AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 24, 1999
REGISTRATION NO. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
WESTFIELD AMERICA, INC.
(Exact name of Registrant as specified in its charter)
MISSOURI 43-0758627
(State or other jurisdictisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
11601 WILSHIRE BOULEVARD, IRV HEPNER, SECRETARY
12TH FLOOR 12TH FLOOR
LOS ANGELES, CALIFORNIA 90025 11601 WILSHIRE BOULEVARD,
(310) 478-4456 LOS ANGELES, CALIFORNIA 90025
(Address, including zip code, (310) 478-4456
and telephone number, including (Name, address, including zip
area code, of registrant's code, and telephone number,
principal executive offices) including area code, of agent
for service)
GREGG A. NOEL, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
300 SOUTH GRAND AVENUE
LOS ANGELES, CALIFORNIA 90071
(213) 687-5000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after this Registration Statement becomes effective
depending upon market conditions and other factors.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box: ( )
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection
with dividend or interest reinvestment plans, check the following box: (X)
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check
the following box and list the Securities registration statement number of
the earlier effective registration statement for the same offering. ( )
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. ( )
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. ( )
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
Title of Each Proposed Maximum Proposed Maximum
Class of Securities Amount to be Offering Price Aggregate Offering Amount of
to be Registered Registered Per Share (1) Price (1) Registration Fee
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par
value $0.01 per share 786,286(2) $14.91 $11,723,524.26 $3,260
- -----------------------------------------------------------------------------------------------
Total 786,286 100% $11,723,524.26 $3,260
- -----------------------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(c) of the Securities Act.
(2) Represents the number of shares of Common Stock issuable upon exchange
of partnership interests in affiliated partnerships. Also being registered
are: (a) such indeterminate number of additional shares of Common Stock as
may be issuable upon or in connection with the exchange of such partnership
interests as a consequence of adjustments to the rate at which such
partnership interests are exchanged into shares of Common Stock and
(b) such indeterminate number of shares of Common Stock as may be issuable
in connection with payments of accrued and unpaid distributions required to
be made by an affiliated partnership, if the registrant exercises its prior
and independent right to pay such required distributions with shares of
Common Stock.
</TABLE>
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE
REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT
THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE
WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND
EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
[TEXT BOX CONTENTS: The information in this prospectus is not complete and
may be changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective.
This prospectus is not an offer to sell these securities and we are not
soliciting an offer to buy these securities in any state where such offer
of sale is not permitted.]
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED AUGUST 24, 1999
PROSPECTUS
WESTFIELD AMERICA, INC.
11601 WILSHIRE BOULEVARD, 12TH FLOOR
LOS ANGELES, CALIFORNIA 90025
(310) 478-4456
786,286 COMMON SHARES
This prospectus relates to the possible issuance from time to time to
New Hanover Associates and its permitted transferees, subject to
adjustment, of 786,286 shares of our common stock. Holders of partnership
interests in two of our affiliated partnerships have the right to receive
cash for their partnership interests, subject to our prior and independent
right to acquire some or all of such partnership interests for an
equivalent number of common shares.
We will not receive any cash proceeds from such issuance.
Our common shares are listed on the New York Stock Exchange, Inc.
under the symbol "WEA." On August 23, 1999, the closing price of one
common share on the New York Stock Exchange was $14.94.
We urge you to read carefully this prospectus and any accompanying
prospectus supplement, which describes the specific terms of the securities
being offered to you, before you make your investment decision.
INVESTING IN THE SECURITIES INVOLVES RISKS, SEE "RISK FACTORS"
BEGINNING ON PAGE 3.
------------------------------------------
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities or
passed upon the adequacy or accuracy of this prospectus. Any
representation to the contrary is a criminal offense.
------------------------------------------
The date of this prospectus is , 1999.
TABLE OF CONTENTS
PAGE PAGE
Risk Factors . . . . . . . . . 3 Redemption of OP Units and
Independence Mall Units . . . . 48
Special Note Regarding Forward-
looking Statements . . . . . . 18 Comparison of Ownership of OP
Units, Independence Mall Units
and Common Shares . . . . . . . 51
The Company . . . . . . . . . . 18
Comparison of Federal Income Tax
Use of Proceeds . . . . . . . . 18 Consequences of Ownership of OP
Units, Independence Mall Units
Description of Capital Stock . 19 and Common Shares . . . . . . . 61
Provisions of our Articles of Federal Income Tax
Incorporation and By-Laws and Considerations . . . . . . . . 62
of Missouri Law . . . . . . . . 31
Plan of Distribution . . . . . 72
Description of OP Units and the Legal Matters . . . . . . . . . 72
Partnership Agreement for the
Operating Partnership . . . . 34 Experts . . . . . . . . . . . . 72
Description of Independence Mall Where You Can Find More
Units and the Independence Mall Information. . . . . . . . . . . 72
Partnership Agreement . . . . . 41
RISK FACTORS
You should carefully consider the following risks as well as the other
information contained or incorporated by reference in this prospectus
before purchasing the securities.
WE MAY HAVE CONFLICTS OF INTEREST
Controlling ownership interest of affiliates allows affiliates to
exercise significant influence on us
As of June 30, 1999, some of our affiliates owned shares of our common
stock, par value $.01 per share, as follows:
o Westfield America Trust, an Australian public property
trust, owned 56.1% of the common shares outstanding.
o Westfield Holdings Limited, an Australian public company,
through wholly-owned subsidiaries, directly owned 19.2% of
the common shares outstanding and, through the ownership of
an equity interest in Westfield America Trust, had an
interest in approximately 23.8% of the common shares held by
Westfield America Trust, which is an additional 13.3% of the
common shares.
In addition, on May 29, 1998, we entered into a stock subscription
agreement with Westfield America Trust pursuant to which we have the right
to sell and Westfield America Trust has the obligation to purchase from us
A$465 million, which was approximately US$307.7 million as of June 30,
1999, of common shares at a 5% discount to the then prevailing market price
of our common shares.
Westfield America Trust may also purchase, at its option, an
additional 8,335,648 common shares pursuant to warrants that it may
exercise in whole or in part at any time prior to May 21, 2017. See
"Possible future sales of shares by affiliates could adversely affect the
market price of our common shares."
To maintain our qualification as a real estate investment trust
("REIT"), generally no individual, other than Frank P. Lowy and the
members of his family, who are subject to a higher ownership threshold, may
directly or indirectly hold more than 5.5%, by value, of our capital stock.
As of December 31, 1998, the Lowy family, or interests associated with
it, owned approximately 35.2% of Westfield Holdings' ordinary shares and
7.6% of the outstanding equity of Westfield America Trust. Additionally,
members of the Lowy family act both as our officers and directors and as
officers and directors of Westfield Holdings. By virtue of these positions
and their ownership interests in Westfield Holdings and Westfield America
Trust, the Lowy family is in position to exercise significant influence on
us, Westfield Holdings and Westfield America Trust.
In addition to its ownership of common shares, Westfield Holdings and
its subsidiaries manage Westfield America Trust. With respect to the
election of our directors, Westfield America Trust's trustee may only vote
its common shares as directed by a majority of holders of equity of
Westfield America Trust. With respect to all other matters, Westfield
America Trust's trustee votes all of its common shares as recommended by
Westfield Holdings and its subsidiaries. Westfield America Trust's
substantial ownership of common shares and Westfield Holdings' ownership of
common shares and equity of Westfield America Trust allows Westfield
America Trust and Westfield Holdings to elect all of our directors and to
control the vote on all matters submitted to our shareholders for a vote.
Matters that could be submitted to our shareholders for a vote include
approval of mergers, sales of all or substantially all of our assets,
issuance of substantial additional equity and "going private" transactions.
Additionally, Westfield America Trust and Westfield Holdings, by virtue of
their ownership of common shares, have significant influence over our
affairs, which influence might not be consistent with the interests of
other shareholders.
We rely on Westfield Holdings and its subsidiaries for our management
and the management of our properties; we lack control over the day-
to-day management of our properties
We have no employees. We rely entirely on Westfield Holdings and its
subsidiaries for our management and the management of our properties. We
are not currently able to operate without Westfield Holdings and its
subsidiaries. Since we cannot elect the directors of the Westfield
Holdings subsidiaries that provide the services listed below, our day-to-
day control of their actions is limited.
We have entered into the following types of contracts with Westfield
Holdings and its subsidiaries:
o Management contracts, pursuant to which Westfield Holdings
and its subsidiaries provide management services for all of
our properties.
o An advisory agreement, pursuant to which Westfield Holdings
and its subsidiaries provide us with corporate strategic
planning, administrative and other asset management
services.
o A master development framework agreement, pursuant to which
Westfield Holdings and its subsidiaries provide planning and
predevelopment work, to determine whether particular
projects are feasible and economically viable, and
development services.
We negotiated the terms and understandings relating to these
agreements with Westfield Holdings and its subsidiaries; however, we
believe that they reflect market terms.
We do, however, have approval rights over aspects of management and
development as follows:
o We set budgets and leasing guidelines in accordance with
company policy that Westfield Holdings and its subsidiaries
must follow in connection with managing our properties.
o Our board of directors, including at least 75% of the
independent directors, must approve all development projects
in connection with plans, feasibility and costs, including
fees to be paid to Westfield Holdings and its subsidiaries.
oo Independent directors are those members of our
board of directors who:
ooo are not, and have not for the last 12
months been, directors, officers or
employees of Westfield Holdings or
Westfield America Trust;
ooo are not affiliates of Westfield Holdings
or Westfield America Trust or officers
or employees of such affiliates;
ooo are not members of the immediate family
of any natural person described above;
and
ooo are free from any relationship that
would interfere with the exercise of
independent judgment as a director.
o We generally may terminate any management contract or the
advisory agreement after May 2000 if at least 75% of the
independent directors and the trustee of Westfield America
Trust, so long as Westfield America Trust holds at least 10%
of our capital stock, determine not to renew the contract in
question because of unsatisfactory performance by the
applicable Westfield Holdings subsidiary that is materially
detrimental to us or because the fees provided for under the
particular contract are not fair.
Westfield Holdings' interests may conflict with the interests of
unaffiliated purchasers or holders
Our contracts with Westfield Holdings' subsidiaries for property
management, asset management and property development and Westfield
Holdings' substantial beneficial ownership of common shares give Westfield
Holdings interests that may conflict with the interests of unaffiliated
purchasers or holders of common shares. In addition, implementation of our
key growth strategies will result in increased payments of management,
advisory and development fees by us to Westfield Holdings' subsidiaries.
The conflicts of interest include the disparate tax treatment between our
U.S. shareholders, on the one hand, and Westfield Holdings and all other
foreign shareholders, including Westfield America Trust, on the other hand,
resulting from the capital gain attributable to the sale of a U.S.
property.
Westfield Holdings has agreed that so long as it is managing our
assets, neither it nor its subsidiaries will acquire any ownership interest
in properties in the United States. Each of Westfield Holdings' management
and development subsidiaries has agreed that so long as it is managing our
properties or providing us with development services, as applicable, it
will not manage or develop, as applicable, a shopping center property in
competition with a property that we own. These agreements are subject to
exceptions for Westfield Holdings' acquisition of entities that do not have
any ownership interest in shopping centers in the United States but are
then managing or developing a competitive center, in addition to other
properties. This non-competition agreement does not apply to any activity
by Westfield Holdings with respect to airport projects. We also have
agreements with Frank P. Lowy, David Lowy, Peter Lowy and Steven Lowy
precluding each of them from acquiring any ownership interest in shopping
center properties in the United States for so long as:
o Westfield Holdings serves as our asset manager and property
manager; and
o interests associated with the Lowy Family have significant
ownership and management interests in Westfield Holdings.
We have overlapping officers and directors with some of our affiliates
Some of the officers and directors of Westfield Holdings and the
subsidiary of Westfield Holdings which manages Westfield America Trust are
also our officers and/or directors. Moreover, all of our executive
officers are also employed by and provide services to Westfield Holdings
and its subsidiaries and properties Westfield Holdings and its subsidiaries
manage. All of our executive officers, other than Frank P. Lowy,
currently devote substantially all of their time to our business. In the
future, however, services performed for Westfield Holdings and its
subsidiaries and properties managed by Westfield Holdings and its
subsidiaries may require any particular officer, or officers, to devote
less than a majority of their time to our business.
We have a creditor relationship with Westfield Holdings and its
subsidiaries; our interests may not align with the interests of
Westfield Holdings and its subsidiaries for the term of the loan
Since May 1997, we have been a creditor of two wholly-owned indirect
subsidiaries of Westfield Holdings. Specifically, we lent $145.0 million
dollars at an 8.5% annual interest rate. The loan is non-recourse, and is
secured by a pledge of Westfield Holdings' 50% partnership interest in a
limited partnership that owns a super-regional shopping center in New
Jersey. We also receive a participating interest payment based upon an
adjustable percentage of the cash flow of the shopping center. Total
interest payments on the loan are capped at 11% per year. The loan will
mature on May 21, 2007, but may be prepaid after May 21, 2000, upon the
sale of Westfield Holdings' interest in the shopping center to an
unaffiliated third party, subject to the payment of a yield maintenance
premium based upon the highest possible participating interest payments.
By its terms, the loan may be prepaid after May 21, 2002 without the
payment of a yield maintenance premium. In the event of a default under
the loan, we will be entitled to accelerate payment of the principal and
accrued interest, and if prior to May 21, 2002, the yield maintenance
premium, and may terminate our contracts with Westfield Holdings and its
subsidiaries for property and asset management and property development.
In May 1997, the board of directors of Westfield Holdings represented
that other than in the case of a sale of its interest in the shopping
center property, it will not prepay the loan until May 20, 2004 without
payment of the yield maintenance premium. We received approximately $7.7
million in interest from the loan for the six months ended June 30, 1999,
which represents a return of 10.7% of invested capital on an annualized
basis. Westfield Holdings' interests with respect to the loan may not
align with our interests for the duration of the loan.
OUR ABILITY TO MAKE DISTRIBUTIONS IS DEPENDENT ON OUR OPERATING
PARTNERSHIP'S ABILITY TO MAKE DISTRIBUTIONS
We have transferred most of our assets to Westfield America Limited
Partnership, our operating partnership, of which we are the sole general
partner. Our ability to make distributions and other payments on the
common shares is dependent upon the operating partnership making
distributions and other payments to its partners. If the operating
partnership does not make distributions or other payments to its partners,
for any reason, it is expected that we would likely not be able to pay
dividends, other distributions or other payments on the common shares.
COVENANT RESTRICTIONS CONTAINED IN SOME OF THE LOAN AGREEMENTS OF OUR
SUBSIDIARIES MAY LIMIT OUR ABILITY TO MAKE PAYMENTS TO OUR SHAREHOLDERS
In some cases, our indirect subsidiaries are subject to loan agreement
provisions that restrict their ability to make distributions or other
payments to their security holders unless specified financial tests or
other criteria are satisfied. These provisions may restrict our indirect
subsidiaries' ability to make distributions to the operating partnership,
which in turn would be paid to us. We are limited by our corporate credit
facility from making annual dividend distributions in excess of our Funds
from Operations.
Funds from Operations means net income (loss), computed in accordance
with generally accepted accounting principles, excluding gains (or losses)
from debt restructurings and sales of property, plus real estate related
depreciation and amortization and after adjustments for unconsolidated
affiliates and joint ventures. This definition is in accordance with
standards established by the White Paper on Funds from Operations approved
by the Board of Governors of the National Association of Real Estate
Investment Trusts in March 1995.
SHAREHOLDERS ARE LIMITED IN THEIR ABILITY TO CHANGE CONTROL OF US
There are significant limitations on the ability of shareholders to
change control of us. The following may prevent a change in control,
tender offers for common shares and attempts to assemble a block of common
shares through purchases of common shares from shareholders at a premium to
the prevailing market price:
o provisions of our Restated Articles of Incorporation;
o provisions of our Second Amended and Restated By-Laws;
o provisions of the First Amended and Restated Agreement of
Limited Partnership of Westfield America Limited
Partnership, dated as of August 3, 1998, as amended;
o Westfield Holdings' and Westfield America Trust's ownership
of a substantial amount of common shares; and/or
o provisions of Missouri law.
The above listed items provide for, among other things:
o a restriction on the constructive ownership of more than
5.5% of our capital stock by any individual (other than the
Lowy family);
o the availability of capital stock for issuance from time to
time at the discretion of our board of directors;
o a classified board of directors;
o the inability of shareholders to take action by written
consent unless such consent is unanimous;
o prohibitions against shareholders calling a special meeting
of shareholders;
o requirements for advance notice for raising business or
making nominations at shareholders' meetings; and
o additional requirements for some business combination
transactions.
THERE ARE RISKS ASSOCIATED WITH INVESTMENTS IN REAL ESTATE
Adverse economic and real estate conditions could adversely affect our
centers
Our ability to make payments to our shareholders depends on our
ability to generate Funds from Operations in excess of required debt
payments and capital expenditure requirements.
Funds from Operations may be adversely affected by factors that are
beyond our control, including:
o the national and regional economic climate, which may be
affected by industry slowdowns, plant closings and other
factors;
o local real estate conditions, for example, a surplus of
retail space;
o retailers' and shoppers' perceptions of the safety,
convenience and attractiveness of our shopping centers;
o trends in the retail industry;
o competition for tenants;
o high vacancy rates;
o changes in market rental rates;
o the inability to collect rent due to bankruptcy or
insolvency of tenants or otherwise;
o the need to periodically renovate, repair and relet space;
and
o increased operating costs.
These factors could also influence the price a purchaser would be
willing to pay for any of our properties if we elect to sell a property.
In the case of vacant space, we may not get full credit for the income that
can be earned from such vacant space in determining the sale price. In
addition, other factors may adversely affect a property's value, including:
o changes in governmental regulations, zoning or tax laws;
o potential environmental or other legal liabilities;
o changes in interest rate levels;
o civil disorder; and
o acts of God, such as floods and earthquakes.
The geographic concentration of our centers could adversely affect us
As of June 30, 1999, 19 of our 37 shopping center properties were
located in California (representing approximately 52% of our shopping
centers' total gross leasable area), 6 are located in Missouri
(representing approximately 16% of the total gross leasable area) and 4 are
located in Connecticut (representing approximately 10% of the total gross
leasable area). To the extent that general economic or other relevant
conditions in these regions decline and result in decreased consumer demand
in these regions, our financial performance may be adversely affected. The
markets for some of these centers are also significantly dependent on the
financial results of major local employers and on industry concentrations.
For example, the sales growth of the shopping center properties located in
California was negatively affected by the California economic recession
from 1990 to 1993.
Risks associated with our expansion and redevelopment activities could
adversely affect us
Our redevelopment and expansion of properties subjects us to a variety
of risks. In the case of an unsuccessful expansion or redevelopment
project, we may fail to recoup our investment in the project. These
redevelopment and expansion risks include:
o abandonment of explored redevelopment opportunities after
the payment of funds;
o failure to obtain required permits, licenses or approvals
for a project;
o expenditure of funds for construction costs beyond original
estimates, possibly making a project uneconomical;
o temporary disruption of income from a property;
o failure to maintain occupancy rates and rents at a level
sufficient to make a completed project profitable; and
o loss of customers due to inconvenience caused by
construction.
Risks associated with our acquisition activities could adversely
affect us
We intend to continue to acquire shopping centers to the extent they
can be acquired on advantageous terms and meet our investment criteria.
However, we may not be able to complete transactions in the future. When
we develop or expand properties, we are subject to the risks that:
o costs may exceed original estimates;
o projected occupancy and rental rates at the property may not
be realized;
o financing may not be available on favorable terms;
o construction and lease-up may not be completed on schedule;
and
o we may experience difficulty or delays in obtaining
necessary zoning, land-use, building occupancy, and other
governmental permits and authorizations.
There is a potential dilutive effect of financing future acquisitions
with equity
We anticipate that we will finance future acquisitions, at least
partly by additional borrowing, or through the issuance of interests in the
operating partnership ("OP Units") by the operating partnership, or by the
issuance of additional equity. The use of equity financing, rather than
debt, for future developments or acquisitions could have a dilutive effect
on the interest of our existing shareholders.
We may have difficulty managing our rapid growth
We have grown rapidly. Since our initial public offering in May 1997,
we have completed numerous acquisition transactions, expanding our
portfolio of properties from 22 properties with total gross leasable area
of 19.2 million square feet to 37 properties with total gross leasable area
of 34.6 million square feet as of June 30, 1999. Our recent acquisition
from TrizecHahn Centers, Inc. is our largest acquisition so far. If we
fail to successfully integrate such businesses or properties, our results
of operations could be adversely affected.
Our ability to successfully integrate acquired businesses and
properties depends on our ability to:
o maintain uniform standards, controls, procedures and
policies;
o maintain adequate management, accounting and information
systems; and
o integrate the acquired properties into our overall business
plan.
We may not be able to accomplish these goals and successfully
integrate any acquired businesses or properties.
Our reliance on some tenants and anchors could adversely affect us
The bankruptcy or insolvency, or a downturn in the business, of any of
our anchor tenants or an anchor-owned store, or the failure of any anchor
tenant to renew its lease when it expires could adversely affect our income
and Funds from Operations because anchor tenants play an important part in
generating customer traffic and making centers desirable locations. Most
anchor tenants have a clause in their leases which allows the anchor
tenants to cease operating, reduce their rent, or terminate their lease if
other anchor stores or a percentage of non-anchor tenants at the same
property are not occupied and operating. Also, some of the tenant leases
permit the tenants to terminate their leases or reduce their rent if a
certain number of anchor stores or a percentage of non-anchor stores cease
to operate at such properties for a specified period of time. Further,
these actions could adversely affect our ability to relet the space that is
vacated.
The leases of some of our anchor tenants, and the reciprocal easement
agreements to which some of the anchor-owned stores are parties, may permit
one of our anchors to transfer its interest in a shopping center to another
retailer. The transfer to a new anchor tenant could adversely affect
customer traffic in a shopping center and thereby reduce the income
generated by that center and could also allow some other anchors and other
tenants to make reduced rental payments or to terminate their leases at
that center. Each of these developments could adversely affect our Funds
from Operations and ability to make expected distributions to shareholders.
As of December 31, 1998, anchors occupied 57.7% of the total gross
leasable area of our shopping centers. As of the same date, the May
Company leased 14.3%, J.C. Penney leased 10.4%, Macy's leased 10.4% and
Sears leased 9.4% of our total gross leasable area. No other anchor leased
more than 3.9% of our total gross leasable area.
As of December 31, 1998, tenants whose parent company is The Limited
Stores collectively occupied approximately 960,000 square feet, or 6.6% of
our aggregate gross leasable area for stores smaller than anchors, kiosks
permanently located within the corridors of the shopping centers and free
standing buildings generally located along the perimeter of a center's
parking area. These tenants include Bath & Body Works, Express, Lane
Bryant, Lerner's, The Limited, Structure and Victoria's Secret, among
others. While each of these tenants is operated as an independent
subsidiary, an unexpected negative change in the financial strength of the
parent company, The Limited Stores, could result in a substantial decrease
in our revenues from leases with these tenants.
In addition to being an anchor at many of our shopping centers, the
May Department Stores Company leases 12 department store properties from
us. A negative change in the financial condition of the May Department
Stores Company could result in a substantial decrease in the revenues these
leases provide to us.
Our inability to relet short term spaces could adversely affect us
We have established a temporary leasing program pursuant to which we
lease some shopping mall space on a short-term basis, usually for a term of
between 30 days to eleven months, pending our ability to secure suitable
long-term tenants. We may be unable to relet any such space upon
expiration of a short-term lease.
Competition with other shopping centers could adversely affect us
All of our shopping centers are located in developed retail and
commercial areas, many of which compete with other malls or neighborhood
shopping centers within their primary trade area. The amount of rentable
space in the relevant primary trade area, the quality of facilities and the
nature of stores at such competing shopping centers could each have a
material adverse effect on our ability to lease space and on the level of
rents we can obtain. In addition, retailers at our shopping centers face
increasing competition from other forms of retailing, such as discount
shopping centers and clubs, outlet malls, catalogues, video and home
shopping networks, and direct mail, telemarketing and internet retailing.
Other real estate investors, including other REITs, compete for acquisition
of new retail shopping centers.
Although we believe our shopping centers can compete effectively
within these trade areas, we compete with other owners, managers and
developers of shopping centers. Those competitors that are not REITs may
be at an advantage to the extent they can utilize operating cash flows to
finance projects, while we, and our competitors that are REITs, are
required to distribute significant amounts of cash from operations to
shareholders. Likewise, our competitors may have greater resources
available for expansion, redevelopment and acquisition purposes. If we
should require funds, we may have to borrow when the cost of capital is
high. If the price of shopping center properties declines, our REIT
distribution requirements may place us at a disadvantage with respect to
potential acquisitions compared to companies that distribute a smaller
percentage of their net taxable income. Competition levels could increase
and might adversely affect our revenues and Funds from Operations.
Illiquidity of our assets could adversely affect our ability to make
distributions to our shareholders
Limitations on our ability to sell our investments could adversely
affect our ability to make distributions to our shareholders. Equity real
estate investments are relatively illiquid and tend to limit our ability to
vary our portfolio promptly in response to changes in economic or other
conditions. Additionally, if we sell some assets that we owned, or assets
which Westland Properties, Inc., now wholly owned by us, owned, on the
first day of the first taxable year for which we, or Westland Properties,
as applicable, qualified as a REIT, within 10 years of the relevant date, a
corporate level tax upon some built-in gains would be levied on us, in turn
adversely affecting distributions to our shareholders.
Also, we acquired some of our properties from persons to whom we
issued OP Units as part of the purchase price. In connection with the
acquisition of these properties, in order to preserve such persons' tax
deferral, we contractually agreed, in general, not to sell or otherwise
transfer the properties for a specified period of time, or in certain
instances, not to sell or otherwise transfer the properties without
compensating the sellers of the properties for their loss of the tax
deferral.
In addition, interests of Westfield Holdings and all other foreign
shareholders, including Westfield America Trust, regarding the sale of a
U.S. property may be inconsistent with the interests of our other
shareholders. See "We may have conflicts of interest - Westfield Holdings'
interests may conflict with the interests of unaffiliated purchasers."
Bankruptcy of our tenants could adversely affect our ability to make
distributions to our shareholders
Virtually all of our income consists of rental income paid by retail
tenants at our properties. Our cash flow and our ability to make
distributions to shareholders will be adversely affected if we are unable
to lease a significant amount of space in the centers, or if a significant
number of tenants are unable to pay their rent or other occupancy costs.
If a tenant defaults in its obligations to us, we may experience
substantial costs and suffer significant delays connected with renovating
and reletting the property.
In times of recession or other economic downturn, there is an
increased risk that retail tenants will be unable to meet their obligations
to us, otherwise default under their leases, or become debtors in cases
under the United States Bankruptcy Code. If any of our tenants becomes a
debtor in a case under the Bankruptcy Code, we would not be permitted to
evict the tenant solely because of its bankruptcy, but the bankruptcy court
could authorize the tenant to reject and terminate its lease with us. A
statutory cap could substantially decrease our claim against such a tenant
for unpaid and future rent below the remaining rent actually owed under the
lease. In any event, our claim for unpaid rent (as capped) would likely
not be paid in full.
Bankruptcy of any of our anchor tenants could have an especially
adverse effect on a property. The resulting deprivation to us of the rent
due from the anchor and the reduction of foot traffic at the center could
impair the performance of the remaining tenants and their ability to meet
their obligations to us.
Lack of updated title insurance for many of our properties could have
an adverse affect on us
We do not have recent policies of title insurance for many of our
properties. We have determined that the substantial cost of new owner's
title insurance policies for the full market value of our properties is not
warranted based on the following:
o our review of the existing owner's and/or mortgagee's title
insurance policies;
o updated title reports that we obtained for some of our
properties; and
o our absence of any knowledge of material title defects
regarding any of our properties since Westfield Holdings
acquired an interest in us.
We have purchased title insurance on the properties in which we have
acquired an interest from TrizecHahn Centers, Inc.
Adverse changes in laws affecting real estate investments could
adversely affect our ability to make distributions to shareholders
We generally pass costs resulting from changes in real estate tax laws
or real estate tax rates through to our tenants, thereby minimizing their
effect on us. Changes in laws increasing the potential liability for
environmental conditions existing at our properties, increasing the
restrictions on discharges or other hazardous waste conditions, or
increasing building code or similar local law requirements may result in
significant unanticipated expenditures which might not be payable by our
tenants and which would adversely affect our Funds from Operations and
ability to make distributions to our shareholders.
Laws benefitting disabled persons could adversely affect our business
A number of Federal, state and local laws, including the Americans
with Disabilities Act of 1990, and regulations exist that may require
modifications to existing buildings on our properties or restrict some
renovations by requiring improved access to such buildings by disabled
persons. Additional legislation or regulations may impose further burdens
or restrictions on owners with respect to improved access by disabled
persons. The costs of compliance with such laws and regulations may be
substantial, and limits or restrictions on completion of some renovations
may limit implementation of our investment strategy in some instances or
reduce overall returns on all investments. Although management has
concluded, based on its review to date, that we will not suffer a material
adverse effect due to the costs of compliance with such current laws and
regulations, no assurance can be given in this regard.
THERE ARE RISKS ASSOCIATED WITH DEBT FINANCING
Inability to refinance balloon payments on debt could have an adverse
effect on us
We do not expect to have sufficient Funds from Operations to be able
to make all of the balloon payments of principal on our debt, and the debt
of some joint ventures in which we have an interest, that becomes due in
the period from 1999 through 2001. An inability to make balloon payments
when due could cause a mortgage lender to foreclose on the properties
securing the loans on which the defaulted balloon payments are due. The
resulting foreclosures could have a material adverse effect on us.
As of June 30, 1999, the aggregate principal amount of consolidated
and unconsolidated debt outstanding (including amounts allocable to our
joint venture partners who are unaffiliated with us or Westfield Holdings)
was $2,673 million. We intend to refinance such debt at or before
maturity, to obtain funds either through financings secured by currently
unencumbered properties or through unsecured financings. Interest rates on
any debt incurred to refinance mortgage debt or debt facilities may be
higher than the rates on the current mortgages or debt facilities or at
floating rates. We may also issue equity or debt securities in order to
obtain funds. Any equity issuance may dilute existing shareholders. We or
our unaffiliated joint venture partners may be unable to refinance
indebtedness or to otherwise obtain funds on commercially reasonable terms,
or at all.
We have no limitation on the amount of our debt
Our charter and by-laws do not limit the amount of debt that we may
enter into, our debt to equity ratio or the aggregate leverage ratio of our
properties.
As of June 30, 1999, we had an aggregate of $2,328 million of
consolidated debt, including $167 million of fixed rate debt with The
Prudential Insurance Company of America, at an average interest rate of
6.51% per annum, secured by three of our wholly-owned shopping centers and
$70.6 million of fixed rate debt, at an average interest rate of 7.13% per
annum, secured by the properties leased to the May Department Stores
Company.
At June 30, 1999, the consolidated debt also includes debt assumed and
issued in conjunction with the shopping centers acquired in 1998 as
follows:
o mortgages assumed in conjunction with the acquisition of
four of the properties purchased in 1998 totaling $237.7
million. These fixed rate mortgages bear interest per annum
at 7.0%.
o borrowings totaling $754.1 million under a secured loan
facility from the Capital Company of America LLC. The loan
bears interest per annum at LIBOR + 0.53% and is secured by
twelve of the properties owned by us with a maturity date of
December 2001. In connection with the borrowings made under
this loan, we entered into an interest rate swap agreement
which effectively fixed the variable rate of the loan at
6.38% per annum.
As of June 30, 1999, our pro-rata share of debt-to-total market
capitalization based on the common share price on June 30, 1999, was 54.6%,
excluding $301.1 million of notes issued to Australian investors from the
numerator, and our balance of cash and cash equivalents was $13.0 million,
not including our proportionate share of cash held by unconsolidated real
estate affiliates. In addition, we have a $600 million unsecured revolving
credit facility with National Australia Bank Limited, Australia and New
Zealand Banking Group Limited, Commonwealth Bank of Australia and Union
Bank of Switzerland. As of June 30, 1999, we had unused capacity under our
unsecured revolving credit facility totaling approximately $120.0 million,
which will be used to finance future redevelopments, acquisitions and/or
for working capital.
Risks of our debt financing could adversely affect us
We have a substantial amount of debt. As a result, we are subject to
the following risks:
o the risk that our cash flow from operations will be
insufficient to meet required payments of principal and
interest;
o the risk that we will not be able to refinance our existing
indebtedness on favorable terms, or at all; and
o the risk that we will be unable to obtain financing for
necessary capital expenditures on favorable terms, or at
all.
Restrictions in our debt instruments limiting our ability to incur
additional indebtedness, including for the purpose of refurbishing our
properties, constructing new improvements or attracting new tenants, may
adversely affect the cash flow received from the properties proposed to be
improved. If we are unable to meet mortgage payments for a mortgage that
is secured by one of our properties, that property could be transferred to
the lender, or other third parties. As a result, we would lose the income
generated by that property and the property's asset value. Additionally,
such a transfer could result in corporate level tax if built-in gain is
recognized.
The loan from the Prudential Insurance Company of America contains
cross-default and cross-collateralization provisions with respect to three
of our shopping center properties that are collateral for the loan. The
loan from The Capital Company of America LLC contains cross-default and
cross-collateralization provisions with respect to twelve of our shopping
center properties that are collateral for that loan. A default with
respect to any mortgage included in either loan constitutes a default with
respect to all such mortgages included in such loan. If a default were to
occur, the lender could accelerate the indebtedness due under each of the
mortgages in the loan package. Moreover, the excess value of a property
securing a mortgage over the amount of that mortgage's indebtedness serves
as additional collateral for the entire loan package. A default with
respect to any property securing either loan could result in the transfer
of all properties securing such loan away from us.
Risks of our interest rate hedging arrangements could adversely affect
us
From time to time, in anticipation of refinancing debt, we enter into
agreements to reduce the risks associated with increases in interest rates.
Although these agreements provide us with some protection against rising
interest rates, these agreements also reduce the benefits to us when
interest rates decline. These agreements involve the following risks:
o interest rate movements during the term of any of our
agreements may result in a gain or loss to us;
o we may be exposed to losses if the hedge is not indexed to
the same rate as the debt anticipated to be incurred; and
o we may incur a loss if the counterparty to any of our
agreements fails to pay.
YOU MAY BE REQUIRED TO PAY FEDERAL INCOME TAX IF YOU EXCHANGE YOUR
INDEPENDENCE MALL UNITS OR OP UNITS FOR CASH OR COMMON SHARES.
If we elect to acquire your limited partnership interest
("Independence Mall Units") in the Westfield Independence Mall Limited
Partnership (the "Independence Mall Partnership") or OP Units in exchange
for common shares, the exchange of such Independence Mall Units or OP Units
will be treated for Federal income tax purposes as a sale of your
Independence Mall Units or OP Units. Such a sale will be fully taxable to
you. In general, you will recognize gain equal to the excess of (1) the
value of the common shares you receive plus the amount of any liabilities
of the Independence Mall Partnership or the operating partnership allocable
to the exchanged Independence Mall Units or OP Units at the time of the
exchange, over (2) the adjusted basis of your Independence Mall Units or OP
Units. It is possible that the amount of gain recognized, or even the tax
liability resulting from such gain, could exceed the value of the common
shares you would receive upon such disposition. In addition, your ability
to sell a substantial number of common shares in order to raise cash to pay
your tax liabilities associated with the redemption of Independence Mall
Units or OP Units may be limited by the trading volume of our common shares
and by fluctuations in the market price of our common shares. As a result,
the price you receive for such shares may not equal the value of your
Independence Mall Units or OP Units at the time of the redemption.
If we do not acquire the Independence Mall Units or OP Units in
exchange for common shares, and the Independence Mall Partnership or the
operating partnership redeems such Independence Mall Units or OP Units for
cash, the tax consequences may differ depending on whether you tender all
of your OP Units or Independence Mall Units and whether the Independence
Mall Partnership or the operating partnership obtained from us the cash
used to effect such redemption. See "Redemption of OP Units and
Independence Mall Units ____ Federal Income Tax Consequences of Redemption of
OP Units and Independence Mall Units."
THERE ARE RISKS ASSOCIATED WITH BEING A REIT
Consequences of our failure to qualify as a REIT could adversely
affect us
If we fail to qualify as a REIT, we will not be allowed a deduction
for distributions to shareholders in computing our taxable income and will
be subject to Federal income tax at regular corporate rates. We also could
be subject to the Federal alternative minimum tax. As a result of the
additional tax liability, we might need to borrow funds or liquidate some
investments in order to pay the applicable tax. Unless we are entitled to
relief under specific statutory provisions, we could not elect to be taxed
as a REIT for four taxable years following the year during which we were
disqualified. Therefore, if we lose our REIT status, the funds available
for distribution to holders of our capital stock would be reduced
substantially for each of the years involved. Moreover, we would no longer
be required to make any distributions. Although we intend to operate as a
REIT, future economic, market, legal, tax or other considerations may cause
us to fail to qualify as a REIT or may cause our board of directors, with
the consent of a majority of the holders of our capital stock to revoke the
REIT election. In addition, tax legislation currently being considered by
Congress contains language which, due to the extent of Westfield America
Trust's ownership interest in us, may prevent us from re-electing REIT
status in the event that our REIT election is terminated. Moreover, a
recent Federal budget proposal contains language which, if enacted in its
present form, would result in the immediate taxation of all gain inherent
in a C corporation's assets upon an election by such corporation to become
a REIT, and this proposal, if enacted, could also effectively preclude us
from re-electing REIT status in the event that our REIT election is
terminated.
We believe that we operate in a manner that enables us to meet the
requirements for qualification as a REIT for Federal income tax purposes.
We have not requested, and do not plan to request, a ruling from the
Internal Revenue Service that we qualify as a REIT. We have, however,
previously received an opinion from the law firm of Skadden, Arps, Slate,
Meagher & Flom LLP, our tax counsel, that commencing with the taxable year
ended December 31, 1994, we were organized in conformity with the
requirements for qualification as a REIT and that our actual method of
operation has enabled, and our proposed method of operation will enable us
to, meet the requirements for qualification and taxation as a REIT.
You should be aware that opinions of counsel are not binding on the
Internal Revenue Service or any court. In rendering its opinion, Skadden,
Arps, Slate, Meagher & Flom LLP relied on assumptions, representations and
covenants made by us as of the date thereof regarding factual matters and
on opinions of local counsel with respect to matters of local law. The
opinion is expressed based upon facts, representations and assumptions as
of the date thereof and Skadden, Arps, Slate, Meagher & Flom LLP does not
have any obligation to advise anyone of any subsequent change in the
matters stated, represented or assumed or any subsequent change in
applicable law. We may not have met the requirements for treatment as a
REIT or may not continue to meet these requirements in the future.
Possible adverse consequences due to limits on the ownership of our
capital stock
In order to comply with the requirements for qualification as a REIT
specified by the Internal Revenue Code, our Restated Articles of
Incorporation place limits on ownership of shares. No individual, other
than members of the Lowy family, may own directly or constructively more
than 5.5%, by value, of our capital stock. The Lowy family is limited to
an aggregate ownership of 26% of our capital stock. The Internal Revenue
Code's rules regarding constructive ownership are broad and complex and may
cause shares owned directly or constructively by a group of related
entities to be constructively owned by one entity.
In the event of a transfer of our capital stock, including the shares
covered by this prospectus, that would violate the ownership restrictions,
we may:
o treat the transfer as void; and/or
o transfer the shares to a trust for the benefit of one or
more charitable organizations.
We also may transfer the shares to a charitable trust and, if we do
so, the original intended purchaser would have a right to share in the
proceeds of a sale by the trust of the shares involved, but only to the
extent of their purchase price for such shares. The intended purchaser
would have no other rights with respect to such shares.
We may be liable for a corporate-level tax if we sell property that we
owned prior to our conversion to REIT status.
Pursuant to an election made by us under Internal Revenue Service
Notice 88-19, we may become liable for a Federal income tax imposed at the
highest corporate rate upon the sale within 10 years of any property that
we owned on the first day of the first taxable year for which we qualified
as a REIT -- February 12, 1994 (or January 1, 1996, in the case of property
held by our subsidiary, Westland Properties). Such property also includes
property that we owned on that date indirectly through partnerships, and a
sale of such property by such a partnership would be considered to be a
sale by us. Upon such a sale, we will be liable for a Federal income tax
on the portion of the gain that was in existence on February 12, 1994.
Although we have no present intention to dispose of any property in a
manner that would trigger such tax consequences, there can be no assurance
that such dispositions will not occur. Among other reasons, such
dispositions could occur in the case of properties held by us through
partnerships and with respect to which we may not have full control over
disposition decisions.
Our obligation to make distributions to shareholders may cause us to
borrow
To qualify as a REIT under the Internal Revenue Code, we are required
each year to distribute at least 95% of our net taxable income, excluding
any net capital gain designated as a capital gain distribution, to our
shareholders. We cannot make any distributions on our common shares unless
we have paid the full dividends on all classes of our outstanding preferred
shares.
Our future distributions may not allow us to satisfy all of our
working capital needs using only cash flow from operations. We may need to
seek periodic debt or equity financings to cover such items as:
o allowances associated with the renewal or replacement of
tenants as their leases expire; and
o the retirement of our debt when it becomes due.
Additionally, differences in timing between calculation of our net
taxable income and the payment of required debt amortization payments could
require us to borrow funds on a short term basis in order to satisfy our
REIT distribution requirements. In that case, we may be forced to borrow
funds even if we believe that prevailing market conditions are not
favorable or that a loan would not be advisable in the absence of tax
considerations.
Possible legislative or other actions affecting REITs could adversely
affect us
You should be aware that legislative, judicial or administrative
action may change the Federal income tax treatment of us at any time, and
that any such action may affect investments and commitments previously
made. The rules dealing with Federal income taxation of REITs are
constantly under review by persons involved in the legislative process and
by the IRS and the U.S. Treasury Department, resulting in revisions of
regulations and revised interpretations of established concepts as well as
statutory changes. For example, tax legislation currently being considered
by Congress contains language which, due to the extent of Westfield America
Trust's ownership interest in us, may prevent us from re-electing REIT
status in the event that our REIT election is terminated. In addition, a
recent Federal budget proposal contains language which, if enacted in its
present form, would result in the immediate taxation of all gain inherent
in a C corporation's assets upon an election by the corporation to become a
REIT, and this proposal, if enacted, could also effectively preclude us
from re-electing REIT status in the event that our REIT election is
terminated.
We may be subject to state or local taxes
We may be subject to state or local income and other taxation in
various state or local jurisdictions. The state and local tax treatment
may not conform to the Federal income tax consequences discussed in this
prospectus. Any such taxes would reduce our operating cash flow.
Consequently, you should consult your own tax advisors regarding the effect
of state and local tax laws.
We may have conflicts of interest with unrelated third parties in
jointly owned properties
We do not own the full interest in some of the limited partnerships
and limited liability companies that own our properties, including nine of
the properties owned as of June 30, 1999. Rather, we own a partial
interest in joint ventures with third party equity interests. Our
interests do not always align with those of a third party equity interest.
We serve in a general partner or managing member capacity and/or Westfield
Holdings serves in a management capacity with respect to some of these
joint ventures and their related properties. In such instances, we and/or
Westfield Holdings may have fiduciary responsibilities to the third party
equity interests of a particular joint venture that must be considered when
making decisions regarding their respective properties.
Some major transactions, such as refinancing, encumbering, expanding
or selling a property may require the consent of the third party equity
interests in the jointly owned property. We may not be able to obtain such
consents as needed, or may be able to do so only by compensating the third
party equity interests from whom we seek the consent, financially or
otherwise.
Some of the jointly owned properties are subject to buy-sell
provisions, rights of first refusal and/or rights of first offer. These
provisions could force us to make decisions regarding buying or selling
interests in particular jointly owned properties at times when we do not
desire to do so. A buy-sell provision could force us to sell our interest
in a jointly owned property because we do not have cash available with
which to purchase a third party's equity interest. Likewise, these and
other provisions in the agreements governing these jointly owned properties
could prevent us from selling interests in the jointly owned properties at
the most advantageous time.
Third party equity interests could cause property ownership actions
regarding particular properties that would have an adverse affect on our
ability to satisfy our requirements for treatment as a REIT.
THE BANKRUPTCY OF UNAFFILIATED PARTNERS COULD CAUSE DELAYS
The bankruptcy of an unaffiliated partner could adversely affect the
operation of any property in which the unaffiliated partner held an
interest. Any action that requires approval of an unaffiliated partner in
bankruptcy and is arguably not an "ordinary course" matter may be subject
to delay and uncertainty while the unaffiliated partner seeks bankruptcy
court approval. Moreover, the unaffiliated partner may not be able to
obtain such approval.
The discharge in bankruptcy of an unaffiliated partner might subject
us to ultimate liability for a greater portion of that partnership's
obligations than we would otherwise bear. In addition, even if the
unaffiliated partner, or its estate, was not completely relieved of
liability for such obligations, we might be required to satisfy such
obligations and then rely upon a claim against the unaffiliated partner, or
its estate, for reimbursement.
THE EFFECT ON FUNDS FROM OPERATIONS OF UNINSURED LOSSES ON PROPERTIES COULD
ADVERSELY AFFECT US
We, our subsidiaries and the joint ventures in which we have an
interest carry comprehensive liability, fire, extended coverage and rental
loss insurance covering their respective properties, with policy
specifications and insured limits customarily carried for similar
properties. We do not insure against losses that are generally either not
insured, not insured at full replacement cost or insured subject to larger
deductibles (such as from wars, floods and earthquakes). Should an
uninsured loss or a loss in excess of insured limits occur, some or all of
the capital invested in a property, as well as the anticipated future
revenues from the property, could be lost. The property owner, however,
would remain obligated for any mortgage indebtedness or other financial
obligations related to the property. We could suffer material adverse
effects from any such loss. Many of our properties are located in areas
where the risk of earthquakes is greater than in other parts of the
country. We currently carry earthquake insurance on all properties managed
by Westfield Holdings and its subsidiaries. Those policies are subject to
a deductible on each building within a property equal to 5% of the insured
value of each building and are further subject to a combined annual
aggregate loss limit of $200 million.
In addition, in some cases, tenants may be permitted to terminate
their leases following the occurrence of a casualty event.
POSSIBLE ENVIRONMENTAL LIABILITIES COULD ADVERSELY AFFECT US
Various Federal, state and local environmental laws subject property
owners and operators to liability for the costs of removal of some
hazardous substances released on property, or for the costs of remediation
of hazardous conditions on a property. These laws often impose liability
regardless of whether the owner or operator knew of, or was responsible
for, the release of the hazardous substances. The presence of hazardous
substances, or the failure to properly remediate conditions caused by
hazardous substances, may adversely affect the owner's ability to sell a
property or to borrow using the property as collateral. The presence of
hazardous substances, or the failure to properly remediate conditions
caused by hazardous substances, may also cause the owner to incur
substantial cleanup costs. Entities who arrange for the disposal or
treatment of hazardous substances may also be liable for the costs of
removal or remediation at the facility to which they sent the substances.
Other laws regulate the management of, and may impose liability for,
personal injuries associated with exposure to asbestos-containing materials
or other regulated materials. If we renovate or demolish any of our
properties, we may incur substantial costs for the removal and disposal of
asbestos-containing materials.
In connection with our ownership and operation of our currently and
formerly-owned properties, we and the joint ventures in which we have an
interest may be potentially liable for removal or remediation costs, as
well as other costs (including governmental fines and costs related to
injuries to persons and property) resulting from environmental conditions
at these properties.
An independent consultant has reviewed existing environmental reports
to identify environmental conditions at our properties, including some
properties that we formerly owned. A majority of the reports were prepared
for entities other than us. In some cases, we commissioned additional or
follow-up investigations by various outside consultants. There can be no
assurance, however:
o that circumstances have not changed since any investigations were
completed;
o that they reveal all potential environmental liabilities;
o that they are accurate; or
o that prior owners or operators of the properties have not created
a potential environmental liability unknown to us.
Based on these investigations and our knowledge of the operation of
our properties, we believe that many of our properties, including
properties that we formerly owned contain, or have contained, petroleum
storage tanks and automobile service operations. These tanks and
operations have, or may have, resulted in soil or ground water
contamination. Further, we are aware of asbestos-containing materials in
each of our shopping centers and in at least some of the properties we
formerly owned.
We have received environmental reports prepared by independent
consultants with respect to each of the properties in which we have
acquired an interest from TrizecHahn Centers, Inc. All of these
environmental reports were prepared in 1998.
Although there can be no assurances, we do not believe that
environmental conditions at any of our properties will have a material
adverse effect on our business, financial condition or results of
operations. We cannot be sure that environmental laws will not become more
stringent in the future or that the environmental conditions on or near our
properties will not have a material adverse effect on individual properties
or on us as a whole in the future.
POSSIBLE FUTURE SALES OF SHARES COULD ADVERSELY AFFECT THE MARKET PRICE OF
OUR COMMON SHARES
We have entered into agreements and issued warrants pursuant to which
Westfield America Trust may in the future purchase a large number of common
shares. As of June 30, 1999, we had 73,345,137 common shares outstanding.
Westfield America Trust may purchase common shares:
o by exercising a warrant entitling it to purchase up to
6,246,096 common shares from time to time prior to July 1,
2016 for $16.01 per share in cash, adjusted for stock
splits, capital reconstructions or similar matters;
o by exercising a warrant entitling it to purchase up to
2,089,552 common shares from time to time prior to May 21,
2017 for $15.00 per share in cash, adjusted for stock
splits, capital reconstructions or similar matters; and
o pursuant to a subscription agreement we entered into on May
29, 1998, providing for Westfield America Trust's purchase
of A$465 million, which was approximately US$307.7 million
as of June 30, 1999, of common shares in three equal
installments at a 5% discount to the then prevailing market
price of our common shares on June 29, 2001, June 28, 2002
and June 30, 2003.
Additionally, Westfield Holdings and its subsidiaries have demand
registration rights, beginning on May 21, 2000. At that time they may
require us to register the sale by Westfield Holdings and its subsidiaries
of up to 10,930,672 common shares. Those common shares may not be sold by
Westfield Holdings and its subsidiaries until May 21, 2000. Westfield
Holdings and its subsidiaries also have currently exercisable demand
registration rights with respect to other common shares. Further,
Westfield Holdings, its subsidiaries, Westfield America Trust and other
affiliated shareholders may sell common shares in the open market subject
to compliance with Rule 144 promulgated under the Securities Act of 1933,
as amended.
In addition, Westfield America Trust owns shares of our preferred
stock, which are immediately convertible into 10,333,340 common shares,
subject to anti-dilution adjustments. Furthermore, a wholly-owned
subsidiary of Westfield Holdings owns shares of our preferred stock, which
are immediately convertible into 2,777,780 common shares, subject to anti-
dilution adjustments.
We have also issued to unaffiliated purchasers:
o 2,164,235 OP Units that are exchangeable into cash, subject to
our prior and independent right to acquire such partnership
interests for an equivalent number of common shares, subject to
adjustment as provided in the partnership agreement for the
operating partnership;
o 909,143 partnership interests in our affiliated partnerships,
including the Independence Mall Units, that are exchangeable into
(1) an equivalent number of OP Units or (2) cash, subject to our
prior and independent right to acquire such partnership interests
for an equivalent number of common shares, subject to adjustment
as provided in the governing partnership agreement; and
o a liquidity option to receive our common shares which, based on a
formula using pro forma numbers for the previous four calendar
quarters, would be equal to approximately 5,700,000 common
shares. The liquidity option is not exercisable for several
years and therefore, when it is exercised, if at all, the number
of common shares to be issued could be substantially different.
All of the common shares mentioned above will be available for sale in
the public markets either immediately upon issuance or from time to time
pursuant to exemptions from registration or upon registration. We cannot
predict the effect, if any, that future sales of common shares, the
availability of common shares for future sale, or the issuance of common
shares in the future will have on the market price of the common shares.
Such events, however, or the perception that they might occur, could
adversely affect the prevailing market price for the common shares. A
reduction in the market price of the common shares could in turn adversely
affect our ability to raise additional capital through the issuance of
equity.
CHANGES IN POLICY MAY BE IMPLEMENTED WITHOUT SHAREHOLDER APPROVAL WHICH MAY
NOT SERVE THE INTERESTS OF ALL SHAREHOLDERS
Our major policies, including policies with respect to acquisitions,
financing, growth, investments, debt capitalization, distributions and
operations, will be determined by our board of directors. The board of
directors may amend or rescind these and other policies from time to time
without a vote of our shareholders. Accordingly, shareholders will have no
control over changes in our policies. Changes in our policies may not
fully serve the interests of all shareholders.
FUTURE ISSUANCES OF OUR SHARES WILL LIKELY HAVE A DILUTIVE EFFECT
We expect that Westfield America Trust and Westfield Holdings will
participate in our proposed dividend reinvestment plan. Shareholders who
do not participate will suffer dilution of their interest in us.
We also expect that we will issue additional equity from time to time
to refinance existing debt, make acquisitions or for other corporate
purposes. Any future issuance of additional equity will most likely result
in dilution of some shareholders' interests. See "There are risks
associated with investments in real estate - There is a potential dilutive
effect of financing future acquisitions with equity," "There are risks
associated with debt financing - Inability to refinance balloon payments on
debt could have an adverse effect on us" and "Possible future sales of
shares by affiliates could adversely affect the market price for our
shares."
OUR BUSINESS MAY BE DISRUPTED AS A RESULT OF THE YEAR 2000 ISSUE
The "Year 2000 Issue" is the result of computer programs being written
using two digits rather than four to define the applicable year. Any of
our computer programs that have time-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. This could
result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send invoices, or engage in similar normal business
activities.
The Westfield Holdings subsidiary that manages most of our properties,
has conducted a company wide assessment of our exposure to Year 2000 Issue
related business disruptions. The assessment examined our internal
systems, including computer hardware and software systems and fire, life
and safety systems at our properties, and the systems of customers and
suppliers critical to our operations.
The Westfield Holdings subsidiary has substantially completed a
program of replacing and upgrading all computer hardware and software
systems as of October 31, 1998 and is currently testing the computer system
for Year 2000 compliance. The assessment also revealed that the fire, life
and safety systems and heating, ventilating and air conditioning systems at
most of the properties have manual overrides available as alternatives to
existing automated controls for these systems. We have completed an
assessment of all electronic and mechanical control systems at our
properties and we are currently in the process of upgrading or replacing
any systems that are not Year 2000 compliant prior to September 30, 1999.
We also rely on our customers to make the necessary preparations for
Year 2000 so that they are able to honor their financial commitments. We
have notified all of our tenants that their responsibilities under their
leases will continue, notwithstanding any Year 2000 Issue difficulties they
may experience. Additionally, we have identified approximately 10 anchor
stores that have lease payments high enough to warrant inquiry as to their
Year 2000 preparation and have made appropriate inquiries. In addition, we
have contacted our third party suppliers in order to assess and, to the
extent possible, minimize potential exposure to Year 2000 Issue related
disruptions. We have identified, to the extent possible, alternative
suppliers who are Year 2000 compliant. We also have determined that
developing redundant systems adequate to provide alternative sources of
utility services to a broad spectrum of our properties is not a financially
viable option.
The worst case scenario could be an extended loss of utility service
resulting from interruptions at the point of power generation, line
transmission or local distribution to our properties. Such an interruption
could result in an inability to provide tenants with access to their
spaces, thereby affecting our ability to collect rent and pay our
obligations which could result in a material adverse effect on us. The
effects could be as insignificant as a minor interruption in services
provided to tenants resulting from unanticipated problems encountered by us
or any of the significant third parties with whom we do business. The
pervasiveness of the Year 2000 Issue makes it likely that previously
unidentified issues will require remediation during the normal course of
business. In such a case, we anticipate that automated procedures could be
replaced by manual procedures while systems are repaired, and that such
interruptions would have a minor effect on our operations.
Although we believe that our efforts to minimize business disruptions
resulting from the Year 2000 Issue are adequate, we can give no assurance
that such efforts, and those of our customers and suppliers, will be
adequate to prevent a material adverse affect on us.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus and the information incorporated by reference includes
forward-looking statements within the meaning of Section 27A of the
Securities Act and Section 21E of the Securities Exchange Act of 1934, as
amended. Some of the forward-looking statements can be identified by the
use of forward-looking words such as "believes," "expects," "may," "will,"
"anticipates," "intends," "plans," "estimates," "proposes," "continue,"
"scheduled" or other similar expressions. Forward-looking statements
involve inherent risks and uncertainties. A number of important factors
could cause actual results to differ materially from those in the forward-
looking statements. For a discussion of factors that could cause actual
results to differ, please see the discussion under "Risk Factors" in this
prospectus, in any prospectus supplement, and in the other information
contained in our publicly available SEC filings. We undertake no
obligation to publicly update or revise any forward-looking statements,
whether as a result of new information, future events, or otherwise.
Readers are cautioned not to rely too heavily on these forward-looking
statements. The forward-looking statements by their nature are not
intended to be definitive predictions of future events. There is no
general duty for us to update forward-looking statements. There is,
however, a duty for us to correct information contained in this prospectus
when a disclosure is misleading when made or when a statement that was
accurate when made becomes misleading due to subsequent events.
THE COMPANY
Westfield America, Inc. is a REIT for U.S. Federal income tax
purposes.
We are primarily in the business of owning, operating, leasing,
developing, redeveloping and acquiring shopping centers located in major
markets in the east coast, midwest and west coast.
We currently own interests in a portfolio of 37 shopping centers, 12
separate department store properties and other real estate investments.
The centers are located in eight states in the east coast, midwest and west
coast regions of the United States.
We have transferred substantially all of our assets to Westfield
America Limited Partnership, our operating partnership. We are the general
partner of the operating partnership and conduct substantially all of our
operations through the operating partnership.
We have engaged a property management company to provide property
management services, an asset management company to provide advisory
services and a development company to provide development services. These
companies provide their services to us under agreements that expire in May
2000 and are renewable annually thereafter. Each of these companies is an
affiliate of Westfield Holdings.
In order to satisfy requirements of the Internal Revenue Code
applicable to REITs, we must distribute to our shareholders 95% of our REIT
taxable income and meet other requirements. We will make, at a minimum,
distributions to our shareholders sufficient to satisfy the distribution
requirements of the Internal Revenue Code.
Our common stock is listed on the New York Stock Exchange under the
symbol "WEA". Our principal executive offices are located at 11601
Wilshire Boulevard, 12th Floor, Los Angeles, California 90025; (310) 478-
4456.
USE OF PROCEEDS
We will not receive any cash proceeds from the issuance of the common
shares, if any, that will be issued pursuant to this prospectus.
DESCRIPTION OF CAPITAL STOCK
The following is a description of the material terms of our capital
stock and of some provisions of Missouri law. You should also read our
Restated Articles of Incorporation, as amended, including the Certificate
of Designation setting forth "Resolution of the Board of Directors of
Westfield America, Inc. Designating Series B Preferred Shares and Fixing
Preferences and Rights Thereof," the Certificate of Designation setting
forth "Resolution Designating Series C Preferred Shares and Fixing
Preferences and Rights Thereof," as amended, (the "Series C Certificate of
Designation"), the Certificate of Designation setting forth "Resolution of
the Board of Directors of Westfield America, Inc. Designating Series C-1
Preferred Shares and Fixing Preferences and Rights Thereof," the
Certificate of Designation setting forth "Resolution of the Board of
Directors of Westfield America, Inc. Designating Series C-2 Preferred
Shares and Fixing Preferences and Rights Thereof," the Certificate of
Designation setting forth "Resolution Designating Series D Preferred Shares
and Fixing Preferences and Rights Thereof " (the "Series D Certificate of
Designation"), the Certificate of Designation setting forth "Resolution of
the Board of Directors of Westfield America, Inc. Designating Series D-1
Preferred Shares and Fixing Preferences and Rights Thereof" and the
Certificate of Designation setting forth "Resolution of the Board of
Directors of Westfield America, Inc., Designating Series E Preferred Shares
and Fixing Preferences and Rights Thereof" ("Articles of Incorporation"),
Second Amended and Restated By-Laws, as amended (the "By-Laws"), and
provisions of the General Business and Corporation Law of Missouri (the
"GBCL"). We have filed copies of our Articles of Incorporation and By-Laws
with the SEC and have incorporated by reference such documents as exhibits
to the registration statement of which this prospectus is a part.
As of the date of this prospectus, our authorized capital consisted of
410,000,200 shares, designated as follows:
o 200 shares of non-voting senior preferred stock (the "Senior
Preferred Shares"), par value $1.00 per share
o 5,000,000 shares of preferred stock (the "Preferred
Shares"), par value $1.00 per share, designated as follows:
oo 940,000 shares of Series A cumulative redeemable
preferred stock (the "Series A Preferred Shares")
oo 400,000 shares of Series B cumulative redeemable
preferred stock (the "Series B Preferred Shares")
oo 416,667 shares of Series C cumulative convertible
redeemable preferred stock (the "Series C
Preferred Shares")
oo 138,889 shares of Series C-1 cumulative
convertible redeemable preferred stock (the
"Series C-1 Preferred Shares")
oo 138,889 Series C-2 cumulative convertible
redeemable preferred stock (the "Series C-2
Preferred Shares" and, together with the Series C
Preferred Shares and the Series C-1 Preferred
Shares, the "Series C Shares")
oo 694,445 shares of Series D cumulative convertible
redeemable preferred stock (the "Series D
Preferred Shares")
oo 138,889 shares of Series D-1 cumulative
convertible redeemable preferred stock (the
"Series D-1 Preferred Shares")
oo 477,778 shares of Series E cumulative convertible
redeemable preferred stock (the "Series E
Preferred Shares")
oo 1,654,443 Preferred Shares which have not been
designated
o 200,000,000 common shares
o 205,000,000 excess shares, par value $.01 per share (the
"Excess Shares")
As of August 20, 1999, our outstanding capital consisted of:
o 2,737,779 Preferred Shares, with the following amounts
outstanding:
oo 940,000 Series A Preferred Shares
oo 270,000 Series B Preferred Shares
oo 416,667 Series C Preferred Shares
oo 138,889 Series C-1 Preferred Shares
oo 138,889 Series C-2 Preferred Shares
oo 694,445 Series D Preferred Shares
oo 138,889 Series D-1 Preferred Shares
oo 477,778 Series E Preferred Shares
o 73,345,137 common shares
oo warrants to purchase up to 8,335,648 common shares
oo the right to sell A$465 million, which was
approximately US$307.7 million as of June 30,
1999, of common shares
oo 2,164,235 OP Units that are exchangeable into
cash, subject to our prior and independent right
to acquire OP Units for an equivalent number of
common shares, which number is subject to
adjustment as provided in the partnership
agreement for the operating partnership
oo 909,143 partnership interests in our affiliated
partnerships, including the Independence Mall
Units held by New Hanover, that are exchangeable
into (1) an equivalent number of OP Units or (2)
cash, subject to our prior and independent right
to acquire such partnership interests for an
equivalent number of common shares, which number
is subject to adjustment as provided in the
governing partnership agreement
oo a liquidity option to receive our common shares
which, based on a formula using pro forma numbers
for the previous four calendar quarters, would be
equal to approximately 5,700,000 common shares.
The liquidity option is not exercisable for
several years and therefore, when it is exercised,
if at all, the number of common shares to be
issued could be substantially different. For a
description of the formula, see "-Liquidity
Option"
SENIOR PREFERRED SHARES
Any holders of Senior Preferred Shares are entitled to receive, when
and as declared by our board of directors, a cash dividend at the annual
rate of $35.00 per share, if such funds are legally available, and no more.
This dividend is payable quarterly. We will not pay any dividend on any
Preferred Shares or common shares unless the full dividend has been paid on
Senior Preferred Shares. Upon our liquidation, dissolution or winding up,
any holders of Senior Preferred Shares are entitled to be paid in full an
amount equal to $550.00 per share, together with the full dividend on each
share for the then current quarterly-yearly dividend period before any
dividend or payment is made to the holders of any Preferred Shares or
common shares. Except as required by applicable law, any holders of Senior
Preferred Shares do not have any voting rights in us. As of the date of
this prospectus, there are no outstanding Senior Preferred Shares.
PREFERRED SHARES
We may issue Preferred Shares from time to time in one or more series
as our board of directors authorizes us to do. Before we issue a new
series of Preferred Shares, our board of directors must pass a resolution
designating the series, which serves to distinguish the new series from
other series and classes of stock. The resolution also sets forth the
number of shares to be included in the new series and establishes the
terms, rights, restrictions and qualifications of the shares of the new
series. These may include any preferences, voting powers, dividend rights
and redemption, sinking fund and conversion rights. Prior to issuing the
shares in a series, and subject to the express terms of any other
outstanding series of Preferred Shares, our board of directors can increase
or decrease the number of shares in a series, alter the designation of a
series or classify or reclassify any unissued shares of a series by fixing
or altering any terms, rights, restrictions and qualifications of the
shares in that series.
Series A Preferred Shares
Dividends. The holders of Series A Preferred Shares are entitled to
receive, when and as declared by our board of directors, cumulative cash
dividends per share equal to the greater of:
o $8.50 per year; and
o an amount currently equal to 6.2461 times the dividend
declared on common shares for such period, adjusted for
stock splits and similar matters, if such funds are legally
available.
Holders of Series A Preferred Shares are entitled to dividends before we
can distribute dividends to holders of common shares.
Liquidation. Upon our liquidation, dissolution or winding up, the
holders of Series A Preferred Shares are entitled to be paid in full an
amount equal to the sum of the following:
o $100.00 per share
o all accrued and unpaid dividends through the last day of the
most recently completed calendar quarter prior to the date
of liquidation, dissolution or winding up
o $2.125 X the actual number of days elapsed from the last day of
the most recently completed calendar quarter to the liquidation
date
-----------------------------------------------------------
90 days
Redemption. From July 1, 2003 on, we may, at the option of our board
of directors, with approval by a majority of independent directors, redeem
in whole, or in part, the outstanding Series A Preferred Shares at a
redemption price equal to the sum of the following:
o $100.00 per share
o all accrued and unpaid dividends through the last day of the
most recently completed calendar quarter prior to the
redemption date
o $2.125 X the actual number of days elapsed from the last day of
the most recently completed calendar quarter to the redemption
date
----------------------------------------------------------
90 days
o the right to receive on the payment date for dividends
declared on the common shares for the calendar quarter
during which the Series A Preferred Shares are redeemed, an
amount equal to the proportionate additional amount, if any,
of dividends that the holder of the Series A Preferred Share
would have been entitled to receive if it held the Series A
Preferred Share on the record date for the common share
dividend.
Voting Rights. The holders of Series A Preferred Shares do not have
any voting rights, other than as required by law, except that:
o if our board of directors does not declare a dividend
payable to holders of Series A Preferred Shares or payable
to holders of any other series of Preferred Shares
authorized with the consent of the holders of Series A
Preferred Shares and ranking equally with the Series A
Preferred Shares (an "Equal Series") for four quarterly
dividend periods, then there shall be one additional member
on the board of directors, and the holders of a majority of
the Series A Preferred Shares and shares of any Equal
Series, voting together as a class, shall have the exclusive
right to elect that director;
oo Once all dividends in arrears are made current and
paid in full, the director elected by the majority
of the holders of the Series A Preferred Shares
and the shareholders of the Equal Series shall
cease to be a director and the number of directors
on the board shall be reduced by one.
oo Currently, there are no Equal Series outstanding.
o a majority of the holders of the Series A Preferred Shares,
voting together as a class, must approve any amendment to
the Articles of Incorporation that materially and adversely
affects their rights, preferences or powers;
oo If an amendment would adversely affect the rights,
preferences or powers of shareholders of any
Equal Series in addition to the rights of holders
of Series A Preferred Shares, then a majority of
the holders of the Series A Preferred Shares and
the shareholders of any Equal Series, voting
together as a class, must approve such amendment.
o the holders of the Series A Preferred Shares must
unanimously approve any amendment to the Articles of
Incorporation that would:
oo decrease the rate or change the time of payment of
any dividend on the Series A Preferred Shares;
oo decrease the amount payable upon redemption of the
Series A Preferred Shares or upon our liquidation;
oo move forward the date on which we may redeem the
Series A Preferred Shares; or
oo amend the number of Series A Preferred Shares
required to amend the Articles of Incorporation.
o a majority of the holders of the Series A Preferred Shares
and the shareholders of any Equal Series, voting together as
a class, must approve any merger or consolidation we are
involved in, if we do not survive such merger or
consolidation and the holders of the Series A Preferred
Shares and shareholders of any Equal Series do not receive
shares of the surviving corporation with substantially
similar rights, preferences and powers in the surviving
corporation as their Series A Preferred Shares and shares of
the Equal Series; and
o a majority of the holders of the Series A Preferred Shares
and the shareholders of any Equal Series, voting together as
a class, must approve any voluntary action by our board of
directors to cause us to cease to have REIT status.
Series B Preferred Shares
The holders of Series B Preferred Shares have substantially the same
dividend, liquidation, redemption and voting rights as the holders of the
Series A Preferred Shares, except that the amount of cumulative cash
dividends is equal to the greater of:
o $8.50 per year; and
o an amount currently equal to 6.6667 times the dividend
declared on common shares for such period, adjusted for
stock splits and similar matters, if such funds are legally
available.
In addition, we may not redeem the Series B Preferred Shares until May
21, 2004, or later. Currently, there are no series of Preferred Shares
which have been authorized with the consent of the holders of the Series B
Preferred Shares and ranking equally with the Series B Preferred Shares.
Series C Preferred Shares
Dividends. The holders of Series C Preferred Shares are entitled to
receive, when and as declared by our board of directors, cumulative
dividends per share equal to the greater of:
$15.30 per year; and
an amount currently equal to 10.0 times the dividend declared on
common shares for such period adjusted for stock splits and
similar matters that affect conversion rates, if such funds are
legally available.
In addition, if we do not have earnings 40% greater than our
consolidated fixed charges, as defined in the Series C Certificate of
Designation, we must pay a dividend 20% greater than that we would normally
be required to pay. Holders of Series C Preferred Shares are entitled to
dividends before we can distribute dividends to holders of common shares.
For a description of events that affect conversion rates, see "Conversion
Rights" in this Section.
Furthermore, we must pay a dividend 2.5 times greater than the
dividend we would normally be required to pay if:
o we file a Federal income tax return for any taxable year on
which we do not compute our income as a REIT;
o our shareholders approve a proposal for us to cease to
qualify as a REIT;
o our board of directors determines, based on the advice of
counsel, that we have ceased to qualify as a REIT; or
o a "determination" is made within the meaning of Section
1313(a) of the Internal Revenue Code that we have ceased to
qualify as a REIT.
Liquidation. Upon our liquidation, dissolution or winding up, the
holders of Series C Preferred Shares are entitled to be paid in full an
amount equal to the sum of the following:
o $180.00 per share
o all accrued and unpaid dividends through the date of
liquidation.
Redemption. From August 12, 2008 on, we may, at the option of our
board of directors, with the approval by a majority of independent
directors, redeem, in whole, or in part, the outstanding Series C Preferred
Shares at a redemption price equal to the sum of:
o $180.00 per share
o all accrued and unpaid dividends through the call date
specified in the notice to holders regarding the redemption.
If the redemption date occurs after a dividend record date, but prior
to the dividend payment date, the dividend payable on such dividend payment
date on the shares called for redemption shall be payable to the holders of
Series C Preferred Shares of record at the close of business on such
dividend record date, and shall not be payable as part of the redemption
price for such shares. If we have not declared and paid, or declared and
set apart for payment, full cumulative dividends on all outstanding Series
C Preferred Shares and shares of any series ranking equally with the Series
C Preferred Shares, including the Series A Preferred Shares, the Series B
Preferred Shares, the Series C-1 Preferred Shares, the Series C-2 Preferred
Shares, the Series D Preferred Shares, the Series D-1 Preferred Shares and
the Series E Preferred Shares, we cannot redeem any Series C Preferred
Shares and we cannot purchase or acquire any Series C Preferred Shares
except in a purchase or exchange offer made on the same terms to all
holders of Series C Preferred Shares.
If there is a change in our control, the holders of the Series C
Preferred Shares can require us, if we have funds legally available to do
so, to redeem their Series C Preferred Shares at a cost of $189.00, plus
accrued and unpaid dividends, if any, to the date that we repurchase the
shares. For purposes of the Series C Preferred Shares, a change in our
control may occur upon:
o the first acquisition, directly or indirectly, by any
individual or entity or "group" of "beneficial ownership" of
more than 25% of our or Westfield America Trust's
outstanding equity securities with voting power to elect our
directors;
oo For purposes of the Series C Preferred Shares and
the definition of change of control, "group" has
the meaning set forth in Section 13(d)(3) of the
Exchange Act, and "beneficial ownership" has the
meaning set forth in Rule 13d-3 under the Exchange
Act (except that such individual or entity shall
be deemed to have beneficial ownership of all
shares that any such individual or entity has the
right to acquire, whether such right is
exercisable immediately or only after a passage of
time).
o during any period of two consecutive years, the individuals
who at the beginning of such period constituted our board of
directors cease for any reason to constitute a majority of
our board of directors then in office;
oo For purposes of this provision, the directors do
not include any directors designated, appointed or
elected by the holders of any series of Preferred
Shares.
o any of us or Westfield America Trust consolidating with or
merging into another entity or conveying, transferring or
leasing all or substantially all of our assets to any
individual or entity pursuant to a transaction in which our
outstanding voting securities or Westfield America Trust's
outstanding voting securities are reclassified or changed
into or exchanged for cash, securities or other property;
and
o any entity consolidating with or merging into any of us or
Westfield America Trust pursuant to a transaction in which
our outstanding voting securities or Westfield America
Trust's outstanding voting securities are reclassified or
changed into or exchanged for cash, securities or other
property.
oo Each of the last two events above will not
constitute a "change of control" if the sole
purpose of such event is for us or Westfield
America Trust to seek to change its domicile or
convert from a corporation to a trust or vice
versa.
oo Each of the last two events above will not
constitute a "change of control" if, immediately
after such transaction, the holders of the
exchanged securities of us or Westfield America
Trust beneficially own at least a majority of the
securities of the merged or consolidated entity
normally entitled to vote in elections of our or
Westfield America Trust's directors.
In addition, none of the events listed above will constitute a "change
of control" if:
o any of Westfield Holdings or its wholly-owned subsidiaries
remains as manager of our properties and as our adviser, in
each case, as such functions are currently performed; or
o the change of control results solely from the purchase or
other acquisition of equity securities by Westfield
Holdings, Westfield America Trust, the Lowy family or the
initial holder of the Series C Preferred Shares.
Also, we have agreed that so long as the initial holder of the Series
C Preferred Shares holds any of the Series C Preferred Shares, if we fail
to continue to be taxed as a REIT, the initial holder of the Series C
Preferred Shares will have the right to require us, if we have funds
legally available to do so, to repurchase any or all of the Series C
Preferred Shares held by the initial holder of the Series C Preferred
Shares at a repurchase price of $207.00 per share, payable in cash plus
accrued and unpaid dividends whether or not declared, if any, to the date
of repurchase or the date payment is made available.
In addition, after August 12, 2008, the holders of the Series C
Preferred Shares have the right to require us to redeem their Series C
Preferred Shares either for cash or for common shares, at our option, as
long as the current market price of the common shares is less than $18.00,
adjusted for events that affect the conversion rate as described below.
Conversion Rights. The holders of Series C Preferred Shares have
additional rights that neither the holders of Series A Preferred Shares nor
the holders of Series B Preferred Shares have. The holders of Series C
Preferred Shares can convert at any time all or any portion of their shares
into common shares, with all of the same rights of common shares as
described below. Series C Preferred Shares can be converted into common
shares at an initial rate obtained by dividing the aggregate liquidation
preference ($180.00 per share) of such shares plus accrued but unpaid
dividends by a conversion price that is currently $18.00. The liquidation
preference is the amount that the holder of Series C Preferred Shares will
receive if we are terminated and our assets are distributed to our
shareholders. Holders of Series C Preferred Shares are entitled to receive
this amount before any payments or distributions are made to holders of the
common shares. The conversion price is subject to adjustment under
formulae set forth in the Series C Certificate of Designation including as
set forth below:
o the issuance of common shares as a dividend or a
distribution on the common shares;
o some subdivisions and combinations of our common shares;
o the issuance of any shares of stock by reclassification of
our common shares;
o the issuance to all holders of our common shares of some
rights, options or warrants entitling them to subscribe for
or purchase common shares at a price per share less than 95%
(100% if a stand-by underwriter is used and charges us a
commission) of the fair market value per common share on the
record date for determination of shareholders entitled to
receive such rights, options or warrants;
o the distribution to all holders of our common shares of any
of our securities, other than common shares, or evidence of
our indebtedness or assets, excluding cumulative cash
dividends or distributions paid on the common shares after
December 31, 1997 which are not in excess of the sum of:
oo our cumulative undistributed funds from
operations, as determined by our board of
directors, at December 31, 1997, plus
oo the cumulative amount of funds from operations, as
determined by our board of directors, after
December 31, 1997, minus
oo the cumulative amount of dividends accrued or paid
on the Series C Preferred Shares or any other
class or series of Preferred Shares.
o the distribution to all holders of our common shares of
rights, options or warrants to subscribe for or purchase any
of our securities (excluding those rights, options or
warrants issued to all holders of common shares described in
the fourth single bullet point above); and
oo The adjustments referred to in the fifth and
sixth single bullet points above will not be made,
however, if such a distribution is made not only
to holders of common shares, but also to each
holder of Series C Preferred Shares converting
such shares into common shares after the
determination date for such
distribution, provided, that if such holder of
Series C Preferred Shares is no longer entitled to
receive such distribution with the common shares
upon conversion, then the adjustment to the
conversion price will be made.
oo The adjustments referred to in the fifth and sixth
single bullet points above will not be required in
connection with rights or warrants distributed by
us to all holders of common shares to subscribe
for or purchase shares of our capital stock, which
rights or warrants, until the occurrence of a
specified event or events:
ooo are deemed to be transferred with such
common shares;
ooo are not exercisable; and
ooo are also issued in connection with
future issuances of common shares, until
the occurrence of the earliest of such
event.
o payment to holders of common shares in connection with a
tender or exchange offer by us or any of our subsidiaries or
controlled affiliates (which does not include open market
repurchases by us) for all or any portion of the common
shares for the amount that the value of any consideration
per common share has a fair market value, as determined in
good faith by our board of directors, that exceeds the
current market price per common share on the trading day
next succeeding the last date on which tenders or exchanges
may be made in accordance with such tender or exchange
offer.
The right to convert Series C Preferred Shares called for redemption
will terminate on the fifth business day prior to the date on which such
shares have been called for redemption. There are 416,667 outstanding
Series C Preferred Shares and each Series C Preferred Share is currently
convertible into 10 common shares.
Registration Rights. The holders of the Series C Preferred Shares
also have registration rights which enable them to require us to register
their Series C Preferred Shares and the common shares that they may receive
upon conversion of their Series C Preferred Shares. The Series C Preferred
Shares' registration rights are governed by a Registration Rights Agreement
that specifies our rights and obligations to register the Series C
Preferred Shares. We have filed a registration statement in response to a
request by the initial holder of the Series C Preferred Shares under such
registration rights agreement for registration of its Series C Shares and
common shares into which the Series C Shares are convertible.
Voting Rights. The holders of Series C Preferred Shares do not have
any voting rights, other than as required by law, except that:
o if we do not pay a full dividend to any holders of the
Series C Shares for two consecutive quarterly dividend
periods, then the holders of Series C Shares, voting
together as a single class, will have the exclusive right to
elect two additional directors to our board of directors;
o if we do not pay a dividend of at least $0.32 per share,
adjusted for events that affect the conversion rate as
described above, to holders of common shares for two
consecutive quarterly dividend periods, then the holders of
the Series C Shares, voting together as a single class, will
have the exclusive right to elect one additional director to
our board of directors;
oo Once all dividends in arrears are made current and
paid in full, and once we pay dividends on common
shares of at least $0.32 per share, then the
directors elected by the holders of the Series C
Shares shall cease to be directors and the number
of directors shall be reduced accordingly.
o they can vote on any matter involving any transaction
between us and one of our affiliates which is brought to a
vote by the holders of common shares;
oo The holders of the Series C Preferred Shares would
vote on such matters with the holders of common
shares, together as a class.
oo The number of votes each holder of the Series C
Preferred Shares would have would be 10 adjusted
for events that affect the conversion rate as
described above.
o a majority of the holders of the Series C Preferred Shares,
voting together as a class, must approve any amendment,
alteration or repeal of the Articles of Incorporation or the
Series C Certificate of Designation that materially and
adversely affects their voting powers, rights or
preferences;
oo The holders of the Series C Preferred Shares will
not be entitled to vote on such a matter if we
redeem the Series C Preferred Shares before any
amendment, alteration or repeal takes effect.
o a majority of the holders of the Series C Preferred Shares,
voting together as a class, must approve any merger or
consolidation we are involved in, if we do not survive such
merger or consolidation and the holders of the Series C
Preferred Shares do not receive shares of the surviving
corporation with substantially similar rights, preferences
and powers in the surviving corporation as their Series C
Preferred Shares;
oo The holders of the Series C Preferred Shares will
not be entitled to vote on such a matter if we
redeem the Series C Preferred Shares prior to the
issuance of such shares in the surviving
corporation.
Right to Participate in Future Offerings. The initial holder of the
Series C Preferred Shares has the right to purchase or subscribe for up to
15% of the number of shares or aggregate amount (whichever is greater) of
any "new securities" that we may issue and sell, so long as such initial
holder continues to hold at least 33% of the aggregate number of issued and
outstanding Series C Shares at the time that we give notice of a proposed
issuance of new securities. For purposes of our Series C Shares, "new
securities" means any of our capital stock (including common stock and
preferred stock), whether now authorized or not, and rights, options or
warrants to purchase our capital stock, and our securities of any type
whatsoever that are convertible into our capital stock or that carry any
rights to purchase our capital stock. For purposes of our Series C Shares,
"new securities" do not include:
o securities issued pursuant to any acquisition of any
property or assets or of another corporation, partnership,
limited liability company or other entity;
o securities issuable upon the exercise of any option,
warrant, subscription or conversion rights outstanding on
June 25, 1998 for the Series C Preferred Shares and December
17, 1998 for the Series C-1 Preferred Shares and the Series
C-2 Preferred Shares;
o securities issuable pursuant to any dividend reinvestment
plan;
o securities issued to employees, officers, consultants or
directors of us pursuant to any stock option plan or stock
purchase or stock bonus or compensation arrangement; or
o securities issued upon conversion of units held in the
operating partnership.
Series C-1 Preferred Shares
The holders of Series C-1 Preferred Shares have substantially the same
dividend, liquidation, redemption, conversion, registration and voting
rights as the holders of the Series C Preferred Shares, as well as the
right to participate in future offerings. There are 138,889 outstanding
Series C-1 Preferred Shares and each Series C-1 Preferred Share is
currently convertible into 10 common shares, adjusted in the same manner as
adjustments of the conversion price for the Series C Preferred Shares
described above.
Series C-2 Preferred Shares
The holders of Series C-2 Preferred Shares have substantially the same
dividend, liquidation, redemption, conversion, registration and voting
rights as the holders of the Series C-1 Preferred Shares, as well as the
right to participate in future offerings. There are 138,889 outstanding
Series C-2 Preferred Shares and each Series C-2 Preferred Share is
currently convertible into 10 common shares, adjusted in the same manner as
adjustments of the conversion price for the Series C Preferred Shares
described above.
Series D Preferred Shares
General. The holders of Series D Preferred Shares have substantially
the same dividend, liquidation, redemption and conversion rights as the
holders of the Series C Preferred Shares. There are 694,445 outstanding
Series D Preferred Shares and each Series D Preferred Share is currently
convertible into 10 common shares, adjusted in the same manner as
adjustments of the conversion price for the Series C Preferred Shares
described above. The holders of the Series D Preferred Shares do not have
any registration rights, nor do they have the right to participate in
future offerings.
Voting Rights. The holders of Series D Preferred Shares do not have
any voting rights, other than as required by law, except that:
o a majority of the holders of the Series D Preferred Shares,
voting together as a class, must approve any amendment,
alteration or repeal of the Articles of Incorporation or the
Series D Certificate of Designation that materially and
adversely affects their voting powers, rights or
preferences;
oo The holders of the Series D Preferred Shares will
not be entitled to vote on such a matter if we
redeem the Series D Preferred Shares before any
amendment, alteration or repeal is to take effect.
o a majority of the holders of the Series D Preferred Shares,
voting together as a class, must approve any merger or
consolidation we are involved in, if we do not survive such
merger or consolidation and the holders of the Series D
Preferred Shares do not receive shares of the surviving
corporation with substantially similar rights, preferences
and powers in the surviving corporation as their Series D
Preferred Shares;
oo The holders of Series D Preferred Shares will not
be entitled to vote on such a matter if we redeem
the Series D Preferred Shares prior to such a
merger or consolidation.
Series D-1 Preferred Shares
The holders of Series D-1 Preferred Shares have substantially the same
dividend, liquidation, redemption, conversion and voting rights as the
holders of Series D Preferred Shares. There are 138,889 outstanding Series
D-1 Preferred Shares and each Series D-1 Preferred Share is currently
convertible into 10 common shares, adjusted in the same manner as
adjustments of the conversion price for the Series C Preferred Shares
described above. The holders of the Series D-1 Preferred Shares do not
have any registration rights, nor do they have the right to participate in
future offerings.
Series E Preferred Shares
General. The holders of Series E Preferred Shares have substantially
the same dividend, liquidation and voting rights as the holders of the
Series D Preferred Shares. In addition, the holders of the Series E
Preferred Shares have substantially the same redemption rights as the
holders of the Series D Preferred Shares, except that we may not redeem the
Series E Preferred Shares until August 16, 2009, and the holders of the
Series E Preferred Shares may not require us to redeem their Series E
Preferred Shares until August 16, 2009. The holders of the Series E
Preferred Shares do not have any registration rights, nor do they have the
right to participate in future offerings.
Conversion Rights. The Series E Preferred Shares have conversion
rights and are convertible into common shares. However, in order for such
rights to be exercised, our shareholders must approve such conversion or
such shares must be transferred to an individual to whom we are permitted
to issue common shares without shareholder approval, in accordance with the
rules of the New York Stock Exchange, Inc. Subject to the foregoing, the
conversion rights of the Series E Preferred Shares are substantially the
same as the conversion rights of the Series D Preferred Shares and each
Series E Preferred Share is convertible into 10 common shares, adjusted in
the same manner as adjustments of the conversion price for the Series C
Preferred Shares described above.
COMMON SHARES
Dividend Rights
The holders of common shares are entitled to receive such dividends as
our board of directors may declare, if such funds are legally available.
In order for us to qualify as a REIT, we must distribute at least 95% of
our taxable income to our common and preferred shareholders. Under our
Articles of Incorporation, the preferred stock has a dividend preference
over common shares. We expect that we will declare regular quarterly
dividends for the three-month periods ending March 31, June 30, September
30 and December 31 each year. All dividends are at the discretion of our
board of directors and depend on our actual funds from operations, our
financial condition, the annual dividend requirements established for REITs
in the Internal Revenue Code and such other factors as our board of
directors deems relevant. All dividends to holders of the common shares
are subject to the prior payment of dividends on Preferred Shares.
Liquidation Rights
Upon our liquidation, dissolution or winding up, or upon any
distribution of our assets, holders of common shares are entitled to
receive our assets legally available for distribution, after payment of all
debts, other liabilities and any liquidation preferences of outstanding
preferred stock.
Voting Rights
At all of our shareholders' meetings, each holder of common shares is
entitled to one vote for each common share entitled to vote at such
meeting. A majority of the common shares voting together as a class, must
approve:
o an election to change our status as a REIT; and
o other matters as required by applicable law.
With respect to excess common shares, the trustee of any excess common
shares is entitled to vote such shares. See "-Restrictions on Ownership
and Transfer."
Election and Removal of Directors
Our board of directors consists of three classes with the terms of
office of directors of each class ending in different years. The Class I
directors are to serve until the annual meeting of shareholders in 2001, or
until their successors are elected; the Class II directors are to serve
until the annual meeting of shareholders in 2002, or until their successors
are elected; the Class III directors are to serve until the annual meeting
of shareholders in 2000, or until their successors are elected. The
directors serve three-year terms, or until their successors are elected.
At a meeting at which a quorum is present, directors are elected by a
majority of the common shares entitled to vote for directors either in
person or by proxy. The rights of the holders of common shares to vote for
directors is subject to any rights of the holders of preferred stock to
elect directors. There are no cumulative voting rights. Directors may be
removed from office only for cause and with the vote of 66 2/3% of the
outstanding shares then entitled to vote at an election of directors.
Preemptive Rights
Holders of common shares do not have the right to subscribe for or
purchase, and they do not have any preemptive right in connection with any
part of any new or additional stock issuance of any class whatsoever, or of
securities convertible into any stock of any class whatsoever.
Redemption Rights
Common shares are not redeemable.
Shareholder Liability
Under Missouri corporate law, none of our shareholders is personally
liable for any of our obligations solely as a result of being a
shareholder.
OUTSTANDING WARRANTS AND AGREEMENTS TO PURCHASE SHARES
We currently have two outstanding warrants. In 1996, we issued a
warrant to Westfield America Trust entitling it to purchase at any time,
and from time to time, in whole or in part, 6,246,096 common shares at an
exercise price of $16.01 per share in cash, adjusted for stock splits,
capital reconstructions and similar matters. This warrant expires on July
1, 2016. In May 1997, we issued a warrant to Westfield America Trust
entitling it to purchase at any time, and from time to time, in whole or in
part, 2,089,552 common shares at an exercise price of $15.00 per share in
cash, adjusted for stock splits, capital reconstructions and similar
matters. This warrant expires on May 21, 2017.
In addition, in May 1998, we entered into a stock subscription
agreement with Westfield America Trust pursuant to which we have the right
to sell, and Westfield America Trust has the obligation to purchase, A$465
million, which was approximately US$307.7 million as of June 30, 1999, of
common shares in three equal installments at a 5% discount to the then
prevailing market price of our common shares on June 29, 2001, June 28,
2002 and June 30, 2003.
OP UNITS AND OTHER PARTNERSHIP INTERESTS
The holders of 2,164,235 OP Units have redemption rights, which permit
them, in some circumstances, to exchange their OP Units for cash, subject
to our prior and independent right to acquire OP Units for an equivalent
number of common shares, which number is subject to adjustment as provided
in the partnership agreement for the operating partnership. In addition,
the holders of 909,143 partnership interests in our affiliated
partnerships, including the Independence Mall Units held by New Hanover,
may exchange such interests for:
o OP Units; or
o cash, subject to our prior and independent right to acquire
such partnership interests for an equivalent number of common
shares, which number is subject to adjustment as provided in
the governing partnership agreement.
LIQUIDITY OPTION
On June 23, 1999, we formed a joint venture with J.P. Morgan
Investment Management, Inc., acting for a group of pension trusts, which
effectively transferred a 50% interest in University Towne Centre and
Valley Fair. Concurrently, we sold a liquidity option to J.P. Morgan which
gives J.P. Morgan the right, under some circumstances, to exchange its
interest in the joint venture, or its interest in either center, for our
common shares. Upon exercise of the liquidity option, J.P. Morgan will
receive common shares equal to J.P. Morgan's share of the funds from
operations in the joint venture, or a center, as applicable, for the
preceding four calendar quarters divided by our per share funds from
operations for the same period. Using pro forma numbers for the previous
four calendar quarters, we could issue approximately 5,700,000 common
shares. The liquidity option is not exercisable for several years and
therefore, when it is exercised, if at all, the number of common shares to
be issued could be substantially different.
RESTRICTIONS ON OWNERSHIP AND TRANSFER
Because our board of directors believes that it is essential for us to
continue to qualify as a REIT, the board of directors has adopted, and our
shareholders have approved, provisions of the Articles of Incorporation
that restrict direct and indirect acquisition and ownership of our shares
of capital stock. See "Federal Income Tax Considerations-Requirements
for Qualification."
Our Articles of Incorporation provide, subject to exceptions including
the higher limit applicable to the Lowy family, that individuals may not
own, or be deemed to own by virtue of various attribution and constructive
ownership provisions of the Internal Revenue Code, more than 5.5% of our
outstanding shares of capital stock, as measured by value. Our Articles of
Incorporation authorize the board of directors to increase the ownership
limit on a case-by-case basis if it receives satisfactory evidence based
upon the advice of our tax counsel or other evidence or undertakings
acceptable to it that such ownership will not then or in the future
jeopardize our status as a REIT. As a condition of increasing the
ownership limit in this way, the board of directors has the discretion to
require the applicant seeking to increase its ownership of our capital
stock to obtain opinions of counsel satisfactory to the board of directors,
or undertakings from the applicant concerning preserving our REIT status,
or both. The ownership restrictions will not apply if a majority of the
holders of our capital stock determine that it is no longer in our best
interest to attempt to qualify, or to continue to qualify, as a REIT.
Issuances or transfers that result in violations of the ownership
limit described above will be null and void to the intended transferee, and
the intended transferee will acquire no rights to the capital stock. In
addition, issuances or transfers that cause us to be beneficially owned by
fewer than 100 persons, or which would result in our being "closely held"
within the meaning of Section 856(h) of the Internal Revenue Code, or which
would otherwise result in our failing to qualify as a REIT, will be null
and void to the intended transferee, and the intended transferee will
acquire no rights to the capital stock. If shares of capital stock are
nevertheless transferred in violation of these rules or the ownership
limit, such shares will automatically be converted into Excess Shares and
transferred to one or more charitable trusts. In addition, if any other
event occurs which would result in any individual directly or indirectly
holding shares of capital stock in violation of the ownership limit, then
shares of capital stock directly or indirectly held by such individual
which result in the owner exceeding the ownership limit will be
automatically converted into Excess Shares and transferred to a charitable
trust. Shares transferred to a charitable trust will remain outstanding,
and the trustee of the trust will have all voting and dividend or
distribution rights pertaining to such Excess Shares. If we pay dividends
or distributions after violation of the ownership limit, but prior to
discovering such violation, the recipient of such dividend or distribution
must return the dividend or distribution to us and we will turn it over to
the trustee of the charitable trust. The trustee of such trust shall
transfer such Excess Shares to a person whose ownership of such Excess
Shares will not violate the ownership limit or other applicable
limitations. When the trustee sells such Excess Shares, the charitable
beneficiaries' interest terminates, the Excess Shares will automatically
convert into shares of capital stock of the same type and class as the
shares from which they were converted, and the sales proceeds will be paid,
first, to the original intended transferee. The sales proceeds received by
the original intended transferee will be the lesser of:
o such transferee's original purchase price (or the original
market value of such shares if the original transferee did
not give value for such shares); and
o the price received by the trustee.
Any remaining proceeds will be paid to the charitable beneficiary. In
addition, we may, for a 90-day period, designate the person to whom the
trustee will sell the capital stock held in the charitable trust. The 90-
day period commences on the date of the transfer that violated the
foregoing provisions and that gave rise to the issuance of Excess Shares,
or the date that we first become aware of such transfer, whichever is
later.
All certificates representing common shares bear a legend referring to
the restrictions described above.
We have the right to require each shareholder to disclose to us in
writing such information concerning the shareholder's direct, indirect and
constructive ownership of shares as our board of directors deems necessary
to comply with the provisions of the Internal Revenue Code applicable to a
REIT or to comply with the requirements of any taxing authority or
governmental agency.
The ownership limitations may have the effect of precluding
acquisition of control of us by a third party so long as our board of
directors and the shareholders determine that maintenance of REIT status is
in our best interest.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common shares is American
Stock Transfer & Trust Company.
LISTING
Our common shares are listed on the New York Stock Exchange under the
symbol "WEA."
PROVISIONS OF OUR
ARTICLES OF INCORPORATION AND BY-LAWS AND OF MISSOURI LAW
Provisions in our Articles of Incorporation and By-Laws and the GBCL,
as well as the substantial influence of Westfield America Trust and
Westfield Holdings, both principal shareholders of us, may delay or make
more difficult unsolicited acquisitions of us or changes in our control.
We believe that such provisions will enable us to develop our business in a
manner that will foster long-term growth without disruption caused by the
threat of a takeover that our board of directors does not consider to be in
our best interests and our shareholders' best interests. These provisions
could discourage third parties from making proposals involving an
unsolicited acquisition of us or change of our control, although
shareholders might consider such proposals, if made, desirable. Such
provisions may also make it more difficult for third parties to alter our
current management structure without the concurrence of our board of
directors. These provisions include, among others:
o the ownership limit;
o the availability of capital stock for issuance from time to
time at the discretion of our board of directors;
o a classified board of directors;
o the inability of the shareholders to take action by written
consent unless such consent is unanimous;
o prohibitions against shareholders calling a special meeting
of shareholders;
o requirements for advance notice for raising business or
making nominations at shareholders' meetings; and
o additional requirements for some business combination
transactions.
The following is a description of the material provisions of our
Articles of Incorporation, the By-Laws and the GBCL which may make an
unsolicited change of our control more difficult. You should also read the
Articles of Incorporation and By-Laws we have filed as exhibits to the
registration statement of which this prospectus is a part and the GBCL.
OWNERSHIP LIMIT
The Articles of Incorporation contain the ownership limit described
above which may discourage a change in our control, and may also deter
tender offers for our common shares that might otherwise be advantageous to
holders of the common shares. The ownership limit may limit the
opportunities of holders to receive a premium for their common shares that
might otherwise exist if an investor were attempting to assemble a block of
shares or otherwise effect a change in our control.
ADDITIONAL CLASSES AND SERIES OF PREFERRED STOCK
Our board of directors can issue additional authorized but unissued
common shares and establish one or more series of preferred stock. Our
board of directors can issue such common shares and preferred stock,
without any further vote or action by the shareholders, unless such action
is required by applicable law or the rules of any stock exchange or
automated quotation system on which our securities are listed. The
issuance of additional capital stock may delay, defer or prevent a change
in our control. The issuance of additional series of preferred stock with
voting or conversion rights may adversely affect the voting power of
holders of common shares. The ability of the board of directors to issue
additional capital stock, while providing flexibility in connection with
possible acquisitions and other corporate purposes, could make it more
difficult for a third party to acquire, or could discourage a third party
from acquiring, a majority of our outstanding voting stock.
SIZE OF BOARD, ELECTION OF DIRECTORS, CLASSIFIED BOARD, REMOVAL OF
DIRECTORS AND FILLING VACANCIES
Our Articles of Incorporation and By-Laws provide that our board of
directors consists of three classes as nearly equal in number as possible,
with directors serving three-year terms of office that expire at different
times in annual succession. The Articles of Incorporation provide that
directors may not be removed from office prior to the expiration of their
term without cause and the vote of 66 2/3% of the outstanding shares then
entitled to vote at an election of directors. A classified board makes it
more difficult for shareholders to change a majority of the directors.
The Articles of Incorporation and the By-Laws limit the total number
of directors to 14 plus any additional directors that the holders of
Preferred Shares may have the right to elect, and provide that a vote by a
majority of the directors then in office may fill any vacancy or any newly
created directorships resulting from any increase in the authorized number
of directors. Accordingly, the board of directors may prevent any
shareholder from obtaining majority representation on the board of
directors by increasing the size of the board and filling the newly created
directorships with its own nominees.
LIMITATIONS ON SHAREHOLDER ACTION BY WRITTEN CONSENT; ABILITY TO CALL
SPECIAL MEETINGS
Our Articles of Incorporation and By-Laws provide that an action by
written consent of shareholders instead of a meeting must be unanimous, as
the GBCL requires. Our By-Laws provide that only the chairman of our board
of directors, any president or a resolution of our board of directors can
call special shareholders' meetings, unless a statute or our Articles of
Incorporation provide otherwise. Furthermore, the By-Laws provide that
only business that is specified in the notice of any special meeting may
come before such meeting, as the GBCL requires.
These provisions may adversely affect the ability of shareholders to
influence our governance. These provisions also may adversely affect the
possibility of shareholders receiving a premium above market price for
their securities from a potential acquirer that is hostile to management.
ADVANCE NOTICE FOR RAISING BUSINESS OR MAKING NOMINATIONS AT MEETINGS
The By-Laws establish an advance notice procedure that shareholders
must follow in order to make shareholder proposals at an annual
shareholders' meeting. Shareholders must also follow this advance notice
procedure in order to make nominations of candidates for election as
directors at meetings at which directors are to be elected. The only
business that we will conduct at a shareholders' meeting is that business
that our board of directors has raised or directed, and business that a
shareholder has given to our secretary on time and in proper form. The
only candidates that will be eligible for election as directors will be
those candidates nominated by or at the direction of our board of directors
and those candidates nominated by any shareholder that has given notice of
such nomination on time and in proper form to our secretary.
BUSINESS COMBINATION AND CONTROL SHARE ACQUISITION STATUTES AND RELATED
PROVISIONS
We are subject to Missouri's Business Combination Statute and the
Control Share Acquisition Statute.
The Business Combination Statute restricts some "business
combinations" between a corporation and an "interested shareholder," or
affiliates of the interested shareholder, for a period of five years after
the date of the transaction in which the person became an interested
shareholder, unless such transaction is approved by the board of directors
on or before the date the interested shareholder obtains such status.
This statute also prohibits business combinations after the five-year
period following the transaction in which the person became an interested
shareholder unless:
o the transaction is approved by the board of directors prior
to the date the interested shareholder obtains such status;
o the business combination is approved by the board of
directors prior to the date the interested shareholder
obtains such status;
o the holders of a majority of the outstanding stock, other
than the stock owned by the interested shareholder, approve
the business combination; or
o the business combination satisfies detailed fairness and
procedural requirements.
A "business combination" includes a merger or consolidation, some
sales, leases, exchanges, pledges and similar dispositions of corporate
assets or stock and some reclassifications and recapitalizations. An
"interested shareholder" includes any person or entity which beneficially
owns or controls 20% or more of the outstanding voting shares of the
corporation.
Because there may be circumstances in which the Business Combination
Statute may not apply to us, our Articles of Incorporation contain a
similar provision restricting business combinations for a five-year period
after a person becomes an interested shareholder unless the business
combination or the transaction in which the person becomes an interested
shareholder was approved by our board of directors on or before the date of
the transaction by which the person became an interested shareholder, or if
such person was an interested shareholder on the date this provision was
adopted, by our shareholders. As with the Business Combination Statute,
our Articles of Incorporation prohibit business combinations after the
five-year period following the transaction in which the person became an
interested shareholder unless the same conditions set forth under the
Business Combination Statute are satisfied.
These provisions may make it more difficult for a 20% beneficial owner
to effect transactions with us and may encourage persons that seek to
acquire us to negotiate with our board of directors prior to acquiring a
20% interest. It is possible that such a provision could make it more
difficult to accomplish a transaction which shareholders may otherwise deem
to be in their best interest.
The GBCL also contains a Control Share Acquisition Statute which may
limit the rights of a shareholder to vote some or all of its shares. A
shareholder whose acquisition of shares results in its having the voting
power, when added to the shares previously held by it, to exercise or
direct the exercise of more than 20% of the outstanding stock of the
corporation, will lose the right to vote some or all of its shares unless
the shareholders approve the acquisition of such shares. In order for the
shareholders to grant approval, the acquiring shareholder must meet
disclosure requirements specified in the GBCL. In addition, a majority of
the outstanding voting shares, as determined before the acquisition, must
approve the acquisition. Furthermore, a majority of the outstanding voting
shares, as determined after the acquisition, but excluding shares held by
the acquiring shareholder, employee directors of the corporation and
officers of the corporation, must approve the acquisition.
Not all acquisitions of shares constitute control share acquisitions.
The following acquisitions do not constitute control share acquisitions:
o good faith gifts;
o transfers in accordance with wills;
o purchases made in connection with an issuance by us;
o mergers involving us which satisfy the other requirements of
the GBCL;
o transactions with a person who owned a majority of our
voting power within the prior year; or
o purchases from a person who previously satisfied the
requirements of the Control Share Acquisition Statute, so
long as the acquiring person does not have voting power
after the ownership in a different ownership range than the
selling shareholder (these ownership ranges are (1) 20% to
33 1/3%, (2) 33 1/3% to less than majority and (3) greater
than majority)
TERMINATION OF REIT STATUS
Our Articles of Incorporation permit our directors, with the approval
of both a majority of the holders of the common shares and a majority of
the holders of the Series A and Series B Preferred Shares (and the trustee
of the excess common shares and the excess Series A and Series B Preferred
Shares), to terminate our status as a REIT under the Internal Revenue Code
at any time.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our Articles of Incorporation contain provisions indemnifying our
directors and officers to the maximum extent permitted by Missouri law.
DESCRIPTION OF OP UNITS AND THE PARTNERSHIP
AGREEMENT FOR THE OPERATING PARTNERSHIP
A summary of some provisions of the First Amended and Restated
Agreement of Limited Partnership of the Westfield America Limited
Partnership, dated as of August 3, 1998, as amended, and a description of
the material terms of the OP Units are set forth below. The following
description does not purport to be complete and is subject to and qualified
in its entirety by reference to applicable provisions of the Delaware
Revised Uniform Limited Partnership Act and the partnership agreement for
the operating partnership. We have filed a copy of the partnership
agreement for the operating partnership with the SEC.
GENERAL
Substantially all of our assets are held by, and substantially all of
our operations are conducted through, the operating partnership, either
directly or through subsidiaries. We are the sole general partner and
also, either directly or through subsidiaries, a limited partner of the
operating partnership and, we, either directly or through subsidiaries, own
all of the outstanding common partnership units and partnership preferred
units in the operating partnership. In addition, the operating partnership
has issued OP Units. As of June 30, 1999 the general partnership and
limited partnership interests represented approximately 97.6% of the
outstanding interests in the operating partnership and the OP Units
represented approximately 2.4% of the outstanding interests in the
operating partnership.
OP Units are held by persons who contributed interests in properties
and/or other assets to the operating partnership and may be held in the
future by persons who exchange their partnership interests in some of our
affiliated partnerships for OP Units. All holders of OP Units or other
interests in the operating partnership (including us in our capacity as
general partner) are entitled to share in cash distributions from, and in
the profits and losses of, the operating partnership in proportion to their
respective percentage interests in the operating partnership, as well as in
those properties that we own outside the operating partnership. The OP
Units and other interests in the operating partnership are not listed on
any exchange or quoted on any national market system. The partnership
agreement for the operating partnership imposes restrictions on the
transfer of OP Units and other partnership interests in the operating
partnership, as described below.
PURPOSES, BUSINESS AND MANAGEMENT
The purpose of the operating partnership includes the conduct of any
business that may be conducted lawfully by a limited partnership formed
under the Delaware Limited Partnership Act, except that the partnership
agreement for the operating partnership requires the business of the
operating partnership to be conducted in such a manner that will permit us
to be classified as a REIT under Sections 856 through 860 of the Internal
Revenue Code. Subject to the foregoing limitation, the operating
partnership may enter into partnerships, joint ventures or similar
arrangements and may own interests in any other entity. We may cause the
Operating Partnership not to take, or to refrain from taking, any action
that, in our judgment, in our sole and absolute discretion:
o could adversely affect our ability to continue to qualify as
a REIT;
o could subject us to any additional taxes under Internal
Revenue Code Section 857 or Internal Revenue Code Section
4981 or any other related or successor provision under the
Internal Revenue Code;
o could violate any law or regulation of any governmental body
or agency having jurisdiction over us, our securities or the
operating partnership; or
o could violate in any material respects any of the covenants,
conditions or restrictions now or hereafter placed upon or
adopted by us pursuant to any of our agreements or
applicable laws and regulations,
unless, in any such case, such action described in the bullet points above
is specifically consented to by us in writing.
In general, our board of directors, in our capacity as sole general
partner of the operating partnership, will manage the affairs of the
operating partnership by directing our affairs.
Except as otherwise expressly provided in the partnership agreement
for the operating partnership or as delegated or provided to an additional
partner by us or any successor general partner pursuant to the partnership
agreement for the operating partnership, all management powers over the
business and affairs of the operating partnership are exclusively vested in
us. No limited partner or OP Unitholder or any other person to whom one or
more partnership interests or OP Units have been transferred may, in its
capacity as a limited partner or OP Unitholder, take part in the
operations, management or control of the operating partnership's business,
transact any business in the operating partnership's name or have the power
to sign documents for or otherwise bind the operating partnership. A
general partner may not be removed by the limited partners or OP
Unitholders with or without cause, except with our consent. In addition to
the powers granted a general partner of a limited partnership under
applicable law or that are granted to the general partner under any other
provision of the partnership agreement for the operating partnership, we,
subject to the other provisions of the partnership agreement for the
operating partnership, have full power and authority to do all things
deemed necessary or desirable by us to conduct the business of the
operating partnership, to exercise all powers of the operating partnership
and to effectuate the purposes of the operating partnership. The operating
partnership may incur debt or enter into other similar credit, guarantee,
financing or refinancing arrangements for any purpose, including, without
limitation, in connection with any acquisition of properties, upon such
terms as we determine to be appropriate. We are authorized to execute,
deliver and perform some agreements and transactions on behalf of the
operating partnership without any further act, approval or vote of the
limited partners or the OP Unitholders.
Restrictions on Our Authority
We may not take any action in contravention of the partnership
agreement for the operating partnership. We may not, without the prior
consent of the limited partners, undertake, on behalf of the operating
partnership, any of the following actions or enter into any transaction
that would have the effect of such actions:
o amend, modify or terminate the partnership agreement for the
operating partnership, except as provided in the partnership
agreement for the operating partnership; for a description
of the provisions of the partnership agreement for the
operating partnership permitting us to amend the partnership
agreement without the consent of the limited partners see
"-Amendment of the Partnership Agreement for the Operating
Partnership;"
o make a general assignment for the benefit of creditors or
appoint or acquiesce in the appointment of a custodian,
receiver or trustee for all or any part of the assets of the
operating partnership;
o institute any proceeding for bankruptcy on behalf of the
operating partnership; or
o approve or acquiesce to the transfer of our partnership
interest or admit into the operating partnership any
additional or successor general partners, subject to the
exceptions discussed in "-Transfers and Withdrawals-
Restrictions on Us."
In addition, we may not amend the partnership agreement for the
operating partnership or take any action on behalf of the operating
partnership, without the prior consent of each limited partner or OP
Unitholder adversely affected by such amendment or action, if such
amendment or action would:
o convert a limited partner into a general partner or convert
an OP Unitholder into a partner for state law purposes;
o modify the limited liability of a limited partner or an OP
Unitholder;
o alter the rights of any limited partner or OP Unitholder to
receive the distributions to which such partner or OP
Unitholder is entitled, or alter the allocations specified
in the partnership agreement for the operating partnership;
or
o alter or modify the redemption rights or related definitions
as provided in the partnership agreement for the operating
partnership.
However, we may make such an amendment or take such an action, if
approved by a majority in interest of the partners or OP Unitholders
holding the affected class or series of partnership interests or OP Units.
Additional Limited Partners and OP Unitholders
We are authorized to admit additional limited partners and OP
Unitholders to the operating partnership from time to time, on terms and
conditions and for such capital contributions as may be established by us
in our sole and absolute discretion. The net capital contribution need not
be equal for all partners or OP Unitholders. No action or consent by the
limited partners or OP Unitholders is required in connection with the
admission of any additional limited partner or OP Unitholder. We are
expressly authorized to cause the operating partnership to issue additional
partnership interests and OP Units:
o upon the conversion, redemption or exchange of any debt,
partnership interests, OP Units or other securities issued
by the operating partnership;
o for less than fair market value, so long as the we conclude
in good faith that such issuance is in the best interests of
us and the operating partnership; and
o in connection with any merger of any other entity into the
operating partnership if the applicable merger agreement
provides that persons are to receive partnership interests
or OP Units in the operating partnership in exchange for
their interests in the entity merging into the operating
partnership.
Subject to Delaware law, any additional partnership interests or OP Units
may be issued in one or more classes, or one or more series of any of such
classes, with such designations, preferences and relative, participating,
optional or other special rights, powers and duties as we shall determine,
in our sole and absolute discretion without the approval of any limited
partner, OP Unitholder or any other person. Without limiting the
generality of the foregoing, we have authority to specify:
o the allocations of items of partnership income, gain, loss,
deduction and credit to each such class or series of
partnership interests and OP Units;
o the right of each such class or series of partnership
interests and OP Units to share in distributions;
o the rights of each such class or series of partnership
interests and OP Units upon dissolution and liquidation of
the operating partnership;
o the voting rights, if any, of each such class or series of
partnership interests and OP Units; and
o the conversion, redemption or exchange rights applicable to
each such class or series of partnership interests and OP
Units.
No person may be admitted as an additional limited partner or OP Unitholder
without our consent which consent may be given or withheld in our sole and
absolute discretion.
ABILITY TO ENGAGE IN OTHER BUSINESSES; CONFLICTS OF INTEREST
We may not conduct any business other than in connection with the
ownership, acquisition and disposition of partnership interests as general
partner, the management of the business of the operating partnership, our
operation as a reporting company with a class or classes of securities
registered under the Exchange Act, our operations as a REIT, the offering,
sale, syndication, private placement or public offering of stock, bonds,
securities or other interests, financing or refinancing of any type related
to the operating partnership or its assets or activities, and such
activities as are incidental to those activities discussed above. We may,
however, in our sole and absolute discretion, from time to time hold or
acquire assets in our own name or otherwise other than through the
operating partnership so long as we take commercially reasonable measures
to insure that the economic benefits and burdens of such property are
otherwise vested in the operating partnership. Other persons (including
our officers, directors, employees, agents and other affiliates) are not
prohibited under the partnership agreement for the operating partnership
from engaging in other business activities and are not required to present
any business opportunities to the operating partnership, however Messrs.
Frank Lowy, Peter Lowy, David Lowy and Steven Lowy have entered into
agreements with us, which include noncompetition provisions. In addition,
we, on behalf of the operating partnership, have adopted some procedures
regarding avoidance of specified conflicts of interest.
DISTRIBUTIONS
Subject to the terms of any partnership unit designation or OP Unit
designation, we shall cause the operating partnership to distribute
quarterly, or on a more or less frequent basis as we determine, all, or
such portion as we may in our sole and absolute discretion determine, of
Available Cash (as such term is defined in the partnership agreement for
the operating partnership) generated by the operating partnership during
such quarter to the partners and OP Unitholders:
o first, with respect to any partnership interests or OP Units
that are entitled to any preference in distribution, in
accordance with the rights of such class or classes of
partnership interests or OP Units, and, within such class or
classes, among the partners and OP Unitholders pro rata in
proportion to their respective percentage interests; and
o second, with respect to any partnership interests or OP
units that are not entitled to any preference in
distribution, in accordance with the rights of such class of
partnership interests, as applicable, and, within such
class, among the partners and OP Unitholders pro rata in
proportion to their respective percentage interests.
To the extent we own properties outside the operating partnership, any
income we receive in connection with the activities from those properties
will result in a recalculation of distributions from the operating
partnership such that we, the limited partners and OP Unitholders, would
each receive the same distributions that we and they would have received
had we contributed such properties to the operating partnership.
BORROWING BY THE OPERATING PARTNERSHIP
We are authorized to cause the operating partnership to borrow money
and to issue and guarantee debt as we deem necessary for the conduct of the
activities of the operating partnership. Such debt may be secured, among
other things, by mortgages, deeds of trust, liens or encumbrances on
properties of the operating partnership.
REIMBURSEMENT OF US; TRANSACTIONS WITH US AND OUR AFFILIATES
We do not receive any compensation for our services as general partner
of the operating partnership. We, as a partner in the operating
partnership, have the same right to allocations and distributions as other
partners and OP Unitholders. In addition, the operating partnership will
reimburse us for all expenses incurred by us in connection with the
operating partnership's business, including expenses relating to the
ownership of interests in and management and operation of, or for the
benefit of, the operating partnership, compensation of officers and
employees, including, without limitation, payments under our future
compensation plans that may provide for stock units, or phantom stock,
pursuant to which our employees will receive payments based upon dividends
on or the value of our common shares, director fees and expenses and all
costs and expenses that we incur in connection with our being a public
company, including costs of filings with the SEC, reports and other
distributions to our shareholders. The operating partnership will
reimburse us for all expenses incurred by us relating to any other offering
of capital stock, including any underwriting discounts or commissions in
such case based on the percentage of the net proceeds from such issuance
contributed to or otherwise made available to the operating partnership.
Except as expressly permitted by the partnership agreement for the
operating partnership, we and our affiliates may not engage in any
transactions with the operating partnership except on terms that are fair
and reasonable and no less favorable to the operating partnership than
would be obtained from an unaffiliated third party.
OUR LIABILITY AND THAT OF THE LIMITED PARTNERS AND OP UNITHOLDERS
We, as the general partner of the operating partnership, are
ultimately liable for all general recourse obligations of the operating
partnership to the extent not paid by the operating partnership. We are
not liable for the nonrecourse obligations of the operating partnership.
The limited partners and OP Unitholders are not required to make
additional contributions to the operating partnership. Assuming that a
limited partner or OP Unitholder does not take part in the control of the
business of the operating partnership, the liability of the limited partner
for obligations of the operating partnership under the partnership
agreement for the operating partnership and the Delaware Limited
Partnership Act is limited, subject to limited exceptions, generally to the
loss of the limited partner's or OP Unitholder's investment in the
operating partnership represented by his or her limited partnership
interest or OP Units, as applicable. The operating partnership will
operate in a manner we deem reasonable, necessary and appropriate to
preserve the limited liability of the limited partners and OP Unitholders.
EXCULPATION AND INDEMNIFICATION OF US
The partnership agreement for the operating partnership generally
provides that we, as general partner, and any of our directors or officers
will incur no liability to the operating partnership, any limited partner,
OP Unitholder or assignee for losses sustained or liabilities incurred or
benefits not derived as a result of errors in judgment, mistakes of law or
of any act or omission if we or such officer or director acted in good
faith. In addition, we, as general partner, are not responsible for any
misconduct or negligence on the part of our agents, provided we appointed
such agents in good faith. We, as general partner, may consult with legal
counsel, accountants, appraisers, management consultants, investment
bankers and other consultants and advisors, and any action we take or omit
to take in reliance upon the opinion of such persons, as to matters which
we, as general partner, reasonably believe to be within their professional
or expert competence, shall be conclusively presumed to have been done or
omitted in good faith and in accordance with such opinion.
The partnership agreement for the operating partnership also provides
for the indemnification, to the fullest extent permitted by law, of us, as
general partner, of our directors and officers, and of such other persons
as we, as general partner, may from time to time designate against any and
all losses, claims, damages, liabilities, joint or several, expenses,
judgments, fines, settlements and other amounts arising from any and all
claims, demands, actions, suits or proceedings in which such person may be
involved that relate to the operations of the operating partnership,
provided that such person will not be indemnified: (1) for willful
misconduct or a knowing violation of the law or (2) for any transaction in
which such person received an improper personal benefit in violation or
breach of any provision of the partnership agreement for the operating
partnership.
SALES OF ASSETS
Under the partnership agreement for the operating partnership, we
generally have the exclusive authority to sell all or substantially all of
the assets of the operating partnership. However, in connection with the
acquisition of properties from persons to whom we issued OP Units as part
of the purchase price, in order to preserve such persons' tax deferral, we
contractually agreed, in general, not to sell or otherwise transfer the
properties for a specified period of time, or in certain instances, not to
sell or otherwise transfer the properties without compensating the sellers
of the properties for their loss of the tax deferral.
REDEMPTION RIGHTS OF QUALIFYING PARTIES
For a description of the redemption rights of holders of common
partnership interests and OP Units, see "Redemption of OP Units and
Independence Mall Units."
TRANSFERS AND WITHDRAWALS
Restrictions on Transfer
The partnership agreement for the operating partnership restricts the
transferability of partnership interests and OP Units. Any transfer or
purported transfer of a partnership interest or OP Unit not made in
accordance with the partnership agreement for the operating partnership
will not be valid. Until the expiration of one year from the date on which
a partner or OP Unitholder acquired partnership interests or OP Units, as
applicable, such partner or OP Unitholder generally may not transfer all or
any portion of its partnership interests or OP Units, as applicable, to any
transferee.
After the expiration of one year from the date on which a partner or
OP Unitholder acquired partnership interests or OP Units, as applicable,
such partner or OP Unitholder has the right to transfer all or any portion
of its partnership interests or OP Units, as applicable, to any person that
is an "accredited investor," subject to the satisfaction of conditions
specified in the partnership agreement for the operating partnership,
including our right of first refusal. For purposes of this transfer
restriction, "accredited investor" shall have the meaning set forth in Rule
501 promulgated under the Securities Act. It is a condition to any
transfer that the transferee assumes by operation of law or express
agreement all of the obligations of the transferor limited partner or OP
Unitholder under the partnership agreement for the operating partnership
with respect to such partnership interests or OP Units, and no such
transfer will relieve the transferor partner or OP Unitholder of its
obligations under the partnership agreement for the operating partnership
without our approval, in our sole and absolute discretion. This transfer
restriction does not apply to a statutory merger or consolidation pursuant
to which all obligations and liabilities of the transferor partner or OP
Unitholder are assumed by a successor corporation by operation of law.
In connection with any transfer of partnership interests or OP Units,
we will have the right to receive an opinion of counsel reasonably
satisfactory to us to the effect that the proposed transfer may be effected
without registration under the Securities Act, and will not otherwise
violate any Federal or state securities laws or regulations applicable to
the operating partnership or the partnership interests or OP Units
transferred.
No transfer by a limited partner or OP Unitholder of its partnership
interests or OP Units, including any redemption or any acquisition of
partnership interests or OP Units by us or by the operating partnership,
may be made to any person if:
o in the opinion of legal counsel for the operating
partnership, it would result in the operating partnership
being treated as an association taxable as a corporation; or
o such transfer is effectuated through an "established
securities market" or a "secondary market (or the
substantial equivalent thereof)" within the meaning of
Internal Revenue Code Section 7704.
Substituted Limited Partners
No limited partner will have the right to substitute a transferee as a
limited partner in its place. A transferee of the interest of a limited
partner may be admitted as a substituted limited partner only with our
consent, which consent may be given or withheld in our sole and absolute
discretion. If we in our sole and absolute discretion, do not consent to
the admission of any permitted transferee as a substituted limited partner,
such transferee will be considered an assignee for purposes of the
partnership agreement for the operating partnership. An assignee will be
entitled to all the rights of an assignee of a limited partnership interest
under the Delaware Limited Partnership Act, including the right to receive
distributions from the operating partnership and the share of net income,
net losses and other items of income, gain, loss, deduction and credit of
the operating partnership attributable to the partnership interests
assigned to such transferee and the rights to transfer the partnership
interests provided in the partnership agreement for the operating
partnership, but will not be deemed to be a holder of partnership interests
for any other purpose under the partnership agreement for the operating
partnership, and will not be entitled to effect a consent or vote with
respect to such partnership interests on any matter presented to the
limited partners for approval. The right to consent or vote, to the extent
provided in the partnership agreement for the operating partnership or
under the Delaware Limited Partnership Act, will fully remain with the
transferor limited partner.
Restrictions on Us
We may not transfer any of our general partner interest or withdraw
from managing the operating partnership unless:
o the limited partners and a majority in interest of the OP
Unitholders consent; or
o immediately after a merger of us as general partner into
another entity, substantially all of the assets of the
surviving entity, other than the general partnership
interest in the operating partnership held by the general
partner, are contributed to the operating partnership as a
capital contribution in exchange for partnership interests
or OP Units.
AMENDMENT OF THE PARTNERSHIP AGREEMENT FOR THE OPERATING PARTNERSHIP
By the General Partner Without the Consent of the Limited Partners or the
OP Unitholders
We have the power, without the consent of the limited partners or the
OP Unitholders, to amend the partnership agreement for the operating
partnership as may be required to facilitate or implement any of the
following purposes:
o to add to our obligations as general partner or surrender
any right or power granted to us or any of our affiliates
for the benefit of the limited partners or the OP
Unitholders;
o to reflect the admission, substitution or withdrawal of
partners or the termination of the operating partnership in
accordance with the partnership agreement for the operating
partnership;
o to reflect a change that is of an inconsequential nature and
does not adversely affect the limited partners or the OP
Unitholders in any material respect, or to cure any
ambiguity, correct or supplement any provision in the
partnership agreement for the operating partnership not
inconsistent with law or with other provisions of the
partnership agreement for the operating partnership, or make
other changes with respect to matters arising under the
partnership agreement for the operating partnership that
will not be inconsistent with law or with the provisions of
the partnership agreement for the operating partnership;
o to satisfy any requirements, conditions or guidelines
contained in any order, directive, opinion, ruling or
regulation of a Federal or state agency or contained in
Federal or state law;
o to reflect such changes as are reasonably necessary for us
to maintain our status as a REIT; and
o to modify the manner in which capital accounts are computed
to the extent set forth in the definition of "Capital
Account" in the partnership agreement for the operating
partnership or contemplated by the Internal Revenue Code or
the Treasury Regulations.
With the Consent of the Limited Partners and OP Unitholders
Amendments to the partnership agreement for the operating partnership
may be proposed only by us. Following such proposal, we will submit to the
partners and OP Unitholders any proposed amendment that, pursuant to the
terms of the partnership agreement for the operating partnership, requires
the consent of the partners holding partnership interests and OP
Unitholders holding OP Units entitled to vote at the meeting. We will seek
the written consent of the partners and OP Unitholders, if applicable, on
the proposed amendment or will call a meeting to vote on the proposed
amendment and to transact any other business that we may deem appropriate.
PROCEDURES FOR ACTIONS AND CONSENTS OF PARTNERS
Meetings of the partners may be called only by us. Notice of any such
meeting will be given to all partners not less than seven days nor more
than thirty days prior to the date of such meeting. Partners may vote in
person or by proxy at such meeting. Each meeting of partners will be
conducted by us or such other person as we may appoint pursuant to such
rules for the conduct of the meeting as we or such other person deems
appropriate in its sole and absolute discretion. Whenever the vote or
consent of partners is permitted or required under the partnership
agreement for the operating partnership, such vote or consent may be given
at a meeting of partners or may be given by written consent. Any action
required or permitted to be taken at a meeting of the partners may be taken
without a meeting if a written consent setting forth the action so taken is
signed by partners holding a majority of outstanding partnership interests
(or such other percentage as is expressly required by the partnership
agreement for the operating partnership for the action in question).
DISSOLUTION
The operating partnership will dissolve, and its affairs will be wound
up, upon the first to occur of any of the following:
o December 31, 2097;
o an event of withdrawal, as defined in the Delaware Limited
Partnership Act, including, without limitation, bankruptcy,
of us unless, within ninety days after the withdrawal, a
majority in interest of the partners agree in writing, in
their sole and absolute discretion, to continue the business
of the operating partnership and to the appointment,
effective as of the date of withdrawal, of a successor
general partner;
o an election to dissolve the operating partnership made by
the general partner in its sole and absolute discretion,
with or without the consent of the partners;
o the entry of a decree of judicial dissolution of the
operating partnership pursuant to the provisions of the
Delaware Limited Partnership Act;
o the occurrence of a terminating capital transaction; or
o the redemption, or acquisition by us, of all partnership
interests other than partnership interests held by us and
all OP Units.
Upon dissolution we, as general partner, or, in the event that there
is no remaining general partner, a liquidator will proceed to liquidate the
assets of the operating partnership and apply the proceeds from such
liquidation in the order of priority set forth in the partnership agreement
for the operating partnership.
DESCRIPTION OF INDEPENDENCE MALL UNITS AND
THE INDEPENDENCE MALL PARTNERSHIP AGREEMENT
A summary of certain provisions of the Agreement of Limited
Partnership of Westfield Independence Mall Limited Partnership, dated as of
August 11, 1998, as amended (the "Independence Mall Partnership
Agreement"), and a description of the material terms of the Independence
Mall Units are set forth below. The following description does not purport
to be complete and is subject to and qualified in its entirety by reference
to applicable provisions of the Delaware Limited Partnership Act and the
Independence Mall Partnership Agreement. We have filed a copy of the
Independence Mall Partnership Agreement as an exhibit to the registration
statement of which this prospectus is a part.
GENERAL
Westfield Independence LLC, a Delaware limited liability company and a
subsidiary of the operating partnership, is the sole general partner of the
Independence Mall Partnership, and as of June 30, 1999, held a 20% capital
interest in the Independence Mall Partnership. All remaining partnership
interests in the Independence Mall Partnership are Independence Mall Units
held by New Hanover, as a limited partner. New Hanover acquired the
Independence Mall Units upon the contribution of its interests in
Independence Mall Associates, a North Carolina limited partnership and
owner of Westfield Shoppingtown Independence Mall. All holders of
Independence Mall Units or other partnership interests in the Independence
Mall Partnership are entitled to share in cash distributions from, and in
the profits and losses of, the Independence Mall Partnership as described
below. The Independence Mall Units and other partnership interests in the
Independence Mall Partnership are not listed on any exchange or quoted on
any national market system. The Independence Mall Partnership Agreement
imposes restrictions on the transfer of Independence Mall Units and other
partnership interests in the Independence Mall Partnership, as described
below.
PURPOSES, BUSINESS AND MANAGEMENT
The purpose of the Independence Mall Partnership includes the conduct
of any business that may be conducted lawfully by a limited partnership
formed under the Delaware Limited Partnership Act, except that the
Independence Mall Partnership Agreement requires the business of the
Independence Mall Partnership to be conducted in such a manner that will
permit us to be classified as a REIT under Sections 856 through 860 of the
Internal Revenue Code unless we cease to qualify for reasons other than the
conduct of the business of the Independence Mall Partnership. Subject to
the foregoing limitation, the Independence Mall Partnership may enter into
partnerships, joint ventures or similar arrangements and may own interests
in any other entity. Notwithstanding the foregoing, until August 11, 2001,
the business of the Independence Mall Partnership is limited to the
ownership of partnership interests in Independence Mall Associates, acting
as general partner of Independence Mall Associates, and any related
activities. Westfield Independence may cause the Independence Mall
Partnership not to take, or refrain from taking, any action which, in its
judgment, and in its sole and absolute discretion:
o could adversely affect our ability to continue to qualify as
a REIT;
o could subject us to any additional taxes under Section 857
or Section 4981 of the Internal Revenue Code; or
o could violate any law or regulation of any governmental body
or agency having jurisdiction over Westfield Independence or
us, or our respective securities
unless such action is specifically consented to by Westfield Independence
in writing.
The affairs of the Independence Mall Partnership will be managed by
us, as directed by our board of directors, since Westfield Independence,
the sole general partner of Independence Mall Partnership, is a subsidiary
of the operating partnership and we are the sole general partner of the
operating partnership.
Except as otherwise expressly provided in the Independence Mall
Partnership Agreement, all management powers over the business and affairs
of the Independence Mall Partnership are exclusively vested in Westfield
Independence. No limited partner or any other person to whom a partnership
interest has been transferred may, in its capacity as a limited partner,
take part in the operation, management or control of the Independence Mall
Partnership's business, transact any business in the Independence Mall
Partnership's name or have the power to sign documents for or otherwise
bind the Independence Mall Partnership. The general partner may not be
removed by the limited partners with or without cause. In addition to the
powers granted to a general partner of a limited partnership under
applicable law or that are granted to the general partner under any other
provision of the Independence Mall Partnership Agreement, Westfield
Independence, subject to the other provisions of the Independence Mall
Partnership Agreement, has full power and authority to do all things deemed
necessary or desirable by it to conduct the business of the Independence
Mall Partnership, to exercise all powers of the Independence Mall
Partnership and to effectuate the purposes of the Independence Mall
Partnership. The Independence Mall Partnership may incur debt or enter
into other similar credit, guarantee, financing or refinancing arrangements
that Westfield Independence deems necessary for the conduct of the
activities of the Independence Mall Partnership, Independence Mall
Associates or the operating partnership, including, without limitation, in
connection with any acquisition of properties, upon such terms as we
determine to be appropriate; provided, that, until August 11, 2001 the
Independence Mall Partnership will not acquire properties or assets
unrelated to Independence Mall Associates, without the consent of a
majority in interest of the limited partners, excluding interests held by
Westfield Independence or its affiliates. Westfield Independence is
authorized to execute, deliver and perform some agreements and transactions
on behalf of the Independence Mall Partnership without any further act,
approval or vote of the limited partners.
Restrictions on Westfield Independence's Authority
Westfield Independence may not take any action in contravention of the
Independence Mall Partnership Agreement. Westfield Independence may not,
without the prior consent of a majority in interest of the limited
partners, excluding interests held by Westfield Independence or its
affiliates, undertake, on behalf of the Independence Mall Partnership, any
of the following actions or enter into any transaction that would have the
effect of such actions:
o amend, modify or terminate the Independence Mall Partnership
Agreement, except as provided in the Independence Mall
Partnership Agreement; for a description of the provisions
of the Independence Mall Partnership Agreement permitting
Westfield Independence to amend the Independence Mall
Partnership Agreement without the consent of the limited
partners see "-Amendment of the Independence Mall
Partnership Agreement;" or
o approve or acquiesce to the transfer of its partnership
interest or admit into the Independence Mall Partnership any
additional or successor general partners, subject to the
exceptions discussed in "-Transfers and Withdrawals-
Restrictions on Westfield Independence."
In addition, Westfield Independence may not amend the Independence
Mall Partnership Agreement without the prior consent of each partner
adversely affected by such amendment, if such amendment would:
o convert a limited partner into a general partner;
o modify the limited liability of a limited partner;
o alter the rights of any partner to receive the distributions
to which such partner is entitled, or alter the allocations
specified in the Independence Mall Partnership Agreement;
o cause the termination of the Independence Mall Partnership
prior to the time set forth in the Independence Mall
Partnership Agreement; or
o amend the section of the Independence Mall Partnership
Agreement imposing limitations on Westfield Independence's
ability to amend the Independence Mall Partnership Agreement
mentioned in the bullet points above.
Additional Limited Partners
Westfield Independence is authorized to admit additional limited
partners to the Independence Mall Partnership from time to time, on terms
and conditions and for such capital contributions as may be established by
Westfield Independence in its sole and absolute discretion. The net
capital contribution need not be equal for all partners. No action or
consent by the limited partners is required in connection with the
admission of any additional limited partner, except that, prior to
August 11, 2001, no additional limited partner may be admitted to the
Independence Mall Partnership without the written consent of a majority in
interest of the limited partners excluding interests held by Westfield
Independence or its affiliates.
Subject to Delaware law, any additional partnership interests in the
Independence Mall Partnership may be issued in one or more classes, or one
or more series of any of such classes, with such designations, preferences
and relative, participating, optional or other special rights, powers and
duties as Westfield Independence shall determine, in its sole and absolute
discretion without the approval of any limited partner, provided that,
prior to August 11, 2001, no additional limited partner may be admitted to
the Independence Mall Partnership without the written consent of a majority
in interest of the limited partners excluding interests held by Westfield
Independence or its affiliates. Such rights, powers and duties may be
senior to the limited partners, but none of such additional partnership
interests in the Independence Mall Partnership shall carry or give to their
holders rights to receive distributions, as to amount, timing and priority,
senior to the rights of the limited partners as set forth in the
Independence Mall Partnership Agreement. Without limiting the generality
of the foregoing, Westfield Independence has authority to specify:
o the allocations of items of Independence Mall Partnership
income, gain, loss, deduction and credit to each such class
or series of partnership interests in the Independence Mall
Partnership;
o the right of each such class or series of partnership
interests in the Independence Mall Partnerships to share in
distributions; and
o the rights of each such class or series of partnership
interests in the Independence Mall Partnership upon
dissolution and liquidation of the Independence Mall
Partnership;
No person may be admitted as an additional limited partner without
Westfield Independence's consent, which consent may be given or withheld in
Westfield Independence's sole and absolute discretion and, until August 11,
2001, the consent of a majority in interest of the limited partners,
excluding Westfield Independence and its affiliates.
ABILITY TO ENGAGE IN OTHER BUSINESSES; CONFLICTS OF INTEREST
Westfield Independence and its affiliates are permitted to purchase,
own, operate, manage and otherwise deal with and profit from any property,
real, personal or mixed, not owned by the Independence Mall Partnership for
their own account and benefit, whether or not competitive with the business
and affairs of the Independence Mall Partnership, provided, however, that
until August 11, 2001, Westfield Independence cannot engage in any
activities other than the ownership of its interests in the Independence
Mall Partnership and activities incidental to such ownership interest.
Westfield Independence may in the future acquire additional real estate
investments that may be competitive with the business of the Independence
Mall Partnership.
GUARANTEED PAYMENTS, DISTRIBUTIONS AND PROFITS AND LOSSES
The Independence Mall Partnership Agreement provides that the limited
partners are entitled to a quarterly guaranteed payment per Independence
Mall Unit in an amount equal to 87.5% of the dividends paid on each of our
common shares with respect to such quarter. In addition, the Independence
Mall Partnership Agreement provides for the quarterly distribution of
Available Cash, as such term is defined in the Independence Mall
Partnership Agreement as follows:
o first, the limited partners receive 100% of the
distributions until they receive, with respect to each
Independence Mall Unit, an amount equal to a "priority
return," which is the distributions paid on each of our
common shares in that quarter, less their guaranteed
payment, plus any unpaid priority return and the interest
accrued on that priority return;
o second, the general partner receives 100% of the
distributions until it receives an amount equal to the
priority return and guaranteed payments paid to the limited
partners during that quarterly period; and
o third, any excess is distributed 99% to the general partner
and 1% to the limited partners.
The Independence Mall Partnership Agreement provides for the
allocation of Net Income, as such term is defined in the Independence Mall
Partnership Agreement to the limited partners and the general partner in
the same priority and amounts as the distributions described above on an
annual basis. The Independence Mall Partnership Agreement provides for the
allocation of Net Loss, as such term is defined in the Independence Mall
Partnership Agreement, in the amount of 99% to the general partner and 1%
to the limited partners, on an annual basis.
BORROWING BY THE INDEPENDENCE MALL PARTNERSHIP
Westfield Independence is authorized to cause the Independence Mall
Partnership to borrow money, to assume, guarantee or contract for
indebtedness and other liabilities, and to issue evidence of indebtedness
and incur any obligations it in good faith deems necessary for the conduct
of the activities of the Independence Mall Partnership, Independence Mall
Associates, the operating partnership or us. Such debt may be secured,
among other things, by deeds, mortgages, deeds of trust, negative pledges
or other liens or encumbrances on the Independence Mall Partnership's
assets.
REIMBURSEMENT OF WESTFIELD INDEPENDENCE; TRANSACTIONS WITH WESTFIELD
INDEPENDENCE AND ITS AFFILIATES
Westfield Independence and/or its affiliates have the right, but not
the obligation, in the sole discretion of Westfield Independence, to
perform all or any of the property management services on account of the
property owned or managed by the Independence Mall Partnership,
Independence Mall Associates or any affiliate, and may cause the
Independence Mall Partnership, Independence Mall Associates or any
affiliate to enter into a management agreement with Westfield Independence
or one or more of its affiliates, in form and substance acceptable to
Westfield Independence in its sole discretion. If Westfield Independence
elects to so perform, or to have an affiliate so perform, the property
management services, then Westfield Independence or its affiliate will be
reimbursed for its expenses and otherwise compensated by the Independence
Mall Partnership in amounts determined by Westfield Independence, in its
good faith discretion, to be comparable to amounts which would be charged
by reputable unrelated third party property management companies which have
substantial experience in performing property management services for
properties of the type owned or managed by the Independence Mall
Partnership for institutional owners with portfolios under management which
are substantially similar in size, nature, and condition of property owned
or managed by the Independence Mall Partnership. Westfield Independence
will not otherwise be compensated for its services as general partner of
the Independence Mall Partnership. Westfield Independence will be
reimbursed by the Independence Mall Partnership to the extent not paid by
Independence Mall Associates for all expenses that it incurs relating to
the ownership and operation of, or for the benefit of, the Independence
Mall Partnership or any of its assets.
Until August 11, 2001, with the consent of a majority in interest of
the limited partners, excluding interests held by Westfield Independence or
its affiliates, and provided that no consent is required in connection with
a permitted loan transaction under the Independence Mall Partnership
Agreement, and from and after August 11, 2001, without the consent of the
limited partners, the Independence Mall Partnership may lend or contribute
funds or other assets to its subsidiaries, Westfield Independence or its
affiliates or other persons in which it has an equity investment and such
persons may borrow funds from the Independence Mall Partnership, on terms
and conditions established in the sole and absolute discretion of Westfield
Independence.
From and after August 11, 2001, Independence Mall Partnership may
transfer assets to joint ventures, other partnerships, corporations or
other business entities in which it is or thereby becomes a participant
upon such terms and subject to such conditions consistent with the
Independence Mall Partnership Agreement and applicable law as Westfield
Independence, in its sole and absolute discretion, believes are advisable.
Except as expressly permitted by the Independence Mall Partnership
Agreement, neither Westfield Independence nor any of its affiliates will
sell, transfer or convey any property to, or purchase or otherwise acquire
any property from, the Independence Mall Partnership, directly or
indirectly, except pursuant to transactions that are determined by
Westfield Independence in good faith to be fair and reasonable to the
Independence Mall Partnership.
LIABILITY OF WESTFIELD INDEPENDENCE AND LIMITED PARTNERS
Westfield Independence, as the general partner of the Independence
Mall Partnership, is ultimately liable for all general recourse obligations
of the Independence Mall Partnership to the extent not paid by the
Independence Mall Partnership. Westfield Independence is not liable for
the nonrecourse obligations of the Independence Mall Partnership.
The limited partners are not required to make additional contributions
to the Independence Mall Partnership. Assuming that a limited partner does
not take part in the control of the business of the Independence Mall
Partnership, the liability of the limited partner for obligations of the
Independence Mall Partnership under the Independence Mall Partnership
Agreement and the Delaware Limited Partnership Act is limited, subject to
limited exceptions, generally to the loss of the limited partner's
investment in the Independence Mall Partnership represented by his or her
limited partnership interest. The Independence Mall Partnership will
operate in a manner Westfield Independence deems reasonable, necessary and
appropriate to preserve the limited liability of the limited partners.
EXCULPATION AND INDEMNIFICATION OF WESTFIELD INDEPENDENCE
The Independence Mall Partnership Agreement generally provides that
Westfield Independence, as general partner, and its members, officers, and
directors will not be liable for monetary damages to the Independence Mall
Partnership, any partners or any assignees for losses sustained or
liabilities incurred as a result of errors in judgment or of any act or
omission if Westfield Independence acted without bad faith, without a
knowing and willful breach of the Independence Mall Partnership Agreement
and without active and deliberate dishonesty. In addition, Westfield
Independence, as general partner, is not, subject to some limitations set
forth in the Independence Mall Partnership Agreement, responsible for any
misconduct or negligence on the part of its agents taken without bad faith,
without a knowing and willful breach of the Independence Mall Partnership
Agreement and without active and deliberate dishonesty. Westfield
Independence, as general partner, may consult with legal counsel,
accountants, appraisers, management consultants, investment bankers,
architects, engineers, environmental consultants and other consultants and
advisors, and any action Westfield Independence takes or omits to take in
reliance upon the opinion of such persons, as to matters which Westfield
Independence, as general partner, reasonably believes to be within their
professional or expert competence, shall be conclusively presumed to have
been done or omitted in good faith and in accordance with such opinion.
The Independence Mall Partnership Agreement also provides for the
indemnification, to the fullest extent permitted by law, of Westfield
Independence, as general partner, of its directors, officers, employees,
members, partners, agents, representatives and affiliates against any and
all losses, claims, damages, liabilities, joint or several, expenses,
judgments, fines, settlements and other amounts arising from any and all
claims, demands, actions, suits or proceedings in which such person may be
involved that relate to the operations of the Independence Mall Partnership
or Westfield Independence in its capacity as general partner, whether or
not suit or other legal proceedings are commenced, unless it is established
by a court of competent jurisdiction and all appeals relating to such
proceeding have been fully completed or the applicable appeal periods have
expired that: (1) the act or omission of the party to be indemnified was
material to the matter giving rise to the proceedings and either was
committed in bad faith or was the result of active and deliberate
dishonesty or a willful and knowing breach of the Independence Mall
Partnership Agreement; (2) the party to be indemnified actually received an
improper and unpermitted personal benefit in money, property or services;
or (3) in the case of any criminal proceeding, the party to be indemnified
knew, or was reckless in not knowing, that the act or omission was
unlawful.
REDEMPTION RIGHTS OF LIMITED PARTNERS
For a description of the redemption rights of limited partners of the
Westfield Independence Partnership, see "Redemption of OP Units and
Independence Mall Units."
SALES OF ASSETS
Until August 11, 2008, Westfield Independence does not, without the
prior approval of a majority of limited partner interests, excluding those
held by Westfield Independence and its affiliates, have the right to
consummate
o the sale or other taxable disposition of all or any material
portion, except for routine disposition of personal property
and fixtures in the ordinary course of business, of the
Independence Mall Partnership's assets and properties, or
the assets or properties of Independence Mall Associates,
whether in one or a series of transactions; or
o a merger, consolidation or dissolution of the Independence
Mall Partnership or Independence Mall Associates,
which in either case would result in the recognition of taxable gain by the
limited partner in such fiscal year. In addition, from and after August
11, 2008, Westfield Independence must use its good faith efforts, to the
extent not inconsistent with our business objectives or those of Westfield
Independence, the operating partnership or our or their respective
affiliates, to consummate any such sale or disposition in a manner that
would enable the limited partners to defer the recognition of taxable gain.
In addition, until August 11, 2005, Westfield Independence does not,
without the prior approval of a majority of limited partner interests,
excluding those held by Westfield Independence and its affiliates, have the
right to distribute any property contributed to the Independence Mall
Partnership by any partner to another partner if, as a result of such
distribution, any limited partner would recognize income pursuant to
Section 737 or Section 704(c)(1)(B) of the Internal Revenue Code.
TRANSFERS AND WITHDRAWALS
Restrictions on Transfer
The Independence Mall Partnership Agreement restricts the
transferability of interests in the Independence Mall Partnership. Any
transfer or purported transfer of a partnership interest in the
Independence Mall Partnership not made in accordance with the Independence
Mall Partnership Agreement will not be valid and the Independence Mall
Partnership shall have no duty or obligation to recognize the transferee as
a partner or holder of any interest whatsoever in the Independence Mall
Partnership and the transferee shall have no rights, interests or claims in
or against the Independence Mall Partnership or any partner of the
Independence Mall Partnership. Except for a transfer to Westfield
Independence, the operating partnership or any other affiliate of Westfield
Independence, a limited partner, other than Westfield Independence and its
affiliates, shall not transfer all or any portion of its interest in the
Independence Mall Partnership, or any of such limited partner's economic
rights as a limited partner, without Westfield Independence's prior written
consent, which consent may be withheld in its sole discretion, provided,
however, that a limited partner may, subject to the provisions of the
Independence Mall Partnership Agreement, but without the requirement of
first obtaining the consent of Westfield Independence, transfer all or any
portion of its interest in the Independence Mall Partnership, or any of
such limited partner's economic rights as a limited partner, to
o the partners of New Hanover as of August 11, 1998 or the
constituent partners, members, beneficiaries or shareholders
as of August 11, 1998 of such partners;
o immediate family members of the limited partner or of any
party enumerated in the bullet point immediately above; and
o family planning trusts in which the limited partner or any
party enumerated in the first bullet point above, together
with their immediate family members, has a 50% or greater
economic interest.
Any such transferee must first execute and deliver a written
agreement, in form and substance reasonably satisfactory to Westfield
Independence, agreeing to be bound by the terms of the Independence Mall
Partnership Agreement.
Westfield Independence may prohibit any transfer by a limited partner
of its Independence Mall Units if, in the opinion of legal counsel to the
Independence Mall Partnership or Westfield Independence, such transfer
would require registration under the Securities Act , or would otherwise
violate any Federal or state securities laws or regulations applicable to
the Independence Mall Partnership or the Independence Mall Units.
No transfer by a Limited Partner of its Independence Mall Units may be
made to any person if:
o in the opinion of legal counsel for the Independence Mall
Partnership or Westfield Independence, it would result in
the Independence Mall Partnership being treated as an
association taxable as a corporation;
o such transfer is effectuated through an "established
securities market" or a "secondary market (or the
substantial equivalent thereof)" within the meaning of
Section 7704 of the Internal Revenue Code;
o such transfer would cause the Independence Mall Partnership
to become, with respect to any employee benefit plan subject
to Title I of the Employment Retirement Income Security Act
of 1974, as amended, a "party-in-interest" as defined in
Section 3(14) of ERISA, or a "disqualified person," as
defined in Section 4975(c) of the Internal Revenue Code;
o such transfer would, in the opinion of legal counsel for the
Independence Mall Partnership or Westfield Independence,
cause any portion of the assets of the Independence Mall
Partnership to constitute assets of any employee benefit
plan pursuant to Department of Labor Regulations Section
2510.2-101;
o such transfer would subject the Independence Mall
Partnership to be regulated under the Investment Company Act
of 1940, the Investment Advisors Act of 1940 or ERISA, each
as amended; or
o in the opinion of legal counsel for the Independence Mall
Partnership or Westfield Independence, it would adversely
affect our ability to continue to qualify as a REIT or
subject Westfield Independence or us to any additional taxes
under Section 857 or Section 4981 of the Internal Revenue
Code.
Substituted Limited Partners
Except for a transferee permitted pursuant to the Independence Mall
Partnership Agreement, no limited partner has the right to substitute a
transferee as a limited partner in its place. Any transferee permitted
pursuant to the Independence Mall Partnership Agreement shall be admitted
to the Independence Mall Partnership as a substituted limited partner. In
addition, Westfield Independence shall have the right to consent to the
admission of any other transferee of the interest of a limited partner as a
substituted limited partner, which consent may be given or withheld in
Westfield Independence's sole and absolute discretion. If Westfield
Independence, in its sole and absolute discretion, does not consent to the
admission of any transferee as a substituted limited partner, such
transferee will be considered an assignee for purposes of the Independence
Mall Partnership Agreement. An assignee will be entitled to receive
distributions from the Independence Mall Partnership and the share of net
income, net losses, recapture income and any other items, gain, loss,
deduction and credit of the Independence Mall Partnership attributable to
the Independence Mall Units assigned to such transferee, but will not be
deemed to be a holder of Independence Mall Units for any other purpose
under the Independence Mall Partnership Agreement, and will not be entitled
to vote with respect to such Independence Mall Units on any matter
presented to the limited partners for approval. Such Independence Mall
Units will be deemed to have been voted on such matters in the same
proportion as all other Independence Mall Units held by limited partners
are voted.
Restrictions on Westfield Independence
Until August 11, 2001, Westfield Independence may transfer any of its
general partner interest or limited partner interests to any affiliate of
Westfield Independence or otherwise in connection with any merger
reorganization or restructuring of us or the operating partnership without
consent or approval of the limited partners. Until August 11, 2001, except
as permitted in the preceding sentence, Westfield Independence shall not
otherwise transfer all or any portion of its general partner interest or
withdraw as a general partner of the Independence Mall Partnership, without
the consent or approval of a majority in interest of the limited partners,
other than interests held by Westfield Independence or its affiliates.
From and after August 11, 2001, Westfield Independence may transfer any of
its general partner interest or withdraw as general partner, or transfer
any of its limited partner interest, without consent or approval from any
limited partners, and any affiliate of Westfield Independence may transfer
any of its general partner interest or limited partner interest without
consent or approval from any limited partners.
AMENDMENT OF THE INDEPENDENCE MALL PARTNERSHIP AGREEMENT
By the General Partner Without the Consent of the Limited Partners
Westfield Independence has the power, without the consent of the
limited partners, to amend the Independence Mall Partnership Agreement as
may be required to facilitate or implement any of the following purposes:
o to add to Westfield Independence's obligations as general
partner or surrender any right or power granted to Westfield
Independence or any of its affiliates for the benefit of the
limited partners;
o to reflect the admission, substitution or withdrawal of
partners in accordance with the Independence Mall
Partnership Agreement;
o to set forth the designations, rights, powers, duties and
preferences of other holders of any additional partnership
interests in the Independence Mall Partnership issued
pursuant to the Independence Mall Partnership Agreement;
o to reflect a change that is of an inconsequential nature and
does not adversely affect the limited partners in any
material respect, or to cure any ambiguity, correct or
supplement any provision in the Independence Mall
Partnership Agreement not inconsistent with law or with
other provisions of the Independence Mall Partnership
Agreement, or make other changes with respect to matters
arising under the Independence Mall Partnership Agreement
that will not be inconsistent with law or with the
provisions of the Independence Mall Partnership Agreement;
and
o to satisfy any requirements, conditions or guidelines
contained in any order, directive, opinion, ruling or
regulation of a Federal or state agency or contained in
Federal or state law;
With the Consent of the Limited Partners
Amendments to the Independence Mall Partnership Agreement may be
proposed by Westfield Independence or by any limited partners, other than
Westfield Independence, holding 25% or more of the partnership interests in
the Independence Mall Partnership. Following such proposal, Westfield
Independence will submit to the limited partners any proposed amendment
that, pursuant to the terms of the Independence Mall Partnership Agreement,
requires the consent of the limited partners. Westfield Independence will
seek the written consent of the partners on the proposed amendment or will
call a meeting to vote on the proposed amendment and to transact any other
business that it may deem appropriate.
MEETINGS
Meetings of the partners may be called by Westfield Independence.
Notice of any such meeting will be given to all partners not less than
seven days nor more than thirty days prior to the date of such meeting.
Partners may vote in person or by proxy at such meeting. Whenever the vote
or consent of partners is permitted or required under the Independence Mall
Partnership Agreement, such vote or consent may be given at a meeting of
partners or may be given by written consent. Any action required or
permitted to be taken at a meeting of the partners may be taken without a
meeting if a written consent setting forth the action so taken is signed by
partners holding a majority of outstanding partnership interests in the
Independence Mall Partnership, or such other percentage as is expressly
required by the Independence Mall Partnership Agreement for the action in
question.
DISSOLUTION
The Independence Mall Partnership will dissolve, and its affairs will
be wound up, upon the first to occur of any of the following:
o March 1, 2097;
o an event of withdrawal, as permitted by and defined in the
Delaware Limited Partnership Act, other than an event of
bankruptcy, of Westfield Independence, as general partner,
unless, within ninety days after the withdrawal, a majority
in interest in capital and profits of the remaining partners
agree in writing, to continue the business of the
Independence Mall Partnership and to the appointment,
effective as of the date of withdrawal, of a substitute
general partner;
o the entry of a decree of judicial dissolution of the
Independence Mall Partnership pursuant to the provisions of
the Delaware Limited Partnership Act;
o the sale of all or substantially all of the assets and
properties of the Independence Mall Partnership; or
o a final and non-appealable judgment is entered by a court of
competent jurisdiction ruling that Westfield Independence is
bankrupt or insolvent, or a final and non-appealable order
for relief is entered by a court with appropriate
jurisdiction against Westfield Independence, in each case
under any Federal or state bankruptcy or insolvency laws,
unless prior to the entry of such order or judgment a
majority in interest in capital and profits of the remaining
partners agree in writing to continue the business of the
Independence Mall Partnership and to the appointment,
effective as of a date prior to the date of such order or
judgment, of a substitute general partner.
Upon dissolution, Westfield Independence, as general partner, or, in
the event that there is no remaining general partner, a liquidator will
proceed to liquidate the assets of the Independence Mall Partnership and
apply the proceeds from such liquidation in the order of priority set forth
in the Independence Mall Partnership agreement.
REDEMPTION OF OP UNITS AND INDEPENDENCE MALL UNITS
GENERAL
New Hanover acquired Independence Mall Units upon the contribution to
the Independence Mall Partnership of New Hanover's partnership interest in
a partnership known as Independence Mall Associates. Pursuant to the
Independence Mall Partnership Agreement, New Hanover has the right to cause
the Independence Mall Partnership to redeem its Independence Mall Units for
cash. The redemption price will be paid in cash, subject to our prior and
independent right to acquire Independence Mall Units for an equivalent
number of our common shares. Alternatively, pursuant to an OP Contribution
Agreement, dated as of August 11, 1998, by and among the operating
partnership and New Hanover, New Hanover has the right to contribute all or a
portion of its Independence Mall Units to the operating partnership for an
equivalent number of OP Units. Pursuant to the partnership agreement for
the operating partnership, such OP Units can be redeemed for cash, subject
to our prior and independent right to acquire OP Units for an equivalent
number of our common shares.
Redemption of Independence Mall Units
From and after August 11, 1999, each Independence Mall Unitholder may,
subject to the terms and conditions of the Independence Mall Partnership
Agreement, deliver a notice of redemption, in the form attached as an
exhibit to the partnership agreement for the operating partnership, a copy
of which is available from us, requesting the redemption of all or a
portion, but not less than 500, of its Independence Mall Units. Within 10
business days following delivery of this notice, Westfield Independence may
acquire the tendered Independence Mall Units for a cash amount equal to the
value of our common shares, based on the ratio of one common share for each
Independence Mall Unit, subject to anti-dilution adjustments, and subject
to our prior and independent right to acquire some or all of the tendered
Independence Mall Units for our common shares, based on the ratio of one
common share for each Independence Mall Unit, subject to anti-dilution
adjustments, and also subject to the restrictions on ownership and the
transfer restrictions and other limitations set forth in our Articles of
Incorporation, as well as well as the terms and conditions of the
partnership agreement for the operating partnership relating to redemption
rights. In addition to this redemption price, an Independence Mall
Unitholder will also be entitled to receive cash to compensate him for any
accrued but unpaid Priority Return, as defined in the Independence Mall
Partnership Agreement, related to the Independence Mall Units which are
being tendered, subject to our prior and independent right to use common
shares to compensate the Independence Mall Unitholder for the Priority
Return.
If the Independence Mall Units are acquired for cash, then Westfield
Independence will become the owner of the Independence Mall Units. If the
Independence Mall Units are acquired for common shares , we will become the
owner of the Independence Mall Units. Such an acquisition of Independence
Mall Units will be treated as a sale of the Independence Mall Units by the
Independence Mall Unitholder to us for Federal income tax purposes. See "-
- Federal Income Tax Consequences of Redemption of OP Units and
Independence Mall Units" below. Upon redemption, the Independence Mall
Unitholder's right to receive distributions from the Independence Mall
Partnership with respect to its Independence Mall Units will cease. If we
elect to exercise our prior and independent right to acquire Independence
Mall Units in exchange for common shares, an Independence Mall Unitholder
will have the rights to distributions as a shareholder of us from the time
of its acquisition of common shares.
Redemption of OP Units
After the first anniversary of becoming a holder of OP Units, each OP
Unitholder, and some assignees, may, subject to the terms and conditions
set forth in the partnership agreement for the operating partnership,
deliver a notice of redemption, in the form attached as an exhibit to the
partnership agreement for the operating partnership, a copy of which is
available from us, requesting the redemption of at least 2,000 OP Units, or
if the OP Unitholder holds fewer than 2,000 OP Units, all of the OP Units
that the OP Unitholder holds. On or before the close of business on the
fifth business day after delivery of this notice, the operating partnership
may acquire the tendered OP Units for a cash amount equal to the value of
our common shares, based on the ratio of one common share for each OP Unit,
subject to anti-dilution adjustments, and subject to our prior and
independent right to acquire some or all of the tendered OP Units for our
common shares, based on the ratio of one common share for each OP Unit,
subject to anti-dilution adjustments, and also subject to the restrictions
on ownership and the transfer restrictions and other limitations set forth
in our Articles of Incorporation. An OP Unitholder can effect a redemption
only once in each fiscal quarter of a twelve-month period and may not
effect a redemption after the operating partnership's record date with
respect to a distribution by the operating partnership and before the
record date we establish for our shareholders for some or all of our
portion of such distribution by the operating partnership.
If the OP Units are acquired for cash, then such OP Units will be
cancelled. If the OP Units are acquired for common shares, we will become
the owner of the OP Units. Such an acquisition of OP Units will be treated
as a sale of the OP Units by the OP Unitholder to us for Federal income tax
purposes. See "-- Federal Income Tax Consequences of Redemption of OP
Units and Independence Mall Units" below. Upon redemption, the OP
Unitholder's right to receive distributions from the operating partnership
with respect to its OP Units will cease. If we elect to exercise our prior
and independent right to acquire OP Units in exchange for common shares, an
OP Unitholder will have the rights to distributions as a shareholder of us
from the time of its acquisition of common shares.
FEDERAL INCOME TAX CONSEQUENCES OF REDEMPTION OF OP UNITS AND INDEPENDENCE
MALL UNITS
The following discussion summarizes certain Federal income tax
considerations that may be relevant to you if you tender your Independence
Mall Units or OP Units for redemption. This summary is based on current
law, is for general information only and is not tax advice. This
discussion does not purport to deal with all aspects of taxation that may
be relevant to particular investors in light of their personal investment
or tax circumstances, or to certain types of investors, including insurance
companies, tax-exempt organizations, financial institutions or broker-
dealers, foreign corporations and persons who are not citizens or residents
of the United States, that are subject to special treatment under the
Federal income tax laws, nor does it give a detailed discussion of any
state, local or foreign tax considerations.
YOU SHOULD CONSULT WITH A TAX ADVISOR REGARDING THE SPECIFIC TAX
CONSEQUENCES OF A REDEMPTION OF INDEPENDENCE MALL UNITS OR OP UNITS,
INCLUDING THE FEDERAL, STATE, LOCAL, AND FOREIGN INCOME AND OTHER TAX
CONSEQUENCES OF SUCH REDEMPTION, AND OF POTENTIAL CHANGES IN APPLICABLE TAX
LAWS.
Tax Treatment of a Redemption of Independence Mall Units or OP Units.
If we acquire your Independence Mall Units or OP Units in exchange for
our common shares, the redemption will be treated as a sale of Independence
Mall Units or OP Units by you to us. The sale will be fully taxable to
you, and you generally will recognize for tax purposes in an amount of gain
equal to the excess of (1) the value of the common shares received by you,
plus the amount of any partnership liabilities allocable to the redeemed
Independence Mall Units or OP Units at the time of the redemption, over (2)
the adjusted basis of your Independence Mall Units or OP Units. The
determination of the adjusted basis of your Independence Mall Units or OP
Units is discussed more fully below. See "-Basis of Independence Mall
Units or OP Units."
If we do not acquire your Independence Mall Units or OP Units in
exchange for our common shares, then the Independence Mall Partnership or
the operating partnership will redeem the Independence Mall Units or OP
Units, as the case may be, for cash. If the Independence Mall Partnership
or the operating partnership redeems the Independence Mall Units or OP
Units for cash contributed by us, the redemption likely would be treated
for tax purposes as a sale of such Independence Mall Units or OP Units by
you to us in a fully taxable transaction as discussed above.
If the Independence Mall Partnership or the operating partnership
redeems all of your Independence Mall Units or OP Units using cash that is
not contributed by us, the tax consequences of such redemption would be the
same as described in the previous paragraph. If, however, such partnership
redeems less than all of the units owned by you: (1) you would not be
permitted to recognize any loss in connection with the redemption; and (2)
you would recognize taxable gain only to the extent that the sum of the
cash and the amount of any partnership liabilities allocable to the
redeemed Independence Mall Units or OP Units exceeds your adjusted basis in
all of your Independence Mall Units or OP Units immediately before the
redemption. A recent Federal budget proposal, however, contains language
that, if enacted in its current form, would, require you to: (1) allocate a
portion of the total basis in your Independence Mall Units or OP Units to
the units surrendered in the redemption; and (2) recognize taxable gain
equal to the excess (if any) of the sum of the cash and the amount of
partnership liabilities allocable to the redeemed units over the adjusted
basis allocated to such redeemed units.
Tax Treatment of Gain from Disposition of Independence Mall Units or OP
Units Generally.
Capital gains recognized by individuals and certain other noncorporate
taxpayers upon the sale or disposition of an Independence Mall Unit or an
OP Unit will generally be subject to a maximum Federal income tax rate of
20% if such Independence Mall Unit or OP Unit was held for more than one
year and will be taxed at ordinary income tax rates if such Independence
Mall Unit or OP Unit was held for one year or less. Generally, gain or
loss recognized by a holder of Independence Mall Units or OP Units on the
sale or other taxable disposition of an Independence Mall Unit or OP Unit
will be taxable as capital gain or loss. However, to the extent that the
amount realized upon the sale or other taxable disposition of an
Independence Mall Unit or OP Unit attributable to such holder's share of
"unrealized receivables" of the Independence Mall Partnership or the
operating partnership, as the case may be, exceeds the basis attributable
to those assets, such excess will be treated as ordinary income. Among
other things, "unrealized receivables" include amounts attributable to
previously claimed depreciation deductions on certain types of property.
In addition, the portion of the gain recognized by you on the sale of
Independence Mall Units or OP Units held for more than one year that is
attributable to real property depreciation deductions of the Independence
Mall Partnership or the operating partnership that have not been recaptured
as ordinary income prior to, or in connection with, such sale will be
subject to a 25% (rather than a 20%) tax rate.
In general, if you acquired your Independence Mall Units or OP Units
by purchase or cash contribution, your holding period in your Independence
Mall Units or OP Units begins at the time of such acquisition. If you
acquired your Independence Mall Units or OP Units in exchange for property,
however, your holding period in your Independence Mall Units or OP Units
generally includes your holding period in such property. If you acquired
your Independence Mall Units or OP Units, as the case may be, at different
times or in exchange for multiple properties in which you had different
holding periods, each such unit may have a holding period that is divided
to reflect the different times of your purchases or the different holding
periods of the various properties that you exchanged. If you sell
Independence Mall Units or OP Units having a divided holding period that is
partially in excess of one year and partially one year or less, any capital
gain or loss that you recognize on such sale would be partially long-term
capital gain or loss and partially short-term capital gain or loss.
Basis of Independence Mall Units or OP Units. If you received your
Independence Mall Units or OP Units in connection with a contribution of
cash, a partnership interest, or other property to the Independence Mall
Partnership or the operating partnership, you generally will have an
initial tax basis in your Independence Mall Units or OP Units ("Initial
Basis") equal to the amount of cash, if any, that you contributed, plus
your basis in the contributed partnership interest or other property.
Similarly, if you are treated as having received Independence Mall Units or
OP Units upon liquidation of a predecessor partnership, you generally will
have an Initial Basis in your Independence Mall Units or OP Units equal to
your basis in your interest in the predecessor partnership.
Your Initial Basis generally is increased by (1) your share of the
Independence Mall Partnership's or the operating partnership's income, (2)
increases in your share of the Independence Mall Partnership's or the
operating partnership's liabilities (including any increase in your share
of liabilities occurring in connection with the issuance of Independence
Mall Units or OP Units), and (3) additional capital contributions made by
you to the Independence Mall Partnership or operating partnership.
Generally, your basis in your units is decreased (but not below zero) by
(1) distributions made to you by the Independence Mall Partnership or the
operating partnership, (2) decreases in your share of the Independence Mall
Partnership's or the operating partnership's liabilities (including any
decrease in your share of liabilities occurring in connection with the
issuance of Independence Mall Units or OP Units), (3) your share of the
Independence Mall Partnership's or the operating partnership's losses, and
(4) your share of the Independence Mall Partnership's or the operating
partnership's nondeductible expenditures that are not capitalized.
Potential Application of Disguised Sale Rules to a Redemption of
Independence Mall Units or OP Units. If you received your Independence
Mall Units or OP Units in exchange for property, there is a risk that a
redemption of your Independence Mall Units or OP Units may cause the
original transfer of property by you to the Independence Mall Partnership
or the operating partnership to be treated as a "disguised" sale of such
property.
Under the Code, a transfer of property by a partner to a partnership
followed by a related transfer of money or property by the partnership to
the partner is treated as a "disguised" sale if: (1) the second transfer
would not have occurred but for the first transfer, and (2) the second
transfer "is not dependent on the entrepreneurial risks of the partnership
operations." In a disguised sale, the partner is treated as if such
partner sold the contributed property to the partnership as of the date the
property was contributed to the partnership. In addition, unless a few
technical exceptions apply, transfers of money or other property between a
partnership and a partner that are made within two years of each other,
such as a redemption of Independence Mall Units or OP Units made within
two years of a contribution by you to the Independence Mall Partnership or
operating partnership, must be reported to the IRS and are presumed to
constitute a "disguised" sale unless the facts and circumstances clearly
establish that such transfers do not constitute a sale. If two years have
passed between the contribution of property and the transfer of money or
other consideration from the partnership to a partner, the transactions
will be presumed not to be a sale unless the facts and circumstances
clearly establish that the transfers constitute a sale.
While there is no authority applying the disguised sale rules to the
exercise of a redemption right by a partner with respect to a partnership
interest received in exchange for property, the exercise of a redemption
right with respect to Independence Mall Units or OP Units within two years
of the date of a contribution of property by you may be treated as a
disguised sale. If this treatment were to apply, you would be treated for
Federal income tax purposes as if, on the date of the contribution of
property by you, the Independence Mall Partnership or the operating
partnership, as the case may be, transferred to you an obligation to give
you the proceeds received by you in the redemption. In that case, you
would be required to recognize gain on the disguised sale in the year in
which you contributed property to the Independence Mall Partnership or the
operating partnership, as the case may be.
Withholding. If we purchase Independence Mall Units or OP Units from
you, or if the Independence Mall Partnership or the operating partnership
redeems your units with cash contributed by us, such sale will be subject
to a withholding tax equal to 10% of the amount realized by you in
connection with the redemption unless you (1) furnish us with an affidavit
stating, under penalty of perjury, your United States taxpayer
identification number and that you are not a foreign person, or (2)
otherwise establish an exemption from such withholding tax. For purposes
of the withholding tax, the "amount realized" is the sum of the cash and
fair market value of other property (e.g., our common shares) received by
you, plus the amount of any partnership liabilities allocable to the
Independence Mall Unit or OP Unit redeemed. Different withholding rules
may apply to a partial redemption that is not treated as a sale of your
Independence Mall Units or OP Units as described above. You may seek a
refund of amounts withheld from the Internal Revenue Service if it is
determined that the amount withheld exceeded your United States tax
liability. The Internal Revenue Service has issued final regulations
regarding the withholding tax rules that are effective for payments made
after December 31, 2000. You should consult your tax advisor regarding the
application of those final Treasury Regulations.
COMPARISON OF OWNERSHIP OF OP UNITS, INDEPENDENCE MALL UNITS AND COMMON SHARES
The information below highlights a number of the significant
differences between the operating partnership, the Independence Mall
Partnership and us relating to, among other things, form of organization,
permitted investments, policies and restrictions, management structure,
compensation and fees, investor rights and Federal income taxation, and
compares legal rights associated with the ownership of OP Units,
Independence Mall Units and common shares, respectively. These comparisons
are intended to assist you in understanding how your investment will be
changed if we exercise our prior and independent right to acquire the OP
Units and Independence Mall Units for common shares. This discussion is
summary in nature and does not constitute a complete discussion of these
matters, and you should carefully review the balance of this prospectus and
the registration statement of which this prospectus is a part for
additional important information about us, the operating partnership and
the Independence Mall Partnership.
FORM OF ORGANIZATION AND ASSETS OWNED
Operating Partnership
The operating partnership is organized as a Delaware limited
partnership. Substantially all of our operations are conducted through the
operating partnership. The operating partnership has a stated termination
date of December 31, 2097, although it may be terminated earlier in some
circumstances.
Independence Mall Partnership
The Independence Mall Partnership is organized as a Delaware limited
partnership. The Independence Mall Partnership has a stated termination
date of March 1, 2097, although it may be terminated earlier in some
circumstances.
Westfield America, Inc.
We are a Missouri corporation. We elected to be taxed as a REIT under
the Internal Revenue Code, commencing with our taxable year ended December
31, 1994, and intend to maintain our election as a REIT. We maintain both
a limited partner interest and a general partner interest in the operating
partnership, which give us an indirect investment in the properties and
other assets owned by the operating partnership. We and our wholly-owned
subsidiaries currently have a 97.6% economic interest in the operating
partnership. Our interest in the operating partnership will:
o increase as OP Units are redeemed for cash or acquired by us
and as we issue additional capital stock and contribute the
net proceeds from such issuance to the operating partnership
in exchange for additional interests in the operating
partnership; and
o decrease as we issue additional OP Units in exchange for
property contributed to the operating partnership.
There are no limits on our corporate existence in our Articles of
Incorporation.
PURPOSE AND PERMITTED INVESTMENTS
Operating Partnership
The operating partnership's purpose is to conduct any business that
may be lawfully conducted by a limited partnership organized pursuant to
the Delaware Limited Partnership Act, provided that such business is
conducted in a manner that permits us to qualify as a REIT. The operating
partnership may, subject to the foregoing limitation, invest in or enter
into partnerships, joint ventures, or similar arrangements and may own
interests in any other entity. We may cause the Operating Partnership not
to take, or to refrain from taking, any action that, in our judgment, in
our sole and absolute discretion:
o could adversely affect our ability to continue to qualify as
a REIT;
o could subject us to any additional taxes under Internal
Revenue Code Section 857 or Internal Revenue Code Section
4981 or any other related or successor provision under the
Internal Revenue Code;
o could violate any law or regulation of any governmental body
or agency having jurisdiction over us, our securities or the
operating partnership; or
o could violate in any material respects any of the covenants,
conditions or restrictions now or hereafter placed upon or
adopted by us pursuant to any of our agreements or
applicable laws and regulations,
unless, in any such case, such action described in the bullet points above
is specifically consented to by us in writing.
Independence Mall Partnership
The Independence Mall Partnership's purpose is to conduct any business
that may be lawfully conducted by a limited partnership organized pursuant
to the Delaware Limited Partnership Act, provided that such business is
conducted in a manner that permits us to qualify as a REIT. The
Independence Mall Partnership may, subject to the foregoing limitation,
invest in or enter into partnerships, joint ventures, or similar
arrangements and may own interests in any other entity. Notwithstanding
the foregoing, until August 11, 2001, the business of the Independence Mall
Partnership is limited to the ownership of interests in Independence Mall
Associates, acting as general partner of Independence Mall Associates and
any related activities. Westfield Independence may cause the Independence
Mall Partnership not to take, or to refrain from taking, any action that in
its judgment, in its sole and absolute discretion:
o could adversely affect our ability to continue to qualify as
a REIT;
o could subject Westfield Independence or us to any additional
taxes under Internal Revenue Code Section 857 or Internal
Revenue Code Section 4981; or
o could violate any law or regulation of any governmental body
or agency having jurisdiction over Westfield Independence,
us or our securities.
unless such action described in the bullet points above is specifically
consented to Westfield Independence in writing.
Westfield America, Inc.
Our Articles of Incorporation permit us to engage in any lawful
activity permitted under Missouri law. However, under the partnership
agreement for the operating partnership, we, as general partner, generally
may not conduct any business other than in connection with the ownership,
acquisition and disposition of partnership interests as general partner,
the management of the business of the operating partnership, our operation
as a reporting company with a class or classes of securities registered
under the Exchange Act, our operations as a REIT, the offering, sale,
syndication, private placement or public offering of stock, bonds,
securities or other interests, financing or refinancing of any type related
to the operating partnership or its assets or activities, and such
activities as are incidental to those activities discussed above. We may,
however, in our sole and absolute discretion, from time to time hold or
acquire assets in our own name or otherwise other than through the
operating partnership so long as we take commercially reasonable measures
to insure that the economic benefits and burdens of such property are
otherwise vested in the operating partnership.
ADDITIONAL EQUITY
Operating Partnership
The operating partnership is authorized to issue OP Units, partnership
preferred units and other partnership interests to its partners, investors
or other persons for such consideration and on such terms and conditions as
we, as general partner, in our sole discretion may deem appropriate.
Additionally, we may cause the operating partnership to issue to us
additional common partnership interests, partnership preferred units or
other partnership interests in different series or classes that may be
senior to the OP Units, provided such issuance to us is in conjunction with
an issuance of our securities having substantially similar rights and in
which the proceeds raised in connection with such issuance are contributed
to the operating partnership. No limited partner or OP Unitholder has any
preemptive or similar rights with respect to additional capital
contributions to the operating partnership or the issuance or sale of any
interests in the operating partnership.
Independence Mall Partnership
The Independence Mall Partnership is authorized to issue Independence
Mall Units and other partnership interests for such consideration and on
such terms and conditions as Westfield Independence, as general partner, in
its sole discretion may deem appropriate. Such rights, powers and duties
may be senior to the limited partners, but none of such additional
partnership interests in the Independence Mall partnership shall carry or
give to their holders rights to receive distributions, as to amount, timing
and priority, senior to the rights of the limited partners as set forth in
the Independence Mall Partnership Agreement. No action or consent by the
limited partners is required in connection with the admission of any
additional limited partner, except that, prior to August 11, 2001, no
additional partner may be admitted to the Independence Mall Partnership
without the written consent of a majority in interest of the limited
partners, excluding interests held by Westfield Independence or its
affiliates.
Westfield America, Inc.
Our board of directors, in its discretion, may cause us to issue
additional equity securities consisting of common shares, Senior Preferred
Shares or Preferred Shares; provided, however, that the total number of
equity securities outstanding may not exceed the total number of authorized
shares set forth in our Articles of Incorporation. As long as the
operating partnership is in existence, the net proceeds of all equity
capital raised by us will be contributed to the operating partnership in
exchange for common partnership interests, partnership preferred units or
other interests in the operating partnership.
BORROWING POLICIES
Operating Partnership
The operating partnership has no restrictions on borrowings, and we,
as general partner, have full power and authority to cause the operating
partnership to borrow money.
Independence Mall Partnership
The Independence Mall Partnership has no restrictions on borrowings,
and Westfield Independence, as general partner, has full power and
authority to cause the Independence Mall Partnership to borrow money.
Westfield America, Inc.
We are not restricted under our Articles of Incorporation or By-Laws
from making borrowings. Accordingly, we could become more highly
leveraged, resulting in an increase in debt service that could adversely
affect our cash flow and, consequently, the amount available for
distribution to our shareholders.
OTHER INVESTMENT RESTRICTIONS
Operating Partnership
Other than restrictions precluding investments by the operating
partnership that would adversely affect our qualification as a REIT, there
are no restrictions upon the operating partnership's authority to enter
into specified transactions, including among others, making investments and
lending operating partnership funds.
Independence Mall Partnership
Other than restrictions precluding investments by the Independence
Mall Partnership that would adversely affect our qualification as a REIT,
the Independence Mall Partnership generally has authority to enter into
specified transactions, including among others, making investments and
lending operating partnership funds. However, until August 11, 2001, some
transactions with affiliates of Westfield Independence require the consent
of a majority in interest of the limited partners, excluding interests held
by Westfield Independence or its affiliates.
Westfield America, Inc.
Neither our Articles of Incorporation nor our By-Laws impose any
restrictions upon the types of investments made by us, except that, under
our Articles of Incorporation, our board of directors is prohibited from
taking action that would terminate our REIT status, unless approved by a
majority in interest of the holders of common shares, Series A Preferred
Shares and Series B Preferred Shares, each voting separately as a class.
MANAGEMENT CONTROL
Operating Partnership
All management powers over the business and affairs of the operating
partnership are vested in us, as general partner. No limited partner or OP
Unitholder has any right to participate in or exercise control or
management power over the business and affairs of the operating
partnership. The limited partners have the right to vote on those matters
described under Voting Rights below. We as general partner may not be
removed by the limited partners, with or without cause.
Independence Mall Partnership
All management powers over the business and affairs of the
Independence Mall Partnership are vested in Westfield Independence, as
general partner. No limited partner has any right to participate in or
exercise control or management power over the business and affairs of the
Independence Mall Partnership. The limited partners have the right to vote
on those matters described under Voting Rights below. Westfield
Independence as general partner may not be removed by the limited partners,
with or without cause.
Westfield America, Inc.
Our board of directors has exclusive control over our business and
affairs subject only to those restrictions set forth in our Articles of
Incorporation and By-Laws, the partnership agreement for the operating
partnership or Missouri law. Our board of directors is divided into three
classes. At each annual meeting of the shareholders, the successors of the
class of directors whose terms expire at that meeting will be elected. The
policies adopted by the board of directors may be altered or eliminated
without a vote of the shareholders. Accordingly, except for their vote in
the elections of directors, shareholders have no control over our ordinary
business policies.
FIDUCIARY DUTIES
Operating Partnership
Under Delaware law, we, as general partner, are accountable to the
operating partnership as a fiduciary and, consequently, are required to
exercise good faith and integrity in all of our dealings with respect to
partnership affairs. However, under the partnership agreement for the
operating partnership, we, as general partner, are under no obligation to
take into account the tax consequences to any partner or OP Unitholder of
any action taken by us, and we, as general partner, are not liable for
monetary damages for losses sustained or liabilities incurred by partners
or OP Unitholders as a result of errors of judgment or of any act or
omission, provided that we have acted in good faith. In connection with
the acquisition of properties where OP Units were issued as part of the
purchase price, we contractually agreed, in general, not to sell or
otherwise transfer those properties for a specified period of time in order
to preserve such persons' tax deferral, or in certain instances, not to
sell or otherwise transfer the properties without compensating the sellers
of the properties for their loss of the tax deferral.
Independence Mall Partnership
Under Delaware Law, Westfield Independence, as general partner, is
accountable to the Independence Mall Partnership, as a fiduciary and,
consequently, is required to exercise good faith and integrity in all of
its dealings with respect to partnership affairs. Until August 11, 2009,
Westfield Independence cannot, without the prior approval of a majority of
limited partner interests, excluding those held by Westfield Independence
and its affiliates, consummate: (1) the sale or other taxable disposition
of all or any material portion, except for routine disposition of personal
property and fixtures in the ordinary course of business, of the
Independence Mall Partnership's assets and properties, or the assets or
properties of Independence Mall Associates, or (2) a merger, consolidation
or dissolution of the Independence Mall Partnership or Independence Mall
Associates, which in either case would result in the recognition of taxable
gain by the limited partner in such fiscal year. In addition, from and
after August 11, 2009, Westfield Independence must use its good faith
efforts, to the extent not inconsistent with the business objectives of
Westfield Independence, the operating partnership or our or their
respective affiliates, to consummate any such sale or disposition in a
manner that would enable the limited partners to defer the recognition of
taxable gain. In addition, until August 11, 2005, Westfield Independence
does not, without the prior approval of a majority of limited partner
interests, excluding those held by Westfield Independence and its
affiliates, have the right to distribute any property contributed to the
Independence Mall Partnership by any partner to another partner if, as a
result of such distribution, any limited partner would recognize income
pursuant to Section 737 or Section 704(c)(1)(B) of the Internal Revenue
Code. However, under the Independence Mall Partnership Agreement,
Westfield Independence, as general partner, is not, subject to some
limitations set forth in the Independence Mall Partnership Agreement,
liable for monetary damages for losses sustained or liabilities incurred by
limited partners as a result of errors of judgment or of any act or
omission, provided that Westfield Independence has acted in good faith.
Westfield America, Inc.
Under Missouri law, our board of directors must perform their duties
in good faith, in a manner that they reasonably believe to be in our best
interests and with the care of an ordinarily prudent person in a like
position. Directors who act in such a manner generally will not be liable
to us for monetary damages arising from their activities.
MANAGEMENT LIABILITY AND INDEMNIFICATION
Operating Partnership
The partnership agreement for the operating partnership generally
provides that we, as general partner, and any of our directors and officers
will incur no liability to the operating partnership or any limited partner
for losses sustained or liabilities incurred or benefits not derived as a
result of errors in judgment, mistakes of law or of any act or omission if
we or such officer or director acted in good faith. In addition, we, as
general partner, are not responsible for any misconduct or negligence on
the part of our agents provided we appointed such agents in good faith.
We, as general partner, may consult with legal counsel, accountants,
appraisers, management consultants, investment bankers and other
consultants and advisors, and any action we take or omit to take in
reliance upon the opinion of such persons, as to matters which we, as
general partner, reasonably believe to be within their professional or
expert competence, shall be conclusively presumed to have been done or
omitted in good faith and in accordance with such opinion. The partnership
agreement for the operating partnership also provides for the
indemnification, to the fullest extent permitted by law, of us, as general
partner, of our directors and officers, and of such other persons as we, as
general partner, may from time to time designate, against any and all
losses, claims, damages, liabilities, expenses, judgments, fines,
settlements and other amounts arising from any and all claims, demands,
actions, suits or proceedings in which such person may be involved that
relate to the operations of the operating partnership, provided that no
such person will be indemnified: (1) for willful misconduct or a knowing
violation of the law or (2) for any transaction in which such person
received an improper personal benefit in violation or breach of any
provision of the partnership agreement for the operating partnership.
Independence Mall Partnership
The Independence Mall Partnership Agreement generally provides that
Westfield Independence, as general partner, and its members, officers, and
directors will not, subject to some limitations set forth in the
Independence Mall Partnership Agreement, be liable for monetary damages to
the Independence Mall Partnership, any partners or any assignees for losses
sustained or liabilities incurred as a result of errors in judgment or of
any act or omission if Westfield Independence acted without bad faith,
without a knowing and willful breach of the Independence Mall Partnership
Agreement and without active and deliberate dishonesty. In addition,
Westfield Independence, as general partner, is not responsible for any
misconduct or negligence on the part of its agents taken without bad faith,
without a knowing and willful breach of the Independence Mall Partnership
Agreement and without active and deliberate dishonesty. Westfield
Independence, as general partner, may consult with legal counsel,
accountants, appraisers, management consultants, investment bankers,
architects, engineers, environmental consultants and other consultants and
advisors, and any action Westfield Independence takes or omits to take in
reliance upon the opinion of such persons, as to matters which Westfield
Independence, as general partner, reasonably believes to be within their
professional or expert competence, shall be conclusively presumed to have
been done or omitted in good faith and in accordance with such opinion.
The Independence Mall Partnership Agreement also provides for the
indemnification, to the fullest extent permitted by law, of Westfield
Independence, as general partner, of its directors, officers, employees,
members, partners, agents, representatives and affiliates against any and
all losses, claims, damages, liabilities, joint or several, expenses,
judgments, fines, settlements and other amounts arising from any and all
claims, demands, actions, suits or proceedings in which such person may be
involved that relate to the operations of the Independence Mall Partnership
or Westfield Independence in its capacity as general partner, whether or
not suit or other legal proceedings are commenced, unless it is established
by a court of competent jurisdiction and all appeals relating to such
proceeding have been fully completed or the applicable appeal periods have
expired that: (1) the act or omission of the party to be indemnified was
material to the matter giving rise to the proceedings and either was
committed in bad faith or was the result of active and deliberate
dishonesty or a willful and knowing breach of the Independence Mall
Partnership Agreement; (2) the party to be indemnified actually received an
improper and unpermitted personal benefit in money, property or services;
or (3) in the case of any criminal proceeding, the party to be indemnified
knew, or was reckless in not knowing, that the act or omission was
unlawful.
Westfield America, Inc.
Our Articles of Incorporation provide for the indemnification of our
directors and officers, and of other persons as we may from time to time
designate, against any and all expenses, including attorneys' fees,
judgments, fines and amounts paid in settlement actually and reasonably
incurred arising from any and all claims, demands, actions, suits or
proceedings in which these people may be involved that relate to our
operations, provided that these people will not be indemnified if they did
not act in good faith and in a manner reasonably believed to be in or not
opposed to our best interests, or, with respect to any criminal action or
proceeding, had reasonable cause to believe their conduct was unlawful.
VOTING RIGHTS
Operating Partnership
Under the partnership agreement for the operating partnership, limited
partners have voting rights only with respect to limited matters such as
some amendments and termination of the partnership agreement for the
operating partnership and some transactions such as the institution of
bankruptcy proceedings, an assignment for the benefit of creditors and some
transfers by the general partner of its interest in the operating
partnership or the admission of a successor general partner. OP
Unitholders generally have no voting rights.
Independence Mall Partnership
Under the Independence Mall Partnership Agreement, limited partners
have voting rights only with respect to limited matters such as some
amendments and termination of the Independence Mall Partnership Agreement
and some transactions such as the sale or other taxable disposition of all
or any material portion of Westfield Independence's assets or properties or
the assets or properties of Independence Mall Associates, and the merger,
consolidation or dissolution of the Independence Mall Partnership or
Independence Mall Associates. In addition, until August 11, 2001, limited
partners have voting rights with respect to the admission of additional
limited partners, some transactions between the Independence Mall
Partnership and its subsidiaries and affiliates, including Westfield
Independence, and some transfers by the general partner of its interest in
the Independence Mall Partnership or the admission of a successor general
partner.
Westfield America, Inc.
Each outstanding common share entitles the holder thereof to one vote
on all matters submitted to shareholders for vote, including the election
of directors. Our common shareholders have the right to vote on, among
other things, a merger of us, amendments to our Articles of Incorporation
and our dissolution. Some amendments to our Articles of Incorporation
require the affirmative vote of not less than three-fourths of votes
entitled to be cast on the matter. Our Articles of Incorporation permit
our board of directors to classify and issue Preferred Shares in one or
more series having voting power which may differ from that of our common
shares.
AMENDMENT OF THE PARTNERSHIP AGREEMENTS OR OUR ARTICLES OF INCORPORATION
Operating Partnership
The partnership agreement for the operating partnership may be amended
through a proposal only by us, the general partner. Some proposals require
the consent of the limited partners and/or OP Unitholders. These include
proposals that would, among other things, convert a limited partner into a
general partner or an OP Unitholder into a partner, modify the limited
liability of a limited partner or an OP Unitholder, alter the rights of any
limited partner or OP Unitholder to receive the distributions to which such
partner or OP Unitholder is entitled, or alter the allocations specified in
the partnership agreement for the operating partnership or alter the
redemption rights described above. In addition, we, as general partner,
may, without the consent of the limited partners or OP Unitholders, amend
the partnership agreement for the operating partnership as to limited
matters enumerated in the partnership agreement for the operating
partnership.
Independence Mall Partnership
Amendments to the Independence Mall Partnership Agreement may be
proposed by Westfield Independence or by any limited partners holding 25%
or more of the partnership interests in the Independence Mall Partnership.
Some proposals require the consent of the limited partners. These include
proposals that would, among other things, convert a limited partner into a
general partner, modify the limited liability of a limited partner, alter
the rights of any limited partner to receive the distributions to which
such partner is entitled or alter the allocation specified in the
Independence Mall Partnership Agreement or cause the termination of the
Independence Mall Partnership prior to the time set forth in the
Independence Mall Partnership Agreement. In addition, Westfield
Independence, as general partner, may, without the consent of the limited
partners, amend the Independence Mall Partnership Agreement as to limited
matters enumerated in the Independence Mall Partnership Agreement.
Westfield America, Inc.
Except as described below, amendments to our Articles of Incorporation
must be approved by the board of directors and by the vote of the holders
of at least a majority of the shares entitled to vote on the matter.
Proposals that would cause us not to qualify as a REIT require the
affirmative vote of holders of at least a majority of the shares entitled
to vote on the matter, including the common shares, voting separately as a
class. Proposals that would alter Articles of Incorporation provisions
relating to the classification or removal of directors or that would repeal
provisions relating to business combinations require the affirmative vote
of holders of three-fourths of the shares entitled to vote on the matter.
Proposals that would alter Articles of Incorporation provisions relating to
control share acquisitions require the affirmative vote of holders of not
less than two-thirds of the shares entitled to vote on the matter.
Proposals that would alter Articles of Incorporation provisions relating to
preemptive rights, indemnification or amendments to the Articles of
Incorporation require the affirmative vote of holders at least a majority
of the shares entitled to vote on the matter.
COMPENSATION, FEES AND DISTRIBUTIONS
Operating Partnership
We, as general partner, do not receive any compensation for our
services as general partner of the operating partnership. As a partner in
the operating partnership, however, we have the same right to allocations
and distributions as other partners and investors of the operating
partnership. However, to the extent we own properties outside the
operating partnership, any income we receive in connection with the
activities from those properties will result in a recalculation of
distributions from the operating partnership such that we, the limited
partners and the OP Unitholders would each receive the same distribution
that we and they would have received had we contributed such properties to
the operating partnership. In addition, the operating partnership is
responsible for all expenses incurred by us in connection with the
operating partnership's business and reimburses us, as general partner, for
such expenses paid by us.
Independence Mall Partnership
Westfield Independence, as general partner, does not receive any
compensation for its services as general partner of the Independence Mall
Partnership. As a partner in the Independence Mall Partnership, however,
Westfield Independence has the right to allocations and distributions of
the Independence Mall Partnership as set forth in the Independence Mall
Partnership Agreement. In addition, the Independence Mall Partnership is
responsible for all expenses incurred relating to the Independence Mall
Partnership's ownership of its assets and the operation of the Independence
Mall Partnership and reimburses Westfield Independence, as general partner,
for such expenses paid by Westfield Independence to the extent not paid by
Independence Mall Associates. In addition, Westfield Independence and/or
its affiliates have the right, but not the obligation, in the sole
discretion of Westfield Independence, to perform all or any of the property
management services on account of the property owned or managed by the
Independence Mall Partnership, Independence Mall Associates or any
affiliate, and may cause the Independence Mall Partnership, Independence
Mall Associates or any affiliate to enter into a management agreement with
Westfield Independence or one or more of its affiliates, in form and
substance acceptable to Westfield Independence in its sole discretion. If
Westfield Independence elects to so perform, or to have an affiliate so
perform, the property management services, then Westfield Independence or
its affiliate will be reimbursed for its expenses and otherwise compensated
by the Independence Mall Partnership in amounts determined by Westfield
Independence, in its good faith direction, to be comparable to amounts
which would be charged by reputable unrelated third party property
management companies which have substantial experience in performing
property management services for properties of the type owned or managed by
the Independence Mall Partnership for institutional owners with portfolios
under management which are substantially similar in size, nature, and
condition of property owned or managed by the Independence Mall
Partnership.
Westfield America, Inc.
Directors receive compensation for their services from us. Our
officers are compensated by Westfield Holdings or its subsidiaries.
LIABILITY OF INVESTORS
Operating Partnership
Under the partnership agreement for the operating partnership and
applicable Delaware law, the liability of the limited partners and OP
Unitholders for the operating partnership's debts and obligations is
generally limited to the amount of their investment in the operating
partnership.
Independence Mall Partnership
Under the Independence Mall Partnership Agreement and applicable
Delaware law, the liability of the limited partners for the Independence
Mall Partnership's debts and obligations is generally limited to the amount
of their investment in the Independence Mall Partnership.
Westfield America, Inc.
Under Missouri law, shareholders generally are not personally liable
for our debts and obligations.
NATURE OF INVESTMENT
Operating Partnership
The OP Units constitute equity interests entitling each OP Unitholder
to such OP Unitholder's proportionate share of cash distributions made to
the OP Unitholders and holders of common partnership interests. The
operating partnership may retain and reinvest proceeds of the sale of
property or excess refinancing proceeds in its business, subject to the
operating partnership's obligation to make any distributions required to be
made under the partnership agreement for the operating partnership.
Independence Mall Partnership
The Independence Mall Units constitute equity interests entitling each
Independence Mall Unitholder to such Independence Mall Unitholder's
proportionate share of cash distributions made to the Independence Mall
Unitholders. The Independence Mall Partnership may retain and reinvest
proceeds of the sale of property or excess refinancing proceeds in its
business, subject to the Independence Mall Partnership's obligation to make
any distributions required to be made under the Independence Mall
Partnership Agreement.
Westfield America, Inc.
The common shares constitute equity interests in us. We are entitled
to receive our proportionate share of distributions made by the operating
partnership with respect to our interest in the operating partnership, and
each shareholder will be entitled to its proportionate share of any
dividends or distributions paid with respect to our common shares. The
dividends payable to our shareholders are not fixed in amount and are only
paid if, when and as declared by our board of directors. In order to
qualify as a REIT, we generally must distribute at least 95% of our "REIT"
taxable income, excluding capital gains, and any taxable income, including
capital gains, not distributed will be subject to corporate income tax.
Tax legislation currently being considered by Congress would reduce
the foregoing distribution requirements so that we would be required to
make distributions, other than capital gain distributions, to our
shareholders in an amount generally equal to 90% of our "REIT taxable
income."
POTENTIAL DILUTION OF RIGHTS
Operating Partnership
We, as general partner, are authorized, in our sole discretion and
without limited partner or OP Unitholder approval, to cause the operating
partnership to issue additional OP Units, partnership preferred units,
limited partnership interests and other equity securities for any
partnership purpose at any time to the limited partners, OP Unitholders or
to other persons on terms established by us as general partner.
Independence Mall Partnership
Westfield Independence, as general partner, is authorized in its
discretion and, from and after August 11, 2001, without limited partner
approval, to cause the Independence Mall Partnership to issue additional
limited partnership interests and other equity securities for any
partnership purpose at any time to the limited partners, or to other
persons on terms established by Westfield Independence as general partner.
Westfield America, Inc.
Our board of directors may in its discretion cause the issuance of
additional Senior Preferred Shares, Preferred Shares and common shares or
other equity securities with such powers, preferences and rights as the
board of directors may designate at the time. The issuance of additional or
other equity securities may result in the dilution of interests of the
shareholders.
LIQUIDITY
Operating Partnership
The partnership agreement for the operating partnership restricts the
transferability of partnership interests and OP Units. Any transfer or
purported transfer of a partnership interest or OP Unit not made in
accordance with the partnership agreement for the operating partnership
will not be valid. Until the expiration of one year from the date on which
a partner or OP Unitholder acquired partnership interests or OP Units, as
applicable, such partner or OP Unitholder generally may not transfer all or
any portion of its partnership interests or OP Units, as applicable, to any
transferee without our consent, which consent may be withheld in our sole
and absolute discretion. After the expiration of one year from the date on
which a partner or OP Unitholder acquired partnership interests or OP
Units, as applicable, such person may transfer his or her partnership
interests or OP Units to an "accredited investor," subject to satisfaction
of conditions set forth in the partnership agreement for the operating
partnership, including our right of first refusal. Subject to some
limitations, a limited partner may assign its economic rights in its
partnership interests without our consent, but we may in our sole and
absolute discretion, refuse to admit the transferee as a substituted
limited partner. Beginning one year from the date of acquisition of the
partnership interests or OP Units, each partner or OP Unitholder has the
right to cause the operating partnership to redeem its partnership
interests or OP Units, as applicable, for cash, subject to our prior and
independent right to acquire such OP Units or partnership interests for
common shares. There is no market for partnership interests in the
operating partnership or OP Units, and the partnership interests in the
operating partnership and the OP Units are not registered under the
Exchange Act, nor are they listed for trading on any securities exchange.
Independence Mall Partnership
The Independence Mall Partnership Agreement restricts the
transferability of interests in the Independence Mall Partnership. Any
transfer or purported transfer of a partnership interest in the
Independence Mall Partnership not made in accordance with the Independence
Mall Partnership Agreement will not be valid and the Independence Mall
Partnership shall have no duty or obligation to recognize the transferee as
a partner or holder of any interest whatsoever in the Independence Mall
Partnership and the transferee shall have no rights, interests or claims in
or against the Independence Mall Partnership or any partner of the
Independence Mall Partnership. Except for a transfer to Westfield
Independence, the operating partnership or any other affiliate of Westfield
Independence, a limited partner, other than Westfield Independence and its
affiliates, shall not transfer all or any portion of its interest in the
Independence Mall Partnership, or any of such limited partner's economic
rights as a limited partner, without Westfield Independence's consent,
which consent may be withheld in its sole discretion, provided, however,
that a limited partner may, subject to the provisions of the Independence
Mall Partnership Agreement, but without the requirement of first obtaining
the consent of Westfield Independence, transfer all or any portion of its
interest in the Independence Mall Partnership, or any of such limited
partner's economic rights as a limited partner, to
o the partners of New Hanover as of August 11, 1998 or the
constituent partners, members, beneficiaries or shareholders
as of August 11, 1998 of such partners;
o immediate family members of the limited partner or of any
party enumerated in the bullet point immediately above; and
o family planning trusts in which the limited partner or any
party enumerated in the first bullet point above (together
with their immediate family members) has a 50% or greater
economic interest.
There is no market for partnership interests in the Independence Mall
Partnership, and the partnership interests in the Independence Mall
Partnership are not registered under the Exchange Act, nor are they listed
for trading on any securities exchange.
Westfield America, Inc.
Subject to any restrictions under Rule 145 of the Securities Act, the
ownership limit provisions in our Articles of Incorporation and to
prospectus delivery and other requirements for registered securities, the
common shares will be freely transferable as registered securities under
the Securities Act. The common shares are listed on the New York Stock
Exchange. The breadth and strength of this market will depend, among other
things, upon the number of common shares outstanding, our financial results
and prospects, the general interest in our common shares and other real
estate investments and our dividend yield compared to that of other debt
and equity securities.
COMPARISON OF FEDERAL INCOME TAX CONSEQUENCES OF OWNERSHIP OF OP UNITS,
INDEPENDENCE MALL UNITS AND COMMON SHARES
ENTITY-LEVEL TAXATION
Operating Partnership or Independence Mall Partnership
The Independence Mall Partnership and the operating partnership are
not subject to Federal income tax. Instead, each holder of Independence
Mall Units or OP Units includes such holder's allocable share of such
partnership's taxable income or loss in determining such holder's Federal
income tax liability. The maximum Federal income tax rate for individuals
under current law (without taking into account the phase out of exemptions
and other adjustments) is 39.6%.
Westfield America, Inc.
So long as we qualify as a REIT, we will be permitted to deduct
distributions paid to our shareholders, which will effectively reduce the
"double taxation" that typically results when a corporation earns income,
pays tax on that income and then distributes the remaining income to its
shareholders in the form of taxable dividends. A REIT is, however, subject
to Federal income tax on income that is not distributed and also may be
subject to Federal income and excise taxes in certain circumstances. The
maximum Federal income tax rate for corporations under current law is 35%,
but in certain circumstances a REIT is subject to a 100% tax on certain
kinds of income. In addition, pursuant to an election made by us under
Internal Revenue Service Notice 88-19, we may become liable for a Federal
income tax imposed at the highest corporate rate upon the sale within 10
years of any property that we owned on the first day of the first taxable
year for which we qualified as a REIT ____ February 12, 1994 (or January 1,
1996, in the case of property held by our subsidiary, Westland Properties).
Such property also includes property that we owned on that date indirectly
through partnerships, and a sale of such property by such a partnership
would be considered to be a sale by us. Upon such a sale, we will be
liable for a Federal income tax on the portion of the gain that was in
existence on February 12, 1994 (or January 1, 1996, in the case of property
held by our subsidiary, Westland Properties).
APPLICABILITY OF THE "PASSIVE ACTIVITY" RULES
Operating Partnership or Independence Mall Partnership
Income and loss from the Independence Mall Partnership or the
operating partnership generally is subject to the "passive activity" rules.
Under these rules, any income and loss from the Independence Mall
Partnership or the operating partnership that constitutes "passive income"
generally can be offset by or against only income and loss from other
investments that constitute "passive activities."
Westfield America, Inc.
Dividends paid by us cannot be offset with losses from "passive
activities."
TAXATION OF DISTRIBUTIONS
Operating Partnership or Independence Mall Partnership
Cash distributions from the Independence Mall Partnership or the
operating partnership are not taxable to a holder of Independence Mall
Units or OP Units except to the extent they exceed such holder's adjusted
basis in such holder's Independence Mall Units or OP Units (which will
include such holder's allocable share of the liabilities of Independence
Mall Partnership or the operating partnership).
Westfield America, Inc.
Distributions that are made by us to our taxable shareholders out of
current or accumulated earnings and profits and not designated as capital
gain distributions will be taken into account by such shareholders as
ordinary income. Distributions that are designated as capital gain
dividends generally will be taxed as long-term capital gains, subject to
certain limitations. Distributions in excess of current or accumulated
earnings and profits will be treated as a nontaxable return of basis to the
extent of your adjusted basis in your common shares, and thereafter will be
taxed in the same manner as gain from a sale of such shares.
TAX INFORMATION PROVIDED TO INVESTORS
Operating Partnership or Independence Mall Partnership
Each year, holders of Independence Mall Units or OP Units receive a
Schedule K-1 tax form containing detailed tax information that such holders
must use in preparing their Federal income tax returns.
Westfield America, Inc.
Each year our shareholders receive a Form 1099 used by REITs to report
dividends paid to their stockholders.
STATE INCOME TAX
Operating Partnership or Independence Mall Partnership
Holders of Independence Mall Units or OP Units are required, in some
cases, to file state income tax returns and/or pay state income taxes in
the states in which the Independence Mall Partnership or the operating
partnership owns property, even if such holders are not residents of those
states.
Westfield America, Inc.
Shareholders who are individuals generally will not be required to
file state income tax returns and/or pay state income taxes outside of
their states of residence solely as a result of the fact that we own
property or transact business in various states. We may be required to pay
state income taxes in certain states.
FEDERAL INCOME TAX CONSIDERATIONS
The following summary of certain Federal income tax considerations
regarding an investment in the common shares is based on current law, is
for general information only and is not tax advice. This discussion does
not purport to deal with all aspects of taxation that may be relevant to
particular investors in light of their personal investment or tax
circumstances, or, except to the limited extent discussed under ''-Taxation
of Tax-Exempt Holders '' and ''-Taxation of Foreign Holders,'' to certain
types of investors (including insurance companies, tax-exempt
organizations, financial institutions or broker-dealers, foreign
corporations and persons who are not citizens or residents of the United
States) that are subject to special treatment under the Federal income tax
laws, nor does it give a detailed discussion of any state, local or foreign
tax considerations. For purposes of this discussion, the term ''Holder''
means any person who purchases common shares.
EACH PROSPECTIVE PURCHASER SHOULD CONSULT WITH A TAX ADVISOR REGARDING
THE SPECIFIC TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND SALE OF THE
COMMON SHARES AND OF OUR ELECTION TO BE TAXED AS A REAL ESTATE INVESTMENT
TRUST INCLUDING THE FEDERAL, STATE, LOCAL, AND FOREIGN INCOME AND OTHER TAX
CONSEQUENCES OF SUCH PURCHASE, OWNERSHIP, SALE AND ELECTION, AND OF
POTENTIAL CHANGES IN APPLICABLE TAX LAWS.
TAXATION OF THE COMPANY
General
The REIT provisions of the Internal Revenue Code are highly technical
and complex. The following discussion sets forth the material aspects of
the provisions of the Code that govern the Federal income tax treatment of
a REIT and its shareholders. This summary is based on, and qualified in
its entirety by, current U.S. law, including the applicable Code
provisions, rules and regulations promulgated thereunder, and
administrative and judicial interpretations thereof, all of which are
subject to change which may apply retroactively.
Opinion of Counsel
We elected to be taxed as a REIT under the Code commencing with our
taxable year ending December 31, 1994, and we intend to continue to operate
in a manner consistent with our REIT election and all of the rules
applicable to a REIT. Skadden, Arps, Slate, Meagher & Flom LLP has issued
its opinion that, commencing with the taxable year ended December 31, 1994,
we were organized in conformity with the requirements for qualification as
a REIT and that our actual method of operation has enabled, and our
proposed method of operation will enable, us to meet the requirements for
qualification and taxation as a REIT.
The foregoing opinion is based and conditioned upon certain
assumptions, representations and covenants made by us as of the date
thereof regarding factual matters. The opinion is expressed as of August
23, 1999, and Skadden, Arps, Slate, Meagher & Flom LLP has no obligation to
advise holders of common shares of any subsequent change in the matters
stated, represented or assumed or any subsequent change in the applicable
law. Our qualification as a REIT depends on the qualification of Westland
Properties as a REIT during the period that Westland Properties was not
wholly owned by us, as well as the continuing qualification of subsidiary
REITs in which we own an interest. Moreover, such qualification and
taxation as a REIT depends upon our having met and continuing to meet
through, among other things, actual annual operating results, distribution
levels and diversity of stock ownership, the various qualification tests
imposed under the Code as discussed below, the results of which will not be
reviewed by Skadden, Arps, Slate, Meagher & Flom LLP. Accordingly, no
assurance can be given that the actual results of our operations for any
particular taxable year have satisfied or will satisfy such requirements.
See ''-Failure to Qualify.'' An opinion of counsel is not binding on the
IRS, and no assurance can be given that the IRS will not challenge our
eligibility for taxation as a REIT.
Taxation of the Company
If we continue to qualify for taxation as a REIT, we generally will
not be subject to Federal corporate income tax on our net income that is
currently distributed to Holders. This treatment substantially eliminates
the ''double taxation'' (at the corporate and shareholder levels) that
generally results from investment in a corporation. However, we will be
subject to Federal income tax as follows: First, we will be taxed at
regular corporate rates on any undistributed REIT taxable income, including
undistributed net capital gains. Second, under certain circumstances, we
may be subject to the ''alternative minimum tax'' on our items of tax
preference. Third, if we have net income from prohibited transactions
(which are, in general, certain sales or other dispositions of property,
other than certain foreclosure property, held primarily for sale to
customers in the ordinary course of business), such net income will be
subject to a 100% tax. Fourth, if we should fail to satisfy the 75% gross
income test or the 95% gross income test (as discussed below), but have
nonetheless maintained our qualification as a REIT because certain other
requirements have been met, we will be subject to a 100% tax on an amount
equal to (1) the gross income attributable to the greater of the amount by
which we fail the 75% or 95% test multiplied by (2) a fraction intended to
reflect our profitability. Fifth, if we should fail to distribute during
each calendar year at least the sum of (1) 85% of our REIT ordinary income
for such year, (2) 95% of our REIT capital gain net income for such year
(other than certain long-term capital gain net income which we elect to
retain and pay tax on), and (3) any undistributed taxable income from prior
periods, we would be subjected to a 4% excise tax on the excess of such
required distribution over the amounts actually distributed. Sixth, if,
during the ten-year period beginning on the first day of the first taxable
year for which we qualified as a REIT, we recognize gain on the disposition
of any property (including any partnership interest) held by us or any
partnership in which an interest was held as of the beginning of such ten-
year period, then, under IRS regulations that have not yet been
promulgated, we will be subject to tax imposed at the highest corporate
rate on the amount of gain equal to the excess of (1) the fair market value
of such property as of the beginning of such ten-year period over (2) our
or the partnership's adjusted tax basis in such property at the beginning
of such ten-year period. Seventh, if we acquire any asset from a C
corporation (i.e., generally a corporation subject to full corporate level
tax) in a transaction in which the adjusted tax basis of the asset in our
hands is determined by reference to the adjusted tax basis of the asset in
the hands of the C corporation, and we recognize gain on the disposition of
such asset during the ten-year period beginning on the date on which we
acquired such asset, then we will be subject to a tax imposed at the
highest corporate rate on the amount of gain equal to the excess of (1) the
fair market value of such property at the beginning of such ten-year period
over (2) our adjusted tax basis in such property at the beginning of such
ten-year period. The results described above with respect to the
recognition of gain on assets acquired from a C corporation assume that we
will make an election pursuant to IRS Notice 88-19 and that the
availability or nature of such election is not modified as proposed in
President Clinton's 1999 Federal Budget Proposal. In addition, we could
also be subject to tax in certain situations and on certain transactions
not presently contemplated.
Requirements for Qualification
The Code defines a REIT as a corporation, trust or association (1)
that is managed by one or more trustees or directors; (2) the beneficial
ownership of which is evidenced by transferable shares, or by transferable
certificates of beneficial interest; (3) which would be taxable as a
domestic corporation, but for the special Code provisions applicable to
REITs; (4) that is neither a financial institution nor an insurance company
subject to certain provisions of the Code; (5) the beneficial ownership of
which is held by 100 or more persons; (6) in which not more that 50% in
value of the outstanding stock is owned, directly or indirectly, by five or
fewer individuals (as defined in the Code to include certain entities); (7)
that makes an election to be a REIT (or has made such election for a
previous taxable year) and satisfies all relevant filing and other
administrative requirements established by the IRS that must be met in
order to elect and maintain REIT status; (8) that uses a calendar year for
Federal income tax purposes and complies with the record keeping
requirements of the Code and Treasury Regulations promulgated thereunder;
and (9) which meets certain other tests described below (including with
respect to the nature of its income and assets). The Code provides that
conditions (1) through (4) must be met during the entire taxable year, that
condition (5) must be met during at least 335 days of a taxable year of 12
months, or during a proportionate part of a taxable year of less than 12
months, and that condition (6) must be met during the last half of each
taxable year. We believe that we satisfy all of the conditions set forth
above. In order to comply with the share ownership tests described in
conditions (5) and (6) above, our Articles of Incorporation provide certain
restrictions on the transfer of our capital stock to prevent concentration
of stock ownership. These restrictions may not ensure that we will, in all
cases, be able to satisfy the share ownership tests set forth above. If a
REIT complies with all the requirements for ascertaining the ownership of
its outstanding stock in a taxable year and does not know or have reason to
know that it violated the share ownership tests set forth above, the REIT
will be deemed to have complied with such tests for such taxable year.
To monitor our compliance with the share ownership requirements
imposed on REITs, we are required to maintain records regarding the actual
ownership of our shares. To do so, we must demand written statements each
year from the record holders of certain percentages of our stock in which
the record holders are to disclose the actual owners of the shares (i.e.,
the persons required to include in gross income the REIT distributions). A
list of those persons failing or refusing to comply with this demand must
be maintained as part of our records. A Holder who fails or refuses to
comply with the demand must submit a statement with its U.S. Federal income
tax return disclosing the actual ownership of the shares and certain other
information. We will not incur a penalty for failure to comply with the
foregoing requirements to the extent that such failure is due to reasonable
cause and not to willful neglect on our part.
Ownership of Partnership Interests
In the case of a REIT that is a partner in a partnership, regulations
provide that the REIT is deemed to own its proportionate share of the
partnership's assets and to earn its proportionate share of the
partnership's income. In addition, the assets and gross income of the
partnership retain the same character in the hands of the REIT for purposes
of the gross income and asset tests applicable to REITs as described below.
Thus, our proportionate share of the assets, liabilities and items of
income of the partnership will be treated as our assets, liabilities and
items of income for purposes of applying the REIT requirements described
herein. A summary of certain rules governing the Federal income taxation
of partnerships and their partners is provided below in ''-Tax Aspects of
Our Investments in Partnerships.''
Income Tests
In order to maintain qualification as a REIT, we annually must satisfy
two gross income requirements. First, at least 75% of our gross income
(excluding gross income from "prohibited transactions," i.e., certain sales
of property held primarily for sale to customers in the ordinary course of
business) for each taxable year must be derived directly or indirectly from
investments relating to real property or mortgages on real property
(including ''rents from real property'' and interest on obligations secured
by mortgages on real property or on interest in real property, and
distributions or other distributions on a gain from the sale of stock in
other REITs) or from certain types of temporary investments. Second, at
least 95% of our gross income (excluding gross income from prohibited
transactions) for each taxable year must be derived from such real property
investments, and from other distributions, interest and gain from the sale
or disposition of stock or securities (or from any combination of the
foregoing). Income earned on liability hedges against our indebtedness,
such as option, futures, and forward contracts will qualify for the 95%
test (but not the 75% test). In certain cases, Treasury Regulations treat
a variable rate and/or foreign currency debt instrument and a liability
and/or currency hedge as a synthetic debt instrument for all purposes of
the Code. If a hedge entered into by us is subject to these Treasury
Regulations, income earned on the hedge will operate to reduce our interest
expense, and, therefore such income will not affect our compliance with
either the 75% or 95% tests.
Rents we receive from the tenants of real property owned directly,
through partnerships (including limited liability companies treated as
partnerships for Federal income tax purposes) in which we have a direct or
indirect ownership interest (collectively, the ''Partnerships''), or
through its wholly-owned subsidiary corporations (''qualified REIT
subsidiaries,'' as described below) will qualify as ''rents from real
property'' in satisfying the gross income requirements described above only
if several conditions are met, including the following. If rent
attributable to personal property leased in connection with a lease of real
property is greater than 15% of the total rent received under the lease,
then the portion of rent attributable to such personal property will not
qualify as ''rents from real property.'' Moreover, for rents received to
qualify as ''rents from real property,'' the REIT generally must not
operate or manage the property or furnish or render services to the tenants
of such property, other than through an ''independent contractor'' from
which the REIT derives no revenue. However, we and our affiliates may, and
do, directly perform services that are ''usually or customarily rendered''
in connection with the rental of space for occupancy only and are not
otherwise considered rendered to the occupant of the property. In
addition, we and our affiliates may provide non-customary services to
tenants of its properties without disqualifying all of the rent from the
property if the payment for such services does not exceed 1% of the total
gross income from the property. For purposes of this test, the income
received from such non-customary services is deemed to be at least 150% of
the direct cost of providing the services. Because certain properties are
managed by third parties, the ability to treat amounts from such property
as ''rents from real property'' will be dependent on the actions of others
and will not be within our control. In addition, we generally may not, and
will not, charge rent that is based in whole or in part on the income or
profits of any person, except for rents that are based on a percentage of
the tenant's gross receipts or sales. Finally, rents derived from tenants
that are at least 10% owned, directly or constructively, by us does not
qualify as ''rents from real property'' for purposes of the gross income
requirements. While we regularly attempt to monitor such requirements and
diligently attempt to comply with them, no assurance can be given that we
will not realize income that does not qualify as ''rents from real
property,'' and that such amounts, when combined with other nonqualifying
income, may exceed 5% of our taxable income and thus disqualify us as a
REIT.
We have derived and continue to derive income from certain sources
that are not described above and that generally do not constitute
qualifying income for purposes of the gross income requirements. While no
assurance can be given that the IRS would not successfully assert
otherwise, we believe that the aggregate amount of such income in any
taxable year will not exceed the limits on nonqualifying income under the
gross income tests.
If we fail to satisfy one or both of the 75% or 95% gross income tests
for any taxable year, we may nevertheless qualify as a REIT for such year
if we are entitled to relief under certain provisions of the Code. These
relief provisions generally will be available if our failure to meet such
tests was due to reasonable cause and not due to willful neglect, we attach
a schedule of the sources of our income to its return, and any incorrect
information on the schedule was not due to fraud with intent to evade tax.
It is not possible, however, to state whether in all circumstances we would
be entitled to the benefit of these relief provisions. If these relief
provisions are inapplicable to a particular set of circumstances involving
us, we will not qualify as a REIT. As discussed above, even where these
relief provisions apply, a tax is imposed with respect to the excess of the
actual amount of nonqualifying income over the amount permitted under the
gross income tests.
Asset Tests
At the close of each quarter of our taxable year, we must also satisfy
three tests relating to the nature of our assets. First, at least 75% of
the value of our total assets must be represented by real estate assets
(including our allocable share of real estate assets held by the
Partnerships), stock in other REITs, stock or debt instruments held for not
more than one year purchased with the proceeds of a stock offering or long-
term (at least five years) debt offering, cash, cash items and U.S.
government securities. Second, not more than 25% of our total assets may
be represented by securities other than those in the 75% asset class.
Third, of the investments not included in the 75% asset class, the value of
any one issuer's securities owned by us may not exceed 5% of the value of
our total assets, and we may not own more than 10% of any one issuer's
outstanding voting securities.
Our indirect interests in certain of the Partnerships and certain
properties are held through our wholly-owned corporate subsidiaries
organized and operated as ''qualified REIT subsidiaries'' within the
meaning of the Code. Qualified REIT subsidiaries are not treated as
separate entities from their parent REIT for Federal income tax purposes.
Instead, all assets, liabilities and items of income, deduction and credit
of each qualified REIT subsidiary are treated as our assets, liabilities
and items. Each qualified REIT subsidiary therefore will not be subject to
Federal corporate income taxation, although it may be subject to state or
local taxation.
In addition, our ownership of stock of each qualified REIT subsidiary
and our interest in the Partnerships do not violate either the 5% value
restriction or the restriction against ownership of more than 10% of the
voting securities of any issuer. Similarly, our ownership of any other
REIT, such as our interests in two subsidiary REITs will not violate these
restrictions, so long as those REITs maintain their qualifications as
REITs.
If we should fail to satisfy the asset test at the end of a calendar
quarter, such a failure would not cause us to lose our REIT status if (1)
we satisfied the asset tests at the close of the preceding calendar quarter
and (2) the discrepancy between the value of our assets and the asset test
requirements arose from changes in the market value of its assets and was
not wholly or partly caused by the acquisition of one or more non-
qualifying assets. If the condition described in clause (2) of the
preceding sentence were not satisfied, we still could avoid
disqualification by eliminating, any discrepancy within 30 days after the
close of the calendar quarter in which it arose.
Annual Distribution Requirements
In order to qualify as a REIT, we are required to make distributions
(other than capital gain distributions) to our shareholders in an amount at
least equal to (1) the sum of (a) 95% of our "REIT taxable income''
(computed without regard to the dividends paid deduction and our net
capital gain to the extent designated as a capital gain distribution) and
(b) 95% of the net income (after tax), if any, from foreclosure property,
minus (2) the sum of certain items of noncash income. Such distributions
must be paid in the taxable year to which they relate, or in the following
taxable year if declared before we timely file our tax return for such year
and if paid with or before the first regular distribution payment after
such declaration. To the extent that we do not distribute all of our net
capital gain or distribute at least 95%, but less than 100%, of our ''REIT
taxable income,'' as adjusted, we will be subject to tax thereon at the
capital gains or ordinary corporate tax rates, as the case may be.
Furthermore, if we should fail to distribute during each calendar year at
least the sum of (1) 85% of our REIT ordinary income for such year, (2) 95%
of our REIT capital gain income for such year (other than certain long-term
capital gains income which we elect to retain and pay tax on), and (3) any
undistributed taxable income from prior periods, we would be subject to a
4% excise tax on the excess of such required distribution over the amounts
actually distributed. We believe that we have made, and we intend to
continue to make, timely distributions sufficient to satisfy this annual
distribution requirement.
It is possible that we, from time to time, may not have sufficient
cash or other liquid assets to meet the 95% distribution requirement due to
timing differences between (1) the actual receipt of income and actual
payment of deductible expenses and (2) the inclusion of such income and
deduction of such expenses in arriving at our REIT taxable income. In the
event that such timing differences occur, in order to meet the 95%
distribution requirement, we may find it necessary to arrange for short-
term, or possibly long-term, borrowings (on terms that may not be favorable
to us) or to pay distributions in the form of taxable distributions of
property.
Under certain circumstances, the Code permits us to rectify a failure
to meet the distribution requirement for a year by paying ''deficiency
dividends'' in a later year, which may be included in our deduction for
distributions paid for the earlier year. Thus, we may avoid being taxed on
amounts distributed as deficiency dividends. We would, however, be
required to pay interest based on the amount of any deduction taken for
deficiency dividends.
Tax legislation currently being considered by Congress would reduce
the foregoing distribution requirements so that we would be required to
make distributions (other than capital gain distributions) to our
shareholders in an amount generally equal to 90% of our "REIT taxable
income."
Absence of Earnings and Profits
The Code provides that, in the case of a corporation like us that was
formerly a taxable C corporation, and in the case of a corporation that is
acquired by us, we may qualify as a REIT for a taxable year only if we
distribute, within the time required by the Code, all of its ''earnings and
profits," if any, accumulated in any non-REIT year. We and our former
owners retained independent certified public accountants to determine our
earnings and profits as of February 11, 1994 (and December 31, 1994) for
purposes of the distribution requirement. The determination by the
independent certified public accountants that we had no non-REIT earnings
and profits was based upon our tax returns as filed with the IRS and other
assumptions and qualifications set forth in the reports issued by such
accountants. We also believe we have satisfied this requirement with
respect to each corporation that we have acquired.
Any adjustments to our taxable income for taxable years ending on or
before the effective date of our REIT election, including as a result of an
examination of our returns by the IRS, could affect the calculation of our
earnings and profits as of the appropriate measurement date. Furthermore,
the determination of earnings and profits requires the resolution of
certain technical tax issues with respect to which there is no authority
directly on point and, consequently, the proper treatment of these issues
for earnings and profits purposes is not free from doubt. There can be no
assurance that the IRS will not examine our tax returns for prior years and
propose adjustments to increase our taxable income. In this regard, the
IRS can consider all taxable years of a corporation as open for review for
purposes of determining the amount of such earnings and profits.
Failure to Qualify
If we fail to qualify for taxation as a REIT in any taxable year, and
the relief provisions do not apply, we will be subject to tax (including
any applicable alternative minimum tax) on its taxable income at regular
corporate rates. Distributions to Holders in any year in which we fail to
qualify will not be deductible by us nor will they be required to be made.
In such event, to the extent of current and accumulated earnings and
profits, all distributions to Holders will be taxable as ordinary income,
and, subject to certain limitations of the Code, corporate distributees may
be eligible for the dividends received deduction. Unless entitled to
relief under specific statutory provisions, we will also be disqualified
from taxation as a REIT for the four taxable years following the year
during which qualification was lost. It is not possible to state whether
in all circumstances we would be entitled to such statutory relief. In
addition, tax legislation currently being considered by Congress contains
language which, due to the extent of Westfield America Trust's ownership
interest in us, may prevent us from re-electing REIT status in the event
that our REIT election is terminated. Moreover, a recent Federal budget
proposal contains language which, if enacted in its present form, would
result in the immediate taxation of all gain inherent in a C corporation's
assets upon an election by such corporation to become a REIT, and this
proposal, if enacted, could also effectively preclude us from re-electing
REIT status.
TAX ASPECTS OF OUR INVESTMENTS IN PARTNERSHIPS
General
Substantially all of our investments are held indirectly through the
Partnerships. In general, partnerships are ''pass-through'' entities that
are not subject to Federal income tax. Rather, partners are allocated
their proportionate shares of the items of income, gain, loss, deduction
and credit of the partnership, and are potentially subject to tax thereon,
without regard to whether the partners receive a distribution from the
partnership. We will include in our income our proportionate share of the
foregoing partnership items for purposes of the various REIT income tests
and in the computation of our REIT taxable income.
Moreover, for purposes of the REIT asset tests, we will include our
proportionate share of assets held by such partnerships. See ''-Taxation
of the Company-Ownership of Partnership Interests.''
Entity Classification
Our direct and indirect investment in the Partnerships involves
special tax considerations, including the possibility of a challenge by the
IRS of the status of any of the Partnerships as a partnership (as opposed
to an association taxable as a corporation) for Federal income tax
purposes. If one of the Partnerships were treated as an association for
Federal income tax purposes, it would be taxable as a corporation subject
to an entity-level tax on its income. In such a situation, the character
of our assets and items of gross income would change, which could preclude
us from satisfying the asset tests and/or the income tests (see ''-Taxation
of the Company-Asset Tests'' and ''-Taxation of the Company-Income
Tests''), and in turn could prevent us from qualifying as a REIT. See
''-Taxation of the Company-Failure to Qualify'' above for a discussion of
the effect of our failure to meet such tests for a taxable year. In
addition, any change in the status of any of the Partnerships for tax
purposes might be treated as a taxable event, in which case we might incur
a tax liability without any related cash distributions.
Tax Allocations with Respect to the Properties
Pursuant to the Code and the regulations thereunder, income, gain,
loss and deduction attributable to appreciated or depreciated property that
is contributed to a partnership in exchange for an interest in the
partnership must be allocated in a manner such that the contributing
partner is charged with, or benefits from, respectively, the unrealized
gain or unrealized loss associated with the property at the time of the
contribution. The amount of such unrealized gain or unrealized loss is
generally equal to the difference between the fair market value of
contributed property at the time of contribution, and the adjusted tax
basis of such property at the time of contribution (a ''Book-Tax
Difference''). Such allocations are solely for Federal income tax purposes
and do not affect the book capital accounts or other economic or legal
arrangements among the partners. Where a partner contributes cash to a
partnership that holds appreciated property, the Treasury regulations
provide for a similar allocation of such items to the other partners.
These rules would apply to the contribution by us to an existing
partnership of the cash proceeds received in any offerings of its stock.
With respect to any property purchased or to be purchased by any of
the Partnerships (other than through the issuance of partnership units),
such property will initially have a tax basis equal to its fair market
value and the special allocation provisions described above will not apply.
Sale of the Properties
Our share of any gain realized by any of the Partnerships in which we
hold a direct or indirect interest on the sale of any property held as
inventory or primarily for sale to customers in the ordinary course of
business will be treated as income from a prohibited transaction that is
subject to a 100% penalty tax. See ''-Requirements for
Qualification-Income Tests.'' Such prohibited transaction income may also
have an adverse effect on our ability to satisfy the income tests for
status as a REIT. Under existing law, whether property is held as
inventory or primarily for sale to customers in the ordinary course of a
partnership's trade or business is a question of fact that depends on all
the facts and circumstances with respect to the particular transaction. We
intend to hold our interests in the Partnerships, and the Partnerships
intend to hold their properties for investment with a view to long-term
appreciation, to engage in the business of acquiring, developing, owning,
and operating the properties and to make such occasional sales of the
properties, including peripheral land, as are consistent with our
investment objectives. Accordingly, we believe that our interests in the
Partnerships, and the Partnerships' interests in the properties will not be
treated as inventory or as property held primarily for sale to customers in
the ordinary course of a trade or business.
TAXATION OF TAXABLE DOMESTIC HOLDERS
Distributions
As long as we qualify as a REIT, distributions made to our taxable
domestic Holders ("U.S. Holders") out of current or accumulated earnings
and profits (and not designated as capital gain distributions or retained
net long-term capital gains) will be taken into account by them as ordinary
income and will not be eligible for the dividends received deduction for
corporations. Distributions that are designated as capital gain
distributions will be taxed as long-term capital gain (to the extent that
they do not exceed our actual net capital gain for the taxable year)
without regard to the period for which the U.S. Holder has held its common
shares. If we elect to retain their share of capital gains rather than
distribute them, a U.S. Holder will be deemed to receive a capital gain
distribution equal to the amount of such retained net long-term capital
gains. In that case, a U.S. Holder (1) will be allowed a credit against
its Federal income tax liability for its proportionate share of tax paid by
us on retained capital gains, and (2) will receive an increase in the basis
of its common shares equal to the excess of such deemed capital gain
distribution over the amount of such tax credit. Corporate U.S. Holders
may be required to treat up to 20% of certain capital gain distributions as
ordinary income.
Distributions in excess of current and accumulated earnings and
profits will not be taxable to a U.S. Holder to the extent that they do not
exceed the adjusted tax basis of the U.S. Holder's common shares, but
rather will reduce the adjusted tax basis of such common shares. To the
extent that such distributions exceed the adjusted tax basis of a U.S.
Holder's common shares, they will be included in income as long-term
capital gain (or short-term capital gain if the common shares have been
held for one year or less) provided that the common shares are a capital
asset in the hands of the U.S. Holder. In addition, any distribution
declared by us in October, November or December of any year and payable to
a U.S. Holder of record on a specified date in any such month shall be
treated as both paid by us and received by the U.S. Holder on December 31
of such year, provided that the distribution is actually paid by us during
January of the following calendar year. Holders may not include in their
individual income tax returns any of our net operating losses or capital
losses.
Dispositions of Common Shares
In general, any loss upon a sale or exchange of common shares by a
U.S. Holder who has held such shares for six months or less (after applying
certain holding period rules) will be treated as a long-term capital loss
to the extent that distributions from us are required to be treated by such
Holder as long-term capital gain.
TAXATION OF NON-U.S. HOLDERS
The following is a discussion of certain anticipated U.S. Federal
income and estate tax consequences of the ownership and disposition of our
common shares applicable to Non-U.S. Holders of such common shares. A
''Non-U.S. Holder'' is any Holder other than (1) a citizen or resident of
the United States, (2) a corporation or partnership created or organized in
the United States or under the laws of the United States or of any state
thereof, (3) an estate or trust whose income is includible in gross income
for U.S. Federal income tax purposes regardless of its source, or (4) a
trust if a United States court is able to exercise primary supervision over
the administration of such trust and one or more United States fiduciaries
have the authority to control all substantial decisions of such trust. The
discussion is based on current law and is for general information only.
The discussion addresses only certain and not all aspects of U.S. Federal
income and estate taxation.
Ordinary Distributions
The portion of distributions received by Non-U.S. Holders payable out
of our earnings and profits which are not attributable to our capital gains
and which are not effectively connected with a U.S. trade or business of
the Non-U.S. Holder will be subject to U.S. withholding tax at the rate of
30% (or lower rate, if so provided by an applicable income tax treaty). In
general, Non-U.S. Holders will not be considered engaged in a U.S. trade or
business solely as a result of their ownership of our common shares. In
cases where the distribution income from a Non-U.S. Holder's investment in
our common shares is (or is treated as) effectively connected with the Non-
U.S. Holder's conduct of a U.S. trade or business, the Non-U.S. Holder
generally will be subject to U.S. tax at graduated rates, in the same
manner as U.S. Holders are taxed with respect to such distributions (and
may also be subject to the 30% branch profits tax in the case of a Non-U.S.
Holder that is a foreign corporation).
Return of Capital Distributions
Distributions in excess of our current and accumulated earnings and
profits to a Non-U.S. Holder will not be subject to income tax to the
extent that they do not exceed the Non-U.S. Holder's adjusted basis in the
common shares with respect to which such distribution occurs, but rather
will reduce the adjusted basis of such common shares. To the extent that
such distributions exceed the Non-U.S. Holder's adjusted basis in the
common shares with respect to which such distribution occurs, they will
give rise to gain from the sale or exchange of such common shares, the tax
treatment of which is described below. Because at the time of a
distribution we generally will not know whether such distribution is in
excess of earnings and profits, we generally will withhold at a rate of 30%
(or a lower applicable treaty rate) on the entire amount of any
distribution that is not a capital gain distribution, the tax treatment of
which is described below. If we determine that a distribution is in excess
of our earnings and profits, we will not withhold with respect to such
excess provided that the common shares with respect to which such
distribution is made do not constitute a United States Real Property
Interest in the hands of the Non-U.S. Holder who receives such distribution
as provided below in "Disposition of Stock of the Company". Any Non-U.S.
Holder may seek a refund of withheld amounts from the Internal Revenue
Service if it is subsequently determined that such distribution was, in
fact, in excess of our current or accumulated earnings and profits and the
amount withheld exceeded such Non-U.S. Holder's United States tax liability
with respect to the distribution.
Capital Gain Distributions
Under the Foreign Investment in Real Property Tax Act of 1980
(''FIRPTA''), a distribution made by us to a Non-U.S. Holder, to the extent
attributable to gains from dispositions of United States Real Property
Interests (''USRPIs'') such as the properties beneficially owned by us
(''USRPI Capital Gains''), will be considered to be income effectively
connected with a U.S. trade or business of the Non-U.S. Holder and subject
to U.S. income tax at the rate applicable to U.S. individuals or
corporations, without regard to whether such distribution is designated as
a capital gain distribution. In addition, we will be required to withhold
tax equal to 35% of the amount of distributions to the extent such
distributions constitute USRPI Capital Gains. Distributions subject to
FIRPTA may also be subject to a 30% branch profits tax in the hands of a
corporate Non-U.S. Holder that is not entitled to treaty exemption. If we
elect to retain their share of capital gains rather than distribute them, a
Non-U.S. Holder will be deemed to receive a capital gain distribution equal
to the amount of such retained net long-term capital gains. In that case,
a Non-U.S. Holder: (1) will be allowed a credit against its Federal income
tax liability for its proportionate share of tax paid by us on retained
capital gains, and (2) will receive an increase in the basis of its common
shares equal to the excess of such deemed capital gain distribution over
the amount of such tax credit.
Disposition of Common Shares of the Company
Unless our common shares constitute a USRPI, a sale of such common
shares by a Non-U.S. Holder generally will not be subject to U.S. taxation
under FIRPTA. The common shares would not constitute a USRPI if we were a
''domestically controlled REIT.'' A domestically controlled REIT is a REIT
in which, at all times during a specified testing period, less than 50% in
value of its shares is held directly or indirectly by Non-U.S. Holders. We
are not a domestically controlled REIT. A Non-U.S. Holder's sale of
common shares generally nevertheless will not be subject to tax under
FIRPTA as a sale of a USRPI provided that (1) the common shares are
''regularly traded'' (as defined by applicable Treasury Regulations) on an
established securities market (e.g., the NYSE, on which the common shares
will be listed) and (2) at all times during the testing period specified in
the Code, the selling Non-U.S. Holder (after application of certain
constructive ownership rules) held 5% or less of our outstanding common
shares.
If gain on the sale of our common shares were subject to taxation
under FIRPTA, the Non-U.S. Holder would be subject to the same treatment as
a U.S. Holder with respect to such gain (subject to applicable alternative
minimum tax and a special alternative minimum tax in the case of
nonresident alien individuals) and the purchaser of the common shares could
be required to withhold 10% of the purchase price and remit such amount to
the IRS.
Capital gains not subject to FIRPTA will nonetheless be taxable in the
United States to a Non-U.S. Holder in two cases: (1) if the Non-U.S.
Holder's investment in our common shares is effectively connected with a
U.S. trade or business conducted by such Non-U.S. Holder, and (2) the Non-
U.S. Holder is a nonresident alien individual who was present in the United
States for 183 days or more during the taxable year and has a ''tax home''
in the United States.
Estate Tax
Common shares owned or treated as owned by an individual who is not a
citizen or resident (as specially defined for U.S. Federal estate tax
purposes) of the United States at the time of death will be includible in
the individual's gross estate for U.S. Federal estate tax purposes, unless
an applicable estate tax treaty provides otherwise. Such individual's
estate may be subject to U.S. Federal estate tax on the property includible
in the estate for U.S. Federal estate tax purposes.
Information Reporting and Backup Withholding For Non-U.S. Holders
We must report annually to the IRS and to each Non-U.S. Holder the
amount of distributions (including any capital gain distributions) paid to,
and the tax withheld with respect to, such Non-U.S. Holder. These
reporting requirements apply regardless of whether withholding was reduced
or eliminated by an applicable tax treaty. Copies of these returns may
also be made available under the provisions of a specific treaty or
agreement with the tax authorities in the country in which the Non-U.S.
Holder resides.
U.S. backup withholding (which generally is imposed at the rate of 31%
on certain payments to persons that fail to furnish the information
required under the U.S. information reporting requirements) and information
reporting generally will not apply to distributions (including any capital
gain distributions) paid on our common shares to a Non-U.S. Holder at an
address outside the United States.
The payment of the proceeds from the disposition of our common shares
to or through a U.S. office of a broker will be subject to information
reporting and backup withholding unless the owner, under penalties of
perjury, certifies, among other things, its status as a Non-U.S. Holder, or
otherwise establishes an exemption. The payment of the proceeds from the
disposition of common shares to or through a non-U.S. office of a non-U.S.
broker generally will not be subject to backup withholding and information
reporting.
Backup withholding is not an additional tax. Any amounts withheld
under the backup withholding rules will be refunded or credited against the
Non-U.S. Holder's U.S. Federal income tax liability, provided that the
required information is furnished to the IRS.
The IRS has issued final Treasury Regulations regarding the backup
withholding rules as applied to Non-U.S. Holders. Those final Treasury
Regulations alter the current system of backup withholding compliance and
will be effective for payments made after December 31, 2000. Prospective
purchasers should consult their-tax advisors regarding the application of
the final Treasury Regulations and the potential effect on their ownership
of common shares.
TAXATION OF TAX-EXEMPT HOLDERS
Based upon a published ruling by the IRS, distributions by us to a
Holder that is a tax-exempt entity will not constitute ''unrelated business
taxable income'' (''UBTI''), provided that the tax-exempt entity has not
financed the acquisition of its shares with ''acquisition indebtedness''
within the meaning of the Code and the shares are not otherwise used in an
unrelated trade or business of the tax-exempt entity.
Notwithstanding the preceding paragraph, however, a portion of the
distributions paid by us may be treated as UBTI to certain U.S. private
pension trusts if we are treated as a ''pension-held REIT.'' We are not,
and do not expect to become, a ''pension-held REIT.'' If we were to become
a pension-held REIT, these rules generally would only apply to certain U.S.
pension trusts that hold more than 10% of our stock.
OTHER TAX CONSEQUENCES
Possible Legislative or Other Actions Affecting Tax Consequences
The present Federal income tax treatment of an investment in us may be
modified by legislative, judicial or administrative action at any time, and
any such action may affect investments and commitments previously made.
The rules dealing with Federal income taxation are constantly under review
by persons involved in the legislative process and by the IRS and the U.S.
Treasury Department, resulting in revisions of regulations and revised
interpretations of established concepts as well as statutory changes.
Revisions in Federal tax laws and interpretations thereof could adversely
affect the tax consequences of an investment in us. For example, tax
legislation currently being considered by Congress contains language which,
due to the extent of Westfield America Trust's ownership interest in us,
may prevent us from re-electing REIT status in the event that our REIT
election is terminated. In addition, a recent Federal budget proposal
contains language which, if enacted in its present form, would result in
the immediate taxation of all gain inherent in a C corporation's assets
upon an election by the corporation to become a REIT, and this proposal, if
enacted, could also effectively preclude us from re-electing REIT status
following a termination.
State and Local Taxes
We may be subject to state or local income and other taxation in
various state or local jurisdictions. The state and local tax treatment of
us may not conform to the Federal income tax consequences discussed above.
Consequently, prospective Holders should consult their own tax advisors
regarding the effect of state and local tax laws on an investment in us.
PLAN OF DISTRIBUTION
This prospectus relates to the possible issuance of common shares if,
and to the extent that, New Hanover and its permitted transferees tender
their Independence Mall Units or their OP Units for redemption, for cash,
subject to our prior and independent right to acquire such Independence
Mall Units or OP Units for common shares.
We have registered the offer and issuance of the common shares
pursuant to our obligations under the First Amended and Restated
Registration Rights Agreement, dated as of June 30, 1999, by and among us
and New Hanover, but registration of such shares does not necessarily mean
that all or any portion of the Independence Mall Units or OP Units will be
presented for redemption, or that we will issue common shares. We will not
receive any cash proceeds from the issuance of the common shares to New
Hanover and its permitted transferees if we exercise our prior and
independent right to acquire Independence Mall Units or OP Units for common
shares, although we will receive either Independence Mall Units or OP
Units.
Pursuant to the registration rights agreement, we will pay all
registration expenses in connection with the registration of the common
shares. We and New Hanover and its permitted transferees have agreed to
indemnify each other against some civil liabilities, including some
liabilities under the Securities Act.
LEGAL MATTERS
The validity under Missouri law of the common shares offered hereby
has been passed upon for us by Husch & Eppenberger, LLC, St. Louis,
Missouri, and some tax matters have been passed upon for us by Skadden,
Arps, Slate, Meagher & Flom LLP, Los Angeles, California.
EXPERTS
Ernst & Young LLP, independent auditors have audited our consolidated
financial statements included in our Annual Report on Form 10-K for the
year ended December 31, 1998, as set forth in their report, which is
incorporated by reference in this prospectus and elsewhere in the
registration statement. Our financial statements are incorporated by
reference in reliance on Ernst & Young LLP's report, given on their
authority as experts in accounting and auditing.
Ernst & Young LLP, independent auditors have audited the statement of
revenues and certain expenses of Topanga Plaza for the year ended December
31, 1997, included in our Form 8-K dated February 3, 1999, as set forth in
their report, which is incorporated by reference in this prospectus and
elsewhere in the registration statement. The statement of revenue and
certain expenses of Topanga Plaza is incorporated by reference in reliance
on Ernst & Young LLP's report, given on their authority as experts in
accounting and auditing.
The combined statement of revenues and certain expenses of selected
TrizecHahn Acquisition Properties to be acquired less than 100% by
Westfield America, Inc. for the year ended December 31, 1997 and the
statement of revenues and certain expenses of selected TrizecHahn
Acquisition Properties to be acquired by Westfield America, Inc. for the
year ended December 31, 1997 have been incorporated by reference in the
registration statement on Form S-3 of which this prospectus is a part in
reliance upon the reports of PricewaterhouseCoopers LLP, independent
accountants, included in our Form 8-K/A as filed on February 1, 1999, and
upon the authority of said firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any documents we
file at the SEC's public reference rooms in Washington, D.C., New York, New
York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms. Our SEC filings are
also available to the public from the SEC's Website at
"http://www.sec.gov."
The SEC allows us to "incorporate by reference" the information we
file with them, which means that we can disclose important information to
you by referring you to those documents. The information incorporated by
reference is considered to be part of this prospectus, and information we
later file with the SEC will automatically update and supersede this
information. We incorporate by reference the documents listed below and
any future filings we will make with the SEC under Sections 13(a), 13(c),
14 and 15(d) of the Exchange Act:
o our Annual Report on Form 10-K for the year ended December 31, 1998;
o our Quarterly Reports on Form 10-Q for the quarterly periods ended
March 31, 1999 and June 30, 1999;
o our Current Reports on Form 8-K filed:
oo December 2, 1998 (as amended by Form 8-K/A filed on
February 1, 1999);
oo February 3, 1999;
oo February 19, 1999; and
oo July 8, 1999 (as amended by Form 8-K/A filed on July
13, 1999);
o The description of our capital stock contained in our
Registration Statement on Form 8-A filed pursuant to the Exchange
Act, including any amendment or report filed to update the
description.
You may request a copy of these filings, at no cost by writing or
telephoning us at the following address:
Westfield America
Secretary
11601 Wilshire Boulevard, 12th Floor
Los Angeles, CA 90025
(310) 478-4456
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. No one has been
authorized to provide you with different information. An offer of the
common shares will not be made in any state where such offer is not
permitted. You should not assume that the information in this prospectus
or any prospectus supplement is accurate as of any date other than the date
on the front of those documents.
[COMPANY LOGO]
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses (other than
underwriting discounts, concessions and commissions) expected to be
incurred in connection with the issuance and distribution of securities
being registered. Except for the SEC filing fee, all amounts shown below
are estimates.
SEC registration fee . . . . . . . . . . . . . . . $ 3,260
Legal fees and expenses . . . . . . . . . . . . . . 73,000
Accounting fees and expenses . . . . . . . . . . . 20,000
Printing and engraving expenses . . . . . . . . . . 1,000
Miscellaneous . . . . . . . . . . . . . . . . . . . 2,740
Total . . . . . . . . . . . . . . . . . . . . . $ 100,000
The Company will bear all of the foregoing expenses.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company has obtained, and pays the cost of, directors' and
officers' liability insurance coverage in the amount of $25.0 million
(subject to a retention or a "deductible" of $250,000). Directors' and
officers' insurance insures (i) the directors and officers of the Company
from any claim arising out of an alleged wrongful act by the directors and
officers of the Company in their respective capacities as directors and
officers of the Company, and (ii) the Company to the extent that the
Company has indemnified the directors and officers for such loss. The
Articles of Incorporation provide for indemnification to the full extent
permitted by Missouri law.
Section 351.355(1) of the Revised Statutes of Missouri provides that a
corporation may indemnify a director, officer, employee or agent of the
corporation in any action, suit or proceeding other than an action by or in
the right of the corporation, against expenses (including attorney's fees),
judgments, fines and settlement amounts actually and reasonably incurred by
him in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation and, with respect to any criminal action,
had no reasonable cause to believe his conduct was unlawful.
Section 351.355(2) provides that the corporation may indemnify any
such person in any action or suit by or in the right of the corporation
against expenses (including attorney's fees) and settlement amounts
actually and reasonably incurred by him in connection with the defense or
settlement of the action or suit if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
corporation, except that he may not be indemnified in respect of any matter
in which he has been adjudged liable for negligence or misconduct in the
performance of his duty to the corporation, unless authorized by the court.
Section 351.355(3) provides that a corporation shall indemnify any
such person against expenses (including attorney's fees) actually and
reasonably incurred by him in connection with the action, suit or
proceeding if he has been successful in defense of such action, suit or
proceeding, and if such action, suit or proceeding is one for which the
corporation may indemnify him under Section 351.355(1) or (2). Section
351.355(7) provides that a corporation shall have the power to give any
further indemnity to any such person, in addition to the indemnity
otherwise authorized under Section 351.355, provided such further indemnity
is either (i) authorized, directed or provided for in the articles of
incorporation of the corporation or any duly adopted amendment thereof or
(ii) is authorized, directed or provided for in any by-law or agreement of
the corporation which has been adopted by a vote of the shareholders of the
corporation, provided that no such indemnity shall indemnify any person
from or on account of such person's conduct which was finally adjudged to
have been knowingly fraudulent, deliberately dishonest or willful
misconduct.
The Articles of Incorporation of the Company contain provisions
indemnifying its directors and officers to the extent authorized
specifically by Sections 351.355(1), (2), (3) and (7).
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons
controlling the registrant pursuant to the foregoing provisions, the
registrant has been informed that in the opinion of the SEC, such
indemnification is against public policy as expressed in the Securities Act
and is therefore unenforceable.
ITEM 16. LIST OF EXHIBITS.
EXHIBIT
NUMBER DESCRIPTION
------- -----------
4.1 Restated Articles of Incorporation of Westfield America, Inc.
(Exhibit 3.1(1)).
4.2 Second Amended and Restated By-Laws of Westfield America, Inc.
(Exhibit 3.2(2)).
4.3 Amendment No. 1 to the Second Amended and Restated By-Laws of
Westfield America, Inc. (Exhibit 3.3(2)).
4.4 Amendment No. 2 to the Second Amended and Restated By-Laws of
Westfield America, Inc. (Exhibit 3.4(2)).
4.5 Amendment No. 3 to the Second Amended and Restated By-Laws of
Westfield America, Inc. (Exhibit 3.5(2)).
4.6 Specimen certificate representing common shares.
5.1 Opinion of Husch & Eppenberger, as to legality of the common
shares.
8.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP regarding tax
matters.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of PricewaterhouseCoopers LLP.
23.3 Consent of Husch & Eppenberger (included in Exhibit 5.1).
23.4 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in
Exhibit 8.1).
24.1 Power of Attorney.
99.1 Amendment No. 5, dated as of August 16, 1999, to First Amended and
Restated Agreement of Limited Partnership of Westfield America
Limited Partnership, dated as of August 3, 1998.
99.2 Agreement of Limited Partnership of Westfield Independence
Mall Limited Partnership, dated as of August 11, 1998.
____________________
(1) Incorporated by reference to designated exhibit to Westfield
America's quarterly report on Form 10-Q filed August 16, 1999, File
No. 333-22731.
(2) Incorporated by reference to designated exhibit to Westfield
America's quarterly report on Form 10-Q filed May 17, 1999, File
No. 333-22731.
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3)
of the Securities Act;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of this registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed
with the SEC pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement; and
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
registration statement or any material change to such information
in this registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed with
or furnished to the SEC by the registrant pursuant to Section 13 or Section
15(d) of the Exchange Act that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold
at the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of
the Exchange Act (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the SEC
such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
(d) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the
Securities Act, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule
430A and contained in a form of prospectus filed by the registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act
shall be deemed to be part of this registration statement as of the
time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the registrant certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-3 and has duly
caused this registration statement on Form S-3 to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Los Angeles,
State of California, on August 24, 1999.
WESTFIELD AMERICA, INC.
(Registrant)
By: /s/ Peter S. Lowy
-------------------
Peter S. Lowy,
Director and Co-President
Pursuant to the requirements of the Securities Act of 1933, as
amended, this registration statement has been signed by the following
persons in the capacities indicated on the 24th of August, 1999.
* Director and Chairman of the Board
- -------------------------
Frank P. Lowy
/s/ Peter S. Lowy Director and Co-President
- -------------------------
Peter S. Lowy (Principal Executive Officer)
* Co-President
- -------------------------
Richard E. Green (Principal Executive Officer)
* Chief Financial Officer and Treasurer
- -------------------------
Mark A. Stefanek (Principal Financial and Accounting Officer)
* Director
- -------------------------
Roy L. Furman
* Director
- -------------------------
Frederick G. Hilmer
Director
- -------------------------
David H. Lowy
Director
- -------------------------
Herman Huizinga
* Director
- -------------------------
Bernard Marcus
* Director
- -------------------------
Larry A. Silverstein
* Director
- -------------------------
Francis T. Vincent, Jr.
By: /s/ Irv Hepner
- -------------------------
Irv Hepner,
Attorney-in-fact
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
4.6 Specimen certificate representing common shares.
5.1 Opinion of Husch & Eppenberger, as to legality of the common shares.
8.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP regarding tax
matters.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of PricewaterhouseCoopers LLP.
24.1 Power of Attorney.
99.1 Amendment No. 5, dated as of August 16, 1999, to First Amended and
Restated Agreement of Limited Partnership of Westfield America Limited
Partnership, dated as of August 3, 1998.
99.2 Agreement of Limited Partnership of Westfield Independence Mall
Limited Partnership, dated as of August 11, 1998.
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
the Registration Statement on Form S-3 and the related Preliminary
Prospectus of Westfield America, Inc., dated August 23, 1999, for the
registration of common stock and to the incorporation by reference therein
of our report dated January 25, 1999 with respect to the consolidated
financial statements of Westfield America, Inc. included in the Annual
Report (Form 10-K) for the year ended December 31, 1998 filed with the
Securities and Exchange Commission.
We also consent to the incorporation by reference of our report dated
January 19, 1998, with respect to the statement of revenues and certain
expenses of Topanga Plaza for the year ended December 31, 1997, which is
included in the Current Report on Form 8-K dated February 3, 1999 and
incorporated by reference in the above mentioned Registration Statement on
Form S-3 and related Preliminary Prospectus dated August 23, 1999.
/s/ Ernst & Young LLP
August 23, 1999
Los Angeles, California
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration
statement of Westfield America, Inc. on Form S-3 of our report dated
April 27, 1998, on our audit of the combined statement of revenues and
certain expenses of selected TrizecHahn Acquisition Properties to be
acquired less than 100% by Westfield America, Inc. for the year ended
December 31, 1997 and of our report dated May 29, 1998, on our audit of the
statement of revenues and certain expenses of selected TrizecHahn
Acquisition Properties to be acquired by Westfield America, Inc. for the
year ended December 31, 1997 which reports are included in the Form 8-K/A
of Westfield America, Inc. filed February 1, 1999. We also consent to the
reference to our Firm under the caption "Experts".
/s/ PRICEWATERHOUSECOOPERS LLP
Newport Beach, California
August 19, 1999
EXHIBIT 24.1
POWER OF ATTORNEY
Each of the undersigned directors and each of the undersigned officers
of Westfield America, Inc., a Missouri corporation (the "Corporation"),
does hereby constitute and appoint Peter S. Lowy, Mark A. Stefanek and Irv
Hepner as his or her true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for him or her and in his or her
name, place and stead in any and all capacities, to execute and deliver in
his or her name and on his or her behalf:
(a) one or more Registration Statements (with all exhibits
thereto) of the Corporation on Form S-3 or any other
appropriate form proposed to be filed by the Corporation with
the Securities and Exchange Commission (the "SEC") (including,
without limitation, Registration Statements filed pursuant to
Rule 462 under the Securities Act of 1933, as amended, or any
successor thereto (the "Securities Act")) for the purpose of
registering under the Securities Act, shares of the
Corporation's common stock, par value $0.01("Shares") issuable
upon exchange of (1) partnership interests in Westfield
Independence Mall Limited Partnership or (2) investor unit
rights in Westfield America Limited Partnership;
(b) any and all supplements and amendments (including, without
limitation, post-effective amendments) to such Registration
Statements; and
(c) any and all other documents and instruments in connection with
the registration of the Shares which such attorney-in-fact and
agent deems necessary or advisable to enable the Corporation to
comply with (1) the Securities Act, the Securities Exchange Act
of 1934, as amended, and the other Federal securities laws of the
United States of America and the rules, regulations and
requirements of the SEC in respect of any thereof; (2) the
securities or Blue Sky laws of any state or other governmental
subdivision of the United States of America; and (3) the
securities or similar applicable laws of any foreign
jurisdiction,
and each of the undersigned hereby grants unto such attorney-in-fact and
agent or his substitute or substitutes, each and every act and thing
requisite and necessary to be done in and about the premises as fully as to
all intents and purposes as he or she might or could do in person, and does
hereby ratify and confirm as his or her own acts and deeds all that such
attorney-in-fact and agent, or his substitute or substitutes, shall
lawfully do or cause to be done by virtue hereof. Such attorney-in-fact
and agent shall have, and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed this power
of attorney this 24th day of August, 1999.
/s/ Frank P. Lowy
----------------------------- ----------------------------
Frank P. Lowy David H. Lowy
/s/ Mark A. Stefanek /s/ Richard E. Green
----------------------------- ----------------------------
Mark A. Stefanek Richard E. Green
/s/ Roy L. Furman /s/ Larry A. Silverstein
----------------------------- ----------------------------
Roy L. Furman Larry A. Silverstein
/s/ Frederick G. Hilmer /s/ Francis T. Vincent, Jr.
----------------------------- ----------------------------
Frederick G. Hilmer Francis T. Vincent, Jr.
/s/ Bernard Marcus
----------------------------- ----------------------------
Herman Huizinga Bernard Marcus
EXHIBIT 4.6
COMMON STOCK COMMON STOCK
NUMBER SHARES
[LOGO OF WESTFIELD SHOPPINGTOWNS(R)]
[IMAGE OF FAMILY OF FOUR PEOPLE IN FRONT OF SHOPPING CENTER]
WESTFIELD
---------
AMERICA, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF MISSOURI
CUSIP 959910 10 0
SEE REVERSE FOR CERTAIN DEFINITIONS
SEE LEGEND ON REVERSE
THIS CERTIFIES THAT
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK
OF THE PAR VALUE OF $.01 PER SHARE OF
WESTFIELD AMERICA, INC. transferable on the books of the Corporation
by the holder hereof in person or by duly authorized attorney upon
surrender of this certificate properly endorsed. This certificate and the
shares represented hereby are issued and shall be held subject to all of
the provisions of the Articles of Incorporation of the Corporation and any
amendments thereto, to all of which the holder, by acceptance hereof,
assents.
This certificate is not valid unless countersigned by
the Transfer Agent and registered by the Registrar.
WITNESS the facsimile seal of the Corporation and the
facsimile signatures of its duly authorized officers.
Dated:
Secretary Chairman
Countersigned and Registered:
AMERICAN STOCK TRANSFER & TRUST COMPANY
(New York, N.Y.) Transfer Agent
and Registrar
By
Authorized Officer
WESTFIELD AMERICA, INC.
THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO
SO REQUESTS A STATEMENT OF THE POWERS, DESIGNATIONS, PREFERENCES AND RIGHTS
OF EACH CLASS OF STOCK OR SERIES THEREOF AND THE QUALIFICATIONS,
LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in
full according to applicable laws or regulations:
TEN COM -- as tenants in common
TEN ENT -- as tenants by the entireties
JT TEN -- as joint tenants with right of survivorship and not
as tenants in common
UNIF GIFT MIN ACT -- ___________ Custodian _________
(Cust) (Minor)
under Uniform Gifts to Minors
Act ______________________
(State)
Additional abbreviations may also be used though not in the above
list.
FOR VALUE RECEIVED ________ HEREBY SELL, ASSIGN AND TRANSFER UNTO
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- -----------------------------------
- ----------------------------------- -----------------------------------
- -------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE)
__________________________________________________________________ SHARES
OF THE CAPITAL STOCK REPRESENTED BY THE WITHIN CERTIFICATE AND DO HEREBY
IRREVOCABLY CONSTITUTE AND APPOINT
_____________________________________________________________________ATTORNEY
TO TRANSFER THE SAID STOCK ON THE BOOKS OF THE WITHIN NAMED CORPORATION
WITH FULL POWER OF SUBSTITUTION IN THE PREMISES.
Dated __________ _____________
________________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE
OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERNATION OR ENLARGEMENT OR ANY CHANGE
WHATEVER.
Signature Guaranteeed:
___________________________________________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT
TO S.E.C. RULE 17Ad-15.
The Common Shares represented by this certificate are subject to
restrictions on ownership and transfer for the purpose of the Corporation's
maintenance of its status as a real estate investment trust under the
Internal Revenue Code of 1986, as amended. No Individual may Beneficially
Own Shares in excess of the then applicable Ownership Limit, which may
decrease or increase from time to time, unless such Individual is an
Existing Holder. In generally, any Individual who attempts to Beneficially
Own Shares in excess of the Ownership Limit, must immediately notify the
Corporation. All capitalized terms used in this legend have the meanings
set forth in the Articles of Incorporation, a copy of which, including the
restrictions on ownership and transfer, will be sent without charge to each
shareholder who so requests. If the restrictions on ownership and transfer
are violated, the Common Shares represented hereby may be automatically
exchanged for Excess Shares and deemed transferred to a Special Trust as
provided in the Articles of Incorporation.
[LETTERHEAD OF HUSCH & EPPENBERGER, LLP]
EXHIBIT 5.1
August 23, 1999
Westfield America, Inc.
11601 Wilshire Boulevard
12th Floor
Los Angeles, Ca 90025
Re: Registration of Common Stock on Form S-3
Dear Ladies and Gentlemen:
We have acted as special Missouri counsel to Westfield America, Inc.,
a Missouri corporation (the "Company"), in connection with the filing of
the Registration Statement (as hereinafter defined), registering Seven
Hundred Eighty Six Thousand Two Hundred Eighty Six (786,286) shares of the
Company's Common Stock, par value $.01 per share (the "Shares") for
issuance to New Hanover Associates and its permitted transferees in
exchange for partnership interests in two partnerships affiliated with the
Company.
This opinion is being furnished in accordance with the requirements of
Item 601(b)(5) of Regulation S-K under the Securities Act of 1933, as
amended (the "Act").
In connection with this opinion, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of (i) the
Registration Statement on Form S-3, as filed with the Securities and
Exchange Commission (the "Commission") on the date hereof under the Act
relating to the registration of the Shares under the Act (such Registration
Statement, referred to as the "Registration Statement"); (ii) specimen
certificates representing the Shares; (iii) the Articles of Incorporation
of the Company, as presently in effect; (iv) the By-Laws of the Company, as
presently in effect; and (v) certain resolutions of the Board of Directors
of the Company relating to the issuance and sale of the Shares and related
matters.
We have also examined originals or copies, certified or otherwise
identified to our satisfaction, of such records of the Company and such
agreements, certificates of public officials, certificates of officers or
other representatives of the Company and others, and such other documents,
certificates and records as we have deemed necessary or appropriate as a
basis for the opinions set forth herein. In our examination, we have
assumed the legal capacity of all natural persons, the genuineness of all
signatures, the authenticity of all documents submitted to us as originals,
the conformity to original documents of all documents submitted to us as
certified, conformed or photostatic copies and the authenticity of the
originals of such latter documents. In making our examination of documents
executed or to be executed by parties other than the Company, we have
assumed that such parties had or will have the power, corporate or other,
to enter into and perform all obligations thereunder and have also assumed
the due authorization by all requisite action, corporate or other, and
execution and delivery by such parties of such documents and the validity
and binding effect thereof. As to any facts material to the opinions
expressed herein which we have not independently established or verified,
we have relied upon statements and representations of officers and other
representatives of the Company and others.
Members of our firm are admitted to the bar in the State of Missouri,
and we do not express any opinion as to the laws of any other jurisdiction.
Based upon and subject to the foregoing, we are of the opinion that
the Shares, when sold, will be validly issued, fully paid and
nonassessable.
We hereby consent to the filing of this opinion with the Commission as
an exhibit to the Registration Statement. We also consent to the reference
to our firm under the caption "Legal Matters" in the Registration
Statement.
This opinion is furnished by us, as your special counsel, in
connection with the filing of the Registration Statement and, except as
provided in the immediately preceding paragraph, is not to be used,
circulated, quoted or otherwise referred to for any other purpose or relied
upon by any other person without our prior written permission.
Very truly yours,
/s/ Husch & Eppenberger, LLP
HUSCH & EPPENBERGER, LLC
[LETTERHEAD OF SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP]
EXHIBIT 8.1
August 23, 1999
Westfield America, Inc.
11601 Wilshire Boulevard, 12th Floor
Los Angeles, California 90025-1748
Re: Federal Income Tax Matters
Dear Sirs:
You have requested our opinion concerning certain Federal income
tax considerations in connection with the Registration Statement on Form S-3
filed with the Securities and Exchange Commission on the date hereof
(the "Registration Statement") by Westfield America, Inc., a Missouri
corporation (1) ("WEA," and together with the subsidiary corporations, limited
liability companies and partnerships in which WEA owns a direct or indirect
interest, the "Company"). Capitalized terms used herein but not defined
shall have the meanings set forth in the Registration Statement.
----------------
(1) Westfield America, Inc. was formerly known as
CenterMark Properties, Inc.
We have acted as special tax counsel to the Company in connection
with, and have assisted in the preparation of, tax aspects of the
Registration Statement and certain other documents. You have provided to
us and we have reviewed certain documents (collectively, the "Documents")
that we have deemed necessary or appropriate as a basis for our opinion,
including, without limitation (i) organizational documents of the entities
comprising the Company, (ii) copies of certain leases, management contracts
and other agreements, (iii) responses to questionnaires describing the
Company's properties and their operation, (iv) a certificate executed by a
duly appointed officer of WEA (the "Officer's Certificate") setting forth
certain factual representations and covenants, and (v) certain schedules,
memoranda, financial information and other records. For purposes of our
opinion, we have not made an independent investigation of the facts set
forth in the Documents. We have, consequently, relied on your
representations that the information presented in the Documents or
otherwise furnished to us accurately and completely describes all material
facts relevant to our opinion.
In our examination, we have assumed the legal capacity of all
natural persons, the genuineness of all signatures, the authenticity of all
documents submitted to us as originals, the conformity to original
documents of all documents submitted to us as certified, conformed or
photostatic copies, and the authenticity of the originals of such copies.
Where documents have been provided to us in draft form, we have assumed
that the final executed versions of such documents will not differ
materially from such drafts.
Our opinion is based on the correctness of the following specific
assumptions: (i) WEA and each of the entities comprising the Company has
been and will continue to be operated in accordance with the laws of the
jurisdiction in which it was formed and in the manner described in the
relevant partnership agreement or other organizational documents; (ii)
there will be no changes in the applicable laws of the States of Missouri
or Delaware or any other state under the laws of which any of the entities
comprising the Company have been formed; (iii) each of the representations
contained in the Officer's Certificate are true, correct and complete; and
(iv) WEA, Westfield Subsidiary REIT 1, Inc. ("New REIT 1"), and Westfield
Subsidiary REIT 2, Inc. ("New REIT 2"), each will comply with the covenants
made by them in the Officer's Certificate, and WEA will take all steps
necessary to insure that New REIT 1 and New REIT 2 will qualify, at all
times after their respective dates of incorporation, as real estate
investment trusts for U.S. Federal income tax purposes.
In rendering our opinion, we have also considered and relied
upon the Internal Revenue Code of 1986, as amended (the "Code"), the
regulations promulgated thereunder by the Treasury Department (the
"Regulations"), administrative rulings, and the other interpretations of
the Code and the Regulations by the courts and the Internal Revenue
Service, all as they exist at the date of this letter. With respect to the
latter assumption, it should be noted that statutes, regulations, judicial
decisions, and administrative interpretations are subject to change at any
time and, in some circumstances, with retroactive effect. A material
change that is made after the date hereof in any of the foregoing bases for
our opinion could affect our conclusions.
We express no opinion as to the laws of any jurisdiction other
than the Federal laws of the United States of America to the extent
specifically referred to herein.
Based on the foregoing, we are of the opinion that:
1. Commencing with WEA's taxable year ended December 31, 1994,
WEA was organized in conformity with the requirements for qualification as
a real estate investment trust ("REIT") under the Code, and its actual
method of operation from February 12, 1994 through the date of this letter
has enabled, and its proposed method of operation will enable, it to meet
the requirements for qualification and taxation as a REIT under the Code.
The foregoing opinion takes into account WEA's interest in Westland
Properties, Inc. ("WPI") during the period that WPI was not a qualified
REIT subsidiary under section 856(i)(2) of the Code. Moreover, such
qualification and taxation as a REIT depends upon WEA's having met and
continuing to meet, through actual annual operating results, certain
requirements, including requirements relating to distribution levels,
diversity of stock ownership, and the various qualification tests imposed
under the Code, the results of which are not reviewed by us. Accordingly,
no assurance can be given that the actual results of WEA's operations for
any particular taxable year satisfy such requirements.
2. The discussion in the Registration Statement under the
heading "FEDERAL INCOME TAX CONSIDERATIONS" is a fair and accurate summary
of the material Federal income tax consequences of the purchase, ownership
and disposition of the shares of WEA stock being registered in such
Registration Statement, subject to the qualifications set forth therein.
Other than as expressly stated above, we express no opinion on
any issue relating to WEA, the Company or to any investment therein.
This opinion is intended for the exclusive use of the Company and
its shareholders and, except as set forth herein, it may not be used,
circulated, quoted or relied upon for any other purpose without our prior
written consent. We consent to the filing of this opinion as an exhibit to
the Registration Statement and to the references to Skadden, Arps, Slate,
Meagher & Flom LLP in the Registration Statement. In giving this consent,
we do not thereby admit that we are within the category of persons whose
consent is required under Section 7 of the Securities Act of 1933, as
amended, or the rules or regulations of the Securities and Exchange
Commission thereunder. This opinion is expressed as of the date hereof,
and we disclaim any undertaking to advise you of any subsequent changes in
the matters stated, represented, or assumed herein or any subsequent
changes in applicable law.
Very truly yours,
\s\ Skadden, Arps, Slate, Meagher & Flom LLP
------------------------------------------
EXHIBIT 99.1
FIFTH AMENDMENT TO THE
FIRST AMENDED AND RESTATED AGREEMENT
OF LIMITED PARTNERSHIP OF
WESTFIELD AMERICA LIMITED PARTNERSHIP
This FIFTH AMENDMENT TO THE FIRST AMENDED AND RESTATED AGREEMENT OF
LIMITED PARTNERSHIP OF WESTFIELD AMERICA LIMITED PARTNERSHIP, dated as of
August 16, 1999 (this "Amendment"), is being executed by Westfield America,
Inc., a Missouri corporation (the "Managing General Partner"), as the
managing general partner of Westfield America Limited Partnership, a
Delaware limited partnership (the "Partnership"), and on behalf of the
Limited Partners pursuant to the authority conferred on the Managing
General Partner by Sections 2.4 and 12.3 of the First Amended and Restated
Agreement of Limited Partnership of Westfield America Limited Partnership,
dated as of August 3, 1998, as amended by that certain First Amendment to
the First Amended and Restated Agreement of Limited Partnership of
Westfield America Limited Partnership, dated as of August 12, 1998, as
further amended by that certain Second Amendment to the First Amended and
Restated Agreement of Limited Partnership of Westfield America Limited
Partnership, dated as of December 8, 1998, as further amended by that
certain Third Amendment to the First Amended and Restated Agreement of
Limited Partnership of Westfield America Limited Partnership, dated as of
December 24, 1998, and as further amended by that certain Fourth Amendment
to the First Amended and Restated Agreement of Limited Partnership of
Westfield America Limited Partnership, dated as of December 29, 1998 (as so
amended, the "Agreement"). Capitalized terms used herein, but not
otherwise defined herein, shall have the respective meanings ascribed
thereto in the Agreement.
WHEREAS, pursuant to Sections 7.1 and 12.3 of the Agreement, the
Managing General Partner is authorized to determine the designations,
preferences and relative, participating, optional or other special rights,
powers and duties of additional Partnership Units and to amend the
Agreement, and the Managing General Partner is hereby creating the
Partnership Preferred Units with the designations, preferences and other
rights, terms and provisions as set forth on Exhibit O attached hereto.
NOW, THEREFORE, in consideration of the foregoing, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. The Agreement is hereby amended by the addition of a new exhibit,
entitled "Exhibit O" in the form attached hereto, which shall be attached
to and made a part of the Agreement.
2. Except as specifically amended hereby, the terms, covenants,
provisions and conditions of the Agreement shall remain unmodified and
continue in full force and effect and, except as amended hereby, all of the
terms, covenants, provisions and conditions of the Agreement are hereby
ratified and confirmed in all respects.
3. This Amendment shall be construed and enforced in accordance
with, and governed by, the laws of the State of Delaware, without regard to
principles of conflicts of law.
IN WITNESS WHEREOF, this Amendment has been executed as of the date
first written above.
WESTFIELD AMERICA, INC.,
Managing General Partner
By: /s/ Irv Hepner
---------------------------
Name: Irv Hepner
Title: Secretary
ALL LIMITED PARTNERS
By: Westfield America, Inc., as attorney-in-fact
pursuant to the power of attorney granted
under Section 2.4 of the Agreement.
By: /s/ Irv Hepner
---------------------------
Name: Irv Hepner
Title: Secretary
EXHIBIT O
PARTNERSHIP UNIT DESIGNATION OF SERIES E
PARTNERSHIP PREFERRED UNITS OF
WESTFIELD AMERICA LIMITED PARTNERSHIP
1. CREATION, NUMBER AND DESIGNATION.
A class of Partnership Preferred Units is hereby created and
designated as "Series E Partnership Preferred Units." The number of
Partnership Preferred Units constituting the Series E Partnership
Preferred Units shall be 477,778. The number of Series E Partnership
Preferred Units may be decreased (but not below the aggregate number
thereof then outstanding and/or which have been reserved for issuance).
Each Series E Partnership Preferred Unit shall be identical in all respects
to each other Series E Partnership Preferred Unit.
2. DEFINITIONS.
For purposes of this Partnership Unit Designation, the following terms
shall have the respective meanings indicated in this Section 2, and
capitalized terms used but not otherwise defined herein shall have the
respective meanings ascribed thereto in the Agreement:
"Affiliate" of, or Person "Affiliated" with, a specified Person, shall
mean a Person that directly or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control
with the Person specified. For purposes of the Corporation, Affiliate
shall include, without limitation, Westfield Holdings Limited ("WHL"),
Westfield America Trust, Frank Lowy, David Lowy, Peter Lowy and Steven Lowy
(such individuals being the "Lowy Family").
"Agreement" shall mean the First Amended and Restated Agreement of
Limited Partnership of Westfield America Limited Partnership, dated as of
August 3, 1998, as amended, modified, supplemented or restated, from time
to time.
"Base Distribution" shall mean an annual distribution per Series E
Partnership Preferred Unit equal to 8.5% of the Liquidation Preference per
Series E Partnership Preferred Unit.
"Board of Directors" shall mean the Board of Directors of the
Corporation or any committee authorized by such Board of Directors to
perform any of its responsibilities with respect to the capital stock of
the Corporation.
"Business Day" shall mean any day, other than a Saturday or Sunday,
that is neither a legal holiday nor a day on which banking institutions in
New York City, New York, are authorized or required by law, regulation or
executive order to close.
"Call Date" shall mean the date specified in the notice to holders
required under Section 5 (d) as the Call Date.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Common Stock" means the common stock, par value $0.01 per share, of
the Corporation.
"Common Equity Shares" shall mean the Common Shares and the Excess
Common Shares which are issued with respect to the Common Stock.
"Common Shares" shall mean the shares of Common Stock.
"Consolidated EBITDA" for any quarter shall mean the consolidated net
income of the Corporation (before extraordinary income or gains and less
equity in income of unconsolidated real estate partnerships), calculated in
a manner consistent with the Corporation's financial statements filed with
the Securities and Exchange Commission, increased by the sum of the
following (without duplication):
a. the Corporation's pro rata share of EBITDA from
unconsolidated real estate partnerships calculated in a manner consistent
with this definition of Consolidated EBITDA,
b. all income taxes paid or accrued according to GAAP for such
quarter (other than income taxes attributable to extraordinary, unusual or
nonrecurring gains or losses except to the extent that such gains were not
included in Consolidated EBITDA),
c. all interest expense paid or accrued in accordance with GAAP
for such quarter (including financing fees and amortization of deferred
financing fees or amortization of original issue discount, but excluding
capitalized interest),
d. depreciation and depletion reflected in such net income,
e. amortization reflected in such net income including, without
limitation, amortization of capitalized debt issuance costs (only to the
extent that such amounts have not been previously included in the amount of
Consolidated EBITDA pursuant to paragraph (c) above), goodwill, other
intangibles and management fees, and
f. any other noncash charges, to the extent deducted from
consolidated net income (including, but not limited to, income allocated to
minority interests).
"Consolidated Fixed Charges" for any quarter shall mean the sum of:
a. the Corporation's pro rata share of fixed charges from
unconsolidated real estate partnerships calculated in a manner consistent
with this definition of Consolidated Fixed Charges,
b. all interest expense paid or accrued in accordance with GAAP
for such quarter (including, without duplication, financing fees and
amortization of deferred financing fees or amortization of original issue
discount),
c. distribution requirements with respect to preferred stock
and any other preferred securities for such quarter (not including any
portion of preferred stock distributions the calculation of which is based
on the distribution paid in such quarter to the holders of shares of the
Corporation's Common Stock), whether or not declared or paid,
d. regularly scheduled amortization of principal of debt during
such quarter (other than any balloon payments at maturity) and
e. all ground rent payments.
"Constituent Person" shall have the meaning set forth in Section 6(e)
hereof.
"Conversion Date" shall have the meaning set forth in Section 6(a)
hereof.
"Conversion Price" shall mean the conversion price per Partnership
Common Unit for which the Series E Partnership Preferred Unit is
convertible, as such Conversion Price may be adjusted pursuant to
Section 6. The initial conversion price shall be $18.00.
"Corporation" shall mean Westfield America, Inc., a Missouri
corporation.
"Corporation Change of Control Repurchase Date" shall have the meaning
set forth in Section 7(a) hereof.
"Corporation Change of Control Repurchase Offer" shall have the
meaning set forth in Section 7(a) hereof.
"Corporation Change of Control Repurchase Payment" shall have the
meaning set forth in Section 7(a) hereof.
"Current Market Price" of publicly traded Common Stock or any other
class of stock or other security of the Corporation or any other issuer for
any day shall mean the last reported sales price, regular way, on such day,
or, if no sale takes place on such day, the average of the reported closing
bid and asked prices on such day, regular way, in either case as reported
on the New York Stock Exchange ("NYSE") or, if such security is not listed
or admitted for trading on the NYSE, on the principal national securities
exchange on which such security is listed or admitted for trading or, if
not listed or admitted for trading on any national securities exchange, on
the Nasdaq National Market ("NASDAQ") or, if such security is not quoted on
NASDAQ, the average of the closing bid and asked prices on such day in the
over-the-counter market as reported by the National Association of
Securities Dealers, Inc. (the "NASD") or, if bid and asked prices for such
security on such day shall not have been reported through the NASD, the
average of the bid and asked prices on such day as furnished by any NYSE
member firm regularly making a market in such security selected for such
purpose by the Board of Directors.
"Distribution Payment Date" shall mean (i) for any Distribution Period
with respect to which the Partnership pays a distribution on the
Partnership Common Unit, the date on which such distribution is paid, or
(ii) for any Distribution Period with respect to which the Partnership does
not pay a distribution on the Partnership Common Unit, a date to be set by
the Managing General Partner, which date shall not be later than the
thirtieth calendar day after the end of the applicable Distribution Period.
"Distribution Periods" shall mean quarterly distribution periods
commencing on January 1, April 1, July 1 and October 1 of each year and
ending on and including the day preceding the first day of the next
succeeding Distribution Period with respect to any Series E Partnership
Preferred Units (other than the initial Distribution Period, which shall
commence on the Grant Date for such Series E Partnership Preferred Units
and end on and include the last day of the calendar quarter immediately
following such Grant Date, and other than the Distribution Period during
which any Series E Partnership Preferred Units shall be redeemed pursuant
to Section 5 or converted pursuant to Section 6, which shall end on and
include the Call Date or Conversion Date with respect to the Series E
Partnership Preferred Units being redeemed or converted, as applicable).
"Excess Common Shares" shall mean shares of excess stock of the
Corporation, par value $0.01 per share, which are issued with respect to
Common Stock.
"Expiration Time" shall have the meaning set forth in Section 6(d)(iv)
hereof.
"Fair Market Value" shall mean the average of the daily Current Market
Prices of a share of the Corporation's Common Stock on the five (5)
consecutive Trading Days selected by the Corporation commencing not more
than 20 Trading Days before, and ending not later than, the earlier of the
day in question and the day before the "ex date" with respect to the
issuance or distribution requiring such computation. The term "ex date,"
when used with respect to any issuance or distribution, means the first day
on which the Common Stock trade regular way, without the right to receive
such issuance or distribution, on the exchange or in the market, as the
case may be, used to determine that day's Current Market Price.
"Fixed Charge Coverage Violation" shall have the meaning set forth in
Section 3(a) hereof.
"Fully Junior Units" shall have the meaning set forth in Section 10(d)
hereof.
"Funds from Operations" shall mean net income (loss) (computed in
accordance with generally accepted accounting principles) excluding gains
(or losses) from debt restructuring, and distributions in excess of
earnings allocated to other operating partnership interests or minority
interests (as reflected in the financial statements of the Corporation)
plus depreciation/amortization of assets unique to the real estate
industry, all computed in a manner consistent with the revised definition
of Funds From Operations adopted by the National Association of Real Estate
Investment Trusts (NAREIT), in its White Paper dated March 1995, as such
definitions may be modified from time to time.
"Grant Date" shall mean the date on which the Series E Partnership
Preferred Units are originally issued.
"Junior Units" shall have the meaning set forth in Section 10(c)
hereof.
"Liquidation Preference" shall have the meaning set forth in Section
4(a) hereof.
"Non-Electing Share" shall have the meaning set forth in Section 6(e)
hereof.
"Partnership" shall mean Westfield America Limited Partnership, a
Delaware limited partnership.
"Parity Units" shall have the meaning set forth in Section 10(b)
hereof.
"Person" shall mean any individual, firm, partnership, corporation,
limited liability company, trust or other entity, and shall include any
successor (by merger or otherwise) of such entity.
"Purchased Shares" shall have the meaning set forth in
Section 6(d)(iv) hereof.
"REIT Termination Event" shall mean the earliest to occur of:
a. the filing of a federal income tax return by the Corporation
for any taxable year on which the Corporation does not compute its income
as a real estate investment trust;
b. the approval by the shareholders of the Corporation of a
proposal for the Corporation to cease to qualify as a real estate
investment trust;
c. a determination by the Board of Directors of the
Corporation, based on the advice of counsel, that the Corporation has
ceased to qualify as a real estate investment trust; or
d. a "determination" within the meaning of Section 1313(a) of
the Code that the Corporation has ceased to qualify as a real estate
investment trust.
"Securities" and "Security" shall have the meanings set forth in
Section 6(d)(iii) hereof.
"Series E Certificate of Designation" shall mean the Certificate of
Designation Setting Forth "Resolution Designating Series E Preferred Shares
and Fixing Preferences and Rights Thereof" Adopted by the Board of
Directors of the Corporation.
"Series E Equity Shares" shall mean the Series E Equity Shares as
governed by the Series E Certificate of Designation.
"Series E Partnership Preferred Unit" means a Partnership Unit created
under this Partnership Unit Designation, with the designations, preferences
and relative, participating, optional or other special rights, powers and
duties set forth in this Exhibit O.
"Senior Units" shall have the meaning set forth in Section 10(a)
hereof.
"set apart for payment" shall be deemed to include, without any action
other than the following, the recording by the Partnership in its
accounting ledgers of any accounting or bookkeeping entry which indicates,
pursuant to a declaration of distributions by the Managing General Partner,
the allocation of funds to be so paid on any series or class of partnership
units of the Partnership; provided, however, that if any funds for any
class or series of Junior Units or Fully Junior Units or any class or
series of Parity Units are placed in a separate account of the Partnership
or delivered to a disbursing, paying or other similar agent, then "set
apart for payment" with respect to the Series E Partnership Preferred Units
shall mean placing such funds in a separate account or delivering such
funds to a disbursing, paying or other similar agent.
"Trading Day" shall mean any day on which the securities in question
are traded on the NYSE, or if such securities are not listed or admitted
for trading on the NYSE, on the principal national securities exchange on
which such securities are listed or admitted, or if not listed or admitted
for trading on any national securities exchange, on NASDAQ, or if such
securities are not quoted on NASDAQ, in the securities market in which the
securities are traded.
"Transaction" shall have the meaning set forth in Section 6(e) hereof.
"Transfer Agent" shall mean the Managing General Partner, or such
other agent or agents of the Partnership as may be designated by the
Managing General Partner as the transfer agent, registrar and distribution
disbursing agent for the Series E Partnership Preferred Units and notified
to the holders of the Series E Partnership Preferred Units.
3. DISTRIBUTIONS.
a. Holders of Series E Partnership Preferred Units shall not be
entitled to any distributions on the Series E Partnership Preferred Units,
whether payable in cash, property or stock, except as provided in this
Exhibit O.
b. Subject to the preferential rights of the holders of any
Partnership Preferred Units that rank senior in the payment of
distributions to the Series E Partnership Preferred Units and subject to
paragraph (c) of this Section 3, the holders of Series E Partnership
Preferred Units shall be entitled to receive, when, as and if declared by
the Managing General Partner, but only out of funds legally available for
the payment of distributions, cumulative preferential distributions payable
in cash to holders of record on the respective date, not exceeding 50 days
preceding such distribution payment date, fixed for the purpose by the
Managing General Partner in advance of payment of each particular
distribution in an amount equal to the greater of (A) the Base Distribution
per unit per annum and (B) an amount per unit equal to the Liquidation
Preference of a Series E Partnership Preferred Unit (exclusive of accrued
but unpaid distributions) divided by the Conversion Price (the "Series E
Common Equivalent Factor") times the dollar amount of cash distributions
declared with respect to each Partnership Common Unit that does not result
in an adjustment to the Conversion Price pursuant to subparagraph (d)(iii)
of Section 6 (such product, the "Series E Common Equivalent Amount") for
the same annual period; provided, however, that if as a result of the
quarterly distributions paid in accordance with the following sentence, the
holders of Series E Partnership Preferred Units shall have received for any
calendar year more distributions than such units shall be entitled under
subparagraphs (A) and (B) above (as adjusted pursuant to the third and
eighth sentences of this Section 3), the distributions payable in respect
of Series E Partnership Preferred Units in subsequent calendar years shall
be reduced to the extent of such overpayment.
Subject to the proviso of the preceding sentence of this
Section 3(b), the distribution paid in respect of each quarterly period in
each calendar year shall be determined as follows (in each case, excluding
any additional payment made pursuant to the following sentence): (1) for
the first quarter, the greater of 25% of the Base Distribution per unit and
the Series E Common Equivalent Amount for the same quarter; (2) for the
second quarter, an amount such that the aggregate amount to be received per
Series E Partnership Preferred Unit in respect of the first two quarters of
such calendar year shall be the greater of 50% of the Base Distribution per
unit and the Series E Common Equivalent Amount for the same two quarters;
(3) for the third quarter, in amount such that the aggregate amount to be
received per Series E Partnership Preferred Unit in respect of the first
three quarters of such calendar year shall be the greater of 75% of the
Base Distribution per unit and the Series E Common Equivalent Amount for
the same three quarters; and (4) for the fourth quarter, an amount such
that the aggregate amount to be received per Series E Partnership Preferred
Unit in respect of such calendar year shall be the amount provided in the
preceding sentence of this Section 3(b). Notwithstanding the foregoing,
for any quarter in which a Fixed Charge Coverage Violation (as defined
below) has occurred, the distribution payable per Series E Partnership
Preferred Unit shall be 1.20 times the amount provided in the preceding
sentence. A "Fixed Charge Coverage Violation" shall occur for any quarter
that the ratio of the Corporation's Consolidated EBITDA to its Consolidated
Fixed Charges is below 1.40 to 1.
The distributions shall begin to accrue as set forth above and
shall be fully cumulative from the first day of the applicable Distribution
Period, whether or not in any Distribution Period or Periods there shall be
funds of the Partnership legally available for the payment of such
distributions, and shall be payable quarterly, when, as and if declared by
the Managing General Partner, in arrears on the Distribution Payment Dates.
Accumulated but unpaid distributions for any past quarterly Distribution
Periods may be declared and paid at any time, without reference to any
regularly scheduled quarterly Distribution Payment Date, to holders of
record on such date, not exceeding 50 days preceding such Distribution
Payment Date, fixed for the purpose by the Managing General Partner in
advance of payment of each particular distribution. Any distribution
payment made on Series E Partnership Preferred Units shall first be
credited against the earliest accrued but unpaid distribution due with
respect to Series E Partnership Preferred Units which remains payable.
Beginning with the quarter in which a REIT Termination Event Occurs, all
distributions payable per Series E Partnership Preferred Unit pursuant to
this Section 3 shall be multiplied by 2.5.
c. The initial Distribution Period for the Series E Partnership
Preferred Units will include a partial distribution for the period from the
Grant Date until the last day of the calendar quarter immediately following
such Grant Date. The amount of distributions payable for such initial
period, or any other period shorter than a full quarterly Distribution
Period, on the Series E Partnership Preferred Units shall be computed by
dividing the number of days in such period by 90 and multiplying the result
by the Series E Equity distribution determined in accordance with
Section 3(b). Holders of Series E Partnership Preferred Units shall not be
entitled to any distributions, whether payable in cash, property or
partnership units, in excess of cumulative distributions, as herein
provided, on the Series E Partnership Preferred Units. No interest, or sum
of money in lieu of interest, shall be payable in respect of any
distribution payment or payments on the Series E Partnership Preferred
Units which may be in arrears.
d. So long as any of the Series E Partnership Preferred Units
are outstanding, except as described in the immediately following sentence,
no distributions shall be declared, paid or set apart for payment by the
Partnership, and no other distribution of cash or other property shall be
made, directly or indirectly, by the Partnership with respect to any class
or series of Parity Units for any period unless distributions equal to the
full amount of accumulated and unpaid distributions have been, or
contemporaneously are, paid with respect to the Series E Partnership
Preferred Units for all Distribution Periods terminating on or prior to the
Distribution Payment Date with respect to such class or series of Parity
Units. When the distributions provided for in Section 3(b) hereof are not
paid in full, all distributions paid with respect to the Series E
Partnership Preferred Units and all distributions paid with respect to any
other class or series of Parity Units shall be paid ratably in proportion
to the respective amounts of distributions accumulated and unpaid on the
Series E Partnership Preferred Units and accumulated and unpaid on such
Parity Units.
e. So long as any Series E Partnership Preferred Units are
outstanding, no distributions (other than distributions paid solely in
Fully Junior Units or options, warrants or rights to subscribe for or
purchase Fully Junior Units) shall be paid by the Partnership, and no other
distribution of cash or other property shall be made, directly or
indirectly, by the Partnership with respect to any Junior Units, nor shall
any Junior Units be redeemed, purchased or otherwise acquired for any
consideration (or any moneys be paid to or made available for a sinking
fund for the redemption of any such Junior Units), directly or indirectly,
by the Partnership (except by conversion into or exchange for Fully Junior
Units), nor shall any other cash or other property otherwise be paid or
distributed to or for the benefit of any holder of Junior Units in respect
thereof, directly or indirectly, by the Partnership unless in each case the
full cumulative distributions (including all accumulated and unpaid
distributions) on all outstanding Series E Partnership Preferred Units and
any other Parity Units of the Partnership shall have been or
contemporaneously are declared and paid or declared and set apart for
payment for all past Distribution Periods with respect to the Series E
Partnership Preferred Units and all Distribution Periods terminating on or
prior to the date of payment of the Series E Partnership Preferred Units
and all Distribution Periods terminating on or prior to the date of payment
on all Parity Units of the Partnership with respect to such Parity Units.
Subject to the foregoing, and not otherwise, such distributions may be
declared by the Managing General Partner and paid on any Partnership Common
Units from time to time out of funds legally available therefor, and the
Series E Partnership Preferred Units shall not be entitled to participate
in any such distributions, whether payable in cash, partnership units or
otherwise.
f. No distributions on the Series E Partnership Preferred Units
shall be declared by the Managing General Partner or paid or set apart for
payment by the Partnership at such time as the terms and provisions of any
agreement of the Partnership, including any agreement relating to its
indebtedness, prohibits such declaration, payment or setting apart for
payment or provides that such declaration, payment or setting apart for
payment would constitute a breach thereof or a default thereunder, or if
such declaration or payment shall be restricted or prohibited by law.
g. In determining whether a distribution by cash payment,
redemption or other acquisition of Units or otherwise is permitted under
Delaware law, no effect shall be given to amounts that would be needed, if
the Partnership were to be dissolved at the time of the distribution, to
satisfy the preferential rights upon dissolution of holders whose
preferential rights on dissolution are superior to those receiving the
distribution.
h. Notwithstanding the foregoing, it is acknowledged that the
Managing General Partner may, pursuant to the Agreement, elect to make
distributions on the Partnership Common Units on a more or less frequent
basis than quarterly and provide for an appropriate record date; in the
event that the Managing General Partner elects to effect such a non-
quarterly distribution, the Managing General Partner may, in its sole and
absolute discretion, cause a Distribution Period (and related Distribution
Payment Date) to be established to reflect the period established for such
Partnership Common Unit distributions and to make such revisions to the
distributions provided in Section 3(b) hereof as may be required to reflect
that more or less than four Distribution Payment Dates will occur during
the relevant calendar year.
4. LIQUIDATION PREFERENCE.
a. In the event of any liquidation, dissolution or winding up
of the Partnership, whether voluntary or involuntary, subject to the prior
preferences and other rights of any Senior Units, before any payment or
distribution of the assets of the Partnership (whether capital or surplus)
shall be made to or set apart for the holders of Junior Units, the holders
of the Series E Partnership Preferred Units shall be entitled to receive
One Hundred Eighty Dollars ($180.00) (the "Liquidation Preference") per
Series E Partnership Preferred Unit plus an amount equal to all
distributions (whether or not earned or declared) accrued and unpaid
thereon to the date of liquidation, dissolution or winding up of the
affairs of the Partnership (any such date, a "Series E Liquidation Date"),
but such holders shall not be entitled to any further payment; provided
that the distribution payable with respect to the Distribution Period
containing the Series E Liquidation Date shall be equal to the distribution
determined pursuant to Section 3 above for the preceding Distribution
Period times a fraction equal to the actual number of days elapsed from the
end date of the calendar quarter most recently completed to the relevant
Series E Liquidation Date over 90 days. If, upon any liquidation,
dissolution or winding up of the Partnership, the assets of the
Partnership, or proceeds thereof, distributable among the holders of the
Series E Partnership Preferred Units shall be insufficient to pay in full
the preferential amount aforesaid and liquidating payments on any other
units of any class or series of Parity Units, then such assets, or the
proceeds thereof, shall be distributed among the holders of Series E
Partnership Preferred Units and any such other Parity Units ratably in
accordance with the respective amounts that would be payable on such
Series E Partnership Preferred Units and any such other Parity Units if all
amounts payable thereon were paid in full. For the purposes of this
Section 4, (i) a consolidation or merger of the Partnership with one or
more corporations, partnerships or other entities or (ii) a sale, lease or
conveyance of all or substantially all of the Partnership's property or
business shall not be deemed to be a liquidation, dissolution or winding
up, voluntary or involuntary, of the Partnership.
b. Subject to the rights of the holders of Parity Units or
Senior Units, upon any liquidation, dissolution or winding up of the
Partnership, after payment shall have been made in full to the holders of
the Series E Partnership Preferred Units, as provided in this Section 4,
the holders of Series E Partnership Preferred Units shall have no other
claim to the remaining assets of the Partnership, and any other series or
class or classes of Junior Units shall, subject to the respective terms and
provisions (if any) applying thereto, be entitled to receive any and all
assets remaining to be paid or distributed, and the holders of the Series E
Partnership Preferred Units shall not be entitled to share therein.
5. REDEMPTION AT THE OPTION OF THE PARTNERSHIP.
a. The Series E Partnership Preferred Units shall not be
redeemable by the Partnership prior to the tenth anniversary of the Grant
Date. On and after the tenth anniversary of the Grant Date, the
Partnership, at its option, may redeem the Series E Partnership Preferred
Units, in whole at any time or from time to time in part, in minimum
increments of $10.0 million of aggregate Liquidation Preference of such
units, out of funds legally available therefor at a redemption price
payable in cash equal to 100% of the Liquidation Preference per Series E
Partnership Preferred Unit (plus all accumulated, accrued and unpaid
distributions as provided in paragraph (c) below).
b. In the event that WHL and its subsidiaries and the trustee
of Westfield America Trust on behalf of Westfield America Trust do not vote
to approve the conversion of the Corporation's Series E Equity Shares into
Common Equity Shares at the Corporation's 2000 Annual Shareholder Meeting
or at any other meeting of the Corporation's shareholders at which such
proposal is raised, the Partnership shall have the right to redeem the
Series E Partnership Preferred Units, in whole or in part, out of funds
legally available therefor at a redemption price payable in cash equal to
100% of the Liquidation Preference per Series E Partnership Preferred Unit
(plus all accumulated, accrued and unpaid distributions as provided in
paragraph (c) below).
c. Upon any redemption of Series E Partnership Preferred Units
pursuant to this Section 5, the Partnership shall pay all accrued and
unpaid distributions, if any, thereon to the Call Date, without interest.
If the Call Date falls after a distribution payment record date and prior
to the corresponding Distribution Payment Date, then each holder of
Series E Partnership Preferred Units at the close of business on such
distribution payment record date shall be entitled to the distribution
payable on such units on the corresponding Distribution Payment Date
notwithstanding any redemption of such units before such Distribution
Payment Date. Except as provided above, the Partnership shall make no
payment or allowance for unpaid distributions, whether or not in arrears,
on Series E Partnership Preferred Units called for redemption.
d. If full cumulative distributions on the Series E Partnership
Preferred Units and any other class or series of Parity Units of the
Partnership have not been declared and paid or declared and set apart for
payment, the Series E Partnership Preferred Units may not be redeemed under
this Section 5 in part, and the Partnership may not purchase or acquire
Series E Partnership Preferred Units, otherwise than pursuant to a purchase
or exchange offer made on the same terms to all holders of Series E
Partnership Preferred Units.
e. Notice of the redemption of any Series E Partnership
Preferred Units under this Section 5 shall be mailed by first-class mail or
recognized overnight courier to each holder of record of Series E
Partnership Preferred Units to be redeemed at the address of each such
holder as shown on the Partnership's records, not less than 30 nor more
than 90 days prior to the Call Date. Neither the failure to mail any
notice required by this paragraph (e), nor any defect therein or in the
mailing thereof, to any particular holder, shall affect the sufficiency of
the notice or the validity of the proceedings for redemption with respect
to the other holders. Each such mailed notice shall state, as appropriate:
(1) the Call Date; (2) the number of Series E Partnership Preferred Units
to be redeemed and, if fewer than all the units held by such holder are to
be redeemed, the number of such units to be redeemed from such holder; (3)
the redemption price; (4) the place or places at which certificates for
such units are to be surrendered; (5) the then-current Conversion Price;
and (6) that distributions on the units to be redeemed shall cease to
accrue on such Call Date except as otherwise provided herein. Notice
having been mailed as aforesaid, from and after the Call Date (unless the
Partnership shall fail to make available an amount of cash necessary to
effect such redemption), (i) except as otherwise provided herein,
distributions on the Series E Partnership Preferred Units so called for
redemption shall cease to accrue, (ii) such units shall no longer be deemed
to be outstanding, and (iii) all rights of the holders thereof as holders
of Series E Partnership Preferred Units shall cease (except the rights to
receive the cash payable upon such redemption, without interest thereon,
upon surrender and endorsement of their certificates if so required and to
receive any distributions payable thereon). The Partnership's obligation
to provide cash in accordance with the preceding sentence shall be deemed
fulfilled if, on or before the Call Date, the Partnership shall deposit
with a bank or trust company that has an office in the Borough of
Manhattan, City of New York, and that has capital and surplus of at least
$150,000,000, necessary for such redemption, in trust, with irrevocable
instructions that such cash be applied to the redemption of the Series E
Partnership Preferred Units so called for redemption. Notwithstanding the
foregoing, the Partnership shall, in the first instance, send the money to
any holder of Series E Partnership Preferred Units that has notified the
Partnership in writing of the location of delivery of funds. No interest
shall accrue for the benefit of the holders of Series E Partnership
Preferred Units to be redeemed on any cash so set aside by the Partnership.
Subject to applicable escheat laws, any such cash unclaimed at the end of
two years from the Call Date shall revert to the general funds of the
Partnership, after which reversion the holders of such units so called for
redemption shall look only to the general funds of the Partnership for the
payment of such cash.
As promptly as practicable after the surrender in accordance with such
notice of the certificates for any such units so redeemed (properly
endorsed or assigned for transfer, if the Partnership shall so require and
if the notice shall so state), such units shall be exchanged for any cash
(without interest thereon) for which such units have been redeemed. If
fewer than all the outstanding Series E Partnership Preferred Units are to
be redeemed, units to be redeemed shall be selected by the Partnership from
outstanding Series E Partnership Preferred Units not previously called for
redemption pro rata (as nearly as may be), by lot or by any other method
determined by the Partnership in its sole discretion to be equitable. If
fewer than all the Series E Partnership Preferred Units evidenced by any
certificate are redeemed, then new certificates evidencing the unredeemed
Series E Partnership Preferred Units shall be issued without cost to the
holder thereof.
6. CONVERSION.
The Series E Partnership Preferred Units shall not be convertible
into Partnership Common Units prior to (i) a vote of the shareholders of
the Corporation approving the conversion of the Corporation's Series E
Equity Shares into Common Equity Shares or (ii) the transfer of the
Series E Equity Shares to an individual to whom the Corporation is
permitted to issue Common Equity Shares without shareholder approval, in
accordance with the rules of the NYSE. Subject to the foregoing, holders
of Series E Partnership Preferred Units shall have the right to convert all
or a portion of such units into Partnership Common Units, as follows:
a. Subject to and upon compliance with the provisions of this
Section 6, a holder of Series E Partnership Preferred Units shall have the
right, at his or her option, at any time (such time being the "Conversion
Date"), to convert all or any portion of such units into the number of
Partnership Common Units obtained by dividing the aggregate Liquidation
Preference of such units (inclusive of accrued but unpaid distributions) by
the Conversion Price (as in effect at the time and on the date provided for
in the last paragraph of paragraph (b) of this Section 6) by surrendering
such units to be converted, such surrender to be made in the manner
provided in paragraph (b) of this Section 6; provided, however, that the
right to convert Series E Partnership Units called for redemption pursuant
to Section 5 shall terminate at the close of business on the fifth Business
Day prior to the Call Date fixed for such redemption, unless the
Partnership shall default in making payment of the cash payable upon such
redemption under Section 5.
b. In order to exercise the conversion right, the holder of
each unit of Series E Partnership Preferred Units to be converted shall
surrender the certificate representing such unit, duly endorsed or assigned
to the Partnership or in blank, at the office of the Transfer Agent,
accompanied by written notice to the Partnership that the holder thereof
irrevocably elects to convert such Series E Partnership Preferred Units.
Unless the partnership units issuable on conversion are to be issued in the
same name as the name in which such Series E Partnership Preferred Units
are registered, each partnership unit surrendered for conversion shall be
accompanied by instruments of transfer, in form satisfactory to the
Partnership, duly executed by the holder or such holder's duly authorized
attorney and an amount sufficient to pay any transfer or similar tax (or
evidence reasonably satisfactory to the Partnership demonstrating that such
taxes have been paid).
Holders of Series E Partnership Preferred Units at the close of
business on a distribution payment record date shall be entitled to receive
the distribution payable on such units on the corresponding Distribution
Payment Date notwithstanding the conversion thereof following such
distribution payment record date and prior to such Distribution Payment
Date. However, Series E Partnership Preferred Units surrendered for
conversion during the period between the close of business on any
distribution payment record date and the opening of business on the
corresponding Distribution Payment Date (except units converted after the
issuance of notice of redemption with respect to a Call Date during such
period, such Series E Partnership Preferred Units being entitled to such
distribution on the Distribution Payment Date) must be accompanied by
payment of an amount equal to the distribution payable on such units on
such Distribution Payment Date. A holder of Series E Partnership Preferred
Units on a distribution payment record date who (or whose transferee)
tenders any such units for conversion into Partnership Common Units on the
corresponding Distribution Payment Date will receive the distribution
payable by the Partnership on such Series E Partnership Preferred Units on
such date, and the converting holder need not include payment of the amount
of such distribution upon surrender of Series E Partnership Preferred Units
for conversion. Except as provided above, the Partnership shall make no
payment or allowance for unpaid distributions, whether or not in arrears,
on converted units or for distributions on the Partnership Common Units
issued upon such conversion.
As promptly as practicable after the surrender of certificates for
Series E Partnership Preferred Units as aforesaid, the Partnership shall
issue and shall deliver at such office to such holder, or on his or her
written order, a certificate or certificates for the number of full
Partnership Common Units issuable upon the conversion of such units in
accordance with provisions of this Section 6, and any fractional interest
in respect of a Partnership Common Unit arising upon such conversion shall
be settled as provided in paragraph (c) of this Section 6.
Each conversion shall be deemed to have been effected immediately
prior to the close of business on the date on which the certificates for
Series E Partnership Preferred Units shall have been surrendered and such
notice shall have been received by the Partnership as aforesaid (and if
applicable, payment of an amount equal to the distribution payable on such
units shall have been received by the Corporation as described above), and
the Person or Persons in whose name or names any certificate or
certificates for Partnership Common Units shall be issuable upon such
conversion shall be deemed to have become the holder or holders of record
of the units represented thereby at such time on such date and such
conversion shall be at the Conversion Price in effect at such time on such
date unless the transfer books of the Partnership shall be closed on that
date, in which event such Person or Persons shall be deemed to have become
such holder or holders of record at the close of business on the next
succeeding day on which such transfer books are open, but such conversion
shall be at the Conversion Price in effect on the date on which such units
shall have been surrendered and such notice received by the Partnership.
c. No fractional units or scrip representing fractions of
Partnership Common Units shall be issued upon conversion of the Series E
Partnership Preferred Units. Instead of any fractional interest in a
Partnership Common Unit that would otherwise be deliverable upon the
conversion of a Series E Partnership Preferred Unit, the Partnership shall
pay to the holder of such unit an amount in cash based upon the Current
Market Price of the Corporation's Common Stock on the Trading Day
immediately preceding the date of conversion. If more than one Series E
Partnership Unit shall be surrendered for conversion at one time by the
same holder, the number of full Partnership Common Units issuable upon
conversion thereof shall be computed on the basis of the aggregate number
of Series E Partnership Preferred Units so surrendered.
d. The Conversion Price shall be adjusted from time to time as
follows:
i. If the Corporation shall after the Grant Date (A) pay a
dividend or make a distribution on its Common Equity Shares
in Common Equity Shares, (B) subdivide its outstanding
Common Equity Shares into a greater number of units, (C)
combine its outstanding Common Equity Shares into a smaller
number of units or (D) issue any shares of stock by
reclassification of its Common Equity Shares, the Conversion
Price in effect at the opening of business on the day
following the date fixed for the determination of holders
entitled to receive such dividend or distribution or at the
opening of business on the Business Day next following the
day on which such subdivision, combination or
reclassification becomes effective, as the case may be,
shall be adjusted so that the holder of any Series E Equity
Shares thereafter surrendered for conversion shall be
entitled to receive the number of Common Equity Shares that
such holder would have owned or have been entitled to
receive after the happening of any of the events described
above as if such Series E Equity Shares had been converted
immediately prior to the record date in the case of a
dividend or distribution or the effective date in the case
of a subdivision, combination or reclassification. An
adjustment made pursuant to this subparagraph (i) shall
become effective immediately after the opening of business
on the Business Day next following the record date (except
as provided in paragraph (h) below) in the case of a
dividend or distribution and shall become effective
immediately after the opening of business on the Business
Day next following the effective date in the case of a
subdivision, combination or reclassification.
ii. If the Corporation shall issue after the Grant Date rights,
options or warrants to all holders of Common Equity Shares
entitling them (for a period expiring within 45 days after
the record date mentioned below) to subscribe for or
purchase Common Equity Shares at a price per share less than
95% (100% if a standby underwriter is used and charges the
Corporation a commission) of the Fair Market Value per share
of the Corporation's Common Stock on the record date for the
determination of holders entitled to receive such rights,
options or warrants, then the Conversion Price in effect at
the opening of business on the Business Day next following
such record date shall be adjusted to equal the price
determined by multiplying (A) the Conversion Price in effect
immediately prior to the opening of business on the Business
Day next following the date fixed for such determination by
(B) a fraction, the numerator of which shall be the sum of
(x) the number of Common Equity Shares outstanding on the
close of business on the date fixed for such determination
and (y) the number of shares that the aggregate proceeds to
the Corporation from the exercise of such rights, options or
warrants for Common Equity Shares would purchase at 95% of
such Fair Market Value (or 100% in the case of a standby
underwriting), and the denominator of which shall be the sum
of (x) the number of Common Equity Shares outstanding on the
close of business on the date fixed for such determination
and (y) the number of additional Common Equity Shares
offered for subscription or purchase pursuant to such
rights, options or warrants. Such adjustment shall become
effective immediately after the opening of business on the
day next following such record date (except as provided in
paragraph (h) below). In determining whether any rights,
options or warrants entitle the holders of Common Equity
Shares to subscribe for or purchase Common Equity Shares at
less than 95% of such Fair Market Value (or 100% in the case
of a standby underwriting), there shall be taken into
account any consideration received by the Corporation upon
issuance and upon exercise of such rights, options or
warrants, the value of such consideration, if other than
cash, to be determined by the Board of Directors whose
determination shall be conclusive. To the extent that
Common Equity Shares are not delivered pursuant to such
rights, options or warrants, upon the expiration or
termination of such rights, options or warrants, the
Conversion Price shall be readjusted to the Conversion Price
which would then be in effect had the adjustments made upon
the issuance of such rights, options or warrants been made
on the basis of delivery of only the number of Common Equity
Shares actually delivered. In the event that such rights,
options or warrants are not so issued, the Conversion Price
shall again be adjusted to be the Conversion Price which
would then be in effect if such date fixed for the
determination of shareholders entitled to receive such
rights, options or warrants had not been fixed.
iii. If the Corporation shall distribute to all holders of its
Common Equity Shares any securities of the Corporation
(other than Common Equity Shares) or evidence of its
indebtedness or assets (excluding cumulative cash dividends
or distributions paid with respect to the Common Equity
Shares after December 31, 1997) which are not in excess of
the following: the sum of (A) the Corporation's cumulative
undistributed Funds from Operations at December 31, 1997,
plus (B) the cumulative amount of Funds from Operations, as
determined by the Board of Directors, after December 31,
1997, minus (C) the cumulative amount of distributions
accrued or paid in respect of the Corporation's Series E
Equity Shares (or any other class or series of preferred
stock of the Corporation after the Grant Date) or rights,
options or warrants to subscribe for or purchase any of its
securities (excluding those rights, options and warrants
issued to all holders of Common Equity Shares entitling them
for a period expiring within 45 days after the record date
referred to in subparagraph (ii) above to subscribe for or
purchase Common Equity Shares, which rights and warrants are
referred to in and treated under subparagraph (ii) above)
(any of the foregoing being hereinafter in this subparagraph
(iii) collectively called the "Securities" and individually
a "Security"), then in each such case the Conversion Price
shall be adjusted so that it shall equal the price
determined by multiplying (x) the Conversion Price in effect
immediately prior to the close of business on the date fixed
for the determination of shareholders entitled to receive
such distribution by (y) a fraction, the numerator of which
shall be the Fair Market Value per share of the
Corporation's Common Stock on the record date mentioned
below less the then Fair Market Value (as determined by the
Board of Directors, whose determination shall be conclusive)
of the portion of the Securities or assets or evidences of
indebtedness so distributed or of such rights, options or
warrants applicable to one Common Equity Share, and the
denominator of which shall be the Fair Market Value per
share of the Corporation's Common Stock on the record date
mentioned below. Such adjustment shall become effective on
the date of distribution retroactive to the opening of
business on the Business Day next following (except as
provided in paragraph (h) below) the record date for the
determination of shareholders entitled to receive such
distribution. For the purposes of this subparagraph (iii),
the distribution of a Security, which is distributed not
only to the holders of the Common Equity Share on the date
fixed for the determination of shareholders entitled to such
distribution of such Security, but also is distributed with
each Partnership Common Unit delivered to a Person
converting a share of Series E Partnership Preferred Units
after such determination date, shall not require an
adjustment of the Conversion Price pursuant to this
subparagraph (iii); provided that on the date, if any, on
which a Person converting a unit of Series E Partnership
Preferred Units would no longer be entitled to receive such
Security with a Partnership Common Unit (other than as a
result of the termination of all such Securities), a
distribution of such Securities shall be deemed to have
occurred and the Conversion Price shall be adjusted as
provided in this subparagraph (iii) (and such day shall be
deemed to be "the date fixed for the determination of the
shareholders entitled to receive such distribution" and "the
record date" within the meaning of the two preceding
sentences). If any dividend or distribution of the type
described in this paragraph (iii) is declared but not so
paid or made, the Conversion Price shall again be adjusted
to the Conversion Price which would then be in effect if
such dividend or distribution had not been declared.
Rights or warrants distributed by the Corporation to all holders
of Common Equity Shares entitling the holders thereof to subscribe for
or purchase shares of the Corporation's capital stock (either
initially or under certain circumstances), which rights or warrants,
until the occurrence of a specified event or events ("Trigger Event"):
(i) are deemed to be transferred with such shares of Common Equity
Shares; (ii) are not exercisable; and (iii) are also issued in respect
of future issuances of Common Equity Shares, shall be deemed not to
have been distributed for purposes of this subparagraph (iii) (and no
adjustment to the Conversion Price under this subparagraph (iii) will
be required) until the occurrence of the earliest Trigger Event. If
such right or warrant is subject to subsequent events, upon the
occurrence of which such right or warrant shall become exercisable to
purchase different securities, evidences of indebtedness or other
assets or entitle the holder to purchase a different number or amount
of the foregoing or to purchase any of the foregoing at a different
purchase price, then the occurrence of each such event shall be deemed
to be the date of issuance and record date with respect to a new right
or warrant (and a termination or expiration of the existing right or
warrant without exercise by the holder thereof to the extent not
exercised). In addition, in the event of any distribution (or deemed
distribution) of rights or warrants, or any Trigger Event or other
event (of the type described in the preceding sentence) with respect
thereto, that resulted in an adjustment to the Conversion Price under
this subparagraph (iii), (1) in the case of any such rights or
warrants which shall all have been redeemed or repurchased without
exercise by any holders thereof, the Conversion Price shall be
readjusted upon such final redemption or repurchase to give effect to
such distribution or Trigger Event, as the case may be, as though it
were a cash distribution (but not a distribution paid exclusively in
cash), equal to the per share redemption or repurchase price received
by a holder of Common Equity Shares with respect to such rights or
warrants (assuming such holder had retained such rights or warrants),
made to all holders of Common Equity Shares as of the date of such
redemption or repurchase, and (2) in the case of such rights or
warrants all of which shall have expired or been terminated without
exercise, the Conversion Price shall be readjusted as if such rights
and warrants had never been issued.
iv. In case a tender or exchange offer (which term shall not
include open market repurchases by the Corporation) made by
the Corporation or any subsidiary or controlled Affiliate of
the Corporation for all or any portion of the Common Equity
Shares shall expire and such tender or exchange offer shall
require the payment by the Corporation or such subsidiary or
controlled Affiliate of consideration per Common Equity
Share having a fair market value (as determined in good
faith by the Board of Directors, whose determination shall
be conclusive and described in a resolution of the Board of
Directors), at the last time (the "Expiration Time") tenders
or exchanges may be made pursuant to such tender or exchange
offer, that exceeds the Current Market Price per share of
the Corporation's Common Stock on the Trading Day next
succeeding the Expiration Time, the Conversion Price shall
be reduced so that the same shall equal the price determined
by multiplying the Conversion Price in effect immediately
prior to the effectiveness of the Conversion Price reduction
contemplated by this subparagraph, by a fraction of which
the numerator shall be the number of Common Equity Shares
outstanding (including any tendered or exchanged shares) at
the Expiration Time, multiplied by the Current Market Price
per share of the Corporation's Common Stock on the Trading
Day next succeeding the Expiration Time, and the denominator
shall be the sum of (A) the fair market value (determined as
aforesaid) of the aggregate consideration payable to
shareholders based upon the acceptance (up to any maximum
specified in the terms of the tender or exchange offer) of
all shares validly tendered or exchanged and not withdrawn
as of the Expiration Time (the shares deemed so accepted, up
to any maximum, being referred to as the "Purchased Shares")
and (B) the product of the number of Common Equity Shares
outstanding (less any Purchased Shares) at the Expiration
Time and the Current Market Price per share of the
Corporation's Common Stock on the Trading Day next
succeeding the Expiration Time, such reduction to become
effective immediately prior to the opening of business on
the day following the Expiration Time. In the event the
Corporation or any subsidiary or controlled Affiliate is
obligated to purchase shares pursuant to any such tender
offer, but the Corporation or such subsidiary or controlled
Affiliate is permanently prevented by applicable law from
effecting any such purchases, or all such purchases are
rescinded, the Conversion Price shall again be adjusted to
be the Conversion Price which would then be in effect if
such tender offer had not been made.
v. No adjustment in the Conversion Price shall be required
unless such adjustment would require a cumulative increase
or decrease of at least 1% in such price; provided, however,
that any adjustments that by reason of this subparagraph (v)
are not required to be made shall be carried forward and
taken into account in any subsequent adjustment until made;
and provided, further, that any adjustment shall be required
and made in accordance with the provisions of this Section 6
(other than this subparagraph (v)) not later than such time
as may be required in order to preserve the tax-free nature
of a distribution to the holders of Partnership Common
Units. Notwithstanding any other provisions of this
Section 6, the Partnership shall not be required to make any
adjustment of the Conversion Price for the issuance of any
Common Equity Shares pursuant to any plan providing for the
reinvestment of dividends or interest payable on securities
of the Corporation and the investment of additional optional
amounts in Common Equity Shares under such plan. All
calculations under this Section 6 shall be made to the
nearest cent (with $.005 being rounded upward) or to the
nearest one-hundredth of a partnership unit (with .005 of a
share being rounded upward), as the case may be. Anything
in this paragraph (d) to the contrary notwithstanding, the
Partnership shall be entitled, to the extent permitted by
law, to make such reductions in the Conversion Price, in
addition to those required by this paragraph (d), as it in
its discretion shall determine to be advisable in order that
any partnership unit distributions, subdivision of
partnership units, reclassification or combination of
partnership units, distribution of rights or warrants to
purchase partnership units, or distribution of other assets
(other than cash distributions) hereafter made by the
Partnership to its Partners shall not be taxable. To the
extent permitted by applicable law, the Partnership from
time to time may reduce the Conversion Price by any amount
for any period of time if the period is at least 20 days,
the reduction is irrevocable during the period and the
Managing General Partner shall have made a determination
that such reduction would be in the best interests of the
Partnership, which determination shall be conclusive.
Whenever the Conversion Price is reduced pursuant to the
preceding sentence, the Partnership shall mail to the holder
of each Series E Partnership Preferred Unit at his or her
last address shown on the Partnership's records a notice of
reduction prior to the date the reduced Conversion Price
takes effect, and such notice shall state the reduced
Conversion Price and the period during which it will be in
effect.
e. If the Corporation shall be a party to any transaction
(including, without limitation, a merger, consolidation, statutory share
exchange, self tender offer for 40% or more of its Common Equity Shares,
sale of all or substantially all of the Corporation's assets or
recapitalization of the Common Equity Shares and excluding any transaction
as to which subparagraph (d)(i) of this Section 6 applies) (each of the
foregoing being referred to herein as a "Transaction"), in each case as a
result of which all or substantially all of the Partnership Common Units
are converted into the right to receive different securities or other
property (including cash or any combination thereof), each Series E
Partnership Preferred Unit which is not redeemed or converted into the
right to receive different securities or other property prior to such
Transaction shall thereafter be convertible, in lieu of Partnership Common
Units into the kind and amount of different securities and other property
(including cash or any combination thereof) receivable upon the
consummation of such Transaction by a holder of that number of Partnership
Common Units into which one Series E Partnership Preferred Unit was
convertible immediately prior to such Transaction, assuming such holder of
Partnership Common Units (i) is not a Person with which the Corporation
consolidated or into which the Corporation merged or which merged into the
Corporation or to which such sale or transfer was made, as the case may be
("Constituent Person"), or an Affiliate of a Constituent Person and (ii)
failed to exercise his rights of election, if any, as to the kind or amount
of shares, securities and other property (including cash) receivable upon
such Transaction (provided that if the kind or amount of shares, securities
and other property (including cash) receivable upon such Transaction is not
the same for each Common Equity Share held immediately prior to such
Transaction by other than a Constituent Person or an Affiliate thereof and
in respect of which such rights of election shall not have been exercised
("Non-Electing Share"), then for the purpose of this paragraph (e) the kind
and amount of shares, securities and other property (including cash)
receivable upon such Transaction by each Non-Electing Share shall be deemed
to be the kind and amount so receivable per share by holders of a plurality
of the Non-Electing Shares). The Corporation shall not be a party to any
Transaction unless the terms of such Transaction are consistent with the
provisions of this paragraph (e), and it shall not consent or agree to the
occurrence of any Transaction until the Corporation has entered into an
agreement with the successor or purchasing entity, as the case may be, for
the benefit of the holders of the Series E Partnership Preferred Units that
will contain provisions enabling the holders of the Series E Partnership
Preferred Units that remain outstanding after such Transaction to convert
into the consideration received by holders of Partnership Common Units at
the Conversion Price in effect immediately prior to such Transaction. The
provisions of this paragraph (e) shall similarly apply to successive
Transactions.
f. If:
i. the Corporation shall declare a distribution (or any other
distribution) on its Common Equity Shares (other than cash
distributions or distributions paid with respect to the
Common Equity Shares after December 31, 1997 not in excess
of the sum of the Corporation's cumulative undistributed
Funds from Operations at December 31, 1997, plus the
cumulative amount of Funds from Operations, as determined by
the Board of Directors, after December 31, 1997, minus the
cumulative amount of distributions accrued or paid in
respect of the Corporation's Series E Equity Shares or any
other class or series of preferred stock of the Corporation
after the Grant Date); or
ii. the Corporation shall authorize the granting to all holders
of Common Equity Shares of rights, options or warrants to
subscribe for or purchase any shares of any class or any
other rights, options or warrants; or
iii. there shall be any reclassification of the Common Equity
Shares (other than an event to which subparagraph (d)(i) of
this Section 6 applies) or any consolidation or merger to
which the Corporation is a party (other than a merger in
which the Corporation is the surviving entity) and for which
approval of any shareholders of the Corporation is required,
or a statutory share exchange, or a self tender offer by the
Corporation for all or substantially all of its outstanding
shares of Common Stock or the sale or transfer of all or
substantially all of the assets of the Corporation as an
entirety; or
iv. there shall occur the voluntary or involuntary liquidation,
dissolution or winding up of the Corporation;
then the Partnership shall cause to be filed with the Transfer Agent and
shall cause to be mailed to the holders of Series E Partnership Preferred
Units at their addresses as shown on the records of the Partnership, as
promptly as possible, but at least 10 days prior to the applicable date
hereinafter specified, a notice stating (A) the date on which a record is
to be taken for the purpose of such distribution, distribution or granting
of rights, options or warrants, or, if a record is not to be taken, the
date as of which the holders of Common Equity Shares of record to be
entitled to such distribution, distribution or rights, options or warrants
are to be determined or (B) the date on which such reclassification,
consolidation, merger, statutory share exchange, sale, transfer,
liquidation, dissolution or winding up is expected to become effective, and
the date as of which it is expected that holders of Partnership Common
Units of record shall be entitled to exchange their Partnership Common
Units for securities or other property, if any, deliverable upon such
reclassification, consolidation, merger, statutory share exchange, sale,
transfer, liquidation, dissolution or winding up. Failure to give or
receive such notice or any defect therein shall not affect the legality or
validity of the proceedings described in this Section 6.
g. Whenever the Conversion Price is adjusted as herein
provided, the Partnership shall promptly file with the Transfer Agent a
certificate setting forth the Conversion Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment
which certificate shall be conclusive evidence of the correctness of such
adjustment absent manifest error. Promptly after delivery of such
certificate, the Partnership shall prepare a notice of such adjustment of
the Conversion Price setting forth the adjusted Conversion Price and the
effective date of such adjustment and shall mail such notice of such
adjustment of the Conversion Price to the holder of each Series E
Partnership Preferred Unit at such holder's last address as shown on the
records of the Partnership.
h. In any case in which paragraph (d) of this Section 6
provides that an adjustment shall become effective on the day next
following the record date for an event, the Partnership may defer until the
occurrence of such event (A) issuing to the holder of any Series E
Partnership Preferred Unit converted after such record date and before the
occurrence of such event the additional Partnership Common Units issuable
upon such conversion by reason of the adjustment required by such event
over and above the Partnership Common Units issuable upon such conversion
before giving effect to such adjustment and (B) paying to such holder any
amount of cash in lieu of any fraction pursuant to paragraph (c) of this
Section 6.
i. There shall be no adjustment of the Conversion Price in case
of the issuance of any stock of the Corporation in a reorganization,
acquisition or other similar transaction except as specifically set forth
in this Section 6. If any action or transaction would require adjustment
of the Conversion Price pursuant to both paragraph (d) and paragraph (e) of
this Section 6, only one adjustment shall be made, and such adjustment
shall be the amount of adjustment that has the highest absolute value.
j. If the Corporation shall take any action affecting the
Common Equity Shares, other than action described in this Section 6, that
in the opinion of the Managing General Partner would materially and
adversely affect the conversion rights of the holders of the Series E
Partnership Preferred Units, the Conversion Price for the Series E
Partnership Preferred Units may be adjusted, to the extent permitted by
law, in such manner, if any, and at such time, as the Managing General
Partner may determine to be equitable in the circumstances.
k. The Partnership covenants that it will at all times reserve
and keep available, free from preemptive rights, out of the aggregate of
its authorized but unissued Partnership Common Units, for the purpose of
effecting conversion of the Series E Partnership Preferred Units, the full
number of Partnership Common Units deliverable upon the conversion of all
outstanding Series E Partnership Preferred Units not theretofore converted.
For purposes of this paragraph (k), the number of Partnership Common Units
that shall be deliverable upon the conversion of all outstanding Series E
Partnership Preferred Units shall be computed as if at the time of
computation all such outstanding units were held by a single holder.
Any Partnership Common Units issued upon conversion of the Series E
Partnership Preferred Units shall be validly issued, fully paid and
nonassessable.
The Partnership shall use its best efforts to comply with all federal
and state securities laws and regulations thereunder in connection with the
issuance of any securities that the Partnership shall be obligated to
deliver upon conversion of the Series E Partnership Preferred Units. The
certificates evidencing such securities shall bear such legends restricting
transfer thereof in the absence of registration under applicable securities
laws or an exemption therefrom as the Partnership may in good faith deem
appropriate.
l. The Partnership will pay any and all documentary stamp or
similar issue or transfer taxes payable in respect of the issue or delivery
of Partnership Common Units or other securities or property on conversion
of the Series E Partnership Preferred Units pursuant hereto; provided,
however, that the Partnership shall not be required to pay any tax that may
be payable in respect of any transfer involved in the issue or delivery of
Partnership Common Units or other securities or property in a name other
than that of the holder of the Series E Partnership Preferred Units to be
converted, and no such issue or delivery shall be made unless and until the
Person requesting such issue or delivery has paid to the Partnership the
amount of any such tax or established, to the reasonable satisfaction of
the Partnership, that such tax has been paid.
7. CHANGE OF CONTROL OF THE CORPORATION.
a. If a Change of Control Repurchase Event (as defined in
Section 7 of the Series E Certificate of Designation) occurs, the holders
of Series E Partnership Preferred Units shall have the right to require the
Partnership, to the extent the Partnership shall have funds legally
available therefor, to redeem any or all of the Series E Partnership
Preferred Units held by such holder at a repurchase price payable in cash
(the "Corporation Change of Control Repurchase Payment") in an amount equal
to 105% of the Liquidation Preference thereof, plus accrued and unpaid
distributions whether or not declared, if any, to the date of repurchase or
the date payment is made available (the "Corporation Change of Control
Repurchase Date"), pursuant to the offer described in subsection (b) below
(the "Corporation Change of Control Repurchase Offer").
b. Within 15 days following the Partnership becoming aware that
a Corporation Change of Control Repurchase Event has occurred, the
Partnership shall mail by first class mail or recognized overnight courier
a notice to each holder of Series E Partnership Preferred Units stating (A)
that a Corporation Change of Control Repurchase Event has occurred and that
such holder has the right to require the Partnership to repurchase any or
all of the Series E Preferred Partnership Units then held by such holder,
(B) the date of repurchase (which shall be a Business Day, no earlier than
30 days and no later than 60 days from the date such notice is mailed, or
such later date as may be necessary to comply with the requirements of the
Exchange Act), (C) the repurchase price and (D) the instructions determined
by the Partnership, consistent with this subsection, that such investor
must follow in order to have the Series E Preferred Partnership Units
repurchased.
c. On the Corporation Change of Control Repurchase Date, the
Partnership, to the extent lawful, shall accept for payment Series E
Preferred Partnership Units or portions thereof tendered by such holder
pursuant to the Corporation Change of Control Repurchase Offer and promptly
by wire transfer of immediately available funds to such holder, as directed
by such holder, send an amount equal to the Corporation Change of Control
Repurchase Payment in respect of all Series E Preferred Partnership Units
or portions thereof so tendered.
d. Notwithstanding anything else herein, to the extent they are
applicable to any Corporation Change of Control Repurchase Offer, the
Partnership will comply with any federal and state securities laws, rules
and regulations and all time periods and requirements shall be adjusted
accordingly.
8. REDEMPTION AT THE OPTION OF THE HOLDER.
a. At any time after the tenth anniversary of the Grant Date,
the holders of Series E Partnership Preferred Units shall have the right at
any time that the Corporation's Common Stock has a Current Market Price at
or below the Conversion Price per unit, to require the Partnership, to the
extent the Partnership shall have funds legally available therefor, to
redeem any or all of the Series E Partnership Preferred Units held by such
holder at a repurchase price payable, at the option of the Partnership, in
either (i) cash or (ii) such number of Partnership Common Units that shall
be convertible into shares of the Corporation's Common Stock as shall have
a Current Market Price in the aggregate on the day prior to the day such
holder gives notice pursuant to Section 8(b) of its intention to redeem,
equal to in either case, 100% of the Liquidation Preference thereof plus
accrued and unpaid distributions whether or not declared, if any, to the
date of repurchase or the date payment is made available (in the aggregate,
the "Redemption Payment").
b. Notwithstanding paragraph (a) of this Section 8, in the
event that WHL and its subsidiaries and the trustee of Westfield America
Trust on behalf of Westfield America Trust vote to approve the conversion
of the Corporation's Series E Equity Shares into Common Equity Shares at a
meeting of shareholders at which such proposal is raised, but the
shareholders of the Corporation as a whole reject the foregoing proposal,
then from and after the later of such rejection date and the second
anniversary of the Grant Date, the Series E Partnership Preferred Units
shall be redeemable at the option of the holder, to the extent that the
Partnership shall have funds legally available therefor, at a redemption
price payable in cash equal to the product of (a) the Series E Common
Equivalent Factor times (b) the Current Market Price on the date of the
notice provided pursuant to paragraph (c) below, plus all accumulated,
accrued and unpaid dividends whether or not declared, if any, to the date
of repurchase or the date payment is made available.
c. For purposes of this Section 8, redemption at the option of
the holder shall be deemed to occur upon receipt by the Partnership of
written notice that the holder of Series E Partnership Preferred Units
wishes to tender units to be redeemed. The holders of such units to be
redeemed shall then have 30 days from the date of such notice to deliver
such units to the Transfer Agent. Upon the surrender of the certificate or
certificates of Series E Partnership Preferred Units to be redeemed, duly
endorsed or assigned to the Partnership or in blank, at the office of the
Transfer Agent, the Partnership shall promptly, either (i) by wire transfer
of immediately available funds to such holder, as directed by such holder,
send an amount equal to the Redemption Payment in respect of all Series E
Partnership Preferred Units or portions thereof so tendered or (ii) issue
and deliver to such holder, or on his or her written order, a certificate
or certificates for the number of full Partnership Common Units issuable in
respect of all Series E Partnership Preferred Units or portions thereof so
tendered.
9. STATUS OF REACQUIRED SERIES E PARTNERSHIP PREFERRED UNITS.
All Series E Partnership Preferred Units which shall have been
granted and reacquired in any manner by the Partnership shall be deemed
cancelled.
10. RANKING.
The Series E Partnership Preferred Units shall with respect to
distribution rights and rights on liquidation, dissolution and winding up
of the affairs of the Partnership, rank pari passu to the Series A
Partnership Preferred Units, the Series B Partnership Preferred Units, the
Series C Partnership Preferred Units, the Series C-1 Partnership Preferred
Units, the Series C-2 Partnership Preferred Units, the Series D Partnership
Preferred Units, and the Series D-1 Partnership Preferred Units of the
Partnership, if any, shall have been authorized and issued.
Each Series E Partnership Preferred Unit shall be identical in
all respects to each other Series E Partnership Preferred Unit.
Any class or series of Partnership Units or Investor Unit Rights
shall be deemed to rank:
a. prior or senior to the Series E Partnership Preferred Units,
as to the payment of distributions and as to distributions of assets upon
the liquidation, dissolution and winding up of the Partnership, if the
holders of such class or series of Partnership Units or Investor Unit
Rights, as the case may be, shall be entitled to the receipt of
distributions or of amounts distributable upon the liquidation, dissolution
and winding up of the Partnership in preference or priority to the holders
of Series E Partnership Preferred Units ("Senior Units");
b. on a parity with the Series E Partnership Preferred Units,
as to the payment of distributions and as to distribution of assets upon
the liquidation, dissolution and winding up of the Partnership, whether or
not the distribution rates, distribution payment dates or redemption or
liquidation prices per unit or other denomination thereof shall be
different from those of the Series E Partnership Preferred Units, if the
holders of such class or series of Partnership Units or Investor Unit
Rights, as the case may be, and the Series E Partnership Preferred Units
shall be entitled to the receipt of distributions and of amounts
distributable upon the liquidation, dissolution and winding up of the
Partnership in proportion to their respective amounts of accumulated and
unpaid distributions per unit or other denomination or liquidation
preferences, without preference or priority one over the other ("Parity
Units");
c. junior to the Series E Partnership Preferred Units, as to
the payment of distributions or as to the distribution of assets upon the
liquidation, dissolution and winding up of the Partnership, if the holders
of Series E Partnership Preferred Units shall be entitled to receipt of
distributions or of amounts distributable upon the liquidation, dissolution
and winding up of the Partnership, in preference or priority to the holders
of such class or series of Partnership Units or Investor Unit Rights
("Junior Units"); and
d. junior to the Series E Partnership Preferred Units, as to
the payment of distributions and as to the distribution of assets upon the
liquidation, dissolution and winding up of the Partnership, if such class
or series of Partnership Units is Partnership Common Units or Class A
Investor Unit Rights, as the case may be, or if the holders of Series E
Partnership Preferred Units shall be entitled to receipt of distributions
and of amounts distributable upon the liquidation, dissolution and winding
up of the Partnership, in preference or priority to the holders of such
class or series of Partnership Units or Investor Unit Rights ("Fully Junior
Units").
11. ALLOCATIONS.
a. For each partnership year, each Holder of a Share of
Series E Preferred Units shall be allocated Net Income of the Partnership
in an amount equal to the amount of distributions made with respect to such
Holder's Series E Preferred Units pursuant to Section 3 hereof during such
Partnership Year. In no event shall items of Net Loss of the Partnership
be allocated to any Holder of Series E Preferred Units unless such
allocation is required by Section 704(b) of the Code or Section 10(b) of
this Exhibit O.
b. If any Series E Partnership Preferred Units are redeemed
pursuant to the terms of this Exhibit O, for the Partnership Year that
includes such redemption (and, if necessary, for subsequent Partnership
Years) (a) gross income and gain (in such relative proportions as the
Managing General Partner in its discretion shall determine) shall be
allocated to the Managing General Partner and such Special Limited
Partner(s) to the extent that the redemption amounts paid or payable with
respect to the Series E Partnership Preferred Units so redeemed (or treated
as redeemed) exceeds the aggregate Capital Account Balances (net of
liabilities assumed or taken subject to by the Partnership) per Series E
Partnership Preferred Unit allocable to the Series E Partnership Preferred
Units so redeemed (or treated as redeemed) and (b) deductions and losses
(in such relative proportions as the Managing General Partner in its
discretion shall determine) shall be allocated to the Managing General
Partner and such Special Limited Partner(s) to the extent that the
aggregate Capital Account Balances (net of liabilities assumed or taken
subject to by the Partnership) per Series E Partnership Preferred Unit
allocable to the Series E Partnership Preferred Units so redeemed (or
treated as redeemed) exceeds the redemption amount paid or payable with
respect to the Series E Partnership Preferred Units so redeemed (or treated
as redeemed).
12. VOTING AND CONSENT RIGHTS.
a. Holders of Series E Partnership Preferred Units shall have
only those voting and consent rights specified in Section 7.3.B of the
Agreement and Section 12(b) hereof.
b. So long as any Series E Partnership Preferred Units are
outstanding, in addition to any other vote or consent of holders of
Series E Partnership Preferred Units required by law or by the Agreement,
the affirmative vote or consent of holders of at least 50% of the
outstanding Series E Partnership Preferred Units, voting or consenting as a
separate class, given in Person or by proxy, either in writing without a
meeting or by vote at any meeting called for the purpose, shall be
necessary for effecting or validating any amendment or alteration of any of
the provisions of this Partnership Unit Designation or the Agreement that
materially and adversely affects the material powers, rights or preferences
of the holders of the Series E Partnership Preferred Units; provided,
however, that the amendment of the Agreement so as to authorize, create,
issue or grant any class or series of Partnership Units, including, without
limitation, any such Partnership Units that may have rights senior or
superior to the Series E Partnership Preferred Units, shall be deemed not
to materially and adversely affect the material powers, rights or
preferences of the holders of Series E Partnership Preferred Units.
c. Except as otherwise required by applicable law or as set
forth herein or in the Agreement, the holders of the Series E Partnership
Preferred Units shall not have any relative, participating, optional or
other special voting rights or powers with respect to any matter, and the
consent or approval of the holders thereof shall not be required for the
taking of any action by the Partnership.
INFORMATION RIGHTS.
Holders of Series E Partnership Preferred Units shall have only
the information rights specified in Section 8.5.A and Section 9.3 of the
Agreement.
13. RESTRICTIONS ON TRANSFER.
The Series E Partnership Preferred Units are subject to the
restrictions on transfer set forth in Article 11 of the Agreement.
14. AMBIGUITY.
In the case of an ambiguity in the application of any of the
provisions of this Partnership Unit Designation, the Managing General
Partner shall have the power to determine the application of the provisions
of this Partnership Unit Designation with respect to any situation based on
its reasonable belief, understanding or knowledge of the circumstances.
15. PARTNERSHIP RECORDS.
The Managing General Partner shall amend Exhibit A to the
Agreement from time to time to the extent necessary to reflect accurately
the grant and any subsequent redemption of, or other event having an effect
on the ownership of, Series E Partnership Preferred Units.
16. GOVERNING LAW.
This Exhibit O shall be construed and enforced in accordance
with, and governed by, the laws of the State of Delaware, without regard to
principles of conflicts of law.
EXHIBIT 99.2
AGREEMENT OF LIMITED PARTNERSHIP
OF
WESTFIELD INDEPENDENCE MALL LIMITED PARTNERSHIP
THIS AGREEMENT OF LIMITED PARTNERSHIP OF WESTFIELD INDEPENDENCE
MALL LIMITED PARTNERSHIP (this "Agreement"), dated as of August 11, 1998
(the "Effective Date"), is entered into by and among WESTFIELD INDEPENDENCE
LLC, a Delaware limited liability company, as the general partner (the
"General Partner"), and NEW HANOVER ASSOCIATES, a Pennsylvania general
partnership as the "Limited Partner" (as hereinafter defined).
WHEREAS, the General Partner and the Limited Partner desire to
form a Delaware limited partnership known as WESTFIELD INDEPENDENCE MALL
LIMITED PARTNERSHIP (the "Partnership"), as evidenced by this Agreement of
Limited Partnership of Westfield Independence Mall Limited Partnership
pursuant to the "Act" (as hereinafter defined).
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby
agree as follows:
ARTICLE 1
DEFINED TERMS
The following definitions shall be for all purposes, unless
otherwise clearly indicated to the contrary, applied to the terms used in
this Agreement.
Section 1.1 "Act" means the Delaware Revised Uniform Limited
Partnership Act, as it may be amended from time to time, and any successor
to such statute.
Section 1.2 "Additional Limited Partner" means a Person admitted
to the Partnership as a Limited Partner pursuant to Section 4.3 hereof and
who is shown as such on the books and records of the Partnership.
Section 1.3 "Adjusted Capital Account" means the Capital Account
maintained for each Partner as of the end of each Partnership taxable year:
(i) increased by any amounts which such Partner is obligated to restore
pursuant to any provision of this Agreement or is deemed to be obligated to
restore pursuant to the penultimate sentences of Regulations Sections
1.704-2(g)(1) and 1.704-2(i)(5); and (ii) decreased by the items described
in Regulations Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii) (d)(5),
and 1.704-1(b)(2)(ii)(d)(6). The foregoing definition of Adjusted Capital
Account is intended to comply with the provisions of Regulations Section
1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
Section 1.4 "Adjusted Capital Account Deficit" means, with respect
to any Partner, the deficit balance, if any, in such Partner's Adjusted
Capital Account as of the end of the relevant Partnership taxable year or
as of such other date for which such deficit balance is to be calculated.
Section 1.5 "Adjusted Property" means any property, the Carrying
Value of which has been adjusted pursuant to Exhibit "B" hereof.
Section 1.6 "Affiliate" means, with respect to any Person: (i)
any Person directly or indirectly controlling, controlled by or under
common control with such Person; (ii) any Person owning or controlling ten
percent (10%) or more of the outstanding voting interests of such Person;
(iii) any Person of which such Person owns or controls ten percent (10%) or
more of the voting interests; or (iv) any officer, director, general
partner or trustee of such Person or of any Person referred to in clauses
(i), (ii), and (iii) above.
Section 1.7 "Agreed Value" means: (i) in the case of any
Contributed Property set forth on Exhibit "D" and as of the time of its
contribution to the Partnership, the Agreed Value of such property as set
forth in Exhibit "D"; (ii) in the case of any Contributed Property not set
forth in Exhibit "D" and as of the time of its contribution to the
Partnership, the 704(c) Value of such property, reduced by any liabilities
either assumed by the Partnership upon such contribution or to which such
property is subject when contributed; and (iii) in the case of any property
distributed to a Partner by the Partnership, the Partnership's Carrying
Value of such property at the time such property is distributed, reduced by
any indebtedness either assumed by such Partner upon such distribution or
to which such property is subject at the time of distribution as determined
under Section 752 of the Code and the Regulations.
Section 1.8 "Agreement" means this Agreement of Limited
Partnership of Westfield Independence Mall Limited Partnership, as it may
be amended, supplemented or restated from time to time.
Section 1.9 "Assignee" means a Person to whom one or more
Partnership Units have been transferred in a manner permitted under this
Agreement, but who has not become a Substituted Limited Partner, and who
has the rights set forth in Section 11.5.
Section 1.10 "Available Cash" means, with respect to any period
for which such calculation is being made, (i) the sum of:
(a) the Net Income or Net Loss (as the case may be) for such
period (without regard to adjustments resulting from allocations described
in Sections 1.A through 1.E of Exhibit "C");
(b) Depreciation and all other noncash charges deducted in
determining Net Income or Net Loss for such period;
(c) the amount of any reduction in the reserves of the
Partnership referred to in clause (ii)(f) below (including, without
limitation, reductions resulting because the General Partner determines
such amounts are no longer necessary);
(d) the excess of proceeds from the sale, exchange,
disposition, or refinancing of Partnership property for such period over
the gain recognized from such sale, exchange, disposition or refinancing
during such period (excluding Terminating Capital Transactions); and
(e) all other cash received by the Partnership for such
period that was not included in determining Net Income or Net Loss for such
period;
(ii) less the sum of:
(a) all principal debt payments made by the Partnership
during such period;
(b) capital expenditures made by the Partnership during such
period;
(c) investments made by the Partnership during such period in
any entity (including loans made thereto) to the extent that such
investments are not otherwise described in clause (ii)(a) or (ii)(b) above;
(d) all other expenditures and payments not deducted in
determining Net Income or Net Loss for such period;
(e) any amount included in determining Net Income or Net Loss
for such period that was not received by the Partnership during such
period; and
(f) the amount of any increase in reserves and other cash or
similar balances (including, but not limited to, working capital reserves,
debt reserve funds, and capital improvements reserves) during any relevant
period, which the General Partner determines in good faith to be necessary
or appropriate in its sole and absolute discretion.
Section 1.11 "Book-Tax Disparities" means, with respect to any
item of Contributed Property or Adjusted Property, as of the date of any
determination, the difference between the Carrying Value of such
Contributed Property or Adjusted Property and the adjusted basis thereof
for federal income tax purposes as of such date. A Partner's share of the
Partnership's Book-Tax Disparities in all of its Contributed Property and
Adjusted Property will be reflected by the difference between such
Partner's Capital Account balance as maintained pursuant to Exhibit "B" and
the hypothetical balance of such Partner's Capital Account computed as if
it had been maintained strictly in accordance with federal income tax
accounting principles.
Section 1.12 "Business Day" means any day except a Saturday,
Sunday or other day on which commercial banks in Los Angeles, California
are authorized or required by law to close.
Section 1.13 "Capital Account" means the Capital Account
maintained for a Partner pursuant to Exhibit "B" hereof.
Section 1.14 "Capital Contribution" means, with respect to any
Partner, any cash, cash equivalents or the Agreed Value of Contributed
Property which such Partner contributes or has contributed to the
Partnership pursuant to Section 4.1 or 4.2 hereof.
Section 1.15 "Carrying Value" means: (i) with respect to a
Contributed Property or Adjusted Property, the 704(c) Value of such
property, reduced (but not below zero) by all Depreciation with respect to
such property charged to the Partners' Capital Accounts following the
contribution of or adjustment with respect to such property; and (ii) with
respect to any other Partnership property, the adjusted basis of such
property for federal income tax purposes, all as of the time of
determination. The Carrying Value of any property shall be adjusted from
time to time in accordance with Exhibit "B" hereof, and to reflect changes,
additions or other adjustments to the Carrying Value for dispositions and
acquisitions of Partnership properties, as reasonably deemed appropriate by
the General Partner.
Section 1.16 "Certificate" means a Certificate of Limited
Partnership relating to the Partnership filed in the office of the Delaware
Secretary of State, as amended from time to time in accordance with the
terms hereof and the Act.
Section 1.17 "Code" means the Internal Revenue Code of 1986, as
amended and in effect from time to time. Any reference herein to a
specific section or sections of the Code shall be deemed to include a
reference to any corresponding provisions of future law.
Section 1.18 "Consent" means the consent or approval of a proposed
action by a Partner given in accordance with Section 14.2 hereof.
Section 1.19 "Contributed Property" means the respective interests
of the General Partner and the Limited Partner in the assets of the
Partnership (including cash and the Mall-Partnership Interest) now or
hereafter contributed to the Partnership. Once the Carrying Value of a
Contributed Property is adjusted pursuant to Exhibit "B" hereof, such
property shall no longer constitute a Contributed Property for purposes of
Exhibit "B" hereof, but shall be deemed an Adjusted Property for such
purposes.
Section 1.20 "Depreciation" means, for each taxable year, an
amount equal to the federal income tax depreciation, amortization, or other
cost recovery deduction allowable with respect to an asset for such year,
except that if the Carrying 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 Carrying Value as the federal income tax depreciation,
amortization, or other cost recovery deduction for such year 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 Carrying Value using any method selected by the General Partner.
Section 1.21 "Funds From Operations" shall mean such term as
defined by the National Association of Real Estate Investment Trusts
("NAREIT") or, if different, such substitute term as adopted or reported by
the General Partner from time to time in its sole discretion.
Section 1.22 "General Partner Interest" means a Partnership
Interest held by the General Partner, in its capacity as general partner.
A General Partner Interest may be expressed as a number of Partnership
Units.
Section 1.23 "Guaranteed Payment" shall have the meaning set forth
in Section 4.1.C.
Section 1.24 "IRS" means the Internal Revenue Service (or any
successor governmental entity), which administers the internal revenue laws
of the United States.
Section 1.25 "Incapacity" or "Incapacitated" means: (i) as to any
individual Partner, death, total physical disability or entry by a court of
competent jurisdiction adjudicating him incompetent to manage his Person or
his estate; (ii) as to any corporation which is a Partner, the filing of a
certificate of dissolution, or its equivalent, for the corporation or the
revocation of its charter; (iii) as to any partnership which is a Partner,
the dissolution and commencement of winding up the partnership; (iv) as to
any estate which is a Partner, the distribution by the fiduciary of the
estate's entire interest in the Partnership; (v) as to any trustee of a
trust which is a Partner, the termination of the trust (but not the
substitution of a new trustee); or (vi) as to any Partner, the bankruptcy
of such Partner. For purposes of this definition, bankruptcy of a Partner
shall be deemed to have occurred when: (a) the Partner commences a
voluntary proceeding seeking liquidation, reorganization or other relief
under any bankruptcy, insolvency or other similar law now or hereafter in
effect; (b) the Partner is adjudged as bankrupt or insolvent, or a final
and nonappealable order for relief under any bankruptcy, insolvency or
similar law now or hereafter in effect has been entered against the
Partner; (c) the Partner executes and delivers a general assignment for the
benefit of the Partner's creditors; (d) the Partner files an answer or
other pleading admitting or failing to contest the material allegations of
a petition filed against the Partner in any proceeding of the nature
described in clause (b) above; (e) the Partner seeks, consents to or
acquiesces in the appointment of a trustee, receiver or liquidator for the
Partner or for all or any substantial part of the Partner's properties; (f)
any proceeding seeking liquidation, reorganization or other relief of or
against such Partner under any bankruptcy, insolvency or other similar law
now or hereafter in effect which has not been dismissed within one hundred
twenty (120) days after the commencement thereof; (g) the appointment
without the Partner's consent or acquiescence of a trustee, receiver or
liquidator which has not been vacated or stayed within ninety (90) days of
such appointment; or (h) an appointment referred to in clause (g) which has
been stayed is not vacated within ninety (90) days after the expiration of
any such stay.
Section 1.26 "Indemnitee" means any Person made a party to a
proceeding by reason of (i) his status as the General Partner, or as a
director, officer, employee, member, partner, agent, representative or
Affiliate of the General Partner, or (ii) his or its liabilities pursuant
to a loan guarantee or otherwise for or as a result of any indebtedness or
obligation of the Partnership or any Subsidiary of the Partnership
(including, without limitation, any indebtedness or obligation which the
Partnership or any Subsidiary of the Partnership has assumed or taken
assets subject to).
Section 1.27 "Limited Partner" means any Person named as a Limited
Partner on Exhibit "A" attached hereto, as such Exhibit may be amended from
time to time, or any Substituted Limited Partner or Additional Limited
Partner, in such Person's capacity as a Limited Partner of the Partnership.
Section 1.28 "Limited Partner Interest" means a Partnership
Interest of a Limited Partner in the Partnership representing a fractional
part of the Partnership Interests of all Partners, and includes any and all
benefits to which the holder of such a Partnership Interest may be
entitled, as provided in this Agreement, together with all obligations of
such Person to comply with the terms and provisions of this Agreement. A
Limited Partner Interest may be expressed as a number of Partnership Units.
Section 1.29 "Liquidating Event" has the meaning set forth in
Section 13.1.
Section 1.30 "Liquidator" has the meaning set forth in Section
13.2.
Section 1.31 "Mall Partnership" means Independence Mall
Associates, a North Carolina Limited Partnership.
Section 1.32 "Mall Partnership Interest" means the 60% general
partnership interest of the Partnership in the Mall Partnership, together
with any additional interests in the Mall Partnership which may now or
hereafter be owned by the Partnership.
Section 1.33 "Market Price" means, on any given day with respect
to a Partnership Unit, the average of the daily market prices for ten (10)
consecutive trading days immediately preceding such date for a REIT Share.
The market price for any such trading day shall be:
(i) if the REIT Shares are listed or admitted to trading on any
securities exchange or The NASDAQ Stock Market's National Market System,
the closing price, regular way, on such day, or if no such sale takes
place on such day, the average of the closing bid and asked prices on
such day, in either case as reported in the principal consolidated
transaction reporting system,
(ii) if the REIT Shares are not listed or admitted to trading on
any securities exchange or The NASDAQ Stock Market's National Market
System, the last reported sale price on such day or, if no sale takes
place on such day, the average of the closing bid and asked prices on
such day, as reported by a reliable quotation source designated by the
General Partner, or
(iii) if the REIT Shares are not listed or admitted to trading
on any securities exchange or The NASDAQ Stock Market's National Market
System and no such last reported sale price or closing bid and asked
prices are available, the average of the reported high bid and low asked
prices on such day, as reported by a reliable quotation source
designated by the General Partner, or if there shall be no bid and asked
prices on such day, the average of the high bid and low asked prices, as
so reported, on the most recent day (not more than ten (10) days prior
to the date in question) for which prices have been so reported;
provided, however, that, if there are no bid and asked prices reported
during the ten (10) days prior to the date in question, the Market Price
shall be determined by the General Partner acting in good faith on the
basis of such quotations and other information as it considers, in its
reasonable judgment, appropriate.
Section 1.34 "Net Income" means, for any taxable period, the
excess, if any, of the Partnership's items of income and gain for such
taxable period over the Partnership's items of loss and deduction
(including all Guaranteed Payments made to the Limited Partners pursuant to
Section 4.1.C) for such taxable period. The items included in the
calculation of Net Income shall be determined in accordance with federal
income tax accounting principles, subject to the specific adjustments
provided for in Exhibit "B".
Section 1.35 "Net Loss" means, for any taxable period, the excess,
if any, of the Partnership's items of loss and deduction (including all
Guaranteed Payments made to the Limited Partners pursuant to Section 4.1.C)
for such taxable period over the Partnership's items of income and gain for
such taxable period. The items included in the calculation of Net Loss
shall be determined in accordance with federal income tax accounting
principles, subject to the specific adjustments provided for in Exhibit
"B".
Section 1.36 "Nonrecourse Built-in-Gain" means, with respect to
any Contributed Properties or Adjusted Properties that are subject to a
Nonrecourse Liability, the amount of any taxable gain that would be
allocated to the Partners pursuant to Section 2.B of Exhibit "C" if such
properties were disposed of in a taxable transaction in full satisfaction
of such liabilities and for no other consideration.
Section 1.37 "Nonrecourse Deductions" has the meaning set forth in
Regulations Section 1.704-2(b)(1), and the amount of Nonrecourse Deductions
for a Partnership taxable year shall be determined in accordance with the
rules of Regulations Section 1.704-2(c).
Section 1.38 "Nonrecourse Liability" has the meaning set forth in
Regulations Section 1.752-1(a)(2).
Section 1.39 "Operating Partnership" means Westfield America
Limited Partnership, a Delaware limited partnership, and any successor
thereto.
Section 1.40 "Partner" means a General Partner or a Limited
Partner, and "Partners" means the General Partner and the Limited Partners
collectively.
Section 1.41 "Partner Minimum Gain" means an amount, with respect
to each Partner Nonrecourse Debt, equal to the Partnership Minimum Gain
that would result if such Partner Nonrecourse Debt were treated as a
Nonrecourse Liability, determined in accordance with Regulations Section
1.704-2(i)(3).
Section 1.42 "Partner Nonrecourse Debt" has the meaning set forth
in Regulations Section 1.704-2(b)(4).
Section 1.43 "Partner Nonrecourse Deductions" has the meaning set
forth in Regulations Section 1.704-2(i)(2), and the amount of Partner
Nonrecourse Deductions with respect to a Partner Nonrecourse Debt for a
Partnership taxable year shall be determined in accordance with the rules
of Regulations Section 1.704-2(i)(2).
Section 1.44 "Partnership" means the limited partnership created
and existing under this Agreement and any successor thereto.
Section 1.45 "Partnership Interest" means an ownership interest in
the Partnership representing a Capital Contribution by either a Limited
Partner or the General Partner, and includes any and all benefits to which
the holder of such a Partnership Interest may be entitled as provided in
this Agreement, together with all obligations of such Person to comply with
the terms and provisions of this Agreement. A Partnership Interest may be
expressed as a number of Partnership Units.
Section 1.46 "Partnership Minimum Gain" has the meaning set forth
in Regulations Section 1.704-2(b)(2), and the amount of Partnership Minimum
Gain, as well as any net increase or decrease in a Partnership Minimum
Gain, for a Partnership taxable year shall be determined in accordance with
the rules of Regulations Section 1.704-2(d).
Section 1.47 "Partnership Record Date" means the record date
established by the General Partner, in its sole and absolute discretion,
for the distribution of Available Cash pursuant to Section 5.1 hereof.
Section 1.48 "Partnership Unit" means a fractional, undivided
share of the Partnership Interests of all Partners issued pursuant to
Sections 4.1 and 4.2. The number of Partnership Units outstanding and the
Percentage Interest in the Partnership represented by such Units are set
forth in Exhibit "A" attached hereto, as such Exhibit may be amended from
time to time. The ownership of Partnership Units shall be evidenced by
such form of certificate for units as the General Partner adopts from time
to time unless the General Partner determines that the Partnership Units
shall be uncertificated securities. If the General Partner elects to
evidence the Partnership Units with a certificate, such certificate may be
imprinted with a legend setting forth such restrictions placed on the units
as specified in this Agreement and such restrictions will be binding upon
all holders of the certificate along with the terms and conditions set
forth in this Agreement.
Section 1.49 "Partnership Year" means the fiscal year of the
Partnership, which shall be the calendar year.
Section 1.50 "Percentage Interest" means, as to a Partner, its
interest in the Partnership as determined by dividing the Partnership Units
owned by such Partner by the total number of Partnership Units then
outstanding and as specified in Exhibit "A" attached hereto, as such
Exhibit may be amended from time to time.
Section 1.51 "Permitted Loan Transaction" shall mean any loan or
advance to the Partnership by the General Partner or any Affiliates of the
General Partner (i) the proceeds of which are to be loaned or advanced by
the Partnership to the Mall Partnership on substantially the same term and
conditions, or (ii) which is on commercially reasonable terms and is
reasonably required in order to make any Guaranteed Payments, or (ii) which
is on commercially reasonable terms and which is reasonably required to
preserve the REIT status of WEA.
Section 1.52 "Person" means an individual or a corporation,
partnership, trust, limited liability company, unincorporated organization,
association or other entity.
Section 1.53 "Priority Return" means an amount per Partnership
Unit held by a Limited Partner equal to the excess of (i) the distributions
paid per REIT Share with respect to the period to which the Priority Return
relates over (ii) any Guaranteed Payments. Any unpaid Priority Return from
any applicable period will accrue at the rate of seven and one-half percent
(7.5%) per annum, compounded quarterly and shall be added to the Priority
Return for the following period.
Section 1.54 "Recapture Income" means any gain recognized by the
Partnership upon the disposition of any property or asset of the
Partnership, which gain is characterized as ordinary income because it
represents the recapture of deductions previously taken with respect to
such property or asset.
Section 1.55 "Regulations" means the Income Tax Regulations
promulgated under the Code, as such regulations may be amended from time to
time (including corresponding provisions of succeeding regulations).
Section 1.56 "REIT" means a real estate investment trust under
Section 856 of the Code.
Section 1.57 "REIT Share" shall mean a share of common stock of
WEA, par value $.01 per share (subject to adjustments, to the extent the
General Partner reasonably deems necessary, to avoid dilution, in the event
of any merger, consolidation, reorganization, share exchange,
recapitalization or similar event).
Section 1.58 "Required Amortization" means the regularly scheduled
principal amortization payments which are required to be made by the Mall
Partnership in connection with that certain $33,000,000 loan from PNC Bank,
National Association ("PNC"), to the Mall Partnership pursuant to the Loan
Agreement, dated as of August 4, 1998, among the Mall Partnership, PNC and
the Banks identified therein, and the other documents executed and
delivered in connection therewith or referenced therein, all as in effect
as of the date hereof (or any lesser regularly scheduled principal
amortization payments resulting from an amendment to such loan agreement),
but excluding any principal payments required at maturity.
Section 1.59 "Residual Gain" or "Residual Loss" means any item of
gain or loss, as the case may be, of the Partnership recognized for federal
income tax purposes resulting from a sale, exchange or other disposition of
Contributed Property or Adjusted Property, to the extent such item of gain
or loss is not allocated pursuant to Section 2.B.1(a) or 2.B.2(a) of
Exhibit "C" to eliminate Book-Tax Disparities.
Section 1.60 "Restricted Period" shall mean the three year period
commencing on the Effective Date and ending on the third anniversary of the
Effective Date.
Section 1.61 "704(c) Value" of any Contributed Property means the
value of such property as set forth in Exhibit "D", or if no value is set
forth in Exhibit "D", the fair market value of such property or other
consideration at the time of contribution, as determined by the General
Partner using such reasonable method of valuation as it may adopt;
provided, however, any property deemed contributed by the Partnership to a
new partnership that is treated as a continuation of the Partnership for
federal income tax purposes upon a termination of the Partnership pursuant
to Section 708(b)(1)(B) of the Code shall have the same 704(c) Value that
it had, and shall be subject to the same allocation method for eliminating
Book-Tax Disparities that was utilized with respect to such property,
immediately prior to such deemed contribution.
Section 1.62 "Subsidiary" means, with respect to any Person, any
corporation, partnership or other entity of which a majority of (i) the
voting power of the voting equity securities, or (ii) the outstanding
equity interests, is owned, directly or indirectly, by such Person.
Section 1.63 "Substituted Limited Partner" means a Person who is
admitted as a Limited Partner to the Partnership pursuant to Section 11.4.
Section 1.64 "Terminating Capital Transaction" means any sale or
other disposition of all or substantially all of the assets of the
Partnership or a related series of transactions that, taken together,
result in the sale or other disposition of all or substantially all of the
assets of the Partnership.
Section 1.65 "Unrealized Gain" attributable to any item of
Partnership property means, as of any date of determination, the excess, if
any, of (i) the fair market value of such property (as determined under
Exhibit "B" hereof) as of such date, over (ii) the Carrying Value of such
property (prior to any adjustment to be made pursuant to Exhibit "B"
hereof) as of such date.
Section 1.66 "Unrealized Loss" attributable to any item of
Partnership property means, as of any date of determination, the excess, if
any, of (i) the Carrying Value of such property (prior to any adjustment to
be made pursuant to Exhibit "B" hereof) as of such date, over (ii) the fair
market value of such property (as determined under Exhibit "B" hereof) as
of such date.
Section 1.67 "WEA" shall mean Westfield America, Inc., a Missouri
corporation, formerly known as Center Mark Properties, Inc.
ARTICLE 2
ORGANIZATIONAL MATTERS
Section 2.1 Organization
The Partnership is a limited partnership organized pursuant to the
provisions of the Act and upon the terms and conditions set forth in this
Agreement. Except as expressly provided herein to the contrary, the rights
and obligations of the Partners and the administration and termination of
the Partnership shall be governed by the Act. The Partnership Interest of
each Partner shall be personal property for all purposes. This Agreement
shall govern the Partnership and be effective from and after the Effective
Date.
Section 2.2 Name
The name of the Partnership shall be Independence Mall Limited
Partnership. The Partnership's business may be conducted under any other
name or names deemed advisable by the General Partner. The words "Limited
Partnership," "L.P.," "Ltd." or similar words or letters shall be included
in the Partnership's name where necessary for the purpose of complying with
the laws of any jurisdiction that so requires. The General Partner in its
sole and absolute discretion may change the name of the Partnership at any
time and from time to time, and shall notify the Limited Partners of such
change in the next regular communication to the Limited Partners.
Section 2.3 Registered Office and Agent; Principal Office
The address of the registered office of the Partnership in the
State of Delaware and the name and address of the registered agent for
service of process on the Partnership in the State of Delaware is The
Corporation Trust Company, 1209 Orange Street, Wilmington, Delaware 19801.
The principal office of the Partnership shall be c/o Westfield America,
Inc., 11601 Wilshire Boulevard, 12th Floor, Los Angeles, California 90025,
or such other place as the General Partner may from time to time designate
by notice to the Limited Partners. The Partnership may maintain offices at
such other place or places within or outside the State of Delaware as the
General Partner deems advisable.
Section 2.4 Power of Attorney
A. Each Limited Partner and each Assignee hereby constitutes and
appoints the General Partner, any Liquidator, and authorized officers and
attorneys-in-fact of each, and each of those acting singly, in each case
with full power of substitution, as its true and lawful agent and attorney-
in-fact, with full power and authority in its name, place and stead to:
(1) execute, swear to, acknowledge, deliver, file and
record in the appropriate public offices: (a) all certificates, documents
and other instruments (including, without limitation, this Agreement and
the Certificate and all amendments or restatement thereof) that the General
Partner or the Liquidator deems appropriate or necessary to form, qualify
or continue the existence or qualification of the Partnership as a limited
partnership (or a partnership in which the Limited Partners have limited
liability) in the State of Delaware and in all other jurisdictions in which
the Partnership may or plans to conduct business or own property; (b) all
instruments that the General Partner deems appropriate or necessary to
reflect any amendment, change, modification or restatement of this
Agreement in accordance with its terms; (c) all conveyances and other
instruments or documents that the General Partner or the Liquidator deems
appropriate or necessary to reflect the dissolution and liquidation of the
Partnership pursuant to the terms of this Agreement, including, without
limitation, a certificate of cancellation; (d) all instruments relating to
the admission, withdrawal, removal or substitution of any Partner pursuant
to, or other events described in, Article 11, 12 or 13 hereof or the
Capital Contribution of any Partner; and (e) any and all financing
statements, continuation statements and other documents necessary or
desirable to create, perfect, continue or validate the security interest
granted by a Limited Partner pursuant to Section 10.5 of this Agreement or
to exercise or enforce the Partnership's rights with respect to such
security interest; and
(2) execute, swear to, seal, acknowledge and file all
ballots, consents, approvals, waivers, certificates and other instruments
appropriate or necessary, in the sole and absolute discretion of the
General Partner or any Liquidator, to make, evidence, give, confirm or
ratify any vote, consent, approval, agreement or other action which is made
or given by the Partners hereunder or is consistent with the terms of this
agreement or appropriate or necessary to effectuate the terms or intent of
this Agreement.
Nothing contained herein shall be construed as authorizing the
General Partner or any Liquidator to amend this Agreement except in
accordance with Article 14 hereof or as may be otherwise expressly provided
for in this Agreement or in the Act.
B. The foregoing power of attorney is irrevocable and a power
coupled with an interest, in recognition of the fact that each of the
Partners will be relying upon the power of the General Partner and any
Liquidator to act as contemplated by this Agreement in any filing or other
action by it on behalf of the Partnership, and it shall survive and not be
affected by the subsequent Incapacity of any Limited Partner or Assignee
and the transfer of all or any portion of such Limited Partner's Assignee's
Partnership Units and shall extend to such Limited Partner's or Assignee's
heirs, successors, assigns and personal representatives. Each such Limited
Partner or Assignee hereby agrees to be bound by any representation made by
the General Partner or any Liquidator, acting pursuant to such power of
attorney, and each such Limited Partner or Assignee hereby waives any and
all defenses which may be available to contest, negate or disaffirm the
action of the General Partner or any Liquidator, taken under such power of
attorney in accordance with the provisions of this Agreement. Each Limited
Partner or Assignee shall execute and deliver to the General Partner or the
Liquidator, within fifteen (15) days after receipt of the General Partner's
or Liquidator's request therefor, such further designation, powers of
attorney and other instruments not inconsistent herewith as the General
Partner or the Liquidator, as the case may be, deems necessary to
effectuate this Agreement and the purposes of the Partnership.
Section 2.5 Term
The term of the Partnership commenced on the Effective Date, and
shall continue until March 1, 2097, unless the Partnership is dissolved
sooner pursuant to the provisions of Article 13 or as otherwise provided by
law.
ARTICLE 3
PURPOSE
Section 3.1 Purpose and Business
The purpose and nature of the business to be conducted by the
Partnership is: (i) to conduct any business that may be lawfully conducted
by a limited partnership organized pursuant to the Act; provided, however,
that, such business shall be limited to and conducted in such a manner as
to permit WEA at all times to be classified as a REIT, unless WEA ceases to
qualify as a REIT for reasons other than the conduct of the business of the
Partnership; (ii) to enter into any partnership, joint venture or other
similar arrangement to engage in any of the foregoing or to own interests
in any entity engaged in any of the foregoing; and (iii) to do anything
necessary or incidental to the foregoing; provided, however, that during
the Restricted Period any business conducted pursuant to clauses (i), (ii)
or (iii) above shall be limited to the ownership of the Mall Partnership
Interest and acting as the general partner of the Mall Partnership, and any
activities related or incidental thereto. In connection with the
foregoing, and without limiting WEA's right, in its sole discretion, to
cease qualifying as a REIT, the Partners acknowledge that WEA's current
status as a REIT inures to the benefit of all of the Partners and not
solely WEA.
Section 3.2 Powers
The Partnership is empowered to do any and all acts and things
necessary, appropriate, proper, advisable, incidental to or convenient for
the furtherance and accomplishment of the purposes and business described
herein and for the protection and benefit of the Partnership, as determined
by the General Partner from time to time in its sole and absolute
discretion; provided, however, that the Partnership shall not take, or
refrain from taking, any action which, in the judgment of the General
Partner, in its sole and absolute discretion: (i) could adversely affect
the ability of WEA to continue to qualify as a REIT; (ii) could subject the
General Partner or WEA to any additional taxes under Section 857 or Section
4981 of the Code; or (iii) could violate any law or regulation of any
governmental body or agency having jurisdiction over the General Partner,
WEA or their respective securities, unless such action (or inaction) shall
have been specifically consented to by the General Partner in writing.
ARTICLE 4
CAPITAL CONTRIBUTIONS
Section 4.1 Capital Contributions of the Partners
A. The Partners have heretofore made various cash contributions
to the Partnership and have contributed to the Partnership the Mall
Partnership Interest. In connection with this Agreement, the Carrying
Values of the Partnership's assets have been adjusted to reflect their
respective fair market values and the Capital Accounts of the Partners
shall reflect their respective contributions as set forth on Exhibit "A",
and such amounts shall be represented by the Partnership Interests and
Partnership Units shown on said Exhibit. The Partnership Units and the
Percentage Interests also shall be adjusted in Exhibit "A" from time to
time by the General Partner to the extent necessary to accurately reflect
redemptions, additional Capital Contributions, the issuance of additional
Partnership Units (pursuant to any merger or otherwise), or similar or
other events having an effect on any Partner's Percentage Interest. The
number of Partnership Units held by the General Partner, in its capacity as
general partner, shall be deemed to be the General Partner Interest.
Except as provided hereinabove and as expressly provided in Sections 4.2,
10.5, and 13.3, the Partners, including, without limitation, the General
Partner, shall have no obligation whatsoever to make any additional or
further Capital Contributions, loans, or advances of any kind to the
Partnership, or to in any way finance the operation of the Partnership, the
distributions to Partners or any of the debt or other obligations of the
Partnership.
B. Except as provided in Section 13.3 of this Agreement and as
otherwise expressly provided herein, the Capital Contribution of each
Partner will be returned to that Partner only in the manner and to the
extent provided in Article 5 and Article 13 hereof, and no Partner may
withdraw from the Partnership or otherwise have any right to demand or
receive the return of its Capital Contribution to the Partnership, except
as specifically provided herein. Under circumstances requiring a return of
any Capital Contribution, no Partner shall have the right to receive
property other than cash, except as specifically provided herein. No
Partner shall be entitled to interest on any Capital Contribution or
Capital Account. The General Partner shall not be liable for the return of
any portion of the Capital Contribution of any Limited Partner, and the
return of such Capital Contributions shall be made solely from Partnership
assets.
C. The Partnership shall make quarterly guaranteed payments to
the Limited Partners in an aggregate amount equal, on an annual basis, to
87.5% of the dividends paid per REIT Share with respect to such calendar
quarter or portion thereof (each such payment, a "Guaranteed Payment").
The Guaranteed Payments are intended by the Partners to be treated, and
shall be treated, as guaranteed payments for the use of capital pursuant to
Section 707(c) of the Code.
Section 4.2 Deficit Restoration Election
A. No Limited Partner shall have any further personal liability
to contribute money to, or in respect of, the liabilities or the
obligations of the Partnership, nor shall any Limited Partner be personally
liable for any obligations of the Partnership, except as otherwise provided
in this Agreement or in the Act. No Partner shall be required to make any
contributions to the capital of the Partnership other than as expressly
provided in this Agreement.
B. Each Partner may, prior to, or at, the time prescribed by
law for the filing of the Partnership federal income tax return for the
taxable year in question (not including extensions), elect to be
unconditionally obligated to restore all or a portion of any deficit in
such Partner's Capital Account upon liquidation of his interest in the
Partnership. Any such election shall be evidenced by written notice to the
Partnership, delivered prior to such time, specifying the amount of any
deficit for which the Partner elects a deficit restoration obligation. Any
amount owing pursuant to a deficit restoration obligation shall be payable
upon the later of (i) the end of the Partnership Year in which such
Partner's Partnership Interest is liquidated or (ii) 90 days after the date
of such liquidation.
C. The amount of any such election shall automatically be
reduced to the extent the deficit in such Partner's Capital Account is
subsequently reduced. If an allocation or distribution thereafter
increases the deficit in such Partner's Capital Account, unless a Partner
elects otherwise under paragraph B. above, such Partner will be obligated
to restore the deficit only to the extent of the lesser of (i) the deficit
amount such Partner has previously elected to restore or (ii) the smallest
deficit balance in such Partner's Capital Account at any time after such
election. For purposes of determining the amount referred to in clause
(ii) of this Section 4.2.C., the income, gain, losses and deductions of the
Partnership shall be prorated on a daily basis (except for income, gain,
losses and deductions from the sale or disposition of capital assets, which
items will be allocated under an interim closing of the books method).
D. Upon the written request of any Limited Partner, the General
Partner shall use reasonable efforts to provide or cause the Partnership to
provide information relevant to the calculation of the amount of the
Limited Partner's deficit in its Capital Account, the amount of its
Adjusted Capital Account, the amount of its Adjusted Capital Account
Deficit and any other information relevant to the Limited Partner's
determination as to whether to elect to restore all or a portion of any
deficit in its Capital Account; provided, that the General Partner shall
not be required to furnish such information to a Limited Partner more often
than once annually.
Section 4.3 Issuances of Additional Partnership Interests. The
General Partner is hereby authorized to cause the Partnership from time to
time to issue to the Partners (including the General Partner) or other
Persons additional Partnership Units or other Partnership Interests in one
or more classes, or one or more series of any of such classes, with such
designations, preferences and relative, participating, optional or other
special rights, powers and duties, including, rights, powers and duties
senior to the Limited Partners, except that, notwithstanding the foregoing,
none of such additional Partnership Units or Partnership Interests shall
carry or give to their holders rights to receive distributions (as to
amount, timing, and priority) senior to the rights of the Limited Partners
as set forth in this Agreement, and provided further however, that no
Additional Limited Partner may be admitted to the Partnership during the
Restricted Period without the written consent of a majority in interest of
the Limited Partners (excluding interests held by the General Partner or
its Affiliates). Subject to the foregoing, the rights, privileges,
benefits, burdens, and restrictions relating to any such additional
Partnership Units or Partnership Interests shall be determined by the
General Partner in its sole and absolute discretion, subject to the Act,
including, without limitation: (i) the allocations of items of Partnership
income, gain, loss, deduction and credit to each such class or series of
Partnership Interests; (ii) the right of each such class or series of
Partnership Interests to share in Partnership distributions; and (iii) the
rights of each such class or series of Partnership Interests upon
dissolution and liquidation of the Partnership; provided that no such
additional Partnership Units or other Partnership Interests shall be issued
to the General Partner, as the General Partner, or a Limited Partner, or to
an Affiliate of either the General Partner or the Limited Partner, unless
the additional Partnership Interests are issued for a fair economic
consideration determined at the time of or within ninety (90) days prior to
the issuance, or unless the issuance of such additional Partnership
Interests is otherwise permitted under the terms and provisions of this
Agreement. A determination by an independent investment banker or
financial advisor that the consideration paid or proposed to be paid by the
General Partner in this regard is a fair economic consideration, or is
otherwise fair from a financial point of view, to the Partnership shall be
conclusive and binding upon all parties hereto for all purposes, and shall
constitute a conclusive, non-rebuttable presumption that the consideration
so paid represented fair, good faith, and proper action by the General
Partner with the Partnership as concerns the General Partner's dealings and
transactions with the Partnership in relation to such issuance.
Section 4.4 General Partner Loans. The General Partner and its
Affiliates shall have the right, but not the obligation, to make loans and
advances to the Partnership, whether secured or unsecured, and shall be
treated as a third party lender to the Partnership (with all attendant
rights, privileges, and remedies) to the extent that it does so. Loans and
advances, if any, funded by the General Partner or its Affiliates shall be
on commercially competitive terms, comparable to similar loans and advances
made by unrelated third party institutional lenders; and, if institutional
lenders would not regularly make such loans or advances, then terms for a
comparable loan or advance described by any unrelated third party loan
broker upon request by the General Partner shall be presumed to be
commercially competitive and comparable to similar loans and advances made
by unrelated third parties for purposes of this Agreement. In addition,
any Permitted Loan Transaction shall be conclusively presumed to be fair,
reasonable and commercially competitive.
Section 4.5 Guaranty of Indebtedness. Any Partner shall have
the right (but not the obligation), exercisable upon written notice to the
Partnership, to elect to guaranty all or any portion of any loans and
advances to the Partnership, if any, in an amount which when taken with the
liabilities otherwise allocated to such Partner shall cause such Partner's
tax basis in such Partner's Partnership Interest to exceed zero but not to
exceed ten percent (10%) of the amount of such Partner's Capital Account as
of the date hereof (or in the event that such Partner is a successor to any
initial Partner, ten percent (10%) of such Partner's proportionate share of
the amount of its predecessor's initial Capital Account) (any such
guaranty, a "Bottom Guaranty"). The Partnership shall provide to the
Limited Partners, by November 1st of each calendar year, information
sufficient to permit the Limited Partners to determine (i) their respective
shares of the Partnership's liabilities at July 1 of such calendar year and
any changes therein reasonably anticipated to occur by December 31st of
such calendar year and (ii) their respective tax bases in their Partnership
Interests at July 1 of such calendar year. If a Limited Partner notifies
the Partnership that it wishes to enter into a Bottom Guaranty of
Partnership indebtedness pursuant to this Section 4.5, the Partnership
shall cooperate in all efforts to implement such Bottom Guaranty before
December 31st of the calendar year in which such Limited Partner so
notifies the Partnership. The Partner providing or requesting to provide
any Bottom Guaranty shall bear all costs and expenses incurred by it, and
all third-party out of pocket costs incurred by the Partnership and the
General Partner (and shall reimburse the Partnership and the General
Partner promptly upon demand), in connection with any request to provide a
Bottom Guaranty, including, without limitation, all costs and expenses
which may become due to the lender in connection therewith; provided,
however, that in the event that such Bottom Guaranty is required as a
result of the failure or inability to satisfy the requirements of Section
6.2.B hereof, all such costs and expenses shall be borne by the
Partnership. In the event that two or more Partners have provided a Bottom
Guaranty, the liability of such Partners thereunder shall be pro rata in
accordance with the amount of such Partner's Bottom Guaranty in relation to
all outstanding Bottom Guaranties of all Partners, regardless of when any
such Bottom Guaranty is entered into or made.
ARTICLE 5
DISTRIBUTIONS
Section 5.1 Requirement and Characterization of Distributions
The General Partner shall distribute to the Partners who were
Partners on the relevant Partnership Record Date, on a calendar quarter
basis, in arrears, within thirty (30) days following the end of the
preceding calendar quarter, an amount equal to the Available Cash (if any)
generated by the Partnership in such preceding calendar quarter as follows:
A. First, 100% to the Limited Partners until the Limited
Partners have received an amount equal to the Priority Return.
B. Second, 100% to the General Partner until such time as the
General Partner has received an amount equal to the sum of (i) all amounts
theretofore distributed to the Limited Partners pursuant to Section 5.1A
above, and (ii) all amount theretofore distributed to the Limited Partners
as Guaranteed Payments pursuant to Section 4.1C above.
C. Third, 99% to the General Partner and 1% to the Limited
Partners, on a pari passu basis.
Section 5.2 Amounts Withheld
All amounts withheld pursuant to the Code or any provisions of
any state or local tax law and Section 10.5 hereof with respect to any
allocation, payment or distribution to the Partners or Assignees shall be
treated as amounts paid or distributed to such Partners or Assignees, as
the case may be, pursuant to Sections 4.1C and 5.1 for all purposes under
this Agreement.
Section 5.3 Distributions Upon Liquidation
Subject to Section 8.7 hereof, proceeds from a Terminating
Capital Transaction and any other cash received or reductions in reserves
made after commencement of the liquidation of the Partnership shall be
distributed to the Partners in accordance with Section 13.2.
ARTICLE 6
ALLOCATIONS
Section 6.1 Allocations of Net Income and Net Loss
For purposes of maintaining the Capital Accounts and in
determining the rights of the Partners among themselves, the Partnership's
items of income, gain, loss and deduction (computed in accordance with
Exhibit "B" hereof) shall be allocated among the General and Limited
Partners in each taxable year (or portion thereof) as provided below.
A. Net Income for a particular period shall be allocated as
follows:
(1) First, 100% to the Limited Partners until the aggregate
Net Income allocated pursuant to this Section 6.1A(1) per Partnership Unit
for the current taxable period and all previous periods equals the
aggregate distributions to the Limited Partners made per Partnership Unit
pursuant to Section 5.1A.
(2) Second, 100% to the General Partner until the aggregate
Net Income allocated pursuant to this Section 6.1A(2) for the current
taxable period and all previous periods equals the aggregate amount of
Available Cash distributed to the General Partner pursuant to Section 5.1B.
(3) Third, if applicable, 99% to the General Partner and 1%
to the Limited Partners, on a pari passu basis.
B. Net Loss for a particular period shall be allocated 99% to
the General Partner and 1% to the Limited Partners, on a pari passu basis.
Section 6.2 Other Allocations
A. For purposes of Regulations Section 1.752-3(a), the Partners
agree that Nonrecourse Liabilities of the Partnership on the Effective Date
in excess of the sum of (i) the amount of Partnership Minimum Gain, and
(ii) the total amount of Nonrecourse Built-in Gain, shall be allocated 100%
to the Limited Partners; provided, that if the property of the Mall
Partnership is significantly expanded and additional Nonrecourse
Liabilities are incurred in amounts that substantially exceed the
Nonrecourse Liability existing on such property on the Effective Date, the
General Partner may be allocated such additional Nonrecourse Liabilities so
long as the Limited Partners are not allocated a lesser amount of
Nonrecourse Liabilities than the amounts allocated to such Limited Partners
on the Effective Date less such Limited Partners' share of any Required
Amortization.
B. During the period commencing on the Effective Date and
ending on the later to occur of (A) the last day of the Restricted Period
or (B) the date on which all of the Limited Partners have exercised their
Contribution Rights (as defined in and pursuant to that certain OP
Contribution Agreement of even date herewith between the Operating
Partnership and the Limited Partner) or their Redemption Rights and are no
longer a Partner, but in no event later than the tenth (10th) anniversary
of the Effective Date, the General Partner shall use its reasonable best
efforts (i) to cause the Mall Partnership to maintain outstanding
indebtedness that is considered to constitute a Nonrecourse Liability
secured by the property owned by the Mall Partnership (and allocable to
such property for purposes of Regulations Section 1.752-3(a)) in a
principal amount equal to at least $33,000,000 less any Required
Amortization and (ii) to cause the amount of Nonrecourse Liabilities
allocable to the Limited Partner and any permitted transferees pursuant to
Section 11.3A hereof to be no less than the amount of Nonrecourse
Liabilities allocable to the Limited Partner immediately prior to the
contribution by the Limited Partner of its interest in the Mall Partnership
to the Partnership less such Limited Partner's share of any Required
Amortization; provided, however, that such best efforts shall be deemed
satisfied with respect to this clause (ii) if clause (i) is satisfied and
such Nonrecourse Liability is properly allocated to the Partners in
accordance with the Regulations promulgated under Section 752 of the Code.
C. Any gain allocated to the General Partner and the Limited
Partners upon the sale or other taxable disposition of any Partnership
asset shall, to the extent possible, after taking into account other
required allocations of gain pursuant to Exhibit "C", be characterized as
Recapture Income in the same proportions and to the same extent as such
Partners have been allocated any deductions directly or indirectly giving
rise to the treatment of such gains as Recapture Income.
ARTICLE 7
MANAGEMENT AND OPERATIONS OF BUSINESS
Section 7.1 Management
A. All management powers over the business and affairs of the
Partnership are and shall be exclusively vested in the General Partner, and
no Limited Partner shall have any right to participate in or exercise
control or management power over the business and affairs of the
Partnership. The General Partner may not be removed by the Limited
Partners with or without cause. In addition to the powers now or hereafter
granted a general partner of a limited partnership under applicable law or
which are granted to the General Partner under any other provision of this
Agreement, the General Partner, shall (except as otherwise set forth in
this Agreement) have full power and authority to do all things deemed
necessary or desirable by it to conduct the business of the Partnership, to
exercise all powers set forth in Section 3.2 hereof and to effectuate the
purposes set forth in Section 3.1 hereof, including, without limitation:
(1) the making of any expenditures, the lending or
borrowing of money (including, without limitation, borrowing of money from
the General Partner or its affiliates as provided in Section 4.4 hereof,
and making prepayments on loans and borrowing money to permit WEA (so long
as WEA qualifies as a REIT) to avoid the payment of any federal income or
excise tax and to permit WEA to maintain REIT status), the assumption or
guarantee of (including, without limitation, the guarantee of indebtedness
or obligations of the General Partner or any of its Affiliates), or other
contracting for, indebtedness and other liabilities, the issuance of
evidence of indebtedness (including the securing of the same by deed,
mortgage, deed of trust, negative pledge or other lien or encumbrance on
the Partnership's assets) and the incurring of any obligations it in good
faith deems necessary for the conduct of the activities of the Partnership,
the Mall Partnership, WEA or the Operating Partnership;
(2) the making of tax, regulatory and other filings, or
rendering of periodic or other reports to governmental or other agencies
having jurisdiction over the business or assets of the Partnership;
(3) subject to Section 8.7 hereof, the acquisition, sale,
disposition, lease, mortgage, pledge, transfer, encumbrance, hypothecation
or exchange of any assets of the Partnership for the benefit of the
Partnership, the Mall Partnership, WEA or the Operating Partnership,
including, without limitation, the exercise or grant of any conversion
option, privilege, negative pledge or subscription right or other right
available in connection with any assets at any time held by the
Partnership, the financing of the conduct of the operations of the
Partnership, the Mall Partnership, WEA or the Operating Partnership, the
secured or unsecured lending of funds to other Persons (including, without
limitation, the Subsidiaries and Affiliates of the Partnership and/or the
General Partner, provided that any loans to Affiliates of the General
Partner shall be at a rate of interest not less than the prime rate in
effect at the time such loan is made, as quoted in the Wall Street Journal)
or the merger or other combination of the Partnership with or into another
entity, and provided further that, without the consent of a majority in
interest of the Limited Partners (excluding interests held by the General
Partner or its Affiliates), the Partnership shall not acquire additional
properties or asset unrelated to the Mall Partnership Interest during the
Restricted Period;
(4) the use of the assets of the Partnership (including,
without limitation, cash on hand from whatever source) for any purpose not
inconsistent with the terms of this Agreement and on any terms it sees fit,
including, without limitation, the repayment of obligations of the
Partnership and its Subsidiaries and any other Person in which it has an
equity investment, and the making of capital contributions to its
Subsidiaries, the holding of any real, personal and mixed property of the
Partnership in the name of the Partnership or in the name of a nominee or
trustee and the creation, by grant or otherwise, of easements or
servitudes;
(5) the management, operation, leasing, collection of
rents, marketing, landscaping, repair, alteration, renovation,
rehabilitation, demolition or improvement of any real property or
improvements owned by the Partnership or any Subsidiary of the Partnership,
including, without limitation, entering into management agreements and
performing any and all actions as contemplated by Section 7.3 hereof, and
the performance of any and all other acts necessary or appropriate to the
operation of such properties, including, without limitation, applications
for rezoning or objections to rezoning of such properties;
(6) the negotiation, execution, and performance of any
contracts, conveyances or other instruments that the General Partner
considers useful or necessary to the conduct of the Partnership's
operations or the implementation of the General Partner's powers under this
Agreement, including, without limitation, the execution and delivery of
leases on behalf of or in the name of the Partnership, contracting with
contractors, developers, consultants, accountants, legal counsel, other
professional advisors and other agents and the payment of their expenses
and compensation out of the Partnership's assets;
(7) the negotiation, execution and performance of any
contracts with Affiliates of the General Partner in accordance with the
provisions of Section 7.5 hereof;
(8) the opening and closing of bank accounts, the
investment of Partnership funds in securities, certificates of deposit and
other instruments, and the distribution of Partnership cash or other
Partnership assets in accordance with this Agreement;
(9) the holding, managing, investing and reinvesting cash
and other assets of the Partnership;
(10) the collection and receipt of revenues and income of
the Partnership;
(11) the establishment of one or more divisions of the
Partnership, the selection and dismissal of agents, outside attorneys,
accountants, consultants and contractors of the Partnership, and the
determination of their compensation and other terms of hiring (whether or
not any of the foregoing are also employed by, consultants to, independent
contractors for, or otherwise do business with the General Partner or its
Affiliates in related or unrelated matters);
(12) the maintenance of such insurance for the benefit of
the Partnership and the Partners as it deems necessary or appropriate
(whether or not such is done as part of a group, combined or other policy
or policies under which the Partnership and the General Partner (or its
Affiliates) are also insured, so long as the General Partner fairly
allocates the expense thereof among the covered parties);
(13) the formation of, or acquisition of an interest in, and
the contribution of some or all of property (or any part thereof or
interest therein) to, any further limited or general partnerships, joint
ventures or other relationships that it deems desirable (including, without
limitation, the acquisition of interests in, and the contributions of
property to, its Subsidiaries and any other Person in which it has an
equity investment from time to time);
(14) the control of any and all matters affecting the rights
and obligations of the Partnership, including the settlement, compromise,
submission to arbitration or any other form of dispute resolution, or
abandonment of, any claim, cause of action, liability, debt or damages, due
or owing to or from the Partnership, the commencement or defense of suits,
legal proceedings, administrative proceedings, arbitration or other forms
of dispute resolution, and the representation of the Partnership in all
suits or legal proceedings, administrative proceedings, arbitrations or
other forms of dispute resolution, the incurring of legal expense, and the
indemnification of any Person against liabilities and contingencies to the
extent permitted by law and consistent with the terms of this Agreement,
including in each and all of the foregoing instances any such matter or
thing in which the General Partner or its Affiliates have a direct
interest;
(15) the undertaking of any action in connection with the
Partnership's direct or indirect investment in its Subsidiaries or any
other Person (including without limitation, the contribution or loan of
funds by the Partnership to such Persons);
(16) the determination of the fair market value of any
Partnership property distributed in kind using such reasonable method of
valuation as the General Partner may adopt;
(17) the exercise, directly or indirectly, through any
attorney-in-fact acting under a general or limited power of attorney, of
any right, including the right to vote, appurtenant to any asset or
investment held by the Partnership;
(18) the exercise of any of the powers of the General
Partner enumerated in this Agreement on behalf of or in connection with any
Subsidiary of the Partnership or any other Person in which the Partnership
has a direct or indirect interest, or jointly with any such Subsidiary or
other Person;
(19) the exercise of any of the powers of the General
Partner enumerated in this Agreement on behalf of any Person in which the
Partnership does not have an interest pursuant to contractual or other
arrangements with such Person;
(20) the making, execution and delivery of any and all
deeds, leases, notes, mortgages, deeds of trust, security agreements,
conveyances, contracts, guarantees, warranties, indemnities, waivers,
releases or legal instruments or agreements in writing necessary or
appropriate, in the judgment of the General Partner, for the accomplishment
of any of the powers of the General Partner enumerated in this Agreement;
(21) the issuance of additional Partnership Units or
Partnership Interests, as appropriate, in connection with Capital
Contributions by Additional Limited Partners and additional Capital
Contributions by Partners pursuant to Article 4 hereof;
(22) to perform or cause to be performed all such other acts
required by this Agreement or not inconsistent herewith; and
(23) to execute, acknowledge and deliver any and all
instruments necessary or desirable to effectuate any of the foregoing.
B. Each of the Limited Partners agrees that the General Partner
is authorized to execute, deliver and perform the above-mentioned
agreements and transactions on behalf of the Partnership without any
further act, approval or vote of the Partners, notwithstanding, the Act or
any applicable law, rule or regulation, to the fullest extent permitted
under the Act or other applicable law, rule or regulation. The execution,
delivery or performance by the General Partner or the Partnership of any
agreement authorized or permitted under this Agreement shall not constitute
a breach by the General Partner of any duty that the General Partner may
owe the Partnership or the Limited Partners or any other Persons under this
Agreement or of any duty stated or implied by law or equity.
C. At all times from and after the date hereof, the General
Partner may cause the Partnership to establish and maintain at any and all
times working capital accounts and other cash or similar balances in such
amounts as the General Partner, in its sole and absolute discretion, deems
appropriate and reasonable from time to time.
D. In exercising its authority under this Agreement, the
General Partner may, but, except as otherwise expressly provided in this
Agreement or in any other Agreement to which the Partnership is a party or
by which it is bound, shall be under no obligation to, take into account
the tax consequences to any Partner of any action taken by it. The General
Partner and the Partnership shall not have liability to a Limited Partner
under any circumstances as a result of an income tax liability incurred by
such Limited Partner as a result of an action (or inaction) by the General
Partner taken pursuant to its authority under this Agreement and in
accordance with the terms hereof.
Section 7.2 Certificate of Limited Partnership
The General Partner has filed the Certificate with the Secretary
of State of Delaware as required by the Act. The General Partner shall use
all reasonable efforts to cause to be filed such other certificates or
documents as may be reasonable and necessary or appropriate for the
continuation, qualification and operation of a limited partnership (or a
partnership in which the limited partners have limited liability) in the
State of Delaware and any other state, or the District of Columbia, in
which the Partnership may elect to do business or own property. To the
extent that such action is determined by the General Partner to be
reasonable and necessary or appropriate, the General Partner shall file
amendments to and restatements of the Certificate and do all of the things
to maintain the Partnership as a limited partnership (or a partnership in
which the limited partners have limited liability) under the laws of the
State of Delaware and each other state, or the District of Columbia, in
which the Partnership may elect to do business or own property. Subject to
the terms of Section 8.5.A(4) hereof, the General Partner shall not be
required, before or after filing, to deliver or mail a copy of the
Certificate or any amendment thereto to any Limited Partner.
Section 7.3 Management and Reimbursement of the General Partner
The General Partner and/or its Affiliates shall have the right,
but not the obligation, in the sole discretion of the General Partner, to
perform all or any of the property management services on account of the
property owned or managed by the Partnership, the Mall Partnership or any
Affiliate, and may, in connection therewith, cause the Partnership, the
Mall Partnership or any Affiliate to enter into a management agreement with
the General Partner or one or more of its Affiliates, in form and substance
acceptable to the General Partner in its sole discretion. If the General
Partner elects to so perform, or to have an Affiliate so perform, the
property management services, then the General Partner or its Affiliate
shall be reimbursed expenses and otherwise compensated therefor by the
Partnership in amounts determined by the General Partner, in its good faith
discretion, to be comparable to amounts which would be charged by reputable
unrelated third party property management companies which have substantial
experience in performing property management services for properties of the
type owned or managed by the Partnership for institutional owners with
portfolios under management which are substantially similar in size,
nature, and condition of property owned or managed by the Partnership. The
reimbursements and fees payable to the General Partner or its Affiliates
under this Section shall be paid no less frequently than monthly. Except
as provided in this Section 7.3 and elsewhere in this Agreement (including
the provisions of Articles 5 and 6 regarding distributions, payments, and
allocations to which it may be entitled), the General Partner shall not be
compensated for its services as general partner of the Partnership. The
General Partner shall be reimbursed by the Partnership (to the extent not
paid by the Mall Partnership) on a monthly basis, or such other basis as it
may determine in its sole and absolute discretion, for all expenses that it
incurs relating to the ownership and operation of, or for the benefit of,
the Partnership or any of its assets.
Section 7.4 Outside Activities of the General Partner
The General Partner and its Affiliates shall be permitted to
purchase, own, operate, manage and otherwise deal with and profit from any
property, real, personal or mixed, not owned by the Partnership for their
own account and benefit, whether or not competitive with the business and
affairs of the Partnership, and neither the Partnership, any Limited
Partner, or any other Person shall have any right, claim, interest or cause
of action therein or as a result thereof; provided, however, that during
the Restricted Period the General Partner shall not engage in any
activities other than the ownership of its Interests in the Partnership and
activities incidental thereto. Without limiting the generality of the
above, nothing in this Agreement shall obligate the General Partner or its
Affiliates to first offer the Partnership an opportunity to invest in any
investment which has been offered to or found by the General Partner or its
Affiliates, whether or not such investment is of a nature that may be
invested in by the Partnership or would compete directly or indirectly with
the business of the Partnership. The Limited Partners hereby acknowledge
that the General Partner currently owns a variety of real estate
investments and may in the future acquire additional real estate
investments that may be competitive with the business of the Partnership.
Section 7.5 Contracts with Affiliates
A. During the Restricted Period with the consent of a majority
in interest of the Limited Partners (excluding interests held by the
General Partner or its Affiliates) (provided, however, that no consent
shall be required in connection with a Permitted Loan Transaction) and from
and after the expiration of the Restricted Period without the consent of
the Limited Partners, the Partnership may lend or contribute funds or other
assets to its Subsidiaries, the General Partner or its Affiliates or other
Persons in which it has an equity investment and such Persons may borrow
funds from the Partnership, on terms and conditions established in the sole
and absolute discretion of the General Partner (provided, however, that any
loans to the General Partner or its Affiliates shall be at a rate of
interest not less than the prime rate in effect at the time such loan is
made, as quoted in the Wall Street Journal). The foregoing authority shall
not create any right or benefit in favor of any Subsidiary or any other
Person.
B. From and after the expiration of the Restricted Period, the
Partnership may transfer assets to joint ventures, other partnerships,
corporations or other business entities in which it is or thereby becomes a
participant upon such terms and subject to such conditions consistent with
this Agreement and applicable law as the General Partner, in its sole and
absolute discretion, believes are advisable.
C. Except as expressly permitted by this Agreement, neither the
General Partner nor any of its Affiliates shall sell, transfer or convey
any property to, or purchase or otherwise acquire any property from, the
Partnership, directly or indirectly, except pursuant to transactions that
are determined by the General Partner in good faith to be fair and
reasonable to the Partnership.
D. From and after the expiration of the Restricted Period, the
General Partner, in its sole and absolute discretion and without the
approval of the Limited Partners, may propose and adopt, on behalf of the
Partnership, employee benefit plans, stock option plans, and similar plans
funded by the Partnership for the benefit of employees of, Subsidiaries of
the Partnership or any Affiliate of any of them in respect of services
performed, directly or indirectly, for the benefit of the Partnership or
any Subsidiaries of the Partnership. Any or all of the foregoing may be
jointly established with the General Partner or its Affiliates, provided
that in such case the allocation of expense shall be shared among the
parties on whose behalf such plans exist as determined by the General
Partner in good faith to be fair and reasonable.
Section 7.6 Indemnification
A. To the fullest extent permitted by law, the Partnership
shall indemnify each Indemnitee from and against any and all losses,
claims, damages, liabilities, joint or several, expenses (including,
without limitation, attorneys' fees and other legal fees and expenses),
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 or the General Partner in its capacity as general partner of
the Partnership as set forth in this Agreement, in which such Indemnitee
may be involved, or is threatened to be involved, as a party or otherwise,
whether or not suit or other legal proceedings are commenced, unless it is
established by a court of competent jurisdiction and all appeals relating
thereto have been fully completed or the applicable appeal periods have
expired that: (i) the act or omission of the Indemnitee was material to
the matter giving rise to the proceedings and either was committed in bad
faith or was the result of active and deliberate dishonesty or a wilful and
knowing breach of this Agreement; (ii) the Indemnitee actually received an
improper and unpermitted personal benefit in money, property or services;
or (iii) in the case of any criminal proceeding, the Indemnitee knew, or
was reckless in not knowing, that the act or omission was unlawful.
Without limitation, the foregoing indemnity shall extend to any liability
of any Indemnitee pursuant to a loan guaranty, recourse obligation, general
partner liability, or otherwise for any indebtedness of the Partnership or
any Subsidiary of the Partnership (including, without limitation, any
indebtedness which the Partnership or any Subsidiary of the Partnership has
assumed or taken subject to), and the General Partner is hereby authorized
and empowered, on behalf of the Partnership, to enter into one or more
indemnity agreements consistent with the provisions of this Section 7.6 in
favor of any Indemnitee having or potentially having liability for any such
indebtedness. The termination of any proceeding by judgment, order or
settlement does not create a presumption that the Indemnitee did not meet
the requisite standard of conduct as set forth in this Section 7.6A. The
termination of any proceeding by conviction of an Indemnitee, or an entry
of an order of probation against an Indemnitee prior to judgment, in each
case after all appeals relating thereto have been fully completed or the
applicable appeal periods have expired, creates a rebuttable presumption
that such Indemnitee acted in a manner contrary to that Specified in this
Section 7.6A with respect to the subject matter of such proceeding. Any
indemnification pursuant to this Section 7.6 shall be made only out of the
assets of the Partnership, and neither the General Partner nor any Limited
Partner shall have any obligation to contribute to the capital of the
Partnership, or otherwise provide funds, to enable the Partnership to fund
its obligations under this Section 7.6.
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.
C. The indemnification provided by this Section 7.6 shall be in
addition to any other rights to which an Indemnitee or any other Person may
be entitled under any agreement, pursuant to any vote of the Partners, as a
matter of law or otherwise, and shall continue as to an Indemnitee who has
ceased to serve in such capacity unless otherwise provided in a written
agreement pursuant to which such Indemnities are indemnified.
D. The Partnership may, but shall not be obligated to, purchase
and maintain insurance, on behalf of the Indemnities and such other Persons
as the General Partner shall 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 power to indemnify such Person against such
liability under the provisions of this Agreement.
E. For purposes of this Section 7.6, the Partnership shall be
deemed to have requested an Indemnitee to serve as fiduciary of an employee
benefit plan whenever the performance by it of its duties to the
Partnership also imposes duties on, or otherwise involves services by, it
to the plan or participants or beneficiaries of the plan; excise taxes
assessed on an Indemnitee with respect to an employee benefit plan pursuant
to applicable law shall constitute fines within the meaning of Section 7.6;
and actions taken or omitted by the Indemnitee with respect to an employee
benefit plan in the performance of its duties for a purpose reasonably
believed by it to be in the interest of the participants and beneficiaries
of the plan shall be deemed to be for a purpose which is not opposed to the
best interests of the Partnership.
F. In no event may an Indemnitee subject any of the Partners to
personal liability by reason of the Indemnification provisions set forth in
this Agreement.
G. An Indemnitee shall not be denied indemnification in whole
or in part under this Section 7.6 because the Indemnitee had an interest in
the transaction with respect to which the indemnification applies if the
transaction was otherwise permitted by the terms of this Agreement.
H. The provisions of this Section 7.6 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. Any amendment, modification or repeal of this Section 7.6 or any
provision hereof shall be prospective only and shall not in any way affect
the Partnership's liability to any Indemnitee under this Section 7.6, as in
effect immediately prior to such amendment, modification, or repeal with
respect to claims arising from or relating to matters occurring, in whole
or in part, prior to such amendment, modification or repeal, regardless of
when such claims may arise or be asserted.
Section 7.7 Liability of the General Partner
A. Notwithstanding anything to the contrary set forth in this
Agreement (except as otherwise set forth in Section 7.7E below), the
General Partner and its members, officers and directors shall not be liable
for monetary damages to the Partnership, any Partners or any Assignees for
losses sustained or liabilities incurred as a result of errors in judgment
or any act or omission if the General Partner acted without bad faith,
without a knowing and wilful breach of the agreement and without active and
deliberate dishonesty.
B. The Limited Partners expressly acknowledge that the General
Partner is acting on behalf of the Partnership and the shareholders of WEA
collectively, that the General Partner is under no obligation to consider
the separate interests of the Limited Partners (except as otherwise
provided herein) in deciding whether to cause the Partnership to take (or
decline to take) any actions, and that the General Partner shall not be
liable for monetary damages for losses sustained, liabilities incurred, or
benefits not derived by Limited Partners in connection with such decisions,
provided that the General Partner has acted without bad faith, without a
knowing and wilful breach of the agreement and without active and
deliberate dishonesty.
C. Subject to its obligations and duties as General Partner set
forth in Section 7.1.A hereof, the General Partner may exercise any of the
powers granted to it by this Agreement and perform any of the duties
imposed upon it hereunder either directly or by or through its agents. The
General Partner shall not be responsible for any misconduct or negligence
on the part of any such agent appointed by the General Partner taken
without bad faith, without a knowing and wilful breach of the agreement and
without active and deliberate dishonesty.
D. Any amendment, modification or repeal of this Section 7.7 or
any provision hereof shall be prospective only and shall not in any way
affect the limitations on the General Partner's and its officers and
directors' liability to the Partnership and the Limited Partners under this
Section 7.7 as in effect immediately prior to such amendment, modification
or repeal with respect to claims arising from or relating to matters
occurring, in whole or in part, prior to such amendment, modification or
repeal, regardless of when such claims may arise or be asserted.
E. Nothing in this Section 7.7 shall be deemed to be a release
or waiver by the Limited Partners of (or an agreement by the Limited
Partners not to assert) any claims against the General Partner which may
arise as a result of a breach by the General Partner of its obligations
contained in Sections 4.1.C, 4.2.B, 4.3, 5.1.A, 6.2, 7.7.E, 8.6, 8.7, 10.2,
11.2, 14.1.C and 14.1.D of this Agreement, the first sentence of Section
4.5 of this Agreement and Sections 2.B.1(a) and 2.B.3 of Exhibit C hereto.
Section 7.8 Other Matters Concerning the General Partner
A. The General Partner may rely and shall be protected in
acting, or refraining from acting, upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent, order,
bond, debenture, or other paper or document believed by it in good faith to
be genuine and to have been signed or presented by the proper party or
parties.
B. The General Partner may consult with legal counsel,
accountants, appraisers, management consultants, investment bankers,
architects, engineers, environmental consultants and other consultants and
advisers selected by it, and any act taken or omitted to be taken in
reliance upon the opinion of such Persons as to matters which such General
Partner reasonably believes to be within such Person's professional or
expert competence shall be conclusively presumed to have been done or
omitted in good faith and in accordance with such opinion.
C. The General Partner shall have the right, in respect of any
of its powers or obligations hereunder, to act through any of its duly
authorized officers and duly appointed attorneys-in-fact. Each such
attorney shall, to the extent provided by the General Partner in the power
of attorney, have full power and authority to do and perform all and every
act and duty which is permitted or required to be done by the General
Partner hereunder.
D. Notwithstanding any other provisions of this Agreement or
the Act, any action of the General Partner on behalf of the Partnership or
any decision of the General Partner to refrain from acting on behalf of the
Partnership, undertaken in the good faith belief that such action or
omission is necessary or advisable in order: (i) to protect the ability of
WEA to continue to qualify as a REIT; or (ii) to avoid the General Partner
or WEA incurring any taxes under Section 857 or Section 4981 of the Code,
is expressly authorized under this Agreement and is deemed approved by all
of the Limited Partners. To the extent that the General Partner takes any
such action which could reasonably be expected to have a material adverse
effect upon the Limited Partners, the General Partner shall promptly notify
the Limited Partners thereof. The General Partner shall indemnify and hold
the Limited Partners harmless from and against any and all claims, losses
and liabilities resulting from any such actions by the General Partner
under this Section 7.8.D which would constitute a breach or violation of
Sections 4.1.C, 4.2.B, 4.3, 5.1.A, 6.2, 7.7.E, 8.6, 8.7, 10.2, 11.2, 14.1.C
or 14.1.D of this Agreement, the first sentence of Section 4.5 of this
Agreement or Sections 2.B.1(a) and 2.B.3 of Exhibit C hereto absent the
first sentence of this Section 7.8.D.
Section 7.9 Title to Partnership Assets
Title to Partnership assets, whether real, personal or mixed and
whether tangible or intangible, shall be deemed to be owned by the
Partnership as an entity, and no Partner, individually or collectively,
shall have any ownership interest in such Partnership assets or any portion
thereof. Title to any or all of the Partnership assets shall be held in
the name of the Partnership.
Section 7.10 Reliance by Third Parties
Notwithstanding anything to the contrary in this Agreement, any
Person dealing with the Partnership shall be entitled to assume that the
General Partner has full power and authority, without consent or approval
of any other Partner or Person, to encumber, sell or otherwise use in any
manner any and all assets of the Partnership and to enter into any
contracts on behalf of the Partnership, and take any and all actions on
behalf of the Partnership and such Person shall be entitled to deal with
the General Partner as if the General Partner were the Partnership's sole
party in interest, both legally and beneficially. Each Limited Partner
hereby waives any and all defenses or other remedies which may be available
against such Person to contest, engage or disaffirm any action of the
General Partner in connection with any such dealing. In no event shall any
Person dealing with the General Partner or its representatives be obligated
to ascertain that the terms of this Agreement have been complied with or to
inquire into the necessity or expedience of any act or action of the
General Partner or its representatives. Each and every certificate,
document or other instrument executed on behalf of the Partnership by the
General Partner or its representatives shall be conclusive evidence in
favor of any and every Person relying thereon or claiming thereunder that:
(i) at the time of the execution and delivery of such certificate, document
or instrument, this Agreement was in full force and effect; (ii) the Person
executing and delivering such certificate, document or instrument was duly
authorized and empowered to do so for and on behalf of the Partnership; and
(iii) such certificate, document or instrument was duly executed and
delivered in accordance with the terms and provisions of this Agreement and
is binding upon the Partnership.
ARTICLE 8
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
Section 8.1 Limitation of Liability
The Limited Partners shall have no liability under this
Agreement, except as expressly provided in this Agreement (including
Section 10.5 hereof) or under the Act.
Section 8.2 Management of Business
No Limited Partner or Assignee (other than the General Partner,
any of its Affiliates or any officer, director, employee, agent or trustee
of the General Partner, the Partnership or any of their Affiliates, in
their capacity as such) shall take part in the operation, management or
control (within the meaning of the Act) 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. The transaction of any
such business by the General Partner, any of its Affiliates or any officer,
director, employee, partner, agent or trustee of the General Partner, the
Partnership or any of their Affiliates, in their capacity as such, shall
not affect, impair or eliminate the limitations on the liability of the
Limited Partners or Assignees under this Agreement.
Section 8.3 Outside Activities of Limited Partners
Subject to the terms and provisions hereof (including, without
limitation, Section 7.4), it is agreed that any Partner (General and/or
Limited) and any Affiliate of any Partner (including any officer, director,
employee, agent, or representative of any Partner) shall be entitled to and
may have business interests and engage in business activities in addition
to those relating to the Partnership, including business interests and
activities that are in direct competition with the Partnership or that are
enhanced by the activities of the Partnership. Neither the Partnership nor
any Partners shall have any rights, claims, or interests by virtue of this
Agreement or any relationships, duties or obligations hereunder (including,
but not limited to, any fiduciary or similar duties created by this
Agreement, under the Act, or otherwise existing at law or in equity) in any
business ventures or investments of any General Partner or Limited Partner,
or any Affiliate of any of the foregoing. None of the Limited Partners nor
any other Person shall have any rights by virtue of this Agreement or the
Partnership relationship established hereby in any business ventures of any
other Person, and such Person shall have no obligation pursuant to this
Agreement to offer any interest in any such business ventures to the
Partnership, any Limited Partner or any such other Person, even if such
opportunity is of a character which, if presented to the Partnership, any
Limited Partner or such other Person could be taken by such Person.
It is further agreed that none of the Partners, General or
Limited, or any of their Affiliates, have any duty, obligation, or
liability to present to the Partnership any business or investment
opportunity which may arise in the course of activity for or on behalf of
the Partnership, or otherwise, for investment by the Partnership or any of
the Partners (even if within the line and scope of the business and affairs
of the Partnership), and instead any Partner, General or Limited, and any
Affiliate may pursue such opportunity for such Partners or Affiliate's own
benefit and account, without any participation, right, or claim therein by
the Partnership or any other Partner, and without notification or
disclosure to the Partnership or any other Partner.
Section 8.4 Return of Capital
No Limited Partner shall be entitled to the withdrawal or return
of its Capital Contribution, except to the extent of distributions made
pursuant to this Agreement or upon termination of the Partnership as
provided herein. Except to the extent provided by Exhibit "C" hereof or as
otherwise expressly provided in this Agreement, no Limited Partner or
Assignee shall have priority over any other Limited Partner or Assignee,
either as to the return of Capital Contributions or as to profits, losses
or distributions.
Section 8.5 Rights of Limited Partners Relating to the
Partnership
A. In addition to the other rights (including, without
limitation, rights to receive other information) provided by this Agreement
or by the Act, and except as limited by Section 8.5.B hereof, each Limited
Partner shall have the right, upon written demand:
(1) to obtain a copy of the most recent annual and
quarterly balance sheet, income statement, and related financial statements
prepared by the Partnership;
(2) to obtain a copy of the Partnership's federal, state
and local income tax returns for each Partnership Year;
(3) to obtain a current list of the name and last known
business, residence or mailing address of each Partner;
(4) to obtain a copy of this Agreement and the Certificate
and all amendments thereto, together with executed copies of all powers of
attorney pursuant to which this Agreement, the Certificate and all
amendments thereto have been executed; and
(5) to obtain true and full information regarding the
amount of cash and a description and statement of any other property or
services contributed by each Partner and which each Partner has agreed to
contribute in the future, and the date on which each became a Partner to
the extent the foregoing is materially different from information contained
in financial statements or other reports provided to Limited Partners.
The request by a Limited Partner of quarterly and annual balance
sheets and income statements regularly prepared by the Partnership in order
to verify the correctness of distributions of cash, if any, to the Limited
Partner in accordance with the terms and provisions of this Agreement shall
be considered a purpose reasonably related to the Limited Partner's
interest as a limited partner in the Partnership.
B. Notwithstanding any other provision of this Section 8.5, the
General Partner may keep confidential from the Limited Partners, for such
period of time as the General Partner determines in its sole and absolute
discretion to be reasonable, any information that: (i) the General Partner
reasonably believes to be in the nature of trade secrets or other
information, the disclosure of which the General Partner in good faith
believes is not in the best interests of the Partnership or could damage
the Partnership or its business; or (ii) the Partnership is required by law
or by agreement with an unaffiliated third party to keep confidential.
Section 8.6 Redemption Rights
Subject to the terms and conditions hereof, at any time following
the first anniversary of the Effective Date, the Limited Partner shall have
the right (the "Redemption Right") to cause the Partnership to redeem all
or any portion (but not less than 500) of the Partnership Units then held
by the Limited Partner. The redemption price per Partnership Unit (the
"Redemption Price") shall be equal to the Market Value of one share of
common stock of WEA and shall be payable, at the option of the General
Partner, in the form of cash or shares of common stock of WEA (valued at
the Market Value), or any combination thereof, within ten business days
following written notice to the General Partner of the exercise of the
Redemption Right. In addition to the Redemption Price, the Limited Partner
shall also be entitled to receive cash or WEA common stock in an amount
equal to any accrued but unpaid Priority Return related to the Partnership
Units which are being redeemed. Except for the Redemption Right, no
Limited Partner shall have the right to require the Partnership to redeem
all or a portion of the Partnership Units held by such Limited Partner. In
the event that the General Partner elects to pay the Redemption Price in
the form of cash, any portion of the Redemption Price which remains unpaid
for more than ten (10) Business Days after delivery of a valid redemption
notice, shall thereafter bear interest at the then-prevailing adjusted
short-term applicable federal rate as of the date of such notice. Any
exercise of the Redemption Rights hereunder shall be subject to and
conducted in accordance with the terms and conditions of (including,
without limitation, notices, required deliveries and deemed
representations) Section 16 of the First Amended and Restated Agreement of
Limited Partnership of the Operating Partnership, dated as of August 3,
1998, as the same may be amended, supplemented or modified form time to
time, except to the extent inconsistent with any of the express terms and
conditions of this Agreement and subject to such modifications or
adjustments as may be appropriate to reflect that the Redemption Rights
apply to the Partnership Units.
Section 8.7 Sale of All or Substantially All Assets
Notwithstanding anything to the contrary contained herein, during
the ten year period following the Effective Date the General Partner shall
not, without the prior approval of a majority of Limited Partner Interests
(excluding those held by the General Partner and its Affiliates), have the
right to consummate (i) the sale or other taxable disposition of all or any
material portion (except for routine disposition of personal property and
fixtures in the ordinary course of business) of the Partnership's assets
and properties (or the Mall Partnership's assets or properties) (whether in
one or a series of transactions) or (ii) a merger, consolidation or
dissolution of the Partnership or the Mall Partnership, which in either
case would result in the recognition of taxable gain by the Limited Partner
in such fiscal year. In addition, from and after the tenth anniversary of
the Effective Date, the General Partner shall use its good faith efforts,
to the extent not inconsistent with the business objectives of the General
Partner, WEA, the Operating Partnership or their respective Affiliates, to
consummate any such sale or disposition in a manner that would enable the
Limited Partners to defer the recognition of taxable gain. In addition,
during the seven (7) year period following the Effective Date, the General
Partner shall not, without the prior approval of a majority of Limited
Partner Interests (excluding those held by the General Partner and its
Affiliates), have the right to distribute any property contributed to the
Partnership by any Partner to another Partner if, as a result of such
distribution, any Limited Partner would recognize income pursuant to
Section 737 of Section 704(c)(1)(B) of the Code.
ARTICLE 9
BOOKS, RECORDS, ACCOUNTING AND REPORTS
Section 9.1 Records and Accounting
The General Partner shall keep or cause to be kept at the
principal office of the Partnership those records and documents required to
be maintained by the Act and other books and records deemed by the General
Partner to be appropriate with respect to the Partnership's business,
including without limitation, all books and records necessary to provide to
the Limited Partners any information, lists and copies of documents
required to be provided pursuant to Sections 8.5A and 9.3 hereof. Any
records maintained by or on behalf of the Partnership in the regular course
of its business may be kept on, or be in the form of, punch cards, magnetic
tape, photographs, micrographics or any other information storage device,
provided that the records so maintained are convertible into clearly
legible written form within a reasonable period of time. The books of the
Partnership shall be maintained, for financial and tax reporting purposes,
on an accrual basis in accordance with generally accepted accounting
principles, or such other basis as the General Partner determines to be
necessary or appropriate.
Section 9.2 Fiscal Year
The fiscal year of the Partnership shall be the calendar year.
Section 9.3 Reports
A. The Partnership shall mail to each Limited Partner no later
than ninety (90) days after the close of each Partnership Year an annual
report containing unaudited financial statements of the Partnership, for
such Partnership year, presented in accordance with generally accepted
accounting principles.
B. The Partnership shall mail to each Limited Partner no later
than ninety (90) days after the close of each calendar quarter (except the
last calendar quarter of each year), a report containing unaudited
financial statements of the Partnership, and such other information as may
be required by applicable law or regulation, or as the General Partner
determines to be appropriate.
C. All accounting and other professional costs and fees
associated with the preparation, compilation, review, audit, and any other
matters relating to the Partnership's records, financial statements and
reports, tax returns, and any other Partnership items described in the
preceding paragraphs shall be at the expense of the Partnership, not the
General Partner.
ARTICLE 10
TAX MATTERS
Section 10.1 Preparation of Tax Returns
The General Partner shall arrange for the preparation and timely
filing of all returns of Partnership income, gains, deductions, losses and
other items required of the Partnership for federal and state income tax
purposes and shall use all reasonable efforts to furnish, within ninety
(90) days of the close of each taxable year, the tax information reasonably
required by the Limited Partners for federal and state income tax reporting
purposes.
Section 10.2 Tax Elections
A. Except as otherwise provided herein, the General Partner
shall, in its sole and absolute discretion, determine whether to make any
available election pursuant to the Code; provided, however, that if
requested by a transferee of a Partnership Interest, the General Partner
shall file an election on behalf of the Partnership pursuant to Section 754
of the Code to adjust the basis of the Partnership property in the case of
a transfer of a Partnership Interest made in accordance with the provisions
of this Agreement. The General Partner intends to elect the so-called
"traditional method with curative allocations of gain from disposition of
contributed property" of making Section 704(c) allocations pursuant to
Regulations Section 1.704-3(c)(3)(iii)(B) with respect to property
contributed as of the date hereof. The General Partner shall have the
right to seek to revoke any tax election, other than the Section 704(c)
election described in the preceding sentence, it makes (including, without
limitation, the election under Section 754 of the Code) upon the General
Partner's determination, in its reasonable discretion, that such revocation
is in the best interest of the Partners.
B. The General Partner intends to elect to be treated as a
partnership under the Code, and, if applicable, for purposes of state and
local law.
Section 10.3 Tax Matters Partner
A. The General Partner shall be the "tax matters partner" of
the Partnership for federal income purposes. Pursuant to Section 6230(e)
of the Code, upon receipt of notice from the IRS of the beginning of an
administrative proceeding with respect to the Partnership, the tax matters
partner shall furnish the IRS with the name, address, taxpayer
identification number, and profit interest of each of the Limited Partners
and the Assignees; provided, however, that such information is provided to
the Partnership by the Limited Partners and the Assignees.
B. The tax matters partner is authorized, but not required:
(1) to enter into any settlement with the IRS with respect
to any administrative or judicial proceedings for the adjustment of
Partnership items required to be taken into account by a Partner for income
tax purposes (such administrative proceedings being referred to as a "tax
audit" and such judicial proceedings being referred to as "judicial
review"), and in the settlement agreement the tax matters partner may
expressly state that such agreement shall bind all Partners, except that
such settlement agreement shall not bind any Partner: (i) who (within the
time period prescribed pursuant to the Code and Regulations) files a
statement with the IRS providing that the tax matters partner shall not
have the authority to enter into a settlement agreement on behalf of such
Partner; or (ii) who is a "notice partner" (as defined in Section
6231(a)(8) of the Code) or a member of a "notice group" (as defined in
Section 6223(b)(2) of the Code);
(2) in the event that a notice of a final administrative
adjustment at the Partnership level of any item required to be taken into
account by a Partner for tax purposes (a "final adjustment") is mailed to
the tax matters partner, to seek judicial review of such final adjustment,
including the filing of a petition for readjustment with the Tax Court or
the District Court of the United States for the district in which the
Partnership's principal place of business is located;
(3) to intervene in any action brought by any other Partner
for judicial review of a final adjustment;
(4) to file a request for an administrative adjustment with
the IRS and, if any part of such request is not allowed by the IRS, to file
an appropriate pleading (petition or complaint) for judicial review with
respect to such request;
(5) to enter into an agreement with the IRS to extend the
period for assessing any tax which is attributable to any item required to
be taken account of by a Partner for tax purposes, or an item affected by
such item; and
(6) to take any other action of behalf of the Partners or
the Partnership in connection with any tax audit or judicial review
proceeding to the extent permitted by applicable law or regulations.
The taking of any action and the incurring of any expense by the
tax matters partner in connection with any such proceeding, except to the
extent required by law, is a matter in the sole and absolute discretion of
the tax matters partner and the provisions relating to indemnification of
the General Partner set forth in Section 7.7 of this Agreement shall be
fully applicable to the tax matters partner in its capacity as such.
C. The tax matters partner shall receive no special
compensation for its services as such. All third party costs and expenses
incurred by the tax matters partner in performing its duties as such
(including legal and accounting fees and expenses) shall be borne or
reimbursed by the Partnership. Nothing herein shall be construed to
restrict the Partnership from engaging an accounting firm to assist the tax
matters partner in discharging its duties hereunder, including an
accounting firm which also renders services to the General Partner and its
Affiliates.
Section 10.4 Organizational Expenses
The Partnership shall elect to deduct expenses, if any, incurred
by it in organizing the Partnership ratably over a sixty (60) month period
as provided in Section 709 of the Code.
Section 10.5 Withholding
Each Partner hereby authorizes the Partnership to withhold from,
or pay on behalf of or with respect to, such Partner any amount of federal,
state, local or foreign taxes that the General Partner determines that the
Partnership is required to withhold or pay with respect to any amount
payable, distributable or allocable to such Partner pursuant to this
Agreement, including, without limitation, any taxes required to be withheld
or paid by the Partnership pursuant to Sections 1441, 1442, 1445, or 1446
of the Code. Any amount paid on behalf of or with respect to any Partner
shall constitute a loan by the Partnership to such Partner, which loan
shall be repaid by such Partner within fifteen (15) days after notice from
the General Partner that such payment must be made, unless: (i) the
Partnership withholds such payment from a distribution which would
otherwise be made to the Partner; or (ii) the General Partner determines,
in its sole and absolute discretion, that such payment may be satisfied out
of the available funds of the Partnership which would, but for such
payment, be distributed to the Partner. Any amounts withheld pursuant to
the foregoing clauses (i) or (ii) shall be treated as having been
distributed to such Partner. Each Partner hereby unconditionally and
irrevocably grants to the Partnership a security interest in such Partner's
Partnership Interest to secure such Partner's obligation to pay to the
Partnership any amounts required to be paid pursuant to this Section 10.5.
In the event that a Partner fails to pay any amounts owed to the
Partnership pursuant to this Section 10.5 when due, the General Partner
may, in its sole and absolute discretion, elect to make the payment to the
Partnership on behalf of such defaulting Partner, and shall succeed to all
rights and remedies of the Partnership as against such defaulting Partner.
Without limitation, in such event the General Partner shall have the right
to receive distributions that would otherwise be distributable to such
defaulting Partner until such time as such loan, together with all interest
thereon, has been paid in full, and any such distributions so received by
the General Partner shall be treated as having been distributed to the
defaulting Partner and immediately paid by the defaulting Partner to the
General Partner in repayment of such loan. Any amounts payable by a
Partner hereunder shall bear interest at the lesser of (A) the base rate on
corporate loans at large United States money center commercial banks, as
published from time to time in the Wall Street Journal, plus four (4)
percentage points, or (B) the maximum lawful rate of interest on such
obligation, such interest to accrue from the date such amount is due (i.e.,
fifteen (15) days after demand) until such amount is paid in full. Each
Partner shall at its own expense take such actions as the Partnership or
the General Partner shall request in order to perfect or enforce the
security interest created hereunder.
ARTICLE 11
TRANSFERS AND WITHDRAWALS
Section 11.1 Transfer
A. The term "transfer" when used in this Article 11 with
respect to a Partnership Unit shall be deemed to refer to a transaction by
which the General Partner purports to assign all or any part of its General
Partner Interest to another Person or by which a Limited Partner purports
to assign all or any part of its Limited Partner Interest to another
Person, and includes a sale, assignment, gift, pledge, encumbrance,
hypothecation, mortgage, exchange or any other disposition by law or
otherwise. The term "transfer" when used in this Article 11 does not
include any acquisition of Partnership Interests by the General Partner
from any Limited Partner of any Partnership Units, nor does it include any
grant of a security interest or any related action involving levy,
execution, or the like contemplated under Section 10.5 of this Agreement.
B. No Partnership Interest shall be transferred, in whole or in
part (including any interest therein), except in accordance with the terms
and conditions set forth in this Article 11. Any transfer or purported
transfer of a Partnership Interest not made in accordance with this Article
11 shall be null and void ab initio, and the Partnership shall have no duty
or obligation to recognize the transferee as a partner or holder of any
interest whatsoever in the Partnership, and the transferee shall have no
rights, interests or claims in or against the Partnership or any Partner.
Section 11.2 Transfer of the General Partner's Interests
During the Restricted Period, the General Partner may transfer
any of its General Partner Interests or Limited Partner Interests to any
Affiliate of the General Partner or otherwise in connection with any merger
reorganization or restructuring of WEA or the Operating Partnership without
consent or approval of the Limited Partners. During the Restricted period,
except as permitted in the preceding sentence, without the consent or
approval of a majority in interest of the Limited Partners (other than
interests held by the General Partner or its Affiliates), the General
partner shall not otherwise transfer all or any portion of its General
Partner Interests or withdraw as a General Partner of the Partnership.
From and after the expiration of the Restricted Period, the General Partner
may transfer any of its General Partner Interest or withdraw as General
Partner, or transfer any of its Limited Partner Interest, without consent
or approval from any Limited Partners, and any Affiliate of the General
Partner may transfer any of its General Partner Interest or Limited Partner
Interest without consent or approval from any Limited Partners.
Section 11.3 Limited Partners' Rights to Transfer
A. Except for a transfer to the General Partner, the Operating
Partnership or any other Affiliate of the General Partner (or its
successors, assignees, affiliates and designees), a Limited Partner (other
than the General Partner and its Affiliates) shall not transfer all or any
portion of its Partnership Interest, or any of such Limited Partner's
economic rights as a Limited Partner without the prior written consent of
the General Partner, which may be withheld in the General Partner's sole
discretion; provided, however, that a Limited Partner may, subject to the
provisions of Sections 11.3.C, 11.3.D, 11.3.E, and 11.4 but without the
requirement of first obtaining the consent of the General Partner, transfer
all or any portion of its Partnership Interest, or any of such Limited
Partner's economic rights as a Limited Partner, to (i) the partners of the
Limited Partner as of the date hereof or the constituent partners, members,
beneficiaries or shareholders as of the date hereof of such partners (each
an "Indirect LP Party"), (ii) immediate family members of the Limited
Partners or of any Indirect LP Party, and (iii) family planning trusts in
which the Limited Partner or any Indirect LP Party (together with their
immediate family members) has a 50% or greater economic interest, provided,
further, however, that any such transferee shall first have executed and
delivered a written agreement, in form and substance reasonably
satisfactory to the General Partner, agreeing to be bound by the terms of
this Agreement.
B. If a Limited Partner is subject to Incapacity, the partners,
executor, administrator, trustee, committee, guardian, conservator or
receiver of such Limited Partner's estate shall have all of the rights of a
Limited Partner, but not more rights than those enjoyed by other Limited
Partners, for the purpose of settling or managing the estate and such power
as the Incapacitated Limited Partner possessed to transfer all or any part
of his or its interest in the Partnership. The Incapacity of a Limited
Partner, in and of itself, shall not dissolve or terminate the Partnership.
C. The General Partner may prohibit any transfer by a Limited
Partner or its Partnership Units if, in the opinion of legal counsel to the
Partnership or the General Partner, such transfer would require
registration under the Securities Act of 1933, as amended, or would
otherwise violate any federal or state securities laws or regulations
applicable to the Partnership or the Partnership Units.
D. No transfer by a Limited Partner of its Partnership Units
may be made to any Person if: (i) in the opinion of legal counsel for the
Partnership or the General Partner, it would result in the Partnership
being treated as an association taxable as a corporation; (ii) such
transfer is effectuated through an "established securities market" or a
"secondary market (or the substantial equivalent thereof)" within the
meaning of Section 7704 of the Code; (iii) such transfer would cause the
Partnership to become, with respect to any employee benefit plan subject to
Title I of ERISA, a "party-in-interest" (as defined in Section 3(14) of
ERISA) or a "disqualified person" (as defined in Section 4975(c) of the
Code); (iv) such transfer would, in the opinion of legal counsel for the
Partnership or the General Partner, cause any portion of the assets of the
Partnership to constitute assets of any employee benefit plan pursuant to
Department of Labor Regulations Section 2510.2-101; (v) such transfer would
subject the Partnership to be regulated under the Investment Company Act of
1940, the Investment Advisors Act of 1940 or the Employee Retirement Income
Security Act of 1974, each as amended; or (vi) in the opinion of legal
counsel for the Partnership or the General Partner, it would adversely
affect the ability of WEA to continue to qualify as a REIT or subject the
General Partner or WEA to any additional taxes under Section 857 or Section
4981 of the Code.
E. No transfer of any Partnership Units may be made to a lender
to the Partnership or any Person who is related (within the meaning of
Section 1.752-4(b) of the Regulations) to any lender to the Partnership
whose loan constitutes a Nonrecourse Liability, without the consent of the
General Partner, in its sole and absolute discretion; provided that as a
condition to such consent the lender will be required to enter into an
arrangement with the Partnership or the General Partner to exchange or
redeem at a price agreeable to the lender, the General Partner, and the
transferring Partner (each in their respective discretion) any Partnership
Units in which a security interest is held immediately prior to the time at
which such lender would be deemed to be a partner in the Partnership for
purposes of allocating liabilities to such lender under Section 752 of the
Code, and provided further, that each Limited Partner adversely affected by
such transfer shall be given an opportunity to guaranty all or a portion of
the indebtedness of the Partnership as provided in Section 4.5.
Section 11.4 Substituted Limited Partners
A. Except for a transferee permitted pursuant to Section
11.3.A, no Limited Partner shall have the right to substitute a transferee
as a Limited Partner in his place. Any transferee permitted pursuant to
Section 11.3.A shall be admitted to the Partnership as a Substituted
Limited Partner. In addition, the General Partner shall have the right to
consent to the admission of any other transferee of the interest of a
Limited Partner pursuant to this Section 11.4 as a Substituted Limited
Partner, which consent may be given or withheld by the General Partner in
its sole and absolute discretion. The General Partner's failure or refusal
to permit a transferee of any such interests to become a Substituted
Limited Partner shall not give rise to any cause of action against the
Partnership or any Partner.
B. A transferee who has been admitted as a Substituted Limited
Partner in accordance with this Article 11 shall have all the rights and
powers and be subject to all the restrictions and liabilities of a Limited
Partner under this Agreement.
C. Upon admission of a Substituted Limited Partner, the General
Partner shall amend Exhibit A to reflect the name, address, number of
Partnership Units, and Percentage Interest of such Substituted Limited
Partner.
Section 11.5 Assignees
If the General Partner, in its sole and absolute discretion, does
not consent to the admission of any transferee as a Substituted Limited
Partner, as described in Section 11.4, such transferee shall be considered
an Assignee for purposes of this Agreement. An Assignee shall be deemed to
have had assigned to it, and shall be entitled to receive, distributions
from the Partnership and the share of Net Income, Net Losses, Recapture
Income, and any other items, gain, loss deduction and credit of the
Partnership attributable to the Partnership Units assigned to such
transferee, but shall not be deemed to be a holder of Partnership Units for
any other purpose under this Agreement, and shall not be entitled to vote
such Partnership Units for any other purpose under this Agreement, and
shall not be entitled to vote such Partnership Units in any matter
presented to the Limited Partners for a vote (such Partnership Units being
deemed to have been voted on such matters in the same proportion as all
other Partnership Units held by Limited Partners are voted). In the event
any such transferee desires to make a further assignment of any such
Partnership Units, such transferee shall be subject to all of the
provisions of this Article 11 to the same extent and in the same manner as
any Limited Partner desiring to make an assignment of Partnership Units.
Section 11.6 General Provisions
A. No Limited Partner may withdraw from the Partnership other
than as a result of a permitted transfer of all such Limited Partner's
Partnership Units in accordance with this Article 11 or a redemption in
accordance with Section 8.6 hereof, or pursuant to any agreement consented
to by the Partnership pursuant to which the Limited Partner's interests in
the Partnership are conveyed and the Limited Partner's withdrawal is
provided for (including, without limitation the OP Contribution Agreement
of even date herewith between the Limited Partner and the Operating
Partnership).
B. Any Limited Partner who shall transfer all of its
Partnership Units in a transfer permitted pursuant to this Article 11 shall
cease to be a Limited Partner upon the admission of all Assignees of such
Partnership Units as Substitute Limited Partners. Similarly, any Limited
Partner who shall transfer all of its Partnership Units pursuant to any
agreement of the type referred to in the preceding paragraph shall cease to
be a Limited Partner.
C. (1) If any Partnership Unit is transferred, or upon the
admission or withdrawal of a Partner, in accordance with the provisions of
the Agreement during any calendar year, the income or loss attributable to
such Partnership Unit for such calendar year shall be divided and allocated
among the Partners based upon an interim closing of the Partnership's books
or another permissible method selected by the General Partner. For the
purposes of accounting convenience and simplicity, if the "interim closing
of the books" method is selected, the Partnership shall treat a transfer
of, or any increase or decrease in, a Partnership Unit which occurs at any
time during any monthly period as having been consummated on the first day
of such monthly period, regardless of when during such monthly period such
transfer, increase or decrease actually occurs.
(2) Distributions under Sections 5.1 and 13.2 and
Guaranteed Payments under Section 4.1.C shall be made only to Partners and
transferees who, according to the books and records of the Partnership, are
Partners or transferees on the actual date of distribution. Neither the
Partnership nor any Partner shall incur any liability for making
distributions in accordance with this Section 11.6.C.(2).
ARTICLE 12
ADMISSION OF PARTNERS
Section 12.1 Admission of Successor General Partner
A successor to all of the General Partner Interest pursuant to
Section 11.2 hereof who is proposed to be admitted as successor General
Partner shall be admitted to the Partnership as the General Partner,
effective upon such transfer. The admission of any such transferee shall
not cause a dissolution of the Partnership and such transferee shall carry
on the business of the Partnership in accordance with the terms and
provisions of this Agreement. In each case, the admission shall be subject
to the successor General Partner executing and delivering to the
Partnership an acceptance of all of the terms and conditions of this
Agreement and such other documents or instruments as may be required to
effect the admission. In the case of such admission on any day other than
the first day of a Partnership Year, all items attributable to the General
Partner Interest for such Partnership Year shall be allocated between the
transferring General Partner and such successor as provided in Section
11.6.C hereof.
Section 12.2 Admission of Additional Limited Partners
A. Except as otherwise provided elsewhere in this Agreement and
subject to the terms and conditions set forth in Section 4.3 hereof, after
the admission to the Partnership of the initial Limited Partners on the
date hereof, a Person who makes a Capital Contribution to the Partnership
in accordance with this Agreement shall be admitted to the Partnership as
an Additional Limited Partner only upon furnishing to the General Partner
(i) evidence of acceptance in form reasonably satisfactory to the General
Partner of all of the terms and conditions of this Agreement, including,
without limitation, the power of attorney granted in Section 2.4 hereof,
and (ii) such other documents or instruments as may be required in the
reasonable discretion of the General Partner in order to effect such
Person's admission as an Additional Limited Partner.
B. Notwithstanding anything to the contrary in this Section
12.2, no Person shall be admitted as an Additional Limited Partner without
the consent of the General Partner, which consent may be given or withheld
in the General Partner's sole and absolute discretion and, during the
Restricted Period, the consent of a majority in interest of the Limited
Partner (excluding interests held by the General Partner or its
Affiliates). The admission of any Person as an Additional Limited Partner
shall become effective on the date upon which the name of such Person is
recorded on the books and records of the Partnership, following the consent
of the General Partner to such admission.
C. If any Additional Limited Partner is admitted to the
Partnership on any day other than the first day of a Partnership Year, then
Net Income, Net Losses, each item thereof and all other items allocable
among Partners and Assignees for such Partnership Year shall be allocated
among such Additional Limited Partner and all other Partners and Assignees
by taking into account their varying interests during the Partnership Year
in accordance with Section 706(d) of the Code, using the interim closing of
the books method. Solely for purposes of making such allocations, each of
such items for the calendar month in which an admission of any Additional
Limited Partner occurs shall be allocated among all of the Partners and
Assignees, including such Additional Limited Partner. All distributions of
Available Cash with respect to which the Partnership Record Date is before
the date of such admission shall be made solely to Partners and Assignees,
other than the Additional Limited Partner, and all distributions of
Available Cash thereafter shall be made to all of the Partners and
Assignees, including such Additional Limited Partner.
Section 12.3 Amendment of Agreement and Certificate of Limited
Partnership
For the admission to the Partnership of any Partner, the General
Partner shall take all steps necessary and appropriate under the Act to
amend the records of the Partnership and, if necessary, to prepare as soon
as practical an amendment to this Agreement (including an amendment of
Exhibit "A") and, if required by law, shall prepare and file an amendment
to the Certificate and may for this purpose exercise the power of attorney
granted pursuant to Section 2.4 hereof.
ARTICLE 13
DISSOLUTION, LIQUIDATION AND TERMINATION
Section 13.1 Dissolution
The Partnership shall not be dissolved by the admission of
Substituted Limited Partners or Additional Limited Partners or by the
admission of a successor General Partner in accordance with the terms of
this Agreement. Upon the withdrawal of the General Partner, any successor
General Partner shall continue the business of the Partnership. The
Partnership shall dissolve, and its affairs be wound up, only upon the
first to occur of any of the following ("Liquidating Events"):
A. the expiration of its term as provided in Section 2.5
hereof;
B. an event of withdrawal of the General Partner, as permitted
by and defined in the Act (other than an event of bankruptcy), unless
within ninety (90) days after such event of withdrawal, a majority in
interest in capital and profits of the remaining Partners agrees in writing
to continue the business of the Partnership and to the appointment,
effective as of the date of withdrawal of a substitute General Partner;
C. entry of a decree of judicial dissolution of the Partnership
pursuant to the provisions of the Act;
D. the sale of all or substantially all of the assets and
properties of the Partnership; or
E. a final and non-appealable judgment is entered by a court of
competent jurisdiction ruling that the General Partner is bankrupt or
insolvent, or a final and non-appealable order for relief is entered by a
court with appropriate jurisdiction against the General Partner, in each
case under any federal or state bankruptcy or insolvency laws as now or
hereafter in effect, unless prior to the entry of such order or judgment a
majority in interest in capital and profits of the remaining Partners agree
in writing to continue the business of the Partnership and to the
appointment, effective as of a date prior to the date of such order or
judgment, of a substitute General Partner.
Section 13.2 Winding Up
A. Upon the occurrence of a Liquidating Event, the Partnership
shall continue solely for the purposes of winding up its affairs in an
orderly manner, liquidating its assets, and satisfying the claims of its
creditors and Partners. No Partner shall take any action that is
inconsistent with, or not necessary to or appropriate for, the winding up
of the Partnership's business and affairs. The General Partner, or in the
event there is no remaining General Partner, any Person elected by a
majority in interest of the Limited Partners (the General Partner or such
other Person being referred to herein as the "Liquidator"), shall be
responsible for overseeing the winding up and dissolution of the
Partnership and shall take full account of the Partnership's liabilities
and property and the Partnership property shall be liquidated as promptly
as is consistent with obtaining the fair value thereof, and the proceeds
therefrom shall be applied and distributed in the following order:
(1) First, to the satisfaction of all of the Partnership's
debts and liabilities to creditors other than the Partners (whether by
payment or the reasonable provision for payment thereof);
(2) Second, pari passu to the satisfaction of all of the
Partnership's debts and liabilities to the Partners and their Affiliates
(whether by payment or the reasonable provision for payment thereof); and
(3) The balance, if any, to the General Partner and Limited
Partners in accordance with the positive balances in their respective
Capital Accounts, after giving effect to all contributions, distributions,
and allocations for all periods.
The General Partner shall not receive any special compensation
for any services performed pursuant to this Article 13.
B. Notwithstanding the provisions of Section 13.2.A hereof
which require liquidation of the assets of the Partnership, but subject to
the order of priorities set forth therein, if prior to or upon dissolution
of the Partnership the Liquidator determines that an immediate sale of part
or all of the Partnership's assets would be impractical or would cause
undue loss to the Partners, the Liquidator may, in its sole and absolute
discretion, defer for a reasonable time the liquidation of any assets
except those necessary to satisfy liabilities of the Partnership (including
those to Partners and their Affiliates as creditors) and/or distribute to
the Partners, in lieu of cash, as tenants in common and in accordance with
the provisions of Section 13.2.A hereof, undivided interests in such
Partnership assets as the Liquidator deems not suitable for liquidation.
Any such distributions in kind shall be made upon not less than ten days
prior written notice to the Partners and only if, in the good faith
judgment of the Liquidator, such distributions in kind are in the best
interest of the Partners, and shall be subject to such conditions relating
to the disposition and management of such properties as the Liquidator
deems reasonable and equitable and to any agreements governing the
operation of such properties at such time. The Liquidator shall determine
the fair market value of any property distributed in kind using such
reasonable method of valuation as it may adopt.
C. In the discretion of the Liquidator, a pro rata portion of
the distributions that would otherwise be made pursuant to this Article 13
may be:
(1) distributed to one or more trust(s) established for the
benefit of the creditors and the General Partner and Limited Partners for
the purposes of liquidating Partnership assets, collecting amounts owed to
the Partnership, and paying any contingent, conditional or unmatured
liabilities or obligations of the Partnership or the General Partner
arising out of or in connection with the Partnership. The assets of any
such trust(s) shall be distributed to the creditors and General Partner and
Limited Partners from time to time, in the reasonable direction of the
Liquidator, in the same manner and proportions as the amount distributed to
such trust (s) by the Partnership would otherwise have been distributed to
the creditors and General Partner and Limited Partners pursuant to this
Agreement; and
(2) withheld or escrowed to provide a reasonable reserve
for Partnership liabilities (contingent or otherwise) and to reflect the
unrealized portion of any installment obligations owed to the Partnership,
provided that such withheld or escrowed amounts shall be distributed to the
creditors and General Partner and Limited Partners in the manner and order
of priority set forth in Section 13.2.A as soon as practicable.
D. Notwithstanding any other provision of this Agreement to the
contrary, if upon a Terminating Capital Event or the final dissolution and
termination of the Partnership and after taking into account all
allocations of Net Income and Net Loss (and other tax items under Article
VI), there remains a deficit in any Partner's Capital Account, then gross
items of income and gain for Capital Account purposes for such Partnership
Year (and to the extent permitted by Section 761(c) of the Code, gross
items of income and gain for Capital Account purposes for the prior
Partnership Year) shall be allocated so as to eliminate, to the extent
possible, the deficit balance in any Partner's Capital Account in
proportion to such deficit.
Section 13.3 Compliance with Timing Requirements of Regulations
In the event the Partnership is "liquidated" within the meaning
of Regulations Section 1.704-1(b)(2)(ii)(g), distributions shall be made
pursuant to this Article 13 to the General Partner and Limited Partners who
have positive Capital Account balances in compliance with Regulations
Section 1.704-1(b)(2)(ii)(b)(2). If any Partner has a deficit balance in
his Capital Account (after giving effect to all contributions,
distributions and allocations for all taxable years, including the year
during which such liquidation occurs), such Partner shall make a
contribution to the capital of the Partnership equal to such deficit, and
such deficit shall be considered a debt owed to the Partnership, but only
if and to the extent such Partner has undertaken to do so in accordance
with Sections 4.2.B. and C.
Section 13.4 Tax Termination
Notwithstanding any other provision of this Article 13, in the
event the Partnership is considered "liquidated" within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g), but no Liquidating Event has
occurred, the Partnership's property shall not be liquidated, the
Partnership's liabilities shall not be paid or discharged, and the
Partnership's affairs shall not be wound up. Instead, for federal income
tax purposes, the Partnership shall be deemed to have contributed the
property in kind to a new partnership treated as a continuation of the
Partnership for federal income tax purposes pursuant to Regulations Section
1.708-1(b)(1)(iv) and the Partnership shall be deemed to liquidate and, in
connection with such deemed liquidation, distribute interests in the new
partnership to the Partners pro rata in accordance with their respective
Capital Account balances immediately prior to such deemed liquidation. The
deemed termination and liquidation of the Partnership pursuant to
Regulations Section 1.708-1(b)(1)(iv) shall be disregarded for purposes of
maintaining and computing the Partners' Capital Accounts in Exhibit "B"
hereto.
Section 13.5 Rights of Limited Partners
Except as otherwise provided in this Agreement, each Limited
Partner shall look solely to the assets of the Partnership for the return
of its Capital Contributions and shall have no right, power or claim to
demand or receive property other than cash from the Partnership. Except as
otherwise provided in this Agreement, no Limited Partner shall have
priority over any other Partner as to the return of its Capital
Contributions, distributions, or allocations.
Section 13.6 Notice of Dissolution
In the event a Liquidating Event occurs or an event occurs that
would, but for the provisions of an election or objection by one or more
Partners pursuant to Section 13.1, result in a dissolution of the
Partnership, the General Partner shall, within thirty (30) days thereafter,
provide written notice thereof to each of the Partners.
Section 13.7 Termination of Partnership and Cancellation of
Certificate of Limited Partnership
Upon the completion of the liquidation of the Partnership's
assets, as provided in Section 13.2 hereof, a certificate of cancellation
shall be filed, the Partnership shall be terminated, and all qualifications
of the Partnership as a foreign limited partnership in jurisdictions other
than the State of California shall be canceled and such other actions as
may be necessary to terminate the Partnership shall be taken.
Section 13.8 Reasonable Time for Winding-Up
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 pursuant to Section 13.2 hereof, in order to minimize any losses
otherwise attendant upon such winding-up, and the provisions of this
Agreement shall remain in effect between the Partners during the period of
liquidation.
Section 13.9 Waiver of Partition and Dissolution
Each Partner hereby waives any right to partition of the
Partnership property and any right to initiate, trigger, cause or commence
a dissolution or an action for dissolution of the Partnership.
ARTICLE 14
AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS
Section 14.1 Amendments
A. Amendments to this Agreement may be proposed by the General
Partner or by any Limited Partners (other than the General Partner) holding
twenty-five percent (25%) or more of the Partnership Interests. Following
such proposal, the General Partner shall submit any proposed amendment to
the Limited Partners. The General Partner shall seek the written vote of
the Partners on the proposed amendment or shall call a meeting to vote
thereon and to transact any other business that it may deem appropriate.
For purposes of obtaining a written vote, the General Partner may require a
response within a reasonable specified time, but not less than fifteen (15)
days, and failure to respond in such time period shall constitute a vote
which is consistent with the General Partner's recommendation with respect
to the proposal. Except as provided in Section 13.1C, 14.1B, 14.1C, or
14.1D, a proposed amendment shall be adopted and be effective as an
amendment hereto if it is approved by the General Partner and it receives
the Consent of Limited Partners holding a majority of the Percentage
Interests of all Limited Partners (without taking into account any
Interests held by the General Partner or any Affiliate thereof); provided,
however, that, except as otherwise provided in Section 4.2A hereof, any
amendment which materially and adversely alters the right of a Limited
Partner to receive distributions of Available Cash or allocations of Net
Income, Net Loss or any other items in the amounts, in the priorities or at
the times described in this Agreement shall require the consent of such
Limited Partner in order to become effective.
B. Notwithstanding Section 14.1.A, the General Partner shall
have the power, without the consent or approval of the Limited Partners, to
amend this Agreement as may be required to facilitate or implement any of
the following purposes:
(1) to add to the obligations of the General Partner or
surrender any right or power granted to the General Partner or any
Affiliate of the General Partner for the benefit of the Limited Partners;
(2) to reflect the admission, substitution, termination, or
withdrawal of Partners in accordance with this Agreement;
(3) to set forth the designations, rights, powers, duties,
and preferences of other holders of any additional Partnership Interests
issued pursuant to Section 4.3, or otherwise pursuant to the terms of this
Agreement;
(4) to reflect a change that is of an inconsequential
nature and does not adversely affect the Limited Partners in any material
respect, or to cure any ambiguity, correct or supplement any provision in
this Agreement not inconsistent with law or with other provisions of this
Agreement, or make any other changes with respect to matters arising under
this Agreement that will not be inconsistent with law or with the
provisions of this Agreement; and
(5) to satisfy any requirements, conditions, or guidelines,
contained in any order, directive, opinion, ruling or regulation of a
federal or state agency or contained in federal or state law.
The General Partner shall provide notice to the Limited Partners
when any action under this Section 14.1.B is taken.
C. Notwithstanding Section 14.1.A and 14.1.B hereof, this
Agreement shall not be amended without Consent of each Partner adversely
affected if such amendment would: (i) convert a Limited Partner's interest
in the Partnership into a General Partner Interest; (ii) modify the limited
liability of a Limited Partner in a manner adverse to such Limited Partner;
(iii) alter rights of the Partner to receive distributions pursuant to
Article 5 or Article 13, or the allocations specified in Article 6 (except
as permitted pursuant to Section 4.2 and Section 14.1.B(3) hereof); (iv)
cause the termination of the Partnership prior to the time set forth in
Sections 2.5 or 13.1; or (v) amend this Section 14.1.C.
D. Notwithstanding Section 14.1.A and 14.1.B hereof, the
General Partner shall not amend Sections 14.1A, 14.1C or 14.2 without
Consent of Limited Partners holding a majority of the Percentage Interests
of the Limited Partners, excluding Limited Partner Interests held by the
General Partner or any Affiliate thereof.
Section 14.2 Meetings of the Partners
A. Meetings of the Partners may be called by the General
Partner. Notice of any such meeting shall be given to all Partners not
less than seven (7) days nor more than thirty (30) days prior to the date
of such meeting. Partners may vote in person or by proxy at such meeting.
Whenever the vote or consent of the Partners is permitted or required under
this Agreement, such vote or consent may be given at a meeting of the
Partners or may be given in accordance with the procedures prescribed in
Sections 14.1A or 14.2B hereof.
B. Any action required or permitted to be taken at a meeting of
the Partners may be taken without a meeting if a written consent setting
forth the action so taken is signed by majority of the Percentage Interests
of the Partners (or such other percentage as is expressly required by this
Agreement). Such consent may be in one instrument or in several
instruments, and shall have the same force and effect as a vote of a
majority of the Percentage Interests of the Partners (or such other
percentage as is expressly required by this Agreement). Such consent shall
be filed with the General Partner. An action so taken shall be deemed to
have been taken at a meeting held on the effective date so certified.
C. Each Limited Partner may authorize any Person or Persons to
act for him by proxy on all matters in which a Limited Partner is entitled
to participate, including waiving notice of any meeting, or voting or
participating at a meeting. Every proxy must be signed by the Limited
Partner or his attorney-in-fact. No proxy shall be valid after the
expiration of eleven (11) months from the date hereof unless otherwise
provided in the proxy. Every proxy shall be revocable at the pleasure of
the Limited Partner executing it, such revocation to be effective upon the
Partnership's receipt of written notice of such revocation from the Limited
Partner executing such proxy.
D. Each meeting of the Partners shall be conducted by the
General Partner or such other Person as the General Partner may appoint
pursuant to such rules for the conduct of the meeting as the General
Partner or such other Person deems appropriate. Without limitation,
meetings of Partners may be conducted in the same manner as meetings of the
shareholders of the General Partner and may be held at the same time, and
as part of, meetings of the shareholders of the General Partner.
ARTICLE 15
GENERAL PROVISIONS
Section 15.1 Addresses and Notices
Any notice, demand, request or report required or permitted to be
given or made to a Partner or Assignee under this Agreement shall be in
writing and shall be deemed given or made when delivered in person or when
sent by first class United States mail or by other means of written
communication to the Partner or Assignee at the address set forth in
Exhibit "A" or such other address of which the Partner shall notify the
General Partner in writing.
Section 15.2 Titles and Captions
All article or section titles or captions in this Agreement are
for convenience only. They shall not be deemed part of this Agreement and
in no way define, limit, extend or describe the scope or intent of any
provisions hereof. Except as specifically provided otherwise, references
to "Articles" and "Sections" are to Articles and Sections of this
Agreement.
Section 15.3 Pronouns and Plurals
Whenever the context may require, any pronoun used in this
Agreement shall include the corresponding masculine, feminine or neuter
forms, and the singular form of nouns, pronouns and verbs shall include the
plural and vice versa.
Section 15.4 Further Action
The parties shall execute and deliver all documents, provide all
information and take or refrain form taking action as may be necessary or
appropriate to achieve the purposes of this Agreement.
Section 15.5 Binding Effect
This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their heirs, executors, administrators, successors,
legal representatives and permitted assigns.
Section 15.6 Creditors
Other than as expressly set forth herein with respect to the
Indemnitees, none of the provisions of this Agreement shall be for the
benefit of, or shall be enforceable by, any creditor of the Partnership.
Section 15.7 Waiver
No failure by any party to insist upon the strict performance of
any covenant, duty, agreement or condition of this Agreement or to exercise
any right or remedy consequent upon a breach thereof shall constitute
waiver of any such breach or any covenant, duty, agreement or condition.
Section 15.8 Counterparts
This Agreement may be executed in counterparts, all of which
together shall constitute one agreement binding on all of the parties
hereto, notwithstanding that all such parties are not signatories to the
original or the same counterpart. Each party shall become bound by this
Agreement immediately upon affixing its signature hereto.
Section 15.9 Applicable Law
This Agreement shall be construed and enforced in accordance with
and governed by the laws of the State of Delaware, without regard to the
principles of conflicts of law.
Section 15.10 Invalidity of Provisions
If any provision of this Agreement is or becomes invalid, illegal
or unenforceable in any respect, the validity, legality or enforceability
of other remaining provisions contained herein shall not be affected
thereby.
Section 15.11 Entire Agreement
This Agreement contains the entire understanding and agreement
among the Partners with respect to the subject matter hereof and amends,
restates and supersedes the Original Agreement and any other prior written
or oral understandings or agreements among them with respect thereto.
Section 15.12 No Rights as Shareholders
Nothing contained in this Agreement shall be construed as
conferring upon the holders of the Partnership Units any rights whatsoever
as shareholders of WEA, including, without limitation, any right to receive
dividends or other distributions made to shareholders of WEA or to vote or
to consent or to receive notice as shareholders in respect of any meeting
of shareholders for the election of directors of WEA or any other matter.
Section 15.13 Discretion of General Partner
With respect to any provision hereof which requires or provides
for the consent or approval of the General Partner, shall consent or
approval may be granted or withheld in the General Partner's sole and
absolute discretion. The General Partner's "sole and absolute discretion,"
"sole discretion" and "discretion" under this Agreement shall be exercised
in good faith.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day first above written.
GENERAL PARTNER:
WESTFIELD INDEPENDENCE LLC,
a Delaware limited liability company
By: Westfield America Limited Partnership,
a Delaware limited partnership
Its: Managing Member
By: Westfield America, Inc.,
a Missouri corporation
Its: Managing General Partner
By: /s/ Irv Hepner
_________________________
Name: Irv Hepner
Its: Secretary
LIMITED PARTNER:
NEW HANOVER ASSOCIATES,
a Pennsylvania general partnership
By: /s/ Joseph Strauss Jr.
_________________________
Name: Joseph Strauss Jr.
Its: Managing Partner
By: /s/ Matthew H. Kamen
----------------------------
Name: Matthew H. Kamen
Its: Managing Partner
<TABLE>
<CAPTION>
EXHIBIT A
INTERESTS OF THE PARTNERS
Partnership
Partner Percentage Interest Capital Account Units
------- ------------------- --------------- -----------
Limited Partners
<S> <C> <C> <C>
New Hanover Associates 80% $14,153,148 786,286
General Partner
Westfield Independence LLC 20% $ 3,440,000 191,111
</TABLE>
EXHIBIT B
Capital Account Maintenance
1. Capital Accounts of the Partners
A. The Partnership shall maintain for each Partner a separate
Capital Account in accordance with the rules of Regulations Section 1.704-
1(b)(2)(iv). Such Capital Account shall be increased by (i) the amount of
all Capital Contributions and any other deemed contributions made by such
Partner to the Partnership pursuant to this Agreement; and (ii) all items
of Partnership income and gain (including income and gain exempt from tax)
computed in accordance with Section 1.B hereof and allocated to such
Partner pursuant to Section 6.1.A of the Agreement and Exhibit C to the
Agreement, and decreased by (x) the amount of cash or Agreed Value of all
distributions of cash or property made to such Partner pursuant to this
Agreement; and (y) all items of Partnership deduction and loss computed in
accordance with Section 1.B hereof and allocated to such Partner pursuant
to Section 6.1.B of the Agreement and Exhibit C to the Agreement.
B. For purposes of computing the amount of any item of income, gain,
deduction or loss to be reflected in the Partners' Capital Accounts, unless
otherwise specified in this Agreement, the determination, recognition and
classification of any such item shall be the same as its determination,
recognition and classification for federal tax purposes 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), with the following adjustments:
(1) Except as otherwise provided in Regulations Section 1.704-
1(b)(2)(iv)(m), the computation of all items of income, gain, loss and
deduction shall be made without regard to any election under Section 754 of
the Code which may be made by the Partnership, provided that the amounts of
any adjustments to the adjusted bases of the assets of the Partnership made
pursuant to Section 734 of the Code as a result of the distribution of
property by the Partnership to a Partner (to the extent that such
adjustments have not previously been reflected in the Partners' Capital
Accounts) shall be reflected in the Capital Accounts of the Partners in the
manner and subject to the limitations prescribed in Regulations Section
1.704-1(b)(2)(iv)(m)(4).
(2) The computation of all items of income, gain, 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.
(3) 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 Carrying Value with respect to such property
as of such date.
(4) In lieu of 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.
(5) In the event the Carrying Value of any Partnership Asset is
adjusted pursuant to Section 1.D hereof, the amount of any such adjustment
shall be taken into account as gain or loss from the disposition of such
asset.
(6) Any items specifically allocated under Section 1 of Exhibit
C to the Agreement shall not be taken into account.
C. Generally, a transferee (including an Assignee) of a Partnership
Unit 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
assets and liabilities shall be deemed solely for federal income tax
purposes, to have been contributed to a new partnership treated as a
continuation of the Partnership and the Partnership shall be deemed to have
liquidated and, in connection with such deemed liquidation, distributed
interests in the new partnership to the Partners pro rata in accordance
with their respective Capital Account balances immediately prior to such
deemed liquidation. In such event, the Carrying Values of the Partnership
properties shall not be adjusted in connection with such deemed liquidation
pursuant to Section 1.D.(2) hereof. The Capital Accounts of such new
partnership shall be maintained in accordance with the principles of this
Exhibit B.
D. (1) Consistent with the provisions of Regulations Section 1.704-
1(b)(2)(iv)(f), and as provided in Section 1.D.(2), the Carrying Value of
all Partnership assets shall be adjusted upward or downward to reflect any
Unrealized Gain or Unrealized Loss attributable to such Partnership
property, as of the times of the adjustments provided in Section 1.D.(2)
hereof, as if such Unrealized Gain or Unrealized Loss had been recognized
on an actual sale of each such property and allocated pursuant to Section
6.1 of the Agreement.
(2) Such adjustments shall be made as of the following times:
(a) immediately prior to the acquisition of an additional interest in the
Partnership by any new or existing Partner in exchange for more than a de
minimis Capital Contribution; (b) 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, other than as set
forth in Section 1.C of this Exhibit B; and (c) 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 (a) and (b) above shall be made only if the General Partner
determines that such adjustments are necessary or appropriate to reflect
economic interests of the Partners in the Partnership.
(3) In accordance with Regulations Section 1.704-1(b)(2)(iv)(e),
the Carrying 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.
(4) In determining Unrealized Gain or Unrealized Loss for
purposes of this Exhibit B, the aggregate cash amount and fair market value
of all Partnership assets (including cash or cash equivalents) shall be
determined by the General Partner using such reasonable method of valuation
as it may adopt, or in the case of a liquidating distribution pursuant to
Article 13 of the Agreement, shall be determined and allocated by the
Liquidator using such reasonable methods of valuation as it may adopt. The
General Partner, 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 reasonable discretion to arrive at a fair market value
for individual properties).
E. The provisions of this Agreement (including this Exhibit B and
other Exhibits to this Agreement) 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 General Partner shall determine that it is
prudent to modify (i) 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, the General Partner, or
the Limited Partners) are computed; or (ii) the manner in which items are
allocated among the Partners for federal income tax purposes in order to
comply with such Regulations or to comply with Section 704(c) of the Code,
the General Partner may make such modification without regard to Article 14
of the Agreement, provided that it is not likely to have a material effect
on the amounts distributable to any Person pursuant to Article 13 of the
Agreement upon the dissolution of the Partnership. The General Partner
also shall (i) where appropriate, in accordance with Regulations Section
1.704-1(b)(2)(iv)(q), make any adjustments that are necessary or
appropriate to maintain equality between Capital Accounts of the Partners
and the amount of Partnership capital reflected on the Partnership's
balance sheet, as computed for book purposes; and (ii) make any appropriate
modifications in the event unanticipated events occur that might otherwise
cause this Agreement not to comply with Regulations Section 1.704-1(b). In
addition, the General Partner may adopt and employ such methods and
procedures for (i) the maintenance of book and tax capital accounts; (ii)
the determination and allocation of adjustments under Sections 704(c), 734
and 743 of the Code; (iii) the determination of Net Income, Net Loss,
taxable loss and items thereof under this Agreement and pursuant to the
Code; (iv) conventions for the determination of cost recovery, depreciation
and amortization deductions, as it determines in its sole discretion are
necessary or appropriate to execute the provisions of this Agreement, to
comply with federal and state tax laws, and are in the best interest of the
Partners.
2. No Interest
No interest shall be paid by the Partnership on Capital
Contributions or on balances in Partners' Capital Accounts.
3. No Withdrawal
No Partner shall be entitled to withdraw any part of his Capital
Contribution or his Capital Account or to receive any distribution from the
Partnership, except as provided in Articles 4, 5, 8 and 13 of the
Agreement.
EXHIBIT C
Special Allocation Rules
1. Special Allocation Rules
Notwithstanding any other provision of the Agreement or this Exhibit
C, the following special allocations shall be made in the following order:
A. Minimum Gain Chargeback. Notwithstanding the provisions of
Section 6.1 of the Agreement or any other provisions of this Exhibit C, if
there is a net decrease in Partnership Minimum Gain during any Partnership
taxable 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 1.A is
intended to comply with the minimum gain chargeback requirements in
Regulations Section 1.704-2(f) and shall be interpreted consistently
therewith. Solely for purposes of this Section 1.A, each Partner's
Adjusted Capital Account Deficit shall be determined prior to any other
allocations pursuant to Section 6.1 of Partner Minimum Gain during such
Partnership taxable year.
B. Partner Minimum Gain Chargeback. Notwithstanding any other
provision of Section 6.1 of this Agreement or any other provisions of this
Exhibit C (except Section 1.A hereof), if there is a net decrease in
Partner Minimum Gain attributable to a Partner Nonrecourse Debt during any
Partnership taxable year, each Partner who has a share of the Partner
Minimum Gain attributable to such Partner Nonrecourse Debt, determined in
accordance with Regulations Section 1.702-2(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 Partner 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 1.B is
intended to comply with the partner nonrecourse debt minimum gain
chargeback requirement in such Section of the Regulations and shall be
interpreted consistently therewith. Solely for purposes of this Section
1.B, each Partner's Adjusted Capital Account Deficit shall be determined
prior to any other allocations pursuant to Section 6.1 of the Agreement or
this Exhibit with respect to such Partnership taxable year, other than
allocations pursuant to Section 1.A hereof.
C. Qualified Income Offset. In the event any Partner unexpectedly
receives any adjustments, allocations or distributions described in
Regulations Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or
1.704-1(b)(2)(ii)(d)(6), and after giving effect to the allocations
required under Sections 1.A and 1.B hereof such Partner has an Adjusted
Capital Account Deficit, items of Partnership income and gain (consisting
of a pro rata portion of each item of Partnership income, including gross
income and gain for the Partnership taxable year) shall be specifically
allocated to such Partner in an amount and manner sufficient to eliminate,
to the extent required by the Regulations, its Adjusted Capital Account
Deficit created by such adjustments, allocations or distributions as
quickly as possible.
D. Nonrecourse Deductions. Nonrecourse Deductions for any
Partnership taxable year shall be allocated to the Partners in accordance
with their respective Percentage Interests. If the General Partner
determines in its good faith discretion that the Partnership's Nonrecourse
Deductions must be allocated in a different ratio to satisfy the safe
harbor requirements of the Regulations promulgated under Section 704(b) of
the Code, the General Partner is authorized, upon notice to the Limited
Partners, to revise the prescribed ratio to the numerically closest ratio
for such Partnership taxable year which satisfy such requirements.
E. Partner Nonrecourse Deductions. Any Partner Nonrecourse
Deductions for any Partnership taxable year shall be specially allocated to
the Partner who bears the economic risk of loss with respect to the Partner
Nonrecourse Debt to which such Partner Nonrecourse Deductions are
attributable in accordance with Regulations Section 1.704-2(i).
F. Code Section 754 Adjustments. To the extent an adjustment to the
adjusted tax basis of any Partnership asset pursuant to Section 734(b) or
743(b) 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.
G. Curative Allocations. The allocations set forth in Section 1.A
through 1.F of this Exhibit C (the "Regulatory Allocations") are intended
to comply with certain requirements of the Regulations under Section 704(b)
of the Code. The Regulatory Allocations may not be consistent with the
manner in which the Partners intend to divide Partnership distributions.
Accordingly, the General Partner is hereby authorized to divide other
allocations of income, gain, deduction and loss among the Partners so as to
prevent the Regulatory Allocations from distorting the manner in which
Partnership distributions will be divided among the Partners. In general,
the Partners anticipate that this will be accomplished by specially
allocating other items of income, gain, loss and deduction among the
Partners so that the net amount of the Regulatory Allocations and such
special allocations to each person is zero. However, the General Partner
will have discretion to accomplish this result in any reasonable manner;
provided, however, that no allocation pursuant to this Section 1.G shall
cause the Partnership to fail to comply with the requirements of
Regulations Sections 1.704-1(b)(2)(ii)(d), -2(e) or -2(i).
2. Allocations for Tax Purposes
A. Except as otherwise provided in this Section 2, for federal
income tax purposes, each item of income, gain, loss and deduction shall be
allocated among the Partners in the same manner as its correlative item of
"book" income, gain, loss or deduction is allocated pursuant to Section 6.1
of the Agreement and Section 1 of this Exhibit C.
B. In an attempt to eliminate Book-Tax Disparities attributable to a
Contributed Property or Adjusted Property, items of income, gain, loss, and
deduction shall be allocated for federal income tax purposes among the
Partners as follows:
(1) (a) In the case of a Contributed Property on the Effective
Date, such items attributable thereto shall be
allocated among the Partners, consistent with the
principles of Section 704(c) of the Code and pursuant
to the "traditional method with curative allocations of
gain from disposition of contributed property" under
Regulations Section 1.704-3(c), to take into account
the variation between the 704(c) Value of such property
and its adjusted basis at the time of contribution; and
(b) any item of Residual Gain or Residual Loss attributable
to a Contributed Property shall be allocated among the
Partners in the same manner as its correlative item of
"book" gain or loss is allocated pursuant to Section
6.1 of the Agreement and Section 1 of this Exhibit C.
(2) (a) In the case of an Adjusted Property, such items shall
(1) first, be allocated among the Partners in a manner
consistent with the principles of Section 704(c)
of the Code and Regulations Section 1.704-3(c) to
take into account the Unrealized Gain or
Unrealized Loss attributable to such property and
the allocations thereof pursuant to Exhibit B; and
(2) second, in the event such property was a
Contributed Property on the Effective Date, be
allocated among the Partners in a manner
consistent with Section 2.B.(1) of this Exhibit C;
and
(b) any item of Residual Gain or Residual Loss
attributable to an Adjusted Property shall be
allocated among the Partners in the same manner
its correlative item of "book" gain or loss is
allocated pursuant to Section 6.1 of the Agreement
and Section 1 of this Exhibit C.
(3) all other items of income, gain, loss and deduction shall be
allocated among the Partners in the same manner as their
correlative item of "book" gain or loss is allocated
pursuant to Section 6.1 of the Agreement and Section 1 of
this Exhibit C.
3. Allocations of Nonrecourse Debt
As set forth in Section 6.2 of the Agreement and subject to Section
4.5 of the Agreement, the Partners hereby agree that for purposes of
allocating excess nonrecourse liabilities pursuant to Regulations Section
1.752-3(a)(3), the Partners' interests in Partnership profits shall be 100%
to the Limited Partner and 0% to the General Partner; provided, that if the
property of the Mall Partnership is significantly expanded and additional
Nonrecourse Liabilities are incurred in amounts that substantially exceed
the Nonrecourse Liability existing on such property on the Effective Date,
the General Partner may be allocated such additional Nonrecourse
Liabilities so long as the Limited Partners are not allocated a lesser
amount of Nonrecourse Liabilities than the amounts allocated to such
Limited Partners on the Effective Date.
4. No Withdrawal
No Partner shall be entitled to withdraw any part of his Capital
Contribution or his Capital Account or to receive any distribution from the
Partnership, except as provided in Articles 4, 5, 8 and 13 of the
Agreement.
<TABLE>
<CAPTION>
EXHIBIT D
SCHEDULE OF AGREED VALUE
Contributed Agreed
Partner Property Value
------ ----------- ------
Limited Partner
---------------
<S> <C> <C>
New Hanover Associates 48% General Partner interest $30,145,234.12
in the Mall Partnership
General Partner
--------------
Westfield Independence LLC 12% General Partner Interest $ 7,247,913.88
in the Mall Partnership
</TABLE>
TABLE OF CONTENTS
Page(s)
ARTICLE 1 DEFINED TERMS . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Act . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 Additional Limited Partner . . . . . . . . . 1
Section 1.3 Adjusted Capital Account . . . . . . . . . . 1
Section 1.4 Adjusted Capital Account Deficit . . . . . . 2
Section 1.5 Adjusted Property . . . . . . . . . . . . . . 2
Section 1.6 Affiliate . . . . . . . . . . . . . . . . . . 2
Section 1.7 Agreed Value . . . . . . . . . . . . . . . . 2
Section 1.8 Agreement . . . . . . . . . . . . . . . . . . 2
Section 1.9 Assignee . . . . . . . . . . . . . . . . . . 2
Section 1.10 Available Cash . . . . . . . . . . . . . . . 2
Section 1.11 Book-Tax Disparities . . . . . . . . . . . . 3
Section 1.12 Business Day . . . . . . . . . . . . . . . . 4
Section 1.13 Capital Account . . . . . . . . . . . . . . 4
Section 1.14 Capital Contribution . . . . . . . . . . . . 4
Section 1.15 Carrying Value . . . . . . . . . . . . . . . 4
Section 1.16 Certificate . . . . . . . . . . . . . . . . 4
Section 1.17 Code . . . . . . . . . . . . . . . . . . . . 4
Section 1.18 Consent . . . . . . . . . . . . . . . . . . 4
Section 1.19 Contributed Property . . . . . . . . . . . . 4
Section 1.20 Depreciation . . . . . . . . . . . . . . . . 5
Section 1.21 Funds From Operations . . . . . . . . . . . 5
Section 1.22 General Partner Interest . . . . . . . . . . 5
Section 1.23 Guaranteed Payment . . . . . . . . . . . . . 5
Section 1.24 IRS . . . . . . . . . . . . . . . . . . . . 5
Section 1.25 Incapacity or Incapacitated . . . . . . . . 5
Section 1.26 Indemnitee . . . . . . . . . . . . . . . . . 6
Section 1.27 Limited Partner . . . . . . . . . . . . . . 6
Section 1.28 Limited Partner Interest . . . . . . . . . . 6
Section 1.29 Liquidating Event . . . . . . . . . . . . . 6
Section 1.30 Liquidator . . . . . . . . . . . . . . . . . 6
Section 1.31 Mall Partnership . . . . . . . . . . . . . . 6
Section 1.32 Mall Partnership Interest . . . . . . . . . 6
Section 1.33 Market Price . . . . . . . . . . . . . . . . 6
Section 1.34 Net Income . . . . . . . . . . . . . . . . . 7
Section 1.35 Net Loss . . . . . . . . . . . . . . . . . . 7
Section 1.36 Nonrecourse Built-in-Gain . . . . . . . . . 8
Section 1.37 Nonrecourse Deductions . . . . . . . . . . . 8
Section 1.38 Nonrecourse Liability . . . . . . . . . . . 8
Section 1.39 Operating Partnership . . . . . . . . . . . 8
Section 1.40 Partner . . . . . . . . . . . . . . . . . . 8
Section 1.41 Partner Minimum Gain . . . . . . . . . . . . 8
Section 1.42 Partner Nonrecourse Debt . . . . . . . . . . 8
Section 1.43 Partner Nonrecourse Deductions . . . . . . . 8
Section 1.44 Partnership . . . . . . . . . . . . . . . . 8
Section 1.45 Partnership Interest . . . . . . . . . . . . 8
Section 1.46 Partnership Minimum Gain . . . . . . . . . . 9
Section 1.47 Partnership Record Date . . . . . . . . . . 9
Section 1.48 Partnership Unit . . . . . . . . . . . . . . 9
Section 1.49 Partnership Year . . . . . . . . . . . . . . 9
Section 1.50 Percentage Interest . . . . . . . . . . . . 9
Section 1.51 Permitted Loan Transaction . . . . . . . . . 9
Section 1.52 Person . . . . . . . . . . . . . . . . . . . 9
Section 1.53 Priority Return . . . . . . . . . . . . . . 9
Section 1.54 Recapture Income . . . . . . . . . . . . . 10
Section 1.55 Regulations . . . . . . . . . . . . . . . 10
Section 1.56 REIT . . . . . . . . . . . . . . . . . . . 10
Section 1.57 REIT Share . . . . . . . . . . . . . . . . 10
Section 1.58 Residual Gain or Residual Loss . . . . . . 10
Section 1.59 Restricted Period . . . . . . . . . . . . 10
Section 1.60 704(c) Value . . . . . . . . . . . . . . . 10
Section 1.61 Subsidiary . . . . . . . . . . . . . . . . 10
Section 1.62 Substituted Limited Partner . . . . . . . 11
Section 1.63 Terminating Capital Transaction . . . . . 11
Section 1.64 Unrealized Gain . . . . . . . . . . . . . 11
Section 1.65 Unrealized Loss . . . . . . . . . . . . . 11
Section 1.66 WEA . . . . . . . . . . . . . . . . . . . 11
ARTICLE 2 ORGANIZATIONAL MATTERS . . . . . . . . . . . . . . . . . 11
Section 2.1 Organization . . . . . . . . . . . . . . . 11
Section 2.2 Name . . . . . . . . . . . . . . . . . . . 12
Section 2.3 Registered Office and Agent;
Principal Office. . . . . . . . . . . . . . 12
Section 2.4 Power of Attorney . . . . . . . . . . . . . 12
Section 2.5 Term . . . . . . . . . . . . . . . . . . . 13
ARTICLE 3 PURPOSE . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 3.1 Purpose and Business . . . . . . . . . . . 14
Section 3.2 Powers . . . . . . . . . . . . . . . . . . 14
ARTICLE 4 CAPITAL CONTRIBUTIONS . . . . . . . . . . . . . . . . . 15
Section 4.1 Capital Contributions of the Partners . . 15
Section 4.2 Deficit Restoration Election . . . . . . . 16
Section 4.3 Issuances of Additional Partnership
Interests . . . . . . . . . . . . . . . . . 17
Section 4.4 General Partner Loans . . . . . . . . . . . 17
Section 4.5 Guaranty of Indebtedness . . . . . . . . . 18
ARTICLE 5 DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . 18
Section 5.1 Requirement and Characterization of
Distributions . . . . . . . . . . . . . . . 18
Section 5.2 Amounts Withheld . . . . . . . . . . . . . 19
Section 5.3 Distributions Upon Liquidation . . . . . . 19
ARTICLE 6 ALLOCATIONS . . . . . . . . . . . . . . . . . . . . . . 19
Section 6.1 Allocations of Net Income and Net Loss . . 19
Section 6.2 Other Allocations . . . . . . . . . . . . . 20
ARTICLE 7 MANAGEMENT AND OPERATIONS OF BUSINESS . . . . . . . . . 21
Section 7.1 Management . . . . . . . . . . . . . . . . 21
Section 7.2 Certificate of Limited Partnership . . . . 25
Section 7.3 Management and Reimbursement of the
General Partner . . . . . . . . . . . . . . 25
Section 7.4 Outside Activities of the General Partner . 26
Section 7.5 Contracts with Affiliates . . . . . . . . . 26
Section 7.6 Indemnification . . . . . . . . . . . . . . 27
Section 7.7 Liability of the General Partner . . . . . 29
Section 7.8 Other Matters Concerning the
General Partner . . . . . . . . . . . . . . 30
Section 7.9 Title to Partnership Assets . . . . . . . . 31
Section 7.10 Reliance by Third Parties . . . . . . . . 31
ARTICLE 8 RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS . . . . . . . 32
Section 8.1 Limitation of Liability . . . . . . . . . . 32
Section 8.2 Management of Business . . . . . . . . . . 32
Section 8.3 Outside Activities of Limited Partners . . 32
Section 8.4 Return of Capital . . . . . . . . . . . . . 33
Section 8.5 Rights of Limited Partners
Relating to the Partnership . . . . . . . . 33
Section 8.6 Redemption Rights . . . . . . . . . . . . . 34
Section 8.7 Sale of All or Substantially All Assets . . 35
ARTICLE 9 BOOKS, RECORDS, ACCOUNTING AND REPORTS . . . . . . . . . 35
Section 9.1 Records and Accounting . . . . . . . . . . 35
Section 9.2 Fiscal Year . . . . . . . . . . . . . . . . 36
Section 9.3 Reports . . . . . . . . . . . . . . . . . . 36
ARTICLE 10 TAX MATTERS. . . . . . . . . . . . . . . . . . . . . . . 36
Section 10.1 Preparation of Tax Returns . . . . . . . . 36
Section 10.2 Tax Elections . . . . . . . . . . . . . . 37
Section 10.3 Tax Matters Partner . . . . . . . . . . . 37
Section 10.4 Organizational Expenses . . . . . . . . . 38
Section 10.5 Withholding . . . . . . . . . . . . . . . 39
ARTICLE 11 TRANSFERS AND WITHDRAWALS. . . . . . . . . . . . . . . . 40
Section 11.1 Transfer . . . . . . . . . . . . . . . . . 40
Section 11.2 Transfer of the General Partner's Interests 40
Section 11.3 Limited Partners' Rights to Transfer . . . 41
Section 11.4 Substituted Limited Partners . . . . . . . 42
Section 11.5 Assignees . . . . . . . . . . . . . . . . 43
Section 11.6 General Provisions . . . . . . . . . . . . 43
ARTICLE 12 ADMISSION OF PARTNERS. . . . . . . . . . . . . . . . . . 44
Section 12.1 Admission of Successor General Partner . . 44
Section 12.2 Admission of Additional Limited Partners . 44
Section 12.3 Amendment of Agreement and Certificate . 45
ARTICLE 13 DISSOLUTION, LIQUIDATION AND TERMINATION . . . . . . . . 45
Section 13.1 Dissolution . . . . . . . . . . . . . . . 45
Section 13.2 Winding Up . . . . . . . . . . . . . . . . 46
Section 13.3 Compliance with Timing Requirements
of Regulations . . . . . . . . . . . . . . 48
Section 13.4 Tax Termination . . . . . . . . . . . . . 48
Section 13.5 Rights of Limited Partners . . . . . . . . 49
Section 13.6 Notice of Dissolution . . . . . . . . . . 49
Section 13.7 Termination of Partnership and
Cancellation of Certificate of Limited
Partnership . . . . . . . . . . . . . . . 49
Section 13.8 Reasonable Time for Winding-Up . . . . . . 49
Section 13.9 Waiver of Partition and Dissolution . . . 49
ARTICLE 14 AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS . . . . . . 50
Section 14.1 Amendments . . . . . . . . . . . . . . . . 50
Section 14.2 Meetings of the Partners . . . . . . . . . 51
ARTICLE 15 GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . 52
Section 15.1 Addresses and Notices . . . . . . . . . . 52
Section 15.2 Titles and Captions . . . . . . . . . . . 52
Section 15.3 Pronouns and Plurals . . . . . . . . . . . 52
Section 15.4 Further Action . . . . . . . . . . . . . . 53
Section 15.5 Binding Effect . . . . . . . . . . . . . . 53
Section 15.6 Creditors . . . . . . . . . . . . . . . . 53
Section 15.7 Waiver . . . . . . . . . . . . . . . . . . 53
Section 15.8 Counterparts . . . . . . . . . . . . . . . 53
Section 15.9 Applicable Law . . . . . . . . . . . . . . 53
Section 15.10 Invalidity of Provisions . . . . . . . . 53
Section 15.11 Entire Agreement . . . . . . . . . . . . 54
Section 15.12 No Rights as Shareholders . . . . . . . . 54
Section 15.13 Discretion of General Partner . . . . . . 54
EXHIBITS
EXHIBIT A Interests of the Partners
EXHIBIT B Capital Account Maintenance
EXHIBIT C Special Allocation Rules
