SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark one)
|x| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the fiscal year ended December 31, 1997.
OR
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________________ to _________________
Commission File Number 33-73988
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
(Exact Name of Registrant as Specified in Its Charter)
Delaware 38-3097317
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
200 East Long Lake Road
Suite 300, P.O. Box 200
Bloomfield Hills, Michigan 48303-0200
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (248) 258-6800
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter periods that the
registrant was required to file such report(s)) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
--- ---
|X| Indicate by a check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the proxy statement of Taubman Centers, Inc. for the annual
meeting of shareholders to be held in 1998 (the "TCO Proxy Statement") are
incorporated by reference into Part III.
<PAGE>
PART I
Item 1. BUSINESS
The Taubman Realty Group Limited Partnership
The Taubman Realty Group Limited Partnership ("TRG"), which was organized in
1985, is an operating partnership that engages in the ownership, management,
leasing, acquisition, development, and expansion of regional shopping centers.
TRG owns as its primary assets interests in regional retail shopping centers
(the "Taubman Shopping Centers" or the "Centers"). TRG's portfolio, as of
December 31, 1997, includes 25 urban and suburban Taubman Shopping Centers
located in 12 states. Two additional Centers are under construction and are
expected to open in November 1998 and March 1999. Twenty-two of the Centers are
"super-regional" centers because they have more than 800,000 square feet of
gross leaseable area. TRG also owns development projects for future regional
shopping centers (the "Development Projects") and approximately 99% of The
Taubman Company Limited Partnership (the "Manager"), which manages the Taubman
Shopping Centers and provides services to TRG and its managing general partner,
Taubman Centers, Inc. ("TCO"). See the table on pages 12 and 13 of this report
for information regarding the Taubman Shopping Centers and TRG's interests in
them.
TCO is a real estate investment trust, or REIT, under the Internal Revenue
Code of 1986, as amended (the "Code"). In order to satisfy the provisions of the
Code applicable to REITs, TCO must distribute to its shareholders at least 95%
of its REIT taxable income and meet certain other requirements. TRG's
partnership agreement provides that TRG will distribute, at a minimum,
sufficient amounts to its partners such that TCO's pro rata share will enable
TCO to pay shareholder dividends (including capital gains dividends that may be
required upon TRG's sale of an asset) that will satisfy the REIT provisions of
the Code.
Recent Developments
For a discussion of business developments that occurred in 1997, see the
response to Item 7, "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
The Shopping Center Business
There are several types of retail shopping centers, varying primarily by size
and marketing strategy. Retail shopping centers range from neighborhood centers
of less than 100,000 square feet of GLA to regional and super-regional shopping
centers. Retail shopping centers in excess of 400,000 square feet of GLA are
generally referred to as "regional" shopping centers, while those centers having
in excess of 800,000 square feet of GLA are generally referred to as
"super-regional" shopping centers. In this annual report on Form 10-K, the term
"regional shopping centers" refers to both regional and super-regional shopping
centers. The term "GLA" refers to gross retail space, including anchors and mall
tenant areas, and the term "Mall GLA" refers to gross retail space, excluding
anchors. The term "anchor" refers to a department store or other large retail
store. The term "mall tenants" refers to stores (other than anchors) that are
typically specialty retailers and lease space in shopping centers.
-1-
<PAGE>
Business of TRG
TRG is engaged in the ownership, management, leasing, acquisition, development
and expansion of regional shopping centers and interests therein.
The Taubman Shopping Centers:
o are strategically located in major metropolitan areas, many in communities
that are among the most affluent in the country, including New York City,
Chicago, Los Angeles, San Francisco, Denver, Columbus, Detroit, Miami,
Phoenix, and Washington, D.C.;
o range in size between 438,000 and 2.3 million square feet of GLA and between
133,000 and 942,000 square feet of Mall GLA. The smallest Center has
approximately 50 stores, and the largest has approximately 250 stores. Of
the 25 Centers, 22 are super-regional shopping centers;
o have aproximately 3,400 stores operated by its mall tenants under
approximately 1,250 trade names;
o have 88 anchors, operating under 17 trade names;
o lease approximately 76% of Mall GLA to national chains, including
subsidiaries or divisions of The Limited (The Limited, Limited Express,
Victoria's Secret, and others), The Gap (The Gap, Banana Republic, and
others), and Woolworth Corporation (Foot Locker, Kinney Shoes, and others);
and
o are among the most productive (measured by mall tenants' average per square
foot sales) in the United States. In 1997, mall tenants in the Taubman
Shopping Centers portfolio had average per square foot sales of $384, which
is substantially greater than the average for all regional shopping centers
owned by public companies.
The most important factor affecting the revenues generated by the Taubman
Shopping Centers is leasing to mall tenants (primarily specialty retailers),
which represents over 90% of revenues. Anchors account for approximately 5% of
revenues because many own their stores and, in general, those that lease their
stores do so at rates substantially lower than those in effect for mall tenants.
TRG's ownership is concentrated in highly productive super-regional shopping
centers. Of its 25 Centers, 19 had annual rent rolls at December 31, 1997 of
over $10 million and 21 had annualized sales per square foot in excess of $300.
TRG believes that this level of productivity in the Taubman Shopping Centers is
indicative of their strong competitive position and is, in significant part,
attributable to TRG's business strategy and philosophy. TRG believes that large
shopping centers (including regional and especially super-regional shopping
centers) are the least susceptible to direct competition because (among other
reasons) anchors and large specialty retail stores do not find it economically
attractive to open additional stores in the immediate vicinity of an existing
location for fear of competing with themselves. In addition to the advantage of
size, TRG believes that the Centers' success can be attributed in part to their
other physical characteristics, such as design, layout, and amenities.
-2-
<PAGE>
Business Strategy And Philosophy
TRG believes that the regional shopping center business is not simply a real
estate development business, but rather an operating business in which a
retailing approach to the on-going management and leasing of the Taubman
Shopping Centers is essential. Thus TRG:
o offers a large, diverse selection of retail stores in each Center to give
customers a broad selection of consumer goods and variety of price ranges;
o endeavors to increase overall mall tenants' sales, and thereby increase
achievable rents, by leasing space to a constantly changing mix of tenants;
and
o seeks to anticipate trends in the retailing industry and emphasizes ongoing
introductions of new retail concepts into the Centers. Due in part to this
strategy, a number of successful retail trade names have opened their first
mall stores in the Taubman Shopping Centers. TRG believes that its execution
of this leasing strategy is unique in the industry and is an important
element in building and maintaining customer loyalty and increasing mall
productivity.
The Taubman Shopping Centers compete for retail consumer spending through
diverse, in-depth presentations of predominantly fashion merchandise in an
environment intended to facilitate customer shopping. While some Taubman
Shopping Centers include stores that target high-end, upscale customers, each
Center is individually merchandised in light of the demographics of its
potential customers within convenient driving distance.
TRG's leasing strategy involves assembling a diverse mix of mall tenants in
each of the Taubman Shopping Centers in order to attract customers, thereby
generating higher sales by mall tenants. High sales by mall tenants make the
Taubman Shopping Centers attractive to prospective tenants, thereby increasing
the rental rates that prospective tenants are willing to pay. TRG implements an
active leasing strategy to increase the Taubman Shopping Centers' productivity
and to set minimum rents at higher levels. Elements of this strategy include
terminating leases of under-performing tenants, renegotiating existing leases,
and not leasing space to prospective tenants that (though viable or attractive
in certain ways) would not enhance a Taubman Shopping Center's retail mix.
TRG's strategy is carried out by the Manager, which is more than 99%
beneficially owned by TRG and which has been engaged to provide property
management and leasing services for the Taubman Shopping Centers and to provide
corporate, development, administrative, and acquisition services for TRG and
TCO. The Manager has been a leading developer and manager in the regional
shopping center business for more than 25 years.
Potential For Growth
TRG seeks to maximize the financial results of its dominant assets, while
pursuing a growth strategy that includes the following key elements 1) an active
new center development program, 2) strategic acquisitions, 3) expansion of the
Centers, and 4) internal growth.
-3-
<PAGE>
Development of New Centers
- --------------------------
TRG believes that it has attractive development opportunities and intends to
continue to pursue an active program of regional shopping center development.
TRG believes that it has the expertise, through the Manager, to develop
economically attractive regional shopping centers through intensive analysis of
local retail opportunities. TRG believes that the development of new centers is
the best use of its capital and an area in which TRG excels. At any time, TRG
has numerous potential development projects in various stages, with the
objective of opening, on average, one new center each year. During 1997, TRG's
program of development produced the opening of two centers. In July, TRG opened
The Mall at Tuttle Crossing, a super-regional shopping center located in
Columbus, Ohio. This Center was 95% leased at year end. In November, TRG opened
Arizona Mills, a value super-regional shopping center located in Tempe, Arizona.
The Center opened 90% leased.
Additionally, two centers from TRG's development program are currently under
construction. In 1997, TRG began construction on Great Lakes Crossing, an
enclosed value super-regional mall in Auburn Hills, Michigan, owned by a
partnership in which TRG has an 80% controlling interest. The 1.4 million square
foot Center is scheduled to open in November 1998, at an expected cost of
approximately $210 million. Construction continues on MacArthur Center, a new
Center in Norfolk, Virginia, which is expected to open in March 1999 with 930
thousand square feet of GLA. The three-level Center will initially be anchored
by Nordstrom and Dillard's. The project is a joint venture in which TRG has a
70% controlling interest and is projected to cost approximately $150 million.
TRG's policies with respect to development activities are designed to limit
the risks otherwise associated with development. For instance, TRG entered into
an agreement to lease Memorial City Mall, a center adjacent to one of the most
affluent residential areas in Houston, Texas, while TRG investigates the
redevelopment opportunities of the center (see "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources -- Capital Spending" for further discussion of the
transaction). Also, TRG generally does not intend to acquire land early in the
development process, but will instead generally acquire options on land or form
partnerships with landholders holding potentially attractive development sites,
typically exercising options only once it is prepared to begin construction. In
addition, TRG does not intend to begin construction until a sufficient number of
anchor stores have agreed to operate in the shopping center, such that TRG is
confident that the projected sales and rents from Mall GLA are sufficient to
earn a return on invested capital in excess of TRG's cost of capital. Having
historically followed these two principles, TRG's experience indicates that less
than 20% of the costs of the development of a regional shopping center will be
incurred prior to the construction period; however, no assurance can be given
that TRG will continue to be able to so minimize pre-construction costs.
While TRG anticipates that it will continue to evaluate development projects
using criteria, including financial criteria for rates of return, similar to
those employed in the past, no assurances can be given that the adherence to
these policies will produce comparable results in the future. In addition, the
costs of shopping center development opportunities that are explored but
ultimately abandoned will, to some extent, diminish the overall return on
development projects.
Strategic Acquisitions
- ----------------------
TRG's objective is to acquire existing centers that are compatible with the
quality of TRG's portfolio (or can be redeveloped to that level) and that
satisfy TRG's strategic plans and pricing requirements. In 1997, TRG completed
three acquisitions totaling over $356 million.
In September 1997, TRG acquired Regency Square shopping center, the dominant
fashion center in the greater Richmond, Virginia area, for $123.9 million.
Regency Square has 825,000 square feet of GLA and is anchored by Hecht's,
JCPenney and Sears.
-4-
<PAGE>
In December 1997, TRG acquired The Falls shopping center in Miami for $156
million. Representing TRG's entry into the Florida market, The Falls is an
812,000 square foot Center, anchored by Bloomingdale's and Macy's.
Also in December, TRG completed the $76.3 million acquisition of the
participating leasehold interest in The Mall at Tuttle Crossing. Tuttle Crossing
opened in July as the second of TRG's two properties in the Columbus, Ohio
market.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Results of Operations -- Acquisitions" and Note 3 to the
Consolidated Financial Statements of TRG for further discussion of these
acquisitions.
TRG believes that it will have additional opportunities to acquire regional
shopping centers, or interests therein, and will have certain advantages in
doing so.
o First, the management expertise of the Manager will enhance the leasing and
operation of newly acquired regional shopping centers. If opportunities
exist to expand, remodel, or re-merchandise the center through new leasing,
the Manager's expertise will assist TRG in making an informed and timely
evaluation of the economic consequences of such activities prior to
acquisition, as well as facilitate implementation of such activities.
o Second, a center can be acquired for any combination of cash or equity
interests in TRG or (subject to certain limitations) TCO, possibly creating
the opportunity for tax-advantaged transactions for the seller, thereby
reducing the price that might otherwise have to be paid in an all cash
transaction or making an opportunity available that would not otherwise
exist. TRG is able to offer partnership interests in itself in exchange for
shopping center interests, allowing sellers to diversify their interests,
attain liquidity not otherwise available, possibly defer taxes that might
otherwise be due if the interests were instead sold for cash, maintain an
investment in the regional shopping center business, and resolve concerns
sellers otherwise may have regarding future management of their properties.
For instance, Biltmore Fashion Park's selling group included private
investors who found it tax efficient to accept TRG partnership units as part
of the consideration when TRG acquired the Center in 1994.
Expansions of the Taubman Shopping Centers
- ------------------------------------------
A key element of growth is the strategic expansion of existing properties to
update and enhance their market positions, by replacing or adding new anchor
stores or increasing mall tenant space. Most of the Taubman Shopping Centers
have been designed to accommodate expansions. Expansion projects can be as
significant as new shopping center construction in terms of scope and cost,
requiring governmental and existing anchor store approvals, design and
engineering activities, including rerouting utilities, providing additional
parking areas or decking, acquiring additional land, and relocating anchors and
mall tenants (all of which must take place with a minimum of disruption to
existing tenants and customers). In 1997, for example, TRG opened a 135,000
square foot expansion at Westfarms in August (followed by a new Nordstrom in
September) and new mall stores totaling 50,000 square feet of Mall GLA at
Biltmore throughout the year. Additionally, construction is in process at Cherry
Creek, where a 132,000 square foot expansion of the Mall GLA will open in the
fall of 1998.
Consolidation of department stores has also strengthened TRG's portfolio, as
retailers continue to be attracted to TRG's dominant and highly productive
locations. A recent department store conversion includes Bloomingdale's at
Beverly Center, which opened in March of 1997.
-5-
<PAGE>
The following table includes information regarding TRG's development,
acquisition, and expansion activities during 1997 and 1996.
Developments:
Completion Date Center Location
--------------- ------ --------
July 1997 Tuttle Crossing Columbus, Ohio
November 1997 Arizona Mills Tempe, Arizona
November 1998 Great Lakes Crossing Auburn Hills, Michigan
March 1999 MacArthur Center Norfolk, Virginia
Acquisitions:
Completion Date Center Location
--------------- ------ --------
June 1996 Paseo Nuevo (1) Santa Barbara, California
July 1996 Fairlane Town Center (2) Dearborn, Michigan
December 1996 La Cumbre Plaza Santa Barbara, California
September 1997 Regency Square Richmond, Virginia
December 1997 Tuttle Leasehold Columbus, Ohio
December 1997 The Falls (3) Miami, Florida
Expansions and Anchor Conversions:
Completion Date Center Location
--------------- ------ --------
June 1996 Biltmore (4) Phoenix, Arizona
August 1996 Fair Oaks (5) Fairfax, Virginia
August 1996 Lakeforest (5) Gaithersburg, Maryland
November 1996 Marley Station (6) Anne Arundel County, Maryland
November 1996 Stoneridge (6) Pleasanton, California
March 1997 Beverly Center (7) Los Angeles, California
August 1997 Westfarms (8) West Hartford, Connecticut
November 1997 Cherry Creek (9) Denver, Colorado
December 1997 Biltmore (10) Phoenix, Arizona
- ------------------
(1) Broadway converted to Macy's immediately prior to TRG's acquisition of
Paseo Nuevo.
(2) Acquired partner's 75% interest in the Center.
(3) Completely redeveloped and expanded in 1996 before TRG's acquisition of The
Falls.
(4) Broadway converted to Macy's.
(5) Woodward & Lothrop converted to Lord & Taylor.
(6) Sears opened new store.
(7) Broadway converted to Bloomingdale's.
(8) 135,000 square foot expansion followed by the opening of a new Nordstrom in
September.
(9) Lord & Taylor opened new and expanded store. Additional 132,000 square foot
expansion of mall tenant space will open in the Fall of 1998.
(10) 50,000 square foot expansion of mall tenant space completed.
-6-
<PAGE>
Internal Growth
- ---------------
The Taubman Shopping Centers are among the most productive in the nation, when
measured by mall tenant's average sales per square foot. Higher sales per square
foot enable mall tenants to remain profitable while paying occupancy costs that
are a greater percentage of total sales. As leases expire at the Centers, TRG
has consistently been able, on a portfolio basis, to lease the available space
to an existing or new tenant at higher rates.
Augmenting this growth, TRG is pursuing a number of new sources of revenue
from the Taubman Shopping Centers. For example, TRG expects increased revenue
from its specialty leasing efforts. In recent years a new industry -- beyond
traditional carts and kiosks -- has evolved, with more and better quality
specialty tenants. TRG has put in place a company-wide program to maximize this
opportunity.
Rental Rates
As leases have expired in the Taubman Shopping Centers, TRG has generally been
able to rent the available space, either to the existing tenant or a new tenant,
at rental rates that are higher than those of the expired leases. In a period of
increasing sales, rents on new leases will tend to rise as tenants' expectations
of future growth become more optimistic. In periods of slower growth or
declining sales, rents on new leases will grow more slowly or will decline for
the opposite reason. However, Center revenues nevertheless increase as older
leases roll over or are terminated early and replaced with new leases negotiated
at current rental rates that are usually higher than the average rates for
existing leases. The following table contains certain information regarding per
square foot base rent, excluding renewals, at Taubman Shopping Centers that have
been owned and open for five years.
Store Store Difference
All Closings Openings Between
Mall During During Opening and
Tenants Year Year Closing Rents
------- ---- ---- -------------
Average Average Average Average
Base Annualized Annualized Annualized
Rent Base Rent Base Rent Base Rent
---- --------- --------- ---------
1997 (1)................... $38.79 $37.62 $41.67 $ 4.05
1996 (1)................... $37.90 $33.39 $42.39 $ 9.00
1995 (1)................... $36.33 $32.96 $41.27 $ 8.31
1994 (2)................... $34.72 $30.46 $41.02 $10.56
1993 (3)................... $32.64 $29.56 $35.86 $ 6.30
(1) Includes 18 centers owned and open prior to January 1, 1991.
(2) Includes 17 centers owned and open prior to January 1, 1990.
(3) Includes 16 centers owned and open prior to January 1, 1989.
Average annualized rent on stores opening in 1997 excludes rent on stores with
greater than 40,000 square feet. TRG anticipates that the spread in 1998 will be
somewhat higher than in 1997. However, this statistic is difficult to predict in
part because TRG's leasing policies and practices may result in early lease
terminations with actual average closing rents which may vary from the average
rent per square foot of scheduled lease expirations. In addition, the opening or
closing of large tenant spaces, which generally pay a lower rent per square
foot, can significantly affect the spread in a given year.
-7-
<PAGE>
Lease Expirations
The following table shows lease expirations based on information available as
of December 31, 1997 for the next ten years for the Taubman Shopping Centers in
operation at that date:
<TABLE>
<CAPTION>
Percent of
Annualized Base Annualized Base Total Leased
Rent Under Rent Under Square Footage
Lease Expiration Number of Leases Leased Area Expiring Leases Expiring Leases Represented by
Year Expiring in Square Footage (in thousands) Per Square Foot Expiring Leases
---- -------- ----------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
1998 (1) 173 423,828 $ 14,527 $ 34.27 4.5%
1999 281 749,483 27,081 36.13 7.9%
2000 346 845,160 31,682 37.49 8.9%
2001 335 825,406 33,050 40.04 8.7%
2002 376 920,849 36,971 40.15 9.7%
2003 362 1,037,080 41,446 39.96 11.0%
2004 310 996,685 41,044 41.18 10.5%
2005 318 1,029,162 42,362 41.16 10.9%
2006 198 612,522 25,835 42.18 6.5%
2007 258 913,452 35,264 38.61 9.7%
(1) Excludes leases that expire in 1998 for which renewal leases or leases with
replacement tenants have been executed as of December 31, 1997.
</TABLE>
TRG believes that the information in the table is not necessarily indicative
of what will occur in the future because of several factors, but principally
because TRG's leasing policies and practices create a significant level of early
lease terminations at the Taubman Shopping Centers. For example, the average
remaining term of the leases that were terminated during the period 1992 to 1997
was approximately 1.9 years. The average term of leases signed during 1997 and
1996 was approximately 7.3 years.
In addition, mall tenants at Taubman Shopping Centers may seek the protection
of the bankruptcy laws, which could result in the termination of such tenants'
leases and thus cause a reduction in the cash flow generated by the Taubman
Shopping Centers. Prior to 1992, such bankruptcies had not affected more than 3%
of leases in the Taubman Shopping Centers in any one calendar year. In 1997,
approximately 1.5% of leases were so affected compared to 2.8% in 1996, 3.2% in
1995, 3.1% in 1994 and 4.0% in 1993. Since 1991, the annual provision for losses
on accounts receivable has been less than 2% of TRG's annual revenues.
Occupancy
Mall tenant average occupancy rates of the Taubman Shopping Centers for the
last five years are as follows:
Year Mall Tenant Average Occupancy
---- -----------------------------
1997 87.6%
1996 87.4%
1995 88.0%
1994 86.6%
1993 86.5%
Historically, average annual occupancy for TRG as a whole has been within a
narrow band. In the last ten years, average annual occupancy has ranged between
86.5% and 88.7%.
Major Tenants
The combined operations of The Limited, Inc. accounted for approximately 12%
of leased Mall GLA as of December 31, 1997 and for approximately 10% of the 1997
base rent. The largest of these, in terms of square footage and rent, is The
Limited, which accounted for approximately 2.3% of leased Mall GLA and 2.1% of
1997 base rent. No other single retail company accounted for more than 4% of
leased Mall GLA or 1997 base rent.
-8-
<PAGE>
Environmental Matters
All of the Taubman Shopping Centers presently owned by TRG (not including
option interests in the Development Projects or any of the real estate managed
by the Manager but not included in TRG's portfolio) have been subject to
environmental assessments. TRG and the Manager are not aware of any
environmental liability relating to the Taubman Shopping Centers or any other
property in which they have or had an interest (whether as an owner or operator)
that TRG believes would have a material adverse effect on TRG's business,
assets, or results of operations. No assurances can be given, however, that all
environmental liabilities have been identified or that no prior owner, operator,
or current occupant has created an environmental condition not known to TRG or
the Manager. Moreover, no assurances can be given that (i) future laws,
ordinances, or regulations will not impose any material environmental liability
or that (ii) the current environmental condition of the Taubman Shopping Centers
will not be affected by tenants and occupants of the Taubman Shopping Centers,
by the condition of properties in the vicinity of the Taubman Shopping Centers
(such as the presence of underground storage tanks), or by third parties
unrelated to TRG or the Manager.
With respect to the matters described below, while there can be no assurances,
TRG believes that such matters will not have a material adverse effect on TRG's
business, assets, or results of operations.
Beverly Center is located over an oil field and several abandoned oil wells,
and is adjacent to an active oil production facility that operates numerous oil
and gas wells. In the Los Angeles basin, where Beverly Center is located,
pockets of methane gas may be found in oil fields; however, elevated levels of
methane have not been detected at Beverly Center.
Cherry Creek is situated on land that was used as a landfill prior to 1950.
Because of the past use of the site as a landfill, the site is listed on the
United States Environmental Protection Agency's Comprehensive Environmental
Response, Compensation and Liability Information System list.
In the summer of 1997, geotechnical drilling activities were undertaken in the
former gasoline station area as part of a parking lot expansion at the
southeastern corner of the Cherry Creek site. The geotechnical soil samples were
observed to have petroleum odors and staining. A subsurface environmental
investigation subsequently revealed a limited zone of hydrocarbon contaminated
soils, with no significant impacts to groundwater. Discussions with the Colorado
Department of Labor and Employment, Oil Inspection Section, held in September
1997, resulted in a "passive retardation" remedial approach that relies on
natural processes to degrade the hydrocarbon contamination. A Corrective Action
Plan was submitted in February 1998 that proposes monitoring the soil and
groundwater quarterly for a period of two years. Acceptance of the plan is
anticipated by May 1998. Implementation of the plan poses no constraints to the
current expansion activity.
Paseo Nuevo is located in an area of known groundwater contamination by
tetrachloroethylene ("PCE"). The groundwater under and around the site was
monitored for six years before, during, and after construction of the center. No
on-site sources of PCE were identified during construction. The Regional Water
Quality Control Board has given approval to discontinue the monitoring program
because the PCE levels remained relatively constant over the six-year period and
do not exceed the state standard for PCE in drinking water.
There are asbestos containing materials ("ACMs") at most of the Taubman
Shopping Centers, primarily in the form of floor tiles, roof coatings and
mastics. The floor tiles, roof coatings and mastics are generally in good
condition. Fire-proofing material containing asbestos is present at some of the
Taubman Shopping Centers in limited concentrations or in limited areas. The
Manager has developed and is implementing an operations and maintenance program
that details operating procedures with respect to ACMs prior to any renovation
and that requires periodic inspection for any change in condition of existing
ACMs.
-9-
<PAGE>
Personnel
TRG has engaged the Manager to provide real estate management, acquisition,
development, and administrative services required by (or of) TRG or any of its
properties.
As of December 31, 1997, the Manager had 449 full-time employees. The
following table provides a breakdown of employees by operational areas as of
December 31, 1997:
Number Of Employees
-------------------
Property Management............... 188
Leasing........................... 73
Development....................... 47
Financial Services................ 77
Other ............................ 64
---
Total....................... 449
===
The Manager considers its relations with its employees to be good.
-10-
<PAGE>
Item 2. PROPERTIES
Taubman Shopping Centers
Ownership
The following table sets forth certain information about each of the Taubman
Shopping Centers. The table includes only Centers in operation at December 31,
1997. Excluded from this table are Great Lakes Crossing, which will open in
November 1998, and MacArthur Center, which will open in March 1999. Also
excluded is Memorial City Mall, a development project. Centers are owned in fee
other than: Beverly Center, Cherry Creek, Columbus City Center, La Cumbre Plaza
and Paseo Nuevo, which are held under ground leases expiring between 2028 and
2083 (exclusive of three ten-year renewal options at Columbus City Center), and
a portion of the parking area at Hilltop (the ground lease of which expires in
2073).
Certain of the Centers are partially owned through joint ventures. Generally,
TRG's joint venture partners have ongoing rights with regard to the disposition
of TRG's interest in the joint ventures, as well as the approval of certain
major matters.
-11-
<PAGE>
<TABLE>
<CAPTION>
TRG's % Percent of Mall
Sq. Ft of GLA/ Ownership GLA Occupied
Mall GLA Year Opened/ Year as of as of 1997 Rent (1)
Centers Anchors as of 12/31/97 Expanded Acquired 12/31/97 12/31/97 (in Thousands)
- ------- ------- -------------- ----------- -------- ---------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Beverly Center Bloomingdale's, Macy's 908,000/ 1982 70%(2) 92% $ 24,797
Los Angeles, CA 600,000
Biltmore Fashion Park Macy's, Saks Fifth 569,000/ 1963/1992/ 1994 100% 95% 10,071
Phoenix, AZ Avenue 330,000 1997
Briarwood Hudson's, JCPenney, 990,000/ 1973/1980 100% 95% 12,433
Ann Arbor, MI Jacobson's, Sears 369,000
Cherry Creek Foley's, Lord & Taylor, 903,000/ 1990 50% 96% 18,306
Denver, CO Neiman Marcus, Saks 430,000 (3)(4)
Fifth Avenue
Columbus City Center Jacobson's, Lazarus, 1,209,000/ 1989 100% 98% 16,335
Columbus, OH Marshall Field's 415,000
Fair Oaks Hecht's, JCPenney, Lord 1,398,000/ 1980/1987/ 50% 88% 18,409
Fairfax, VA & Taylor, Sears 582,000 1988
(Washington, D.C.
Metropolitan Area)
Fairlane Town Center Hudson's, JCPenney, 1,484,000/(5) 1976/1978/ 100% 79% 13,632
Dearborn, MI Lord & Taylor, Saks 594,000 1980
(Detroit Metropolitan Fifth Avenue, Sears
Area)
The Falls Bloomingdale's, Macy's 812,000/ 1980/1996 1997 100% 90% 884(1)
Miami, FL 357,000
Hilltop JCPenney, Macy's, Sears 1,096,000/ 1976/1991 100% 85% 5,811
Richmond, CA 367,000
(San Francisco
Metropolitan Area)
La Cumbre Plaza Robinsons-May, Sears 478,000/ 1967/1989 1996 100% 95% 4,042
Santa Barbara, CA 178,000
Lakeforest Hecht's, JCPenney, Lord 1,107,000/ 1978/1992 100% 88% 13,045
Gaithersburg, MD & Taylor, Sears 437,000
(Washington, D.C.
Metropolitan Area)
Lakeside Crowley's, Hudson's, 1,474,000/ 1976/1980 50% 88% 16,398
Sterling Heights, MI JCPenney, Lord & 513,000
(Detroit Metropolitan Taylor, Sears
Area)
- ----------------------------
(1) Includes minimum and percentage rent for the year ended December 31, 1997.
Excludes rent from certain peripheral properties. For Centers opened or
acquired in 1997, the amounts reflect rents for the period subsequent to
the opening or acquisition date. 1997 openings and acquisitions include The
Mall at Tuttle Crossing (July), Regency Square (September), Arizona Mills
(November), and The Falls (December).
(2) TRG has an option to acquire the remaining 30%. The results of Beverly
Center are consolidated in TRG's financial statements.
(3) GLA excludes approximately 166,000 square feet for the renovated buildings
on adjacent peripheral land.
(4) An expansion of the Center of approximately 132,000 square feet of Mall GLA
will open in the fall of 1998.
(5) A 30-screen theater will be added and is anticipated to open by the summer
of 1999.
12
<PAGE>
<CAPTION>
TRG's % Percent of Mall
Sq. Ft of GLA/ Ownership GLA Occupied
Mall GLA Year Opened/ Year as of as of 1997 Rent (1)
Centers Anchors as of 12/31/97 Expanded Acquired 12/31/97 12/31/97 (in Thousands)
- ------- ------- -------------- ----------- -------- ---------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Marley Station Hecht's, JCPenney, 1,088,000/ 1987/1994/ 100% 77% $ 9,447
Anne Arundel County, MD Macy's, Sears 375,000 1996
(Washington, D.C.
Metropolitan Area)
Meadowood Mall JCPenney, Macy's (two 889,000/ 1979/1995 100% 93% 9,666
Reno, NV locations), Sears 312,000
Paseo Nuevo Macy's, Nordstrom 438,000/ 1990 1996 100% 88% 4,193
Santa Barbara, CA 133,000
Regency Square Hecht's (two 825,000/ 1975/1987 1997 100% 100% 2,888(1)
Richmond, VA locations), JCPenney, 238,000
Sears
The Mall at Short Hills Bloomingdale's, 1,372,000/ 1980/1994/ 100% 96% 31,095
Short Hills, NJ Macy's, Neiman Marcus, 550,000 1995
Nordstrom, Saks Fifth
Avenue
Stamford Town Center Filene's, Macy's, 875,000/ 1982 50% 90% 15,678
Stamford, CT Saks Fifth Avenue 382,000
Stoneridge JCPenney, Macy's (two 1,291,000/ 1980/1990/ 100% 92% 15,608
Pleasanton, CA locations), Nordstrom, 449,000 1996
(San Francisco Sears
Metropolitan Area)
The Mall at Tuttle JCPenney, Lazarus, 974,000/ 1997 100% 93% 5,748(1)
Crossing Marshall Field's, 383,000
Columbus, OH Sears
Twelve Oaks Mall Hudson's, JCPenney, 1,224,000/ 1977/1980 50% 95% 18,729
Novi, MI Lord & Taylor, Sears 486,000
(Detroit Metropolitan
Area)
Westfarms Filene's, Filene's 1,298,000/ 1974/1997 79% 83% 17,230
West Hartford, CT Men's Store/Furniture 528,000
Gallery, JCPenney, Lord
& Taylor, Nordstrom
Woodfield JCPenney, Lord & 2,267,000/ 1971/1972/ 50% 89% 35,286
Schaumburg, IL Taylor, Marshall 942,000 1995
(Chicago Metropolitan Field's, Nordstrom,
Area) Sears
Woodland Hudson's, JCPenney, 1,094,000/ 1968/1974/ 50% 96% 13,843
Grand Rapids, MI Sears 369,000 1984/1989
Value Center:
- ------------
Arizona Mills Off 5th Saks, 1,157,000/ 1997 37% 80% 2,611(1)
Tempe, AZ Rainforest Cafe, 531,000
(Phoenix Metropolitan JCPenney Outlet,
Area) Oshman's Supersports ---------
USA, GameWorks,
Harkins Cinemas
Total GLA/Total Mall GLA: 27,220,000/
10,850,000
Average GLA/Average Mall GLA: 1,089,000/
434,000
</TABLE>
13
<PAGE>
Anchors
The following table summarizes certain information regarding the anchors at
the Taubman Shopping Centers.
Number of 12/31/97 GLA
Name Anchor Stores (in thousands) % of GLA
---- ------------- ------------- --------
Federated
Macy's 12 2,156
Lazarus 2 658
Bloomingdale's 3 604
-- ------
Total 17 3,418 13.1%
Sears 15 3,099 11.9%
JCPenney 15 2,710 10.4%
May Company
Lord & Taylor 8 1,035
Hecht's 5 749
Filene's 2 379
Filene's Men's Store/
Furniture Gallery 1 80
Foley's 1 178
Robinsons-May 1 150
-- ------
Total 18 2,571 9.9%
Dayton Hudson
Hudson's 5 1,040
Marshall Field's 3 686
-- ------
Total 8 1,726 6.6%
Nordstrom 5(1) 877 3.4%
Saks 5 450 1.7%
Jacobson's 2 221 0.8%
Neiman Marcus 2 216 0.8%
Crowley's 1 115 0.4%
-- ------ ----
Total 88 15,403 59.1%
== ====== ====
(1) An additional Nordstrom store will be added along with Dillard's in
connection with the development of MacArthur Center.
14
<PAGE>
Mortgage Debt
The following table sets forth certain information regarding the mortgages
encumbering the Taubman Shopping Centers as of December 31, 1997. All mortgage
debt in the table below is nonrecourse to TRG, except for debt encumbering
Arizona Mills and MacArthur Center. TRG has guaranteed the payment of principal
and interest on the mortgage debt of these Centers (the guarantee on the Arizona
Mills mortgage is limited to the extent of TRG's 37% ownership interest in the
joint venture owning the Center). The loan agreements provide for the reduction
of the amounts guaranteed as certain center performance and valuation criteria
are met. Biltmore, Hilltop and Stoneridge are also encumbered by assessment
bonds totaling approximately $4.8 million, which are not included in the table.
<TABLE>
<CAPTION>
Principal
Balance Annual Debt Balance Due Earliest
Centers Consolidated in Interest as of 12/31/97 Service Maturity on Maturity Prepayment
TRG's Financial Statements Rate (000's) (000's) Date (000's) Date
- -------------------------- ---- ------- ------- ---- ------- ----
<S> <C> <C> <C> <C> <C> <C>
Beverly Center 8.36% $146,000 Interest Only 07/15/04 $146,000 30 Days' Notice(1)
Columbus City Center 7.00% 8,022 $ 725 08/01/19 0 At Any Time(2)
MacArthur Center (70%) Floating 42,241(3) Interest Only 10/27/00 42,241 4 Days' Notice(2)
Stoneridge Floating(4) 74,762 Interest Only (4) 75,000 (4)
Centers Owned by Unconsolidated
Joint Ventures/TRG's % Ownership
- --------------------------------
Arizona Mills (37%) Floating(5) 121,991(5) Interest Only 02/01/02 121,991 5 Days' Notice(2)
Cherry Creek (50%) Floating(6) 130,000 Interest Only 08/01/98 130,000 4 Days' Notice(2)
Fair Oaks (50%) 9.00% 39,119 4,304 12/01/16 0 12/01/97(7)
Lakeside (50%) 6.47% 88,000 Interest Only 12/15/00 88,000 30 Days' Notice(1)
Stamford Town Center (50%) 11.69%(8) 55,630 7,207 12/01/17 0 01/01/00(9)
Twelve Oaks Mall (50%) Floating(10) 49,940 Interest Only 10/15/01 50,000 30 Days' Notice(2)
Westfarms (79%) 7.85% 100,000 Interest Only 07/01/02 100,000 07/01/98(11)
Floating(12) 51,792(12) Interest Only 07/01/02 51,792 4 Days' Notice(2)
Woodfield (50%) Floating(13) 172,000 Interest Only 10/13/98 172,000 30 Days' Notice(2)
Woodland (50%) 8.20% 66,000 Interest Only 05/15/04 66,000 30 Days' Notice(1)
- ------------------------
(1) Debt may be prepaid with a yield maintenance prepayment penalty.
(2) Prepayment can be made without penalty.
(3) The loan is a construction facility with a maximum availability of $150
million.
(4) Commercial paper facility. The maximum availability under the facility is
$75 million. Commercial paper is generally sold with a 30 day maturity.
(5) The loan is a construction facility with a maximum availability of $145
million. The rate is capped at 9.5% until maturity, plus credit spread,
based on one month LIBOR.
(6) The rate is capped at 6.5% through January 1998 and from February 1998 to
maturity at 7%, plus credit spread, based on one month LIBOR.
(7) The mortgage was prepayable on 12/01/97 (the earliest prepayment date) with
a penalty of 4.5% of outstanding principal. In March 1998, the mortgage was
extinguished with the proceeds of a $140 million, 6.60%, secured financing
maturing 2008. The net proceeds were also used to pay the prepayment
penalty of approximately $1.8 million. In addition, proceeds of $5.6
million were used to close out a treasury lock agreement entered into in
1997, which resulted in an effective rate on the financing of approximately
7%. The remaining proceeds were distributed to the owners.
(8) The lender is entitled to contingent interest equal to 20% of annual
applicable receipts in excess of approximately $9.0 million.
(9) The mortgage has a prepayment penalty of 6%, declining by one-half of 1%
for each year after the earliest prepayment date, reducing to a minimum
penalty of 1%, plus an amount equal to ten times the greater of (i)
contingent interest payable for the year immediately preceding prepayment
or (ii) the average amount of contingent interest for the three years
immediately prior to prepayment.
(10) The rate is capped at 8.55% until maturity, plus credit spread, based on
one month LIBOR.
(11) If the loan is prepaid between 7/1/98 and 1/3/02 there is a yield
maintenance prepayment penalty.
(12) The loan is a construction facility with a maximum availability of $55
million. The rate on the construction facility is capped until maturity at
6.5%, plus credit spread.
(13) The interest rate on $93.5 million was swapped to maturity at an effective
annual rate of 5.4%. The rate on the balance of the financing, which has
been capped at a maximum annual rate, including credit spread, of 6.5% to
maturity, floats at a rate of three month LIBOR plus 0.5%.
</TABLE>
For additional information regarding the Taubman Shopping Centers and their
operation, see the responses to Item 1 of this report.
-15-
<PAGE>
Item 3. LEGAL PROCEEDINGS
Neither TRG, the Consolidated Businesses, nor any of the joint ventures is
presently involved in any material litigation nor, to TRG's knowledge, is any
material litigation threatened against TRG or any of their properties. Except
for routine litigation involving present or former tenants of Taubman Shopping
Centers (generally eviction or collection proceedings), substantially all
litigation is covered by TRG's and the joint ventures' liability insurance.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
None
-16-
<PAGE>
Item 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial data for TRG and should be
read in conjunction with the financial statements and notes thereto and
Management's Discussion and Analysis of Financial Condition and Results of
Operations included in this report.
<TABLE>
<CAPTION>
Year Ended December 31
----------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(In thousands of dollars, except as noted)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
I. TRG
Revenues 313,426 263,696 228,918 197,134 177,107
Operating Costs 270,402 231,355 207,159 176,194 161,934
Equity in income before
extraordinary items of
Unconsolidated Joint Ventures 52,270 51,753 57,940 51,263 54,153
------- ------- ------- ------- -------
Income before extraordinary items 95,294 84,094 79,699 72,203 69,326
Extraordinary items (1) (1,328) 16,627 (44,731) (9,454)
------- ------- ------- ------- -------
Net income 95,294 82,766 96,326 27,472 59,872
Preferred distributions to TCO (4,058)
------- ------- ------- ------- -------
Net income available to unitholders 91,236 82,766 96,326 27,472 59,872
======= ======= ======= ======= =======
Income before extraordinary items
per unit of partnership interest (2) 0.66 0.65 0.64 0.59 0.57
Net income per unit of partnership
interest (2) 0.66 0.64 0.77 0.22 0.49
Weighted average number of units of
partnership interest
outstanding (3) 138,271,014 128,579,312 125,459,939 122,509,799 122,418,156
Number of units of partnership
interest outstanding
at end of period (3) 138,299,310 138,251,907 125,459,939 125,459,939 122,418,156
Distributions to partnership
unitholders 128,094 119,099 116,225 113,479 110,939
Preferred distributions to TCO 4,058
II. UNCONSOLIDATED JOINT VENTURES
Revenues (4) 258,783 265,336 291,144 268,815 268,563
Operating Costs (4) 166,402 171,063 183,814 174,950 167,846
------- ------- ------- ------- -------
Income before extraordinary items 92,381 94,273 107,330 93,865 100,717
======= ======= ======= ======= =======
TRG's share of income before
extraordinary items 52,270 51,753 57,940 51,263 54,153
======= ======= ======= ======= =======
<CAPTION>
As of December 31
----------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(In thousands of dollars, except as noted)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Real estate before accumulated
depreciation 1,593,350 1,136,416 926,207 843,960 665,978
Total assets 1,396,826 978,262 804,356 739,811 574,456
Total debt and capital lease
obligation (5) 1,284,327 1,041,254 969,667 872,158 695,517
<CAPTION>
Year Ended December 31
----------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(In thousands of dollars, except as noted)
<S> <C> <C> <C> <C> <C>
SUPPLEMENTAL INFORMATION:
EBITDA (6) 255,743 229,811 216,130 186,657 174,714
TRG's Beneficial Interest Expense (6) 102,902 98,192 96,254 74,322 67,407
Distributable Cash Flow (6) 146,701 129,714 117,847 110,257 105,237
Consolidated Coverage Ratio (7) 2.5 2.3 2.2 2.5 2.6
Ratio of Earnings to Fixed Charges
and Preferred Distributions 1.6 1.7 1.7 1.7 1.9
OPERATING DATA:
Mall tenant sales (8) 3,086,259 2,827,245 2,739,393 2,561,555 2,483,342
Sales per square foot (8) 384 377 364 348 338
Number of shopping centers at end
of period 25 21 19 20 19
Ending Mall GLA in thousands of
square feet 10,850 9,250 8,996 9,088 8,823
Average occupancy 87.6% 87.4% 88.0% 86.6% 86.5%
Ending occupancy 90.3% 88.0% 89.4% 89.3% 88.7%
Leased space (9) 92.3% 89.0% 90.6% 90.9% 90.1%
Average base rent per square
foot (10):
All mall tenants $38.79 $37.90 $36.33 $34.72 $32.64
Stores closing during year $37.62 $33.39 $32.96 $30.46 $29.56
Stores opening during year $41.67 $42.39 $41.27 $41.02 $35.86
-17-
<PAGE>
- --------------------------
(1) In 1995, TRG recognized an $18.9 million extraordinary gain related to the
disposition of Bellevue Center and the related extinguishment of debt. Also
included in extraordinary items are extraordinary charges in 1993 through
1996 related to the extinguishment of debt.
(2) TRG's basic and diluted earnings per unit amounts are equal, except for
1993, for which diluted income before extraordinary items per unit and
diluted net income per unit were 0.56 and 0.48, respectively.
(3) Effective September 30, 1997, TRG split its existing units of partnership
interest at a ratio of 1,975.08 to one, establishing a one-for-one
equivalency of TRG's units of partnership interest and TCO's common shares.
The split did not alter the ownership percentage of any of TRG's partners.
Prior years' amounts have been adjusted to reflect the unit split on a
retroactive basis.
(4) Amounts are reported net of intercompany profits.
(5) Includes the Tuttle Crossing capital lease obligation of $39.8 million and
$14.4 million at December 31, 1996 and 1995, respectively, which was
extinguished during 1997. TRG's pro rata share of its Consolidated
Businesses' and Unconsolidated Joint Ventures' debt (excluding capital
lease obligations) was $1.737 billion and $1.398 billion at December 31,
1997 and 1996, respectively.
(6) EBITDA, Beneficial Interest Expense, and Distributable Cash Flow are
defined and discussed in MD&A -Liquidity and Capital
Resources-Distributions. Distributable Cash Flow was restated for 1994 and
1993 from the previously reported amounts to reflect the deduction of
non-real estate depreciation and amortization, as specified in NAREIT's
definition of Funds from Operations. EBITDA and Distributable Cash Flow do
not represent cash flow from operations, as defined by generally accepted
accounting principles, and should not be considered to be an alternative to
net income as a measure of operating performance or to cash flows as a
measure of liquidity.
(7) Defined as EBITDA divided by TRG's Beneficial Interest Expense.
(8) Based on reports of sales furnished by mall tenants.
(9) Leased space comprises both occupied space and space that is leased but not
yet occupied.
(10) Amounts include Centers owned and open for at least five years.
</TABLE>
-18-
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- ---------------------------------------------
The following discussion should be read in conjunction with Selected Financial
Data, the Consolidated Financial Statements of The Taubman Realty Group Limited
Partnership and the Notes thereto.
General Background and Performance Measurement
The Taubman Realty Group Limited Partnership (TRG) is an operating partnership
that engages in the full range of activities of the regional shopping center
business. These activities include the ownership, management, leasing,
expansion, acquisition and development of regional shopping centers (Taubman
Shopping Centers or Centers). TRG's Managed Businesses consist of: (i) Taubman
Shopping Centers that TRG controls by ownership or contractual agreement,
development projects for future regional shopping centers (Development Projects)
and The Taubman Company Limited Partnership (the Manager), (collectively, the
Consolidated Businesses); and (ii) Taubman Shopping Centers partially owned
through joint ventures with third parties that are not controlled
(Unconsolidated Joint Ventures). The Unconsolidated Joint Ventures are accounted
for under the equity method in TRG's Consolidated Financial Statements.
Certain aspects of the performance of the Managed Businesses are best
understood by measuring their performance as a whole, without regard to TRG's
ownership interest. For example, mall tenant sales and shopping center occupancy
trends fit this category and are so analyzed below. In addition, trends in
certain items of revenue and expense are often best understood in the same
fashion, and the discussions following take this approach when appropriate. When
relevant, these items are also discussed separately with regard to the
Consolidated Businesses and the Unconsolidated Joint Ventures.
Mall Tenant Sales and Center Revenues
Over the long term, the level of mall tenant sales is the single most
important determinant of revenues of the Taubman Shopping Centers because mall
tenants provide over 90% of these revenues and because mall tenant sales
determine the amount of rent, percentage rent, and recoverable expenses
(together, total occupancy costs) that mall tenants can afford to pay. However,
levels of mall tenant sales can be considerably more volatile in the short run
than total occupancy costs.
TRG believes that the ability of tenants to pay occupancy costs and earn
profits over long periods of time increases as sales per square foot increase,
whether through inflation or real growth in customer spending. Because most mall
tenants have certain fixed expenses, the occupancy costs that they can afford to
pay and still be profitable are a higher percentage of sales at higher sales per
square foot.
The following table summarizes occupancy costs, excluding utilities, for mall
tenants as a percentage of mall tenant sales.
1997 1996 1995
---- ---- ----
Mall tenant sales (in thousands) $3,086,259 $2,827,245 $2,739,393
Sales per square foot 371 365 346
Sales per square foot (excluding
theaters and tenants greater
than 40,000 square feet) 384 377 364
Minimum rents 10.1% 10.4% 10.4%
Percentage rents 0.3 0.3 0.3
Expense recoveries 4.4 4.5 4.4
---- ---- ----
Mall tenant occupancy costs 14.8% 15.2% 15.1%
==== ==== ====
-19-
<PAGE>
Mall tenant occupancy costs as a percentage of sales decreased in 1997
primarily due to Centers acquired in 1997 and late 1996 (Results of Operations
- -- Acquisitions). These Centers have lower occupancy costs than the portfolio
average and consequently provide a source of future revenue growth.
Occupancy
Historically, average annual occupancy for TRG as a whole has been within a
narrow band. In the last ten years, average annual occupancy has ranged between
86.5% and 88.7%. Mall tenant average occupancy rates for the last three years
are as follows:
Year Mall Tenant Average Occupancy
---- -----------------------------
1997 87.6%
1996 87.4
1995 88.0
Rental Rates
As leases have expired in the Taubman Shopping Centers, TRG has generally been
able to rent the available space, either to the existing tenant or a new tenant,
at rental rates that are higher than those of the expired leases. In a period of
increasing sales, rents on new leases will tend to rise as tenants' expectations
of future growth become more optimistic. In periods of slower growth or
declining sales, rents on new leases will grow more slowly or will decline for
the opposite reason. However, Center revenues nevertheless increase as older
leases roll over or are terminated early and replaced with new leases negotiated
at current rental rates that are usually higher than the average rates for
existing leases. The following table contains certain information regarding per
square foot base rent, excluding renewals, at the 18 Taubman Shopping Centers
that have been owned and open for five years.
Store Store Difference
All Closings Openings Between
Mall During During Opening and
Tenants Year Year Closing Rents
------- ---- ---- -------------
Average Average Average Average
Base Annualized Annualized Annualized
Rent Base Rent Base Rent Base Rent
---- --------- --------- ---------
1997 $38.79 $37.62 $41.67 $4.05
1996 $37.90 $33.39 $42.39 $9.00
1995 $36.33 $32.96 $41.27 $8.31
Average annualized rent on stores opening in 1997 excludes rent on stores with
greater than 40,000 square feet. TRG anticipates that the spread in 1998 will be
somewhat higher than in 1997. However, this statistic is difficult to predict in
part because TRG's leasing policies and practices may result in early lease
terminations with actual average closing rents which may vary from the average
rent per square foot of scheduled lease expirations. In addition, the opening or
closing of large tenant spaces, which generally pay a lower rent per square
foot, can significantly affect the spread in a given year.
Seasonality
The regional shopping center industry is seasonal in nature, with mall tenant
sales highest in the fourth quarter due to the Christmas season, and with
lesser, though still significant, sales fluctuations associated with the Easter
holiday and back-to-school events. While minimum rents and recoveries are
generally not subject to seasonal factors, most leases are scheduled to expire
in the first quarter, and the majority of new stores open in the second half of
the year in anticipation of the Christmas selling season. Accordingly, revenues
and occupancy levels are generally highest in the fourth quarter.
-20-
<PAGE>
The following table summarizes certain quarterly operating data for TRG's
Managed Businesses for 1997:
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter Total
1997 1997 1997 1997 1997
----------------------------------------------------
(in thousands)
Mall tenant sales $600,709 $629,906 $692,487 $1,163,157 $3,086,259
Revenues 130,677 134,756 137,728 157,192 560,353
Occupancy:
Average Occupancy 86.5% 86.8% 87.0% 89.5% 87.6%
Ending Occupancy 86.4% 87.1% 87.2% 90.3% 90.3%
Leased Space 88.7% 89.5% 90.8% 92.3% 92.3%
Because the seasonality of sales contrasts with the generally fixed nature of
minimum rents and recoveries, mall tenant occupancy costs (the sum of minimum
rents, percentage rents and expense recoveries) relative to sales are
considerably higher in the first three quarters than they are in the fourth
quarter. The following table summarizes occupancy costs, excluding utilities,
for mall tenants as a percentage of sales for each quarter of 1997:
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter Total
1997 1997 1997 1997 1997
-------------------------------------------------
Minimum rents 12.6% 11.8% 11.3% 7.3% 10.1%
Percentage rents 0.2 0.3 0.3 0.2 0.3
Expense recoveries 5.2 5.1 4.7 3.5 4.4
---- ---- ---- ---- ----
Mall tenant occupancy costs 18.0% 17.2% 16.3% 11.0% 14.8%
==== ==== ==== ==== ====
Results of Operations
Equity Transactions
In October 1997, TRG's managing general partner, Taubman Centers, Inc. (TCO)
used the $200 million public offering of eight million shares of 8.3% Series A
Cumulative Redeemable Preferred Stock to acquire a Series A Preferred Equity
interest in TRG that entitles TCO to income and distributions (in the form of
guaranteed payments) in amounts equal to the dividends payable on TCO's Series A
Preferred Stock. TRG bore all expenses of the offering, which have been
accounted for as a reduction of the proceeds. TRG used the net proceeds to pay
down debt under TRG's existing revolving credit and commercial paper facilities,
which were used to fund the acquisition of Regency Square in September 1997.
In December 1996, TRG issued units of partnership interest to TCO for the $75
million proceeds from TCO's December 1996 offering of 5.97 million shares of
common stock. TRG bore all expenses of TCO's offering which have been accounted
for as a reduction of the proceeds from TRG's issuance of units. TRG used the
net proceeds to pay down short term floating rate debt and to acquire La Cumbre
Plaza. Also in December 1996, TCO exchanged common shares for TRG units of
partnership interest newly issued under TRG's incentive option plan.
Additionally in 1996, TRG issued units of partnership interest in connection
with the acquisition of the remaining interest in Fairlane Town Center.
Acquisitions
The following discussion of TRG's 1997 acquisitions contains forward-looking
statements regarding the impact of these acquisitions on EBITDA (EBITDA is
defined and described in Liquidity and Capital Resources -- Distributions). The
actual impact may vary based on a variety of factors, including actual
occupancy, rents achieved and operating expenses of the Centers. See Note 3 to
TRG's consolidated financial statements for further discussion of the
acquisitions.
-21-
<PAGE>
The Falls
- ---------
In December 1997, TRG acquired The Falls shopping center for $156 million in
cash. The operating results of The Falls have been consolidated in TRG's
financial statements from the acquisition date. TRG borrowed under an existing
revolving credit facility to fund the acquisition. The acquisition is expected
to produce EBITDA of about 8% of the acquisition cost in 1998.
Regency Square
- --------------
In September 1997, TRG acquired Regency Square (Regency) shopping center,
located in Richmond, Virginia, for $123.9 million in cash. The acquisition was
initially funded with borrowings under TRG's revolving credit facilities, which
were paid down in October 1997 with the proceeds from TRG's issuance of Series A
Preferred Equity. The operating results of Regency have been consolidated in
TRG's financial statements from the acquisition date. Regency is expected to add
EBITDA of approximately 8% of the acquisition cost in 1998.
La Cumbre Plaza
- ---------------
In December 1996, TRG acquired a 100% leasehold interest in La Cumbre Plaza
(La Cumbre) located in Santa Barbara, California for $22.25 million in cash. The
acquisition was funded with proceeds from an issuance of TRG units of
partnership interest. The operating results of La Cumbre have been consolidated
in TRG's financial statements from the acquisition date.
Fairlane Town Center
- --------------------
In July 1996, TRG completed transactions that resulted in the acquisition of
the 75% interest in Fairlane Town Center (Fairlane) previously held by a Joint
Venture Partner. In connection with the transaction, TRG issued to the former
Joint Venture Partner units of partnership interest, exchangeable for
approximately 6.1 million shares of TCO's common stock, which had a closing
price of $10.75 per share on the day prior to the issuance date. TRG also
assumed mortgage debt of approximately $26 million, representing the former
Joint Venture Partner's beneficial interest in the $34.6 million mortgage
encumbering the property. TRG used unsecured debt to fund the repayment of the
9.73% mortgage and the prepayment penalty of approximately $1.2 million. The
operating results of Fairlane have been consolidated in TRG's financial
statements from the acquisition date. Prior to the acquisition date, TRG's
interest in Fairlane was accounted for under the equity method as an
Unconsolidated Joint Venture. In January 1998, TRG redeemed the former Joint
Venture Partner's units of partnership interest for approximately $77.7 million
(including costs).
Paseo Nuevo
- -----------
In June 1996, TRG acquired a 100% leasehold interest in Paseo Nuevo, located
in Santa Barbara, California, for $37 million in cash. TRG borrowed under its
existing lines of credit to fund the acquisition. The operating results of Paseo
Nuevo have been consolidated in TRG's financial statements from the acquisition
date.
New Centers and Expansions
In November 1997, TRG opened Arizona Mills, a 37% owned value super-regional
shopping center located in Tempe, Arizona. The Center opened 90% leased.
-22-
<PAGE>
In July 1997, TRG opened The Mall at Tuttle Crossing, a super-regional
shopping center located in Columbus, Ohio. The Center was 95% leased at year
end. TRG's ownership interest in The Mall at Tuttle Crossing was subject to a
long-term participating lease with Tuttle Crossing Holding Co., a subsidiary of
The Limited, Inc. (The Limited) for land and leasehold improvements. In December
1997, TRG purchased The Limited's interests in the lease for $76.3 million in
cash and took fee simple title to the underlying land and buildings. The lease
had been accounted for as a capital lease with capital lease assets and a
capital lease obligation of $55.3 million at the date of the acquisition. The
purchase is anticipated to produce a return of approximately 8% of the
acquisition cost in 1998.
TRG opened a 135,000 square foot expansion at Westfarms in August 1997. The
expansion was approximately 90% leased as of year end. In addition,
approximately 50,000 square feet of new mall stores opened at Biltmore in 1997.
See also Liquidity and Capital Resources -- Capital Spending for discussions of
other planned expansion and development activities.
Memorial City Mall Lease
In November 1996, TRG entered into an agreement to lease Memorial City Mall
(Memorial City), a 1.4 million square foot shopping center located in Houston,
Texas. The lease of this unencumbered property grants TRG the exclusive right to
manage, lease and operate the property. TRG has the option to terminate the
lease after the third full lease year by paying $2 million to the lessor. TRG is
using this option period to evaluate the redevelopment opportunities of the
Center. As a development project, Memorial City has been excluded from all
operating statistics in this report, and Memorial City's results of operations
have been presented as a net line item in the following tabular comparisons of
TRG's results of operations. Memorial City is expected to have an immaterial
effect on EBITDA and net income during the option period.
-23-
<PAGE>
Comparison of Fiscal Year 1997 to Fiscal Year 1996
Occupancy and Mall Tenant Sales
Average occupancy in the Taubman Shopping Centers was 87.6% in 1997 versus
87.4% in 1996. Ending occupancy for the Taubman Shopping Centers at December 31,
1997 was 90.3% versus 88.0% at December 31, 1996. Leased space at December 31,
1997 was 92.3% compared to 89.0% at the same date in 1996.
Total sales for Taubman Shopping Center mall tenants increased in 1997 by 9.2%
to $3.09 billion from $2.83 billion in 1996. Tenant sales per square foot
increased by 1.6% to $371 in 1997 from $365 in 1996. Tenant sales per square
foot, excluding theaters and tenants greater than 40,000 square feet, increased
by 1.9% to $384 in 1997 from $377 in 1996. Mall tenant sales for Centers that
were owned and open for all of 1997 and 1996 (which excludes all Centers
acquired in those years, as well as Tuttle Crossing and Arizona Mills) were
$2.85 billion, a 1.6% increase over 1996. Sales statistics for the first three
quarters of 1997 were negatively affected by new competition near certain
Centers. The effect of the competition on sales moderated in the fourth quarter,
after the anniversary date of the opening of the competing centers.
-24-
<PAGE>
Comparison of Fiscal Year 1997 to Fiscal Year 1996
The following table sets forth operating results for TRG's Managed Businesses
for 1997 and 1996, showing the results of the Consolidated Businesses and
Unconsolidated Joint Ventures:
<TABLE>
<CAPTION>
1997 1996
------------------------------------------- -------------------------------------------
TRG UNCONSOLIDATED TOTAL TRG UNCONSOLIDATED TOTAL
CONSOLIDATED JOINT MANAGED CONSOLIDATED JOINT MANAGED
BUSINESSES(1) VENTURES(2) BUSINESSES BUSINESSES(1) VENTURES(2) BUSINESSES
------------------------------------------- -------------------------------------------
(in millions of dollars)
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
Minimum rents 173.3 155.9 329.2 149.2 157.2 306.4
Percentage rents 7.2 3.1 10.2 6.0 4.0 9.9
Expense recoveries 97.5 89.7 187.1 85.1 95.2 180.4
Management, leasing and
development 8.8 8.8 8.5 8.5
Other 14.9 10.2 25.0 13.0 8.9 22.0
----- ----- ----- ----- ----- -----
Total revenues 301.6 258.8 560.4 261.9 265.3 527.2
OPERATING COSTS:
Recoverable expenses 82.0 76.4 158.4 71.6 81.8 153.4
Other operating 28.1 11.9 39.9 25.4 12.8 38.2
Management, leasing and
development 4.7 4.7 4.7 4.7
General and administrative 25.7 25.7 21.8 21.8
Interest expense 73.6 54.5 128.2 70.5 53.5 124.0
Depreciation and amortization 44.5 23.7 68.1 35.7 22.9 58.7
----- ----- ----- ----- ----- -----
Total operating costs 258.5 166.4 424.9 229.7 171.1 400.8
Net results of Memorial City (1) 0.0 0.0 0.2 0.2
----- ----- ----- ----- ----- -----
43.0 92.4 135.4 32.3 94.3 126.6
===== ===== ===== =====
Equity in income of Unconsolidated
Joint Ventures 52.3 51.8
----- -----
Income before extraordinary item 95.3 84.1
Extraordinary item (1.3)
----- -----
Net income 95.3 82.8
Preferred distributions to TCO (4.1)
----- -----
Net income available to unitholders 91.2 82.8
===== =====
SUPPLEMENTAL INFORMATION (3):
EBITDA contribution 161.4 94.4 255.7 138.6 91.2 229.8
TRG's Beneficial Interest Expense (73.6) (29.3) (102.9) (70.5) (27.7) (98.2)
Non-real estate depreciation (2.1) (2.1) (1.9) (1.9)
Preferred distributions to TCO (4.1) (4.1)
----- ----- ----- ----- ----- -----
Distributable Cash Flow
contribution 81.6 65.1 146.7 66.2 63.5 129.7
===== ===== ===== ===== ===== =====
(1) The results of operations of Memorial City are presented net in this table.
TRG expects that Memorial City's net operating income will approximate the
ground rent payable under the lease for the immediate future.
(2) With the exception of the Supplemental Information, amounts represent 100%
of the Unconsolidated Joint Ventures. Amounts are net of intercompany
profits. The Unconsolidated Joint Ventures are accounted for under the
equity method in TRG's Consolidated Financial Statements.
(3) EBITDA, TRG's Beneficial Interest Expense and Distributable Cash Flow are
defined and discussed in Liquidity and Capital Resources -- Distributions.
(4) Amounts in this table may not add due to rounding.
(5) Certain 1996 amounts have been reclassified to conform to 1997
classifications.
</TABLE>
-25-
<PAGE>
TRG --Consolidated Businesses
- -----------------------------
Total revenues for 1997 were $301.6 million, a $39.7 million or 15.2% increase
over 1996. Minimum rents increased $24.1 million, of which $21.4 million was
caused by the 1997 and 1996 acquisitions, and the opening of Tuttle Crossing.
The results of Fairlane have been consolidated in TRG's results subsequent to
the acquisition date in July 1996 (prior to that date Fairlane was accounted for
under the equity method as an Unconsolidated Joint Venture). Minimum rents also
increased due to the expansion at Biltmore and tenant rollovers. Percentage rent
increased primarily due to the acquisitions. The increase in expense recoveries
was primarily due to the acquired Centers and Tuttle Crossing. Other revenue
increased $1.9 million primarily due to an insurance recovery, a litigation
settlement, and an increase in lease cancellation revenue.
Total operating costs increased $28.8 million, or 12.5%. Recoverable and
depreciation and amortization expenses increased primarily due to the
acquisitions and Tuttle Crossing. Other operating expenses increased primarily
due to the acquisitions and Tuttle Crossing, offset by a decrease in the charge
to operations for development pre-construction reserves. General and
administrative expense increased by $3.9 million primarily due to increases in
compensation (including the continuing phase-in of the long-term compensation
plan), recruiter fees and relocation charges, travel, and training. Interest
expense increased due to an increase in debt used to finance Tuttle Crossing and
capital expenditures at other Consolidated Businesses, partially offset by an
increase in capitalized interest. The acquisitions were initially funded with
debt which was subsequently paid down with the proceeds from the December 1996
and the October 1997 equity issuances.
Revenues and expenses as presented in the preceding table differ from the
amounts shown in TRG's consolidated statement of operations by the amounts
representing Memorial City's revenues and expenses, which are presented in the
preceding table as a net amount.
Unconsolidated Joint Ventures
- -----------------------------
Total revenues for 1997 were $258.8 million, a $6.5 million, or 2.5%, decrease
from 1996, representing a $15.0 million decrease caused by the change of
Fairlane from an Unconsolidated Joint Venture to a Consolidated Business, offset
by increases due to the openings of Arizona Mills and the expansion at
Westfarms, in addition to increases at other Centers. The decrease in minimum
rents was primarily due to Fairlane, offset by Arizona Mills, Westfarms and
increases due to tenant rollovers at other Centers. The decrease in expense
recoveries was primarily due to Fairlane, offset by Arizona Mills. Other revenue
increased by $1.3 million primarily due to gains on peripheral land sales,
offset by a decrease in lease cancellation revenue and interest income.
Total operating costs decreased by $4.7 million, or 2.7%, to $166.4 million
for 1997 including a $10.1 million decrease due to Fairlane. Recoverable
expenses decreased $5.4 million primarily due to Fairlane, offset by increases
due to Arizona Mills. Other operating costs decreased primarily due to Fairlane
and a decrease in bad debt expense. Additionally, included in 1996 other
operating expense was a nonrecurring $0.5 million payment to an anchor at one of
the Centers. Interest expense increased $1.0 million primarily due to an
increase in debt used to finance Arizona Mills and the Westfarms expansion,
partially offset by a decrease in debt related to Fairlane. Operating costs as
presented in the preceding table differ from the amounts shown in the combined,
summarized financial statements of the Unconsolidated Joint Ventures (Note 4 to
TRG's financial statements) by the amount of intercompany profit.
As a result of the foregoing, net income of the Unconsolidated Joint Ventures
decreased by $1.9 million, or 2.0%, to $92.4 million. TRG's equity in net income
of the Unconsolidated Joint Ventures was $52.3 million, a 1.0% increase from
1996.
Net Income
- ----------
As a result of the foregoing, TRG's income before extraordinary item increased
by $11.2 million, or 13.3%, to $95.3 million for 1997. In 1996, TRG recognized a
$(1.3) million extraordinary charge related to the prepayment of Fairlane's
debt. After payment of $4.1 million in preferred distributions to TCO, net
income available to partnership unitholders for 1997 was $91.2 million, compared
to $82.8 million in 1996.
-26-
<PAGE>
Comparison of Fiscal Year 1996 to Fiscal Year 1995
Occupancy and Mall Tenant Sales
Average occupancy in the Taubman Shopping Centers was 87.4% in 1996 versus
88.0% in 1995. Ending occupancy for the Taubman Shopping Centers at December 31,
1996 was 88.0% versus 89.4% at December 31, 1995. Leased space at December 31,
1996 was 89.0% compared to 90.6% at the same date in 1995. Average occupancy for
1996 was somewhat less than the previous year's level but comfortably within
TRG's historic range of average annual occupancy.
Total sales for Taubman Shopping Center mall tenants increased in 1996 by 3.2%
to $2.83 billion from $2.74 billion in 1995. Tenant sales per square foot
increased by 5.2% to $365 in 1996 from $346 in 1995. Sales per square foot in
1995 was $352, excluding Bellevue Center. Mall tenant sales for Centers that
were owned and open for all of 1996 and 1995 were $2.81 billion, a 3.9% increase
over 1995.
-27-
<PAGE>
Comparison of Fiscal Year 1996 to Fiscal Year 1995
The following table sets forth operating results for TRG's Managed Businesses
for 1996 and 1995, showing the results of the Consolidated Businesses and
Unconsolidated Joint Ventures:
<TABLE>
<CAPTION>
1996 1995
------------------------------------------- -------------------------------------------
TRG UNCONSOLIDATED TOTAL TRG UNCONSOLIDATED TOTAL
CONSOLIDATED JOINT MANAGED CONSOLIDATED JOINT MANAGED
BUSINESSES(1) VENTURES(2) BUSINESSES BUSINESSES VENTURES(2) BUSINESSES
------------------------------------------- -------------------------------------------
(in millions of dollars)
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
Minimum rents 149.2 157.2 306.4 130.4 166.2 296.6
Percentage rents 6.0 4.0 9.9 5.6 3.6 9.2
Expense recoveries 85.1 95.2 180.4 75.3 101.5 176.8
Other 21.5 8.9 30.4 17.6 11.5 29.1
Gain on disposition of Bellevue 8.3 8.3
----- ----- ----- ----- ----- -----
Total revenues 261.9 265.3 527.2 228.9 291.1 520.0
OPERATING COSTS:
Recoverable expenses 71.6 81.8 153.4 62.9 88.2 151.1
Other operating 25.4 12.8 38.2 22.5 12.3 34.8
Management, leasing and
development 4.7 4.7 3.7 3.7
General and administrative 21.8 21.8 19.8 19.8
Interest expense 70.5 53.5 124.0 65.8 58.6 124.4
Depreciation and amortization 35.7 22.9 58.7 32.4 24.7 57.1
----- ----- ----- ----- ----- -----
Total operating costs 229.7 171.1 400.8 207.1 183.8 390.9
Net results of Memorial City (1) 0.2 0.2
----- ----- ----- ----- ----- -----
32.3 94.3 126.6 21.8 107.3 129.1
===== ===== ===== =====
Equity in income before extraordinary
items of Unconsolidated Joint
Ventures (including $5.0 million in
1995 related to the disposition of
Bellevue) 51.8 57.9
----- -----
Income before extraordinary items 84.1 79.7
Extraordinary items (1.3) 16.6
----- -----
Net income 82.8 96.3
===== =====
SUPPLEMENTAL INFORMATION(3):
EBITDA contribution 138.6 91.2 229.8 120.0 96.1 216.1
TRG's Beneficial Interest Expense (70.5) (27.7) (98.2) (65.8) (30.4) (96.2)
Non-real estate depreciation (1.9) (1.9) (2.0) (2.0)
----- ----- ----- ----- ----- -----
Distributable Cash Flow
contribution 66.2 63.5 129.7 52.1 65.7 117.8
===== ===== ===== ===== ===== =====
(1) The results of operations of Memorial City are presented net in this table.
TRG expects that Memorial City's net operating income will approximate the
ground rent payable under the lease for the immediate future.
(2) With the exception of the Supplemental Information, amounts represent 100%
of the Unconsolidated Joint Ventures. Amounts are net of intercompany
profits.
(3) EBITDA, TRG's Beneficial Interest Expense and Distributable Cash Flow are
defined and discussed in Liquidity and Capital Resources -- Distributions.
EBITDA for 1995 does not include the gain related to the disposition of
Bellevue Center.
(4) Amounts in this table may not add due to rounding.
(5) Certain 1996 amounts have been reclassified to conform to 1997
classifications.
</TABLE>
-28-
<PAGE>
TRG --Consolidated Businesses
- -----------------------------
Total revenues for 1996 were $261.9 million, a $33.0 million or 14.4% increase
from 1995. Minimum rents for 1996 increased $18.8 million, of which $8.7 million
was caused by the Fairlane and Paseo Nuevo acquisitions. The results of Fairlane
have been consolidated in TRG's results subsequent to the acquisition date
(prior to that date Fairlane was accounted for under the equity method as an
Unconsolidated Joint Venture). Minimum rent also increased due to the expansions
at Short Hills and Meadowood and tenant rollovers. The increase in expense
recoveries was also primarily due to the Fairlane and Paseo Nuevo acquisitions
and recoveries of increased maintenance costs and property taxes. The increase
in other revenues of $3.9 million was primarily due to increases in revenue from
management, leasing, and development services, rental fees on exterior
advertising signs and gains on sales of peripheral land, partially offset by a
decrease in lease cancellation revenue.
Total operating costs increased $22.6 million, or 10.9%, to $229.7 million.
The increase in recoverable expenses for 1996 was due to Fairlane and Paseo
Nuevo and to increases in maintenance costs and property taxes, including those
related to the expansion at Short Hills. Other operating expenses increased due
to Fairlane and Paseo Nuevo, and an increase in the charge to operations for
development pre-construction reserves. General and administrative expenses
increased $2.0 million due primarily to increases in compensation, including
costs of the new long-term performance compensation plan and the allocation of
internal acquisition costs, travel, and professional fees in 1996, offset by a
decrease resulting from a $0.8 million charge in 1995 for severance and
termination benefits. Interest expense increased $4.7 million due primarily to
an increase in debt levels, including debt used to finance the acquisition of
Paseo Nuevo and capital expenditures and the assumption of debt relating to the
Fairlane acquisition, and a decrease in capitalized interest, partially offset
by decreased interest rates. The increase in depreciation and amortization was
due primarily to the acquisitions of Fairlane and Paseo Nuevo and the expansions
at Short Hills and Meadowood.
Revenues and expenses as presented in the preceding table differ from the
amounts shown in TRG's consolidated income statements by the amounts
representing Memorial City's revenues and expenses, which are presented in the
preceding table as a net amount.
Unconsolidated Joint Ventures
- -----------------------------
Total revenues for 1996 were $265.3 million, a $25.8 million or 8.9% decrease
from 1995, primarily representing a $23.8 million decrease caused by the change
in Fairlane from an Unconsolidated Joint Venture to a Consolidated Business and
by the November 1995 disposition of Bellevue Center (Bellevue). Minimum rent
decreases due to Fairlane and Bellevue were offset by increases due to the
expansion at Woodfield and tenant rollovers. Expense recoveries decreased
primarily due to Fairlane and Bellevue, offset by increases at other Centers.
Other income decreased due to a gain on the sale of peripheral land in 1995 and
decreased interest income in 1996, offset by an increase in lease cancellation
revenue in 1996. In 1995, an ordinary gain of $8.3 million was recognized on the
disposition of Bellevue.
Total operating costs decreased by $12.7 million, or 6.9%, to $171.1 million
for 1996, representing a $19.9 million decrease due to Fairlane and Bellevue,
offset by increases at other Centers. Recoverable expenses decreased $6.4
million due to Fairlane and Bellevue, offset by increases in maintenance costs
and property taxes. Other operating costs increased $0.5 million reflecting
increases in property management costs, promotion and advertising costs, bad
debt expense and a nonrecurring $0.5 million payment to an anchor at one of the
Centers, offset by decreases due to Bellevue and Fairlane. Interest expense
decreased $5.1 million due to a decrease in debt related to Fairlane and
Bellevue and an increase in capitalized interest, partially offset by increases
due to an increase in debt used to finance capital expenditures and to higher
interest rates on certain debt refinanced in 1995. Operating costs as presented
in the preceding table differ from the amounts shown in the combined, summarized
financial statements of the Unconsolidated Joint Ventures (Note 4 to TRG's
financial statements) by the amount of intercompany profit.
-29-
<PAGE>
As a result of the foregoing, income before extraordinary items of the
Unconsolidated Joint Ventures was $94.3 million in 1996, a decrease of 12.1%
from 1995. TRG's equity in income before extraordinary items of the
Unconsolidated Joint Ventures decreased $6.1 million, or 10.5%, to $51.8 million
for 1996.
Net Income
- ----------
As a result of the foregoing, TRG's income before extraordinary items
increased by $4.4 million, or 5.5%, to $84.1 million for 1996. In 1996, TRG
recognized a $(1.3) million extraordinary charge related to the prepayment of
Fairlane's debt. In 1995, TRG recognized an $18.9 million extraordinary gain
related to the disposition of Bellevue and the related extinguishment of
Bellevue's debt, and $(2.2) million in extraordinary charges related to the
prepayment of debt at TRG and at one of its Unconsolidated Joint Ventures. Net
income for 1996 was $82.8 million, compared to $96.3 million in 1995.
-30-
<PAGE>
Liquidity and Capital Resources
As of December 31, 1997, TRG had a cash balance of $3.3 million. TRG has
available for general partnership purposes an unsecured revolving credit
facility of $300 million, which expires in March 2000. Included in the credit
facility is a competitive bid option program which allows TRG to hold auctions,
among the banks participating in the facility, for short term borrowings of up
to $150 million. Borrowings under this facility at December 31, 1997 were $210
million. TRG also has available an unsecured bank line of credit of up to $30
million with borrowings of $10.2 million at December 31, 1997. This line expires
in August 1998. TRG also has available a secured commercial paper facility of up
to $75 million, with borrowings of $75 million at December 31, 1997. Commercial
paper is generally sold with a 30 day maturity. This facility is supported by a
line of credit facility, which is renewable quarterly for a twelve month period.
Proceeds from short term borrowings provided $487.3 million of funding for
1997 (including $358.2 million, including transaction costs, for the
acquisitions of Regency Square, The Falls and interests in Tuttle Crossing)
compared to $121.2 million in 1996 (including $103.6 million for the
acquisitions of Paseo Nuevo and an interest in Fairlane Town Center). In
November 1997, proceeds from TRG's revolving credit facilities were also used to
repay $100 million of floating rate notes. Additionally, proceeds in both 1997
and 1996 were used to fund capital expenditures for the Consolidated Businesses
and contributions to Unconsolidated Joint Ventures for construction costs.
In October 1997, TRG used the net proceeds from the issuance of its Series A
Preferred Equity to pay down floating rate debt under TRG's existing revolving
credit and commercial paper facilities, which were used to fund the acquisition
of Regency Square. During 1996, proceeds from the issuance of TRG units of
partnership interest were used to pay down short term borrowings of $124.7
million and for the $22.3 million acquisition of La Cumbre.
TRG has a medium-term note program under TRG's $500 million shelf registration
statement. During July 1997, TRG issued $55 million of unsecured 10-year notes
at a coupon rate of 7%. The net proceeds were used to pay down floating rate
debt under TRG's revolving credit facilities. In 1996, TRG used the proceeds
from the issuance of $154 million of notes to pay down floating rate debt under
TRG's revolving credit facilities as well as to pay off the $34.6 million
mortgage on Fairlane and the related prepayment penalty of approximately $1.2
million. Including the issuance in July 1997, TRG has issued a total of $342
million of notes since the program's inception in 1995.
In October 1997, TRG closed on a three year $150 million secured construction
facility for MacArthur Center, which is owned by a consolidated 70% owned
venture. The loan bears interest at one month LIBOR plus 1.2%. Borrowings under
the facility were $42.2 million at December 31, 1997. The payment of the
principal and interest is guaranteed by TRG. The loan agreement provides for the
reduction of the amount guaranteed as certain center performance and valuation
criteria are met.
In November 1997, TRG entered into an unsecured $210 million construction
facility maturing in 2001 to finance the construction of Great Lakes Crossing.
Under the loan agreement, the maturity date may be extended for one year. The
loan bears interest at one month LIBOR plus 0.90%. Borrowings under the facility
at December 31, 1997 were $46.9 million.
Scheduled principal payments on installment notes were $838 thousand and $793
thousand in 1997 and 1996, respectively.
-31-
<PAGE>
At December 31, 1997, TRG's debt and its beneficial interest in the debt of
its consolidated and Unconsolidated Joint Ventures totaled $1,737.2 million. As
shown in the following table, $79.8 million of this debt was floating rate debt
that remained unhedged at December 31, 1997. Interest rates shown do not include
amortization of debt issuance costs and interest rate hedging costs. These items
are reported as interest expense in TRG's results of operations. In the
aggregate, these costs accounted for 0.36% of the effective rate of interest in
TRG's beneficial interest in debt at December 31, 1997. Included in TRG's
beneficial interest in debt at December 31, 1997 is debt used to fund
development and expansion costs. TRG's beneficial interest in assets on which
interest is being capitalized totaled $149.0 million as of December 31, 1997.
TRG's beneficial interest in capitalized interest was $13.7 million for the year
ended December 31, 1997.
<TABLE>
<CAPTION>
Beneficial Interest in Debt
-------------------------------------------------------------
Amount Interest LIBOR Frequency LIBOR
(In millions Rate at Cap of Rate at
of dollars) 12/31/97 Rate Resets 12/31/97
---------- -------- ---- ------ ---------
<S> <C> <C> <C> <C> <C>
Total beneficial interest in
fixed rate debt 1,066.3 7.65%(1)
Floating rate debt hedged via
interest rate caps:
Through January 1998 65.0 6.72 6.50% Monthly 5.72%
Through October 1998 39.3 6.25 6.00 Three Months 5.81
Through December 1998 100.0 6.72(1) 6.50 Three Months 5.81
Through July 1999 65.0 6.72(1) 7.00 Monthly 5.72
Through December 1999 200.0 6.72(1) 9.50(2) Monthly 5.72
Through October 2001 25.0 6.43 8.55 Monthly 5.72
Through January 2002 53.4 7.18(1) 9.50 Monthly 5.72
Through July 2002 43.4 7.67(1) 6.50 Monthly 5.72
Other floating rate debt 79.8 6.72(1)
-------
Total beneficial interest in debt 1,737.2 7.32(1)
=======
(1) Denotes weighted average interest rate.
(2) Rate reduces to 7.0% in December 1998.
</TABLE>
TRG's loan and facility agreements and indenture contain various restrictive
covenants including limitations on the amount of secured and unsecured debt and
minimum debt service coverage ratios, the latter being the most restrictive. TRG
is in compliance with all of such covenants.
Subsequent to year end, Fairfax Company of Virginia L.L.C.
(successor-in-interest to Fairfax Associates, a 50% owned Unconsolidated Joint
Venture) completed a $140 million, 6.60%, secured financing maturing in 2008.
The net proceeds were used to extinguish an existing mortgage on Fair Oaks of
approximately $39 million and pay a prepayment penalty of approximately $1.8
million. In addition, proceeds of $5.6 million were used to close out a treasury
lock agreement entered into in 1997, which resulted in an effective rate on the
financing of approximately 7%. The remaining proceeds were distributed to the
owners. TRG used its 50% share of the distribution to pay down its revolving
credit facilities.
-32-
<PAGE>
Distributions
A principal factor considered by TRG in deciding upon distributions to
partners is an amount, which TRG defines as Distributable Cash Flow, equal to
EBITDA less TRG's Beneficial Interest Expense, non-real estate depreciation and
amortization, and preferred distributions. This measure of performance is
influenced not only by operations but also by capital structure. EBITDA is
defined as TRG's beneficial interest in revenues, less operating costs before
interest, depreciation and amortization, meaning TRG's pro rata share of this
result for each of the Managed Businesses, after recording appropriate
intercompany eliminations. TRG's Beneficial Interest Expense is defined as TRG's
pro rata share of the interest expense of each of TRG's Managed Businesses.
EBITDA and Distributable Cash Flow do not represent cash flows from operations,
as defined by generally accepted accounting principles, and should not be
considered to be an alternative to net income as an indicator of operating
performance or to cash flows from operations as a measure of liquidity.
The following table summarizes TRG's Distributable Cash Flow for the years
ended December 31, 1997 and 1996:
<TABLE>
<CAPTION>
Year ended Year ended
December 31, 1997 December 31, 1996
-------------------------------------- ---------------------------------------
TRG UNCONSOLIDATED TRG UNCONSOLIDATED
CONSOLIDATED JOINT CONSOLIDATED JOINT
BUSINESSES VENTURES(1) TOTAL BUSINESSES VENTURES(1) TOTAL
-------------------------------------- ---------------------------------------
(in millions of dollars)
<S> <C> <C> <C> <C> <C> <C>
TRG's Net Income (2)(3) 95.3 82.8
Extraordinary item (3) 1.3
Depreciation and amortization (4) 57.5 47.5
TRG's Beneficial Interest Expense 102.9 98.2
----- -----
EBITDA 161.4 94.4 255.7 138.6 91.2 229.8
TRG's Beneficial Interest Expense (73.6) (29.3) (102.9) (70.5) (27.7) (98.2)
Non-real estate depreciation (2.1) (2.1) (1.9) (1.9)
Preferred distributions to TCO (4.1) (4.1)
----- ----- ----- ----- ----- -----
Distributable Cash Flow 81.6 65.1 146.7 66.2 63.5 129.7
===== ===== ===== ===== ===== =====
(1) Amounts represent TRG's beneficial interest in the operations of its
Unconsolidated Joint Ventures.
(2) Includes TRG's share of gains on peripheral land sales of $2.5 million and
$1.0 million in 1997 and 1996, respectively.
(3) Extraordinary charge related to the extinguishment of debt, primarily
consisting of a prepayment penalty.
(4) Includes $3.7 million and $3.3 million of amortization of mall tenant
allowances in 1997 and 1996, respectively.
(5) Amounts may not add due to rounding.
</TABLE>
For 1997, EBITDA and Distributable Cash Flow were $255.7 million and $146.7
million, compared to $229.8 million and $129.7 million in 1996. In addition to
$4.1 million representing preferred distributions to TCO on TRG's Series A
Preferred Equity, TRG distributed $128.1 million to its partners in 1997,
compared to $119.1 million in 1996.
The Partnership Committee of TRG makes an annual determination of appropriate
distributions for each year. The determination is based on anticipated
Distributable Cash Flow available after preferred distributions to TCO on TRG's
Series A Preferred Equity, as well as financing considerations and such other
factors as the Partnership Committee considers appropriate. Further, the
Partnership Committee has decided that the growth in distributions will be less
than the growth in Distributable Cash Flow for the immediate future.
Except under unusual circumstances, TRG's practice is to distribute equal
monthly installments of the determined amount of distributions throughout the
year. Due to seasonality and the fact that cash available to TRG for
distributions may be more or less than net cash provided from operating
activities plus distributions from Joint Ventures during the year, TRG may
borrow from unused credit facilities (described above) to enable it to
distribute the amount decided upon by the TRG Partnership Committee.
Distributions by each Joint Venture may be made only in accordance with the
terms of its partnership agreement. TRG, in general, acts as the managing
partner and has the right to determine the amount of cash available for
distribution from the Joint Venture. In general, the provisions of these
agreements require the distribution of all available cash (as defined in each
partnership agreement), but most do not allow borrowing to finance distributions
without approval of the Joint Venture Partner.
-33-
<PAGE>
As a result, distribution policies of many Joint Ventures will not parallel
those of TRG. While TRG may not, therefore, receive as much in distributions
from each Joint Venture as it intends to distribute with respect to that Joint
Venture, TRG does not believe this will impede its intended distribution policy
because of TRG's overall access to liquid resources, including borrowing
capacity.
Any inability of TRG or its Joint Ventures to secure financing as required to
fund maturing debts, capital expenditures and changes in working capital,
including development activities and expansions, may require the utilization of
cash to satisfy such obligations, thereby possibly reducing distributions to
partners of TRG.
In addition, if the GM Trusts exercise their rights under the Cash Tender
Agreement (see Liquidity and Capital Resources -- Cash Tender Agreement below),
TRG will be required to pay the GM Trusts $10.9 million and may borrow to
finance such expenditures.
Capital Spending
Capital spending for routine maintenance of the Taubman Shopping Centers is
generally recovered from tenants. Excluding acquisitions, capital spending by
the Managed Businesses not recovered from tenants is summarized in the following
table:
1997
----------------------------------------------------
TRG's Share of
Unconsolidated Consolidated Businesses
Consolidated Joint and Unconsolidated
Businesses Ventures(1) Joint Ventures(1)(2)
----------------------------------------------------
(in millions of dollars)
Development, renovation,
and expansion:
Existing centers 12.1 52.8 46.5
New centers 110.8 134.3 140.7
Pre-construction development
activities, net of charge to
operations 11.5 11.5
Mall tenant allowances 5.3 4.0 7.5
Corporate office improvements
and equipment 2.9 2.9
Other 0.8 0.5 1.1
----- ----- -----
Total 143.4 191.6 210.2
===== ===== =====
(1) Costs are net of intercompany profits.
(2) Includes TRG's share of construction costs for Great Lakes Crossing (an 80%
owned consolidated joint venture) and MacArthur Center (a 70% owned
consolidated joint venture).
1996
----------------------------------------------------
TRG's Share of
Unconsolidated Consolidated Businesses
Consolidated Joint and Unconsolidated
Businesses Ventures(1) Joint Ventures(1)(2)
----------------------------------------------------
(in millions of dollars)
Development, renovation,
and expansion:
Existing centers 5.2 40.3 35.7
New centers 14.9 58.4 33.8
Pre-construction development
activities,
net of charge to operations 4.1 4.1
Mall tenant allowances 4.5 5.2 7.0
Corporate office improvements
and equipment 1.5 1.5
Other 2.3 1.4 3.1
---- ----- ----
Total 32.5 105.3 85.2
==== ===== ====
(1) Costs are net of intercompany profits.
(2) Includes TRG's share of construction costs for Great Lakes Crossing (an 80%
owned consolidated joint venture) and MacArthur Center (a 70% owned
consolidated joint venture).
In 1997 and 1996, TRG's share of mall tenant allowances per square foot leased
during the year, excluding expansion space and new developments, was $8.34 and
$9.96, respectively. In addition, TRG's share of its Consolidated Businesses'
and Unconsolidated Joint Ventures' capitalized leasing costs, excluding new
developments, was $10.9 million, or $10.72 per square foot leased during the
year in 1997, and $8.5 million or $10.47 per square foot leased during the year
in 1996.
-34-
<PAGE>
At Cherry Creek, an ongoing expansion includes a newly constructed Lord &
Taylor store, which opened in November 1997, and the addition of 132 thousand
square feet of mall GLA, which will open in the fall of 1998. The expansion is
expected to cost approximately $50 million. TRG has a 50% ownership interest in
Cherry Creek.
Great Lakes Crossing, an enclosed value super-regional mall being developed by
TRG in Auburn Hills, Michigan, is expected to open in November 1998. The Center
will be 1.4 million square feet and its anchors will include Off 5th-Saks Fifth
Avenue Outlet, Oshman's Supersports USA, Rainforest Cafe, Jeepers!, and a
25-screen 100,000 square foot Star Theater complex. This Center will be owned by
a joint venture in which TRG has a controlling 80% interest and is projected to
cost approximately $210 million.
MacArthur Center, a new Center under construction in Norfolk, Virginia, is
expected to open in March 1999. The Center is expected to open with 930 thousand
square feet and will initially be anchored by Nordstrom and Dillard's. This
Center will be owned by a joint venture in which TRG has a 70% controlling
interest and is projected to cost approximately $150 million.
In 1996, TRG entered into an agreement to lease Memorial City Mall, a 1.4
million square foot shopping center located in Houston, Texas. Memorial City is
anchored by Sears, Foley's, Montgomery Ward and Mervyn's. TRG has the option to
terminate the lease after the third full year by paying $2 million to the
lessor. TRG is using this option period to evaluate the redevelopment
opportunities of the Center. Under the terms of the lease, TRG has agreed to
invest a minimum of $3 million during the three year option period. If the
redevelopment proceeds, TRG is required to invest an additional $22 million in
property expenditures not recoverable from tenants during the first 10 years of
the lease term.
Assuming no acquisitions, planned capital spending by the Managed Businesses
not recovered from tenants for 1998 is summarized in the following table:
1998
----------------------------------------------------
TRG's Share of
Unconsolidated Consolidated Businesses
Consolidated Joint and Unconsolidated
Businesses Ventures(1) Joint Ventures(1)(2)
----------------------------------------------------
(in millions of dollars)
Development, renovation, and
expansion 240.9(3) 39.0(4) 208.4
Mall tenant allowances 4.6 9.0 9.6
Pre-construction development
and other 22.1 1.4 22.8
----- ----- -----
Total 267.6 49.4 240.8
===== ===== =====
(1) Costs are net of intercompany profits.
(2) Includes TRG's share of construction costs for Great Lakes Crossing (an 80%
owned consolidated joint venture) and MacArthur Center (a 70% owned
consolidated joint venture).
(3) Includes costs related to MacArthur Center and Great Lakes Crossing.
(4) Includes costs related to the expansion project at Cherry Creek.
TRG's share of costs for development projects scheduled to be completed in
1999 is anticipated to be as much as $58 million in 1999. TRG's estimates of
1998 and 1999 capital spending include only projects approved by TRG's
Partnership Committee and, consequently, TRG's estimates will change as new
projects are approved. Currently, TRG expects to open on average one $175
million to $200 million shopping center each year. TRG's estimates regarding
capital expenditures presented above are forward-looking statements and certain
significant factors could cause the actual results to differ materially,
including but not limited to: 1) actual results of negotiations with anchors,
tenants and contractors; 2) changes in the scope and number of projects; 3) cost
overruns; 4) timing of expenditures; and 5) actual time to complete projects.
Capital Resources
TRG believes that its net cash provided by operating activities, distributions
from the Joint Ventures, the unutilized portion of its credit facilities, and
its ability to access the credit markets assure adequate liquidity to conduct
its operations in accordance with its distribution and financing policies.
-35-
<PAGE>
Cash Tender Agreement
A. Alfred Taubman and the GM Trusts each have the annual right to tender to
TCO units of partnership interest in TRG (provided that the aggregate value is
at least $50 million) and cause TCO to purchase the tendered interests at a
purchase price based on a market valuation of TCO on the trading date
immediately preceding the date of the tender (the Cash Tender Agreement). At A.
Alfred Taubman's election, his family, and Robert C. Larson and his family may
participate in tenders. The GM Trusts will be entitled to receive from TRG an
amount (not to exceed $10.9 million in the aggregate over the term of the
Partnership) equal to 5.5% of the amounts that TCO pays to the GM Trusts under
the Cash Tender Agreement.
TRG is not aware of any present intention of any partner to sell its interest
in TRG under the Cash Tender Agreement.
-36-
<PAGE>
Item 8. FINANCIAL STATEMENTS
The Financial Statements of The Taubman Realty Group Limited Partnership, and
the Independent Auditors' Reports thereon are filed pursuant to this Item 8 and
are included in this report at Item 14.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III *
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The material appearing in the TCO Proxy Statement under the caption
"Management --Directors and Executive Officers" is incorporated by reference as
part of the information requested by this item. TRG is managed by a Partnership
Committee consisting of 13 members, 11 of whom also serve as Directors of TCO,
TRG's Managing General Partner. The following is information concerning members
of TRG's Partnership Committee that is not contained in the TCO Proxy Statement.
Joseph F. Azrack, 50, has been a member of TRG's Executive Committee since
1993. Mr. Azrack is President and Chief Executive Officer and a Director of AEW
Capital Management, L.P., a Boston based real estate investment advisory firm.
Mr. Azrack is a Director of LaQuinta Inns, a company operating in the motel
industry; Evans Withycombe Residential, Inc., which is engaged in the investment
and development of apartments; and UDC Homes, Inc., a homebuilder active in
Arizona and California.
Ronald M. Pastore, 39, has been a Partnership Committee member since 1997. He
is a Director of AEW Capital Management, L.P. He is also Asset Group Leader for
AEW Capital Management's retail group, with direct responsibility for the
management of highly structured retail investments and large, multi-asset retail
portfolios.
Item 11. EXECUTIVE COMPENSATION
The information required by this item is hereby incorporated by reference to
the material appearing in the TCO Proxy Statement under the captions "Executive
Compensation" and "Management -- Compensation of Directors."
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information appearing in the TCO Proxy Statement under the caption
"Security Ownership of Certain Beneficial Owners and Management" is incorporated
by reference in partial response to this item. TCO owns 50,828,785 units of
partnership interest, representing 38.4% of TRG. Messrs. Azrack and Pastore, who
are the only members of the Partnership Committee not listed in the table
incorporated by reference, do not own any interests in TRG.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is hereby incorporated by reference to
the material appearing in the TCO Proxy Statement under the caption
"Management--Certain Transactions".
- -------------------------------
* The Compensation Committee Report on Executive Compensation and the
Shareholder Return Performance Graph appearing in the TCO Proxy Statement are
not incorporated by reference in this Annual Report on Form 10-K or in any other
report, registration statement, or prospectus of the Registrant.
-37-
<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
14(a)(1) The following financial statements of The Taubman Realty Group
Limited Partnership and the Independent Auditors' Report thereon
are filed with this report:
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
Independent Auditors' Report ..................................F-2
Consolidated Balance Sheet as of December 31, 1997 and 1996....F-3
Consolidated Statement of Operations for the years ended
December 31, 1997, 1996 and 1995.............................F-4
Consolidated Statement of Accumulated Deficiency in Assets for the
years ended December 31, 1997, 1996 and 1995.................F-5
Consolidated Statement of Cash Flows for the years ended
December 31, 1997, 1996 and 1995.............................F-6
Notes to Consolidated Financial Statements.....................F-7
14(a)(2) The following is a list of the financial statement schedules
required by Item 14(d).
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
Schedule II - Valuation and Qualifying Accounts...............F-24
Schedule III - Real Estate and Accumulated Depreciation.......F-25
UNCONSOLIDATED JOINT VENTURES OF THE TAUBMAN REALTY GROUP LIMITED
PARTNERSHIP
Independent Auditors' Report..................................F-27
Combined Balance Sheet as of December 31, 1997 and 1996.......F-28
Combined Statement of Operations for the years ended
December 31, 1997, 1996 and 1995............................F-29
Combined Statement of Accumulated Deficiency in Assets for the
three years ended December 31, 1997, 1996 and 1995..........F-30
Combined Statement of Cash Flows for the years ended
December 31, 1997, 1996 and 1995............................F-31
Notes to Combined Financial Statements........................F-32
UNCONSOLIDATED JOINT VENTURES OF THE TAUBMAN REALTY GROUP LIMITED
PARTNERSHIP
Schedule II - Valuation and Qualifying Accounts...............F-41
Schedule III - Real Estate and Accumulated Depreciation.......F-42
14(a)(3)
2(a) -- Purchase and Sale Agreement By and Between One Federal
Street Joint Venture and The Taubman Realty Group Limited
Partnership, dated July 16, 1997 (Purchase and Sale
Agreement) (without exhibits or schedules, which will be
supplementally provided to the Securities and Exchange
Commission upon its request) (incorporated herein by
reference to Exhibit 2(a) filed with the Registrant's
Current Report on Form 8-K dated September 4, 1997).
2(b) -- First Amendment to Purchase and Sale Agreement, dated
August 15, 1997 (without exhibits or schedules, which will
be supplementally provided to the Securities and Exchange
Commission upon its request) (incorporated herein by
reference to Exhibit 2(b) filed with the Registrant's
Current Report on Form 8-K dated September 4, 1997).
-38-
<PAGE>
2(c) -- Agreement of Purchase and Sale By and Between The Falls
Limited L.P. and The Taubman Realty Group Limited
Partnership, dated November 5, 1997, as amended by First
Amendment to Agreement of Purchase and Sale entered into
on November 6, 1997, and Second Amendment to Agreement of
Purchase and Sale entered into on November 13, 1997
(without exhibits or schedules, which will be
supplementally provided to the Securities and Exchange
Commission upon its request).
3 -- Form of The Amended and Restated Agreement of Limited
Partnership of The Taubman Realty Group Limited
Partnership, as amended through September 30, 1997
(incorporated herein by reference to Exhibit 4(c) to TCO's
Post-Effective Amendment No. 1 to Form S-3 Registration
Statement No. 333- 35433).
4(a) -- Amended and Restated Indenture dated as of March 4, 1994
between The Taubman Realty Group Limited Partnership and
Chemical Bank, as Trustee (incorporated herein by
reference to Exhibit 4(a) filed with Amendment No.1 to the
Registrant's Registration Statement on Form S-4 (File No.
33-73988) (the "Registration Statement")).
4(b) -- Officers' Certificate designating the terms of the 7%
Notes due 2003 (incorporated herein by reference to
Exhibit 4(b) filed with Amendment No. 1 to the
Registration Statement).
4(c) -- Officers' Certificate designating the terms of TRG's 8%
Notes due 1999 (incorporated herein by reference to
Exhibit 4(f) filed with the Registrant's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1994 (the
"1994 Second Quarter Form 10-Q")).
4(d) -- Indenture dated as of July 22, 1994 among Beverly Finance
Corp., La Cienega Associates, the Borrower, and Morgan
Guaranty Trust Company of New York, as Trustee
(incorporated herein by reference to Exhibit 4(g) filed
with the 1994 Second Quarter Form 10-Q).
4(e) -- Deed of Trust, with assignment of Rents, Security
Agreement and Fixture Filing, dated as of July 22, 1994,
from La Cienega Associates, Grantor, to Commonwealth Land
Title Company, Trustee, for the benefit of Morgan Guaranty
Trust Company of New York, as Trustee, Beneficiary
(incorporated herein by reference to Exhibit 4(h) filed
with the 1994 Second Quarter Form 10-Q).
4(f) -- Medium-Term Notes due June 15, 2002 (incorporated herein
by reference to Exhibit 4(i) filed with the Registrant's
Quarterly Report on Form 10-Q for the quarter ended June
30, 1995).
4(g) -- Amended and Restated Revolving Loan Agreement dated as of
March 5, 1997 (the "Revolving Loan Agreement"), among The
Taubman Realty Group Limited Partnership, as Borrower,
Union Bank of Switzerland, (New York Branch), as a Bank,
the other Banks signatory to the Revolving Loan Agreement,
each as a Bank, and Union Bank of Switzerland (New York
Branch), as Administrative Agent (incorporated herein by
reference to Exhibit 4, filed with the Registrant's
Quarterly Report on Form 10-Q for the quarter ended March
31, 1997 (the "1997 First Quarter Form 10-Q")).
4(h) -- Form of Contribution and Acceptance of Preferred Equity,
Designation of Series A Preferred Equity, and
Establishment of Preferred Rate (incorporated herein by
reference to Exhibit 4(d) to TCO's Post-Effective
Amendment No. 1 to Form S-3 Registration Statement No.
333-35433).
-39-
<PAGE>
4(i) -- Construction Loan Agreement among Taubman MacArthur
Associates Limited Partnership, as Borrower, and
Bayerische Hypotheken - Und Wechsel - Bank,
Aktiengesellschaft, New York Branch and The Other Banks
and Financial Institutions from time to time Parties
hereto, as Lenders and Bayerische Hypotheken - Und Wechsel
- Bank Aktiengesellschaft, New York Branch, as Agent,
dated as of October 28, 1997.
4(j) -- Loan Agreement dated as of November 25, 1997 among The
Taubman Realty Group Limited Partnership, as Borrower,
Fleet National Bank, as a Bank, PNC Bank, National
Association, as a Bank, the other Banks signatory hereto,
each as a Bank, and PNC Bank, National Association, as
Administrative Agent.
*10(a) -- The Taubman Realty Group Limited Partnership 1992
Incentive Option Plan, as Amended and Restated Effective
as of September 30, 1997.
10(b) -- Corporate Services Agreement between Taubman Centers, Inc.
and The Taubman Company Limited Partnership (the
"Manager") (incorporated herein by reference to Exhibit
10(b) filed with the Registration Statement).
10(c) -- Master Services Agreement between The Taubman Realty Group
Limited Partnership and the Manager (incorporated herein
by reference to Exhibit 10(c) filed with the Registration
Statement).
*10(d) -- Supplemental Retirement Savings Plan (incorporated herein
by reference to Exhibit 10(e) filed with the Registrant's
Annual Report on Form 10-K for the year ended December 31,
1994).
*10(e) -- The Taubman Company Long-Term Performance Compensation
Plan (incorporated herein by reference to Exhibit 10(g)
filed with the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1995).
*10(f) -- Employment agreement between The Taubman Company Limited
Partnership and Lisa A. Payne (incorporated herein by
reference to Exhibit 10 filed with the 1997 First Quarter
Form 10-Q).
*10(g) -- Amended and Restated Continuing Offer, dated as of
September 30, 1997 (incorporated herein by reference to
Exhibit 10 filed with the Registrant's 1997 Third Quarter
Report on Form 10-Q).
12 -- Statement Re: Computation of TRG's Ratios of Earnings to
Fixed Charges and Preferred Distributions.
21 -- Subsidiaries of The Taubman Realty Group Limited
Partnership.
23 -- Consent of Deloitte & Touche LLP.
24 -- Powers of Attorney.
27 -- Financial Data Schedule.
- --------------------
* A management contract or compensatory plan or arrangement required to be
filed pursuant to Item 14(c) of Form 10-K.
-40-
<PAGE>
14(b) Current Reports on Form 8-K.
TRG filed a current report on Form 8-K dated December 8, 1997 to report a
press release announcing TRG's acquisition of The Falls shopping center in
Miami, Florida and the agreement to purchase The Limited, Inc.'s interest
in The Mall at Tuttle Crossing, a Taubman Shopping Center located in
Columbus, Ohio.
TRG filed a current report on Form 8-K dated December 4, 1997 to report
the completion of TRG's acquisition of The Falls. The 8-K included the
following financial statements and pro forma information regarding the
acquisition of The Falls:
Independent Auditors' Report.
The Falls, Historical Summary of Revenues and Direct Operating
Expenses for the Year Ended December 31, 1996.
The Taubman Realty Group Limited Partnership, Pro Forma Condensed
Consolidated Balance Sheet, September 30, 1997 (unaudited).
The Taubman Realty Group Limited Partnership, Pro Forma Condensed
Consolidated Statement of Operations, Year Ended December 31, 1996
(unaudited).
The Taubman Realty Group Limited Partnership, Pro Forma Condensed
Consolidated Statement of Operations, Nine Months Ended September 30,
1997 (unaudited).
14(c) The list of exhibits filed with this report is set forth in response to
Item 14(a)(3). The required exhibit index has been filed with the
exhibits.
14(d) The financial statement schedules of The Taubman Realty Group Limited
Partnership and the financial statements and the financial statement
schedules of the Unconsolidated Joint Ventures of The Taubman Realty Group
Limited Partnership listed at Item 14(a)(2) are filed pursuant to this
Item 14(d).
-41-
<PAGE>
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1997 AND 1996 AND FOR
EACH OF THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
Partners
The Taubman Realty Group Limited Partnership
We have audited the accompanying consolidated balance sheets of The Taubman
Realty Group Limited Partnership and subsidiaries as of December 31, 1997 and
1996, and the related consolidated statements of operations, accumulated
deficiency in assets, and cash flows for each of the three years in the period
ended December 31, 1997. Our audits also included the financial statement
schedules listed in the Index at Item 14. These financial statements and
financial statement schedules are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on the financial
statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of The Taubman Realty Group Limited
Partnership and subsidiaries as of December 31, 1997 and 1996, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1997 in conformity with generally accepted accounting
principles. Also, in our opinion, such financial statement schedules, when
considered in relation to the basic consolidated financial statements taken as a
whole, present fairly in all material respects the information set forth
therein.
DELOITTE & TOUCHE LLP
Detroit, Michigan
February 18, 1998
F-2
<PAGE>
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEET
(in thousands)
December 31
-----------------------
1997 1996
---- ----
Assets:
Properties (Notes 5 and 8) $1,593,350 $1,136,416
Accumulated depreciation and amortization 268,658 234,030
---------- ----------
$1,324,692 $ 902,386
Cash and cash equivalents 3,250 7,912
Accounts and notes receivable, less
allowance for doubtful accounts of $414
and $393 in 1997 and 1996 17,803 20,162
Accounts receivable from related
parties (Note 10) 7,400 6,293
Deferred charges and other assets
(Notes 6 and 9) 43,681 41,509
---------- ----------
$1,396,826 $ 978,262
========== ==========
Liabilities:
Unsecured notes payable (Note 8) $1,008,459 $ 796,805
Mortgage notes payable (Note 8) 275,868 204,600
Capital lease obligation (Note 3) 39,849
Accounts payable and other liabilities (Note 7) 106,404 86,779
Distributions in excess of net income of
Unconsolidated Joint Ventures (Note 4) 141,815 142,367
---------- ----------
$1,532,546 $1,270,400
Commitments and Contingencies (Notes 4, 8,
9, 11, and 14)
Accumulated Deficiency in Assets (Note 2):
Series A Preferred Equity 192,840
Partners' Accumulated Deficit (328,560) (292,138)
---------- ----------
(135,720) (292,138)
---------- ----------
$1,396,826 $ 978,262
========== ==========
See notes to financial statements.
F-3
<PAGE>
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except unit data)
Year Ended December 31
----------------------------------
1997 1996 1995
---- ---- ----
Revenues:
Minimum rents $181,291 $150,577 $130,418
Percentage rents 7,655 6,073 5,617
Expense recoveries 100,348 85,502 75,293
Other 15,376 13,044 12,227
Revenue from management, leasing and
development services (Note 10) 8,756 8,500 5,363
-------- -------- --------
$313,426 $263,696 $228,918
-------- -------- --------
Operating Costs:
Recoverable expenses $ 85,750 $ 72,093 $ 62,910
Other operating 35,904 26,518 22,512
Management, leasing and development
services 4,675 4,714 3,696
General and administrative 25,715 21,803 19,790
Interest expense 73,639 70,454 65,858
Depreciation and amortization 44,719 35,773 32,393
-------- -------- --------
$270,402 $231,355 $207,159
-------- -------- --------
Income before equity in income of
Unconsolidated Joint Ventures and
before extraordinary items $ 43,024 $ 32,341 $ 21,759
Equity in income before extraordinary
items of Unconsolidated Joint
Ventures (including $5,005 in 1995,
related to the disposition of
Bellevue) (Note 4) 52,270 51,753 57,940
-------- -------- --------
Income before extraordinary items $ 95,294 $ 84,094 $ 79,699
Extraordinary items (Notes 4 and 8) (1,328) 16,627
-------- -------- --------
Net Income $ 95,294 $ 82,766 $ 96,326
Preferred distributions to TCO (Note 2) (4,058)
-------- -------- --------
Net income available to unitholders $ 91,236 $ 82,766 $ 96,326
======== ======== ========
Allocation of net income to
unitholders:
General Partners $ 70,663 $ 64,804 $ 77,077
Limited Partners 20,573 17,962 19,249
-------- -------- --------
$ 91,236 $ 82,766 $ 96,326
======== ======== ========
Basic and Diluted Earnings per Unit
of Partnership Interest (Note 12):
Income before extraordinary items $ .66 $ .65 $ .64
Extraordinary items (.01) .13
-------- -------- --------
Net Income $ .66 $ .64 $ .77
======== ======== ========
Weighted Average Number of Units of
Partnership Interest Outstanding
(Notes 2 and 12) 138,271,014 128,579,312 125,459,939
=========== =========== ===========
See notes to financial statements.
F-4
<PAGE>
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF ACCUMULATED DEFICIENCY IN ASSETS
Years Ended December 31, 1997, 1996 and 1995
(in thousands)
<TABLE>
<CAPTION>
Partners' Accumulated Deficit
-----------------------------
Series A General Limited
Preferred Equity Partners Partners Total
---------------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Balance, January 1, 1995 $(306,423) $ (76,525) $(382,948)
Distributions (93,000) (23,225) (116,225)
Net income 77,077 19,249 96,326
--------- --------- ---------
Balance, December 31, 1995 $(322,346) $ (80,501) $(402,847)
Change of ownership (Notes 2 and 3) 124,813 22,229 147,042
Distributions (93,513) (25,586) (119,099)
Net income 64,804 17,962 82,766
--------- --------- ---------
Balance, December 31, 1996 $(226,242) $ (65,896) $(292,138)
Issuance of Series A Preferred
Equity (Note 2) $192,840 192,840
Change of ownership (Note 2) 310 126 436
Distributions (4,058) (99,205) (28,889) (132,152)
Net income 4,058 70,663 20,573 95,294
-------- --------- --------- ---------
Balance, December 31, 1997 $192,840 $(254,474) $ (74,086) $(135,720)
======== ========= ========= =========
</TABLE>
See notes to financial statements.
F-5
<PAGE>
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
Year Ended December 31
--------------------------------
1997 1996 1995
---- ---- ----
Cash Flows From Operating Activities:
Income before extraordinary items $ 95,294 $ 84,094 $ 79,699
Adjustments to reconcile income before
extraordinary items to net cash
provided by operating activities:
Depreciation and amortization 44,719 35,773 32,393
Income before extraordinary items in
excess of distributions from
Unconsolidated Joint Ventures (206)
Provision for losses on accounts
receivable 1,027 1,295 818
Amortization of deferred financing
costs 2,392 2,024 2,250
Other 724 615 3,062
Gains on sales of land (880) (1,041) (818)
Increase (decrease) in cash attributable
to changes in assets and liabilities:
Receivables, deferred charges and
other assets (9,162) (8,326) (11,254)
Accounts payable and other liabilities 19,603 999 5,501
--------- --------- ---------
Net Cash Provided By Operating Activities $ 153,717 $ 115,433 $ 111,445
--------- --------- ---------
Cash Flows From Investing Activities:
Purchase of interests in Centers $(358,227) $(125,904)
Additions to properties (142,420) (33,806) $ (70,691)
Proceeds from sales of land 1,795 1,936 1,966
Contributions to Unconsolidated Joint
Ventures (18,822) (14,653)
Distributions from Unconsolidated Joint
Ventures in excess of income before
extraordinary items 18,270 10,921
--------- --------- ---------
Net Cash Used In Investing Activities $(499,404) $(161,506) $ (68,725)
--------- --------- ---------
Cash Flows From Financing Activities:
Debt proceeds $ 630,585 $ 275,212 $ 200,747
Debt payments (347,838) (229,212) (13,689)
Early extinguishment of debt (35,964) (105,827)
Debt issuance costs (2,846) (830) (1,599)
Issuance of units of partnership interest 436 147,042
Issuance of Series A Preferred Equity 192,840
Cash distributions to partnership
unitholders (128,094) (119,099) (116,225)
Cash distributions to TCO for Series A
Preferred Equity interest (4,058)
--------- --------- ---------
Net Cash Provided By (Used In) Financing
Activities $ 341,025 $ 37,149 $ (36,593)
--------- --------- ---------
Net Increase (Decrease) In Cash $ (4,662) $ (8,924) $ 6,127
Cash and Cash Equivalents at Beginning
of Year 7,912 16,836 10,709
--------- --------- ---------
Cash and Cash Equivalents at End of Year $ 3,250 $ 7,912 $ 16,836
========= ========= =========
See notes to financial statements.
F-6
<PAGE>
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three Years Ended December 31, 1997
Note 1 - Summary of Significant Accounting Policies
General
The Taubman Realty Group Limited Partnership (TRG) engages in the ownership,
management, leasing, acquisition, development and expansion of regional retail
shopping centers (Taubman Shopping Centers) and interests therein. TRG's
portfolio, as of December 31, 1997, includes 25 urban and suburban Taubman
Shopping Centers in 12 states. Two additional Centers are under construction in
Norfolk, Virginia, and Auburn Hills, Michigan. Taubman Centers, Inc. (TCO) is
the managing general partner of TRG. GMPTS Limited Partnership (GMPTS), TG
Partners Limited Partnership (TG) and Taub-Co Management, Inc. are also general
partners.
At December 31, 1997, TRG had 138,299,310 units of partnership interest
outstanding, of which 107,114,443 units represented general partnership
interests. At December 31, 1997, TRG was owned 36.70% by TCO, 36.17% by GMPTS,
20.22% by certain present and former key executives (and certain of their family
members) of the predecessor to The Taubman Company Limited Partnership, the
Manager (collectively, the Taubman Group), and TG, and 6.91% by certain former
joint venture partners and others (Note 16). The members of the Taubman Group
(other than Taub-Co Management, Inc.), the former joint venture partners and
others are limited partners of TRG. Additionally, TCO owns the Series A
Preferred Equity interest in TRG (Note 2).
Income and distributions of TRG are allocated first to the Series A Preferred
Equity interest, and the remaining amounts to the general and limited partners
of TRG in accordance with their percentage ownership. The financial statements
include only those assets, liabilities, and results of operations which relate
to the business of TRG. No provision has been made for income taxes since these
taxes are the responsibility of the individual partners.
Basis of Presentation
The consolidated financial statements include the accounts of TRG and its
consolidated subsidiaries. Investments in entities unilaterally controlled by
ownership or contractual agreements are consolidated; investments in entities
not unilaterally controlled (Unconsolidated Joint Ventures) are accounted for
under the equity method.
The Manager, which is approximately 99% beneficially owned by TRG, provides
property management and leasing services for Taubman Shopping Centers and
provides corporate, development and acquisition services. Intercompany balances
and profits are eliminated in consolidation.
Dollar amounts presented in tables within the notes to the consolidated
financial statements are stated in thousands of dollars, except for unit data or
as otherwise noted.
Revenue Recognition
Shopping center space is generally leased to specialty retail tenants under
short and intermediate term leases which are accounted for as operating leases.
Minimum rents are recognized on an accrual basis as earned, the result of which
does not differ materially from a straight-line method. Percentage rents are
recognized on an accrual basis as earned. Expense recoveries, which include an
administrative fee, are recognized as revenue in the period applicable costs are
chargeable to tenants.
F-7
<PAGE>
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Depreciation and Amortization
Buildings, improvements and equipment, stated at cost, are depreciated on
straight-line or double-declining balance bases over the estimated useful lives
of the assets, which range from 5 to 50 years. Tenant allowances and deferred
leasing costs are amortized on a straight-line basis over the lives of the
related leases.
Capitalization
Costs related to the acquisition, development, construction and improvement of
properties are capitalized. Interest costs are capitalized until construction is
substantially complete. Properties are reviewed for impairment if events or
changes in circumstances indicate that the carrying amounts of the properties
may not be recoverable. Costs of potentially unsuccessful development
pre-construction activities are provided for by charges to operations and
written off if abandoned.
Cash and Cash Equivalents
Cash equivalents consist of highly liquid investments with a maturity of 90
days or less at the date of purchase.
Deferred Charges
Direct financing and interest rate hedging costs are deferred and amortized
over the terms of the related agreements as a component of interest expense.
Direct costs related to leasing activities are capitalized and amortized on a
straight-line basis over the lives of the related leases. All other deferred
charges are amortized on a straight-line basis over the terms of the agreements
to which they relate.
Stock-Based Compensation Plans
Stock-based compensation plans are accounted for under APB Opinion 25,
"Accounting for Stock Issued to Employees" and related interpretations, as
permitted under FAS 123, "Accounting for Stock-Based Compensation".
Interest Rate Hedging Agreements
Premiums paid for interest rate caps are amortized to interest expense over
the terms of the cap agreements. Amounts received under the cap agreements are
accounted for on an accrual basis, and recognized as a reduction of interest
expense. The differential to be paid or received on swap agreements is accounted
for on an accrual basis and recognized as an adjustment to interest expense.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, disclosure of contingent
assets and liabilities at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value of
financial instruments:
The carrying value of cash and cash equivalents, accounts and notes
receivable, and accounts payable approximates fair value due to the short
maturity of these instruments.
F-8
<PAGE>
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The fair value of TRG's debt is estimated based on quoted market prices if
available, or on the current rates available to TRG for debt of similar
terms and maturity and the assumption that debt will be prepaid at the
earliest possible date.
The fair value of interest rate hedging instruments is the amount that TRG
would receive or pay to terminate the agreement at the reporting date,
taking into account current interest rates.
Reclassifications
Certain prior year amounts have been reclassified to conform to 1997
classifications.
Note 2 - Equity Transactions
In October 1997, TCO used the $200 million proceeds of its offering of 8.3%
Series A Cumulative Redeemable Preferred Stock (Series A Preferred Stock) to
acquire a Series A Preferred Equity interest in TRG that entitles TCO to
distributions (in the form of guaranteed payments) in amounts equal to the
dividends payable on TCO's Series A Preferred Equity. TRG bore all expenses of
the offering, which were accounted for as a reduction of the proceeds from the
Series A Preferred Equity. TRG used the net proceeds to pay down floating rate
debt under TRG's existing revolving credit and commercial paper facilities,
which were used to fund the acquisition of Regency Square in September 1997
(Note 3).
The Series A Preferred Equity has no stated maturity, sinking fund requirement
or mandatory redemption. In the event of partnership liquidation, the $200
million Series A Preferred Equity and any unpaid guaranteed payments would be
paid prior to any distributions to holders of units of partnership interest.
Effective September 30, 1997, TRG amended its partnership agreement to split
existing units of partnership interest at a ratio of 1,975.08 to one. The split
did not alter the ownership percentage of any of TRG's partners. All unit and
per unit amounts have been adjusted to reflect the unit split on a retroactive
basis.
In December 1996, TRG issued units of partnership interest to TCO for the $75
million proceeds from TCO's December 1996 equity offering. TRG bore all expenses
of TCO's offering, which have been accounted for as a reduction of the proceeds
from TRG's issuance of units. Also in December 1996, TRG issued units of
partnership interest in connection with the exercise of incentive options (Note
11). Concurrently under TCO's continuing offer to exchange shares of common
stock for certain partnership interests in TRG, TCO exchanged 652 thousand
shares of common stock for these newly issued units of TRG partnership interest.
TRG used the net proceeds from the issuance of units to pay down short term
floating rate debt and to acquire La Cumbre Plaza (Note 3). Additionally in
1996, TRG issued units of partnership interest in connection with the
acquisition of the remaining interest in Fairlane Town Center (Note 3), which
were subsequently redeemed in January 1998 (Note 16).
F-9
<PAGE>
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 3 - Acquisitions
In 1997 and 1996, TRG acquired interests in various shopping centers. These
acquisitions were recorded at fair value and the operating results of the
Centers have been consolidated in TRG's financial statements from the
acquisition dates.
Center Date Acquired Purchase Price
-------- --------------- ----------------
The Falls December 1997 $ 156,000
The Mall at Tuttle Crossing December 1997 76,268
Regency Square September 1997 123,880
La Cumbre Plaza December 1996 22,250
Fairlane Town Center July 1996 91,552
Paseo Nuevo June 1996 37,000
In 1997, TRG acquired interests in The Mall at Tuttle Crossing (Tuttle
Crossing) from Tuttle Crossing Holding Co., a subsidiary of The Limited, Inc.
(The Limited). TRG's ownership interest in Tuttle Crossing was subject to a
long-term participating lease with The Limited for land and leasehold
improvements. TRG purchased The Limited's interest in the lease and took fee
simple title to the underlying land and buildings. The lease had been accounted
for as a capital lease with capital lease assets and a capital lease obligation
of $55.3 million at the acquisition date. Tuttle Crossing opened in July 1997.
La Cumbre Plaza was purchased subject to four ground leases (three of which
are participating). The leases expire in 2028. Paseo Nuevo was purchased subject
to two participating ground leases expiring in 2065.
In 1996, TRG completed transactions that resulted in the acquisition of the
75% interest in Fairlane Town Center (Fairlane) previously held by a Joint
Venture Partner. In connection with the transactions, which resulted in TRG
owning 100% of Fairlane, TRG issued to the former Joint Venture Partner units of
partnership interest, exchangeable for approximately 6.1 million shares of TCO
common stock, which had a closing price of $10.75 per share on the day prior to
the issuance date. The units issued represented limited partnership units. TRG
also assumed mortgage debt of approximately $26 million, representing the former
Joint Venture Partner's beneficial interest in the $34.6 million mortgage
encumbering the property. TRG used unsecured debt to fund the repayment of the
9.73% mortgage and prepayment penalty of $1.2 million. Prior to the acquisition
date, TRG's interest in Fairlane was accounted for under the equity method as an
Unconsolidated Joint Venture. The units issued to the former Joint Venture
Partner were redeemed in January 1998 (Note 16).
F-10
<PAGE>
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Pro forma results of TRG's operations, assuming the acquisitions had occurred
on January 1, 1996 are as follows:
Pro Forma
---------
Year ended December 31
------------------------
1997 1996
---- ----
Revenues $337,823 $308,487
Income before extraordinary item 89,054 80,425
Net income 89,054 79,079
Earnings per unit of partnership interest:
Income before extraordinary item $ 0.61 $ 0.61
Net income 0.61 0.60
The pro forma results are not necessarily indicative of what actual results
would have been had the acquisitions occurred on January 1, 1996, nor are they
necessarily indicative of future results.
Note 4 - Investments in Unconsolidated Joint Ventures
Following are TRG's investments in various real estate Unconsolidated Joint
Ventures which own regional retail shopping centers. TRG is generally the
managing general partner of these Unconsolidated Joint Ventures. TRG's interest
in each Unconsolidated Joint Venture is as follows:
TRG's %
Ownership
as of
Unconsolidated Joint Venture Taubman Shopping Center December 31, 1997
- ---------------------------- ----------------------- ------------------
Arizona Mills, L.L.C. Arizona Mills 37%
Fairfax Associates Fair Oaks 50
Lakeside Mall Limited Partnership Lakeside 50
Rich-Taubman Associates Stamford Town Center 50
Taubman-Cherry Creek
Limited Partnership Cherry Creek 50
Twelve Oaks Mall Limited
Partnership Twelve Oaks Mall 50
West Farms Associates Westfarms 79
Woodfield Associates Woodfield 50
Woodland Woodland 50
Arizona Mills, L.L.C. developed Arizona Mills, a value super-regional mall in
Tempe, Arizona, which opened in November 1997. TRG's ownership interest in
Arizona Mills, L.L.C. increased in January 1997 to 37% from 35% as a result of
Arizona Mills, L.L.C.'s redemption of a former owner's 5% interest for $2.8
million (the former owner is an affiliate of a partner in TRG).
In January 1997, Arizona Mills, L.L.C. closed on a secured $145 million
construction facility maturing in 2002. The loan bears interest at one month
LIBOR plus 1.3%. The loan is hedged until maturity at a one month LIBOR cap rate
of 9.5%, plus credit spread. The payment of the principal and interest is
guaranteed by each of the owners of Arizona Mills, L.L.C., to the extent of its
ownership percentage. The loan agreement provides for the reduction of the
amount guaranteed as certain center performance and valuation criteria are met.
Borrowings on the facility at December 31, 1997 were $122 million.
F-11
<PAGE>
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
In December 1995, TRG recognized an ordinary gain of $5.0 million on the
disposition of Bellevue Center (Bellevue), a 60% owned Unconsolidated Joint
Venture, based on the carrying value of TRG's investment in Bellevue. TRG also
recognized an extraordinary gain of $18.9 million on the related extinguishment
of Bellevue's debt. The carrying value of TRG's investment in Bellevue differed
from TRG's 60% share of Bellevue's net deficiency in assets due to the
elimination of intercompany profits on sales of services.
TRG reduces its investment in Unconsolidated Joint Ventures to eliminate
intercompany profits on sales of services that are capitalized by the
Unconsolidated Joint Ventures. As a result, the carrying value of TRG's
investment in Unconsolidated Joint Ventures is less than TRG's share of the
deficiency in assets reported in the Balance Sheet of the Unconsolidated Joint
Ventures of the Taubman Realty Group Limited Partnership by $8.1 million and
$7.4 million in 1997 and 1996, respectively. These differences are amortized
over the useful lives of the related assets.
F-12
<PAGE>
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Combined balance sheet and results of operations information is presented
below for all Unconsolidated Joint Ventures, followed by TRG's beneficial
interest in the combined information. Beneficial interest is calculated based on
TRG's ownership interest in each of the Unconsolidated Joint Ventures.
December 31
---------------------
1997 1996
---- ----
Assets:
Properties $ 623,981 $ 450,469
Other assets 84,397 71,252
--------- ---------
$ 708,378 $ 521,721
========= =========
Liabilities and partners' accumulated
deficiency in assets:
Debt $ 875,356 $ 724,162
Capital lease obligations 6,509 5,000
Other liabilities 94,801 51,691
TRG's accumulated deficiency in assets (133,680) (134,986)
Unconsolidated Joint Venture Partners'
accumulated deficiency in assets (134,608) (124,146)
--------- ---------
$ 708,378 $ 521,721
========= =========
TRG's accumulated deficiency in assets (above) $(133,680) $(134,986)
Elimination of intercompany profit (8,135) (7,381)
--------- ---------
Distributions in excess of net income
of Unconsolidated Joint Ventures $(141,815) $(142,367)
========= =========
Year Ended December 31
------------------------------
1997 1996 1995
---- ---- ----
Revenues $258,635 $265,337 $287,180
-------- -------- --------
Recoverable and other operating expenses $ 94,131 $100,164 $106,859
Interest expense 54,018 52,994 57,857
Depreciation and amortization 24,180 23,837 25,471
-------- -------- --------
Total operating costs $172,329 $176,995 $190,187
-------- -------- --------
Income before extraordinary items $ 86,306 $ 88,342 $ 96,993
Extraordinary items 30,761
-------- -------- --------
Net income $ 86,306 $ 88,342 $127,754
======== ======== ========
Net income attributable to TRG $ 46,857 $ 47,413 $ 68,498
Extraordinary items attributable to TRG (18,327)
Realized intercompany profit 5,413 4,340 7,769
-------- -------- --------
Equity in income before extraordinary
items of Unconsolidated Joint Ventures $ 52,270 $ 51,753 $ 57,940
======== ======== ========
Year Ended December 31
------------------------------
1997 1996 1995
---- ---- ----
TRG's beneficial interest in
Unconsolidated Joint Ventures'
operations:
Revenues less recoverable and other
operating expenses $ 94,361 $ 91,243 $ 96,120
Ordinary gain on disposition of Bellevue 5,005
Interest expense (29,263) (27,738) (30,396)
Depreciation and amortization (12,828) (11,752) (12,789)
-------- -------- --------
Income before extraordinary items $ 52,270 $ 51,753 $ 57,940
======== ======== ========
F-13
<PAGE>
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 5 - Properties
Properties, including peripheral land and development pre-construction costs,
at December 31, 1997 and 1996 are summarized as follows:
1997 1996
---- ----
Land $ 132,308 $ 65,127
Buildings, improvements and equipment 1,326,731 957,185
Construction in process 94,500 42,429
Assets under capital lease (Notes 3 and 13) 39,849
Peripheral land 6,630 7,414
---------- ----------
$1,560,169 $1,112,004
Development pre-construction costs
(See below) 33,181 24,412
---------- ---------
$1,593,350 $1,136,416
========== ==========
Depreciation expense for 1997, 1996, and 1995 was $37.6 million, $29.6
million, and $26.6 million. Peripheral land consists primarily of undeveloped
land generally adjacent to the Taubman Shopping Centers. Construction in process
includes costs related to the construction of new centers, and expansions and
other improvements at various existing centers.
TRG actively pursues opportunities for the development of new regional
shopping centers. Development pre-construction activities, including market
research, site location, environmental work, zoning permits and obtaining of
anchor commitments, may take years to accomplish and ultimately may be
abandoned. TRG provides a reserve for the cost of such potentially unsuccessful
pre-construction activities.
The activity in development pre-construction costs and the related reserve for
1997 and 1996 is summarized as follows:
Costs Reserve Net
----- ------- ---
Balance, January 1, 1996 $35,872 $(10,198) $25,674
Costs incurred 12,556 12,556
Charged to operations (8,501) (8,501)
Transfers to construction in process
and investments in Unconsolidated
Joint Ventures (5,317) (5,317)
Costs of projects written off (6,223) 6,223
------- -------- -------
Balance, December 31, 1996 $36,888 $(12,476) $24,412
Costs incurred 16,988 16,988
Charged to operations (5,454) (5,454)
Transfers to construction in process (2,765) (2,765)
Costs of projects written off (1,870) 1,870
------- -------- -------
Balance, December 31, 1997 $49,241 $(16,060) $33,181
======= ======== =======
F-14
<PAGE>
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 6 - Deferred Charges and Other Assets
Deferred charges and other assets at December 31, 1997 and 1996 are summarized
as follows:
1997 1996
---- ----
Leasing $ 39,480 $ 38,353
Accumulated amortization (20,534) (21,284)
-------- --------
$ 18,946 $ 17,069
Prepaid ground rent (Note 9) 6,043 6,122
Deferred financing costs, net 10,486 9,343
Other, net 8,206 8,975
-------- --------
$ 43,681 $ 41,509
======== ========
Note 7 - Other Liabilities
In November 1992, the General Motors Hourly-Rate Employes Pension Trust and
the General Motors Salaried Employes Pension Trust (GM Trusts), which indirectly
own interests in TRG, entered into an agreement with TCO (the Cash Tender
Agreement) pursuant to which the GM Trusts have certain rights to cause TCO to
purchase their interests in TRG. TRG will pay the GM Trusts an amount (not to
exceed $10.9 million in the aggregate over the term of the Partnership) equal to
5.5% of the amounts that TCO pays to the GM Trusts under the Cash Tender
Agreement.
F-15
<PAGE>
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 8 - Debt
Unsecured Notes Payable
Unsecured notes payable at December 31, 1997 and 1996 consists of the
following:
1997 1996
---- ----
7% Notes due 2003 $ 199,719 $ 199,679
8% Notes due 1999 199,969 199,950
Floating Rate Notes due 1997 99,955
Notes payable to banks:
Construction facility, maximum borrowing
available of $210 million, interest at
LIBOR plus 0.90%, maturing December 2001 46,900
Line of credit, maximum borrowing
available of $300 million, interest at
LIBOR plus 0.90%, maturing March 2000 210,000
Line of credit, maximum borrowing available
of $30 million, interest based on a
variable bank borrowing rate, 6.75% at
December 31, 1997, maturing August 1998 10,175 10,100
Medium-Term Notes:
Floating rate notes:
Three month LIBOR plus 0.80% due 1998 $ 20,000 $ 20,000
Three month LIBOR plus 0.77% due 1998 14,000 14,000
Three month LIBOR plus 0.90% due 1999 20,000 20,000
Three month LIBOR plus 1.05% due 2001 30,000 30,000
Fixed rate notes:
7.38% Notes due 2000 13,000 13,000
7.31% Notes due 2000 2,000 2,000
7.19% Notes due 2000 5,000 5,000
7.22% Notes due 2001 8,400 8,400
8.00% Notes due 2001 69,981 69,976
7.40% Notes due 2002 5,000 5,000
7.50% Notes due 2002 99,791 99,745
7.00% Notes due 2007 54,524
---------- ---------
Total Medium-Term Notes $ 341,696 $ 287,121
---------- ---------
Total Unsecured Notes Payable $1,008,459 $ 796,805
========== =========
As of December 31, 1997, TRG has available for general partnership purposes an
unsecured revolving credit facility of $300 million. Included in the credit
facility is a competitive bid option program which allows TRG to hold auctions,
among the banks participating in the facility, for short term borrowings of up
to $150 million.
TRG has used the proceeds from the $210 million construction facility to make
contributions to Taubman Auburn Hills Associates Limited Partnership, a
consolidated 80% owned venture, to finance the construction of Great Lakes
Crossing. TRG is entitled to preferred distributions on these contributions at a
rate of prime plus 1.5%. The preferred distributions will be paid from available
cash as defined in the partnership agreement. The maturity date on the
construction facility may be extended to December 2002.
F-16
<PAGE>
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
TRG has issued $342 million of Medium-Term Notes since the program's inception
in 1995 under TRG's $500 million shelf registration statement.
TRG's loan and facility agreements and indenture contain various restrictive
covenants including limitations on the amount of secured and unsecured debt and
minimum debt service coverage ratios, the latter being the most restrictive. TRG
is in compliance with all covenants.
Mortgage Notes Payable
Mortgage notes payable at December 31, 1997 and 1996 consists of the
following:
<TABLE>
<CAPTION>
Balance Due
Center 1997 1996 Interest Rate Maturity Date on Maturity
- ------ ---- ---- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Beverly Center $146,000 $146,000 8.36% 07/15/04 $146,000
Columbus City Center 8,022 8,175 7.00% 08/01/19 0
MacArthur Center 42,241 Floating 10/27/00 42,241
Stoneridge 74,762 44,897 Floating 01/20/98 75,000
Assessment bonds
payable 4,843 5,528 Various Various 0
-------- --------
$275,868 $204,600
======== ========
</TABLE>
Mortgage debt is collateralized by properties with a net book value of $208.7
million as of December 31, 1997. The assessment bonds payable are due in monthly
installments with maturities at various dates through 2019, and fixed interest
rates between 6.0% and 7.2%.
In October 1997, TRG closed on a three year, $150 million construction
facility for MacArthur Center, which is owned by a consolidated 70% owned
venture. The loan bears interest at one month LIBOR plus 1.2%. Under the
facility agreement the maturity date may be extended for two years. The payment
of the principal and interest is guaranteed by TRG. The loan agreement provides
for the reduction of the amount guaranteed as certain center performance and
valuation criteria are met.
Stoneridge is encumbered by a deed of trust securing a commercial paper
facility. The facility is supported by an underlying credit facility of up to
$75 million, which is renewable quarterly for a twelve month period.
Commercial paper is generally sold with a 30 day maturity.
The following table presents scheduled principal payments on mortgage debt,
excluding commercial paper, as of December 31, 1997.
1998 $ 896
1999 738
2000 42,804
2001 602
2002 643
Thereafter 155,423
F-17
<PAGE>
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Interest Expense
Interest paid in 1997, 1996 and 1995, net of amounts capitalized of $9.5
million, $5.7 million and $6.9 million in 1997, 1996 and 1995, approximated
$69.8 million, $69.8 million and $62.2 million.
Extraordinary Items
In 1996, TRG recognized an extraordinary charge to income of $1.3 million
primarily consisting of a prepayment penalty related to the extinguishment of
debt at a wholly owned Center. In 1995, TRG recognized an extraordinary gain of
approximately $18.9 million, related to the extinguishment of debt at Bellevue
(Note 4) and $2.2 million of extraordinary charges, consisting primarily of
prepayment penalties, related to the extinguishment of debt of TRG and an
Unconsolidated Joint Venture.
Interest Rate Hedging Instruments
TRG enters into interest rate agreements to reduce its exposure to changes in
the cost of its floating rate debt. The derivative agreements generally match
the notional amounts, reset dates and rate bases of the hedged debt to assure
the effectiveness of the derivatives in reducing interest rate risk. As of
December 31, 1997, the following interest rate cap agreements were outstanding:
Frequency
Notional LIBOR of Rate
Amount Cap Rate Resets Term
--------- -------- ------------ -----------------------------------
$100,000 6.5% Three Months November 1997 through December 1998
200,000 9.5% Monthly December 1997 through December 1999
The 9.5% cap rate of the $200 million notional amount cap agreement decreases
to 7.0% beginning in December 1998.
TRG is exposed to credit risk in the event of nonperformance by the
counterparties to its interest rate cap and swap agreements, but has no
off-balance sheet risk of loss. TRG anticipates that its counterparties will
fully perform their obligations under the agreements.
Fair Value of Financial Instruments Related to Debt
The estimated fair values of TRG's financial instruments at December 31, 1997
and 1996 are as follows:
December 31
---------------------------------------------------
1997 1996
------------------------ ------------------------
Carrying Fair Carrying Fair
Value Value Value Value
------------------------ ------------------------
Unsecured notes payable $1,008,459 $1,031,983 $ 796,805 $ 804,928
Mortgage notes payable 275,868 286,961 204,600 213,126
Interest rate instruments:
In a receivable position 842 135 964 412
In a payable position (17) (76)
F-18
<PAGE>
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Beneficial Interest in Debt and Interest
TRG's beneficial interest in the debt (excluding capital lease obligations),
capitalized interest, and interest expense (net of capitalized interest) of TRG,
its consolidated subsidiaries and its Unconsolidated Joint Ventures (Note 4) is
summarized in the following table. TRG's beneficial interest for 1997 excludes
the 30% minority interest in the debt outstanding on the MacArthur Center
construction facility.
Unconsolidated TRG's Share of TRG's TRG's
Joint Unconsolidated Consolidated Beneficial
Ventures Joint Ventures Subsidiaries Interest
-------- -------------- ------------ --------
Debt as of:
December 31, 1997 $875,356 $ 465,556 $1,284,327 $1,737,211
December 31, 1996 724,162 396,962 1,001,405 1,398,367
Capitalized interest:
1997 $ 9,438 $ 4,371 $ 9,469 $ 13,676
1996 4,790 3,187 5,682 8,869
1995 3,481 1,799 6,852 8,651
Interest expense
(net of capitalized
interest):
1997 $54,018 $29,263 $73,639 $102,902
1996 52,994 27,738 70,454 98,192
1995 57,857 30,396 65,858 96,254
Note 9 - Leases
Operating Leases
Shopping center space is leased to tenants and certain anchors pursuant to
lease agreements. Tenant leases typically provide for guaranteed minimum rent,
percentage rent and other charges to cover certain operating costs. Future
minimum rent under operating leases in effect at December 31, 1997 for operating
centers, assuming no new or renegotiated leases or option extensions on anchor
agreements, is summarized as follows:
1998 $ 205,779
1999 196,423
2000 173,580
2001 157,597
2002 139,594
Thereafter 461,160
Certain Taubman Shopping Centers, as lessees, have ground leases expiring at
various dates through the year 2076. In addition, the Manager leases its office
facilities. Rental payments under ground and office leases were $9.8 million,
$8.0 million and $7.3 million in 1997, 1996 and 1995. Included in these amounts
are related party office rental payments of $3.1 million, $3.0 million and $2.8
million in 1997, 1996 and 1995.
F-19
<PAGE>
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The following is a schedule of future minimum rental payments required under
operating leases.
1998 $ 8,677
1999 8,752
2000 8,537
2001 8,259
2002 8,095
Thereafter 189,935
The table above includes $2.9 million, $3.0 million, $2.9 million, $2.6
million, $2.6 million and $6.2 million of related party amounts in 1998, 1999,
2000, 2001, 2002 and thereafter.
Included in deferred charges is approximately $6.0 million representing
lump-sum payments for base rent on two parcels of adjacent land. These costs are
being charged to operations over the 87 and 99 year terms of the leases.
Memorial City Mall Lease
In November 1996, TRG entered into an agreement to lease Memorial City Mall,
located in Houston, Texas. The lease of this unencumbered property grants TRG
the exclusive right to manage, lease and operate the property. The annual rent
is initially $7 million. TRG has the option to terminate the lease after the
third full lease year by paying $2 million to the lessor. Accordingly, the lease
will be accounted for as an operating lease during the option period. TRG is
using this option period to evaluate the redevelopment opportunities of the
center.
If TRG does not exercise its option to terminate the lease at the end of the
third full lease year, the lease continues for another 52 years and provides for
increases in rent every ten years based on 75% of the increase in the Consumer
Price Index between 1996 and the then current year. Under the terms of the
lease, TRG has agreed to invest a minimum of $3 million during the three year
option period. If the redevelopment proceeds, TRG is required to invest an
additional $22 million in property expenditures not recoverable from tenants
during the first 10 years of the lease term.
Note 10 - Transactions with Affiliates
The revenue from management, leasing and development services is derived
primarily from transactions with affiliates. Accounts receivable from related
parties includes amounts related to reimbursement of third-party
(non-affiliated) costs.
During 1997, TRG acquired an option from a related party to purchase certain
real estate on which TRG may develop a shopping center. The option agreement
requires option payments of $150 thousand during each of the first five years,
$400 thousand in the sixth year, and $500 thousand in the seventh year. If TRG
exercises the option, the purchase price for the property will be between $5
million and $10 million, depending upon the year of purchase. While the optionor
will have no interest in the shopping center itself, the optionor may, under
certain circumstances, participate in the proceeds from TRG's future sales of
the peripheral land contiguous to the shopping center.
Other related party transactions are described in Notes 4, 9 and 11.
F-20
<PAGE>
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 11 - The Manager
The Manager, The Taubman Company Limited Partnership, provides property
management, leasing and development services to the Taubman Shopping Centers and
affiliates.
The Manager has a voluntary retirement savings plan established in 1983 and
amended and restated effective January 1, 1994 (the Plan). The Plan is qualified
in accordance with Section 401(k) of the Internal Revenue Code (the Code). The
Manager contributes an amount equal to 2% of the qualified wages of all
qualified employees and matches employee contributions in excess of 2% up to 7%
of qualified wages. In addition, the Manager may make discretionary
contributions within the limits prescribed by the Plan and imposed in the Code.
Costs relating to the Plan were $1.7 million, $1.6 million, and $1.5 million in
the years ended December 31, 1997, 1996 and 1995, respectively.
TRG has an incentive option plan for employees of the Manager. Currently,
options for 8.2 million units of partnership interest, as restated for the unit
split (Note 2), may be issued under the plan, including options outstanding for
7.0 million units. The exercise price of all options outstanding is equal to
market value on the date of the grant. Incentive options generally become
exercisable to the extent of one-third of the units on each of the third,
fourth, and fifth anniversaries of the date of grant. Options expire ten years
from the date of grant.
A summary of the status of the plan as of December 31, 1997, 1996, and 1995,
and changes during the years ending on those dates are presented below:
<TABLE>
<CAPTION>
1997 1996 1995
------------------------ ------------------------ ------------------------
Weighted-Average Weighted-Average Weighted-Average
Exercise Price Exercise Price Exercise Price
Options Units Per Unit Units Per Unit Units Per Unit
--------- ----- -------- ----- -------- ----- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of year 6,983,804 $11.19 8,129,819 $11.18 7,221,282 $11.37
Granted 100,828 13.14 932,238 9.66
Exercised (39,299) 11.25 (652,245) 11.23
Cancelled (21,728) 10.86 (493,770) 11.06 (23,701) 11.41
--------- --------- ---------
Outstanding at
end of year 7,023,605 11.22 6,983,804 11.19 8,129,819 11.18
========= ========= =========
Options vested
at year end 5,530,263 11.29 3,768,452 11.23 2,360,220 11.19
========= ========= =========
</TABLE>
Options outstanding at December 31, 1997 have a remaining weighted-average
contractual life of 5.4 years and range in exercise price from $9.39 to $13.89.
The weighted average fair value per unit of options granted during 1997 and 1995
was $2.33 and $1.37. There were no grants in 1996. TRG used a binomial option
price model to determine the grant date fair values of the 1997 and 1995 grants
based on the following assumptions: volatility rates of 21% and 22%, risk-free
rates of return of approximately 6.8% and 8%, and dividend yields of
approximately 7% and 9%, respectively.
TRG applies APB Opinion 25 and related Interpretations in accounting for the
plan. The exercise price of all options outstanding granted under the plan was
equal to market value on the date of grant. Accordingly, no compensation expense
has been recognized for the plan. Had compensation cost for the plan been
determined based on the fair value of the options at the grant dates for 1997
and 1995 awards (there were no grants in 1996) consistent with the method of FAS
Statement 123, the pro forma effect on TRG's earnings and earnings per unit of
partnership interest would not have been material.
F-21
<PAGE>
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Effective January 1, 1996, the Manager adopted The Taubman Company Long-Term
Performance Compensation Plan. Annually, eligible employees will be granted
contingent notional TRG units of partnership interest, the ultimate number of
which will be based on the employee's performance. These awards, which will vest
on the third anniversary of the date of grant, will also accrue distribution
equivalents in the form of additional notional units each time TRG makes a
distribution to its partners. Upon vesting, additional notional units may be
granted based on the performance of the employee and the Manager and/or TRG. The
awards will be paid to the employee in cash upon vesting, based on the value of
TRG's units of partnership interest, unless the employee elects to defer payment
as provided in the plan. The cost of this plan was approximately $4.5 million
and $2.0 million for 1997 and 1996, respectively.
Note 12 - Earnings Per Unit of Partnership Interest
Basic earnings per unit of partnership interest are based on the average
number of units of partnership interest outstanding during each period. Diluted
earnings per unit of partnership interest are based on the average number of
units of partnership interest outstanding during each period, assuming exercise
of all options for units of partnership interest having exercise prices less
than the average market value of the units using the treasury stock method. For
the years ended December 31, 1997, 1996 and 1995, options for 0.4 million, 1.0
million and 7.2 million units of partnership interest with average exercise
prices of $13.58, $12.64 and $11.37, respectively, were excluded from the
computation of diluted earnings per unit because the options' exercise prices
were greater than the average market price for the period calculated. In January
1998, TRG redeemed a partner's interest in TRG (Note 16), which will affect the
number of units of partnership interest outstanding in 1998.
Year Ended December 31
------------------------------------------
1997 1996 1995
------------------------------------------
Income before extraordinary
items allocable to
unitholders (Numerator) $ 91,236 $ 84,094 $ 79,699
======== ========= ========
Partnership units (Denominator):
Basic 138,271,014 128,579,312 125,459,939
Effect of dilutive options 1,002,634 160,594 4,148
----------- ----------- -----------
Diluted 139,273,648 128,739,906 125,464,087
=========== =========== ===========
Per unit - basic and diluted $ 0.66 $ 0.65 $ 0.64
====== ====== ======
Note 13 - Supplemental Disclosures of Non-Cash Activities
In connection with the construction of Tuttle Crossing, additions to assets
under capital lease and the capital lease obligation were recognized for $15.5
million, $25.4 million, and $14.4 million in 1997, 1996, and 1995, respectively.
The outstanding capital lease obligation was extinguished in connection with the
1997 acquisition of interests in Tuttle Crossing (Note 3).
Note 14 - Contingencies
TRG is currently involved in certain litigation arising in the ordinary
course of business. Management believes that this litigation will not have a
material adverse effect on TRG's assets or results of operations.
F-22
<PAGE>
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 15 - Quarterly Financial Data (Unaudited)
The following is a summary of quarterly results of operations for 1997 and
1996.
1997
----------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
----------------------------------
(in thousands, except unit data)
Revenues $72,897 $73,027 $78,037 $89,465
Equity in income of Unconsolidated
Joint Ventures 12,328 14,340 12,205 13,397
Income before extraordinary item 23,584 22,170 23,041 26,499
Net Income 23,584 22,170 23,041 26,499
Basic and diluted earnings
per unit of partnership interest:
Income before extraordinary item $0.17 $0.16 $0.17 $0.16
Net Income 0.17 0.16 0.17 0.16
1996
----------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
----------------------------------
(in thousands, except unit data)
Revenues $59,914 $60,073 $66,318 $77,391
Equity in income of Unconsolidated
Joint Ventures 13,276 12,628 13,432 12,417
Income before extraordinary item 20,868 18,500 20,940 23,786
Net Income 20,868 18,500 19,612 23,786
Basic and diluted earnings
per unit of partnership interest:
Income before extraordinary item $0.17 $0.15 $0.16 $0.18
Net Income 0.17 0.15 0.15 0.18
Note 16 - Subsequent Events
In January 1998, TRG redeemed a partner's 6.1 million units of partnership
interest for approximately $77.7 million (including costs). The redemption was
funded through the use of an existing revolving credit facility.
Subsequent to December 31, 1997, Fairfax Company of Virginia L.L.C.
(successor-in-interest to Fairfax Associates, a 50% owned Unconsolidated Joint
Venture) completed a $140 million, 6.60%, secured financing maturing in 2008.
The net proceeds were used to extinguish an existing mortgage on Fair Oaks of
approximately $39 million and pay a prepayment penalty of approximately $1.8
million. In addition, proceeds of $5.6 million were used to close out a treasury
lock agreement entered into in 1997, which resulted in an effective rate on the
financing of approximately 7%. The remaining proceeds were distributed to the
owners. TRG used its 50% share of the distribution to pay down its revolving
credit facilities.
F-23
<PAGE>
Schedule II
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
Valuation and Qualifying Accounts
For the years ended December 31, 1997, 1996, and 1995
(in thousands)
<TABLE>
<CAPTION>
Additions
--------------------------
Balance at Charged to Charged to Balance
beginning costs and other at end
of year expenses accounts Write-offs of year
--------- ---------- ---------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1995:
Allowance for doubtful receivables $ 502 818 0 (939) $ 381
======= ===== ==== ====== =======
Development pre-construction reserve $ 8,348 6,814 0 (4,964) $10,198
======= ===== ==== ====== =======
Year ended December 31, 1996:
Allowance for doubtful receivables $ 381 1,295 42(1) (1,325) $ 393
======= ===== ==== ====== =======
Development pre-construction reserve $10,198 8,501 0 (6,223) $12,476
======= ===== ==== ====== =======
Year ended December 31, 1997:
Allowance for doubtful receivables $ 393 1,027 0 (1,006) $ 414
====== ===== ==== ====== =======
Development pre-construction reserve $12,476 5,454 0 (1,870) $16,060
======= ===== ==== ====== =======
(1) Represents the balance of Fairlane's allowance for doubtful receivables as
of the date of TRG's acquisition of additional interests in Fairlane.
Subsequent to the acquisition date, the accounts of Fairlane have been
consolidated in TRG's financial statements.
</TABLE>
F-24
<PAGE>
<TABLE>
<CAPTION>
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP Schedule III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997
(in thousands)
Gross Amount at Which
Initial Cost Carried at Close of Period
to Company Cost ---------------------------------------
------------------- Capitalized Accumulated Total
Buildings and Subsequent Depreciation Cost Net
Land Improvements to Acquisition Land BI&E Total (A/D) of A/D
---- ------------ -------------- ---- ---- ----- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Taubman Shopping Centers:
Beverly Center, Los Angeles, CA $ 0 $ 131,187 $ 22,104 $ 0 $ 153,291 $ 153,291 $ 48,058 $ 105,233
Biltmore, Phoenix, AZ 18,000 96,864 8,320 18,000 105,184 123,184 9,390 113,794
Briarwood, Ann Arbor, MI 4,027 47,761 5,964 4,027 53,725 57,752 28,663 29,089
Columbus City Center,
Columbus, OH 0 57,787 278 0 58,065 58,065 15,383 42,682
Fairlane Town Center,
Dearborn, MI 14,067 88,023 771 14,067 88,794 102,861 9,869 92,992
The Falls, Miami, FL 25,479 131,347 0 25,479 131,347 156,826 229 156,597
Hilltop, Richmond, CA 2,522 36,139 7,788 2,522 43,927 46,449 16,740 29,709
La Cumbre Plaza, Santa Barbara, CA 0 23,048 39 0 23,087 23,087 844 22,243
Lakeforest, Gaithersburg, MD 4,047 18,137 7,245 4,047 25,382 29,429 16,107 13,322
Marley Station, Glen Burnie, MD 3,692 45,072 11,118 3,692 56,190 59,882 26,968 32,914
Meadowood Mall, Reno, NV 1,890 14,116 13,734 1,890 27,850 29,740 12,598 17,142
Paseo Nuevo, Santa Barbara, CA 0 35,210 385 0 35,595 35,595 1,832 33,763
Regency Square, Richmond, VA 21,702 103,062 0 21,702 103,062 124,764 980 123,784
The Mall at Short Hills,
Short Hills, NJ 16,000 116,054 120,709 16,000 236,763 252,763 36,729 216,034
Stoneridge, Pleasanton, CA 882 25,265 16,496 882 41,761 42,643 23,644 18,999
The Mall at Tuttle Crossing,
Columbus, OH 20,000 118,078 0 20,000 118,078 138,078 2,629 135,449
Other:
Manager's Office Facilities 0 0 23,505 0 23,505 23,505 17,796 5,709
Peripheral Land 6,630 0 5 6,630 5 6,635 0 6,635
Construction in Process and
Development Pre-construction
Costs 0 122,011 5,670 0 127,681 127,681 0 127,681
Other 0 1,120 0 0 1,120 1,120 199 921
-------- ---------- -------- -------- ---------- ---------- -------- ----------
TOTAL $138,938 $1,210,281 $244,131 $138,938 $1,454,412 $1,593,350 $268,658 $1,324,692
======== ========== ======== ======== ========== ========== ======== ==========
<CAPTION>
Date of
Completion of
Construction or Depreciable
Encumbrances Acquisition Life
------------ ----------- ----
<S> <C> <C> <C>
Taubman Shopping Centers:
Beverly Center, Los Angeles, CA $146,000 1982 40 Years
Biltmore, Phoenix, AZ 2,979 1994 40 Years
Briarwood, Ann Arbor, MI 0 1973 33 Years
Columbus City Center,
Columbus, OH 8,022 1989 31 Years
Fairlane Town Center,
Dearborn, MI 0 1996 40 Years
The Falls, Miami, FL 0 1997 40 Years
Hilltop, Richmond, CA 607 1976 50 Years
La Cumbre Plaza, Santa Barbara, CA 0 1996 40 Years
Lakeforest, Gaithersburg, MD 0 1978 30 Years
Marley Station, Glen Burnie, MD 0 1987 40 Years
Meadowood Mall, Reno, NV 0 1979 40 Years
Paseo Nuevo, Santa Barbara, CA 0 1996 40 Years
Regency Square, Richmond, VA 0 1997 40 Years
The Mall at Short Hills,
Short Hills, NJ 0 1980 40 Years
Stoneridge, Pleasanton, CA 76,019 1980 40 Years
The Mall at Tuttle Crossing,
Columbus, OH 0 1997 50 Years
Other:
Manager's Office Facilities 0
Peripheral Land 0
Construction in Process and
Development Pre-construction
Costs 42,241
Other 0
--------
TOTAL $275,868
========
</TABLE>
The changes in total real estate assets for the three years ended December 31,
1997 are as follows:
1997 1996 1995
---- ---- ----
Balance, beginning of year $1,136,416 $ 926,207 $ 843,960
Acquisitions 358,227 150,522
New development and improvements 142,420 59,237 85,109
Disposals (1) (43,713) (3,808) (2,862)
Transfers In, net (2) 4,258
---------- ---------- ---------
Balance, end of year $1,593,350 $1,136,416 $ 926,207
========== ========== =========
F-25
<PAGE>
(Schedule III (cont.))
The changes in accumulated depreciation and amortization for the three years
ended December 31, 1997 are as follows:
1997 1996 1995
---- ---- ----
Balance, beginning of year $(234,030) $(200,440) $(175,358)
Depreciation for year (37,642) (29,570) (26,574)
Disposals 3,014 1,290 1,492
Transfers In (2) (5,310)
--------- --------- ---------
Balance, end of year $(268,658) $(234,030) $(200,440)
========= ========= =========
(1) 1997 disposal amount includes $39,849 representing the net decrease in
Tuttle Crossing's assets under capital lease.
(2) Primarily represents consolidation in 1996 of TRG's original 25% interest
in Fairlane's assets (costs of acquiring the remaining 75% interest are
included in Acquisitions above), net of transfers of pre-construction costs
to construction in process of an Unconsolidated Joint Venture.
F-26
<PAGE>
UNCONSOLIDATED JOINT VENTURES OF THE TAUBMAN REALTY GROUP
LIMITED PARTNERSHIP
COMBINED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1997 AND 1996 AND
FOR EACH OF THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
F-27
<PAGE>
INDEPENDENT AUDITORS' REPORT
Partners
The Taubman Realty Group Limited Partnership
We have audited the accompanying combined balance sheets of Unconsolidated
Joint Ventures of The Taubman Realty Group Limited Partnership (the
"Partnership") as of December 31, 1997 and 1996, and the related combined
statements of operations, accumulated deficiency in assets, and cash flows for
each of the three years in the period ended December 31, 1997. Our audits also
included the financial statement schedules listed in the Index at Item 14. These
financial statements and financial statement schedules are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on the
financial statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such combined financial statements present fairly, in all
material respects, the financial position of Unconsolidated Joint Ventures of
The Taubman Realty Group Limited Partnership as of December 31, 1997 and 1996,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1997 in conformity with generally
accepted accounting principles. Also, in our opinion, such financial statement
schedules, when considered in relation to the basic combined financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.
DELOITTE & TOUCHE LLP
Detroit, Michigan
February 18, 1998
F-28
<PAGE>
UNCONSOLIDATED JOINT VENTURES OF THE TAUBMAN REALTY GROUP
LIMITED PARTNERSHIP
COMBINED BALANCE SHEET
(in thousands)
December 31
-----------------------
1997 1996
---- ----
Assets:
Properties (Notes 2, 4 and 6) $ 829,640 $ 638,960
Accumulated depreciation and amortization 205,659 188,491
--------- ---------
$ 623,981 $ 450,469
Cash and cash equivalents 36,875 25,914
Accounts and notes receivable, less allowance
for doubtful accounts of $314 and $90
in 1997 and 1996 8,531 7,142
Note receivable from Joint Venture Partner
(Note 6) 1,294 1,600
Deferred charges and other assets (Notes 3 and 6) 37,697 36,596
--------- ---------
$ 708,378 $ 521,721
========= =========
Liabilities:
Mortgage notes payable (Note 4) $ 874,472 $ 721,809
Other notes payable (Note 4) 884 2,353
Capital lease obligations (Note 5) 6,509 5,000
Accounts payable and other liabilities 94,801 51,691
--------- ---------
$ 976,666 $ 780,853
Commitments (Note 5)
Accumulated deficiency in assets:
TRG $(133,680) $(134,986)
Joint Venture Partners (134,608) (124,146)
--------- ---------
$(268,288) $(259,132)
--------- ---------
$ 708,378 $ 521,721
========= =========
See notes to financial statements.
F-29
<PAGE>
UNCONSOLIDATED JOINT VENTURES OF THE TAUBMAN REALTY GROUP
LIMITED PARTNERSHIP
COMBINED STATEMENT OF OPERATIONS
(in thousands)
Year Ended December 31
------------------------------
1997 1996 1995
---- ---- ----
Revenues:
Minimum rents $155,912 $157,212 $166,244
Percentage rents 3,057 3,951 3,629
Expense recoveries 89,653 95,244 101,455
Other 10,013 8,930 11,444
Gain on disposition of Bellevue (Note 1) 4,408
-------- -------- --------
$258,635 $265,337 $287,180
-------- -------- --------
Operating costs:
Recoverable expenses (Note 6) $ 76,493 $ 81,799 $ 88,250
Other operating (Note 6) 17,638 18,365 18,609
Interest expense (Note 4) 54,018 52,994 57,857
Depreciation and amortization 24,180 23,837 25,471
-------- -------- --------
$172,329 $176,995 $190,187
-------- -------- --------
Income before extraordinary items $ 86,306 $ 88,342 $ 96,993
Extraordinary items (Notes 1 and 4) 30,761
-------- -------- --------
Net Income $ 86,306 $ 88,342 $127,754
======== ======== ========
Allocation of net income:
Attributable to TRG $ 46,857 $ 47,413 $ 68,498
Attributable to Joint Venture Partners 39,449 40,929 59,256
-------- -------- --------
$ 86,306 $ 88,342 $127,754
======== ======== ========
See notes to financial statements.
F-30
<PAGE>
UNCONSOLIDATED JOINT VENTURES OF THE TAUBMAN REALTY GROUP
LIMITED PARTNERSHIP
COMBINED STATEMENT OF ACCUMULATED DEFICIENCY IN ASSETS
Years ended December 31, 1997, 1996 and 1995
(in thousands)
Joint Venture
TRG Partners Total
--- -------- -----
Balance, January 1, 1995 $(165,328) $(167,603) $(332,931)
Cash distributions (53,287) (49,413) (102,700)
Net income 68,498 59,256 127,754
--------- --------- ---------
Balance, December 31, 1995 $(150,117) $(157,760) $(307,877)
Cash contributions 14,457 24,958 39,415
Non-cash contributions (Note 1) 4,797 8,050 12,847
Cash distributions (55,146) (51,154) (106,300)
TRG purchase of Fairlane interest
(Note 1) 3,610 10,831 14,441
Net income 47,413 40,929 88,342
--------- --------- ---------
Balance, December 31, 1996 $(134,986) $(124,146) $(259,132)
Cash contributions 18,822 9,800 28,622
Cash distributions (64,373) (59,711) (124,084)
Net income 46,857 39,449 86,306
--------- --------- ---------
Balance, December 31, 1997 $(133,680) $(134,608) $(268,288)
========= ========= =========
See notes to financial statements.
F-31
<PAGE>
UNCONSOLIDATED JOINT VENTURES OF THE TAUBMAN REALTY GROUP
LIMITED PARTNERSHIP
COMBINED STATEMENT OF CASH FLOWS
(in thousands)
Year Ended December 31
--------------------------------
1997 1996 1995
---- ---- ----
Cash Flows From Operating Activities:
Income before extraordinary items $ 86,306 $ 88,342 $ 96,993
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 24,180 23,837 25,471
Provision for losses on accounts
receivable 697 1,303 974
Gains on sales of land (2,748) (1,303)
Gain on disposition of Bellevue (Note 1) (4,408)
Other 3,806 2,922 2,493
Increase (decrease) in cash attributable
to changes in assets and liabilities:
Receivables, deferred
charges and other assets (7,760) (1,821) (10,128)
Accounts payable and other liabilities 43,110 4,841 4,258
--------- --------- --------
Net Cash Provided By Operating Activities $ 147,591 $ 119,424 $ 114,350
--------- --------- ---------
Cash Flows From Investing Activities:
Additions to properties $(190,188) $ (97,137) $ (48,320)
Restricted cash for expansion 1,309 40,879
Proceeds from sales of land 3,452 1,390
--------- --------- ---------
Net Cash Used In Investing Activities $(186,736) $ (95,828) $ (6,051)
--------- --------- ---------
Cash Flows From Financing Activities:
Debt proceeds $ 158,255 $ 20,529 $ 235,030
Debt payments (8,267) (2,670) (6,665)
Extinguishment of debt (189,705)
Debt issuance costs (4,420) (6,198)
Cash contributions from partners 28,622 39,415
Cash distributions to partners (124,084) (106,300) (102,700)
--------- --------- ---------
Net Cash Provided By (Used In) Financing
Activities $ 50,106 $ (49,026) $ (70,238)
--------- --------- ---------
Net Increase (Decrease) In Cash $ 10,961 $ (25,430) $ 38,061
Cash and Cash Equivalents at Beginning
of Year 25,914 51,344 13,283
--------- --------- --------
Cash and Cash Equivalents at End of Year $ 36,875 $ 25,914 $ 51,344
========= ========= =========
See notes to financial statements.
F-32
<PAGE>
UNCONSOLIDATED JOINT VENTURES OF THE TAUBMAN REALTY GROUP
LIMITED PARTNERSHIP
NOTES TO COMBINED FINANCIAL STATEMENTS
Three Years Ended December 31, 1997
Note 1 - Summary of Significant Accounting Policies
Basis of Presentation
The Taubman Realty Group Limited Partnership (TRG) engages in the ownership,
management, leasing, acquisition, development and expansion of regional retail
shopping centers (Taubman Shopping Centers) and interests therein. TRG has
engaged the Manager (The Taubman Company Limited Partnership, which is
approximately 99% beneficially owned by TRG) to provide property management and
leasing services for the Taubman Shopping Centers and to provide corporate,
development, and acquisition services. For financial statement reporting
purposes, the accounts of Taubman Shopping Centers owned through joint ventures
with third parties that are not controlled (Unconsolidated Joint Ventures) have
been combined in these financial statements. Generally, net profits and losses
of the Unconsolidated Joint Ventures are allocated to TRG and the outside
partners (Joint Venture Partners) in accordance with their ownership
percentages.
Dollar amounts presented in tables within the notes to the combined financial
statements are stated in thousands.
Investments in Unconsolidated Joint Ventures
TRG's interest in each of the Unconsolidated Joint Ventures at December 31,
1997, is as follows:
TRG's %
Unconsolidated Joint Venture Taubman Shopping Center Ownership
- ---------------------------- ----------------------- ---------
Arizona Mills, L.L.C. Arizona Mills 37%
Fairfax Associates Fair Oaks 50
Lakeside Mall Limited Partnership Lakeside 50
Rich-Taubman Associates Stamford Town Center 50
Taubman-Cherry Creek
Limited Partnership Cherry Creek 50
Twelve Oaks Mall
Limited Partnership Twelve Oaks Mall 50
West Farms Associates Westfarms 79
Woodfield Associates Woodfield 50
Woodland Woodland 50
Arizona Mills, L.L.C. developed Arizona Mills, a value super-regional mall in
Tempe, Arizona, which opened in November 1997. TRG's ownership interest in
Arizona Mills, L.L.C. increased in January 1997 to 37% from 35% as a result of
Arizona Mills, L.L.C.'s redemption of a former owner's 5% interest for $2.8
million. The former owner is an affiliate of a partner in TRG. In 1996, Arizona
Mills, L.L.C. purchased for $24.8 million approximately 116 acres of land on
which the Center was constructed from an affiliate of a partner in TRG and of a
former owner in Arizona Mills. Also in 1996, TRG and the other owners of Arizona
Mills contributed non-cash pre-construction costs related to this center
totaling $12.8 million.
F-33
<PAGE>
UNCONSOLIDATED JOINT VENTURES OF THE TAUBMAN REALTY GROUP
LIMITED PARTNERSHIP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
In July 1996, TRG completed transactions that resulted in it acquiring the 75%
interest in Fairlane Town Center (Fairlane) previously held by a Joint Venture
Partner. TRG also assumed mortgage debt of approximately $26 million,
representing the former Joint Venture Partner's beneficial interest in the $34.6
million mortgage encumbering the property. The accounts of Fairlane are included
in these combined financial statements until the acquisition date. On the
acquisition date, the book values of Fairlane's assets and liabilities were
approximately $25 million and $39 million, respectively.
In December 1995, the bank group holding the $99.5 million nonrecourse
mortgage encumbering Bellevue Center acquired title to the Center through a
nonjudicial foreclosure sale. The mortgage matured on November 1, 1995. TRG
ceased to recognize the results of Bellevue Associates (Bellevue), TRG's 60%
owned Unconsolidated Joint Venture that owned the Center, as of November 1,
1995, and, accordingly, the accounts of Bellevue Associates are not included in
these combined financial statements from that date.
As a result of the foreclosure and debt extinguishment, Bellevue recognized in
1995 an extraordinary gain of approximately $31.4 million, representing the
difference between the carrying value of the debt and the fair value of the
Center, net of related transaction costs, and an ordinary gain of approximately
$4.4 million, representing the excess of the fair value of the Center over its
carrying value. The extinguishment of the debt and write off of the Center's
carrying value represent non-cash transactions.
Revenue Recognition
Shopping center space is generally leased to specialty retail tenants under
short and intermediate term leases which are accounted for as operating leases.
Minimum rents are recognized on an accrual basis as earned, the result of which
does not differ materially from a straight-line method. Percentage rents are
recognized on an accrual basis as earned. Expense recoveries, which include an
administrative fee, are recognized as revenue in the period applicable costs are
chargeable to tenants.
Depreciation and Amortization
Buildings, improvements and equipment, stated at cost, are depreciated on
straight-line or double-declining balance bases over the estimated useful lives
of the assets which range from 3 to 55 years. Tenant allowances and deferred
leasing costs are amortized on a straight-line basis over the lives of the
related leases.
Capitalization
Costs related to the acquisition, development, construction, and improvement
of properties are capitalized. Interest costs are capitalized until construction
is substantially complete. Properties are reviewed for impairment if events or
changes in circumstances indicate that the carrying amounts of the properties
may not be recoverable.
Cash and Cash Equivalents
Cash equivalents consist of highly liquid investments with a maturity of 90
days or less at the date of purchase.
F-34
<PAGE>
UNCONSOLIDATED JOINT VENTURES OF THE TAUBMAN REALTY GROUP
LIMITED PARTNERSHIP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
Deferred Charges
Direct financing and interest rate hedging costs are deferred and amortized
over the terms of the related agreements as a component of interest expense.
Direct costs related to leasing activities are capitalized and amortized on a
straight-line basis over the lives of the related leases. All other deferred
charges are amortized on a straight-line basis over the terms of the agreements
to which they relate.
Interest Rate Hedging Agreements
Premiums paid for interest rate caps are amortized to interest expense over
the terms of the cap agreements. Amounts received under the cap agreements are
accounted for on an accrual basis, and recognized as a reduction of interest
expense. The differential to be paid or received on swap agreements is accounted
for on an accrual basis and recognized as an adjustment to interest expense.
Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value of
financial instruments:
The carrying value of cash and cash equivalents, accounts and notes
receivable, and accounts payable approximates fair value due to the short
maturity of these instruments.
The fair value of mortgage notes and other notes payable is estimated based
on quoted market prices if available, or on the current rates available to
the Unconsolidated Joint Ventures for debt of similar terms and maturity
and the assumption that debt will be prepaid at the earliest possible
date.
The fair value of interest rate hedging instruments is the amount the
Unconsolidated Joint Venture would pay or receive to terminate the
agreement at the reporting date, taking into account current interest
rates.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, disclosure of contingent
assets and liabilities at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Reclassifications
Certain prior year amounts have been reclassified to conform to 1997
classifications.
F-35
<PAGE>
UNCONSOLIDATED JOINT VENTURES OF THE TAUBMAN REALTY GROUP
LIMITED PARTNERSHIP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
Note 2 - Properties
Properties, at December 31, 1997 and 1996, are summarized as follows:
1997 1996
---- ----
Land $ 45,549 $ 43,477
Buildings, improvements and equipment 753,859 476,283
Construction in process 27,443 115,953
Peripheral land 2,789 3,247
-------- --------
$829,640 $638,960
======== ========
Depreciation expense for 1997, 1996 and 1995 was $18.7 million, $18.0 million
and $18.4 million. Peripheral land primarily consists of undeveloped land
generally adjacent to the Taubman Shopping Centers. Construction in process
includes costs related to expansions and other improvements at various centers.
Assets under capital lease of $6.5 million and $5.0 million at December 31, 1997
and 1996, respectively, are included in the table above in buildings,
improvements and equipment.
Note 3 - Deferred Charges and Other Assets
Deferred charges and other assets at December 31, 1997 and 1996 are summarized
as follows:
1997 1996
---- ----
Leasing $ 41,568 $ 39,924
Accumulated amortization (20,562) (19,298)
-------- --------
$ 21,006 $ 20,626
Deferred financing, net 12,442 11,810
Other, net 4,249 4,160
-------- --------
$ 37,697 $ 36,596
======== ========
F-36
<PAGE>
UNCONSOLIDATED JOINT VENTURES OF THE TAUBMAN REALTY GROUP
LIMITED PARTNERSHIP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
Note 4 - Debt
Mortgage Notes Payable
Mortgage notes payable at December 31, 1997 and 1996 consists of the
following:
Balance Due
Center 1997 1996 Interest Rate Maturity Date on Maturity
- ------ ---- ---- ------------- ------------- -----------
Arizona Mills $121,991 Floating 02/01/02 $121,991
Cherry Creek 130,000 $130,000 Floating 08/01/98 130,000
Fair Oaks 39,119 39,865 9.00% 12/01/16 0
Lakeside 88,000 88,000 6.47% 12/15/00 88,000
Stamford Town Center 55,630 56,291 11.69% 12/01/17 0
Twelve Oaks Mall 49,940 49,924 Floating 10/15/01 50,000
Westfarms 100,000 100,000 7.85% 07/01/02 100,000
Westfarms 51,792 19,729 Floating 07/01/02 51,792
Woodfield 172,000 172,000 Floating 10/13/98 172,000
Woodland 66,000 66,000 8.20% 05/15/04 66,000
------- --------
$874,472 $721,809
======== ========
The Arizona Mills loan is a construction facility with a maximum availability
of $145 million. The rate is capped at 9.5% until maturity, plus credit spread.
The payment of principal and interest is guaranteed by each of the owners of
Arizona Mills to the extent of its ownership percentage. The loan agreement
provides for the reduction of the amount guaranteed as certain center
performance and valuation criteria are met.
The other Unconsolidated Joint Ventures with floating rate debt have entered
into interest rate agreements to reduce their exposure to increases in interest
rates. The rate on Cherry Creek's loan is capped at 6.5% through January 1998
and from February 1998 to maturity at 7%, plus credit spread, based on one month
LIBOR. The loan can be extended up to an additional three years. The rate on the
Twelve Oaks loan is capped at 8.55% until maturity, plus credit spread, based on
one month LIBOR. The interest rate on $93.5 million of the Woodfield loan was
swapped to maturity at an effective annual rate of 5.4%. The rate on the balance
of the Woodfield financing, which has been capped at a maximum annual rate,
including credit spread, of 6.5% to maturity by an interest rate agreement,
floats at a rate of three month LIBOR plus 0.5%. The Westfarms balance of $51.8
million represents borrowings under a construction facility with a maximum
availability of $55 million. The rate on the construction facility is capped
until maturity at 6.5%, plus credit spread.
The Stamford note also requires payment of additional interest ($1.3 million,
$1.6 million, and $1.4 million in 1997, 1996, and 1995) based on operating
results.
F-37
<PAGE>
UNCONSOLIDATED JOINT VENTURES OF THE TAUBMAN REALTY GROUP
LIMITED PARTNERSHIP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
Scheduled principal payments on mortgage debt are as follows as of December
31, 1997:
1998 $303,559
1999 1,727
2000 89,914
2001 52,121
2002 276,135
Thereafter 151,016
--------
Total $874,472
========
Other Notes Payable
Other notes payable at December 31, 1997 and 1996 consists of the following:
1997 1996
---- ----
Notes payable to banks, line of credit,
interest generally at prime (8.5% at
December 31, 1997), maximum borrowings
available up to $7.5 million to fund
tenant loans, allowances and buyouts
and working capital. $ 832 $2,293
Other 52 60
----- ------
$ 884 $2,353
===== ======
Interest Expense
Interest paid on mortgages and other notes payable in 1997, 1996 and 1995, net
of amounts capitalized of $9.4 million, $4.8 million, and $3.5 million,
approximated $48.7 million, $49.9 million, and $55.6 million.
Extraordinary Items
In 1995, Bellevue Associates recognized an extraordinary gain of approximately
$31.4 million (Note 1). The extraordinary charge to income totaling $0.6 million
in 1995 primarily represented a prepayment penalty relating to the
extinguishment of mortgage debt.
Interest Rate Hedging Instruments
Certain of the Unconsolidated Joint Ventures have entered into interest rate
swap and cap agreements to reduce their exposure to changes in the cost of
floating rate debt. The terms of the derivative agreements are equivalent to the
notional amounts, reset dates and rate bases of the underlying hedged debt to
assure the effectiveness of the derivatives in reducing interest rate risk.
These Unconsolidated Joint Ventures are exposed to credit risk in the event of
nonperformance by their counterparties to the agreements, but have no
off-balance sheet risk of loss. These Unconsolidated Joint Ventures anticipate
that their counterparties will be able to fully perform their obligations under
the agreements.
In 1997, Fairfax Associates entered into a treasury lock agreement to
effectively fix the rate on its anticipated refinancing of the mortgage on Fair
Oaks. At December 31, 1997, Fairfax Associates would have paid $4.2 million to
close out the agreement (Note 7).
F-38
<PAGE>
UNCONSOLIDATED JOINT VENTURES OF THE TAUBMAN REALTY GROUP
LIMITED PARTNERSHIP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
Fair Value of Debt Instruments
The estimated fair values of financial instruments at December 31, 1997 and
1996 are as follows:
December 31
---------------------------------------------------
1997 1996
------------------------ ------------------------
Carrying Fair Carrying Fair
Value Value Value Value
------------------------ ------------------------
Mortgage notes payable $874,472 $910,250 $721,809 $757,438
Other notes payable 884 884 2,353 2,353
Interest rate instruments:
In a receivable position 4,787 2,164 4,065 3,263
In a payable position (4,241)
Note 5 - Leases
Shopping center space is leased to tenants and certain anchors pursuant to
lease agreements. Tenant leases typically provide for guaranteed minimum rent,
percentage rent and other charges to cover certain operating costs. Future
minimum rent under operating leases in effect at December 31, 1997 for operating
centers, assuming no new or renegotiated leases or option extensions on anchor
agreements, is summarized as follows:
1998 $177,731
1999 171,664
2000 158,214
2001 141,862
2002 124,068
Thereafter 377,803
Minimum rent received from former related parties was $0.9 million in 1995.
There are no related party amounts in the table above.
One Unconsolidated Joint Venture, as lessee, has a ground lease expiring in
2083. Rental payments under the lease were $1.8 million, $1.7 million and $1.7
million in each of 1997, 1996 and 1995. All of the ground lease rental payments
and scheduled future payments represent minimum rental expense payable to its
Joint Venture Partner.
The following is a schedule of future minimum rental payments required under
the lease:
1998 $ 1,984
1999 1,984
2000 1,984
2001 1,984
2002 2,058
Thereafter 656,417
F-39
<PAGE>
UNCONSOLIDATED JOINT VENTURES OF THE TAUBMAN REALTY GROUP
LIMITED PARTNERSHIP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (Continued)
Capital Lease Obligations
Certain Unconsolidated Joint Ventures have entered into lease agreements for
property improvements with three to five year terms. As of December 31, 1997,
future minimum lease payments for these capital leases are as follows:
1998 $ 1,976
1999 1,976
2000 1,933
2001 1,803
2002 65
-------
Total minimum lease payments $ 7,753
Less amount representing interest (1,244)
-------
Capital lease obligations $ 6,509
=======
Note 6 - Transactions with Affiliates
Charges from the Manager under various written agreements were as follows for
the years ended December 31:
1997 1996 1995
---- ---- ----
Management and leasing services $17,352 $16,720 $18,668
Security and maintenance services 9,468 11,608 15,468
Development services 4,661 5,410 5,708
------- ------- -------
$31,481 $33,738 $39,844
======= ======= =======
TRG is a one-third owner of an entity providing management, leasing, and
development services to Arizona Mills, L.L.C. Charges from this entity were $9.7
million in 1997.
Westfarms previously loaned $2.4 million to one of its Joint Venture Partners
to purchase a portion of a deceased Joint Venture Partner's interest. The note
bears interest at approximately 7.9% and requires monthly principal payments of
$25 thousand, plus accrued interest, with the final payment due in 2001. The
balance at December 31, 1997 and 1996 was $1.3 million and $1.6 million,
respectively. Interest income related to the loan was approximately $0.1 million
in 1997, 1996, and 1995.
Other related party transactions are described in Notes 1 and 5.
Note 7 - Subsequent Event
Subsequent to December 31, 1997, Fairfax Company of Virginia L.L.C.
(successor-in-interest to Fairfax Associates) completed a $140 million, 6.60%,
secured financing maturing in 2008. The net proceeds were used to extinguish an
existing mortgage on Fair Oaks of approximately $39 million and pay a prepayment
penalty of approximately $1.8 million. In addition, proceeds of $5.6 million
were used to close out a treasury lock agreement entered into in 1997 (Note 4),
which resulted in an effective rate on the financing of approximately 7%. The
remaining proceeds were distributed to the owners.
F-40
<PAGE>
<TABLE>
<CAPTION>
Schedule II
UNCONSOLIDATED JOINT VENTURES OF THE TAUBMAN REALTY GROUP
LIMITED PARTNERSHIP
Valuation and Qualifying Accounts
For the years ended December 31, 1997, 1996 and 1995
(in thousands)
Additions
--------------------------
Balance at Charged to Charged to Balance
beginning costs and other at end
of year expenses accounts Write-offs of year
------- -------- -------- ---------- -------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1995:
Allowance for doubtful receivables $ 402 974 0 (1,219) $ 157
===== ===== ==== ====== =====
Year ended December 31, 1996:
Allowance for doubtful receivables $ 157 1,303 0 (1,370) $ 90
===== ===== ==== ====== =====
Year ended December 31, 1997:
Allowance for doubtful receivables $ 90 697 0 (473) $ 314
===== ===== ==== ====== =====
</TABLE>
F-41
<PAGE>
<TABLE>
<CAPTION>
Schedule III
UNCONSOLIDATED JOINT VENTURES OF THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997
(in thousands)
Gross Amount at Which
Initial Cost Carried at Close of Period
to Company Cost -----------------------------------------
---------------------- Capitalized Accumulated Total
Buildings and Subsequent Depreciation Cost Net
Land Improvements to Acquisition Land BI&E Total (A/D) of A/D
---- ------------- -------------- ---- ---- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Taubman Shopping Centers:
Arizona Mills, Tempe, AZ $22,017 $162,406 $ 0 $22,017 $162,406 $184,423 $ 1,371 $183,052
Cherry Creek, Denver, CO 0 103,795 20,457 0 124,252 124,252 34,043 90,209
Fair Oaks, Fairfax, VA 5,167 36,182 10,638 5,167 46,820 51,987 27,736 24,251
Lakeside, Sterling Heights, MI 2,667 21,182 10,110 2,667 31,292 33,959 21,277 12,682
Stamford Town Center,
Stamford, CT 1,977 43,461 11,318 1,977 54,779 56,756 26,950 29,806
Twelve Oaks Mall, Novi, MI 803 28,787 14,786 803 43,573 44,376 23,500 20,876
Westfarms, Farmington, CT 5,287 38,657 111,001 5,287 149,658 154,945 22,418 132,527
Woodfield, Schaumburg, IL 5,264 18,450 94,034 5,264 112,484 117,748 30,552 87,196
Woodland, Grand Rapids, MI 2,367 19,078 9,517 2,367 28,595 30,962 17,812 13,150
Other Properties:
Peripheral land 2,789 0 0 2,789 0 2,789 0 2,789
Construction in Process 0 0 27,443 0 27,443 27,443 0 27,443
------- -------- -------- ------- -------- -------- -------- --------
TOTAL $48,338 $471,998 $309,304 $48,338 $781,302 $829,640 $205,659 $623,981
======= ======== ======== ======= ======== ======== ======== ========
<CAPTION>
Date of
Completion of Depreciable
Encumbrances Construction Life
------------ -------------- -----------
<S> <C> <C> <C>
Taubman Shopping Centers:
Arizona Mills, Tempe, AZ $121,991 1997 50 Years
Cherry Creek, Denver, CO 130,000 1990 40 Years
Fair Oaks, Fairfax, VA 39,119 1980 55 Years
Lakeside, Sterling Heights, MI 88,000 1976 40 Years
Stamford Town Center,
Stamford, CT 55,630 1982 40 Years
Twelve Oaks Mall, Novi, MI 49,940 1977 50 Years
Westfarms, Farmington, CT 151,792 1974 34 Years
Woodfield, Schaumburg, IL 172,000 1971 33 Years
Woodland, Grand Rapids, MI 66,000 1968 33 Years
Other Properties:
Peripheral land 0
Construction in Process 0
--------
TOTAL $874,472
========
The changes in total real estate assets for the three years ended December 31,
1997 are as follows:
1997 1996 1995
---- ---- ----
Balance, beginning of year $638,960 $570,066 $600,877
Improvements 192,888 110,187(1) 48,320
Disposals (2,208) (4,775) (79,131)(2)
Transfers Out (36,518)(3)
-------- -------- --------
Balance, end of year $829,640 $638,960 $570,066
======== ======== ========
The changes in accumulated depreciation and amortization for the three years
ended December 31, 1997 are as follows:
1997 1996 1995
---- ---- ----
Balance, beginning of year $(188,491) $(196,263) $(198,103)
Depreciation for year (18,669) (17,976) (18,378)
Disposals 1,501 4,564 20,218(2)
Transfers Out 21,184(3)
--------- --------- ---------
Balance, end of year $(205,659) $(188,491) $(196,263)
========= ========= =========
(1) Includes TRG's transfer to Arizona Mills of TRG's accumulated
pre-construction costs related to this project.
(2) Includes amounts related to the disposition of Bellevue Center. Subsequent
to October 31, 1995, TRG ceased recognition of Bellevue's operations,
consequently, the accounts of Bellevue are no longer included in these
combined financial statements.
(3) Subsequent to TRG's purchase of the Joint Venture Partner's interest, the
accounts of Fairlane are no longer included in these combined financial
statements.
</TABLE>
F-42
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
By: Taubman Centers, Inc., Its Managing General
Partner
Date: March 27, 1998 By: /s/ ROBERT S. TAUBMAN
-------------------------------------
Robert S. Taubman, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
* Chairman of the Board March 27, 1998
- ---------------------- --------------
A. Alfred Taubman
* Vice Chairman of the Board March 27, 1998
- ---------------------- --------------
Robert C. Larson
/s/ ROBERT S. TAUBMAN President, Chief Executive March 27, 1998
- ---------------------- Officer, and Director --------------
Robert S. Taubman
/s/ LISA A. PAYNE Chief Financial Officer March 27, 1998
- ---------------------- and Director --------------
Lisa A. Payne
/s/ ESTHER R. BLUM Vice President, Controller and March 27, 1998
- ---------------------- Chief Accounting Officer --------------
Esther R. Blum
* Director March 27, 1998
- ---------------------- --------------
Graham Allison
* Director March 27, 1998
- ---------------------- --------------
Claude M. Ballard
* Director March 27, 1998
- ---------------------- --------------
Allan J. Bloostein
* Director March 27, 1998
- ---------------------- --------------
Jerome A. Chazen
* Director March 27, 1998
- ---------------------- --------------
Thomas E. Dobrowski
* Director March 27, 1998
- ---------------------- --------------
S. Parker Gilbert
* Director March 27, 1998
- ---------------------- --------------
W. Allen Reed
*By: /s/ LISA A. PAYNE
-----------------
Lisa A. Payne, as
Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
Exhibit
Number
- ------
2(a) -- Purchase and Sale Agreement By and Between One Federal Street
Joint Venture and The Taubman Realty Group Limited Partnership,
dated July 16, 1997 (Purchase and Sale Agreement) (without
exhibits or schedules, which will be supplementally provided to
the Securities and Exchange Commission upon its request)
(incorporated herein by reference to Exhibit 2(a) filed with the
Registrant's Current Report on Form 8-K dated September 4, 1997).
2(b) -- First Amendment to Purchase and Sale Agreement, dated August 15,
1997 (without exhibits or schedules, which will be supplementally
provided to the Securities and Exchange Commission upon its
request) (incorporated herein by reference to Exhibit 2(b) filed
with the Registrant's Current Report on Form 8-K dated September
4, 1997).
2(c) -- Agreement of Purchase and Sale By and Between The Falls Limited
L.P. and The Taubman Realty Group Limited Partnership, dated
November 5, 1997, as amended by First Amendment to Agreement of
Purchase and Sale entered into on November 6, 1997, and Second
Amendment to Agreement of Purchase and Sale entered into on
November 13, 1997 (without exhibits or schedules, which will be
supplementally provided to the Securities and Exchange Commission
upon its request).
3 -- Form of The Amended and Restated Agreement of Limited Partnership
of The Taubman Realty Group Limited Partnership, as amended
through September 30, 1997 (incorporated herein by reference to
Exhibit 4(c) to TCO's Post-Effective Amendment No. 1 to Form S-3
Registration Statement No. 333-35433).
4(a) -- Amended and Restated Indenture dated as of March 4, 1994 between
The Taubman Realty Group Limited Partnership and Chemical Bank,
as Trustee (incorporated herein by reference to Exhibit 4(a)
filed with Amendment No. 1 to the Registrant's Registration
Statement on Form S-4 (File No. 33-73988) (the "Registration
Statement")).
4(b) -- Officers' Certificate designating the terms of the 7% Notes due
2003 (incorporated herein by reference to Exhibit 4(b) filed with
Amendment No. 1 to the Registration Statement).
4(c) -- Officers' Certificate designating the terms of TRG's 8% Notes due
1999 (incorporated herein by reference to Exhibit 4(f) filed with
the Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1994 (the "1994 Second Quarter Form 10-Q")).
4(d) -- Indenture dated as of July 22, 1994 among Beverly Finance Corp.,
La Cienega Associates, the Borrower, and Morgan Guaranty Trust
Company of New York, as Trustee (incorporated herein by reference
to Exhibit 4(g) filed with the 1994 Second Quarter Form 10-Q).
4(e) -- Deed of Trust, with assignment of Rents, Security Agreement and
Fixture Filing, dated as of July 22, 1994, from La Cienega
Associates, Grantor, to Commonwealth Land Title Company, Trustee,
for the benefit of Morgan Guaranty Trust Company of New York, as
Trustee, Beneficiary (incorporated herein by reference to Exhibit
4(h) filed with the 1994 Second Quarter Form 10-Q).
4(f) -- Medium-Term Notes due June 15, 2002 (incorporated herein by
reference to Exhibit 4(i) filed with the Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1995).
<PAGE>
EXHIBIT INDEX
Exhibit
Number
- ------
4(g) -- Amended and Restated Revolving Loan Agreement dated as of March
5, 1997 (the "Revolving Loan Agreement"), among The Taubman
Realty Group Limited Partnership, as Borrower, Union Bank of
Switzerland, (New York Branch), as a Bank, the other Banks
signatory to the Revolving Loan Agreement, each as a Bank, and
Union Bank of Switzerland (New York Branch), as Administrative
Agent (incorporated herein by reference to Exhibit 4, filed with
the Registrant's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1997 (the "1997 First Quarter Form 10-Q")).
4(h) -- Form of Contribution and Acceptance of Preferred Equity,
Designation of Series A Preferred Equity, and Establishment of
Preferred Rate (incorporated herein by reference to Exhibit 4(d)
to TCO's Post-Effective Amendment No. 1 to Form S-3 Registration
Statement No. 333-35433).
4(i) -- Construction Loan Agreement among Taubman MacArthur Associates
Limited Partnership, as Borrower, and Bayerische Hypotheken - Und
Wechsel - Bank, Aktiengesellschaft, New York Branch and The Other
Banks and Financial Institutions from time to time Parties
hereto, as Lenders and Bayerische Hypotheken - Und Wechsel - Bank
Aktiengesellschaft, New York Branch, as Agent, dated as of
October 28, 1997.
4(j) -- Loan Agreement dated as of November 25, 1997 among The Taubman
Realty Group Limited Partnership, as Borrower, Fleet National
Bank, as a Bank, PNC Bank, National Association, as a Bank, the
other Banks signatory hereto, each as a Bank, and PNC Bank,
National Association, as Administrative Agent.
* 10(a) -- The Taubman Realty Group Limited Partnership 1992 Incentive
Option Plan, as Amended and Restated Effective as of September
30, 1997.
10(b) -- Corporate Services Agreement between Taubman Centers, Inc. and
The Taubman Company Limited Partnership (the "Manager")
(incorporated herein by reference to Exhibit 10(b) filed with the
Registration Statement).
10(c) -- Master Services Agreement between The Taubman Realty Group
Limited Partnership and the Manager (incorporated herein by
reference to Exhibit 10(c) filed with the Registration
Statement).
* 10(d) -- Supplemental Retirement Savings Plan (incorporated herein by
reference to Exhibit 10(e) filed with the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1994).
* 10(e) -- The Taubman Company Long-Term Performance Compensation Plan
(incorporated herein by reference to Exhibit 10(g) filed with the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1995).
* 10(f) -- Employment agreement between The Taubman Company Limited
Partnership and Lisa A. Payne (incorporated herein by reference
to Exhibit 10 filed with the 1997 First Quarter Form 10-Q).
* 10(g) -- Amended and Restated Continuing Offer, dated as of September 30,
1997 (incorporated herein by reference to Exhibit 10 filed with
the Registrant's 1997 Third Quarter Report on Form 10-Q).
12 -- Statement Re: Computation of TRG's Ratios of Earnings to Fixed
Charges and Preferred Distributions.
21 -- Subsidiaries of The Taubman Realty Group Limited Partnership.
<PAGE>
EXHIBIT INDEX
Exhibit
Number
- ------
23 -- Consent of Deloitte & Touche LLP.
24 -- Powers of Attorney.
27 -- Financial Data Schedule.
- ------------------------
* A management contract or compensatory plan or arrangement required to be
filed pursuant to Item 14(c) of Form 10-K.
AGREEMENT OF PURCHASE AND SALE
THE FALLS SHOPPING CENTER
MIAMI, FLORIDA
By and Between
THE FALLS PARTNERS LIMITED L.P.,
a Delaware limited partnership,
Seller
and
THE TAUBMAN REALTY GROUP
LIMITED PARTNERSHIP
a Delaware limited partnership,
Purchaser
DATED: November 5, 1997
Form Date 5/06/97
<PAGE>
AGREEMENT OF PURCHASE AND SALE
THE FALLS SHOPPING CENTER
MIAMI, FLORIDA
THIS AGREEMENT OF PURCHASE AND SALE is made and entered into this 5th day
of November, 1997 by and between THE FALLS PARTNERS LIMITED L.P., a Delaware
limited partnership ("Seller"), having an address of c/o Heitman Capital
Management Corporation, 180 North LaSalle Street, Suite 3600, Chicago, Illinois
60601-6789, Attention: Howard J. Edelman; facsimile number (312) 541- 6738, and
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP, a Delaware limited partnership
("Purchaser"), having an address of c/o The Taubman Company, 200 East Long Lake
Road, Bloomfield Hills, Michigan 48304, Attention: Cordell A. Lietz; facsimile
number (248) 258-7297.
RECITALS
Seller is the owner of (i) a parcel of real estate located in Miami,
Florida, legally described on Exhibit A attached hereto together with all
buildings and improvements situated thereon (excluding any owned by tenants
thereof) and all of Seller's right, title and interest in and to all tenements,
hereditaments, appurtenances, and rights used in connection therewith, rights,
easements and rights-of-way incident thereto and means of access thereto,
including strips and gores adjoining or adjacent thereto together with all and
singular the rights and appurtenances whatsoever, in anyway belonging, relating
or appertaining to such parcel of real estate (collectively, the "Real
Property");
(ii) All of the fixtures, appliances, personalty and equipment situated on
or about the Real Property and owned by Seller or the property manager and used
in connection with the operation, maintenance or management of the Real
Property, including, without limitation, those items identified on Schedule 1
attached hereto (collectively, the "Personal Property");
(iii) All of the interests of the landlord under all of the leases,
license agreements, kiosk agreements and other occupancy agreements and
modifications and amendments thereto relating to the Real Property and described
on Schedule 2, attached hereto together with any modifications thereof or new
leases hereafter entered into, to the extent permitted herein (collectively, the
"Leases");
(iv) All of the site plan approvals and development rights (collectively,
the "Development Rights");
-1-
<PAGE>
(v) All contracts and service agreements identified on Schedule 3 attached
hereto, together with any modifications thereof or new contracts hereafter
entered into, to the extent permitted herein (collectively, the "Service
Contracts");
(vi) All of Seller's right, title and interest in and to all tenant lists,
telephone exchange numbers, business licenses relating to The Falls Shopping
Center, the name "The Falls Shopping Center" and "The Falls", (specifically
excluding, however, the names "Heitman"; "Heitman Properties of Florida Ltd.;
"Heitman Capital Management Corporation") the advertising materials, surveys,
soil and topographical and traffic studies, plans and specifications relating to
the Real Property; consents, authorizations, variances, waivers, licenses,
permits, certificates of occupancy and approvals from any Federal, state,
courts, municipal or other governmental or quasi-governmental agency,
department, board, commission, bureau or other entity or instrumentality in
respect of the Real Property or the Personal Property; development rights
related to the Property, warranties, guarantees and other assurances and all
other rights of Seller related to the Real Property (collectively, the
"Intangible Property"). Notwithstanding anything in this Agreement to the
contrary, Seller makes no representation or warranty that any of the Intangible
Property has been registered or otherwise filed with any governmental or
quasi-governmental authority.
The Real Property, Personal Property, the Leases, the Development Rights,
the Service Contracts and the Intangible Property are hereafter collectively
referred to as the "Property". The Property is commonly known as The Falls
Shopping Center contains a total of approximately 823,650 square feet of
leasable floor area ("GLA"), including approximately (i) 350,250 square feet of
in-line mall stores and kiosks; (ii) three developed out-parcel sites leased to
Merrill Lynch, (which includes the lease of a building owned by Seller), Hops
Brewery (which owns its own building) and Sun Bank (which owns its own building)
(collectively, the "Outlot Tenants"); (iii) two leased anchor parcels consisting
of an approximate 225,000 square foot Bloomingdale's store and an approximate
230,000 square foot Macy's store (Bloomingdale's and Macy's are hereinafter
collectively referred to as the "Anchor Tenants"); and three unimproved parcels
of land located south of the canal.
Subject to and on the terms and provisions of and for the considerations
set forth in this Agreement, Seller has agreed to sell, and Purchaser has agreed
to buy, the Property.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Definitions. As used in this Agreement, the following terms have the
following meanings:
-2-
<PAGE>
Closing Date. As agreed between Seller and Purchaser but no later than
November 20, 1997.
Due Diligence Period. The period commencing on the date hereof and ending
on November 6, 1997.
Escrow Company. Chicago Title Insurance Company.
Offering Materials. That certain brochure prepared by Eastdil Realty
Company L.L.C., dated August 1997.
Title Company. Chicago Title Insurance Company.
Tenants. As used in this Agreement, the term "Tenants" shall include the
in-line mall and kiosk tenants, the Anchor Tenants and the Outlot Tenants
under the Leases.
2. Sale; Purchase Price.
2.1 Subject to the terms and provisions hereof, Seller agrees to sell and
convey to Purchaser, and Purchaser agrees to purchase from Seller the Property
(the "Closing").
2.2 The total purchase price (hereinafter called the "Purchase Price")
to be paid by Purchaser to Seller for the Property shall be One Hundred-Fifty
Eight Million Five Hundred Thousand and no/100 Dollars ($158,500,000.00). The
Purchase Price shall be payable in the following manner:
(a) Earnest Money. Purchaser shall, prior to the expiration of
the Due Diligence Period deposit with the Title Company, as escrow agent, the
amount of Two Million Five Hundred Thousand and 00/100 Dollars ($2,500,000.00)
(hereinafter called the "Earnest Money") which Earnest Money shall be in the
form of a wire transfer of immediately available United States of America funds
or at Purchaser's option, in the form of an irrevocable letter of credit from a
bank and in a form both acceptable to Seller in Seller's sole discretion and
with an expiration date of not earlier than March 31, 1998 (the "Letter of
Credit"). The Earnest Money shall be held and disbursed by the Title Company
acting as escrow agent pursuant to the Earnest Money Escrow Agreement in the
form of Exhibit B attached hereto which the parties have executed simultaneously
with this Agreement. The Earnest Money shall be invested in a federally issued
or insured interest bearing instrument with any interest accruing thereon being
deemed part of the Earnest Money and shall be paid to the party to which the
Earnest Money is paid pursuant to the
-3-
<PAGE>
provisions hereof, unless it is applied to the Purchase Price. If the sale
hereunder is consummated in accordance with the terms hereof, the Earnest Money
and any interest thereon shall be applied to the Purchase Price to be paid by
Purchaser at the Closing. In the event of a default hereunder by Purchaser or
Seller, the Earnest Money shall be applied as provided herein.
(b) Cash Balance. Purchaser shall pay the balance of the Purchase
Price, subject to the prorations described in Section 5 below, in cash (the
"Cash Balance") by wire transfer of immediately available United States of
America funds to the Title Company for payment to Seller, in accordance with the
terms and conditions of this Agreement on the Closing Date. If the Cash Balance
and all other documents required to be delivered by Purchaser to close are
received by the Escrow Company on the Closing Date but not prior to noon on the
Closing Date, then the Closing shall take place on the following business day
and the Cash Balance shall be held by the Escrow Company for the account of
Purchaser in an interest bearing account until the next business day at which
time the Cash Balance shall be immediately disbursed to Seller, all interest on
the Cash Balance shall be immediately disbursed to Purchaser, and the Proration
Date shall be deemed to be the immediately preceding day. Notwithstanding the
immediately previous sentence, if the Cash Balance is received by the Escrow
Company later than noon on the Closing Date, Seller shall have the right to
waive this paragraph and receive the Cash Balance on the Closing Date without
changing the Proration Date.
3. Conditions Precedent. In the event any of the conditions set forth in
Sections 3.2(b), 3.3, 3.4 or 3.5 below shall not have been fulfilled, accepted
or deemed accepted or waived as provided herein on or before the applicable
dates specified herein, Purchaser shall have the right to terminate this
Agreement by giving written notice thereof to Seller on or before the respective
dates specified herein, and thereupon all Earnest Money shall be refunded to
Purchaser and neither party shall have any further rights or obligations
hereunder, except for the Surviving Obligations (as hereinafter defined).
3.1 Seller's Deliveries. Seller has delivered or made available to
Purchaser complete copies of the following items which are in Seller's
possession:
(a) All available plans and specifications pertaining to the
Property, including a survey prepared by Fortin, Leavy, Sikes, Inc., dated
February 20, 1997, plotted September 24, 1997 (the "Existing Survey").
(b) All financial and operating statements for the years 1994,
1995 and 1996, and year to date 1997, and all other related documentary support
pertaining to the Property;
-4-
<PAGE>
(c) The Leases;
(d) copies of all Lease Proposals (as defined in Section 15(b))
presently outstanding listed on Schedule 4 attached hereto;
(e) Property tax bills for the current and three (3) most recent
prior years and a current statement of assessed value;
(f) A current preliminary title report together with copies of
all documents referred to as exceptions to title except for existing loan
documents;
(g) copies of all the Service Contracts and any proposed service
or maintenance contracts currently being negotiated;
(h) Any inspections or studies, including without limitation,
feasibility, marketing, soils, asbestos, environmental and engineering studies;
(i) All reciprocal easement and/or operating agreement(s) if any
(including supplemental agreements if any), or other such related documents as
deemed pertinent by Purchaser;
(j) Tenant files and financial data on all tenants as is
available;
(k) Tenant sales report for 1994, 1995 and 1996, and year to date
1997;
(l) Tenant expense recapture calculation worksheets and resulting
billings for 1994, 1995, 1996 and 1997;
(m) A schedule of all significant suits, actions, litigation,
administrative proceedings or other governmental investigations or inquiries,
pending or threatened, affecting businesses or operations of Seller or its
affiliates with respect to the Property; and
(n) Any information regarding any ownership by Seller of any
Tenants of the Property.
Seller shall provide to Purchaser any documents described in this Section
3.1 and first coming into Seller's possession or produced by Seller after the
initial delivery and continue to provide the same during the pendency of this
Agreement.
-5-
<PAGE>
In the event this Agreement terminates for any reason, Purchaser shall
immediately return to Seller all information delivered by Seller or Seller's
agent(s) to Purchaser or Purchaser's agent(s). The foregoing provision shall
survive termination of this Agreement.
3.2 Due Diligence. Purchaser and its representatives shall be permitted to
enter upon the Property at any reasonable time and from time to time before the
Closing Date to examine, inspect and investigate the Property as well as all
records and other documentation provided by Seller or located at the Property
(collectively, "Due Diligence"). The Due Diligence shall be subject to the
terms, conditions and limitations set forth in this Section 3.2.
(a) Purchaser shall have a right to enter upon the Property for
the purpose of conducting its Due Diligence provided that in each such instance
(i) Purchaser notifies Seller of its intent to enter the Property to conduct its
Due Diligence not less than 48 hours prior to such entry; (ii) the date and
approximate time period are scheduled with Seller; and (iii) Purchaser is in
full compliance with the insurance requirements set forth in Section 3.2(f)
hereof. At Seller's election, a representative of Seller shall be present during
any entry by Purchaser or its representatives upon the Property for conducting
its Due Diligence. Purchaser shall take all necessary actions to insure that
neither it nor any of its representatives interfere with the tenants or ongoing
operations occurring at the Property. Purchaser shall not cause or permit any
mechanic liens, materialmen's liens or other liens to be filed against the
Property as a result of its Due Diligence.
(b) Purchaser shall have through the last day of the Due
Diligence Period in which to conduct its Due Diligence and, in Purchaser's sole
discretion, to determine whether the Property is acceptable to Purchaser. If
during the Due Diligence Period, Purchaser becomes aware of any problem or
defect in the Property or any other aspect of the Property which Purchaser
determines makes the Property unsuitable to Purchaser, Purchaser may terminate
this Agreement by giving written notice of termination to Seller on or before
the last day of the Due Diligence Period. If Purchaser does not timely deliver
the Earnest Money, this Agreement shall automatically terminate. In the event of
such termination, neither party shall have any further obligations to the other
party hereunder, except for the Surviving Obligations.
(c) Purchaser shall, at least thirty-one (31) days prior to the
Closing Date, notify Seller in writing requesting termination of any or all of
the Service Contracts, which are noted on Schedule 2 as being terminable upon
thirty (30) days notice, that Purchaser does not elect to assume. If Purchaser
does not timely give notice requesting termination of a Service Contract,
Purchaser shall be
-6-
<PAGE>
deemed to have accepted the assumption of such Service Contract. Purchaser shall
assume all other Service Contracts in the manner provided herein.
(d) Purchaser shall have the right to conduct, at its sole cost
and expense, any inspections, studies or tests that Purchaser deems appropriate
in determining the condition of the Property, provided, however, Purchaser is
not permitted to perform any intrusive testing (except for limited asbestos
sampling to be done as part of Purchaser's Phase I site assessment), including,
without limitation, a Phase II environmental assessment or boring, without (i)
submitting to Seller the scope and inspections for such testing; and (ii)
obtaining the prior written consent of Seller, which consent shall not be
unreasonably withheld.
(e) Purchaser agrees and covenants with Seller not to disclose to
any third party (other than lenders, accountants, attorneys and other
professionals and consultants in connection with the transaction contemplated
herein) prior to Closing without Seller's prior written consent, unless
Purchaser is obligated by New York Stock Exchanges rules or regulations or by
law to make such disclosure, any of the reports or any other documentation or
information obtained by Purchaser which relates to the Property or Seller in any
way, all of which shall be used by Purchaser and its agents solely in connection
with the transaction contemplated hereby. In the event that this Agreement is
terminated, this subsection 3.2(e) shall survive termination.
(f) Purchaser agrees to indemnify, defend and hold Seller and its
partners, trustees, beneficiaries, shareholders, members, managers, advisors and
other agents and their respective employees, officers, directors and
shareholders (the "Indemnified Parties") harmless from and against any and all
claims, losses, damages, costs and expense (including, without limitation,
reasonable attorneys' fees and court costs) suffered or incurred by any of the
Indemnified Parties as a result of any activities of Purchaser (including
activities of any of Purchaser's employees, consultants, contractors or other
agents) relating to the Property, including, without limitation, mechanics'
liens, damage to the Property, injury to persons or property resulting from such
activities, and in the event that the Property is disturbed or altered in any
way as a result of such activities, Purchaser shall promptly restore the
Property to its condition existing prior to the commencement of such activities
which disturb or alter the Property. The foregoing indemnity does not include
any claims, losses, damages, costs and expenses (including, without limitation,
reasonable attorneys' fees and court costs) resulting from the mere discovery of
information on or a condition at the Property. Furthermore, Purchaser agrees to
maintain and have in effect workers' compensation insurance, with statutory
limits of coverage, and commercial general liability insurance with (i) all risk
coverage, (ii) waiver of subrogation, and (iii) limits of not less than One
Million and
-7-
<PAGE>
00/100 ($1,000,000.00) for personal injury, including bodily injury and death,
and property damage. Such insurance shall name Heitman Capital Management
Corporation ("HCMC") and Heitman Properties of Florida Ltd. as additional
insureds. Purchaser shall deliver to Seller a copy of the certificate of
insurance effectuating the insurance required hereunder prior to the
commencement of such activities which certificate shall provide that such
insurance shall not be terminated or modified without at least thirty (30) days'
prior written notice to Seller.
(g) Purchaser acknowledges and agrees that it shall have no right
to review or inspect any of the following: (i) internal memoranda,
correspondence, analyses, documents or reports prepared by or for Seller in
connection with this Agreement or in connection with the transaction
contemplated by this Agreement, (ii) communications between Seller and HCMC
(except as may be listed in paragraph 3.1 above), (iii) appraisals, assessments
or other valuations of the Property in the possession of Seller or HCMC, and
(iv) management agreements.
(h) Sections 3.2(e) and 3.2(f) and such other provisions in this
Agreement which expressly survive Closing or termination of this Agreement shall
survive Closing or any termination of this Agreement (collectively, the
"Surviving Obligations").
3.3 Title and Survey. Seller shall, at Seller's sole cost and expense,
obtain and deliver to Purchaser for Purchaser's review a commitment for a
standard owner's policy of title insurance along with a copy of each instrument
listed as an exception thereon other than Seller's debt instruments (the "Title
Commitment") on the Real Property issued by the Title Company. Seller has
delivered to Purchaser a copy of the Existing Survey which Purchaser shall
reimburse Seller for as provided in Section 4 hereof. During the Due Diligence
Period, Seller shall obtain from the Title Company at Seller's sole cost and
expense a survey endorsement and, if and to the extent available, contiguity,
fairway and PUD endorsements. Purchaser may elect to receive an update to the
Existing Survey (the "Updated Survey") by notifying Seller of such election in
writing prior to November 6, 1997. If Purchaser so elects, Seller shall, at
Purchaser's sole cost and expense, obtain and deliver to Purchaser for
Purchaser's review the Updated Survey. Purchaser shall have until the later of
November 6, 1997 and the date which is fifteen days after receipt of the Title
Commitment and Existing Survey (such date being referred to as the "Title Review
Date") for examination of Title Commitment and Existing Survey and the making of
any objections thereto, said objections to be made in writing and delivered to
Seller on or before the end of the Title Review Date. If Purchaser shall fail to
make any objections on or before the Title Review Date, Purchaser shall be
deemed to have accepted all exceptions to the Title Commitment shown on Schedule
B, Section II,
-8-
<PAGE>
except for exceptions 1, 2, 3 and 4, and the form and substance of the Existing
Survey and all matters shown thereon; all such exceptions and matters shall be
included in the term "Permitted Exceptions" as used herein. In the event
Purchaser elects to receive the Updated Survey, then Purchaser shall have until
the Title Review Date for examination of the Updated Survey and the making of
objections to matters shown thereon, such objections to be made in writing and
delivered to Seller on or before the expiration of the Title Review Date. If
Purchaser shall fail to make any such objections to the Updated Survey on or
before such date, Purchaser shall be deemed to have accepted the form and
substance of the Updated Survey and all matters shown thereon; all such
exceptions and matters shall be included as Permitted Exceptions. If any
objections to (i) the Title Commitment or Existing Survey or exceptions to title
are made within the Title Review Period, or (ii) the Updated Survey are made
before the date specified above, then Seller shall have the right, but not the
obligation except as hereafter provided, to cure (by removal, endorsement or
otherwise) such objections on or before the Closing Date in a manner reasonably
acceptable to Purchaser. If the objections are not cured by Seller no later than
five (5) days before the scheduled Closing Date, then Purchaser may as its only
option, elect to either: (i) waive such objection and consummate the transaction
contemplated by this Agreement; or (ii) terminate this Agreement, in which event
the Earnest Money shall be returned to Purchaser and neither party shall have
any further obligations to the other party except for the Surviving Obligations.
Notwithstanding anything to the contrary contained in this Agreement, Seller
shall be obligated to remove (or cause the Title Company to affirmatively insure
over in a manner reasonably acceptable to Purchaser) (i) any deeds of trust,
mortgages, and related loan documents securing any financing obtained by Seller,
including, without limitation, the existing loan with Continental Bank, N.A.
(the "Existing Loan"), (ii) any mechanic's or materialmen's liens relating to
work done by or on behalf of Seller and (iii) any tax or judgment liens against
Seller. Seller agrees to use best efforts to satisfy all of the requirements set
forth in Schedule B - Section 1 of the Commitment at or prior to the Closing
Date.
3.4 Estoppels. Seller shall deliver to Purchaser, no later than five (5)
days prior to the Closing Date, (i) estoppel certificates in substance
reasonably satisfactory to Purchaser, in the form of Exhibit C attached hereto
or in the form of estoppel required under such tenant's lease, from in-line mall
tenants and kiosks leasing at least eighty percent (80%) of the in-line and
kiosk space excluding United Artists and except for those tenants noted on the
last page of Schedule 2; (ii) estoppel certificates in substance reasonably
satisfactory to Purchaser from the Anchor Tenants in the form of estoppel
required under such Anchor Tenants' lease or in such form as such Anchor Tenant
traditionally executes, including confirmation that all construction work has
been completed and all construction allowances paid; (iii) estoppel certificates
in substance reasonably satisfactory to Purchaser from the
-9-
<PAGE>
Outlot Tenants in the form of estoppel required under such Outlot Tenants'
lease, and (iv) estoppel certificate in substance reasonably satisfactory to
Purchaser from United Artists TGI Fridays and Los Ranchos in a form required
under their leases; provided that, with respect to Seller's delivery of the TGI
Fridays and Los Ranchos estoppels, notwithstanding anything contained in this
Agreement to the contrary, it shall not be a condition precedent to Purchasers
obligations under this Agreement unless Purchaser has granted all approvals
required in connection with the TGI Fridays and Los Ranchos leases.
3.5 Purchaser's Partnership Committee Approval. The obligations of
Purchaser under this Agreement are contingent upon obtaining the approval of its
partnership committee ("Committee Approval"). Not later than November 6, 1997,
Purchaser shall deliver to Seller written notice of Purchaser's receipt of such
approval or lack thereof. If no such notice is received by Seller by such date,
then Purchaser shall be deemed to have not obtained such approval and this
Agreement shall automatically terminate, and thereupon all Earnest Money, if
any, shall be refunded to Purchaser and neither party shall have any further
rights or obligations hereunder, except for the Surviving Obligations.
4. Closing; Conditions; Deliveries.
4.1 Time, Place and Manner of Closing. The Closing shall be held on the
Closing Date in the Miami, Florida offices of the Title Company or at any
location mutually acceptable to the parties.
4.2 Condition to Parties' Obligation to Close. In addition to all other
conditions set forth herein, the obligation of Seller, on the one hand, and
Purchaser, on the other hand, to consummate the transaction contemplated
hereunder shall be contingent upon the following:
(a) The other party's representations and warranties contained
herein shall be true and correct in all material respects as of the date of this
Agreement and the Closing Date;
(b) As of the Closing Date, the other party shall have performed
its obligations hereunder in all material respects and all deliveries to be made
at Closing have been tendered;
(c) As of the Closing Date, there shall exist no pending action,
suit or proceeding with respect to the other party before or by any court or
administrative agency which seeks to restrain or prohibit, or to obtain damages
or
-10-
<PAGE>
a discovery order with respect to, this Agreement or the consummation of the
transactions contemplated hereby; and
If the condition set forth in paragraphs (a) or (b) above are not
satisfied on the Closing Date, the party who is not in breach or default shall
have the right to terminate this Agreement by written notice to the other party
in which case this Agreement shall terminate and be of no further force or
effect whatsoever except for the Surviving Obligations and except that such
non-defaulting party shall have the rights and remedies available to such party
as provided herein.
In addition, the obligations of Purchaser to consummate the transaction
contemplated hereunder shall be contingent upon the following.
(1) There shall have been no "Material Adverse Change" on or prior to
the Closing Date. As used herein, "Material Adverse Change" shall
mean any changes with respect to The Falls Shopping Center which,
individually or in the aggregate, are material and adverse and
which first arise after five (5) days before the expiration of
the Due Diligence Period, including, without limitation, a change
in laws which impose a material additional cost or liability upon
the Property or Purchaser, a material change in the environmental
condition of the Property or the bankruptcy, closing or
announcement of an intent to close of any Anchor Tenant or United
Artists.
(2) The Title Company issuing to Purchaser on the Closing Date the
policy of title insurance or marked-up commitment for title
insurance in the face amount of the Purchase Price which (i)
shows title to the Real Property to be vested in Purchaser, (ii)
shows the Permitted Exceptions to be the only exceptions to title
and (iii) is otherwise in the form and with such endorsements as
to which Purchaser and the Title Company agreed upon prior to the
end of the Due Diligence Period.
If either of the conditions set forth in paragraphs (1) or (2) above are
not satisfied on the Closing Date, Purchaser shall have the right to terminate
this Agreement by written notice to Seller in which case this Agreement shall
terminate, and thereupon all Earnest Money shall be refunded to Purchaser and
neither party shall have any further rights or obligations hereunder except for
the Surviving Obligations.
4.3 Deliveries. At Closing each party shall execute and deliver to the
other and/or the Title Company the following documents:
-11-
<PAGE>
(a) Seller shall deliver to Purchaser and/or the Title Company:
(i) a special warranty deed (the "Deed") to the Property in
recordable form, duly executed by Seller and acknowledged and the same form as
set forth in Exhibit E attached hereto, conveying to Purchaser title to the Real
Property, subject only to the Permitted Exceptions;
(ii) a bill of sale duly executed by Seller and in the same
form as set forth in Exhibit F attached hereto, conveying to Purchaser title to
all personal property owned by Seller and located at the Real Property, if any;
(iii) an assignment to Purchaser of the Leases duly executed
by Seller and in the same form as set forth in Exhibit G attached hereto;
(iv) an assignment to Purchaser of the Service Contracts being
assumed hereunder (to the extent assignment is not prohibited by their terms)
duly executed by Seller and in the same form as set forth in Exhibit H attached
hereto;
(v) a general assignment to Purchaser of the licenses and
permits affecting the Property, the trade names "The Falls" and "The Falls
Shopping Center", the Intangible Property and Seller's right with respect to the
merchant's association and/or promotional funds, if any and any existing
guarantees and warranties under construction contracts, if any, (all to the
extent assignment is not prohibited by their terms) duly executed by Seller and
in the same form as set forth in Exhibit I attached hereto;
(vi) a non-foreign transferor certification pursuant to
Section 1445 of the Internal Revenue Code and any similar provisions of
applicable state law, in the same form as set forth on Exhibit J attached hereto
(the "Affidavit"); and
(vii) a certified resolution of Seller signed by all of the
general partners of Seller certifying that Seller has the legal power, right and
authority to consummate the sale of the Property, and that HCMC is authorized to
sign the Closing Documents, and a certified resolution of HCMC and an incumbency
certificate authorizing the person and entity who signed this Agreement and who
sign the Closing documents to sign the Closing Documents;
(viii) All documents and instruments required by the Title
Company to satisfy the requirements of the title commitment and issue the policy
pursuant thereto to Purchaser.
-12-
<PAGE>
(ix) Evidence of termination of the existing management
agreement and release by property manager from HCMC and Heitman Properties of
Florida, Ltd.;
(x) The originals (or if unavailable, a copy certified by
Seller as true and correct) of all of the Leases and Service Contracts (which
items may be delivered by Seller by leaving the same at the Property);
(xi) To the extent in the possession or control of or
reasonably available to Seller, the original (or, if originals are unavailable,
copies) of all of the Intangible Property (which items may be delivered by
Seller by leaving the same at the Property);
(xii) To the extent in the possession or control of or
reasonably available to Seller, all plans and specifications, keys, records and
all leasing files and correspondence files relating to and located at the
Property (which items may be delivered by Seller by leaving the same at the
Property);
(xiii) Duly transferred security deposits which are held in
the form of letters of credit;
(xiv) Copies of the most recent aged account receivable trial
balance, rent roll and operating statements; and
(xv) A release of any claim against the Property by Eastdil
Realty Company, L.L.C., broker for Seller.
(b) Purchaser shall deliver to Seller or the Title Company:
(i) the Cash Balance, by wire transfer, as provided in Section
2.2 hereof;
(ii) an assumption duly executed by the Purchaser of the
assignments described in Sections 4.3(a)(iii), (iv) and (v); and
(iii) a certified resolution of Purchaser's partnership
committee certifying that Purchaser has the legal power, right and authority to
consummate the purchase of the Property and authorizing signatories to execute
the Closing Documents and a certified incumbency certificate authorizing the
person and entity who signed this Agreement and who sign the Closing Documents
to sign such documents.
-13-
<PAGE>
(c) Seller and Purchaser shall jointly deliver to the Title Company:
(i) A closing statement;
(ii) All transfer declarations or similar documentation
required by law;
(iii) Letters to the tenants of the Property in the form of
Exhibit K attached hereto (Seller shall execute separate letters for the Anchor
Tenants, Outlot Tenants and United Artists and, at Purchaser's request, for any
other tenant; provided that Purchaser prepares and delivers any such notice to
Seller for its review and approval (which shall not be unreasonably withheld)
not less than five (5) days prior to Closing); and
(iv) Notices in substantially the form attached hereto as
Exhibit L attached hereto to the other party to each Service Contract assumed by
Purchaser pursuant to Section 3.2(c) of this Agreement.
(d) The Title Company shall deliver to Purchaser an initialed
mark-up of the Title Commitment, extending the effective date to the Closing
Date, insuring Purchaser as owner of the Real Property, and removing all
exceptions other than Permitted Exceptions.
4.4 Permitted Termination. So long as a party is not in default hereunder,
if any condition to such party's obligation to proceed with the Closing
hereunder has not been satisfied or waived as of the Closing Date or such
earlier date as provided herein, such party may, in its sole discretion,
terminate this Agreement by delivering written notice to the other party before
the Closing Date, or elect to close, notwithstanding the non-satisfaction of
such condition, in which event such party shall be deemed to have waived any
such condition.
5. Prorations. All items of income and expense shall be paid, prorated or
adjusted as of the close of business on the day prior to the Closing Date (the
"Proration Date") in the manner hereinafter set forth:
5.1 Purchaser shall be credited with (i) the amount of (A) all rents and
(B) all expense contributions, real estate tax contributions, and other
reimbursements from tenants ("Tenant Contributions") received by Seller and
attributable to any month commencing after the Closing Date and (ii) all
unapplied cash security deposits held by Seller and which were made by tenants
under all leases of the Real Property in effect as of the Closing Date, and
(iii) all unfunded tenant allowances and other payments (including leasing
commissions for leases listed on Schedule 6) to
-14-
<PAGE>
be made by Seller and the cost of all construction or tenant improvement work to
be done by Seller under all of the Leases and those proposed leases listed on
Schedule 6 (whether or not such leases have been entered into as of the Closing
Date), except to the extent set forth (x) specifically listed on Schedule 4; or
(y) in the Proposals approved by Purchaser or deemed approved by Purchaser as
provided in subsection 15(b) hereof.
5.2 All rents and Tenant Contributions and other income from the Property
for the month of Closing shall be prorated between Purchaser and Seller based
upon their respective days of ownership for such month in which the Closing
occurs. Neither Purchaser nor Seller shall receive credit at Closing for any
payments of rental obligations due but not paid as of the Proration Date. At the
time of the final calculation and collection from tenants of Tenant
Contributions for 1997, whether in the nature of a reconciliation payment or
full payment, in arrears, there shall be a reproration between Purchaser and
Seller as to the Tenant Contributions. Such reproration shall not be made on the
basis of a per diem method of allocation, but shall instead be apportioned
between Seller and Purchaser on the basis of the relative share of actual
expenses in question incurred and paid by Seller and Purchaser during the lease
year in question. Seller covenants to provide Purchaser with any information
necessary to finalize such calculation. Purchaser covenants to bill tenants for
amounts due from tenants attributable to periods prior to closing and diligently
pursue collections from tenants and, as collected, to timely deliver to Seller
reproration amounts due Seller.
5.3 Percentage rent shall be prorated between Purchaser and Seller by
utilizing the percentage rent payable for such lease year based upon the actual
days of ownership of the Property during such tenant's lease year. There shall
be no adjustment for percentage rent payments for a particular tenant until
after the receipt of any percentage rent payments made by such tenant.
5.4 Any amounts received from tenants after Closing shall be applied on a
tenant by tenant basis in the following order: (i) first on account of any
amount currently due Purchaser from such tenant(s); (ii) next, on account of any
amount due Seller from such tenant(s) for the period up to and including the
Proration Date and (iii) finally, any balance then remaining to Purchaser.
Seller retains the right to sue tenants after Closing for any delinquent
payments or other amounts owed to Seller, except for actions or proceedings
affecting a tenant's rights of possession or landlord liens. However, Seller
will not exercise any such rights or remedies unless such delinquent rents have
not been collected by Purchaser and paid to Seller within six (6) months after
the Closing Date.
-15-
<PAGE>
5.5 Operating expenses, including, without limitation, permits, licenses,
membership dues, and any other prepaid expenses, shall be prorated between
Purchaser and Seller on an accrual basis based upon the actual days of their
respective ownership of the Property utilizing the actual expenses or reasonable
estimates, subject to reproration when the actual amounts are known.
5.6 Real estate taxes shall be prorated between Seller and Purchaser based
upon the actual days of ownership of the parties for the year in which Closing
occurs utilizing the most recent ascertainable tax bill(s). Seller and Purchaser
agree to reprorate said real estate taxes upon Purchaser's receipt of the actual
tax bill for the tax year in question, if any. Seller reserves the right to meet
with governmental officials and to contest any reassessment governing or
affecting Seller's obligations under this Section, with Purchaser's prior
written approval, which will not be unreasonably withheld. Seller shall retain
all rights with respect to any refund of taxes applicable to any period prior to
the Closing Date, subject to the rights of tenants.
5.7 Except for utilities billed directly to Tenants, utilities shall be
prorated as of the Proration Date based upon either meter readings on the
Proration Date or the prior month's actual invoices. Seller shall be credited
with any unapplied utility deposit in effect as of the Closing Date to the
extent such deposit is assignable and actually paid to Purchaser.
5.8 Purchaser shall be responsible for and pay for all costs in connection
with (i) Proposals listed on Schedule 4 attached hereto, to the extent such
amounts are identified on Schedule 4, and (ii) any Proposal which Purchaser
approved, or is deemed to have approved as provided in Section 15(b) herein to
the extent such amounts are identified in such Proposals; provided that no
commissions shall be paid to HCMC or any of its affiliates.
5.9 All insurance policies and property management agreements shall be
terminated as of the Closing Date and there shall be no proration with respect
to these items.
5.10 Purchaser shall be credited with the contractor's security deposits
listed on Schedule 1 to the General Assignment attached as Exhibit I.
In the event any prorations or computations made under this Section are based on
estimates or prove to be incorrect, then either party shall be entitled to an
adjustment to correct the same, provided that it makes written demand on the
party from whom it is entitled to such adjustment within one hundred and twenty
days after the end of the current calendar year or, in the case of percentage
rent adjustments, from the
-16-
<PAGE>
end of the applicable lease year. Purchaser shall indemnify and hold Seller
harmless from and against any and all claims for which Purchaser received
credits pursuant to this Section 5. The indemnity set forth in the immediately
preceding sentence and the covenants contained in this Section 5 shall survive
Closing.
6. Seller's Representations, Warranties and Covenants. Seller hereby represents,
warrants and covenants as follows:
6.1 Power. Seller has the legal power, right and authority to enter into
this Agreement and the instruments referenced herein and to consummate the
transactions contemplated hereby.
6.2 Requisite Action. All requisite action (corporate, trust, partnership
or otherwise) has been taken by Seller in connection with entering into this
Agreement and the instruments referenced herein and the consummation of the
transactions contemplated hereby. No consent of any partner, shareholder,
member, creditor, investor, judicial or administrative body, authority or other
party is required which has not been obtained to permit Seller to enter into
this Agreement and consummate the transaction contemplated hereby.
6.3 Authority. The individuals executing this Agreement and the
instruments referenced herein on behalf of Seller have the legal power, right
and actual authority to bind Seller to the terms and conditions hereof and
thereof.
6.4 Validity. This Agreement and all documents required hereby to be
executed by Seller are and shall be valid, legally binding obligations of and
enforceable against Seller in accordance with their terms.
6.5 Conflicts. None of the execution and delivery of this Agreement and
documents referenced herein, the incurrence of the obligations set forth herein,
the consummation of the transactions herein contemplated or referenced herein
conflicts with or results in the material breach of any terms, conditions or
provisions of or constitutes a default under, any bond, note, or other evidence
of indebtedness or any contract, lease or other agreements or instruments to
which Seller is a party.
6.6 Leases. Attached hereto as Schedule 2 is a complete and accurate list
of the Leases, which shall be updated by Seller prior to Closing, if necessary,
by adding thereto leases executed after the date hereof through Closing. There
are no leases, subleases, occupancy agreements or tenancies, or any modification
or amendment thereto, in effect pertaining to the Property, except for the
Leases listed on Schedule 2. No party is entitled to any leasing commissions or
leasing fees chargeable to the landlord under any of the Leases except as
expressly set forth in
-17-
<PAGE>
the Offering Materials. HCMC is not entitled to any leasing commissions or
leasing fees chargeable to the landlord under any of the Leases. Seller owns all
of the interest of the landlord under the Leases and has not assigned, pledged,
hypothecated or otherwise encumbered or transferred its interest in the Leases,
except as provided in the documents evidencing and securing the Existing Loan
which will be paid and discharged at or before Closing.
6.7 Service Contracts. Attached hereto as Schedule 3 is a complete and
accurate list of the Service Contracts, which shall be updated by Seller prior
to Closing, if necessary. There are no service agreements or contracts relating
to the Property which will be in force on the Closing Date, except for the
Service Contracts (and other agreements set forth in this Agreement).
6.8 Notices. Except as disclosed in writing to Purchaser, Seller has not
received any written notice that the Property, and all present uses and
operations thereof, are in violation of any applicable zoning, environmental,
land-use, building, fire, health and safety laws or any of the Permitted
Exceptions.
6.9 Litigation. Except as set forth on Schedule 5 no litigation,
condemnation proceedings, or administrative proceedings has been served upon
Seller, nor to the best of the Seller's knowledge has been filed, or threatened
in writing, affecting the Property. Schedule 5 shall be updated by Seller prior
to Closing, if necessary.
6.10 Environmental Condition. Seller has no knowledge of any violation of
Environmental Laws related to the Property or the presence or release (other
than as permitted by law) of Hazardous Materials on or from the Property except
as disclosed in the environmental reports delivered by Seller to Purchaser
identified as (i) Report from Allied Environmental dated August 15, 1997; (ii)
Inspection Results Report from Dade County Florida Department of Environmental
Resources Management dated September 23, 1997; (iii) Draft Report -
Environmental Assessment prepared by Camp Dresser & McKee, dated December 16,
1988; (iv) Additional Soil Sample Collection and Analytical Results prepared by
Camp Dresser & McKee dated December 29, 1988; (v) Phase I Environmental
Assessment Report prepared by Camp Dresser & McKee dated October 1990; (vi)
Report of Phase I Environmental Site Assessment and Radon Screening; and (vii)
Phase I Environmental Site Assessment/Future Macy's Site prepared by Evans
Environmental dated December 5, 1994 (the "Environmental Reports"). There are no
agreements between the Seller and any governmental body or agency (Federal,
state or local) or any private entity concerning Environmental Laws or relating
in any way to the presence, spill, discharge, release, threat of release,
storage, treatment, disposal or investigation of any Hazardous Material. Except
as disclosed in the Environmental Reports, to Seller's knowledge, there are no
underground storage
-18-
<PAGE>
tanks at the Property. Except as disclosed in the Environmental Reports, Seller
has not discharged or released any Hazardous Materials at the Property in
violation of Environmental Laws or which could result in cleanup, remediation or
any corrective action being required under any applicable Environmental Laws.
The term "Environmental Laws" includes, without limitation, the Resource
Conservation and Recovery Act and the Comprehensive Environmental Response
Compensation and Liability Act ("CERCLA") and other federal laws governing the
environment as in effect on the date of this Agreement together with their
implementing regulations and guidelines as of the date of this Agreement, and
all state, regional, county, municipal and other local laws, regulations and
ordinances that are equivalent or similar to the federal laws recited above or
that purport to regulate Hazardous Materials in effect as of the date of this
Agreement. "Hazardous Materials" means any substance which is (i) designated,
defined, classified or regulated as a hazardous substance, hazardous material,
hazardous waste, pollutant or contaminant under any Environmental Law, as
currently in effect as of the date of this Agreement, (ii) petroleum
hydrocarbon, including crude oil or any fraction thereof and all petroleum
products, (iii) PCBs, (iv) lead, (v) friable asbestos, (vi) flammable
explosives, (vii) infectious materials, or (viii) radioactive materials.
6.11 Financial Statements. The annual operating statements and the audited
financial statements prepared on an accrual basis as of December 31 of the years
1994 through 1996, inclusive, and year-to-date annual operating statements
delivered to Purchaser by Seller were prepared by Seller in good faith in the
ordinary course of business. The general ledger includes all payments made by
Seller through its effective date.
6.12 ERISA; Personnel. As of the date hereof, Seller does not employ any
person at the Property nor is Seller a party, or obligated to become a party, to
any union or other collective bargaining contract pertaining to the operation
and maintenance of the Property. There are no employees of Seller or property
manager to whom Purchaser shall, at or after Closing, have any obligation in a
capacity as a successor employer nor is Seller a party to any employment
contracts or agreements respecting the Property.
6.13 No Sales Contracts. Except for this Agreement, there are no contracts
to sell, convey or transfer the Property or any purchase or sale options, rights
of first refusals, rights of first offer or similar agreements with respect to
the Property (other than Purchaser pursuant to the terms hereof).
6.14 Development Rights. Seller will not sell, transfer, modify or amend
any of the Development Rights and Seller has not received any written notice
challenging, contesting or calling into question any of the Development Rights.
-19-
<PAGE>
6.15 Indemnity. Seller shall indemnify and hold Purchaser harmless from
and against any and all claims, actions, judgments, liabilities, liens, damages,
penalties, fines, costs and reasonable attorneys' fees, foreseen or unforeseen,
asserted against, imposed on or suffered or incurred by Purchaser (or the
Property) directly or indirectly arising out of or in connection with any breach
of the warranties, representations and covenants set forth in this Section 6.
The indemnification set forth in the immediately preceding sentence shall be
limited to an aggregate amount not to exceed Two Million Five Hundred Thousand
and no/100's Dollars ($2,500,000.00) in the aggregate with respect to any breach
of the warranties, representation and covenants set forth in this Agreement, or
any other document made in connection with the transfer of the Property, except
that such limitation shall not apply to any breach of the warranties,
representations or covenants set forth in subsections 6.1 through 6.5 herein or
subsections 6.6 or 6.13. The warranties and representations set forth in this
Section 6 shall be deemed remade as of Closing, and said warranties and
representations as so remade, and the indemnity obligation set forth in herein
shall survive Closing, provided that any claim by Purchaser based upon a
misrepresentation or breach of any warranty or representation or indemnity
obligation under this Section 6 shall be deemed waived unless Purchaser has
given Seller notice of such claim prior to the date which is one (1) year after
the Closing Date.
As used in this Section 6, the term "to Seller's knowledge" "actual knowledge"
or "best of Seller's knowledge" (i) shall mean and apply to the actual knowledge
of Howard J. Edelman, Tom Rogers and Gary Kaplan and not to any other parties,
(ii) shall mean the actual knowledge of such individuals, without any
investigation or inquiry of any kind, and (iii) shall not mean such individuals
are charged with knowledge of the acts, omissions and/or knowledge of Seller's
agents or employees.
Notwithstanding anything contained in this Agreement to the contrary,
Seller shall have no liability for breaches of any representations, warranties
and certifications (the "Representations") which are made by Seller herein or in
any of the documents or instruments required to be delivered by Seller hereunder
if Philip Hofmann, Hans Schaefer and Michael B. Kolbow had knowledge of such
breach by Seller at the Closing Date and Purchaser shall not have the right to
bring any lawsuit or other legal action against Seller, nor pursue any other
remedies against Seller, as a result of the breach of such Representation caused
thereby, but Purchaser's sole right shall be to terminate this Agreement in
which event, the Earnest Money shall be returned to Purchaser.
7. Purchase As-Is. EXCEPT FOR THE REPRESENTATIONS WARRANTIES
AND COVENANTS OF SELLER EXPRESSLY SET FORTH IN SECTION 6 OF
THIS AGREEMENT AND IN ANY OF THE CLOSING DOCUMENTS, PURCHASER
-20-
<PAGE>
WARRANTS AND ACKNOWLEDGES TO AND AGREES WITH SELLER THAT PURCHASER IS PURCHASING
THE PROPERTY IN ITS "AS-IS, WHERE IS" CONDITION "WITH ALL FAULTS" AS OF THE
CLOSING DATE AND SPECIFICALLY AND EXPRESSLY WITHOUT ANY WARRANTIES,
REPRESENTATIONS OR GUARANTEES, EITHER EXPRESS OR IMPLIED, AS TO ITS CONDITION,
FITNESS FOR ANY PARTICULAR PURPOSE, MERCHANTABILITY, OR ANY OTHER WARRANTY OF
ANY KIND, NATURE, OR TYPE WHATSOEVER FROM OR ON BEHALF OF SELLER. EXCEPT FOR THE
REPRESENTATIONS OF SELLER EXPRESSLY SET FORTH IN SECTION 6 OF THIS AGREEMENT OR
IN THE CLOSING DOCUMENTS, SELLER SPECIFICALLY DISCLAIMS ANY WARRANTY, GUARANTY
OR REPRESENTATION, ORAL OR WRITTEN, PAST OR PRESENT, EXPRESS OR IMPLIED,
CONCERNING (A) THE VALUE, NATURE, QUALITY OR CONDITION OF THE PROPERTY,
INCLUDING, WITHOUT LIMITATION, THE WATER, STRUCTURAL INTEGRITY, SOIL AND
GEOLOGY; (B) THE INCOME TO BE DERIVED FROM THE PROPERTY; (C) THE SUITABILITY OF
THE PROPERTY FOR ANY AND ALL ACTIVITIES AND USES WHICH PURCHASER MAY CONDUCT
THEREON, INCLUDING THE POSSIBILITIES FOR FUTURE DEVELOPMENT OF THE PROPERTY; (D)
THE COMPLIANCE OF OR BY THE PROPERTY OR ITS OPERATION WITH ANY LAWS, RULES,
ORDINANCES OR REGULATIONS OF ANY APPLICABLE GOVERNMENTAL AUTHORITY OR BODY; (E)
THE HABITABILITY, MERCHANTABILITY, MARKETABILITY, PROFITABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OF THE PROPERTY; (F) THE MANNER OR QUALITY OF THE
CONSTRUCTION OR MATERIALS, IF ANY, INCORPORATED INTO THE PROPERTY; (G) THE
MANNER, QUALITY, STATE OF REPAIR OR LACK OF REPAIR OF THE PROPERTY; (H) THE
PRESENCE OR ABSENCE OF HAZARDOUS MATERIALS AT, ON, UNDER, OR ADJACENT TO THE
PROPERTY OR ANY OTHER ENVIRONMENTAL MATTER OR CONDITION OF THE PROPERTY; OR (I)
ANY OTHER MATTER WITH RESPECT TO THE PROPERTY. PURCHASER ACKNOWLEDGES AND AGREES
THAT, EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES OF SELLER CONTAINED IN
SECTION 6 OF THIS AGREEMENT AND IN THE CLOSING DOCUMENTS, ANY INFORMATION
PROVIDED BY OR ON BEHALF OF SELLER WITH RESPECT TO THE PROPERTY WAS OBTAINED
FROM A VARIETY OF SOURCES AND THAT SELLER HAS NOT MADE ANY INDEPENDENT
INVESTIGATION OR VERIFICATION OF SUCH INFORMATION AND MAKES NO REPRESENTATIONS
AS TO THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION. SELLER IS NOT LIABLE OR
BOUND IN ANY MANNER BY ANY ORAL OR WRITTEN STATEMENTS, REPRESENTATIONS OR
INFORMATION PERTAINING TO THE PROPERTY, OR THE OPERATION THEREOF, FURNISHED BY
ANY REAL ESTATE BROKER, AGENT, EMPLOYEE, SERVANT OR OTHER PERSON EXCEPT FOR THE
EXPRESS REPRESENTATIONS SET FORTH IN SECTION 6
-21-
<PAGE>
OF THIS AGREEMENT AND IN THE CLOSING DOCUMENTS. PURCHASER FURTHER ACKNOWLEDGES
AND AGREES THAT PURCHASER IS A SOPHISTICATED AND EXPERIENCED PURCHASER OF
PROPERTIES SUCH AS THE PROPERTY AND HAS BEEN DULY REPRESENTED BY COUNSEL IN
CONNECTION WITH THE NEGOTIATION OF THIS AGREEMENT. EXCEPT AS MAY OTHERWISE BE
PROVIDED HEREIN, SELLER HAS MADE NO AGREEMENT TO ALTER, REPAIR OR IMPROVE ANY OF
THE PROPERTY.
8. Purchaser's Representations, Warranties and Covenants. Purchaser hereby
represents, warrants and covenants as follows:
8.1 Power. Purchaser has the legal power, right and authority to enter
into this Agreement and the instruments referenced herein and to consummate the
transactions contemplated hereby.
8.2 Requisite Action. Except as provided in Section 3.5 hereof, all
requisite action (corporate, trust, partnership or otherwise) has been taken by
Purchaser in connection with entering into this Agreement and the instruments
referenced herein and the consummation of the transactions contemplated hereby.
Except as provided in Section 3.5 hereof, no consent of any partner,
shareholder, member, creditor, investor, judicial or administrative body,
authority or other party is required which has not been obtained to permit
Purchaser to enter into this Agreement and consummate the transaction
contemplated hereby.
8.3 Authority. The individuals executing this Agreement and the
instruments referenced herein on behalf of Purchaser have the legal power, right
and actual authority to bind Purchaser to the terms and conditions hereof and
thereof.
8.4 Validity. This Agreement and all documents required hereby to be
executed by Purchaser are and shall be valid, legally binding obligations of and
enforceable against Purchaser in accordance with their terms.
8.5 Conflicts. Neither the execution and delivery of this Agreement and
documents referenced herein, nor the incurrence of the obligations set forth
herein, nor the consummation of the transactions herein contemplated, nor
referenced herein conflict with or result in the material breach of any terms,
conditions or provisions of or constitute a default under, any bond, note, or
other evidence of indebtedness or any contract, lease or other agreements or
instruments to which Purchaser is a party.
-22-
<PAGE>
8.6 Litigation. No litigation has been served upon Purchaser, nor to the
best of Purchaser's knowledge has been filed, or threatened in writing, against
Purchaser in any court or by or before any other governmental agency or
instrumentality which would materially and adversely affect the ability of
Purchaser to carry out the transactions contemplated by this Agreement.
8.7 Indemnity. Purchaser shall indemnify and hold Seller harmless from and
against any and all claims, actions, judgments, liabilities, liens, damages,
penalties, fines, costs and reasonable attorneys' fees, foreseen or unforeseen,
asserted against, imposed on or suffered or incurred by Seller directly or
indirectly arising out of or in connection with any breach of the warranties,
representations and covenants set forth in this Section 8. The warranties,
representations and indemnities set forth in this Section 8 shall be deemed
remade as of Closing and shall survive Closing, and said warranties and
representations as so remade, and the indemnity obligation set forth in herein
shall be deemed waived unless Seller has given Purchaser written notice of any
such claim prior to the date which is one (1) year from the Closing Date.
9. Closing Costs. Seller shall pay the following expenses: (i) the costs to
obtain a standard owner's title policy and the cost of a survey endorsement and
contiguity, fairway and PUD endorsements, if, and to the extent available,
thereto, if available; (ii) all of the total amount of all conveyance fees,
documentary, stamp and transfer taxes and surtaxes; (iii) one-half of all
recording fees (iv) one half of all closing escrow fees, including "New York
Style" closing fees; (v) one-half of the costs for the Updated Survey; and (vi)
Seller's legal fees and expenses. Purchaser shall pay the following expenses:
(a) reimbursement to Seller for a portion of the costs of the Existing Survey in
an amount equal to Eleven Thousand and no/100's Dollars ($11,000.00); (b)
one-half of all closing escrow fees, including "New York Style" closing fees;
(c) one half of all recording fees; (d) all costs and expenses associated with
Purchaser's financing, if any; (e) one-half of the costs for the Updated Survey;
and (f) Purchaser's legal fees and expenses. Seller shall not be responsible for
any costs and expenses incurred in connection with the transfer of any
transferable permits, warranties or licenses in connection with the ownership or
operation of the Property. The provisions of this Section 9 shall survive
Closing, but not any termination of this Agreement.
10. Commissions. Seller shall be solely responsible for the payment of the
commission to Eastdil Realty Company, L.L.C. ("Eastdil). Seller and Purchaser
each warrant and represent to the other that (other than Eastdil) neither has
had any dealings with any broker, agent, or finder relating to the sale of the
Property or the transactions contemplated hereby, and each agrees to indemnify
and hold the other and their respective advisors (including HCMC) harmless
against any claim for
-23-
<PAGE>
brokerage commissions, compensation or fees by any broker, agent, or finder in
connection the sale of the Property or the transactions contemplated hereby
resulting from the acts of the indemnifying party. The provisions of this
Section 10 shall survive Closing.
11. New York Style Closing. It is contemplated that the transaction shall be
closed by means of a so-called New York Style Closing, with the concurrent
delivery of the documents of title, transfer of interest, delivery of the title
policy or marked-up title commitment described in Section 4.3(d) and the payment
of the Purchase Price. Seller and Purchaser shall each provide any reasonable
undertaking to the Title Company necessary to accommodate the New York Style
Closing.
12. Attorneys' Fees and Costs. In the event suit or action is instituted to
interpret or enforce the terms of this Agreement, or in connection with any
arbitration or mediation of any dispute, the prevailing party shall be entitled
to recover from the other party such sum as the court, arbitrator or mediator
may adjudge reasonable as such party's costs and attorney's fees, including such
costs and fees as are incurred in any trial, on any appeal, in any bankruptcy
proceeding (including the adjudication of issues peculiar to bankruptcy law) and
in any petition for review. Each party shall also have the right to recover its
reasonable costs and attorney's fees incurred in collecting any sum or debt owed
to it by the other party. The provisions of this Section 12 shall survive
Closing or any termination of this Agreement.
13. Notice. All notices, demands, deliveries and communications (a "Notice")
under this Agreement shall be delivered or sent by: (i) first class, registered
or certified mail, postage prepaid, return receipt requested, (ii) nationally
recognized overnight carrier, or (iii) facsimile with original Notice sent via
overnight delivery addressed to the address of the party in question set forth
in the first paragraph of this Agreement and copies to the parties designated
below or to such other address as either party may designate by Notice pursuant
to this Section 13. Notices shall be deemed given (x) three business days after
being mailed as provided in clause (i) above, (y) one business day after
delivery to the overnight carrier as provided in clause (ii) above, or (z) on
the day of the transmission of the facsimile so long as it is received in its
entirety by 5:00 pm (New York City, New York Time) on such day and the original
of such Notice is received the next business day via overnight mail as provided
in clause (iii) above.
Notices to Seller copy to: Altheimer & Gray
10 South Wacker Drive, Suite 4000
Chicago, Illinois 60606-7482
Attention: Barry Nekritz, Esq.
facsimile no. 312/715-4800
-24-
<PAGE>
Notices to Purchaser copy to: Miro, Weiner & Kramer
500 No. Woodward Avenue, Suite 100
Bloomfield Hills, Michigan 48303
Attention: Chris Heaphy, Esq.
facsimile no. 248/646-7887
The provisions of this Section 13 shall survive Closing or any termination
of this Agreement.
14. Fire or Other Casualty; Condemnation.
14.1 If the Property or any part thereof is damaged by fire or other
casualty prior to the Closing Date which would cost in excess of One Hundred
Thousand and no/100's Dollars ($100,000.00) to repair (as determined by an
insurance adjuster selected by the insurance carriers), or which may have a
material affect on the income generated by the Property and which is not covered
by rental loss insurance. Purchaser may terminate this Agreement by written
notice to Seller given on or before the earlier of (i) twenty (20) days
following such casualty or (ii) the Closing Date. In the event of such
termination, this Agreement shall be of no further force and effect and, except
for the Surviving Obligations, neither party shall thereafter have any further
obligation under this Agreement, and Seller shall direct the Title Company to
promptly return all Earnest Money to Purchaser. If Purchaser does not elect to
terminate this Agreement or the cost of repair is determined by said adjuster to
be less than One Hundred Thousand and no/100's Dollars ($100,000.00), the
Closing shall take place as herein provided without abatement of the Purchase
Price, and Seller shall assign and transfer to Purchaser on the Closing Date,
without warranty or recourse, all of Seller's right, title and interest to the
balance of insurance proceeds paid or payable to Seller on account of such fire
or casualty remaining after reimbursement to Seller for the total amount of all
costs and expenses incurred by Seller in connection therewith including but not
limited to making emergency repairs, securing the Property and complying with
applicable governmental requirements. Seller shall pay to Purchaser the amount
of the deductible of any of Seller's applicable insurance policies.
14.2 If any material portion of the Property is taken in eminent domain
proceedings (or is the subject of a pending or threatened taking or eminent
domain proceeding) prior to Closing, Purchaser may terminate this Agreement by
notice to Seller given on or before the earlier of (i) twenty (20) days after
such taking or pending or threatened taking or (ii) the Closing Date, and, in
the event of such
-25-
<PAGE>
termination, this Agreement shall be of no further force and effect and, except
for the Surviving Obligations, neither party shall thereafter have any further
obligation under this Agreement, and Seller shall direct the Title Company to
promptly return all Earnest Money to Purchaser. If Purchaser does not so elect
to terminate or if the taking is not material, then the Closing shall take place
as herein provided without abatement of the Purchase Price, and Seller shall
deliver or assign to Purchaser on the Closing Date, without warranty or
recourse, all of Seller's right, title and interest in and to all condemnation
awards paid or payable to Seller. For purposes hereof, a "material portion" of
the Property shall mean (i) any access to the Property, (ii) any parking spaces
at the Property such that the Property would be rendered in noncompliance with
law or the provisions of any of the Leases covering required number of parking
spaces, (iii) any gross leasable area of the Property, (iv) if any tenant has
the right to terminate its Lease as a result of such action, or (v) any portion
of the common area or the portion of the Property which may adversely affect the
operations of the Property or the expansion or development thereof.
15. Operations After Date of This Agreement. Seller covenants and agrees with
Purchaser that:
(a) after the date hereof through the Closing, Seller will (except as
specifically provided to the contrary herein):
(i) Refrain from transferring any of the Property or creating on the
Property any easements, liens, mortgages, encumbrances, or other interests
which will survive Closing or permitting any changes to the zoning
classification of the Land;
(ii) Refrain from entering into or amending any contracts, or other
agreements (including leases, except as provided in Section 15(b) below)
regarding the Property (other than service contracts in the ordinary and
usual course of business and which are cancelable by the owner of the
Property without penalty within thirty (30) days after giving notice
thereof);
(iii) Continue to operate, maintain, and repair the Property in a
manner consistent with Seller's current practices and not enter into any
new commitments with respect to any capital expenditure or construction
without Purchaser's prior written consent, which consent shall not be
unreasonably delayed, withheld or denied;
(iv) Fully comply with the terms of the Leases and Permitted
Exceptions;
-26-
<PAGE>
(v) Refrain from offering the Property for sale or marketing the
same; and
(vi) Deliver to Purchaser not less than five (5) days prior to the
expiration of the Due Diligence Period copies of all leases entered into
after the date hereof and copies of all Proposals (as defined in Section
15(b) below) with respect to which no lease has been executed and which
has not expired or been withdrawn, except as provided otherwise in Section
15(b) below.
(vii) Not remove any of the Personal Property from the Real
Property, except for items that are replaced with an item of equally
suitable value, free and clear of any lien or claim;
(viii) Seller shall immediately notify Purchaser of any pending, or
any written threat of, litigation, arbitration or administrative hearing
affecting the Property and not covered by insurance promptly following
receipt of notice thereof by Seller; and
(ix) Seller shall continue to maintain or cause to be maintained its
books and records in accordance with its past practices.
(b) after the date hereof, Seller will refrain from (i) amending any
Leases of any portion of the Property, (ii) canceling any of such Leases, or
(iii) executing any new leases without the prior written consent of Purchaser
(which consent prior to the expiration of the Due Diligence Period shall not be
unreasonably withheld and thereafter may be withheld in Purchaser's sole and
absolute discretion). As used herein, "Proposal" shall mean a description of the
economic and business terms of any proposed lease or amendment along with any
financial information on the tenant in Seller's possession (the "Proposal").
Purchaser shall be deemed to have approved: (x) all Proposals listed on Schedule
4 attached hereto; and (y) any Proposals delivered to Purchaser after the date
hereof through the date which is five (5) days prior to the expiration of the
Due Diligence Period if Purchaser does not object thereto within five (5)
business days of receipt. Seller shall have the right to execute the lease
documents constituting a Proposal approved or deemed approved by Purchaser.
The provisions of this Section 15 shall survive Closing or any termination
of this Agreement.
16. Assignment. Purchaser shall not assign this Agreement without Seller's prior
written consent. Such consent may be withheld for any reason or no reason
-27-
<PAGE>
except in the case of an assignment to an affiliate of Purchaser. Subject to the
previous sentence, this Agreement shall apply to, inure to the benefit of and be
binding upon and enforceable against the parties hereto and their respective
successors and assigns. Purchaser shall have the right to assign and transfer
its rights under this Agreement to any entity in which Purchaser owns at least a
50% equity or ownership interest provided that Purchaser delivers to Seller: (i)
a duly executed express assumption of all of the duties and obligations of
Purchaser by the proposed assignee, and (ii) an ERISA certificate, in the form
attached hereto as Exhibit D.
17. Remedies.
(a) IN THE EVENT THAT SELLER SHALL FAIL TO CONSUMMATE THIS AGREEMENT AND
SUCH FAILURE IS NOT A RESULT OF PURCHASER'S DEFAULT OR A TERMINATION OF THIS
AGREEMENT BY PURCHASER OR SELLER PURSUANT TO A RIGHT TO DO SO UNDER THE
PROVISIONS HEREOF, PURCHASER, IN THE CASE WHERE SUCH FAILURE IS BASED UPON A
VOLUNTARY ACTION BY SELLER, SHALL ONLY BE ENTITLED TO SEEK AT ITS ELECTION,
EITHER: (i) THE REMEDY OF SPECIFIC PERFORMANCE, OR (ii) DAMAGES IN AN AMOUNT NOT
TO EXCEED THE AMOUNT OF THE EARNEST MONEY FOR ANY AND ALL OF PURCHASER'S CLAIM
FOR DAMAGES UNDER THIS AGREEMENT (IN ADDITION TO A REFUND OF THE EARNEST MONEY).
IN NO EVENT SHALL SELLER BE LIABLE TO PURCHASER FOR ANY PUNITIVE, SPECULATIVE OR
CONSEQUENTIAL DAMAGES. IN THE CASE WHERE SUCH FAILURE IS BASED UPON AN ACTION
OTHER THAN A VOLUNTARY ACTION BY SELLER, PURCHASER, AS ITS SOLE AND EXCLUSIVE
REMEDY, MAY TERMINATE THIS AGREEMENT AND RECEIVE A REFUND OF THE EARNEST MONEY.
IN NO EVENT SHALL PURCHASER BE ENTITLED TO RECORD A LIS PENDENS OR NOTICE OF
PENDENCY OF ACTION AGAINST THE PROPERTY FOR ANY REASON WHATSOEVER, UNLESS
PURCHASER IS SEEKING SPECIFIC PERFORMANCE. A VOLUNTARY ACTION HEREUNDER SHALL BE
DEEMED TO BE (i) AN AFFIRMATIVE ACTION OF SELLER, OR (ii) AN OMISSION BY SELLER
WHERE SELLER HAD A DUTY TO TAKE SUCH ACTION.
(b) IN THE EVENT THAT PURCHASER SHOULD FAIL TO CONSUMMATE THIS AGREEMENT
FOR ANY REASON, EXCEPT SELLER'S DEFAULT OR THE TERMINATION OF THIS AGREEMENT BY
PURCHASER PURSUANT TO A RIGHT TO DO SO UNDER THE TERMS AND PROVISIONS HEREOF,
THEN SELLER, AS ITS SOLE AND EXCLUSIVE REMEDY MAY TERMINATE THIS AGREEMENT BY
NOTIFYING PURCHASER THEREOF AND RECEIVE OR RETAIN THE EARNEST MONEY AS
LIQUIDATED DAMAGES, PROVIDED THAT THIS PROVISION SHALL NOT LIMIT SELLER'S RIGHTS
TO
-28-
<PAGE>
RECEIVE REIMBURSEMENT FOR ATTORNEYS FEES RESULTING FROM SUCH BREACH AND TO
PURSUE AND RECOVER ON A CLAIM WITH RESPECT TO ANY SURVIVING OBLIGATIONS. THE
PARTIES AGREE THAT SELLER WILL SUFFER DAMAGES IN THE EVENT OF PURCHASER'S
DEFAULT ON ITS OBLIGATIONS. ALTHOUGH THE AMOUNT OF SUCH DAMAGES IS DIFFICULT OR
IMPOSSIBLE TO DETERMINE, THE PARTIES AGREE THAT THE AMOUNT OF THE EARNEST MONEY
IS A REASONABLE ESTIMATE OF SELLER'S LOSS IN THE EVENT OF PURCHASER'S DEFAULT.
THUS, SELLER SHALL ACCEPT AND RETAIN THE EARNEST MONEY AS LIQUIDATED DAMAGES BUT
NOT AS A PENALTY. EXCEPT AS OTHERWISE SET FORTH IN THIS SECTION 17(b), SUCH
LIQUIDATED DAMAGES SHALL CONSTITUTE SELLER'S SOLE AND EXCLUSIVE REMEDY. IN THE
EVENT SELLER IS ENTITLED TO THE EARNEST MONEY AS LIQUIDATED DAMAGES AND TO THE
EXTENT SELLER HAS NOT ALREADY RECEIVED THE EARNEST MONEY, THE EARNEST MONEY
SHALL BE IMMEDIATELY PAID TO SELLER BY THE TITLE COMPANY, AND PURCHASER AGREES
TO TAKE ALL SUCH ACTIONS AND EXECUTE AND DELIVER ALL SUCH DOCUMENTS NECESSARY OR
APPROPRIATE TO EFFECT SUCH PAYMENT.
SELLER AND PURCHASER ACKNOWLEDGE THAT THEY HAVE READ
AND UNDERSTAND THE PROVISIONS OF THE FOREGOING LIQUIDATED
DAMAGES PROVISION AND BY THEIR SIGNATURES IMMEDIATELY BELOW
AGREE TO BE BOUND BY ITS TERMS.
SELLER: PURCHASER:
THE FALLS PARTNERS LIMITED THE TAUBMAN REALTY GROUP
L.P., a Delaware limited partnership LIMITED PARTNERSHIP
a Delaware limited partnership
By: Heitman Capital Management By: /s/ Cordell A. Lietz
Corporation, an Illinois -------------------------
corporation Name: Cordell A. Lietz
its agent and attorney-in-fact Its: Authorized Signatory
By: /s/ Howard J. Edelman
------------------------
Name: Howard J. Edelman
Its: Executive Vice President
-29-
<PAGE>
18. Indemnification.
18.1 Seller's Indemnification of Purchaser. Seller hereby agrees to
indemnify, defend, and hold Purchaser harmless from and against all costs,
expenses, liabilities, demands, claims, and damages (and any loss of expenses,
including, without limitation, interest, penalties and reasonable attorneys'
fees and disbursements, asserted against, resulting to, imposed upon, or
incurred by Purchaser as a result thereof) by reason of or resulting from (a)
all third-party claims relating to the Property that arise, take place, occur or
accrue prior to the Closing Date, including, without limitation, under the
Leases; and (b) any of the lawsuits, claims or other matters set forth on
Schedule 5 hereto. The indemnification set forth in Section 6.15 and in this
Section 18.1 shall be limited (except as specifically set forth in Section 6.15)
to an aggregate amount not to exceed Two Million Five Hundred Thousand and
no/100's Dollars ($2,500,000.00) with respect to Purchaser's right to or
collection of any funds from Seller under this Agreement or in any other
documents made in connection with the transfer of the Property and shall be
deemed waived unless Purchaser has given Seller written notice of such claim
prior to the date which is one (1) year after the Closing Date. For the period
of this indemnity Seller agrees to place in escrow the Two Million Five Hundred
Thousand Dollars and no/100s ($2,500,000.00). The agreement governing the rights
of the parties under such escrow shall be in a form reasonably acceptable to
Purchaser and Seller. The provisions of this Section 18.1 shall survive Closing
or any termination of this Agreement.
18.2 Purchaser's Indemnification of Seller. Purchaser hereby agrees to
indemnify, defend, and hold Seller harmless from and against all costs,
expenses, liabilities, demands, claims, and damages (and any loss of expenses,
including, without limitation, interest, penalties and reasonable attorneys'
fees and disbursements, asserted against, resulting to, imposed upon, or
incurred by Seller as a result thereof) by reason of or resulting from all
third-party claims relating to the Property that arise, take place, occur or
accrue after the Closing Date, including, without limitation, under the Leases.
The indemnity set forth in this Section 18.2 shall be limited to an aggregate
amount not to exceed Two Million Five Hundred Thousand and no/100's Dollars
($2,500,000.00) and shall be deemed waived unless Seller has given Purchaser
written notice of such claim prior to the date which is one (1) year after the
Closing Date. The provisions of this Section 18.2 shall survive Closing or any
termination of this Agreement.
19. Miscellaneous. The provisions of this Section 19 shall survive Closing or
any termination of this Agreement.
19.1 Entire Agreement. This Agreement, together with the exhibits attached
hereto, constitute the entire agreement of the parties hereto regarding the
purchase and sale of the Property, and all prior agreements, understandings,
representations and statements, oral or written, are hereby merged herein. In
the event of a conflict
-30-
<PAGE>
between the terms of this Agreement and any prior written agreements, the terms
of this Agreement shall prevail. This Agreement may only be amended or modified
by an instrument in writing, signed by the party intended to be bound thereby.
19.2 Time. All parties hereto agree that time is of the essence in this
transaction. If the time for performance of any obligation hereunder shall fall
on a Saturday, Sunday or holiday (national, in the State of Illinois or the
state in which the Property is located) such that the transaction contemplated
hereby can not be performed, the time for performance shall be extended to the
next such succeeding day where performance is possible.
19.3 Counterpart Execution. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original.
19.4 Governing Law. THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE
UNDER THE LAWS OF THE STATE OF FLORIDA AND FOR ALL PURPOSES SHALL BE GOVERNED BY
AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA.
19.5 Publicity. Seller and Purchaser hereby covenant and agree that, at
all times after the date of execution hereof and continuing until the Closing,
unless consented to in writing by the other party, no press release or other
public disclosure concerning this transaction shall be made, and each party
agrees to use reasonable efforts to prevent disclosure of this transaction.
Seller shall have the right to approve of Purchaser's first press release after
Closing describing this transaction, which approval shall not be unreasonably
withheld or delayed except with respect to information regarding the identity of
the constituent partners of Seller which Seller may deny release of in its sole
and absolute discretion. Notwithstanding any of the foregoing, Purchaser shall
have the right to issue a press release with respect to this transaction if
required by (i) rules and regulations of the New York Stock Exchange, (ii)
applicable law (including, without limitation, the Securities and Exchange
Commission), and (iii) if Purchaser believes such release is reasonable and
necessary based upon shareholder relations, analyst requests or other bona fide
business reasons except for purposes of clause (iii) with respect to information
regarding the identity of the constituent partners of Seller which Purchaser
agrees not to disclose.
19.6 Recordation. Except as is permitted by Section 17 hereof, Purchaser
shall not record this Agreement or a memorandum or other notice thereof in any
public office without the express written consent of Seller. A breach by
Purchaser of this covenant shall constitute a material default by Purchaser
under this Agreement.
-31-
<PAGE>
19.7 Benefit. This Agreement is for the benefit of Purchaser and Seller,
and except as provided in the indemnity granted by Purchaser under Paragraph 3.2
with respect to the Indemnified Parties listed therein, no other person or
entity will be entitled to rely on this Agreement, receive any benefit from it
or enforce any provisions of it against Purchaser or Seller.
19.8 Section Headings. The Section headings contained in this Agreement
are for convenience only and shall in no way enlarge or limit the scope or
meaning of the various and several Sections hereof.
19.9 Further Assurances. Purchaser and Seller agree to execute all
documents and instruments reasonably required in order to consummate the
purchase and sale herein contemplated.
19.10 Severability. If any portion of this Agreement is held to be
unenforceable by a court of competent jurisdiction, the remainder of this
Agreement shall remain in full force and effect.
19.11 Waiver of Trial by Jury. Seller and Purchaser, to the extent they
may legally do so, hereby expressly waive any right to trial by jury of any
claim, demand, action, cause of action, or proceeding arising under or with
respect to this Agreement, or in any way connected with, or related to, or
incidental to, the dealings of the parties hereto with respect to this Agreement
or the transactions related hereto or thereto, in each case whether now existing
or hereafter arising, and irrespective of whether sounding in contract, tort, or
otherwise. To the extent they may legally do so, Seller and Purchaser hereby
agree that any such claim, demand, action, cause of action, or proceeding shall
be decided by a court trial without a jury and that any party hereto may file an
original counterpart or a copy of this Section with any court as written
evidence of the consent of the other party or parties hereto to waiver of its or
their right to trial by jury.
19.12 Independent Counsel. Purchaser and Seller each acknowledge that: (a)
they have been represented by independent counsel in connection with this
Agreement; (b) they have executed this Agreement with the advice of such
counsel; and (c) this Agreement is the result of negotiations between the
parties hereto and the advice and assistance of their respective counsel. The
fact that this Agreement was prepared by Seller's counsel as a matter of
convenience shall have no import or significance. Any uncertainty or ambiguity
in this Agreement shall not be construed against Seller because Seller's counsel
prepared this Agreement in its final form.
19.13 Governmental Approvals. Nothing contained in this Agreement shall
be construed as authorizing Purchaser to apply for a zoning change, variance,
-32-
<PAGE>
subdivision maps, lot line adjustment, or other discretionary governmental act,
approval or permit with respect to the Property prior to the Closing, and
Purchaser agrees not to do so. Purchaser agrees not to submit any reports,
studies or other documents, including, without limitation, plans and
specifications, impact statements for water, sewage, drainage or traffic,
environmental review forms, or energy conservation checklists to any
governmental agency, or any amendment or modification to any such instruments or
documents prior to the Closing, except as may be required by law. Purchaser's
obligation to purchase the Property shall not be subject to or conditioned upon
Purchaser's obtaining any variances, zoning amendments, subdivision maps, lot
line adjustment or other discretionary governmental act, approval or permit.
19.14 No Waiver. No covenant, term or condition of this Agreement other
than as expressly set forth herein shall be deemed to have been waived by Seller
or Purchaser unless such waiver is in writing and executed by Seller or
Purchaser, as the case may be.
19.15 Discharge and Survival. The delivery of the Deed by Seller, and the
acceptance thereof by Purchaser shall be deemed to be the full performance and
discharge of every covenant and obligation on the part of Seller to be performed
hereunder except the Surviving Obligations. No action shall be commenced after
the Closing on any covenant or obligation except the Surviving Obligations.
20. Exculpation of Seller and Related Parties. Notwithstanding anything to the
contrary contained in this Agreement or in any exhibits attached hereto or in
any documents executed in connection herewith (collectively, including this
Agreement, said exhibits and any such document, the "Purchase Documents"), it is
expressly understood and agreed by and between the parties hereto that: (i) the
recourse of Purchaser or its successors or assigns against Seller with respect
to the alleged breach by or on the part of Seller of any representation,
warranty, covenant, undertaking, indemnity or agreement contained in any of the
Purchase Documents (collectively, "Seller's Undertakings") shall be limited to
an amount not to exceed Two Million Five Hundred Thousand and no/100's Dollars
($2,500,000.00) in the aggregate of all recourse of Purchaser under the Purchase
Documents except as specifically provided in Section 6.15; and (ii) no personal
liability or personal responsibility of any sort with respect to any of Seller's
Undertakings or any alleged breach thereof is assumed by, or shall at any time
be asserted or enforceable against, Seller (except as set forth in Section 6.15)
or HCMC, or against any of their respective shareholders, directors, officers,
employees, agents, constituent partners (except as may be provided by law),
members, beneficiaries, trustees or representatives except as provided in (i)
above with respect to Seller. The provisions of this Section 20 shall survive
Closing or any termination of this Agreement.
-33-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused these presents to be
made as of the day and year first above stated.
SELLER: PURCHASER:
THE FALLS PARTNERS LIMITED L.P., a THE TAUBMAN REALTY GROUP
Delaware limited partnership LIMITED PARTNERSHIP
a Delaware limited partnership
By: Heitman Capital By: /s/ Cordell A. Lietz
Management Corporation, an Illinois ------------------------
corporation Name: Cordell A. Lietz
its agent and attorney-in-fact Its: Authorized Signatory
By: /s/ Howard J. Edelman
-----------------------------
Name: Howard J. Edelman
Its: Executive Vice President
EXHIBITS AND SCHEDULES
----------------------
Exhibit A - Legal Description
Exhibit B - Form of Earnest Money Escrow Agreement
Exhibit C - Form of Tenant Estoppel Certificate
Exhibit D - Form of ERISA Certificate
Exhibit E - Form of Special Warranty Deed
Exhibit F - Form of Bill of Sale
Exhibit G - Form of Assignment and Assumption of Leases
Exhibit H - Form of Assignment and Assumption of Contracts
Exhibit I - Form of General Assignment
Exhibit J - Form of Non-Foreign Affidavit
Exhibit K - Form of Tenant Notification Letter
Exhibit L - Form of Vendor Notification Letter
Schedule 1 - List of Personal Property
Schedule 2 - List of Leases
Schedule 3 - List of Service Contracts
Schedule 4 - List of Proposals
Schedule 5 - List of Litigation
Schedule 6 - List of Leases Out for Signature, Leases Under Negotiation and
Agreed Credits to Tenants
<PAGE>
FIRST AMENDMENT TO AGREEMENT OF PURCHASE AND SALE
THIS FIRST AMENDMENT TO AGREEMENT OF PURCHASE AND SALE ("Amendment") is
entered into on November 6, 1997, by and between THE FALLS PARTNERS LIMITED
L.P., a Delaware limited partnership ("Seller"), having an address of c/o
Heitman Capital Management Corporation, 180 North LaSalle Street, Suite 3600,
Chicago, Illinois 60601- 6789, and THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP,
a Delaware limited partnership ("Purchaser"), having an address of c/o The
Taubman Company, 200 East Long Lake Road, Bloomfield Hills, Michigan 48304, is
based upon the following:
A. Seller and Purchaser entered into a certain Agreement of Purchase and
Sale (the "Purchase Agreement"), dated November 5, 1997, with respect to The
Falls Shopping Center in Miami, Florida (the "Property").
B. Seller and Purchaser desire to amend the Purchase Agreement in the
manner set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants, promises and
agreements and subject to the terms and conditions contained herein, the parties
hereto hereby agree as follows:
1. The Due Diligence Period described in Section 1 of the Purchase
Agreement is hereby changed to November 11, 1997. Purchaser hereby agrees that
it has completed its Due Diligence and accepts the condition of the Property,
and hereby waives any right to terminate the Purchase Agreement as a result of
the Due Diligence or the condition of the Property, except for (i) the matters
described in that certain letter from Purchaser to Seller dated November 6,
1997, and (ii) Purchaser's investigation of the Development Rights (including,
without limitation, stormwater drainage). If any of the matters described in the
foregoing clauses (i) and (ii) are not resolved to Purchaser's sole
satisfaction, Purchaser shall have the right to terminate the Purchase
Agreement.
- 1 -
<PAGE>
2. Purchaser acknowledges that it has received the Committee Approval
described in Section 3.5 of the Purchase Agreement and waives any right to
terminate the Purchase Agreement as a result of the condition set forth in
Section 3.5 of the Purchase Agreement.
3. Seller hereby acknowledges receipt of Purchaser's title objection
letter, dated November 4, 1997. Nothing contained herein, or any subsequent
waiver of the Due Diligence Period by Purchaser, shall affect such letter or the
rights and obligations of the parties relative thereto unless and until the
matters set forth in such letter are resolved in accordance with Section 3.3 of
the Purchase Agreement.
4. Capitalized terms used herein shall have the meaning ascribed to them
in the Purchase Agreement.
5. Except as modified by this Amendment, the Purchase Agreement remains in
full force and effect and is hereby ratified and confirmed.
6. This Amendment may be executed in counterparts, each of which shall
constitute an original, although not fully executed, but all of which when taken
together shall constitute but one Amendment. Delivery of a executed counterpart
of this Amendment by telecopy or facsimile shall be effective as delivery of an
original executed counterpart hereof.
- 2 -
<PAGE>
IN WITNESS WHEREOF, Seller and Purchaser have executed this Amendment as
of the date first above written.
THE FALLS PARTNERS LIMITED L.P., a
Delaware limited partnership
By: Heitman Capital Management Corporation,
an Illinois corporation its agent and
attorney-in-fact
By: /s/ Howard J. Edelman
-----------------------------------
Howard J. Edelman
Its: Executive Vice President
"Seller"
THE TAUBMAN REALTY GROUP LIMITED
PARTNERSHIP, a Delaware limited
partnership
By: /s/ Cordell A. Lietz
----------------------------------
Cordell A. Lietz
Its: Authorized Signatory
"Purchaser"
- 3 -
<PAGE>
SECOND AMENDMENT TO AGREEMENT OF PURCHASE AND SALE
THIS SECOND AMENDMENT TO AGREEMENT OF PURCHASE AND SALE
("Amendment") is entered into on November 13, 1997, but effective as of November
11, 1997, by and between THE FALLS PARTNERS LIMITED L.P., a Delaware limited
partnership ("Seller"), having an address of c/o Heitman Capital Management
Corporation, 180 North LaSalle Street, Suite 3600, Chicago, Illinois 60601-6789,
and THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP, a Delaware limited partnership
("Purchaser"), having an address of c/o The Taubman Company, 200 East Long Lake
Road, Bloomfield Hills, Michigan 48304, is based upon the following:
A. Seller and Purchaser entered into a certain Agreement of Purchase and
Sale, dated November 5, 1997, as amended by a certain First Amendment to
Agreement of Purchase and Sale, dated November 6, 1997 (collectively, the
"Purchase Agreement"), with respect to The Falls Shopping Center in Miami,
Florida (the "Property").
B. Seller and Purchaser desire to further amend the Purchase Agreement in
the manner set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants, promises and
agreements and subject to the terms and conditions contained herein, the parties
hereto hereby agree as follows:
1. Purchaser hereby agrees that it has completed its Due Diligence and
accepts the condition of the Property, and hereby waives any right to terminate
the Purchase Agreement as a result of the Due Diligence or the condition of the
Property. Nothing contained herein shall affect Purchaser's title objection
letter, dated November 4, 1997, or the rights and obligations of the parties
relative thereto unless and until the matters set forth in such letter are
resolved in accordance with Section 3.3 of the Purchase Agreement.
- 1 -
<PAGE>
2. The Purchase Price set forth in Section 2.2 of the Purchase Agreement
is hereby changed to One Hundred Fifty-Six Million Dollars ($156,000,000).
3. Section 2.2(a) of the Purchase Agreement is hereby amended to provide
that the Earnest Money will be deposited with the Title Company, as escrow
agent, within one (1) business day after Purchaser's receipt of a fully-executed
counterpart of this Amendment.
4. Purchaser and Seller shall determine on November 14, 1997, whether it
is likely that the conditions to closing will be satisfied on or before November
18, 1997. If either Purchaser or Seller determine in its good faith discretion
that such conditions to close are not likely to be satisfied on or before
November 18, 1997, then such party shall have the right to extend the Closing
Date until a date not later than December 4, 1997.
5. Seller and Purchaser acknowledge that certain, relatively minor,
changes will be made to the legal description of the Real Property and that the
proper legal description will be attached to the Special Warranty Deed delivered
by Seller to Purchaser at closing. The legal description set forth on Exhibit A
to the Purchase Agreement will be deemed modified to conform to the legal
description attached to such Special Warranty Deed.
6. Seller acknowledges that its interest in the portion of the Property
located west of the C-100-C Canal is held by City National Bank of Florida, as
trustee for the benefit of Seller. Seller acknowledges that it is the sole
beneficiary of such trust. Seller agrees to cause such trust to convey such
portion of the Property directly to Purchaser at closing pursuant to customary
trustee's deeds.
7. Seller hereby consents to the assignment by Purchaser of its rights
under the Purchase Agreement to The Falls Shopping Center Associates, a Florida
general partnership, the sole partners of which are Purchaser and The TRG Trust
XIII, provided that such transferee executes the assumption agreement and ERISA
Certificate described in Section 16 of the Purchase Agreement.
- 2 -
<PAGE>
8. Capitalized terms used herein shall have the meaning ascribed to them
in the Purchase Agreement.
9. Except as modified by this Amendment, the Purchase Agreement remains in
full force and effect and is hereby ratified and confirmed.
10. This Amendment may be executed in counterparts, each of which shall
constitute an original, although not fully executed, but all of which when taken
together shall constitute but one Amendment. Delivery of a executed counterpart
of this Amendment by telecopy or facsimile shall be effective as delivery of an
original executed counterpart hereof.
IN WITNESS WHEREOF, Seller and Purchaser have executed this Amendment as
of the date first above written.
THE FALLS PARTNERS LIMITED L.P., a
Delaware limited partnership
By: Heitman Capital Management Corporation,
an Illinois corporation its agent and
attorney-in-fact
By: /s/ Howard J. Edelman
-----------------------------------
Howard J. Edelman
Its: Executive Vice President
"Seller"
THE TAUBMAN REALTY GROUP LIMITED
PARTNERSHIP, a Delaware limited
partnership
By: /s/ Cordell A. Lietz
----------------------------------
Cordell A. Lietz
Its: Authorized Signatory
"Purchaser"
- 3 -
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONSTRUCTION LOAN AGREEMENT
among
TAUBMAN MACARTHUR ASSOCIATES LIMITED PARTNERSHIP,
as Borrower,
BAYERISCHE HYPOTHEKEN- UND WECHSEL-BANK,
AKTIENGESELLSCHAFT, NEW YORK BRANCH and
THE OTHER BANKS AND FINANCIAL INSTITUTIONS
FROM TIME TO TIME PARTIES HERETO,
as Lenders,
and
BAYERISCHE HYPOTHEKEN- UND WECHSEL-BANK
AKTIENGESELLSCHAFT, NEW YORK BRANCH,
as Agent
Dated as of October 28, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS.................................................. 2
1.1 Defined Terms............................................... 2
1.2 Other Definitional Provisions............................... 17
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS.............................. 17
2.1 Agreement to Lend and to Borrow; Notes...................... 17
2.2 Determination of Amounts of Loan Advances................... 18
2.3 Budget Evaluation........................................... 19
2.4 Budget Reallocation and Adjustments......................... 19
2.5 Use of Proceeds............................................. 20
SECTION 3. BORROWING PROCEDURES......................................... 20
3.1 Procedure for Borrowing..................................... 20
3.2 First Advance and Subsequent Advances....................... 20
3.3 Waivers of Conditions....................................... 21
3.4 Advances to Pay Interest.................................... 21
3.5 Optional Prepayments........................................ 22
3.6 Conversion and Continuation Options......................... 22
3.7 Minimum Amounts of Tranches; Maximum Number of
Tranches................................................. 23
3.8 Interest Rates and Payment Dates............................ 23
3.9 Computation of Interest and Fees............................ 23
3.10 Inability to Determine Interest Rate....................... 24
3.11 Pro Rata Treatment and Payments............................ 24
3.12 Illegality................................................. 25
3.13 Legal Requirements......................................... 25
3.14 Taxes...................................................... 27
3.15 Indemnity.................................................. 28
3.16 Substitution of Lenders.................................... 29
3.17 Extension of Maturity Date................................. 30
SECTION 4. REPRESENTATIONS AND WARRANTIES............................... 31
4.1 Formation and Existence..................................... 31
4.2 Power and Authority......................................... 32
4.3 Authorization; Enforceable Obligations...................... 32
4.4 No Litigation............................................... 32
4.5 Consents, Approvals, Authorizations, Etc.................... 32
4.6 No Legal Bar................................................ 33
4.7 Compliance with Building Codes, Zoning Laws,
Etc...................................................... 33
4.8 No Default.................................................. 33
4.9 Taxes....................................................... 33
4.10 Availability of Utilities.................................. 33
4.11 Brokerage.................................................. 33
4.12 Permits, Etc............................................... 34
4.13 Financial Statements....................................... 34
4.14 ERISA...................................................... 34
4.15 Solvency................................................... 35
i
<PAGE>
Page
4.16 Roads...................................................... 35
4.17 REA and Leases............................................. 35
4.18 Accuracy of Information; Full Disclosure................... 35
4.19 Mall Site in Buildable Condition........................... 36
4.20 Plans under REA............................................ 36
SECTION 5. AFFIRMATIVE COVENANTS........................................ 36
5.1 Construction................................................ 36
5.2 Performance under Other Agreements.......................... 37
5.3 No Encroachments............................................ 37
5.4 Application of Insurance and Condemnation Proceeds.......... 37
5.5 Certain Notices............................................. 38
5.6 Plan Changes................................................ 38
5.7 Indemnification............................................. 39
5.8 Expenses.................................................... 39
5.9 Construction Schedule....................................... 40
5.10 Inspection of Books and Records............................ 40
5.11 Movement of Unincorporated Materials..................... 40
5.12 Inspection Reports......................................... 41
5.13 Financial Statements; Other Information.................... 41
5.14 Administration Fee......................................... 42
5.15 Leasing.................................................... 42
SECTION 6. NEGATIVE COVENANTS........................................... 43
6.1 Additional Debt............................................. 43
6.2 Changes in Plans............................................ 43
6.3 ............................................................ 43
6.4 Changes in Agreements....................................... 43
6.5 Transactions with Affiliates................................ 44
6.6 Appointment of Manager; Amendment of Third Party Management
Agreement. .............................................. 44
SECTION 7. CONDITIONS PRECEDENT TO FIRST ADVANCE........................ 44
7.1 Closing Documents........................................... 44
7.2 Fees........................................................ 48
7.3 Agency Construction Funding................................. 49
7.4 Accounting.................................................. 49
7.5 Representations and Warranties.............................. 49
7.6 No Default or Event of Default.............................. 49
7.7 Notices of Leasehold Mortgage............................... 49
7.8 Surety Bonds; Construction Contracts....................... 49
7.9 Additional Matters.......................................... 49
SECTION 8. CONDITIONS PRECEDENT TO SUBSEQUENT ADVANCES.................. 49
ii
<PAGE>
Page
8.1 All Subsequent Advances..................................... 49
8.2 Completion of Improvements.................................. 52
SECTION 9. EVENTS OF DEFAULT............................................ 53
9.1 Events of Default........................................... 53
9.2 Lenders' Right to Apply Loan Proceeds....................... 56
9.3 Lenders' Right to Stop Advancing Funds and to Accelerate
the Loans................................................... 57
9.4 Lenders' Right to Complete.................................. 57
9.5 Power of Attorney........................................... 58
SECTION 10. THE AGENT................................................... 58
10.1 Appointment................................................ 58
10.2 Delegation of Duties....................................... 58
10.3 Exculpatory Provisions..................................... 59
10.4 Reliance by Agent.......................................... 59
10.5 Notice of Default.......................................... 59
10.6 Non-Reliance on Agent and Other Lenders.................... 60
10.7 Indemnification............................................ 60
10.8 Agent in Its Individual Capacity........................... 61
10.9 Successor Agent............................................ 61
10.10 Rights of Agent and the Lenders........................... 61
10.11 Participation. .......................................... 63
10.12 Liability of Agent........................................ 64
SECTION 11. GENERAL CONDITIONS.......................................... 65
11.1 No Waivers................................................. 65
11.2 Lenders and Agent Sole Beneficiary......................... 65
11.3 Notices.................................................... 65
11.4 Modifications.............................................. 66
11.5 Rights Cumulative.......................................... 66
11.6 Sign....................................................... 67
11.7 Schedules.................................................. 67
11.8 Successors and Assigns..................................... 67
11.9 Governing Law.............................................. 67
11.10 Submission to Jurisdiction................................ 67
11.11 WAIVERS OF JURY TRIAL..................................... 68
11.12 Captions.................................................. 68
11.13 Adjustments; Set-off...................................... 68
11.14 Counterparts.............................................. 68
11.15 Severability.............................................. 69
11.16 Integration............................................... 69
11.17 Cure Rights of Agency..................................... 69
11.18 Exculpation............................................... 69
11.19 Non-Recourse to TRG Partners.............................. 70
iii
<PAGE>
SCHEDULES
Schedule 1 Borrower Construction Plans
EXHIBITS
Exhibit A Form of Borrowing Certificate and Requisition
Exhibit B Form of Note
Exhibit C Form of Assignment and Acceptance
Exhibit D Solvency Certificate
iv
<PAGE>
CONSTRUCTION LOAN AGREEMENT
---------------------------
THIS AGREEMENT is made as of the 28th day of October, 1997 among
TAUBMAN MACARTHUR ASSOCIATES LIMITED PARTNERSHIP, a Delaware limited partnership
("Borrower"), BAYERISCHE HYPOTHEKEN- UND WECHSEL-BANK AKTIENGESELLSCHAFT, NEW
YORK BRANCH, the New York branch of a German banking corporation as
administrative agent (in such capacity, the "Agent") for itself and the other
banks and financial institutions from time to time parties to this Agreement
(the Agent, together with such other banks and financial institutions, being
sometimes referred to collectively as "Lenders" and individually as a "Lender").
RECITALS
--------
A. The Borrower is developing and constructing a regional shopping
mall in the Downtown North Area of Norfolk, Virginia to be known as "MacArthur
Center", containing approximately 930,000 square feet of gross leasable area
(the "Mall"), which Mall may include an entertainment center. The Norfolk
Redevelopment and Housing Authority in its capacity as the Redevelopment
Commission of the City of Norfolk (the "Agency") is leasing to Borrower a
portion of the Mall, as more particularly described in Schedule A to the
Mortgage (the "Leased Premises"). The Mall is to be anchored by Nordstrom, Inc.,
which will lease its site (the "Nordstrom Site") directly from the Agency and
Dillards, Inc. which will lease its site (the "Dillards Site") directly from
Borrower.
B. Borrower has requested Lenders to make loans to Borrower in the
aggregate principal amount not to exceed $150,000,000 in order to provide the
financing for (i) construction of improvements to be located on the Leased
Premises and (ii) certain other costs, as described in the Budget referred to
below.
C. Subject to the terms and conditions of this Agreement, Lenders
will make the loans to Borrower.
<PAGE>
2
AGREEMENT
---------
SECTION 1. DEFINITIONS
-----------
1.1 Defined Terms. For the purposes of this Agreement each of the
following terms shall have the meaning given such term below:
Administrative Fee: As defined in Section 3.14.
Affected Bank: As defined in Section 3.16
Agent: As defined in the Preamble, including any successor agent
appointed pursuant to this Agreement.
Affiliate: As to any Person, any other Person (other than a
subsidiary) which, directly or indirectly, is in control of, is controlled
by, or is under common control with, such Person. For purposes of this
definition "control" of a Person means the power, directly or indirectly,
either to (a) vote 10% or more of the securities having ordinary voting
power for the election of directors of such Person or (b) direct or cause
the direction of the management and policies of such Person, whether by
contract or otherwise.
Agency: As defined in the Recitals.
Agency Construction Plans: Any schematic plan, design development
document, plan or specification delivered by the Agency to Agent with
respect to the Public Components (as defined in the Project Agreement).
Agency Estoppel: The certificate dated as of the date of this
Agreement addressed to the Agent for the benefit of the Lenders from the
Agency in which the Agency certifies the amount it has funded to date for
completion of the Agency's Work and other amounts which it is required to
fund pursuant to the Project Documents and other matters reasonably
requested by the Agent.
Agency Documents: The collective reference to the Project Agreement
and the Mall Lease.
Agency's Work: shall mean the design and construction of the Public
Components (as defined in the Project Agreement).
Agreement: This Construction Loan Agreement, as it may be amended,
supplemented or otherwise modified from time to time.
<PAGE>
3
Anchor Leases: The collective reference to the Dillards Lease, the
Nordstrom's Lease, the Nordstrom Supplement, the Dillards' Supplement and
any lease or other agreement entered into by Borrower with a department
store which occupies the Third Anchor Parcel (as defined in the Mortgage).
Applicable Margin: with respect to each Type of Loan at any date, the
applicable percentage per annum set forth below:
Eurodollar Loans 1.20%
Prime Rate Loans 0.50%
provided, if during any Interest Period the Negative Rating Condition
exists, the Applicable Margin shall be increased by 0.15% with respect to
the Guarantied Principal for such Interest Period (and remain as stated
above with respect to the Non-Guarantied Principal) and provided, further,
during the Second Extension Period, the then Applicable Margin (after
giving effect to any increase pursuant to the proviso above) shall be
increased by 0.15% with respect to the entire principal amount of the Loans
outstanding.
Architect: Hobbs & Black Associates, Inc. or such architect as
Borrower may engage from time to time with the prior written consent of
Agent if required under the terms of this Agreement.
Architect's Agreement: The Agreement dated January 15, 1996 between
Borrower and the Architect as the same may be amended, supplemented or
otherwise modified from time to time with the prior written consent of
Agent in accordance with the terms of this Agreement.
Architect's Certificate: A certificate (which shall include standard
form G-702) by the Architect delivered to the Agent on or before the date
of the initial advance of the Loan, satisfactory in form and substance to
Agent.
Assignee: As defined in subsection 10.11(b).
Assignment of Leases: The Assignment of Leases dated as of the date
this Agreement made by Borrower to Agent, as it may be amended,
supplemented or otherwise modified from time to time.
Automatic Acceleration Default: As defined in the Mortgage.
Available Commitment: As to any Lender at any time, an amount equal to
the excess, if any, of (a) the amount of
<PAGE>
4
such Lender's Commitment over (b) the aggregate principal amount of all
Loans theretofore made by such Lender, provided that from and after the
Termination Date, the Available Commitment shall equal zero.
Borrower: As defined in the Preamble.
Borrowing Certificate and Requisition: A certificate by a Responsible
Officer, delivered to Agent on each Borrowing Date, substantially in the
form of Exhibit A.
Borrowing Date: Any Business Day (or LIBOR Business Day for a
Eurodollar Loan) specified in a notice pursuant to subsection 3.1 as a date
on which Borrower requests Lenders to make Loans hereunder.
Borrower Construction Plans: The plan, design development document and
specifications delivered by Borrower to Agent with respect to the Private
Components (as defined in the Project Agreement), a schedule of which is
attached hereto as Schedule 1.
Borrower Documents: The collective reference to the Management
Agreement, the Partnership Agreement, the REA, the Dillards' Supplement,
the Nordstrom Supplement and the Construction Documents.
Borrower's Work: Shall mean the design and Construction of the Private
Components (as defined in the Project Agreement).
Budget: The budget previously delivered to and approved by Agent, as
it may be amended, supplemented or otherwise modified from time to time in
accordance with this Agreement.
Budget Deficit: As defined in subsection 2.3.
Business Day: A day other than a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required by law
to close.
Code: The Internal Revenue Code of 1986, as amended from time to time.
Collateral: The collective reference to the Leased Premises and any
other property encumbered by the Security Documents.
Commitment: As to any Lender, the obligations of such Lender to make
Loans to Borrower hereunder in an aggregate principal amount not to exceed
the amount set forth opposite such Lender's name on the signature page to
this Agreement.
<PAGE>
5
Commitment Amount: At any time, the aggregate principal amount of the
Loans outstanding at such time plus the sum of the Available Commitment of
each Lender at such time.
Commitment Percentage: As to any Lender at any time, the percentage
which such Lender's Commitment then constitutes of the aggregate
Commitments (or, at any time after the Commitments shall have expired or
terminated, the percentage which the aggregate principal amount of such
Lender's Loans then outstanding constitutes of the aggregate principal
amount of the Loans then outstanding).
Commitment Period: The period from and including the date hereof to
but not including the Termination Date or such earlier date as the
Commitments shall terminate as provided herein.
Commonly Controlled Entity: An entity, whether or not incorporated,
which is under common control with the Borrower within the meaning of
Section 4001 of ERISA or is part of a group which includes the Borrower and
which is treated as a single employer under Section 414 of the Code.
Completion or Completed: Shall mean, with respect to the Improvements,
completion of the Improvements in accordance with each of the conditions
set forth in Section 8.2.
Completion Guaranty: The Completion Guaranty dated of even date
herewith made by Guarantor in favor of Agent, as it may be amended,
supplemented or otherwise modified from time to time.
Construction Agreement: The agreement dated on or about the date
hereof, between Borrower and the Construction Manager, providing for the
construction of the Improvements, as the same may be amended, supplemented
or otherwise modified from time to time in accordance with the terms of
this Agreement.
Construction Documents: The collective reference to the Construction
Agreement, the Architect's Agreement, the Engineer's Agreement and the
Permits.
Construction Manager: Sordoni Skanska Construction Co. or such other
construction manager or general contractors as may be engaged by Borrower
from time to time in connection with the construction of the Improvements
with the Agent's prior written approval if required under the terms of this
Agreement.
Construction Manager's Certificate: A certificate by the Construction
Manager (which shall include standard form
<PAGE>
6
G-702) delivered to the Agent on or before the date of the initial advance
of the Loan, satisfactory in Form and substance to Agent.
Consulting Professional: Inspection & Valuation International, Inc.,
or such other architectural or engineering consultant as Lenders may engage
from time to time to examine the Plans, changes in the Plans and Budget
cost breakdowns and estimates, to make periodic inspections of the progress
on construction of the Improvements on Lenders' behalf and to advise and
render reports to Lenders.
Contractual Obligation: As to any Person, any provision of any
security issued by such Person or of any agreement, instrument or
undertaking to which such Person is a party or by which it or any of its
property is bound.
Default: Any of the events specified in subsection 9.1, whether or not
any requirement for the giving of notice, the lapse of time, or both, or
any other condition has been satisfied.
Dillards: Dillards Department Stores, Inc., a Delaware corporation.
Dillards' Improvements: The improvements constituting a Dillards
retail department store containing approximately 260,000 square feet of
space to be constructed on the Dillards' Site and to be operated by
Dillards.
Dillards' Lease: The Land Sublease dated as of November 22, 1996
between Dillards and the Borrower for the occupancy of the Dillards' Site.
Dillards' Site: As defined in the Recitals.
Dillards' Supplement: The Supplemental Agreement dated as of November
22, 1996 by and between Borrower and Dillards.
Dollars and $: Dollars in lawful currency of the United States of
America.
Engineer: Michael Baker Jr., Inc or such other engineer as may be
engaged by Borrower from time to time in connection with the construction
of the Improvements with the Agent's prior written approval if required
under this Agreement.
Engineer's Agreement: The agreement dated on or about the date hereof
between Borrower and the Engineer, as the same may be amended, supplemented
or otherwise modified from time to time with the prior written consent of
Agent if required under this Agreement.
<PAGE>
7
Engineer's Certificate: A certificate from the Engineer delivered to
the Agent on or before the date of the initial advance of the Loan,
satisfactory in form and substance to Agent.
Environmental Indemnity: The Environmental Indemnity Agreement dated
as of the date of this Agreement made by Borrower and the Guarantor in
favor of Lenders as the same may be amended, supplemented or otherwise
modified from time to time.
ERISA: The Employee Retirement Income Security Act of 1974, as amended
from time to time.
ERISA Plan: At a particular time, any employee benefit plan which is
covered by ERISA and in respect of which the Borrower or a Commonly
Controlled Entity is (or, if such plan were terminated at such time, would
under Section 4069 of ERISA be deemed to be) an "employer" as defined in
Section 3(5) of ERISA.
Eurodollar Loans: Loans the rate of interest applicable to which is
based upon the Eurodollar Rate.
Eurodollar Rate: with respect to each Eurodollar Loan during a
specified Interest Period, the rate of interest per annum obtained by
dividing (i) the Eurodollar rate commencing on the first day of such
Interest Period, appearing on Page 3750 of the Telerate Service as of 11:00
A.M., London time, two LIBOR Business Days prior to the beginning of such
Interest Period by (ii) a percentage equal to 100% minus the stated maximum
rate (expressed as a percentage, rounded upward to the next 1/100th of one
percent) of all reserve requirements (including any marginal, emergency,
supplemental, special or other reserves) applicable as of a date which is
two LIBOR Business Days prior to the beginning of such Interest Period to
any member bank of the Federal Reserve System in respect of "Eurocurrency
liabilities" as defined in Regulation D (or any successor category of
liabilities under Regulation D). In the event that such rate does not
appear on Page 3750 of the Telerate Service (or otherwise on such service),
the "Eurodollar Rate" shall be determined on the basis of the rates at
which deposits in U.S. dollars are offered by four major banks (the
"Reference Banks") at or about 11:00 A.M., London time, two LIBOR Business
Days prior to the beginning of such Interest Period, to prime banks in the
interbank eurodollar market for delivery on the first day of such Interest
Period, for a period equal to such Interest Period, and in an amount
comparable to the amount of its Eurodollar Loan to be outstanding during
such Interest Period, as adjusted for reserve requirements pursuant the
previous sentence. Agent will request the principal London office of each
of the Reference Banks to provide a quotation of its
<PAGE>
8
rate. If at least two such quotations are provided, the rate for that
Interest Period will be the arithmetic mean of the quotations.
If fewer than two quotations are provided as requested, the rate for that
Interest Period will be the arithmetic mean of the rates quoted by major
banks in New York City, selected by Agent, at approximately 11:00 A.M., New
York City time, on the date that is two LIBOR Business Days prior to the
beginning of such Interest Period for loans in U.S. dollars to leading
European banks for a period equal to such Interest Period, and in an amount
comparable to the amount of its Eurodollar Loan to be outstanding during
such Interest Period, as adjusted for reserve requirements pursuant the
above definition.
Event of Default: Any of the events specified in subsection 9.1,
provided that any requirement for the giving of notice, the lapse of time,
or both, or any other condition, has been satisfied.
Federal Funds Rate: For any day, the rate per annum equal to the
weighted average of the rates on overnight federal funds transactions, as
published by the Federal Reserve Bank of New York for such day provided
that (a) if such day is not a Business Day, the Federal Funds Rate for such
day shall be such rate on such transactions on the immediately preceding
Business Day as so published on the next succeeding Business Day, and (b)
if such rate is not so published for any day which is a Business Day, the
Federal Funds Rate for such day shall be the average of the rates quoted to
Agent by three federal funds brokers of recognized standing selected by it
on such day on such transactions.
Financing Lease: Any lease of property, real or personal, the
obligations of the lessee in respect of which are required in accordance
with GAAP to be capitalized on a balance sheet of the lessee.
First Extended Maturity Date: As defined in Section 3.17.
First Extension: The extension of the Initial Maturity Date until the
First Extended Maturity Date pursuant to Section 3.17.
Force Majeure Delay: Any cause or event which is beyond the reasonable
control and not due to the fault or negligence of Borrower, which delays,
prevents or prohibits the construction of the Improvements, including,
without limitation, acts of God or the elements, fire, strikes, labor
disputes, delays in delivery of material and disruption of shipping.
<PAGE>
9
GAAP: Generally accepted accounting principles in the United States of
America in effect from time to time.
Garage Agreement: as defined in the definition of REA.
Governmental Authority: Any nation or government, any state or other
political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government.
Guarantied Obligations: As defined in the Payment Guaranty.
Guarantied Principal: As defined in the Payment Guaranty.
Guaranties: The collective reference to (i) the Completion Guaranty,
(ii) the Payment Guaranty and (iii) the Environmental Indemnity.
Guarantor: The Taubman Realty Group Limited Partnership, a Delaware
limited Partnership.
Guaranty Percentage: As defined in the Payment Guaranty.
Hypo: Bayerische Hypotheken-Und Wechsel-Bank Aktiengesellschaft, New
York Branch.
Improvements: The Borrower's Work to be constructed on the Leased
Premises in accordance with Borrower Construction Plans.
Indebtedness: Of any Person at any date, means, without duplication
(a) all indebtedness of such Person for borrowed money or for the deferred
purchase price of property or services (including trade obligations), (b)
all obligations of such Person as the lessee under Financing Leases, (c)
current liabilities in respect of unfunded vested benefits under any ERISA
Plan, (d) obligations under letters of credit issued for the account of
such Person, (e) obligations under bankers' or trade acceptance facilities,
(f) all guarantees of such Person of any Indebtedness or other obligation
of any other Person, (g) all endorsements (other than for collection or
deposit in the ordinary course of business) and other contingent
obligations to purchase any of the items included in this definition, to
provide funds for payment, to supply funds to invest in any Person or
otherwise to assure a creditor against loss, (h) all obligations secured by
any Lien on any property owned by such Person even though such Person has
not assumed or otherwise become liable for the payment thereof, (i) all
obligations under any agreement providing for contingent participation or
other hedging mechanisms with respect to
<PAGE>
10
interest on any other indebtedness of such Person payable on any of the
items described above in this definition and (j) any other indebtedness of
such Person which is evidenced by a note, bond, debenture or similar
instrument.
Initial Maturity Date: October 27, 2000.
Insolvency: With respect to any Multiemployer Plan, the condition that
such ERISA Plan is insolvent within the meaning of Section 4245 of ERISA.
Insolvent: Pertaining to a condition of Insolvency.
Interest Payment Date: The first Business Day of each calendar month.
Interest Period: With respect to any Eurodollar Loan:
(i) initially, the period commencing on the borrowing or
conversion date, as the case may be, with respect to such Eurodollar
Loan and ending one, two, three or six months (to the extent funds are
available for such six-month period) thereafter, as selected by
Borrower in its notice of borrowing or notice of conversion, as the
case may be, given with respect thereto; and
(ii) thereafter, each period commencing on the last day of the
immediately preceding Interest Period applicable to such Eurodollar
Loan and ending one, two, three or six months (to the extent funds are
available for such six-month period) thereafter, as selected by
Borrower by irrevocable notice to Agent not less than three LIBOR
Business Days prior to the last day of the then current Interest
Period with respect thereto;
provided that, all of the foregoing provisions relating to Interest Periods
are subject to the following:
(A) if any Interest Period pertaining to a Eurodollar Loan would
otherwise end on a day that is not a LIBOR Business Day, such Interest
Period shall be extended to the next succeeding LIBOR Business Day
unless the result of such extension would be to carry such Interest
Period into another calendar month in which event such Interest Period
shall end on the immediately preceding LIBOR Business Day;
(B) any Interest Period that would otherwise extend beyond the
Maturity Date shall end on the Maturity Date; and
(C) any Interest Period pertaining to a Eurodollar Loan that
begins on the last LIBOR Business
<PAGE>
11
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall end on the last LIBOR Business Day of a calendar month.
Land: the parcel of land demised by the Agency to Borrower under the
Mall Lease.
Leased Premises: As defined in the Recitals.
Leases: All subleases, underlettings, concession agreements and
licenses of any portion of the Leased Premises, now existing or entered
into in the future to which Borrower is a party.
Legal Requirement: As to any Person, any law, treaty, rule or
regulation or determination of an arbitrator or a court or other
Governmental Authority, in each case applicable to or binding upon such
Person or any of its property or to which such Person or any of its
property is subject.
Lender or Lenders: As defined in the Preamble.
LIBOR Business Day: A day other than a Saturday, Sunday or other day
on which commercial banks in London, England are authorized or required by
law to close.
Lien: Any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge or other
security interest or any preference, priority or other security agreement
or preferential arrangement of any kind or nature whatsoever (including,
without limitation, any conditional sale or other title retention agreement
and any Financing Lease having substantially the same economic effect as
any of the foregoing).
Loan: Any loan made by any Lender pursuant to this Agreement.
Loan Documents: The collective reference to this Agreement, the Notes,
the Security Documents, the Guaranties, the Environmental Indemnity and all
other documents and instruments from time to time evidencing or securing
the Loan.
Major Agreements: The collective reference to the Project Documents,
the Construction Documents and the Anchor Leases, as the same may be
amended, supplemented, modified or replaced from time to time with the
prior written consent of Agent in accordance with the terms hereof.
<PAGE>
12
Major Leases: Any lease or sublease of space by Borrower which demises
in excess of 10,000 square feet.
Mall: As defined in the Recitals.
Mall Lease: The Deed of Ground Lease dated as of June 14, 1996 between
the Agency, as lessor, and Borrower, as lessee, as it may be amended,
supplemented or otherwise modified with Lenders' prior written approval in
accordance with subsection 6.4.
Management Agreement: any management agreement entered into by
Borrower and Manager in accordance with the terms of this Agreement, as it
may be amended, supplemented or otherwise modified from time to time with
Lenders' prior written approval in accordance with subsection 6.4.
Manager: an entity engaged by Borrower from time to time in accordance
with this Agreement to operate and lease the Mall.
Material Adverse Effect: A material adverse effect on (a) the
business, operations, property, financial condition or prospects of
Borrower or Guarantor which would materially impair Borrower's or the
Guarantor's ability to perform its obligations under this Agreement or any
of the other Loan Documents or any of the Project Documents or (b) the
validity or enforceability of any of the Loan Documents or the material
rights or remedies of the Agent or the Lenders thereunder.
Maturity Date: The Initial Maturity Date, the First Extended Maturity
Date or the Second Extended Maturity Date, whichever is applicable.
Moody's: Moody's Investors Service, Inc. and its successors.
Mortgage: The Leasehold Deed of Trust, Assignment of Leases and Rents
and Security Agreement dated as of the date of this Agreement made by
Borrower to the trustee named therein for the benefit of Agent, as it may
be amended, supplemented or otherwise modified from time to time.
Multiemployer Plan: An ERISA Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
Negative Rating Condition: At any time, (a) the Guarantied Obligations
of the Loan is above zero and (b) the Guarantor has a long-term senior
unsecured debt rating of below BBB- by S&P and below Baa3 by Moodys.
<PAGE>
13
provided that if S&P and/or Moody's shall cease to issue ratings of debt
securities of Guarantor, then the Agent and the Borrower shall negotiate in
good faith to agree upon a substitute rating agency or agencies (and to
correlate the system of ratings of each substitute rating agency with that
of the rating agency for which it is substituting) and (a) until such
substitute rating agency or agencies are agreed upon, the existence of the
Negative Rating Condition shall be determined on the basis of the rating
assigned by the other rating agency (or, if both S&P and Moody's shall have
so ceased to issue such ratings, on the basis of the rating in effect
immediately prior thereto) and (b) after such substitute rating agency or
agencies are agreed upon, the existence of the Negative Rating Condition
shall be determined on the basis of the rating assigned by the other rating
agency and such substitute rating agency or the two substitute rating
agencies, as the case may be.
Non-Excluded Taxes: As defined in subsection 3.14.
Non-Guarantied Principal: As defined in the Payment Guaranty.
Nordstrom: Nordstrom, Inc., a Washington corporation.
Nordstrom Improvements: The improvements constituting a retail
department store containing approximately 160,000 square feet of space to
be constructed on the Nordstrom Site and to be operated by Nordstrom.
Nordstrom's Lease: The Lease dated as of November 22, 1996 between
Nordstrom and the Agency for the occupancy of the Nordstrom Site and
improvements.
Nordstrom's Supplement: The Supplemental Agreement dated as of
November 22, 1996 by and between Borrower and Nordstrom.
Note or Notes: The collective reference to the Notes dated as of the
date of this Agreement made by Borrower to the order of each Lender, as the
same may be amended, supplemented, modified, extended, restated or replaced
from time to time (including, without limitation, any new or replacement
notes issued to any Lender pursuant to subsection 10.11(d) of this
Agreement).
NPA: Norfolk Place Associates, L.P., a Virginia limited partnership.
Outside Completion Date: February 15, 2000 subject to extension for
Force Majeure delays, but in no event later than March 10, 2000.
Participants: As defined in subsection 10.11(a).
<PAGE>
14
Partnership Agreement: The Agreement of Limited Partnership of
Borrower dated as of May 11, 1995, as it may be amended, supplemented or
otherwise modified from time to time in accordance with Section 6.4(b).
Payment Guaranty: The Payment Guaranty dated as of the date of this
Agreement, as the same may be amended, supplemented or otherwise modified
from time to time.
PBGC: The Pension Benefit Guaranty Corporation established pursuant to
Subtitle A of Title IV of ERISA.
Permits: All consents, licenses and building permits required for
construction, completion, occupancy and operation of the Improvements in
accordance with all Legal Requirements affecting the Project.
Permitted Encumbrances: As defined in the Mortgage.
Permitted Exceptions: As defined in the Mortgage.
Person: An individual, partnership, limited liability company,
corporation, business trust, joint stock company, trust, unincorporated
association, joint venture, Governmental Authority or other entity of
whatever nature.
Plans: The collective reference to the Agency Construction Plans and
Borrower Construction Plans, as such plans and specifications may be
amended, supplemented or otherwise modified from time to time in accordance
with subsections 6.2 and 6.3.
Prime Rate: The rate of interest publicly announced by Agent's New
York Branch in New York, New York from time to time as its prime commercial
lending rate. The prime commercial lending rate is not intended to be the
lowest rate of interest charged by such Branch in connection with the
extension of credit to debtors.
Prime Rate Loans: Loans the rate of interest applicable to which is
based upon the Prime Rate.
Project: The collective reference to the Land and the Improvements.
Project Agreement: The Land Disposition and Development Contract dated
May 31, 1994 between the Agency and NPA as assigned by NPA to Borrower
pursuant to an Assignment and Assumption Agreement dated May 11, 1995 and
as amended by a First Amendment dated as of May 8, 1995, a Second Amendment
dated November 13, 1995 and a Third Amendment dated March 11, 1996 and as
it may be further amended, supplemented or otherwise modified from time to
time in accordance with subsection 6.4.
<PAGE>
15
Project Documents: The collective reference to the Agency Documents
and the Borrower Documents.
REA: The collective reference to (i) the Construction, Operation and
Reciprocal Easement Agreement dated as of November 22, 1996 by and among
Borrower, Nordstrom, Dillards and the Agency and (ii) the Parking
Development, Operation and Maintenance Agreement (the "Garage Agreement")
dated as of June 14, 1996 by and among the City, the Agency, Borrower,
Nordstrom and Dillards, as each may be further amended, supplemented or
otherwise modified from time to time in accordance with subsection 6.4.
Regal Lease: That certain Lease dated February 12, 1997 between
Borrower and Regal Cinema, Inc, as it may be amended, supplemented or
otherwise modified from time to time.
Register: As defined in subsection 10.11(c).
Reorganization: With respect to any Multiemployer Plan, the condition
that such plan is in reorganization within the meaning of Section 4241 of
ERISA.
Reportable Event: Any of the events set forth in Section 4043(b) of
ERISA, other than those events as to which the thirty day notice period is
waived under subsections .13, .14, .16, .18, .19 or .20 of PBGC Reg. ss.
2615.
Required Lenders: At any time, Lenders the Commitment Percentages of
which aggregate at least 66 2/3%.
Rents: All rights of Borrower in respect of cash and securities
deposited under any Lease and the right to receive and collect the
revenues, income, rents, issues and profits of any Lease.
Responsible Officer: Shire Rothbart, Brian Lasher, Richard McGlinn or
Mary Zebrowski or such other individual as shall be named by a Responsible
Officer by notice to Agent.
S&P: Standard & Poor's Ratings Group and its successors.
Second Extension: The extension of the First Extended Maturity Date
until the Second Extended Maturity Date pursuant to Section 3.17.
Second Extension Period: As defined in Section 3.17.
Security Agreement: The Security Agreement and Assignment of Contracts
made by Borrower to Agent dated as
<PAGE>
16
of the date of this Agreement as it may be amended, supplemented or
otherwise modified from time to time.
Security Documents: The collective reference to the Mortgage, the
Assignment of Leases, the Security Agreement and all other documents from
time to time entered into or consented to by Borrower which secure the
repayment of the Notes.
Single Employer Plan: Any ERISA Plan which is covered by Title IV of
ERISA, but which is not a Multiemployer Plan.
Solvency Certificate: A certificate substantially in the form of
Exhibit D.
Solvent: means, when used with respect to any Person, that (1) the
fair value of the property of such Person, on a going concern basis, is
greater than the total amount of liabilities (including, without
limitation, contingent liabilities) of such Person; (2) the present fair
saleable value of the assets of such Person, on a going concern basis, is
not less than the amount that will be required to pay the probable
liabilities of such Person on its debts as they become absolute and
matured; (3) such Person does not intend to, and does not believe that it
will, incur debts or liabilities beyond such Person's ability to pay as
such debts and liabilities mature; (4) such Person is not engaged in
business or a transaction, and is not about to engage in business or a
transaction, for which such Person's property would constitute unreasonably
small capital after giving due consideration to the prevailing practice in
the industry in which such Person is engaged; and (5) such Person has
sufficient resources, provided that such resources are prudently utilized,
to satisfy all of such Person's obligations. Contingent liabilities will be
computed at the amount that, in light of all the facts and circumstances
existing at such time, represents the amount that can reasonably be
expected to become an actual or matured liability.
Termination Date: the date that is six months after the Outside
Completion Date.
Title Company: Lawyers Title Insurance Company, or such other title
company as may be approved in writing by Agent.
Tranche: The collective reference to Eurodollar Loans the then current
Interest Periods with respect to all of which begin on the same date and
end on the same later date (whether or not such Loans shall originally have
been made on the same day); Tranches may be identified as "Eurodollar
Tranches".
<PAGE>
17
Transferee: As defined in subsection 11.8(f).
Trust Property: As defined in the Mortgage.
Type: As to any Loan, its nature as a Prime Rate Loan or a Eurodollar
Loan.
Unincorporated Materials: Materials purchased or manufactured for
incorporation in the Improvements but, at the time an advance under the
Loan is made to pay the cost therefor, not yet incorporated in the
Improvements.
1.2 Other Definitional Provisions. (a) Unless otherwise specified
therein, all terms defined in this Agreement shall have the defined meanings
when used in the Notes or any certificate or other document made or delivered
pursuant hereto.
(b) As used herein and in the Notes, and any certificate or other
document made or delivered pursuant hereto, accounting terms relating to
Borrower not defined in subsection 1.1 and accounting terms partly defined in
subsection 1.1, to the extent not defined, shall have the respective meanings
given to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and Section, subsection,
Schedule and Exhibit references are to this Agreement unless otherwise
specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS
-------------------------------
2.1 Agreement to Lend and to Borrow; Notes. (a) Subject to the
conditions and upon the terms provided for in this Agreement, each Lender
severally agrees to make loans to Borrower in an aggregate principal amount not
to exceed the amount of the Commitment of such Lender, but only during the
Commitment Period. The Loans may from time to time be (a) Eurodollar Loans, (b)
Prime Rate Loans or (c) a combination thereof, as determined by Borrower and
notified to Agent in accordance with subsection 3.1.
(b) The Loans made by each Lender shall be evidenced by a Note of
Borrower, substantially in the form of Exhibit B, with appropriate insertions
therein as to payee, date and principal amount, payable to the order of such
Lender. Each Lender is hereby authorized to record the date and amount of each
advance and payment or prepayment of principal of its Loan, each continuation
thereof, each conversion of all or a portion thereof to another Type and, in the
case of Eurodollar Loans, the length
<PAGE>
18
of each Interest Period with respect thereto, on the schedule annexed to and
constituting a part of its Note, and any such recordation shall constitute prima
facie evidence of the accuracy of the information so recorded. The Note of each
Lender shall (a) be dated the date hereof, (b) be stated to mature on the
Maturity Date and (c) provide for the payment of interest in accordance with
subsection 3.8.
2.2 Determination of Amounts of Loan Advances.
(a) Disbursements for costs of constructing and equipping the
Improvements included in the Budget, shall be made as such costs are incurred;
the amount of the costs which have been incurred shall be determined by the
Agent, in its reasonable discretion, based upon certifications of Borrower, the
Construction Manager and the Consulting Professional and such other evidence as
may be reasonably required by the Agent, less the amount which Borrower retains
under the relevant construction contracts. Upon final completion of the work
performed by any contractor or subcontractor substantially in accordance with
the Plans, as certified to Agent by the Construction Manager and confirmed by
the Consulting Professional, Agent shall release that portion of the retention
allocated to the work performed by such contractor or subcontractor in
accordance with the Budget, provided that Agent shall have received a final lien
waiver and sworn statement from such contractor or subcontractor.
(b) The Lenders, upon instruction by the Agent, shall advance from
time to time portions of the Loans to pay costs of Unincorporated Materials;
provided, that, in no event shall the outstanding amount of the Loans disbursed
to pay the costs of Unincorporated Materials at any one time exceed the sum of
$3,500,000. Any such advances shall be made subject to satisfaction of all other
conditions of this Agreement applicable to advances of the Loan and each of the
following conditions:
(1) the Unincorporated Materials, whether stored on or off the
Leased Premises, shall be secured, segregated and identifiable in a
manner reasonably satisfactory to the Agent;
(2) the Agent shall be given the complete address of the place of
storage of any Unincorporated Materials stored off the Land and the
Consulting Professional shall be allowed access at reasonable times to
inspect such Unincorporated Materials;
(3) the Agent shall be provided with insurance with respect to
the Unincorporated Materials of kinds, in form and amount and written
by insurers satisfactory to the Agent and covering the Agent as an
insured;
<PAGE>
19
(4) except as provided in clause (8) below, the Agent shall have
received evidence satisfactory to it that Borrower has good title to
the Unincorporated Materials, free from any lien or encumbrances, upon
payment therefor;
(5) the Agent shall have received copies of any documents of
title and warehouse receipts that evidence title to the Unincorporated
Materials;
(6) the Agent shall have received such documents and instruments,
including, without limitation, financing statements, security
agreements, consents of manufacturers, vendors, warehousemen and
bailees, as the Agent may reasonably require to evidence or perfect
the Agent's lien on the Unincorporated Materials;
(7) upon request by Agent, the Agent shall have received evidence
satisfactory to it that all specially fabricated Unincorporated
Materials have been fabricated in accordance with the Plans; and
(8) if the Agent advances amounts to pay contract deposits for
Unincorporated Materials, and title has not passed to Borrower, the
Agent shall have received a first, perfected, enforceable security
interest in Borrower's rights in the contract for the purchase of such
materials and any sums payable or refundable to Borrower thereunder,
and, if requested by the Agent, the contract vendor shall have
consented to such assignment and agreed to perform its obligations
under such contract for the benefit of the Agent.
2.3 Budget Evaluation. If at any time Agent, after reallocation of any
amounts under subsection 2.4, reasonably determines after consultation with
Borrower that the portion of the Available Commitment allocated to any line item
of the Budget is not sufficient to pay the cost of completing such line item,
except, so long as no Event of Default is continuing, the line item for
interest, (any such deficiency, a "Budget Deficit"), Borrower shall be required
to pay costs of such line item or items as to which the Budget Deficit exists
with funds from some other source (including the contingency line item) before
Lenders advance proceeds of the Loans to pay such costs and upon such payment by
Borrower, such Budget Deficit shall be remedied.
2.4 Budget Reallocation and Adjustments. If at any time the Available
Commitment allocated to any line item shown on the Budget exceeds the amount
necessary for such line item, then Borrower, with the approval of Agent, which
approval shall not be unreasonably withheld or delayed, may allocate the amount
of such excess to any other line item shown on the Budget that Agent deems to be
insufficient, or if no other line item is insufficient Borrower may reallocate
the amount of such excess to
<PAGE>
20
any other line item shown on the Budget (including contingency), provided,
however, such reallocation shall require Agent's prior approval, such approval
not to be unreasonably withheld and which approval shall not be required if the
aggregate amount of such reallocation is for an amount less then $5,000,000.
2.5 Use of Proceeds. The proceeds of the Loans shall be used by
Borrower only for payment of costs specified in the Budget.
SECTION 3. BORROWING PROCEDURES
--------------------
3.1 Procedure for Borrowing. Borrower shall give Agent irrevocable
notice (which notice must be received by Agent prior to 10:00 A.M., New York
City time, seven Business Days prior to the Borrowing Date (which date shall be
prior to the Termination Date) requesting that Lenders make loans on the
Borrowing Date and specifying (i) the amount to be borrowed, (ii) whether the
Loans are to be initially Eurodollar Loans, Prime Rate Loans, or a combination
thereof, and (iii) if the Loans are to be entirely or partly Eurodollar Loans,
the respective amounts of each such Type of Loan and the respective lengths of
the initial Interest Periods therefor. Upon receipt of such notice Agent shall
promptly notify each Lender thereof. Provided all conditions to an advance of
the Loan proceeds have been satisfied or otherwise waived by Agent in accordance
with the terms hereof, Lenders shall deposit in an account designated by
Borrower for transmittal upon Borrower's order, in immediately available funds,
the amount of the advance then requested. Upon the occurrence and during the
continuance of an Event of Default, at Agent's option, Lenders may advance funds
by payment directly to the third party to whom an amount is payable and Agent
shall provide Borrower with notice promptly after such advance is made. The
execution of this Agreement by Borrower constitutes an irrevocable authorization
to Lenders to advance Loan proceeds as provided in this subsection. No further
authorization shall be necessary to warrant such direct advances. All sums
advanced by direct payment to third parties shall reduce the Available
Commitment, shall be evidenced by the Notes and shall be secured by the Security
Documents. Lenders shall have no obligation to make advances of the Loan
proceeds more often than once in each calendar month. Lenders shall have no
obligation to see to the disposition of any direct payments to any contractor or
other Person.
3.2 First Advance and Subsequent Advances. The first advance of Loan
proceeds shall be made upon satisfaction of all conditions specified in Section
7 of this Agreement. All advances after the first advance shall be made upon
satisfaction of all conditions specified in Section 8 of this Agreement.
<PAGE>
21
3.3 Waivers of Conditions. (a) Agent, in its sole discretion may, but
shall have no obligation to, waive any requirements imposed on Borrower for
giving notice of borrowing.
(b) If any or all conditions precedent to an advance of Loan proceeds
have not been satisfied on any Borrowing Date, Agent, in its sole discretion,
may, but shall have no obligation to, waive such conditions and disburse all or
a part of the requested advance subject however, to the provisions of Section
11.4 hereof. No person dealing with Borrower, directly or indirectly, shall have
standing to object to such waiver. Such waivers and advances pursuant to such
waivers shall be deemed made pursuant to this Agreement and not in modification
of this Agreement.
3.4 Advances to Pay Interest. (a) Included in the Budget are amounts
allocated to pay interest on the Loans. Subject to the conditions set forth
below, Borrower shall request advances to be made on each Interest Payment Date
for the purpose of paying the interest due or to become due at such time, in
which event Lenders shall be authorized and are hereby directed to disburse the
amount of such interest by crediting the bank account maintained by Borrower
with Agent. No separate fund or account shall be created for such interest. In
no event shall Lenders be obligated to make any advance if the request for such
advance does not contain a direction to pay interest on the Loans due at the
time of such advance unless Borrower has paid interest to Lenders directly from
a source other than the Loan proceeds. Any such request for an advance of
interest shall be accompanied by a direction by Borrower to Lenders to charge
such bank account for the amount of such interest then due and advanced to
Borrower by Lenders. Notwithstanding the foregoing, Borrower hereby requests
Lenders to make advances to pay such interest on the day when each interest
payment is due in the amount of interest then due, by crediting such amount to
the bank account maintained by Borrower with Agent and charging such account for
such interest. Lenders may comply with the foregoing request at any time,
notwithstanding any failure by Borrower to make a more specific request.
(b) Agent, in its discretion, may refuse to advance for the payment of
interest at such time and so long as either a Default or an Event of Default has
occurred and is continuing. If Agent determines not to advance for the payment
of interest for such reason, Agent shall so notify Borrower and Borrower shall
be obligated to pay all interest becoming due on the Loans after such notice
from a source other than Loan proceeds, in the manner and at the times provided
in the Notes, provided that if Agent is stayed or otherwise prohibited from
providing such notice, Borrower shall nevertheless be liable for all interest
becoming due.
3.5 Optional Prepayments. Borrower may at any time and from time to
time prepay the Loans, in whole or in part,
<PAGE>
22
without premium or penalty, provided that (a) Borrower shall have given at least
four Business Days' prior notice to Agent, specifying the date and amount of
prepayment and whether the prepayment is of Eurodollar Loans, Prime Rate Loans
or a combination thereof, and, if of a combination thereof, the amount allocable
to each, (b) all accrued and unpaid interest to the date of such prepayment on
the amount being prepaid is then paid and (c) any amounts payable pursuant to
subsection 3.15 are then paid. Upon receipt of any such notice Agent shall
promptly notify each Lender thereof. Amounts prepaid on account of the Loans may
not be reborrowed. Partial prepayments shall be in an aggregate principal amount
of $100,000 or a whole multiple thereof.
3.6 Conversion and Continuation Options. (a) Borrower may elect from
time to time to convert Eurodollar Loans to Prime Rate Loans by giving Agent
irrevocable notice no later than 11:00 A.M. at least three LIBOR Business Days
prior to such requested conversion, provided that any such conversion of
Eurodollar Loans may only be made on the last day of an Interest Period with
respect thereto. Borrower may elect from time to time to convert Prime Rate
Loans to Eurodollar Loans by giving Agent irrevocable notice no later than 11:00
A.M. at least three LIBOR Business Days prior to such requested conversion. Any
such notice of conversion to Eurodollar Loans shall specify the length of the
initial Interest Period or Interest Periods therefor. Upon receipt of any such
notice Agent shall promptly notify each Lender thereof. All or any part of
outstanding Eurodollar Loans and Prime Rate Loans may be converted as provided
herein, provided that (i) no Loan may be converted into a Eurodollar Loan when
any Event of Default has occurred and is continuing and Agent has determined
that such a conversion is not appropriate and (ii) no Loan may be converted into
a Eurodollar Loan after the date that is one month prior to the Maturity Date.
(b) Any Eurodollar Loans may be continued as such upon the expiration
of the then current Interest Period with respect thereto by Borrower giving
notice to Agent, in accordance with the applicable provisions of the term
"Interest Period" set forth in subsection 1.1, of the length of the next
Interest Period to be applicable to such Loans, provided that no Eurodollar Loan
may be continued as such (i) when any Event of Default has occurred and is
continuing and Agent has determined that such a continuation is not appropriate
or (ii) after the date that is one month prior to the Maturity Date and
provided, further, that if Borrower shall fail to give any required notice as
described above in this paragraph or if such continuation is not permitted
pursuant to the preceding proviso such Loans shall be automatically converted,
at Agent's election, to Prime Rate Loans or one-month Eurodollar Loans on the
last day of such then expiring Interest Period.
3.7 Minimum Amounts of Tranches; Maximum Number of Tranches. All
borrowings, conversions and continuations of Loans
<PAGE>
23
hereunder and all selections of Interest Periods hereunder shall be in such
amounts and be made pursuant to such elections so that, after giving effect
thereto, the aggregate principal amount of the Loans comprising each Eurodollar
Tranche shall be at least equal to $1,000,000. No more than five Eurodollar
Tranches in the aggregate may be outstanding at any time under this Agreement
and the Notes.
3.8 Interest Rates and Payment Dates. (a) Each Eurodollar Loan shall
bear interest for each day during each Interest Period with respect thereto at a
rate per annum equal to the Eurodollar Rate determined for such day plus the
Applicable Margin.
(b) Each Prime Rate Loan shall bear interest at a rate per annum equal
to the Prime Rate plus the Applicable Margin.
(c) If all or a portion of (i) the principal amount of any Loan, (ii)
any interest payable thereon or (iii) any fee or other amount payable hereunder
shall not be paid when due (whether at the stated maturity, by acceleration or
otherwise), such overdue amount shall bear interest at a rate per annum which is
(x) in the case of overdue principal, the rate that would otherwise be
applicable thereto pursuant to the foregoing provisions of this subsection plus
4% or (y) in the case of overdue interest, fee or other amount, the rate
described in paragraph (b) of this subsection plus 4%, in each case from the
date of such non-payment until such amount is paid in full (as well after as
before judgment); provided, however, that in the case of overdue interest, the
rate described in clause (y) shall not apply if such interest is paid within
three Business Days after written notice to Borrower.
(d) Interest shall be payable in arrears on each Interest Payment
Date, provided that interest accruing pursuant to paragraph (c) of this
subsection shall be payable from time to time on demand.
3.9 Computation of Interest and Fees. (a) Fees and interest shall be
calculated on the basis of a 360-day year for the actual days elapsed. Agent
shall as soon as practicable notify Borrower and Lenders of each determination
of a Eurodollar Rate. Any change in the interest rate on a Loan resulting from a
change in the Prime Rate, or the Eurocurrency Reserve Requirements, shall become
effective as of the opening of business on the day on which such change becomes
effective. Agent shall as soon as practicable notify Borrower and Lenders of the
effective date and the amount of each such change in interest rate.
(b) Each determination of an interest rate by Agent pursuant to any
provision of this Agreement shall be conclusive and binding on Borrower in the
absence of manifest error. Agent shall, at the request of Borrower, deliver to
Borrower a
<PAGE>
24
statement showing the quotations used by Agent in determining any interest rate
pursuant to subsection 3.9(a).
3.10 Inability to Determine Interest Rate. If prior to the first day
of any Interest Period:
(a) Agent shall have determined (which determination shall be
conclusive and binding upon Borrower) that, by reason of circumstances
affecting the relevant market, adequate and reasonable means do not exist
for ascertaining the Eurodollar Rate for such Interest Period, or
(b) Agent shall have received notice from the Required Lenders that
the Eurodollar Rate determined or to be determined for such Interest Period
will not adequately and fairly reflect the cost to such Lenders of making
or maintaining their affected Loans during such Interest Period,
Agent shall give telecopy or telephonic notice thereof to Borrower and Lenders
as soon as practicable thereafter. If such notice is given (x) any Eurodollar
Loans requested to be made on the first day of such Interest Period shall be
made as Prime Rate Loans, (y) any Loans that were to have been converted on the
first day of such Interest Period to Eurodollar Loans shall be converted to or
continued as Prime Rate Loans and (z) any outstanding Eurodollar Loans shall be
converted, on the first day of such Interest Period, to Prime Rate Loans. Until
such notice has been withdrawn by Agent, no further Eurodollar Loans shall be
made or continued as such, nor shall Borrower have the right to convert Loans to
Eurodollar Loans.
3.11 Pro Rata Treatment and Payments. (a) Each borrowing by Borrower
from the Lenders hereunder, each payment by Borrower on account of any fees
hereunder shall be made pro rata according to the respective Commitment
Percentages of the Lenders. Each payment (including each prepayment) by Borrower
on account of principal of and interest on the Loans shall be made pro rata
according to the respective outstanding principal amounts of the Loans then held
by Lenders. All payments (including prepayments) to be made by Borrower
hereunder and under the Notes, whether on account of principal, interest, fees
or otherwise, shall be made without set off or counterclaim and shall be made
prior to 12:00 Noon, New York City time, on the due date thereof to Agent, for
the account of Lenders, at Agent's office specified in subsection 11.3, in
Dollars and in immediately available funds. Agent shall distribute such payments
to Lenders promptly upon receipt in like funds as received. If any payment
hereunder (other than payments on the Eurodollar Loans) becomes due and payable
on a day other than a Business Day, such payment shall be extended to the next
succeeding Business Day, and, with respect to payments of principal, interest
thereon shall be payable at the then applicable rate during such extension. If
any payment on a
<PAGE>
25
Eurodollar Loan becomes due and payable on a day other than a LIBOR Business
Day, the maturity thereof shall be extended to the next succeeding LIBOR
Business Day unless the result of such extension would be to extend such payment
into another calendar month, in which event such payment shall be made on the
immediately preceding LIBOR Business Day.
(b) Unless Agent shall have been notified in writing by any Lender
prior to a borrowing that such Lender will not make the amount that would
constitute its Commitment Percentage of such borrowing available to Agent, Agent
may assume that such Lender is making such amount available to Agent, and Agent
may (but shall be under no obligation), in reliance upon such assumption, make
available to Borrower a corresponding amount. If such amount is not made
available to Agent by the required time on the Borrowing Date therefor, such
Lender shall pay to Agent, on demand, such amount with interest thereon at a
rate equal to the daily Federal Funds Rate for the period until such Lender
makes such amount immediately available to Agent. A certificate of Agent
submitted to any Lender with respect to any amounts owing under this subsection
shall be conclusive in the absence of manifest error. If such Lender's
Commitment Percentage of such borrowing is not made available to Agent by such
Lender within three Business Days of such Borrowing Date, Agent shall also be
entitled to recover such amount with interest thereon at the rate per annum
applicable to Prime Rate Loans hereunder, on demand, from Borrower, provided
that (i) the foregoing shall not impair any of Borrower's rights or remedies
against such Lender and (ii) Agent shall promptly notify such Lender that it has
defaulted under this Agreement.
3.12 Illegality. Notwithstanding any other provision herein, if the
adoption of or any change in any Legal Requirement or in the interpretation or
application thereof shall make it unlawful for any Lender to make or maintain
Eurodollar Loans as contemplated by this Agreement, (a) the commitment of such
Lender hereunder to make Eurodollar Loans, continue Eurodollar Loans as such and
convert Prime Rate Loans to Eurodollar Loans shall forthwith be cancelled and
(b) such Lender's Loans then outstanding as Eurodollar Loans, if any, shall be
converted automatically to Prime Rate Loans on the respective last days of the
then current Interest Periods with respect to such Loans or within such earlier
period as required by law. If any such conversion of a Eurodollar Loan occurs on
a day which is not the last day of the then current Interest Period with respect
thereto, Borrower shall pay to such Lender such amounts, if any, as may be
required pursuant to subsection 3.15.
3.13 Legal Requirements. (a) If the adoption of or any change in any
Legal Requirement or in the interpretation or application thereof or compliance
by any Lender with any request or directive (whether or not having the force of
law) from any central bank or other Governmental Authority, in any such case
made subsequent to the date hereof:
<PAGE>
26
(i) shall subject any Lender to any tax of any kind whatsoever with
respect to this Agreement, any Note or any Eurodollar Loan made by it, or
change the basis of taxation of payments to such Lender in respect thereof
(except for Non-Excluded Taxes covered by subsection 3.15 and changes in
the rate of tax on the overall net income of such Lender);
(ii) shall impose, modify or hold applicable any reserve, special
deposit, compulsory loan or similar requirement against assets held by,
deposits or other liabilities in or for the account of, advances, loans or
other extensions of credit by, or any other acquisition of funds by, any
office of such Lender which is not otherwise included in the determination
of the Eurodollar Rate; or
(iii) shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, converting into,
continuing or maintaining Eurodollar Loans or to reduce any amount receivable
hereunder in respect thereof, then, in any such case, Borrower shall promptly
pay such Lender, upon its demand, any additional amounts necessary to compensate
such Lender for such increased cost or reduced amount receivable. If any Lender
becomes entitled to claim any additional amounts pursuant to this subsection, it
shall promptly notify Borrower after it becomes aware of such increased costs,
through Agent, of the event by reason of which it has become so entitled. A
certificate as to any additional amounts payable pursuant to this subsection
submitted by such Lender, through Agent, to Borrower shall be conclusive in the
absence of manifest error. No Lender shall be entitled to any compensation
pursuant to this Section relating to any period more than 90 days prior to the
date notice thereof is given to Borrower by such Lender.
(b) If any Lender shall have determined that any change in any Legal
Requirement regarding capital adequacy or in the interpretation or application
thereof or compliance by such Lender or any corporation controlling such Lender
with any request or directive regarding capital adequacy (whether or not having
the force of law) from any Governmental Authority, in any such case made
subsequent to the date hereof, does or shall have the effect of reducing the
rate of return on such Lender's or such corporation's capital as a consequence
of its obligations hereunder to a level below that which such Lender or such
corporation could have achieved but for such change or compliance (taking into
consideration such Lender's or such corporation's policies with respect to
capital adequacy) by an amount deemed by such Lender to be material, then from
time to time, after submission by such Lender to Borrower (with a copy to Agent)
of a written request therefor, Borrower shall pay to such Lender such additional
amount or amounts as will compensate such Lender for such reduction.
<PAGE>
27
(c) If, subsequent to the date of this Agreement, any Lender obtains
actual knowledge of any increased costs or losses of yield as described above or
any indemnified Non-Excluded Taxes described in subsection 3.14(a) below
(collectively, "Indemnified Losses"), Agent, on behalf of such Lender, shall
promptly notify Borrower thereof, and Lenders agree to use reasonable efforts
(without incurring material costs and without undertaking to restructure or
reallocate any assets other than the Loans) to minimize any Indemnified Losses.
Notwithstanding any provision to the contrary in this subsection or subsection
3.15, Borrower shall not be required to reimburse or indemnify Lenders for any
Indemnified Losses to the extent any such Indemnified Losses are incurred or
attributable to the period ending 90 days after Borrower's receipt of notice of
such Indemnified Losses, provided such Indemnified Losses shall not apply
retroactively and Borrower shall prepay the Loans pursuant to subsection 3.5
hereof within such 90-day period (such prepayment to be made at Borrower's sole
option).
3.14 Taxes. (a) All payments made by Borrower under this Agreement and
the Notes shall be made free and clear of, and without deduction or withholding
for or on account of, any present or future stamp or other taxes, levies,
imposts, duties, charges, fees, deductions or withholdings, now or hereafter
imposed, levied, collected, withheld or assessed by any Governmental Authority,
excluding income taxes and franchise taxes (imposed in lieu of or in addition to
income taxes) imposed on Agent or any Lender as a result of a present or former
connection between Agent or such Lender and the jurisdiction of the Governmental
Authority imposing such tax or any political subdivision or taxing authority
thereof or therein. If any such non-excluded taxes, levies, imposts, duties,
charges, fees, deductions or withholdings ("Non-Excluded Taxes") are required to
be withheld from any amounts payable to Agent or any Lender hereunder or under
the Notes, the amounts so payable to Agent or such Lender shall be increased to
the extent necessary to yield to Agent or such Lender (after payment of all
Non-Excluded Taxes) interest or any such other amounts payable hereunder at the
rates or in the amounts specified in this Agreement and the Notes, provided,
however, that Borrower shall not be required to increase any such amounts
payable to any Lender that is not organized under the laws of the United States
of America or a state thereof if such Lender fails to comply with the
requirements of paragraph (b) of this subsection. Whenever any Non-Excluded
Taxes are payable by Borrower, as promptly as possible thereafter Borrower shall
send to Agent for its own account or for the account of such Lender, as the case
may be, a certified copy of an original official receipt received by Borrower
showing payment thereof. If Borrower fails to pay any Non-Excluded Taxes when
due to the appropriate taxing authority or fails to remit to Agent the required
receipts or other required documentary evidence, Borrower shall indemnify Agent
and Lenders for any incremental taxes, interest or penalties that may become
payable by Agent or any Lender as a result of any such
<PAGE>
28
failure. Any Lender making a claim against Borrower for the payment of
Non-Excluded Taxes under this Section shall provide prompt notice to Borrower
that such taxes are due. Notwithstanding anything contained herein to the
contrary, Borrower shall not be responsible for the payment of any Taxes
incurred more than 90 days prior to Borrower's receipt of such notice.
(b) Each Lender that is not incorporated under the laws of the United
States of America or a state thereof shall:
(i) deliver to Borrower and Agent (A) two duly completed copies of
United States Internal Revenue Service Form 1001 or 4224, or successor
applicable form, as the case may be, and (B) an Internal Revenue Service
Form W-8 or W-9, or successor applicable form, as the case may be;
(ii) deliver to Borrower and Agent two further copies of any such form
or certification on or before the date that any such form or certification
expires or becomes obsolete and after the occurrence of any event requiring
a change in the most recent form previously delivered by it to Borrower;
and
(iii) obtain such extensions of time for filing and complete such
forms or certifications as may reasonably be requested by Borrower or
Agent;
unless in any such case an event (including, without limitation, any change in
treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms inapplicable
or which would prevent such Lender from duly completing and delivering any such
form with respect to it and such Lender so advises Borrower and Agent. Such
Lender shall certify (i) in the case of a Form 1001 or 4224, that it is entitled
to receive payments under this Agreement without deduction or withholding of any
United States federal income taxes and (ii) in the case of a Form W-8 or W-9,
that it is entitled to an exemption from United States backup withholding tax.
Each Person that shall become a Transferee pursuant to Section 10.11 shall, upon
the effectiveness of the related transfer, be required to provide all of the
forms and statements required pursuant to this subsection, provided that in the
case of a Participant such Participant shall furnish all such required forms and
statements to the Lender from which the related participation shall have been
purchased.
3.15 Indemnity. Borrower agrees to indemnify each Lender and to hold
each Lender harmless from any loss or expense which such Lender may sustain or
incur as a consequence of (a) default by Borrower in making a borrowing of,
conversion into or continuation of Eurodollar Loans after Borrower has given a
notice requesting the same in accordance with the provisions of this Agreement,
(b) failure by Borrower in making any prepayment
<PAGE>
29
after Borrower has given a notice thereof in accordance with the provisions of
this Agreement or (c) the making of a prepayment of Eurodollar Loans on a day
which is not the last day of an Interest Period with respect thereto. Such
indemnification may include an amount equal to the excess, if any, of (i) the
amount of interest which would have accrued on the amount so prepaid, or not so
borrowed, converted or continued, for the period from the date of such
prepayment or of such failure to borrow, convert or continue to the last day of
such Interest Period (or, in the case of a failure to borrow, convert or
continue, the Interest Period that would have commenced on the date of such
failure) in each case at the applicable rate of interest for such Loans provided
for herein (excluding, however, the Applicable Margin included therein, if any)
over (ii) the amount of interest (as reasonably determined by such Lender) which
would have accrued to such Lender on such amount by placing such amount on
deposit for a comparable period with leading banks in the interbank eurodollar
market.
3.16 Substitution of Lenders. (a) If any Lender (an "Affected Bank")
(i) makes demand upon Borrower for (or if Borrower is otherwise required to pay)
amounts pursuant to Section 3.13 (any such amounts referred to as "Additional
Costs") or (ii) is unable to make or maintain a Eurodollar Loan as a result of a
condition described in Section 3.12, or (iii) defaults in its obligations to
make Advances in accordance with the terms of this Agreement, Borrower may,
within 90 days of receipt of such demand or notice (or the occurrence of such
other event causing Borrower to be required to pay Additional Costs or causing
said Section 3.12 to be applicable) or the occurrence of such default, as the
case may be, give notice (a "Replacement Notice") to Agent (which will promptly
forward a copy of such notice to each Lender) of Borrower's intention either (x)
to prepay in full the Affected Bank's Note and to terminate the Affected Bank's
entire Commitment or (y) to replace the Affected Bank with another financial
institution (the "Replacement Bank") designated in such Replacement Notice.
In the event Borrower gives the notice provided for in clause (x) above,
and if the Affected Bank shall not agree within 30 days of its receipt thereof
to waive the payment of the Additional Costs in question or the effect of the
circumstances described in Section 3.12 or if the Affected Bank shall not cure
such default within five days of its receipt thereof, then, so long as no
Default or Event of Default shall exist, Borrower may (notwithstanding the
provisions of Section 3.11) terminate the Affected Bank's entire Commitment,
provided that in connection therewith it pays to the Affected Bank all
outstanding principal and accrued and unpaid interest under the Affected Bank's
Note, together with all other amounts, if any, due from Borrower to the Affected
Bank, including all amounts properly demanded and unreimbursed under Sections
3.5 and all Additional Costs.
<PAGE>
30
In the event Borrower gives the notice provided for in clause (y) above,
and if (i) Agent shall, within 30 days of its receipt of the Replacement Notice,
notify Borrower and each Lender in writing that the Replacement Bank is
reasonably satisfactory to Agent and (ii) the Affected Bank shall not, prior to
the end of such 30-day period, agree to waive the payment of the Additional
Costs in question or the effect of the circumstances described in Section 3.12
or if the Affected Bank shall not cure such default, then the Affected Bank
shall, so long as no Default or Event of Default shall exist, assign its Note
and all of its rights and obligations under this Agreement to the Replacement
Bank, and the Replacement Bank shall assume all of the Affected Bank's rights
and obligations, pursuant to an agreement, substantially in the form of an
Assignment and Assumption Agreement, executed by the Affected Bank and the
Replacement Bank and otherwise in accordance with the provisions of Section
10.11(b). In connection with such assignment and assumption, the Replacement
Bank shall pay to the Affected Bank an amount equal to the outstanding principal
amount under the Affected Bank's Note plus all interest accrued thereon, plus
all other amounts, if any (other than the Additional Costs in question), then
due and payable to the Affected Bank; provided, however, that prior to or
simultaneously with any such assignment and assumption, Borrower shall have paid
to such Affected Bank all amounts properly demanded and unreimbursed under
Section 3.15. Upon the effective date of such assignment and assumption, the
Replacement Bank shall become a Lender under this Agreement and shall have all
the rights and obligations of a Lender as set forth in such Assignment and
Assumption Agreement, and the Affected Bank shall (except to the extent of any
damages caused by a default by such Lender) be released from its obligations
hereunder, and no further consent or action by any party shall be required. Upon
the consummation of any assignment pursuant to this Section, a substitute Note
shall be issued to the Replacement Bank by Borrower, in exchange for the return
of the Affected Bank's Note. The obligations evidenced by such substitute note
shall constitute "Obligations" for all purposes of this Agreement and the other
Loan Documents. If the Replacement Bank is not incorporated under the laws of
the United States of America or a state thereof, it shall, prior to the first
date on which interest or fees are payable hereunder for its account, deliver to
Borrower and Agent certification as to exemption from deduction or withholding
of any United States federal income taxes in accordance with Section 3.14.
Borrower, Agent and the Lenders shall execute such modifications to the
Loan Documents as shall be reasonably required in connection with and to
effectuate the foregoing.
3.17 Extension of Maturity Date. Borrower shall have the option to
extend the Initial Maturity Date for a period of one year, from the date that is
one day after the Initial Maturity Date to the date that is one year after the
Initial Maturity Date (the "First Extended Maturity Date") and for a
<PAGE>
31
further period (the "Second Extension Period") of one year from the date that is
one day after the First Extended Maturity Date to the date (the "Second Extended
Maturity Date") that is one year after the First Extended Maturity Date,
provided that the following conditions are satisfied for each such extension:
(a) at least 60 days prior to the Initial Maturity Date or the First
Extended Maturity Date, as the case may be, Agent shall have received:
(i) written notice from Borrower of its election to extend the
Initial Maturity Date or the First Extended Maturity Date, as the case
may be; and
(ii) an extension fee, for the account of the Lenders, in an
amount equal to (a) 0.10% for the First Extension and (b) 0.25% for
the Second Extension, of the Commitment Amount as of the Initial
Maturity Date or the First Extended Maturity Date, as the case may be;
(b) no Default or Event of Default shall have occurred and be
continuing as of the Initial Maturity Date or the First Extended Maturity
Date, as the case may be.
SECTION 4. REPRESENTATIONS AND WARRANTIES
------------------------------
In order to induce Lenders to enter into this Agreement and to make
the Loan, Borrower covenants, represents and warrants to Lenders as follows:
4.1 Formation and Existence. (a) Borrower (i) is a duly organized and
validly existing limited partnership, formed under the laws of the State of
Delaware, (ii) has all requisite power and authority to consummate the
transactions contemplated in the Loan Documents and the Project Documents and
(iii) is in compliance with all applicable Legal Requirements, except to the
extent that the failure to comply would not be likely to result in a Material
Adverse Effect.
(b) The Guarantor (i) is a duly organized and validly existing limited
partnership, formed and in good standing under the laws of the State of
Delaware, (ii) has all requisite power and authority to be a Partner, (iii) has
all requisite power and authority to authorize and has authorized Borrower to
consummate the transactions contemplated in the Loan Documents and (iv) is in
compliance with all applicable Legal Requirements, except to the extent that the
failure to comply would not reasonably be expected to have a Material Adverse
Effect.
4.2 Power and Authority. The consummation of the transactions
contemplated in the Loan Documents and the Project Documents and the performance
or observance of Borrower's
<PAGE>
32
obligations under the Loan Documents and the Project Documents have been duly
authorized by all necessary action on the part of Borrower and Guarantor.
4.3 Authorization; Enforceable Obligations. (a) The Loan Documents
have been duly executed and delivered on behalf of Borrower and each
constitutes, the legal, valid and binding obligation of Borrower, enforceable
against Borrower in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally.
(b) The Project Documents have been duly executed and delivered,
constitute the legal, valid and binding obligations of Borrower, and to the best
of Borrower's knowledge, the other parties to such agreements, have not been
amended, modified or terminated (except for certain amendments thereto, copies
of which have been furnished to Agent) and are in full force and effect. The
rights of Borrower under each of the Project Agreement, the Management
Agreement, the REA and the Mall Lease may be assigned to Lenders without the
consent of any Person. Borrower has done all things required to be done as of
the date of this Agreement to keep unimpaired the leasehold created by the Mall
Lease (other than the Permitted Exceptions). To the best of Borrower's
knowledge, there exists no default of any party under the Project Documents and
no event has occurred and is continuing which with notice or the passage of time
or both would constitute a default under the Project Documents.
4.4 No Litigation. There is no action, suit or proceeding pending
against or directly involving Borrower or the Collateral, or to the best of
Borrower's knowledge threatened in writing against or directly involving
Borrower or the Collateral which would have a Material Adverse Effect or would
materially adversely affect the Collateral in any court, or before or by any
Governmental Authority, whether federal, state, county or municipal, which has
not been disclosed in writing to Agent.
4.5 Consents, Approvals, Authorizations, Etc. No consent, approval,
order or authorization of or registration, declaration or filing with any
Governmental Authority is required in connection with the valid execution and
delivery of the Loan Documents or the Agency Documents or the carrying out or
performance of any of the transactions required or contemplated by the Loan
Documents or the Agency Documents in each case by Borrower or, if required, such
consent, approval, order or authorization has been obtained or such
registration, declaration or filing has been accomplished (other than the
recording of the Mortgage and filing of UCC-1 Financing Statements) or will be
obtained or accomplished prior to the time any such action requiring consent is
undertaken.
<PAGE>
33
4.6 No Legal Bar. The execution, delivery and performance of the Loan
Documents and the Project Documents, borrowings under this Agreement and the use
of the proceeds of the Loan will not violate any Legal Requirement affecting or
any Contractual Obligation of Borrower or Guarantor and will not result in, or
require, the creation or imposition of any Lien on any of Borrower's properties
or revenues pursuant to any Legal Requirement or Contractual Obligation, except
for the Lien of the Security Documents.
4.7 Compliance with Building Codes, Zoning Laws, Etc. To the best of
Borrower's knowledge, there are no existing violations of any Legal Requirement
affecting the Land or the construction, use or occupancy of the Improvements.
4.8 No Default. Borrower is not in default under or with respect to
any Contractual Obligation in any respect which has a Material Adverse Effect.
No Default or Event of Default has occurred and is continuing.
4.9 Taxes. Borrower has filed or caused to be filed all tax returns
that are required to be filed, and has paid all taxes shown to be due and
payable on such returns or on any assessments made against Borrower or the
Project and all other taxes, fees or other charges imposed on Borrower or the
Project by any Governmental Authority (other than those taxes, the amount or
validity of which is being contested in good faith by appropriate proceedings
diligently prosecuted and with respect to which prior notice has been given to
Agent and reserves reasonably satisfactory to Agent have been provided or a bond
reasonably satisfactory to Agent has been posted); and no tax Liens have been
filed and no claims are being asserted with respect to any such taxes, fees or
other charges.
4.10 Availability of Utilities. All utility services and facilities
necessary for the construction of the Improvements without impediment or delay
(including, without limitation, gas, electrical, water and storm and sanitary
sewage services and facilities) will be available at the boundaries of the Land
upon the commencement of construction and all utility services necessary for the
operation of the Improvements for their intended purposes will be available at
or within the boundaries of the Land when needed.
4.11 Brokerage. No brokerage or other fee, commission or compensation
is to be paid by Lenders in connection with this Loan as a result of any actions
by Borrower or any Affiliate of Borrower or Lender.
4.12 Permits, Etc. All Permits for the construction of Borrower's Work
and to the extent that Borrower is obligated to perform any of the Agency's Work
in accordance with any of the Project Documents, all permits for the
Construction of such Agency's Work that Borrower is obligated to obtain and
which are
<PAGE>
34
required to the date that this representation is being made or reaffirmed have
been obtained and are in full force and effect.
4.13 Financial Statements. Any and all financial statements delivered
to Lenders by or on behalf of Borrower or Guarantor are true and correct in all
material respects and fairly present the financial conditions of their subjects
as of their respective dates, no material adverse change has occurred in the
financial conditions reflected since their respective dates and no additional
Indebtedness has been incurred by Borrower since the respective dates of the
latest statements, other than the borrowings contemplated by this Agreement or
other Indebtedness which has been approved by Lenders in writing. No such
financial statement or any certificate or statement furnished to Lenders by or
on behalf of Borrower or Guarantor in connection with the transactions
contemplated by this Agreement, and no representation or warranty in this
Agreement, contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained in such
financial statements, certificates or other statements or this Agreement not
misleading in any material respect.
4.14 ERISA. Neither a Reportable Event nor an "accumulated funding
deficiency" (within the meaning of Section 412 of the Code or Section 302 of
ERISA) has occurred during the five-year period prior to the date on which this
representation is made or deemed made with respect to any ERISA Plan, and each
ERISA Plan has complied in all material respects with the applicable provisions
of ERISA and the Code. No termination of a Single Employer Plan has occurred,
and no Lien in favor of the PBGC or an ERISA Plan has arisen, during such
five-year period. The present value of all accrued benefits under each Single
Employer Plan (based on those assumptions used to fund such Single Employer
Plans) did not, as of the last annual valuation date prior to the date on which
this representation is made or deemed made, exceed the value of the assets of
such ERISA Plan allocable to such accrued benefits. Neither Borrower nor any
Commonly Controlled Entity has had a complete or partial withdrawal from any
Multiemployer Plan, and neither Borrower nor any Commonly Controlled Entity
would become subject to any liability under ERISA if Borrower or any such
Commonly Controlled Entity were to withdraw completely from all Multiemployer
Plans as of the valuation date most closely preceding the date on which this
representation is made or deemed made. No such Multiemployer Plan is in
Reorganization or Insolvent. The present value (determined using actuarial and
other assumptions which are reasonable in respect of the benefits provided and
the employees participating) of the liability of Borrower and each Commonly
Controlled Entity for post retirement benefits to be provided to their current
and former employees under ERISA Plans which are welfare benefit plans (as
defined in Section 3(1) of ERISA) does not, in the aggregate, exceed the assets
under all such ERISA Plans allocable to such benefits.
<PAGE>
35
4.15 Solvency. Borrower is, and upon consummation of the transactions
contemplated by this Agreement, the other Loan Documents and any other
documents, instruments or agreements relating thereto, will be, Solvent.
4.16 Roads. All roads necessary for the use of the Improvements for
their intended purposes and required by Governmental Authorities have either
been completed or the necessary rights of way therefor are owned by Borrower or
have been acquired by appropriate Governmental Authorities or dedicated to
public use and accepted by said Governmental Authorities, and all necessary
steps have been taken by Borrower and said Governmental Authorities to assure
the complete construction and installation thereof no later than the Outside
Completion Date or any earlier date required by any Legal Requirement, any Lease
or the REA.
4.17 REA and Leases. The REA and all existing Leases in respect of the
Project are unmodified and in full force and effect, there exists no default by
Borrower, or to the best of Borrower's knowledge, by any other party under the
REA or any existing Leases, and all conditions to the effectiveness and
continuing effectiveness the REA and all existing Leases required to be
satisfied as of the date hereof have been satisfied.
4.18 Accuracy of Information; Full Disclosure. All written
information, reports and other papers and data with respect to Borrower
furnished to Lenders by Borrower were, to the best of Borrower's knowledge, at
the time the same were so furnished or as of the date of such report or
information, correct in all material respects, or have been subsequently
supplemented by other information, reports or other papers or data, to the
extent necessary to give Lenders a true and accurate knowledge of the subject
matter of such information, reports, or other papers and data in all material
respects. All projections with respect to Borrower furnished to Lenders by or on
behalf of Borrower, as supplemented, were prepared and presented in good faith
by Borrower. No fact is known to Borrower which has or is reasonably likely to
have a Material Adverse Effect, which has not been set forth in the financial
statements referred to in subsection 4.13 or in such information, reports,
papers and data or otherwise disclosed in writing to Lenders prior to the date
hereof. Neither this Agreement nor any documents, financial statements, reports,
notices, schedules, certificates, statements or other writings furnished by or
on behalf of Borrower to Agent or any Lender in connection with the negotiation
of this Agreement or the consummation of the transactions contemplated hereby,
or required herein to be furnished by or on behalf of Borrower, contains to
Borrower's knowledge any untrue or misleading statement of a material fact or
omits a material fact necessary to make the statements herein or therein not
misleading. There is no fact known to Borrower which Borrower has not disclosed
to Agent and Lenders in writing which materially affects adversely nor, so far
as Borrower can now
<PAGE>
36
foresee, will materially affect adversely the business, prospects, profits or
financial condition of Borrower or the ability of Borrower to perform this
Agreement.
4.19 Mall Site in Buildable Condition. The Agency has delivered the
Leased Premises in "Buildable Condition" as such term is defined in the Project
Agreement.
4.20 Plans under REA. Borrower has delivered all Plans required to be
delivered under the REA to the other parties to the REA and such Plans have
either been approved or deemed approved pursuant to the terms of the REA by all
of such parties.
SECTION 5. AFFIRMATIVE COVENANTS.
----------------------
Borrower agrees, unless otherwise consented to in writing by Agent or
Lenders, as applicable, that, so long as the Commitments remain in effect or the
Notes remain outstanding and unpaid or any amount is owing to any Lender
hereunder or under any of the other Loan Documents, Borrower shall fully keep
and perform each of the covenants set forth in this Section.
5.1 Construction. (a) Borrower shall complete the erection and
equipping of Borrower's Work with due diligence on or before the Outside
Completion Date subject to and in accordance with the Borrower Construction
Plans, this Agreement, the REA, the Project Agreement and the Leases, and shall
diligently enforce all of its rights, if any, under any of the Project Documents
to cause the Agency to complete the erection and equipping of the Agency's Work
with due diligence, subject to and in accordance with the Agency Construction
Plans and the Project Agreement. Borrower shall construct and equip Borrower's
Work and shall diligently enforce all of its rights, if any, under any of the
Project Documents to cause the Agency to construct and equip the Agency's Work
in full compliance with the Legal Requirements affecting the Project and all
requirements of the appropriate Board of Fire Underwriters or other similar body
acting in and for the locality in which the Project is situated.
(b) Upon demand of the Agent, Borrower at its sole cost and expense,
shall correct promptly any structural defect in the Improvements, any material
departure from the Plans in violation of this Agreement and any failure to
comply with applicable Legal Requirements in all material respects (unless such
Legal Requirements are being contested by Borrower in accordance with the terms
of the Mortgage).
<PAGE>
37
5.2 Performance under Other Agreements. Borrower shall duly perform
and observe in all material respects all of (a) the covenants, agreements and
conditions on its part to be performed and observed under each of the Loan
Documents and the Leases, and (b) the covenants, agreements and conditions on
its part to be performed and observed under each of the Project Documents.
Borrower shall diligently enforce its rights and remedies under the Agency
Documents, the REA and the Anchor Leases in a commercially reasonable manner.
5.3 No Encroachments. The Improvements shall be constructed entirely
on the Leased Premises and shall not encroach upon or overhang any easement or
right-of-way or the land of others in any material manner. When erected the
Improvements shall be wholly within any building restriction lines, however
established. Borrower shall furnish to Agent promptly after the foundations for
the Improvements have been completed, a foundation survey prepared by a
registered surveyor or engineer.
5.4 Application of Insurance and Condemnation Proceeds. Any proceeds
of insurance or condemnation received as a result of a casualty or taking shall
be applied as provided in the Mortgage. In the event that Agent shall make
available to Borrower the proceeds of any fire or other casualty insurance or
condemnation actually paid to Agent in respect of such damage or destruction of
the Improvements (after deducting therefrom any sums retained by Agent in
reimbursement for costs of collection) to pay the cost of restoration, as
provided in the Mortgage, Borrower shall, and shall diligently enforce its
rights, if any, under the Project Documents to cause the Agency to, proceed
promptly with the work of restoration of the Improvements or any other
improvements located at the Mall in accordance with the Plans and shall
prosecute the work of restoration diligently to completion. Except as otherwise
provided in the Mortgage with respect to insurance proceeds in an amount less
than $3,000,000, all insurance proceeds shall be held by Agent to secure payment
of Borrower's obligations under this Agreement, the Notes and the Security
Documents and disbursed in accordance with the procedures and subject to the
conditions specified in this Agreement and the Mortgage for the disbursement of
Loan proceeds. If any Event of Default or payment Default shall occur prior to
completion of such work of restoration, then Agent, at its option, may apply
such insurance or condemnation proceeds in payment of sums due under this
Agreement or on the Notes or any of the Security Documents, in such order as
Agent may elect in its sole discretion. Any insurance or condemnation proceeds
remaining after restoration of the Improvements is completed shall be, (a) if
completion of such restoration occurs prior to the Completion Date, at Agent's
election, applied in prepayment of the principal amount of the Loans, in the
inverse order of maturity if payable in installments, or paid over to Borrower
or (b) if such completion of restoration occurs after the Completion Date, paid
over to Borrower.
<PAGE>
38
5.5 Certain Notices. Borrower shall give notice to Agent promptly upon
the occurrence of:
(a) the receipt by Borrower of any notice given to Borrower that a
default by Borrower has occurred under any Anchor Lease, Major Lease, the
REA, or any Project Document;
(b) the giving by Borrower of any notice of default or other material
notice under any Anchor Lease, the REA, any Agency Document and any
Construction Document;
(c) the giving by Borrower of any notice under any Major Lease
alleging that a default has occurred under such Major Lease or indicating
Borrower's intent to terminate such Major Lease, provided that the
foregoing notice requirement shall be satisfied if the default giving rise
to such notice is described in the report delivered by Borrower to Agent
pursuant to subsection 5.13(a)(iii);
(d) the receipt by Borrower of any notice given to Borrower or with
respect to the Project or the giving by Borrower of any notice which
alleges that any portion of construction or equipping or furnishing of the
Improvements does not comply with any Legal Requirement;
(e) Borrower becoming aware of any development or event which is
reasonably likely to have a Material Adverse Effect;
(f) any condition which results or is reasonably likely to result in a
Force Majeure Delay in completion of the Improvements; and
(g) the following events, as soon as possible and in any event within
30 days after Borrower knows or has reason to know thereof: (i) the
occurrence or expected occurrence of any Reportable Event with respect to
any ERISA Plan, a failure to make any required contribution to a ERISA
Plan, the creation of any Lien in favor of the PBGC or a ERISA Plan or any
withdrawal from, or the termination, Reorganization or Insolvency of, any
Multiemployer Plan or (ii) the institution of proceedings or the taking of
any other action by the PBGC or Borrower or any Commonly Controlled Entity
or any Multiemployer Plan with respect to the withdrawal from, or the
terminating, Reorganization or Insolvency of, any ERISA Plan.
Each notice pursuant to this subsection shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to in such
notice and stating what action Borrower proposes to take with respect to such
occurrence.
5.6 Plan Changes. Borrower, without the prior written consent of the
Agent but subject to the provisions of Section
<PAGE>
39
2.3, shall not make (a) any single change to the Plans or direct or make change
orders or change bulletins that would require Borrower to incur greater than
$500,000 in additional costs or (b) any changes to the Plans or direct or make
change orders or change bulletins that would, in the aggregate, require Borrower
to incur greater than $3,000,000 in additional costs, provided, however, once
the aggregate increased costs resulting from approved or unapproved changes to
the Plans or change orders exceeds $3,000,000, Agent's prior approval shall be
necessary prior to Borrower's making any change to the Plans that would require
Borrower to incur greater than $250,000 in additional costs. Furthermore,
Borrower shall provide copies of all change orders, change bulletins and other
revisions of the Plans and the Construction Agreement to the Consulting
Professional and, if Agent's prior approval is required under this Section, to
Agent, prior to commencement of any work reflecting such changes or revisions,
and, if Agent's prior approval is not required pursuant to this Section, to the
Agent, promptly after such work is commenced.
5.7 Indemnification. Borrower hereby indemnifies Agent and Lenders
against any claims for brokerage fees or commissions asserted in connection with
the Loans arising out of or in connection with any act or omission of Borrower
or any Affiliate of Borrower and agrees to pay all reasonable out-of-pocket
expenses incurred by Lenders in connection with the defense of any such action
or proceeding brought to collect any such brokerage fees or commissions.
5.8 Expenses. (a) Borrower shall pay or reimburse Agent and Lenders
for all reasonable out-of-pocket expenses incurred by Agent and Lenders before
and after the date of this Agreement with respect to any and all transactions
contemplated by this Agreement including, without limitation, the preparation of
any document reasonably required by Agent and the enforcement of any of Agent's
and/or Lenders' rights under this Agreement, but excluding expenses incurred by
any Lender in connection with its sale of participating interests in, or
assignment of, all or any part of its rights and obligations hereunder pursuant
to subsection 10.11(b) and (c) of this Agreement. From time to time after the
closing, Borrower may receive statements for such expenses, including, without
limitation, attorneys' fees and disbursements. Borrower shall pay such
statements promptly upon receipt. Agent acknowledges that the Administrative Fee
is payable in consideration for the ordinary administration of the Loan by Agent
and that no additional compensation shall be due therefor.
(b) If, with respect to the Loans or the Project, any action or
proceeding is commenced by Agent (including, without limitation, any action to
foreclose under the Mortgage or to collect the Loans or enforce the Guaranties)
or to which Agent and/or one or more Lenders are made a party, or in which it
becomes necessary to defend or uphold the lien of the Mortgage,
<PAGE>
40
or in which Agent and/or one or more Lenders are served with any legal process,
discovery notice or subpoena relating to Lenders' lending to Borrower or
accepting the Guaranties, Borrower will reimburse Agent and Lenders for all
expenses (including, without limitation, attorney's fees and costs) which have
been or may be incurred by Agent and Lenders arising from or in connection with
such action or proceeding promptly upon receipt of statements for such expenses.
(c) Any amounts payable or reimbursable by Borrower under this
subsection which are not paid or reimbursed within thirty days after demand by
Agent shall bear interest at the rate of interest payable under subsection
3.8(c) from the date of such demand until payment. Agent shall furnish Borrower
with supporting information for such statements as reasonably requested by
Borrower.
5.9 Construction Schedule. As soon as reasonably available after
commencement of construction, Borrower shall provide Agent, at Borrower's
expense, with a critical path method schedule for completion of the construction
and equipping of the Improvements, which schedule shall be in form and substance
reasonably satisfactory to Agent.
5.10 Inspection of Books and Records. Agent and the Consulting
Professional, and designated representatives of either of them, shall, upon
reasonable prior notice and at reasonable times, have the right of entry and
free access to the Improvements (subject to the rights of lessees) and the right
in the presence of a representative of Borrower (provided Borrower makes its
representative available on a timely basis) to inspect all work done, labor
performed and materials furnished in and about the Improvements and to inspect
all books, contracts, records and plans and shop drawings of Borrower relating
to the Project or the construction of the Improvements. Upon reasonable prior
notice and at reasonable times, Borrower shall make its representatives
available for Agent or the Consulting Professional and any designated
representative of either, to discuss Borrower's affairs, finances and accounts
relating to the Project and the construction of the Improvements and Borrower
will cooperate, and cause the Construction Manager to cooperate, with Agent and
the Consulting Professional and any designated representative of either of them.
5.11 Movement of Unincorporated Materials. With respect to any
Unincorporated Materials for which advances of the Loan have been made, Borrower
shall give notice to Agent not less than five days prior to any change in the
location of such Unincorporated Materials, which notice shall state the date on
which transfer shall commence, the destination and the name and address of the
carrier. If requested by Agent at the time such notice is given, Borrower shall
furnish to Agent, promptly when available, copies of bills of lading,
certificates of bailment, warehouse receipts and other documents and instruments
evidencing
<PAGE>
41
Borrower's rights in the Unincorporated Materials in transit and on arrival at
destination.
5.12 Inspection Reports. Borrower shall furnish, or cause to be
furnished, to the Consulting Professional as soon as available: (a) copies of
all construction contracts and purchase orders entered into after the date
hereof, (b) copies of contractor trade payment breakdowns and monthly job cost
reports prepared by Borrower and the Construction Manager and (c) such other
information as may be reasonably requested by the Consulting Professional in
order to make reports to Agent as to the status of the Project. Upon request by
Agent, Borrower shall furnish or cause to be furnished to the Consulting
Professional, copies of all testing and quality control reports and Architect's
field reports prepared for and delivered to Borrower.
5.13 Financial Statements; Other Information. (a) Borrower shall
deliver to the Agent (i) within 90 days after the end of each of its fiscal
years after the opening of the Project to the general public, annual audited
operating statements and a rent roll for the Project and a copy of the balance
sheet and statement of sources and uses of funds of Borrower as at the end of
such year, and related statements of income and retained earnings and changes in
financial position for such year, (ii) within 45 days after the end of each of
its fiscal quarters after the opening of the Project to the general public,
(other than the last) quarterly operating statements and a rent roll for the
Project and a copy of the balance sheet and statement of sources and uses of
funds of Borrower as at the end of such quarter, and related statements of
income and retained earnings and changes in financial position for such quarter
and a statement of Borrower's calculation of the Guarantied Obligations as of
the end of such fiscal quarter and (iii) within 20 days after the end of each
two-month period, a leasing status report, tenant sales reports, tenant
receivable reports and a current rent roll, each in the form reasonably
acceptable to Agent. The foregoing financial statements of Borrower shall be
certified by a Responsible Officer and, with respect to the annual financial
statements of Borrower, also by Deloitte & Touche or such other nationally
recognized certified public accountant reasonably approved by the Agent. All
financial statements of Borrower delivered to the Agent shall be true and
correct in all material respects, shall be prepared in accordance with generally
accepted accounting principles, consistently applied, and in each case shall
fairly present the financial condition of the subject as of the dates thereof
and each of the operating statements shall be in reasonable detail and include
cash flow and any other information reasonably requested by the Agent. Any
material adverse change that occurs in the financial condition of Borrower after
the date of the most recent financial statements shall be reported to the Agent
promptly. None of the financial statements of Borrower or any certificate or
statement furnished to the Agent by or on behalf of Borrower in connection with
the transactions contemplated hereby, shall contain any untrue statement of a
<PAGE>
42
material fact or omit to state a material fact necessary in order to make the
statements contained therein or herein not misleading.
(b) Borrower shall furnish to the Agent:
(i) concurrently with the delivery of the financial statements
referred to in subsection (a), a certificate of a Responsible Officer
(A) stating that, to the best of such person's knowledge, after such
examination or investigation as is necessary to enable such person to
make an informed judgment, Borrower during such period has, in all
material respects, observed or performed all of its covenants and
other agreements, and satisfied every condition, contained in this
Agreement and all other Loan Documents to be observed, performed or
satisfied by it, and that such person has obtained no knowledge of any
Default or any Event of Default, except as specified in such
certificate and (B) stating Borrower's calculation of the Guarantied
Obligations as of the end of such fiscal year;
(ii) not later than November 30th of each year commencing after
Completion, a copy of the projections by Borrower of the operating
budget and cash flow for the Project for the following year; and
(iii) promptly, such additional financial and other information
as the Agent may from time to time reasonably request.
5.14 Administration Fee. Borrower agrees to pay on the first day of
each calendar quarter, for the immediately preceding calendar quarter, to the
Agent an administrative fee (the "Administrative Fee") in an amount equal to (i)
$30,000 (i.e., $120,000 per calendar year) for the period beginning on the date
hereof and ending on the date of Completion of the Improvements and (ii) $15,000
(i.e., $60,000 per calendar year) for the period beginning after Completion of
the Improvements and ending on the date that the Loans are repaid in full. The
Administrative Fee shall be pro rated for any partial calendar quarter during
which this Agreement is in effect.
5.15 Leasing. Borrower shall generally lease space in the Project to
quality tenants at prevailing market rents and other market terms.
<PAGE>
43
SECTION 6. NEGATIVE COVENANTS
------------------
Borrower agrees, unless otherwise consented to in writing by Agent or
Lenders, which consent shall not be unreasonably withheld with respect to
subsections 6.3, 6.4 and 6.6, that, so long as the Commitments remain in effect,
any Note remains outstanding and unpaid or any other amount is owing to any
Lender hereunder or under any of the other Loan Documents, Borrower shall not
take or permit the actions set forth in this Section.
6.1 Additional Debt. Borrower shall not create, incur, assume or
suffer to exist any Indebtedness other than (a) the Loans, (b) trade payables
incurred in the ordinary course of business, (c) unsecured loans made to
Borrower by any partner in Borrower, provided that such loans are subordinated
to the Loans in a manner reasonably acceptable to Agent and (d) unsecured loans
incurred for working capital purposes of the Project (which shall include the
right to enter into Financing Leases), provided that such loans and Financing
Leases described in clause (d) shall (i) not become effective until after the
Completion of the Project, (ii) be subordinated to the Loans in a manner
reasonably satisfactory to Agent and (iii) be in an aggregate amount not to
exceed $10,000,000 at any time outstanding.
6.2 Changes in Plans. (a) Borrower shall not modify or supplement, or
permit the modification or supplementing of, the Plans in any respect, which in
the reasonable determination of the Consulting Professional would (i) materially
adversely affect the structural integrity of the Improvements or alter the
nature of the Improvements as a regional shopping center or (ii) cause the
Improvements to be Completed after the Outside Completion Date and (b) Borrower
shall not modify or supplement, or permit the modification or supplementing of,
the Plans in any respect without the prior written consent of lessees under
Leases which specify construction requirements, parties to any Project Document
which have the authority to approve any changes in Plans and all Governmental
Authorities which previously have approved the matters to be changed.
6.3 Intentionally Deleted.
6.4 Changes in Agreements. Borrower shall not:
(a) surrender, terminate, cancel, rescind or supplement, alter, revise,
modify or amend any Agency Document, Anchor Lease or the REA (including, without
limitation, allowing the ipso facto amendment which is contemplated by the
penultimate paragraph of Section 13.2 of the REA to occur) or permit any such
action to be taken.
(b) amend, modify or waive any of the provisions of the Partnership
Agreement which would result in (i) the reduction or impairment of authority of
Guarantor, (ii) the loss by Guarantor
<PAGE>
44
of control over the operation and management of Borrower or the Project or (iii)
the reduction of Guarantor's ownership interest in Borrower to an amount less
than 51% of the total ownership and economic interests in Borrower.
(c) enter into a Management Agreement which does not expressly provide (i)
that the Agent shall have the right to terminate such Management Agreement
without penalty or cost to Agent after the occurrence and during the continuance
of an Event of Default and (ii) that the Agent or its designee shall have the
right to continue the Management Agreement in full force in accordance with the
terms of such Management Agreement for a period not to exceed 120 days from the
date that the Agent or its designee takes over the Project.
(d) amend, modify or waive any of the material provisions of any of the
Construction Documents or permit any such action to be taken, except to the
extent such changes do not materially affect the rights or interests of Agent or
the Lenders (which rights shall include the Agent's right to succeed to
Borrower's interest under the Construction Documents after an Event of Default).
6.5 Transactions with Affiliates. Borrower shall not enter into any
transaction, including, without limitation, any purchase, sale, lease or
exchange of property or the rendering of any service, with any Affiliate except
for transactions which (a) are upon fair and reasonable terms no less favorable
to Borrower than it would obtain in a hypothetical comparable arm's length
transaction with a Person not an Affiliate or (b) neither the Agent nor the
Lenders or any of their successors or assigns would be bound upon the
foreclosure or assignment-in-lieu of foreclosure of the Project.
6.6 Appointment of Manager; Amendment of Third Party Management
Agreement. Borrower shall not appoint any Manager other than an Affiliate of
Guarantor. If Agent consents to Borrower entering into a Management Agreement
with a Manager that is not an Affiliate of Guarantor, Borrower shall not amend,
modify or terminate such Management Agreement.
SECTION 7. CONDITIONS PRECEDENT TO FIRST ADVANCE
-------------------------------------
Lenders shall not be obligated to make the first advance of Loan
proceeds until all of the conditions set forth in this Section shall have been
satisfied.
7.1 Closing Documents. Agent shall have received all the items set
forth in this subsection, in each case in form and substance satisfactory to
Agent.
(a) Taxes. Evidence that all past and current taxes and assessments
(or installments thereof, if payable in
<PAGE>
45
installments) applicable to the Project or payable by Borrower have been
paid, except for any taxes or assessments which are not yet delinquent.
(b) Title Insurance Policy. A mortgagee's policy of title insurance or
satisfactory evidence of Title Company's unconditional obligation to issue
such a policy, dated as the date of the first advance of the Loan (the
"Title Insurance Policy"). Such Title Insurance Policy shall (i) be in the
amount of the Loan; (ii) be issued at ordinary rates; (iii) insure the
Agent that the Mortgage creates a valid Lien on the Leased Premises and the
Improvements located thereon, free and clear of all defects and
encumbrances, except for the Permitted Exceptions; (iv) be in the form of
policies providing the Agent with the broadest coverage that is then
offered by Title Company to mortgagees of properties located in the City of
Norfolk and Commonwealth of Virginia and that is otherwise satisfactory to
the Agent; (v) provide full coverage against mechanics' liens and against
survey exceptions not specified as Permitted Exceptions; (vi) contain a
pending disbursements clause or endorsement in form and substance
satisfactory to Agent and a commitment of Title Company to provide notices
of title continuation or endorsement sufficient to enable Agent to
determine that title to the Project is satisfactory prior to Agent's making
any subsequent advance of the Loan; and (vii) contain such other
endorsements and affirmative coverage as Agent may request. The Agent shall
be furnished with copies of all documents that appear as exceptions in the
Title Insurance Policy.
(c) Payment of Title Insurance Premium. Evidence satisfactory to Agent
that all premiums in respect of such title insurance policy have been paid.
(d) Survey. A survey of the Leased Premises (current to within 60 days
of the date of the first advance of the Loan), certified to Lenders by an
independent professional licensed land surveyor satisfactory to Agent,
which survey shall be made in accordance with the Minimum Standard Detail
Requirements for Land Title Surveys jointly established and adopted by the
American Title Association and the American Congress on Surveying and
Mapping in 1988. Without limiting the generality of the foregoing, there
shall be surveyed and shown on such survey the following: (i) the locations
of all buildings and other structures, if any, on the Leased Premises and
the established building setback lines; (ii) the lines and the width of
streets abutting the Leased Premises; (iii) all access and other easements
appurtenant to or necessary to the use of the Leased Premises; (iv) all
roadways, paths, driveways, easements, encroachments and overhanging
projections and similar encumbrances affecting the Leased Premises, whether
recorded, apparent from a physical inspection of the Leased Premises or
otherwise
<PAGE>
46
known to the surveyor; (v) any party walls with structures on adjoining
property any encroachments on any adjoining property by the building
structures and improvements on the Leased Premises; and (vi) if the Leased
Premises is described by reference to a filed map, a legend relating the
survey to such map.
(e) Availability of Utilities. Letters from local utility companies or
Governmental Authorities stating, or such other evidence satisfactory to
Agent, showing that gas, electric power, sanitary and storm sewers, water
and all other utilities (i) that are necessary and required during the
construction period have been completed and will be available in such a
manner as to assure Agent that construction will not be impeded by a lack
of utilities and (ii) that are necessary for operation and occupancy of the
Improvements will be completed in such a manner and at such a time as will
assure the opening and operation of the Improvements on or before the
Outside Completion Date.
(f) Architect's Certificate. The Architect's Certificate.
(g) Construction Manager's Certificate. The Construction Manager's
Certificate and a certified list of all construction contracts entered into
in connection with the Improvements.
(h) Hazard Insurance. Policies or certificates of insurance required
by the Mortgage and any of the other Security Documents, accompanied by
evidence of the payment of the premiums for such policies, with mortgagee
loss payable endorsements naming Lenders as loss payees and confirmation by
Agent's insurance consultant that the insurance in place complies with all
requirements of the Mortgage.
(i) Flood Insurance. If required by the Mortgage, a policy of flood
insurance in an amount equal to the lesser of (i) the maximum limit of
coverage available under the National Flood Insurance Act of 1968, as
amended, and (ii) the amount of the Loan.
(j) Permits, Etc. Copies of all Permits required for Borrower's Work
as available, and, to the extent available to Borrower, copies of all
Permits required for Agency's Work.
(k) Soils and Geological Report. If requested by Agent, a soils and
geological report, including a summary of soils tests borings issued by a
professional engineer satisfactory to Agent.
<PAGE>
47
(l) Opinion of Counsel for Borrower. An opinion of counsel for
Borrower.
(m) Opinion of Counsel for Guarantor. An opinion of counsel for
Guarantor.
(n) Project Documents. Certified copies of duly executed counterparts
of the Major Agreements.
(o) Plans. A copy of the Plans.
(p) Loan Documents. Duly executed copies of all Loan Documents.
(q) Budget. The Budget, together with the cost breakdown and schedule
for construction of the Improvements setting forth all items of costs and
expenses and estimating the construction trade schedules required to
complete the construction and equipping of the Improvements.
(r) Organizational Documentation. For Borrower and Guarantor, with
respect to each such entity:
(1) the partnership agreement including all amendments and
attachments, certified by a general partner;
(2) the partnership certificate including all amendments,
certified by an official in whose office it is filed or recorded;
(3) any certificates filed or recorded or required to be filed or
recorded by such partnership in the state of its formation and the
state where the Land is located in order for it to do business in
those states;
(4) any consents by other partners required for the borrowing
contemplated by this Agreement and the execution, delivery and
performance of the Loan Documents or the execution, delivery and
performance of the Guaranty, as applicable; and
(5) if requested by Lender, an acknowledgement by each of the
partners in Borrower of his or its continued membership in Borrower.
(s) Borrowing Certificate and Requisition. A Borrowing Certificate and
Requisition, duly executed by Borrower.
(t) Pre-Leasing Requirement. Fully executed counterparts of the
Nordstrom's Lease and the Dillards' Lease. In addition, each of Nordstrom
and Dillards shall
<PAGE>
48
have executed the REA in form and substance satisfactory to the Lenders.
(u) Environmental Report. An environmental report with respect to the
Leased Premises in form and substance satisfactory to Agent, in its sole
discretion.
(v) Construction Schedule. The Agent shall have received a critical
path method schedule for completion of the construction and equipping of
the Improvements in form and substance satisfactory to Agent.
(w) Engineer's Certificate. The Engineer's Certificate.
(x) Lien Searches. The results of a recent search by a Person
satisfactory to Agent, of the Uniform Commercial Code, judgment and tax
lien filings which may have been filed with respect to personal property of
Borrower.
(y) Solvency Certificates. A Solvency Certificate, duly executed, from
each of Borrower and Guarantor.
(z) Appraisal. An independent M.A.I. appraisal which shall comply in
all respects with the standards for real estate appraisals established
pursuant to the Financial Institutions Reform, Recovery, and Enforcement
Act of 1989.
(aa) Leases. Copies of all fully executed Leases of the Improvements
existing on the date of this Agreement, together with, to the extent in
Borrower's possession and not prohibited by the terms of the Lease, current
financial statements of the tenants (and guarantors of the tenants'
obligations, if applicable) thereunder.
(ab) Standard Form of Lease. The standard form of lease Borrower
intends to use in connection with the leasing of space in the Improvements.
(ac) REA. A copy, certified to be true and complete, of the REA,
together with estoppel certificates with respect thereto from each of
Dillards, Nordstrom and the Agency.
(ad) Management and Leasing Contracts. Copies of all existing
contracts providing for the management, maintenance, operation or leasing
of the Project or any improvements thereon, together with, in each case,
such collateral assignments as Agent may require.
7.2 Fees. Agent shall have received any fees payable hereunder and all
reasonable legal fees and disbursements of Lenders' counsel payable in
connection with the preparation, execution and delivery of the Loan Documents
and the consummation of the transactions contemplated by the Loan Documents.
<PAGE>
49
7.3 Agency Construction Funding. Agent shall have received evidence,
satisfactory to Agent, that the Agency has appropriated and funded no less than
$95,000,000 to cause the completion of the Agency's Work in accordance with the
Project Agreement and the Agency Construction Plans.
7.4 Accounting. Agent shall have received and approved an accounting
of all expenditures for costs shown on the Budget incurred prior to the first
advance of the Loan.
7.5 Representations and Warranties. The representations and warranties
which are contained in any of the Loan Documents or any certificate, document or
financial or other statement furnished under or in connection with the Loan
Documents, shall be correct in all material respects on and as of the date of
the first advance as if made on and as of such date.
7.6 No Default or Event of Default. No Default or Event of Default
shall have occurred and be continuing on such date or after giving effect to the
advance to be made on such Borrowing Date.
7.7 Notices of Leasehold Mortgage. Borrower shall have provided Agent
executed notices to the Agency, as lessor under the Mall Lease and each party to
the REA, informing such parties of the existence of the Mortgage and the notice
address of Agent, in a manner which will ensure that Agent will be afforded all
rights of a leasehold mortgagee under the Mall Lease and the REA and otherwise
in form and substance reasonably satisfactory to Agent.
7.8 Surety Bonds; Construction Contracts. Borrower shall have provided
evidence reasonably satisfactory to Agent and the Consulting Professional that
the Construction Manager and all subcontractors which are required pursuant to
the terms of the relevant Construction Documents or subcontracts to procure
payment and performance bonds have procured such bonds in form and substance as
required by such Construction Documents. Agent shall have received executed
copies of all trade contracts for any contractors which are being paid with the
proceeds of the Loans.
7.9 Additional Matters. All of the foregoing items and all other
documents and legal matters in connection with the transactions contemplated by
this Agreement shall be satisfactory in form and substance to Agent and its
counsel.
SECTION 8. CONDITIONS PRECEDENT TO SUBSEQUENT ADVANCES
-------------------------------------------
8.1 All Subsequent Advances. Lenders shall not be obligated to make
any advance of Loan proceeds subsequent to the initial advance until all of the
conditions set forth in this subsection shall have been satisfied.
(a) Satisfactory Title. The Security Documents shall constitute a
valid first lien on the Collateral for the full
<PAGE>
50
amount of the Loan advanced to and including such date, free and clear of
all Liens except for Permitted Exceptions and Permitted Encumbrances. Agent
shall have been furnished with a notice of title continuation or an
endorsement to the title insurance policy issued to Lenders in connection
with the first advance of the Loan, which continuation or endorsement shall
state that since the last disbursement of the Loan there have been no
changes in the state of title to the Project and that there are no
additional survey exceptions not previously approved by Agent.
(b) No Other Security Interests. Except as otherwise permitted herein,
all materials and fixtures incorporated in the construction of the
Improvements shall have been purchased so that their absolute ownership
shall have vested in Borrower immediately upon delivery to the Land and
Borrower shall have produced and furnished, if required by Agent, the
contracts, bills of sale or other agreements under which title to such
materials and fixtures is claimed.
(c) Statement of Expenditures. Agent shall have received with respect
to Borrower's Work, a statement of Borrower, in form and substance
satisfactory to Agent, setting forth the names, addresses and amounts due
or to become due as well as the amounts previously paid to every
contractor, subcontractor, and supplier furnishing materials for or
performing labor on the construction of any part of Borrower's Work.
(d) Representations and Warranties. The representations and warranties
contained in any of the Loan Documents or any certificate, document or
financial or other statement furnished under or in connection with the Loan
Documents, shall be correct in all material respects on and as of the
Borrowing Date for such advance as if made on and as of such date.
(e) No Default or Event of Default. No Default or Event of Default
shall have occurred and be continuing on such date or result from the
advance to be made on such Borrowing Date.
(f) Borrower's Work. Agent shall have received and approved (i) an
inspection report of the Consulting Professional and the Architect covering
the progress of construction, conformity of Borrower's Work with the
Borrower Construction Plans, quality of work completed and percentage of
work completed and standard form G-702 (or such alternate form reasonably
approved by Agent) executed by the Architect and the Construction Manager,
(ii) a draw request signed by the Construction Manager, satisfactory in
form and substance to Agent, with appropriate insertions, accompanied by
true copies of unpaid invoices, receipted bills and lien waivers for all
items paid with the previous advance of the Loans, and such other
supporting information as Agent may request. Agent shall have also received
(i) an inspection report of the Consulting Professional and the Architect
covering the progress of
<PAGE>
51
construction, conformity of the Agency's Work relating to items covered by
the Garage Agreement with the Agency Plans, quality of work completed and
percentage of work completed and standard AIA form G-702 (or such alternate
form reasonably approved by Agent) executed by the Architect and the
Construction Manager and with respect to any request for an advance for
Borrower's contribution towards the construction of the parking garage
under the Garage Agreement, Agent shall have confirmed that the conditions
to Borrower's obligation to make such contribution under the Garage
Agreement have been satisfied.
(g) Other Costs. In the case of advances to pay the costs included in
the Budget that are not among the costs described in the preceding
paragraph, Agent shall have received such evidence as it may reasonably
require that such costs have been properly incurred and are due and
payable.
(h) Evidence of Compliance. All instruments relating to each advance
and all actions taken on or prior to each advance in connection with the
performance of the Loan Documents shall be satisfactory to Agent, and Agent
shall have been furnished with such documents, reports, certificates,
affidavits and other information, in form and substance satisfactory to
Agent, as Agent may require to evidence compliance with all of the
provisions of the other Loan Documents.
(i) Lien Waivers. Borrower shall have furnished to Lender with respect
to Borrower's Work, lien waivers in form and substance satisfactory to
Agent from the Construction Manager and all contractors, subcontractors,
suppliers and materialmen, evidencing that they have been paid in full for
all work performed or materials supplied to the date of the preceding
advance, except for retentions provided for in this Agreement.
(j) Agreements. Each of the Major Agreements shall be in full force
and effect. There shall exist no default, after the giving of notice, if
applicable, and/or expiration of cure periods, if applicable, by (i) any
party other than Borrower under any Major Agreement that, in the reasonable
judgement of Agent, could have a Material Adverse Effect and (ii) Borrower
under any Agency Document, any Anchor Lease, the REA or any Construction
Document, subject to Borrower's right, with respect to the Construction
Documents, to dispute in consultation with Agent, both acting in good faith
to determine the proper course of action to be taken under such agreements,
the charges or amounts which may be due under such agreements.
(k) Damage or Injury. The Improvements shall not have been materially
damaged by fire or other casualty unless there shall have been received by
Agent or a person approved by Agent, or unless the relevant insurance
company shall have confirmed coverage for such casualty and committed to
disburse, insurance proceeds sufficient in the sole judgment of Agent and
the Consulting Professional, to effect satisfactory restoration and
<PAGE>
52
completion of the Improvements on or before the Outside Completion Date.
(l) Taxes. Agent shall have received evidence that all past and
current (if then due and payable) taxes and assessments applicable to the
Project or payable by Borrower in connection with the Project have been
paid.
(m) Waived Conditions. Upon the request of Agent, all conditions
waived with respect to the initial advance or any subsequent advance shall
be met.
(n) Borrowing Certificate and Requisition. Agent shall have received a
Borrowing Certificate and Requisition dated the date of such advance.
(o) No Litigation. There shall be no action, suit or proceeding
(zoning or otherwise) pending against or involving Borrower or the
Collateral or with respect to any of the Permits in any court, or before or
by any Governmental Authority, whether federal, state, county or municipal
which Agent determines to have a reasonable likelihood to be adversely
determined and which, if adversely determined, would be reasonably likely
to have a Material Adverse Effect.
(p) Surety Bonds; Construction Contracts. To the extent not previously
delivered to Agent, Borrower shall have provided evidence reasonably
satisfactory to Agent and the Consulting Professional that the Construction
Manager and all subcontractors which are required in accordance with the
terms of the relevant Construction Documents or subcontracts to procure
payment and performance bonds have procured such bonds in form and
substance as required by such Construction Documents. Agent shall have
received executed copies of all trade contracts for any contractors which
are being paid with the proceeds of the Loans.
8.2 Completion of Improvements. The Improvements shall not be deemed
completed for purposes of this agreement until all of the conditions set forth
in this subsection shall have been satisfied.
(a) The Improvements shall have been completed substantially in
accordance with the Plans and accepted by Borrower subject to completion of
minor "punch list" items having an aggregate cost to complete or repair not to
exceed $1,500,000;
(b) The Agency's Work shall have been completed substantially in
accordance with the Agency Plans;
(c) The Agent shall have received the following, in each case in form
and substance satisfactory to the Agent:
<PAGE>
53
(i) evidence of the approval by all appropriate Governmental
Authorities of the Improvements as being complete as to construction
including, without limitation, a copy of the Temporary Certificate of
Occupancy;
(ii) the certificate of (a) the Architect and (b) the
Construction Manager that the Improvements have been completed
substantially in accordance with the Plans, that connection has been
made to all appropriate utility facilities; and
(iii) a perimeter survey showing the completed Improvements, all
easements on and appurtenant to the Leased Premises and the location
of access to the Leased Premises and all utility and water easements
directly affecting the Leased Premises with a certification that the
Improvements do not encroach on any property other than the Leased
Premises, that no buildings, other structures or appurtenances on
other property encroach on the Leased Premises and that all set-back
requirements have been complied with.
SECTION 9. EVENTS OF DEFAULT
-----------------
9.1 Events of Default. The occurrence of any of the events set forth
in this subsection shall constitute an Event of Default.
(a) Payment of Note. Borrower shall fail to pay any principal of
any Note when due in accordance with the terms thereof or hereof; or
Borrower shall fail to pay any interest, fees, charges or other
amounts payable hereunder, under any Note or any other Loan Document
within three Business Days after written notice to Borrower.
(b) Unsatisfactory Title. Title to any part of the Collateral
shall not be satisfactory to Agent, in its reasonable judgment, by
reason of any Lien or other defect (even though any such defect may
have existed at the time of any prior advance), except the Permitted
Exceptions, the Permitted Encumbrances and the Liens of the Security
Documents, and such Lien, encumbrance or other defect shall not be
removed or bonded or insured over within 30 days after notice to
Borrower.
(c) Unauthorized Assignments, Etc. Borrower shall assign any
interest in this Agreement or any advance to be made or any interest
in either.
(d) Damage or Destruction. The Improvements are partially or
totally damaged or destroyed by fire or any other cause prior to
Completion and the restoration of the Improvements cannot with the
exercise of ordinary diligence reasonably be expected to be completed
on or prior to the Outside Completion Date, subject to extensions by
the period of any Force Majeure Delay.
<PAGE>
54
(e) Cessation of Construction. For the period commencing on the
date of the first advance hereunder through the Outside Completion
Date, there is any cessation of construction of Borrower's Work for
any period after the date construction commences in excess of 60
successive calendar days, unless the conditions of each of
subparagraphs (i), (ii), (iii) and (iv) of this subparagraph shall be
satisfied at all times during such cessation:
(i) the cessation of construction shall have been caused by
reason of a Force Majeure Delay;
(ii) Borrower shall have made adequate provision, acceptable
to Agent, for the protection of materials acquired by Borrower
stored on site and for the protection of the tenant finish work
constituting Borrower's Work, to the extent then constructed,
against deterioration and against other loss or damage and theft;
(iii) Borrower shall have furnished to Agent satisfactory
evidence that such cessation of construction will not (x)
materially adversely affect or jeopardize the rights of Borrower
under agreements relating to the construction or operation of the
Project (including any Leases) or (y) increase the cost of
construction of Borrower's Work, unless Borrower shall either
demonstrate to Agent's satisfaction that an adequate source of
funds is and shall remain available to cover such increased costs
or deposit with Agent additional funds in an amount equal to such
increased costs; and
(iv) from time to time upon Agent's request during any such
cessation of construction, Borrower shall furnish to Agent
satisfactory evidence that (notwithstanding such cessation of
construction) the completion of the Improvements can be
accomplished on or prior to the Outside Completion Date, subject
to extensions by the period of any Force Majeure Delay.
(f) Nonconforming Work. The construction of all or any material
part of the Improvements, including, without limitation, materials,
fixtures and articles, is performed in a manner other than
substantially in accordance with the Plans and Borrowers does not
promptly remedy the same after Borrower is aware of such variance.
(g) Other Security Agreements. Any of the following occurs: (i)
Borrower executes any chattel mortgage or other security agreement on
any materials, fixtures or articles of personal property used in the
construction of Borrower's Work, which, for security agreements
securing an amount less than $1,000,000, are not discharged within 5
days after notice from Agent of the existence of such security
agreement or if any such materials, fixtures or articles are purchased
pursuant to any
<PAGE>
55
conditional sales contract or other security agreement or otherwise so
that the ownership of such materials, fixtures or articles will not
vest unconditionally in Borrower upon delivery, unconditionally and
free from encumbrance or (ii) Borrower does not furnish to Agent
within 30 days after request the contracts, bills of sale, statements,
receipted vouchers and agreements, or any of them, under which
Borrower claims title to such materials, fixtures or articles.
(h) Insufficient Funds. Borrower shall fail to remedy any Budget
Deficit within (i) 30 days after demand by Agent if such Budget
Deficit shall occur prior to the making of the first advance hereunder
and (ii) 30 days after demand by Agent if such Budget Deficit shall
occur after the making of the first advance hereunder.
(i) Defaults under Other Agreements. Any default by Borrower
shall occur under the Ground Lease, the REA, the Project Agreement,
any Anchor Lease, the Construction Documents (subject to Borrowers
right to dispute amounts due under the Construction Documents in
accordance with Section 8.1(j)), and any notice, if required, shall
have been given and any grace or cure period, if applicable, shall
have expired.
(j) Failure to Complete. The Improvements shall not be completed,
as provided in this Agreement, as of the close of business on the
Outside Completion Date.
(k) Other Covenants. Borrower shall default in the performance or
observance of any of the provisions contained in Section 6.1 or 6.4 of
this Agreement.
(l) Other Defaults. An Event of Default (as defined in the
Mortgage) shall have occurred and be continuing, or Borrower shall
default in the performance or observance of any other term, covenant,
condition or obligation contained in this Agreement or any of the Loan
Documents (other than the Mortgage) and such default shall continue
for 30 days after notice shall have been given to Borrower by Agent
specifying such default and requiring such default to be remedied,
which 30-day period may be extended to the extent required (provided
that such extended period shall not be longer than 180 days at any
time when the Guaranty Percentage is less than 100%) if such default
is not susceptible of cure within 30 days so long as Borrower has
commenced to cure such default within such 30-day period and is
thereafter diligently prosecuting such cure to completion and so long
as such delay is not likely to have a Material Adverse Effect;
provided, however, any default in the payment of an obligation to pay
a liquidated amount (including, without limitation, discharging any
non-permitted Liens) shall be promptly cured after notice by Agent.
(m) Security Documents. Any of the Security Documents or the
Guaranties shall cease for any reason to be in full force
<PAGE>
56
and effect (except in accordance with their terms), or Borrower or any
other Person executing any Security Document or any Guaranty shall so
assert in writing.
(n) Acceleration Events. Any Automatic Acceleration Default shall
occur.
(o) ERISA. (i) Any Person shall engage in any "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of
the Code) involving any ERISA Plan, (ii) any "accumulated funding
deficiency" (as defined in Section 302 of ERISA), whether or not
waived, shall exist with respect to any ERISA Plan or any Lien in
favor of the PBGC or an ERISA Plan shall arise on the assets of
Borrower or any Commonly Controlled Entity, (iii) a Reportable Event
shall occur with respect to, or proceedings shall commence to have a
trustee appointed, or a trustee shall be appointed, to administer or
to terminate, any Single Employer Plan, which Reportable Event or
commencement of proceedings or appointment of a trustee is, in the
reasonable opinion of Required Lenders, likely to result in the
termination of such Single Employer Plan for purposes of Title IV of
ERISA, (iv) any Single Employer Plan shall terminate for purposes of
Title IV of ERISA, (v) Borrower or any Commonly Controlled Entity
shall, or in the reasonable opinion of Required Lenders is likely to,
incur any liability in connection with a withdrawal from, or the
Insolvency or Reorganization of, a Multiemployer Plan or (vi) any
other event or condition shall occur or exist with respect to an ERISA
Plan; and in each case in clauses (i) through (vi) above, such event
or condition, together with all other such events or conditions, if
any, could subject Borrower to any tax, penalty or other liability
which, in the aggregate, is material in relation to the business,
operations, property or financial or other condition of Borrower.
(p) Guarantor Covenants. Guarantor shall default in the
performance or observance of any of the covenants contained in any of
the Guaranties, after any required notice has been provided and
applicable cure period has expired.
9.2 Lenders' Right to Apply Loan Proceeds. During the continuance of
an Event of Default, Lenders shall have the right, but not the obligation, to
disburse and directly apply proceeds of the Loans to satisfy Borrower's
obligations if and to the extent the same are due and payable. Borrower hereby
authorizes Lenders during the continuance of any Event of Default to hold, use,
disburse and apply advances of the Loans for costs incurred in constructing and
equipping Borrower's Work, payment or performance of obligations of Borrower
under the Loan Documents (including payment of interest on the Loans) and
preservation and protection of the Collateral. Such disbursements shall be
deemed advances of the Loans for all purposes and shall be secured by the
Security Documents.
<PAGE>
57
9.3 Lenders' Right to Stop Advancing Funds and to Accelerate the
Loans. In addition to any other rights and remedies Lenders may have pursuant to
the Loan Documents or otherwise, and without limitation, if any Event of Default
shall occur, (a) if such Event of Default is an Automatic Acceleration Default,
automatically the Commitments shall terminate and the Loans (together with
accrued interest) and all other amounts owing under this Agreement, the Notes,
the Security Documents and the other Loan Documents immediately shall become due
and payable, and (b) if such event is any other Event of Default, either or both
of the following actions may be taken: (i) Agent may by notice to Borrower,
declare the Commitments to be terminated, in which case the Commitments shall
immediately terminate; and (ii) Agent may, by notice to Borrower, declare the
Loans (together with accrued interest thereon) and all other amounts payable
under this Agreement, the Notes, the Security Documents and the other Loan
Documents to be due and payable, in which case such amounts immediately shall
become due and payable. Except as expressly provided above in this subsection,
Borrower hereby expressly waives presentment, demand, protest and all other
notices of any kind.
9.4 Lenders' Right to Complete. Upon the occurrence and during the
continuance of any Event of Default, in addition to any other remedies which
Lenders may have pursuant to the Loan Documents, or as provided by statute or
rule of law, Agent may enter upon the Leased Premises and construct, equip and
complete Borrower's Work in accordance with the Borrower Construction Plans with
such changes in the Borrower Construction Plans as Lenders may from time to time
and in their sole discretion deem appropriate, all at the risk, cost and expense
of Borrower. Lenders shall have the right at any and all times to discontinue
any work commenced by it in respect of Borrower's Work or to change any course
of action undertaken by it and shall not be bound to Borrower by any limitations
or requirements of time whether set forth in this Agreement or otherwise.
Lenders shall have the right and power, but shall not be obligated, to assume
Borrower's interest under any contract made by or on behalf of Borrower in any
way relating to Borrower's Work or the construction of Borrower's Work and to
take over and use all or any part or parts of the labor, materials, supplies and
equipment contracted for by or on behalf of Borrower, whether or not previously
incorporated into Borrower's Work, all in the sole and absolute discretion of
Lenders. In connection with any construction of Borrower's Work undertaken by
Lenders pursuant to the provisions of this subsection, Lenders may (i) engage
builders, contractors, architects, engineers and others for the purpose of
furnishing labor, materials and equipment in connection with any construction of
Borrower's Work, (ii) pay, settle or compromise all bills or claims which may
become Liens against the Leased Premises, or any part of the Leased Premises, or
which have been or may be incurred in any manner in connection with the
construction, completion and equipping of Borrower's Work or for the discharge
of Liens or defects in the title of the Leased Premises, or any part of the
Leased Premises, and (iii) take such other action (including the employment of
watchmen to protect the Leased Premises) or refrain from acting under this
Agreement, as Lenders may in their
<PAGE>
58
sole and absolute discretion from time to time determine without any limitation
whatsoever. Borrower shall be liable to reimburse Lenders for all sums paid or
incurred for the construction, completion and equipping of Borrower's Work,
whether such sums shall be paid or incurred pursuant to the provisions of this
subsection or otherwise. At Lenders' option, all such sums shall be treated as
advances hereunder for all purposes or as demand obligations of Borrower,
bearing interest at the non-default interest rate provided in this Agreement
plus 4% from the date of payment by Lenders to the date of repayment by
Borrower. All of the foregoing amounts, including interest, shall be deemed to
constitute advances under this Agreement, be evidenced by the Note and secured
by the Security Documents. Upon the occurrence and during the continuance of any
Event of Default, the rights, powers and privileges provided in this subsection
and all other remedies available to Lenders under this Agreement or by statute
or by rule of law may be exercised by Lenders at any time and from time to time
whether or not the Loan shall be due and payable, and whether or not Lenders
shall have instituted any foreclosure or other action for the enforcement of the
Security Documents or the Note.
9.5 Power of Attorney. For the purpose of carrying out the provisions
and exercising the rights, powers and privileges granted in this Section,
Borrower hereby irrevocably constitutes and appoints Agent, effective upon the
occurrence and during the continuance of an Event of Default, its true and
lawful attorney-in-fact to execute, acknowledge and deliver any instruments and
do and perform any acts such as are referred to in this Section in the name and
on behalf of Borrower. This power of attorney is a power coupled with an
interest and cannot be revoked.
SECTION 10. THE AGENT
---------
10.1 Appointment. Each Lender hereby irrevocably designates and
appoints Bayerische Hypotheken-Und Wechsel-Bank Aktiengesellschaft, New York
Branch as Agent of such Lender under this Agreement and the other Loan
Documents, and each such Lender irrevocably authorizes Hypo as Agent for such
Lender, to take such action on its behalf under the provisions of this Agreement
and the other Loan Documents and to exercise such powers and perform such duties
as are expressly delegated to Agent by the terms of this Agreement and the other
Loan Documents, together with such other powers as are reasonably incidental
thereto. Notwithstanding any provision to the contrary elsewhere in this
Agreement, Agent shall not have any duties or responsibilities, except those
expressly set forth herein, or any fiduciary relationship with any Lender, and
no implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Loan Document or
otherwise exist against Agent.
10.2 Delegation of Duties. Agent may execute any of its duties under
this Agreement and the other Loan Documents by or through agents or
attorneys-in-fact and shall be entitled to advice
<PAGE>
59
of counsel concerning all matters pertaining to such duties. Agent shall not be
responsible for the negligence or misconduct of any agents or attorneys in-fact
selected by it with reasonable care.
10.3 Exculpatory Provisions. Neither Agent nor any of its officers,
directors, employees, agents, attorneys-in-fact or Affiliates shall be (i)
liable to any Lenders for any action lawfully taken or omitted to be taken by it
or such Person under or in connection with this Agreement or any other Loan
Document (except for its or such Person's own gross negligence or willful
misconduct) or (ii) responsible in any manner to any Lenders for any recitals,
statements, representations or warranties made by Borrower or any Partner
therein contained in this Agreement or any other Loan Document or in any
certificate, report, statement or other document referred to or provided for in,
or received by Agent under or in connection with, this Agreement or any other
Loan Document or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or the Notes or any other Loan
Document or for any failure of Borrower to perform its obligations hereunder or
thereunder. Agent shall not be under any obligation to any Lender to ascertain
or to inquire as to the observance or performance of any of the agreements
contained in, or conditions of, this Agreement or any other Loan Document, or to
inspect the properties, books or records of Borrower.
10.4 Reliance by Agent. Agent shall be entitled to rely, and shall be
fully protected in relying, upon any Note, writing, resolution, notice, consent,
certificate, affidavit, letter, telecopy, telex or teletype message, statement,
order or other document or conversation believed by it to be genuine and correct
and to have been signed, sent or made by the proper Person or Persons and upon
advice and statements of legal counsel (including, without limitation, counsel
to Borrower), independent accountants and other experts selected by Agent. Agent
may deem and treat the payee of any Note as the owner thereof for all purposes
unless a written notice of assignment, negotiation or transfer thereof shall
have been filed with Agent. Agent shall be fully justified in failing or
refusing to take any action under this Agreement or any other Loan Document
unless it shall first receive such advice or concurrence of the Required Lenders
as it deems appropriate or it shall first be indemnified to its satisfaction by
Lenders against any and all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action. Agent shall in all cases
be fully protected by all Lenders in acting, or in refraining from acting, under
this Agreement and the Notes and the other Loan Documents in accordance with a
request of the Required Lenders, and such request and any action taken or
failure to act pursuant thereto shall be binding upon all Lenders and all future
holders of the Notes.
10.5 Notice of Default. Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Event of Default hereunder unless
Agent has received notice from a Lender or Borrower referring to this Agreement,
describing such Default or
<PAGE>
60
Event of Default and stating that such notice is a "notice of default". In the
event that Agent receives such a notice, Agent shall give notice thereof to
Lenders. Agent shall take such action with respect to such Default or Event of
Default as shall be reasonably directed by the Required Lenders; provided that
unless and until Agent shall have received such directions, Agent may (but shall
not be obligated to) take such action, or refrain from taking such action, with
respect to such Default or Event of Default as it shall deem advisable in the
best interests of Lenders. In no event shall Agent be required to take any such
action which it determines to be contrary to law.
10.6 Non-Reliance on Agent and Other Lenders. Each Lender expressly
acknowledges that neither Agent nor any of its officers, directors, employees,
agents, attorneys-in-fact or Affiliates has made any representations or
warranties to it and that no act by Agent hereinafter taken, including any
review of the affairs of Borrower, shall be deemed to constitute any
representation or warranty by Agent to any Lender. Each Lender represents to
Agent that it has, independently and without reliance upon Agent or any other
Lender, and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
operations, property, financial and other condition and creditworthiness of
Borrower and made its own decision to make its Loans hereunder and enter into
this Agreement. Each Lender also represents that it will, independently and
without reliance upon Agent or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement and the other Loan Documents, and to make such investigation as
it deems necessary to inform itself as to the business, operations, property,
financial and other condition and creditworthiness of Borrower. Except for
notices, reports and other documents expressly required to be furnished to
Lenders by Agent hereunder, Agent shall not have any duty or responsibility to
provide any Lender with any credit or other information concerning the business,
operations, property, condition (financial or otherwise), prospects or
creditworthiness of Borrower which may come into the possession of Agent or any
of its officers, directors, employees, agents, attorneys-in-fact or Affiliates.
10.7 Indemnification. Lenders agree to indemnify Agent in its capacity
as such (to the extent not reimbursed by Borrower and without limiting the
obligation of Borrower to do so), ratably according to their respective
Commitment Percentages in effect on the date on which indemnification is sought
under this subsection (or, if indemnification is sought after the date upon
which the Commitments shall have terminated and the Loans shall have been paid
in full, ratably in accordance with their Commitment Percentages immediately
prior to such date), from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind whatsoever which may at any time (including, without
limitation, at any time following the payment of the Notes) be imposed on,
incurred by or asserted against
<PAGE>
61
Agent in any way relating to or arising out of this Agreement, any of the other
Loan Documents or any documents contemplated by or referred to herein or therein
or the transactions contemplated hereby or thereby or any action taken or
omitted by Agent under or in connection with any of the foregoing; provided that
no Lender shall be liable for (a) the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting solely from Agent's gross negligence
or willful misconduct, (b) any loss of principal of or interest with respect to
Agent's Loans or (c) any loss suffered by Agent in connection with an interest
rate cap, swap or other interest rate hedging arrangement entered into with
Borrower. The agreements in this subsection shall survive the payment of the
Notes and all other amounts payable hereunder.
10.8 Agent in Its Individual Capacity. Agent and its Affiliates may
make loans to, accept deposits from and generally engage in any kind of business
with Borrower as though Agent were not Agent hereunder and under the other Loan
Documents. With respect to its Loans made or renewed by it and any Note issued
to it, Agent shall have the same rights and powers under this Agreement and the
other Loan Documents as any Lender and may exercise the same as though it were
not Agent, and the terms "Lender" and "Lenders" shall include Agent in its
individual capacity.
10.9 Successor Agent. Agent agrees not to resign without the prior
consent of Borrower, which consent shall not be unreasonably withheld, provided,
however, Agent shall have the right to resign without Borrower's consent if an
Event of Default has occurred and is continuing or in the event it becomes an
Affected Bank and is removed or replaced as a Lender pursuant to Section 3.16.
If Agent shall resign as Agent under this Agreement and the other Loan
Documents, then the Required Lenders shall appoint from among Lenders a
successor agent for Lenders, provided that the appointment of any successor
agent other than Hypo shall be subject to the consent of Borrower, which consent
shall not be unreasonably withheld or delayed. Upon the appointment of a
successor agent for Lenders, such successor agent shall succeed to the rights,
powers and duties of Agent, and the term "Agent" shall mean such successor agent
effective upon such appointment and approval, and the former Agent's rights,
powers and duties as Agent shall be terminated, without any other or further act
or deed on the part of such former Agent or any of the parties to this Agreement
or any holders of the Notes. After any retiring Agent's resignation as Agent,
the provisions of this subsection shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Agent under this Agreement and
the other Loan Documents.
10.10 Rights of Agent and the Lenders. Notwithstanding anything to the
contrary herein or in any other Loan Documents:
(a) with the written consent of the Required Lenders, the Agent may,
from time to time, (i) enter into with the Borrower written amendments,
supplements or modifications hereto and to
<PAGE>
62
the Notes and the other Loan Documents, or change in any manner the rights
of the Lenders or of Borrower hereunder or thereunder (including, without
limitation, modifying any financial covenant contained herein) or (ii)
waive, on such terms and conditions as the Required Lenders or the Agent,
as the case may be, may specify in such instrument, any of the requirements
of this Agreement, the Notes or the other Loan Documents or any Default or
Event of Default and its consequences; provided, however, that no such
waiver and no such amendment, supplement or modification shall (A) without
the written consent of each Lender affected thereby (i) reduce or forgive
the amount of any Note or of any installment thereof, (ii) extend the
scheduled date of maturity of the Loans or any mandatory principal payment
thereon, (iii) reduce the stated rate of any interest or fee payable
hereunder or extend the scheduled date of any payment thereof or (iv)
forgive any portion of interest or principal, fees or other amounts due
hereunder, (B) without the written consent of all the Lenders, (i) amend,
modify or waive any provision of this subsection, (ii) reduce the number
specified in the definition of Required Lenders, (iii) consent to the
assignment or transfer by Borrower of any of its rights and obligations
under this Agreement and the other Loan Documents or (iv) release any
collateral or subordinate the Lien of the Mortgage to any other mortgage,
and (C) without the written consent of the Agent, amend, modify or waive
any provision of Section 10 of this Agreement. Any such waiver and any such
amendment, supplement or modification shall apply equally to each of the
Lenders and shall be binding upon each of the Borrower, the Lenders, the
Agent and all future holders of any of the Notes. In the case of any
waiver, the Borrower, the Lenders and the Agent shall be restored to their
former position and rights hereunder and under the outstanding Notes and
any other Loan Documents, and any Default or Event of Default waived shall
be deemed to be cured and not continuing; but no such waiver shall extend
to any subsequent or other Default or Event of Default, or impair any right
consequent thereon.
(b) In addition to the Agent, the Required Lenders shall have the
right to determine that conversion to a Eurodollar Loan is inappropriate
pursuant to subsection 3.6(a) or 3.6(b) above;
(c) If clause (b) of subsection 3.10 is invoked, the Required Lenders
shall certify that the Eurodollar Rate determined or to be determined for
such Interest Period will not adequately and fairly reflect the cost to the
Lenders of making or maintaining the affected Eurodollar Loan during the
applicable Interest Period; and
(d) Under clause (b) of Section 9.3, (i) the Agent may only accelerate
the Obligations with the consent of the Required Lenders and (ii) the Agent
shall accelerate the Obligations upon the direction of the Required
Lenders.
<PAGE>
63
10.11 Participation; Assignments. (a) Except as provided in paragraph
10.11(g), any Lender may, in the ordinary course of its commercial banking
business and in accordance with applicable law, at any time sell to one or more
banks or other entities ("Participants") participating interests in any Loan
owing to such Lender, any Note held by such Lender, any Commitment of such
Lender or any other interest of such Lender in connection with the Loans. In the
event of any such sale by a Lender of a participating interest to a Participant,
such Lender's obligations under this Agreement to the other parties to this
Agreement shall remain unchanged, such Lender shall remain solely responsible
for the performance thereof, such Lender shall remain the holder of any such
Note for all purposes under this Agreement and the other Loan Documents, and
Borrower and Agent shall continue to deal solely and directly with such Lender
in connection with such Lender's rights and obligations under this Agreement and
the other Loan Documents. Borrower agrees that each Participant shall be
entitled to the benefits of subsections 3.13, 3.14 and 3.15 with respect to its
participation in the Commitments outstanding from time to time; provided, that
no Participant shall be entitled to receive any greater amount pursuant to such
provisions than the transferor Lender would have been entitled to receive in
respect of the amount of the participation transferred by such transferor Lender
to such Participant had no such transfer been made.
(b) Except as provided in paragraph 10.11(g), any Lender, in the
ordinary course of its commercial banking business and in accordance with
applicable law, at any time and from time to time may sell to any Lender or any
Affiliate thereof without Borrower's consent or to one or more additional banks
or financial institutions with the prior written consent of Agent and Borrower,
which consent of Borrower shall not be unreasonably withheld and which consent
shall not be required during the continuance of an Event of Default ("an
Assignee") all or any part of its rights and obligations under this Agreement,
the Notes and the other Loan Documents pursuant to an Assignment and Acceptance,
substantially in the form of Exhibit C, executed by such Assignee and such
assigning Lender (and Borrower, if required) and delivered to Agent for its
acceptance and recording in the Register. Upon such execution, delivery,
acceptance and recording, from and after the effective date determined pursuant
to such Assignment and Acceptance, (x) the Assignee thereunder shall be a party
hereto and shall have the rights and obligations of a Lender hereunder with a
Commitment as set forth therein, and (y) the assigning Lender thereunder shall,
to the extent provided in such Assignment and Acceptance, be released from its
obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender's rights
and obligations under this Agreement, such assigning Lender shall cease to be a
party hereto). Notwithstanding the foregoing, provided that an Event of Default
has not occurred, (a) Hypo shall retain Commitments in an amount not less than
$25,000,000 and (b) no Lender may assign any portion of its Commitment (other
than to an existing Lender) in an amount less than $15,000,000 unless it assigns
its entire Commitment.
<PAGE>
64
(c) Agent shall maintain at its address referred to in subsection 11.3
a copy of each Assignment and Acceptance delivered to it and a register (the
"Register") for the recordation of the names and addresses of Lenders and the
Commitment of, and principal amount of the Loans owing to, each Lender from time
to time. The entries in the Register shall be conclusive, in the absence of
manifest error, and Borrower, Agent and Lenders may treat each Person whose name
is recorded in the Register as the owner of the Loan recorded therein for all
purposes of this Agreement. The Register shall be available for inspection by
Borrower or any Lender at any reasonable time and from time to time upon
reasonable prior notice.
(d) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an Assignee (and Borrower, if required), together with
payment to Agent of a registration and processing fee of $3,000 (payable by such
assigning Lender), Agent shall (i) promptly accept such Assignment and
Acceptance and (ii) on the effective date determined pursuant thereto record the
information contained therein in the Register and give notice of such acceptance
and recordation to Lenders and Borrower. On or prior to such effective date,
Borrower shall execute and deliver to Agent (in exchange for the Note of the
assigning Lender) a new Note, as the case may be, to the order of such Assignee
in an amount equal to the Commitment or Loan, as the case may be, assumed by it
pursuant to such Assignment and Acceptance and, if the assigning Lender has
retained a Commitment or Loan hereunder, a new Note, as the case may be, to the
order of the assigning Lender in an amount equal to the Commitment or Loan, as
the case may be, retained by it hereunder. Such new Note shall be dated the date
of this Agreement, and shall otherwise be in the form of the Note replaced
thereby.
(e) Borrower authorizes each Lender to disclose to any Participant or
Assignee (each, a "Transferee") and any prospective Transferee, on a
confidential basis, any and all financial information in such Lender's
possession concerning Borrower and its Affiliates which has been delivered to
such Lender by or on behalf of Borrower pursuant to this Agreement or which has
been delivered to such Lender by or on behalf of Borrower in connection with
such Lender's credit evaluation of Borrower and its Affiliates prior to becoming
a party to this Agreement.
(f) Nothing herein shall prohibit any Lender from pledging or
assigning any Note to any Federal Reserve Bank in accordance with applicable
law, provided that no such assignment shall release such Lender from it
obligations hereunder.
(g) Notwithstanding the foregoing provisions of this Section, so long
as an Event of Default is not continuing, no Lender shall assign, grant, convey,
or transfer all or any portion of or interest (participation or otherwise) in
the Loan to any Person if such Person is a partner in Borrower. Any Person who
becomes a Lender or Participant in accordance with the terms of this Agreement
agrees to be bound by the provisions of this Paragraph and, other than in
connection with a bankruptcy proceeding of a partner in
<PAGE>
65
Borrower or during the continuance of an Event of Default, agrees not to take
any action that would make it a partner in Borrower. Any Lender may conclusively
rely upon the certificate of any proposed Transferee stating that such proposed
Transferee is not a partner in Borrower and the assigning or participating
Lender shall have no liability to Borrower or any partner in Borrower for
assigning or participating any interest in the Loan in reliance on such
certification.
10.12 Liability of Agent. Agent shall not have any liabilities or
responsibilities to Borrower on account of the failure of any Lender to perform
its obligations hereunder (without affecting any rights of Borrower hereunder)
or to any Lender on account of the failure of Borrower to perform its
obligations hereunder or under any other Loan Document.
SECTION 11. GENERAL CONDITIONS
------------------
The following conditions shall be applicable throughout the term of
this Agreement:
11.1 No Waivers. No advance of proceeds of the Loans shall constitute
a waiver of any of the conditions of Lenders' obligation to make further
advances. No waiver of any such condition shall constitute a waiver of any
Default or Event of Default related to or predicated upon such condition. Any
advance made by Lenders and any sums expended by Lenders pursuant to the Loan
Documents shall be deemed to have been made pursuant to this Agreement,
notwithstanding the existence of an uncured Default or Event of Default. No
advance of the Loans at a time when an Event of Default exists, whether or not
Lenders had actual knowledge of such default, shall constitute a waiver of any
right or remedy of Lenders existing by reason of such Event of Default,
including, without limitation, the right to accelerate the maturity of the Loan
or to foreclose the Lien of the Security Documents or to refuse to make further
advances of the Loan.
11.2 Lenders and Agent Sole Beneficiary. All conditions of the
obligation of Lenders and Agent to make advances of the Loan are imposed solely
and exclusively for the benefit of Lenders and Agent and their assigns and no
other Person shall have standing to require satisfaction of such conditions in
accordance with their terms or be entitled to assume that Lenders will refuse to
make advances in the absence of strict compliance with any or all such terms and
no Person shall, under any circumstances, be deemed to be a beneficiary of such
conditions, any or all of which may be freely waived in whole or in part by
Agent and/or Lenders at any time if in their sole discretion they deem such
waiver to be advisable. Lenders' obligation to make advances of the Loan,
subject to the terms and conditions of this Agreement, is solely for the benefit
of Borrower and no other Person shall be deemed to be a beneficiary of such
obligation nor entitled to require any advance of Loan proceeds. Inspections and
approvals of the Plans and the Improvements and the
<PAGE>
66
workmanship and materials used in the construction of the Improvements shall
impose no responsibility or liability of any nature whatsoever on Agent and/or
Lenders, and no Person shall, under any circumstances, be entitled to rely upon
such inspections and approvals by Agent and/or Lenders for any reason. Lenders
are only obligated under this Agreement to make the advances if and to the
extent required by this Agreement.
11.3 Notices. All notices, demands, consents and approvals hereunder
shall be in writing and shall be deemed to have been sufficiently given or
served when presented personally, when delivered to an overnight courier service
with guaranteed next business day delivery or, 5 days after being deposited in
the mail, postage prepaid, certified or registered, return receipt requested,
addressed as follows:
Borrower: Taubman MacArthur Associates Limited Partnership
c/o The Taubman Company
200 East Long Lake Road, Suite 300
P.O. Box 200
Bloomfield Hills, Michigan 48303-0200
Attention: Shire Rothbart
with a copy to: Miro Weiner & Kramer
Suite 100
500 North Woodward Avenue
Bloomfield Hills, Michigan 48303
Attention: Martin Katz, Esq.
Agent: Bayerische Hypotheken- Und Wechsel-Bank
Aktiengesellschaft, New York Branch
32 Old Slip
Financial Square
New York, New York 10005
Attention: William Rogers
with a copy to: Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Gregory J. Ressa
provided that any notice, request or demand to or upon the Agent or Lenders
pursuant to subsection 3.1, 3.4, 3.5, 3.6 or 3.11 shall not be effective until
received. Any party may change its address by notice to the other parties.
11.4 Modifications. Neither this Agreement, any Note or any other Loan
Document, nor any terms hereof or thereof may be amended, supplemented or
modified except in a writing duly executed by Borrower and Agent in accordance
with the terms of this Agreement. Any such waiver and any such amendment,
supplement or modification shall apply equally to each of Lenders and shall be
binding upon Borrower, Lenders, Agent and all future holders of the Notes. In
the case of any waiver, Borrower, Lenders and Agent shall be restored to
<PAGE>
67
their former position and rights hereunder and under the outstanding Notes and
any other Loan Documents, and any Default or Event of Default waived shall be
deemed to be cured and not continuing; but no such waiver shall extend to any
subsequent or other Default or Event of Default, or impair any right consequent
thereon.
11.5 Rights Cumulative. All rights, powers and remedies given to Agent
and Lenders under this Agreement are cumulative and not alternative, and are in
addition to all rights, powers and remedies otherwise afforded Agent and Lenders
under all statutes and rules of law (all rights, powers and remedies
collectively, "Lenders' Rights"); any forbearance or delay by Agent or Lenders
in exercising any of Lenders' Rights shall not be deemed to be a waiver, and the
exercise or partial exercise of any of Lenders' Rights shall not preclude the
further exercise of any of Lenders' Rights which shall continue in full force
and effect until specifically waived by an instrument in writing executed by
Agent or Lenders. All representations, warranties and covenants contained in any
of the Loan Documents shall survive the making of the Loans.
11.6 Sign. Prior to the Outside Completion Date, at Lenders' option,
Borrower will, to the extent it has the right to do so under the Agency
Documents and in compliance with Legal Requirements and at its sole cost and
expense, erect and maintain a sign on the Land indicating the source of the
construction financing, which sign shall be subject to Agent's and Borrower's
reasonable approval.
11.7 Schedules. The Schedules attached to this Agreement are essential
to and are made a part of this Agreement.
11.8 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of Borrower, Lenders, Agent, all future holders of the
Notes and their respective successors and assigns, except that Borrower may not
assign or transfer any of its rights or obligations under this Agreement without
the prior written consent of each Lender.
11.9 Governing Law. THIS AGREEMENT IS MADE AND DELIVERED IN NEW YORK,
NEW YORK AND SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT
OF LAWS.
11.10 Submission to Jurisdiction. All judicial actions, suits or
proceedings brought against Borrower and its property with respect to its
obligations, liabilities or any other matter under or arising out of or in
connection with this Agreement or any other Loan Document or for recognition or
enforcement of any judgment rendered in any such proceedings may be brought in
any trial or appellate state or federal court of competent jurisdiction in the
City of New York. By execution and delivery of this Agreement, Borrower accepts,
generally and unconditionally, the non-exclusive jurisdiction of such courts and
irrevocably waives, and agrees not to plead or claim, any objection that it may
ever have to the venue of any such action or
<PAGE>
68
proceeding in any such court or that such action or proceeding was brought in an
inconvenient court. Borrower irrevocably agrees that all process in any
proceeding or any court arising out of or in connection with this Agreement or
any of the other Loan Documents, may be effected by mailing to Borrower a copy
by registered or certified mail or any substantially similar form of mail,
postage prepaid, to Borrower at its address set forth in subsection 11.3 or at
such other address of which Lenders shall have been notified in accordance with
the terms of such subsection. Such service shall be effective ten days after
such mailing. Such service will be effective and binding service in every
respect. Borrower shall not assert that such service did not constitute
effective and binding service within the meaning of any applicable state or
federal law, rule, regulation or the like. Borrower irrevocably waives any
objections, including without limitation any objection to the laying of venue or
based on the grounds of forum non conveniens, which it may now or in the future
have to the bringing of any such action or proceeding in any such jurisdiction.
Nothing in this Agreement shall affect the right to effect service of process in
any other manner permitted by law or shall limit the right to sue in any other
jurisdiction.
11.11 WAIVERS OF JURY TRIAL. BORROWER, Agent AND LENDERS HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR THE NOTES OR ANY OTHER LOAN DOCUMENT
AND FOR ANY COUNTERCLAIM THEREIN.
11.12 Captions. The captions in this Agreement are for convenience of
reference only, and in no way limit or amplify the provisions of this Agreement.
11.13 Adjustments; Set-off. (a) If any Lender (a "benefitted Lender")
shall at any time receive any payment of all or part of its Loans, or interest
thereon, or receive any collateral in respect thereof (whether voluntarily or
involuntarily, by set-off, pursuant to events or proceedings of the nature
referred to in Section 19(a)(v) of the Mortgage, or otherwise), in a greater
proportion than any such payment to or collateral received by any other Lender,
if any, in respect of such other Lender's Loans, or interest therein, such
benefitted Lender shall purchase for cash from the other Lenders a participating
interest in such portion of each such other Lender's Loan, or shall provide such
other Lenders with the benefits of any such collateral, or the proceeds thereof,
as shall be necessary to cause such benefitted Lender to share the excess
payment or benefits of such collateral or proceeds ratably with each of the
Lenders; provided, however, if all or any portion of such excess payment or
benefits is thereafter recovered from such benefitted Lender, such purchase
shall be rescinded, and the purchase price and benefits returned, to the extent
of such recovery, but without interest.
(b) In addition to any rights and remedies of Lenders provided by law,
each Lender shall have the right, without prior notice to Borrower, any such
notice being expressly waived by
<PAGE>
69
Borrower to the extent permitted by applicable law, upon any amount becoming due
and payable by Borrower hereunder or under the Notes (whether at the stated
maturity, by acceleration or otherwise) to set-off and appropriate and apply
against such amount any and all deposits (general or special, time or demand,
provisional or final), in any currency, and any other credits, indebtedness or
claims, in any currency, in each case whether direct or indirect, absolute or
contingent, matured or unmatured, at any time held or owing by such Lender or
any branch or agency thereof to or for the credit or the account of Borrower.
Each Lender agrees promptly to notify Borrower and Agent after any such set-off
and application made by such Lender, provided that the failure to give such
notice shall not affect the validity of such set-off and application.
11.14 Counterparts. This Agreement may be executed by one or more of
the parties to this Agreement on any number of separate counterparts (including
by telecopy), and all of said counterparts taken together shall be deemed to
constitute one and the same instrument. A set of the copies of this Agreement
signed by all the parties shall be lodged with Borrower and Agent.
11.15 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
11.16 Integration. This Agreement and the other Loan Documents
represent the agreement of Borrower, Agent and the Lenders with respect to the
subject matter hereof, and there are no promises, undertakings, representations
or warranties by Agent or any Lender or Borrower relative to subject matter
hereof not expressly set forth or referred to herein or in the other Loan
Documents.
11.17 Cure Rights of Agency. Lenders agree that the Agency shall have
the right to cure any Default hereunder and under the other Loan Documents
during the applicable cure period provided herein and in the other Loan
Documents and Lenders shall accept such cure by the Agency. Notwithstanding the
foregoing, neither the Agent nor any Lender shall have any obligation to provide
a notice of default to the Agency.
11.18 Exculpation. Notwithstanding anything to the contrary contained
in this Agreement, the Notes, the Security Documents, any other Loan Documents
or any certificates, documents or instruments executed in connection with the
Loan, except as provided below, (a) no partner in Borrower nor any partner,
director, officer, trustee, shareholder, member, employee or principal in any
such partner, nor any of their successors and assigns (collectively, "Exculpated
Persons") shall have any personal liability for the payment of the Notes or any
other fee, charge or other amount which may become due under this Agreement, the
Notes, the Security
<PAGE>
70
Documents or the other Loan Documents or for the performance of the obligations
under this Agreement, the Notes, the Security Documents or the other Loan
Documents and (b) Lenders' and Agent's sole recourse shall be against Borrower,
all of Borrower's assets, Borrower's interests in the Trust Property, the
security of any of the other Security Documents and Guarantor under the
Guaranties, and no deficiency judgment or judgment for payment of money or
damages shall lie against any Exculpated Person in any suit or action to collect
on the Notes or to foreclose upon the Mortgage or to realize upon the security
of any of the other Security Documents; provided, however, that the foregoing
shall not apply to liability (to the extent hereafter provided) arising from:
(a) the fraudulent acts and intentional misrepresentations of any
Exculpated Persons;
(b) the failure of Borrower during the continuance of an Event of
Default to apply the rents, income and other revenues of the Trust Property
to the payment of real estate taxes, operating expenses, maintenance and
other expenses of the Trust Property in accordance with the terms of the
Mortgage and to amounts due under the Loan Documents, to the extent of the
funds not so applied; and
(c) the willful failure of Borrower to apply or use any insurance
proceeds or condemnation awards or proceeds of any taking under power of
eminent domain or conveyance in lieu thereof in accordance with the terms
of the Mortgage, to the extent of the awards or proceeds not so applied.
Nothing contained in this paragraph shall (i) prevent Lenders' full recourse
against Borrower, all of Borrower's assets and Borrower's interests in the Trust
Property and the security of any of the other Loan Documents, (ii) impair the
validity of the indebtedness evidenced by the Notes, (iii) except as set forth
in this paragraph, in any way affect or impair the right of the holder of the
Notes, the Security Documents or any of the other Loan Documents to exercise any
or all of its rights under the Notes, the Security Documents or any of the other
Loan Documents, or affect or impair the obligations of Borrower hereunder so
long as recourse to any Exculpated Person is limited as aforesaid and (iv)
modify, qualify or affect in any manner whatsoever the personal recourse
undertakings, obligations and liabilities of any Person under any guaranty of
payment or other guaranty now or hereafter executed and delivered to Agent or
Lenders in connection with the Loan.
11.19 Non-Recourse to TRG Partners. Notwithstanding anything to the
contrary contained in this Agreement, in any of the other Loan Documents, or in
any other instruments, certificates, documents or agreements executed in
connection with the Loans (all of the foregoing, for purposes of this
subsection, hereinafter referred to, individually and collectively, as the
"Relevant Documents"), no recourse under or upon any Obligation, representation,
warranty, promise or other matter whatsoever shall be had against any of the
<PAGE>
71
constituent partners of the Guarantor and their successors or assigns (said
constituent partners of the Guarantor and their successors or assigns for
purposes of this subsection, hereinafter referred to, individually and
collectively, as the "TRG Partners") and each Lender expressly waives and
releases, on behalf of itself and its successors and assigns, all right to
assert any liability whatsoever under or with respect to the Relevant Documents
against, or to satisfy any claim or obligation arising thereunder against, any
of the TRG Partners or out of any assets of the TRG Partners, provided, however,
that nothing in this subsection shall be deemed to: (i) release the Guarantor or
Borrower from any personal liability pursuant to, or from any of its respective
obligations under this Agreement or the Guaranties or the other Relevant
Documents, or from personal liability for its fraudulent actions or fraudulent
omissions; (ii) release any TRG Partner from personal liability for its or his
own fraudulent actions or fraudulent omissions; (iii) constitute a waiver or
impairment of any obligation evidenced or secured by, or contained in, the
Relevant Documents or affect in any way the validity or enforceability of the
Relevant Documents; or (iv) limit the right of Agent and/or the Lenders to
proceed against or realize upon any collateral now or hereafter given for the
Loans or any and all of the assets of Borrower or the Guarantor (notwithstanding
the fact that the TRG Partners have an ownership interest in Borrower and the
Guarantor and, thereby, an interest in the assets of Borrower and the Guarantor)
or to name Borrower or the Guarantor (or, to the extent that the same are
required by applicable law or are determined by a court to be necessary parties
in connection with an action or suit against Borrower or the Guarantor or any
collateral now or hereafter given for the Loans, any of the TRG Partners) as a
party defendant in, and to enforce against any collateral now or hereafter given
for the Loans and/or assets of Borrower or the Guarantor any judgment obtained
by Agent and/or the Lenders with respect to, any action or suit under the
Relevant Documents so long as no judgment shall be taken (except to the extent
taking a judgment is required by applicable law or determined by a court to be
necessary to preserve Agent's and/or the Lenders' rights against any collateral
now or hereafter given for the Loans or Guarantor, but not otherwise) or shall
be enforced against the TRG Partners, their successors and assigns, or their
assets.
<PAGE>
72
TO CONFIRM THEIR AGREEMENT, this Agreement has been duly executed by
Lenders, Borrower and Agent as of the date first written above.
BAYERISCHE HYPOTHEKEN- UND WECHSEL-
BANK, AKTIENGESELLSCHAFT, NEW YORK
BRANCH
By: /s/ William J. Rogers
---------------------------------
Name: William J. Rogers
Title: Vice President
By: /s/ Stephen G. Melidones
----------------------------------
Name: Stephen G. Melidones
Title: Assistant Vice President
TAUBMAN MACARTHUR ASSOCIATES LIMITED
PARTNERSHIP
By: Taubman Realty Group Limited
Partnership, its general partner
By: /s/ Shire Rothbart
-----------------------------
Name: Shire Rothbart
Title: Authorized Signatory
- --------------------------------------------------------------------------------
LOAN AGREEMENT
dated as of November 25, 1997
among
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP,
as Borrower,
FLEET NATIONAL BANK,
as a Bank,
PNC BANK, NATIONAL ASSOCIATION,
as a Bank,
the other Banks signatory hereto, each as a Bank
and
PNC BANK, NATIONAL ASSOCIATION,
as Administrative Agent
- ------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I. DEFINITIONS; ETC..................................................1
Section 1.01 Definitions..........................................1
Section 1.02 Accounting Terms....................................14
Section 1.03 Computation of Time Periods.........................14
Section 1.04 Rules of Construction...............................15
ARTICLE II. THE LOANS.......................................................15
Section 2.01 The Loans...........................................15
Section 2.02 Purpose.............................................15
Section 2.03 Advances Generally..................................15
Section 2.04 Procedures for Advances.............................16
Section 2.05 Extension of Maturity Date..........................16
Section 2.06 Interest Periods; Renewals..........................16
Section 2.07 Interest............................................17
Section 2.08 Fees................................................17
Section 2.09 Notes...............................................17
Section 2.10 Prepayments.........................................18
Section 2.11 Changes of Commitments..............................18
Section 2.12 Method of Payment...................................18
Section 2.13 Elections, Conversions or Continuation of Loans.....19
Section 2.14 Minimum Amounts.....................................19
Section 2.15 Certain Notices Regarding Elections, Conversions
and Continuations of Loans..........................19
Section 2.16 Late Payment Premium................................19
ARTICLE III. YIELD PROTECTION; ILLEGALITY; ETC..............................20
Section 3.01 Additional Costs....................................20
Section 3.02 Limitation on Types of Loans........................21
Section 3.03 Illegality..........................................21
Section 3.04 Treatment of Affected Loans.........................22
Section 3.05 Certain Compensation................................22
Section 3.06 Capital Adequacy....................................23
Section 3.07 Substitution of Banks...............................23
ARTICLE IV. CONDITIONS PRECEDENT............................................24
Section 4.01 Conditions Precedent to the Initial Advance.........24
Section 4.02 Conditions Precedent to Advances After the Initial
Advance.............................................26
Section 4.03 Deemed Representations..............................26
ARTICLE V. REPRESENTATIONS AND WARRANTIES...................................26
Section 5.01 Due Organization....................................26
Section 5.02 Power and Authority; No Conflicts; Compliance With
Laws................................................26
Section 5.03 Legally Enforceable Agreements......................27
i
<PAGE>
Section 5.04 Litigation..........................................27
Section 5.05 Good Title to Properties............................27
Section 5.06 Taxes...............................................27
Section 5.07 ERISA...............................................27
Section 5.08 No Default on Outstanding Judgments or Orders.......28
Section 5.09 No Defaults on Other Agreements.....................28
Section 5.10 Government Regulation...............................28
Section 5.11 Environmental Protection............................28
Section 5.12 Solvency............................................28
Section 5.13 Financial Statements................................28
Section 5.14 Valid Existence of Affiliates.......................29
Section 5.15 Insurance...........................................29
Section 5.16 Accuracy of Information; Full Disclosure............29
ARTICLE VI. AFFIRMATIVE COVENANTS...........................................29
Section 6.01 Maintenance of Existence............................29
Section 6.02 Maintenance of Records..............................29
Section 6.03 Maintenance of Insurance............................29
Section 6.04 Compliance with Laws; Payment of Taxes..............30
Section 6.05 Right of Inspection.................................30
Section 6.06 Compliance With Environmental Laws..................30
Section 6.07 Payment of Costs....................................30
Section 6.08 Maintenance of Properties...........................30
Section 6.09 Reporting and Miscellaneous Document Requirements...30
ARTICLE VII. NEGATIVE COVENANTS.............................................34
Section 7.01 Mergers Etc.........................................34
Section 7.02 Investments.........................................34
Section 7.03 Sale of Assets......................................34
Section 7.04 Interest Rate Hedging...............................34
Section 7.05 Partnership Committee of Borrower...................34
ARTICLE VIII. FINANCIAL COVENANTS...........................................35
Section 8.01 Net Worth...........................................35
Section 8.02 Relationship of Total Outstanding Indebtedness to Gross
Asset Value.........................................35
Section 8.03 Relationship of Secured Indebtedness to Gross Asset
Value...............................................35
Section 8.04 Relationship of Combined EBITDA to Interest Expense.35
Section 8.05 Relationship of Combined EBITDA to Adjusted Total
Outstanding Indebtedness............................35
Section 8.06 Combined EBTDA......................................35
Section 8.07 Unsecured Debt Yield................................35
Section 8.08 Relationship of Unencumbered Combined EBITDA to
Interest Expense on Unsecured Indebtedness..........35
ARTICLE IX. EVENTS OF DEFAULT...............................................36
Section 9.01 Events of Default...................................36
Section 9.02 Remedies............................................38
ARTICLE X. ADMINISTRATIVE AGENT; RELATIONS AMONG BANKS......................38
ii
<PAGE>
Section 10.01 Appointment, Powers and Immunities of Administrative
Agent...............................................38
Section 10.02 Reliance by Administrative Agent....................38
Section 10.03 Defaults............................................39
Section 10.04 Rights of Administrative Agent as a Bank............39
Section 10.05 Indemnification of Administrative Agent.............39
Section 10.06 Non-Reliance on Administrative Agent and Other
Banks...............................................40
Section 10.07 Failure of Administrative Agent to Act..............40
Section 10.08 Resignation or Removal of Administrative Agent......40
Section 10.09 Amendments Concerning Agency Function...............41
Section 10.10 Liability of Administrative Agent...................41
Section 10.11 Transfer of Agency Function.........................41
Section 10.12 Non-Receipt of Funds by Administrative Agent........41
Section 10.13 Withholding Taxes...................................41
Section 10.14 Minimum Commitment by Fleet and PNC.................42
Section 10.15 Pro Rata Treatment..................................42
Section 10.16 Sharing of Payments Among Banks.....................42
Section 10.17 Possession of Documents.............................42
ARTICLE XI. NATURE OF OBLIGATIONS...........................................43
Section 11.01 Absolute and Unconditional Obligations..............43
Section 11.02 Non-Recourse to TRG Partners........................43
ARTICLE XII. MISCELLANEOUS..................................................44
Section 12.01 Binding Effect of Request for Advance...............44
Section 12.02 Amendments and Waivers..............................44
Section 12.03 Usury...............................................44
Section 12.04 Expenses; Indemnification...........................44
Section 12.05 Assignment; Participation...........................45
Section 12.06 Documentation Satisfactory..........................47
Section 12.07 Notices.............................................47
Section 12.08 Intentionally Omitted...............................47
Section 12.09 Table of Contents; Headings.........................47
Section 12.10 Severability........................................47
Section 12.11 Counterparts........................................47
Section 12.12 Integration.........................................47
Section 12.13 GOVERNING LAW.......................................48
Section 12.14 Waivers.............................................48
Section 12.15 JURISDICTION; IMMUNITIES............................48
EXHIBIT A - Authorization Letter
EXHIBIT B - Solvency Certificate
EXHIBIT C - Note
EXHIBIT D - List of Affiliates
EXHIBIT E - Assignment and Assumption Agreement
iii
<PAGE>
LOAN AGREEMENT ("this Agreement") dated as of November 25, 1997
among THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP, a limited partnership
organized and existing under the laws of the State of Delaware ("Borrower"),
FLEET NATIONAL BANK ("Fleet"), PNC BANK, NATIONAL ASSOCIATION (in its individual
capacity and not as Administrative Agent, "PNC") and the lenders signatory
hereto (Fleet, PNC, said other lenders signatory hereto, and the lenders who
from time to time become Banks pursuant to Section 3.07 or 12.05, each a "Bank"
and collectively, the "Banks") and PNC BANK, NATIONAL ASSOCIATION, as
administrative agent for the Banks (in such capacity, together with its
successors in such capacity, "Administrative Agent").
Borrower has requested that the Banks extend credit as provided
herein, and the Banks are prepared to extend such credit.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, covenants and conditions hereinafter set forth, Borrower,
Administrative Agent and each of the Banks agree as follows:
ARTICLE I. DEFINITIONS; ETC.
Section 1.01 Definitions. As used in this Agreement the following
terms have the following meanings (except as otherwise provided, terms defined
in the singular to have a correlative meaning when used in the plural and vice
versa):
"Acquisition Indebtedness Adjustment" means, as of any date, the
aggregate, for all acquisitions that occurred during the twelve (12)-month
period ending on such date, of the product of (1) the increase in Total
Outstanding Indebtedness as a result of indebtedness assumed and/or incurred in
connection with the acquisition and which is still outstanding as of such date,
multiplied by (2) the ratio of (A) three hundred sixty five (365) minus the
number of days between the closing of the acquisition and such date to (B) three
hundred sixty five (365).
"Acquisition Unsecured Indebtedness Adjustment" means, as of any
date, the aggregate, for all acquisitions that occurred during the twelve
(12)-month period ending on such date, of the product of (1) the increase in
Unsecured Indebtedness as a result of unsecured indebtedness assumed and/or
incurred in connection with the acquisition and which is still outstanding as of
such date, multiplied by (2) the ratio of (A) three hundred sixty five (365)
minus the number of days between the closing of the acquisition and such date to
(B) three hundred sixty five (365).
"Adjusted Total Outstanding Indebtedness" means, as of any date,
Total Outstanding Indebtedness plus the Disposition Indebtedness Adjustment less
the Acquisition Indebtedness Adjustment.
"Adjusted Unsecured Indebtedness" means, as of any date, Unsecured
Indebtedness plus the Disposition Unsecured Indebtedness Adjustment less the
Acquisition Unsecured Indebtedness Adjustment.
"Administrative Agent" has the meaning specified in the preamble.
<PAGE>
"Administrative Agent's Office" means Administrative Agent's address
located at One PNC Plaza, 249 Fifth Avenue, P1-POPP-19-2, Pittsburgh,
Pennsylvania 15222, Attention: Real Estate Banking, or such other address in the
United States as Administrative Agent may designate by notice to Borrower and
the Banks.
"Affiliate" means, with respect to any Person (the "first Person"),
any other Person: (1) which directly or indirectly controls, or is controlled
by, or is under common control with the first Person; or (2) ten percent (10%)
or more of the beneficial interest in which is directly or indirectly owned or
held by the first Person. The term "control" means the possession, directly or
indirectly, of the power, alone, to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting
securities, by contract, or otherwise.
"Agreement" means this Loan Agreement, as amended, supplemented or
modified from time to time.
"Applicable Lending Office" means, for each Bank and for its LIBOR
Loan or Base Rate Loan, as applicable, the lending office of such Bank (or of an
Affiliate of such Bank) designated as such on its signature page hereof or in
the applicable Assignment and Assumption Agreement, or such other office of such
Bank (or of an Affiliate of such Bank) as such Bank may from time to time
specify to Administrative Agent and Borrower as the office by which its LIBOR
Loan or Base Rate Loan, as applicable, is to be made and maintained.
"Applicable Margin" means, with respect to Base Rate Loans and LIBOR
Loans, the respective rates per annum determined, at any time, based on
Borrower's Credit Rating at the time, in accordance with the following table.
Any change in Borrower's Credit Rating causing it to move to a different range
on the table shall effect an immediate change in the Applicable Margin.
================================================================================
Borrower's Credit Rating Applicable Margin Applicable Margin
(S&P/Moody's/Duff & Phelps/Fitch for Base Rate Loans for LIBOR Loans
Ratings) (% per annum) (% per annum)
- --------------------------------------------------------------------------------
A/A2/A/A or higher 0.00 0.60
- --------------------------------------------------------------------------------
A-/A3/A-/A- 0.00 0.70
- --------------------------------------------------------------------------------
BBB+/Baal/BBB+/BBB+ 0.00 0.80
- --------------------------------------------------------------------------------
BBB/Baa2/BBB/BBB 0.00 0.90
- --------------------------------------------------------------------------------
BBB-/Baa3/BBB-/BBB- 0.00 1.00
- --------------------------------------------------------------------------------
Below BBB-/Baa3/BBB-/BBB- or
unrated 0.35 1.35
================================================================================
"Assignee" has the meaning specified in Section 12.05.
"Assignment and Assumption Agreement" means an Assignment and
Assumption Agreement, substantially in the form of EXHIBIT E, pursuant to which
a Bank assigns and an Assignee assumes rights and obligations in accordance with
Section 12.05.
2
<PAGE>
"Authorization Letter" means a letter agreement executed by Borrower
in the form of EXHIBIT A.
"Bank" and "Banks" have the respective meanings specified in the
preamble.
"Bank Parties" means Administrative Agent and the Banks.
"Banking Day" means (1) any day on which commercial banks are not
authorized or required to close in Pittsburgh and Boston and (2) whenever such
day relates to a LIBOR Loan, an Interest Period with respect to a LIBOR Loan or
notice with respect to a LIBOR Loan, a day on which dealings in Dollar deposits
are also carried out in the London interbank market and banks are open for
business in London.
"Banks' Valuation Consultant" means Landauer Associates, Inc. or
such other appraisal firm(s) reasonably acceptable to Borrower, Fleet and PNC.
"Base Rate" means, for any day, the higher of (1) the Federal Funds
Rate for such day plus one-half percent (.50%), or (2) the Prime Rate for such
day.
"Base Rate Loan" means all or any portion (as the context requires)
of a Bank's Loan which shall accrue interest at a rate determined in relation to
the Base Rate.
"Borrower's Accountants" means Deloitte & Touche, or such other
accounting firm(s) selected by Borrower and reasonably acceptable to the
Required Banks.
"Borrower" has the meaning specified in the preamble.
"Borrower's Credit Rating" means the lower of the two (2) ratings
(if there are only two (2) ratings) or the lower of the two (2) highest ratings
(if there are more than two (2) ratings) assigned from time to time to
Borrower's unsecured and unsubordinated long-term indebtedness by, respectively,
S&P, Moody's, Duff & Phelps and Fitch. Unless such indebtedness of Borrower is
rated by at least two (2) of the Rating Agencies, at least one (1) of which must
be either S&P or Moody's, "Borrower's Credit Rating" shall be considered unrated
for purposes of determining both the Applicable Margin and Facility Fee Rate.
"Capital Lease" means any lease which has been or should be
capitalized on the books of the lessee in accordance with GAAP.
"Closing Date" means the date this Agreement has been executed by
all parties.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
"Combined EBTDA" means, for any period of time, Combined EBITDA less
Interest Expense.
3
<PAGE>
"Combined EBITDA" means, for any period of time, (1) revenues less operating
costs before interest, depreciation and amortization and unusual items for
Borrower and its Consolidated Businesses (based on the accounting principles
reflected in the TRG Consolidated Financial Statements as of and for the year
ended December 31, 1996 contained in the Form 10-K for such period of TRG, and
assuming that any dividends paid on any equity security shall not be deducted in
calculating Combined EBITDA unless such equity security may be converted into a
debt security at any time or is mandatory redeemable for cash within twenty (20)
years from its initial issuance) plus (2) Borrower's beneficial interest in
revenues less operating costs before interest, depreciation and amortization and
unusual items (after eliminating appropriate intercompany amounts) applicable to
each of the UJVs.
"Consolidated Businesses" means, collectively (1) each Affiliate of
Borrower, all of the equity interests of which are, or, under GAAP, are deemed
to be, owned by Borrower and (2) Taub-Co Management Inc., The Taubman Company
Limited Partnership and their respective Affiliates so long as more than ninety
percent (90%) of the equity interests in the entities referred to in this clause
(2) are owned directly or indirectly by Borrower.
"Consolidated Outstanding Indebtedness" means, as of any time,
mortgage notes payable and other notes payable of Borrower and its Consolidated
Businesses, as reflected in the TRG Consolidated Financial Statements.
"Contingent Liabilities" means the sum of (1) those liabilities, as
determined in accordance with GAAP, set forth and quantified as contingent
liabilities in the notes to the TRG Consolidated Financial Statements and (2)
contingent liabilities, other than those described in the foregoing clause (1),
which represent direct payment guaranties of Borrower; provided, however, that
Contingent Liabilities shall exclude contingent liabilities which represent the
"Other Party's Share" of "Duplicated Obligations" (as such quoted terms are
hereinafter defined). "Duplicated Obligations" means, collectively, all those
payment guaranties in respect of Debt of UJVs for which Borrower and another
party are jointly and severally liable, where the other party is, in the sole
judgment of the Required Banks, capable of satisfying the Other Party's Share of
such obligation. "Other Party's Share" means such other party's fractional
beneficial interest in the UJV in question.
"Continue", "Continuation" and "Continued" refer to the continuation
pursuant to Section 2.13 of a LIBOR Loan as a LIBOR Loan from one Interest
Period to the next Interest Period.
"Convert", "Conversion" and "Converted" refer to a conversion
pursuant to Section 2.13 of a Base Rate Loan into a LIBOR Loan or a LIBOR Loan
into a Base Rate Loan, each of which may be accompanied by the transfer by a
Bank (at its sole discretion) of all or a portion of its Loan from one
Applicable Lending Office to another.
"Debt" means: (1) indebtedness or liability for borrowed money, or
for the deferred purchase price of property or services (including trade
obligations); (2) obligations as lessee under Capital Leases; (3) current
liabilities in respect of unfunded vested benefits under any Plan; (4)
obligations under letters of credit issued for the account of any Person; (5)
all obligations arising under bankers' or trade acceptance facilities; (6) all
guarantees, endorsements (other than for collection or deposit in the ordinary
course of business), and other contingent
4
<PAGE>
obligations to purchase any of the items included in this definition, to provide
funds for payment, to supply funds to invest in any Person, or otherwise to
assure a creditor against loss; (7) all obligations secured by any Lien on
property owned by the Person whose Debt is being measured, whether or not the
obligations have been assumed; and (8) all obligations under any agreement
providing for contingent participation or other hedging mechanisms with respect
to interest payable on any of the items described above in this definition.
"Default" means any event which with the giving of notice or lapse
of time, or both, would become an Event of Default.
"Default Rate" means a rate per annum equal to: (1) with respect to
Base Rate Loans, a variable rate three percent (3%) above the rate of interest
then in effect thereon (including the Applicable Margin); and (2) with respect
to LIBOR Loans, a fixed rate three percent (3%) above the rate(s) of interest in
effect thereon (including the Applicable Margin) at the time of Default until
the end of the then current Interest Period therefor and, thereafter, a variable
rate three percent (3%) above the rate of interest for a Base Rate Loan
(including the Applicable Margin).
"Disposition" means a sale (whether by assignment, transfer or
Capital Lease) of an asset.
"Disposition Indebtedness Adjustment" means, as of any date, the
aggregate, for all Dispositions that occurred during the twelve (12)-month
period ending on such date, of the product of (1) the reduction in Total
Outstanding Indebtedness as a result of indebtedness repaid in connection with
the Disposition, multiplied by (2) the ratio of (A) three hundred sixty five
(365) minus the number of days between the closing of the Disposition and such
date to (B) three hundred sixty five (365).
"Disposition Unsecured Indebtedness Adjustment" means, as of any
date, the aggregate, for all Dispositions that occurred during the twelve
(12)-month period ending on such date, of the product of (1) the reduction in
Unsecured Indebtedness as a result of unsecured indebtedness repaid in
connection with the Disposition, multiplied by (2) the ratio of (A) three
hundred sixty five (365) minus the number of days between the closing of the
Disposition and such date to (B) three hundred sixty five (365).
"Dollars" and the sign "$" mean lawful money of the United States of
America.
"Duff & Phelps" means Duff & Phelps Credit Rating Company.
"Elect", "Election" and "Elected" refer to election, if any, by
Borrower pursuant to Section 2.13 to have all or a portion of an advance of the
Loans be outstanding as LIBOR Loans.
"Environmental Discharge" means any discharge or release of any
Hazardous Materials in violation of any applicable Environmental Law.
"Environmental Law" means any Law relating to pollution or the
environment, including Laws relating to noise or to emissions, discharges,
releases or threatened releases of Hazardous Materials into the work place, the
community or the environment, or otherwise
5
<PAGE>
relating to the generation, manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Materials.
"Environmental Notice" means any written complaint, order, citation,
letter, inquiry, notice or other written communication from any Person (1)
affecting or relating to Borrower's compliance with any Environmental Law in
connection with any activity or operations at any time conducted by Borrower,
(2) relating to the occurrence or presence of or exposure to or possible or
threatened or alleged occurrence or presence of or exposure to Environmental
Discharges or Hazardous Materials at any of Borrower's locations or facilities,
including, without limitation: (a) the existence of any contamination or
possible or threatened contamination at any such location or facility and (b)
remediation of any Environmental Discharge or Hazardous Materials at any such
location or facility or any part thereof; and (3) any violation or alleged
violation of any relevant Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, including any rules and regulation promulgated
thereunder.
"ERISA Affiliate" means any corporation or trade or business which
is a member of the same controlled group of organizations (within the meaning of
Section 414(b) of the Code) as Borrower or is under common control (within the
meaning of Section 414(c) of the Code) with Borrower.
"Event of Default" has the meaning specified in Section 9.01.
"Facility Fee Rate" means the rate per annum determined, at any
time, based on Borrower's Credit Rating, in accordance with the following table.
Any change in Borrower's Credit Rating which causes it to move into a different
range on the table shall effect an immediate change in the Facility Fee Rate.
Borrower's Credit Rating Facility Fee Rate
(S&P/Moody's/Duff & Phelps/Fitch Ratings) (% per annum)
- ----------------------------------------- -------------
A/A2/A/A or higher 0.15
A-/A3/A-/A- 0.15
BBB+/Baa1/BBB+/BBB+ 0.20
BBB/Baa2/BBB/BBB 0.20
BBB-/Baa3/BBB-/BBB- 0.25
Below BBB-/Baa3/BBB-/BBB- or unrated 0.25
"Federal Funds Rate" means, for any day, the rate per annum (based
on a year of 360 days) announced by the Federal Reserve Bank of New York (or any
successor) on such day as being the weighted average of the rates on overnight
Federal funds transactions arranged by Federal funds brokers on the previous
trading day, as computed and announced by such Federal Reserve Bank (or any
successor) in substantially the same manner as such Federal Reserve Bank
computes and announces the weighted average it refers to as the "Federal Funds
Effective Rate" as of the date of this Agreement; provided, however, that if
such Federal Reserve Bank (or its
6
<PAGE>
successor) does not announce such rate on any day, the "Federal Funds Rate" for
such day shall be the Federal Funds Effective Rate for the last day on which
such rate was announced.
"Fiscal Year" means each period from January 1 to December 31.
"Fitch" means Fitch Investors Service, L.P.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect from time to time, applied on a basis consistent
with those used in the preparation of the financial statements referred to in
Section 5.13 (except for changes concurred in by Borrower's Accountants).
"Good Faith Contest" means the contest of an item if: (1) the item
is diligently contested in good faith, and, if appropriate, by proceedings
timely instituted; (2) adequate reserves are established with respect to the
contested item; (3) during the period of such contest, the enforcement of any
contested item is effectively stayed; and (4) the failure to pay or comply with
the contested item during the period of the contest is not likely to result in a
Material Adverse Change.
"Governmental Approvals" means any authorization, consent, approval,
license, permit, certification, or exemption of, registration or filing with or
report or notice to, any Governmental Authority.
"Governmental Authority" means any nation or government, any state
or other political subdivision thereof, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Great Lakes Crossing" means the single-level, enclosed,
super-regional value shopping center containing approximately 1,340,000 square
feet of gross leasable area to be constructed and operated by TAH on an
approximately 300 acre site located in Auburn Hills, Michigan owned by it.
"Gross Asset Value" means, as of any time, an amount, determined
annually as of June 30th of each year and effective for the twelve (12)-month
period beginning on the day after such date (it being agreed that Gross Asset
Value determined as of June 30, 1997 is $3,712,416,000), equal to the sum of:
(i) the lesser of (1) the aggregate book value of the long-term
assets of Borrower, as reflected in the TRG Consolidated Financial Statements as
of and for the year ended such June 30th, other than those assets described in
clause (ii) below, or (2) five percent (5%) of the amount determined pursuant to
said clause (ii); and
(ii) the amount, determined by Borrower with the concurrence of
the Banks' Valuation Consultant, equal to the aggregate of the
then-current values, on a free and clear basis, of the real properties
owned or leased, directly or indirectly, in whole or part, by Borrower,
which are included in the TRG Consolidated Financial Statements as of and
for the year ended as of such June 30th, multiplied by Borrower's
respective beneficial interests in such assets (it being understood that
the Banks' Valuation Consultant shall not determine the fractional
beneficial interest of Borrower in such real properties);
7
<PAGE>
in each case, as adjusted for any Dispositions or acquisitions subsequent to the
most recent annual determination of Gross Asset Value by:
(1) in the case of Dispositions of assets described in clause (i)
above, deducting the book value of the asset disposed of, as reflected in
such annual determination, less the excess, if any, of the amount
determined pursuant to clause (i)(1) above over the amount determined
pursuant to clause (i)(2) above (in each case, prior to the Disposition in
question),
(2) in the case of Dispositions of assets described in clause (ii)
above, deducting the value for the asset determined pursuant to clause
(ii) above,
(3) in the case of acquisitions of assets described in clause (i)
above, adding the Purchase Price for the acquired asset, and
(4) in the case of acquisitions of assets described in clause (ii)
above, adding the lesser of (A) the Purchase Price for the acquired asset
or (B) the acquired asset's trailing twelve (12)-month net operating
income, less any management fee adjustment, if applicable, capitalized at
a rate of eight percent (8%) per annum; provided, however, that at
Borrower's request and expense, Administrative Agent shall promptly cause
the Banks' Valuation Consultant to appraise the acquired asset and, upon
the completion of such appraisal, provided such appraisal is reasonably
satisfactory to Administrative Agent, the appraised value of the acquired
asset as determined in such appraisal shall be substituted for the amount
calculated pursuant to clauses (A) and (B) above.
In no event shall any adjustment pursuant to clauses (2) or (3) above cause the
component of Gross Asset Value determined pursuant to clause (i) above to exceed
five percent (5%) of the component determined pursuant to clause (ii) above. Any
adjustment, pursuant to the operation of clauses (2) or (4) above, to the amount
determined pursuant to clause (ii) above shall also effect an automatic
adjustment to the component of Gross Asset Value determined pursuant to clause
(i) above by reason of the operation of clause (i)(2).
"Hazardous Materials" means any pollutant, effluents, emissions,
contaminants, toxic or hazardous wastes or substances, as any of those terms are
defined from time to time in or for the purposes of any relevant Environmental
Law, including asbestos fibers and friable asbestos, polychlorinated biphenyls,
and any petroleum or hydrocarbon-based products or derivatives.
"Initial Advance" means the first advance of proceeds of the Loans.
"Interest Expense" means, for any period of time, the consolidated
interest expense (without deduction of consolidated interest income) of Borrower
and its Consolidated Businesses (based on the accounting principles reflected in
the TRG Consolidated Financial Statements as of and for the year ended December
31, 1996 contained in the Form 10-K for such period of TRG), including, without
limitation or duplication (or, to the extent not so included, with the addition
of), (1) the portion of any rental obligation in respect of any Capital Lease
obligation allocable to interest expense in accordance with GAAP; (2) the
amortization of Debt discounts; (3) any payments or receipts (other than
up-front fees) with respect to interest rate swap or similar agreements; (4) any
dividends attributable to any equity security which may be
8
<PAGE>
converted into a debt security of Borrower at any time or is mandatorily
redeemable for cash within twenty (20) years from its initial issuance; and (5)
the interest expense and items listed in clauses (1) through (4) above
applicable to each of the UJVs multiplied by Borrower's respective beneficial
interests in the UJVs (it being understood that the items listed in clauses (1),
(2) and (3) above shall be considered part of Interest Expense even if, due to a
change in GAAP, such items would no longer be considered interest expense under
GAAP).
"Interest Period" means, with respect to any LIBOR Loan, the period
commencing on the date the same is advanced, converted from a Base Rate Loan or
Continued, as the case may be, and ending, as Borrower may select pursuant to
Section 2.06, on the numerically corresponding day in the first, second, third,
or, if available to all of the Banks, sixth or twelfth, calendar month
thereafter, provided that each such Interest Period which commences on the last
Banking Day of a calendar month (or on any day for which there is no numerically
corresponding day in the appropriate subsequent calendar month) shall end on the
last Banking Day of the appropriate calendar month.
"Law" means any federal, state or local statute, law, rule,
regulation, ordinance, order, code, or rule of common law, now or hereafter in
effect, and any judicial or administrative interpretation thereof by a
Governmental Authority or otherwise, including any judicial or administrative
order, consent decree or judgment.
"LIBOR Base Rate" means, with respect to any Interest Period
therefor, the rate per annum for the first day of the Interest Period ("the
Reset Date") for deposits in Dollars for a period of the number of months
contained in the Interest Period (the "Designated Maturity") which appears on
Dow Jones Page 3750 (or such other display page on the Dow Jones System as may
replace such Page 3750) as of 11:00 A.M. (London time) on the day that is two
(2) Banking Days prior to that Reset Date for a period, and in an amount,
comparable to such Interest Period and principal amount of the LIBOR Loan in
question outstanding during such Interest Period. If such rate does not appear
on Dow Jones Page 3750 (or such replacement page), the rate for a Reset Date
will be determined on the basis of the rates at which deposits in Dollars are
offered by four (4) major banks in the London interbank market as selected by
Administrative Agent and agreed to by Borrower (the "Reference Banks") at
approximately 11:00 A.M. (London time) on the day that is two (2) Banking Days
preceding that Reset Date to prime banks in the London interbank market for a
period of the Designated Maturity commencing on that Reset Date and in an amount
comparable to the amount of the LIBOR Loan to be outstanding during such
Interest Period (the "Representative Amount"). Administrative Agent will request
the principal London office of each of the Reference Banks to provide a
quotation of its rate. If at least two (2) such quotations are provided, the
rate for that Interest Period will be the arithmetic mean of the quotations. If
fewer than two (2) quotations are provided as requested, the rate for that Reset
Date will the arithmetic mean of the rates quoted by major banks in New York
City, selected by Administrative Agent and agreed to by Borrower, at
approximately 11:00 A.M. (New York time) on that Reset Date for loans in Dollars
to leading European banks for a period of the Designated Maturity commencing on
that Reset Date and in a Representative Amount.
"LIBOR Interest Rate" means, for any LIBOR Loan, a rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) determined by
Administrative Agent to be equal to the quotient of (1) the LIBOR Base Rate for
such LIBOR Loan for the Interest Period
9
<PAGE>
therefor divided by (2) one minus the LIBOR Reserve Requirement for such LIBOR
Loan for such Interest Period.
"LIBOR Loan" means all or any portion (as the context requires) of
any Bank's Loan which shall accrue interest at rate(s) determined in relation to
LIBOR Interest Rate(s).
"LIBOR Reserve Requirement" means, for any LIBOR Loan, the rate at
which reserves (including any marginal, supplemental or emergency reserves) are
actually required to be maintained during the Interest Period for such LIBOR
Loan under Regulation D by the applicable Bank against "Eurocurrency
liabilities" (as such term is used in Regulation D). Without limiting the effect
of the foregoing, the LIBOR Reserve Requirement shall also reflect any other
reserves actually required to be maintained by any Bank by reason of any
Regulatory Change against (1) any category of liabilities which includes
deposits by reference to which the LIBOR Base Rate is to be determined as
provided in the definition of "LIBOR Base Rate" in this Section 1.01 or (2) any
category of extensions of credit or other assets which include loans the
interest rate on which is determined on the basis of rates referred to in said
definition of "LIBOR Base Rate".
"Lien" means any mortgage, deed of trust, pledge, security interest,
hypothecation, assignment for collateral purposes, deposit arrangement, lien
(statutory or other), or other security agreement or charge of any kind or
nature whatsoever of any third party (excluding any right of setoff but
including, without limitation, any conditional sale or other title retention
agreement, any financing lease having substantially the same economic effect as
any of the foregoing, and the filing of any financing statement under the
Uniform Commercial Code or comparable law of any jurisdiction to evidence any of
the foregoing).
"Loan" and "Loans" have the respective meanings specified in Section
2.01.
"Loan Commitment" means, with respect to each Bank, the obligation
to make a Loan in the principal amount set forth below or in the applicable
Assignment and Assumption Agreement, as such amount may be reduced from time to
time in accordance with the provisions of Section 2.11 or pursuant to an
Assignment and Assumption Agreement:
Bank Loan Commitment
---- ---------------
Fleet $ 46,000,000
PNC 46,000,000
Dresdner Bank AG 30,000,000
Commerzbank AG 30,000,000
Comerica Bank 20,000,000
Bayerische Hypotheken-und Wechsel-Bank AG 20,000,000
Landesbank Hessen-Thuringen Girozentrale 18,000,000
Total $210,000,000
============
10
<PAGE>
"Loan Documents" means this Agreement, the Notes and the Solvency
Certificates.
"Material Adverse Change" means either (1) a material adverse change
in the status of the business, results of operations, financial condition,
property or prospects of Borrower or (2) any event or occurrence of whatever
nature which is likely to have a material adverse effect on the ability of
Borrower to perform its obligations under the Loan Documents.
"Maturity Date" means December 1, 2001, subject to extension in
accordance with Section 2.05.
"Moody's" means Moody's Investors Service, Inc.
"Multiemployer Plan" means a Plan defined as such in Section 3(37)
of ERISA to which contributions have been made by Borrower or any ERISA
Affiliate and which is covered by Title IV of ERISA.
"Net Worth" means the excess of Gross Asset Value over Total
Outstanding Indebtedness.
"Note" and "Notes" have the respective meanings specified in Section
2.09.
"Obligations" means each and every obligation, covenant and
agreement of Borrower, now or hereafter existing, contained in this Agreement,
and any of the other Loan Documents, whether for principal, reimbursement
obligations, interest, fees, expenses, indemnities or otherwise, and any
amendments or supplements thereto, extensions or renewals thereof or
replacements therefor, including but not limited to all indebtedness,
obligations and liabilities of Borrower to Administrative Agent and any Bank now
existing or hereafter incurred under or arising out of or in connection with the
Notes, this Agreement, the other Loan Documents, and any documents or
instruments executed in connection therewith; in each case whether direct or
indirect, joint or several, absolute or contingent, liquidated or unliquidated,
now or hereafter existing, renewed or restructured, whether or not from time to
time decreased or extinguished and later increased, created or incurred, and
including all indebtedness of Borrower, under any instrument now or hereafter
evidencing or securing any of the foregoing.
"Parent" means, with respect to any Bank, any Person controlling
such Bank.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"Person" means an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.
"Plan" means any employee benefit or other plan established or
maintained, or to which contributions have been made, by Borrower or any ERISA
Affiliate of Borrower and which is covered by Title IV of ERISA or to which
Section 412 of the Code applies.
11
<PAGE>
"presence", when used in connection with any Environmental Discharge
or Hazardous Materials, means and includes presence, generation, manufacture,
installation, treatment, use, storage, handling, repair, encapsulation,
disposal, transportation, spill, discharge and release.
"Prime Rate" means that rate of interest from time to time announced
by PNC at its Principal Office as its then prime rate, which rate may not be the
lowest rate then being charged to commercial borrowers by PNC.
"Principal Office" means the principal office of PNC in the United
States, presently located at One PNC Plaza, 249 Fifth Avenue, Pittsburgh,
Pennsylvania 15222.
"Pro Rata Share" means, for purposes of this Agreement and with
respect to each Bank, a fraction, the numerator of which is the amount of such
Bank's Loan Commitment and the denominator of which is the Total Loan
Commitment.
"Prohibited Transaction" means any transaction set forth in Section
406 of ERISA or Section 4975 of the Code.
"Purchase Price" means, with respect to an acquisition, the total
consideration paid, including in the amount of such consideration (without
duplication) (1) any Debt that, at the time of such acquisition, is directly or
indirectly secured by a Lien on all or any portion of the property so acquired
and any Debt to which such property is subject, including, in the case of an
acquisition of any Person, any Debt of such Person, regardless of whether such
Debt is secured or unsecured, or recourse or non-recourse to such Person and (2)
the fair market value of any other non-cash consideration.
"Rating Agencies" means S&P, Moody's, Duff & Phelps and Fitch.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System, as the same may be amended or supplemented from time to
time, or any similar Law from time to time in effect.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System, as the same may be amended or supplemented from time to
time.
"Regulatory Change" means, with respect to any Bank, any change
after the date of this Agreement in United States federal, state, municipal or
foreign laws or regulations (including Regulation D) or the adoption or making
after such date of any interpretations, directives or requests applying to a
class of banks including such Bank of or under any United States, federal,
state, municipal or foreign laws or regulations (whether or not having the force
of law) by any court or governmental or monetary authority charged with the
interpretation or administration thereof.
"Reportable Event" means any of the events set forth in Section
4043(b) of ERISA.
"Required Banks" means at any time the Banks holding at least sixty
six and two-thirds percent (66-2/3%) of the then aggregate unpaid principal
amount of the Loans.
12
<PAGE>
"Secured Indebtedness" means that portion of Total Outstanding
Indebtedness that is secured.
"Solvency Certificate" means a certificate in substantially the form
of EXHIBIT B, to be delivered by Borrower pursuant to the terms of this
Agreement.
"Solvent" means, when used with respect to any Person, that (1) the
fair value of the property of such Person, on a going concern basis, is greater
than the total amount of liabilities (including, without limitation, contingent
liabilities) of such Person; (2) the present fair saleable value of the assets
of such Person, on a going concern basis, is not less than the amount that will
be required to pay the probable liabilities of such Person on its debts as they
become absolute and matured; (3) such Person does not intend to, and does not
believe that it will, incur debts or liabilities beyond such Person's ability to
pay as such debts and liabilities mature; (4) such Person is not engaged in
business or a transaction, and is not about to engage in business or a
transaction, for which such Person's property would constitute unreasonably
small capital after giving due consideration to the prevailing practice in the
industry in which such Person is engaged; and (5) such Person has sufficient
resources, provided that such resources are prudently utilized, to satisfy all
of such Person's obligations. Contingent liabilities will be computed at the
amount that, in light of all the facts and circumstances existing at such time,
represents the amount that can reasonably be expected to become an actual or
matured liability.
"S&P" means Standard & Poor's Ratings Services, a division of
McGraw-Hill Companies.
"Supplemental Fee Letter" means that certain letter agreement, dated
the date hereof, among Fleet, PNC, Administrative Agent, Syndication Agent and
Borrower.
"Syndication Agent" means Fleet National Bank.
"TAH" means Taubman Auburn Hills Associates Limited Partnership, a
Delaware limited partnership in which Borrower owns an eighty percent (80%)
general partnership interest.
"TCI" means Taubman Centers, Inc., a Michigan corporation.
"Total Loan Commitment" means Two Hundred Ten Million Dollars
($210,000,000).
"Total Outstanding Indebtedness" means the sum, without duplication,
of (1) Consolidated Outstanding Indebtedness, (2) TRG's Share of UJV Combined
Outstanding
Indebtedness and (3) Contingent Liabilities.
"TRG Consolidated Financial Statements" means the consolidated
balance sheet and related consolidated statement of operations, accumulated
deficiency in assets and cash flows, and footnotes thereto, of Borrower,
prepared in accordance with GAAP.
"TRG's Share of UJV Combined Outstanding Indebtedness" means the sum
of the indebtedness of each of the UJVs contributing to UJV Combined Outstanding
Indebtedness multiplied by Borrower's respective beneficial interests in each
such UJV.
13
<PAGE>
"UJV Combined Outstanding Indebtedness" means, as of any time, the
sum of (1) mortgage notes payable and (2) other notes payable, of the UJVs, on a
combined basis, as reflected in the balance sheets of each of the UJVs, prepared
in accordance with GAAP.
"UJVs" means the unconsolidated joint ventures in which Borrower
owns a beneficial interest and which are accounted for under the equity method
in the TRG Consolidated Financial Statements.
"Unencumbered Combined EBITDA" means that portion of Combined EBITDA
attributable to Unencumbered Wholly-Owned Assets.
"Unencumbered Wholly-Owned Assets" means assets, reflected on the
TRG Consolidated Financial Statements, wholly owned, directly or indirectly, by
Borrower and not subject to any Lien to secure all or any portion of Secured
Indebtedness; provided, however, that, for purposes of this definition only, the
loans described in the following table, so long as the documents in respect of
the same permit secondary financing, shall not be considered part of Secured
Indebtedness:
================================================================================
Description of
Debt Obligation Obligor Affected Asset Amount ($)
- ---- ---------- ------- -------------- ------ ---
- --------------------------------------------------------------------------------
UDAG Loan TL-Columbus Columbus City Center 8,022,470
Associates
- --------------------------------------------------------------------------------
Assessment Bonds - City Richmond Hilltop land 801,077
of Richmond Associates
- --------------------------------------------------------------------------------
Assessment Bonds - City Stoneridge Stoneridge land 1,312,368
Pleasanton Properties
- --------------------------------------------------------------------------------
Assessment Bond - City Biltmore Shopping Biltmore land 3,182,742
of Phoenix Center Partners
- --------------------------------------------------------------------------------
Capital South Centrum TL - Columbus Columbus City Center 1,000,000
Parking Right Associates
================================================================================
"Unsecured Debt Yield" means, for any calendar quarter, the ratio,
expressed as a percentage, of (1) Unencumbered Combined EBITDA for the twelve
(12)-month period ending with such calendar quarter to (2) Adjusted Unsecured
Indebtedness as of the end of such calendar quarter.
"Unsecured Indebtedness" means that portion of Total Outstanding
Indebtedness that is unsecured.
Section 1.02 Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP, and all financial
data required to be delivered hereunder shall be prepared in accordance with
GAAP.
Section 1.03 Computation of Time Periods. Except as otherwise
provided herein, in this Agreement, in the computation of periods of time from a
specified date to a later
14
<PAGE>
specified date, the word "from" means "from and including" and words "to" and
"until" each means "to but excluding".
Section 1.04 Rules of Construction. When used in this Agreement: (1)
"or" is not exclusive; (2) a reference to a Law includes any amendment or
modification to such Law; (3) a reference to a Person includes its permitted
successors and permitted assigns; (4) except as provided otherwise, all
references to the singular shall include the plural and vice versa; (5) except
as provided in this Agreement, a reference to an agreement, instrument or
document shall include such agreement, instrument or document as the same may be
amended, modified or supplemented from time to time in accordance with its terms
and as permitted by the Loan Documents; (6) all references to Articles or
Sections shall be to Articles and Sections of this Agreement unless otherwise
indicated; and (7) all Exhibits to this Agreement shall be incorporated into
this Agreement.
ARTICLE II. THE LOANS
Section 2.01 The Loans. (a) Subject to the terms and conditions of
this Agreement, each of the Banks severally agrees to make a loan to Borrower
(each such loan by a Bank, a "Loan"; such loans, collectively, the "Loans")
pursuant to which the Bank shall from time to time advance to Borrower up to an
amount equal to such Bank's Loan Commitment. The Loans may be outstanding as:
(1) Base Rate Loans; (2) LIBOR Loans; or (3) a combination of the foregoing, as
Borrower shall elect and notify Administrative Agent in accordance with Section
2.15. The LIBOR Loan and Base Rate Loan of each Bank shall be maintained at such
Bank's Applicable Lending Office for its LIBOR Loan and Base Rate Loan,
respectively.
(b) The obligations of the Banks under this Agreement are several,
and no Bank shall be responsible for the failure of any other Bank to make any
advance of a Loan to be made by such other Bank. However, the failure of any
Bank to make any advance of the Loan to be made by it hereunder on the date
specified therefor shall not relieve any other Bank of its obligation to make
any advance of its Loan specified hereby to be made on such date.
Section 2.02 Purpose. Borrower shall use the proceeds of the Loans
solely (i) as a contribution of capital to TAH to pay all or part of TAH's
pre-development, development and construction costs in connection with Great
Lakes Crossing and (ii) to pay interest on the Loans and transaction costs
relating to the consummation of the transaction contemplated hereby.
Section 2.03 Advances Generally. The Initial Advance shall be in the
minimum amount of Two Million Dollars ($2,000,000) and in integral multiples of
One Hundred Thousand Dollars ($100,000) above such amount and shall be made upon
satisfaction of the conditions set forth in Section 4.01. Subsequent advances
shall be made no more frequently than monthly thereafter, upon satisfaction of
the conditions set forth in Section 4.02. The amount of each advance subsequent
to the Initial Advance shall be (x) in the case of advances of Base Rate Loans,
in the minimum amount of One Hundred Thousand Dollars ($100,000) and in integral
multiples of One Hundred Thousand Dollars ($100,000) above such amount and (y)
in the case of advances of LIBOR Loans, in the minimum amount of One Million
Dollars ($1,000,000) and in integral multiples of One Hundred Thousand Dollars
($100,000) above such amount.
15
<PAGE>
Notwithstanding anything to the contrary contained herein, Borrower
shall not be entitled to any advances of proceeds of the Loans subsequent to the
original Maturity Date (i.e. during the one(1)-year extension term contemplated
by Section 2.05).
Section 2.04 Procedures for Advances. Borrower shall submit to
Administrative Agent a request for each advance hereunder, stating the amount
requested, and certifying that (x) no Default or Event of Default then exists or
would exist as a result of such advance, (y) the advance will be, and all prior
advances have been, used solely for the purposes described in Section 2.02 and
(z) none of the costs covered by said request for advance were the subject of
any previous request for advance, no later than 10:00 a.m. (Pittsburgh time) on
the date, in the case of advances of Base Rate Loans, which is two (2) Banking
Days, and, in the case of advances of LIBOR Loans, which is three (3) Banking
Days, prior to the date the advance is to be made. Administrative Agent, upon
its receipt and approval of the request for advance, will so notify the Banks
either by telephone or by facsimile. Not later than 10:00 a.m. (Pittsburgh time)
on the date of each advance, each Bank shall, through its Applicable Lending
Office and subject to the conditions of this Agreement, make the amount to be
advanced by it on such day available to Administrative Agent, at Administrative
Agent's Office and in immediately available funds, for the account of Borrower.
The amount so received by Administrative Agent shall, subject to the conditions
of this Agreement, be made available to Borrower, in immediately available
funds, by Administrative Agent's crediting an account of Borrower designated by
Borrower.
Section 2.05 Extension of Maturity Date. Provided there exists no
Default or Event of Default, Borrower shall have the option, exercisable once,
to extend the Maturity Date for a period of one (1) year, subject to (i)
Administrative Agent's receipt of (x) a written request from Borrower for such
extension between sixty (60) and ninety (90) days prior to the Maturity Date,
(y) an extension fee, for the account of the Banks, in the amount of .05% of the
outstanding principal amount of the Loans as of the Maturity Date and (z) such
note extension agreement(s) as Administrative Agent may reasonably require, (ii)
Borrower's Credit Rating, as of the date of Borrower's exercise of such option,
being "investment grade" (i.e., BBB- or better by S&P, Baa3 or better by Moody's
and BBB- or better by Duff & Phelps and Fitch) by at least two (2) of the Rating
Agencies, one (1) of which must be either S&P or Moody's and (iii)
Administrative Agent's determination (which shall be conclusive so long as made
on a reasonable basis) that, as of the Maturity Date, Borrower will remain in
compliance with the financial covenants set forth in Article VIII.
Section 2.06 Interest Periods; Renewals In the case of the LIBOR
Loans, Borrower shall select an Interest Period of any duration in accordance
with the definition of Interest Period in Section 1.01, subject to the following
limitations: (1) no Interest Period may extend beyond the Maturity Date; (2) if
an Interest Period would end on a day which is not a Banking Day, such Interest
Period shall be extended to the next Banking Day, unless such Banking Day would
fall in the next calendar month, in which event such Interest Period shall end
on the immediately preceding Banking Day; and (3) only five (5) discrete
segments of a Bank's Loan bearing interest at a LIBOR Interest Rate, for a
designated Interest Period, pursuant to a particular Election, Conversion or
Continuation, may be outstanding at any one time (each such segment of each
Bank's Loan corresponding to a proportionate segment of each of the other Banks'
Loans).
16
<PAGE>
Upon notice to Administrative Agent as provided in Section 2.15,
Borrower may Continue any LIBOR Loan on the last day of the Interest Period of
the same or different duration in accordance with the limitations provided
above. If Borrower shall fail to give notice to Administrative Agent of such a
Continuation, such LIBOR Loan shall automatically become a Base Rate Loan on the
last day of the current Interest Period.
Section 2.07 Interest. Borrower shall pay interest to Administrative
Agent for the account of the applicable Bank on the outstanding and unpaid
principal amount of the Loans, at a rate per annum as follows: (1) for Base Rate
Loans at a rate equal to the Base Rate plus the Applicable Margin; and (2) for
LIBOR Loans at a rate equal to the applicable LIBOR Interest Rate plus the
Applicable Margin. Any principal amount not paid when due (when scheduled, at
acceleration or otherwise) shall bear interest thereafter, payable on demand, at
the Default Rate.
The interest rate on Base Rate Loans shall change when the Base Rate
changes. Interest on Base Rate Loans and LIBOR Loans shall not exceed the
maximum amount permitted under applicable law. Interest shall be calculated for
the actual number of days elapsed on the basis of, in the case of both Base Rate
Loans and LIBOR Loans, three hundred sixty (360) days.
Accrued interest shall be due and payable in arrears, in the case of
both Base Rate Loans and LIBOR Loans, on the first Banking Day of each calendar
month; provided, however, that interest accruing at the Default Rate shall be
due and payable on demand.
Section 2.08 Fees. (a) Borrower shall, during the term of the Loans,
pay to Administrative Agent for the account of each Bank a facility fee computed
on the daily Loan Commitment of such Bank (irrespective of usage), at a rate per
annum equal to the daily Facility Fee Rate, calculated on the basis of a year of
three hundred sixty (360) days for the actual number of days elapsed. The
accrued facility fee shall be due and payable in arrears on the tenth (10th) day
of December, March, June and September of each year (for the respective periods
September 1 through November 30, December 1 through February 28/29, March 1
through May 31 and June 1 through August 31), commencing on the first such date
after the Closing Date, and upon the Maturity Date or earlier termination of the
Loan Commitments.
(b) Borrower shall pay, for the accounts of the parties specified
therein, the fees provided for, on the dates specified, in the Supplemental Fee
Letter.
Section 2.09 Notes. The Loan made by each Bank under this Agreement
shall be evidenced by, and repaid with interest in accordance with, a promissory
note of Borrower in the form of EXHIBIT C duly completed and executed by
Borrower, in the principal amount equal to such Bank's Loan Commitment, payable
to such Bank for the account of its Applicable Lending Office (each such note,
as the same may hereafter be amended, modified, extended, severed, assigned,
substituted, renewed or restated from time to time, including any substitute
note pursuant to Section 3.07 or 12.05, a "Note"; all such notes, as so amended,
modified, extended, severed, assigned, substituted, renewed or restated from
time to time, collectively, the "Notes"). Each Note shall mature, and all
outstanding principal and accrued interest and other sums thereunder shall be
paid in full, on the Maturity Date, as the same may be accelerated or extended.
17
<PAGE>
Each Bank is hereby authorized by Borrower to endorse on a schedule
attached to the Note held by it, the amount of each advance, and each payment of
principal received by such Bank for the account of its Applicable Lending
Office(s) on account of its Loan, which endorsements, if made, shall, in the
absence of manifest error, be conclusive as to the outstanding balance of the
Loan made by such Bank; provided, however, that the failure to make such
notations with respect to the Loans or each advance or payment shall not limit
or otherwise affect the obligations of Borrower under this Agreement or the Note
held by such Bank.
Section 2.10 Prepayments. Borrower may, upon at least one (1)
Banking Day's notice to Administrative Agent in the case of the Base Rate Loans,
and at least two (2) Banking Days' notice to Administrative Agent in the case of
LIBOR Loans (in each case to be received by Administrative Agent no later than
1:00 P.M., Pittsburgh time), prepay the Loans, provided that (1) any partial
prepayment under this Section shall be in integral multiples of One Million
Dollars ($1,000,000); (2) a LIBOR Loan may be prepaid only on the last day of
the Applicable Interest Period for such LIBOR Loan; and (3) each prepayment
under this Section shall include all interest accrued on the amount of principal
prepaid through the date of prepayment. Any prepayment shall effect a permanent
reduction in the Total Loan Commitment by the amount prepaid.
Section 2.11 Changes of Commitments. (a) At any time, Borrower shall
have the right, without premium or penalty, to terminate the unused Loan
Commitments, in whole or in part, from time to time, provided that: (1) Borrower
shall give notice of each such termination to Administrative Agent, specifying
the amount of the termination, no later then 10:00 a.m. (Pittsburgh time) on the
date which is fifteen (15) days prior to the effectiveness of such termination;
(2) the Loan Commitments of each of the Banks must be terminated ratably and
simultaneously with those of the other Banks; and (3) each partial termination
of the Loan Commitments as a whole (and corresponding reduction of the Total
Loan Commitment) shall be in an integral multiple of One Million Dollars
($1,000,000).
(b) The Loan Commitments, to the extent terminated, may not be
reinstated.
Section 2.12 Method of Payment. Borrower shall make each payment
under this Agreement and under the Notes not later than 11:00 A.M. (Pittsburgh
time) on the date when due in Dollars to Administrative Agent at Administrative
Agent's Office in immediately available funds. Administrative Agent will
thereafter, on the day of its receipt of each such payment (assuming receipt by
11:00 A.M.), cause to be distributed to each Bank (1) such Bank's appropriate
share (based upon the respective outstanding principal amounts and rate(s) of
interest under the Notes of the Banks) of the payments of principal and interest
in like funds for the account of such Bank's Applicable Lending Office; and (2)
fees payable to such Bank in accordance with the terms of this Agreement.
Borrower hereby authorizes Administrative Agent and the Banks, if and to the
extent payment by Borrower is not made when due under this Agreement or under
the Notes, to charge from time to time against any account Borrower maintains
with Administrative Agent or any Bank any amount so due to Administrative Agent
and/or the Banks.
Except to the extent provided in this Agreement, whenever any
payment to be made under this Agreement or under the Notes is due on any day
other than a Banking Day, such payment shall be made on the next succeeding
Banking Day, and such extension of time shall in
18
<PAGE>
such case be included in the computation of the payment of interest and other
fees, as the case may be.
Section 2.13 Elections, Conversions or Continuation of Loans.
Subject to the provisions of Article III and Sections 2.06 and 2.14, Borrower
shall have the right to Elect to have all or a portion of any advance of the
Loans be LIBOR Loans, to Convert Base Rate Loans into LIBOR Loans, to Convert
LIBOR Loans into Base Rate Loans, or to Continue LIBOR Loans as LIBOR Loans, at
any time or from time to time, provided that: (1) Borrower shall give
Administrative Agent notice of each such Election, Conversion or Continuation as
provided in Section 2.15; and (2) a LIBOR Loan may be Converted or Continued
only on the last day of the applicable Interest Period for such LIBOR Loan.
Except as otherwise provided in this Agreement, each Election, Continuation and
Conversion shall be applicable to each Bank's Loan in accordance with its Pro
Rata Share.
Section 2.14 Minimum Amounts. With respect to the Loans as a whole,
each Election and each Conversion shall be in an amount at least equal to One
Million Dollars ($1,000,000) and in integral multiples of One Hundred Thousand
Dollars ($100,000).
Section 2.15 Certain Notices Regarding Elections, Conversions and
Continuations of Loans. Notices by Borrower to Administrative Agent of
Elections, Conversions and Continuations of LIBOR Loans shall be irrevocable and
shall be effective only if received by Administrative Agent not later than 10:00
a.m. (Pittsburgh time) on the number of Banking Days prior to the date of the
relevant Election, Conversion or Continuation specified below:
Number of
Notice Banking Days Prior
------ ------------------
Conversions into Base Rate Loans three (3)
Election of, Conversions into or Continuations as,
LIBOR Loan three (3)
Promptly following its receipt of any such notice, Administrative Agent shall so
advise the Banks either by telephone or by facsimile. Each such notice of
Election shall specify the portion of the amount of the advance that is to be
LIBOR Loans (subject to Section 2.14) and the duration of the Interest Period
applicable thereto (subject to Section 2.06); each such notice of Conversion
shall specify the LIBOR Loans or Base Rate Loans to be Converted; and each such
notice of Conversion or Continuation shall specify the date of Conversion or
Continuation (which shall be a Banking Day), the amount thereof (subject to
Section 2.14) and the duration of the Interest Period applicable thereto
(subject to Section 2.06). In the event that Borrower fails to Elect to have any
portion of an advance of the Loans be LIBOR Loans, the entire amount of such
advance shall constitute Base Rate Loans. In the event that Borrower fails to
Continue LIBOR Loans within the time period and as otherwise provided in this
Section, such LIBOR Loans will be automatically Converted into Base Rate Loans
on the last day of the then current applicable Interest Period for such LIBOR
Loans.
Section 2.16 Late Payment Premium. Borrower shall, at Administrative
Agent's option, pay to Administrative Agent for the account of the Banks a late
payment premium in the
19
<PAGE>
amount of four percent (4%) of any payments of interest under the Loans made
more than fifteen (15) days after the due date thereof, which shall be due with
any such late payment.
ARTICLE III. YIELD PROTECTION; ILLEGALITY; ETC.
Section 3.01 Additional Costs. Borrower shall pay directly to each
Bank from time to time on demand such amounts as such Bank may determine to be
necessary to compensate it for any increased costs which such Bank determines
are attributable to its making or maintaining a LIBOR Loan, or its obligation to
make or maintain a LIBOR Loan, or its obligation to Convert a Base Rate Loan to
a LIBOR Loan hereunder, or any reduction in any amount receivable by such Bank
hereunder in respect of its LIBOR Loan or such obligations (such increases in
costs and reductions in amounts receivable being herein called "Additional
Costs"), in each case resulting from any Regulatory Change which:
(1) changes the basis of taxation of any amounts payable to such Bank
under this Agreement or the Notes in respect of any such LIBOR Loan (other
than changes in the rate of general corporate, franchise, branch profit,
net income or other income tax imposed on such Bank or its Applicable
Lending Office by the jurisdiction in which such Bank has its principal
office or such Applicable Lending Office); or
(2) (other than to the extent the LIBOR Reserve Requirement is taken
into account in determining the LIBOR Rate at the commencement of the
applicable Interest Period) imposes or modifies any reserve, special
deposit, deposit insurance or assessment, minimum capital, capital ratio
or similar requirements relating to any extensions of credit or other
assets of, or any deposits with or other liabilities of, such Bank
(including any LIBOR Loan or any deposits referred to in the definition of
"LIBOR Interest Rate" in Section 1.01), or any commitment of such Bank
(including such Bank's Loan Commitment hereunder); or
(3) imposes any other condition affecting this Agreement or the Notes
(or any of such extensions of credit or liabilities).
Notwithstanding the foregoing, in the event that any Bank determines that it
shall incur Additional Costs in maintaining a LIBOR Loan, such Bank shall
provide written notice thereof to Borrower (with a copy to Administrative
Agent), which notice shall include the dollar amount of the Additional Costs,
and Borrower shall have the option, which option must be exercised within five
(5) Banking Days of Borrower's receipt of such notice, to prepay such LIBOR Loan
or to Convert such LIBOR Loan into a Base Rate Loan, subject, however, to the
provisions of Section 3.05.
Without limiting the effect of the provisions of the first paragraph
of this Section, in the event that, by reason of any Regulatory Change, any Bank
either (1) incurs Additional Costs based on or measured by the excess above a
specified level of the amount of a category of deposits of other liabilities of
such Bank which includes deposits by reference to which the LIBOR Interest Rate
is determined as provided in this Agreement or a category of extensions of
credit or other assets of such Bank which includes loans based on the LIBOR
Interest Rate or (2) becomes subject to restrictions on the amount of such a
category of liabilities or assets which it may hold, then, if such Bank so
elects by notice to Borrower (with a copy to Administrative
20
<PAGE>
Agent), the obligation of such Bank to permit Elections of, to Continue, or to
Convert Base Rate Loans into, LIBOR Loans shall be suspended (in which case the
provisions of Section 3.04 shall be applicable) until such Regulatory Change
ceases to be in effect.
Determinations and allocations by a Bank for purposes of this
Section of the effect of any Regulatory Change pursuant to the first or second
paragraph of this Section, on its costs or rate of return of making or
maintaining its Loan or portions thereof or on amounts receivable by it in
respect of its Loan or portions thereof, and the amounts required to compensate
such Bank under this Section, shall be conclusive absent manifest error.
To the extent that changing the jurisdiction of a Bank's Applicable
Lending Office would have the effect of minimizing Additional Costs, each such
Bank shall use reasonable efforts to make such a change, provided that same
would not otherwise be disadvantageous to each such Bank.
No Bank shall be entitled to any compensation pursuant to this
Section relating to any period more than ninety (90) days prior to the date
notice thereof is given to Borrower by such Bank.
Section 3.02 Limitation on Types of Loans. Anything herein to the
contrary notwithstanding, if, on or prior to the determination of the LIBOR
Interest Rate for any Interest Period:
(1) Administrative Agent determines (which determination shall be
conclusive) that quotations of interest rates for the relevant deposits
referred to in the definition of "LIBOR Interest Rate" in Section 1.01 are
not being provided in the relevant amounts or for the relevant maturities
for purposes of determining rates of interest for the LIBOR Loans as
provided in this Agreement; or
(2) a Bank determines (which determination shall be conclusive) and
promptly notifies Administrative Agent that the relevant rates of interest
referred to in the definition of "LIBOR Interest Rate" in Section 1.01
upon the basis of which the rate of interest for LIBOR Loans for such
Interest Period is to be determined do not adequately cover the cost to
such Bank of making or maintaining such LIBOR Loan for such Interest
Period;
then Administrative Agent shall give Borrower prompt notice thereof, and so long
as such condition remains in effect, the Banks (or, in the case of the
circumstances described in clause (2) above, the affected Bank) shall be under
no obligation to permit Elections of LIBOR Loans, to Convert Base Rate Loans
into LIBOR Loans or to Continue LIBOR Loans and Borrower shall, on the last
day(s) of the then current Interest Period(s) for the affected outstanding LIBOR
Loans, either (x) prepay the affected LIBOR Loans or (y) Convert the affected
LIBOR Loans into Base Rate Loans in accordance with Section 2.13.
Section 3.03 Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Bank or its Applicable
Lending Office to honor its obligation to make or maintain a LIBOR Loan
hereunder, to allow Elections of a LIBOR Loan or to Convert a Base Rate Loan
into a LIBOR Loan, then such Bank shall promptly notify Administrative Agent and
Borrower thereof and such Bank's obligation to make or maintain a
21
<PAGE>
LIBOR Loan, or to permit Elections of, to Continue, or to Convert its Base Rate
Loan into, a LIBOR Loan shall be suspended (in which case the provisions of
Section 3.04 shall be applicable) until such time as such Bank may again make
and maintain a LIBOR Loan.
Section 3.04 Treatment of Affected Loans. If the obligations of any
Bank to make or maintain a LIBOR Loan, or to permit an Election of a LIBOR Loan,
to Continue its LIBOR Loan, or to Convert its Base Rate Loan into a LIBOR Loan,
are suspended pursuant to Sections 3.01 or 3.03 (each LIBOR Loan so affected
being herein called an "Affected Loan"), such Bank's Affected Loan shall be
automatically Converted into a Base Rate Loan on the last day of the then
current Interest Period for the Affected Loan (or, in the case of a Conversion
required by Sections 3.01 or 3.03, on such earlier date as such Bank may specify
to Borrower).
To the extent that such Bank's Affected Loan has been so Converted,
all payments and prepayments of principal which would otherwise be applied to
such Bank's Affected Loan shall be applied instead to its Base Rate Loan and
such Bank shall have no obligation to Convert its Base Rate Loan into a LIBOR
Loan.
In the event that the conditions giving rise to the suspension of
any Bank's obligations to permit an Election of a LIBOR Loan, to Continue its
LIBOR Loan, or to Convert its Base Rate Loan into a LIBOR Loan shall cease to
exist, such Bank shall provide Borrower with prompt written notice of same (with
a copy to Administrative Agent), and such Bank shall again be obligated to
permit an Election of a LIBOR Loan, to Continue its LIBOR Loan, or to Convert
its Base Rate Loan into a LIBOR Loan in accordance with this Agreement.
Section 3.05 Certain Compensation. Borrower shall pay to
Administrative Agent for the account of the applicable Bank, upon the request of
such Bank through Administrative Agent, such amount or amounts as shall be
sufficient (in the reasonable opinion of such Bank) to compensate it for any
loss, cost or expense which such Bank determines is attributable to:
(1) any payment, prepayment, Conversion or Continuation of a LIBOR
Loan made by such Bank on a date other than the last day of an applicable
Interest Period for such LIBOR Loan, whether by reason of acceleration or
otherwise; or
(2) any failure by Borrower for any reason to Convert or Continue a
LIBOR Loan to be Converted or Continued by such Bank on the date specified
therefor in the relevant notice under Section 2.15; or
(3) any failure by Borrower to borrow (or to qualify for a borrowing
of) a LIBOR Loan which would otherwise be made hereunder on the date
specified in the relevant Election notice under Section 2.15 given or
submitted by Borrower.
Without limiting the foregoing, such compensation shall include an
amount equal to the present value (using as the discount rate an interest rate
equal to the rate determined under (2) below) of the excess, if any, of (1) the
amount of interest which otherwise would have accrued on the principal amount so
paid, prepaid, Converted or Continued (or not Converted, Continued or borrowed)
for the period from the date of such payment, prepayment, Conversion or
Continuation (or failure to Convert, Continue or borrow) to the last day of the
then current applicable Interest Period (or, in the case of a failure to
Convert, Continue or borrow, to the last
22
<PAGE>
day of the applicable Interest Period which would have commenced on the date
specified therefor in the relevant notice) at the applicable rate of interest
for the LIBOR Loan provided for herein, over (2) the amount of interest (as
reasonably determined by such Bank) based upon the interest rate which such Bank
would have bid in the London interbank market for Dollar deposits, for amounts
comparable to such principal amount and maturities comparable to such period. A
determination of any Bank as to the amounts payable pursuant to this Section
shall be conclusive absent manifest error.
Section 3.06 Capital Adequacy. If any Bank shall have determined
that, after the date hereof, the adoption of any applicable law, rule or
regulation regarding capital adequacy, or any change therein, or any change in
the interpretation or administration thereof by any Governmental Authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or any request or directive regarding capital adequacy
(whether or not having the force of law) of any such Governmental Authority,
central bank or comparable agency, has or would have the effect of reducing the
rate of return on capital of such Bank (or its Parent) as a consequence of such
Bank's obligations hereunder to a level below that which such Bank (or its
Parent) could have achieved but for such adoption, change, request or directive
(taking into consideration its policies with respect to capital adequacy) by an
amount deemed by such Bank to be material, then from time to time, within
fifteen (15) days after demand by such Bank (with a copy to Administrative
Agent), Borrower shall pay to such Bank such additional amount or amounts as
will compensate such Bank (or its Parent) for such reduction. A certificate of
any Bank claiming compensation under this Section, setting forth in reasonable
detail the basis therefor, shall be conclusive absent manifest error.
Section 3.07 Substitution of Banks. If any Bank (an "Affected Bank")
(i) makes demand upon Borrower for (or if Borrower is otherwise required to pay)
Additional Costs pursuant to Section 3.01 or (ii) is unable to make or maintain
a LIBOR Loan as a result of a condition described in Section 3.03 or clause (2)
of Section 3.02, Borrower may, within ninety (90) days of receipt of such demand
or notice (or the occurrence of such other event causing Borrower to be required
to pay Additional Costs or causing said Section 3.03 or clause (2) of Section
3.02 to be applicable), as the case may be, give notice (a "Replacement Notice")
to Administrative Agent (which will promptly forward a copy of such notice to
each Bank) of Borrower's intention either (x) to prepay in full the Affected
Bank's Note and to terminate the Affected Bank's entire Loan Commitment or (y)
to replace the Affected Bank with another financial institution (the
"Replacement Bank") designated in such Replacement Notice.
In the event Borrower opts to give the notice provided for in clause
(x) above, and if the Affected Bank shall not agree within thirty (30) days of
its receipt thereof to waive the payment of the Additional Costs in question or
the effect of the circumstances described in Section 3.03 or clause (2) of
Section 3.02, then, so long as no Default or Event of Default shall exist,
Borrower may (notwithstanding the provisions of clause (2) of Section 2.11(a))
terminate the Affected Bank's entire Loan Commitment, provided that in
connection therewith it pays to the Affected Bank all outstanding principal and
accrued and unpaid interest under the Affected Bank's Note, together with all
other amounts, if any, due from Borrower to the Affected Bank, including all
amounts properly demanded and unreimbursed under Sections 3.01 and 3.05.
In the event Borrower opts to give the notice provided for in clause
(y) above, and if (i) Administrative Agent shall, within thirty (30) days of its
receipt of the Replacement Notice,
23
<PAGE>
notify Borrower and each Bank in writing that the Replacement Bank is reasonably
satisfactory to Administrative Agent and (ii) the Affected Bank shall not, prior
to the end of such thirty (30)- day period, agree to waive the payment of the
Additional Costs in question or the effect of the circumstances described in
Section 3.03 or clause (2) of Section 3.02, then the Affected Bank shall, so
long as no Default or Event of Default shall exist, assign its Note and all of
its rights and obligations under this Agreement to the Replacement Bank, and the
Replacement Bank shall assume all of the Affected Bank's rights and obligations,
pursuant to an agreement, substantially in the form of an Assignment and
Assumption Agreement, executed by the Affected Bank and the Replacement Bank. In
connection with such assignment and assumption, the Replacement Bank shall pay
to the Affected Bank an amount equal to the outstanding principal amount under
the Affected Bank's Note plus all interest accrued thereon, plus all other
amounts, if any (other than the Additional Costs in question), then due and
payable to the Affected Bank; provided, however, that prior to or simultaneously
with any such assignment and assumption, Borrower shall have paid to such
Affected Bank all amounts properly demanded and unreimbursed under Sections 3.01
and 3.05. Upon the effective date of such assignment and assumption, the
Replacement Bank shall become a Bank Party to this Agreement and shall have all
the rights and obligations of a Bank as set forth in such Assignment and
Assumption Agreement, and the Affected Bank shall be released from its
obligations hereunder, and no further consent or action by any party shall be
required. Upon the consummation of any assignment pursuant to this Section, a
substitute Note shall be issued to the Replacement Bank by Borrower, in exchange
for the return of the Affected Bank's Note. The obligations evidenced by such
substitute note shall constitute "Obligations" for all purposes of this
Agreement and the other Loan Documents. If the Replacement Bank is not
incorporated under the laws of the United States of America or a state thereof,
it shall, prior to the first date on which interest or fees are payable
hereunder for its account, deliver to Borrower and Administrative Agent
certification as to exemption from deduction or withholding of any United States
federal income taxes in accordance with Section 10.13.
Borrower, Administrative Agent and the Banks shall execute such
modifications to the Loan Documents as shall be reasonably required in
connection with and to effectuate the foregoing.
ARTICLE IV. CONDITIONS PRECEDENT
Section 4.01 Conditions Precedent to the Initial Advance. The
obligations of the Banks hereunder and the obligation of each Bank to make the
Initial Advance are subject to the condition precedent that Administrative Agent
shall have received on or before the Closing Date each of the following
documents, and each of the following requirements shall have been fulfilled:
(1) Fees and Expenses. The payment of (A) all fees and expenses
incurred by Administrative Agent and Syndication Agent (including, without
limitation, the reasonable fees and expenses of legal counsel); and (B)
those fees specified in the Supplemental Fee Letter to be paid on or
before the Closing Date;
(2) Note. The Notes for Fleet, PNC and each of the other Banks
signatory hereto, duly executed by Borrower;
24
<PAGE>
(3) Financials of Borrower. Audited TRG Consolidated Financial
Statements as of and for the year ended December 31, 1996 and unaudited
TRG Consolidated Financial Statements as of and for the quarter ended
September 30, 1997, each acceptable to the Banks;
(4) Evidence of Formation of Borrower. Certified (as of the Closing
Date) copies of Borrower's certificate and agreement of limited
partnership, with all amendments thereto, and a certificate of the
Secretary of State of the jurisdiction of formation as to its good
standing therein;
(5) Evidence of All Partnership Action. Certified (as of the
Closing Date) copies of all documents evidencing partnership action taken
by Borrower authorizing the execution, delivery and performance of the
Loan Documents and each other document to be delivered by or on behalf of
Borrower pursuant to this Agreement;
(6) Incumbency and Signature Certificate of Borrower. A certificate
(dated as of the Closing Date) of the Secretary of the Partnership
Committee of Borrower certifying the names and true signatures of each
person authorized to sign on behalf of Borrower;
(7) Solvency Certificate. A Solvency Certificate, duly executed,
from Borrower;
(8) Compliance Certificate. A certificate of the sort required by
paragraph (4) of Section 6.09;
(9) Opinion of Counsel for Borrower. A favorable opinion, dated the
Closing Date, of Miro Weiner & Kramer, counsel for Borrower, as to such
matters as Administrative Agent may reasonably request;
(10) Authorization Letter. The Authorization Letter, duly executed
by Borrower;
(11) Request for Advance. A request for an advance in accordance
with Section 2.04;
(12) Certificate. The following statements shall be true and
Administrative Agent shall have received a certificate dated the Closing
Date signed by a duly authorized signatory of Borrower stating, to the
best of the certifying party's knowledge, the following:
(a) All representations and warranties contained in this
Agreement and in each of the other Loan Documents are true and
correct on and as of the Closing Date as though made on and as of
such date, and
(b) No Default or Event of Default has occurred and is
continuing, or could result from the transactions contemplated by
this Agreement and the other Loan Documents;
25
<PAGE>
(13) Supplemental Fee Letter. The Supplemental Fee Letter,
duly executed by Borrower;
(14) Project Budget. A budget setting forth, on an item-by-item
basis, all hard and soft costs incurred, and estimated by Borrower
to be incurred, by TAH in connection with its development and
construction of Great Lakes Crossing; and
(15) Additional Documentation. Such other approvals, opinions
or documents as Administrative Agent or any Bank may reasonably
request.
Section 4.02 Conditions Precedent to Advances After the Initial
Advance. The obligation of each Bank to make advances of the Loans subsequent to
the Initial Advance shall be subject to satisfaction of the following conditions
precedent:
(1) All conditions of Section 4.01 shall have been and remain
satisfied as of the date of the advance;
(2) No Default or Event of Default shall have occurred and be
continuing as of the date of the advance;
(3) Each of the representations and warranties contained in this
Agreement and in each of the other Loan Documents shall be true and
correct as of the date of the advance; and
(4) Administrative Agent shall have received a request for an
advance in accordance with Section 2.04.
Section 4.03 Deemed Representations. Each request by Borrower for,
and acceptance by Borrower of, an advance of proceeds of the Loans shall
constitute a representation and warranty by Borrower that, as of both the date
of such request and the date of the advance (1) no Default or Event of Default
has occurred and is continuing, and (2) if any representation or warranty
contained in this Agreement or the other Loan Documents is untrue or incorrect,
the condition giving rise to such untruthfulness or incorrectness is not likely
to result in a Material Adverse Change.
ARTICLE V. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Administrative Agent and each Bank as
follows:
Section 5.01 Due Organization. Borrower is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization, has the partnership power and authority to own its assets and to
transact the business in which it is now engaged, and, if applicable, is duly
qualified as a foreign partnership and in good standing under the laws of each
other jurisdiction in which such qualification is required.
Section 5.02 Power and Authority; No Conflicts; Compliance With
Laws. The execution, delivery and performance of the obligations required to be
performed by Borrower of
26
<PAGE>
the Loan Documents does not and will not (a) require the consent or approval of
its partners or such consent or approval has been obtained, (b) contravene its
partnership agreement, (c) violate any provision of, or require any filing,
registration, consent or approval under, any Law (including, without limitation,
Regulation U), order, writ, judgment, injunction, decree, determination or award
presently in effect having applicability to it, (d) result in a breach of or
constitute a default under or require any consent under any indenture or loan or
credit agreement or any other agreement, lease or instrument to which it may be
a party or by which it or its properties may be bound or affected except for
consents which have been obtained, (e) result in, or require, the creation or
imposition of any Lien, upon or with respect to any of its properties now owned
or hereafter acquired, or (f) cause it to be in default under any such Law,
order, writ, judgment, injunction, decree, determination or award or any such
indenture, agreement, lease or instrument; to the best of its knowledge,
Borrower is in compliance with all Laws applicable to it where the failure to be
in compliance would cause a Material Adverse Change to occur.
Section 5.03 Legally Enforceable Agreements. Each Loan Document is a
legal, valid and binding obligation of Borrower, enforceable against Borrower in
accordance with its terms, except to the extent that such enforcement may be
limited by applicable bankruptcy, insolvency and other similar laws affecting
creditors' rights generally.
Section 5.04 Litigation. There are no actions, suits or proceedings
pending or, to its knowledge, threatened against Borrower or any of its
Affiliates before any court or arbitrator or any Governmental Authority except
actions, suits or proceedings which have been disclosed to Administrative Agent
and the Banks in writing and which are fully covered by insurance or would, if
adversely determined, not substantially impair the ability of Borrower to pay
when due any amounts which may become payable under the Notes or to otherwise
pay and perform its obligations in connection with the Loan.
Section 5.05 Good Title to Properties. Borrower and each of its
Affiliates have good, marketable and legal title to all of the properties and
assets each of them purports to own (including, without limitation, those
reflected in the June 30, 1997 financial statements referred to in Section 5.13)
and, in the case of all of Borrower's shopping center properties, only with
exceptions which do not materially detract from the value of such property or
assets or the use thereof in Borrower's and such Affiliate's business, and
except to the extent that any such properties and assets have been encumbered or
disposed of since the date of such financial statements without violating any of
the covenants contained in Article VII or elsewhere in this Agreement. Borrower
and its Affiliates enjoy peaceful and undisturbed possession of all leased
property necessary in any material respect in the conduct of their respective
businesses. All such leases are valid and subsisting and are in full force and
effect.
Section 5.06 Taxes. Borrower has filed all tax returns (federal,
state and local) required to be filed and has paid all taxes, assessments and
governmental charges and levies due and payable without the imposition of a
penalty, including interest and penalties, except to the extent they are the
subject of a Good Faith Contest.
Section 5.07 ERISA. Borrower is in compliance in all material
respects with all applicable provisions of ERISA. Neither a Reportable Event nor
a Prohibited Transaction has occurred with respect to any Plan; no notice of
intent to terminate a Plan has been filed nor has any Plan been terminated
within the past five (5) years; no circumstance exists which constitutes
27
<PAGE>
grounds under Section 4042 of ERISA entitling the PBGC to institute proceedings
to terminate, or appoint a trustee to administer, a Plan, nor has the PBGC
instituted any such proceedings; Borrower and the ERISA Affiliates thereof have
not completely or partially withdrawn under Sections 4201 or 4204 of ERISA from
a Multiemployer Plan; Borrower and the ERISA Affiliates thereof have met the
minimum funding requirements of each under ERISA with respect to the plans of
each and there are no unfunded vested liabilities with respect to any plan
established or maintained by each; and Borrower and the ERISA Affiliates thereof
have not incurred any liability to the PBGC under ERISA.
Section 5.08 No Default on Outstanding Judgments or Orders. Borrower
has satisfied all judgments which are not being appealed and is not in default
with respect to any judgment, order, writ, injunction, decree, rule or
regulation of any court, arbitrator or federal, state, municipal or other
Governmental Authority, commission, board, bureau, agency or instrumentality,
domestic or foreign.
Section 5.09 No Defaults on Other Agreements. Except as disclosed to
the Bank Parties in writing, including anything disclosed on financial
statements, Borrower, to the best of its knowledge, is not a party to any
indenture, loan or credit agreement or any lease or other agreement or
instrument or subject to any partnership, trust or other restriction which is
likely to result in a Material Adverse Change. To the best of its knowledge,
Borrower is not in default in any respect in the performance, observance or
fulfillment of any of the obligations, covenants or conditions contained in any
agreement or instrument which is likely to result in a Material Adverse Change.
Section 5.10 Government Regulation. Borrower is not subject to
regulation under the Investment Company Act of 1940, the Interstate Commerce
Act, the Federal Powers Act or any statute or regulation limiting any such
Person's ability to incur indebtedness for money borrowed as contemplated
hereby.
Section 5.11 Environmental Protection. To the best of Borrower's
knowledge, none of Borrower's or its Affiliates' properties contains any
Hazardous Materials that, under any Environmental Law currently in effect, (1)
would impose liability on Borrower that is likely to result in a Material
Adverse Change, or (2) is likely to result in the imposition of a Lien on any
assets of Borrower or its Affiliates, in each case if not properly handled in
accordance with applicable Law. To the best of Borrower's knowledge, neither it
nor any of its Affiliates is in violation of, or subject to any existing,
pending or threatened investigation or proceeding by any Governmental Authority
under, any Environmental Law.
Section 5.12 Solvency. Borrower is, and upon consummation of the
transactions contemplated by this Agreement, the other Loan Documents and any
other documents, instruments or agreements relating thereto, will be, Solvent.
Section 5.13 Financial Statements. The TRG Consolidated Financial
Statements most recently delivered to the Banks pursuant to the terms of this
Agreement are in all material respects complete and correct and fairly present
the financial condition of the subjects thereof as of the dates of and for the
periods covered by such statements, all in accordance with GAAP, and there has
been no Material Adverse Change since the date of such most recently delivered
TRG Consolidated Financial Statements.
28
<PAGE>
Section 5.14 Valid Existence of Affiliates. As of the Closing Date,
the only material Affiliates of Borrower which own or lease operating shopping
centers or shopping centers under construction are listed on EXHIBIT D. Each
such Affiliate is a partnership, limited liability company or joint venture duly
organized and existing in good standing under the laws of the jurisdiction of
its formation. As to each such Affiliate, its correct name, the jurisdiction of
its formation and Borrower's percentage of beneficial interest therein are set
forth on said EXHIBIT D. Borrower and each of such Affiliates have the power to
own their respective properties and to carry on their respective businesses now
being conducted. Each of Borrower and such Affiliates is duly qualified as a
foreign partnership, company or venture to do business and is in good standing
in every jurisdiction in which the nature of the respective businesses conducted
by it or its respective properties, owned or held under lease, make such
qualification necessary.
Section 5.15 Insurance. Borrower and each of its Affiliates has in
force paid insurance with financially sound and reputable insurance companies or
associations in such amounts and covering such risks as are usually carried by
companies engaged in the same or a similar business and similarly situated.
Section 5.16 Accuracy of Information; Full Disclosure. Neither this
Agreement nor any documents, financial statements, reports, notices, schedules,
certificates, statements or other writings furnished by or on behalf of Borrower
to Administrative Agent or any Bank in connection with the negotiation of this
Agreement or the consummation of the transactions contemplated hereby, or
required herein to be furnished by or on behalf of Borrower, contains any untrue
or misleading statement of a material fact or omits a material fact necessary to
make the statements herein or therein not misleading. There is no fact which
Borrower has not disclosed to Administrative Agent and the Banks in writing
which materially affects adversely nor, so far as Borrower can now foresee, will
materially affect adversely the business, prospects, profits or financial
condition of Borrower or the ability of Borrower to perform this Agreement and
the other Loan Documents.
ARTICLE VI. AFFIRMATIVE COVENANTS
So long as any of the Notes shall remain unpaid or the Loan
Commitments remain in effect, or any other amount is owing by Borrower to any
Bank hereunder or under any other Loan Document, Borrower shall:
Section 6.01 Maintenance of Existence. Preserve and maintain its
legal existence and, if applicable, good standing in the jurisdiction of
organization and, if applicable, qualify and remain qualified as a foreign
partnership in each jurisdiction in which such qualification is required, except
to the extent that failure to so qualify is not likely to result in a Material
Adverse Change.
Section 6.02 Maintenance of Records. Keep adequate records and books
of account, in which complete entries will be made in accordance with GAAP,
reflecting all of its financial transactions.
Section 6.03 Maintenance of Insurance. At all times, maintain and
keep in force, and cause each of its Affiliates to maintain and keep in force,
insurance with financially
29
<PAGE>
sound and reputable insurance companies or associations in such amounts and
covering such risks as are usually carried by companies engaged in the same or a
similar business and similarly situated, which insurance may provide for
reasonable deductibility from coverage thereof.
Section 6.04 Compliance with Laws; Payment of Taxes. Comply in all
respects with all Laws applicable to it or to any of its properties or any part
thereof, such compliance to include, without limitation, paying before the same
become delinquent all taxes, assessments and governmental charges imposed upon
it or upon its property, except to the extent they are the subject of a Good
Faith Contest.
Section 6.05 Right of Inspection. At any reasonable time and from
time to time upon reasonable notice, permit Administrative Agent or any Bank or
any agent or representative thereof (provided that a representative of any Bank
must, at Borrower's request, be accompanied by a representative of Borrower), to
examine and make copies and abstracts from the records and books of account of,
and visit the properties of, Borrower and to discuss the affairs, finances and
accounts of Borrower with the independent accountants of Borrower.
Section 6.06 Compliance With Environmental Laws. Comply in all
material respects with all applicable Environmental Laws and immediately pay or
cause to be paid all costs and expenses incurred in connection with such
compliance, except to the extent there is a Good Faith Contest.
Section 6.07 Payment of Costs. Pay all costs and expenses required
for the satisfaction of the conditions of this Agreement.
Section 6.08 Maintenance of Properties. Borrower will do all things
reasonably necessary to maintain, preserve, protect and keep its and its
Affiliates' properties in good repair, working order and condition.
Section 6.09 Reporting and Miscellaneous Document Requirements.
Furnish directly to each of the Banks:
(1) Annual Financial Statements. As soon as available and in any
event within ninety (90) days after the end of each Fiscal Year, the TRG
Consolidated Financial Statements as of the end of and for such Fiscal
Year, in reasonable detail and stating in comparative form the respective
figures for the corresponding date and period in the prior Fiscal Year and
audited by Borrower's Accountants;
(2) Quarterly Financial Statements. As soon as available and in any
event within forty-five (45) days after the end of each calendar quarter
(other than the last quarter of the Fiscal Year), the unaudited TRG
Consolidated Financial Statements as of the end of and for such calendar
quarter, in reasonable detail and stating in comparative form the
respective figures for the corresponding date and period in the prior
Fiscal Year;
(3) Statement of Gross Asset Value. As soon as available and in any
event within ninety (90) days after June 30th of each year, a statement by
Borrower setting forth the calculation of Gross Asset Value, including
individual ten (10)-year projections for each asset (described in clause
(ii) of the definition of Gross Asset Value in Section 1.01) contributing
to Gross Asset Value and a summary of material assumptions,
30
<PAGE>
accompanied by a concurrence letter from the Banks' Valuation Consultant
confirming that, based on their review of all relevant materials, there is
no more than a ten percent (10%) variation between the contribution to
Gross Asset Value from all the assets described in clause (ii) of the
definition of Gross Asset Value in Section 1.01, as determined by
Borrower, and the contribution from said assets to Gross Asset Value if
the same had been estimated by the reviewer in a full appraisal of the
same interests, which concurrence letter shall contain a one (1)-page
summary of its analysis for each of the individual assets contributing to
Gross Asset Value;
(4) Certificate of No Default and Financial Compliance. Within forty
five (45) days after the end of each of the first three quarters of each
Fiscal Year and within ninety (90) days after the end of each Fiscal Year,
a certificate of Borrower's chief financial officer or Treasurer (a)
stating that, to the best of his or her knowledge, no Default or Event of
Default has occurred and is continuing, or if a Default or Event of
Default has occurred and is continuing, specifying the nature thereof and
the action which is proposed to be taken with respect thereto; (b) stating
that the covenants contained in Sections 7.02, 7.03 and 7.04 and in
Article VIII have been complied with (or specifying those that have not
been complied with) and including computations demonstrating such
compliance (or non-compliance); and (c) setting forth the details of all
items comprising Total Outstanding Indebtedness (including amount,
maturity, interest rate and amortization requirements), Unencumbered
Combined EBITDA, Unsecured Interest Expense and Unsecured Indebtedness;
(5) Certificate of Borrower's Accountants. Simultaneously with the
delivery of the annual financial statements required by paragraph (1) of
this Section, a statement of Borrower's Accountants who audited such
financial statements comparing the computations set forth in the financial
compliance certificate required by paragraph (4) of this Section to the
audited financial statements required by paragraph (1) of this Section
(where such information appears in such financial statements);
(6) Notice of Litigation. Promptly after the commencement and
knowledge thereof, notice of all actions, suits, and proceedings before
any court or arbitrator, affecting Borrower which, if determined adversely
to Borrower is likely to result in a Material Adverse Change;
(7) Notices of Defaults and Events of Default. As soon as possible
and in any event within ten (10) days after Borrower becomes aware of the
occurrence of a material Default or any Event of Default a written notice
setting forth the details of such Default or Event of Default and the
action which is proposed to be taken with respect thereto;
(8) Dispositions or Acquisitions of Assets. Within thirty (30) days
after the occurrence thereof, written notice of any Disposition or
acquisition of assets (other than acquisitions or Dispositions of
investments such as certificates of deposit, Treasury securities and money
market deposits in the ordinary course of Borrower's cash management) in
excess of Twenty Five Million Dollars ($25,000,000), together with, in the
case of any acquisition of such an asset, (i) a certificate of the sort
required by paragraph (4)(b) of this Section, containing covenant
compliance calculations that include the pro-forma adjustments set forth
at the end of this Section, which calculations
31
<PAGE>
shall demonstrate Borrower's compliance, on a pro-forma basis, as of the
end of the most recently ended calendar quarter for which financial
results are required hereunder to have been reported by Borrower, with all
covenants enumerated in said paragraph (4)(b) and (ii) such other
information relating to the acquisition as Administrative Agent may
reasonably request, including, without limitation, (x) copies of the
agreements governing the acquisition and (y) historical balance sheets (to
the extent available) and statements of income and cash flows with respect
to the property acquired for at least the preceding three (3) years and
Borrower's revenue and expense projections for the property acquired for
at least the next five (5) years (all of the foregoing to be in form and
detail satisfactory to Administrative Agent);
(9) Material Adverse Change. As soon as is practicable and in any
event within five (5) days after knowledge of the occurrence of any event
or circumstance which is likely to result in or has resulted in a Material
Adverse Change, written notice thereof;
(10) Bankruptcy of Tenants. Promptly after becoming aware of the
same, written notice of the bankruptcy, insolvency or cessation of
operations of any tenant in any property of Borrower or in which Borrower
has an interest to which five percent (5%) or more of minimum rent payable
to Borrower directly or through its Consolidated Businesses or UJVs is
attributable;
(11) Offices. Thirty (30) days' prior written notice of any change
in the chief executive office or principal place of business of Borrower;
(12) Environmental and Other Notices. As soon as possible and in any
event within five (5) days after receipt, copies of all Environmental
Notices received by Borrower which are not received in the ordinary course
of business and which relate to a situation which is likely to result in a
Material Adverse Change;
(13) Insurance Coverage. Promptly, such information concerning
Borrower's insurance coverage as Administrative Agent may reasonably
request;
(14) Change in Borrower's Credit Rating. Within two (2) Banking Days
after any change in Borrower's Credit Rating, written notice of such
change;
(15) SEC Filings, Etc. As soon as possible and in any event within
ten (10) days of the sending or filing thereof, copies of all proxy
statements, financial statements and reports which TCI sends to its
shareholders, and copies of all annual reports on Form 10-K (without
exhibits), quarterly reports on Form 10-Q (without exhibits) and current
reports on Form 8-K (without exhibits), and all registration statements
which are declared effective which Borrower or TCI files with the
Securities and Exchange Commission or any Governmental Authority which may
be substituted therefor; and
(16) General Information. Promptly, such other information
respecting the condition or operations, financial or otherwise, of
Borrower or any properties of Borrower as Administrative Agent may from
time to time reasonably request.
32
<PAGE>
In connection with each acquisition of assets that is required to be
reported pursuant to paragraph (8) of this Section, the following pro-forma
adjustments shall be made to the covenant compliance calculations required as of
the end of the most recently ended calendar quarter for which financial results
are required hereunder to have been reported by Borrower:
(i) Gross Asset Value shall be adjusted by adding thereto the
lesser of (A) the Purchase Price Borrower paid for the acquired asset or
(B) the acquired asset's trailing twelve (12)-month net operating income,
less any management fee adjustment, if applicable, capitalized at a rate
of eight percent (8%) per annum; provided, however, that, at Borrower's
request and expense, Administrative Agent shall promptly cause the Banks'
Valuation Consultant to appraise the acquired asset and, upon the
completion of such appraisal, provided such appraisal is reasonably
satisfactory to Administrative Agent, the appraised value of the acquired
asset as determined in such appraisal shall be substituted for the amount
calculated pursuant to clauses (A) and (B) above.
(ii) Total Outstanding Indebtedness, Secured Indebtedness and
Unsecured Indebtedness shall be adjusted by adding thereto, respectively,
all indebtedness, secured indebtedness and unsecured indebtedness that is
assumed and/or incurred by Borrower in connection with the acquisition.
For purposes of such adjustments, indebtedness, secured indebtedness and
unsecured indebtedness in connection with the acquisition shall be treated
in a manner consistent with the treatment of Total Outstanding
Indebtedness, Secured Indebtedness and Unsecured Indebtedness in the TRG
Consolidated Financial Statements.
(iii) Combined EBITDA, for any period, shall be adjusted by adding
(or subtracting, in the case of a loss) thereto actual revenues less
operating costs before interest, depreciation, amortization and
extraordinary items, for the same period (based on the same accounting
principles and assumptions as are set forth in the definition of "Combined
EBITDA" in Section 1.01, to the extent possible based on information
reasonably available with respect to the acquired asset), from the
acquired asset.
(iv) If, upon its acquisition, the acquired asset becomes part of
Unencumbered Wholly-Owned Assets, Unencumbered Combined EBITDA, for any
period, shall be adjusted by adding (or subtracting, in the case of a
loss) thereto actual income before interest expense, income taxes,
depreciation, amortization and extraordinary items, for the same period,
from the acquired asset.
(v) Interest Expense and Unsecured Interest Expense, for any
period, shall be adjusted by adding thereto interest expense to be
incurred on, respectively, all indebtedness and unsecured indebtedness
that is assumed and/or incurred by Borrower in connection with the
acquisition, assuming, for purposes of this calculation, that such
indebtedness were to bear interest at a rate 1.75% per annum in excess of
the rate of interest that would be payable on a ten (10)-year United
States Treasury Note issued as of the date of the acquisition.
33
<PAGE>
ARTICLE VII. NEGATIVE COVENANTS
So long as any of the Notes shall remain unpaid, or the Loan
Commitments remain in effect, or any other amount is owing by Borrower to
Administrative Agent or any Bank hereunder or under any other Loan Document,
Borrower shall not do any or all of the following:
Section 7.01 Mergers Etc. Merge or consolidate with (except where
Borrower or a Person wholly-owned by Borrower is the surviving entity), or sell,
assign, lease or otherwise dispose of (whether in one transaction or in a series
of transactions) all or substantially all of its assets (whether now owned or
hereafter acquired) (or enter into any agreement to do any of the foregoing).
Section 7.02 Investments. Make any loan or advance to any Person or
purchase or otherwise acquire any capital stock, assets, obligations or other
securities of, make any capital contribution to, or otherwise invest in, or
acquire any interest in, any Person (any such transaction, an "Investment") if
(1) the Investment is in connection with something other than a retail shopping
center and the amount of any single such Investment (or the aggregate amount of
any single such Investment together with all related Investments), would exceed
twenty percent (20%) of Net Worth; (2) except to the extent permitted by clause
(3) below, such Investment constitutes the acquisition of a minority interest in
a Person (a "Minority Interest") and the amount of such Investment, together
with the value of all other Minority Interests acquired after the Closing Date
contributing to Gross Asset Value, would exceed ten percent (10%) of Net Worth,
or (3) such Investment constitutes the acquisition of a Minority Interest in a
regional shopping center or portfolio of regional shopping centers and the
amount of such Investment, together with the value of all other such Minority
Interests, would exceed twenty percent (20%) of Net Worth. A fifty percent (50%)
beneficial interest in a Person, in connection with which the holder thereof
exercises joint control over such Person with the holder(s) of the other fifty
percent (50%) beneficial interest, shall not constitute a "Minority Interest"
for purposes of this Section.
Section 7.03 Sale of Assets. Effect a Disposition of any of its now
owned or hereafter acquired assets, including assets in which Borrower owns a
beneficial interest through its ownership of interests in joint ventures,
aggregating more than forty percent (40%) of Gross Asset Value.
Section 7.04 Interest Rate Hedging. At any time, permit or suffer
more than twenty five percent (25%) of Total Outstanding Indebtedness not to be
"hedged"; for purposes of this Section, "hedged" shall mean bearing interest at
an effective fixed rate, either pursuant to the debt instrument itself or
through the operation of a "cap", "collar", "swap" or comparable interest rate
protection contract, such debt instrument, or instrument creating the "cap",
"collar", "swap" or comparable interest rate protection contract, as the case
may be, having an original term of at least twelve (12) months.
Section 7.05 Partnership Committee of Borrower. At any time, permit
or suffer the failure or inability of any one (1) or more of (1) TG Partners
Limited Partnership and/or Taub-Co Management, Inc.; (2) the General Motors
Hourly-Rate Employees Pension Trust and/or the General Motors Salaried Employees
Pension Trust, directly or indirectly (or a single
34
<PAGE>
"GMPTS Transferee," as such quoted term is defined in Borrower's Amended and
Restated Agreement of Limited Partnership); and (3) TCI, to designate a majority
of Borrower's partnership committee.
ARTICLE VIII. FINANCIAL COVENANTS
So long as any of the Notes shall remain unpaid, or the Loan
Commitments remain in effect, or any other amount is owing by Borrower to
Administrative Agent or any Bank under this Agreement or under any other Loan
Document, Borrower shall not permit or suffer:
Section 8.01 Net Worth. At any time, Net Worth to be less than One
Billion Dollars ($1,000,000,000); or
Section 8.02 Relationship of Total Outstanding Indebtedness to Gross
Asset Value. At any time, Total Outstanding Indebtedness to exceed fifty percent
(50%) of Gross Asset Value; or
Section 8.03 Relationship of Secured Indebtedness to Gross Asset
Value. At any time, Secured Indebtedness to exceed thirty five percent (35%) of
Gross Asset Value; or
Section 8.04 Relationship of Combined EBITDA to Interest Expense. As
of the end of any calendar quarter, the ratio of (1) Combined EBITDA to (2)
Interest Expense, each for the twelve (12)-month period then ended and taken as
a whole, to be less than 1.85 to 1.0; or
Section 8.05 Relationship of Combined EBITDA to Adjusted Total
Outstanding Indebtedness. As of the end of any calendar quarter, the ratio
(expressed as a percentage) of (1) Combined EBITDA for the twelve (12)-month
period then ended and taken as a whole to (2) Adjusted Total Outstanding
Indebtedness as of the end of such calendar quarter to be less than thirteen
percent (13%); or
Section 8.06 Combined EBTDA. As of the end of any calendar quarter,
Combined EBTDA for such calendar quarter to be less than Twelve Million Five
Hundred Thousand Dollars ($12,500,000); or
Section 8.07 Unsecured Debt Yield. As of the end of any calendar
quarter, Unsecured Debt Yield for such calendar quarter to be less than eleven
and one half percent (11- 1/2%); or
Section 8.08 Relationship of Unencumbered Combined EBITDA to
Interest Expense on Unsecured Indebtedness. As of the end of any calendar
quarter, the ratio of (1) Unencumbered Combined EBITDA to (2) that portion of
Interest Expense attributable to Unsecured Indebtedness, each for the prior
twelve (12)-month period then ended and taken as a whole, to be less than 1.50
to 1.00.
35
<PAGE>
ARTICLE IX. EVENTS OF DEFAULT
Section 9.01Events of Default. Any of the following events shall be
an "Event of Default":
(1) If Borrower shall: fail to pay the principal of any Notes as and
when due; or fail to pay interest accruing on any Notes as and when due
and such failure to pay shall continue unremedied for five (5) days after
the due date of such amount; or fail to pay any fee or interest or any
other amount due under this Agreement or any other Loan Document as and
when due and such failure to pay shall continue unremedied for two (2)
days after notice by Administrative Agent of such failure to pay; or
(2) If any representation or warranty made by Borrower in this
Agreement or in any other Loan Document or which is contained in any
certificate, document, opinion, financial or other statement furnished at
any time under or in connection with a Loan Document shall prove to have
been incorrect in any material respect on or as of the date made; or
(3) If Borrower shall fail (a) to perform or observe any term,
covenant or agreement contained in Article VII or Article VIII; or (b) to
perform or observe any term, covenant or agreement contained in Article VI
or otherwise contained in this Agreement (other than obligations
specifically referred to elsewhere in this Section) or any Loan Document,
or any other document executed by Borrower and delivered to Administrative
Agent and/or the Banks in connection with the transactions contemplated
hereby and such failure shall remain unremedied for thirty (30)
consecutive calendar days after the occurrence thereof (or such shorter
cure period as may be expressly prescribed in the applicable Loan
Document); provided, however, that if any such default under clause (b)
above cannot by its nature be cured within such thirty (30) day, or
shorter, as the case may be, grace period and so long as Borrower shall
have commenced cure within such thirty (30) day, or shorter, as the case
may be, grace period and shall, at all times thereafter, diligently
prosecute the same to completion, Borrower shall have an additional
period, not to exceed sixty (60) days, to cure such default; in no event,
however, is the foregoing intended to effect an extension of the Maturity
Date; or
(4) If Borrower shall fail (a) to pay any Debt (other than the
payment obligations described in paragraph (1) of this Section) in an
amount equal to or greater than Ten Million Dollars ($10,000,000) when due
(whether by scheduled maturity, required prepayment, acceleration, demand,
or otherwise), or (b) to perform or observe any material term, covenant,
or condition under any agreement or instrument relating to any such Debt,
when required to be performed or observed, if the effect of such failure
to perform or observe is to accelerate, or to permit the acceleration of,
after the giving of notice or the lapse of time, or both (other than in
cases where, in the judgment of the Required Banks, meaningful discussions
likely to result in (i) a waiver or cure of the failure to perform or
observe, or (ii) otherwise averting such acceleration are in progress
between Borrower and the obligee of such Debt), the maturity of such Debt,
or any such Debt shall be declared to be due and payable, or required to
be prepaid (other than by a regularly scheduled or otherwise required
prepayment), prior to the stated maturity thereof; or
36
<PAGE>
(5) If Borrower, or any Affiliate of Borrower to which One Hundred
Fifty Million Dollars ($150,000,000) or more of Gross Asset Value is
attributable, shall: (a) generally not, or be unable to, or shall admit in
writing its inability to, pay its debts as such debts become due; or (b)
make an assignment for the benefit of creditors, petition or apply to any
tribunal for the appointment of a custodian, receiver or trustee for it or
a substantial part of its assets; or (c) commence any proceeding under any
bankruptcy, reorganization, arrangement, readjustment of debt, dissolution
or liquidation law or statute of any jurisdiction, whether now or
hereafter in effect; or (d) have had any such petition or application
filed or any such proceeding shall have been commenced, against it, in
which an adjudication or appointment is made or order for relief is
entered, or which petition, application or proceeding remains undismissed
or unstayed for a period of sixty (60) days or more; or (e) be the subject
of any proceeding under which all or a substantial part of its assets may
be subject to seizure, forfeiture or divestiture; or (f) by any act or
omission indicate its consent to, approval of or acquiescence in any such
petition, application or proceeding or order for relief or the appointment
of a custodian, receiver or trustee for all or any substantial part of its
property; or (g) suffer any such custodianship, receivership or
trusteeship for all or any substantial part of its property, to continue
undischarged for a period of sixty (60) days or more; or
(6) If one or more judgments, decrees or orders for the payment of
money in excess of Ten Million Dollars ($10,000,000) in the aggregate
shall be rendered against Borrower, and any such judgments, decrees or
orders shall continue unsatisfied and in effect for a period of thirty
(30) consecutive days without being vacated, discharged, satisfied or
stayed or bonded pending appeal; or
(7) If any of the following events shall occur or exist with respect
to Borrower, or any ERISA Affiliate of Borrower: (a) any Prohibited
Transaction involving any Plan; (b) any Reportable Event with respect to
any Plan: (c) the filing under Section 4041 of ERISA of a notice of intent
to terminate any Plan or the termination of any Plan; (d) any event or
circumstance which might constitute grounds entitling the PBGC to
institute proceedings under Section 4042 of ERISA for the termination of,
or for the appointment of a trustee to administer, any Plan, or the
institution by the PBGC of any such proceedings; or (e) complete or
partial withdrawal under Section 4201 or 4204 of ERISA from a
Multiemployer Plan or the reorganization, insolvency, or termination of
any Multiemployer Plan; and in each case above, if such event or
conditions, if any, could in the opinion of any Bank subject Borrower or
any ERISA Affiliate of Borrower to any tax, penalty, or other liability to
a Plan, Multiemployer Plan, the PBGC or otherwise (or any combination
thereof) which in the aggregate exceeds or may exceed Fifty Thousand
Dollars ($50,000); or
(8) If at any time TCI is not a qualified real estate investment
trust under Sections 856 through 860 of the Code or is not listed on the
New York Stock Exchange or the American Stock Exchange; or
(9) If at any time Borrower fails to operate as a real estate
operating company for ERISA purposes (within the meaning of C.F.R.
ss.2510.3-101); or
37
<PAGE>
(10) If the Taubman Company Limited Partnership, the entity presently
providing property management and leasing services for all the regional
shopping center properties in which Borrower has an ownership interest,
shall discontinue providing such services for twenty five percent (25%) or
more of the regional shopping center properties then owned in whole or in
part by Borrower.
Section 9.02 Remedies. If any Event of Default shall occur and be
continuing, Administrative Agent shall, upon request of the Required Banks, by
notice to Borrower, (1) declare the outstanding Notes, all interest thereon, and
all other amounts payable under this Agreement, and any other Loan Documents to
be forthwith due and payable, whereupon the Notes, all such interest, and all
such amounts due under this Agreement, and under any other Loan Document shall
become and be forthwith due and payable, without presentment, demand, protest,
or further notice of any kind, all of which are hereby expressly waived by
Borrower; and/or (2) exercise any remedies provided in any of the Loan Documents
or by law.
ARTICLE X. ADMINISTRATIVE AGENT; RELATIONS AMONG BANKS
Section 10.01 Appointment, Powers and Immunities of Administrative
Agent. Each Bank hereby irrevocably appoints and authorizes Administrative Agent
to act as its agent hereunder and under any other Loan Document with such powers
as are specifically delegated to Administrative Agent by the terms of this
Agreement and any other Loan Document, together with such other powers as are
reasonably incidental thereto. Administrative Agent shall have no duties or
responsibilities except those expressly set forth in this Agreement and any
other Loan Document or required by law, and shall not by reason of this
Agreement be a fiduciary or trustee for any Bank except to the extent that
Administrative Agent acts as an agent with respect to the receipt or payment of
funds (nor shall Administrative Agent have any fiduciary duty to Borrower nor
shall any Bank have any fiduciary duty to Borrower or to any other Bank).
Administrative Agent shall not be responsible to the Banks for any recitals,
statements, representations or warranties made by Borrower or any officer,
partner or official of Borrower or any other Person contained in this Agreement
or any other Loan Document, or in any certificate or other document or
instrument referred to or provided for in, or received by any of them under,
this Agreement or any other Loan Document, or for the value, legality, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any other Loan Document or any other document or instrument referred to or
provided for herein or therein, for the perfection or priority of any Lien
securing the Obligations or for any failure by Borrower to perform any of its
obligations hereunder or thereunder. Administrative Agent may employ agents and
attorneys-in-fact and shall not be responsible, except as to money or securities
received by it or its authorized agents, for the negligence or misconduct of any
such agents or attorneys-in-fact selected by it with reasonable care. Neither
Administrative Agent nor any of its directors, officers, employees or agents
shall be liable or responsible for any action taken or omitted to be taken by it
or them hereunder or under any other Loan Document or in connection herewith or
therewith, except for its or their own gross negligence or willful misconduct.
Borrower shall pay any fee agreed to by Borrower and Administrative Agent with
respect to Administrative Agent's services hereunder.
Section 10.02 Reliance by Administrative Agent. Administrative Agent
shall be entitled to rely upon any certification, notice or other communication
(including any thereof by telephone, telex, telegram or cable) believed by it to
be genuine and correct and to have been
38
<PAGE>
signed or sent by or on behalf of the proper Person or Persons, and upon advice
and statements of legal counsel, independent accountants and other experts
selected by Administrative Agent. Administrative Agent may deem and treat each
Bank as the holder of the Loan made by it for all purposes hereof and shall not
be required to deal with any Person who has acquired a participation in any Loan
or participation from a Bank. As to any matters not expressly provided for by
this Agreement or any other Loan Document, Administrative Agent shall in all
cases be fully protected in acting, or in refraining from acting, hereunder in
accordance with instructions signed by the Required Banks, and such instructions
of the Required Banks and any action taken or failure to act pursuant thereto
shall be binding on all of the Banks and any other holder of all or any portion
of any Loan or participation.
Section 10.03 Defaults. Administrative Agent shall not be deemed to
have knowledge of the occurrence of a Default or Event of Default unless
Administrative Agent has received notice from a Bank or Borrower specifying such
Default or Event of Default and stating that such notice is a "Notice of
Default." In the event that Administrative Agent receives such a notice of the
occurrence of a Default or Event of Default, Administrative Agent shall give
prompt notice thereof to the Banks. Administrative Agent, following consultation
with the Banks, shall (subject to Section 10.07) take such action with respect
to such Default or Event of Default which is continuing as shall be directed by
the Required Banks; provided that, unless and until Administrative Agent shall
have received such directions, Administrative Agent may take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in the best interest of the Banks; and
provided further that Administrative Agent shall not send a notice of Default or
acceleration to Borrower without the approval of the Required Banks. In no event
shall Administrative Agent be required to take any such action which it
determines to be contrary to law.
Section 10.04 Rights of Administrative Agent as a Bank. With respect
to its Loan Commitment and the Loan provided by it, Administrative Agent in its
capacity as a Bank hereunder shall have the same rights and powers hereunder as
any other Bank and may exercise the same as though it were not acting as
Administrative Agent, and the term "Bank" or "Banks" shall, unless the context
otherwise indicates, include Administrative Agent in its capacity as a Bank.
Administrative Agent and its Affiliates may (without having to account therefor
to any Bank) accept deposits from, lend money to (on a secured or unsecured
basis), and generally engage in any kind of banking, trust or other business
with Borrower (and any Affiliates of Borrower) as if it were not acting as
Administrative Agent.
Section 10.05 Indemnification of Administrative Agent. Each Bank
agrees to indemnify Administrative Agent (to the extent not reimbursed under
Section 12.04 or under the applicable provisions of any other Loan Document, but
without limiting the obligations of Borrower under Section 12.04 or such
provisions), for its Pro Rata Share of any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind and nature whatsoever which may be imposed on,
incurred by or asserted against Administrative Agent in any way relating to or
arising out of this Agreement, any other Loan Document or any other documents
contemplated by or referred to herein or the transactions contemplated hereby or
thereby (including, without limitation, the costs and expenses which Borrower is
obligated to pay under Section 12.04) or under the applicable provisions of any
other Loan Document or the enforcement of any of the terms hereof or thereof or
of any such other documents or instruments; provided that no Bank shall be
liable for (1) any
39
<PAGE>
of the foregoing to the extent they arise from the gross negligence or willful
misconduct of the party to be indemnified, (2) any loss of principal or interest
with respect to Administrative Agent's Loan or (3) any loss suffered by
Administrative Agent in connection with a swap or other interest rate hedging
arrangement entered into by Administrative Agent with Borrower.
Section 10.06 Non-Reliance on Administrative Agent and Other Banks.
Each Bank agrees that it has, independently and without reliance on
Administrative Agent or any other Bank, and based on such documents and
information as it has deemed appropriate, made its own credit analysis of
Borrower and the decision to enter into this Agreement and that it will,
independently and without reliance upon Administrative Agent or any other Bank,
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own analysis and decisions in taking or not taking
action under this Agreement or any other Loan Document. Administrative Agent
shall not be required to keep itself informed as to the performance or
observance by Borrower of this Agreement or any other Loan Document or any other
document referred to or provided for herein or therein or to inspect the
properties or books of Borrower. Except for notices, reports and other documents
and information expressly required to be furnished to the Banks by
Administrative Agent hereunder, Administrative Agent shall not have any duty or
responsibility to provide any Bank with any credit or other information
concerning the affairs, financial condition or business of Borrower (or any
Affiliate of Borrower) which may come into the possession of Administrative
Agent or any of its Affiliates. Administrative Agent shall not be required to
file this Agreement, any other Loan Document or any document or instrument
referred to herein or therein, for record or give notice of this Agreement, any
other Loan Document or any document or instrument referred to herein or therein,
to anyone.
Section 10.07 Failure of Administrative Agent to Act. Except for
action expressly required of Administrative Agent hereunder, Administrative
Agent shall in all cases be fully justified in failing or refusing to act
hereunder unless it shall have received further assurances (which may include
cash collateral) of the indemnification obligations of the Banks under Section
10.05 in respect of any and all liability and expense which may be incurred by
it by reason of taking or continuing to take any such action.
Section 10.08 Resignation or Removal of Administrative Agent.
Provided there exists no Event of Default, Administrative Agent hereby agrees
not to unilaterally resign except in the event it becomes an Affected Bank and
is removed or replaced as a Bank pursuant to Section 3.07, in which event it
shall have the right to resign. Administrative Agent may be removed at any time
with or without cause by the Required Banks, provided that Borrower and the
other Banks shall be promptly notified thereof. Upon any such resignation or
removal, the successor Administrative Agent shall, at Fleet's option, be Fleet.
If Fleet elects not to become the successor Administrative Agent, the Required
Banks shall have the right to appoint a successor Administrative Agent. If no
successor Administrative Agent shall have been so appointed by the Required
Banks and shall have accepted such appointment within thirty (30) days after the
Required Banks' removal of the retiring Administrative Agent, then the retiring
Administrative Agent may, on behalf of the Banks, appoint a successor
Administrative Agent, which shall be one of the Banks. The Required Banks or the
retiring Administrative Agent, as the case may be, shall upon the appointment of
a successor Administrative Agent promptly so notify Borrower and the other
Banks. Upon the acceptance of any appointment as Administrative Agent hereunder
by a successor Administrative Agent, such successor
40
<PAGE>
Administrative Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Administrative Agent, and
the retiring Administrative Agent shall be discharged from its duties and
obligations hereunder. After any retiring Administrative Agent's removal
hereunder as Administrative Agent, the provisions of this Article X shall
continue in effect for its benefit in respect of any actions taken or omitted to
be taken by it while it was acting as Administrative Agent.
Section 10.09 Amendments Concerning Agency Function. Notwithstanding
anything to the contrary contained in this Agreement, Administrative Agent shall
not be bound by any waiver, amendment, supplement or modification of this
Agreement or any other Loan Document which affects its duties, rights, and/or
function hereunder or thereunder unless it shall have given its prior written
consent thereto.
Section 10.10 Liability of Administrative Agent. Administrative
Agent shall not have any liabilities or responsibilities to Borrower on account
of the failure of any Bank to perform its obligations hereunder or to any Bank
on account of the failure of Borrower to perform its obligations hereunder or
under any other Loan Document.
Section 10.11 Transfer of Agency Function. Without the consent of
Borrower or any Bank, Administrative Agent may at any time or from time to time
transfer its functions as Administrative Agent hereunder to any of its offices
wherever located in the United States, provided that Administrative Agent shall
promptly notify Borrower and the Banks thereof.
Section 10.12 Non-Receipt of Funds by Administrative Agent. Unless
Administrative Agent shall have received notice from a Bank or Borrower (either
one as appropriate being the "Payor") prior to the date on which such Bank is to
make payment hereunder to Administrative Agent of the proceeds of a Loan or
Borrower is to make payment to Administrative Agent, as the case may be (either
such payment being a "Required Payment"), which notice shall be effective upon
receipt, that the Payor will not make the Required Payment in full to
Administrative Agent, Administrative Agent may assume that the Required Payment
has been made in full to Administrative Agent on such date, and Administrative
Agent in its sole discretion may, but shall not be obligated to, in reliance
upon such assumption, make the amount thereof available to the intended
recipient on such date. If and to the extent the Payor shall not have in fact so
made the Required Payment in full to Administrative Agent, the recipient of such
payment shall repay to Administrative Agent forthwith on demand such amount made
available to it together with interest thereon, for each day from the date such
amount was so made available by Administrative Agent until the date
Administrative Agent recovers such amount, at the customary rate set by
Administrative Agent for the correction of errors among Banks for three (3)
Banking Days and thereafter at the Base Rate.
Section 10.13 Withholding Taxes. Each Bank represents that it is
entitled to receive any payments to be made to it hereunder without the
withholding of any tax and will furnish to Administrative Agent such forms,
certifications, statements and other documents as Administrative Agent or
Borrower may request from time to time to evidence such Bank's exemption from
the withholding of any tax imposed by any jurisdiction or to enable
Administrative Agent to comply with any applicable Laws or regulations relating
thereto. Without limiting the effect of the foregoing, if any Bank is not
created or organized under the laws of the United States of America or any state
thereof, such Bank will furnish to
41
<PAGE>
Administrative Agent Form 4224 or Form 1001 of the Internal Revenue Service, or
such other forms, certifications, statements or documents, duly executed and
completed by such Bank as evidence of such Bank's exemption from the withholding
of U.S. tax with respect thereto. Administrative Agent shall not be obligated to
make any payments hereunder to such Bank in respect of any Loan or participation
or such Bank's Loan Commitment or obligation to purchase participations until
such Bank shall have furnished to Administrative Agent the requested form,
certification, statement or document.
Section 10.14 Minimum Commitment by Fleet and PNC. Subsequent to the
Closing Date, each of Fleet and PNC agree to maintain a Loan Commitment in an
amount no less than Twenty Five Million Dollars ($25,000,000), provided there
exists no Event of Default, and each of them further agrees to hold and not to
participate or assign any of such amount other than an assignment to a Federal
Reserve Bank or to their respective Parent or respective majority-owned
subsidiary.
Section 10.15 Pro Rata Treatment. Except to the extent otherwise
provided, (1) each advance of proceeds of the Loans shall be made by the Banks,
(2) each reduction of the amount of the Total Loan Commitment under Section 2.10
or Section 2.11 shall be applied to the Loan Commitments of the Banks, and (3)
each payment of the facility fee accruing under Section 2.08(a) shall be made
for the account of the Banks, ratably according to the amounts of their
respective Loan Commitments.
Section 10.16 Sharing of Payments Among Banks. If a Bank shall
obtain payment of any principal of or interest on any Loan made by it through
the exercise of any right of setoff, banker's lien, counterclaim, or by any
other means (including direct payment), and such payment results in such Bank
receiving a greater payment than it would have been entitled to had such payment
been paid directly to Administrative Agent for disbursement to the Banks, then
such Bank shall promptly purchase for cash from the other Banks participations
in the Loans made by the other Banks in such amounts, and make such other
adjustments from time to time as shall be equitable to the end that all the
Banks shall share ratably the benefit of such payment. To such end the Banks
shall make appropriate adjustments among themselves (by the resale of
participations sold or otherwise) if such payment is rescinded or must otherwise
be restored. Borrower agrees that any Bank so purchasing a participation in the
Loans made by other Banks may exercise all rights of setoff, banker's lien,
counterclaim or similar rights with respect to such participation. Nothing
contained herein shall require any Bank to exercise any such right or shall
affect the right of any Bank to exercise, and retain the benefits of exercising,
any such right with respect to any other indebtedness of Borrower.
Section 10.17 Possession of Documents. Each Bank shall keep
possession of its own Note. Administrative Agent shall hold all the other Loan
Documents and related documents in its possession and maintain separate records
and accounts with respect thereto, and shall permit the Banks and their
representatives access at all reasonable times to inspect such Loan Documents,
related documents, records and accounts.
42
<PAGE>
ARTICLE XI. NATURE OF OBLIGATIONS
Section 11.01 Absolute and Unconditional Obligations. Borrower
acknowledges and agrees that its obligations and liabilities under this
Agreement and under the other Loan Documents shall be absolute and unconditional
irrespective of: (1) any lack of validity or enforceability of any of the
Obligations, any Loan Documents, or any agreement or instrument relating
thereto; (2) any change in the time, manner or place of payment of, or in any
other term in respect of, all or any of the Obligations, or any other amendment
or waiver of or consent to any departure from any Loan Documents or any other
documents or instruments executed in connection with or related to the
Obligations; (3) any exchange or release of any collateral, or of any other
Person from all or any of the Obligations; or (4) any other circumstances which
might otherwise constitute a defense available to, or a discharge of, Borrower
or any other Person in respect of the Obligations.
The obligations and liabilities of Borrower under this Agreement and
other Loan Documents shall not be conditioned or contingent upon the pursuit by
any Bank or any other Person at any time of any right or remedy against Borrower
or any other Person which may be or become liable in respect of all or any part
of the Obligations or against any collateral or security or guarantee therefor
or right of setoff with respect thereto.
Section 11.02 Non-Recourse to TRG Partners. Notwithstanding anything
to the contrary contained in this Agreement, in any of the other Loan Documents,
or in any other instruments, certificates, documents or agreements executed in
connection with the Loans (all of the foregoing, for purposes of this Section,
hereinafter referred to, individually and collectively, as the "Relevant
Documents"), no recourse under or upon any Obligation, representation, warranty,
promise or other matter whatsoever shall be had against any of the constituent
partners of Borrower or their successors or assigns (said constituent partners
and their successors and assigns, for purposes of this Section, hereinafter
referred to, individually and collectively, as the "TRG Partners") and each Bank
expressly waives and releases, on behalf of itself and its successors and
assigns, all right to assert any liability whatsoever under or with respect to
the Relevant Documents against, or to satisfy any claim or obligation arising
thereunder against, any of the TRG Partners or out of any assets of the TRG
Partners, provided, however, that nothing in this Section shall be deemed to:
(1) release Borrower from any personal liability pursuant to, or from any of its
respective obligations under, the Relevant Documents, or from personal liability
for its fraudulent actions or fraudulent omissions; (2) release any TRG Partner
from personal liability for its or his own fraudulent actions or fraudulent
omissions; (3) constitute a waiver of any obligation evidenced or secured by, or
contained in, the Relevant Documents or affect in any way the validity or
enforceability of the Relevant Documents; or (4) limit the right of
Administrative Agent and/or the Banks to proceed against or realize upon any
collateral hereafter given for the Loans or any and all of the assets of
Borrower (notwithstanding the fact that the TRG Partners have an ownership
interest in Borrower and, thereby, an interest in the assets of Borrower) or to
name Borrower (or, to the extent that the same are required by applicable law or
are determined by a court to be necessary parties in connection with an action
or suit against Borrower or any collateral hereafter given for the Loans, any of
the TRG Partners) as a party defendant in, and to enforce against any collateral
hereafter given for the Loans and/or assets of Borrower any judgment obtained by
Administrative Agent and/or the Banks with respect to, any action or suit under
the Relevant Documents so long as no judgment shall be taken (except to the
extent taking a judgment is required by applicable law or determined by a court
to be necessary
43
<PAGE>
to preserve Administrative Agent's and/or Banks' rights against any collateral
hereafter given for the Loans or Borrower, but not otherwise) or shall be
enforced against the TRG Partners, their successors and assigns, or their
assets.
ARTICLE XII. MISCELLANEOUS
Section 12.01 Binding Effect of Request for Advance. Borrower agrees
that, by its acceptance of any advance of proceeds of the Loans under this
Agreement, it shall be bound in all respects by the request for advance
submitted on its behalf in connection therewith with the same force and effect
as if Borrower had itself executed and submitted the request for advance and
whether or not the request for advance is executed and/or submitted by an
authorized person.
Section 12.02 Amendments and Waivers. No amendment or material
waiver of any provision of this Agreement or any other Loan Document nor consent
to any material departure by Borrower therefrom, shall in any event be effective
unless the same shall be in writing and signed by the Required Banks and, solely
for purposes of its acknowledgment thereof, Administrative Agent, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given, provided, however, that no amendment, waiver
or consent shall, unless in writing and signed by all the Banks do any of the
following: (1) reduce the principal of, or interest on, the Notes or any fees
due hereunder or any other amount due hereunder or under any Loan Document; (2)
postpone any date fixed for any payment of principal of, or interest on, the
Notes or any fees due hereunder or under any Loan Document, or waive any default
in the payment of principal, interest or any other amount due hereunder or under
any Loan Documents; (3) change the definition of Required Banks; (4) amend this
Section or any other provision requiring the consent of all the Banks or of the
Required Banks; (5) waive any default under paragraph (5) of Section 9.01; (6)
increase the Loan Commitment of any Bank; or (7) amend Section 10.15 or Section
10.16. Any advance of proceeds of the Loans made prior to or without the
fulfillment by Borrower of all of the conditions precedent thereto, whether or
not known to Administrative Agent and the Banks, shall not constitute a waiver
of the requirement that all conditions, including the non-performed conditions,
shall be required with respect to all future advances. No failure on the part of
Administrative Agent or any Bank to exercise, and no delay in exercising, any
right hereunder shall operate as a waiver thereof or preclude any other or
further exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
Section 12.03 Usury. Anything herein to the contrary
notwithstanding, the obligations of Borrower under this Agreement and the Notes
shall be subject to the limitation that payments of interest shall not be
required to the extent that receipt thereof would be contrary to provisions of
law applicable to a Bank limiting rates of interest which may be charged or
collected by such Bank.
Section 12.04 Expenses; Indemnification. Borrower agrees to
reimburse Administrative Agent on demand for all costs, expenses, and charges
(including, without limitation, all reasonable fees and charges of engineers,
appraisers and external legal counsel) incurred by Administrative Agent in
connection with the Loans and to reimburse each of the Banks for reasonable
legal costs, expenses and charges incurred by each of the Banks in
44
<PAGE>
connection with the performance or enforcement of this Agreement, the Notes, or
any other Loan Documents; provided, however, that Borrower is not responsible
for costs, expenses and charges incurred by the Bank Parties in connection with
the administration or syndication of the Loans (other than the syndication
expenses and administration fee required by the Supplemental Fee Letter).
Borrower agrees to indemnify Administrative Agent and each Bank and their
respective directors, officers, employees and agents from, and hold each of them
harmless against, any and all losses, liabilities, claims, damages or expenses
incurred by any of them arising out of or by reason of (x) any claims by brokers
due to acts or omissions by Borrower, or (y) any investigation or litigation or
other proceedings (including any threatened investigation or litigation or other
proceedings) relating to any actual or proposed use by Borrower of the proceeds
of the Loans, including without limitation, the reasonable fees and
disbursements of counsel incurred in connection with any such investigation or
litigation or other proceedings (but excluding any such losses, liabilities,
claims, damages or expenses incurred by reason of the gross negligence or
willful misconduct of the Person to be indemnified).
The obligations of Borrower under this Section shall survive the
repayment of all amounts due under or in connection with any of the Loan
Documents and the termination of the Loans.
Section 12.05 Assignment; Participation. This Agreement shall be
binding upon, and shall inure to the benefit of, Borrower, Administrative Agent,
the Banks and their respective successors and permitted assigns. Borrower may
not assign or transfer its rights or obligations hereunder.
Subject to the provisions of Section 10.14, any Bank may at any time
grant to one or more banks or other institutions (each a "Participant")
participating interests in its Loan (each a "Participation") subject to the
consent of Fleet and PNC, which consents shall not be unreasonably withheld or
delayed, and provided that any such Participation shall be in the minimum amount
of Ten Million Dollars ($10,000,000). In the event of any such grant by a Bank
of a Participation to a Participant, whether or not Borrower or Administrative
Agent was given notice, such Bank shall remain responsible for the performance
of its obligations hereunder, and Borrower and Administrative Agent shall
continue to deal solely and directly with such Bank in connection with such
Bank's rights and obligations hereunder. Any agreement pursuant to which any
Bank may grant a Participation shall provide that such Bank shall retain the
sole right and responsibility to enforce the obligations of Borrower hereunder
and under any other Loan Document including, without limitation, the right to
approve any amendment, modification or waiver of any provision of this Agreement
or any other Loan Document; provided that such participation agreement may
provide that such Bank will not agree to any modification, amendment or waiver
of this Agreement described in Section 12.02 without the consent of the
Participant.
Subject to the provisions of Section 10.14, any Bank having a Loan
Commitment in an amount equal to or exceeding Fifteen Million Dollars
($15,000,000) may at any time assign to any bank or other institution, with the
acknowledgment of Administrative Agent and the consent of Fleet, PNC and,
provided there exists no Event of Default, of Borrower, which consents shall not
be unreasonably withheld or delayed (such assignee, a "Consented Assignee"), or
to one or more banks or other institutions which are majority owned subsidiaries
of a Bank or to the Parent of a Bank (each Consented Assignee or subsidiary bank
or institution, an
45
<PAGE>
"Assignee") all, or a proportionate part of all, of its rights and obligations
under this Agreement and its Note, and such Assignee shall assume rights and
obligations, pursuant to an Assignment and Assumption Agreement executed by such
Assignee and the assigning Bank, provided that, in each case, after giving
effect to such assignment, the Assignee's Loan Commitment, and, in the case of a
partial assignment, the assigning Bank's Loan Commitment, each will be equal to
or greater than Five Million Dollars ($5,000,000). Upon (i) execution and
delivery of such instrument, (ii) payment by such Assignee to the Bank of an
amount equal to the purchase price agreed between the Bank and such Assignee and
(iii) payment by such Assignee to Administrative Agent of a fee, for
Administrative Agent's own account, in the amount of $2,500, on account of
Administrative Agent's fees and expenses in connection with such assignment,
such Assignee shall be a Bank Party to this Agreement and shall have all the
rights and obligations of a Bank as set forth in such Assignment and Assumption
Agreement, and the assigning Bank shall be released from its obligations
hereunder to a corresponding extent, and no further consent or action by any
party shall be required. Upon the consummation of any assignment pursuant to
this paragraph, substitute Notes shall be issued to the assigning Bank and
Assignee by Borrower, in exchange for the return of the original Note. The
obligations evidenced by such substitute notes shall constitute "Obligations"
for all purposes of this Agreement and the other Loan Documents. If the Assignee
is not incorporated under the laws of the United States of America or a state
thereof, it shall, prior to the first date on which interest or fees are payable
hereunder for its account, deliver to Borrower and Administrative Agent
certification as to exemption from deduction or withholding of any United States
federal income taxes in accordance with Section 10.13.
Any Bank may at any time assign all or any portion of its rights
under this Agreement and its Note to a Federal Reserve Bank. No such assignment
shall release the transferor Bank from its obligations hereunder.
Borrower recognizes that in connection with a Bank's selling of
Participations or making of assignments, any or all documentation, financial
statements, appraisals and other data, or copies thereof, relevant to Borrower
or the Loans may be exhibited to and retained by any such Participant or
assignee or prospective Participant or assignee. In addition, such documentation
etc. may be exhibited to and retained by Affiliates of a Bank. In connection
with a Bank's delivery of any financial statements and appraisals to any such
Participant or assignee or prospective Participant or assignee, such Bank shall
also deliver its standard confidentiality statement indicating that the same are
delivered on a confidential basis. Borrower agrees to provide all assistance
reasonably requested by a Bank to enable such Bank to sell Participations or
make assignments of its Loan as permitted by this Section. Each Bank agrees to
provide Borrower with notice of all Participations sold by such Bank.
Notwithstanding the foregoing provisions of this Section, no Bank
shall assign, grant, convey, or transfer all or any portion of or interest
(participation or otherwise) in the Loan to any Person if such Person is (i) a
greater than 10% partner (determined in accordance with Treasury Regulations
Section 1.752-2(d)(1) of the Code) of Borrower (a "Greater than 10% Partner"),
(ii) an 80% or greater partner, member or shareholder of any Greater than 10%
Partner or (iii) a person who is under 80% or greater common ownership with (x)
a Greater than 10% Partner or (y) a shareholder, member or partner of any
Greater than 10% Partner. For purposes of clauses (ii) and (iii), percentage
ownership shall be determined pursuant to Sections 267(b) and 707(b) of the Code
as modified by Treasury Regulations Section 1.752-4. Any Person
46
<PAGE>
described above is referred to as a "Disqualified Person". Any Person who
becomes a Bank or Participant in accordance with the terms of this Agreement
agrees to be bound by the provisions of this Section and, other than obtaining,
in connection with a bankruptcy proceeding of a constituent partner of Borrower,
any interest as (a) a partner in Borrower or (b) an 80% or greater interest as a
partner, member or shareholder of any partner of Borrower, agrees not to take
any action that would make it a Disqualified Person. In addition, any Bank or
Participant shall be a "qualified person" within the meaning of Section
465(b)(6)(D)(i) and 49(a)(1)(D)(iv) of the Code.
Section 12.06 Documentation Satisfactory. All documentation required
from or to be submitted on behalf of Borrower in connection with this Agreement
and the documents relating hereto shall be subject to the prior approval of, and
be satisfactory in form and substance to, Administrative Agent, its counsel and,
where specifically provided herein, the Banks. In addition, the persons or
parties responsible for the execution and delivery of, and signatories to, all
of such documentation, shall be acceptable to, and subject to the approval of,
Administrative Agent and its counsel and the Banks.
Section 12.07 Notices. Unless the party to be notified otherwise
notifies the other party in writing as provided in this Section, and except as
otherwise provided in this Agreement, notices shall be given to Administrative
Agent by telephone, confirmed by writing, and to the Banks and to Borrower by
ordinary mail or overnight courier addressed to such party at its address on the
signature page of this Agreement. Notices shall be effective: (1) if by
telephone, at the time of such telephone conversation, (2) if given by mail,
three (3) days after mailing; and (3) if given by overnight courier, upon
receipt.
Section 12.08 Intentionally Omitted.
Section 12.09 Table of Contents; Headings. Any table of contents and
the headings and captions hereunder are for convenience only and shall not
affect the interpretation or construction of this Agreement.
Section 12.10 Severability. The provisions of this Agreement are
intended to be severable. If for any reason any provision of this Agreement
shall be held invalid or unenforceable in whole or in part in any jurisdiction,
such provision shall, as to such jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without in any manner affecting the validity
or enforceability thereof in any other jurisdiction or the remaining provisions
hereof in any jurisdiction.
Section 12.11 Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument, and any party hereto may execute this Agreement by signing any
such counterpart.
Section 12.12 Integration. The Loan Documents and Supplemental Fee
Letter set forth the entire agreement among the parties hereto relating to the
transactions contemplated thereby and supersede any prior oral or written
statements or agreements with respect to such transactions.
47
<PAGE>
Section 12.13 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY,
AND INTERPRETED AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.
Section 12.14 Waivers. In connection with the obligations and
liabilities as aforesaid, Borrower hereby waives: (1) promptness and diligence;
(2) notice of any actions taken by any Bank Party under this Agreement, any
other Loan Document or any other agreement or instrument relating thereto except
to the extent otherwise provided herein; (3) all other notices, demands and
protests, and all other formalities of every kind in connection with the
enforcement of the Obligations, the omission of or delay in which, but for the
provisions of this Section, might constitute grounds for relieving Borrower of
its obligations hereunder; (4) any requirement that any Bank Party protect,
secure, perfect or insure any Lien on any collateral or exhaust any right or
take any action against Borrower or any other Person or any collateral; (5) any
right or claim of right to cause a marshalling of the assets of Borrower; and
(6) all rights of subrogation or contribution, whether arising by contract or
operation of law (including, without limitation, any such right arising under
the Federal Bankruptcy Code) or otherwise by reason of payment by Borrower,
either jointly or severally, pursuant to this Agreement or other Loan Documents.
Section 12.15 JURISDICTION; IMMUNITIES. BORROWER, THE ADMINISTRATIVE
AGENT AND EACH BANK HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY NEW
YORK STATE OR UNITED STATES FEDERAL COURT SITTING IN NEW YORK CITY OVER ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE NOTES OR
ANY OTHER LOAN DOCUMENT. BORROWER, THE ADMINSTRATIVE AGENT, AND EACH BANK
IRREVOCABLY AGREE THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE
HEARD AND DETERMINED IN SUCH NEW YORK STATE OR UNITED STATES FEDERAL COURT.
BORROWER, THE ADMINISTRATIVE AGENT, AND EACH BANK IRREVOCABLY CONSENT TO THE
SERVICE OF ANY AND ALL PROCESS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING
OF COPIES OF SUCH PROCESS TO BORROWER, THE ADMINISTRATIVE AGENT OR EACH BANK, AS
THE CASE MAY BE, AT THE ADDRESSES SPECIFIED HEREIN. BORROWER, THE ADMINISTRATIVE
AGENT AND EACH BANK FURTHER WAIVE ANY OBJECTION TO VENUE IN THE STATE OF NEW
YORK AND ANY OBJECTION TO AN ACTION OR PROCEEDING IN THE STATE OF NEW YORK ON
THE BASIS OF FORUM NON CONVENIENS. BORROWER, THE ADMINISTRATIVE AGENT AND EACH
BANK AGREE THAT ANY ACTION OR PROCEEDING BROUGHT AGAINST BORROWER, THE
ADMINISTRATIVE AGENT OR ANY BANK, AS THE CASE MAY BE, SHALL BE BROUGHT ONLY IN A
NEW YORK STATE COURT SITTING IN NEW YORK CITY OR A UNITED STATES FEDERAL COURT
SITTING IN NEW YORK CITY.
Nothing in this Section shall affect the right of Borrower,
Administrative Agent or any Bank to serve legal process in any other manner
permitted by law.
To the extent that Borrower, Administrative Agent or any Bank have
or hereafter may acquire any immunity from jurisdiction of any court or from any
legal process (whether from service or notice, attachment prior to judgment,
attachment in aid of execution, execution or otherwise) with respect to itself
or its property, Borrower, Administrative Agent and each
48
<PAGE>
Bank hereby irrevocably waive such immunity in respect of its obligations under
this Agreement, the Notes and any other Loan Document.
BORROWER, ADMINISTRATIVE AGENT AND EACH BANK WAIVE ANY RIGHT EACH
SUCH PARTY MAY HAVE TO JURY TRIAL IN CONNECTION WITH ANY SUIT, ACTION OR
PROCEEDING BROUGHT WITH RESPECT TO THIS AGREEMENT, THE NOTES OR THE LOANS. IN
ADDITION, BORROWER HEREBY WAIVES, IN CONNECTION WITH ANY SUIT, ACTION OR
PROCEEDING BROUGHT BY ADMINISTRATIVE AGENT OR THE BANKS WITH RESPECT TO THE
NOTES, ANY RIGHT BORROWER MAY HAVE TO (1) INTERPOSE ANY COUNTERCLAIM THEREIN
(OTHER THAN A COUNTERCLAIM THAT IF NOT BROUGHT IN THE SUIT, ACTION OR PROCEEDING
BROUGHT BY ADMINISTRATIVE AGENT OR THE BANKS COULD NOT BE BROUGHT IN A SEPARATE
SUIT, ACTION OR PROCEEDING OR WOULD BE SUBJECT TO DISMISSAL OR SIMILAR
DISPOSITION FOR FAILURE TO HAVE BEEN ASSERTED IN SUCH SUIT, ACTION OR PROCEEDING
BROUGHT BY ADMINISTRATIVE AGENT OR THE BANKS) OR (2) HAVE THE SAME CONSOLIDATED
WITH ANY OTHER OR SEPARATE SUIT, ACTION OR PROCEEDING. NOTHING HEREIN CONTAINED
SHALL PREVENT OR PROHIBIT BORROWER FROM INSTITUTING OR MAINTAINING A SEPARATE
ACTION AGAINST ADMINISTRATIVE AGENT OR THE BANKS WITH RESPECT TO ANY ASSERTED
CLAIM.
49
<PAGE>
IN WITNESS WHEREOF, the parties hereto, intending to be legally
bound, have caused this Agreement to be duly executed as of the day and year
first above written.
THE TAUBMAN REALTY GROUP LIMITED
PARTNERSHIP, a Delaware
limited partnership
By: /s/ Shire Rothbart
-----------------------------
Shire Rothbart,
its authorized signatory
Address for Notices:
c/o The Taubman Company
Limited Partnership
200 East Long Lake Road - Suite 300
Bloomfield Hills, Michigan 48304
Attention: Mr. Shire Rothbart
with copy to:
Miro Weiner & Kramer
500 North Woodward Avenue
Suite 100 - P.O. Box 908
Bloomfield Hills, Michigan 48303-0908
Attention: Martin L. Katz, Esq.
50
<PAGE>
PNC BANK, NATIONAL ASSOCIATION
(as Bank and Administrative Agent)
By: /s/ Dina S. Muth
-------------------------------
Name: Dina S. Muth
Title: Real Estate Officer
Address for notices and Applicable
Lending Office:
One PNC Plaza
249 Fifth Avenue
P1-POPP-19-2
Pittsburgh, Pennsylvania 15222
Attention: Ms. Dina Muth
Telephone: (412) 762-9118
Telecopy: (412) 762-6500
with copy to:
One PNC Plaza
249 Fifth Avenue
P1-POPP-03-2
Pittsburgh, Pennsylvania 15222
Attention: Ms. Arlene Ohler
Telephone: (412) 762-3627
Telecopy: (412) 762-8672
FLEET NATIONAL BANK
By: /s/ Margaret A. Mulcahy
----------------------------
Name: Margaret A. Mulcahy
Title: Senior Vice President
Address for notices and Applicable
Lending Office:
75 State Street
MA BOF 11-C
Boston, Massachusetts 02109
Attention: Ms. Margaret Mulcahy
Telephone: (617) 346-4291
Telecopy: (617) 346-3220
51
<PAGE>
DRESDNER BANK AG, New York and
Grand Cayman Branches
By /s/ Brigitte Sacin
-----------------------------
Name: Brigitte Sacin
Title: Assistant Treasurer
By /s/ Beverly G. Cason
------------------------------
Name: Beverly G. Cason
Title: Vice President
Address for notices and Applicable
Lending Office:
Dresdner Bank AG, New York and
Grand Cayman Branches
190 South LaSalle Street, Suite 2700
Chicago, Illinois 60603
Attention: Ms. Maureen M. Slentz
Telephone: (312) 444-1316
Telecopy: (312) 444-1301 or 1305
COMMERZBANK AG, Chicago Branch
By /s/ Douglas P. Traynor
-----------------------------
Name: Douglas P. Traynor
Title: Vice President
By /s/ E. Marcus Perry
-----------------------------
Name: E. Marcus Perry
Title: Assistant Treasurer
Address for notices and Applicable
Lending Office:
Commerzbank AG, Chicago Branch
c/o Commerzbank AG, New York Branch
2 World Financial Center
New York, New York 10281-1050
Attention: Mr. Douglas P. Traynor
Telephone: (212) 266-7569
Telecopy: (212) 266-7530
52
<PAGE>
KEY BANK NATIONAL ASSOCIATION
By
----------------------------------
Name:
Title:
Address for notices and Applicable
Lending Office:
Key Bank National Association
Commercial Real Estate Division
127 Public Square, 6th Floor
Cleveland, Ohio 44114-1306
Attention: Ms. Mary Ellen Fowler
Telephone: (216) 689-4975
Telecopy: (216) 689-4997
BAYERISCHE HYPOTHEKEN- UND
WECHSEL-BANK AKTIENGESELLSCHAFT
(New York Branch)
By /s/ Stephen G. Melidones
---------------------------------
Name: Stephen G. Melidones
Title: Assistant Vice President
By /s/ Eva Lam
----------------------------------
Name: Eva Lam
Title: Assistant Treasurer
Address for notices and Applicable
Lending Office:
Bayerische Hypotheken- Und
Wechsel-Bank Aktiengesellschaft
(New York Branch)
Financial Square
32 Old Slip
New York, New York 10005
Attention: Mr. Stephen G. Melidones
Telephone: (212) 440-0844
Telecopy: (212) 440-0824
53
<PAGE>
COMERICA BANK
By /s/ Kristine L. Andersen
-------------------------------
Name: Kristine L. Andersen
Title: Account Officer
Address for notices and Applicable
Lending Office:
Comerica Bank
U.S. Banking-East
Comerica Tower at Detroit Center
500 Woodward Avenue
Detroit, Michigan 48226
Attention: Ms. Kristine L. Andersen
Telephone: (313) 222-3648
Telecopy: (313) 222-3330
LANDESBANK HESSEN-THURINGEN
GIROZENTRALE, New York Branch
By /s/ Robert W. Becker
----------------------------------
Name: Robert W. Becker
Title: Vice President
By /s/ Michael A. Pierro
-----------------------------------
Name: Michael A. Pierro
Title: Assistant Vice President
Address for notices and Applicable
Lending Office:
Landesbank Hessen-Thuringen
Girozentrale, New York Branch
420 Fifth Avenue, 24th Floor
New York, New York 10018-2729
Attention: Mr. Michael Pierro
Telephone: (212) 703-5209
Telecopy: (212) 703-5296
54
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
1992 INCENTIVE OPTION PLAN
--------------------------
(As Amended and Restated Effective as of September 30, 1997)
Article 1
Background, Amendment and Restatement, and Term.
1.1 Background. THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP, a Delaware
limited partnership (including any successor thereto, "TRG") was formed for the
purposes of, among other things, owning, operating, acquiring, developing,
redeveloping, expanding, leasing, managing, financing and refinancing, disposing
of, and generally dealing with, regional retail shopping centers and
opportunities to develop regional retail shopping centers (and interests
therein). TRG has engaged the Manager, on an exclusive basis, to provide various
services, including management, leasing, development, acquisition, and
administrative services, to TRG.
1.2 Original Plan. TRG adopted The Taubman Realty Group Limited Partnership
1992 Incentive Option Plan (the "Original Plan") effective as of November 20,
1992, to provide incentives to employees of the Manager to remain in the employ
of the Manager for the benefit of TRG, to encourage proprietary interest in TRG,
and to attract new employees with outstanding qualifications to serve the
Manager on behalf of TRG.
1.3 Amended and Restated Plan. The Original Plan is hereby amended and
restated effective as of September 30, 1997 and is referred to hereinafter as
the "Plan".
1.4 Term. The Plan will remain in effect until terminated or abandoned by
action of the Partnership Committee in accordance with the Partnership
Agreement.
Article 2
Definitions
In the Plan, whenever the context so indicates, the singular or plural
number, and the masculine, feminine or neuter gender shall each be deemed to
include the other, the terms "he," "his," and "him" shall refer to an Optionee,
and the capitalized terms shall have the following meanings:
2.1 "Articles of Incorporation" means the Amended and Restated Articles of
Incorporation of the Company, as the same may be amended from time to time.
2.2 "Beneficiary" means (i) an individual, trust, estate, or Family Trust
who or which, by will or by operation of the laws of descent and distribution,
succeeds to the rights and obligations of an Optionee under the Plan and the
Option Agreement upon the Optionee's death; or (ii) an individual who, as a
result of designation by an Optionee, succeeds to the
<PAGE>
rights and obligations of such Optionee under the Plan and the Option Agreement
upon such Optionee's death.
2.3 "Board of Directors" means the Board of Directors of the Company.
2.4 "Business Day" means any Day on which the New York Stock Exchange is
open for trading.
2.5 "Code" means the Internal Revenue Code of 1986, as amended from time to
time (or any corresponding provisions of succeeding law).
2.6 "Common Stock" means the common stock of the Company, par value $.01
per share.
2.7 "Company" means Taubman Centers, Inc., a Michigan corporation.
2.8 "Compensation Committee" means the Compensation Committee established
for TRG pursuant to the Partnership Agreement.
2.9 "Continuing Offer" means the Continuing Offer, as amended and restated
effective as of September 30, 1997, by the Company to certain holders of Units
of Partnership Interest and Incentive Options to exchange, subject to certain
restrictions, Units of Partnership Interest (or the right, without condition, to
receive Units of Partnership Interest pursuant to the Plan) for shares of Common
Stock.
2.10 "Date of Exercise", means with respect to an Incentive Option, the
Business Day immediately preceding the date on which such Incentive Option is
exercised pursuant to the Plan.
2.11 "Date of Grant", means with respect to an Incentive Option, the
Business Day immediately preceding the date on which the Compensation Committee
grants such Incentive Option pursuant to the Plan.
2.12 "Day" means each calendar day, including Saturdays, Sundays, and legal
holidays; provided, however, that if the Day on which a period of time for
consent or approval or other action ends is not a Business Day, such period
shall end on the next Business Day.
2.13 "Disability" or "Disabled" means, with respect to an Employee, a
physical or mental condition resulting from any medically determinable physical
or mental impairment that renders such Employee incapable of engaging in any
substantial gainful employment and that can be expected to result in death or
that has lasted or can be expected to last for a continuous period of not less
than three hundred sixty-five (365) Days. Notwithstanding the foregoing, an
Employee shall not be deemed to be Disabled as a result of any condition that:
(a) was contracted, suffered, or incurred while such Employee was
engaged in, or resulted from such Employee having engaged in, a felonious
activity;
- 2 -
<PAGE>
(b) resulted from an intentionally self-inflicted injury or an
addiction to drugs, alcohol, or substances which are not administered under
the direction of a licensed physician as part of a medical treatment plan;
or
(c) resulted from service in the Armed Forces of the United
States for which such Employee received a disability benefit or pension
from the United States, or from service in the armed forces of any other
country irrespective of any disability benefit or pension.
The Disability of an Employee and the date upon which an Employee ceases to
be employed by reason of Disability shall be determined by the Compensation
Committee, upon the recommendation from the Manager, in accordance with uniform
principles consistently applied, upon the basis of such evidence as the
Compensation Committee and the Manager deem necessary and desirable, and its
good faith determination shall be conclusive for all purposes of this Plan and
the relevant Option Agreement. The Compensation Committee or the Manager shall
have the right to require an Employee to submit to an examination by a physician
or physicians and to submit to such reexaminations as the Compensation Committee
or the Manager shall require in order to make a determination concerning the
Employee's physical or mental condition; provided, however, that (i) an Employee
may not be required to undergo a medical examination more often than once each
one hundred eighty (180) Days nor at any time after the normal date of the
Employee's Retirement, and (ii) the fees and expenses of any such medical
examination(s) shall be considered expenses of administering the Plan. If any
Employee engages in any occupation or employment (except for rehabilitation as
determined by the Compensation Committee, upon the recommendation from the
Manager) for remuneration or profit, which activity would be inconsistent with
the finding of Disability, or if the Compensation Committee, upon the
recommendation from the Manager, determines on the basis of a medical
examination that an Employee no longer has a Disability, or if an Employee
refuses to submit to any medical examination properly requested by the
Compensation Committee or the Manager, then in any such event, the Employee
shall be deemed to have recovered from such Disability.
2.14 "Effective Date" means September 30, 1997. The effective date of the
Original Plan was November 20, 1992.
2.15 "Employee" means an individual who is and continues to be employed
(within the meaning of Section 3401 of the Code and the regulations promulgated
thereunder) by the Manager or a Manager Entity. An Employee shall cease to be an
Employee upon the voluntary or involuntary termination of his employment with
the Manager or a Manager Entity (as such terms are defined in Sections 2.26 and
2.27 hereof) for any reason, including death, Disability, Retirement, or with or
without cause. Transfers of employment between the Manager and a Manager Entity,
or between Manager Entities, shall not affect an individual's status as an
Employee for purposes of the Plan and shall not be treated as a cessation of
employment provided that the cessation of employment with the Manager or a
Manager Entity is immediately followed by employment with the Manager or another
Manager Entity. Whether an authorized leave of absence, or an absence due to
military or government service, Disability, or any other reason, constitutes a
cessation of employment shall be determined by the Compensation Committee, upon
the recommendation from the Manager.
- 3 -
<PAGE>
2.16 "Exercise Price", means with respect to an Incentive Option, the price
at which an Optionee may exercise his Incentive Option to acquire one or more
Units of Partnership Interest which are the subject of such Optionee's Incentive
Option, and in accordance with the following provisions:
(a) Incentive Options Granted prior to or at the time of the
Initial Public Offering: The Exercise Price shall be equal
to $11.139 for each Unit of Partnership Interest subject to
an Incentive Option granted prior to or at the time of the
Initial Public Offering.
(b) Incentive Option Granted After November 20, 1992 but prior
to September 30, 1997: The Exercise Price shall be equal to
the Fair Market Value of each Unit of Partnership Interest
(as defined in the Original Plan) determined as of the Date
of Grant, divided by 1975.08 (rounding the quotient up to
the nearest 1/10th cent) for each Unit of Partnership
Interest subject to an Incentive Option granted on any date
after November 20, 1992 but prior to September 30, 1997.
(c) Incentive Options Granted on or after September 30, 1997:
The Exercise Price shall be equal to the Fair Market Value
of each Unit of Partnership Interest (as defined in Section
2.18) determined as of the Date of Grant, for each Unit of
Partnership Interest subject to an Incentive Option granted
on any date on or after September 30, 1997.
2.17 "Fair Market Value of the Common Stock" means the per share value of
the Common Stock on the Valuation Date, and is determined as follows:
(a) If the Common Stock is listed or admitted for trading on any
national securities exchange, the Fair Market Value of the Common Stock is
the closing price per share on such exchange on such Valuation Date (or, if
listed on more than one exchange, the principal said exchange).
(b) If the Common Stock is not traded on any national securities
exchange, but is quoted on the National Association of Securities Dealers,
Inc. Automated Quotation System (NASDAQ System) or any similar system of
automated dissemination of quotations of prices in common use, the Fair
Market Value of the Common Stock is the price per share equal to the mean
between the closing high bid and the closing low bid on such system on such
Valuation Date.
(c) If neither paragraph (a) nor paragraph (b) of this definition
is applicable, the Fair Market Value of the Common Stock is the fair market
value per share, on such Valuation Date, as determined by the Board of
Directors (or by the Partnership Committee if the Board of Directors does
not, for any reason, provide such determination), in good faith and in
accordance with uniform principles consistently applied.
- 4 -
<PAGE>
2.18 "Fair Market Value of each Unit of Partnership Interest" means, with
respect to an Incentive Option, the value of a Unit of Partnership Interest that
is the subject of an Incentive Option granted on or after September 30, 1997 and
is equal to the Fair Market Value of the Common Stock.
2.19 "Family Trust" means, with respect to an Optionee, a trust for the
benefit of such Optionee or for the benefit of any member or members of such
Optionee's Immediate Family, or for the benefit of such Optionee and any member
or members of such Optionee's Immediate Family (for the purpose of determining
whether or not a trust is a Family Trust, the fact that one or more of the
beneficiaries (but not the sole beneficiary) of the trust includes a Person or
Persons, other than a member of such Optionee's Immediate Family, entitled to a
distribution after the death of the settlor if he, she, it, or they shall have
survived the settlor of such trust, which distribution is to be made of
something other than a Partnership Interest and/or includes an organization or
organizations exempt from federal income taxes pursuant to the provisions of
Section 501(a) of the Code and described in Section 501(c)(3) of the Code, shall
be disregarded); provided, however, that a trust will be a "Family Trust"
hereunder only if the trustee or trustees of such Family Trust shall be solely
such Optionee, a member or members of such Optionee's Immediate Family, a
responsible financial institution and/or an attorney who is a member of the Bar
of any State in the United States and/or an individual or individuals approved
by the Partnership Committee.
2.20 "Fractional Unit" means less than one Unit of Partnership Interest.
2.21 "Immediate Family" means, with respect to an Optionee, (i) such
Optionee's spouse (former or then current), (ii) such Optionee's parents and
grandparents, and (iii) ascendants and descendants (natural or adoptive, of the
whole or half blood) of such Optionee's parents or of the parents of such
Optionee's spouse (former or then current).
2.22 "Impermissible Holder" is defined in Section 7.17 hereof.
2.23 "Incentive Option" means an option granted pursuant to the Plan to
acquire one (1) or more Units of Partnership Interest, general and/or limited.
2.24 "Incumbent Board" is defined in Section hereof.
2.25 "Initial Public Offering" or "IPO" means the initial public offering
of shares of Common Stock pursuant to the Company's first effective registration
statement for the sale to the public of such Common Stock filed under the
Securities Act of 1933, as amended.
2.26 "Manager" means TTC, or such other Person who has by written contract
with TRG agreed to provide management, administration, leasing, and development
services for the properties of TRG.
2.27 "Manager Entity" means a Person in which the Manager, or one or more
of the Persons possessing a beneficial interest in the Manager, possesses a
beneficial interest and which Person has agreed to provide personnel,
management, administration, leasing and/or development or other services for the
properties of TRG, or to the Manager for the benefit of TRG, or for TRG itself.
2.28 "Option Agreement" is defined in Section hereof.
- 5 -
<PAGE>
2.29 "Optionee" means an Employee or a former Employee who has received an
Incentive Option.
2.30 "Original Plan" means The Taubman Realty Group Limited Partnership
1992 Incentive Option Plan effective as of November 20, 1992.
2.31 "Partnership Agreement" means The Amended and Restated Agreement of
Limited Partnership of The Taubman Realty Group Limited Partnership, as the same
has been or may be amended and/or supplemented.
2.32 "Partnership Committee" means the Partnership Committee and the
Executive Committee established for TRG pursuant to the Partnership Agreement.
2.33 "Partnership Interest" means an interest, as a Partner, in TRG, as
such terms are defined in the Partnership Agreement.
2.34 "Partnership Interest Certificate" is defined in Section hereof.
2.35 "Person" or "Persons" means an individual, a partnership (general or
limited), corporation, joint venture, business trust, cooperative, association,
or other form of business organization, whether or not regarded as a legal
entity under applicable law, a trust (inter vivos or testamentary), an estate of
a deceased, insane, or incompetent person, a quasi-governmental entity, a
government or any agency, authority, political subdivision, or other
instrumentality thereof, or any other entity.
2.36 "Plan" means The Taubman Realty Group Limited Partnership 1992
Incentive Option Plan as amended and restated effective as of September 30,
1997, as the same may be amended from time to time.
2.37 "Retirement" means the termination of employment by an Employee after
the attainment of the age of sixty-five (65) years or upon such earlier date as
required by local law or as otherwise determined by the Compensation Committee,
upon the recommendation from the Manager.
2.38 "Special Incentive Options" means those Incentive Options granted for
the purpose of converting amounts previously granted to eligible employees under
The Taubman Company, Inc. Long Term Management Incentive Plan into Incentive
Options under this Plan. All references and provisions in the Plan applicable to
Incentive Options shall include and apply equally to Special Incentive Options
unless expressly provided otherwise.
2.39 "Transfer" means any assignment, sale, transfer, conveyance, mortgage
or other encumbrance, pledge, or other disposition or act of alienation, whether
voluntary or involuntary, or by operation of law.
2.40 "Termination for Cause" means termination of employment by reason of
an Optionee's action or repeated acts, including without limitation, the
commission of a felony, fraud, or wilful misconduct, which has resulted, or is
likely to result, in material damage to the Manager, a Manager Entity, or TRG,
as the Compensation Committee, upon the recommendation from the Manager, may
conclusively determine.
- 6 -
<PAGE>
2.41 "TRG" means The Taubman Realty Group Limited Partnership, a Delaware
limited partnership, or any successor thereto.
2.42 "TTC" means The Taubman Company Limited Partnership, a Delaware
limited partnership.
2.43 "Units of Partnership Interest" means the units into which Partnership
Interests are divided.
2.44 "Valuation Date" means, with respect to an Incentive Option, the Date
of Grant of such Incentive Option or the Date of Exercise, as applicable.
Whenever reference is made to a Valuation Date, it shall mean, with respect to
the Common Stock, the price at the close of trading on such Valuation Date, and
with respect to any other item, midnight in Detroit, Michigan at the end of such
Valuation Date.
Article 3
Administration.
3.1 Administration. The Plan shall be administered by the Compensation
Committee in accordance with this Article 3. Except as otherwise provided in the
Partnership Agreement or this Plan and except as otherwise expressly reserved to
the Partnership Committee in the Plan or in the Partnership Agreement, the
Compensation Committee shall have the sole discretionary authority (i) to select
the Employees who are to be granted Incentive Options under the Plan, (ii) to
determine the number of Units of Partnership Interest in TRG to be optioned to
an Employee, (iii) to authorize the granting of Incentive Options, (iv) to
interpret the Plan, (v) to establish and modify administrative rules for the
Plan, (vi) to impose such conditions and restrictions on Incentive Options as it
determines appropriate, (vii) to execute Option Agreements, (viii) to cancel
Incentive Options and to substitute new Incentive Options with the consent of an
Optionee, and (ix) to take any other actions in connection with the Plan and the
Incentive Options and to make all determinations under the Plan as it may deem
necessary or advisable.
It is anticipated that the Compensation Committee will act upon a
recommendation from the Manager in exercising the discretion granted to the
Compensation Committee under the Plan. Action taken or not taken by the
Compensation Committee on one or more occasions shall be without obligation to
take or not take such action on any other occasion(s).
The Compensation Committee may, subject to the provisions of the
Partnership Agreement, delegate to one or more Persons any of its powers, other
than its power to authorize the granting of Incentive Options, hereinbefore,
hereinafter, or pursuant to the Partnership Agreement provided or conferred, or
designate one or more Persons to do or perform those matters to be done or
performed by the Compensation Committee, including administration of the Plan.
Any Person or Persons delegated or designated by the Compensation Committee
shall be subject to the same obligations and requirements imposed on the
Compensation Committee and its members under the Plan and the Partnership
Agreement.
Notwithstanding the foregoing provisions of this Section 3.1, any selection
of an officer or director of the Company to be granted an Incentive Option under
the Plan, and any
- 7 -
<PAGE>
decisions concerning the timing, pricing, and amount of a grant to an officer or
director of the Company, in the event such officer or director is subject to the
provisions of Section 16 of the Securities Exchange Act of 1934 at the time of
grant, shall be made solely by those members of the Compensation Committee, but
in no event fewer than two, who are "disinterested persons" within the meaning
of Rule 16b-3 under the Securities Exchange Act of 1934. In view of the fact
that, subject to certain restrictions, the Units of Partnership Interest
acquired upon exercise of an Incentive Option may be exchanged, pursuant to the
Continuing Offer, for shares of Common Stock, all grants of Incentive Options to
such officers and directors of the Company must further be confirmed by a
committee of two or more disinterested directors of the Company (which
confirmation shall be deemed made if such disinterested directors who serve on
such committee of the Board of Directors also serve on the Compensation
Committee).
3.2 Expenses of Administration. TRG shall pay all costs and expenses of
administering the Plan.
3.3 Indemnification. The Compensation Committee, members of the
Compensation Committee, and each Person or Persons designated or delegated by
the Compensation Committee, and the Manager and each Manager Entity and the
shareholders, directors and officers of the Manager and each Manager Entity
shall be entitled to indemnification and reimbursement from TRG for any action
or any failure to act in connection with services performed by or on behalf of
the Compensation Committee for the benefit of TRG to the fullest extent provided
or permitted by the Partnership Agreement and by any insurance policy or other
agreement intended for the benefit of the Compensation Committee, or by any
applicable law.
Article 4
Units of Partnership Interest Available Under the Plan
4.1 Units of Partnership Interest Available. Incentive Options may be
granted by TRG under the Plan from time to time to purchase an aggregate Eight
Million, Eight Hundred Eighty- Seven Thousand, Eight Hundred Sixty (8,887,860)
Units of Partnership Interest, as said number may be increased by the action of
the Partnership Committee.
4.2 Units of Partnership Interest Subject to Terminated or Expired
Incentive Options. In the event that an outstanding Incentive Option is
surrendered, expires or is terminated for any reason before it shall have been
fully exercised, then all Units of Partnership Interest in TRG formerly subject
to such Incentive Option shall again be available for any Incentive Option
subsequently granted under the Plan.
4.3 Adjustments. In the event of any change in the Units of Partnership
Interest by reason of merger, or by reason of a division or combination of Units
of Partnership Interest, or otherwise, the number and kind of Units of
Partnership Interest which may thereafter be optioned and sold under the Plan,
the number and kind of Units of Partnership Interest subject to option and
outstanding Option Agreements, and the Exercise Price per Unit of Partnership
Interest, shall be appropriately adjusted in a manner consistent with such
change, as the Compensation Committee may deem equitable.
- 8 -
<PAGE>
Article 5
Participation
All Employees shall be eligible to receive grants of Incentive Options
under the Plan. The Optionees shall be such individuals as the Compensation
Committee may select, upon the recommendation from the Manager, from among the
Employees (who may include executive officers of the Manager), and shall be
based upon the expected future contribution of such Employee to the Manager for
the benefit of TRG.
Article 6
Incentive Options
6.1 Power to Grant Incentive Options. The Compensation Committee may grant
to such Employees as the Compensation Committee may select, in accordance with
Article 5 hereof, Incentive Options entitling the Optionee to purchase Units of
Partnership Interest from TRG in such quantity, exercisable at an Exercise Price
equal to the Fair Market Value of the Units of Partnership Interest determined
as of the Date of Grant, and on such terms and subject to such conditions not
inconsistent with the terms of the Plan, as may be established by the
Compensation Committee. No Incentive Option covering a Fractional Unit shall be
granted under the Plan.
6.2 Modification, Extension, and Renewal of Incentive Options. Subject to
the approval of the Partnership Committee, the Compensation Committee may
modify, extend, or renew outstanding Incentive Options, or accept the
cancellation or surrender of outstanding Incentive Options (to the extent not
previously exercised) for the granting of new Incentive Options in substitution
therefor. Notwithstanding the foregoing, no modification of an Incentive Option
shall, without the consent of the Optionee, alter or impair any rights or
obligations under any Incentive Option previously granted.
6.3 Optionee to Have No Rights as a Partner. An Optionee shall have no
rights as a partner in TRG with respect to the Units of Partnership Interest
made subject to an Incentive Option unless and until such Optionee exercises
such Incentive Option, is admitted as a partner in TRG, and is issued a
Partnership Interest Certificate evidencing his Units of Partnership Interest.
No adjustments shall be made for distributions, allocations, or other rights
with respect to any Units of Partnership Interest prior to the last to occur of
the foregoing events specified in this Section 6.3.
Article 7
Terms and Conditions of Incentive Options
7.1 Option Agreements. The terms of any Incentive Option shall be as set
forth in a written incentive option agreement (an "Option Agreement") in such
form as the Compensation Committee shall from time to time determine. Each
Option Agreement shall comply with and be subject to the terms and conditions of
the Plan, the Partnership Agreement, and such other terms and conditions as the
Compensation Committee may deem appropriate. No Person shall have any rights
under any Incentive Option granted under the Plan unless and until TRG and the
Optionee have executed an Option Agreement setting forth the grant and the terms
and conditions of the Incentive Option.
- 9 -
<PAGE>
7.2 Plan Provisions Control Incentive Option Terms. The terms of the Plan
shall govern all Incentive Options granted under the Plan, and in no event shall
the Compensation Committee have the power to grant any Incentive Option under
the Plan which is contrary to any of the provisions of the Plan. In the event
that any provision of an Incentive Option granted under the Plan shall conflict
with any term in the Plan as constituted on the Date of Grant of such Incentive
Option, the term in the Plan constituted on the Date of Grant of such Incentive
Option shall control.
7.3 Conditions for Exercise (Vesting). Except with respect to Special
Incentive Options or in the case of the death, Disability, or Retirement of an
Optionee, and subject to the provisions of Sections 7.6, 8.3, and 8.4 hereof, no
part of an Incentive Option granted under the Plan may be exercised until the
Optionee has completed three (3) years of employment with the Manager after the
Date of Grant of such Incentive Option. Except with respect to Special Incentive
Options or in the case of the death, Disability, or Retirement of an Optionee,
and provided that an Optionee has completed three (3) years of employment with
the Manager after the Date of Grant of such Incentive Option, such Incentive
Option shall become exercisable (i.e., it shall "vest") as follows:
(a) Subject to paragraph (d) below of this Section 7.3, each
Incentive Option (other than a Special Incentive Option) granted under this
Plan shall become exercisable (i) on the third (3rd) anniversary date of
the Date of Grant of such Incentive Option, to the extent of one-third
(1/3) of the Units of Partnership Interest made subject to such Incentive
Option; (ii) on the fourth (4th) anniversary date of the Date of Grant of
such Incentive Option, to the extent of an additional one-third (1/3) of
the Units of Partnership Interest made subject to such Incentive Option;
and (iii) on the fifth (5th) anniversary date of the Date of Grant, to the
extent of all of the Units of Partnership Interest made subject to such
Incentive Option.
(b) The vesting and exercise of Special Incentive Options shall
be determined under the terms of the Original Plan.
(c) For purposes of this Section 7.3, in determining the "Units
of Partnership Interest made subject to such Incentive Option," account
shall be taken of any adjustments made to the Units of Partnership Interest
as described in Section 4.3 hereof after the Date of Grant of the Incentive
Option, such that the number of Units of Partnership Interest with respect
to which an Optionee's Incentive Option is vested shall be redetermined at
the time of an adjustment, and the number of Units of Partnership Interest
with respect to which an Optionee's Incentive Option becomes vested on any
anniversary date shall be determined by reference to the number of Units of
Partnership Interest then subject to such Incentive Option, taking any
adjustments previously made into account.
(d) An Optionee may exercise all or any portion of an Incentive
Option, to the extent vested; however, Incentive Options may not be
exercised over less than one (1) Unit of Partnership Interest. If, as a
result of the vesting provisions of Section 7.3(a), the Units of
Partnership Interest with respect to which an Optionee's Incentive
Option(s) become exercisable include a Fractional Unit, then the
exercisable Options shall be rounded down to cover whole Units only.
- 10 -
<PAGE>
7.4 Conversion of Incentive Options Granted Prior to September 30, 1997. In
connection with the division of Units of Partnership Interest effective
September 30, 1997, the number of Units of Partnership Interest subject to all
unexercised and outstanding Incentive Options granted prior to September 30,
1997 shall be increased (effective as of September 30, 1997) by a factor of
1,975.08, rounding up to the next whole Unit if the product would otherwise
include a Fractional Unit.
7.5 Expiration Date. Notwithstanding any other provision of the Plan, no
Incentive Option shall be exercisable after the tenth (10th) anniversary of the
Date of Grant.
7.6 Acceleration of Exercise Time. Notwithstanding anything to the contrary
in the Plan, including Sections 7.3, 7.7 and 7.8 hereof, the Compensation
Committee, in its discretion, upon the recommendation from the Manager, may
allow the exercise, in whole or in part, at any time more than six (6) months
after the Date of Grant, as determined by the Compensation Committee, of any
Incentive Option held by an Optionee, which Incentive Option has not previously
become exercisable.
7.7 Termination of Employment (Except by Death, Disability, or Retirement)
Within Three Years After Date of Grant. Except in the case of the death,
Disability, or Retirement of an Optionee, if an Optionee ceases to be an
Employee for any reason within three (3) years after the Date of Grant to such
Optionee of an Incentive Option under the Plan, such Optionee's right to
exercise such Incentive Option or any part thereof shall be forfeited
immediately and permanently.
7.8 Termination of Employment (Except by Death, Disability, or Retirement)
More Than Three Years After Date of Grant. Except in the case of the death,
Disability, or Retirement of an Optionee, if an Optionee ceases to be an
Employee for any reason more than three (3) years after the Date of Grant to
such Optionee of an Incentive Option under the Plan, such Optionee shall have
the right, subject to the restrictions of Sections 7.5, 7.17 and 7.18 hereof, to
exercise such Incentive Option, in full or in part, at any time within ninety
(90) Days after his cessation of employment, but only to the extent that, on the
date of such cessation of employment, such Optionee's right to exercise such
Incentive Option had vested pursuant to the terms of Section 7.3 hereof and the
applicable Option Agreement and had not previously been exercised.
7.9 Termination for Cause. Notwithstanding the preceding Sections of this
Article 7, including without limitation Sections 7.3 and 7.8 hereof, an
Incentive Option shall cease to be exercisable and shall be forfeited
immediately and permanently on the date of an Optionee's cessation of employment
if such cessation is a Termination For Cause (as defined in Section 2.40
hereof).
7.10 Death of Optionee. If an Optionee dies while an Employee and without
having fully exercised his Incentive Option(s), then any outstanding Incentive
Option(s) of such Optionee shall vest immediately and fully, and the executor,
administrator, or other personal representative of the Optionee's estate, or the
trustee of any Family Trust receiving such Incentive Option(s) as a result of
such Optionee's death, or any heir, successor, assign, or other transferee of
the Optionee receiving such Incentive Option(s) by will or by the laws of
descent and distribution, shall have the right, subject to the restrictions of
Sections 7.5, 7.17 and 7.18 hereof, to exercise such Incentive Option(s) to
acquire the Units of Partnership
- 11 -
<PAGE>
Interest in TRG made subject to such Incentive Option(s), in full or in part, at
any time within seven hundred thirty (730) Days after the Optionee's death.
7.11 Disability of Optionee. If an Optionee who ceases to be an Employee at
any time by reason of Disability has not fully exercised his Incentive
Option(s), then any outstanding Incentive Option(s) of such Optionee shall vest
immediately and fully, and such Optionee or his guardian or other legal
representative, shall have the right, subject to the restrictions of Sections
7.5, 7.17 and 7.18 hereof, to exercise such Incentive Option(s) to acquire the
Units of Partnership Interest in TRG made the subject of such Incentive
Option(s), in full or in part, at any time prior to the tenth (10th) anniversary
date of the Date of Grant.
7.12 Retirement of Optionee. If an Optionee who ceases to be an Employee at
any time by reason of Retirement has not fully exercised his Incentive
Option(s), then any Incentive Option(s) of such Optionee shall vest immediately
and fully, and such Optionee shall have the right, subject to the restrictions
of Sections 7.5, 7.17 and 7.18 hereof, to exercise such Incentive Option(s) to
acquire the Units of Partnership Interest in TRG made the subject of such
Incentive Option(s), in full or in part, at any time prior to the tenth (10th)
anniversary date of the Date of Grant.
7.13 Exercise Procedures. Each Incentive Option granted under the Plan
shall be exercised by written notice to the Compensation Committee, which notice
must be received by the Compensation Committee on or before the earlier of (i)
the date such Incentive Option expires pursuant to Section 7.5 hereof, and (ii)
the last date on which such Incentive Option may be exercised as provided in
Sections 7.7 through 7.12 and in Section 8.3 hereof.
7.14 Payment of the Exercise Price. The purchase price for each Unit of
Partnership Interest in TRG to be purchased upon exercise of an Incentive Option
granted under the Plan shall be paid in full in cash by the Optionee pursuant to
the Option Agreement and in an amount equal to the Exercise Price.
7.15 Taxes. TRG or the Manager, or a Manager Entity, as the case may be,
shall be entitled, if the Compensation Committee deems it necessary or
desirable, to withhold (or secure payment from an Optionee or Beneficiary in
lieu of withholding) the amount of any withholding or other tax required by law
to be withheld or paid by TRG or the Manager with respect to any amount payable
and/or Units of Partnership Interest issuable under such Optionee's Incentive
Option, and TRG may defer payment or issuance of the Units of Partnership
Interest upon such Optionee's exercise of an Incentive Option unless indemnified
to its satisfaction against any liability for such tax. The amount of any such
withholding shall be determined by the Compensation Committee.
7.16 Surrender of Incentive Options. Any Incentive Option granted under the
Plan may be surrendered to TRG for cancellation on such terms as the
Compensation Committee and the Optionee agree, including, but not limited to,
terms which provide that upon such surrender TRG shall pay to the Optionee cash
or, subject to the provisions of Section 7.17 hereof, Units of Partnership
Interest, or a combination of cash and Units of Partnership Interest.
7.17 Prohibition Against Exercise of Incentive Option. In the event that an
Optionee properly exercising an Incentive Option as provided in the Plan, or any
other Person properly
- 12 -
<PAGE>
exercising an Incentive Option as provided in the Plan, is not a Person to whom
a Partner (as that term is defined in the Partnership Agreement) would be
permitted to Transfer all or any portion of its Partnership Interest, as
provided in Section 8.1(b) of the Partnership Agreement (such Optionee or other
Person being hereinafter referred to as an "Impermissible Holder"), then such
Impermissible Holder shall nevertheless be permitted to exercise such Incentive
Option as provided in Sections 7.3 through 7.12 and in Sections 8.2 and 8.4
hereof, by complying with the procedures provided in Sections 7.13 and 7.15
hereof and by paying or causing to be paid to TRG the Exercise Price pursuant to
Section 7.14, but such Impermissible Holder shall not be issued Unit(s) of
Partnership Interest but shall, instead, and at the same time, receive shares of
Common Stock pursuant to and subject to the terms and conditions of the
Continuing Offer.
7.18 Prohibition Against Exercise of Option within Six (6) Months of Date
of Grant. Notwithstanding any other provision of the Plan (including Sections
8.3 and 8.4 hereof), no Incentive Option which, but for this Section 7.18 is
exercisable, shall be exercised within six (6) months from the Date of Grant.
Article 8
Amendment and Termination of the Plan; Dissolution of TRG
8.1 Amendment of the Plan. The Compensation Committee, with the approval or
at the direction of the Partnership Committee, may from time to time suspend or
discontinue the Plan or revise or amend the Plan in any respect whatsoever. In
addition, the Compensation Committee, with the approval or at the direction of
the Partnership Committee and the Company, may cause the Company to adopt an
incentive option plan in replacement of the Plan whereby options to purchase
shares of Common Stock of the Company are granted to Employees. In such event,
all outstanding Incentive Options shall be adjusted to be consistent with the
terms and provisions of the Plan and the Continuing Offer, and in such manner as
the Compensation Committee may deem equitable or as may be required pursuant to
applicable law; provided, however, that except with the written consent of an
Optionee or as otherwise specifically provided herein with respect to a
replacement plan, no amendment or suspension of the Plan shall alter or impair
any Incentive Option previously granted to such Optionee under the Plan.
8.2 Termination of the Plan. The Compensation Committee, with the approval
or at the direction of the Partnership Committee, shall have the right and power
to terminate the Plan at any time, and no Incentive Option shall be granted
under the Plan after the termination of the Plan. Except as otherwise provided
in Section 8.3 hereof, the termination of the Plan shall not have any other
effect, and any Incentive Option outstanding at the time of the termination of
the Plan may be exercised after termination of the Plan, at any time prior to
the expiration date of such Incentive Option and to the same extent and subject
to the same terms and conditions, as provided in Article 7 hereof, that would
have applied to such Incentive Option if the Plan had not been terminated.
8.3 Dissolution of TRG. The dissolution of TRG (provided that TRG is not
reconstituted as provided in the Partnership Agreement) shall automatically and
without further action cause the Plan to terminate and each outstanding
Incentive Option which is not yet vested to vest immediately and fully. Each
Optionee holding an outstanding Incentive Option which is then, or by reason of
the dissolution of TRG has become, vested and exercisable, as
- 13 -
<PAGE>
set forth in Article 7 hereof, shall receive written notice of the dissolution
of TRG and shall have fifteen (15) Days from the receipt of such written notice
of dissolution to exercise such Optionee's Incentive Option(s) by delivering
written notice of such exercise as provided in Section 7.13 hereof and by paying
or causing to be paid to TRG the Exercise Price. Except as otherwise provided in
this Section 8.3, any Incentive Option exercised upon dissolution shall be
exercisable only as provided under the Plan and shall continue to be subject to
all of the terms and conditions of the Plan. The grant of any Incentive Option
pursuant to the Plan shall not affect in any way the right or power of TRG to
make changes to its business structure, or to merge, dissolve, or terminate, or
to sell or transfer any or all of its assets.
8.4 Termination of Management Contract/Change of Control Event. Upon the
termination of the Master Services Agreement (as defined in the Partnership
Agreement) between TRG and the Manager, for any reason, or upon the occurrence
of either of the following events (a "change of control" event), all Incentive
Options previously granted under the Plan shall vest immediately and fully, but
shall otherwise be exercisable only as provided under the Plan and shall
continue to be subject to all of the terms and conditions of the Plan. For
purposes of this Section 8.4, a "change of control" event means:
(a) The acquisition of beneficial ownership of Units of
Partnership Interest in TRG entitling the Person acquiring such beneficial
ownership to appoint a majority of the members of the Partnership
Committee, if such Person was not, at the time of the Initial Public
Offering, a Partner of TRG (as identified in the Preamble to the
Partnership Agreement); or
(b) If, at such time as the Company obtains the right to appoint
a majority of the members of the Partnership Committee, or at any time
thereafter, at least a majority of that number of the individuals who
constitute the Board of Directors are not, or cease for any reason to be,
the same individuals who constituted the Board of Directors immediately
after the consummation of the Initial Public Offering (the "Incumbent
Board"); provided, that any individual becoming a director after the
Initial Public Offering whose election or nomination for election by the
Company's shareholders was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall, for the purposes of
this clause (b), be considered as though such individual were a member of
the Incumbent Board.
Article 9
Compliance With Other Laws and Regulations
9.1 Exemption or Qualification. The Plan, the grant and exercise of
Incentive Options under the Plan, and the obligation of TRG to sell and deliver
Units of Partnership Interest under such Incentive Options shall be subject to
all applicable federal and state laws, rules, and regulations and to such
approvals by any government or regulatory agency as may be required. TRG shall
not be required to issue or deliver any Partnership Interest Certificates for
Units of Partnership Interest prior to such time as there is an appropriate
exemption available from the registration or qualification requirements for such
Units of Partnership Interest under any federal or state law, or any ruling or
regulation of any government body which TRG shall, in its discretion, determine
to be necessary or advisable. Any determination by TRG and its counsel in
connection with any of the matters set forth in this Section 9.1 shall be
conclusive and binding on all Persons.
- 14 -
<PAGE>
9.2 Representation. The Compensation Committee may require that any Person
who is granted an Incentive Option under the Plan represent and agree in writing
that if the Units of Partnership Interest made subject to the Incentive Option
are issuable under an exemption from registration requirements, the Units of
Partnership Interest will be "restricted" securities which may be resold only in
compliance with the applicable securities laws, and that such Person is
acquiring the Units of Partnership Interest issued upon exercise of an Incentive
Option for investment and not with a view toward distribution.
Article 10
Disposition of Units of Partnership Interest
10.1 Limitations on Transfer. An Optionee's rights and interests under the
Plan may not be assigned or transferred other than by will or the laws of
descent and distribution, and during the lifetime of an Optionee, only the
Optionee personally (or the Optionee's personal representative) may exercise the
Optionee's rights under the Plan. An Optionee's Beneficiary may exercise the
Optionee's rights to the extent they are exercisable under the Plan following
the death of the Optionee. Notwithstanding any other provision of the Plan to
the contrary, an Optionee's rights and interests under the Plan shall vest in
the Company upon the Optionee's exercise of the Incentive Option, acceptance of
the Continuing Offer, and payment of the Exercise Price as described in Section
7.17 hereof.
10.2 Partnership Interest Certificates. Units of Partnership Interest shall
be represented by a certificate of TRG (a "Partnership Interest Certificate").
Each Partnership Interest Certificate shall bear the following legend:
The Unit(s) of Partnership Interest represented by this
certificate is (are) subject to and transferable only in
compliance with the Amended and Restated Agreement of Limited
Partnership of The Taubman Realty Group Limited Partnership, as
the same may be amended and/or supplemented from time to time
(the "Partnership Agreement"), a copy of which is on file at the
office of The Taubman Realty Group Limited Partnership. Any
assignment, sale, transfer, conveyance, mortgage, or other
encumbrance, pledge, granting of an Option or proxy, or other
disposition or act of alienation, whether voluntary or
involuntary, or by operation of law, in respect of a Unit of
Partnership Interest made other than as permitted in the
Partnership Agreement shall be null and void and have no force or
effect whatsoever.
In addition, Partnership Interest Certificates evidencing Units of
Partnership Interest acquired under the Plan pursuant to an unregistered
transaction shall bear the following restrictive legend and such other
restrictive legends as are required or deemed advisable under the provisions of
any applicable law:
The sale of the Unit(s) of Partnership Interest represented by
this certificate has not been registered under the
- 15 -
<PAGE>
Securities Act of 1933 (the "Act"). Any transfer of such Unit(s)
of Partnership Interest will be invalid unless a registration
statement under the Act is in effect as to such transfer, or, in
the opinion of counsel for the Partnership, such registration is
unnecessary in order for such transfer to comply with the Act.
Any determination by TRG and its counsel in connection with any of the matters
set forth in this Section 10.2 shall be conclusive and binding on all persons.
Article 11
General Provisions
11.1 No Right to Continued Employment. No Employee or any other Person
shall have any claim or right to be granted an Incentive Option under the Plan.
Neither the adoption and maintenance of the Plan nor the granting of Incentive
Options pursuant to the Plan shall be deemed to constitute a contract of
employment between the Manager or TRG or the Company and any Employee or to be a
condition of the employment of any Person. The Plan and any Incentive Option
granted under the Plan shall not confer upon any Optionee any right with respect
to continued employment by the Manager or a Manager Entity, nor shall they
interfere in any way with the right of the Manager or a Manager Entity to
terminate the employment of any Optionee at any time, and for any reason, with
or without cause, it being acknowledged, unless expressly provided otherwise in
writing, that the employment of any Optionee is "at will."
11.2 Dealings with Beneficiaries or Representatives of an Optionee. The
Compensation Committee may require such proper proof of death and such evidence
of the right of any Person other than an Optionee to exercise any Incentive
Option granted under the Plan, as the Compensation Committee deems necessary or
advisable. The Compensation Committee's determination of death or Disability and
of the right of any Person other than an Optionee to exercise an Incentive
Option shall be conclusive. The Compensation Committee, in its discretion, may
require from any Person, other than an Optionee, exercising any Incentive Option
under the Plan, such security and indemnity as the Compensation Committee, in
its discretion, deems necessary or advisable. The issuance of and acceptance of
any Units of Partnership Interest and/or of cash (pursuant to Section 7.14) or
the issuance and acceptance of Common Stock pursuant to Section 7.17 hereof,
shall constitute a complete acquittance and discharge of full liability of TRG,
the Manager, each Manager Entity, and the Company under the Plan, and the
Compensation Committee shall be entitled to demand a receipt and/or acquittance
in full satisfaction of all claims against TRG, the Manager, each Manager
Entity, and the Company.
11.3 Application of Funds. The proceeds received by TRG from the exercise
of any Incentive Option to acquire a Unit of Partnership Interest in TRG shall
be used for general partnership purposes of TRG.
11.4 Inspection of Records. Copies of the Plan, records reflecting each
Optionee's Incentive Option(s), and any other documents and records that an
Optionee is entitled by law to inspect shall be open to inspection by the
Optionee and his duly authorized representative(s) at the office of TRG at any
reasonable business hour.
- 16 -
<PAGE>
11.5 Word Meanings. The words such as "herein," "hereinafter," "hereof,"
and "hereunder" refer to this Plan as a whole and not merely to a subdivision in
which such words appear unless the context otherwise requires.
11.6 Section Titles. Section titles are for descriptive purposes only and
shall not control or alter the meaning of the Plan as set forth in the text.
11.7 Severability. Whenever possible, each provision in the Plan and every
Incentive Option at any time granted under the Plan shall be interpreted in such
a manner as to be effective and valid under applicable law, but if any provision
of the Plan or any Incentive Option at any time granted under the Plan shall be
held to be prohibited or invalid under applicable law, then, (i) such provision
shall be deemed amended to accomplish the objectives of the provision as
originally written to the fullest extent permitted by law, and (ii) all other
provisions of the Plan and every other Incentive Option at any time granted
under the Plan shall remain in full force and effect.
11.8 Compliance with Securities Exchange Act. With respect to persons
subject to Section 16 of the Securities Exchange Act of 1934 (the "1934 Act"),
transactions under this Plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successors under the 1934 Act. To the extent any
provision of the Plan or action by the plan administrators fails to so comply,
it shall be deemed null and void, to the extent permitted by law and deemed
advisable by the plan administrators.
11.9 Strict Construction. No rule of strict construction shall be implied
against TRG, the Partnership Committee, the Compensation Committee, or any other
Person in the interpretation of any of the terms of the Plan, any Incentive
Option granted under the Plan or any rule or procedure established by the
Compensation Committee.
11.10 Choice of Law. All determinations made and actions taken pursuant to
the Plan shall be governed by the internal laws of the State of Michigan and
construed in accordance therewith.
11.11 Execution. To record the adoption of the Plan, as amended and
restated, TRG has caused the execution hereof effective as of the 30th day of
September, 1997.
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP,
a Delaware limited partnership
By: /s/ Lisa A. Payne
---------------------------------------
Its: Authorized Signatory
- 17 -
Exhibit 12
The Taubman Realty Group Limited Partnership
Computation of Ratios of Earnings to Fixed Charges
and Preferred Distributions
(in thousands of dollars, except ratios)
<TABLE>
<CAPTION>
Year Ended December 31
----------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Earnings from Continuing Operations $ 95,294 $ 84,094 $ 79,699 $ 72,203 $ 69,326
Add back:
Fixed charges 125,123 113,480 110,541 88,198 77,230
Amortization of previously capitalized
interest (1) 2,166 1,969 2,185 2,035 1,818
Equity in net income in excess of
distributions of less than 50% owned
Unconsolidated Joint Ventures 0 0 (344) (100) 0
Deduct:
Capitalized interest (1) (13,840) (8,869) (8,651) (8,899) (4,316)
-------- -------- -------- -------- --------
Earnings Available for Fixed Charges
and Preferred Distributions $208,743 $190,674 $183,430 $153,437 $144,058
======== ======== ======== ======== ========
Fixed Charges
Interest expense $ 73,639 $ 70,454 $ 65,858 $ 47,732 $ 45,337
Capitalized interest 9,469 5,682 6,852 7,098 2,640
Interest portion of rent expense 7,389 5,556 4,762 4,101 4,276
Proportionate share of Unconsolidated
Joint Ventures' fixed charges 34,626 31,788 33,069 29,267 24,977
-------- -------- -------- -------- --------
Total Fixed Charges $125,123 $113,480 $110,541 $ 88,198 $ 77,230
======== ======== ======== ======== ========
Preferred Distributions 4,058 0 0 0 0
-------- -------- -------- -------- --------
Total Fixed Charges and Preferred
Distributions $129,181 $113,480 $110,541 $ 88,198 $ 77,230
======== ======== ======== ======== ========
Ratio of Earnings to Fixed Charges
and Preferred Distributions 1.6 1.7 1.7 1.7 1.9
- -------------------
(1) Amounts include TRG's pro rata share of capitalized interest and
amortization of previously capitalized interest of the Unconsolidated Joint
Ventures.
</TABLE>
Exhibit 21
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
LIST OF SUBSIDIARIES
JURISDICTION
NAME OF FORMATION DOING BUSINESS AS
- ---- ------------ -----------------
La Cienega Associates California Beverly Center
Biltmore Shopping Center Partners Arizona Biltmore Fashion Park
Briarwood Michigan Briarwood
TL-Columbus Associates Michigan Columbus City Center
Fairlane Town Center Michigan Fairlane Town Center
The Falls Shopping Center Associates Florida The Falls
Taubman Auburn Hills Associates Delaware Great Lakes Crossing
Limited Partnership (under construction)
Richmond Associates Michigan Hilltop
La Cumbre Shopping Center Associates California La Cumbre Plaza
Lakeforest Associates Maryland Lakeforest
Taubman MacArthur Associates Delaware MacArthur Center
Limited Partnership (under construction)
TKL-East Michigan Marley Station
Taubman Western Associates No. 2 Michigan Meadowood Mall
Katy-Gessner Associates Limited Delaware Memorial City Mall
Partnership (leased)
Paseo Nuevo Associates California Paseo Nuevo
TRG - Regency Square Associates Virginia Regency Square
Short Hills Associates New Jersey The Mall at Short Hills
Stoneridge Properties California Stoneridge
Taub-Co Management, Inc. Michigan N/A
The Taubman Company Limited Partnership Delaware The Taubman Company
Tuttle Crossing Associates Ohio The Mall at Tuttle
Crossing
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Amendment No. 2 to Form S-3
Registration Statement No. 33-90818 and in Form S-8 Registration Statement No.
33-80650 of The Taubman Realty Group Limited Partnership of our reports dated
February 18, 1998, on the consolidated financial statements and the financial
statement schedules of The Taubman Realty Group Limited Partnership and the
combined financial statements and the financial statement schedules of
Unconsolidated Joint Ventures of The Taubman Realty Group Limited Partnership
appearing in this Annual Report on Form 10-K of The Taubman Realty Group Limited
Partnership for the year ended December 31, 1997.
Deloitte & Touche LLP
Detroit, Michigan
March 23, 1998
POWER OF ATTORNEY
The undersigned, a Director of Taubman Centers, Inc., a Michigan
corporation (the "Company"), Managing General Partner of The Taubman Realty
Group Limited Partnership ("TRG"), does hereby constitute and appoint Robert S.
Taubman and Lisa A. Payne and each of them, with full power of substitution, as
his true and lawful attorney and agent to execute in his name and on his behalf,
as a Director of the Company, TRG's Annual Report on Form 10-K for the year
ended December 31, 1997, and any and all amendments thereto, to be filed with
the Securities and Exchange Commission (the "Commission") pursuant to the
Securities Exchange Act of 1934, as amended (the "Act"), and any and all
instruments that such attorneys and agents, or either of them, may deem
necessary or advisable to enable the Company to comply with the Act and the
rules, regulations, and requirements of the Commission in respect thereof, and
the undersigned does hereby ratify and confirm as his own act and deed all that
such attorneys and agents, and each of them, shall do or cause to be done by
virtue hereof. Each such attorney or agent shall have, and may exercise, all of
the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his signature
this 16th day of February, 1998.
/S/ A. ALFRED TAUBMAN
--------------------------------------
A. Alfred Taubman
<PAGE>
POWER OF ATTORNEY
The undersigned, a Director of Taubman Centers, Inc., a Michigan
corporation (the "Company"), Managing General Partner of The Taubman Realty
Group Limited Partnership ("TRG"), does hereby constitute and appoint Robert S.
Taubman and Lisa A. Payne and each of them, with full power of substitution, as
his true and lawful attorney and agent to execute in his name and on his behalf,
as a Director of the Company, TRG's Annual Report on Form 10-K for the year
ended December 31, 1997, and any and all amendments thereto, to be filed with
the Securities and Exchange Commission (the "Commission") pursuant to the
Securities Exchange Act of 1934, as amended (the "Act"), and any and all
instruments that such attorneys and agents, or either of them, may deem
necessary or advisable to enable the Company to comply with the Act and the
rules, regulations, and requirements of the Commission in respect thereof, and
the undersigned does hereby ratify and confirm as his own act and deed all that
such attorneys and agents, and each of them, shall do or cause to be done by
virtue hereof. Each such attorney or agent shall have, and may exercise, all of
the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his signature
this 3rd day of March, 1998.
/S/ CLAUDE M. BALLARD
--------------------------------------
Claude M. Ballard
<PAGE>
POWER OF ATTORNEY
The undersigned, a Director of Taubman Centers, Inc., a Michigan
corporation (the "Company"), Managing General Partner of The Taubman Realty
Group Limited Partnership ("TRG"), does hereby constitute and appoint Robert S.
Taubman and Lisa A. Payne and each of them, with full power of substitution, as
his true and lawful attorney and agent to execute in his name and on his behalf,
as a Director of the Company, TRG's Annual Report on Form 10-K for the year
ended December 31, 1997, and any and all amendments thereto, to be filed with
the Securities and Exchange Commission (the "Commission") pursuant to the
Securities Exchange Act of 1934, as amended (the "Act"), and any and all
instruments that such attorneys and agents, or either of them, may deem
necessary or advisable to enable the Company to comply with the Act and the
rules, regulations, and requirements of the Commission in respect thereof, and
the undersigned does hereby ratify and confirm as his own act and deed all that
such attorneys and agents, and each of them, shall do or cause to be done by
virtue hereof. Each such attorney or agent shall have, and may exercise, all of
the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his signature
this 15th day of February, 1998.
/S/ ALLAN J. BLOOSTEIN
--------------------------------------
Allan J. Bloostein
<PAGE>
POWER OF ATTORNEY
The undersigned, a Director of Taubman Centers, Inc., a Michigan
corporation (the "Company"), Managing General Partner of The Taubman Realty
Group Limited Partnership ("TRG"), does hereby constitute and appoint Robert S.
Taubman and Lisa A. Payne and each of them, with full power of substitution, as
his true and lawful attorney and agent to execute in his name and on his behalf,
as a Director of the Company, TRG's Annual Report on Form 10-K for the year
ended December 31, 1997, and any and all amendments thereto, to be filed with
the Securities and Exchange Commission (the "Commission") pursuant to the
Securities Exchange Act of 1934, as amended (the "Act"), and any and all
instruments that such attorneys and agents, or either of them, may deem
necessary or advisable to enable the Company to comply with the Act and the
rules, regulations, and requirements of the Commission in respect thereof, and
the undersigned does hereby ratify and confirm as his own act and deed all that
such attorneys and agents, and each of them, shall do or cause to be done by
virtue hereof. Each such attorney or agent shall have, and may exercise, all of
the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his signature
this 15th day of February, 1998.
/S/ W. ALLEN REED
--------------------------------------
W. Allen Reed
<PAGE>
POWER OF ATTORNEY
The undersigned, a Director of Taubman Centers, Inc., a Michigan
corporation (the "Company"), Managing General Partner of The Taubman Realty
Group Limited Partnership ("TRG"), does hereby constitute and appoint Robert S.
Taubman and Lisa A. Payne and each of them, with full power of substitution, as
his true and lawful attorney and agent to execute in his name and on his behalf,
as a Director of the Company, TRG's Annual Report on Form 10-K for the year
ended December 31, 1997, and any and all amendments thereto, to be filed with
the Securities and Exchange Commission (the "Commission") pursuant to the
Securities Exchange Act of 1934, as amended (the "Act"), and any and all
instruments that such attorneys and agents, or either of them, may deem
necessary or advisable to enable the Company to comply with the Act and the
rules, regulations, and requirements of the Commission in respect thereof, and
the undersigned does hereby ratify and confirm as his own act and deed all that
such attorneys and agents, and each of them, shall do or cause to be done by
virtue hereof. Each such attorney or agent shall have, and may exercise, all of
the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his signature
this 13th day of February, 1998.
/S/ S. PARKER GILBERT
--------------------------------------
S. Parker Gilbert
<PAGE>
POWER OF ATTORNEY
The undersigned, a Director of Taubman Centers, Inc., a Michigan
corporation (the "Company"), Managing General Partner of The Taubman Realty
Group Limited Partnership ("TRG"), does hereby constitute and appoint Robert S.
Taubman and Lisa A. Payne and each of them, with full power of substitution, as
his true and lawful attorney and agent to execute in his name and on his behalf,
as a Director of the Company, TRG's Annual Report on Form 10-K for the year
ended December 31, 1997, and any and all amendments thereto, to be filed with
the Securities and Exchange Commission (the "Commission") pursuant to the
Securities Exchange Act of 1934, as amended (the "Act"), and any and all
instruments that such attorneys and agents, or either of them, may deem
necessary or advisable to enable the Company to comply with the Act and the
rules, regulations, and requirements of the Commission in respect thereof, and
the undersigned does hereby ratify and confirm as his own act and deed all that
such attorneys and agents, and each of them, shall do or cause to be done by
virtue hereof. Each such attorney or agent shall have, and may exercise, all of
the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his signature
this 12th day of February, 1998.
/S/ JEROME A. CHAZEN
--------------------------------------
Jerome A. Chazen
<PAGE>
POWER OF ATTORNEY
The undersigned, a Director of Taubman Centers, Inc., a Michigan
corporation (the "Company"), Managing General Partner of The Taubman Realty
Group Limited Partnership ("TRG"), does hereby constitute and appoint Robert S.
Taubman and Lisa A. Payne and each of them, with full power of substitution, as
his true and lawful attorney and agent to execute in his name and on his behalf,
as a Director of the Company, TRG's Annual Report on Form 10-K for the year
ended December 31, 1997, and any and all amendments thereto, to be filed with
the Securities and Exchange Commission (the "Commission") pursuant to the
Securities Exchange Act of 1934, as amended (the "Act"), and any and all
instruments that such attorneys and agents, or either of them, may deem
necessary or advisable to enable the Company to comply with the Act and the
rules, regulations, and requirements of the Commission in respect thereof, and
the undersigned does hereby ratify and confirm as his own act and deed all that
such attorneys and agents, and each of them, shall do or cause to be done by
virtue hereof. Each such attorney or agent shall have, and may exercise, all of
the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his signature
this 17th day of February, 1998.
/S/ THOMAS E. DOBROWSKI
--------------------------------------
Thomas E. Dobrowski
<PAGE>
POWER OF ATTORNEY
The undersigned, a Director of Taubman Centers, Inc., a Michigan
corporation (the "Company"), Managing General Partner of The Taubman Realty
Group Limited Partnership ("TRG"), does hereby constitute and appoint Robert S.
Taubman and Lisa A. Payne and each of them, with full power of substitution, as
his true and lawful attorney and agent to execute in his name and on his behalf,
as a Director of the Company, TRG's Annual Report on Form 10-K for the year
ended December 31, 1997, and any and all amendments thereto, to be filed with
the Securities and Exchange Commission (the "Commission") pursuant to the
Securities Exchange Act of 1934, as amended (the "Act"), and any and all
instruments that such attorneys and agents, or either of them, may deem
necessary or advisable to enable the Company to comply with the Act and the
rules, regulations, and requirements of the Commission in respect thereof, and
the undersigned does hereby ratify and confirm as his own act and deed all that
such attorneys and agents, and each of them, shall do or cause to be done by
virtue hereof. Each such attorney or agent shall have, and may exercise, all of
the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his signature
this 15th day of March, 1998.
/S/ ROBERT C. LARSON
--------------------------------------
Robert C. Larson
<PAGE>
POWER OF ATTORNEY
The undersigned, a Director of Taubman Centers, Inc., a Michigan
corporation (the "Company"), Managing General Partner of The Taubman Realty
Group Limited Partnership ("TRG"), does hereby constitute and appoint Robert S.
Taubman and Lisa A. Payne and each of them, with full power of substitution, as
his true and lawful attorney and agent to execute in his name and on his behalf,
as a Director of the Company, TRG's Annual Report on Form 10-K for the year
ended December 31, 1997, and any and all amendments thereto, to be filed with
the Securities and Exchange Commission (the "Commission") pursuant to the
Securities Exchange Act of 1934, as amended (the "Act"), and any and all
instruments that such attorneys and agents, or either of them, may deem
necessary or advisable to enable the Company to comply with the Act and the
rules, regulations, and requirements of the Commission in respect thereof, and
the undersigned does hereby ratify and confirm as his own act and deed all that
such attorneys and agents, and each of them, shall do or cause to be done by
virtue hereof. Each such attorney or agent shall have, and may exercise, all of
the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his signature
this 23rd day of March, 1998.
/S/ GRAHAM ALLISON
--------------------------------------
Graham Allison
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
TAUBMAN REALTY GROUP LIMITED PARTNERSHIP (TRG) CONSOLIDATED BALANCE SHEET AS OF
DECEMBER 31, 1997 AND TRG'S CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR
ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000917473
<NAME> THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
<MULTIPLIER> 1,000 <F1>
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<CASH> 3,250
<SECURITIES> 0
<RECEIVABLES> 25,617
<ALLOWANCES> 414
<INVENTORY> 0
<CURRENT-ASSETS> 0 <F2>
<PP&E> 1,593,350
<DEPRECIATION> 268,658
<TOTAL-ASSETS> 1,396,826
<CURRENT-LIABILITIES> 0 <F2>
<BONDS> 1,284,327
0
0
<COMMON> 0
<OTHER-SE> (328,560)
<TOTAL-LIABILITY-AND-EQUITY> 1,396,826
<SALES> 0
<TOTAL-REVENUES> 313,426
<CGS> 0
<TOTAL-COSTS> 171,048
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 73,639
<INCOME-PRETAX> 95,294
<INCOME-TAX> 0
<INCOME-CONTINUING> 95,294
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 95,294
<EPS-PRIMARY> .66 <F3>
<EPS-DILUTED> .66
<FN>
<F1> EXCEPT FOR UNIT DATA.
<F2> TRG HAS AN UNCLASSIFIED BALANCE SHEET.
<F3> EFFECTIVE SEPTEMBER 30, 1997, TRG AMENDED ITS PARTNERSHIP AGREEMENT TO
SPLIT EXISTING UNITS OF PARTNERSHIP INTEREST AS A RATIO OF 1975.08 T0
ONE.
</FN>
</TABLE>
