SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Reporting Pursuant
to Section 13 or 15(d) of the
Securities and Exchange Act of 1934
Date of report (earliest event reported): September 30, 1998
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 33-73988 38-3097317
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification Number)
200 East Long Lake Road, Suite 300, Bloomfield Hills, Michigan 48303-0200
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, Including Area Code: (248) 258-6800
None
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
Item 1. Changes in Control of Registrant
The information required by this item is given in response to Item 2.
Item 2. Acquisition or Disposition of Assets
Taubman Centers, Inc. (TCO) is the managing general partner of The Taubman
Realty Group Limited Partnership (TRG). On September 30, 1998, TCO obtained a
majority and controlling interest in TRG as a result of a transaction in which
TRG exchanged interests in 10 shopping centers, together with $990 million of
its debt, for all of the partnership units owned by General Motors Pension
Trusts (GMPT), representing approximately 37% of TRG's equity (the GMPT
Exchange). The approximately 50 million GMPT partnership units had a fair value
of approximately $675 million based on the average share price of TCO common
stock for the two week period prior to the closing of the transaction. As a
result of the GMPT Exchange, TCO's ownership of TRG increased to 62.7%.
TRG no longer has a Partnership Committee overseeing its operations and the
GMPT-affiliated members of TCO's Board of Directors resigned, resulting in TCO
having a nine-member board with a majority of independent directors.
Additionally, TCO became obligated to issue to the partners in TRG other than
TCO (Minority Partners), upon subscription, one share of Series B Non-
Participating Convertible Preferred Stock (Series B Preferred Stock) for each
TRG unit held by the Minority Partners. Each of the Minority Partners is
entitled to subscribe for one share of Series B Preferred Stock for each TRG
unit of partnership interest that the Minority Partner holds. The subscription
price is equal to the per share liquidation preference of 1/10th of one cent.
TCO expects to have completed the initial issuance of Series B Preferred Stock
to the Minority Partners before the end of 1998. If TRG issues additional units
to one or more Minority Partners (including new partners in TRG), each new Unit
will carry the right to subscribe for one share of series B Preferred Stock for
1/10th of one cent per share. TCO may not issue additional shares of Series B
Preferred Stock except as described above, other than to reflect stock
dividends, splits, or similar matters that would otherwise adversely affect the
relative voting power of the Series B Preferred Stock. Each share of Series B
Preferred Stock entitles the holder to one vote on all matters submitted to
TCO's shareholders. The holders of Series B Preferred Stock, voting as a class,
have the right to designate up to four nominees for election as directors of
TCO. On all other matters, including the election of directors, the holders of
Series B Preferred Stock will vote with the holders of common stock. The holders
of Series B Preferred Stock are not entitled to dividends or earnings. Under
certain circumstances, the Series B Preferred Stock is convertible into common
stock (at a ratio of 14,000 shares of Series B Preferred Stock for one share of
common stock), but TCO will redeem for cash any fractional shares of common
stock resulting from a conversion.
Item 7. Financial Statements and Exhibits
b. The following pro forma information is included in this filing on Form 8-K:
The Taubman Realty Group Limited Partnership Pro Forma Condensed Consolidated
Balance Sheet as of June 30, 1998 (unaudited)
The Taubman Realty Group Limited Partnership Pro Forma Condensed Consolidated
Statement of Operations, Year Ended December 31, 1997 (unaudited)
The Taubman Realty Group Limited Partnership Pro Forma Condensed Consolidated
Statement of Operations, Six Months Ended June 30, 1998 (unaudited)
1
<PAGE>
c. Exhibits
Separation and Relative Value Adjustment Agreement between The Taubman Realty
Group Limited Partnership and GMPTS Limited Partnership (without exhibits or
schedules, which will be supplementally provided to the Securities and
Exchange Commission upon its request.)
2
<PAGE>
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
As of June 30, 1998
(unaudited)
(in thousands)
This unaudited Pro Forma Condensed Consolidated Balance Sheet is presented as if
the GMPT Exchange and certain related transactions (see accompanying Notes and
Significant Assumptions) had occurred on June 30, 1998. In management's opinion,
all adjustments necessary to reflect the effects of these transactions have been
made. The unaudited Pro Forma Condensed Consolidated Balance Sheet is not
necessarily indicative of what the actual financial position would have been at
June 30, 1998, nor does it purport to represent the future financial position of
TRG.
Historical Adjustments (A) Pro Forma
---------- ----------- ---------
Assets:
Properties, net $1,416,635 $(476,435) $940,200
Other assets 64,086 (27,731) 36,355
---------- --------- --------
$1,480,721 $(504,166) $976,555
========== ========== ========
Liabilities:
Debt $1,414,433 $(810,897) $603,536
Accounts payable and
accrued liabilities 110,217 (31,197) 79,020
Distributions in excess of
net income of Unconsolidated
Joint Ventures 169,714 (48,543) 121,171
---------- --------- --------
$1,694,364 $(890,637) $803,727
Accumulated Deficiency in Assets:
Series A Preferred Equity 192,840 192,840
Partners' Accumulated Deficit (406,483) 386,471 (20,012)
---------- --------- --------
(213,643) 386,471 172,828
---------- --------- --------
$1,480,721 $(504,166) $976,555
========== ========= ========
See Accompanying Notes and Significant Assumptions
3
<PAGE>
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
NOTES AND SIGNIFICANT ASSUMPTIONS
As of June 30, 1998
(A) On September 30, 1998, TRG exchanged interests in 10 shopping centers (nine
wholly owned and one Unconsolidated Joint Venture), together with $990 million
of debt, for all of GMPT's partnership units (approximately 50 million units
with a fair value of $675 million, based on the average stock price of TCO
shares of $13.50 for the two week period prior to the closing). The amount of
debt allocated to GMPT is subject to a working capital adjustment calculated as
of September 30, 1998; this adjustment would have decreased the amount of debt
allocated to GMPT by approximately $12 million if the GMPT Exchange had occurred
on June 30, 1998. The pro forma adjustments reflect the impact to TRG of the
exchange of the 10 centers. On a pro forma basis, a gain of $1.1 billion on the
exchange would have been realized as of June 30, 1998, representing the
difference between the fair value of the GMPT units and the sum of the net book
values of the 10 shopping centers, the debt assumed by GMPT, and estimated
transaction costs.
In anticipation of the GMPT Exchange, TRG used the $1.2 billion proceeds from
two bridge loans bearing interest at one-month LIBOR plus 1.30% to extinguish
approximately $1.1 billion of debt, including substantially all of TRG's public
unsecured debt, its outstanding commercial paper, and borrowings on its existing
lines of credit. The remaining proceeds were used primarily to pay prepayment
premiums and transaction costs. An extraordinary charge of approximately $49
million, consisting primarily of prepayment premiums, was recognized in
connection with the extinguishment of the debt.
The balance on the first bridge loan of $902 million was assumed by GMPT at the
time of the GMPT Exchange. The second loan has a balance of $310 million and
expires in June 1999. TRG has begun the process of obtaining permanent secured
financing to replace the bridge loan. Additionally, TRG has obtained a $200
million line of credit, replacing TRG's previous revolving credit and commercial
paper facilities. TRG has also entered into treasury lock agreements with a
notional amount of $200 million at approximately 5%, plus credit spread.
GMPT's share of debt totaling $990 million includes the $902 million bridge
loan, $86 million representing 50% of the debt on the Joint Venture owned
shopping center, and $1.6 million of assessment bond obligations. The adjustment
to debt in the pro forma balance sheet includes the reduction for GMPT's share
of debt (excluding the $86 million of Joint Venture debt, which is included in
the adjustment to Distributions in excess of net income of Unconsolidated Joint
Ventures), net of expected transaction costs, prepayment premiums and
restructuring charges totaling $93 million. The estimated restructuring charges
include costs related to involuntary termination of personnel and renegotiated
contracts with certain of TRG's outside consultants. GMPT's share of debt
includes its share of the $93 million of expected costs.
4
<PAGE>
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended December 31, 1997
(unaudited)
(in thousands, except unit data)
This unaudited Pro Forma Condensed Consolidated Statement of Operations is
presented as if the GMPT Exchange and certain other significant debt and equity
transactions (see the accompanying Notes and Significant Assumptions) had
occurred on January 1, 1997. In management's opinion, all adjustments necessary
to reflect the effects of these transactions have been made. This unaudited Pro
Forma Condensed Consolidated Statement of Operations is not necessarily
indicative of what actual results of operations would have been had these
transactions been completed as of January 1, 1997, nor does it purport to
represent the results of operations for future periods.
<TABLE>
<CAPTION>
Historical GMPT Exchange(A) Pro Forma Other Pro Forma
---------- ------------- --------- ----- ---------
<S> <C> <C> <C> <C> <C>
Revenues $313,426 $(123,777) $189,649 $ 8,810(B) $198,459
Operating Expenses:
Recoverable expenses $ 85,750 $ (36,437) $ 49,313 $ 2,261(B) $ 51,574
Other operating 35,904 (10,972) 24,932 521(B) 25,453
Management, leasing and
development services 4,675 12,853 17,528 17,528
General and administrative 25,715 25,715 25,715
Interest 73,639 (45,605) 28,034 (1,243)(B)(C) 26,791
Depreciation and amortization 44,719 (18,081) 26,638 2,366(B) 29,004
-------- --------- -------- ------- --------
$270,402 $ (98,242) $172,160 $ 3,905 $176,065
-------- --------- -------- ------- --------
Income before equity in
income of Unconsolidated
Joint Ventures $ 43,024 $ (25,535) $ 17,489 $ 4,905 $ 22,394
Equity in income before
extraordinary items of
Unconsolidated Joint
Ventures 52,270 (12,251) 40,019 40,019
-------- --------- -------- ------- --------
Income before extraordinary
items $ 95,294 $ (37,786) $ 57,508 $ 4,905 $ 62,413
Preferred distributions to TCO (4,058) (4,058) (12,542)(C) (16,600)
-------- --------- -------- ------- --------
Income before extraordinary
items allocable to unitholders $ 91,236 $ (37,786) $ 53,450 $(7,637) $ 45,813
======== ========= ======== ======= ========
Income before extraordinary
items per Unit of
Partnership Interest:
Basic $ .66 $ (.05) $ .61 $ (.07) $ .54
======== ========= ======== ======= ========
Diluted $ .66 $ (.06) $ .60 $ (.06) $ .54
======== ========= ======== ======= ========
Weighted average number
of Units of Partnership
Interest outstanding 138,271,014 (50,025,713) 88,245,301 (4,092,416)(C) 84,152,885
=========== =========== ========== ========== ==========
</TABLE>
See Accompanying Notes and Significant Assumptions
5
<PAGE>
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
NOTES AND SIGNIFICANT ASSUMPTIONS
For the Year Ended December 31, 1997
(A) GMPT Exchange
-------------
On September 30, 1998, TRG exchanged interests in 10 shopping centers (nine
wholly owned and one Unconsolidated Joint Venture), together with $990 million
of debt, for all of GMPT's approximately 50 million partnership units. TRG will
continue to manage the centers exchanged under a management agreement with GMPT
that expires December 31, 1999. The management agreement is cancelable with 90
days notice. The estimated gain on the exchange of approximately $1.1 billion,
representing the difference between the fair value of the GMPT units of $675
million, based on the average stock price of $13.50 for the two week period
prior to the closing, and the sum of the net book values of the 10 shopping
centers, the debt assumed by GMPT, and the transaction costs, has been excluded
from TRG's pro forma operations for the year ended December 31, 1997. Included
as pro forma adjustments are the results of operations of the exchanged centers,
interest on debt assumed by GMPT, and the incremental effect of the new
management agreement with GMPT on management, leasing, and development revenues
and expenses.
In anticipation of the GMPT Exchange, TRG used the $1.2 billion proceeds from
two bridge loans bearing interest at one-month LIBOR plus 1.30% to extinguish
approximately $1.1 billion of debt, including substantially all of TRG's public
unsecured debt, its outstanding commercial paper, and borrowings on its existing
lines of credit. The remaining proceeds were used primarily to pay prepayment
premiums and transaction costs. An extraordinary charge of approximately $49
million, consisting primarily of prepayment premiums, was recognized in
connection with the extinguishment of the debt.
The balance on the first bridge loan of $902 million was assumed by GMPT at the
time of the GMPT Exchange. The second loan has a balance of $310 million and
expires in June 1999. TRG has begun the process of obtaining permanent secured
financing to replace the bridge loan. Additionally, TRG has obtained a $200
million line of credit, replacing TRG's previous revolving credit and commercial
paper facilities. TRG has also entered into treasury lock agreements with a
notional amount of $200 million at approximately 5%, plus credit spread.
GMPT's share of debt totaling $990 million includes the $902 million bridge
loan, $86 million representing 50% of the debt on the Joint Venture owned
shopping center, and $1.6 million of assessment bond obligations. The adjustment
to interest expense in the pro forma balance sheet includes the reduction for
interest expense on GMPT's share of debt (excluding the adjustment for interest
expense on the $86 million of Joint Venture debt, which is included in the
adjustment to Equity in income before extraordinary items of Unconsolidated
Joint Ventures), net of additional interest on borrowings for expected
transaction costs, prepayment premiums and restructuring charges totaling $93
million. GMPT's share of debt includes its share of the $93 million of expected
costs.
The average interest rates on both the extinguished debt and the new bridge loan
debt are approximately 7%. A 50 basis point change in the rates assumed would
increase or decrease the pro forma interest expense adjustment by approximately
$0.5 million. The pro forma adjustment to interest expense is not indicative of
future periods as the amount of average debt outstanding in the period is not
equal to debt outstanding on the day of the transaction.
6
<PAGE>
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
NOTES AND SIGNIFICANT ASSUMPTIONS - continued
For the Year Ended December 31, 1997
Concurrent with the GMPT Exchange, TRG committed to a restructuring of its
operations, including involuntary termination of personnel. TRG also
renegotiated contracts with certain of its outside consultants. The pro forma
income statement excludes any adjustment to general and administrative expense
related to these and future restructuring initiatives, however, TRG expects to
reduce its annual general and administrative expense by approximately $10
million by 1999. This is a forward looking statement, and certain significant
factors could cause the actual reductions in TRG's general and administrative
expense to differ materially, including but not limited to: 1) actual payroll
reductions achieved; 2) actual results of negotiations; 3) use of outside
consultants; and, 4) changes in TRG's owned or managed portfolio.
(B) Acquisition of Interest in Regency Square
-----------------------------------------
In September 1997, TRG acquired Regency Square shopping center for approximately
$123.9 million. TRG used floating rate debt to fund the acquisition (average
rate of 7% for the year ended December 31, 1997). The purchase price was
allocated primarily to land and to buildings and site improvements, which are
being depreciated over 40 years and 15 years, respectively. Pro forma revenues
and expenses for the period prior to the acquisition date, other than interest
and depreciation, are based on unaudited information provided by the seller of
the property.
(C) Other Equity Transactions
-------------------------
In October 1997, TCO completed a $200 million public offering of eight million
shares of Series A Preferred Stock. TCO used the proceeds 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 Stock. The costs of the offering were paid by TRG. TRG used
the net proceeds to pay down short term floating rate debt (average rate of 7%
for the year ended December 31, 1997), which was used to fund the acquisition of
Regency Square in September 1997.
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 floating rate debt (average rate of 7% for the year
ended December 31, 1997).
In April 1998, TCO sold approximately 2.0 million shares of its common stock at
$13.1875 per share, before deducting the underwriting commission and expenses of
the offering. TCO used the proceeds to acquire an additional equity interest in
TRG. TRG paid all costs of the offering. Net proceeds of approximately $25
million were used by TRG to pay down short term floating rate debt (average rate
of 7% for the year ended December 31, 1997).
7
<PAGE>
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Six Months Ended June 30, 1998
(unaudited)
(in thousands, except unit data)
This unaudited Pro Forma Condensed Consolidated Statement of Operations is
presented as if the GMPT Exchange and certain other significant equity
transactions (see the accompanying Notes and Significant Assumptions) had
occurred on January 1, 1997. In management's opinion, all adjustments necessary
to reflect the effects of these transactions have been made. This unaudited Pro
Forma Condensed Consolidated Statement of Operations is not necessarily
indicative of what actual results of operations would have been had these
transactions been completed as of January 1, 1997, nor does it purport to
represent the results of operations for future periods.
<TABLE>
<CAPTION>
Historical GMPT Exchange(A) Pro Forma Other(B) Pro Forma
---------- ------------- --------- ----- ---------
<S> <C> <C> <C> <C> <C>
Revenues $179,234 $(79,252) $ 99,982 $99,982
Operating Expenses:
Recoverable expenses $ 48,422 $(23,107) $ 25,315 $25,315
Other operating 20,365 (6,522) 13,843 13,843
Management, leasing and
development services 2,425 8,068 10,493 10,493
General and administrative 13,605 13,605 13,605
Interest 44,586 (27,881) 16,705 $ (754) 15,951
Depreciation and amortization 28,080 (12,931) 15,149 15,149
-------- -------- -------- ------ -------
$157,483 $(62,373) $ 95,110 $ (754) $94,356
-------- -------- -------- ------ -------
Income before equity in income
of Unconsolidated Joint
Ventures $ 21,751 $(16,879) $ 4,872 $ 754 $ 5,626
Equity in income before
extraordinary items of
Unconsolidated Joint Ventures 24,531 (6,039) 18,492 18,492
-------- -------- -------- ------ -------
Income before extraordinary
items $ 46,282 $(22,918) $ 23,364 $ 754 $24,118
Preferred distributions to TCO (8,300) (8,300) (8,300)
-------- -------- -------- ------ -------
Income before extraordinary
items allocable to unitholders $ 37,982 $(22,918) $ 15,064 $ 754 $15,818
======== ======== ======== ====== =======
Income before extraordinary
items per Unit of
Partnership Interest:
Basic $ .29 $ (.11) $ .18 $ .01 $ .19
======== ======== ======== ====== =======
Diluted $ .28 $ (.10) $ .18 $ .01 $ .19
======== ======== ======== ====== =======
Weighted average number of
Units of Partnership
Interest outstanding 133,140,814 (50,025,713) 83,115,101 1,115,282(B) 84,230,383
=========== =========== ========== ========= ==========
</TABLE>
See Accompanying Notes and Significant Assumptions
8
<PAGE>
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
NOTES AND SIGNIFICANT ASSUMPTIONS
For the Six Months Ended June 30, 1998
(A) GMPT Exchange
-------------
On September 30, 1998, TRG exchanged interests in 10 shopping centers (nine
wholly owned and one Unconsolidated Joint Venture), together with $990 million
of debt, for all of GMPT's approximately 50 million partnership units. TRG will
continue to manage the centers exchanged under a management agreement with GMPT
that expires December 31, 1999. The management agreement is cancelable with 90
days notice. The estimated gain on the exchange of approximately $1.1 billion,
representing the difference between the fair value of the GMPT units of $675
million, based on the average stock price of $13.50 for the two week period
prior to the closing, and the sum of the net book values of the 10 shopping
centers, the debt assumed by GMPT, and the transaction costs, has been excluded
from TRG's pro forma operations for the six months ended June 30, 1998. Included
as pro forma adjustments are the results of operations of the exchanged centers,
including interest on debt assumed by GMPT, and the incremental effect of the
new management agreement with GMPT on management, leasing, and development
revenues and expenses.
In anticipation of the GMPT Exchange, TRG used the $1.2 billion proceeds from
two bridge loans bearing interest at one-month LIBOR plus 1.30% to extinguish
approximately $1.1 billion of debt, including substantially all of TRG's public
unsecured debt, its outstanding commercial paper, and borrowings on its existing
lines of credit. The remaining proceeds were used primarily to pay prepayment
premiums and transaction costs. An extraordinary charge of approximately $49
million, consisting primarily of prepayment premiums, was recognized in
connection with the extinguishment of the debt.
The balance on the first bridge loan of $902 million was assumed by GMPT at the
time of the GMPT Exchange. The second loan has a balance of $310 million and
expires in June 1999. TRG has begun the process of obtaining permanent secured
financing to replace the bridge loan. Additionally, TRG has obtained a $200
million line of credit, replacing TRG's previous revolving credit and commercial
paper facilities. TRG has also entered into treasury lock agreements with a
notional amount of $200 million at approximately 5%, plus credit spread.
GMPT's share of debt totaling $990 million includes the $902 million bridge
loan, $86 million representing 50% of the debt on the Joint Venture owned
shopping center, and $1.6 million of assessment bond obligations. The adjustment
to interest expense in the pro forma balance sheet includes the reduction for
interest expense on GMPT's share of debt (excluding the adjustment for interest
expense on the $86 million of Joint Venture debt, which is included in the
adjustment to Equity in income before extraordinary items of Unconsolidated
Joint Ventures), net of additional interest on borrowings for expected
transaction costs, prepayment premiums and restructuring charges totaling $93
million. GMPT's share of debt includes its share of the $93 million in expected
costs.
The average interest rates on both the extinguished debt and the new bridge loan
debt are approximately 7%. A 50 basis point change in the rates assumed would
increase or decrease the pro forma interest expense adjustment by approximately
$0.5 million. The pro forma adjustment to interest expense is not indicative of
future periods as the amount of average debt outstanding in the period is not
equal to debt outstanding on the day of the transaction.
9
<PAGE>
THE TAUBMAN REALTY GROUP LIMITED PARTNERSHIP
NOTES AND SIGNIFICANT ASSUMPTIONS - continued
For the Six Months Ended June 30, 1998
Concurrent with the GMPT Exchange, TRG committed to a restructuring of its
operations, including involuntary termination of personnel. TRG also
renegotiated contracts with certain of its outside consultants. The pro forma
income statement excludes any adjustment to general and administrative expense
related to these and future restructuring initiatives, however, TRG expects to
reduce its annual general and administrative expense by approximately $10
million by 1999. This is a forward looking statement, and certain significant
factors could cause the actual reductions in TRG's general and administrative
expense to differ materially, including but not limited to: 1) actual payroll
reductions achieved; 2) actual results of negotiations; 3) use of outside
consultants; and 4) changes in TRG's owned or managed portfolio.
(B) Other Equity Transactions
-------------------------
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 floating rate debt (average rate of 7% for the six
months ended June 30, 1998). In April 1998, TCO sold approximately 2.0 million
shares of its common stock at $13.1875 per share, before deducting the
underwriting commission and expenses of the offering. TCO used the proceeds to
acquire an additional equity interest in TRG. TRG paid all costs of the
offering. Net proceeds of approximately $25 million were used by TRG to pay down
short term floating rate debt (average rate of 7% for the six months ended June
30, 1998).
10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
THE TAUBMAN REALTY GROUP
LIMITED PARTNERSHIP
Date: October 15, 1998 By: /s/ Lisa A. Payne
-----------------
Lisa A. Payne
Executive Vice President and
Chief Financial Officer
EXHIBIT INDEX
Exhibit Number Description
2 Separation and Relative Value Adjustment
Agreement between The Taubman Realty Group
Limited Partnership and GMPTS Limited
Partnership (without exhibits or schedules,
which will be supplementally provided to the
Securities and Exchange Commission upon its
request.)
11
SEPARATION AND RELATIVE VALUE ADJUSTMENT AGREEMENT
between
THE TAUBMAN REALTY GROUP
LIMITED PARTNERSHIP
and
GMPTS LIMITED PARTNERSHIP
August 17 , 1998
------
<PAGE>
TABLE OF CONTENTS
ARTICLE 1 - DEFINED TERMS............................................ 3
1.1 Defined Terms............................................ 3
1.2 Use of Certain Terms..................................... 11
1.3 Accounting Terms......................................... 11
ARTICLE 2 - REDEMPTION............................................... 12
2.1 Transfer and Redemption of Units......................... 12
2.2 Delivery of the Exchange Units........................... 12
2.3 Exchange Debt............................................ 12
ARTICLE 3 - PROPERTY REPRESENTATIONS AND WARRANTIES.................. 13
3.1 The Company's Property Representations and Warranties.... 13
3.2 Due Diligence............................................ 23
3.3 Adjustment Amount........................................ 25
3.4 Untrue Property Representations and Other Representations;
Limitation on the Company's Liability.................... 28
3.5 Rejection Conditions..................................... 29
3.6 Condition of Exchange Properties......................... 32
3.7 Interest................................................. 33
3.8 GMPTS's Knowledge Regarding Required Consents............ 33
3.9 Currency................................................. 33
3.10 Survival of the Representations and Warranties........... 34
ARTICLE 4 - PRORATIONS, EXPENSES, COSTS, AND TAX RETURNS............. 35
4.1 Proration................................................ 35
4.2 Fees and Expenses........................................ 37
4.3 Costs if Agreement Terminates............................ 38
4.4 Survival................................................. 38
ARTICLE 5 - TAX MATTERS.............................................. 39
5.1 Profits and Losses of Partnership Prior to Closing....... 39
5.2 Tax Returns.............................................. 39
5.3 Cooperation.............................................. 40
5.5 Survival................................................. 40
ARTICLE 6 - CLOSING.................................................. 40
6.1 Closing.................................................. 40
6.2 The Company's Closing Deliveries......................... 41
6.3 GMPTS's Closing Deliveries............................... 43
6.4 Survival................................................. 44
ARTICLE 7 - CONDITIONS TO CLOSING.................................... 44
7.1 Conditions Precedent to the Company's Obligations........ 44
7.2 Conditions Precedent to GMPTS's Obligation............... 45
7.3 Injunction............................................... 45
7.4 Waiver of Failure of Conditions Precedent................ 45
7.5 No Other Conditions to Closing........................... 46
(i)
<PAGE>
ARTICLE 8 - REPRESENTATIONS AND WARRANTIES........................... 46
8.1 GMPTS's Representations and Warranties................... 46
8.2 The Company's Representations and Warranties............. 47
ARTICLE 9 - COVENANTS................................................ 48
9.1 GMPTS's Covenants........................................ 48
9.1.1 Confidentiality.................................... 48
9.1.2 Approvals not a Condition to GMPTS's Performance... 49
9.1.3 Board and Partnership Committee Seats.............. 49
9.2 The Company's Covenants.................................. 49
9.2.1 Management, Maintenance, and Operation of Exchange
Properties Prior to Closing............................. 50
9.2.2 Access to Exchange Properties...................... 51
9.2.3 Estoppels.......................................... 51
9.2.4 Confidentiality.................................... 52
9.3 Mutual Covenants......................................... 52
9.3.1 Publicity.......................................... 52
9.3.2 Covenants of the Company and GMPTS................. 53
ARTICLE 10 - DEFAULT................................................. 54
10.1 Default by GMPTS......................................... 54
10.2 Default by the Company................................... 54
10.3 Specific Enforcement..................................... 55
10.4 Survival................................................. 55
ARTICLE 11 - INDEMNITY AND RELEASE................................... 56
11.1 Indemnification by the Company........................... 56
11.2 Indemnification by GMPTS................................. 57
11.3 Notice of Indemnification................................ 58
11.4 Procedure for Third-Party Claims......................... 59
11.5 Limitation on the Company's Liability for Certain Matters 60
11.6 Limitation on GMPTS' Liability for Certain Matters....... 60
11.7 Punitive and Consequential Damages....................... 61
11.8 Mutual Release........................................... 61
11.9 Survival................................................. 61
ARTICLE 12 - MISCELLANEOUS........................................... 62
12.1 Counterparts............................................. 62
12.2 Assignment............................................... 62
12.3 Waiver................................................... 62
12.4 No Recordation........................................... 62
12.5 Blue-Pencil.............................................. 63
12.6 Governing Law............................................ 63
12.7 Notices.................................................. 63
12.8 Survival................................................. 64
12.9 Exchange Properties Held for Investment.................. 64
12.10 Binding Effect........................................... 64
12.11 Captions................................................. 64
12.12 Entire Agreement......................................... 65
(ii)
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EXHIBITS
Exhibit A - Exchange Properties and Exchange Owning Entities
Exhibit B - Debt to be Assumed by NewCo
Exhibit C - Excluded Assets
Exhibit D - Real Estate Taxes and Assessments Being Contested But Unpaid
Exhibit E - Unsecured Note
Exhibit F - Assignment of Membership Interest (for NewCo and NewCo Two)
Exhibit G - Certificate of Amendment of Limited Partnership
Exhibit H - Certificate Updating Representations and Warranties of the Company
Exhibit I - Legal Opinion - Company
Exhibit J - Non-Foreign Status Affidavit
Exhibit K - Evidence of Authority - Company
Exhibit L-1 - Direction to Distribute Trust Assets - TRG Trust
Exhibit L-2 - Direction to Distribute Trust Assets - TRG Trust II
Exhibit L-3 - Direction to Distribute Trust Assets - TRG Trust IV
Exhibit L-4 - Direction to Distribute Trust Assets - TRG Trust XIII
Exhibit M - Property Management Agreement
Exhibit N - Transfer Tax Affidavits
Exhibit O-1 - Certificate of Formation for NewCo
Exhibit O-2 - Certificate of Formation for NewCo Two
Exhibit P-1 - Amendment to Certificate of Formation for NewCo
Exhibit P-2 - Amendment to Certificate of Formation for NewCo Two
Exhibit Q - Assignment of Partnership Interests (for assignments into NewCo and
NewCo Two and assignments into the Company by the TRG Trusts)
Exhibit R - Assignment of Exchange Units
Exhibit S - Certificate of Withdrawal
Exhibit T - Certificate Updating Representations and Warranties of GMPTS
Exhibit U - Assumption and Agreement of NewCo of Obligations under Separation
Agreement
Exhibit V - Legal Opinion - GMPTS
Exhibit W - Evidence of Authority
Exhibit X - Termination of GMPTS's Rights Under Cash Tender
Exhibit Y - Resignation of Board and Committee Seats
Exhibit Z-1 - Assets and Direct Liabilities of NewCo
Exhibit Z-2 - Assets and Direct Liabilities of NewCo Two
Exhibit AA - Approved Press Release
SCHEDULES
Schedule 3.1(a) - Partners, Partnership Documents, and Percentage Interests for
the Exchange Owning Entities
Schedule 3.1(e) - Agreements Extending Income Tax Assessment or Collection
Periods and Income Tax Audit or Certiorari Proceedings
Schedule 3.1(i) - List of Security Deposits
Schedule 3.1(k) - Certain Tenant/Anchor Bankruptcies
(iii)
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Schedule 3.1(l) - Required Licenses Not Yet Issued and Violations of Issued
Licenses
Schedule 3.1(m) - Casualty and Liability Insurance Policies
Schedule 3.1(n) - Litigation
Schedule 3.1(o) - Collective Bargaining Agreements, Union Contracts, and
Severance or Termination Pay Liabilities of the Exchange
Owning Entities
Schedule 3.1(p) - Building Code and Zoning violations
Schedule 3.1(q) - Ground Lease Documents
Schedule 3.1(r) - List of Loan Documents
Schedule 3.1(s) - List of Anchor Documents
Schedule 3.1(t) - List of Service Contracts
Schedule 3.1(u) - Notices of Defaults Sent or Received With Respect to Anchor
Documents, Partnership Documents, Loan Document or Ground
Leases
Schedule 3.1(v) - Notices of Default Received under Service Contracts
Schedule 3.1(w) - Required Conditions to be Satisfied
Schedule 3.1(x) - Violations of Environmental Law and Environmental Remediation
Schedule 6.2(s) - Form of Amended and Restated Partnership Agreement for the
Wholly-Owned Exchange Entities
(iv)
<PAGE>
SEPARATION AND RELATIVE VALUE ADJUSTMENT AGREEMENT
This Separation and Relative Value Adjustment Agreement (this "Agreement")
is entered into this 17th day of August, 1998, between The Taubman Realty Group
Limited Partnership, a Delaware limited partnership having an office at 200 East
Long Lake Road, Suite 300, Bloomfield Hills, Michigan 48304 (the "Company"), and
GMPTS Limited Partnership, a Delaware limited partnership having an office at
c/o AEW Capital Management LP, 225 Franklin Street, Boston, Massachusetts 02110
("GMPTS"), based upon the following:
A. GMPTS is a partner in the Company, and the Company and GMPTS have
decided to redeem GMPTS's entire partnership interest in the Company, all on the
terms and subject to the conditions set forth herein.
B. The Company and GMPTS, with the assistance of Morgan Stanley Dean
Witter, have selected certain properties, assets, and liabilities of the Company
to be transferred to GMPTS to effectuate such redemption. The Partnership
Committee has received a fairness opinion from Morgan Stanley Dean Witter with
respect to the fairness to the remaining partners in the Company from a
financial point of view, as of the date of such opinion, of such redemption.
C. In furtherance of the foregoing, (a) the Company will prior to Closing
(as defined below) contribute, to a newly- formed, single member Delaware
limited liability company ("NewCo"), the Company's partnership interests in
those entities described on Exhibit A attached hereto and hereby made a part
hereof that own or lease the properties (the "Exchange Properties") described on
Exhibit A and (b) the Company will prior to Closing cause to be distributed to
the Company and thereafter contributed to a newly-formed, single member Delaware
limited liability company ("NewCo Two") the partnership interests in the
Exchange Owning Entities (as defined below) owned by the TRG Trusts identified
on Exhibit A, and such
<PAGE>
contributions will be made subject to and with the assumption by NewCo and NewCo
Two of the debt, obligations, and liabilities with respect to the Exchange
Properties, including the obligations with respect to debt secured by some of
the Exchange Properties and the Company's obligations with respect to certain
other debt to be assumed by NewCo, as such debt is more particularly set forth
on Exhibit B, in exchange for 100% of the issued membership interests of NewCo
and NewCo Two. After such contributions to NewCo and NewCo Two, each of the
Exchange Owning Entities will continue to own all of the real and personal
property it owned immediately prior to such contributions, including all fee
owned property (i.e., each fee Exchange Property), ground leasehold estates,
space leases, department store leases, reciprocal easement agreements,
supplemental agreements, service and maintenance contracts, fixtures, equipment,
vehicles, supplies, rights, claims, and any other assets, tangible or
intangible, owned by each Exchange Owning Entity immediately prior to such
contributions, if any, except for the Excluded Assets, which the Company shall
have the right to transfer out of the Exchange Owning Entities at or prior to
Closing; provided, however, if separate filings or applications are needed to
cause any trademarks, logos, or names to remain vested in each Exchange Owning
Entity after such contributions, the Company shall reasonably cooperate with
GMPTS in making such filings and applications and causing such trademarks,
logos, and names to be so vested.
NOW, THEREFORE, in consideration of the promises and covenants contained
in this Agreement, and other good and valuable consideration, the receipt and
sufficiency of which the parties hereby acknowledge, the Company and GMPTS,
intending to be legally bound, hereby agree as follows:
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<PAGE>
ARTICLE 1 - DEFINED TERMS
1.1 Defined Terms. As used herein the following terms shall have the
following meanings:
"Adjustment Amounts" has the meaning provided in Section 3.3(a).
"Affiliate" of any specified individual or entity means any other
individual or entity directly or indirectly controlling or controlled by, or
under direct or indirect common control with, such specified individual or
entity. An Affiliate of an individual or entity includes, without limitation,
(i) any officer or director of such individual or entity, and (ii) any record or
beneficial owner of more than 10% of any class of ownership interests of such
individual or entity. For purposes of this definition "control" of any
individual or entity means the power to direct the management and policies of
such individual or entity, directly or indirectly, whether through the ownership
of ownership interests, by contract or otherwise, and the terms "controlling"
and "controlled" have meanings correlative to the foregoing.
"Agreement" has the meaning provided in the introductory paragraph hereof.
"Anchor Documents" has the meaning provided in Section 3.1(s).
"Anchor Party" means a party to an Anchor Document other than an Owning
Entity.
"Applicable GMPTS Notice Date" has the meaning provided in Section 3.3(b).
"Approved Press Release" has the meaning provided in Section 9.3.1.
"Assignment of Membership Interest" has the meaning provided in Section
6.2(a).
"Assumed Bridge Loan" means that certain loan to be in the original
principal amount of approximately $894,000,000 and to be made by UBS AG, New
York Branch, (or one or more other lenders acceptable to the Company and GMPTS)
to NewCo and NewCo Two or the Company which will be assumable by NewCo and/or
NewCo Two, pursuant to a commitment issued by UBS AG. The parties acknowledge
that the Company will negotiate the Assumed Bridge Loan, which will have a term
of twelve (12) months. If the Assumed
3
<PAGE>
Bridge Loan is accelerated and declared due by the lender prior to the stated
maturity date solely by reason of a material breach of a representation or
warranty with respect to the Exchange Properties set forth in the initial loan
documents for the Assumed Bridge Loan (and any subsequent representations and
warranties set forth in any amendment thereto, to the extent such
representations are the same as those set forth in such initial loan documents,
and only if the term of the loan which is the subject of such amendment ends on
or before the term of the initial Assumed Bridge Loan), the Company shall
indemnify and hold harmless GMPTS from any damages or costs suffered as a result
of GMPTS having to obtain a replacement loan.
"Blue Sky Laws" has the meaning provided in Section 3.1(cc).
"Business Day" means any day that is not a Saturday, a Sunday, or other
day on which banks are required or authorized to be closed in the City of New
York.
"CalPERS" means The California Public Employees' Retirement System.
"Cash Tender" has the meaning provided in Section 8.1(a).
"Certificate of Amendment" has the meaning provided in Section 6.2(b).
"Claim" has the meaning provided in Section 11.4.
"Closing " has the meaning provided in Section 6.1.
"Closing Date" has the meaning provided in Section 6.1.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning provided in the introductory paragraph hereof.
"Company Parties" has the meaning provided in Section 11.2.
"Confidential Information" has the meaning provided in Section 9.1.1.
"Contested Matter" has the meaning provided in Section 3.10.
"Defeasance" has the meaning provided in Section 7.1(c).
"Due Diligence" has the meaning provided in Section 3.2.
4
<PAGE>
"Encumbrances" has the meaning provided in Section 2.2.
"Environmental Law" means any Law relating to pollution or protection of
the environment, health, safety or natural resources, including, without
limitation, those relating to the use, handling, transportation, treatment,
storage, disposal, release or discharge of Hazardous Materials.
"Estimated Deferred Maintenance and Repair Costs" means the cost of
repairs, replacements, or improvements to the Portfolio Properties, as
reasonably estimated by Merritt and Harris (or by the New Engineer in the case
where the New Engineering Reports are being used under Section 3.3), which are
(1) described as "required" in the Merritt and Harris Reports (or in the case
where the New Engineering Reports are being used, as described as the most
imminently required work in the New Engineering Reports) and are not
contemplated by the most recent budget for the Property, to the extent not
anticipated to be charged to tenants of the Property in accordance with the
presently existing terms of applicable leases with such tenants, (2) required or
needed to be made as a result of an uninsured casualty existing on the Relative
Valuation Date (including the amount of the deductible for any insured
casualty), or (3) are required under applicable Law to be made by the Owning
Entity on or before the date hereof to correct violations of Law at the Property
which exist on the Relative Valuation Date and are not contemplated by the most
recent budget for the Property, to the extent not anticipated to be charged to
tenants of the Property.
"Exchange Act" has the meaning provided in Section 3.1(cc).
"Exchange Debt" has the meaning provided in Section 2.3.
"Exchange Owning Entities" means the Owning Entities of the Exchange
Properties, as are described on Exhibit A attached hereto.
"Exchange Partnership Documents" has the meaning provided in Section
3.1(a).
"Exchange Properties" has the meaning provided in Recital C hereof.
5
<PAGE>
"Exchange Units" means the 50,025,713 units of partnership interest in the
Company of which GMPTS is the record and beneficial owner and which constitute
all of the units of partnership interest owned by GMPTS.
"Excluded Assets" means the property, claims, and assets identified on
Exhibit C attached hereto.
"Expiration Date" has the meaning provided in Section 3.10.
"GAAP" means generally accepted accounting principles.
"GMPTS" has the meaning provided in the introductory paragraph hereof, and
shall include an assignee of GMPTS permitted under Section 12.2 hereof.
"GMPTS Parties" has the meaning provided in Section 11.1.
"Ground Leases" has the meaning provided in Section 3.1(q).
"Hazardous Materials" means (a) petroleum and petroleum products,
by-products or breakdown products, radioactive materials, asbestos-containing
materials and polychlorinated biphenyls and (b) any other chemicals, materials
or substances regulated as toxic or hazardous or as a pollutant, contaminant or
hazardous waste under any applicable Environmental Law.
"hereof," "herein," and "hereunder" and words of similar import shall mean
this Agreement as a whole and not any particular section, paragraph of
subdivision thereof.
"HSR Act" has the meaning provided in Section 3.1(cc).
"including" means including, without limitation.
"Indemnified Party" has the meaning provided in Section 11.3.
"Law" means any federal, state, local or foreign statute, law, ordinance,
regulation, rule, code, order, judgement or decree, and any judicial or
administrative interpretation thereof, and any other requirement or rule of law,
including any amendment thereto or modification thereof.
"Leases" has the meaning provided in Section 3.1(h).
6
<PAGE>
"Litigation" has the meaning provided in Section 3.1(n).
"Loan Documents" has the meaning provided in Section 3.1(r).
"Manager" means The Taubman Company Limited Partnership, a Delaware
limited partnership.
"Membership Interests" means the NewCo Membership Interests and the NewCo
Two Membership Interests.
"Merritt and Harris Reports" means the physical inspection and engineering
reports ordered by the Company on July 16, 1998, to be prepared by Merritt and
Harris in connection with the Transaction. At the request of either party after
the preparation of the final Merritt and Harris Reports, the parties shall
attach to this Agreement a schedule identifying the Merritt and Harris Reports
by name, date, and job number.
"NewCo" has the meaning provided in Recital C.
"NewCo Membership Interests" has the meaning provided in Section 2.1.
"NewCo Two" has the meaning provided in Recital C.
"NewCo Two Membership Interests" has the meaning provided in Section 2.1.
"New Engineer" has the meaning provided in Section 3.2(d).
"New Engineering Reports" means any physical inspection or engineering
reports issued by the New Engineer with respect to the Portfolio Properties
pursuant to Section 3.2(d).
"New Environmental Consultant" has the meaning provided in Section 3.2(c).
"New Environmental Reports" means any environmental reports issued by the
New Environmental Consultant with respect to the Portfolio Properties pursuant
to Section 3.2(c).
"NYSE" means the New York Stock Exchange.
"Obligated Party" has the meaning provided in Section 11.3.
"Owning Entities" means the partnerships or other entities which directly
own the real estate interests indirectly held by the Company.
7
<PAGE>
"Partnership Agreement" means the partnership agreement of the Company
existing on the date hereof.
"Percentage Interest" means, with respect to GMPTS, 37.2464% and, with
respect to the Company, 62.7536%.
"Permitted Exceptions" means the following with respect to the Properties:
(a) building and use restrictions and zoning and building ordinances, codes,
regulations, and resolutions and governmental land use regulations provided the
same do not prevent the present use of the Property as a shopping center, (b)
mortgages, deeds of trust, liens, security interests, negative pledges, and
other charges and encumbrances in favor of any lender and given in connection
with (i) with respect to the Exchange Properties, the Assumed Bridge Loan, the
Released Debt and any other indebtedness set forth on Exhibit B hereto that is
assumed by GMPTS hereunder or to which the Properties may be subject at Closing
as provided herein, and (ii) with respect to the Retained Properties, any
indebtedness described in the Company's most recent regularly prepared financial
statements, (c) the lien of real estate taxes, assessments, and water and sewer
charges not delinquent as of the date of this Agreement or which are disclosed
on Exhibit D and are being contested in good faith, (d) any exceptions the Title
Company would agree to insure over, without any additional cost or liability to
either party, except for any payment, bonding, indemnity, or other obligation
which may be agreed to by the party who will not indirectly or directly own the
Property after Closing, in such party's sole discretion, provided such insurance
is satisfactory to the other party in its reasonable discretion, (e) inchoate or
recorded mechanic's, construction, and materialmen liens which the Owning Entity
(1) does not have the financial responsibility to remove or discharge or (2) is
not likely to have the financial responsibility to remove or discharge because a
financially responsible third party has the responsibility to remove or
discharge, (f) the Anchor Documents, (g) any other department store leases,
reciprocal easement
8
<PAGE>
agreements, or operating agreements, (h) the rights of tenants under the Leases
as tenants only and any other leases entered into pursuant to the terms hereof,
(i) customary easements or rights for access to and construction, use,
maintenance, or repair of utility lines, wires, terminal boxes, mains, pipes,
cables, conduits, poles and other equipment and facilities on, under, and across
the Properties, (j) standard printed exclusions from coverage contained in the
form of the title insurance policy issued by the Title Company, (k) any matter
that is the responsibility of any department store party, including any Anchor
Party, any tenant, or any subtenant (other than an Owning Entity) of an
Property, (l) the Ground Leases, (m) utility contracts or agreements, and (n)
any other agreements, restrictions, liens, or encumbrances which would not have
a material adverse effect on a Property.
"Portfolio Properties" means the Exchange Properties and the Retained
Properties.
"Press Release" has the meaning provided in Section 9.3.1.
"Property" means any one of the Portfolio Properties.
"Property Management Agreement" has the meaning provided in Section
6.2(j).
"Regulatory Filings" has the meaning provided in Section 3.1(cc).
"Property Representations" has the meaning provided in Section 3.1.
"Relative Representations" has the meaning provided in Section 3.1.
"Relative Valuation Date" means August 3, 1998, being the date on which
the parties agreed upon the relative valuation of the Company's properties,
assets, and liabilities.
"Relative Value" means, with respect to any Portfolio Property, the
relative value agreed to by the parties for that Property when they determined
the relative value of all of the Portfolio Properties.
"Released Claims" has the meaning provided in Section 11.8.
"Retained Bridge Loan" means that certain loan to be in the original
principal amount of approximately $430,000,000 (depending on the amount of
senior unsecured notes
9
<PAGE>
tendered) and to be made by UBS AG, New York Bank (or one or more other lenders
acceptable to the Company), to the Company.
"Retained Properties" means the properties and assets owned, directly or
indirectly, by the Company, other than the Exchange Properties.
"Securities Act" has the meaning provided in Section 3.1(cc).
"Service Contracts" has the meaning provided in Section 3.1(t).
"Surveys" means the updated surveys of all or certain of the Properties
obtained by the Company in connection with the Transaction.
"Tax Return" means any return, declaration, report, estimate, claim for
refund, or information return or statement relating to, or required to be filed
in connection with, any Taxes, including any schedule or attachment thereto, and
any amendment thereof.
"Taxes" means any and all taxes, however denominated, imposed by any
federal, state, local or foreign government, or any agency or political
subdivision thereof, including without limitation, net income, gross income,
gross receipts, license, payroll, employment- relief, excise, severance, stamp,
occupancy, premium, windfall profits, environmental, customs or import duties,
capital, franchise, profits, withholding, social security (or similar),
unemployment, disability, worker's compensation taxes, real property, personal
property, sales, use, transfer, registration, value added, ad valorem,
estimated, or any other tax of any kind whatsoever, including any interest,
penalty, addition to tax, other charge, or additional amounts imposed by any
taxing authority, whether disputed or not.
"Tenancies" has the meaning provided in Section 3.1(h).
"Tender Offer" has the meaning provided in Section 7.1(c).
"Title Company" means Flagler Title Company, 1897 Palm Beach Lakes
Boulevard, Suite 125, West Palm Beach, Florida, 33409.
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<PAGE>
"Title Insurance Commitments" means the title insurance commitments issued
by the Title Company in connection with the Transaction with respect to all or
certain of the Properties.
"Transaction" has the meaning provided in Section 6.1.
"Versar Reports" means the environmental reports ordered by the Company on
July 13, 1998, to be prepared by Versar, Inc., in connection with the
Transaction. At the request of either party after the preparation of the final
Versar Reports, the parties shall attach to this Agreement a schedule
identifying the Versar Reports by name, date, and job number.
"Wholly-Owned Exchange Entities" means all of the Exchange Owning Entities
except Woodfield Associates. "Woodfield Management Agreement" means that certain
Management Agreement, dated March 31, 1989, between the Manager and Woodfield
Associates, as amended by Amendment to Management Agreement, dated March 31,
1989, between the Manager and Woodfield Associates. 1.2 Use of Certain Terms.
(a) Any defined term used in the plural shall refer to all members of the
relevant class in the defined term, and any defined terms used in the singular
shall refer to any one of the members of the relevant class in the defined term.
The plural shall include the singular and vice versa. All pronouns and any
variations thereof shall be deemed to refer to the masculine, feminine, or
neuter, as the identity of the person or entity may require. When used in this
Agreement, "or" is not exclusive. (b) All Schedules and Exhibits described or
referenced herein are hereby incorporated by this reference into this Agreement
as if fully set forth herein. (c) Any reference herein to a Section means a
Section of this Agreement. 1.3 Accounting Terms. All accounting terms not
specifically defined in this Agreement shall be construed in conformity with,
and all financial data required by this
11
<PAGE>
Agreement to be submitted shall, unless otherwise expressly stated, be prepared
in conformity with generally accepted accounting principles, applied on a
consistent basis.
ARTICLE 2 - REDEMPTION
2.1 Transfer and Redemption of Units. At the Closing, GMPTS shall transfer
the Exchange Units to the Company, and the Company shall redeem the Exchange
Units from GMPTS, in exchange for 100% of the membership interests (the "NewCo
Membership Interests") in NewCo and 100% of the membership interests (the "NewCo
Two Membership Interests") in NewCo Two.
2.2 Delivery of the Exchange Units. At the Closing, GMPTS will deliver to
the Company Certificate Nos. 31 and 35 evidencing the Exchange Units, together
with a duly executed assignment separate from certificate, assigning and
transferring to the Company all right, title, and interest in and to the
Exchange Units, free and clear of any security interests, pledges, mortgages,
liens, claims, encumbrances, charges or rights of others of any kind
(collectively, "Encumbrances"). The parties acknowledge that the foregoing
Certificate Nos. 31 and 35 evidenced 22,333.019 and 2,995.435 units of
partnership interest in the Company prior to the Company's split of its units
effective September 30, 1997, and that such certificates are now deemed to
evidence, in the aggregate, 50,025,713 units of partnership interest in the
Company as a result of such split. Concurrently with GMPTS's delivery of title
to the Exchange Units to the Company in the condition required hereunder, the
Company will deliver all certificates, if any, and duly executed assignments
separate from such certificates necessary to assign and transfer to GMPTS all
right, title, and interest in and to NewCo and NewCo Two, free and clear of any
Encumbrances, to GMPTS, and NewCo and NewCo Two will assume, for the Company's
benefit, the liabilities set forth on Exhibit B hereto.
2.3 Exchange Debt. Prior to the Closing, GMPTS shall use its good faith,
commercially reasonable efforts to cause the Company to be fully and
unconditionally released from any and all liabilities and obligations relating
to or arising out of the indebtedness
12
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described on Exhibit B attached hereto (the "Exchange Debt"). Such reasonable
efforts shall include causing to be delivered to a lender of any Exchange Debt
assumptions, guaranties, or similar assurances by NewCo and/or GMPTS with
respect to the Exchange Debt, if reasonably requested by any such lender. If a
lender of any Exchange Debt does not release the Company fully and completely
with respect thereto (including as a result of any such lender imposing
unreasonable obligations on GMPTS, NewCo and/or NewCo Two), then NewCo and GMPTS
shall, jointly and severally, indemnify, defend, and hold harmless the Company
from and against any obligations or liabilities with respect to the Exchange
Debt.
ARTICLE 3 - PROPERTY REPRESENTATIONS AND WARRANTIES
3.1 The Company's Property Representations and Warranties. Subject to the
terms and conditions of this Article 3, the Company represents and warrants to
GMPTS as follows as of the Relative Valuation Date:
(a) Schedule 3.1(a) describes each Exchange Owning Entity and all partners
therein and their respective percentage interest. The partners of the Exchange
Owning Entities are the record and beneficial owners of their respective
partnership interests in each Exchange Owning Entity as set forth on Schedule
3.1(a) in accordance with the percentages specified in Schedule 3.1(a) (except
no representation is made as to the beneficial owner of CalPERS's partnership
interest in Woodfield Associates) and with respect to the Company's interest in
the Wholly-Owned Exchange Entities and the Company's interest in Woodfield
Associates, such partners hold their partnership interests (and at Closing NewCo
and NewCo Two will hold such partnership interests) free and clear of any and
all security interests, liens, pledges, hypothecations, or encumbrances whether
recorded, perfected, choate or inchoate, actual or contingent, except as may be
provided for in the partnership agreements and amendments thereto described on
Schedule 3.1(a) (the "Exchange Partnership Documents") and the amended and
restated partnership agreements for the Wholly-Owned Exchange Entities described
in Section 6.2(s). With respect to Wholly-Owned Exchange Entities, no person,
13
<PAGE>
firm, or entity, other than the ones identified on Schedule 3.1(a), (1) owns any
partnership interest in any Wholly-Owned Exchange Entity or any right or option
(or any right of first refusal with respect to) to acquire a partnership
interest in any Wholly-Owned Exchange Entity or (b) has the right to receive any
capital, profits, or distributions of any Wholly-Owned Exchange Entity as to any
equity interest therein. With respect to the Company's interest in Woodfield
Associates, except as provided in the partnership agreement of Woodfield
Associates, no person, firm or entity (i) owns any portion of the Company's
partnership interest in Woodfield Associates or any right or option (or any
right of first refusal with respect to) to acquire any such partnership interest
or (ii) has the right to receive any capital, profits, or distributions with
respect to such partnership interest. True and complete copies of the Exchange
Partnership Documents, as amended to date, have been delivered to GMPTS, and
true and complete copies of the amended and restated partnership agreements for
the Wholly- Owned Exchange Entities described in Section 6.2(s) will be
delivered to GMPTS at Closing. Upon the Company's delivery of all right, title,
and interest in and to the Membership Interests to GMPTS, GMPTS shall have good
and marketable title to the Membership Interests.
(b) Each Exchange Owning Entity owns its assets described on the balance
sheets referenced in paragraph 3.1(f) and has not engaged in any business other
than owning, leasing, managing, and operating its respective Exchange Property
and related property and assets. Each Exchange Owning Entity is duly qualified
to do business in each jurisdiction in which the ownership of its property or
the conduct of its business requires such qualification.
(c) At Closing, no Exchange Owning Entity will have any accrued and unpaid
obligation to make payments of any kind to or on behalf of any partners or any
beneficial owner of any partner except for any obligation under the Woodfield
Exchange Partnership Documents which has accrued, but is not yet due as of the
Closing Date.
(d) The partnership interests of the partners in each Wholly-Owned
Exchange Entity have not been registered or qualified under the Securities Act
of 1933, as amended, or under
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the securities laws of the state where the respective Exchange Property is
located or any other state. The partnership interest of the Company in Woodfield
Associates has not been registered or qualified under the Securities Act of
1933, as amended, or under the securities laws of the state where such Exchange
Property is located or any other state.
(e) All federal, state and local Tax Returns (including Tax Returns
concerning "gross receipts and business use and occupancy") required to be filed
by each Exchange Owning Entity, including Tax Returns required to be filed with
regard to its Exchange Property, have been timely (taking into account valid
extensions) filed, and all Taxes whether or not due and owing by each Exchange
Owning Entity, including in connection with the ownership and operation of its
Exchange Property, have been paid in full or properly accrued on the balance
sheets delivered to GMPTS. No written claim has been received by the Company or
any Exchange Owning Entity from any authority in a jurisdiction where an
Exchange Owning Entity does not file Tax Returns that it is, or may be, subject
to taxation by that jurisdiction. Except as set forth on Schedule 3.1(e), (1) no
Exchange Owning Entity is a party to any agreement extending the period for
assessment or collection of any Tax and (2) no tax audit or tax certiorari
proceedings are currently pending or to the Company's knowledge threatened in
writing to be brought with respect to any Exchange Owning Entity or its Exchange
Property.
In addition:
(i) Other than with respect to real estate taxes and assessments,
there are no outstanding deficiencies or assessments or
written proposals received by the Company for assessment of
any Taxes proposed, asserted or assessed against any Exchange
Owning Entity.
(ii) None of the Exchange Owning Entities is a party to any
outstanding tax sharing or other allocation agreement with
respect to Taxes except to the extent imposed by the laws of
any state.
(iii) Each of the Exchange Owning Entities has withheld and paid all
Taxes required to be withheld and paid in connection with
amounts paid or owing any employee, partner, independent
contractor, creditor or other third party.
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(iv) None of the Exchange Owning Entities is a corporation or an
association taxable as a corporation for federal income tax
purposes.
(v) Not later than September 30, 1998, the Company shall deliver
to GMPTS a schedule setting forth, to the knowledge of the
Company, the adjusted tax basis of each Exchange Owning Entity
in its assets as of December 31, 1997 and a schedule setting
forth those Exchange Owning Entities with Section 754
elections in effect as of the date hereof.
(vi) None of the Exchange Owning Entities has agreed to, or has
been required to, make any Section 481(a) adjustment because
of a change in accounting method. There are no closing
agreements, irrevocable elections or similar binding
agreements which will restrict the choice of any Exchange
Owning Entity or their respective partners regarding the
treatment of any item of income, deduction, credit or
allowance for federal income tax purposes in taxable periods
subsequent to the Closing Date.
(vii) The Company has delivered, or will deliver as soon as
practicable, to GMPTS complete copies of all Tax Returns of
each Exchange Owning Entity filed for periods ending on or
after December 31, 1994.
(viii) No Exchange Owning Entity owns any interest in excess of 50%
in any corporation, limited liability company or partnership.
(ix) With respect to this paragraph (e), GMPTS shall have no right
to make a claim against the Company for any breach thereof to
the extent that any costs, expenses, or Taxes due are
reimbursable by tenants or Anchor Parties at the Exchange
Properties.
(f) The unaudited balance sheets and statements of income, changes in the
equity, and cash flow as of and for the fiscal periods ended December 31, 1997
and June 30, 1998 delivered to GMPTS for each Owning Entity have been prepared
in accordance with GAAP, present fairly the financial condition and results of
operations of the Owning Entity, and have been prepared on a consistent period
by period basis.
(g) Each Exchange Owning Entity is a duly formed, validly existing
partnership for local partnership law purposes.
(h) (1) Each rent roll (individually, a "Rent Roll" and collectively, the
"Rent Rolls") dated July 31, 1998 and delivered by the Company to GMPTS under
separate cover of even date herewith is, when taken as a whole with respect to
each Exchange Property,
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true, accurate, and correct with respect to all leases and all other non-lease
tenancies (all such tenancies, collectively, the "Tenancies") affecting each
Exchange Property as of the date of such Rent Roll and shown thereon, and
contain the following information with respect to each Tenant: (i) the name of
the Tenant; (ii) the space which such Tenant occupies; (iii) the approximate
square footage of such space; (iv) the lease commencement date and lease
termination date; (v) the step date; (vi) the minimum annual rent; and (vii) the
breakpoint amount and rate; (2) attached to the above-referenced separate cover
of even date herewith is a true, correct and complete list of all leases and all
amendments, modifications, renewals and extensions thereof (collectively, the
"Leases"), true, correct and complete copies of which have been or will be
delivered to GMPTS on or prior to Closing, reasonably promptly upon request by
GMPTS; (3) no Lease contains, nor does any Tenant, nor to the Company's
knowledge any other party, have a purchase option or any right of first offer or
first refusal to purchase (or any other similar right to acquire any ownership
interest, as distinguished from rights to lease additional space in any Exchange
Property) with respect to any Exchange Property or any portion thereof, except
as may be set forth in an Anchor Document with respect to an Anchor Party's
leased premises.
(i) Schedule 3.1(i) sets forth a list of all security deposits currently
being held pursuant to the Leases by each Exchange Owning Entity and all such
security deposits are held in accordance with applicable Law. No Tenant has
asserted any claim (other than for a customary refund at the expiration of a
Lease) to all or any part of such security deposits and no Exchange Owning
Entity has applied any portion of any such security deposits to the payment of
any sums due from any Tenant under a Lease.
(j) None of the Leases and none of the rents, security deposits or other
amounts payable thereunder have been assigned, pledged, or encumbered other than
as provided in the Loan Documents.
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(k) Except as set forth on Schedule 3.1(k), no Exchange Owning Entity has
received written notice of any filing of a bankruptcy, reorganization,
insolvency, or similar proceeding by any Tenant leasing in excess of 2,500
square feet of space.
(l) Except as set forth on Schedule 3.1(l), to the Company's knowledge,
each Exchange Owning Entity has all of the licenses and permits (including
certificates of occupancy) necessary for the ownership and operation of each
Exchange Property by the Exchange Owning Entity (not any required by tenants or
Anchor Parties) as it is currently being operated and the same are in full force
and effect and no Exchange Owning Entity has taken any action that would (or
failed to take any action the omission of which would) result in the revocation
of such licenses and permits and no Exchange Owning Entity has received any
written notice of violation from any Governmental Authority or written notice of
an intention by any such Governmental Authority to revoke any certificate of
occupancy or other license issued by it in connection with the use and operation
of any Exchange Property, that in each case has not been cured or otherwise
resolved to the satisfaction of such Governmental Authority. To the Company's
knowledge, the Transaction will not result in or cause to be terminated or
cancelled any license or permit necessary for the ownership and operation of any
Exchange Property, as it is currently being operated, which could not be
replaced by GMPTS upon delivery of customary applications and fees and upon
complying with other requirements which are generally required for similar
properties in the applicable jurisdiction.
(m) Schedule 3.1(m) identifies and describes all insurance policies
(excluding title insurance) maintained by the Exchange Owning Entity with
respect to the Exchange Properties. Upon request by GMPTS, the Company shall
promptly deliver copies of such policies to GMPTS. Continually during its period
of ownership, each Exchange Owning Entity has maintained insurance in
commercially reasonable amounts with respect to the Exchange Properties and the
owner thereof.
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(n) Except for all items set forth on Schedule 3.1(n) (such items herein
referred to collectively as the "Litigation"), there is no lawsuit, litigation,
or arbitration pending against any Exchange Owning Entity before any federal,
state, municipal, foreign, or other court or governmental or administrative body
or agency, or any private arbitration tribunal for which any Exchange Owning
Entity has a significant potential financial or legal exposure. The description
of the Litigation described on the letter dated July 13, 1998, from the Company
to its counsel is accurate in all material respects.
(o) No Exchange Owning Entity is bound by any employment agreement,
collective bargaining agreement, union contract, or similar agreement except as
set forth on Schedule 3.1(o). No Exchange Owning Entity or the Company has any
employees that will remain at the Exchange Property and become an employee of
GMPTS after Closing. Except as set forth on Schedule 3.1(o), no Exchange Owning
Entity is a party to, or bound by, any agreement that contains any material
severance or termination pay liability or obligation, including, without
limitation, any "excess parachute payment," as defined in Section 280G(b) of the
Code. No Exchange Owning Entity maintains or sponsors or has any liability
(contingent or otherwise) for any contributions to any pension, profit sharing,
thrift, employee stock ownership or other retirement plan, or deferred
compensation, stock ownership, stock purchase, performance share, bonus or other
incentive plan, or severance plan or other pension or welfare benefit plan,
agreement, arrangement or understanding, whether or not such plan is or is
intended to be qualified under Section 401(a) of the Code, including, without
limitation, any employee benefit plan within the meaning of Section 3(3) of
ERISA and any "plan" within the meaning of Section 4975(e)(1) of the Code.
(p) Except as set forth on Schedule 3.1(p) there is no judicial,
municipal, or administrative action, suit, arbitration, or proceeding against
the Company, an Exchange Owning Entity, or an Exchange Property, or any part
thereof, pending in any court or governmental department, commission, board,
agency or instrumentality, of the United States
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or any state, county, city or other political subdivision (a "Governmental
Authority"), alleging a material building code or zoning violation.
(q) Schedule 3.1(q) sets forth a true, correct, and complete list of each
ground lease (and all amendments and modifications thereto) creating the ground
leasehold estates owned by the Exchange Owning Entity described on Schedule
3.1(q) (the "Ground Lease").
Each Ground Lease is in full force and effect.
(r) Schedule 3.1(r) sets forth a true, correct, and complete description
of each loan document evidencing or containing any terms and conditions of any
mortgage loans encumbering the Exchange Properties (the "Loan Documents").
Exhibit B sets forth the outstanding principal balance of each such loan as of
July 31, 1998.
(s) Except as identified on Schedule 3.1(s) attached hereto (the "Anchor
Documents"), or included in the Leases or the Permitted Exceptions, there are no
written agreements with any Anchor Party, or modifications of or supplements to
the Anchor Documents, which are binding on the Exchange Owning Entities or the
Exchange Properties.
(t) Except for the Permitted Exceptions and contracts or agreements which
may be terminated by the Exchange Owning Entity on thirty (30) days or less
notice without penalty or premium, there are no service, supply, maintenance, or
utility contracts or agreements which will be binding upon the Exchange
Properties or the Exchange Owning Entities and which will impose an obligation
on the Exchange Owning Entities after the Closing other than the contracts
listed on Schedule 3.1(t) attached hereto (the "Service Contracts"). None of the
Exchange Owning Entities has entered into any contracts or agreements which will
be binding on the Exchange Owning Entity after closing and which require an
annual payment by the Exchange Owning Entity in excess of $50,000, other than
the Leases, Anchor Documents, Ground Leases, Loan Documents, Exchange
Partnership Documents, Permitted Exceptions, Service Contracts, the Woodfield
Management Agreement, and any contract or agreement which may be terminated on
thirty (30) days or less notice. Except for the existing
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<PAGE>
management agreements for the Exchange Properties (all of which, except for the
Woodfield Management Agreement, will be terminated at closing), there are no
contracts or agreements between the Exchange Owning Entities and the Company or
any Affiliate thereof which could not be terminated without penalty or premium
upon the request of GMPTS.
(u) Except as identified on Schedule 3.1(u) attached hereto, and except
for defaults cured on or before the date hereof, neither the Company nor any
Exchange Owning Entity has (i) received any written notice from any Anchor
Party, CalPERS, any lender under the Loan Documents, or any landlord under a
Ground Lease asserting that the Exchange Owning Entity or the Company is in
default under such Lease, Anchor Document, Exchange Partnership Documents, Loan
Documents, or Ground Lease, as the case may be, or (ii) sent to any such party
any written notice asserting that such party is in default under such document.
No written notice has been received by the Company or any Exchange Owing Entity
from any Anchor Party who is open and operating on the date hereof stating that
such Anchor Party intends to cease operation (other than temporarily due to
casualty, remodeling, renovation, relocation, or similar causes) at an Exchange
Property.
(v) None of the Exchange Owning Entities has received any written notice
of default under any of the Service Contracts which remains uncured except as
listed on Schedule 3.1(v) attached hereto.
(w) In order to transfer the Company's partnership interests in the
Exchange Owning Entities to NewCo and NewCo Two and to transfer all of the
Membership Interests therein to GMPTS without in and of itself causing (or with
the giving of notice or lapse of time, or both, resulting in) a breach of or
default under, or triggering (or with the giving of notice or lapse of time, or
both, triggering) any significant rights in a third party, including any rights
of first offer or rights of first refusal under, any of the Leases, Anchor
Documents, Ground Leases, or the Loan Documents, the only conditions which must
be satisfied or consents received are set forth on Schedule 3.1(w) attached
hereto.
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(x) Except as described on Schedule 3.1(x), there is no (i) violation of
Environmental Law at a Property for which the Owning Entity or the Company is
liable, or (ii) condition at a Property which the Owning Entity is required
under Environmental Law to remediate.
(y) The total Estimated Deferred Maintenance and Repair Costs for the
Exchange Properties is equal to GMPTS's Percentage Interest of the total
Estimated Deferred Maintenance and Repair Costs for the Portfolio Properties.
(z) There is no exception to title or title defect with respect to any of
the Properties which is not a Permitted Exception.
(aa) The minimum rents for the Portfolio Properties deemed to be in place
as of January 1, 1998, which were used by the parties in the determination of
the Relative Value of the Portfolio Properties were based upon leases in place
and modified for anticipated new leases or lease terminations. The 1998
forecasts which were used for determining the Relative Valuation of the
Portfolio Properties were determined by the Company in accordance with the
method of preparing previous mid-year forecasts prepared by the Company in the
ordinary course of business, and such forecasts were applied on a uniform basis
with respect to all of the Portfolio Properties.
(bb) The transfers contemplated by this Agreement by the Company will not
result in the Company having assets remaining in its hands after the transfers
that is an unreasonably small capital for the business in which it is engaged.
The Company does not intend or believe that it will incur debts beyond its
abilities to pay such debts as they mature.
(cc) Except as contemplated hereby, neither the execution and delivery by
the Company hereof nor the consummation by the Company of the Transaction will
conflict with or result in a breach of any provisions of the Partnership
Agreement of the Company; violate or conflict with any regulation, rule, order
or administrative position of NYSE, or any other United States national
securities exchange on which any class of securities of Taubman Centers, Inc.,
is listed; or require any consent, approval or authorization of, or declaration,
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filing or registration with, any Governmental Authority, other than any filings
required under the Securities Act of 1933, as amended (the "Securities Act"),
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"), state
securities laws ("Blue Sky Laws") (collectively, the "Regulatory Filings"), the
Code and any filings required to be made with the Office of the Secretary of the
State of Michigan and NYSE or any other national securities exchange on which
any class of securities of Taubman Centers, Inc. is listed. The representations
and warranties set forth in paragraphs (a) through (w) above are herein referred
to as the "Property Representations" and the representations and warranties set
forth in paragraphs (x) through (aa) above are herein referred to as the
"Relative Representations".
3.2 Due Diligence. (a) GMPTS shall conduct whatever examinations,
inspections, testing, studies and/or investigations (herein collectively called
"Due Diligence") of the Exchange Properties as GMPTS may desire. If in GMPTS's
reasonable determination, GMPTS believes that any of the Property
Representations or the Relative Representations are untrue in any material
respect with respect to any one or more of the Exchange Properties, GMPTS may,
as its sole and exclusive remedies, (i) in the case of the Relative
Representations, timely deliver to the Company the notice described in Section
3.3 and may then proceed under Section 3.3, (ii) in the case of a Property
Representation, make a claim under Section 3.4, and/or (iii) in the case
described in clause (b) of Section 3.5, proceed under Section 3.5. Except as
expressly provided in Section 3.5, GMPTS shall not have any right to terminate
or rescind this Agreement for any reason whatsoever, including as a result of
GMPTS's Due Diligence or the existence of any untrue Property Representations or
Relative Representations, it being understood and agreed that GMPTS's sole and
exclusive rights relating to such matters shall be to proceed under Section 3.3,
Section 3.4, Section 3.5, or Article 10.
(b) The Company has delivered or will deliver to GMPTS the Versar Reports,
the Merritt and Harris Reports, and the Title Commitments promptly after receipt
by the Company.
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The Company shall provide to GMPTS copies of all agreements, work orders,
correspondence, and other material relating to the ordering of the Versar
Reports and the Merritt and Harris Reports, including all drafts thereof
received by the Company. GMPTS shall have the right to accompany the
environmental and/or engineering consultant during its site visits.
(c) If either party believes in good faith that any or all of the Versar
Reports were not prepared in a fair and uniform manner with respect to any or
all of the Portfolio Properties, such party shall have the right to cause both
parties jointly to engage an environmental consultant to perform a new
environmental assessment of all of the Portfolio Properties by sending a written
notice requesting such action and its reasons therefor to the other party on or
before the date which is ten (10) Business Days after (i) in the case of GMPTS,
receipt by GMPTS of all of the Versar Reports for the Exchange Properties and
(ii) in the case of the Company, receipt by the Company of all of the Versar
Reports for the Retained Properties. Upon receipt of such notice, the parties
shall in good faith attempt to agree upon the environmental consultant to
perform such new assessment. If the parties do not so agree within five (5)
Business Days of such notice, the parties shall direct Versar, Inc. to select a
new environmental consultant to perform such new assessment. Any environmental
consultant selected by Versar must have experience in investigating properties
similar to the Portfolio Properties. The environmental consultant selected in
accordance with this paragraph (b) to perform the new assessment is hereinafter
referred to as the "New Environmental Consultant". In the event a New
Environmental Consultant is selected as provided above, the New Environmental
Report shall be used for purposes of this Article 3.
(d) If either party believes in good faith that any or all the Merritt and
Harris Reports were not prepared in a fair and uniform manner with respect to
any or all of the Portfolio Properties, such party shall have the right to cause
both parties jointly to engage an engineer to perform a new investigation for
all of the Portfolio Properties by sending a written notice requesting such
action and its reasons therefor to the other party on or before the date which
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is ten (10) Business Days after (i) in the case of GMPTS, receipt by GMPTS of
all of the Merritt and Harris Reports for the Exchange Properties and (ii) in
the case of the Company, receipt by the Company of all of the Merritt and Harris
Reports for the Retained Properties. Upon receipt of such notice, the parties
shall, in good faith, attempt to agree upon the engineer to perform such
investigation. If the parties do not so agree within five (5) Business Days of
such notice, the parties shall direct Merritt and Harris to select a new
engineer to perform such investigation. Any engineer selected by Merritt and
Harris must have experience in investigating properties similar to the Portfolio
Properties. The engineer selected in accordance with this paragraph (d) to
perform the additional investigation is hereinafter referred to as the "New
Engineer." In the event a New Engineer is selected as provided above, the New
Engineering Report shall be used for purposes of this Article 3.
3.3 Adjustment Amount for Untrue Relative Representations. (a) GMPTS and
the Company have entered into this Agreement based on the mutual assumption
(without investigation with respect to paragraphs (x), (y), and (z) of the
Relative Representations) that the Relative Representations are true in all
material respects. If, however, on or before the Applicable GMPTS Notice Date,
GMPTS identifies any fact or condition (such facts or conditions with respect to
paragraphs (x) and (y) of the Relative Representations being limited to the
facts and conditions set forth in or reasonably inferable from (a) the Versar
Reports or the New Environmental Reports (if any) and/or (b) the Merritt and
Harris Reports or the New Engineering Reports (if any)) which it believes in
good faith results in any of the Relative Representations with respect to any
Exchange Property being untrue in any material respect (other than a fact or
condition disclosed in any filings made by the Company with the Securities and
Exchange Commission prior to the date hereof, such facts and conditions the
parties agree having been taken into account by the parties in determining the
relative valuation of the Portfolio Properties), GMPTS shall have the right, one
time only with respect to each of the four Relative Representations, to notify
the Company in writing of all such
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matters (which notice shall include reasonable detail thereof) on or before the
Applicable GMPTS Notice Date. The Company shall have the right, one time only
with respect to each of the four Relative Representations, to notify GMPTS in
writing within sixty (60) days after each Applicable GMPTS Notice Date (which
notice shall include reasonable detail thereof) of any fact or condition which
the Company believes in good faith results in any of the Relative
Representations with respect to the Retained Properties being untrue in any
material respect (other than a fact or condition disclosed in any filings made
by the Company with the Securities and Exchange Commission prior to the date
hereof). Upon receipt of such notices, the parties shall use their good faith,
commercially reasonable efforts to agree upon whether there are any untrue
Relative Representations described in such notices for each Portfolio Property
and the cost of correction as established herein (without having to actually
incur the cost of such correction) thereof and any reasonably anticipated
liabilities to third parties as a result of such facts or conditions. No
adjustment shall be made for any alleged untrue Relative Representation which is
first asserted by either party after the respective dates set forth above, and
any such allegation shall be of no effect hereunder. If the parties are unable
to agree upon such amounts within one hundred twenty (120) days of each
Applicable GMPTS Notice Date, (i) with respect to paragraphs (z) and (aa) of the
Relative Representations either party shall have the right to resolve such
dispute by submitting the dispute to binding arbitration in accordance with the
then-prevailing rules of the American Arbitration Association sitting in
Detroit, Michigan, and (ii) with respect to paragraphs (x) and (y) of the
Relative Representations, the environmental consultant and the engineer used by
the parties in Section 3.2, respectively, shall determine such amounts, if not
previously determined. Any such proceedings must be brought on or before the
first anniversary of the Closing Date, failing which neither party shall have
any liability under this Section 3.3. The amount so-agreed upon or determined in
accordance with this paragraph (a) for each Property is referred to as the
"Adjustment Amount" for such Property. The Company shall only have the right to
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identify matters under paragraph (aa) of the Relative Representations to the
extent necessary to off-set amounts claimed by GMPTS under such paragraph (aa).
The Company shall only have the right to identify matters under paragraph (z) of
the Relative Representations to the extent necessary to off-set amounts claimed
by GMPTS under such paragraph (z). The Company shall only have the right to
identify matters under paragraphs (x) and/or (y) of the Relative Representations
to the extent necessary to off-set amounts claimed by GMPTS under such
paragraphs (x) and/or (y).
(b) The "Applicable GMPTS Notice Date" means (i) with respect to paragraph
(x) of the Relative Representations, September 30, 1998, unless either the
Versar Reports recommend additional investigation which the parties are
performing or the parties have ordered the New Environmental Reports, in which
case such date shall be thirty (30) days after receipt by GMPTS of reasonably
sufficient facts and information necessary to reasonably quantify any untrue
nature of such paragraph (x) with respect to the Exchange Properties, but in no
event later than one hundred eighty (180) days after the Closing Date, (ii) with
respect to paragraph (y) of the Relative Representations, thirty (30) days after
such receipt of the Merritt and Harris Reports, unless the parties have ordered
New Engineering Reports, in which case such date shall be thirty (30) days after
receipt by GMPTS of the New Engineering Reports for the Exchange Properties,
(iii) with respect to paragraph (z) of the Relative Representations, within ten
(10) Business Days after the Closing Date, and (iv) with respect to paragraph
(aa) of the Relative Representations, one hundred eighty (180) days after the
Closing Date.
(c) If the total amount of the Adjustment Amounts for all of the Exchange
Properties exceeds GMPTS's Percentage Interest of the total amount of the
Adjustment Amounts for all of the Portfolio Properties by more than $5,000,000,
then within thirty (30) days of the agreement or determination of the final
Adjustment Amounts, the Company shall pay to GMPTS, in the currency described in
Section 3.9, such amount from the first dollar of
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loss or claim. On the other hand, if the total amount of the final Adjustment
Amounts for all of the Retained Properties exceeds the Company's Percentage
Interest of the total amount of the Adjustment Amounts for all of the Portfolio
Properties, GMPTS shall not owe the Company any amount under this Section 3.3.
(d) Notwithstanding anything in this Agreement to the contrary, the
parties hereby knowingly and voluntarily expressly agree that (1) the sole and
only consequence of, or liability of either party for, any untrue Relative
Representation or any breach of a Relative Representation shall be for either
party to make a claim under this Section 3.3 and to enforce against the other
party the obligations of such other party under this Section 3.3 or to proceed
under Section 3.5 and (2) the Company shall not be liable for any actual (other
than claims under paragraph (c) of this Section 3.3), incidental, consequential,
punitive, exemplary, or other damages whatsoever as a result of any untrue
Relative Representation or breach of a Relative Representation and no such
damages may be claimed under this Agreement and each party hereby absolutely and
irrevocably waives, releases, and forever discharges the other party from and
against any and all such damages.
3.4 Untrue Property Representations and Other Representations; Limitation
on the Company's Liability. If GMPTS discovers any fact or condition which
results in any of the Property Representations or the representations and
warranties set forth in paragraphs (bb) and (cc) of Section 3.1 being untrue in
any material respect, GMPTS shall promptly notify the Company of such fact or
condition, and GMPTS shall in good faith use all commercially reasonable efforts
to mitigate any damages resulting therefrom. Subject to the terms and conditions
of this Section 3.4 and the remaining Sections of this Article 3, the Company
shall be liable to GMPTS for actual damages suffered as a result thereof.
Notwithstanding anything in this Agreement to the contrary, (a) the Company
shall have no liability to GMPTS for any breach by the Company of any of the
Property Representations or the representations and warranties set forth in
paragraphs (bb) and (cc) of Section 3.1 unless and until GMPTS's
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damages from breaches of the Property Representations and/or the representations
and warranties set forth in paragraphs (bb) and (cc) of Section 3.1 exceed the
total sum of $10,000,000 in the aggregate with respect to all Exchange
Properties in which case GMPTS shall be entitled to recover from the Company all
of GMPTS's damages in excess of such amount, in the form of currency described
in Section 3.9, subject only to the other limitation of liability set forth in
this Section 3.4, (b) the Company shall have no liability under this Section 3.4
for any breach of any Relative Representation, and (c) the Company shall not be
liable for any punitive, exemplary, incidental, or consequential damages as a
result of any breach of a Property Representation or the representations and
warranties set forth in paragraphs (bb) and (cc) of Section 3.1.
3.5 Rejection Conditions. For purposes of this Agreement, it will be
deemed a "Rejection Condition" if (a) on the Closing Date, an Exchange Owning
Entity does not legally and beneficially own its respective Exchange Property
(or in the case of the Hilltop, Stoneridge, and Woodfield Exchange Owning
Entities, if the land trustee holding title for the benefit of such Exchange
Owning Entities does not own such Exchange Property) or any interest holder in
the Exchange Owning Entity that is transferring its partnership interest does
not legally and beneficially own that interest, (b) prior to the Closing Date,
GMPTS or the Company identifies a fact or condition which existed on the
Relative Valuation Date and such fact or condition (i) results in an untrue
Relative Representation (based only on the Merritt and Harris Reports with
respect to physical condition and the Versar Reports with respect to
environmental matters or the New Engineering Reports or the New Environmental
Reports, if and to the extent received on or before the Closing Date) with
respect to any Exchange Properties and (ii) results in a reduction of more than
the greater of $40,000,000 or 35% of the gross relative value for that Property
which was used by the parties when they determined the relative values of the
Portfolio Properties, or (c) on the Closing Date, the parties have not satisfied
any material condition or obtained any consent which is required prior to
transferring
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the Company's interest in the Exchange Owning Entity to NewCo or transferring
the Membership Interest to GMPTS in the manner contemplated by this Agreement;
provided, however, in the event any such condition is not satisfied or such
consent is not obtained on or prior to the originally scheduled Closing Date,
subject to the last paragraph of this Section 3.5, the Company shall have the
right to exclude such Exchange Property from the Closing and adjourn the Closing
for that Exchange Property for up to 90 days to attempt to satisfy such
condition or obtain such consent, and if such condition is not satisfied or such
consent is not obtained within such 90 days, GMPTS shall have the right to
reject such Exchange Property hereunder. In the event of any delayed closing
described in this Section 3.5, the "Closing Date" as used herein with respect to
that Property(ies) shall mean the actual date on which the closing of that
Property(ies) is consummated. In the event a Rejection Condition exists on the
Closing Date with respect to an Exchange Property, subject to the foregoing
right to adjourn the Closing for that Exchange Property up to ninety (90) days,
GMPTS and the Company shall each have the right to exclude such Exchange
Property from this Agreement by delivering written notice to the other on the
Closing Date. If either party so excludes an Exchange Property, then with
respect to each such excluded Exchange Property:
(i) In lieu of transferring to NewCo the Company's interest in the
Exchange Owning Entity with respect to the excluded Exchange
Property at the Closing, the Company shall execute and deliver to
GMPTS an unsecured note, in the form of Exhibit E attached hereto,
with a per annum interest rate of eight percent (8%), a maturity
date of three (3) years, prepayable at any time without penalty or
premium, and in an amount equal to the agreed value of that Exchange
Property as determined by the parties when they determined the
Relative Value of the Portfolio Properties, less the outstanding
principal balance as of the Closing Date on any secured financings
on such Property (and reduced by 50% to reflect the Company's
interest in the Exchange Owning Entity in the
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case of Woodfield); provided, however, if the Rejection Condition
resulting in the Property being excluded is set forth in paragraph
(b) above, the amount of such note shall be reduced by GMPTS's
Percentage Interest of such reduction in relative value. The
principal balance of any such note shall be deemed satisfied in full
upon delivery to GMPTS of the partnership interests in such Exchange
Owning Entity which was so excluded within six (6) months from the
date of the first Closing, or any time thereafter so long as (1) a
material adverse change has not occurred with respect to that
Exchange Property and (2) the Company reaffirms the Property
Representations as of the date of the delivery of such partnership
interest with such changes as are necessary to reflect the
then-current facts so long as such facts do not have a material
adverse affect on the Property. In addition, if at any time after
Closing the Company has the right to deliver such Exchange Property
to GMPTS, GMPTS shall have the right to require the Company to
transfer such partnership interest to GMPTS in full satisfaction of
such note,but in such case, the Company shall not be deemed to have
made any Property Representations with respect to such Property and
the Company shall have no liability with respect to such Property
Representations;
(ii) The excluded Property will not be used when determining the
Adjustment Amounts and no Property Representation or Relative
Representations will be deemed made (or breached) with respect to
that Property;
(iii) The amounts set forth in clause (a) of Section 3.4 shall be reduced
by a percentage, such percentage being equal to a fraction
(expressed as a percentage), the numerator of which is the Relative
Value of the excluded Property and the denominator of which is the
sum of the Relative Values for all of the Exchange Properties;
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(iv) For all purposes of this Agreement, the excluded Property shall not
be deemed to be one of the Exchange Properties; and
(v) Any debt described on Exhibit B with respect to the excluded
Property shall not be assumed by NewCo.
If a Rejection Condition described in clause (c) above exists on the Closing
Date with respect to more than two of the Exchange Properties, GMPTS and the
Company shall each have the right to terminate this Agreement by delivering
written notice to the other on the Closing Date in which case this Agreement
shall terminate and be of no further force or effect whatsoever. If a Rejection
Condition exists on the Closing Date and either party has delivered notice of
such condition to the other on or before the Closing Date with respect to an
Exchange Property and such Property is not excluded hereunder, the Company shall
have no liability under this Article 3 for any breach or untrue Property
Representation or Relative Representation as a result of the existence of the
Rejection Condition.
3.6 Condition of Exchange Properties. Subject to the terms of this Article
3, the Exchange Properties are being transferred in an "AS-IS" condition and
"WITH ALL FAULTS" as of the Relative Valuation Date. Except as expressly set
forth in this Agreement and in any certificates, documents, and instruments
delivered pursuant hereto or executed in connection herewith, no
representations, warranties, agreements, assurances, or certifications have been
made or are made, and no responsibility has been or is assumed, by the Company
or any of the Company Parties as to the Membership Interests, the Exchange
Properties, the Exchange Owning Entities or any other fact or matter whatsoever
with respect to the Exchange Properties. The parties hereto agree that all
undertakings and agreements heretofore made between them or their respective
agents or representatives with respect to the subject matter hereof are merged
into this Agreement and the Exhibits and Schedules attached hereto and in all
certificates, documents and instruments to be delivered pursuant to the terms
hereof, which alone fully and completely express their agreement and no party is
relying upon any
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statement or representation made by any other party unless such statement or
representation is specifically embodied in this Agreement or in the Exhibits or
Schedules attached hereto or in any certificates, documents, and instruments to
be delivered pursuant to the terms hereof.
3.7 Interest. If either party does not pay to the other any consideration
owed to the other when due under this Agreement, such party shall pay to the
other, in addition to such money or consideration owed, interest thereon at the
per annum rate set forth in Section 11.4(c) from the date such money or
consideration is owed until the date such money or consideration has been paid.
3.8 GMPTS's Knowledge Regarding Required Consents. To the extent that
GMPTS or any GMPTS Party, has actual knowledge on or prior to the Closing Date
of any fact or condition which would result in the Property Representation set
forth in paragraph (w) of Section 3.1 being untrue, GMPTS shall promptly (but in
any event prior to the Closing) notify the Company in writing of such fact or
condition. If GMPTS or any GMPTS Party has any such knowledge and GMPTS closes
the Transaction, the Company shall not be deemed to have breached the Property
Representation set forth in paragraph (w).
3.9 Currency. If the Company has any financial obligations to GMPTS under
Section 3.3 or Section 3.4, such obligations shall be satisfied (i) first, by
the Company paying to GMPTS cash, up to the maximum amount of $35,000,000, (ii)
next, by the Company executing and delivering to GMPTS an unsecured note, in the
form of Exhibit E, with a per annum interest rate of eight percent (8%), a
maturity date of three (3) years, prepayable at any time without penalty or
premium, and up to the maximum amount of $35,000,000, (iii) next, in the form of
units of partnership interest in the Company up to the maximum amount of
$25,000,000, assuming the value of each such unit is equal to the average NYSE
closing price of the shares of common stock of Taubman Centers, Inc. for the 60
Business Days preceding the date the final Adjustment Amount is determined, in
the case of adjustment under Section 3.3, and on the date the amount is agreed
upon or otherwise determined in
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accordance with Section 3.3 in the case of any payment due by the Company under
Section 3.4, and (iv) the remainder thereof by the Company executing and
delivering to GMPTS an unsecured note in the form of Exhibit E hereto, with a
per annum interest rate of eight percent (8%), a maturity date of three (3)
years, and prepayable at any time without penalty or premium. In connection with
the delivery of any units of partnership interest in the Company delivered
pursuant to this Section 3.9, the Company shall deliver to GMPTS a written
designation identifying GMPTS as a "Designated Offeree" under the Amended and
Restated Continuing Offer, effective September 30, 1997, made by Taubman
Centers, Inc., subject to the terms and conditions thereof and entitled to the
benefits thereof as a Designated Offeree. Notwithstanding such designation,
GMPTS and each Existing Holder shall nevertheless continue to be subject to the
Existing Holder Limit or Ownership Limit, whichever is applicable, under the
Articles of Incorporation for Taubman Centers, Inc.
3.10 Survival of the Representations and Warranties. The Relative
Representations shall survive only as is provided in Section 3.3. The Property
Representations shall survive the Closing and not be merged therein until the
date which is one hundred eighty (180) days after the Closing Date (the
"Expiration Date"), and the Company shall only be liable to GMPTS hereunder for
a breach of a Property Representation with respect to which a written claim
(including good faith reasonable detail thereof) is made by GMPTS against the
Company on or before the Expiration Date (a "Contested Matter"). On the
Expiration Date, all liability for breaches of the Property Representations
shall automatically expire, except with respect to a Contested Matter, in which
case the liability, if any, with respect to a Contested Matter shall survive,
solely with respect to or related to the claim so alleged, until the first (1st)
anniversary of the Closing Date, at which time the Company's liability with
respect thereto shall automatically expire unless GMPTS has filed a lawsuit with
respect to the Contested Matter prior to such first (1st) anniversary, and if
such lawsuit is filed, the Company's liability with respect to the Contested
Matter shall survive until a final adjudication (i.e., an
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adjudication with respect to which the time for taking all appeals as of right
has lapsed or with respect to which no further appeal is legally available) of
the Contested Matter, at which time the liability or absence thereof with
respect thereto shall be conclusively established.
ARTICLE 4 - PRORATIONS, EXPENSES, COSTS, AND TAX RETURNS
4.1 Proration. (a) As used herein, the following terms shall have the
following meanings:
(i) "Balance Sheets" means the balance sheets which are used as the
basis for the Company's filings with the Securities and Exchange
Commission, prepared in accordance with GAAP applied consistently
with the Company's year end balance sheets in all material respects.
(ii) "Entity Working Capital" means the Company's share, based on its
ownership interest, of working capital in each Owning Entity
determined by subtracting the Company's share of liabilities
(excluding all secured and unsecured debt and deferred income) from
the Company's share of assets (excluding mall facilities, residual
property and improvements, land leases and deferred charges), all as
shown on the Balance Sheets for the Owning Entities.
(iii) "TTC Working Capital" means the Company's share, based on its
ownership interest, of working capital in the Manager determined by
subtracting total liabilities (excluding notes payable) from total
assets (excluding property and equipment), all as shown on the
Manager's Balance Sheet.
(iv) "Company Working Capital" means (based on the Company's books prior
to consolidation of controlled entities including the Owning
Entities and the Manager) the Company's working capital
determined by subtracting total liabilities (excluding all
secured and unsecured debt, distributions to centers in excess of
net income of unconsolidated Joint Ventures, and the amount
accrued in 1992 relating to the Cash Tender Agreement) from the
Company's total assets (excluding notes receivable and deferred
charges), all as set forth on the Company's Balance Sheet.
(b) The parties shall pro rate the Entity Working Capital, the TTC Working
Capital, and the Company Working Capital in the manner set forth herein, based
on the balance sheets as of the end of the month prior to the month in which the
Closing occurs. No adjustment will be made for any time period which may have
elapsed between such prior month end and the Closing Date, in as much as GMPTS
will be obtaining, through the Membership Interests, all working capital in the
Exchange Owning Entities which has accumulated after such month end and prior to
closing by virtue of the transfers of the partnership interests to NewCo and
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NewCo Two as set forth herein. Likewise, the Company shall not pay any pro rated
or full distribution to GMPTS in respect of the Exchange Units for the month in
which the Closing occurs, and any distribution so made shall be returned to the
Company. However, any amounts distributed by the Exchange Owning Entities to
their partners on or after the first day of the month in which the Closing
occurs shall be returned to the Exchange Owning Entity.
(c) If based on such Balance Sheets, GMPTS's beneficial interest in the
Entity Working Capital for all of the Exchange Owning Entities exceeds GMPTS's
Percentage Interest of the sum of the Entity Working Capital for all of the
Portfolio Properties, the TTC Working Capital, and the Company Working Capital,
GMPTS shall pay to the Company such excess. On the other hand, if GMPTS's
beneficial interest in the Entity Working Capital for all of the Exchange Owning
Entities is less than GMPTS's Percentage Interest of the sum of the Entity
Working Capital for all of the Portfolio Properties, the TTC Working Capital,
and the Company Working Capital, the Company shall pay to GMPTS, such short
fall. In each case, the amount owed to either party shall be adjusted as
provided in paragraph (b) above, if applicable.
(d) Changes in the Company's unsecured debt balances at the previous
month's end that occurred after July 31, 1998 shall result in a reallocation of
debt. Increases in the unsecured debt balance between July 31, 1998 and the
previous month's end due to borrowing related to pre-development projects and
projects under construction (i.e., Great Lakes and MacArthur) shall be excluded
from the debt balance to be reallocated.
(e) All amounts due to a party under this Section 4.1 shall be calculated
and paid on the Closing Date, unless such amounts are not known on the Closing
Date, in which case such amounts shall be determined as soon as practical after
the Closing Date and paid to the appropriate party within five (5) Business Days
of determination of the amount due, together with interest thereon at the per
annum rate set forth in Section 11.4(c) from the Closing Date until the date
paid.
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4.2 Fees and Expenses. (a) GMPTS shall be responsible for the payment of
the fees and expenses of its own legal counsel and financial advisors incurred
in connection with the transactions contemplated by this Agreement.
(b) GMPTS will reimburse the Company for GMPTS's Percentage Interest of
(i) the fees of Morgan Stanley Dean Witter for services provided to the Company
in connection with the Transaction, including (to the extent not previously
paid) the work on behalf of the strategic planning special committee established
by the partnership committee of the Company, (ii) the costs, expenses,and
premiums and/or other payments incurred by the Company in connection with the
Tender Offer or the Defeasance, including the fees of Morgan Stanley Dean
Witter, up to the maximum aggregate amount of $50,000,000, and obtaining the
Assumed Bridge Loan and the Retained Bridge Loan, and in connection with the
entering into of this Agreement, and (iii) the reasonable fees of legal counsel
for the Company for services rendered to the Company in connection with this
Agreement and the transactions contemplated herein including the completion of
the Tender Offer or Defeasance and subsequent refinancings prior to Closing.
(c) GMPTS shall reimburse the Company for GMPTS's Percentage Interest of
all of the severance and other employee related documented costs and expenses
and all of the documented restructuring costs and expenses incurred by the
Manager as a result of the Transaction prior to the second (2nd) anniversary of
the Closing Date, including all employees' retention bonuses and payments up to
a maximum amount equal to GMPTS's Percentage Interest of $18,000,000.
(d) GMPTS shall reimburse the Company for GMPTS's Percentage Interest of
any and all transfer taxes, revenue stamps, and similar taxes and fees, fees to
lenders and lenders' counsel (including, without limitation, in connection with
the allocation of debt to the Exchange Properties and the obtaining of any
releases), the costs of obtaining any necessary consents, the costs of
transferring the trademarks, logos, and names described in the proviso
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of Recital C above, and any and all other costs relating to the redemption of
the Exchange Units.
(e) GMPTS shall be solely responsible for and shall pay for all costs and
expenses of any title insurance commitment, reports, or policies with respect to
the Exchange Properties, including the Title Commitments.
(f) GMPTS shall reimburse the Company for GMPTS's Percentage Interest of
all costs and expenses of obtaining the Surveys, Versar Reports, the New
Environmental Reports (if any), Merritt and Harris Reports, and the New
Engineering Reports (if any), which have been commissioned in connection with
the Transaction.
(g) GMPTS shall be solely responsible for any other due diligence cost or
expense with respect to the Exchange Properties, and the Company shall be solely
responsible for all such costs and expenses with respect to the Retained
Properties.
With respect to any fees or costs described above which are to be shared
by the parties, the Company shall pay such fees and expenses and GMPTS shall
reimburse the Company for its Percentage Interests of such fees and expenses
promptly upon request therefor by the Company.
4.3 Costs if Agreement Terminates. If this Agreement is terminated for any
reason, GMPTS shall be responsible for the payment of its fees and expenses
described in paragraphs (a) and (g) of Section 4.2 and the Company shall be
responsible for the payment of all other costs and expenses described in Section
4.2. Notwithstanding anything contained herein to the contrary, the provisions
of this Section 4.3 shall survive any termination of this Agreement.
4.4 Survival. The provisions of this Article 4 shall survive Closing.
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ARTICLE 5 - TAX MATTERS
5.1 Profits and Losses of Partnership Prior to Closing. The parties
confirm that the profits and losses of the Company for the period from January
1, 1998, through the Closing Date shall be allocated for tax reporting purposes
pursuant to the applicable provisions of the Partnership Agreement. After the
Closing Date, (a) the Company shall continue to provide GMPTS with full access
to such additional financial and operating data of the Company and other
information as may be reasonably required in connection with the assets and
liabilities being assumed by GMPTS, provided, however, that GMPTS shall provide
reasonable advance notice to the Company of its need or desire for such access
and provided, further, that GMPTS shall pay for the cost and expense of any
copies made of such information, and (b) GMPTS shall continue to provide the
Company with full access to such additional financial and operating data with
respect to the Exchange Properties and other information as may be reasonably
required by the Company, provided, however, that the Company shall provide
reasonable advance notice to GMPTS of its need or desire for such access and
provided, further, that the Company shall pay for the cost and expense of any
copies made of such information. Neither party shall be obligated to retain any
such information after the date on which such information would no longer be
retained under its normal document retention program.
5.2 Tax Returns. The Company and GMPTS will cooperate with each other in
providing and preparing such information and item described in Section 5.1,
including any relating to the Properties, as may be required in order to timely
prepare and deliver Tax Returns and other similar items after the Closing Date.
In connection therewith, the Company shall prepare the applicable 1998 Tax
Returns of the Company, and GMPTS shall pay to the Company GMPTS's Percentage
Interest of the cost and expense incurred by the Company in preparing such Tax
Returns promptly upon request of the Company. The Company shall also prepare and
file all Tax Returns of each Exchange Owning Entity which are due to be filed
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after the Closing Date for any period that ends on or before the Closing Date.
The Company shall permit GMPTS to review and comment on the Company's 1998 Tax
Returns and on all other Tax Returns prepared by the Company prior to filing.
GMPTS shall comment to the Company in an expeditious manner. GMPTS shall pay the
Company GMPTS's Percentage Interest of the reasonable costs and expenses
incurred by the Company in preparing all such Tax Returns promptly upon request
of the Company. GMPTS shall prepare and file, in a manner consistent with all
returns for prior periods, all Tax Returns not heretofore filed of each Exchange
Owning Entity for tax periods that begin before the Closing Date and end after
the Closing Date, and the Company shall pay GMPTS the Company's Percentage
Interest of the reasonable costs and expenses incurred by GMPTS in preparing
such Tax Returns promptly upon the request of GMPTS. GMPTS shall permit the
Company to review and comment on all such tax returns prepared by GMPTS prior to
filing. The Company shall comment to GMPTS in an expeditious manner.
5.3 Cooperation. The Company and GMPTS shall cooperate fully in the filing
of Tax Returns pursuant to this Article and any audit, litigation or other
proceeding with respect to such Tax Return or Taxes.
5.5 Survival. The provisions of this Article 5 shall survive Closing.
ARTICLE 6 - CLOSING
6.1 Closing. The transfer and redemption of the Exchange Units and the
transfer of the Membership Interests (the "Transaction") shall occur (the
"Closing") at the offices of the Company located at 712 Fifth Avenue, New York,
New York, at 12:00 p.m. Detroit time on the fifth (5th) Business Day after the
condition precedent set forth in paragraph (c) of Section 7.1 has been satisfied
or waived, but in no event before September 30, 1998, or after the first (1st)
anniversary of the date hereof. The date on which the Closing occurs is herein
referred to as the "Closing Date".
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6.2 The Company's Closing Deliveries. At the Closing, the Company shall
deliver or cause to be delivered to GMPTS the following:
(a) Assignment of Membership Interest. A duly executed assignment of the
Membership Interests to GMPTS in the form of Exhibit F attached
hereto (the "Assignment of Membership Interest").
(b) An Amendment to Certificate of Limited Partnership. An Amendment to
the Certificate of Limited Partnership of the Company evidencing the
withdrawal of GMPTS from the Company in the form of Exhibit G
attached hereto (the "Certificate of Amendment").
(c) Certificate Updating Representations and Warranties. A certificate
updating the representations and warranties of the Company set forth
in Section 8.2 as of the Closing Date in the form of Exhibit H
attached hereto.
(d) Legal Opinion. A legal opinion of the Company's counsel opining as
to the due authorization, execution, and delivery by the Company of
this Agreement and all documents and agreements to be executed and
delivered by the Company to GMPTS hereunder, in the form of Exhibit
I attached hereto.
(e) Non-Foreign Status Affidavit. A non-foreign status affidavit from
the Company in the form required by Section 1445 of the Internal
Revenue Code, in the form of Exhibit J attached hereto.
(f) Evidence of Authority. A certificate of the Secretary of the Company
with respect to the authority to act on behalf of the Company of the
individual executing on behalf of the Company this Agreement and all
documents and agreements contemplated by this Agreement to be
delivered by the Company and the Company's authorization to
consummate the Transaction, in the form of Exhibit K attached
hereto.
(g) Directions to Distribute Trust Assets. Copies of the Directions to
Distribute Trust Assets from the Company to the trustees of the TRG
Trust, the TRG Trust II, the TRG Trust IV, and the TRG Trust XIII in
the form of Exhibits L-1, L-2, L-3, and L-4, respectively.
(h) Original Documents. Constructive possession of originals or, if
originals are not available, copies, of the Leases, the Anchor
Documents, the Loan Documents, the Exchange Partnership Documents,
the Ground Leases, and Service Contracts shall be delivered to GMPTS
by the Company leaving the same in the possession and control of the
Manager.
(i) Exchange Properties Documents. Constructive possession of the
following, to the extent in the possession or control of or
reasonably available to the Company or the Manager, shall be
delivered by the Company leaving the same in the possession and
control of the Manager or at the Property: (i) the original (or, if
unavailable, a copy) of the existing certificate or certificates of
occupancy, licenses, permits, authorizations and approvals issued
for or with respect to the Exchange Properties by governmental
authorities having
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jurisdiction, and (ii) all books, records and files (other than
Confidential Information) located at the Exchange Properties or at
the office of the Company or the Manager relating solely to the
Exchange Properties and the ownership and operation thereof.
(j) Property Management Agreement. The separate Property Management
Agreements (the "Property Management Agreements") to be entered into
by GMPTS and the Manager in the form of Exhibit M attached hereto
for each Wholly-Owned Exchange Entity.
(k) Transfer Tax Affidavits. Transfer tax affidavits and returns where
required, in the form of Exhibit N attached hereto.
(l) Proration. The proration in favor of GMPTS under Section 4.1, if
any.
(m) Certificate of Formation of NewCo and NewCo Two. Certified copies of
the Certificate of Formation of NewCo and NewCo Two, which
Certificates of Formation shall be in the form of Exhibit O-1 and
Exhibit O-2, respectively.
(n) Good Standing of NewCo and NewCo Two. Certificates of Good Standing
for NewCo and NewCo Two.
(o) Amendment to Certificates of Formation. Amendments to the
Certificates of Formation of NewCo and NewCo Two evidencing the
transfer of the Membership Interests to GMPTS, in the form of
Exhibit P-1 and P-2, respectively.
(p) Assignments of Partnership Interests. Copies of the Assignments of
Partnership Interests pursuant to which NewCo acquired its interests
in the Exchange Owning Entities, which Assignments of Partnership
Interests shall be in the form of Exhibit Q attached hereto.
(q) Consents. Copies of any releases, assumptions, novations, consents,
approvals, or waivers obtained by the Company with respect to the
Transaction.
(r) Estoppels. Copies of all estoppel certificates described in Section
9.2.3 which have been received by the Company as of the Closing Date
and not previously delivered to GMPTS.
(s) Amended and Restated Partnership Agreements. At the Closing but
prior to the transfer of the Membership Interests to NewCo and NewCo
Two, the Company shall amend and restate the Exchange Owning
Documents for the Wholly- Owned Exchange Entities in the form of
Schedule 6.2(s) attached hereto, and shall deliver copies thereof to
GMPTS.
(t) Other Documents. Such other documents as may be reasonably requested
by GMPTS, provided such documents do not, in the Company's
judgement, impose any material cost or liability upon the Company.
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6.3 GMPTS's Closing Deliveries. At the Closing, GMPTS shall deliver or
cause to be delivered to the Company the following:
(a) Assignment Separate from Exchange Units. A duly executed assignment
of the Exchange Units to the Company in the form of Exhibit R
attached hereto.
(b) Certificate of Exchange Units. The original Certificate Nos. 31 and
35 representing the Exchange Units.
(c) Amendment to Certificate of Limited Partnership. The Certificate of
Amendment.
(d) Confirmation of Withdrawal. A confirmation of withdrawal and
acknowledgement of the redemption of the Exchange Units in the form
of Exhibit S attached hereto.
(e) Certificate Updating Representations and Warranties. A certificate
updating the representations and warranties of GMPTS set forth in
Section 8.1 as of the Closing Date in the form of Exhibit T attached
hereto.
(f) Assumption and Agreement from NewCo and NewCo Two. A duly executed
Assumption Agreement in the form of Exhibit U from NewCo, NewCo Two,
and GMPTS.
(g) Legal Opinion. A legal opinion of GMPTS's counsel opining as to the
due authorization, execution, and delivery by GMPTS of this
Agreement and all documents and agreements to be executed and
delivered by GMPTS to the Company hereunder, in the form of Exhibit
V attached hereto.
(h) Consents and Releases. Copies of any releases, assumptions,
novations, consents, approvals, or waivers obtained by GMPTS with
respect to the Transaction.
(i) Acceptance of Assignment of Membership Interest. A duly executed
acceptance of the Assignment of Membership Interest in the form of
Exhibit F attached hereto.
(j) Evidence of Authority. A certificate of the Secretary of the GMPTS
Corporation with respect to the authority to act on behalf of GMPTS
of the individual executing on behalf of GMPTS this Agreement and
all documents and agreements contemplated by this Agreement to be
delivered by GMPTS and GMPTS's authorization to consummate the
Transaction, in the form of Exhibit W attached hereto.
(k) Transfer Tax Affidavits. Transfer tax affidavits and returns where
required, in the form of Exhibit N attached hereto, together with
evidence of payment of all amounts due thereunder.
(l) Property Management Agreements. The Property Management Agreements.
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(m) Termination of Rights Under Cash Tender. A surrender and termination
of all of GMPTS's rights under the Cash Tender, in the form of
Exhibit X attached hereto.
(n) Resignation of Board and Partnership Committee Seats. A resignation
in the form of Exhibit Y attached hereto from the individuals
appointed or elected by GMPTS holding seats on the Company's
partnership committee and the Taubman Centers, Inc.'s board of
directors.
(o) Proration. The proration in favor of the Company under Section 4.1,
if any.
(p) Other Documents. Such other documents as may be reasonably required
by the Company, provided such documents do not, in GMPTS's judgment,
impose any material cost or liability upon GMPTS.
6.4 Survival. The provisions of this Article 6 shall survive Closing.
ARTICLE 7 - CONDITIONS TO CLOSING
7.1 Conditions Precedent to the Company's Obligations. The Company's
obligation to redeem the Exchange Units and to transfer the Membership Interests
hereunder is conditioned upon the satisfaction of all of the following
conditions:
(a) The due performance in all material respects by GMPTS of the
undertakings and agreements to be performed by it under Article 6; and
(b) The truth in all material respects of each representation and warranty
made in Section 8.1 of this Agreement by GMPTS at the time as of which the same
is made and as of the Closing Date; and
(c) On or before the first (1st) anniversary of the date hereof, either
(i) the completion of the tender offer (the "Tender Offer") for the unsecured,
senior notes of the Company issued pursuant to that certain Amended and Restated
Indenture dated March 4, 1994, by and between the Company as issuer, and
Chemical Bank, as trustee, such that a sufficient number of note holders consent
to the amendment of such Indenture to eliminate or modify the covenants
contained therein which would be breached by the consummation of the
transactions contemplated by this Agreement or (ii) the "covenant defeasance" of
all such debt (the "Defeasance"). The Company shall use its best efforts to
complete the Tender
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Offer or Defeasance successfully; provided, however, that the Company shall not
be obligated (but may, in its sole discretion elect) to complete the Tender
Offer or Defeasance if the cost of doing so exceeds $50,000,000, excluding
amounts due and owing on such notes.
7.2 Conditions Precedent to GMPTS's Obligation. GMPTS's obligations to
transfer the Exchange Units to the Company and to accept the Membership
Interests in redemption of the Exchange Units is conditioned upon the
satisfaction of all of the following conditions:
(a) The due performance in all material respects by the Company of the
undertakings and agreements to be performed by it under Article 6; and
(b) The truth in all material respects of each representation and warranty
made in Section 8.2 of this Agreement by the Company at the time as of which the
same is made and as of the Closing Date.
7.3 Injunction. If a court of competent jurisdiction has issued a
temporary restraining order or an injunction enjoining either or both of the
parties hereto from closing the entire Transaction, the Closing shall be
suspended until such time as the litigation in which the order or injunction
arises is resolved; provided, however, if the parties hereto are still prevented
by an injunction from consummating the entire Transaction on the first
anniversary of the date hereof, this Agreement shall automatically terminate and
be of no further force or effect whatsoever without notice or other action of
either party, and neither party shall have any liability to the other following
such termination.
7.4 Waiver of Failure of Conditions Precedent. At any time or times on or
before the earlier of the date specified above for the satisfaction of any
condition or the Closing Date, the Company or GMPTS may elect in writing to
waive the benefit of any such condition set forth in Section 7.1 (except for
subparagraph (c)) or Section 7.2, respectively. By closing the Transaction, the
Company and GMPTS shall be conclusively deemed to have waived the benefit of any
remaining, unfulfilled conditions set forth in Section 7.1 or Section 7.2,
respectively, except for any breach of any representation or warranty or any
default or other
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breach hereunder. In the event any of the conditions set forth in paragraphs (a)
and (b) of Sections 7.1 or 7.2 are neither waived nor fulfilled on or before the
Closing Date, GMPTS or the Company (as appropriate) may suspend its obligation
to Close by written notice to the other on or prior to the Closing Date and
pursue its remedies under Article 10. In the event that the condition set forth
in paragraph (c) of 7.1 is not satisfied prior to the first (1st) anniversary of
the date hereof, then this Agreement shall automatically terminate and be of no
further force or effect on the first (1st) anniversary of the date hereof.
7.5 No Other Conditions to Closing. Except as expressly set forth in
Section 7.1, Section 7.2, or Section 7.3, there are no conditions to Closing and
no event or occurrence arising before or after the Relative Valuation Date shall
be a condition to Closing or allow either party to terminate this Agreement,
including any casualty, destruction, condemnation, or adverse change with
respect to any of the Portfolio Properties.
ARTICLE 8 - REPRESENTATIONS AND WARRANTIES
8.1 GMPTS's Representations and Warranties. GMPTS represents and warrants
to the Company as follows as of the date hereof:
(a) GMPTS is the record and beneficial owner of the Exchange Units, free
and clear of any Encumbrances. At the Closing, the Company will receive good and
marketable title to the Exchange Units, free and clear of any Encumbrances.
Except for this Agreement and the Partnership Agreement, there are no other
contracts, agreements, understandings, arrangements, securities, or commitments
of any nature to which GMPTS is a party relating to the sale, purchase,
redemption, conversion, exchange, or transfer of any of the Exchange Units
except for a certain Cash Tender Agreement, dated November 30, 1992, among the
Company, Taubman Centers, Inc., GMPTS, and others (the "Cash Tender"). Except
for the Exchange Units, GMPTS owns no units of partnership interest in the
Company and has no option, contract, or other agreement to purchase any units of
partnership interest in the Company.
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(b) GMPTS is a limited partnership duly organized, validly existing, and
in good standing under the laws of the State of Delaware and has made all
filings and recordings necessary to exist, operate, and do business under all
applicable Laws and has the power and authority to own, operate, and lease its
properties, to carry on its business as currently conducted, and to execute,
deliver, and perform this Agreement and any other documents or instruments
delivered by it pursuant to or in connection with this Agreement.
(c) The execution, delivery, and performance by GMPTS of this Agreement
and all other documents and instruments required to be delivered by GMPTS
pursuant to this Agreement have been duly and validly authorized by all
necessary actions of GMPTS and its general partners (none of which actions have
been modified or rescinded, and all of which actions are in full force and
effect).
(d) This Agreement constitutes, and when delivered, all other documents
and instruments required to be delivered by GMPTS pursuant to this Agreement
will constitute, legally valid and binding obligations of GMPTS, enforceable
against GMPTS in accordance with their respective terms, except as such
enforceability may be limited by bankruptcy, insolvency (including, without
limitation, all laws relating to fraudulent conveyances), reorganization,
moratorium, and other similar laws and equitable principles relating to or
limiting creditors' rights generally.
8.2 The Company's Representations and Warranties. The Company represents
and warrants to GMPTS as follows as of the date hereof:
(a) The Company is a limited partnership duly organized, validly existing,
and in good standing under the laws of the State of Delaware and has made all
filings and recordings necessary to exist, operate, and do business under all
applicable law and has the partnership power and authority to own, operate, and
lease its properties, to conduct its business as currently conducted, and to
execute, deliver, and perform this Agreement and any other documents and
instruments delivered by it pursuant to or in connection with this Agreement.
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(b) The execution, delivery, and performance by the Company of this
Agreement and all other documents and instruments required to be delivered by
the Company under this Agreement have been duly and validly authorized by all
necessary actions of the Company (none of which actions have been modified or
rescinded, and all of which actions are in full force and effect).
(c) This Agreement constitutes, and when delivered, all other documents
and instruments required to be delivered by the Company pursuant to this
Agreement will constitute, legally valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms,
except as such enforceability may be limited by bankruptcy, insolvency
(including all laws relating to fraudulent conveyances), reorganization,
moratorium, and other similar laws and equitable principles relating to or
limiting creditors' rights generally.
(d) The Company is the record and beneficial owner of the Membership
Interests, free and clear of all Encumbrances. At the Closing, GMPTS will
receive good and marketable title to the Membership Interests, free and clear of
any Encumbrances.
(e) The only assets and direct liabilities of NewCo are as shown on
Exhibit Z-1 attached hereto and the only assets and direct liabilities of NewCo
Two are as shown on Exhibit Z-2 attached hereto.
ARTICLE 9 - COVENANTS
9.1 GMPTS's Covenants. GMPTS hereby covenants with the Company as follows:
9.1.1 Confidentiality. At al l times GMPTS and its affiliates,
advisors, and agents shall keep secret and retain in strictest confidence and
shall not use for the benefit of itself or others, all non-public information,
including customer lists, supplier lists, details of contracts, pricing
policies, operational methods, marketing plans or strategies, product
development techniques or plans, or technical policies (collectively,
"Confidential Information") pertaining to the Retained Properties; provided,
however, that the term Confidential
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Information shall not be deemed to include information that was or becomes
generally available to the public other than as a result of disclosure by GMPTS
or any GMPTS Party. The prohibition against disclosure of Confidential
Information shall survive the Closing and the restrictive covenants contained in
this Section 9.1.1 shall not terminate until such Confidential Information
ceases to be Confidential Information as defined herein. The parties hereto
acknowledge and agree that the Company may suffer irreparable harm from a breach
by GMPTS or any of its affiliates, advisors, or agents, of any of the covenants
or agreements contained herein. In the event of an alleged or threatened breach
by GMPTS or any of its affiliates, advisors, or agents of any of the provisions
of this Section 9.1.1, the Company or its successors or assigns may, in addition
to all other rights or remedies existing in its favor, apply to any court of
competent jurisdiction for specific performance and/or injunctive or other
relief in order to enforce or prevent any violation of the provisions hereof.
The provisions of this Section 9.1.1 shall survive Closing as and to the extent
not terminated by this Section. GMPTS shall have no liability under this Section
as a result of any disclosure of any Confidential Information by the Manager.
9.1.2 Approvals not a Condition to GMPTS's Performance. GMPTS
acknowledges and agrees that its obligation to perform under this Agreement is
not contingent upon GMPTS's ability to obtain any approval or consent of any
party unrelated to the Exchange Property, except as otherwise expressly provided
herein.
9.1.3 Board and Partnership Committee Seats. At Closing, GMPTS shall
resign the seats held by it on the Partnership Committee of the Company and on
the Board of Directors of Taubman Centers, Inc.
9.2 The Company's Covenants. The Company hereby covenants with GMPTS as
follows:
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9.2.1 Management, Maintenance, and Operation of Exchange Properties
Prior to Closing. Between the date hereof and the Closing Date, the Company
shall, unless otherwise directed in writing by GMPTS:
(a) cause the Exchange Properties and the Exchange Owning Entity to be
managed, maintained, and operated in a manner consistent with the
Company's past practices with respect to the Exchange Properties; (b)
cause each Exchange Owning Entity to continue to offer the Exchange
Property for lease in the ordinary course of business consistent with the
past practices of the Exchange Owning Entity and the Company shall keep
GMPTS informed as to the status thereof prior to the Closing Date; (c) not
do nor allow any Exchange Owning Entity to do any of the following without
the prior written consent of GMPTS, which consent shall not be
unreasonably withheld or delayed:
(i) modify, amend, or terminate any of the Exchange Partnership
Documents, Ground Leases, Anchor Documents, or Loan Documents;
(ii) grant or consent to any new encumbrances, easement, lien, or
restriction covering the Exchange Properties which will
survive the Closing excluding (but subject to Section 9.2.1(b)
and 9.2.1(c)(i)) any new leases or modifications of leases;
(iii) remove any equipment or other items of personal property from
the Exchange Properties excluding any such removal in the
ordinary course of business (provided such property is, if
needed, replaced with substantially similar property); or
(iv) incur any debt other than trade payables or fail to pay any
creditor when due.
(d) keep its existing insurance coverage (or substantially similar
coverage) current and in full force and effect with respect to each of the
Exchange Properties.
In addition, if the consent of the Exchange Owning Entity is required under any
existing management agreement with respect to any Exchange Property, the Company
shall obtain the consent of GMPTS with respect to such matter.
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9.2.2 Access to Exchange Properties. All requests by GMPTS for
access to information pursuant to this Agreement shall be submitted or directed
exclusively to an individual to be designated by the Company. At any time prior
to Closing, the Company shall allow GMPTS or GMPTS's representatives access to
the Exchange Properties upon reasonable prior notice at reasonable times
provided such access does not interfere with the operation of the Exchange
Properties or the rights of tenants, Anchor Parties, partners, or customers in
any material respect. In addition, the Company shall direct the Manager to give
or otherwise make available to GMPTS, its attorneys, agents and/or
representatives all books, records, files and other writings in the Manager's
possession related in any material way to the use, ownership or operation of the
Exchange Properties, excluding any Proprietary Materials.
9.2.3 Estoppels. The Company shall use its commercially reasonable
efforts to promptly deliver an estoppel certificate to each Tenant leasing in
excess of 5,000 square feet of space (individually in any one Exchange Property,
or individually and together with its affiliates at all of the Exchange
Properties), Anchor Party, Ground Lessor, and any lender under the Loan
Documents, and, if so requested by GMPTS, CalPERS with respect to the Woodfield
Exchange Owning Entity and any other third party under an agreement affecting an
Exchange Property. The form of the estoppel certificate to be sent to any such
party shall be subject to the approval of the Company, which approval shall not
be unreasonably withheld or delayed. If the estoppel certificate is sent to the
Company under a letter conspicuously stating that it shall be deemed approved if
not objected to within five (5) Business Days of receipt, then it shall be
deemed approved by the Company if it is not objected to within such five (5)
Business Day period. The Company agrees to use its commercially reasonable good
faith efforts to obtain all such estoppel certificates within ninety (90) days
after the date hereof. The Company agrees to send out all such estoppels within
twenty-five (25) days of receipt from GMPTS of the approved form. If Closing is
delayed with respect to any or all of
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the Exchange Properties, the Company shall, upon the request of GMPTS, resend
any estoppel certificates which GMPTS believes in good faith are stale. The
Company shall have no liability under this Section 9.2.3 unless it has failed to
use its commercially reasonable efforts to perform its obligations under this
Section 9.2.3.
9.2.4 Confidentiality. At all times the Company and its affiliates,
advisors, and agents, shall keep secret and retain in strictest confidence and
shall not use for the benefit of itself or others, all Confidential Information
pertaining to the Exchange Properties; provided, however, that the term
Confidential Information shall not be deemed to include information that was or
becomes generally available to the public other than as a result of disclosure
by the Company or any Company Party. The prohibition against disclosure of
Confidential Information shall survive the Closing and the restrictive covenants
contained in this Section 9.2.4 shall not terminate until such Confidential
Information ceases to be Confidential Information as defined herein. The parties
hereto acknowledge and agree that GMPTS may suffer irreparable harm from a
breach by the Company or any of its affiliates, advisors, or agents of any of
the covenants or agreements contained herein. In the event of an alleged or
threatened breach by the Company or any of its affiliates, advisors, or agents
of any of the provisions of this Section 9.2.4, GMPTS or its successors or
assigns may, in addition to all other rights or remedies existing in its favor,
apply to any court of competent jurisdiction for specific performance and/or
injunctive or other relief in order to enforce or prevent any violation of the
provisions hereof. The provisions of this Section 9.2.4 shall survive Closing as
and to the extent not terminated by this Section.
9.3 Mutual Covenants. GMPTS and the Company hereby covenant with each other
as follows:
9.3.1 Publicity. Contemporaneously with the execution of this
Agreement, the parties shall jointly issue the press release attached hereto as
Exhibit AA (the "Approved Press Release"). Thereafter, the Company and GMPTS
each hereby covenant that (a) prior to the
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Closing neither the Company nor GMPTS shall issue, and the Company and GMPTS
shall cause their respective advisors not to issue, any other press release or
public statement (a "Press Release") with respect to the Transaction without the
prior consent of the other, except to the extent required by Law or the NYSE
(and in such event the disclosing party shall provide to the other party in
advance any proposed press release or other disclosure and give such other party
an opportunity to comment thereon and approve the same, such approval not to be
unreasonably withheld) and (b) after the Closing, the Press Release related to
the consummation of Transaction issued by either the Company or GMPTS shall be
subject to the review and approval of both parties (which approval shall not be
unreasonably withheld). If either the Company or GMPTS is required by Law or the
NYSE to issue any Press Release other than the Approved Press Release, such
party shall endeavor to provide to the other at least two (2) Business Days
prior to the issuance of the same, a copy of the proposed Press Release for its
review. The provisions of this Section 9.3.1 shall survive the Closing (and not
be merged therein) or earlier termination of this Agreement.
9.3.2 Covenants of the Company and GMPTS; Consents. Between the date
of this Agreement and the Closing Date, the parties hereto agree (a) to use
their best efforts without having to pay consent fees (i) to obtain all
consents, permits, waivers of rights of first offer, first refusal, or
otherwise, or approvals from governmental authorities or other third parties and
satisfy all of the conditions and obtain all of the consents set forth on
Schedule 3.1(w) or otherwise necessary to consummate and make effective the
transactions contemplated by this Agreement, and, if a consent from a third
party cannot be obtained or a condition cannot be satisfied, to restructure the
Transaction, or a part thereof, to lawfully obviate the need for the missing
consent or satisfy the condition in some other way, so long as such
restructuring does not impose any material financial obligations on either party
unless such party consents to such material financial obligations, (ii) to cause
the Closing to occur, and (iii) cooperate in connection with any prepayment of
the Stoneridge secured financing
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which may be required to be made by GMPTS in order to consummate the
Transaction; (b) not to take or omit to take any action which would be
reasonably likely to cause any condition of closing set forth in Article 7 of
this Agreement not to occur; and (c) to cooperate with each other in connection
with the foregoing. If a claim or lawsuit is made or filed by any person or
entity after Closing alleging that a consent or approval was required to
consummate the Transaction and that such consent or approval was not obtained,
the parties shall share in accordance with their respective Percentage Interests
all losses, costs, liabilities, and damages (including interest, penalties, and
reasonable attorneys' fees and disbursements resulting therefrom),
notwithstanding the fact that GMPTS may not have the right to seek damages
against the Company in such case as a result of the operation of Section 3.8.
ARTICLE 10 - DEFAULT
10.1 Default by GMPTS. If, on the Closing Date, (i) GMPTS is in default of
any of its obligations hereunder, or (ii) any of GMPTS's representations or
warranties in Section 8.1 are untrue in any material respect, or (iii) the
Closing otherwise fails to occur by reason of GMPTS's failure or refusal to
perform its obligations hereunder in a prompt and timely manner, then the
Company may elect, as its exclusive remedies, to either (a) proceed to close the
Transaction and retain all rights and remedies hereunder or at law or in equity
against GMPTS or (b) if and only if the default is also the failure of a
condition described in Section 7.1, not Close until GMPTS has performed its
obligations hereunder and seek specific performance of this Agreement by GMPTS;
provided, however, if the Closing has not occurred prior to the first
anniversary hereof, the Company shall, at any time thereafter, have the right to
terminate this Agreement and sue for damages. In no event shall the Company have
the right to terminate this Agreement as a result of any default or breach by
GMPTS hereunder, except as provided in the foregoing clause (b).
10.2 Default by the Company. If, on the Closing Date, (i) the Company is
in default of any of its obligations hereunder, or (ii) any of the Company's
representations or warranties
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in Section 8.2 are untrue in any material respect, or (iii) the Closing
otherwise fails to occur by reason of the Company's failure or refusal to
perform its obligations hereunder in a prompt and timely manner, GMPTS may
elect, as its exclusive remedies, to either (a) proceed to close the Transaction
and retain all rights and remedies hereunder or at Law or in equity against the
Company, or (b) if and only if the default is also a failure of a condition
described in Section 7.2, not close until the Company has performed its
obligations hereunder and seek specific performance of this Agreement by the
Company; provided, however, if the Closing has not occurred prior to the first
anniversary hereof, GMPTS shall, at any time thereafter, have the right to
terminate this Agreement and sue for damages. In no event shall GMPTS have the
right to terminate this Agreement as a result of any default or breach by the
Company hereunder, except as provided in the foregoing clause (b).
10.3 Specific Enforcement. The parties recognize and agree that in the
event that the Closing is not consummated in accordance with this Agreement,
immediate irreparable injury would be caused for which there would be no
adequate remedy at Law. Accordingly, the Company and GMPTS agree that each party
will be entitled to injunctive relief to prevent the other party from breaching
its obligations under this Agreement and that each party is entitled to specific
enforcement of the terms and provisions of this Agreement, in addition to any
other remedy to which the party may be entitled, whether at Law or in equity,
subject to the terms, conditions, and limitations set forth in this Agreement.
10.4 Survival. The provisions of this Article 10 shall survive Closing.
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ARTICLE 11 - INDEMNITY AND RELEASE
11.1 Indemnification by the Company. The Company hereby agrees to
indemnify, defend, and hold harmless GMPTS and its agents (which for purposes of
paragraphs (f) and (g) below expressly include representatives of GMPTS on both
the Partnership Committee of the Company and the Board of Directors of Taubman
Centers, Inc.), trustees, beneficiaries, contractors, employees, officers,
directors, shareholders, partners (excluding the Company), and advisors, and the
agents, or trustees, beneficiaries, contractors, employees, officers, directors,
shareholders, partners and advisors of any partner of GMPTS, and their
respective permitted successors and permitted assigns (collectively, the "GMPTS
Parties" and any one of them a "GMPTS Party"), from and against all losses,
costs, expenses, liabilities, demands, claims, and damages (including interest,
penalties, and reasonable attorneys' fees and disbursements), asserted against,
resulting from, imposed upon or incurred by a GMPTS Party, as a result, by
reason of, or resulting from:
(a) any third-party claim relating to the Retained Properties, whether
arising, taking place, occurring, or accruing before or after
Closing;
(b) any breach or alleged breach of any obligation owed by any of the
entities which own the Retained Properties, whether arising, taking
place, occurring, or accruing before or after Closing;
(c) any breach or alleged breach of any partnership agreement governing
any of the entities which own the Retained Properties, whether
arising, taking place, occurring or accruing before of after
Closing;
(d) any lawsuit or claim against the Retained Properties or the owners
thereof;
(e) except as provided in Section 4.2(b) with respect to the fees of
Morgan Stanley Dean Witter, any claim for a fee, commission or other
payment by any investment bank, advisor, broker, or consultant
engaged or hired by the Company with respect to this Agreement or
the Transaction;
(f) any matter for which GMPTS or any Company Partnership Committee
Member appointed by GMPTS or any director of Taubman Centers, Inc.
elected by GMPTS would be indemnified against under Section 6.12 of
the Partnership Agreement of the Company as in effect on the date
hereof, regardless of whether such Section 6.12 of the Partnership
Agreement is hereafter modified, amended or terminated; provided,
however, that for purposes of this Section 11.1(f), "GMPTS Parties"
shall include only those persons which are entitled
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to indemnification under Section 6.12 of the Partnership Agreement
of the Company as in effect on the date hereof; provided further,
however, that for purposes of this Section 11.1(f), GMPTS itself
shall be excluded from the term "GMPTS Party", but only to the
extent of any amount which would otherwise be due to GMPTS under
this Section 11.1(f) as a result of any shareholder or bondholder
direct or derivative action, to the extent, but only to the extent,
based upon the execution and performance of this Agreement;
(g) any matter for which GMPTS or any Company Partnership Committee
Member appointed by GMPTS or any director of Taubman Centers, Inc.
elected by GMPTS would be indemnified against under Article VIII of
the Articles of Incorporation of Taubman Centers, Inc., regardless
of whether such Article VIII of the Articles of Incorporation is
hereafter modified, amended or terminated; provided, however, that
for purposes of this Section 11.1(g), "GMPTS Parties" shall include
only those persons which are entitled to indemnification under
Article VIII of the Articles of Incorporation of Taubman Centers,
Inc., as in effect on the date hereof;
(h) liabilities which are not set forth on the balance sheets described
in Section 3.1(f) but which under GAAP were required to be shown
thereof except for (i) liabilities with respect to matters which are
the subject matter of representations and warranties set forth in
this Agreement, (ii) liabilities to which GMPTS would be subject if
it acquired the assets of the Exchange Owning Entity rather than
partnership interests therein, and (iii) liabilities resulting from
or arising out of the Leases, Anchor Documents, Ground Leases, Loan
Documents, Exchange Partnership Documents, the Service Contracts,
and/or the Permitted Exceptions;
(i) any claim arising out of the Excluded Assets whether arising, taking
place, occurring, or accruing before or after Closing;
(j) the obligations of the Company set forth above in the definition of
the "Assumed Bridge Loan."
11.2 Indemnification by GMPTS. GMPTS, NewCo and NewCo Two, jointly and
severally, hereby agree to indemnify, defend, and hold harmless the Company and
its agents, trustees, beneficiaries, contractors, employees, officers,
directors, shareholders, partners (excluding GMPTS), and advisors, and their
respective successors and assigns (collectively, the "Company Parties"), from
and against all losses, costs, expenses, liabilities, demands, claims, and
damages (including interest, penalties, and reasonable attorneys' fees and
disbursements), asserted against, resulting from, imposed upon or incurred by a
Company Party, as a result, by reason of, or resulting from:
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(a) any third-party claim relating to the Exchange Properties, whether
arising, taking place, occurring, or accruing before or after
Closing;
(b) any breach or alleged breach, or any obligation owed, by any Owning
Entity under any of the Leases, the Anchor Documents, the Ground
Lease, the Loan Documents, the Service Contracts, or otherwise
whether arising, taking place, occurring, or accruing before or
after Closing;
(c) any breach or alleged breach of any Exchange Partnership Document,
by any partner other than an CalPERS, whether arising, taking place,
occurring or accruing before of after Closing.
(d) any of the lawsuits, claims and other matters described in Schedule
3.1(n) or Schedule 3.1(p) attached hereto;
(e) any claim for a fee, commission or other payment by any investment
bank, advisor, broker, or consultant engaged or hired by GMPTS with
respect to this Agreement or the Transaction.
Notwithstanding anything to the contrary contained in this Section 11.2,
GMPTS shall not have an obligation to indemnify the Company pursuant to this
Section 11.2 if the matter giving rise to GMPTS's obligation to indemnify also
constitutes a breach by the Company of any of its representations and warranties
hereunder whether or not GMPTS still has the right to bring a lawsuit against
the Company under the provisions of Section 3.4 or Section 3.10.
11.3 Notice of Indemnification. If a party (the "Obligated Party") is
required to indemnify a Company Party or a GMPTS Party (as applicable, the
"Indemnified Party") under the terms of this Agreement, the Indemnified Party
shall give prompt written notice and a demand or request for indemnification to
the Obligated Party (together with a description in reasonable detail of the
facts known to the Indemnified Party with respect thereto including copies of
any pleadings, lawsuits or written demands with respect thereto), but the
failure to so notify the Obligated Party will not relieve the Obligated Party of
any liability that it may have to the Indemnified Party, except to the extent
that the Obligated Party is materially prejudiced by the Indemnified Party's
failure to give such notice.
11.4 Procedure for Third-Party Claims. (a) If the claim or matter for
which indemnity is sought hereunder results from a third-party claim (the
"Claim"), then this Section 11.4 shall
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govern the procedure with respect to such indemnification. Upon receipt of
notice of a Claim from an Indemnified Party, the Obligated Party shall assume
the defense thereof with counsel reasonably satisfactory to such Indemnified
Party and the Indemnified Party shall cooperate in all reasonable respects in
such defense. The Indemnified Party shall have the right to employ separate
counsel in any action or claim and to participate in the defense thereof,
provided that the fees and expenses of counsel employed by the Indemnified Party
shall be at the expense of the Obligated Party only if such counsel is retained
pursuant to the provisions of Section 11.4(c). The Obligated Party may conduct
such defense in the name of or on behalf of the Indemnified Party or Obligated
Party and shall have full authority and control with respect thereto, including
the settlement thereof, provided no such settlement may subject the Indemnified
Party to civil or criminal fines or penalties, impose on-going obligations or
restrictions on the Indemnified Party or result in the admission of any default
or violation by the Indemnified Party under any agreement or Law, without the
express prior written authorization of the Indemnified Party.
(b) Subject to the provisions of subparagraph (a) above, if a final
adjudication (i.e., an adjudication with respect to which the time for taking
all appeals as of right has lapsed or with respect to which no further appeal is
legally available) of such Claim is rendered against the Indemnified Party, by a
court of competent jurisdiction, the Obligated Party shall, within thirty (30)
days after such adjudication becomes final, pay, and satisfy such Claim.
(c) If the Obligated Party fails to contest and defend against, or to pay
and satisfy the Claim within such thirty (30) days, or if a separate defense may
be asserted or there exists a conflict in defenses, then the Indemnified Party
may, at its option, with counsel of its or his choice contest and defend against
and/or settle, pay and satisfy, with the consent of the Obligated Party, which
consent may not be unreasonably withheld, the Claim, in which case the Obligated
Party shall immediately reimburse the Indemnified Party for all costs and
expenses (such as, but not limited to, actual attorneys' fees and disbursements)
incurred by
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the Indemnified Party in contesting and defending against and/or paying and
satisfying the Claim and enforcing the indemnification, together with interest
on such costs and expenses from the time incurred until the time paid at the per
annum rate equal to the prime rate announced from time to time by UBS AG, New
York Branch. If UBS AG, New York Branch, does not announce such rate or does not
exist, then such rate shall be equal to the prime rate set forth in the Wall
Street Journal.
(d) Each party agrees to cooperate with the reasonable requests of the
other party in contesting, defending, paying, satisfying, or appealing an
adjudication rendered with respect to any Claim.
(e) If the Indemnified Party recovers from a third party (through
insurance or otherwise) any amounts with respect to which the Obligated Party
made payments to or for the account of the Indemnified Party under this Section
11, the Indemnified Party shall promptly pay over to the Obligated Party any
amounts so recovered, net of collection costs.
11.5 Limitation on the Company's Liability for Certain Matters.
Notwithstanding anything contained herein or in any closing document to the
contrary, the Company shall have no liability to GMPTS for any of the Company's
indemnity obligation hereunder unless, until, and only to the extent that
GMPTS's damages and claims resulting from the indemnity hereunder exceed the
total sum of $100,000; provided, however, that such limitation shall not apply
to any claim under Section 11.1(h) and (i).
11.6 Limitation on GMPTS' Liability for Certain Matters. Notwithstanding
anything contained herein or in any closing document to the contrary, GMPTS
shall have no liability to the Company for any of GMPTS's indemnity obligation
hereunder unless, until and only to the extent that the Company's damages and
claims resulting from the indemnity hereunder exceed the total sum of $100,000.
11.7 Punitive and Consequential Damages. Neither any Company Party nor any
GMPTS Party shall be entitled to recover from the other under the provisions of
this
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Agreement for any punitive, exemplary, or consequential damages resulting from
any breach of this Agreement.
11.8 Mutual Release. (a) As further consideration for GMPTS's execution of
this Agreement, the Company, and its successors and assigns, as of the Closing
Date, hereby absolutely and irrevocably waive, release, and forever discharge
GMPTS from any and all claims, rights, demands, actions, suits, causes of
action, damages, counterclaims, defenses, losses, costs, obligations,
liabilities and expenses of every kind or nature other than any that may arise
in connection with the Transaction or this Agreement (collectively, "Released
Claims"), known or unknown, suspected or unsuspected, fixed or contingent,
foreseen or unforeseen, arising out of or relating directly to any circumstances
or state of facts pertaining to the Partnership Agreement or GMPTS's status as a
partner in the Company; provided, however, that the foregoing shall not
constitute a release of any of GMPTS's obligations under this Agreement,
including its representations and warranties hereunder.
(b) As further consideration for the Company's execution of this
Agreement, GMPTS, and its successors and assigns, as of the Closing Date, hereby
absolutely and irrevocably waive, release, and forever discharge the Company
from any and all Released Claims, known or unknown, suspected or unsuspected,
fixed or contingent, foreseen or unforeseen, arising out of or relating directly
to any circumstances or state of facts pertaining to the Partnership Agreement
or GMPTS's status as a partner in the Company; provided, however, that the
foregoing shall not constitute a release of any of the Company's obligations
under this Agreement, or relieve it of its representations and warranties
hereunder.
11.9 Survival. The provisions of this Article 11 shall survive Closing.
ARTICLE 12 - MISCELLANEOUS
12.1 Counterparts. This Agreement may be executed in counterparts, each of
which will be deemed to be an original, but both of which together will
constitute one and the same instrument.
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12.2 Assignment. Neither this Agreement nor any rights or obligations
under this Agreement may be assigned directly or indirectly by either party, by
operation of law or otherwise, without the other party's prior written consent,
except that GMPTS may assign all of its right, title, and interest in and to
this Agreement, in whole but not in part, to an Affiliate of The General Motors
Hourly-Rate Employees Pension Trust and The General Motors Retirement Program
for Salaried Employees Trust, provided (a) the assignee remains an Affiliate of
The General Motors Hourly-Rate Employees Pension Trust and The General Motors
Retirement Program for Salaried Employees Trust until the Closing has been fully
completed, (b) the assignee expressly assumes for the benefit of the Company all
of GMPTS's obligations and liabilities hereunder, and (c) GMPTS shall not be
released of any of its obligations or liabilities hereunder.
12.3 Waiver. To the extent permitted by law, all rights and remedies
existing or arising under, or related to, this Agreement are cumulative to, and
not exclusive of, any rights or remedies otherwise available under applicable
law. No failure on the part of either party to exercise, or delay in exercising,
any right will be deemed a waiver of such right, and no single or partial
exercise of a right will preclude any further or other exercise of that or any
other rights.
12.4 No Recordation. The Company and GMPTS each agrees that neither this
Agreement nor any memorandum or notice hereof shall be recorded against any
Exchange Property and GMPTS agrees not to file any notice of pendency or other
instrument (other than a judgment) against the Exchange Properties or any
portion thereof in connection herewith (except in the event GMPTS commences an
action for specific performance of the Company's obligations hereunder).
12.5 Blue-Pencil. If any provision of this Agreement is determined to be
invalid, illegal, or unenforceable, the remaining provisions of this Agreement
will remain in full force and effect, provided that the economic and legal
substance of the transactions contemplated
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by this Agreement is not affected in any manner materially adverse to either
party. To the extent permitted by law, the Company and GMPTS waive any provision
of law that renders any provision of this Agreement unenforceable in any
respect.
12.6 Governing Law. This Agreement is governed by, and is to be
interpreted and enforced under and in accordance with, the internal laws of the
State of New York.
12.7 Notices. All notices, demands, requests, or other communications
which may be or are required to be given, served, or sent by either party to the
other party pursuant to this Agreement shall be in writing and shall be hand
delivered or sent by reputable overnight courier. Each notice, demand, request
or communication which shall be delivered in the manner described shall be
deemed sufficiently given, served, sent, received, or delivered for all purposes
at such time as it is delivered to the addressee, if hand delivered, and one
Business Day after depositing with a reputable overnight courier, or at such
time as delivery is refused by the addressee upon presentation. Subject to the
above, all notices, demands, requests or other communications shall be addressed
as follows:
If to TRG:
The Taubman Realty Group Limited Partnership
200 East Long Lake Road
Bloomfield Hills, Michigan 48304
Attention: Mr. Robert S. Taubman
With a copy (which shall not constitute notice) to:
Miro Weiner & Kramer
500 North Woodward Avenue
Suite 100
Bloomfield Hills, Michigan 48304
Attention: Jeffrey H. Miro, Esq.
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If to GMPTS:
GMPTS Limited Partnership
c/o AEW Capital Management
225 Franklin Street
Boston, Massachusetts 02110
Attention: Joseph F. Azrack
GMPTS Limited Partnership
c/o AEW Capital Management
225 Franklin Street
Boston, Massachusetts 02110
Attention: Grant Monahon
With a copy (which shall not constitute notice) to:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, New York 10038
Attention: Dennis Block
12.8 Survival. The terms and provisions of this Agreement shall terminate
and be deemed merged into the document delivered at Closing unless expressly
provided herein to the contrary, in which case the specified terms and
provisions shall survive until the expiration of the applicable statute of
limitations, except where a shorter period of time is provided herein. The
provisions of this Article 12 shall survive Closing.
12.9 Exchange Properties Held for Investment. GMPTS was one of the
founders of the Company, has held its interest in the Company as an investment,
and has advised the Company that it expects to obtain and hold the Exchange
Properties for investment, subject to decisions in the ordinary course. GMPTS
shall have no liability to the Company under this Section 12.9.
12.10 Binding Effect. This Agreement is binding upon, and inures to the
benefit of, the parties hereto and their respective permitted successors and
permitted assigns.
12.11 Captions. The captions used throughout this Agreement are for
convenience only and are not to be used in the interpretation or construction of
this Agreement.
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12.12 Entire Agreement. This Agreement constitutes the entire agreement of
the parties with respect to the subject matter hereof.
IN WITNESS WHEREOF, GMPTS and the Company have entered into this Agreement
as of the date first written above.
GMPTS LIMITED PARTNERSHIP, a
Delaware limited partnership
By: GMPTS Corporation, a Delaware
corporation, general partner
By:/s/ Ronald M. Pastore
-----------------------------
Its: Authorized Signatory
THE TAUBMAN REALTY GROUP LIMITED
PARTNERSHIP, a Delaware limited
partnership
By:/s/ Robert S. Taubman
-----------------------------------
Its: Authorized Signatory
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