not been
cured and, to its actual knowledge, no Event of Default has occurred
with respect to the requesting Partner that has not been cured, in each
case except as specified in such statement and, (c) that to its actual
knowledge, no event has occurred which with the passage of time or the
giving of notice, or both, would ripen into an Event of Default
hereunder, except as specified in such statement.
11.12 Usury. If any return, interest payment, or other
charge payable under this Agreement shall at any time exceed the maximum
amount chargeable by applicable law, then the applicable rate of return
or interest shall be the maximum rate permitted by applicable law.
11.13 Business Day. "Business Day" or "business day"
means any calendar day except Saturday, Sunday, or a federal or State of
Delaware legal holiday.
11.14 Proposing and Adopting Amendments. Amendments to
this Agreement may be proposed by any Executive Committee Member by his
submitting to the Executive Committee a verbatim statement of the
proposed amendment, and such Executive Committee Member shall include in
any such submission a recommendation as to the proposed amendment. A
proposed amendment shall be adopted and be effective as an amendment
<PAGE> 45
hereto upon the approval of the Executive Committee and its mutual
execution and delivery by the Partners. This Agreement may be amended
only upon the written agreement of both Partners, and no provision
benefiting a Partner may be waived, except by a written instrument
signed by the Partner. The giving of consent by any Partner to any
action by another Partner in any one instance shall not limit or waive
the necessity to obtain such Partner's consent in any future instance.
11.15 Partners Not Agents. Nothing contained herein shall
be construed to constitute any Partner the agent of another Partner,
except as otherwise expressly provided herein, or in any manner to limit
the Partners in the carrying on of their own respective businesses or
activities.
11.16 Entire Understanding; Etc. This Agreement
constitutes the entire agreement and understanding among the Partners,
and supersedes any prior or contemporaneous understandings and/or
written or oral agreements among them, respecting the subject matter of
this Agreement.
11.17 Action Without Dissolution. To the fullest extent
permitted by law, each Partner shall be entitled to maintain, on its own
behalf or on behalf of the Partnership, any action or proceeding against
any other Partner or the Partnership (including an action for damages,
specific performance, or injunctive or declaratory relief) for or by
reason of the tortious conduct of such party or the breach by such party
of this Agreement or any other agreement entered into with such party in
connection with the transactions contemplated hereunder, and the
bringing of such action or proceeding shall not cause or require the
dissolution of the Partnership or an accounting of the Partnership's
assets or affairs.
11.18 Attorneys' Fees. In the event of any litigation
between Partners by reason of a breach hereunder, or to enforce or
interpret any provision, right or obligation hereunder, the unsuccessful
party or parties to such litigation covenants and agree to pay the
successful party or parties all costs and expenses reasonably incurred,
including reasonable attorneys' fees. For the purpose of this
Agreement, the term "attorneys' fees" and "attorneys' fees and costs"
shall mean the fees and expenses of counsel to the parties hereto, which
may include printing, photostating, duplicating and other expenses, air
freight charges and fees billed for law clerks, paralegals, librarians
and others not admitted to the bar but performing services under the
supervision of any attorney. Such term shall also include all such fees
and expenses incurred with respect to appeals and bankruptcy
proceedings, and whether or not any action or proceeding is brought with
respect to the matter for which said fees and expenses were incurred.
11.19 Waiver of Jury Trial. To the fullest extent
permitted by law, each Partner hereby waives trial by jury in any
action, proceeding or counterclaim brought by a Partner or the
Partnership with respect to any matter whatsoever arising out of or in
any way connected with this Agreement, the relationship of the Partners,
any claim of injury or damage relating to any of the foregoing, or the
enforcement of any remedy under any statute with respect thereto.
<PAGE> 46
11.20 Confidentiality. The terms of this Agreement, any
non-public details of the transactions contemplated hereby, any
financial, marketing or other information delivered or produced pursuant
to the terms of this Agreement not generally disclosed to the public,
the trade, or creditors, and any non-public information regarding any
other Partner or any of its Affiliates learned as a result of the
partnership relationship created by this Agreement, shall not be
disclosed by any Partner (or any of its Affiliates) to any Person other
than its Affiliates, directors, officers, trustees, employees, partners,
attorneys and agents of such Partner and their affiliates, except as may
be required by any regulatory authority having jurisdiction or by any
applicable law, regulation, ordinance or order, and except as otherwise
required to carry out the intent of this Agreement.
11.21 Press Releases. Each Partner agrees to refrain from
generating or participating in any publicity statement, press release,
or other public notice regarding the formation of this Partnership or
the identification of its Partners, the acquisition, disposition or
financing of the Properties by the Partnership or any other business or
affairs of the Partnership. All publicity statements, press releases or
other public notices relating to the formation of this Partnership or
the identification of its Partners, the acquisition, disposition or
financing of the Properties by the Partnership or any other business or
affairs of the Partnership must be approved by the Executive Committee.
Upon the full execution of the Purchase Agreement, the Partners shall
issue a joint press release in a form acceptable to both Partners.
11.22 Existing Financing. The Partners hereby acknowledge
and agree that the Underlying Properties shall be acquired by the
Underlying Partnership subject to, and the Underlying Partnership shall
assume, the Existing Financing and that the acquisition of the
Properties subject to such Existing Financing is subject to the approval
of the Rating Agencies (Moody's Investors Service, Inc. and Fitch
Investors Service, L.P.). Each of the Partners hereby agrees to execute
any commercially reasonable amendment to this Agreement reasonably
required by such Rating Agencies in connection with such approval.
11.23 Consents; Approvals. Unless otherwise herein
provided, in any instance in which any Partner, any Executive Committee
Member or any Operating Committee Member shall be requested to consent
to or approve of any matter with respect to which such Person's consent
or approval is required by any of the provisions of this Agreement, such
consent (or refusal to consent) or approval (or disapproval) shall be
given in writing, and such consent or approval shall not be unreasonably
withheld or delayed unless this Agreement with respect to a particular
consent or approval shall expressly provide that the same may be given
or refused in the sole judgment or discretion of such Partner, Executive
Committee Member or Operating Committee Member, as applicable.
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<PAGE> 47
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement effective as of the date and year first above written.
GENERAL PARTNERS
MACERICH EQ GP CORP.,
a Delaware corporation
By:
Its:
SDG EQ ASSOCIATES, INC.,
a Delaware corporation
By:
Its:
LIMITED PARTNERS
MACERICH EQ LIMITED PARTNERSHIP,
a California limited partnership
By: MACERICH EQ GP CORP.,
a Delaware corporation,
its General Partner
By:
Its:
SDG EQ DEVELOPERS LIMITED PARTNERSHIP,
a Delaware limited partnership
By: SDG EQ ASSOCIATES, INC.,
a Delaware corporation,
its General Partner
By:
Its: Chief Executive Officer
GLOSSARY OF DEFINED TERMS
"Accountants" shall mean the firm or firms of independent certified
public accountants selected by the Partners on behalf of the Partnership
to audit the books and records of the Partnership and to prepare
statements and reports in connection therewith.
"Act" shall mean the Delaware Uniform Partnership Act, as the same
may hereafter be amended or supplemented from time to time and any
successor thereto.
"Additional Capital Contributions" is defined in Section 2.3.
"Affected Gain" is defined in the Allocations Exhibit.
"Affiliate" shall mean any Entity which directly or indirectly
through one or more intermediaries, Controls, is Controlled by, or is
under common Control with, any Person and shall include in the case of
Macerich and MSPE, Macerich Property Management Company, a California
corporation and Macerich Management Company, a California corporation,
and in the case of SDG and SSPE shall include M.S. Management
Associates, Inc., a Delaware corporation, and its subsidiaries.
"Agreement" shall mean this Partnership Agreement.
"Allocations Exhibit" shall mean Exhibit A.
"Annual Budget" is defined in Section 5.7(a).
"Audited Financial Statements" shall mean financial statements
(balance sheets, statement of income, statement of partners' equity and
statement of cash flows) prepared in accordance with generally accepted
accounting principles and accompanied by an independent auditor's
report.
"Bankruptcy" shall mean, with respect to any Partner, (i) the
commencement by such Partner of any proceeding seeking relief under any
provision or chapter of the federal Bankruptcy Code or any other federal
or state law relating to insolvency, bankruptcy or reorganization;
(ii) an adjudication that such Partner is insolvent or bankrupt;
(iii) the entry of an order for relief under the federal Bankruptcy Code
with respect to such Partner; (iv) the filing of any such petition or
the commencement of any such case or proceeding against such Partner,
unless such petition and the case or proceeding initiated thereby are
dismissed within ninety (90) days from the date of such filing; (v) the
filing of an answer by such Partner admitting the material allegations
of any such petition; (vi) the appointment of a trustee, receiver or
custodian for all or substantially all of the assets of such Partner
unless such appointment is vacated or dismissed within ninety (90) days
from the date of such appointment but not less than five (5) days before
the proposed sale of any assets of such Partner; (vii) the insolvency of
such Partner or the execution by such Partner of a general assignment
for the benefit of creditors; (viii) the convening by such Partner of a
meeting of its creditors, or any class thereof, for purposes of
effecting a moratorium upon or extension or composition of its debts;
(ix) the failure of such Partner to pay its debts as they mature;
(x) the levy, attachment, execution or other seizure of substantially
all of the assets of such Partner where such seizure is not discharged
within thirty (30) days thereafter; or (xi) the admission by such
Partner in writing of its inability to pay its debts as they mature or
that it is generally not paying its debts as they become due.
"Base Rate" is defined in Section 2.4(a).
"Budget" and "Budgets" is defined in Section 5.7(a).
"Budgeted Capital Items" shall mean capital expenditures set forth
in a Budget for any of the Properties.
"Business Day" is defined in Section 11.13.
"Buy-Sell Closing" is defined in Section 7.3(a).
"Buy-Sell Major Decision" shall mean a decision to sell, finance,
refinance, expand or renovate a Property involving an expenditure or
commitment by the Partnership in the case of an expansion or renovation
of not less than $10,000,000.
"Call Closing" is defined in Section 8.3.
"Call Dissolution Meeting" is defined in Section 8.2.
"Call Notice" is defined in Section 8.1.
"Call Property" is defined in Section 8.2.
"Capital Account" is defined in the Allocations Exhibit.
"Capital Contribution" shall mean, with respect to any Partner, the
amount of money and initial Gross Asset Value of any property other than
money contributed to the Partnership with respect to the Partnership
Interest held by such Partner (net of liabilities to which such property
is subject).
"Cash Flow Shortfalls" shall mean the excess, if any, of (a) the
sum (without duplication) of all operating or other cash expenditures
paid by the Partnership (other than capital expenditures of any nature),
plus all payments of principal, interest, fees and related costs made by
the Partnership with respect to Partnership indebtedness (including all
such payments, fees and costs paid in connection with the Existing
Financing), plus all additions to Partnership reserves established in
accordance with this Agreement], over (b) all cash revenues and funds
received by the Partnership from any and all sources, including
reductions of Partnership reserves established in accordance with this
Agreement, but excluding security deposit and other refundable deposits
unless and until earned or applied. Non-cash allowances such as
depreciation, amortization, cost recovery deductions, or similar items
shall not be considered when calculating Cash Flow Shortfalls.
"Closing Funding Requirement" is defined in Section 2.2(b).
"Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
"Contributing Party" is defined in Section 2.3(c).
"Control" shall mean the ability, whether by the direct or indirect
ownership of shares or other equity interests, by contract or otherwise,
to elect a majority of the directors of a corporation, to select the
managing partner of a partnership, or otherwise to select, or have the
power to remove and then select, a majority of those persons exercising
governing authority over an Entity. In the case of a limited
partnership, the sole general partner, all of the general partners to
the extent each has equal management control and authority, or the
managing general partner or managing general partners thereof shall be
deemed to have control of such partnership and, in the case of a trust,
any trustee thereof or any Person having the right to select any such
trustee shall be deemed to have control of such trust. The terms
"Controls" and "Controlled" shall have correlative meanings.
"Controlling Party" is defined in Section 5.14(c).
"Date of Value" is defined in Section 7.1.
"Default Loan" is defined in Section 2.4(a).
"Default Loan Deficiency" is defined in Section 10.2.
"Defaulting Party" is defined in Section 5.14(a).
"Depreciation" is defined in the Allocations Exhibit.
"Designated Property" is defined in Section 8.3.
"Due Diligence Formation and Acquisition Costs" is defined in
Section 2.2(b).
"Entity" shall mean any general partnership, limited partnership,
corporation, limited liability company, joint venture, trust, business
trust, cooperative or association.
"Escrow Agent" shall mean the "Escrow Agent" under and defined in
the Purchase Agreement.
"Escrow Closing Requirement" is defined in Section 2.2(b).
"Equitable" shall mean The Equitable Life Assurance Society of the
United States, a New York corporation, the "seller" of the Properties
under the Purchase Agreement.
"Event of Default" is defined in Section 5.14(a).
"Executive Committee" is defined in Section 5.1.
"Executive Committee Members" is defined in Section 5.1.
"Exercising Party" is defined in Section 8.1.
"Exercising Party's Property" and "Exercising Party's Properties"
are defined in Section 8.2.
"Existing Financing" shall mean that certain financing with respect
to all of the Properties evidenced by those certain collateralized fixed
and floating rate notes in the aggregate principal sum of $485,000,000
issued by Equitable, which notes are secured by, inter alia, those
documents and instruments more particularly described on Exhibit B to
the Purchase Agreement.
"Fiscal Year" is defined in the Allocations Exhibit.
"Funds from Operations" shall mean net income (loss) (computed in
accordance with generally accepted accounting principles), excluding
gains (or losses) from debt restructuring and sales of property, plus
depreciation and amortization (excluding depreciation on personal
property and amortization of loan and financial instrument costs), and
after adjustments for unconsolidated entities. Adjustments for
unconsolidated entities are calculated at the same basis.
"Glossary of Defined Terms" is defined in the preamble paragraph to
this Agreement.
"Gross Asset Value" is defined in the Allocations Exhibit.
"Immediate Family" shall mean, with respect to any individual, such
individual's spouse, parents, parents-in-law, descendants, nephews,
nieces, brothers, sisters, brothers-in-law, sisters-in-law and children-
in-law.
"Indemnitee" means (i) any Person that is (A) a Partner, (B) an
Executive Committee Member, (C) an Operating Committee Member or (D) a
director, officer, employee, trustee, agent or representative of a
Partner, and (ii) such other Persons (including Affiliates of a Partner
or the Partnership) as the Partners may mutually designate from time to
time.
"Initial Capital Contributions" is defined in Section 2.2.
"Initial Reserve Requirement" is defined in Section 2.2(b).
"Initiating Party" is defined in Section 7.1.
"Interim Operating Budget" is defined in Section 5.7(a).
"Lien" shall mean any liens, security interests, mortgages, deeds
of trust, charges, claims, encumbrances, pledges, options, rights of
first offer or first refusal and any other rights or interests of others
of any kind or nature, actual or contingent, or other similar
encumbrances of any nature whatsoever.
"Liquidator" is defined in Section 10.2.
"Loan Default Transferee" is defined in Section 6.3(c).
"Loan Default Transfer Notice" is defined in Section 6.3(c).
"Macerich" is defined in the Introduction to this Agreement.
"Macerich Management Agreement" is defined in Section 5.5.
"Major Decision" is defined in Section 5.1(c).
"Minimum Gain Attributable to Partner Nonrecourse Debt" is defined
in the Allocations Exhibit.
"Net Cash Flow" means with respect to any period, the excess, if
any, of (a) all cash revenues and funds received by the Partnership from
any and all sources during such period, including reductions of
Partnership reserves established in accordance with this Agreement, but
excluding security deposit and other refundable deposits unless and
until earned or applied, over (b) the sum (without duplication) of all
capital, operating or other cash expenditures of the Partnership paid
during such period, plus all payments of principal, interest, fees and
related costs with respect to Partnership indebtedness made during such
period (including all such payments, fees and costs paid in connection
with the Existing Financing), plus all additions to Partnership reserves
established in accordance with this Agreement. Net Cash Flow shall not
be reduced by depreciation, amortization, cost recovery deductions, or
similar non-cash allowances.
"Net Income or Net Loss" is defined in the Allocations Exhibit.
"Non-Competition Area" is defined in Section 1.8(b).
"Noncontributing Party" is defined in Section 2.3(c).
"Non-defaulting Party" is defined in Section 5.14(a).
"Non-Exercising Party" is defined in Section 8.1.
"Non-Exercising Party's Property" and "Non-Exercising Party's
Properties" are defined in Section 8.2.
"Nonproposing Party"is defined in Section 1.8(b).
"Nonrecourse Deductions" is defined in the Allocations Exhibit.
"Nonrecourse Liabilities" is defined in the Allocations Exhibit.
"Offering Notice" is defined in Section 7.1.
"Operating Committee" is defined in Section 5.3.
"Operating Committee Members" is defined in Section 5.3.
"Operating Partnership" shall mean, in the case of SDG, Simon
DeBartolo Group, L.P., a Delaware limited partnership, and in the case
of Macerich, The Macerich Partnership, L.P., a Delaware limited
partnership, as well as their successors by consolidation or other
combination with or into another Person.
"Original Approved Pre-Closing Budget" is defined in Section
2.2(c).
"Other Interests" is defined in Section 1.8(a).
"Partner Nonrecourse Deductions" is defined in the Allocations
Exhibit.
"Partner Nonrecourse Debt" is defined in the Allocations Exhibit.
"Partner" shall mean Macerich, MSPE, SDG and SSPE, and their
permitted successors and assigns that are admitted as Partners,
individually.
"Partners" shall mean Macerich MSPE, SDG and SSPE, and their
permitted successors and assigns that are admitted as Partners.
"Partnership" shall mean the partnership hereby constituted, as
such partnership may from time to time be constituted.
"Partnership Interest" shall mean an ownership interest of a
Partner in the Partnership from time to time, including such Partner's
Percentage Interest and such Partner's Capital Account, and any and all
other benefits to which the holder of such Partnership Interest may be
entitled as provided in this Agreement, together with all obligations of
such Person to comply with the terms of this Agreement.
"Partnership Interest Loan" is defined in Section 6.3(a).
"Partnership Interest Loan Default Notice" is defined in Section
6.3(d).
"Partnership Interest Loan Obligations" is defined in Section
6.3(a).
"Partnership Minimum Gain" is defined in the Allocations Exhibit.
"Partnership Properties" shall mean any tangible or intangible
property hereafter acquired by the Partnership.
"Party" and "Parties" are defined in Section 1.1.
"Percentage Interest" is defined in Section 2.1.
"Permitted Transfers" is defined in Section 6.1(b).
"Person" shall mean any individual or Entity.
"Pledging Partner" is defined in Section 6.3(a)(xi).
"Portfolio Offer Notice" is defined in Section 8.6(a).
"Portfolio Offer Price" is defined in Section 8.6(a).
"Portfolio Selling Party" is defined in Section 8.6(a).
"Principal Office" is defined in Section 1.4.
"Property" shall mean any of the Properties individually.
"Properties" shall mean , collectively, the Partnership Properties
and the Underlying Properties.
"Property Manager" shall mean the property manager for any
particular Property engaged pursuant to a Macerich Management Agreement
or SDG Management Agreement, as the case may be, as well as any property
manager approved by the Executive Committee, pursuant to Section
5.1(c)(ii), with respect to any Partnership Property.
"Proposal" is defined in Section 1.8(b).
"Proposing Party" is defined in Section 1.8(b).
"Purchase Agreement" shall mean that certain Purchase and Sale
Agreement by and between Equitable and SM Portfolio Partners, which
provides for the sale of the Properties by Equitable to SM Portfolio
Partners, subject to the Existing Financing.
"Purchase Price" is defined in Section 7.1.
"Purchasing Party" is defined in Section 7.2.
"REIT" is defined in Section 1.3.
"Real Estate Activity" is defined in Section 1.8(b).
"Regulations" shall mean the final, temporary or proposed Income
Tax Regulations promulgated under the Code, as such regulations may be
amended from time to time (including corresponding provisions of
succeeding regulations).
"Regulatory Allocations" is defined in the Allocations Exhibit.
"Related Persons" is defined in Section 1.8.
"Remaining Party" is defined in Section 8.6(a).
"Responding Party" is defined in Section 7.1.
"SDG" is defined in the Introduction to this Agreement.
"SDG Management Agreement" is defined in Section 5.5.
"Subject Property" is defined in Section 7.1.
"Tax Item" is defined in the Allocations Exhibit.
"Term" is defined in Section 1.5.
"Transfer" means, as a noun, any voluntary or involuntary transfer,
sale, other disposition, hypothecation or encumbrance, and, as a verb,
voluntarily or involuntarily to transfer, sell, otherwise dispose of,
hypothecate or encumber.
"Transferee" is defined in Section 6.2.
"Underlying Partnership" shall mean SDG Macerich Properties, L.P.,
a Delaware limited partnership, which owns the Properties.
"Underlying Properties" shall mean the real properties to be
acquired by the Underlying Partnership pursuant to the Purchase
Agreement, each of which real properties is more specifically identified
and defined on Schedule 4 attached hereto, together with all other
tangible and intangible property to be acquired by the Underlying
Partnership pursuant to the Purchase Agreement.
"Unrealized Gain" is defined in the Allocations Exhibit.
"Unrealized Loss" is defined in the Allocations Exhibit.
EXHIBIT A
Allocations Exhibit
Each Capitalized term used in this Allocations Exhibit either is
defined in the Glossary of Defined Terms to the Agreement or in Section
5 of this Allocations Exhibit.
1. Capital Accounts.
1.1 Establishment and Maintenance of Capital Accounts. The
Partnership shall establish and maintain for each Partner a separate
account ("Capital Account") in accordance with the rules of Regulations
Section 1.704-1(b)(2)(iv) and this Allocations Exhibit. The Capital
Account of each Partner shall be increased by (i) the amount of all
Capital Contributions and any other contributions made by such Partner
to the Partnership pursuant to the Agreement, (ii) the amount of Net
Income allocated to such Partner pursuant to Section 2.1 of this
Allocations Exhibit, and (iii) the amount of any other items of income
or gain specially allocated to such Partner pursuant to Section 3 of
this Allocations Exhibit. The Capital Account of each Partner shall be
decreased by (i) the amount of cash or Gross Asset Value (net of any
liabilities to which the Partnership Assets distributed are subject) of
any distributions of cash or property made to such Partner pursuant to
the Agreement, (ii) the amount of Net Loss allocated to such Partner
pursuant to Section 2.2 of this Allocations Exhibit, and (iii) the
amount of any other items of deduction or loss specially allocated to
such Partner pursuant to Section 3 of this Allocations Exhibit. The
initial balance of each Partner's Capital Account shall equal the amount
of such Partner's Capital Contribution to the Partnership on the date
hereof as described in Article 2 of the Agreement. The Capital Accounts
of each Partner shall be increased or decreased to reflect the
revaluation of Partnership Assets under Section 1.3 of this Allocations
Exhibit.
1.2 Transferees. Generally, a transferee (including any assignee)
of a Partnership Interest shall succeed to a pro rata portion of the
Capital Account of the transferor; provided, however, that, if the
transfer causes a termination of the Partnership under Section
708(b)(1)(B) of the Code, the Partnership's properties and liabilities
shall be deemed, solely for federal income tax purposes, to have been
contributed to a new Partnership in exchange for an interest in the new
Partnership, and the terminated Partnership distributes interests in the
new Partnership to the purchasing Partner and the other remaining
Partners in proportion to their respective Percentage Interests in
liquidation of the terminated Partnership. In such event, the Gross
Asset Values of the Partnership properties shall be adjusted immediately
prior to such deemed contribution pursuant to Section 1.3(b) of this
Allocations Exhibit. The Capital Accounts of such reconstituted
Partnership shall be maintained in accordance with the principles of
this Allocations Exhibit.
1.3 Revaluations of Partnership Assets.
(a) Consistent with the provisions of Regulations Section
1.704-1(b)(2)(iv)(f), and as provided in this Section 1.3, the
Gross Asset Values of all Partnership Assets shall be adjusted
upward or downward to reflect any Unrealized Gain or Unrealized
Loss attributable to such Partnership Assets, as of the times of
the adjustments provided in Section 1.3(b) of this Allocations
Exhibit, as if such Unrealized Gain or Unrealized Loss had been
recognized on an actual sale of each such property and allocated
pursuant to this Allocations Exhibit.
(b) Such adjustments shall be made as of the following times:
(i) immediately prior to the acquisition of an additional interest
in the Partnership, after the date hereof, by any new or existing
Partner in exchange for more than a de minimis Capital
Contribution; (ii) immediately prior to the distribution by the
Partnership to a Partner of more than a de minimis amount of
property as consideration for an interest in the Partnership; and
(iii) immediately prior to the liquidation of the Partnership
within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g);
provided, however, that adjustments pursuant to clauses (i) and
(ii) above shall be made only if the Partners determine that such
adjustments are necessary or appropriate to reflect the relative
economic interests of the Partners in the Partnership.
(c) In accordance with Regulations Section 1.704-
1(b)(2)(iv)(e) the Gross Asset Value of Partnership Assets
distributed in kind shall be adjusted upward or downward to reflect
any Unrealized Gain or Unrealized Loss attributable to such
Partnership property, as of the time any such asset is distributed.
(d) In determining Unrealized Gain or Unrealized Loss for
purposes of this Allocations Exhibit, the aggregate cash amount and
fair market value of all Partnership Assets (including cash or cash
equivalents) shall be determined by the Partners using such
reasonable methods of valuation as they may adopt, or in the case
of a liquidating distribution pursuant to Article 10 of the
Agreement, be determined and allocated by the Liquidator using such
reasonable methods of valuation as it may adopt. The Partners, or
the Liquidator, as the case may be, shall allocate such aggregate
value among the assets of the Partnership (in such manner as it
determines in its sole and absolute discretion necessary to arrive
at a fair market value for individual properties).
1.4 Compliance with Regulations. The provisions of this
Allocations Exhibit relating to the maintenance of Capital Accounts are
intended to comply with Regulations Section 1.704-1(b), and shall be
interpreted and applied in a manner consistent with such Regulations.
In the event the Partners shall determine that it is prudent to modify
the manner in which the Capital Accounts, or any debits or credits
thereto (including, without limitation, debits or credits relating to
liabilities which are secured by contributed or distributed property or
which are assumed by the Partnership, or any of the Partners), are
computed in order to comply with such Regulations, the Partners may make
such modification, provided that it is not likely to have a material
effect on the amounts distributable to any Person pursuant to Article 10
of the Agreement upon the dissolution of the Partnership. The Partners
also shall (i) make any adjustments that are necessary or appropriate to
maintain equality between the Capital Accounts of the Partners and the
amount of Partnership capital reflected on the Partnership's balance
sheet, as computed for book purposes, in accordance with Regulations
Section 1.704-1(b)(2)(iv)(q), and (ii) make any appropriate
modifications in the event unanticipated events might otherwise cause
the Agreement and this Allocations Exhibit not to comply with
Regulations Section 1.704-(b).
2. Allocation of Net Income and Net Loss. After giving effect to the
special allocations set forth in Section 3 of this Allocations Exhibit,
Net Income and Net Loss for any Fiscal Year or other applicable period
shall be allocated to the Partners in accordance with their respective
Percentage Interests.
3. Special Allocations.
Notwithstanding any other provision of the Agreement or this
Allocations Exhibit, the following special allocations shall be made in
the following order:
3.1 Minimum Gain Chargeback. Notwithstanding any other provisions
of this Allocations Exhibit, if there is a net decrease in Partnership
Minimum Gain during any Fiscal Year, each Partner shall be specially
allocated items of Partnership income and gain for such year (and, if
necessary, subsequent years) in an amount equal to such Partner's share
of the net decrease in Partnership Minimum Gain, as determined under
Regulations Section 1.704-2(g). Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts required
to be allocated to each Partner pursuant thereto. The items to be so
allocated shall be determined in accordance with Regulations Section
1.704-2(f)(6). This Section 3.1 is intended to comply with the minimum
gain chargeback requirements of Regulations Section 1.704-2(f) and shall
be interpreted consistently therewith.
3.2 Partner Minimum Gain Chargeback. Notwithstanding any other
provision of this Allocations Exhibit (except Section 3.1), if there is
a net decrease in Minimum Gain Attributable to a Partner Nonrecourse
Debt during any Fiscal Year, each Partner who has a share of the
Partnership Minimum Gain Attributable to such Partner Nonrecourse Debt,
determined in accordance with Regulations Section 1.704-2(i)(5), shall
be specially allocated items of Partnership income and gain for such
year (and, if necessary, subsequent years) in an amount equal to such
Partner's share of the net decrease in Partnership Minimum Gain
Attributable to such Partner Nonrecourse Debt, determined in accordance
with Regulations Section 1.704-2(i)(5). Allocations pursuant to the
previous sentence shall be made in proportion to the respective amounts
required to be allocated to each Partner pursuant thereto. The items to
be so allocated shall be determined in accordance with Regulations
Section 1.704-2(i)(4). This Section 3.2 is intended to comply with the
minimum gain chargeback requirements of Regulations Section 1.704-
2(i)(4) and shall be interpreted consistently therewith.
3.3 Interest on Default Loans. Interest Deductions with respect
to any Default Loan shall be allocated to the Noncontributing Partner
with respect to such Default Loan.
3.4 Partner Nonrecourse Deductions. Any Partner Nonrecourse
Deductions for any Fiscal Year shall be specially allocated to the
Partner who bears the economic risk of loss, under Regulations Section
1.704-2(i)(1), with respect to the Partner Nonrecourse Debt to which
such Partner Nonrecourse Deductions are attributable in accordance with
Regulations Section 1.704-2(i)(2).
3.5 Code Section 754 Adjustments. To the extent an adjustment to
the adjusted tax basis of any Partnership Asset pursuant to Section 732,
734 or 743 of the Code is required, pursuant to Regulations Section
1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital
Accounts, the amount of such adjustment to the Capital Accounts shall be
treated as an item of gain (if the adjustment increases the basis of the
asset) or loss (if the adjustment decreases such basis), and such item
of gain or loss shall be specially allocated to the Partners in a manner
consistent with the manner in which their Capital Accounts are required
to be adjusted pursuant to such Section of the Regulations.
3.6 Curative Allocations. The allocations set forth in Sections
3.1, 3.2, 3.3 and 3.5 (the "Regulatory Allocations") are intended to
comply with certain requirements of Regulations Sections 1.704-1(b) and
1.704-2. Notwithstanding any provisions of Sections 2 and 3 to the
contrary (other than the Regulatory Allocations), the Regulatory
Allocations shall be taken into account in allocating other items of
income, gain, loss and deduction among the Partners so that, to the
extent possible, the cumulative net amount for the allocations of
Partnership items under Sections 2 and 3 hereof shall be equal to the
net amount that would have been allocated had the Regulatory Allocations
not occurred. This Section 3.8 is intended to minimize to the extent
possible and to the extent necessary any economic distortions which may
result from application of the Regulatory Allocations and shall be
interpreted in a manner consistent therewith.
4. Allocations for Tax Purposes.
4.1 Generally. Except as otherwise provided in this Section 4,
for federal income tax purposes, each item of income, gain, loss and
deduction (a "Tax Item") shall be allocated among the Partners in the
same manner as its correlative item of "book" income, gain, loss or
deduction is allocated among the Partners pursuant to Sections 2 and 3
of this Allocations Exhibit.
4.2 Sections 1245/1250 Recapture. If any portion of gain from the
sale of property is treated as gain which is ordinary income by virtue
of the application of Code Sections 1245 or 1250 ("Affected Gain"), then
(i) such Affected Gain shall be allocated among the Partners in the same
proportion that the depreciation and amortization deductions giving rise
to the Affected Gain were allocated and (ii) other Tax Items of gain of
the same character that would have been recognized, but for the
application of Code Sections 1245 and/or 1250, shall be allocated away
from those Partners who are allocated Affected Gain pursuant to
Clause (i) so that, to the extent possible, the other Partners are
allocated the same amount and type, of capital gain that would have been
allocated to them had Code Sections 1245 and/or 1250 not applied. For
purposes hereof, in order to determine the proportionate allocations of
depreciation and amortization deductions for each Fiscal Year or other
applicable period, such deductions shall be deemed allocated on the same
basis as Net Income and Net Loss for such period.
4.3 Tax Allocations: Code Section 704(c). In accordance with
Code Section 704(c) and the Regulations promulgated thereunder, income,
gain, loss and deduction with respect to any property contributed to the
capital of the Partnership shall, solely for tax purposes, be allocated
among the Partners so as to take account of any variation between the
adjusted basis of such property to the Partnership for federal income
tax purposes and its initial Gross Asset Value. In the event the Gross
Asset Value of any Partnership asset is adjusted pursuant to Section 1.3
of this Allocations Exhibit, subsequent allocations of income, gain,
loss and deduction with respect to such asset shall take account of any
variation between the adjusted basis of such asset to the Partnership
for federal income tax purposes and its Gross Asset Value in the same
manner as under Code Section 704(c) and the Regulations promulgated
thereunder. Without limiting the foregoing, the Partners shall allocate
income, gain, loss and deduction with respect to any property acquired
as of the date hereof, the adjusted basis of which differs from its
Gross Asset Value, among the Partners on a property by property basis,
subject to the application of the "ceiling limitation," in accordance
with Regulations Section 1.704-3(b). The Partners shall allocate
income, gain, loss and deduction with respect to any property acquired
after the date hereof, the adjusted basis of which differs from its
Gross Asset Value, among the Partners under any method the they may
elect, so long as such method is set forth in the Regulations
promulgated under Section 704(c) of the Code on the date such property
is acquired.
5. Definitions.
"Affected Gain" is defined in Section 4.2.
"Depreciation" means, for each Fiscal Year, an amount equal to
the depreciation, amortization, or other cost recovery deduction
allowable with respect to an asset for such Fiscal Year, except that if
the Gross Asset Value of an asset differs from its adjusted basis for
federal income tax purposes at the beginning of such Fiscal Year,
Depreciation shall be an amount which bears the same ratio to such
beginning Gross Asset Value as the federal income tax depreciation,
amortization or other cost recovery deduction for such Fiscal Year bears
to such beginning adjusted tax basis; provided, however, that if the
adjusted basis for federal income tax purposes of an asset at the
beginning of such Fiscal Year is zero, Depreciation shall be determined
with reference to such beginning Gross Asset Value using any reasonable
method selected by the Partners.
"Fiscal Year" means each calendar year, or partial calendar
year, occurring during the term of the Partnership, or such other Fiscal
Year as may be adopted by the Executive Committee from time to time.
"Gross Asset Value" means, with respect to any asset, the
asset's adjusted basis for federal income tax purposes, except as
follows:
(i) the initial Gross Asset Value of any asset contributed by
a Partner to a Partnership shall be the gross fair market value of
such asset on the date of contribution to the Partnership, as
determined by the Partners;
(ii) the Gross Asset Values of all Partnership
Assets shall be adjusted in accordance with Section 1.3
of this Allocations Exhibit; and
(iii) the Gross Asset Value of an asset shall be
adjusted each Fiscal Year by the Depreciation with
respect to such asset taken into account for purposes of
computing Net Income and Net Loss for such year.
"Minimum Gain Attributable to Partner Nonrecourse Debt" shall
mean "partner nonrecourse debt minimum gain" as determined in accordance
with Regulation Section 1.704-2(i)(2).
"Net Income or Net Loss" shall mean, for each Fiscal Year or
other applicable period, an amount equal to the Partnership's taxable
income or loss for such year or period, determined in accordance with
Section 703(a) of the Code (for this purpose, all items of income, gain,
loss or deduction required to be stated separately pursuant to Section
703(a) of the Code shall be included in taxable income or loss), with
the following adjustments:
(i) The computation of all items of income, gain,
loss and deduction shall be made without regard to the
fact that items described in Sections 705(a)(1)(B) or
705(a)(2)(B) of the Code are not includable in gross
income or are neither currently deductible nor
capitalized for federal income tax purposes;
(ii) Any income, gain or loss attributable to the
taxable disposition of any Partnership property shall be
determined as if the adjusted basis of such property as
of such date of disposition were equal in amount to the
Partnership's Gross Asset Value with respect to such
property as of such date;
(iii) In lieu of the depreciation, amortization,
and other cost recovery deductions taken into account in
computing such taxable income or loss, there shall be
taken into account Depreciation for such Fiscal Year;
(iv) In the event the Gross Asset Value of any
Partnership property is adjusted to reflect any
Unrealized Gain or Unrealized Loss with respect to such
property pursuant to Section 1.3 hereof, the amount of
any such Unrealized Gain or Unrealized Loss shall be
taken into account as gain or loss from the disposition
of such property; and
(v) Any items specially allocated under Article 3
of this Allocations Exhibit shall not be taken into
account.
"Nonrecourse Deductions" shall have the meaning set forth in
Sections 1.704-2(b)(1) and (c) of the Regulations.
"Nonrecourse Liabilities" shall have the meaning set forth in
Section 1.752-1(a)(2) of the Regulations.
"Partner Nonrecourse Deductions" shall have the meaning set
forth in Section 1.704-2(i)(1) of the Regulations.
"Partner Nonrecourse Debt" shall have the meaning set forth in
Section 1.704-2(b)(4) of the Regulations.
"Partnership Minimum Gain" shall have the meaning set forth in
Sections 1.704-2(b)(2) and (d)(1) of the Regulations.
"Tax Item" is defined in Section 4.1 of this Allocations
Exhibit.
"Unrealized Gain" means, with respect to any Partnership
property as of any particular date, the excess of (i) the gross fair
market value of such property on such date as determined in accordance
with Section 1.3 of this Allocations Exhibit, over (ii) the Gross Asset
Value of such property to the Partnership on such date.
"Unrealized Loss" means, with respect to any Partnership
property as of any particular date, the excess of (i) the Gross Asset
Value of such property to the Partnership on such date, over (ii) the
gross fair market value of such property on such date, as determined in
accordance with Section 1.3 of this Allocations Exhibit as of such date.
SCHEDULE 1
ORIGINAL APPROVED PRE-CLOSING BUDGET
To be mutually approved by SDG and Macerich and incorporated into this
Agreement by an amendment signed by SDG and Macerich.
SCHEDULE 2
MACERICH MANAGED PROPERTIES
1. Empire East
Sioux Falls, South Dakota
2. Empire Mall
Sioux Falls, South Dakota
3. Lindale Mall
Cedar Rapids, Iowa
4. Mesa Mall
Grand Junction, Colorado
5. Rushmore Mall
Rapid City, South Dakota
6. Southern Hills Mall
Sioux City, Iowa
7. Southridge Mall
Des Moines, Iowa
SCHEDULE 3
SDG MANAGED PROPERTIES
1. Eastland Mall
Evansville, Indiana
2. Granite Run Mall
Media, Pennsylvania
3. Lake Square Mall
Leesburg, Florida
4. NorthPark Mall
Davenport, Iowa
5. SouthPark Mall
Moline, Illinois
6. Valley Mall
Harrisonburg, Virginia
SCHEDULE 4
LIST OF PROPERTIES
1. Eastland Mall
Evansville, Indiana
2. Empire East
Sioux Falls, South Dakota
3. Empire Mall
Sioux Falls, South Dakota
4. Granite Run Mall
Media, Pennsylvania
5. Lake Square Mall
Leesburg, Florida
6. Lindale Mall
Cedar Rapids, Iowa
7. Mesa Mall
Grand Junction, Colorado
8. NorthPark Mall
Davenport, Iowa
9. Rushmore Mall
Rapid City, South Dakota
10. Southern Hills Mall
Sioux City, Iowa
11. SouthPark Mall
Moline, Illinois
12. Southridge Mall
Des Moines, Iowa
13. Valley Mall
Harrisonburg, Virginia
SCHEDULE 5
NONCOMPETITION AREA
To be mutually approved by SDG and Macerich and incorporated into this
Agreement by an amendment signed by SDG and Macerich.
============================================================================
EXHIBIT 10.63
LIMITED PARTNERSHIP AGREEMENT
OF SDG MACERICH PROPERTIES, L.P.
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS 1
1.1 Definitions 1
ARTICLE II GENERAL PROVISIONS 6
2.1 Formation and Organization 6
2.2 Partnership Name 7
2.3 Purpose 7
2.4 Registered Office; Registered Agent 7
2.5 Term 7
2.6 Filings 7
2.7 Bankruptcy Limitations 7
ARTICLE III PARTNERS' CAPITAL CONTRIBUTIONS 8
3.1 Capital Contributions of the Partners 8
3.2 Other Matters 8
ARTICLE IV ALLOCATIONS 8
4.1 Allocation of Profits and Losses 8
4.2 Elections 9
ARTICLE V DISTRIBUTIONS 9
5.1 Distributions 9
5.2 Amounts Withheld 9
5.3 In Kind Distributions 9
ARTICLE VI MANAGEMENT 10
6.1 Management Generally 10
6.2 Executive Committee 10
6.3 No Individual Authority 12
6.4 Operating Committee. 12
6.5 Warranted Reliance by Executive Committee Members and
Operating Committee Members on Others 14
6.6 Authority of the General Partners 15
6.7 Tax Matters Partner 15
6.8 Tax Elections 15
6.9 Right to Rely on a General Partner 15
6.10 Duties and Obligations of General Partners 16
6.11 Indemnification of General Partners 18
6.12 Reimbursement 18
6.13 Removal of General Partners 19
6.14 Management Agreements 19
6.15 REIT Status 20
6.16 Defaults and Remedies 22
ARTICLE VII AMENDMENTS 23
7.1 Amendments 23
ARTICLE VIII TRANSFERS OF PARTNERSHIP INTERESTS 24
8.1 Rights of Transferees 24
ARTICLE IX POWER OF ATTORNEY 24
9.1 General Partner as Attorney 24
ARTICLE X DISSOLUTION AND WINDING UP 24
10.1 Liquidating Events 24
10.2 Winding Up 25
ARTICLE XI BOOKS AND REPORTS 26
11.1 Books of Account and Records 26
ARTICLE XII MISCELLANEOUS 26
12.1 Notices 26
12.2 Binding Effect 27
12.3 Severability 27
12.4 Governing Law 27
12.5 Counterpart Execution 27
LIMITED PARTNERSHIP AGREEMENT
OF SDG MACERICH PROPERTIES, L.P.
THIS LIMITED PARTNERSHIP AGREEMENT is entered into and shall
be effective as of the 24th day of February, 1998, by and between Simco
Acquisitions, Inc., a Delaware corporation ("Simco"), and a wholly owned
subsidiary of Simon DeBartolo Group, Inc., a Maryland corporation, and
Macerich Property EQ GP Corp., a Delaware corporation ("Macerich"), and
a wholly owned subsidiary of The Macerich Company, a Maryland
corporation (each, individually, a ``General Partner,'' and
collectively, the ``General Partners''), and SM Portfolio Limited
Partnership, a Delaware limited partnership, as the Limited Partner,
pursuant to the provisions of the Delaware Revised Uniform Limited
Partnership Act, on the following terms and conditions:
ARTICLE I
DEFINITIONS
1.1 Definitions. As used in this Agreement, the following
terms have the following meanings:
(a) ``Act'' means the Delaware Revised Uniform Limited
Partnership Act, as set forth in Title 6, Chapter 17 of the Delaware
Code, as amended from time to time (or any corresponding provisions of
succeeding law).
(b) ``Affiliate'' shall have the meaning set form in the SM
Partnership Agreement.
(c) ``Agreement'' or ``Partnership Agreement'' means this
Agreement of Limited Partnership, as amended from time to time.
(d) ``Bankruptcy'' shall mean, with respect to any Partner,
(i) the commencement by such Partner of any proceeding seeking relief
under any provision or chapter of the federal Bankruptcy Code or any
other federal or state law relating to insolvency, bankruptcy or
reorganization; (ii) an adjudication that such Partner is insolvent or
bankrupt; (iii) the entry of an order for relief under the federal
Bankruptcy Code with respect to such Partner; (iv) the filing of any
such petition or the commencement of any such case or proceeding against
such Partner, unless such petition and the case or proceeding initiated
thereby are dismissed within ninety (90) days from the date of such
filing; (v) the filing of an answer by such Partner admitting the
<PAGE> 01
material allegations of any such petition; (vi) the appointment of a
trustee, receiver or custodian for all or substantially all of the
assets of such Partner unless such appointment is vacated or dismissed
within ninety (90) days from the date of such appointment but not less
than five (5) days before the proposed sale of any assets of such
Partner; (vii) the insolvency of such Partner or the execution by such
Partner of a general assignment for the benefit of creditors; (viii) the
convening by such Partner 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.
(e) ``Capital Account'' means, with respect to any Partner,
the Capital Account maintained for such Partner in accordance with
Section 704(b) of the Code and the Regulations thereunder.
(f) ``Capital Contributions'' means, with respect to any
Partner, the amount of money or other property or assets contributed to
the Partnership from time to time with respect to the interest in the
Partnership held by such Person.
(g) ``Code'' means the Internal Revenue Code of 1986, as
amended from time to time (or any corresponding provisions of succeeding
law).
(h) ``Controlling Partner'' is defined in Section 6.16(c).
(i) ``Defaulting Partner'' is defined in Section 6.16.
(j) ``Depreciation'' means, for each Fiscal Year, an amount
equal to the depreciation, amortization, or other cost recovery
deduction allowable with respect to an asset for such Fiscal Year,
except that if the Gross Asset Value of an asset differs from its
adjusted Basis for Federal income tax purposes at the beginning of such
Fiscal Year, Depreciation shall be an amount which bears the same ratio
to such beginning Gross Asset Value as the Federal income tax
depreciation, amortization, or other cost recovery deduction for such
Fiscal Year bears to such beginning adjusted tax basis; provided,
however, that if the adjusted basis for Federal income tax purposes of
an asset at the beginning of such Fiscal Year is zero, Depreciation
shall be determined with reference to such beginning Gross Asset Value
using any reasonable method selected by the General Partner.
(k) ``Employee Benefit Plan'' has the meaning assigned to the
term ``employee benefit plan'' in Section 3(3) of ERISA, which is or was
maintained or contributed to by the Partnership or a Related Person to
the Partnership.
<PAGE> 02
(l) ``Event of Default'' is defined in Section 6.16.
(m) ``Executive Committee'' shall have the meaning set forth
in Section 6.2.
(n) ``Executive Committee Members'' shall have the meaning
set forth in Section 6.2.
(o) ``Equitable'' shall mean The Equitable Life Assurance
Society of the United States, a New York corporation, the "seller" of
the Properties under the Purchase Agreement.
(p) ``Existing Financing'' shall mean that certain financing
with respect to all of the Properties evidenced by those certain
collateralized fixed and floating rate notes in the aggregate principal
sum of $485,000,000 issued by Equitable, which notes are secured by,
inter alia, those documents and instruments more particularly described
on Exhibit B to the Purchase Agreement.
(q) ``Fiscal Year'' means (i) the period commencing on the
date hereof and ending on December 31, 1998 and, (ii) any subsequent
twelve (12) month period commencing on January 1.
(r) ``General Partnership Interest'' means the Partnership
Interest held by each General Partner constituting one half of one
percent (.5%) of the total Partnership Interests outstanding and owned
by all of the Partners.
(s) ``Gross Asset Value'' means the adjusted basis of
property for Federal income tax purposes, except that the Gross Asset
Value of the Property will be adjusted to its fair market value (i)
whenever such adjustment is required in order for allocations under this
Agreement to have "economic effect'' within the meaning of Regulation
Section 1.704-1(b)(2)(iv), and (ii) if the General Partners consider
appropriate, whenever such adjustment is permitted under Regulation
Section 1.704-l(b)(2)(ii). If the Gross Asset Value of property is so
adjusted, such Gross Asset Value shall thereafter be further adjusted by
the Depreciation taken into account with respect to such asset for
purposes of computing Profits and Losses.
(t) ``Independent Director'' means, with respect to any
Person, a director of such Person who is not at the time of appointment
and who has not at any time during the preceding five (5) year period
prior to such director's appointment as a director and during the
continuation of such director's service as a director has not been and
does not become subsequently: (i) a partner, stockholder or holder of
any other beneficial interest in such Person or in any Affiliate of such
Person, (ii) a director, officer, partner, trade creditor or employee of
such Person or any partner, subsidiary or Affiliate of such Person,
<PAGE> 03
(iii) a customer, service provider (including professionals), creditor,
supplier, independent contractor, manager, or any other Person who
derives more than $2,000 annually from its activities with such Person
or any Affiliate or partner of such Person (other than revenue derived
in respect of being an Independent Director); (iv) a Person controlling
or controlled by any of the Persons referenced in clauses (i) (ii) or
(iii) above, or (v) a member of the immediate family of any such Person
referenced in clauses (i), (ii), (iii) or (iv) above. Solely for
purposes of this definition, (x) "Affiliate'' shall mean, as to any
Person, any other Person that, directly or indirectly, is in control of,
is controlled by, or is under common control with, such Person, and (y)
"control'' of a person shall mean (i) either the power, directly or
indirectly, to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting
securities, by contract or otherwise or (ii) the ownership of 10% or
more of the voting securities of such Person.
(u) ``Limited Partner'' means SM Portfolio Limited
Partnership and any Person who has become a Limited Partner pursuant to
the terms of this Agreement.
(v) ``Limited Partnership Interest'' means that Partnership
Interest held by the Limited Partner constituting ninety-nine percent
(99%) of the total Partnership Interests outstanding and owned by all of
the Partners.
(w) ``Macerich Management Agreement'' is defined in Section
6.14.
(x) ``Majority in Interest '' means as of any date any
Partner or Partners whose aggregate Partnership Interests constitute at
least a simple majority of the aggregate Partnership Interests then
outstanding.
(y) ``Net Cash Flow from Operations'' means the gross
proceeds from Partnership operations, less the portion thereof used to
pay or establish reserves for all Partnership expenses, debt payments,
capital improvements, replacements and contingencies, all as determined
by the General Partners. "Net Cash Flow From Operations'' shall not be
reduced by depreciation, amortization, cost recovery deductions or
similar allowances but shall be increased by any reduction of reserves
previously established pursuant to this paragraph or the succeeding
paragraph.
(z) ``Net Cash From Sales or Refinancings'' means the net
cash proceeds from the sale or other disposition and all refinancings of
the Property, less any portion thereof used to establish reserves, all
as determined by the General Partners. "Net Cash From Sales or
Refinancings'' shall include all principal and interest payments with
respect to any note or other obligation received by the Partnership in
connection with the sale or other disposition of the Property.
(aa) ``Operating Committee'' shall have the meaning set forth
in Section 6.4.
<PAGE> 04
(bb) ``Operating Committee Members'' shall have the meaning
set forth in Section 6.4.
(cc) ``Partners'' means all General Partners and all Limited
Partners, where no distinction is required by the context in which the
term is used herein. "Partner'' means any one of the Partners.
(dd) ``Partnership'' means the partnership formed pursuant to
the certificate of limited partnership and this Agreement.
(ee) ``Partnership Interest'' means the respective percentage
interest of a Partner in the Partnership as set forth in Exhibit A
attached hereto.
(ff) ``Person'' means any individual, partnership,
corporation, trust, or other entity.
(gg) ``Profits'' and ``Losses'' means, for each Fiscal Year,
an amount equal to the Partnership's taxable income or loss for such
Fiscal Year, determined in accordance with Code Section 703(a) (for this
purpose, all items of income, gain, loss, or deduction required to be
stated separately pursuant to Code Section 703(a)(1) shall be included
in taxable income or loss), with the following adjustments:
(i) 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 subsection shall
be added to such taxable income or loss;
(ii) In the event the Gross Asset Value of any property
is adjusted pursuant to Subparagraph (i) of the definition of
Gross Asset Value", the amount of such adjustment shall be
taken into account as gain or loss from the disposition of the
property for purposes of computing Profits or Losses;
(iii) Gain or loss resulting from the disposition of any
property shall be computed by reference to the Gross Asset
Value of such property, notwithstanding that the adjusted tax
basis of such property differs from its Gross Asset Value;
(iv) In lieu of the depreciation, amortization, and
other cost recovery deductions taken into account in computing
such taxable income or loss, there shall be taken into account
Depreciation for such Fiscal Year, computed in accordance with
the definition of Depreciation contained herein; and
(v) To the extent an adjustment to the adjusted tax
basis of any Partnership asset pursuant to Code Section 734(b)
or Code Section 743(b) is required pursuant to Regulations
<PAGE> 05
Section 1.704-1(b)(2)(iv)(m)(4) to be taken into account in
determining Capital Accounts as a result of a distribution
other than in complete liquidation of a Partner's Interest,
the amount of such adjustment shall be treated as an item of
gain (if the adjustment increases the basis of the asset) or
loss (if the adjustment decreases the basis of the asset) from
the disposition of the asset and shall be taken into account
for purposes of computing Profits or Losses.
(hh) ``Properties'' shall mean the real properties to be
acquired by the Partnership pursuant to the Purchase Agreement, each of
which real properties is more specifically identified and defined on
Schedule 1 attached hereto, together with all other tangible and
intangible property to be acquired by the Partnership pursuant to the
Purchase Agreement.
(ii) ``Property'' shall mean any of the Properties
individually.
(jj) ``Property Manager'' shall mean the property manager for
any particular Property engaged pursuant to a Macerich Management
Agreement or Simco Management Agreement, as the case may be, as well as
any property manager approved by the Executive Committee with respect to
any Property.
(kk) ``Purchase Agreement'' shall mean that certain Purchase
and Sale Agreement by and between Equitable and SM Portfolio Partners,
which provides for the sale of the Properties by Equitable to SM
Portfolio Partners, subject to the Existing Financing.
(ll) ``REIT'' means a "real estate investment trust" within
the meaning of Section 856 of the Code.
(mm) ``Regulations'' means the Income Tax Regulations,
including Temporary Regulations, promulgated under the Code, as such
Regulations may be amended from time to time (including corresponding
provisions of succeeding regulations).
(nn) ``SIMCO Management Agreement'' is defined in Section
6.14.
(oo) ``SM Partnership Agreement'' means the Partnership
Agreement of SM Portfolio Limited Partnership, dated as of February 24,
1998.
ARTICLE II
GENERAL PROVISIONS
2.1 Formation and Organization. The Partners hereby agree to
form the Partnership as a limited partnership pursuant to the provisions
of the Act and upon the terms and conditions set forth in this
Agreement. Each Partner's initial Capital Contribution and corresponding
<PAGE> 06
Partnership Interest is set forth in Exhibit A, which is attached to and
forms part of this Agreement. The Partnership shall be treated as a
partnership for Federal income tax purposes, and the Tax Matters Partner
(as defined in Section 6.7) shall make any elections and take any and
all other actions necessary to effect such partnership status.
2.2 Partnership Name. The name of the Partnership shall be
SDG Macerich Properties, L.P., and all business of the Partnership shall
be conducted in such name.
2.3 Purpose. The limited purposes for which the Partnership
is organized are to acquire, improve, lease, finance, refinance,
mortgage, operate, manage, own, hold, sell exchange or otherwise
disclose of or deal with the Properties, or any part thereof, and to
engage in any and all activities related or incidental thereto. The
Partnership shall not engage in any other business activity, and shall
not own any assets or incur any indebtedness other than the assets or
indebtedness relating to the Properties or otherwise in furtherance of
the purposes of the Partnership.
2.4 Registered Office; Registered Agent. The registered
office and registered agent for service of process of the Partnership in
the State of Delaware shall be The Corporation Trust Company,
Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801
or such other Person as the General Partners may appoint.
2.5 Term. The term of the Partnership commenced on the date
the certificate of limited partnership was filed in the office of the
Secretary of State of Delaware in accordance with the Act and shall
continue until the winding up and liquidation of the Partnership (in
accordance with Article X) and the completion of its business.
2.6 Filings.
(a) The General Partners shall take any and all other actions
as may be reasonably necessary to perfect and maintain the status of the
Partnership as a limited partnership or similar type of entity under the
laws of Delaware and any other states or jurisdictions in which the
Partnership engages in business.
(b) Upon the dissolution of the Partnership, the General
Partners shall promptly execute and cause to be filed certificates of
dissolution in accordance with the Act and the laws of any other states
or jurisdictions in which the Partnership has filed certificates.
2.7 Bankruptcy Limitations. The Partnership shall not,
without unanimous vote of the directors of the General Partners (which
must include the affirmative vote of at least one Independent Director
of each General Partner) (i) commence any case, proceeding or other
action seeking protection for the Partnership as a debtor under any
existing or future law of any jurisdiction relating to bankruptcy,
insolvency, reorganization or relief of debtors, (ii) consent to the
<PAGE> 07
entry of an order for relief in or institution of any case, proceeding
or other action brought by any third party against the Partnership as a
debtor under any existing or future law of any jurisdiction relating to
bankruptcy, insolvency, reorganization or relief of debtors, (iii) file
an answer in any involuntary case or proceeding described in clause (ii)
above admitting the material allegations of the petition therein or
otherwise failing to contest any such involuntary case or proceeding,
(iv) seek or consent to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator, custodian or any similar official for
the Partnership or for a substantial portion of its properties, (v) make
any assignment for the benefit of the creditors of the Partnership, or
(vi) admit in writing the inability of the Partnership to generally pay
its debts as they mature or that the Partnership is generally not paying
its debts as they become due.
ARTICLE III
PARTNERS' CAPITAL CONTRIBUTIONS
3.1 Capital Contributions of the Partners. Each Partner has
made the initial Capital Contributions set forth in Exhibit A attached
hereto and any subsequent Capital Contributions shall be reflected in
the books and records of the Partnership. No Partner shall be obligated
to make any additional Capital Contributions. Each Partner shall
establish and maintain a Capital Account with respect to the
Partnership.
3.2 Other Matters.
(a) Except as otherwise provided in this Agreement, no
Partner shall demand or receive a return of its Capital Contributions or
withdraw from the Partnership without the consent of all Partners.
(b) The General Partners shall not have any personal
liability for the repayment of any Capital Contributions of any Limited
Partner.
(c) The Limited Partner shall not be personally liable for
the debts, liabilities, contracts or other obligations of the
Partnership.
ARTICLE IV
ALLOCATIONS
4.1 Allocation of Profits and Losses. The Profits and Losses
of the Partnership shall be allocated among the Partners in accordance
with their Partnership Interests; provided, however, that, in accordance
with Code Section 704(c) and the Regulations thereunder and Regulation
Section 1.704-1(b)(4)(i), income, gain, loss, and deduction with respect
to any property contributed to the capital of the Partnership shall,
solely for tax purposes, be allocated among the Partners so as to take
<PAGE> 08
account of any variation between the adjusted basis of such property to
the Partnership for federal income tax purposes and its initial Gross
Asset Value.
4.2 Elections. In no event shall the Tax Matters Partner (as
defined in Section 6.7) make any election or cause any election to be
made that would cause the Partnership to be treated as an association
taxable as a corporation for Federal income tax purposes. Except as
otherwise expressly provided herein, any tax elections required or
permitted to be made by the Partnership under the Code or otherwise, and
all material decisions with respect to the calculation of the Net
Profits or Net Losses of the Partnership, shall be made in such manner
as may be determined by the General Partners to be in the best interests
of the Partners.
ARTICLE V
DISTRIBUTIONS
5.1 Distributions. Net Cash Flow From Operations, Net Cash
Flow from Sales or Refinancings, and, except as otherwise prohibited
under this Agreement, any of the Properties, shall be distributed at
such times as the General Partners may determine, to the Partners pro
rata in accordance with their Partnership Interests.
5.2 Amounts Withheld. The General Partners are authorized to
withhold from distributions or allocations to a Partner and to pay over
to any Federal, state or local government any amounts required to be
withheld pursuant to the Code or any provisions of any other Federal,
state or local law with respect to any payment, distribution or
allocation to the Partnership or the Partner and shall allocate any such
amounts to the Partner with respect to which such amount was withheld.
All amounts so withheld shall be treated as amounts distributed to such
Partner, and will reduce the amount otherwise distributable to such
Partner, pursuant to this Article V for all purposes under this
Agreement.
5.3 In Kind Distributions. If there shall occur, as between
the General Partners, a deadlock over a Buy-Sell Major Decision (as
defined in the SM Partnership Agreement), then either General Partner
may elect to cause the Property with respect to which such deadlock
exists to be distributed in kind to the Partners pro rata in accordance
with their Partnership Interests; provided, however, that no such in
kind distribution shall occur unless, either prior to or
contemporaneously with such distribution, the Property is released from
the Existing Financing, or any other lien or encumbrance to which it may
become subject after the date hereof.
<PAGE> 09
ARTICLE VI
MANAGEMENT
6.1 Management Generally. The management of the
Partnership shall be vested in the Executive Committee, Operating
Committee and the General Partners constituted as hereinafter provided.
The Limited Partner shall have no part in the management or control of
the Partnership, shall have no authority or right to act on behalf of
the Partnership in connection with any matter, and shall have no right
to consent to or approve any action by the General Partners except as
expressly provided herein or as required by the Act.
6.2 Executive Committee. The Partnership shall at all
times have an executive committee (the "Executive Committee") composed
of two individuals (the "Executive Committee Members") who shall oversee
the performance of the Operating Committee.
(a) Membership and Voting.
(i) Membership. The Executive Committee will
consist of two (2) Executive Committee Members, with one (1)
Executive Committee Member appointed by each General Partner.
Concurrently with the execution and delivery of this Agreement, the
General Partners have notified one another in writing of their
respective initial appointed Executive Committee Member. Each
General Partner may, at any time, appoint an alternate Executive
Committee Member by prior written notice to the other General
Partner's appointed Executive Committee Member and such alternates
will have all the powers, authority and duties of a regular
Executive Committee Member in the absence or inability of a regular
Executive Committee Member to serve. In no event, however, shall
the other Executive Committee Member be under any obligation to
make inquiries as to, or verify or confirm, any such absence or
inability to serve of a regular Executive Committee Member, it
being understood and agreed that the Executive Committee Members
shall be entitled to rely upon and accept an alternate Executive
Committee Member's assertion of the absence or inability to serve
of the regular Executive Committee Member in question. Each
General Partner shall cause its appointed Executive Committee
Member and alternate Executive Committee Member to comply with the
terms of this Agreement. Each General Partner will have the power
to remove its Executive Committee Member or alternate Executive
Committee Member appointed by it by written notice to the other
General Partner's Executive Committee Member. Vacancies on the
Executive Committee will be filled by appointment by the General
Partner that appointed the Executive Committee Member previously
holding the position that is then vacant. The General Partners may
mutually agree to increase or decrease the size of the Executive
Committee proportionately, from time to time. Notices to an
Executive Committee Member shall be delivered to such Person's
attention at the address set forth in Section 12.1 for the General
Partner that appointed such Executive Committee Member. No
<PAGE> 10
appointment or removal by a General Partner of an Executive
Committee Member or alternate Executive Committee Member shall be
effective until written notice of such action is received or deemed
received pursuant to Section 12.1 by the Executive Committee Member
of the other General Partner. Each General Partner and its
respective Executive Committee Member and alternate Executive
Committee Member, when dealing with the other General Partner's
respective Executive Committee Member and alternate Executive
Committee Member, (i) shall be entitled to rely upon and accept the
written act, approval, consent or vote of each of such other
General Partner's then-appointed Executive Committee Member and
alternate Executive Committee Member, and (ii) shall be under no
obligation to make any inquiries in order to verify or confirm any
of such written acts, approvals, consents or votes.
(ii) Voting. Each Executive Committee Member shall have
one vote on any decision of the Executive Committee. An Executive
Committee Member may give a written proxy to another Executive
Committee Member to vote on such Executive Committee Member's
behalf in such Executive Committee Member's absence. Except as
expressly provided to the contrary in this Agreement, all actions,
decisions, capital calls, determinations, waivers, approvals and
consents to be taken or given by the Executive Committee must be
unanimously approved by the Executive Committee Members (whether or
not present at the meeting at which such vote occurs).
(b) Meetings of the Executive Committee; Time and
Place. Unless otherwise agreed by the Executive Committee, regular
meetings of the Executive Committee shall be held no less often than
quarterly at such time and at such place as the Executive Committee
shall determine. At such regular meetings, the Operating Committee
shall report on the financial performance and condition of the
Partnership on a year-to-date basis (including cash flows, reserves,
outstanding loans, and compliance efforts), progress on capital
projects, material contracts entered into, material litigation,
marketing and leasing efforts, deviations from any budget and such other
matters relevant to the management and operation of the Partnership and
the Properties. Special meetings of the Executive Committee shall be
held on the call of any Executive Committee Member; provided that at
least three (3) business days' notice is given to all Executive
Committee Members (unless written waiver of this requirement by all
Executive Committee Members is obtained). A quorum for any Executive
Committee meeting shall consist of not less than two (2) Executive
Committee Members (one appointed by each General Partner) present either
in person or by proxy. The Executive Committee may make use of
telephones and other electronic devices to hold meetings; provided that
the Executive Committee Members participating in such meeting can hear
one another. The Executive Committee may act without a meeting if the
action taken is reduced to writing and approved by the Executive
Committee in accordance with the other voting provisions of this
Agreement. Written minutes shall be taken at each meeting of the
Executive Committee. However, any action taken or matter agreed upon by
the Executive Committee shall be deemed final, whether or not written
minutes are ever prepared or finalized.
<PAGE> 11
6.3 No Individual Authority. Except as otherwise expressly
provided in this Agreement, no Partner, acting alone, shall have any
authority to act for, or undertake or assume any obligation or
responsibility on behalf of, the other Partner or the Partnership.
6.4 Operating Committee. Unless otherwise agreed to by the
General Partners, the management of the Partnership, subject to the
restrictions on its authority set forth in Section 6.2, shall be vested
in the operating committee (the "Operating Committee"). The Operating
Committee shall be composed of two individuals (the "Operating Committee
Members") who shall vote on all management issues relating to the
business and operations of the Partnership.
(a) Membership and Voting.
(i) Membership. The Operating Committee will
consist of two (2) Operating Committee Members, with one (1)
Operating Committee Member appointed by each General Partner.
Concurrently with the execution and delivery of this Agreement, the
General Partners have notified one another in writing of their
respective initial appointed Operating Committee Member. Each
General Partner may, at any time, appoint one of its employees as
an alternate Operating Committee Member by prior written notice to
the other General Partner's appointed Operating Committee Member
and such alternates will have all the powers, authority and duties
of a regular Operating Committee Member in the absence or inability
of a regular Operating Committee Member to serve. In no event,
however, shall the other Operating Committee Member be under any
obligation to make inquiries as to, or verify or confirm, any such
absence or inability to serve of a regular Operating Committee
Member, it being understood and agreed that the Operating Committee
Members shall be entitled to rely upon and accept an alternate
Operating Committee Member's assertion of the absence or inability
to serve of the regular Operating Committee Member in question.
Each General Partner shall cause its appointed Operating Committee
Member and alternate Operating Committee Member to comply with the
terms of this Agreement. Each General Partner will have the power
to remove its Operating Committee Member or alternate Operating
Committee Member appointed by it by written notice to the other
General Partner's Operating Committee Member. Vacancies on the
Operating Committee will be filled by appointment by the General
Partner that appointed the Operating Committee Member previously
holding the position that is then vacant. The General Partners may
mutually agree to increase or decrease the size of the Operating
Committee proportionately, from time to time. Notices to an
Operating Committee Member shall be delivered to such Person's
attention at the address set forth in Section 12.1 for the General
Partner that appointed such Operating Committee Member. No
appointment or removal by a General Partner of an Operating
Committee Member or alternate Operating Committee Member shall be
effective until written notice of such action is received or deemed
received pursuant to Section 12.1 by the Operating Committee Member
of the other General Partner. Each General Partner and its
respective Operating Committee Member and alternate Operating
Committee Member, when dealing with the other General Partner's
<PAGE> 12
respective Operating Committee Member and alternate Operating
Committee Member, (i) shall be entitled to rely upon and accept the
written act, approval, consent or vote of each of such other
General Partner's then-appointed Operating Committee Member and
alternate Operating Committee Member, and (ii) shall be under no
obligation to make any inquiries in order to verify or confirm any
of such written acts, approvals, consents or votes.
(ii) Voting. Each Operating Committee Member shall
have one vote on any decision of the Operating Committee. An
Operating Committee Member may give a written proxy to another
Operating Committee Member or any Partner's employee to vote on
such Operating Committee Member's behalf in such Operating
Committee Member's absence. Except as expressly provided to the
contrary in this Agreement, all actions, decisions, capital calls,
determinations, waivers, approvals and consents to be taken or
given by the Operating Committee must be unanimously approved by
the Operating Committee Members (whether or not present at the
meeting at which such vote occurs).
(b) Reports and Meetings of the Operating Committee;
Time and Place. The Operating Committee shall report to the Executive
Committee on activities undertaken by the Operating Committee, as
required by the Executive Committee and this Agreement. Unless
otherwise agreed by the Operating Committee, regular meetings of the
Operating Committee shall be held monthly at such time and at such place
as the Operating Committee shall determine. Special meetings of the
Operating Committee shall be held on the call of any Operating Committee
Member; provided that at least three (3) business days' notice is given
to all Operating Committee Members (unless written waiver of this
requirement by all Operating Committee Members is obtained). A quorum
for any Operating Committee meeting shall consist of not less than two
(2) Operating Committee Members (one appointed by each General Partner)
present either in person or by proxy. The Operating Committee may make
use of telephones and other electronic devices to hold meetings;
provided that the Operating Committee Members participating in such
meeting can hear one another. The Operating Committee may act without a
meeting if the action taken is reduced to writing and approved by the
Operating Committee in accordance with the other voting provisions of
this Agreement. Written minutes shall be taken at each meeting of the
Operating Committee. However, any action taken or matter agreed upon by
the Operating Committee shall be deemed final, whether or not written
minutes are ever prepared or finalized. Operating Committee meetings
may be attended by persons other than the Operating Committee Members
(including other employees of the Partners and their Affiliates).
(c) Duties of the Operating Committee. The Operating
Committee shall be generally responsible for overseeing and managing the
day-to-day business, operations and affairs of the Partnership and
carrying out the duties delegated to it by the Executive Committee, and
shall have fiduciary responsibility for the safekeeping and use of all
funds and assets of the Partnership, whether or not in its immediate
possession or control. The Operating Committee may, in carrying out its
<PAGE> 13
duties, defend against lawsuits or other judicial or administrative
proceedings brought against the Partnership, provided that it promptly
notifies the Executive Committee of such action. The funds of the
Partnership shall not be commingled with the funds of any other Person,
and the Operating Committee shall not employ, or permit any other Person
to employ, such funds in any manner except for the benefit of the
Partnership. The bank accounts of the Partnership shall be maintained
in such banking institutions as are approved by the Operating Committee
and withdrawals shall be made only in the regular course of Partnership
business and as otherwise authorized in this Agreement on such signature
or signatures as the Operating Committee may determine. Subject to the
limitations on its powers and authorities set forth in this Agreement,
the Operating Committee shall ensure that the Partnership complies with
its obligations under the Purchase Agreement and the loan documents
pertaining to the Existing Financing, and all other material agreements
to which the Partnership is a party or by which the Partnership is
bound. The Operating Committee shall also have the duties imposed upon
it elsewhere in this Agreement. The Operating Committee shall devote
sufficient time, effort and managerial resources to the business of the
Partnership as is reasonably required to fulfill its obligations
hereunder.
6.5 Warranted Reliance by Executive Committee Members and
Operating Committee Members on Others. In exercising their authority
and performing their duties under this Agreement, the Executive
Committee Members and the Operating Committee Members shall be entitled
to rely on information, opinions, reports, or statements of the
following persons or groups unless they have actual knowledge concerning
the matter in question that would cause such reliance to be unwarranted:
(a) one or more agents of the Partnership whom the
Executive Committee Member or Operating Committee Member, as the case
may be, reasonably believes to be reliable and competent in the matters
presented; and
(b) any attorney, public accountant, or other person as
to matters which the Executive Committee Member or Operating Committee
Member, as the case may be, reasonably believes to be within such
person's professional or expert competence.
6.6 Authority of the General Partners.
(a) Except as otherwise provided herein, the General Partners
shall have the power on behalf and in the name of the Partnership to
carry out any and all of the objects and purposes of the Partnership set
forth in Section 2.3 and to perform all acts incidental thereto or
connected therewith which it may deem necessary or advisable, including,
without limitation, the power to:
(i) acquire or sell any assets of the Partnership;
<PAGE> 14
(ii) incur indebtedness on behalf of the Partnership and
secure any and all of such indebtedness with the assets of the
Partnership: and
(iii) open, maintain, and close bank accounts and draw
checks or other orders for the payment of money.
6.7 Tax Matters Partner. Macerich Property EQ GP Corp. is
specifically authorized and appointed to act as the ``Tax Matters
Partner'' under section 6231(a)(7) of the Code and in any similar
capacity under state or local law; provided, however, that it shall
exercise its authority in such capacity subject to all applicable terms
and limitations set forth in this Agreement. Notwithstanding the
foregoing, the Tax Matters Partner shall not, without the prior written
approval of the other General Partner, (i) make any tax election on
behalf of the Partnership, (ii) take any action with respect to any
federal, state or local contest of any partnership item (as defined in
Section 6231(a)(7) of the Code (or any successor thereto) (and
comparable provisions of state and local income tax laws) of the
Partnership, or (iii) take any action with respect to any audit of any
federal, state or local income tax return or income tax report filed by
or on behalf of the Partnership.
6.8 Tax Elections. Without limiting in any way the General
Partners' rights and powers under Section 6.6, and subject to Section
6.7, the Tax Matters Partner may make any and all elections for Federal,
state, and local tax purposes including any election, if permitted by
applicable law, to adjust the basis of the Property pursuant to Code
Sections 754, 734(b), and 743(b), or comparable provisions of state or
local law, in connection with transfers of interests in the Partnership
and Partnership distributions.
6.9 Right to Rely on a General Partner. Any Person dealing
with the Partnership may rely (without duty of further inquiry) upon a
certificate signed by a General Partner as to the identity of such
General Partner or the Limited Partner, the Persons who are authorized
to execute and deliver any instrument or document of the Partnership,
and any act or failure to act by the Partnership or any other matter
whatsoever involving the Partnership or any Partner.
6.10 Duties and Obligations of General Partners.
(a) The General Partners shall take all actions which may be
necessary or appropriate (i) for the continuation of the Partnership's
valid existence as a limited partnership under the laws of the State of
Delaware and of each other jurisdiction in which such existence is
necessary to protect the limited liability of the Limited Partner or to
enable the Partnership to conduct the business in which it is engaged
and (ii) for the accomplishment of the Partnership's purposes.
<PAGE> 15
(b) The General Partners shall cause to be provided, or cause
the Partnership to carry, such insurance as is customary in the business
in which the Partnership is engaged and in the places in which it is so
engaged.
(c) Notwithstanding anything to the contrary herein, the
Partnership shall, and the General Partners shall cause the Partnership
to:
i) maintain its records and books of account separate
from those of any other Person;
ii) not commingle its assets and funds with those of
any other Person (it being understood that a General Partner may,
in its capacity as a general partner of the Partnership, hold
assets or funds on behalf of the Partnership);
iii) conduct its own business in its own name (it being
understood that a General Partner may act on behalf of the
Partnership in its capacity as a general partner of the
Partnership);
iv) maintain separate financial statements;
v) pay its own liabilities out of its own funds;
vi) cause the directors of its general partners to meet
on a regular basis, or act pursuant to a unanimous written consent,
to carry on the business of the Partnership and keep minutes of
such meetings and observe all limited partnership formalities, as
applicable;
vii) maintain an arms-length relationship with its
Affiliates;
viii) pay the salaries of its own employees, if any, and
maintain a sufficient number of employees in light of its
contemplated business operations;
ix) not guarantee or become obligated for the debts of
any other Person (except in connection with the endorsement of
negotiable instruments in the ordinary course of business and
except for a General Partner in its capacity as a general partner
of the Partnership) or hold out its credit as being available to
satisfy the obligations of others;
x) allocate fairly and reasonably any overhead for
shared office space;
xi) use separate stationery, invoices and checks;
<PAGE> 16
xii) not pledge its assets for the benefit of any other
Person or make any loans or advances to any Person;
xiii) maintain its accounts separate from those of any
other Person (it being understood that a General Partner may, in
its capacity as a general partner of the Partnership, maintain an
account on behalf of the Partnership);
xiv) hold itself out as a separate entity;
xv) file its own tax returns, as required;
xvi) not engage in any nonexempt ``prohibited
transaction'' described in Section 406 of ERISA or section 4975 of
the Code;
xvii) not acquire obligations or securities of its
stockholders or Affiliates (it being understood that a General
Partner, in its capacity as a general partner of the Partnership,
may hold its interest as a general partner of the Partnership);
<PAGE> 17
xviii) correct any misunderstanding actually known by it
regarding its separate identity; and
xix) maintain adequate capital in light of its
contemplated business operations.
(d) Notwithstanding anything to the contrary herein, for so
long as the Existing Financing is outstanding, the General Partners may
not do, or cause or permit the Partnership to do, any of the following:
(i) wind up, dissolve or liquidate, in whole or in part, consolidate or
merge with or into any other Person or convey, sell or transfer all or
substantially all of the assets of the Partnership to any Person; (ii)
approve any act by the Partnership as a result of which the Partnership
would be dissolved; (iii) engage in any business or activity other than,
in the case of a General Partner, the ownership of such General
Partner's interest in the Partnership, or in the case of the
Partnership, the ownership and operation of the Properties; or (iv)
incur or assume any indebtedness, other than, in the case of the
Partnership, the Existing Financing.
6.11 Indemnification of General Partners. The General
Partners or any officers or directors of the General Partners
(collectively, "Indemnitees") shall have no liability to any Partner
or the Partnership for, and the Partnership agrees to indemnify each
Indemnitee to the fullest extent permitted by law from and against, any
and all losses, judgments, liabilities, expenses and amounts paid in
settlement of any claims sustained by them in connection with the
Partnership. However, each Indemnitee shall be liable, responsible, and
accountable, and the Partnership shall not be liable to any Indemnitee,
for any portion of such losses, judgments, liabilities and expenses that
results from any Indemnitee's willful misconduct, or fraud, as finally
determined by a court of competent jurisdiction. If any action, suit or
proceeding shall be pending against the Partnership or an Indemnitee in
connection with the Partnership, such Indemnitee shall have the right to
employ separate counsel of its choice in such action, suit or
proceeding. The reasonable fees and expenses of such separate counsel
shall constitute expenses for the purposes of the indemnification
provided by this Section 6.11. The satisfaction of the obligations of
the Partnership under this Section 6.11 shall be from and limited to the
assets of the Partnership, and no other Partner shall have any personal
liability on account thereof. Each Indemnitee shall have the right to
receive advances from the Partnership for all legal expenses and other
costs incurred as a result of a legal action and for all amounts for
which such Indemnitee believes in good faith that such Indemnitee is
entitled to indemnification under this Section 6.11, but only if (i) the
legal action relates to the performance of duties or services by such
Indemnitee on behalf of the Partnership; and (ii) such Indemnitee
undertakes to repay the advanced funds to the Partnership in the
circumstances and the manner set out below. The Partnership shall make
such advances (for which the Partnership is liable as determined above)
within 30 days after a request for such advance is received. In the
event that a determination is made that the Partnership is not so
obligated in respect of any advance made by it, such Indemnitee will
within 30 days of such determination repay the advanced funds to the
Partnership with interest from the date of payment until the date of
repayment of such amount and in the event that a determination is made
<PAGE> 18
that the Partnership is so obligated in respect of any amount not
advanced by the Partnership to a particular Indemnitee, the Partnership
will within 30 days of such determination pay such amount to such
Indemnitee with interest from the date of any expenditure to the date of
such determination. Any judgment against the Partnership and any
Indemnitee wherein such Indemnitee is entitled to indemnification
hereunder must first be satisfied from the assets of the Partnership
before such Indemnitee is responsible for the satisfaction of such
judgment.
6.12 Reimbursement. A General Partner shall be reimbursed for
all reasonable costs and expenses incurred by it on behalf of the
Partnership. A General Partner shall receive no other compensation for
managing the affairs of the Partnership.
6.13 Removal of General Partners. A Majority in Interest of
the Limited Partners shall have the power and authority to remove a
General Partner and to appoint a replacement General Partner, provided
that any such replacement General Partner shall be a Person (i) who
consents to such appointment, (ii) who is capable of performing the
functions of the replaced General Partner hereunder, and (iii) who is an
entity organized pursuant to a certificate of incorporation (or other
constituent documents) which includes provisions in form and in
substance that comply with the requirements of the Existing Financing.
Any replacement General Partner appointed pursuant to this Section 6.13
shall, effective upon acceptance of such appointment, be admitted as a
General Partner of the Partnership, and shall succeed to all of the
powers and responsibilities of the replaced General Partner hereunder.
In the event that the replaced General Partner is replaced pursuant to
this Section 6.13 by a replacement General Partner which does not
purchase such replaced General Partner's Partnership Interest, (i) such
replaced General Partner shall be treated as an assignee of a
Partnership Interest under Section 8.1 and may be admitted as a
substituted Partner subject to the consent of a Majority in Interest of
the Limited Partners and (ii) all Partnership Interests shall be reduced
pro rata to the minimum extent necessary to admit the replacement
General Partner as a Partner.
6.14 Management Agreements. Macerich or an Affiliate of
Macerich shall be hired as Property Manager to manage the Properties
described on Schedule 2 attached hereto, and Simco or an Affiliate of
Simco shall be hired as Property Manager to manage the Properties
described on Schedule 3 attached hereto. The management of each of the
Properties shall be governed by management agreements to be entered into
prior to the Partnership's acquisition of the Properties. Macerich and
Simco hereby covenant and agree to negotiate in good faith to agree upon
a form management agreement which will govern the management of each of
the Properties. One form management agreement will be used for all
Properties, whether managed by Macerich or Simco. Notwithstanding
anything to the contrary stated in this Agreement, Macerich, acting
alone, shall have the exclusive right and authority on behalf of the
Partnership so long as Macerich is not a Defaulting Partner (i) to
determine on behalf of the Partnership whether Simco or its Affiliate
acting as Property Manager under any management agreement for any
property (each a "Simco Management Agreement") is in default under such
Simco Management Agreement, and, if so, the action to be taken by the
Partnership with respect thereto, (ii) to exercise termination rights in
<PAGE> 19
accordance with the terms under each Simco Management Agreement, (iii)
to arrange for and cause the enforcement and defense of the
Partnership's rights under each such Simco Management Agreement
(including by the prosecution or defense of any proceeding or action
that it deems necessary or appropriate), (iv) to grant any approval or
waiver under, or agree to any amendment or modification of, any Simco
Management Agreement, and (v) to retain, as a Partnership expense,
counsel of its choosing in connection with any of the foregoing actions
set forth in clauses (i), (ii), (iii) or (iv). Notwithstanding anything
to the contrary statement in this Agreement, Simco, acting alone, shall
have the exclusive right and authority on behalf of the Partnership so
long as Simco is not a Defaulting Partner (i) to determine on behalf of
the Partnership whether Macerich or its Affiliate acting as Property
Manager under any management agreement for any Property (each a
"Macerich Management Agreement") is in default under such Macerich
Management Agreement, and, if so, the action to be taken by the
Partnership with respect thereto, (ii) to exercise termination rights in
accordance with the terms under each Macerich Management Agreement,
(iii) to arrange for and cause the enforcement and defense of the
Partnership's rights under each such Macerich Management Agreement
(including by the prosecution or defense of any proceeding or action
that it deems necessary or appropriate), (iv) to grant any approval or
waiver under, or agree to any amendment or modification of, any Macerich
Management Agreement, and (v) to retain, as a Partnership expense,
counsel of its choosing in connection with any of the foregoing actions
set forth in clauses (i), (ii), (iii) or (iv). In no event shall
Macerich have the right to cause the termination or cancellation of any
Simco Management Agreement without cause, and in no event shall Simco
have the right to cause the termination or cancellation of any Macerich
Management Agreement without cause.
6.15 REIT Status. The Partners hereby acknowledge that
certain Persons directly or indirectly owning interests in Macerich or
Simco or the Limited Partners are and intend to qualify at all times as
a REIT, and that each such Partner's or other Person's ability to
qualify as such will depend principally upon the nature of the
Partnership's operations. Accordingly, the Partnership's operations
shall be conducted at all times in a manner that will enable each of
Macerich, Simco and the Limited Partners and each Person owning,
directly or indirectly, interests in either Macerich or Simco or the
Limited Partners to satisfy all requirements for REIT status under
Sections 856 through 860 of the Code and the regulations promulgated
thereunder to the extent possible. In furtherance of the foregoing (and
not in limitation thereof), notwithstanding any other provision herein
to the contrary, the Partnership shall conduct its operations in
accordance with the following provisions at all times:
(a) The Partnership shall not render any services to
any lessee or sublessee or any customer thereof, either directly or
through an "independent contractor" within the meaning of Section
856(d)(3) of the Code, if the rendering of such services shall cause all
or any part of the rents received by the Partnership to fail to qualify
as "rents from real property" within the meaning of Section 856(d) of
the Code;
<PAGE> 20
(b) The Partnership shall not own, directly or
indirectly (taking into account the attribution rules referred to in
Section 856(d)(5) of the Code), in the aggregate 10% or more of the
total number of shares of all classes of stock, 10% or more of the
voting power of all classes of voting stock or 10% or more of the assets
or net profits of any lessee or sublessee of all or any part of any of
the Properties;
(c) No lease or sublease of any space at the Properties
shall provide for any rent based in whole or in part on the "income or
profits" within the meaning of Section 856(d)(2)(A) of the Code derived
by any lessee or sublessee;
(d) The Partnership shall not own more than 10% of the
outstanding voting securities of any one issuer (as determined for
purposes of Section 856(c)(5)(B) of the Code);
(e) Neither the Partnership nor any Partner shall take
any action (or fail to take any action permitted under this Agreement)
that would otherwise cause the Partnership's gross income to consist of
more than one percent (1%) of income not described in Section 856(c)(2)
of the Code or more than ten percent (10%) of income not described in
Section 856(c)(3) of the Code, or cause any significant part of the
Partnership Assets to consist of assets other than "real estate assets"
within the meaning of Section 856(c)(6)(B) of the Code;
(f) The Partnership shall distribute to the Partners
during each Fiscal Year an amount of cash such that the portion so
distributed will equal or exceed 100% of the amount of Partnership
taxable income, if any, to be allocated to the Partners with respect to
such Fiscal Year distributed at the times required to prevent the
imposition of an excise tax under Section 4981 of the Code; provided,
however, that if each such Partner's distributable share of any Net Cash
Flow from Operations of the Partnership and its distributable share of
any funds maintained in the Partnership reserves are insufficient to
meet the aforesaid distribution requirement with respect to such
Partner, then the Partnership shall have satisfied the foregoing
distribution requirement with respect to such Partner upon distributing
to it such distributable share of Net Cash Flow from Operations and
funds maintained in the Partnership reserves. In no event shall the
Partnership be required to borrow funds, or any Partner be required to
contribute funds to the Partnership, in order to permit the Partnership
to satisfy the foregoing distribution requirement. In no event shall
the foregoing provisions of this subsection (f) adversely affect the
allocation of, and Partnership Interest in, Net Cash Flow from
Operations of any other Partner.
(g) The Partnership shall not engage in any "prohibited
transactions" within the meaning of Section 857(b)(6)(B)(iii) of the
Code.
The Partners hereby acknowledge that the foregoing are the current
guidelines applicable to the qualification of REITs. If and to the
extent that any of the requirements to qualify for REIT status shall be
changed, altered, modified or added to, then such changes, alterations,
<PAGE> 21
modifications or additions, as applicable, shall be deemed incorporated
herein, and this Section 6.15 shall be deemed to be amended and modified
as necessary to incorporate such changed, altered, modified or added
REIT requirements.
6.16 Defaults and Remedies.
(a) Events of Default. The occurrence of any of the
following events by or with respect to a Partner (the "Defaulting
Partner"; and the other Partners shall be referred to herein as a
"Non-defaulting Partner," provided that the other Partners or any of
them is not already a Defaulting Partner) shall be a default hereunder
and if not cured within the applicable notice and cure period provided
below, if any, such default shall constitute an "Event of Default"
hereunder:
(i) The failure of a Partner to make any payment as
required by this Agreement that is not cured within five (5)
business days of written notice to such Partner;
(ii) The failure of a Partner to perform any of its
other obligations under this Agreement or the breach by a Partner
of any of the terms of this Agreement, and a continuation of such
failure or breach for more than thirty (30) days after notice by a
Non-defaulting Partner to the Defaulting Partner that such
Defaulting Partner has failed to perform any of its obligations
under, or has breached, this Agreement; provided that if such
failure or breach is of the nature that it can be cured but cannot
reasonably be cured within such thirty (30) day period, such period
shall be extended for up to an additional sixty (60) days so long
as the Defaulting Partner in good faith commences all reasonable
curative efforts within ten (10) days of its receipt of such notice
from the Non-defaulting Partner and diligently and expeditiously
continues its curative efforts to completion; or
(iii) The occurrence of a Bankruptcy with respect to
a Partner or the withdrawal by a Partner.
(b) Remedies. Upon the occurrence of any Event of
Default, a Non-defaulting Partner may elect to do one or more of the
following:
(i) Exercise its rights under Section 6.16;
(ii) Dissolve the Partnership and commence to
liquidate its assets as provided in Article X;
<PAGE> 22
(iii) Enforce any covenant by the Defaulting Partner
to advance money or to take or forbear from any other action
hereunder; or
(iv) Pursue any other remedy permitted by this
Agreement or at law or in equity.
(c) Change of Governance of Partnership. In addition
to any other rights or remedies which a Non-defaulting Partner may have
under this Agreement or under applicable laws with respect to an Event
of Default, a Non-defaulting Partner that is a General Partner shall
have the option to exercise the rights set forth below in this
Section 6.16 in the event of the occurrence of any Event of Default by
the other General Partner. Upon the occurrence of an Event of Default
by a General Partner, the other General Partner may elect, by giving
written notice to the Defaulting Partner, to assume the role of the
"Controlling Partner" of the Partnership, and shall remain as such
unless and until (i) the Partners otherwise agree, (ii) such Controlling
Partner is removed as such pursuant to the foregoing provisions of this
Section 6.16 by reason of its having become a Defaulting Partner, or
(iii) such Event of Default is cured. During the period of time that an
Event of Default by a General Partner has occurred and is continuing,
the other General Partner shall have the authority to take exclusive
charge and control of the Partnership free and clear of any and all
restrictions (including any and all restrictions set forth in this
Article VI and any and all consent, voting or approval rights granted
the Executive Committee, Operating Committee or any General Partner,
other than that of the Controlling Partner) imposed by this Agreement,
and the Defaulting Partner's right to, acting alone, make certain
decisions and take certain actions with respect to matters concerning
the Partnership's management agreements with a Non-defaulting Partner
(or its Affiliates) as provided in Section 6.14 shall be suspended and
the other General Partner as the Controlling Partner shall make all such
decisions and take all such actions thereunder. The Controlling Partner
shall have the right to amend any fictitious business name statement,
certificate of partnership, or any similar document to reflect such
election and to provide that it is the sole General Partner authorized
to bind the Partnership, and to file or record any such amended
documents and change the Partnership's Principal Office, and each
Partner hereby grants to the Controlling Partner its irrevocable power
of attorney to do the same, which power of attorney shall be deemed to
be a power coupled with an interest which may not be revoked until the
termination and winding up of the Partnership. The provisions of this
Section 6.16(c) shall take precedence over any provision to the contrary
set forth in this Agreement.
(d) Remedies Not Exclusive. No remedy conferred upon
the Partnership or any Partner in this Agreement is intended to be
exclusive of any other remedy herein or by law provided or permitted,
but rather each shall be cumulative and shall be in addition to every
other remedy given hereunder or now or hereafter existing at law, in
equity or by statute.
<PAGE> 23
ARTICLE VII
AMENDMENTS
7.1 Amendments. Amendments permitted to be made under this
Agreement may be made only by an instrument in writing signed by all of
the Partners. For so long as the Existing Financing is outstanding, the
Partnership shall not amend, alter in any manner or delete Sections 2.3,
2.7, 6.10, 6.13, 7.1, or 10.1 hereof without the unanimous vote of all
directors of the General Partners, including the Independent Directors
of each General Partner; provided, however, that the Partnership may
amend or alter any such Section without obtaining such consent in order
to clarify the provision of such Section if (i) such amendment or
alteration will not materially adversely affect the rights of the
holders of any outstanding debt instruments of the Partnership, and
(ii) prior written notice is given to each rating agency for such debt
instruments of such amendment and each rating agency approves the same.
ARTICLE VIII
TRANSFERS OF PARTNERSHIP INTERESTS
8.1 Rights of Transferees. An assignee of a Limited
Partnership Interest shall be admitted as a substitute Limited Partner,
and shall have all rights of a Partner under the Act and this Agreement.
An assignee of a Partnership Interest shall execute an instrument in
form and substance satisfactory to the General Partners agreeing to be
bound by, and to acquire the Partnership Interest subject to, the
provisions of this Agreement.
ARTICLE IX
POWER OF ATTORNEY
9.1 General Partner as Attorney. The Limited Partner hereby
makes, constitutes, and appoints each General Partner its true and
lawful attorney to make, sign, execute, certify, acknowledge, file, and
record any instrument deemed necessary or appropriate by the General
Partners to carry out fully the provisions of this Agreement. The
Limited Partner authorizes the General Partners to take any further
action which the General Partners consider necessary or advisable in
connection with the foregoing.
<PAGE> 24
ARTICLE X
DISSOLUTION AND WINDING UP
10.1 Liquidating Events. The Partnership shall dissolve and
commence winding up and liquidating upon the first to occur of any of
the following, and upon no other event without the unanimous consent of
all general partners of the Partnership at such time (``Liquidating
Events''):
(a) January 1, 2095;
(b) The sale of all property of the Partnership so long as
the Existing Financing is no longer outstanding and all of the
Partnership's obligations with respect to such Existing Financing have
been satisfied;
(c) The happening of any other event that makes it unlawful,
impossible, or, so long as the Existing Financing is no longer
outstanding and all of the Partnership's obligations with respect to the
Existing Financing have been satisfied, impractical to carry on the
business of the Partnership;
(d) The withdrawal, removal or bankruptcy of the last
remaining General Partner, the assignment by such General Partner of its
entire interest in the Partnership or any other event that causes such
General Partner to cease to be a general partner under the Act, provided
that any such event shall not constitute a Liquidating Event if the
Partnership is continued pursuant to this Section 10.1; or
(e) At any time from and after the date which is eighteen
(18) months after the acquisition of the Properties by the Partnership,
upon the election of either General Partner, without cause and in its
sole and absolute discretion; provided, however, that this subclause (e)
shall not be effective unless, prior to or contemporaneously with any
such transaction, the Existing Financing is satisfied in full.
The Partners hereby agree that, notwithstanding any provision of the
Act, the Partnership shall not dissolve prior to the occurrence of a
Liquidating Event. Upon the occurrence of any event set forth in
Subparagraph (d) hereof, the Partnership shall not be dissolved or
required to be wound up if within ninety (90) days after such event
Partners holding a majority of the remaining Partnership Interests in
the Partnership agree in writing to continue the business of the
Partnership and to the appointment, effective as of the date of such
event, of one or more additional General Partners.
10.2 Winding Up. Except as otherwise provided in Section 10.1,
upon the occurrence of a Liquidating Event, the Partnership shall
continue solely for the purposes of winding up its affairs in an orderly
<PAGE> 25
manner, liquidating its assets, and satisfying the claims of its
creditors and Partners. To the extent not inconsistent with the
foregoing, all covenants and obligations in this Agreement shall
continue in full force and effect until such time as the Partnership
assets have been distributed pursuant to this Section 10.2 and the
certificate of limited partnership has been canceled in accordance with
the Act. The General Partner (or, in the event there is no General
Partner, any Person elected by the Limited Partners) shall be
responsible for overseeing the winding up and dissolution of the
Partnership, shall take full account of the Partnership's liabilities
and Property, shall cause the Partnership assets to be liquidated as
promptly as is consistent with obtaining the fair value thereof, and
shall cause the proceeds therefrom, to the extent sufficient therefor,
to be applied and distributed in the following order:
(a) First, to the payment and discharge of all of the
Partnership's debts and liabilities to creditors; and
(b) The balance, if any, to the General Partners and the
Limited Partner in accordance with their Capital Accounts, after giving
effect to all contributions, distributions, and allocations for all
periods.
Notwithstanding the foregoing, in the event of a dissolution
under the circumstances described in subclause (e) of Section 10.1, the
assets of the Partnership shall not be sold, but shall be distributed in
kind to the Partners.
ARTICLE XI
BOOKS AND REPORTS
11.1 Books of Account and Records.
(a) Appropriate books of account and records shall be kept by
the General Partners at the principal office the Partnership and each
Partner shall at all times have access thereto. Such books of account
and records shall include a Register of Partnership Interests to reflect
the ownership, transfer, pledge or release of pledge of uncertificated
securities.
(b) The books of account of the Partnership shall, at the
election of the General Partners, be kept on a cash or accrual basis in
accordance with sound accounting principles.
ARTICLE XII
MISCELLANEOUS
12.1 Notices. Any notice, payment, demand, or communication
required or permitted to be given by any provision of this Agreement
shall be in writing and addressed as follows, provided that any Partner
<PAGE> 26
may change any of the following information by delivering notice of such
change to the other party:
If to the Limited Partner:
SM Portfolio Limited Partnership
233 Wilshire Boulevard, Suite 700
Santa Monica, California 90401
Telecopier No.: (310) 395-2791
If to the General Partners:
If to Simco Acquisitions, Inc.:
c/o Simon DeBartolo Group
National City Center
115 West Washington Street
Indianapolis, Indiana 46204
Telecopier No.: (317) 685-7221
If to Macerich Property EQ GP Corp.:
233 Wilshire Boulevard, Suite 700
Santa Monica, California 90401
Telecopier No.: (310) 395-2791
Any such notice shall be deemed to be delivered, given, and received for
all purposes as of the date so delivered.
12.2 Binding Effect. Except as otherwise provided in this
Agreement, every covenant, term, and provision of this Agreement shall
be binding upon and inure to the benefit of the Partners and their
respective heirs, legatees, legal representatives, successors,
transferees, and assigns.
12.3 Severability. Every provision of this Agreement is
intended to be severable. If any term or provision hereof is illegal or
invalid for any reason whatsoever, such illegality or invalidity shall
not affect the validity or legality of the remainder of this Agreement.
12.4 Governing Law. The laws of the State of Delaware shall
govern the validity of this Agreement, the construction of its terms,
and the interpretation of the rights and duties of the Partners.
<PAGE> 27
12.5 Counterpart Execution. This Agreement may be executed in
any number of counterparts with the same effect as if all of the
Partners had signed the same document. All counterparts shall be
construed together and shall constitute one agreement.
[The remainder of this page has been intentionally been left blank]
<PAGE> 28
IN WITNESS WHEREOF, the parties have entered into this
Agreement of Limited Partnership as of the day first above written.
General Partners
Simco Acquisitions, Inc.
By:
Its:
Macerich Property EQ GP Corp.
By: \s\Richard A. Bayer
Richard A. Bayer
Its: General Counsel and Secretary
Limited Partner
SM Portfolio Limited Partnership
By: Macerich EQ GP Corp.,
a Delaware corporation,
its General Partner
By: \s\Richard A. Bayer
Richard A. Bayer
Its: General Counsel and Secretary
<PAGE> 29
By: SDG EQ Associates, Inc.,
a Delaware corporation,
its General Partner
By:
Its:
<PAGE> 30
EXHIBIT A
AGREEMENT OF LIMITED PARTNERSHIP
OF
Partners
Names Capital Contribution Partnership Interest
SM Portfolio Limited Partnership $ 990 99%
SDG Property EQ Associates, Inc. $ 5 .5%
Macerich Property EQ GP Corp. $ 5 .5%
SCHEDULE 1
LIST OF PROPERTIES
1. Eastland Mall
Evansville, Indiana
2. Empire East
Sioux Falls, South Dakota
3. Empire Mall
Sioux Falls, South Dakota
4. Granite Run Mall
Media, Pennsylvania
5. Lake Square Mall
Leesburg, Florida
6. Lindale Mall
Cedar Rapids, Iowa
7. Mesa Mall
Grand Junction, Colorado
8. NorthPark Mall
Davenport, Iowa
9. Rushmore Mall
Rapid City, South Dakota
10. Southern Hills Mall
Sioux City, Iowa
11. SouthPark Mall
Moline, Illinois
12. Southridge Mall
Des Moines, Iowa
13. Valley Mall
Harrisonburg, Virginia
SCHEDULE 2
MACERICH MANAGED PROPERTIES
1. Empire East
Sioux Falls, South Dakota
2. Empire Mall
Sioux Falls, South Dakota
3. Lindale Mall
Cedar Rapids, Iowa
4. Mesa Mall
Grand Junction, Colorado
5. Rushmore Mall
Rapid City, South Dakota
6. Southern Hills Mall
Sioux City, Iowa
7. Southridge Mall
Des Moines, Iowa
SCHEDULE 3
SIMCO MANAGED PROPERTIES
1. Eastland Mall
Evansville, Indiana
2. Granite Run Mall
Media, Pennsylvania
3. Lake Square Mall
Leesburg, Florida
4. NorthPark Mall
Davenport, Iowa
5. SouthPark Mall
Moline, Illinois
6. Valley Mall
Harrisonburg, Virginia
============================================================================
EXHIBIT 10.64
AGREEMENT OF LIMITED PARTNERSHIP
OF
SIMON CAPITAL LIMITED PARTNERSHIP
TABLE OF CONTENTS
ARTICLE IDEFINITIONS: ETC.
1.1 Definitions. 1
ARTICLE IIORGANIZATION
2.1 Formation. 8
2.2 Name. 8
2.3 Purpose and Business of the Partnership. 8
2.4 Location of the Principal Place of Business. 12
2.5 Registered Agent and Registered Office. 12
ARTICLE IIITERM
3.1 Dissolution. 12
ARTICLE IVCONTRIBUTIONS TO CAPITAL
4.1 General Partner Capital Contributions. 12
4.2 Contributions of Partners. 12
4.3 Additional Funds. 13
4.4 No Third Party Beneficiary. 13
4.5 No Interest: No Return. 14
4.6 Capital Accounts. 14
ARTICLE VALLOCATIONS, DISTRIBUTIONS AND OTHERTAX AND ACCOUNTING MATTERS
5.1 Allocations. 16
5.2 Partnership Distributions. 22
5.3 Books of Account. 22
5.4 Reports. 22
5.5 Audits. 23
5.6 Tax Returns. 23
5.7 Tax Matters Partner. 23
ARTICLE VIRIGHTS AND DUTIES OF, AND RESTRICTIONS ON THE GENERAL PARTNER
6.1 Expenditures by Partners. 23
6.2 Powers and Duties of General Partner. 24
6.3 Major Decisions. 26
6.4 Proscriptions. 27
6.5 Additional Covenants. 27
6.6 Operation in Accordance with REIT Requirements. 30
6.7 Waiver and Indemnification. 30
6.8 Additional Partners. 31
6.9 Limitation of Liability of Directors, Shareholders, Employees
and Officers of the General Partner. 31
ARTICLE VIIDISSOLUTION, LIQUIDATION AND WINDING-UP
7.1 Accounting. 31
7.2 Distribution on Dissolution. 31
7.3 Sale of Partnership Assets. 32
7.4 Distributions in Kind. 32
7.5 Documentation of Liquidation. 33
7.6 Liability of the Liquidating Agent. 33
ARTICLE VIIITRANSFER OF PARTNERSHIP INTERESTS
8.1 Transfer of Partnership Interests. 33
ARTICLE IXRIGHTS AND OBLIGATIONS OF THE LIMITED PARTNER
9.1 No Participation in Management. 33
9.2 Bankruptcy Of the Limited Partner. 34
9.3 No Withdrawal. 34
9.4 Duties and Conflicts. 34
ARTICLE XGENERAL PROVISIONS
10.1 Notices. 34
10.2 Successors. 35
10.3 EFFECT AND INTERPRETATION. 35
10.4 Counterparts. 35
10.5 Partners Not Agents. 35
10.6 Entire Understanding: Etc. 35
10.7 Severability. 35
10.8 Pronouns and Headings. 35
10.9 Assurances. 35
10.10 Amendment. 36
AGREEMENT OF LIMITED PARTNERSHIP
OF
SIMON CAPITAL LIMITED PARTNERSHIP
This AGREEMENT OF LIMITED PARTNERSHIP OF SIMON CAPITAL LIMITED
PARTNERSHIP is made and entered into as of the ____ day of August, 1997,
by and among SDG Capital Associates Limited Partnership, a Delaware
limited partnership, as general partner (the "General Partner"), Simon
DeBartolo Group, L.P., a Delaware limited partnership, as limited
partner and DeBartolo Capital Partnership, a Delaware general
partnership, as limited partner (Simon DeBartolo Group, L.P. and
DeBartolo Capital Partnership collectively referred to as the "Limited
Partners").
WITNESSETH:
WHEREAS, the parties hereto desire to form a limited partnership
under the provisions of the Delaware Uniform Limited Partnership Act for
the purposes and on the terms set forth below.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained and other good and valuable consideration,
the receipt, adequacy and sufficiency of which are hereby acknowledged,
the parties hereto, intending legally to be bound, hereby agree 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 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.
<PAGE> 01
"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
undertaken by the General Partner on behalf or for the benefit of the
Partnership.
"Affiliate" shall mean, with respect to any Partner (or as to any
other Person the affiliates of whom are relevant for purposes of any of
the provisions of this Agreement), (i) any member of the Immediate
Family of such Partner; (ii) any partner, trustee, beneficiary, member
or shareholder of a Partner; (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, 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 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 such petition or the
commencement of any such case or proceeding against such Partner, unless
such petition and the case or proceeding initiated thereby are dismissed
within ninety (90) days from the date of such filing, (v) the filing of
an answer by such Partner admitting the 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)
<PAGE> 02
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 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 Interest held by such Partner (net of liabilities to which
such property is subject).
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Company" shall mean Simon DeBartolo Group, Inc., a Maryland
corporation.
"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.
"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 an
asset for such year or other period, except that if the Gross Asset
Value of an asset differs from its adjusted basis for federal income tax
purposes at the beginning of such 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.
"Entity" shall mean any general partnership, limited partnership,
limited liability company, corporation, joint venture, trust, business
trust, cooperative or association.
<PAGE> 03
"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 SDG Capital Associates Limited
Partnership, a Delaware limited partnership.
"Gross Asset Value" shall have the meaning set forth in Section
4.6(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.
"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.
"Lender" shall mean The Chase Manhattan Bank or any successor or
assign hereof.
"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(s)" shall mean Simon DeBartolo Group, L.P., a
Delaware limited partnership and DeBartolo Capital Partnership, a
Delaware general partnership.
"Liquidating Agent" shall mean such individual or Entity as is
selected as the Liquidating Agent hereunder by the General Partner,
which individual or Entity may include 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.
<PAGE> 04
"Loan" shall have the meaning set forth in Section 2.3 hereof.
"Loan Documents" shall have the meaning set forth in Section 2.3
hereof.
"Losses" shall have the meaning set forth in Section 5.1 hereof.
"Major Decisions" shall have the meaning set forth in Section 6.3
hereof.
"Minimum Gain" shall have the meaning set forth in Section
5.1(d)(1) hereof.
"Minimum Gain Chargeback" shall have the meaning set forth in
Section 5.1(d)(1) hereof.
"Mortgage" shall mean those certain deeds of trust and/or
mortgages encumbering the Property to be executed and delivered by the
Partnership to the Lender.
"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), 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 and distributions from any
subsidiary of the Partnership, but excluding Capital Contributions) less
the aggregate amount of all expenses or other amounts paid with respect
to such period (including all payments of principal and interest on
account of our indebtedness of the Partnership), 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 of any asset by or on behalf of
the Partnership after deduction of any costs or expenses incurred by the
Partnership, or payable specifically out of the proceeds of such sale
(including, without limitation, any repayment of any indebtedness
required to be repaid as a result of such sale or which the General
Partner elects to repay out of the proceeds of such sale, together with
<PAGE> 05
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).
"Nonrecourse Liabilities" shall have the meaning set forth in
Section 5.1(d)(1) hereof.
"Notes" shall mean those certain Commercial Mortgage Notes
executed by the Partnership and delivered to the Lender in accordance
with the Loan Documents.
"Partner Nonrecourse Debt" shall have the meaning set forth in
Section 5.1(d)(2) hereof.
"Partner Nonrecourse Debt Minimum Gain" shall have the meaning set
forth in Section 5.1(d)(2) hereof.
"Partner Nonrecourse Deduction" shall have the meaning set forth
in Section 5.1(d)(2) hereof.
"Partner(s)" shall mean the 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 the limited partnership hereby
constituted, as such limited partnership may from time to time be
constituted.
"Partnership Fiscal Year" shall mean the calendar year.
"Partnership Interest" shall mean with respect to a Partner, such
Partner's right to the allocations (and each item thereof), specified in
section 5.1 hereof and all distributions from the Partnership, and its
rights of management, consent, approval, or participation, if any, as
provided in this Agreement.
"Partnership Minimum Gain" shall have the meaning set forth in
Section 1.704-2(b)(2) of the Regulations.
"Percentage Interest" shall mean, with respect to any Partner, the
percentage ownership interest of such Partner in the Partnership. The
Percentage Interest of the General Partner shall at all times be 1%, and
the Percentage Interest of the Limited Partners shall at all times be
99%.
<PAGE> 06
"Person" shall mean any individual or Entity.
"Pledge" shall mean a pledge or grant of a mortgage, security
interest, lien or other encumbrance in respect of a Partnership
Interest.
"Private Placement Agency Agreement" shall mean the Private
Placement Agency Agreement among the Partnership and Chase Securities,
Inc..
"Profits" shall have the meaning set forth in Section 5.1 hereof.
"Property" shall mean those properties (including peripheral land)
and interests set forth in Exhibit A hereto.
"REIT Requirements" shall have the meaning set forth in Section
5.2 hereof.
"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).
"Required Funds" shall have the meaning set forth in Section 4.3
hereof.
"Special Director" shall have the meaning given to such term in
the Certificate of Incorporation of the General Partner.
"Substituted Limited Partner" shall have the meaning set forth in
Section 8.2 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.
"Transfer" shall mean any assignment, sale, transfer, conveyance
or other disposition or act of alienation, whether voluntary or
involuntary, or by operation of law.
<PAGE> 07
ARTICLE II
ORGANIZATION
2.1 Formation. The parties hereto do hereby form and organize the
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 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 a
Certificate of Limited Partnership and such other notice, instrument,
document, or certificate as may be required by applicable law, and which
may be necessary to enable the Partnership to conduct its business, and
to own its property, under the Partnership name, to be filed or recorded
in all appropriate public offices. Upon request of the General Partner,
the Limited Partners shall execute any assumed or fictitious name
certificate or certificates required by law to be filed in connection
with the formation of the Partnership. The General Partner shall
promptly 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 formation, qualification, and operation of a limited partnership
under the laws of the State of Delaware and for the qualification and
operation of a limited partnership in the States of Wisconsin, Ohio,
Florida, Kansas, Pennsylvania and Indiana.
2.2 Name. The business of the Partnership shall be conducted
under the name of Simon Capital Limited Partnership or such other name
as the General Partner may select, and all transactions of the
Partnership, to the extent permitted by applicable law, shall be carried
on and completed in such name. The Partnership shall at all times
conduct its own business in its own name.
2.3 Purpose and Business of the Partnership.
(a) Subject to the limitations set forth herein, the purpose
for which the Partnership is formed is to engage solely in the
following activities:
(1) To execute and deliver any and all instruments,
agreements, certificates, documents, notices, papers or other
writings as may be necessary or advisable in connection with
the acquisition by the Partnership of the Property;
<PAGE> 08
(2) to execute and deliver (i) the loan agreement
with the Lender pursuant to which the Partnership will borrow
$225,000,000; (ii) the Note evidencing borrowings pursuant to
the loan agreement; (iii) mortgages or deeds of trust
encumbering each Property, to secure all obligations of the
Partnership under the Loan Agreement and the Note; and (iv)
any and all assignments, financing statements, security
agreements, certificates, documents, notices, papers or other
writings in connection therewith (collectively, the "Loan
Documents");
(3) to execute and deliver a placement,
underwriting or similar agreement with any underwriter that
may be retained in connection with the securitization of the
Note, and any instruments, agreements, certificates,
documents, notices, papers or other writings as may be
necessary or advisable in connection with any securitization;
(4) to engage in any activities necessary to hold,
receive, exchange, otherwise dispose of and otherwise deal in
and exercise all rights, powers, privileges, and all other
incidents of ownership or possession with respect to all the
Property and any property or interests which may be acquired
by the Partnership as a result of any sale or other
disposition of any Property;
(5) to engage in any activities necessary to
authorize, execute and deliver any other instrument,
agreement, certificate, notice or document in connection with
the activities described above, including the filing of any
instrument, agreements, certificates, notices, applications
and other documents necessary or advisable to comply with any
applicable laws, statutes, rules and regulations or necessary
or advisable to perfect or protect the above-referenced
security interests;
(6) to take any and all other actions necessary
under and pursuant to this Agreement; and
(7) to engage in such lawful activities and to
exercise such powers permitted to partnerships under the laws
of the State of Delaware that are necessarily incident to or
connected with the foregoing or necessary or convenient to
accomplish the foregoing and which are consistent with the
limitations set forth in this Section 2.3(a) and the other
Sections hereof.
<PAGE> 09
(b) Notwithstanding anything contained herein to the
contrary, so long as the Note is outstanding, Section 2.3(a) shall
not be amended without the consent of the Lender, any successor
thereto or any assignee of the Note.
(c) The Partnership shall not commingle its funds with those
of any Affiliate or any other 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. The Partnership shall maintain its own
separate bank accounts, payroll and books of account.
(d) The Partnership shall pay from its own assets all
obligations of any kind incurred by the Partnership (other than
organizational expenses).
(e) The Partnership shall take all appropriate action
necessary to ensure its existence as a partnership in good standing
under the laws of the State of Delaware.
(f) All financial statements, accounting records and other
partnership documents of the Partnership shall be maintained at an
office separate from those of any Affiliate or any other entity.
(g) The annual financial statements of the Partnership shall
disclose, in accordance with and to the extent required under GAAP,
any transactions between the Partnership and any Affiliate.
(h) All business transactions entered into by the Partnership
with any Affiliate shall be on terms and conditions that are no
less favorable to the Partnership than the terms and conditions
that would be expected to have been obtained, at the time of such
transaction and under similar circumstances, from unaffiliated
persons. In addition, all such transactions shall be approved by
the General Partner. The Partnership shall not guarantee any
liabilities or obligations of any Affiliate or any other Person,
nor shall it assume any indebtedness or other liabilities or
obligations of any Affiliate or any other Person.
<PAGE> 10
(i) The Partnership shall at all times hold itself out to the
public (including any Affiliate's creditors) as a separate and
distinct entity operating under the Partnership's own name, and the
Partnership shall act solely in its own name and through its own
authorized officers and agents.
(j) The Partnership shall pay out of its own funds salaries,
if any, of its officers and employees, and shall reimburse any
Affiliate for any service provided to the Partnership by such
Affiliate (including those to be provided pursuant to any lease,
administrative or management services agreement or other contract
between the Partnership and any Affiliate) in accordance with the
terms of any such lease, agreement or other contract.
(k) Notwithstanding any other provision of this Agreement or
any provision of law that otherwise so empowers the Partnership,
for so long as the Note under the loan agreement is outstanding,
the Partnership shall not, without the approval of the General
Partner and the holder of such Notes, do any of the following:
(1) engage in any business or activity other than
as set forth in Section 2.3(a) or as may be necessary or
convenient to comply with the provisions of Section 2.3(c)
through and including Section 2.3(j); or
(2) institute any proceeding to be adjudicated as
bankrupt or insolvent, or consent to the institution of
bankruptcy or insolvency proceedings against it, or file a
petition or answer or consent seeking reorganization or relief
under any applicable federal, or state law relating to
bankruptcy, or consent to the filing of any such petition or
to the appointment of a receiver, rehabilitator, conservator,
liquidator, assignee, trustee, sequestrator (or other similar
official) of the Partnership or of any substantial part of its
property, or ordering the winding up or liquidation of its
affairs, or make any assignment for the benefit of creditors,
or admit in writing its inability to pay its debts generally
as they become due, or take any action in furtherance of the
foregoing; or
(3) consolidate, merge, dissolve or liquidate, in
whole or in part; or
(4) incur, assume or guarantee any debt except as
provided in the loan agreement.
<PAGE> 11
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.
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 in its sole and absolute
discretion.
ARTICLE III
TERM
3.1 Dissolution. The Partnership shall be dissolved upon the
occurrence of the earlier of (i) December 31, 2069, and (ii) the
earliest of the following events:
(a) The withdrawal, dissolution, termination or bankruptcy of
the General Partner, it being agreed that so long as the Notes are
outstanding, the General Partner shall not withdraw or resign from
the Partnership and in the event that the General Partner shall
become disassociated from the Partnership, shall withdraw from the
Partnership or shall liquidate, become insolvent or file a petition
for bankruptcy, the Partnership shall appoint a new special purpose
general partner and deliver an acceptable non-consolidation opinion
to the holder of the Note and to any applicable rating agency
concerning the Partnership and the replacement general partner;
(b) The sale or other disposition of all or substantially all
the assets of the Partnership; or
(c) dissolution required by operation of law.
ARTICLE IV
CONTRIBUTIONS TO CAPITAL
4.1 General Partner Capital Contributions. Simultaneously with
the execution and delivery hereof, the General Partner shall contribute
or cause to be made Capital Contributions of assets described on
Schedule 1, and (after giving effect to such contributions) the General
Partner shall have made or caused to be made Capital Contributions to
<PAGE> 12
the Partnership of money and/or assets in the amount or of the nature
set forth on Schedule 2.
4.2 Contributions of Partners. On the date hereof, the Limited
Partners shall make or cause to be made Capital Contributions of assets
described on Schedule 1, and (after giving effect to such contributions)
the Limited Partners shall have made or caused to be made Capital
Contributions to the Partnership of money and/or assets in the amount or
of the nature set forth on Schedule 2. By execution and delivery of
this Agreement, the Limited Partners hereby acknowledge and agree that
the relative values of their capital interests in the Partnership are as
reflected by the Capital Accounts and Percentage Interests (which shall,
initially, be as set forth on Schedule 2). Except as otherwise
expressly provided herein or required by applicable law, the Limited
Partners shall not be required to contribute any additional capital to
the Partnership. All surtax, documentary stamp tax or other transfer
tax that may be imposed as a result of the foregoing Capital
Contributions shall be paid by the General Partner.
4.3 Additional Funds. The Partnership may obtain funds ("Required
Funds") which it considers necessary to meet the needs and 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, provided that at the time of such financing, none
of the Notes remain outstanding. In no event may the Partnership obtain
any 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. This
Section 4.3 shall not be deemed to limit the right of the Partnership at
any time to incur certain types of indebtedness to the extent expressly
permitted under the Mortgage.
4.4 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 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
<PAGE> 13
Partnership or pledged or encumbered by the Partnership to secure any
debt or other obligation of the Partnership or of any of the Partners.
Notwithstanding the foregoing provisions of this Section 4.4,
restrictions set forth in this Agreement which are required by the terms
of the Loan Documents shall inure to the benefit of, and be enforceable
by, the holder of the Loan Documents and its successors and assigns.
4.5 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.
4.6 Capital Accounts.
(a) The Partnership shall establish and maintain a separate
capital account ("Capital Account") for each Partner, including a
substitute 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
5.1 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; such
Partner's distributive share of Losses; and any other items in
the nature of expenses or losses that are allocated to such
Partner pursuant to Section 5.1 hereof, but excluding tax
items described in Regulations Section 1.704-1(b)(4)(i).
<PAGE> 14
In the event that a Partner's Partnership Interest or portion
thereof is transferred within the meaning of Regulations Section 1.704-
1(b)(2)(iv)(f), the transferee shall succeed to the Capital Account of
the transferor to the extent that it relates to the Partnership Interest
or portion thereof so transferred.
In the event that the Gross Asset Values of Partnership assets are
adjusted as described below in Section 4.6(b) hereof, the Capital
Accounts of the Partners shall be adjusted to reflect the aggregate net
adjustments as if the Partnership sold all of its property 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 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:
(1) 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 General Partner;
(2) 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:
(i) 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 Limited Partner as
consideration for a Partnership Interest;
(ii) 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 a Partnership Interest; and
<PAGE> 15
(iii) the liquidation of the Partnership
within the meaning of Section 1.704-1(b)(2)(ii)(g) of the
Regulations.
(3) 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 4.6(a) above.
ARTICLE V
ALLOCATIONS, DISTRIBUTIONS AND OTHER
TAX AND ACCOUNTING MATTERS
5.1 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 5.1(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 5.1(d) hereof shall not be taken into account in
computing Profits or Losses; and
<PAGE> 16
(4) any expenditures of the Partnership described
in Section 705(a)(2)(B) of the Code (or treated as such under
Regulation Section 704-1(b)(2)(iv)(i)) and not otherwise taken
into account in computing Profits or Losses pursuant to this
Section 5.1(a) shall be deducted from such taxable income or
loss.
(b) Except as otherwise provided in section 5.1(d) hereof,
the Profits and Losses of the Partnership (and each item thereof)
for each Partnership Fiscal Year shall be allocated among the
Partners in accordance with their respective Percentage Interests.
(c) For the purpose of Section 5.1(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
5.1, 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 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
<PAGE> 17
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 5.1(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 1.7042(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
5.1(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
5.1(d)(1) hereof, but before any other allocations are made
for such taxable year, and subject to the exceptions set forth
in Regulations Section 1.7042(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 pursuant to this Section
5.1(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
<PAGE> 18
such purpose, each Partner's interest in Partnership profits
is hereby specified to be such Partner's Percentage Interest.
(4) No Limited Partners 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 to a Limited Partner pursuant to this Section
5.1(d)(4) shall be allocated to the 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 1.7042(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 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 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 5.1(d)(4) and
Section 5.1(d)(1) and/or (2) hereof apply, Section 5.1(d)(1)
and/or (2) hereof shall be applied prior to this Section
5.1(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 among the Partners so as to take account of any variation
between the adjusted basis of such property to the Partnership for
<PAGE> 19
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, 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 provisions) of proposed, temporary or final Regulations.
(f) Notwithstanding anything to the contrary contained in
this Section 5.1, 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)
or during which there is a change in the Partners' Percentage
Interests 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 (notwithstanding any agreement between the assignor and
assignee of such Partnership Interest although the 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
General Partner.
(g) In the event of a sale or exchange of a Partner's
Partnership Interest or portion thereof or upon the death of a
Partner, if the Partnership has not theretofore elected, pursuant
to Section 754 of the Code, to adjust the basis of Partnership
property, the General Partner shall cause the Partnership to elect,
if the Person acquiring such Partnership Interest or portion
thereof so requests, 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, 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:
<PAGE> 20
(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 Interest or portion thereof so transferred. No
capital contribution obligation shall be imposed on any
Partner and neither the Partnership Interest of, nor the
amount of any cash distributions to, any Partner shall be
affected as a result of such election, and except as provided
in Regulations 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 bases 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.
Except as provided in Sections 5.1(e) and 5.1(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 item of "book" income, gain, loss, or deduction
has been allocated pursuant to this Section 5.1.
(i) 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
<PAGE> 21
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.
(j) 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 laws, gain for
federal income tax purposes attributable to such subsequent
disposition shall first be allocated among the Partners other than
the selling Partner in an amount equal to such Partners'
allocations of "book" gain on the property pursuant to this Section
5.1, and any remaining gain for federal income tax purposes shall
be allocated to the selling Partner.
5.2 Partnership Distributions. 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; provided, however, that
all such distributions shall be made pro rata in accordance with the
Partners' then Percentage Interests; and provided further, that
notwithstanding the foregoing, the General Partner shall use its best
efforts (not requiring any material expenditure of funds or the
incurrence of any material liability on the part of the General Partner)
to cause the Partnership to distribute sufficient amounts to enable the
Simon DeBartolo Group, L.P. to distribute sufficient amounts to the
Company to pay shareholder dividends that will (a) satisfy the
requirements for qualifying as a REIT under the Code and Regulations
(the "REIT Requirements"), and (b) avoid any federal income or excise
tax liability of the general partner. All amounts withheld pursuant to
the Code or a provision of any state or local tax law with respect to
any allocation, payment or distribution to any Partner shall be treated
as amounts distributed to such Partner.
5.3 Books of Account. At all times during the continuance of the
Partnership, the General Partner shall maintain or cause to be
maintained full, true, complete and correct books of account in-
accordance with generally accepted accounting principles 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
<PAGE> 22
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 required to be kept pursuant to the
Act. The books and records of account shall be kept separately from the
books and records of account of any other Person, at the principal
office of the 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.
5.4 Reports. Within one hundred twenty (120) 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 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 of the
Partnership's financial condition and statements of operations cash flow
and Partnership equity relating to the fiscal quarter then just ended,
prepared in accordance with GAAP.
5.5 Audits. Not less frequently than annually, the books and
records of the partnership shall be audited by the Accountants.
5.6 Tax Returns.
(a) Consistent with all other provisions of this Agreement,
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 such Partnership Fiscal Year on appropriate forms.
<PAGE> 23
5.7 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.
ARTICLE VI
RIGHTS AND DUTIES OF, AND RESTRICTIONS ON THE GENERAL PARTNER
6.1 Expenditures by Partners. 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 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,
all Administrative Expenses.
6.2 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 6.3 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. Except as otherwise expressly provided herein, and subject
to Sections 2.3 and 6.3 hereof, the General Partner shall have the
right, power and authority:
(a) To manage, insure against loss and protect the Property
or any portion thereof; to improve, develop or redevelop the
Property; to participate in the ownership, redevelopment and
expansion of the Property; to mortgage, pledge or otherwise
encumber the Property, or any portion thereof, but only in
accordance with Section 2.3 hereof; to lease the Property or any
portion 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, all in accordance with the
Mortgage; to grant easements of any kind; to release, convey or
assign any right, title or interest in or about or easement
appurtenant to the Property or any portion thereof; to construct
and reconstruct, remodel, alter, repair, add to or take from
buildings on the Property; to insure any Person having an interest
in or responsibility for the care, management or repair of said
Property;
<PAGE> 24
(b) 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,
mechanics, consultants, accountants, attorneys, insurance brokers,
real estate brokers, placement agents, financial advisors and
others, the general partner agreeing to employ at all times a
sufficient number of employees in light of its contemplated
business operations;
(c) To enter into contracts on behalf of the Partnership in
accordance with Section 2.3 hereof;
(d) 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 may deem necessary,
proper or advisable;
(e) 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 Affiliate thereof, for the
conservation of the Partnership's assets or for any purpose
convenient or beneficial to the Partnership or any Affiliate
thereof;
(f) 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; provided, however, that in no event in connection
with any of the foregoing shall the accounts or funds of the
<PAGE> 25
Partnership be commingled with the accounts or funds of any other
Person and the Partnership shall at all times pay its own
liabilities from Partnership funds;
(g) 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 enforcer 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;
(h) 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;
(i) To take all reasonable measures necessary to insure
compliance by the Partnership with applicable arrangements and
contractual obligations entered into by the Partnership from time
to time in accordance with the provisions of this Agreement,
including periodic reports required to be submitted to lenders,
using all due diligence to insure that the Partnership is in
compliance with its contractual obligations;
(j) To maintain the Partnership's books and records; and
(k) 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 and state tax returns and reports.
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
<PAGE> 26
of the Partnership. Nothing contained in this Section 6.2 shall
authorize the General Partner to take any action which would be in
violation of Section 2.3.
6.3 Major Decisions. The General Partner shall not, without the
prior consent of the Limited Partners and any additional partners that
may from time to time be admitted to the Partnership in accordance with
Section 6.7 hereof and, so long as any of the Notes remains outstanding,
the unanimous affirmative vote of the Board of Directors of the general
partner of the General Partner (and with regard to only (c) and (d)
below the consent of the holder of such Notes), undertake any of the
following actions on behalf of the Partnership (the "Major Decisions"):
(a) Institute any proceeding for or take any action resulting
in Bankruptcy on behalf of the Partnership;
(b) Take title to any personal or real property other than in
the name of the Partnership;
(c) Act or cause the taking or refraining of any action with
respect to the dissolution, liquidation or winding up of the
Partnership or an election to continue the Partnership or to
continue the business of the Partnership; or
(d) Merge or consolidate with or into any Person or sell,
exchange, transfer or otherwise dispose of all or substantially all
of the Partnership's assets.
6.4 Proscriptions. The General Partner shall not have the
authority:
(a) to do any act in contravention of this Agreement or the
Loan Documents or which would make it impossible to carry on the
ordinary business of the Partnership, provided that a sale of the
Property shall not be deemed to be such an act;
(b) to possess any Partnership property or assign rights in
specific Partnership property for other than Partnership purposes;
or
(c) to do any act in contravention of applicable law.
<PAGE> 27
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.
6.5 Additional Covenants.
(a) Notwithstanding any provision to the contrary set forth
herein, the General Partner covenants that, so long as any of the
Notes remain outstanding, it shall not cause or permit the
Partnership to:
(1) engage, directly or indirectly, in any business
activity, other than activities authorized hereunder or under
the Loan Documents, and any and all lawful activities
incidental to or necessary, suitable or convenient to
accomplish the foregoing to the extent that same are not
contrary to Section 2.3 hereof or are otherwise prohibited by
the Loan Documents;
(2) commingle its property with the property of any
of its partners or Affiliates or any other Person;
(3) transfer or lease the Property or any portion
thereof or interest therein, except as permitted under the
Mortgage;
(4) engage in a nonexempt prohibited transaction
described in Section 406 of ERISA or Section 4975 of the Code;
(5) acquire obligations or securities of its
Partners;
(6) except as expressly permitted under the Loan
Documents, engage in any dissolution, liquidation, winding-up,
consolidation, merger, sale of all or substantially all of its
assets or transfer of its ownership interests;
(7) except for the Loan, be the obligor or
guarantor of or otherwise incur or be responsible for any
indebtedness;
<PAGE> 28
(8) pledge its assets for the benefit of any other
entity, make loans or advances to any other entity, guarantee
or become obligated for the debts of another entity or hold
its credit out as being available to satisfy the obligations
of others;
(9) partition the Property;
(10) amend this Agreement in any manner: (A) such
that the Partnership would not, as a result of such amendment,
be a special purpose entity, (B) that would have a material
adverse effect on the mortgagee under the Mortgage or (C) to
modify the limitations on the business of the Partnership, the
restrictions on amendment, modification or termination hereof,
the restrictions on the Partnership's ability to institute a
Bankruptcy, or any other covenant to make same inconsistent
with this Section 6.5(a) (the above referenced limitations,
restrictions and covenants shall include, without limitation,
those set forth in Sections 2.3, 3.1, 4.3, 6.3, 6.4, 6.5, 6.7,
8.1 and 10.10 hereof), unless, in the case of any modification
described in this clause (C), the Partnership shall obtain
written consent of the holders of the Notes and written
confirmation from any applicable rating agency that such
modification will not result in the downgrade, qualification
or withdrawal of the rating then assigned to the Notes;
(11) take title to any real or personal property
other than in the name of the Partnership;
(12) buy or hold evidence of indebtedness issued by any
other person or entity (other than cash and investment grade
securities); or
(13) identify itself as a division of any other person or
entity.
(b) The General Partner covenants that, so long as any of the
Notes remain outstanding, it shall cause the Partnership to:
(1) do or cause to be done all things necessary to
preserve and keep in full force and effect the existence of
the Partnership and maintain adequate capitalization (taking
into account, among other things, the market value of its
assets) for its business purposes;
<PAGE> 29
(2) maintain books and records, bank accounts,
checks, invoices and financial statements separate from those
of its Affiliates and observe other partnership formalities
and maintain a principal executive and administrative office
through which its business is conducted separate from that of
any of its Affiliates; provided, however, that the Partnership
and/or any of its Affiliates may have offices in the same
location provided there is a fair and appropriate allocation
of overhead costs, including, without limitation, the salaries
of any shared employees, if any, among the Partnership and/or
any such Affiliate and/or any such Affiliate bears its fair
share of such costs;
(3) pay all of its obligations and liabilities and
the salaries of its employees, if any, out of its own funds;
(4) maintain a sufficient number of employees in
light of its contemplated business operations;
(5) at all times conduct its own business in its
own name, hold itself out to the public as a legal entity
separate and distinct from any of its Affiliates (including
using separate stationery and including, with respect to its
leasing activities, entering into any contracts and preparing
its financial statements), to correct any known
misunderstanding regarding its separate identity and cause it
and such Affiliates to conduct business with it on an arm's
length and commercially reasonable basis;
(6) at all times be a "Single Purpose Entity" (as
that term is defined in the Mortgage); and
(7) prepare and file its own tax returns or, if
part of a consolidated group, join in the consolidated tax
return of such group as a separate member thereof, each in
accordance with the terms of Section 5.6 hereof.
6.6 Operation in Accordance with REIT Requirements. The Partners
acknowledge and agree that the Partnership shall be operated in a manner
that will enable the Company, general partner of Simon DeBartolo Group,
L.P., to (a) satisfy the REIT Requirements and (b) avoid the imposition
of any federal income or excise tax liability. The Partnership shall
avoid taking any action which would result in the Company ceasing to
<PAGE> 30
satisfy the requirements for qualifying as a real estate investment
trust under the Code and the Regulations or would result in the
imposition of any federal income or excise tax liability of the Company.
6.7 Waiver and Indemnification. Neither the General Partner nor
any of its Affiliates, directors, trust managers, officers, employees,
shareholders, nor any Person acting on its 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 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
Partnership shall, and hereby does, indemnify and hold harmless the
General Partner and its Affiliates, their respective directors,
officers, shareholders, employees and any other individual acting on
their behalf to the extent such Persons would be indemnified by the
Company pursuant to Article Eighth of the Articles of Incorporation of
the Company if such persons were directors, officers, agents or
employees of the Company; 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.
6.8 Additional Partners. Additional Partners may be admitted to
the Partnership only with the consent of the General Partner and the
Limited Partners, subject to the terms and conditions of the Mortgage.
6.9 Limitation of Liability of Directors, Shareholders, Employees
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.
ARTICLE VII
DISSOLUTION, LIQUIDATION AND WINDING-UP
<PAGE> 31
7.1 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.
7.2 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 than those distributions
made pursuant to this Section 7.2(d) and Section 7.4 hereof).
If upon dissolution and termination of the Partnership the Capital
Account of the Limited Partners are less than zero, then the Limited
Partners 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.
7.3 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 oh the best terms and conditions as the Liquidating
Agent in good faith believes are reasonably available at the time and
<PAGE> 32
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 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 Liquidating Agent shall continue to
act to enforce all of the rights of the Partnership pursuant to any such
obligations until paid in full.
7.4 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 Partners, 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
7.2 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 among the Partners if there were a taxable
disposition of such property for its fair market value as of the date of
the distribution.
7.5 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.
7.6 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, 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:
<PAGE> 33
(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 VIII
TRANSFER OF PARTNERSHIP INTERESTS
8.1 Transfer of Partnership Interests. As long as the Notes are
outstanding, neither the General Partner nor the Limited Partners shall
withdraw from the Partnership or Transfer, encumber or otherwise dispose
of any interest in the Partnership such that the transferee owns more
than a 49% interest in the Partnership or the transferee is an affiliate
or family member of a transferor which owned more than a 49% interest in
the Partnership prior to such transfer, and any action taken in
contravention of the foregoing shall be null and void.
ARTICLE IX
RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNERS
9.1 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.
9.2 Bankruptcy Of the Limited Partners. The Bankruptcy of the
Limited Partners shall not cause a dissolution of the Partnership, but
the rights of the Limited Partners 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 on 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.
9.3 No Withdrawal. The Limited Partners may not withdraw from the
Partnership without the prior written consent of the General Partner,
other than as expressly provided in this Agreement.
9.4 Duties and Conflicts. The General Partner recognizes that the
Limited Partners and its Affiliates has or may have other business
interests, activities and investments, some of which may be in conflict
<PAGE> 34
or competition with the business of the Partnership, and that such
persons are entitled to carry on such other business interests,
activities and investments. The Limited Partners and its 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, without any obligation to offer any interest in such
activities to the Partnership or to any Partner. 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, shall not be deemed wrongful or
improper.
ARTICLE X
GENERAL PROVISIONS
10.1 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 served or sent by United States mail and shall be
deemed to have been given when delivered in person, upon receipt of
telecopy 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 10.1, the
addresses of the parties hereto are all at c/o Simon DeBartolo Group,
115 W. Washington Street, Indianapolis, Indiana 46204. The address of
any party hereto may be changed by a notice in writing given in
accordance with the provisions hereof.
10.2 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.
10.3 EFFECT AND INTERPRETATION. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN CONFORMITY WITH THE LAWS OF THE STATE OF DELAWARE.
10.4 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.
<PAGE> 35
10.5 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.
10.6 Entire Understanding: Etc. This Agreement and the other
agreements referenced herein or therein constitutes the entire agreement
and understanding among the Partners and supersedes any prior
understandings and/or written or oral agreements among them respecting
the subject matter within.
10.7 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.
10.8 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."
10.9 Assurances. Each of the Partners shall hereafter execute and
deliver such further instruments and do such further acts and things as
may be required or useful to carry out the intent and purpose of this
Agreement and as are not inconsistent with the terms hereof.
10.10 Amendment. Subject to Section 6.5(a)(10) hereof, this
Agreement may be amended, modified or terminated, but only in writing by
the General Partner, the Limited Partners and all other parties admitted
to the Partnership in accordance with Section 6.7 hereof.
[End of Page 36]
<PAGE> 36
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.
GENERAL PARTNER: SDG CAPITAL LIMITED PARTNERSHIP,
a Delaware limited partnership
By: \s\David Simon
David Simon, Chief Executive Officer
LIMITED PARTNER: SIMON DeBARTOLO GROUP, L.P., a
Delaware limited partnership
By: SD PROPERTY GROUP, INC., an Ohio
corporation, managing general partner
By: \s\David Simon
David Simon
Chief Executive Officer
DeBARTOLO CAPITAL PARTNERSHIP, a
Delaware general partnership
By: DeBARTOLO PROPERTIES, INC., an Ohio
corporation
By: \s\David Simon
David Simon
Chief Executive Officer
<PAGE> 37
SCHEDULE 1
CAPITAL CONTRIBUTIONS
GENERAL PARTNER GROSS ASSET VALUE
(SDG Capital Associates Limited Partnership)
Cash $1,636,000
West Ridge Mall (2.5% undivided interest) $1,702,400
TOTAL $3,338,400
LIMITED PARTNER
(Simon DeBartolo Group, L.P.)
West Ridge Mall (97.5% undivided interest) $66,861,600
LIMITED PARTNER
(DeBartolo Capital Partnership)
Bay Park Square $36,300,000
Boardman Plaza $26,640,000
Cheltenham Square $50,000,000
DeSoto Square $56,800,000
Upper Valley Mall $44,800,000
Washington Square $49,100,000
$263,640,000
TOTAL CAPITAL $333,840,000
<PAGE> 38
SCHEDULE 2
CAPITAL ACCOUNT PERCENTAGES
GENERAL PARTNER Percent Interest
SDG Capital Associates Limited Partnership 1%
LIMITED PARTNERS
DeBartolo Capital Partnership 78.5%
Simon DeBartolo Group, L.P. 20.5%
TOTAL 100.0%
<PAGE> 39
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from SEC Form
10-K and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 109,699
<SECURITIES> 0
<RECEIVABLES> 202,163
<ALLOWANCES> (13,804)
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 6,867,354
<DEPRECIATION> 461,792
<TOTAL-ASSETS> 7,662,667
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 5,077,990
0
339,061
<COMMON> 11
<OTHER-SE> 1,217,790
<TOTAL-LIABILITY-AND-EQUITY> 7,662,667<F2>
<SALES> 0
<TOTAL-REVENUES> 1,054,167
<CGS> 0
<TOTAL-COSTS> 571,145
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 5,992
<INTEREST-EXPENSE> 287,823
<INCOME-PRETAX> 203,133
<INCOME-TAX> 203,133
<INCOME-CONTINUING> 203,133
<DISCONTINUED> 0
<EXTRAORDINARY> 58
<CHANGES> 0
<NET-INCOME> 137,237
<EPS-PRIMARY> 1.08
<EPS-DILUTED> 1.08
<FN>
<F1>The Company does not report using a classified balance sheet.
<F2>Includes limited parters' interest in the Operating Partnership of $694,437.
</FN>
</TABLE>
