-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ergb/JZbNoELXlBMCLhgGbXApHHX4i71eksVTZpUDlEBc8DmyH0Je9EQH5WLmYh4 3/v4JWAXi1DwbJ0PVb0Oqw== 0000910612-06-000058.txt : 20060315 0000910612-06-000058.hdr.sgml : 20060315 20060315163607 ACCESSION NUMBER: 0000910612-06-000058 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 20 CONFORMED PERIOD OF REPORT: 20051231 FILED AS OF DATE: 20060315 DATE AS OF CHANGE: 20060315 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CBL & ASSOCIATES PROPERTIES INC CENTRAL INDEX KEY: 0000910612 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 621545718 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-12494 FILM NUMBER: 06688687 BUSINESS ADDRESS: STREET 1: 2030 HAMILTON PLACE BVLD, SUITE 500 STREET 2: CBL CENTER CITY: CHATTANOOGA STATE: TN ZIP: 37421 BUSINESS PHONE: 4238550001 MAIL ADDRESS: STREET 1: 2030 HAMILTON PLACE BVLD, SUITE 500 STREET 2: CBL CENTER CITY: CHATTANOOGA STATE: TN ZIP: 37421 10-K 1 form10k.txt FORM 10-K ANNUAL REPORT FOR 2005 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K |X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2005 Or |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 1-12494 CBL & ASSOCIATES PROPERTIES, INC. (Exact Name of Registrant as Specified in Its Charter) Delaware 62-1545718 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporate or organization) 2030 Hamilton Place Blvd, Suite 500 37421 Chattanooga, TN (Zip Code) (Address of principal executive office) Registrant's telephone number, including area code:(423) 855-0001 Securities registered pursuant to Section 12(b) of the Act: Title of each Class Name of each exchange on which registered - ------------------------------------ ----------------------------------------- Common Stock, $0.01 par value New York Stock Exchange 8.75% Series B Cumulative Redeemable Preferred Stock, $0.01 par value New York Stock Exchange 7.75% Series C Cumulative Redeemable Preferred Stock, $0.01 par value New York Stock Exchange 7.375% Series D Cumulative Redeemable Preferred Stock, $0.01 par value New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes |X| No |_| Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes |_| No |X| Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods that the registrant was required to file such report(s)) and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No |_| Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. |_| 1 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer |X| Accelerated filer |_| Non-accelerated filer |_| Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes |_| No |X| The aggregate market value of the 60,749,837 shares of common stock held by non-affiliates of the registrant as of June 30, 2005 was $2,616,495,460, based on the closing price of $43.07 per share on the New York Stock Exchange on June 30, 2005. (For this computation, the registrant has excluded the market value of all shares of its common stock reported as beneficially owned by executive officers and directors of the registrant; such exclusion shall not be deemed to constitute an admission that any such person is an "affiliate" of the registrant.) As of March 10, 2006, there were 64,116,757 shares of common stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's proxy statement for the annual shareholders meeting to be held on May 8, 2006, are incorporated by reference into Part III. 2 TABLE OF CONTENTS Item No. Page PART I 1 Business 4 1A Risk Factors 12 1B Unresolved Staff Comments 20 2 Properties 20 3 Legal Proceedings 35 4 Submission of Matters to a Vote of Security Holders 35 PART II 5 Market For Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 35 6 Selected Financial Data 37 7 Management's Discussion and Analysis of Financial Condition and Results of Operations 38 7A Quantitative and Qualitative Disclosures about Market Risk 56 8 Financial Statements and Supplementary Data 56 9 Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 56 9A Controls and Procedures 56 9B Other Information 59 PART III 10 Directors and Executive Officers of the Registrant 61 11 Executive Compensation 61 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 61 13 Certain Relationships and Related Transactions 61 14 Principal Accounting Fees and Services 61 PART IV 15 Exhibits, Financial Statement Schedules 62 Signatures 63 3 Cautionary Statement Relevant to Forward-Looking Information for the Purpose of the "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995 Certain statements made in this section or elsewhere in this report may be deemed "forward looking statements" within the meaning of the federal securities laws. Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, we cannot give assurance that these expectations will be attained, and it is possible that actual results may differ materially from those indicated by these forward-looking statements due to a variety of risks and uncertainties. In addition to the risk factors discussed below in Item 1A. of this report, such risks and uncertainties include, without limitation, general industry, economic and business conditions, interest rate fluctuations, costs of capital and capital requirements, availability of real estate properties, inability to consummate acquisition opportunities, competition from other companies and retail formats, changes in retail rental rates in our markets, shifts in customer demands, tenant bankruptcies or store closings, changes in vacancy rates at our properties, changes in operating expenses, changes in applicable laws, rules and regulations, the ability to obtain suitable equity and/or debt financing and the continued availability of financing in the amounts and on the terms necessary to support our future business. We disclaim any obligation to update or revise any forward-looking statements to reflect actual results or changes in the factors affecting the forward-looking information. Part I. ITEM 1. BUSINESS Background CBL & Associates Properties, Inc. (the "CBL") was organized on July 13, 1993, as a Delaware corporation, to acquire substantially all of the real estate properties owned by CBL & Associates, Inc., and its affiliates ("CBL's Predecessor"), which was formed by Charles B. Lebovitz in 1978. On November 3, 1993, CBL completed an initial public offering (the "Offering"). Simultaneous with the completion of the Offering, CBL's Predecessor transferred substantially all of its interests in its real estate properties to CBL & Associates Limited Partnership (the "Operating Partnership") in exchange for common units of limited partnership interest in the Operating Partnership. The interests in the Operating Partnership contain certain conversion rights that are more fully described in Note 9 to the consolidated financial statements. The terms "we", "us", "our" and the "Company" refer to CBL & Associates Properties, Inc. and its subsidiaries. Recent Developments In January 2005, we closed the third phase of our joint venture, Galileo America LLC ("Galileo America"), when we sold our interests in two power centers, one community center and one community center expansion to Galileo America for $58.6 million. We acquired the properties listed in the following table during 2005. Please see Note 3 to the consolidated financial statements for more information.
Purchase Acquisition Property Location Price Date - ----------------------------------------------------- ----------------------------------------------- ------------ ----------- (in 000's) Laurel Park Place Livonia, MI $ 80,363 June 2005 The Mall of Acadiana Lafayette, LA 175,204 July 2005 Layton Hills Mall and Layton Hills Convenience Center Layton Hills, UT 120,926 November 2005 Oak Park Mall, Eastland Mall and Hickory Point Mall Overland Park, KS; Bloomington, IL; Forsyth, IL 508,180 November 2005 ----------- $884,673 ===========
4 In February 2005, we amended one of our secured credit facilities to increase the total availability from $80.0 million to $100.0 million and to extend the maturity by one year to June 2007. On May 9, 2005, our shareholders approved an increase in the authorized shares of the common stock under our amended and restated certificate of incorporation to 180,000,000 shares from 95,000,000 shares. On May 10, 2005, our board of directors approved a two-for-one stock split of our common stock, which was effected in the form of a stock dividend. The record date for the stock split was June 1, 2005, and the distribution date was June 15, 2005. The common units and special common units of limited partner interest in the Operating Partnership were also split on a two-for-one basis so that they continue to be exchangeable on a one-for-one basis into shares of our common stock. In April 2005, we formed a joint venture with the Richard E. Jacobs Group ("Jacobs") to develop Gulf Coast Town Center in Lee County (Ft. Myers/Naples), Florida. See Note 5 to the consolidated financial statements for more information. In August 2005, we transferred our 8.4% ownership interest in Galileo America to Galileo America in exchange for Galileo America's interest in two community centers: Springdale Center in Mobile, AL, and Wilkes-Barre Township Marketplace in Wilkes-Barre Township, PA. We also sold our management and advisory contracts with Galileo America to New Plan Excel Realty Trust, Inc. ("New Plan"). In September 2005, we increased the availability under our unsecured credit facility from $400.0 million to $500.0 million. In October 2005, our board of directors declared a special one-time cash dividend for our common stock of $0.09 per share. The dividend was payable on January 16, 2006, to shareholders of record as of December 30, 2005. The special dividend was declared as a result of the taxable gains generated from the sale of our management and advisory contracts with Galileo America that is discussed in Note 5 to the consolidated financial statements. In November 2005, our board of directors approved a plan to repurchase up to $60.0 million of our common stock by December 31, 2006. The stock repurchase plan was adopted to provide us the opportunity to repurchase shares relatively equivalent to the Series K Special Common Units that were issued in connection with the acquisition of the three-mall portfolio that is discussed in Note 3 to the consolidated financial statements. We had repurchased 1,371,034 shares of our common stock as of December 31, 2005 for a total of $55.0 million, or a weighted average cost of $40.11 per share. We do not intend to repurchase any additional shares subsequent to December 31, 2005. In November 2005, we formed a 50/50 joint venture with Jacobs to own Triangle Town Center and its associated and lifestyle centers, Triangle Town Place and Triangle Town Commons, in Raleigh, NC. We assumed management, leasing and any future development responsibilities of these properties. The Company's Business We are a self-managed, self-administered, fully integrated real estate investment trust ("REIT"). We own, develop, acquire, lease, manage, and operate regional malls, open-air and community shopping centers. Our shopping center properties are located in 27 states, but primarily in the southeastern and midwestern United States. We have elected to be taxed as a REIT for federal income tax purposes. We conduct substantially all of our business through the Operating Partnership. We are the 100% owner of two qualified REIT subsidiaries, CBL Holdings I, Inc. and CBL Holdings II, Inc. CBL Holdings I, Inc. is the sole general partner of the Operating Partnership. At December 31, 2005, CBL Holdings 5 I, Inc. owned a 1.6% general partnership interest and CBL Holdings II, Inc. owned a 52.5% limited partnership interest in the Operating Partnership, for a combined interest held by us of 54.1%. As of December 31, 2005, we owned: |X| interests in a portfolio of operating properties including 77 enclosed regional malls and two open-air centers (the "Malls"), 30 associated centers (the "Associated Centers"), seven community centers (the "Community Centers") and our corporate office building (the "Office Building"); |X| interests in two mall expansions, two open-air centers, one open-air shopping center expansion, two associated centers, one community center and one community center expansion that are currently under construction (the "Construction Properties"), as well as options to acquire certain shopping center development sites; and |X| mortgages on eight properties that are secured by first mortgages or wrap-around mortgages on the underlying real estate and related improvements (the "Mortgages"). The Malls, Associated Centers, Community Centers, Construction Properties, Mortgages and Office Building are collectively referred to as the "Properties" and individually as a "Property." We conduct our property management and development activities through CBL & Associates Management, Inc. (the "Management Company") to comply with certain technical requirements of the Internal Revenue Code of 1986, as amended. The Management Company manages all but five of the Properties. Governor's Square and Governor's Plaza in Clarksville, TN, and Kentucky Oaks Mall, in Paducah, KY are all owned by joint ventures and are managed by a property manager that is affiliated with the third party managing general partner, which receives a fee for its services. The managing partner of each of these Properties controls the cash flow distributions, although our approval is required for certain major decisions. Springdale Center in Mobile, AL and Wilkes-Barre Township Marketplace in Wilkes-Barre Township, PA, are managed by a third party that receives a fee for its services. The majority of our revenues are derived from leases with retail tenants and generally include minimum rents, percentage rents based on tenants' sales volumes and reimbursements from tenants for expenditures related to property operating expenses, real estate taxes, insurance and maintenance and repairs, as well as certain capital expenditures. We also generate revenues from sales of peripheral land at the properties and from sales of real estate assets when it is determined that we can realize a premium value for the assets. Proceeds from such sales are generally used to reduce borrowings on our credit facilities. The following terms used in this annual report on Form 10-K will have the meanings described below: |X| GLA - refers to gross leasable area of retail space in square feet, including anchors and mall tenants |X| Anchor - refers to a department store or other large retail store |X| Freestanding - property locations that are not attached to the primary complex of buildings that comprise the mall shopping center |X| Outparcel - land used for freestanding developments, such as retail stores, banks and restaurants, on the periphery of the Properties 6 Significant Markets Our top five markets, in terms of revenues, were as follows for the year ended December 31, 2005:
Market Percentage Total of Revenues - ---------------------- ---------------------------- Nashville, TN 6.2% Madison, WI 3.5% Chattanooga, TN 3.1% Pittsburgh, PA 3.3% Winston-Salem, NC 3.0% ------ 19.1% =====
Top 25 Tenants Our top 25 tenants based on percentage of total revenues were as follows for the year ended December 31, 2005:
Annual Percentage Number Gross of Total Tenant of Stores Square Feet Rentals (1) Revenues ------------------------------------------ ----------- -------------- --------------- -------------- 1 Limited Brands, Inc. 235 1,451,230 $49,816,597 5.6% 2 Foot Locker, Inc. 193 760,487 28,743,398 3.2% 3 The Gap, Inc. 106 1,052,246 24,849,474 2.8% 4 Luxottica Group, S.P.A. (2) 77 362,187 16,993,141 1.9% 5 Abercrombie & Fitch, Co. 197 479,638 16,737,262 1.9% 6 AE Outfitters Retail Company 73 384,206 15,162,552 1.7% 7 Signet Group PLC (3) 104 158,906 14,502,975 1.6% 8 Zale Corporation 148 148,800 13,637,113 1.5% 9 JC Penney Co. Inc. (4) 69 7,701,909 13,273,150 1.5% 10 Finish Line, Inc. 68 356,479 12,948,490 1.5% 11 New York & Company, Inc. 45 348,612 11,031,050 1.2% 12 The Regis Corporation 198 230,075 11,014,242 1.2% 13 Hallmark Cards, Inc. 88 309,068 10,310,067 1.2% 14 The Children's Place Retail Stores, Inc.(5) 61 258,951 9,898,797 1.1% 15 Genesco Inc. (6) 139 178,211 9,801,639 1.1% 16 Charming Shoppes, Inc. (7) 58 344,733 9,789,050 1.1% 17 Pacific Sunwear of California 81 279,350 9,625,585 1.1% 18 Dick's Sporting Goods, Inc. 11 654,686 9,085,563 1.0% 19 Aeropostale, Inc. 66 223,772 8,736,517 1.0% 20 Trans World Entertainment (8) 50 259,060 8,364,797 0.9% 21 Sun Capital Partners, Inc. (9) 65 441,360 7,988,783 0.9% 22 Federated Department Stores, Inc.(10) 86 6,228,826 7,951,723 0.9% 23 Christopher & Banks, Inc. 67 231,681 7,736,242 0.9% 24 Claire's Stores, Inc. 117 132,167 7,537,292 0.9% 25 The Buckle, Inc. 44 214,094 7,377,496 0.8% ----------- -------------- --------------- -------------- 2,446 23,190,734 $342,912,995 38.5% =========== ============== =============== ============== (1) Includes annual minimum rent and tenant reimbursements based on amounts in effect at December 31, 2005. (2) Luxottica was previously Lenscrafters and Sunglass Hut. Luxottica purchased Cole National Corporation, which operates Pearl Vision and Things Remembered in October 2004. (3) Signet Group was previously Sterling, Inc. They operate Kay Jewelers, Marks & Morgan, JB Robinson, Shaw's Jewelers, Osterman's Jewelers, LeRoy's Jewelers, Jared Jewelers, Belden Jewelers and Rogers Jewelers. (4) J.C. Penney owns 29 of these stores. (5) The Children's Place Retail Stores, Inc. purchased The Disney Store in November 2004. (6) Genesco Inc. operates Journey's, Jarman and Underground Station. Genesco purchased Hat World, which operates Hat World, Lids, Hat Zone and Cap Factory, as of April 2, 2004. (7) Charming Shoppes, Inc. operates Lane Bryant, Fashion Bug and Catherine's. (8) Trans World Entertainment operates FYE (formerly Camelot Music and Record Town) and Saturday Matinee. (9) Sun Capital Partners, Inc. operates Sam Goody, Suncoast Motion Pictures, Musicland, Life Uniform, Anchor Blue, Mervyn's, Bruegger's Bagels, Wick's Furniture and the Mattress Firm. Musicland Group, which includes Sam Goody. 7 and Suncoast, recently filed for bankruptcy under Chapter 11. They represent 178,776 square feet and $6,535,866 in total annual revenue. (10) Federated Department Stores merged with May Company in 2005. They now operate After Hours Formalwear, Desmond's Formal Wear, Mitchell's Formal Wear, Tuxedo World, David's Bridal, Burdine's, Famous Barr, Foley's, Hecht's, Kaufmann's, Lazarus, L.S. Ayers, Macy's, Marshall Field's, Meier & Frank, Rich's-Macy's, Robinson's May, & The Jones Store.
Our Growth Strategy Our objective is to achieve growth in funds from operations by maximizing cash flows through a variety of methods that are discussed below. Leasing, Management and Marketing Our objective is to maximize cash flows from our existing Properties through: |X| aggressive leasing that seeks to increase occupancy, |X| originating and renewing leases at higher base rents per square foot compared to the previous lease, |X| merchandising, marketing, sponsorship and promotional activities and |X| aggressively controlling operating costs and resulting tenant occupancy costs. Expansions and Renovations We can generate additional revenue by expanding a Property through the addition of department stores, mall stores and large retail formats. An expansion also protects the Property's competitive position within its market. As shown below, we completed seven expansions during 2005 and expect to expand four Properties in 2006:
Property Location GLA Opening Date - ----------------------------------------------------------------------------------------------------------------- Completed in 2005: - ------------------ CoolSprings Crossing Nashville, TN 10,000 March The District at Monroeville Mall Monroeville, PA 75,000 April Citadel Mall Charleston, SC 45,000 August St. Clair Square Fairview Heights, IL 8,500 September Stroud Mall Stroudsburg, PA 4,500 October Fayette Mall Lexington, KY 144,000 October Fashion Square Orange Park, FL 18,000 October --------- 305,000 ========= Scheduled for 2006: - ------------------- Southaven Towne Center (Dillard's) Southaven, MS 158,900 March Southaven Towne Center (Gordman's) Southaven, MS 59,400 April Burnsville Center Burnsville, MN 20,600 April Coastal Grand-Myrtle Beach (PetsMart) Myrtle Beach, SC 20,100 May Hanes Mall (Dick's Sporting Goods) Winston-Salem, NC 66,000 July Southaven Towne Center Southaven, MS 15,000 November --------- 340,000 =========
Renovations usually include renovating existing facades, uniform signage, new entrances and floor coverings, updating interior decor, resurfacing parking lots and improving the lighting of interiors and parking lots. Renovations can result in attracting new retailers, increased rental rates and occupancy levels and maintaining the Property's market dominance. As shown below, we renovated three Properties during 2005 and expect to renovate nine Properties during 2006. 8
Property Location - --------------------------------------------------------- Completed in 2005: Fayette Mall Lexington, KY Hamilton Corner Chattanooga, TN Village at Rivergate Nashville, TN Scheduled for 2006: CoolSprings Galleria Nashville, TN Chapel Hill Mall Akron, OH Hamilton Crossing Chattanooga, TN Harford Mall Bel Air, MD Honey Creek Mall Terre Haute, IN Madison Square Huntsville, AL Northpark Mall Joplin, MO Park Plaza Mall Little Rock, AR Wausau Center Wausau, WI
Development of New Retail Properties In general, we seek development opportunities in middle-market trade areas that we believe are under-served by existing retail operations. These middle-markets must also have sufficient demographics to provide the opportunity to effectively maintain a competitive position. The following shows the new developments we opened during 2005 and those under construction at December 31, 2005:
Property Location GLA Opening Date - -------------------------------------------------------------------------------------------------------- Opened in 2005: - --------------- Imperial Valley Mall (60/40 joint venture) El Centro, CA 754,000 March Hamilton Corner Chattanooga, TN 68,000 March Coastal Grand Crossing Myrtle Beach, SC 15,000 May Cobblestone Village at Royal Palm Beach Royal Palm Beach, FL 225,000 June Chicopee Marketplace Chicopee, MA 156,000 September Southaven Towne Center Southaven, MS 279,100 October Gulf Coast Town Center (Phase I) Ft. Myers, FL 436,000 November ------------------ 1,933,100 ================== Currently under construction: - ----------------------------- The Plaza at Fayette (Phase I) Lexington, KY 73,400 July 2006 Lakeview Point Stillwater, OK 207,300 October 2006 Gulf Coast Town Center (Phase II) Ft. Myers, FL 739,000 October 2006 High Pointe Commons Harrisburg, PA 297,100 October 2006 The Shoppes at St. Clair Fairview Heights, IL 75,000 March 2007 ------------------ 1,391,800 ==================
Our total investment in the Properties opened in 2005 was $282.6 million and the total investment in the Properties we had under construction at December 31, 2005 is projected to be $219.7 million. Acquisitions We believe there is opportunity for growth through acquisitions of regional malls and other associated properties. We selectively acquire regional mall properties where we believe we can increase the value of the property through our development, leasing and management expertise. We acquired the following Properties during 2005: 9
Property Location GLA Month Acquired - ------------------------------------------------------------------------------------------------------ Laurel Park Place Livonia, MI 805,200 June The Mall of Acadiana Lafayette, LA 997,300 July Layton Hills Mall Layton Hills, UT 660,700 November Layton Hills Convenience Center Layton, UT 93,900 November Oak Park Mall Overland Park, KS 1,488,500 November Eastland Mall Bloomington, IL 755,800 November Hickory Point Mall Forsyth, IL 743,100 November Triangle Town Center (50/50 joint venture) Raleigh, NC 1,279,200 November Triangle Town Place (50/50 joint venture) Raleigh, NC 161,800 November ------------------ 6,985,500 ==================
Insurance We carry a comprehensive blanket policy for general liability, property casualty (including fire, earthquake and flood) and rental loss covering all of the Properties, with specifications and insured limits customarily carried for similar properties. The property and liability insurance policies on our Properties currently include loss resulting from acts of terrorism, whether foreign or domestic. We believe the Properties are adequately insured in accordance with industry standards. Environmental Matters Under various federal, state and local laws, ordinances and regulations, a current or previous owner or operator of real estate may be liable for the costs of removal or remediation of petroleum, certain hazardous or toxic substances on, under or in such real estate. Such laws typically impose such liability without regard to whether the owner or operator knew of, or was responsible for, the presence of such substances. The costs of remediation or removal of such substances may be substantial. The presence of such substances, or the failure to promptly remove or remediate such substances, may adversely affect the owner's or operator's ability to lease or sell such real estate or to borrow using such real estate as collateral. Persons who arrange for the disposal or treatment of hazardous or toxic substances may also be liable for the costs of removal or remediation of such substances at the disposal or treatment facility, regardless of whether such facility is owned or operated by such person. Certain laws also impose requirements on conditions and activities that may affect the environment or the impact of the environment on human health. Failure to comply with such requirements could result in the imposition of monetary penalties (in addition to the costs to achieve compliance) and potential liabilities to third parties. Among other things, certain laws require abatement or removal of friable and certain non-friable asbestos-containing materials in the event of demolition or certain renovations or remodeling. Certain laws regarding asbestos-containing materials require building owners and lessees, among other things, to notify and train certain employees working in areas known or presumed to contain asbestos-containing materials. Certain laws also impose liability for release of asbestos-containing materials into the air and third parties may seek recovery from owners or operators of real properties for personal injury or property damage associated with asbestos-containing materials. In connection with the ownership and operation of properties, we may be potentially liable for all or a portion of such costs or claims. All of our properties (but not properties for which we hold an option to purchase but do not yet own) have been subject to Phase I environmental assessments or updates of existing Phase I environmental assessments within approximately the last ten years. Such assessments generally consisted of a visual inspection of the properties, review of federal and state environmental databases and certain information regarding historic uses of the property and adjacent areas and the preparation and issuance of written reports. Some of the properties contain, or contained, underground storage tanks used for storing petroleum products or wastes typically associated with automobile service or other operations conducted at the properties. Certain properties contain, or contained, dry-cleaning establishments utilizing solvents. Where believed to be warranted, samplings of building materials or subsurface investigations were undertaken. At certain properties, where warranted by the conditions, we have 10 developed and implemented an operations and maintenance program that establishes operating procedures with respect to asbestos-containing materials. The costs associated with the development and implementation of such programs were not material. We believe that our properties are in compliance in all material respects with all federal, state and local ordinances and regulations regarding the handling, discharge and emission of hazardous or toxic substances. We have recorded in our financial statements a liability of $2.4 million related to potential future asbestos abatement activities at our Properties which are not expected to have a material impact on our financial condition or results of operations. We have not been notified by any governmental authority, and are not otherwise aware, of any material noncompliance, liability or claim relating to hazardous or toxic substances in connection with any of our present or former properties. Nevertheless, it is possible that the environmental assessments available to us do not reveal all potential environmental liabilities. It is also possible that subsequent investigations will identify material contamination, that adverse environmental conditions have arisen subsequent to the performance of the environmental assessments, or that there are material environmental liabilities of which management is unaware. Moreover, no assurances can be given that (i) future laws, ordinances or regulations will not impose any material environmental liability or (ii) the current environmental condition of the properties has not been or will not be affected by tenants and occupants of the properties, by the condition of properties in the vicinity of the properties or by third parties unrelated to us, the Operating Partnership or the relevant property's partnership. Competition The Properties compete with various shopping facilities in attracting retailers to lease space. In addition, retailers at our properties face competition from discount shopping centers, outlet malls, wholesale clubs, direct mail, television shopping networks, the internet and other retail shopping developments. The extent of the retail competition varies from market to market. We work aggressively to attract customers through marketing promotions and campaigns. Seasonality Our business is somewhat seasonal in nature with tenant sales achieving the highest levels during the fourth quarter because of the holiday season, which results in higher percentage rent income in the fourth quarter. The Malls earn most of their "temporary" rents (rents from short-term tenants) during the holiday period. Thus, occupancy levels and revenue production are generally the highest in the fourth quarter of each year. Results of operations realized in any one quarter may not be indicative of the results likely to be experienced over the course of the entire year. Financial Information About Segments See Note 12 to the consolidated financial statements for information about our reportable segments. Employees We currently have 784 full-time and 699 part-time employees. None of our employees are represented by a union. Corporate Offices Our principal executive offices are located at CBL Center, 2030 Hamilton Place Boulevard, Suite 500, Chattanooga, Tennessee, 37421 and our telephone number is (423) 855-0001. 11 Available Information There is additional information about us on our web site at cblproperties.com. Electronic copies of our Annual Report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, as well as any amendments to those reports, are available free of charge by visiting the "investor relations" section of our web site. These reports are posted as soon as reasonably practical after they are electronically filed with, or furnished to, the Securities and Exchange Commission. The information on the web site is not, and should not, be considered to be a part of this Form 10-K. ITEM 1A. RISK FACTORS RISKS RELATED TO REAL ESTATE INVESTMENTS Real property investments are subject to various risks, many of which are beyond our control, that could cause declines in the operating revenues and/or the underlying value of one or more of our Properties. A number of factors may decrease the income generated by a retail shopping center property, including: |X| National, regional and local economic climates, which may be negatively impacted by plant closings, industry slowdowns, adverse weather conditions, natural disasters, and other factors which tend to reduce consumer spending on retail goods. |X| Local real estate conditions, such as an oversupply of, or reduction in demand for, retail space or retail goods, and the availability and creditworthiness of current and prospective tenants. |X| Increased operating costs, such as increases in real property taxes, utility rates and insurance premiums. |X| Perceptions by retailers or shoppers of the safety, convenience and attractiveness of the shopping center. |X| The willingness and ability of the shopping center's owner to provide capable management and maintenance services. |X| The convenience and quality of competing retail properties and other retailing options, such as the Internet. In addition, other factors may adversely affect the value of our Properties without affecting their current revenues, including: |X| Adverse changes in governmental regulations, such as local zoning and land use laws, environmental regulations or local tax structures that could inhibit our ability to proceed with development, expansion, or renovation activities that otherwise would be beneficial to our Properties. |X| Potential environmental or other legal liabilities that reduce the amount of funds available to us for investment in our Properties. |X| Any inability to obtain sufficient financing (including both construction financing and permanent debt), or the inability to obtain such financing on commercially favorable terms, to fund new developments, acquisitions, and property expansions and renovations which otherwise would benefit our Properties. |X| An environment of rising interest rates, which could negatively impact both the value of commercial real estate such as retail shopping centers and the overall retail climate. 12 The loss of one or more significant tenants, due to bankruptcies or as a result of ongoing consolidations in the retail industry, could adversely affect both the operating revenues and value of our Properties. Regional malls are typically anchored by well-known department stores and other significant tenants who generate shopping traffic at the mall. A decision by an anchor tenant or other significant tenant to cease operations at one or more Properties could have a material adverse effect on those Properties and, by extension, on our financial condition and results of operations. The closing of an anchor or other significant tenant may allow other anchors and/or tenants at an affected Property to terminate their leases, to seek rent relief and/or cease operating their stores or otherwise adversely affect occupancy at the Property. In addition, key tenants at one or more Properties might terminate their leases as a result of mergers, acquisitions, consolidations, dispositions or bankruptcies in the retail industry. The bankruptcy and/or closure of one or more significant tenants, if we are not able to successfully re-tenant the affected space, could have a material adverse effect on both the operating revenues and underlying value of the Properties involved. We may incur significant costs related to compliance with environmental laws, which could have a material adverse effect on our results of operations, cash flow and the funds available to us to pay dividends. Under various federal, state and local environmental laws, ordinances and regulations, a current or previous owner or operator of real property may be liable for the costs of removal or remediation of hazardous or toxic substances on, under or in that real property. These laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of hazardous or toxic substances. The costs of investigation, removal or remediation of hazardous or toxic substances may be substantial. In addition, the presence of hazardous or toxic substances, or the failure to remedy environmental hazards properly, may adversely affect the owner's or operator's ability to sell or rent affected real property or to borrow money using affected real property as collateral. Persons or entities that arrange for the disposal or treatment of hazardous or toxic substances may also be liable for the costs of removal or remediation of hazardous or toxic substances at the disposal or treatment facility, whether or not that facility is owned or operated by the person or entity arranging for the disposal or treatment of hazardous or toxic substances. Laws exist that impose liability for release of asbestos-containing materials into the air, and third parties may seek recovery from owners or operators of real property for personal injury associated with exposure to asbestos-containing materials. In connection with our ownership, operation, management, development and redevelopment of our Properties, or any other Properties we acquire in the future, we may be potentially liable under these laws and may incur costs in responding to these liabilities, which could have an adverse effect on our results of operations, cash flow and the funds available to us to pay dividends. RISKS RELATED TO OUR BUSINESS AND THE MARKET FOR OUR STOCK We may elect not to proceed with certain development projects once they have been undertaken, resulting in charges that could have a material adverse effect on our results of operations for the period in which the charge is taken. We intend to pursue development and expansion activities as opportunities arise. In connection with any development or expansion, we will incur various risks including the risk that development or expansion opportunities explored by us may be abandoned and the risk that construction costs of a project may exceed original estimates, possibly making the project not profitable. Other risks include the risk that we may not be able to refinance construction loans which are generally with full recourse to us, the risk that occupancy rates and rents at a completed project will not meet projections and will be insufficient to make the project profitable, and the risk that we will not be able to obtain anchor, mortgage lender and property partner approvals for certain expansion activities. In the event of an unsuccessful development project, our loss could exceed our investment in the project. 13 We have in the past elected not to proceed with certain development projects and anticipate that we will do so again from time to time in the future. If we elect not to proceed with a development opportunity, the development costs ordinarily will be charged against income for the then-current period. Any such charge could have a material adverse effect on our results of operations for the period in which the charge is taken. Competition from other retail formats could adversely affect the revenues generated by our properties, resulting in a reduction in funds available for distribution to our stockholders. There are numerous shopping facilities that compete with our Properties in attracting retailers to lease space. In addition, retailers at our Properties face competition for customers from: |X| Discount shopping centers |X| Outlet malls |X| Wholesale clubs |X| Direct mail |X| Telemarketing |X| Television shopping networks |X| Shopping via the Internet Each of these competitive factors could adversely affect the amount of rents that we are able to collect from our tenants, thereby reducing our revenues and the funds available for distribution to our stockholders. Since our shopping center properties are located principally in the Southeastern and Midwestern United States, our financial position, results of operations and funds available for distribution to shareholders are subject generally to economic conditions in these regions. Our properties are located principally in the southeastern and midwestern Unites States. Our properties located in the southeastern United States accounted for approximately 52.6% of our total revenues from all properties for the year ended December 31, 2005 and currently include 40 Malls, 20 Associated Centers, five Community Centers and one Office Building. Our properties located in the midwestern United States accounted for approximately 25.9% of our total revenues from all properties for the year ended December 31, 2005 and currently include 21 Malls and three Associated Centers. Our results of operations and funds available for distribution to shareholders therefore will be subject generally to economic conditions in the southeastern and midwestern United States. We will continue to look for opportunities to geographically diversify our portfolio in order to minimize dependency on any particular region; however, the expansion of the portfolio through both acquisitions and developments is contingent on many factors including consumer demand, competition and economic conditions. Certain of our shopping center properties are subject to ownership interests held by third parties, whose interests may conflict with ours and thereby constrain us from taking actions concerning these properties which otherwise would be in the best interests of the Company and our stockholders. We own partial interests in eight malls, six associated centers, three community centers and one office building. We manage all of these properties except for Governor's Square, Governor's Plaza and Kentucky Oaks. A property manager affiliated with the managing general partner performs the property management services for these properties and receives a fee for its services. The managing partner of each of these three Properties controls the cash flow distributions, although our approval is required for certain major decisions. Springdale Center in Mobile, AL and Wilkes-Barre Township Marketplace in Wilkes-Barre Township, PA, are managed by a third party that receives a fee for its services. 14 Where we serve as managing general partner of the partnerships that own our properties, we may have certain fiduciary responsibilities to the other partners in those partnerships. In certain cases, the approval or consent of the other partners is required before we may sell, finance, expand or make other significant changes in the operations of such properties. To the extent such approvals or consents are required, we may experience difficulty in, or may be prevented from, implementing our plans with respect to expansion, development, financing or other similar transactions with respect to such properties. With respect to Governor's Square, Governor's Plaza and Kentucky Oaks we do not have day-to-day operational control or control over certain major decisions, including the timing and amount of distributions, which could result in decisions by the managing general partner that do not fully reflect our interests. This includes decisions relating to the requirements that we must satisfy in order to maintain our status as a REIT for tax purposes. However, decisions relating to sales, expansion and disposition of all or substantially all of the assets and financings are subject to approval by the Operating Partnership. Certain agreements with prior owners of Properties that we have acquired may inhibit our ability to enter into future sale or refinancing transactions affecting such Properties, which otherwise would be in the best interests of the Company and our stockholders. Certain Properties that we originally acquired from third parties had unrealized gain attributable to the difference between the fair market value of such Properties and the third parties' adjusted tax basis in the Properties immediately prior to their contribution of such Properties to the Operating Partnership pursuant to our acquisition. For this reason, a taxable sale by us of any of such Properties, or a significant reduction in the debt encumbering such Properties, could result in adverse tax consequences to the third parties who contributed these properties in exchange for interests in the Operating Partnership. Under the terms of these transactions, we have generally agreed that we either will not sell or refinance such an acquired Property for a number of years in any transaction that would trigger adverse tax consequences for the parties from whom we acquired such Property, or else we will reimburse such parties for all or a portion of the additional taxes they are required to pay as a result of the transaction. Accordingly, these agreements may cause us not to engage in future sale or refinancing transactions affecting such Properties which otherwise would be in the best interests of the Company and our stockholders, or may increase the costs to us of engaging in such transactions. The loss or bankruptcy of a major tenant could negatively affect our financial position and results of operations. In the year ended December 31, 2005, no tenant accounted for 5% or more of revenues except for The Limited Stores Inc. (including Intimate Brands, Inc.), which accounted for approximately 5.6% of our total revenues. The loss or bankruptcy of this key tenant could negatively affect our financial position and results of operations. Our financial position, results of operations and funds available for distribution to shareholders could be adversely affected by any economic downturn affecting the operating results at our properties in the Nashville, Tennessee area, which is our single largest market. Our properties located in Nashville, TN accounted for 6.2% of our revenues for the year ended December 31, 2005. No other market accounted for more than 3.5% of our revenues for the year ended December 31, 2005. Our financial position and results of operations will therefore be affected by the results experienced at properties located in the Nashville, TN area. Rising interest rates could both increase our borrowing costs, thereby adversely affecting our cash flow and the amounts available for distributions to our stockholders, and decrease our stock price, if investors seek higher yields through other investments. 15 An environment of rising interest rates could lead holders of our securities to seek higher yields through other investments, which could adversely affect the market price of our stock. One of the factors that may influence the price of our stock in public markets is the annual distribution rate we pay as compared with the yields on alternative investments. Numerous other factors, such as governmental regulatory action and tax laws, could have a significant impact on the future market price of our stock. In addition, increases in market interest rates could result in increased borrowing costs for us, which may adversely affect our cash flow and the amounts available for distributions to our stockholders. Recent changes in the U.S. federal income tax treatment of corporate dividends may make our stock less attractive to investors, thereby lowering our stock price. In May 2003, the maximum U.S. federal income tax rate for dividends received by individual taxpayers was reduced generally from 38.6% to 15% (from January 1, 2003 through 2008). However, dividends payable by REITs are generally not eligible for such treatment. Although this legislation did not have a directly adverse effect on the taxation of REITs or dividends paid by REITs, the more favorable treatment for non-REIT dividends could cause individual investors to consider investments in non-REIT corporations as more attractive relative to an investment in a REIT, which could have an adverse impact on the market price of our stock. Certain of our credit facilities, the loss of which could have a material, adverse impact on our financial condition and results of operations, are conditioned upon the Operating Partnership continuing to be managed by certain members of its current senior management and by such members of senior management continuing to own a significant direct or indirect equity interest in the Operating Partnership. Certain of the Operating Partnership's lines of credit are conditioned upon the Operating Partnership continuing to be managed by certain members of its current senior management and by such members of senior management continuing to own a significant direct or indirect equity interest in the Operating Partnership (including any shares of our common stock owned by such members of senior management may hold in us). If the failure of one or more of these conditions resulted in the loss of these credit facilities and we were unable to obtain suitable replacement financing, such loss could have a material, adverse impact on our financial position and results of operations. Our insurance coverage may change in the future, and may not include coverage for acts of terrorism. The general liability and property casualty insurance policies on our Properties currently include loss resulting from acts of terrorism, whether foreign or domestic. The cost of general liability and property casualty insurance policies that include coverage for acts of terrorism has risen significantly post-September 11, 2001. The cost of coverage for acts of terrorism is currently mitigated by the Terrorism Risk Insurance Act ("TRIA"). If TRIA is not extended beyond 2006, we may incur higher insurance costs and greater difficulty in obtaining insurance that covers terrorist-related damages. Our tenants may also experience similar difficulties. We are unable at this time to predict whether we will continue our policy coverage as currently structured when our policies are up for renewal on December 31, 2006. RISKS RELATED TO FEDERAL INCOME TAX LAWS If we fail to qualify as a REIT in any taxable year, our funds available for distribution to stockholders will be reduced. We intend to continue to operate so as to qualify as a REIT under the Internal Revenue Code. Although we believe that we are organized and operate in such a manner, no assurance can be given that we currently qualify and in the future will continue to qualify as a REIT. Such qualification involves the application of highly technical and complex Internal Revenue Code provisions for 16 which there are only limited judicial or administrative interpretations. The determination of various factual matters and circumstances not entirely within our control may affect our ability to qualify. In addition, no assurance can be given that legislation, new regulations, administrative interpretations or court decisions will not significantly change the tax laws with respect to qualification or its corresponding federal income tax consequences. If in any taxable year we were to fail to qualify as a REIT, we would not be allowed a deduction for distributions to stockholders in computing our taxable income and we would be subject to federal income tax on our taxable income at regular corporate rates. Unless entitled to relief under certain statutory provisions, we also would be disqualified from treatment as a REIT for the four taxable years following the year during which qualification was lost. As a result, the funds available for distribution to our stockholders would be reduced for each of the years involved. We currently intend to operate in a manner designed to qualify as a REIT. However, it is possible that future economic, market, legal, tax or other considerations may cause our board of directors, with the consent of a majority of our stockholders, to revoke the REIT election. Any issuance or transfer of our capital stock to any person in excess of the applicable limits on ownership necessary to maintain our status as a REIT would be deemed void ab initio, and those shares would automatically be transferred to a non-affiliated charitable trust. To maintain our status as a REIT under the Internal Revenue Code, not more than 50% in value of our outstanding capital stock may be owned, directly or indirectly, by five or fewer individuals (as defined in the Internal Revenue Code to include certain entities) during the last half of a taxable year. Our certificate of incorporation generally prohibits ownership of more than 6% of the outstanding shares of our capital stock by any single stockholder determined by vote, value or number of shares (other than Charles Lebovitz, our Chief Executive Officer, David Jacobs, Richard Jacobs and their affiliates under the Internal Revenue Code's attribution rules). The affirmative vote of 66 (2)/3% of our outstanding voting stock is required to amend this provision. Our board of directors may, subject to certain conditions, waive the applicable ownership limit upon receipt of a ruling from the IRS or an opinion of counsel to the effect that such ownership will not jeopardize our status as a REIT. Absent any such waiver, however, any issuance or transfer of our capital stock to any person in excess of the applicable ownership limit or any issuance or transfer of shares of such stock which would cause us to be beneficially owned by fewer than 100 persons, will be null and void and the intended transferee will acquire no rights to the stock. Instead, such issuance or transfer with respect to that number of shares that would be owned by the transferee in excess of the ownership limit provision would be deemed void ab initio and those shares would automatically be transferred to a trust for the exclusive benefit of a charitable beneficiary to be designated by us, with a trustee designated by us, but who would not be affiliated with us or with the prohibited owner. Any acquisition of our capital stock and continued holding or ownership of our capital stock constitutes, under our certificate of incorporation, a continuous representation of compliance with the applicable ownership limit. In order to maintain our status as a REIT avoid the imposition of certain additional taxes under the Internal Revenue Code, we must satisfy minimum requirements for distributions to shareholders, which may limit the amount of cash we might otherwise have been able to retain for use in growing our business. To maintain our status as a REIT under the Internal Revenue Code, we generally will be required each year to distribute to our stockholders at least 90% of our taxable income after certain adjustments. However, to the extent that we do not distribute all of our net capital gain or distribute at least 90% but less than 100% of our REIT taxable income, as adjusted, we will be subject to tax on the undistributed amount at ordinary and capital gains corporate tax rates, as the case may be. In addition, we will be subject to a 4% nondeductible excise tax on the amount, if any, by which certain distributions paid by us during each calendar year are less than the sum of 85% of our ordinary income 17 for such calendar year, 95% of our capital gain net income for the calendar year and any amount of such income that was not distributed in prior years. In the case of property acquisitions, including our initial formation, where individual properties are contributed to our Operating Partnership for Operating Partnership units, we have assumed the tax basis and depreciation schedules of the entities' contributing properties. The relatively low tax basis of such contributed properties may have the effect of increasing the cash amounts we are required to distribute as dividends, thereby potentially limiting the amount of cash we might otherwise have been able to retain for use in growing our business. This low tax basis may also have the effect of reducing or eliminating the portion of distributions made by us that are treated as a non-taxable return of capital. RISKS RELATED TO OUR ORGANIZATIONAL STRUCTURE The ownership limit described above, as well as certain provisions in our amended and restated certificate of incorporation and bylaws, our stockholder rights plan, and certain provisions of Delaware law may hinder any attempt to acquire us. Certain provisions of Delaware law, as well as of our amended and restated certificate of incorporation and bylaws, and agreements to which we are a party, may have the effect of delaying, deferring or preventing a third party from making an acquisition proposal for us and may inhibit a change in control that some, or a majority, of our stockholders might believe to be in their best interest or that could give our stockholders the opportunity to realize a premium over the then-prevailing market prices for their shares. These provisions and agreements may be summarized as follows: |X| THE OWNERSHIP LIMIT - As described above, to maintain our status as a REIT under the Internal Revenue Code, not more than 50% in value of our outstanding capital stock may be owned, directly or indirectly, by five or fewer individuals (as defined in the Internal Revenue Code to include certain entities) during the last half of a taxable year. Our certificate of incorporation generally prohibits ownership of more than 6% of the outstanding shares of our capital stock by any single stockholder determined by value (other than Charles Lebovitz, David Jacobs, Richard Jacobs and their affiliates under the Internal Revenue Code's attribution rules). In addition to preserving our status as a REIT, the ownership limit may have the effect of precluding an acquisition of control of us without the approval of our board of directors. |X| CLASSIFIED BOARD OF DIRECTORS; REMOVAL FOR CAUSE - Our certificate of incorporation provides for a board of directors divided into three classes, with one class elected each year to serve for a three-year term. As a result, at least two annual meetings of stockholders may be required for the stockholders to change a majority of our board of directors. In addition, our stockholders can only remove directors for cause and only by a vote of 75% of the outstanding voting stock. Collectively, these provisions make it more difficult to change the composition of our board of directors and may have the effect of encouraging persons considering unsolicited tender offers or other unilateral takeover proposals to negotiate with our board of directors rather than pursue non-negotiated takeover attempts. |X| ADVANCE NOTICE REQUIREMENTS FOR STOCKHOLDER PROPOSALS - Our bylaws establish advance notice procedures with regard to stockholder proposals relating to the nomination of candidates for election as directors or new business to be brought before meetings of our stockholders. These procedures generally require advance written notice of any such proposals, containing prescribed information, to be given to our Secretary at our principal executive offices not less than 60 days nor more than 90 days prior to the meeting. |X| VOTE REQUIRED TO AMEND BYLAWS - A vote of 66 (2)/3% of the outstanding voting stock is necessary to amend our bylaws. 18 |X| STOCKHOLDER RIGHTS PLAN - We have a stockholder rights plan, which may delay, deter or prevent a change in control unless the acquirer negotiates with our board of directors and the board of directors approves the transaction. The rights plan generally would be triggered if an entity, group or person acquires (or announces a plan to acquire) 15% or more of our common stock. If such transaction is not approved by our board of directors, the effect of the stockholder rights plan would be to allow our stockholders to purchase shares of our common stock, or the common stock or other merger consideration paid by the acquiring entity, at an effective 50% discount. |X| DELAWARE ANTI-TAKEOVER STATUTE - We are a Delaware corporation and are subject to Section 203 of the Delaware General Corporation Law. In general, Section 203 prevents an "interested stockholder" (defined generally as a person owning 15% or more of a company's outstanding voting stock) from engaging in a "business combination" (as defined in Section 203) with us for three years following the date that person becomes an interested stockholder unless: (a) before that person became an interested holder, our board of directors approved the transaction in which the interested holder became an interested stockholder or approved the business combination; (b) upon completion of the transaction that resulted in the interested stockholder becoming an interested stockholder, the interested stockholder owns 85% of our voting stock outstanding at the time the transaction commenced (excluding stock held by directors who are also officers and by employee stock plans that do not provide employees with the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer); or (c) following the transaction in which that person became an interested stockholder, the business combination is approved by our board of directors and authorized at a meeting of stockholders by the affirmative vote of the holders of at least two-thirds of our outstanding voting stock not owned by the interested stockholder. Under Section 203, these restrictions also do not apply to certain business combinations proposed by an interested stockholder following the announcement or notification of certain extraordinary transactions involving us and a person who was not an interested stockholder during the previous three years or who became an interested stockholder with the approval of a majority of our directors, if that extraordinary transaction is approved or not opposed by a majority of the directors who were directors before any person became an interested stockholder in the previous three years or who were recommended for election or elected to succeed such directors by a majority of directors then in office. Certain ownership interests held by members of our senior management may tend to create conflicts of interest between such individuals and the interests of the Company and our Operating Partnership. |X| RETAINED PROPERTY INTERESTS - Members of our senior management own interests in certain real estate properties that were retained by them at the time of our initial public offering. These consist primarily of outparcels at certain of our properties, which are being offered for sale through our management company. As a result, these members of our senior management have interests that could conflict with the interests of the Company, our shareholders and the Operating Partnership with respect to any transaction involving these properties. |X| TAX CONSEQUENCES OF THE SALE OR REFINANCING OF CERTAIN PROPERTIES - Since certain of our properties had unrealized gain attributable to the difference between the fair market value and adjusted tax basis in such properties immediately prior to their contribution to the Operating Partnership, a taxable sale of any such properties, or a 19 significant reduction in the debt encumbering such properties, could cause adverse tax consequences to the members of our senior management who owned interests in our predecessor entities. As a result, members of our senior management might not favor a sale of a property or a significant reduction in debt even though such a sale or reduction could be beneficial to us and the Operating Partnership. Our bylaws provide that any decision relating to the potential sale of any property that would result in a disproportionately higher taxable income for members of our senior management than for us and our stockholders, or that would result in a significant reduction in such property's debt, must be made by a majority of the independent directors of the board of directors. The Operating Partnership is required, in the case of such a sale, to distribute to its partners, at a minimum, all of the net cash proceeds from such sale up to an amount reasonably believed necessary to enable members of our senior management to pay any income tax liability arising from such sale. |X| INTERESTS IN OTHER ENTITIES; POLICIES OF THE BOARD OF DIRECTORS - Certain entities owned in whole or in part by members of our senior management, including the construction company that built or renovated most of our properties, may continue to perform services for, or transact business with, us and the Operating Partnership. Furthermore, certain property tenants are affiliated with members of our senior management. Accordingly, although our bylaws provide that any contract or transaction between us or the Operating Partnership and one or more of our directors or officers, or between us or the Operating Partnership and any other entity in which one or more of our directors or officers are directors or officers or have a financial interest, must be approved by our disinterested directors or stockholders after the material facts of the relationship or interest of the contract or transaction are disclosed or are known to them, these affiliations could nevertheless create conflicts between the interests of these members of senior management and the interests of the Company, our shareholders and the Operating Partnership in relation to any transactions between us and any of these entities. ITEM 1B. UNRESOLVED STAFF COMMENTS None ITEM 2. PROPERTIES Refer to Item 7: Management's Discussion and Analysis for additional information pertaining to the Properties' performance. Malls We own a controlling interest in 72 Malls and non-controlling interests in seven Malls. We also own a controlling interest in three Malls and two Mall expansions that are currently under construction. The Malls are primarily located in middle markets and have strong competitive positions because they are the only, or dominant, regional mall in their respective trade areas. The Malls are generally anchored by two or more department stores and a wide variety of mall stores. Anchor tenants own or lease their stores and non-anchor stores (20,000 square feet or less) lease their locations. Additional freestanding stores and restaurants that either own or lease their stores are typically located along the perimeter of the Malls' parking areas. We classify our regional malls into two categories - malls that have completed their initial lease-up are referred to as stabilized malls and malls that are in their initial lease-up phase and have not been open for three calendar years are referred to as non-stabilized malls. The non-stabilized malls currently include Parkway Place in Huntsville, AL, which opened in October 2002; Coastal Grand-Myrtle Beach in Myrtle Beach, SC, which opened in March 2004; Imperial Valley Mall in El Centro, CA, which opened in March 2005; Southaven 20 Towne Center in Southaven, MS, which opened in October 2005; and Gulf Coast Town Center (Phase I) in Ft. Myers, FL, which opened in November 2005. We own the land underlying each Mall in fee simple interest, except for Walnut Square, Westgate Mall, St. Clair Square, Bonita Lakes Mall, Meridian Mall, Stroud Mall, Wausau Center, Chapel Hill Mall, Eastgate Mall, Eastland Mall and Mall of Acadiana. We lease all or a portion of the land at each of these Malls subject to long-term ground leases. The following table sets forth certain information for each of the Malls as of December 31, 2005.
Mall Store Year of Total Sales Percentage Year of Most Mall per Mall Opening/ Recent Company's Total Store Square Store GLA Mall/Location Acquisition Expansion Ownership GLA(1) GLA(2) Foot(3) Leased(4) Anchors - ------------------------ ------------ ----------- ----------- ------------- ------------- -------- ------------------------------ Coastal Grand-Myrtle Beach 2004 N/A 50% 997,838 452,670 $333 93% Bed Bath & Beyond, Belk, Myrtle Beach, SC Books A Million, Dick's Sporting Goods, Dillard's, Sears Gulf Coast Town Center 2005 N/A 50% 401,423 108,105 - 48% Babies R Us, Jo-Ann Ft. Meyers, FL Fabrics, Linens N Things, Staples, Super Target Imperial Valley Mall 2005 N/A 60% 761,790 269,433 281 83% Dillard's, JC Penney, El Centro, CA(13) Robinsons-May, Sears Parkway Place Mall 1957/1998 2002 45% 629,284 273,602 268 91% Dillard's, Parisian Huntsville, AL Southaven Towne Center 2005 N/A 100% 691,877 112,119 107 100% Circuit City, Cost Plus, Southaven, MS(23) Linens N Things, JC Penney --------------- ------------ -------- ------ Total Non-Stabilized Malls 3,482,212 1,215,929 $308 89% --------------- ------------ -------- ------ Stabilized Malls: Arbor Place 1999 N/A 100% 1,176,365 378,280 $380 97% Bed Bath & Beyond, Atlanta (Douglasville), GA Borders, Dillard's, JC Penney, Macy's, Old Navy, Parisian, Sears Asheville Mall 1972/2000 2000 100% 965,429 304,974 317 92% Belk, Dillard's, Asheville, NC Dillard's West, JC Penney, Sears Bonita Lakes Mall(5) 1997 N/A 100% 634,012 185,871 280 98% Dillard's, Goody's, Meridian, MS JC Penney, McRae's, Sears Brookfield Square 1967/2001 1997 100% 1,125,439 344,962 430 97% Barnes & Noble, Boston Brookfield, WI Store, JC Penney, Old Navy, Sears Burnsville Center 1977/1998 N/A 100% 1,078,000 429,196 359 99% JC Penney, Marshall Burnsville, MN Fields, Mervyn's(6), Old Navy, Sears, Steve & Barry's Cary Towne Center 1979/2001 1993 100% 1,008,324 299,256 297 99% Belk, Dillard's, Cary, NC Hecht's, JC Penney, Sears Chapel Hill Mall(7) 1966/2004 1995 100% 859,902 300,578 289 98% JC Penney, Kaufmann's, Akron, OH Old Navy, Sears Cherryvale Mall 1973/2001 2004 100% 786,396 302,836 328 99% Bergner's, JC Penney, Rockford, IL Marshall Field's, Sears Citadel Mall 1981/2001 2000 100% 1,117,380 321,610 273 92% Belk, Dillard's, Old Charleston, SC Navy, Parisian, Sears, Target College Square 1988 1999 100% 475,974 153,505 253 99% Belk, Goody's, JC Morristown, TN Penney, Proffitt's(21), Sears 21 Mall Store Year of Total Sales Percentage Year of Most Mall per Mall Opening/ Recent Company's Total Store Square Store GLA Mall/Location Acquisition Expansion Ownership GLA(1) GLA(2) Foot(3) Leased(4) Anchors - ------------------------ ------------ ----------- ----------- ------------- ------------- -------- ------------------------------ Columbia Place 1977/2001 N/A 100% 1,094,772 329,160 269 95% Dillard's, JC Columbia, SC Penney(22), Macy's, Old Navy, Sears CoolSprings Galleria 1991 1994 100% 1,115,678 361,042 414 99% Dillard's, Hecht's, Nashville, TN JC Penney, Parisian, Sears Cross Creek Mall 1975/2003 2000 100% 1,036,305 255,023 482 100% Belk, Hecht's, JC Fayetteville, NC Penney, Sears East Towne Mall 1971/2001 2004 100% 842,426 336,064 319 94% Barnes & Noble, Boston Madison, WI Store, Dick's Sporting Goods, Gordman's, JC Penney, Sears, Steve & Barry's Eastgate Mall(8) 1980/2003 1995 100% 1,110,157 273,438 307 98% Dillard's, JC Penney, Cincinnati, OH Kohl's, Sears, Steve & Barry's Eastland Mall 1967/2005 N/A 100% 810,787 226,192 318 98% Bergner's, Famous Barr, Bloomington, IL JC Penney, Kohl's, Old Navy, Sears Fashion Square 1972/2001 1993 100% 796,556 317,359 289 95% JC Penney, Marshall Saginaw, MI Field's, Sears, Steve & Barry's Fayette Mall 1971/2001 1993 100% 1,193,441 352,043 490 96% Dick's, Dillard's, JC Lexington, KY Penney, Macy's, Sears Foothills Mall 1983/1996 2004 95% 482,571 155,875 245 96% Goody's, JC Penney, Maryville, TN Proffitt's for Women, Proffitt's for Men Kids & Home, Sears, TJ Maxx Frontier Mall 1981 1997 100% 528,745 214,994 234 95% Dillard's I, Dillard's Cheyenne, WY II, Gart Sports, JC Penney, Sears Georgia Square 1981 N/A 100% 674,210 252,656 272 98% Belk, JC Penney, Athens, GA Macy's, Sears Governor's Square 1986 1999 48% 742,517 310,892 294 90% Belk, Dillard's, Clarksville, TN Goody's, JC Penney, Sears Greenbrier Mall 1981/2004 2004 100% 888,450 304,465 356 95% Dillard's, Hecht's, Chesapeake, VA JC Penney, Sears Hamilton Place 1987 1998 90% 1,152,172 371,124 376 99% Dillard's, JC Penney, Chattanooga, TN Parisian, Proffitt's for Men Kids & Home, Proffitt's for Women, Sears Hanes Mall 1975/2001 1990 100% 1,482,583 553,395 340 96% Belk, Dillard's, Winston-Salem, NC Hecht's, JC Penney, Old Navy, Sears Harford Mall 1973/2003 1999 100% 489,597 187,661 362 96% Hecht's, Old Navy, Bel Air, MD Sears Hickory Hollow Mall 1978/1998 1991 100% 1,098,052 427,863 251 94% Dillard's, Hecht's, Nashville, TN JC Penney, Linens N Things, Sears Hickory Point Mall 1977/2005 N/A 100% 835,222 244,405 212 64% Bergner's, JC Penney, Decatur, IL Kohl's, Old Navy, Sears, Von Maur Honey Creek Mall 1968/2004 1981 100% 678,305 212,182 326 96% Elder-Beerman, Terre Haute, IN JC Penney, L.S. Ayers, Sears Janesville Mall 1973/1998 1998 100% 615,241 161,911 291 96% Boston Store, Janesville, WI JC Penney, Kohl's, Sears 22 Mall Store Year of Total Sales Percentage Year of Most Mall per Mall Opening/ Recent Company's Total Store Square Store GLA Mall/Location Acquisition Expansion Ownership GLA(1) GLA(2) Foot(3) Leased(4) Anchors - ------------------------ ------------ ----------- ----------- ------------- ------------- -------- ------------------------------ Jefferson Mall 1978/2001 1999 100% 987,863 272,650 312 91% Dillard's, JC Penney, Louisville, KY Macy's, Sears Kentucky Oaks Mall 1982/2001 1995 50% 1,125,723 354,671 267 94% Best Buy, Dillard's, Paducah, KY Elder-Beerman, JC Penney, K's Merchandise Mart, Sears The Lakes 2001 N/A 90% 592,756 261,502 260 100% Bed Bath & Beyond, Muskegon, MI Dick's Sporting Goods, JC Penney, Sears, Younkers Lakeshore Mall 1992 1999 100% 500,729 147,901 319 93% Beall's(9), Belk, JC Sebring, FL Penney, Kmart, Sears Laurel Park Place 1989/2005 1994 70% 502,927 204,117 410 88% Parisian, Von Maur Livonia, MI Layton Hills Mall 1980/2005 1998 100% 626,418 313,495 340 98% Gart Sports, JCPenney, Layton, UT Meier & Frank, Mervyn's Madison Square 1984 1985 100% 932,581 299,246 287 93% Dillard's, JC Penney, Huntsville, AL McRae's, Parisian, Sears, Steve & Barry's Mall del Norte 1977/2004 1993 100% 1,207,719 377,836 421 93% Beall Bros.(9), Laredo, TX Dillard's, Foley's, Foley's Home Store, JC Penney, Joe Brand, Mervyn's, Sears, Ward's(10) Mall of Acadiana(24) 1979/2005 2004 100% 1,000,518 306,111 426 97% Dillard's, Foley's, Lafayette, LA JCPenney, Sears Meridian Mall(11) 1969/1998 2001 100% 979,861 500,868 272 97% Bed Bath & Beyond, Lansing, MI Dick's Sporting Goods, JC Penney, Marshall Field's, Mervyn's, Old Navy, Schuler Books, Steve & Barry's, Younkers Midland Mall 1991/2001 N/A 100% 514,468 197,194 287 95% Barnes & Noble, Elder- Midland, MI Beerman, JC Penney, Sears, Steve & Barry's, Target Monroeville Mall 1969/2004 2003 100% 1,151,959 428,413 320 95% Macy's, JC Penney, Pittsburgh, PA Kaufmann's(20) Northpark Mall 1972/2004 1996 100% 978,850 377,255 296 86% Famous Barr, Famous Joplin, MO Barr Home Store, JC Penney, Old Navy, Sears, Shopko(12), Ward's(12) Northwoods Mall 1972/2001 1995 100% 1,021,337 290,660 346 99% Belk, Books A Million, Charleston, SC Dillard's, JC Penney, Sears Oak Hollow Mall 1995 N/A 75% 801,128 251,008 210 89% Belk, Dillard's, High Point, NC JC Penney, Sears, Steve & Barry's Oak Park Mall 1974/2005 1998 100% 1,558,184 475,097 443 96% Dillard's North, Overland Park, KS Dillard's South, JC Penney, Nordstrom, The Jones Store Old Hickory Mall 1967/2001 1994 100% 546,907 166,812 322 93% Belk, JC Penney, Jackson, TN Macy's, Sears Panama City Mall 1976/2002 1984 100% 604,597 222,290 315 99% Dillard's, JC Penney, Panama City, FL Linens N Things, Sears 23 Mall Store Year of Total Sales Percentage Year of Most Mall per Mall Opening/ Recent Company's Total Store Square Store GLA Mall/Location Acquisition Expansion Ownership GLA(1) GLA(2) Foot(3) Leased(4) Anchors - ------------------------ ------------ ----------- ----------- ------------- ------------- -------- ------------------------------ Park Plaza 1988/2004 N/A 100% 567,120 266,681 464 83% Dillard's I, Little Rock, AR Dillard's II Parkdale Mall 1972/2001 1986 100% 1,409,128 355,741 312 92% Beall Bros.(9), Books Beaumont, TX A Million, Dillard's I, Dillard's II(14), Foley's, JC Penney, Linens N Things, Old Navy, Sears, Steve & Barry's Pemberton Square 1985 1999 100% 351,920 133,685 154 74% Hudson's/LA, Dillard's, Vicksburg, MS JC Penney, McRae's Plaza del Sol 1979 1996 51% 266,596 107,570 177 97% Beall Bros.(9), JC Del Rio, TX Penney, Bel Furniture/ LA, Ross Post Oak Mall 1982 1985 100% 777,628 290,102 296 96% Beall Bros.(9), College Station, TX Dillard's, Dillard's South, Foley's, JC Penney, Sears, Steve & Barry's Randolph Mall 1982/2001 1989 100% 378,913 143,720 202 95% Belk, Books A Million, Asheboro, NC Dillard's, JC Penney, Sears Regency Mall 1981/2001 1999 100% 928,305 294,897 282 92% Boston Store, JC Racine, WI Penney, Linens N Things, Sears, Steve & Barry's, Target Richland Mall 1980/2002 1996 100% 709,289 229,811 298 92% Beall Bros.(9), Waco, TX Dillard's I, Dillard's II, JC Penney, Sears River Ridge Mall 1980/2003 2000 100% 786,440 204,870 317 99% Belk, Hecht's, JC Lynchburg, VA Penney, Sears, Value City Rivergate Mall 1971/1998 1998 100% 1,129,491 347,662 314 99% Dillard's, Hecht's, JC Nashville, TN Penney, Linens N Things, Sears Southpark Mall 1989/2003 N/A 100% 628,283 202,308 296 97% Hecht's, JC Penney, Colonial Heights, VA Dillard's, Sears St. Clair Square(15) 1974/1996 1993 100% 1,051,658 282,384 398 96% Dillard's, Famous Barr, Fairview Heights, IL JC Penney, Sears Stroud Mall(16) 1977/1998 2005 100% 425,947 152,024 314 99% JC Penney, Sears, Stroudsburg, PA The Bon-Ton Sunrise Mall 1979/2003 2000 100% 751,218 327,761 358 87% Beall Bros.(9), Brownsville, TX Dillard's, JC Penney, Linens N Things, Sears Towne Mall 1977/2001 N/A 100% 465,598 155,284 217 92% Dillard's, Elder- Franklin, OH Beerman, Sears Triangle Town Center 2002/2005 N/A 50% 1,275,957 427,382 338 88% Barnes & Noble, Belk, Raleigh, NC Dillard's, Hecht's, Sak's Fifth Avenue, Sears Turtle Creek Mall 1994 1995 100% 846,098 223,004 412 96% Dillard's, Goody's, Hattiesburg, MS JC Penney, McRae's I, McRae's II, Sears Twin Peaks Mall 1985 1997 100% 558,203 244,818 242 95% Dillard's I, Dillard's Longmont, CO II, JC Penney, Sears, Steve & Barry's Valley View Mall 1985/2003 1999 100% 1,241,173 313,079 348 99% Belk, Hecht's, Roanoke, VA JC Penney, Old Navy, Sears Volusia Mall 1974/2004 1982 100% 1,060,489 241,946 441 98% Macy's, Dillard's East, Daytona Beach, FL Dillard's West, Dillard's South, JC Penney, Sears 24 Mall Store Year of Total Sales Percentage Year of Most Mall per Mall Opening/ Recent Company's Total Store Square Store GLA Mall/Location Acquisition Expansion Ownership GLA(1) GLA(2) Foot(3) Leased(4) Anchors - ------------------------ ------------ ----------- ----------- ------------- ------------- -------- ------------------------------ Walnut Square(17) 1980 1992 100% 449,160 169,965 260 95% Belk, Belk Home & Kids, Dalton, GA Goody's, JC Penney, Sears Wausau Center(18) 1983/2001 1999 100% 427,244 154,044 269 94% JC Penney, Sears, Wausau, WI Younkers West Towne Mall 1970/2001 2004 100% 905,324 270,419 428 93% Boston Store, Dick's Madison, WI Sporting Goods, JC Penney, Sears, Steve & Barry's Westgate Mall(19) 1975/1995 1996 100% 1,102,444 340,316 272 98% Bed Bath & Beyond, Spartanburg, SC Belk, Dick's Sporting Goods, Dillard's, JC Penney, Sears Westmoreland Mall 1977/2002 1994 100% 1,012,794 312,339 309 99% JC Penney, Kaufmann's, Greensburg, PA Kaufmann's Home Store, Old Navy, Sears, Steve & Barry's, The Bon-Ton York Galleria 1989/1999 N/A 100% 770,462 233,245 321 96% Boscov's, JC Penney, York, PA Sears, The Bon-Ton ------------- ------------- -------- -------- Total Stabilized Malls 62,806,415 20,740,995 $331 95% ------------- ------------- -------- -------- Grand total 66,288,627 21,956,924 $330 94% ============= ============= ======== ======== (1) Includes total square footage of the Anchors (whether owned or leased by the Anchor) and Mall Stores. Does not include future expansion areas. (2) Excludes Anchors. (3) Totals represent weighted averages. (4) Includes tenants paying rent for executed leases as of December 31, 2005. (5) Bonita Lakes - We are the lessee under a ground leases for 82 acres, which extends through June 30, 2060, including one 25-year renewal option. The annual base rent at December 31, 2005 is $31,341 increasing by an average of 2% per year. (6) Burnsville Center - The former Mervyn's building is being redeveloped. The lower level is now occupied by Steve & Barry's and the upper level is scheduled to open as Dick's Sporting Goods in April 2006. (7) Chapel Hill Mall - Ground rent is $10,000 per year. The lease extends through September 29, 2016 and has no renewal options. (8) Eastgate Mall - Ground rent is $24,000 per year. The lease extends through January 31, 2022 and has no renewal options. (9) Lakeshore Mall, Mall del Norte, Parkdale Mall, Plaza del Sol, Post Oak Mall, Richland Mall, and Sunrise Mall - Beall Bros. operating in Texas is unrelated to Beall's operating in Florida. (10) Mall del Norte - Ward's is vacant and is currently being redeveloped. Circuit City will open in a portion of this space in February 2006. (11) Meridian Mall - We are the lessee under several ground leases in effect through March 2067, with one 99-year extension option. Fixed rent is $18,700 per year plus 3% to 4% of all rents. (12) Northpark Mall - Shopko and Ward's are vacant. (13) Imperial Valley - Mall opened in March 2005. Sales PSF is for a partial year. (14) Parkdale Mall - Dillard's II is closed due to Hurricane Rita. (15) St. Clair Square - We are the lessee under a ground lease for 20 acres, which extends through January 31, 2073, including 14 five-year renewal options and one four-year renewal option. The rental amount is $40,500 per year. In addition to base rent, the landlord receives .25% of Dillard's sales in excess of $16,200,000. (16) Stroud Mall - We are the lessee under a ground lease, which extends through July, 2089. The current rental amount is $50,000 per year, increasing by $10,000 every ten years through 2059. An additional $100,000 is paid every 10 years. (17) Walnut Square - We are the lessee under several ground leases, which extend through March 14, 2078, including six ten-year renewal options and one eight-year renewal option. The rental amount is $149,450 per year. In addition to base rent, the landlord receives 20% of the percentage rents collected. The Company has a right of first refusal to purchase the fee. (18) Wausau Center - Ground rent is $76,000 per year plus 10% of net taxable cash flow. The lease extends through May 31, 2067 and has no renewal options. (19) Westgate Mall - We are the lessee under several ground leases for approximately 53% of the underlying land. The leases extend through October 31, 2084, including six ten-year renewal options. The rental amount is $130,000 per year. In addition to base rent, the landlord receives 20% of the percentage rents collected. The Company has a right of first refusal to purchase the fee. (20) Monroeville Mall - The Kaufmann's store has been purchased by Boscov's. (21) College Square - Proffitt's closed in December 2005. Kohl's has purchased the building and is expected to open in this space in October 2006. (22) Columbia Place - JC Penney closed on October 10, 2005. (23) Southaven Towne Center - Opened in October 2005. Sales PSF is for a partial year. (24) Mall of Acadiana - Ground rent was $10,000 for 2005, will be $50,000 for 2006 and will increase to $500,000 per year through July 31, 2015. There are no renewal options.
25 Anchors Anchors are an important factor in a Mall's successful performance. The public's identification with a mall property typically focuses on the anchor tenants. Mall anchors are generally a department store whose merchandise appeals to a broad range of shoppers and plays a significant role in generating customer traffic and creating a desirable location for the mall store tenants. Anchors may own their stores and the land underneath, as well as the adjacent parking areas, or may enter into long-term leases with respect to their stores. Rental rates for anchor tenants are significantly lower than the rents charged to mall store tenants. Anchors account for 5.8% of the total revenues from our Properties. Each anchor that owns its store has entered into an operating and reciprocal easement agreement with us covering items such as operating covenants, reciprocal easements, property operations, initial construction and future expansion. During 2005, we added the following anchors and junior anchor boxes (i.e., non-traditional anchors) to the following Malls:
Anchor Property Location - ---------------------------------------------------------------------------------- J.C. Penney Greenbrier Mall Chesapeake, VA Steve & Barry's West Towne Mall Madison, WI Steve & Barry's Fashion Square Mall Saginaw, MI Steve & Barry's Post Oak Mall College Station, TX Steve & Barry's Parkdale Mall Beaumont, TX Steve & Barry's Burnsville Mall Burnsville, MN Steve & Barry's Oak Hollow Mall High Point, NC Steve & Barry's Twin Peaks Mall Longmont, CO Dick's Sporting Goods Westmoreland South Greensburg, PA Dick's Sporting Goods Citadel Mall Charleston, SC Dick's Sporting Goods Fayette Mall Lexington, KY Linens `N' Things Panama City Mall Panama City, FL Linens `N' Things Sunrise Mall Brownsville, TX Ross Dress For Less Plaza del Sol Del Rio, TX Barnes & Noble Brookfield Square Brookfield, WI
As of December 31, 2005, the Malls had a total of 400 anchors and junior anchors including seven vacant anchor locations. The mall anchors and junior anchors and the amount of GLA leased or owned by each as of December 31, 2005 is as follows:
Number of Anchor Stores Leased GLA Owned GLA Total GLA - ------------------------------ -------------- ----------------- ------------------ ----------------- JCPenney 69 4,087,506 3,599,091 7,686,597 Sears 68 1,694,281 7,088,265 8,782,546 Dillard's 54 481,759 6,951,701 7,433,460 Sak's Boston Store 5 96,000 599,280 695,280 Bergner's 3 - 385,401 385,401 Parisian 7 281,431 647,633 929,064 Sak's 1 - 83,066 83,066 Younkers 3 194,161 106,131 300,292 Subtotal 19 571,592 1,821,511 2,393,103 Belk Belk 20 624,928 1,947,054 2,571,982 McRae's 5 - 511,359 511,359 Proffitt's 5 - 540,483 540,483 Subtotal 30 624,928 2,998,896 3,623,824 Bon-Ton Bon-Ton 3 87,024 231,715 318,739 Elder-Beerman 4 194,613 117,888 312,501 Subtotal 7 281,637 349,603 631,240 Federated Department Stores Famous Barr 4 371,830 121,231 493,061 26 Number of Anchor Stores Leased GLA Owned GLA Total GLA - ------------------------------ -------------- ----------------- ------------------ ----------------- Foley's 5 146,725 460,278 607,003 Hecht's 13 413,707 1,377,646 1,791,353 Jones Store 1 - 181,373 181,373 Kaufmann's 4 189,554 402,879 592,433 L.S. Ayres 1 173,000 - 173,000 Macy's 8 360,226 1,007,470 1,367,696 Marshall Fields 4 147,632 494,299 641,931 Meier & Frank 1 162,240 - 162,240 Robinsons-May 1 - 138,193 138,193 Subtotal 42 1,964,914 4,183,369 6,148,283 Babies R Us 1 30,700 - 30,700 Barnes & Noble 4 118,360 - 118,360 Beall Bros. 6 222,440 - 222,440 Beall's (FL) 1 45,844 - 45,844 Bed, Bath & Beyond 5 154,835 - 154,835 Bel Furniture 1 29,998 - 29,998 Best Buy 1 34,262 - 34,262 Books A Million 4 69,765 - 69,765 Borders 1 25,814 - 25,814 Boscov's 1 - 150,000 150,000 Circuit City 1 33,887 - 33,887 Cost Plus 1 18,243 - 18,243 Dick's Sporting Goods 7 419,551 - 419,551 Gart Sports 2 41,287 - 41,287 Goody's 6 204,249 - 204,249 Gordman's 1 47,943 - 47,943 Hudson's 1 20,269 - 20,269 Jo-Ann Fabrics 1 35,330 - 35,330 Joe Brand 1 29,413 - 29,413 Kmart 1 86,479 - 86,479 Kohl's 4 357,091 - 357,091 Linens N Things 8 222,034 - 222,034 Mervyn's 3 242,389 - 242,389 Nordstrom 1 - 200,000 200,000 Old Navy 15 310,739 - 310,739 Ross 1 30,307 - 30,307 Schuler Books 1 24,116 - 24,116 Shopko/K's Merchandise Mart 1 - 85,229 85,229 Staples 1 20,388 - 20,388 Steve & Barry's 14 519,940 - 519,940 Target 4 - 490,476 490,476 TJ Maxx 1 30,000 - 30,000 Value City 1 97,411 - 97,411 Von Maur 2 - 233,280 233,280 Vacant Anchors: Shopko (1) 1 - 90,000 90,000 Ward's 2 212,226 - 212,226 JC Penney 1 - 120,532 120,532 Proffit's (2) 1 - 50,000 50,000 Mervyn's (3) 1 62,419 - 62,419 Vacant 1 - 158,857 158,857 --------------------------------------------------- ----------------- 400 13,504,346 28,570,810 42,075,156 =================================================== ================= (1) Although store is vacant, rental payments continue to be made. (2) The Proffitt's store at College Square Mall has been purchased by Kohl's, which is expanding the store for an October 2006 opening. (3) We have purchased this space and are redeveloping it.
27 Mall Stores The Malls have approximately 10,376 mall stores. National and regional retail chains (excluding local franchises) lease approximately 76.1% of the occupied mall store GLA. Although mall stores occupy only 28.7% of the total mall GLA, the Malls received 90.7% of their revenues from mall stores for the year ended December 31, 2005. Mall Lease Expirations The following table summarizes the scheduled lease expirations for mall stores as of December 31, 2005:
Expiring Average Leases as % Expiring Number of GLA of Annualized of Total Leases as a Year Ending Leases Annualized Expiring Base Rent Per Annualized % of Total December 31, Expiring Base Rent (1) Leases Square Foot Base Rent (2) Leased GLA(3) - ----------------- -------------- --------------- -------------- --------------- -------------- -------------- 2006 768 $39,905,000 1,713,000 $23.30 9.1% 10.0% 2007 901 56,291,000 2,422,000 23.24 12.8% 14.2% 2008 822 52,376,000 2,167,000 24.17 12.0% 12.7% 2009 708 48,848,000 1,847,000 26.45 11.1% 10.8% 2010 751 53,644,000 1,959,000 27.38 12.2% 11.5% 2011 557 43,950,000 1,610,000 27.30 10.0% 9.4% 2012 438 32,614,000 1,110,000 29.38 7.4% 6.5% 2013 417 34,490,000 1,240,000 27.82 7.9% 7.3% 2014 345 26,177,000 898,000 29.15 6.0% 5.3% 2015 377 32,610,000 1,232,000 26.47 7.4% 7.2% (1) Total annualized contractual base rent in effect at December 31, 2005 for all leases that had been executed as of December 31, 2005, including rent for space that is leased but not occupied. (2) Total annualized contractual base rent of expiring leases as a percentage of the total annualized base rent of all leases that were executed as of December 31, 2005. (3) Total GLA of expiring leases as a percentage of the total GLA of all leases that were executed as of December 31, 2005.
Mall Tenant Occupancy Costs Occupancy cost is a tenant's total cost of occupying its space, divided by sales. The following table summarizes tenant occupancy costs as a percentage of total mall store sales for the last three years:
Year Ended December 31, (1) --------------------------------------------- 2005 2004 2003 -------------- -------------- --------------- Mall store sales (in millions)(1) $4,367.0 $3,453.0 $3,199.9 ============== ============== =============== Minimum rents 8.2% 8.3% 8.5% Percentage rents 0.4% 0.3% 0.3% Tenant reimbursements (2) 3.2% 3.4% 3.4% -------------- -------------- --------------- Mall tenant occupancy costs 11.8% 12.0% 12.2% ============== ============== =============== (1) Consistent with industry practice, sales are based on reports by retailers (excluding theaters) leasing mall store GLA of 10,000 square feet or less. Represents 100% of sales for the Malls. In certain cases, the Company and the Operating Partnership own less than a 100% interest in the Malls. (2) Represents reimbursements for real estate taxes, insurance, common area maintenance charges and certain capital expenditures.
Associated Centers We own a controlling interest in 27 Associated Centers and a non-controlling interest in three Associated Centers. We also own a controlling interest in two Associated Centers that were under construction at December 31, 2005. Associated Centers are retail properties that are adjacent to a regional mall complex and include one or more anchors, or big box retailers, along with smaller tenants. Anchor tenants typically include tenants such as TJ Maxx, Target, Toys R Us and Goody's. Associated Centers are managed by the staff at the Mall it is adjacent to and usually benefit from the customers drawn to the Mall. 28 We own the land underlying the Associated Centers in fee simple interest, except for Bonita Lakes Crossing, which is subject to a long-term ground lease. The following table sets forth certain information for each of the Associated Centers as of December 31, 2005:
Year of Opening/ Total Percentage Associated Center/ Most Recent Company's Leasable GLA Location Expansion Ownership Total GLA(1) GLA(2) Occupied(3) Anchors - ----------------------------------------------------------------------------------------------------------------------------------- Annex at Monroeville 1969 100% 185,309 185,309 99% Burlington Coat Factory, Dick's Pittsburgh, PA Sporting Goods, Guitar Center, Office Max Bonita Lakes Crossing(4) 1997/1999 100% 138,150 138,150 100% Books-A-Million, Office Max, Meridian, MS Old Navy, Shoe Carnival, TJ Maxx, Toys 'R' Us Chapel Hill Suburban 1969 100% 117,088 117,088 99% H.H. Gregg, Value City Akron, OH Coastal Grand Crossing 2005 50% 14,907 14,907 89% Lifeway Christian Store Myrtle Beach, SC CoolSprings Crossing 1992 100% 366,466 184,905 100% American Signature(5), H.H. Nashville, TN Gregg(6), Lifeway Christian Store, Target(5), Toys "R" Us(5), Wild Oats(6) Courtyard at Hickory Hollow 1979 100% 77,560 77,560 67% Carmike Cinemas, Just for Feet(7) Nashville, TN The District at Monroeville 2004 100% 70,039 70,039 88% Barnes & Noble Pittsburgh, PA Eastgate Crossing 1991 100% 195,112 195,112 97% Borders, Circuit City, Kroger, Cincinnati, OH Office Depot, Office Max(5) Foothills Plaza 1983/1986 100% 71,216 71,216 98% Carmike Cinemas, Dollar General, Maryville, TN Foothill's Hardware, Fowler's Furniture, Hall's Salvage and Surplus Frontier Square 1985 100% 186,552 16,527 100% PetCo(8), Ross(8), Target(5), Cheyenne, WY TJ Maxx(8) Georgia Square Plaza 1984 100% 15,393 15,393 100% Georgia Theatre Company Athens, GA Governor's Square Plaza 1985(9) 49% 189,930 57,351 100% Best Buy, Lifeway Christian Store, Clarksville, TN Premier Medical Group, Target Gunbarrel Pointe 2000 100% 281,525 155,525 99% David's Bridal, Goody's, Kohl's, Chattanooga, TN Target(5) Hamilton Corner 1990/2005 90% 69,695 69,695 86% PetCo Chattanooga, TN Hamilton Crossing 1987/2005 92% 194,592 101,479 94% Home Goods(10), Guitar Center, Chattanooga, TN Lifeway Christian Store, Michaels (10), TJ Maxx, Toys "R" Us(5) Harford Annex 1973/2003 100% 107,903 107,903 100% Best Buy, Dollar Tree, Gardiner's Bel Air, MD Furniture, PetsMart The Landing at Arbor Place 1999 100% 169,523 91,836 85% Circuit City(5), Lifeway Christian Atlanta(Douglasville), GA Store, Michael's, Shoe Carnival, Toys "R" Us(5) Layton Hills Convenience Center 1980 100% 93,892 93,892 93% Big Lots, Dollar Tree, Layton, UT Downeast Outfitters Layton Hills Plaza 1989 100% 19,500 19,500 76% None Layton, UT Madison Plaza 1984 100% 153,085 98,690 93% Food World, Design World, Huntsville, AL H.H. Gregg(11), TJ Maxx Parkdale Crossing 2002 100% 96,102 96,102 98% Barnes & Noble, Lifeway Christian Beaumont, TX Store, Office Depot, PetCo Pemberton Plaza 1986 10% 77,894 26,948 75% Blockbuster, Kroger(5) Vicksburg, MS The Shoppes at Hamilton Place 2003 92% 125,301 125,301 98% Bed Bath & Beyond, Marshall's, Ross Chattanooga, TN 29 Year of Opening/ Total Percentage Associated Center/ Most Recent Company's Leasable GLA Location Expansion Ownership Total GLA(1) GLA(2) Occupied(3) Anchors - ----------------------------------------------------------------------------------------------------------------------------------- The Shoppes at Panama City 2004 100% 66,503 66,503 86% Best Buy Panama City, FL Sunrise Commons 2001 100% 100,567 100,567 100% K-Mart(5), Marshall's, Old Navy, Brownsville, TX Ross, Staples(5) The Terrace 1997 92% 156,297 117,025 100% Barnes & Noble, Circuit City(5), Chattanooga, TN Linens 'N Things, Old Navy, Party City, Staples Triangle Town Place 2004 50% 149,471 149,471 100% Bed, Bath & Beyond, Dick's Raleigh, NC Sporting Goods, DSW Shoes, Party City Village at Rivergate 1981/1998 100% 166,366 66,366 75% Circuit City, Target(5) Nashville, TN West Towne Crossing 1980 100% 436,878 169,195 100% Barnes & Noble, Best Buy, Madison, WI Kohl's(5), Cub Foods(5), Gander Mountain(5), Office Max(5), Shopko(5) Westgate Crossing 1985/1999 100% 157,838 157,838 95% Goody's, Old Navy, Toys "R" Us Spartanburg, SC Westmoreland Crossing 2002 100% 277,483 277,483 86% Carmike Cinema, Dick's Sporting Greensburg, PA Goods, Michaels(12), Shop N' Save(13), T.J. Maxx ------------ ------------- -------- Total Associated Centers 4,528,137 3,234,876 84% ============ ============= ======== (1) Includes total square footage of the Anchors (whether owned or leased by the Anchor) and shops. Does not include future expansion areas. (2) Includes leasable Anchors. (3) Includes tenants with executed leases as of December 31, 2005, and includes leased anchors. (4) Bonita Lakes Crossing - The land is ground leased through June 2035 with options to extend through June 2060. The annual rent at December 31, 2005 was $21,779, increasing by an average of 2% each year. (5) Owned by the tenant. (6) CoolSprings Crossing - Space is owned by Developers Diversified and subleased to H.H. Gregg and Wild Oats. (7) Courtyard at Hickory Hollow - Just for Feet is vacant. (8) Frontier Square - Space is owned by Clifford Enterprises and subleased to PetCo, Ross, and TJ Maxx. (9) Governor's Square Plaza - Originally opened in 1985, and was acquired by the Company in June 1997. (10) Hamilton Crossing - Former Service Merchandise space is owned by Developers Diversified and subleased to Home Goods and Michaels. (11) Madison Plaza - Former Service Merchandise space is owned by Developers Diversified and subleased to H.H. Gregg. (12) Westmoreland Crossing - Former Service Merchandise space is owned by Developers Diversified and subleased to Michaels. (13) Westmoreland Crossing - Shop N' Save closed February 4, 2006.
Associated Centers Lease Expirations The following table summarizes the scheduled lease expirations for Associated Center tenants in occupancy as of December 31, 2005.
Expiring Annualized Average Leases as % Expiring Number of Base Rent of GLA of Annualized of Total Leases as a Year Ending Leases Expiring Expiring Base Rent Per Annualized % of Total December 31, Expiring Leases (1) Leases Square Foot Base Rent (2) Leased GLA(3) - ----------------- -------------- --------------- -------------- --------------- -------------- -------------- 2006 28 $1,156,000 83,000 $13.99 4.2% 3.3% 2007 36 1,794,000 165,000 10.87 6.5% 6.5% 2008 32 2,217,000 218,000 10.19 8.1% 8.6% 2009 27 2,602,000 230,000 11.33 9.5% 9.1% 2010 27 3,058,000 335,000 9.12 11.2% 13.2% 2011 11 2,924,000 301,000 9.73 10.7% 11.9% 2012 18 3,470,000 282,000 12.32 12.7% 11.1% 2013 10 1,246,000 101,000 12.34 4.5% 4.0% 2014 15 2,432,000 236,000 10.29 8.9% 9.3% 2015 18 2,310,000 448,000 17.01 8.4% 5.4% (1) Total annualized contractual base rent in effect at December 31, 2005 for all leases that had been executed as of December 31, 2005, including rent for space that is leased but not occupied. (2) Total annualized contractual base rent of expiring leases as a percentage of the total annualized base rent of all leases that were executed as of December 31, 2005. (3) Total GLA of expiring leases as a percentage of the total GLA of all leases that were executed as of December 31, 2005.
30 Community Centers We own a controlling interest in seven Community Centers. We also own a non-controlling interest in one Community Center and a controlling interest in one community center expansion that are currently under construction. Community Centers typically have less development risk because of shorter development periods and lower costs. While Community Centers generally maintain higher occupancy levels and are more stable, they typically have slower rent growth because the anchor stores' rents are typically fixed and are for longer terms. Community Centers are designed to attract local and regional area customers and are typically anchored by a combination of supermarkets, or value-priced stores that attract shoppers to each center's small shops. The tenants at our Community Centers typically offer necessities, value-oriented and convenience merchandise. We own the land underlying the Community Centers in fee simple interest, except for Massard Crossing and Wilkes-Barre Township Marketplace, which are subject to long-term ground leases for all or a portion of the land underlying these properties. The following tables sets forth certain information for each of our Community Centers at December 31, 2005:
Year of Opening/ Total Percentage Community Center/ Most Recent Company's Total Leasable GLA Location Expansion Ownership GLA(1) GLA(2) Occupied(3) Anchors - ----------------------------------------------------------------------------------------------------------------------------------- Chicopee Marketplace 2005 100% 439,602 151,263 100% iParty, Marshall's, Chicopee, MA Ocean State Job Lot, Staples Cobblestone at Royal Palm 2005 100% 33,207 33,207 100% Target(4) Royal Palm Beach, FL Fashion Square(5) 2004 100% 30,368 30,368 79% None Orange Park, FL Massard Crossing 2001 10% 300,717 98,410 100% Goody's, TJ Maxx, Ft. Smith, AR Wal*Mart(4) Springdale Center 1960/2002 100% 780,041 644,155 96% Barnes & Noble, Best Mobile, AL Buy, Burlington Coat Factory, David's Bridal, Goody's, Linens N Things, Marquee Cinemas(6), McRae's, Old Navy, Sam's Club, Staples, Wherehouse Music Wilkes-Barre Township Marketplace 2004 100% 305,770 100,770 100% A.C. Moore Crafts, Wilkes-Barre Township, PA Fashion Bug, Wal*Mart(4) Willowbrook Plaza 1999 10% 386,185 292,635 87% American Houston, TX Multi-Cinema, Home Depot(7), Lane Home Furnishings, Linens 'N Things ----------------------------------- Total Community Centers 2,275,890 1,350,808 95% =================================== (1) Includes total square footage of the Anchors (whether owned or leased by the Anchor) and shops. Does not include future expansion areas. (2) Includes leasable Anchors. (3) Includes tenants with executed leases as of December 31, 2005, and includes leased anchors. (4) Owned by the tenant. (5) Fashion Square - 18,125 square feet under construction. (6) Springdale Center - Former Marquee Cinemas space is vacant. (7) Willowbrook Plaza - Home Depot is vacant and owns its space.
31 Community Centers Lease Expirations The following table summarizes the scheduled lease expirations for tenants in occupancy at Community Centers as of December 31, 2005:
Expiring Annualized Average Leases as % Expiring Number of Base Rent of GLA of Annualized of Total Leases as a Year Ending Leases Expiring Expiring Base Rent Per Annualized % of Total December 31, Expiring Leases (1) Leases Square Foot Base Rent (2) Leased GLA(3) - ----------------- -------------- --------------- -------------- --------------- -------------- -------------- 2006 5 $ 247,906 13,824 $17.93 3.4% 2.9% 2007 14 1,047,349 117,513 8.91 14.4% 24.3% 2008 9 341,212 18,172 18.78 4.7% 3.8% 2009 5 174,462 8,504 20.52 2.4% 1.8% 2010 19 1,091,688 61,914 17.63 15.0% 12.8% 2011 5 375,922 21,263 17.68 5.2% 4.4% 2012 3 117,273 8,943 13.11 1.6% 1.8% 2013 1 69,000 4,000 17.25 0.9% 0.8% 2014 3 469,199 29,215 16.06 6.4% 6.0% 2015 9 1,396,763 103,297 13.52 19.2% 21.3% (1) Total annualized contractual base rent in effect at December 31, 2005 for all leases that had been executed as of December 31, 2005, including rent for space that is leased but not occupied. (2) Total annualized contractual base rent of expiring leases as a percentage of the total annualized base rent of all leases that were executed as of December 31, 2005. (3) Total GLA of expiring leases as a percentage of the total GLA of all leases that were executed as of December 31, 2005.
Mortgages We own eight mortgages that are collateralized by first mortgages or wrap-around mortgages on the underlying real estate and related improvements. The mortgages are more fully described on Schedule IV in Part IV of this report. Office Buildings We own a 92% interest in the 128,000 square foot office building where our corporate headquarters is located. As of December 31, 2005, we occupied 65% of the total square footage of the building. Mortgage Loans Outstanding At December 31, 2005 (in thousands)
Our Ownership Interest Principal Balloon Open to in the Interest Balance as of Annual Debt Maturity Payment Due Prepayment Property Property Rate 12/31/05 (1) Service Date on Maturity Date (2) - ------------------------------------------------------------------------------------------------------------------------------- Consolidated Debt Malls: Arbor Place 100% 6.51% $ 76,525 $ 6,610 Jul-12 $ 63,397 Open (4) Asheville Mall 100% 6.98% 67,780 5,677 Sep-11 61,229 Open Bonita Lakes Mall 100% 6.82% 25,789 2,503 Oct-09 22,539 Open Brookfield Square 100% 5.08% 104,876 6,822 Nov-15 85,601 Nov-08 (4) Burnsville Center 100% 8.00% 68,272 6,900 Aug-10 60,341 Open Cary Towne Center 100% 6.85% 86,114 7,077 Mar-09 81,961 Open Chapel Hill Mall 100% 5.32% (3) 64,000 3,405 May-06 64,000 Open Cherryvale Mall 100% 5.00% 93,774 6,055 Nov-15 76,647 Nov-08 (4) Citadel Mall 100% 7.39% 29,939 3,174 May-07 28,700 Open Columbia Place 100% 5.45% 32,471 2,493 Oct-13 25,512 Sep-06 (4) Coolsprings Galleria 100% 6.22% 128,574 9,618 Sep-10 112,700 Open Cross Creek Mall 100% 5.00% 62,645 5,401 Apr-12 56,520 Open 32 Our Ownership Interest Principal Balloon Open to in the Interest Balance as of Annual Debt Maturity Payment Due Prepayment Property Property Rate 12/31/05 (1) Service Date on Maturity Date (2) - ------------------------------------------------------------------------------------------------------------------------------- East Towne Mall 100% 5.00% 79,807 5,153 Nov-15 65,231 Nov-08 (4) Eastgate Mall 100% 4.55% (5) 56,335 3,501 Dec-09 52,321 Dec-07 (4) Eastland Mall 100% 5.85% 59,400 3,475 Dec-15 59,400 Dec-08 (4) Fashion Square 100% 6.51% 58,591 5,061 Jul-12 48,540 Jul-06 (4) Fayette Mall 100% 7.00% 93,028 7,824 Jul-11 84,096 Open Greenbrier Mall 100% 5.37% (3) 92,650 4,975 Apr-06 92,650 Open Hamilton Place 90% 7.00% 61,640 6,361 Mar-07 59,505 Open Hanes Mall 100% 7.31% 105,990 10,726 Jul-08 97,551 Open Hickory Hollow Mall 100% 6.77% 86,136 7,723 Aug-08 80,847 Open (9) Hickory Point Mall 100% 5.85% 33,116 2,347 Dec-15 27,690 Dec-08 (4) Honey Creek Mall 100% 4.75% 32,178 2,786 Apr-09 30,122 Open Janesville Mall 100% 8.38% 12,816 1,857 Apr-16 0 Open Jefferson Mall 100% 6.51% 42,629 3,682 Jul-12 35,316 Open Laurel Park Place 100% 8.50% 50,297 4,985 Dec-12 44,096 Open (4) Layton Hills Mall 100% 5.29% (3) 102,850 5,441 Jul-06 102,850 Open Mall del Norte 100% 5.04% 113,400 5,715 Dec-14 113,400 Dec-07 (4) Meridian Mall 100% 4.52% (3) 91,090 6,416 Oct-08 84,588 Sep-06 (4) Midland Mall 100% 5.38% 30,000 1,613 Jun-06 30,000 Open Monroeville Mall 100% 5.30% 129,990 10,363 Jan-13 105,507 Jan-06 (4) Northpark Mall 100% 5.50% 40,682 3,171 Mar-09 37,829 Open (4) Northwoods Mall 100% 6.51% 61,033 5,271 Jul-12 50,562 Open (4) Oak Hollow Mall 75% 7.31% 43,073 4,709 Feb-08 39,567 Open Oak Park Mall 100% 5.85% 275,700 16,128 Dec-15 275,700 Dec-08 (4) Old Hickory Mall 100% 6.51% 33,803 2,920 Jul-12 28,004 Open (4) Panama City Mall 100% 7.30% 39,290 3,373 Aug-12 36,089 Open (4) Park Plaza Mall 100% 4.90% 40,757 3,943 May-10 38,606 Open (4) Parkdale Mall 100% 5.01% 54,274 4,003 Sep-10 47,408 Sep-06 (4) Randolph Mall 100% 6.50% 14,740 1,272 Jul-12 12,209 Open (4) Regency Mall 100% 6.51% 33,427 2,887 Jul-12 27,693 Open (4) Rivergate Mall 100% 6.77% 69,614 6,240 Aug-08 65,479 Open (9) Southpark Mall 100% 5.10% 36,655 3,308 May-12 30,763 Open St. Clair Square 100% 7.00% 65,596 6,361 Apr-09 58,975 Open Stroud Mall 100% 8.42% 31,252 2,977 Dec-10 29,385 Open (4) Valley View Mall 100% 5.10% 43,840 4,362 Sep-10 40,495 Open Volusia Mall 100% 4.75% 53,721 4,259 Mar-09 51,265 Open Wausau Center 100% 6.70% 12,927 1,238 Dec-10 10,725 Open West Towne Mall 100% 5.00% 112,728 7,279 Nov-15 92,139 Nov-08 (4) Westgate Mall 100% 6.50% 52,953 4,570 Jul-12 43,860 Open (4) Westmoreland Mall 100% 5.05% 79,996 5,993 Jan-13 63,175 Feb-06 (4) York Galleria 100% 8.34% 49,965 4,727 Dec-10 46,932 Open (4) -------------------------------- 3,418,728 264,730 -------------------------------- Associated Centers: Bonita Lakes Crossing 100% 6.82% 8,081 784 Oct-09 7,062 Open Chapel Hill Suburban 100% 5.37% (3) 2,500 134 May-06 2,500 Open Courtyard At Hickory Hollow 100% 6.77% 4,010 360 Aug-08 3,764 Open (9) Eastgate Crossing 100% 6.38% 9,980 1,018 Apr-07 9,674 Open (6) Hamilton Corner 90% 10.13% 2,023 471 Aug-11 0 Open Parkdale Crossing 100% 5.01% 8,570 632 Sep-10 7,507 Sep-06 (4) The Landing At Arbor Place 100% 6.51% 8,638 746 Jul-12 7,157 Open (4) 33 Our Ownership Interest Principal Balloon Open to in the Interest Balance as of Annual Debt Maturity Payment Due Prepayment Property Property Rate 12/31/05 (1) Service Date on Maturity Date (2) - ------------------------------------------------------------------------------------------------------------------------------- Village At Rivergate 100% 6.77% 3,288 295 Aug-08 3,086 Open (9) Westgate Crossing 100% 8.42% 9,483 907 Jul-10 8,954 Open (4) -------------------------------- 56,573 5,347 -------------------------------- Community Centers: Massard Crossing, Pemberton Plaza and Willowbrook Plaza 10% 7.54% 37,407 3,264 Feb-12 34,230 Open (10) -------------------------------- 37,407 3,264 -------------------------------- Other: CBL Center 92% 6.25% 14,369 1,108 Aug-12 12,662 Open (4) Secured Credit Facilities 100% 5.29% (7) 412,285 21,795 (8) 412,285 Open Unsecured Credit Facility 100% 5.29% (3) 278,000 14,705 Aug-06 278,000 Open -------------------------------- 704,654 37,608 -------------------------------- Construction Properties: The Plaza at Fayette 100% 5.91% (3) 8,550 505 Dec-06 8,550 Open Southaven Towne Center 100% 5.97% (3) 23,649 1,412 June-07 23,649 Open Gulf Coast Town Center 50% 5.63% (3) 42,020 2,364 Sep-08 42,020 Open Lakeview Pointe 100% 5.49% (3) 2,612 143 Nov-08 2,612 Open -------------------------------- 76,831 4,424 -------------------------------- Unamortized Premiums and Other: 46,862(11) -------------------------------- Total Consolidated Debt $4,341,055 $ 315,373 ================================ Unconsolidated Debt: Coastal Grand-Myrtle Beach 50% 5.09% $ 97,615 $ 7,078 Oct-14 74,423 Oct-07 (4) Governor's Square Mall 48% 8.23% 30,584 3,476 Sep-16 14,144 Open Imperial Valley Mall 60% 4.99% (12) 59,855 3,859 Sep-15 49,019 Sep-08 (4) Kentucky Oaks Mall 50% 9.00% 30,507 3,573 Jun-07 29,439 Open Parkway Place 45% 5.30% (13) 53,200 2,820 Jun-08 53,200 Open (13) Plaza del Sol 51% 9.15% 3,012 796 Aug-10 0 Open Triangle Town Center 50% 5.74% 200,000 14,367 Sec-15 170,715 Dec-08 (4) -------------------------------- Total Unconsolidated Debt $ 474,773 $ 35,969 ================================ Total Consolidated and Unconsolidated Debt $4,815,828 $351,342 ================================ Company's Pro-Rata Share of Total Debt (14) $4,531,731 $327,472 ================================ (1) The amount listed includes 100% of the loan amount even though the Company may have less than a 100% ownership interest in the property. (2) Prepayment premium is based on yield maintenance, unless otherwise noted. (3) The interest rate is variable at various spreads over LIBOR priced at the rates in effect at December 31, 2005. The note is prepayable at any time without prepayment penalty. (4) Loan may be defeased. (5) The Company holds a B-Note in the amount of $7.75 million on Eastgate Mall. The Company and its joint venture partner each hold a B-Note in the amount of $9.0 million for Coastal Grand - Myrtle Beach. (6) The loan has three five-year options based on a rate reset. (7) Represents the weighted average interest rate on four secured credit facilities. The interest rates on the largest two secured facilities are at a spread 0.90% over LIBOR and the other two are at 1.00% over LIBOR. (8) The four secured credit facilities mature at various dates from February 2006 to June 2007. (9) The mortgages are cross-collateralized and cross-defaulted. (10) The mortgages are cross-collateralized and cross-defaulted and are prepayable by defeasance (11) Represents premiums related to debt assumed to acquire real estate assets, which had stated interest rates that were above the estimated market rates for similar debt instruments at the respective acquisition date. (12) The Company owns 60% of Imperial Valley Mall but guarantees 100% of the debt. (13) The Company owns 45% of Parkway Place but guarantees 50% of the debt. 34 (14) Represents the Company's pro rata share of debt, including our share of unconsolidated affiliates' debt and excluding minority investors' share of consolidated debt on shopping center properties. The following table is a reconciliation of consolidated debt to the Company's pro rata share of total debt. We present our share of total consolidated and unconsolidated debt because we believe it provides investors and lenders a clearer understanding of our total debt obligations and liquidity. Total consolidated debt $ 4,341,055 Minority investors share of consolidated debt (51,950) Company's share of unconsolidated debt 242,626 --------------------- Company's pro rata share of total debt $ 4,531,731 =====================
ITEM 3. LEGAL PROCEEDINGS We are currently involved in certain litigation that arises in the ordinary course of our business. We believe that the pending litigation will not materially affect our financial position or results of operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. (a) Market Information ------------------- The New York Stock Exchange is the principal United States market in which our common stock is traded. The high and low sales prices for our common stock for each quarter of our two most recent fiscal years were as follows, as adjusted for the 2-for-1 stock split in June 2005:
Quarter Ended High Low ------------------------------------------- ----------- ---------- 2005: March 31 $39.03 $33.32 June 30 $44.05 $35.33 September 30 $46.80 $39.30 December 31 $42.15 $35.15 2004: March 31 $31.05 $27.73 June 30 $31.09 $22.90 September 30 $31.83 $26.41 December 31 $38.57 $30.40
Holders ------- There were approximately 643 shareholders of record for our common stock as of March 10, 2006. Dividends --------- The frequency and amounts of dividends declared and paid on the common stock for each quarter of our two most recent fiscal years were as follows, as adjusted for the 2-for-1 stock split in June 2005:
Quarter Ended 2005 2004 ------------------------------------------ -------------- ---------- March 31 $0.40625 $0.3625 June 30 $0.40625 $0.3625 September 30 $0.40625 $0.3625 December 31 $0.54750(1) $0.40625 (1) Includes a one-time cash dividend of $0.09 per share.
35 Future dividend distributions are subject to our actual results of operations, economic conditions and such other factors as our board of directors deems relevant. Our actual results of operations will be affected by a number of factors, including the revenues received from the Properties, our operating expenses, interest expense, the ability of the anchors and tenants at the Properties to meet their obligations and unanticipated capital expenditures. Securities Authorized For Issuance Under Equity Compensation Plans ------------------------------------------------------------------ See Part III, Item 12. Recent Sales Of Unregistered Securities; Use Of Proceeds From ---------------------------------------------------------------------- Registered Securities --------------------- None Report Of Offering Of Securities And Use Of Proceeds Therefrom (b) None Purchases Of Equity Securities By The Issuer And Affiliated Purchasers ---------------------------------------------------------------------- (c) The following table presents information with respect to repurchases of common stock made by us during the three months ended December 31, 2005:
Approximate Dollar Average Total Number of Value of Total Number Price Shares Purchased as Shares that May Yet of Shares Paid per Part of a Publicly Be Purchased Period Purchased Share Announced Plan (6) Under the Plan (6) - --------------- -------------- --------------- ----------------------- --------------------- Oct. 1-31, 2005 10,399(1) $37.77(2) -- -- Nov. 1-30, 2005 796,301(3) $39.89(3) 794,460 $28,308,307.74 (7) Dec. 1-31, 2005 576,574 $40.42(4) 576,574 $ 5,002,034.58 (7) -------------- --------------- ----------------------- --------------------- Total 1,383,274 $40.09(5) 1,371,034 $ 5,002,034.58 (7) ============== =============== ======================= ===================== (1) Represents shares surrendered to the Company by employees to satisfy federal and state income tax withholding requirements related to the vesting of shares of restricted stock issued under the CBL & Associates Properties, Inc. Amended and Restated Stock Incentive Plan, as amended. (2) Represents the market value of the common stock on the vesting date for the shares of restricted stock, which was used to determine the number of shares required to be surrendered to satisfy income tax withholding requirements. (3) Includes: (i) 1,841 shares surrendered to the Company to satisfy tax withholding requirements, as described in note (1), at an average value of $41.31 per share determined as described in note (2); and (ii) 794,460 shares repurchased pursuant to the program described in note (6) at an average price of $39.89 per share (including brokerage commissions). (4) Includes brokerage commissions. (5) See notes (2), (3) and (4) above. (6) Our Board of Directors approved a plan, announced November 1, 2005, to repurchase up to $60.0 million of our common stock by December 31, 2006. We had repurchased 1,371,034 shares of common stock under this program as of December 31, 2005 for a total of approximately $55.0 million, or a weighted average cost of $40.11 per share. We do not intend to repurchase any additional shares subsequent to December 31, 2005. (7) Remaining authorization as of the end of each period.
36
(In thousands, except per share data) Year Ended December 31, (1) ------------------------------------------------------------------- 2005 2004 2003 2002 2001 ---------- ---------- ---------- ---------- ---------- Total revenues(2) $908,712 $781,433 $690,127 $607,018 $546,735 Total expenses(2) 505,581 437,745 374,399 324,229 289,186 ---------- ---------- ---------- ---------- ---------- Income from operations 403,131 343,688 315,728 282,789 257,549 Interest income 6,831 3,355 2,485 1,853 1,891 Interest expense (208,183) (177,219) (153,321) (142,908) (156,404) Loss on extinguishment of debt (6,171) - (167) (3,872) (13,558) Gain on sales of real estate assets 53,583 29,272 77,765 2,804 10,649 Gain on sale of management contracts 21,619 - - - - Equity in earnings of unconsolidated affiliates 8,495 10,308 4,941 8,215 7,155 Minority interest in earnings: Operating partnership (112,061) (85,186) (106,532) (64,251) (49,643) Shopping center properties (4,879) (5,365) (2,758) (3,280) (1,654) ---------- ---------- ---------- ---------- ---------- Income before discontinued operations 162,365 118,853 138,141 81,350 55,985 Discontinued operations 110 2,258 5,998 3,556 4,923 ---------- ---------- ---------- ---------- ---------- Net income 162,475 121,111 144,139 84,906 60,908 Preferred dividends (30,568) (18,309) (19,633) (10,919) (6,468) ---------- ---------- ---------- ---------- ---------- Net income available to common shareholders $131,907 $102,802 $124,506 $ 73,987 $ 54,440 ========== ========== ========== ========== ========== Basic earnings per common share: Income before discontinued operations, net of preferred dividends $ 2.10 $ 1.63 $ 1.98 $ 1.23 $ 0.98 ========== ========== ========== ========== ========== Net income available to common shareholders $ 2.10 $ 1.67 $ 2.08 $ 1.29 $ 1.07 ========== ========== ========== ========== ========== Weighted average shares outstanding 62,721 61,602 59,872 57,380 50,716 Diluted earnings per common share: Income before discontinued operations, net of preferred dividends $ 2.03 $ 1.57 $ 1.90 $ 1.19 $ 0.96 ========== ========== ========== ========== ========== Net income available to common shareholders $ 2.03 $ 1.61 $ 2.00 $ 1.25 $ 1.05 ========== ========== ========== ========== ========== Weighted average shares and potential dilutive common shares outstanding 64,880 64,004 62,386 59,336 51,666 Dividends declared per common share $ 1.77 $ 1.49 $ 1.35 $ 1.16 $ 1.07
December 31, (1) ------------------------------------------------------------------ 2005 2004 2003 2002 2001 ---------- ---------- ---------- ---------- ---------- BALANCE SHEET DATA: Net investment in real estate assets $5,944,428 $4,894,780 $3,912,220 $3,611,485 $3,201,622 Total assets 6,352,322 5,204,500 4,264,310 3,795,114 3,372,851 Total mortgage and other notes payable 4,341,055 3,371,679 2,738,102 2,402,079 2,315,955 Minority interests 609,475 566,606 527,431 500,513 431,101 Shareholders' equity 1,081,522 1,054,151 837,300 741,190 522,008 OTHER DATA: Cash flows provided by (used in): Operating activities $389,574 $339,197 $274,349 $273,923 $213,075 Investing activities (712,508) (608,651) (312,366) (274,607) (201,245) Financing activities 326,006 274,888 44,994 3,902 (6,877) Funds From Operations (FFO) (3) of the Operating Partnership $389,958 $310,405 $271,589 $235,474 $182,687 FFO applicable to the Company 213,596 169,725 146,552 126,127 94,945 (1) Please refer to Notes 3 and 5 to the consolidated financial statements for a description of acquisitions and joint venture transactions that have impacted the comparability of the financial information presented. (2) Certain prior period amounts have been reclassified to present marketing fund revenues and expenses on a gross basis in accordance with Emerging Issues Task Force Issue No. 99-19, Reporting Revenue Gross as a Principal versus Net as an Agent. As a result, both total revenues and total expenses increased from previously reported amounts by $24,188, $25,884, $23,058 and $12,513 for the years ended December 31, 2004, 2003, 2002 and 2001, respectively. Additionally, certain prior period amounts have been reclassified to present the results of operations of long-lived assets disposed of as discontinued operations for all periods presented. These reclassifications did not change previously reported amounts of net income available to common shareholders. (3) Please refer to Management's Discussion and Analysis of Financial Condition and Results of Operations for the definition of FFO. FFO does not represent cash flow from operations as defined by accounting principles generally accepted in the United States and is not necessarily indicative of the cash available to fund all cash requirements.
37 Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of financial condition and results of operations should be read in conjunction with the consolidated financial statements and accompanying notes that are included in this annual report. Capitalized terms used, but not defined, in this Management's Discussion and Analysis of Financial Condition and Results of Operations have the same meanings as defined in the notes to the consolidated financial statements. In this discussion, the terms "we", "us", "our" and the "Company" refer to CBL & Associates Properties, Inc. and its subsidiaries. Certain statements made in this section or elsewhere in this report may be deemed "forward looking statements" within the meaning of the federal securities laws. Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, we can give no assurance that these expectations will be attained, and it is possible that actual results may differ materially from those indicated by these forward-looking statements due to a variety of risks and uncertainties. In addition to the risk factors discussed in Item 1A of our annual report on Form 10-K for the year ending December 31, 2005, such risks and uncertainties include, without limitation, general industry, economic and business conditions, interest rate fluctuations, costs of capital and capital requirements, availability of real estate properties, inability to consummate acquisition opportunities, competition from other companies and retail formats, changes in retail rental rates in our markets, shifts in customer demands, tenant bankruptcies or store closings, changes in vacancy rates at our properties, changes in operating expenses, changes in applicable laws, rules and regulations, the ability to obtain suitable equity and/or debt financing and the continued availability of financing in the amounts and on the terms necessary to support our future business. We disclaim any obligation to update or revise any forward-looking statements to reflect actual results or changes in the factors affecting the forward-looking information. Executive Overview We are a self-managed, self-administered, fully integrated real estate investment trust ("REIT") that is engaged in the ownership, development, acquisition, leasing, management and operation of regional shopping malls and community centers. Our shopping centers are located in 27 states, but primarily in the southeastern and midwestern United States. As of December 31, 2005, we owned controlling interests in 72 regional malls (we include large open-air centers in malls), 27 associated centers (each adjacent to a regional mall), seven community centers, and three office buildings, including our corporate office building. We consolidate the financial statements of all entities in which we have a controlling financial interest or where we are the primary beneficiary of a variable interest entity. As of December 31, 2005, we owned non-controlling interests in seven regional malls and three associated centers. Because major decisions such as the acquisition, sale or refinancing of principal partnership or joint venture assets must be approved by one or more of the other partners, we do not control these partnerships and joint ventures and, accordingly, account for these investments using the equity method. We had two mall expansions, two open-air shopping centers, one open-air shopping center expansion, two associated centers, one community center, which is owned in a joint venture, and one community center expansion under construction as of December 31, 2005. The majority of our revenues are derived from leases with retail tenants and generally include minimum rents, percentage rents based on tenants' sales volumes and reimbursements from tenants for expenditures related to property operating expenses, real estate taxes and maintenance and repairs, as well as certain capital expenditures. We also generate revenues from sales of peripheral land at the properties and from sales of real estate assets when it is determined that we can realize a premium value for the assets. Proceeds from such sales are generally used to reduce borrowings on our credit facilities. 38 We expanded our portfolio in 2005 with the acquisition of six malls and one associated center, representing a total investment of $884.7 million. We also formed a 50/50 joint venture to own one mall and its associated center, which was valued at $283.5 million. We opened seven new developments and seven property expansions totaling 2.4 million square feet, including the 754,000 square foot regional mall Imperial Valley Mall in El Centro, CA, which we own in a joint venture. We have approximately 1.7 million square feet of new developments, which represent $191.1 million of net investment, that are scheduled to open during 2006. We also added a total of 14 big box tenants and an anchor retailer to our malls, which have made positive contributions by strengthening the tenant mix of these properties. Results of Operations Comparison of the Year Ended December 31, 2005 to the Year Ended December 31, 2004 The following significant transactions impacted the consolidated results of operations for the year ended December 31, 2005, compared to the year ended December 31, 2004: |X| Since January 1, 2004, we have acquired or opened 17 malls, two open-air centers, five associated centers and three community centers (collectively referred to as the "2005 New Properties"). The 2005 New Properties are as follows:
Property Location Date Acquired / Opened - ------------------------------------------------------------------------------------------------------------------ Acquisitions: - ------------- Honey Creek Mall Terre Haute, IN March 2004 Volusia Mall Daytona Beach, FL March 2004 Greenbrier Mall Chesapeake, VA April 2004 Fashion Square Orange Park, FL April 2004 Chapel Hill Mall Akron, OH May 2004 Chapel Hill Suburban Akron, OH May 2004 Park Plaza Mall Little Rock, AR June 2004 Monroeville Mall Monroeville, PA July 2004 Monroeville Annex Monroeville, PA July 2004 Northpark Mall Joplin, MO November 2004 Mall del Norte Laredo, TX November 2004 Laurel Park Place Livonia, MI June 2005 The Mall of Acadiana Lafayette, LA July 2005 Layton Hills Mall Layton, UT November 2005 Layton Hills Convenience Center Layton, UT November 2005 Oak Park Mall Overland Park, KS November 2005 Eastland Mall Bloomington, IL November 2005 Hickory Point Mall Forsyth, IL November 2005 Triangle Town Center (50/50 joint venture) Raleigh, NC November 2005 Triangle Town Place (50/50 joint venture) Raleigh, NC November 2005 New Developments: - ----------------- Coastal Grand-Myrtle Beach Myrtle Beach, SC March 2004 The Shoppes at Panama City Panama City, FL March 2004 Imperial Valley Mall El Centro, CA March 2005 Cobblestone Village at Royal Palm Beach Royal Palm Beach, FL June 2005 Chicopee Marketplace Chicopee, MA September 2005 Southaven Towne Center Southaven, MS October 2005 Gulf Coast Town Center - Phase I (50/50 joint venture) Ft. Myers, FL November 2005
|X| In January 2005, two power centers, one community center and one community center expansion were sold to Galileo America LLC ("Galileo America"). Since we had a continuing involvement with these properties 39 through our ownership interest in Galileo America and the agreement under which we were the exclusive manager of the properties, the results of operations of these properties were not reflected in discontinued operations. Therefore, the year ended December 31, 2005, does not include a significant amount of revenues and expenses related to these properties, whereas the year ended December 31, 2004 includes a full period of revenues and expenses related to these properties. |X| In August 2005, Galileo America redeemed our 8.4% ownership interest by distributing two community centers to us: Springdale Center in Mobile, AL, and Wilkes-Barre Township Marketplace in Wilkes-Barre Township, PA. We also sold our management and advisory contracts with Galileo America to New Plan Excel Realty Trust, Inc. ("New Plan"). See Note 5 to the consolidated financial statements for a more thorough discussion of these transactions. Properties that were in operation for the entire period during 2005 and 2004 are referred to as the "2005 Comparable Properties" in this section. Revenues The $127.3 million increase in revenues was primarily attributable to increases of $93.2 million from the 2005 New Properties and $30.4 million from the 2005 Comparable Properties. These increases were offset by a reduction in revenues of $7.0 million related to the community centers that were sold to Galileo America in January 2005. The increase in revenues of the 2005 Comparable Properties was driven by our ability to maintain high occupancy levels while achieving a weighted average increase of 6.5% in rents from both new leases and lease renewals for comparable small shop spaces, as well as an increase in percentage rents. The increase in management, development and leasing fees of $10.7 million was primarily attributable to management and leasing fees received from Galileo America prior to the redemption of our interest in Galileo America, plus an $8.0 million acquisition fee received from Galileo America that was related to Galileo America's acquisition of an approximately $1.0 billion portfolio of shopping center properties from New Plan. Operating Expenses Property operating expenses including real estate taxes and maintenance and repairs, increased as a result of increases of $30.0 million from the 2005 New Properties and $1.6 million from the 2005 Comparable Properties. This was offset by a decrease of $2.6 million related to the community centers that were sold to Galileo America in January 2005. The increase in depreciation and amortization expense resulted from increases of $28.7 million from the 2005 New Properties and $8.9 million from the 2005 Comparable Properties. The increase attributable to the 2005 Comparable Properties is due to ongoing capital expenditures for renovations, expansions, tenant allowances and deferred maintenance. General and administrative expenses increased $3.9 million during 2005. Severance packages for individuals affected by the sale of our management and advisory contracts with Galileo America contributed $1.3 million to the increase. The remainder of the increase is related to additional salaries and benefits for the personnel added to manage the properties acquired during 2005 and 2004 combined with annual compensation increases for existing personnel. As a percentage of revenues, general and administrative expenses decreased to 4.3% in 2005 compared with 4.5% in 2004. We recognized a loss on impairment of real estate assets of $1.3 million during 2005, which was related to a $1.0 million reduction in the carrying value 40 of assets identified as held for sale at December 31, 2005, and an additional loss of $0.3 million related to the properties that were sold to Galileo America in January 2005. The additional impairment loss of $0.3 million was related the adjustment of certain estimated amounts when the actual amounts became known in 2005. We recognized a loss on impairment of real estate assets of $3.1 million during 2004 when we reduced the carrying value of ten community centers to their respective estimated fair values. The ten community centers included four community centers that were sold to Galileo America in January 2005, five community centers that were sold to a third party during March 2005 and one community center that was sold for a loss during the fourth quarter of 2004. Other Income and Expenses Interest expense increased $31.0 million primarily due to the debt on the 2005 New Properties, the refinancings that were completed on the 2005 Comparable Properties and an increase in variable interest rates. Gain on sales of real estate assets of $53.6 million in 2005 includes $44.2 million of gains related to the redemption of our ownership interest in Galileo America, $1.0 million from the recognition of deferred gain on properties that were previously sold to Galileo America and $8.4 million of gains on the sales of eleven outparcels. The gain on sales of real estate assets of $29.3 million in 2004 included $26.8 million of gain related to the second phase of the Galileo America joint venture and $2.5 million of gain on sales of seven outparcels at various properties. The gain on sales of management contracts of $21.6 million represents the gain on the sale of our management and advisory contracts with Galileo America to New Plan in August 2005. Equity in earnings of unconsolidated affiliates decreased by $1.8 million in 2005 as a result the redemption of our interest in Galileo America in August 2005. Additionally, although Coastal Grand-Myrtle Beach and Imperial Valley Mall opened in March 2004 and March 2005, respectively, our equity in the earnings of these two properties was flat compared to the prior year. This was due to the mortgage loan that was placed on Coastal Grand-Myrtle Beach in September 2004, which is at a fixed interest rate that is higher than the previous variable rate loan. Discontinued operations for 2005 represent the operations of the six community centers we sold during 2005 as well as the operations of the two community centers that were classified as held for sale as of December 31, 2005. Discontinued operations during 2004 reflect the results of two community centers that we sold during 2004, as well as the results of the properties described in the previous sentence. Comparison of the Year Ended December 31, 2004 to the Year Ended December 31, 2003 The following significant transactions impacted the consolidated results of operations for the year ended December 31, 2004, compared to the year ended December 31, 2003: |X| Since January 1, 2003, we have acquired or opened 15 malls, six associated centers and four community centers (collectively referred to as the "2004 New Properties"). The 2004 New Properties are as follows: 41
Property Location Date Acquired / Opened - ---------------------------------------------------------------------------------------------------- Acquisitions: - ------------- Sunrise Mall Brownsville, TX April 2003 Sunrise Commons Brownsville, TX April 2003 Cross Creek Mall Fayetteville, NC September 2003 River Ridge Mall Lynchburg, VA October 2003 Valley View Mall Roanoke, VA October 2003 Southpark Mall Colonial Heights, VA December 2003 Harford Mall Bel Air, MD December 2003 Harford Annex Bel Air, MD December 2003 Honey Creek Mall Terre Haute, IN March 2004 Volusia Mall Daytona Beach, FL March 2004 Greenbrier Mall Chesapeake, VA April 2004 Fashion Square Orange Park, FL April 2004 Chapel Hill Mall Akron, OH May 2004 Chapel Hill Suburban Akron, OH May 2004 Park Plaza Mall Little Rock, AR June 2004 Monroeville Mall Monroeville, PA July 2004 Monroeville Annex Monroeville, PA July 2004 Northpark Mall Joplin, MO November 2004 Mall del Norte Laredo, TX November 2004 New Developments: - ----------------- The Shoppes at Hamilton Place Chattanooga, TN May 2003 Cobblestone Village St. Augustine, FL May 2003 Waterford Commons Waterford, CT September 2003 Wilkes-Barre Township Marketplace Wilkes-Barre Township, PA March 2004 Coastal Grand-Myrtle Beach Myrtle Beach, SC March 2004 The Shoppes at Panama City Panama City, FL March 2004
|X| In October 2003, we sold 41 community centers to Galileo America. We sold six additional community centers to Galileo America in January 2004. Since we had continuing involvement with these properties through our ownership interest in Galileo America and our role as manager of the properties, the results of operations of these properties were not reflected in discontinued operations. Therefore, the year ended December 31, 2003 includes results of operations for these properties through the dates they were sold. |X| Effective January 1, 2004, we began to consolidate the results of operations of PPG Venture I Limited Partnership, which owns two community centers and one associated center (the "PPG Properties"), as a result of the adoption of a new accounting pronouncement. The PPG Properties were accounted for as unconsolidated affiliates using the equity method of accounting prior to January 1, 2004. Properties that were in operation for the entire period during 2004 and 2003 are referred to as the "2004 Comparable Properties" in this section. Revenues The $87.6 million increase in revenues was primarily attributable to increases of $116.2 million from the 2004 New Properties, $7.5 million related to the PPG Properties and $2.1 million from the 2004 Comparable Properties. These increases were offset by a reduction in revenues of $42.5 million related to the community centers that were sold to Galileo America in October 2003 and January 2004. The increase in revenues of the 2004 Comparable Properties was driven by our ability to maintain high occupancy levels, while achieving an increase of 3.3% in rents from both new leases and lease renewals for comparable small shop spaces. An increase in management and leasing fees of $2.8 million received from Galileo America was the primary contributor to the $4.3 million increase in 42 management, development and leasing fees. The $2.8 million increase in other revenues is primarily attributable to a growth in revenues that we receive from providing security and maintenance services to third parties. Operating Expenses Property operating expenses including real estate taxes and maintenance and repairs, increased as a result of increases of $39.9 million from the 2004 New Properties and $2.2 million from the PPG Properties, offset by decreases of $9.4 million related to the community centers that were sold to Galileo America and $15.1 million in operating expenses of the 2004 Comparable Properties. The increase in depreciation and amortization expense resulted from increases of $29.0 million from the 2004 New Properties, $1.0 million related to the PPG Properties and $6.6 million from the 2004 Comparable Properties. These increases were offset by a decrease of $7.4 million related to the community centers that we sold to Galileo America in October 2003 and January 2004. The increase attributable to the 2004 Comparable Properties is due to ongoing capital expenditures for renovations, expansions, tenant allowances and deferred maintenance. General and administrative expenses increased $4.9 million during 2004. As a percentage of revenues, this was only a 0.1% increase over the comparable 2003 amount. General and administrative expenses were significantly impacted by an additional $1.1 million of expenses in 2004 related to compliance with Section 404 of the Sarbanes-Oxley Act of 2002. State tax expenses also increased $1.8 million as a result of our continued growth. The remainder of the increase is attributable to additional salaries and benefits for the personnel added to manage the properties acquired during 2004 and 2003 combined with annual compensation increases for existing personnel. We identified ten community centers and recorded a loss on impairment of real estate assets of $3.1 million to reduce the carrying value of these properties to their respective estimated fair values based on estimates of the selling prices to be received from the sales of nine centers in 2005. One community center was sold for a loss during the fourth quarter of 2004. Other Income and Expenses Interest expense increased $23.9 million primarily due to the debt on the 2004 New Properties and the PPG Properties, as well as the additional financings that were obtained on the 2004 Comparable Properties. The increase was offset by a reduction in interest expense related to the Galileo Transaction as well as normal principal amortization. The gain on sales of real estate assets of $29.3 million in 2004 included $26.8 million of gain related to the Galileo Transaction and $2.5 million of gain on sales of seven outparcels at various properties. Equity in earnings of unconsolidated affiliates increased by $5.4 million in 2004 as a result of our interest in Galileo America and the opening of Coastal Grand-Myrtle Beach in March 2004. We sold two community centers during 2004 for a gain on discontinued operations of $0.9 million. We sold one community center for a loss of $0.1 million, which was included in loss on impairment of real estate assets. Operating income from discontinued operations decreased in 2004 because the properties were owned for a shorter period of time in 2004 than in 2003, and because 2003 includes the operations of properties that were sold during 2003. Operational Review The shopping center business is, to some extent, seasonal in nature with tenants achieving the highest levels of sales during the fourth quarter because 43 of the holiday season, which results in higher percentage rent income in the fourth quarter. Additionally, the malls earn most of their short-term rents during the holiday period. Thus, occupancy levels and revenue production are generally the highest in the fourth quarter of each year. Results of operations realized in any one quarter may not be indicative of the results likely to be experienced over the course of the fiscal year. We classify our regional malls into two categories - malls that have completed their initial lease-up are referred to as stabilized malls and malls that are in their initial lease-up phase and have not been open for three calendar years are referred to as non-stabilized malls. The non-stabilized malls currently include Parkway Place in Huntsville, AL, which opened in October 2002; Coastal Grand-Myrtle Beach in Myrtle Beach, SC, which opened in March 2004; Imperial Valley Mall in El Centro, CA, which opened in March 2005; Southaven Towne Center in Southaven, MS, which opened in October 2005; and Gulf Coast Town Center (Phase I) in Ft. Myers, FL, which opened in November 2005. We derive a significant amount of our revenues from the mall properties. The sources of our revenues by property type were as follows:
Year Ended December 31, --------------------------------- 2005 2004 ----------------- --------------- Malls 91.1% 90.2% Associated centers 3.8% 4.1% Community centers 1.0% 2.3% Mortgages, office building and other 4.1% 3.4%
Sales and Occupancy Costs Mall store sales (for those tenants who occupy 10,000 square feet or less and have reported sales) in the stabilized malls increased 4.1% on a comparable per square foot basis to $330 per square foot for 2005 compared with $317 per square foot for 2004. Occupancy costs as a percentage of sales for the stabilized malls were 11.8% and 12.0% for 2005 and 2004, respectively. Occupancy Our portfolio occupancy is summarized in the following table:
December 31, --------------------------------- 2005 2004 ----------------- --------------- Total portfolio 94.5% 94.0% Total mall portfolio 94.4% 94.3% Stabilized malls 94.7% 94.4% Non-stabilized malls 89.4% 92.8% Associated centers 94.1% 91.8% Community centers (1) 95.3% 94.0% (1) Excludes the community centers that were sold to Galileo America.
44 Leasing Average annual base rents per square foot were as follows for each property type:
December 31, ------------------------------------ 2005 2004 ----------------- ------------------ Stabilized malls $26.87 $25.60 Non-stabilized malls 27.41 26.33 Associated centers 10.55 9.77 Community centers (1) 9.61 8.12 Other 19.33 19.10 (1) Excludes the community centers that were sold to Galileo America.
During 2005, we achieved positive results from new and renewal leasing of comparable small shop space for spaces that were previously occupied as summarized in the following table:
Base Rent Initial Base Average Base Per Rent Per Rent Per Square Foot Square Foot % Change Square Foot % Change Square Feet Prior Lease New Lease Initial New Lease Average ------------- ------------- --------------- ----------- -------------- ----------- Year-To-Date: Stabilized Malls 2,235,715 $25.18 $26.10 3.7% $26.72 6.1% Associated centers 101,624 13.54 16.91 24.9% 17.26 27.5% Community centers (1) 54,469 16.56 16.67 0.7% 16.69 0.8% Other 8,364 15.69 17.66 12.5% 17.89 14.0% ------------- ------------- --------------- ----------- -------------- ----------- 2,400,172 $24.46 $25.47 4.1% $26.06 6.5% ============= ============= =============== =========== ============== =========== (1) Excludes the community centers that were sold to Galileo America.
Liquidity and Capital Resources There was $28.8 million of unrestricted cash and cash equivalents as of December 31, 2005, an increase of $3.1 million from December 31, 2004. Cash flows from operations are used to fund short-term liquidity and capital needs such as tenant construction allowances, capital expenditures and payments of dividends and distributions. For longer-term liquidity needs such as acquisitions, new developments, renovations and expansions, we typically rely on property specific mortgages (which are generally non-recourse), construction and term loans, revolving lines of credit, common stock, preferred stock, joint venture investments and a minority interest in the Operating Partnership. Cash provided by operating activities increased $50.4 million to $389.6 million for the year ended December 31, 2005. The increase was primarily attributable to the operations of the 2005 New Properties plus the acquisition fee earned in connection with Galileo America's transaction with New Plan. Debt During 2005, we borrowed $946.8 million under mortgage and other notes payable and paid $353.8 million to reduce outstanding borrowings. We also assumed $385.8 million in debt and recorded a debt premium of $10.6 million in connection with the acquisitions of six malls and two associated centers. We paid $6.5 million in connection with the extinguishment of certain mortgage notes payable during 2005 and paid $3.4 million in financing costs in connection with the new borrowings. The following tables summarize debt based on our pro rata ownership share, including our pro rata share of unconsolidated affiliates and excluding minority investors' share of consolidated properties, because we believe this provides investors and lenders a clearer understanding of our total debt obligations and liquidity (in thousands): 45
Weighted Average Minority Unconsolidated Interest Consolidated Interests Affiliates Total Rate(1) -------------- --------------- ----------------- --------------- --------------- December 31, 2005: Fixed-rate debt: Non-recourse loans on operating properties $ 3,281,939 $ (51,950) $ 216,026 $3,446,015 5.99% -------------- --------------- ----------------- --------------- --------------- Variable-rate debt: Recourse term loans on operating properties 292,000 - 26,600 318,600 5.33% Construction loans 76,831 - - 76,831 5.76% Lines of credit 690,285 - - 690,285 5.29% -------------- --------------- ----------------- --------------- --------------- Total variable-rate debt 1,059,116 - 26,600 1,085,716 5.33% -------------- --------------- ----------------- --------------- --------------- Total $ 4,341,055 $ (51,950) $ 242,626 $4,531,731 5.83% ============== =============== ================= =============== =============== December 31, 2004: Fixed-rate debt: Non-recourse loans on operating properties $ 2,688,186 $ (52,914) $ 104,114 $2,739,386 6.35% -------------- --------------- ----------------- --------------- --------------- Variable-rate debt: Recourse term loans on operating properties 207,500 - 29,415 236,915 3.40% Construction loans 14,593 - 39,493 54,086 4.05% Lines of credit 461,400 - - 461,400 3.37% -------------- --------------- ----------------- --------------- --------------- Total variable-rate debt 683,493 - 68,908 752,401 3.44% -------------- --------------- ----------------- --------------- --------------- Total $ 3,371,679 $ (52,914) $ 173,022 $3,491,787 5.72% ============== =============== ================= =============== =============== (1) Weighted average interest rate including the effect of debt premiums, but excluding amortization of deferred financing costs.
In February 2005, we amended one of our secured credit facilities to increase the total availability from $80.0 million to $100.0 million and to extend the maturity by one year to June 2007. The interest rate remained at LIBOR plus 1.00% until it was reduced to LIBOR plus 0.9% in December 2005. As of December 31, 2005, we had four secured lines of credit with total availability of $503.0 million that are used for construction, acquisition and working capital purposes. Each of these lines is secured by mortgages on certain of our operating properties. There were total borrowings of $412.3 million outstanding at a weighted average interest rate of 5.29% as of December 31, 2005. In February 2006, we amended one of our secured credit facilities to increase the maximum availability from $373.0 million to $476.0 million, extend the maturity date from February 28, 2006 to February 28, 2009 plus a one-year extension option, increase the minimum tangible net worth requirement, as defined, from $1.0 billion to $1.37 billion and increase the limit on the maximum availability that the Company may request from $500.0 million to $650.0 million. In March 2005, we retired a mortgage note payable of $11.1 million and recognized a loss on extinguishment of $0.9 million, which consisted of a prepayment fee of $0.8 million and the write-off of unamortized deferred financing costs of $0.1 million. In September 2005, we obtained a ten-year, non-recourse mortgage note payable of $60.0 million on Imperial Valley Mall, one of our unconsolidated affiliates, that has a fixed interest rate of 4.985% and matures in September 2015. The proceeds of the loan were used to retire the outstanding borrowings of $58.3 million under the construction loan that was incurred to develop Imperial Valley Mall. Also in September 2005, we retired two mortgage notes payable totaling $52.6 million, including unamortized debt premiums of $1.3 million. We recognized a loss on extinguishment of debt in the amount of less than $0.1 million, which consisted of a prepayment fee of $1.1 million and the write-off of unamortized deferred financing costs of $0.2 million, offset by the write-off of the unamortized debt premium of $1.3 million. In October 2005, we obtained four new mortgage notes payable totaling $392.0 million, which are ten-year, non-recourse loans having a weighted average interest rate of 5.02%. In connection with obtaining these new loans, we retired four loans totaling $179.5 million. As a result of the retirement of these four loans, we recognized a loss on extinguishment of debt of $5.2 million in October 46 2005, which includes prepayment fees of $4.6 million and the write-off of unamortized deferred financings costs of $0.8 million. The secured and unsecured credit facilities contain, among other restrictions, certain financial covenants including the maintenance of certain coverage ratios, minimum net worth requirements, and limitations on cash flow distributions. We were in compliance with all financial covenants and restrictions under our credit facilities at December 31, 2005. Additionally, certain property-specific mortgage notes payable require the maintenance of debt service coverage ratios on their respective properties. At December 31, 2005, the properties subject to these mortgage notes payable were in compliance with the applicable ratios. We expect to refinance the majority of mortgage and other notes payable maturing over the next four years with replacement loans. Based on our pro rata share of total debt, there is $978.7 million of debt that is scheduled to mature in 2006. In January 2006, we extended the maturity of $358.2 million of this debt to 2009. There are extension options in place to extend the maturity of $509.1 million of this debt to 2007. We expect to repay or refinance the remaining $111.4 million of maturing loans. Equity At our Annual Meeting of Shareholders on May 9, 2005, our shareholders approved an increase in the authorized shares of the common stock under our amended and restated certificate of incorporation to 180,000,000 shares from 95,000,000 shares. On May 10, 2005, our board of directors approved a two-for-one stock split of our common stock, which was effected in the form of a stock dividend. The record date for the stock split was June 1, 2005, and the distribution date was June 15, 2005. We retained the current par value of $0.01 per share for all shares of common stock. The Operating Partnership currently has common units and special common units of limited partner interest outstanding that may be exchanged by their holders, under certain circumstances, for shares of common stock on a one-for-one basis. These common units and special common units were also split on a two-for-one basis so that they continue to be exchangeable on a one-for-one basis into shares of our common stock. All references to numbers of common shares and per share data in the accompanying consolidated financial statements, the notes thereto and this annual report have been adjusted to reflect the stock split on a retroactive basis. Shareholders' equity reflects the stock split through a reclassification of $0.3 million from Additional Paid-In Capital to Common Stock, which represents the par value of the additional shares resulting from the split. In October 2005, our board of directors declared a special one-time cash dividend for our common stock of $0.09 per share. The dividend was payable on January 16, 2006, to shareholders of record as of December 30, 2005. The special dividend was declared as a result of the taxable gains generated from the sale of our management and advisory contracts with Galileo America that is discussed in Note 5 to the consolidated financial statements. In November 2005, our board of directors approved a plan to repurchase up to $60.0 million of our common stock by December 31, 2006. The stock repurchase plan was adopted to provide us the opportunity to repurchase shares relatively equivalent to the Series K Special Common Units that were issued in connection with the acquisition of the three-mall portfolio that is discussed in Note 3 to the consolidated financial statements. We had repurchased 1,371,034 shares of our common stock as of December 31, 2005 for a total of $55.0 million, or a weighted average cost of $40.11 per share. As of December 31, 2005, we had paid $48.3 million of this amount and had a payable of $6.7 million for the remainder. We do not intend to repurchase any additional shares subsequent to December 31, 2005. In October 2005, we issued 174,403 shares of common stock to one of our officers when the officer's deferred compensation agreement was terminated. We had accrued all compensation expense related to the agreement as it was earned during the term of the agreement. 47 We received $10.2 million in proceeds from issuances of common stock during 2005 from exercises of employee stock options and our dividend reinvestment plan. During 2005 we paid dividends of $133.7 million to holders of our common stock and our preferred stock, as well as $89.5 million in distributions to the minority interest investors in our Operating Partnership and certain shopping center properties. Subsequent to December 31, 2005, holders of 1,507,649 units of limited partnership interest in the Operating Partnership exercised their conversion rights, which are described in Note 9 to the consolidated financial statements. We have elected to issue 1,480,067 shares of common stock and $1,112 in cash in exchange for these units. As a publicly traded company, we have access to capital through both the public equity and debt markets. In January 2006, we filed a shelf registration statement with the Securities and Exchange Commission authorizing us to publicly issue shares of preferred stock, common stock and warrants to purchase shares of common stock. There is no limit to the offering price or number of shares that we may issue under this shelf registration statement. We anticipate that the combination of equity and debt sources will, for the foreseeable future, provide adequate liquidity to continue our capital programs substantially as in the past and make distributions to our shareholders in accordance with the requirements applicable to real estate investment trusts. Our strategy is to maintain a conservative debt-to-total-market capitalization ratio in order to enhance our access to the broadest range of capital markets, both public and private. Based on our share of total consolidated and unconsolidated debt and the market value of our equity, our debt-to-total-market capitalization (debt plus market-value equity) ratio was as follows at December 31, 2005 (in thousands, except stock prices):
Shares Outstanding Stock Price (1) Value ------------------ ----------------- ----------------- Common stock and operating partnership units 115,438 $ 39.51 $4,560,955 8.75% Series B Cumulative Redeemable Preferred Stock 2,000 $ 50.00 100,000 7.75% Series C Cumulative Redeemable Preferred Stock 460 $250.00 115,000 7.375% Series D Cumulative Redeemable Preferred Stock 700 $250.00 175,000 ----------------- Total market equity 4,950,955 Our share of total debt 4,531,731 ----------------- Total market capitalization $9,482,686 ================= Debt-to-total-market capitalization ratio 47.8% ================= (1) Stock price for common stock and operating partnership units equals the closing price of our common stock on December 30, 2005. The stock price for the preferred stock represents the liquidation preference of each respective series of preferred stock.
48 Contractual Obligations The following table summarizes our significant contractual obligations as of December 31, 2005 (dollars in thousands):
Payments Due By Period ----------------------------------------------------------------- Less Than 1 - 3 3 - 5 More Than Total 1 Year Years Years 5 Years ------------ ------------ ------------ ----------- ------------- Long-term debt: Total consolidated debt service (1) $5,543,721 $1,227,126 $1,104,912 $1,130,390 $2,081,293 Minority investors' share in shopping center properties (69,712) (4,887) (23,432) (6,147) (35,246) Our share of unconsolidated affiliates debt service (2) 380,079 16,240 60,725 30,049 273,065 ------------ ------------ ------------ ----------- ------------- Our share of total debt service obligations 5,854,088 1,238,479 1,142,205 1,154,292 2,319,112 ------------ ------------ ------------ ----------- ------------- Operating leases: (3) Ground leases on consolidated properties 58,901 1,321 3,549 3,560 50,471 Minority investors' share in shopping center properties (2,376) (32) (68) (73) (2,203) ------------ ------------ ------------ ----------- ------------- Our share of total ground lease obligations 56,525 1,289 3,481 3,487 48,268 ------------ ------------ ------------ ----------- ------------- Purchase obligations: (4) ------------ ------------ ------------ ----------- ------------- Construction contracts on consolidated properties 46,208 46,208 - - - ------------ ------------ ------------ ----------- ------------- Total contractual obligations $5,956,821 $1,285,976 $1,145,686 $1,157,779 $2,367,380 ============ ============ ============ =========== ============= (1) Represents principal and interest payments due under terms of mortgage and other notes payable and includes $1,059,116 of variable-rate debt on seven operating properties, two construction loans, four secured credit facilities and one unsecured credit facility. The variable-rate loans on the operating properties call for payments of interest only with the total principal due at maturity. The construction loans and credit facilities do not require scheduled principal payments. The future contractual obligations for all variable-rate indebtedness reflect payments of interest only throughout the term of the debt with the total outstanding principal at December 31, 2005 due at maturity. The future interest payments are projected based on the interest rates that were in effect at December 31, 2005. See Note 6 to the consolidated financial statements for additional information regarding the terms of long-term debt. (2) Includes $26,600 of variable-rate indebtedness. Future contractual obligations have been projected using the same assumptions as used in (1) above. (3) Obligations where we own the buildings and improvements, but lease the underlying land under long-term ground leases. The maturities of these leases range from 2006 to 2091 and generally provide for renewal options. Renewal options have not been included in the future contractual obligations. (4) Represents the remaining balance to be incurred under construction contracts that had been entered into as of December 31, 2005, but were not complete. The contracts are primarily for development, renovation and expansion of properties.
Capital Expenditures We expect to continue to have access to the capital resources necessary to expand and develop our business. Future development and acquisition activities will be undertaken as suitable opportunities arise. We do not expect to pursue these activities unless adequate sources of financing are available and we can achieve satisfactory returns on our investments. An annual capital expenditures budget is prepared for each property that is intended to provide for all necessary recurring and non-recurring capital expenditures. We believe that property operating cash flows, which include reimbursements from tenants for certain expenses, will provide the necessary funding for these expenditures. 49 Developments and Expansions The following is a summary of the projects currently under construction (dollars in thousands):
Our Share of Gross Costs as of Leasable Our Share of December 31, Scheduled Property Location Area Total Costs 2005 Opening Date - --------------------------------- ------------------- ------------ --------------- --------------- --------------- Mall Expansions: Burnsville Center (Phase II) Burnsville, MN 82,900 $ 13,000 $ 1,244 April-06 Hanes Mall (Dick's Sporting Goods) Winston-Salem, NC 66,000 10,150 3,632 July-06 Open-Air Centers: Southaven Towne Center (Gordman's) Southaven, MS 59,400 7,190 1,405 April-06 Lakeview Point Stillwater, OK 207,300 21,095 5,940 October-06 Gulf Coast Town Center (Phase II) Ft. Myers, FL 739,000 109,641(1) 14,500(1) October-06 Associated Centers: The Plaza at Fayette (Phase I) Lexington, KY 73,400 24,414 15,058 July-06 The Shoppes at St. Clair Fairview Heights, IL 75,000 26,957 9,933 March-07 Community Center: High Pointe Commons Harrisburg, PA 297,100 7,271 2,787 October-06 --------------- --------------- --------------- 1,600,100 $219,718 $54,499 =============== =============== =============== (1) Amounts shown are 100% of the cost and cost to date.
There are construction loans in place for the costs of Gulf Coast Town Center and Lakeview Pointe. We have commitments for construction loans that will cover the costs of The Plaza at Fayette and the Shoppes at St. Clair. The remaining costs will be funded with operating cash flows and the credit facilities. We have entered into a number of option agreements for the development of future regional malls and community centers. Except for the projects listed in the above table, we do not have any other material capital commitments. Acquisitions We acquired six malls and one associated center during 2005 for an aggregate purchase price of $884.7 million, including transaction costs. We paid $426.1 million in cash, assumed $385.8 million of debt and issued limited partnership interests in the Operating Partnership valued at $72.9 million to fund these acquisitions. The total cash paid was funded with borrowings under our credit facilities and two new loans totaling $136.0 million. These acquisitions are expected to generate an initial weighted-average, unleveraged return of 6.2%. We acquired a 50/50 joint venture interest in an open-air center that was under development. We initially contributed $40.3 million for our 50% interest, which was used to refund the aggregate acquisition and development costs incurred with respect to the project that were previously paid by our joint venture partner. We acquired a 50/50 joint venture interest in a mall and its associated center, which were valued at $283.5 million. Our initial capital contribution to this joint venture was $1.6 million of cash. 50 Dispositions We received a total of $64.4 million in net cash proceeds from the sales of real estate assets during 2005. The third phase of the joint venture transaction with Galileo America, which is discussed in Note 5 to the consolidated financial statements, closed in January 2005 and generated net cash proceeds of $42.5 million. We received $8.3 million in cash proceeds and took a note receivable for $2.6 million from the sale of six community centers. We also received $13.6 million in cash proceeds from the sales of eleven outparcels. We received $21.6 million in net cash proceeds from the sale of our management and advisory contracts with Galileo America. We also received an acquisition fee of $8.0 million as a result of Galileo America's purchase of a portfolio of properties from New Plan Excel Realty Trust, Inc. See Note 5 to the accompanying consolidated financial statements for a more detailed description of these transactions. Other Capital Expenditures Including our share of unconsolidated affiliates' capital expenditures, we spent $52.8 million in 2005 for tenant allowances, which generate increased rents from tenants over the terms of their leases. Deferred maintenance expenditures were $31.5 million for 2005 and included $12.4 million for resurfacing and improved lighting of parking lots, $11.7 million for roof repairs and replacements and $7.4 million for various other expenditures. Renovation expenditures were $27.5 million in 2005. Deferred maintenance expenditures are billed to tenants as common area maintenance expense, and most are recovered over a 5- to 15-year period. Renovation expenditures are primarily for remodeling and upgrades of malls, of which approximately 30% is recovered from tenants over a 5- to 15-year period. We expect to renovate seven malls during 2006 at a total estimated cost of $53.6 million, which will be funded from operating cash flows and availability under our credit facilities. Off-Balance Sheet Arrangements Unconsolidated Affiliates We have ownership interests in eleven unconsolidated affiliates that are described in Note 5 to the consolidated financial statements. The unconsolidated affiliates are accounted for using the equity method of accounting and are reflected in the consolidated balance sheets as "Investments in Unconsolidated Affiliates." The following are circumstances when we may consider entering into a joint venture with a third party: |X| Third parties may approach us with opportunities where they have obtained land and performed some pre-development activities, but they may not have sufficient access to the capital resources or the development and leasing expertise to bring the project to fruition. We enter into such arrangements when we determine such a project is viable and we can achieve a satisfactory return on our investment. We typically earn development fees from the joint venture and provide management and leasing services to the property for a fee once the property is placed in operation. |X| We determine that we may have the opportunity to capitalize on the value we have created in a property by selling an interest in the property to a third party. This provides us with an additional source of capital that can be used to develop or acquire additional real estate assets that we believe will provide greater potential for growth. When we retain an interest in an asset rather than selling a 100% interest, it is typically because this allows us to continue to manage the property, which provides us the ability to earn fees for management, leasing, development, financing and acquisition services provided to the joint venture. 51 Guarantees We may issue guarantees on the debt of a joint venture primarily because it allows the joint venture to obtain funding at a lower cost than could be obtained otherwise. This results in a higher return for the joint venture on its investment, and in a higher return on our investment in the joint venture. We may receive a fee from the joint venture for providing the guaranty. Additionally, when we issue a guaranty, the terms of the joint venture agreement typically provide that we may receive indemnification from the joint venture. As of December 31, 2005, we have guaranteed 50% of the debt of Parkway Place L.P. The total amount outstanding at December 31, 2005, was $53.2 million, of which we have guaranteed $26.6 million. The guaranty will expire when the related debt matures in June 2008. The Company's guarantees and the related accounting are more fully described in Note 17 to the consolidated financial statements. Critical Accounting Policies Our significant accounting policies are disclosed in Note 2 to the consolidated financial statements. The following discussion describes our most critical accounting policies, which are those that are both important to the presentation of our financial condition and results of operations and that require significant judgment or use of complex estimates. Revenue Recognition Minimum rental revenue from operating leases is recognized on a straight-line basis over the initial terms of the related leases. Certain tenants are required to pay percentage rent if their sales volumes exceed thresholds specified in their lease agreements. Percentage rent is recognized as revenue when the thresholds are achieved and the amounts become determinable. We receive reimbursements from tenants for real estate taxes, insurance, common area maintenance, and other recoverable operating expenses as provided in the lease agreements. Tenant reimbursements are recognized as revenue in the period the related operating expenses are incurred. Tenant reimbursements related to certain capital expenditures are billed to tenants over periods of 5 to 15 years and are recognized as revenue when billed. We receive management, leasing and development fees from third parties and unconsolidated affiliates. Management fees are charged as a percentage of revenues (as defined in the management agreement) and are recognized as revenue when earned. Development fees are recognized as revenue on a pro rata basis over the development period. Leasing fees are charged for newly executed leases and lease renewals and are recognized as revenue when earned. Development and leasing fees received from unconsolidated affiliates during the development period are recognized as revenue to the extent of the third-party partners' ownership interest. Fees to the extent of our ownership interest are recorded as a reduction to our investment in the unconsolidated affiliate. Gains on sales of real estate assets are recognized when it is determined that the sale has been consummated, the buyer's initial and continuing investment is adequate, our receivable, if any, is not subject to future subordination, and the buyer has assumed the usual risks and rewards of ownership of the asset. When we have an ownership interest in the buyer, gain is recognized to the extent of the third party partner's ownership interest and the portion of the gain attributable to our ownership interest is deferred. 52 Real Estate Assets We capitalize predevelopment project costs paid to third parties. All previously capitalized predevelopment costs are expensed when it is no longer probable that the project will be completed. Once development of a project commences, all direct costs incurred to construct the project, including interest and real estate taxes, are capitalized. Additionally, certain general and administrative expenses are allocated to the projects and capitalized based on the amount of time applicable personnel work on the development project. Ordinary repairs and maintenance are expensed as incurred. Major replacements and improvements are capitalized and depreciated over their estimated useful lives. All acquired real estate assets are accounted for using the purchase method of accounting and accordingly, the results of operations are included in the consolidated statements of operations from the respective dates of acquisition. The purchase price is allocated to (i) tangible assets, consisting of land, buildings and improvements, as if vacant, and tenant improvements and (ii) identifiable intangible assets and liabilities generally consisting of above- and below-market leases and in-place leases. We use estimates of fair value based on estimated cash flows, using appropriate discount rates, and other valuation methods to allocate the purchase price to the acquired tangible and intangible assets. Liabilities assumed generally consist of mortgage debt on the real estate assets acquired. Assumed debt with a stated interest rate that is significantly different from market interest rates is recorded at its fair value based on estimated market interest rates at the date of acquisition. Depreciation is computed on a straight-line basis over estimated lives of 40 years for buildings, 10 to 20 years for certain improvements and 7 to 10 years for equipment and fixtures. Tenant improvements are capitalized and depreciated on a straight-line basis over the term of the related lease. Lease-related intangibles from acquisitions of real estate assets are amortized over the remaining terms of the related leases. The amortization of above- and below-market leases is recorded as an adjustment to minimum rental revenue, while the amortization of all other lease-related intangibles is recorded as amortization expense. Any difference between the face value of the debt assumed and its fair value is amortized to interest expense over the remaining term of the debt using the effective interest method. Carrying Value of Long-Lived Assets We periodically evaluate long-lived assets to determine if there has been any impairment in their carrying values and record impairment losses if the undiscounted cash flows estimated to be generated by those assets are less than their carrying amounts or if there are other indicators of impairment. If it is determined that an impairment has occurred, the excess of the asset's carrying value over its estimated fair value is charged to operations. We recorded losses on the impairment of real estate assets of $1.3 million and $3.1 million in 2005 and 2004, respectively, which are discussed in Note 2 to the consolidated financial statements. There were no impairment charges in 2003. Recent Accounting Pronouncements In December 2004, the FASB issued Statement of Financial Accounting Standards ("SFAS") No. 153, "Exchanges of Nonmonetary Assets, an amendment of APB No. 29, Accounting for Nonmonetary Transactions." SFAS No. 153 requires exchanges of productive assets to be accounted for at fair value, rather than at carryover basis, unless (1) neither the asset received nor the asset surrendered has a fair value that is determinable within reasonable limits or (2) the transactions lack commercial substance. SFAS No. 153 became effective for nonmonetary asset exchanges occurring in fiscal periods that began after June 15, 2005. In December 2004, the FASB released its final revised standard, SFAS No. 123 (Revised 2004), "Share-Based Payment." SFAS No. 123(R) requires that a public entity measure the cost of equity based service awards based on the 53 grant-date fair value of the award. That cost will be recognized over the period during which an employee is required to provide service in exchange for the award or the vesting period. No compensation cost is recognized for equity instruments for which employees do not render the requisite service. In April 2005, the Securities and Exchange Commission issued a Staff Accounting Bulletin to modify the effective date so that SFAS No. 123(R) can be adopted beginning with the first interim reporting period of the next fiscal year beginning after June 15, 2005, instead of the first interim period beginning after June 15, 2005. We previously adopted the fair value provisions of SFAS No. 123, "Accounting for Stock Based Compensation," as amended by SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure - An Amendment of FASB Statement No. 123" effective January 1, 2003. We will adopt SFAS No. 123(R) on January 1, 2006, using a modified prospective application. We estimate that this will result in the recognition of additional compensation expense of approximately $0.3 million and $0.1 million during the years ending December 31, 2006 and 2007, which represents the unamortized deferred compensation expense associated with all remaining stock options that were not vested as of December 31, 2005. In May 2005, the FASB issued Statement No. 154 entitled, "Accounting Changes and Error Corrections," which will be effective in the first quarter of fiscal year 2006. This statement addresses the retrospective application of such changes and corrections and we will follow the provision of this standard in the event of any future accounting changes. In June 2005, the FASB issued Emerging Issues Task Force ("EITF") Issue No. 04-05, "Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights." EITF Issue No. 04-05 provides a framework for determining whether a general partner controls, and should consolidate, a limited partnership or a similar entity. EITF Issue No. 04-05 is effective after June 29, 2005, for all newly formed limited partnerships and for any pre-existing limited partnerships that modify their partnership agreements after that date. General partners of all other limited partnerships are required to apply the consensus no later than the beginning of the first reporting period in fiscal years beginning after December 15, 2005. We do not expect that the adoption of EITF Issue No. 04-05 will have a material impact on our financial position, results of operations or cash flows. In June 2005, the FASB issued FASB Staff Position ("FSP") 78-9-1, "Interaction of AICPA Statement of Position 78-9 and EITF Issue No. 04-05." The EITF acknowledged that the consensus in EITF Issue No. 04-05 conflicts with certain aspects of Statement of Position ("SOP") 78-9, "Accounting for Investments in Real Estate Ventures." The EITF agreed that the assessment of whether a general partner, or the general partners as a group, controls a limited partnership should be consistent for all limited partnerships, irrespective of the industry within which the limited partnership operates. Accordingly, the guidance in SOP 78-9 was amended in FSP 78-9-1 to be consistent with the guidance in EITF Issue No. 04-05. The effective dates for this FSP are the same as those for EITF Issue No. 04-05 described above. We do not expect that the adoption of FSP 78-9-1 will have a material impact on our financial position, results of operations or cash flows. In March 2005, the FASB issued Interpretation No. 47 ("FIN 47"), "Accounting for Conditional Asset Retirement Obligations," which clarifies the accounting for conditional asset retirement obligations as used in SFAS No. 143, "Accounting for Asset Retirement Obligations." A conditional asset retirement obligation is an unconditional legal obligation to perform an asset retirement activity in which the timing and (or) method of settlement are conditional on a future event that may or may not be within the control of the entity. Therefore, an entity is required to recognize a liability for the fair value of a conditional asset retirement obligation under SFAS No. 143 if the fair value of the liability can be reasonably estimated. FIN 47 permits, but does not require, restatement of interim financial information. The provisions of FIN 47 are effective for reporting periods ending after December 15, 2005.In accordance with the transition provisions of FIN 47, we recorded an asset of $1.9 million and a liability of $2.4 million related to conditional asset retirement obligations as of December 31, 2005. The difference between the amounts of the asset and liability of $0.5 million was recognized as maintenance and repairs expense in our consolidated statement of operations for the year ended December 31, 2005. 54 Impact of Inflation In the last three years, inflation has not had a significant impact on our operations because of the relatively low inflation rate. Substantially all tenant leases do, however, contain provisions designed to protect us from the impact of inflation. These provisions include clauses enabling us to receive percentage rent based on tenants' gross sales, which generally increase as prices rise, and/or escalation clauses, which generally increase rental rates during the terms of the leases. In addition, many of the leases are for terms of less than 10 years which may provide us the opportunity to replace existing leases with new leases at higher base and/or percentage rent if rents of the existing leases are below the then existing market rate. Most of the leases require the tenants to pay their share of operating expenses, including common area maintenance, real estate taxes and insurance, which reduces our exposure to increases in costs and operating expenses resulting from inflation. Funds From Operations Funds From Operations ("FFO") is a widely used measure of the operating performance of real estate companies that supplements net income determined in accordance with generally accepted accounting principles ("GAAP"). The National Association of Real Estate Investment Trusts ("NAREIT") defines FFO as net income (computed in accordance with GAAP) excluding gains or losses on sales of operating properties, plus depreciation and amortization of real estate assets, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated on the same basis. We compute FFO as defined above by NAREIT less dividends on preferred stock. Our method of calculating FFO may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs. We believe that FFO provides an additional indicator of the operating performance of our properties without giving effect to real estate depreciation and amortization, which assumes the value of real estate assets declines predictably over time. Since values of well-maintained real estate assets have historically risen with market conditions, we believe that FFO enhances investors' understanding of our operating performance. The use of FFO as an indicator of financial performance is influenced not only by the operations of our properties and interest rates, but also by our capital structure. FFO does not represent cash flows from operations as defined by accounting principles generally accepted in the United States, is not necessarily indicative of cash available to fund all cash flow needs and should not be considered as an alternative to net income for purposes of evaluating our operating performance or to cash flow as a measure of liquidity. FFO increased 25.6% in 2005 to $390.0 million compared to $310.4 million in 2004. The 2005 New Properties generated 59% of the growth in FFO, while consistently high portfolio occupancy, increases in rental rates from new and renewal leasing and increased recoveries of operating expenses at the 2005 Comparable Properties accounted for 25% of the growth in FFO. The remaining 16% of growth is primarily attributable to the gain from the sale of the Galileo America management contracts to New Plan and the acquisition fee related to Galileo America's acquisition of New Plan's portfolio. 55 The reconciliation of FFO to net income available to common shareholders is as follows (in thousands):
Year Ended December 31, ------------------------------------------------- 2005 2004 2003 ------------------------------------------------- Net income available to common shareholders $ 131,907 $ 102,802 $ 124,506 Depreciation and amortization from: Consolidated properties 179,651 142,012 112,826 Unconsolidated affiliates 9,210 6,144 4,307 Discontinued operations 1,860 618 965 Minority interest in earnings of operating partnership 112,061 85,186 106,532 Gain on sales of operating real estate assets (42,562) (23,696) (71,886) Minority investors' share of depreciation and amortization (1,390) (1,230) (1,111) (Gain) loss on discontinued operations 82 (845) (4,042) Depreciation and amortization of non-real estate assets (861) (586) (508) ------------- ------------- ------------- FFO $ 389,958 $ 310,405 $ 271,589 ============= ============= ============= FFO applicable to our shareholders $ 213,596 $ 169,725 $ 146,552 ============= ============= =============
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to interest rate risk on our debt obligations. Our interest rate risk management policy requires that we use derivative financial instruments for hedging purposes only and that, if we do enter into a derivative financial instrument, the derivative financial instrument be entered into with only major financial institutions based on their credit ratings and other factors. We did not have any derivative financial instruments at December 31, 2005 and 2004. Based on our proportionate share of consolidated and unconsolidated variable-rate debt at December 31, 2005, a 0.5% increase or decrease in interest rates on variable rate debt would increase or decrease annual cash flows by approximately $5.4 million and, after the effect of capitalized interest, annual earnings by approximately $4.8 million. Based on our proportionate share of total consolidated and unconsolidated debt at December 31, 2005, a 0.5% increase in interest rates would decrease the fair value of debt by approximately $76.4 million, while a 0.5% decrease in interest rates would increase the fair value of debt by approximately $78.9 million. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. Reference is made to the Index to Financial statements contained in Item 15 on page 60. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None ITEM 9A. CONTROLS AND PROCEDURES Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of its effectiveness to future periods are subject to the risk that 56 controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. As of the end of the period covered by this annual report, an evaluation was performed under the supervision of our Chief Executive Officer and Chief Financial Officer and with the participation of our management, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(e). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective. No change in our internal control over financial reporting occurred during the fourth fiscal quarter of the period covered by this annual report that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Report Of Management On Internal Control Over Financial Reporting Management of CBL & Associates Properties, Inc. and its consolidated subsidiaries (the "Company"), is responsible for establishing and maintaining adequate internal control over financial reporting. The Company's internal control over financial reporting is a process designed under the supervision of the Company's chief executive officer and chief financial officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company's financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles. As of December 31, 2005, management conducted an assessment of the effectiveness of the Company's internal control over financial reporting based on the framework established in Internal Control -- Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management has determined that the Company's internal control over financial reporting as of December 31, 2005 is effective. The Company's internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; provide reasonable assurances that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and the directors of the Company; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on its financial statements. Management's assessment of the effectiveness of the Company's internal control over financial reporting as of December 31, 2005 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report appearing herein, which expresses an unqualified opinion on management's assessment of the effectiveness of the Company's internal control over financial reporting and an unqualified opinion on the effectiveness of the Company's internal control over financial reporting as of December 31, 2005. Report Of Independent Registered Public Accounting Firm To the Board of Directors and Shareholders of CBL & Associates Properties, Inc.: 57 We have audited management's assessment, included in the accompanying Report of Management on Internal Control over Financial Reporting, that CBL & Associates Properties, Inc. and subsidiaries (the "Company") maintained effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control--Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management's assessment and an opinion on the effectiveness of the Company's internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management's assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions. A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements. Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, management's assessment that the Company maintained effective internal control over financial reporting as of December 31, 2005, is fairly stated, in all material respects, based on the criteria established in Internal Control--Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based on the criteria established in Internal Control--Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedules as of and for the year ended December 31, 2005 of the Company and our report dated March 10, 2006 expressed an unqualified opinion on those financial statements and financial statement schedules. /s/ DELOITTE & TOUCHE LLP 58 Atlanta, Georgia March 10, 2006 ITEM 9B. OTHER INFORMATION At a meeting held on October 26, 2005, the Compensation Committee of the Company's board of directors approved the following actions affecting the compensation of our executive officers: 2005 Base Salaries for Named Executive Officers - ------------------------------------------------ The Compensation Committee approved 2006 Base Salary levels for the Company's officers and members of senior management, including setting the following 2006 Base Salary levels for those individuals who qualify as "named executive officers" (pursuant to Item 402(a)(3) of Securities and Exchange Commission Regulation S-K):
Name: Title: 2006 Base Salary - --------------------------- ----------------------------------------- ----------------- Charles B. Lebovitz Chairman of the Board and $558,802 Chief Executive Officer John N. Foy Vice Chairman of the Board, Chief $486,320 Financial Officer and Treasurer Stephen D. Lebovitz Director, President and Secretary $475,000 Eric P. Snyder Senior Vice President and $446,000 Director of Corporate Leasing Augustus N. Stephas Senior Vice President - Accounting $456,600 and Controller
In the case of Charles B. Lebovitz, John N. Foy and Stephen D. Lebovitz, these base salaries were approved to take effect as of January 1, 2006. In the case of Mr. Stephas, the effective date is February 28, 2006, and in the case of Mr. Snyder, the effective date is September 15, 2006. Each of Charles B. Lebovitz, John N. Foy and Stephen D. Lebovitz are parties to deferred compensation agreements issued under the Amended and Restated Stock Incentive Plan, as amended (the "Stock Incentive Plan"), pursuant to which the amounts representing annual increases over their base salaries since 1995 are paid in quarterly installments in the form of the Company's Common Stock rather than cash. Revisions to 2005 Executive Bonus Opportunities - ----------------------------------------------- The Compensation Committee also approved certain adjustments to the criteria or matters pursuant to which designated Company executives are eligible to earn bonuses during the 2005 fiscal year based upon the successful continuation and/or completion of development, financing, leasing and re-leasing, temporary leasing, sponsorships, management, accounting, marketing, remodelings, expansions, peripheral property sales, acquisitions and joint ventures with respect to the Company and its properties identified by the Compensation Committee as being within each such executive's areas of responsibility. These adjustments affected the maximum potential bonuses that could be earned by two of the three executives covered by these bonus criteria who are named executive officers of the Company as follows: the maximum potential bonus payments that could be earned by John N. Foy and Stephen D. Lebovitz for specified projects completed during 2005 was increased from $575,000 to $675,000 for each of such named executive officers. The actual amount of any bonus payouts will be dependent on the successful continuation or completion of the projects or matters upon which each such officer's bonus is based, as well as the officer's continued employment with the Company at such time. In addition to the adjustments to the potential bonus levels approved as described above for certain officers, the Compensation Committee also approved an increase from $1,000,000 to $1,075,000 in the amount of a separate allocation of funds to be available as bonus compensation for payment to three designated 59 senior executives, in conjunction with the Compensation Committee's decision concerning the actual bonuses to be paid to such officers based upon the Committee's evaluation of their performance during 2005. Two of the officers who participated in such bonus pool for fiscal 2005 are named executive officers, and the Compensation Committee approved the following 2005 bonus amounts for such officers: Charles B. Lebovitz - $675,000 and Augustus N. Stephas - $225,000. In the case of both of the bonus mechanisms described above for 2005, each officer who receives a bonus has the option of electing whether to have his or her bonus paid in cash or in shares of the Company's Common Stock pursuant to the terms of the Stock Incentive Plan. The number of shares issued with respect to any bonus that an officer elects to receive in the Company's Common Stock will be determined based on the market value of the Common Stock on the date when such bonus becomes payable. Approval of 2006 Executive Bonus Opportunities - ---------------------------------------------- The Compensation Committee also approved the criteria or matters pursuant to which designated Company executives will be eligible to earn bonuses for the 2006 fiscal year. The amount of the bonus paid to each executive will be based upon the successful continuation and/or completion of development, financing, leasing and re-leasing, temporary leasing, sponsorships, management, accounting, marketing, remodelings, expansions, peripheral property sales, acquisitions and joint ventures with respect to the Company and its properties identified by the Compensation Committee as being within each such executive's areas of responsibility. Three of the executives covered by these bonus criteria are named executive officers of the Company. The potential bonuses that the Compensation Committee provided that such named executive officers could earn pursuant to the above-stated criteria or matters are as follows: John N. Foy - $725,000; Stephen D. Lebovitz - $725,000; and Eric P. Snyder - $325,000. The actual amount of any bonus payouts will be dependent on the successful continuation or completion of the projects or matters upon which each such officer's bonus is based, as well as the officer's continued employment with the Company at such time. In addition to the potential bonus levels approved as described above for certain officers, the Compensation Committee also approved a separate allocation of up to an aggregate of $1,325,000 to be available as bonus compensation for payment to three designated senior executives, consisting of specified maximum bonuses that could be earned by each of the three executives totaling $1,175,000 plus the opportunity to share in an unallocated discretionary bonus pool of up to $150,000. The actual bonus payments to such officers, including the amount (if any) to be paid out of the $150,000 unallocated pool, will be determined during the fourth quarter of 2006 by the Compensation Committee, based upon its evaluation of such officers' performance during the year. Two of the officers for whom any fiscal 2006 bonuses will be determined pursuant to this method are named executive officers, and the potential bonus payouts set by the Compensation Committee for each of these officers is as follows: Charles B. Lebovitz - $725,000 plus any additional participation in the unallocated $150,000 pool, and Augustus N. Stephas - $250,000 plus any additional participation in the unallocated $150,000 pool. As with the 2005 bonuses, in the case of both of the bonus mechanisms described above for 2006, each officer who receives a bonus will have the option of electing whether to have his or her bonus paid in cash or in shares of the Company's Common Stock pursuant to the terms of the Stock Incentive Plan. The number of shares issued with respect to any bonus that an officer elects to receive in the Company's Common Stock will be determined based on the market value of the Common Stock on the date when such bonus becomes payable. 60 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. Incorporated herein by reference to the sections entitled "Election of Directors," "Directors and Executive Officers," "Certain Terms of the Jacobs Acquisition," "Corporate Governance Matters," "Board of Directors' Meetings and Committees - Audit Committee," and "Section 16(a) Beneficial Ownership Reporting Compliance" in our most recent definitive proxy statement filed with the Securities and Exchange Commission (the "Commission") with respect to our Annual Meeting of Stockholders to be held on May 8, 2006. Our board of directors has determined that Winston W. Walker, an independent director and chairman of the audit committee, qualifies as an "audit committee financial expert" as such term is defined by the rules of the Securities and Exchange Commission. ITEM 11. EXECUTIVE COMPENSATION. Incorporated herein by reference to the sections entitled "Compensation of Directors," "Executive Compensation" and "Compensation Committee Interlocks and Insider Participation" in our most recent definitive proxy statement filed with the Commission with respect to our Annual Meeting of Stockholders to be held on May 8, 2006. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. Incorporated herein by reference to the sections entitled "Security Ownership of Certain Beneficial Owners and Management" and "Equity Compensation Plan Information as of December 31, 2005", in our most recent definitive proxy statement filed with the Commission with respect to our Annual Meeting of Stockholders to be held on May 8, 2006. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. Incorporated herein by reference to the section entitled "Certain Relationships and Related Transactions" in our most recent definitive proxy statement filed with the Commission with respect to our Annual Meeting of Stockholders to be held on May 8, 2006. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES Incorporated herein by reference to the section entitled "Independent Registered Public Accountants' Fees and Services" under "RATIFICATION OF THE SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS" in our most recent definitive proxy statement filed with the Commission with respect to our Annual Meeting of Stockholders to be held on May 8, 2006. 61 PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (1) Financial Statements Page Number Report Of Independent Registered Public Accounting Firm 65 CBL & Associates Properties, Inc. Consolidated Balance Sheets as of December 31, 2005 and 2004 66 CBL & Associates Properties, Inc. Consolidated Statements of Operations for the Years Ended December 31, 2005, 2004 and 2003 67 CBL & Associates Properties, Inc. Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 2005, 2004 and 2003 68 CBL & Associates Properties, Inc. Consolidated Statements of Cash Flows for the Years Ended December 31, 2005, 2004 and 2003 69 Notes to Consolidated Financial Statements 70 (2) Financial Statement Schedules Schedule II Valuation and Qualifying Accounts 102 Schedule III Real Estate and Accumulated Depreciation 103 Schedule IV Mortgage Loans on Real Estate 114 Financial statement schedules not listed herein are either not required or are not present in amounts sufficient to require submission of the schedule or the information required to be included therein is included in our consolidated financial statements in Item 15 or are reported elsewhere. (3) Exhibits The Exhibit Index attached to this report is incorporated by reference into this Item 15(a)(3). 62 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CBL & ASSOCIATES PROPERTIES, INC. (Registrant) By: __/s/ John N. Foy_________ --------------- John N. Foy Vice Chairman of the Board, Chief Financial Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer) Dated: March 15, 2006 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature Title Date /s/ Charles B. Lebovitz Chairman of the Board, and Chief Executive March 15, 2006 - -------------------------------- Charles B. Lebovitz Officer (Principal Executive Officer) /s/ John N. Foy Vice Chairman of the Board, Chief Financial March 15, 2006 - -------------------------------- Officer and Treasurer (Principal Financial John N. Foy Officer and Principal Accounting Officer) /s/ Stephen D. Lebovitz* Director, President and Secretary March 15, 2006 - -------------------------------- Stephen D. Lebovitz /s/ Claude M. Ballard* Director March 15, 2006 - -------------------------------- Claude M. Ballard /s/ Leo Fields* Director March 15, 2006 - -------------------------------- Leo Fields /s/ Matthew S. Dominski* Director March 15, 2006 - -------------------------------- Matthew S. Dominski /s/ Winston W. Walker* Director March 15, 2006 - -------------------------------- Winston W. Walker /s/ Gary L. Bryenton* Director March 15, 2006 - -------------------------------- Gary L. Bryenton /s/ Martin J. Cleary* Director March 15, 2006 - -------------------------------- Martin J. Cleary *By: /s/ John N. Foy Attorney-in-Fact March 15, 2006 - -------------------------------- John N. Foy
63 INDEX TO FINANCIAL STATEMENTS Report Of Independent Registered Public Accounting Firm 65 CBL & Associates Properties, Inc. Consolidated Balance Sheets as of December 31, 2005 and 2004 66 CBL & Associates Properties, Inc. Consolidated Statements of Operations for the Years Ended December 31, 2005, 2004 and 2003 67 CBL & Associates Properties, Inc. Consolidated Statements of Cash Flows for the Years Ended December 31, 2005, 2004 and 2003 68 CBL & Associates Properties, Inc. Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 2005, 2004 and 2003 69 Notes to Consolidated Financial Statements 70 Schedule II Valuation and Qualifying Accounts 102 Schedule III Real Estate and Accumulated Depreciation 103 Schedule IV Mortgage Loans on Real Estate 114 64 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of CBL & Associates Properties, Inc.: We have audited the accompanying consolidated balance sheets of CBL & Associates Properties, Inc. and subsidiaries (the "Company") as of December 31, 2005 and 2004, and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 2005. Our audits also included the financial statement schedules listed in the Index at Item 15. These financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements and financial statement schedules based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of CBL and Associates Properties, Inc. and subsidiaries as of December 31, 2005 and 2004, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2005, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company's internal control over financial reporting as of December 31, 2005, based on the criteria established in Internal Control--Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 10, 2006 expressed an unqualified opinion on management's assessment of the effectiveness of the Company's internal control over financial reporting and an unqualified opinion on the effectiveness of the Company's internal control over financial reporting. /s/ DELOITTE & TOUCHE LLP Atlanta, Georgia March 10, 2006 65 CBL & Associates Properties, Inc. Consolidated Balance Sheets (In thousands, except share data)
December 31, --------------------------------------- 2005 2004 ASSETS --------------------------------------- Real estate assets: Land $ 776,989 $ 659,782 Buildings and improvements 5,698,669 4,670,462 --------------------------------------- 6,475,658 5,330,244 Accumulated depreciation (727,907) (575,464) --------------------------------------- 5,747,751 4,754,780 Real estate assets held for sale 63,168 61,607 Developments in progress 133,509 78,393 --------------------------------------- Net investment in real estate assets 5,944,428 4,894,780 Cash and cash equivalents 28,838 25,766 Receivables: Tenant, net of allowance for doubtful accounts of $3,439 in 2005 and $3,237 in 2004 55,056 38,409 Other 6,235 13,706 Mortgage notes receivable 18,117 27,804 Investments in unconsolidated affiliates 84,138 84,782 Other assets 215,510 119,253 --------------------------------------- $ 6,352,322 $ 5,204,500 ======================================= LIABILITIES AND SHAREHOLDERS' EQUITY Mortgage and other notes payable $ 4,341,055 $ 3,359,466 Mortgage notes payable on real estate assets held for sale - 12,213 Accounts payable and accrued liabilities 320,270 212,064 --------------------------------------- Total liabilities 4,661,325 3,583,743 --------------------------------------- Commitments and contingencies (Notes 3, 5 and 17) Minority interests 609,475 566,606 --------------------------------------- Shareholders' equity: Preferred stock, $.01 par value, 15,000,000 shares authorized: 8.75% Series B cumulative redeemable preferred stock, 2,000,000 shares outstanding in 2005 and 2004 20 20 7.75% Series C cumulative redeemable preferred stock, 460,000 shares outstanding in 2005 and 2004 5 5 7.375% Series D cumulative redeemable preferred stock, 700,000 shares outstanding in 2005 and 2004 7 7 Common stock, $.01 par value, 180,000,000 shares authorized, 62,512,816 and 62,667,104 shares issued and outstanding in 2005 and 2004, respectively 625 627 Additional paid-in capital 1,037,764 1,025,478 Deferred compensation (8,895) (3,081) Other comprehensive income 288 - Retained earnings 51,708 31,095 --------------------------------------- Total shareholders' equity 1,081,522 1,054,151 --------------------------------------- $ 6,352,322 $ 5,204,500 ======================================= The accompanying notes are an integral part of these balance sheets.
66 CBL & Associates Properties, Inc. Consolidated Statements of Operations (In thousands, except per share amounts)
Year Ended December 31, ------------------------------------- 2005 2004 2003 ------------------------------------- REVENUES: Minimum rents $ 549,368 $ 476,568 $ 426,247 Percentage rents 23,166 15,951 12,900 Other rents 17,674 16,102 12,633 Tenant reimbursements 278,498 246,016 218,646 Management, development and leasing fees 20,521 9,791 5,525 Other 19,485 17,005 14,176 ------------------------------------- Total revenues 908,712 781,433 690,127 ------------------------------------- EXPENSES: Property operating 151,280 139,349 128,782 Depreciation and amortization 179,651 142,012 112,825 Real estate taxes 68,116 58,066 51,319 Maintenance and repairs 50,559 43,527 39,589 General and administrative 39,197 35,338 30,395 Loss on impairment of real estate assets 1,334 3,080 - Other 15,444 16,373 11,489 ------------------------------------- Total expenses 505,581 437,745 374,399 ------------------------------------- Income from operations 403,131 343,688 315,728 Interest income 6,831 3,355 2,485 Interest expense (208,183) (177,219) (153,321) Loss on extinguishment of debt (6,171) - (167) Gain on sales of real estate assets 53,583 29,272 77,765 Gain on sales of management contracts 21,619 - - Equity in earnings of unconsolidated affiliates 8,495 10,308 4,941 Minority interest in earnings: Operating Partnership (112,061) (85,186) (106,532) Shopping center properties (4,879) (5,365) (2,758) ------------------------------------- Income before discontinued operations 162,365 118,853 138,141 Operating income of discontinued operations 192 1,413 1,956 Gain (loss) on discontinued operations (82) 845 4,042 ------------------------------------- Net income 162,475 121,111 144,139 Preferred dividends (30,568) (18,309) (19,633) ------------------------------------- Net income available to common shareholders $ 131,907 $ 102,802 $ 124,506 ===================================== Basic per share data: Income before discontinued operations, net of preferred dividends $ 2.10 $ 1.63 $ 1.98 Discontinued operations - 0.04 0.10 ------------------------------------- Net income available to common shareholders $ 2.10 $ 1.67 $ 2.08 ===================================== Weighted average common shares outstanding 62,721 61,602 59,872 Diluted per share data: Income before discontinued operations, net of preferred dividends $ 2.03 $ 1.57 $ 1.90 Discontinued operations - 0.04 0.10 ------------------------------------- Net income available to common shareholders $ 2.03 $ 1.61 $ 2.00 ===================================== Weighted average common and potential dilutive common shares outstanding 64,880 64,004 62,386 The accompanying notes are an integral part of these statements.
67 CBL & Associates Properties, Inc. Consolidated Statement Of Shareholders' Equity (In thousands, except share data)
Accumulated Retained Additional Other Earnings Preferred Common Paid-in Comprehensive Deferred (Accumulated Stock Stock Capital Loss Compensation Deficit) Total --------- ------ ---------- ------------- ----------- ----------- ---------- Balance, December 31, 2002 $ 47 $ 596 $ 765,388 $ - $ (2,397) $(22,444) $ 741,190 Net income - - - - - 144,139 144,139 Gain on current period cash flow hedges - - - - 2,397 - 2,397 --------- Total comprehensive income 146,536 Dividends declared - common stock - - - - - (81,096) (81,096) Dividends declared - preferred stock - - - - - (17,453) (17,453) Issuance of 460,000 shares of Series C preferred - stock 5 - 111,222 - - 111,227 Redemption of 2,675,000 shares of Series A - preferred stock (27) - (64,668) - - (2,180) (66,875) Issuance of 405,676 shares of common stock - 4 8,753 (1,855) - - 6,902 Exercise of stock options - 6 7,756 - - - 7,762 Accrual under deferred compensation arrangements - - 618 - - - 618 248 Amortization of deferred compensation - - - - - - 248 Adjustment for minority interest in Operating Partnership - - (11,759) - - - (11,759) --------- ------ ---------- ------------- ----------- ----------- ---------- Balance, December 31, 2003 25 606 817,310 (1,607) - 20,966 837,300 Net income and total comprehensive income - - - - - 121,111 121,111 Dividends declared - common stock - - - - - (92,678) (92,678) Dividends declared - preferred stock - - - - - (18,304) (18,304) Issuance of 700,000 shares of Series D preferred - stock 7 - 169,326 - - - 169,333 Issuance of 169,962 shares of common stock - 2 4,526 (2,129) - - 2,399 Exercise of stock options - 14 15,254 - - - 15,268 Accrual under deferred compensation arrangements - - 776 - - - 776 Amortization of deferred compensation - - - 655 - - 655 Conversion of Operating Partnership units into 525,636 shares of common stock - 5 5,625 - - - 5,630 Adjustment for minority interest in Operating Partnership - - 12,661 - - - 12,661 --------- ------ ---------- ------------- ----------- ----------- ---------- Balance, December 31, 2004 32 627 1,025,478 (3,081) - 31,095 1,054,151 Net income - - - - - 162,475 162,475 Unrealized gain on available for sale securities - - - - 288 - 288 ----------- Total comprehensive income - - - - - - 162,763 Dividends declared - common stock - - - - - (111,294) (111,294) Dividends declared - preferred stock - - - - - (30,568) (30,568) Additional costs of issuing 700,000 shares of Series D preferred stock - - (193) - - - (193) Issuance of 230,041 shares of common stock - 2 9,011 (7,896) - - 1,117 Repurchase of 1,371,034 shares of common stock - (14) (54,984) - - - (54,998) Exercise of stock options - 8 9,733 - - - 9,741 Accelerated vesting of stock-based compensation - - 480 256 - - 736 Accrual under deferred compensation arrangements - - 780 - - - 780 Issuance of stock under deferred compensation - arrangement - 2 (2) - - - - Amortization of deferred compensation - - - 1,826 - - 1,826 Conversion of Operating Partnership units into 52,136 shares of common stock - - 10,304 - - - 10,304 Adjustment for minority interest in Operating Partnership - - 37,157 - - - 37,157 --------- ------ ---------- ------------- ----------- ------------ --------- Balance, December 31, 2005 $ 32 $ 625 $1,037,764 $(8,895) $288 $51,708 $1,081,522 ========= ====== ========== ============= =========== =========== ========== The accompanying notes are an integral part of these statements.
68 CBL & Associates Properties, Inc. Consolidated Statements of Cash Flows (In thousands)
Year Ended December 31, ----------------------------------------------- 2005 2004 2003 ----------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $162,475 $121,111 $144,139 Adjustments to reconcile net income to net cash provided by operating activities: Minority interest in earnings 116,940 90,551 109,331 Depreciation 133,834 100,667 85,584 Amortization 55,381 49,162 34,301 Net amortization of above and below market leases (6,434) (3,515) (311) Amortization of debt premiums (7,347) (5,262) (646) Gain on sales of real estate assets (53,583) (29,583) (77,775) (Gain) loss on discontinued operations 82 (845) (4,042) Gain on sales of management contracts (21,619) - - Stock-based compensation expense 2,125 2,646 2,494 Amortization of deferred compensation 1,826 655 248 Equity in earnings of unconsolidated affiliates in excess of distributions received (1,148) - - Write-off of development projects 560 3,714 2,056 Extinguishment of debt (353) - 167 Loss on impairment of real estate assets 1,334 3,080 - Changes in assets and liabilities: Tenant and other receivables (9,879) (1,678) (9,773) Other assets (1,116) (3,413) (12,770) Accounts payable and accrued liabilities 16,496 11,907 1,346 ----------------------------------------------- Net cash provided by operating activities 389,574 339,197 274,349 ----------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to real estate assets (361,285) (219,383) (227,362) Acquisitions of real estate assets and other assets (426,537) (587,163) (273,265) Proceeds from sales of real estate assets 64,350 113,565 284,322 Proceeds from sale of management contracts 22,000 - - Costs related to sale of management contracts (381) - - Cash in escrow - 78,476 (78,476) Additions to mortgage notes receivable (859) (9,225) (10,000) Payments received on mortgage notes receivable 13,173 17,590 1,840 Distributions in excess of equity in earnings of unconsolidated affiliates 15,523 28,908 9,740 Additional investments in and advances to unconsolidated affiliates (27,840) (27,112) (15,855) Changes in other assets (10,652) (4,307) (3,310) ----------------------------------------------- Net cash used in investing activities (712,508) (608,651) (312,366) ----------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from mortgage and other notes payable 946,825 642,743 572,080 Principal payments on mortgage and other notes payable (353,806) (355,651) (390,115) Additions to deferred financing costs (3,407) (6,029) (4,830) Repurchase of common stock (48,292) - - Proceeds from issuance of common stock 508 529 5,026 Proceeds from exercise of stock options 9,741 15,268 7,762 Proceeds from issuance of preferred stock - 169,333 111,227 Redemption of preferred stock - - (64,695) Additional costs of preferred stock offerings (193) - - Purchase of minority interest in the Operating Partnership (2,172) (5,949) (21,013) Distributions to minority interests (89,459) (78,493) (72,186) Dividends paid to holders of preferred stock (31,214) (17,633) (19,633) Dividends paid to common shareholders (102,525) (89,230) (78,629) ----------------------------------------------- Net cash provided by financing activities 326,006 274,888 44,994 ----------------------------------------------- Net change in cash and cash equivalents 3,072 5,434 6,977 Cash and cash equivalents, beginning of period 25,766 20,332 13,355 ----------------------------------------------- Cash and cash equivalents, end of period $ 28,838 $ 25,766 $ 20,332 =============================================== The accompanying notes are an integral part of these statements.
69 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except share data) NOTE 1. ORGANIZATION CBL & Associates Properties, Inc. ("CBL"), a Delaware corporation, is a self-managed, self-administered, fully-integrated real estate investment trust ("REIT") that is engaged in the ownership, development, acquisition, leasing, management and operation of regional shopping malls and community shopping centers. CBL's shopping center properties are located in 27 states, but are primarily in the southeastern and midwestern United States. CBL conducts substantially all of its business through CBL & Associates Limited Partnership (the "Operating Partnership"). As of December 31, 2005, the Operating Partnership owned controlling interests in 72 regional malls, 27 associated centers (each located adjacent to a regional mall), seven community centers and CBL's corporate office building. The Operating Partnership consolidates the financial statements of all entities in which it has a controlling financial interest or where it is the primary beneficiary of a variable interest entity. The Operating Partnership owned non-controlling interests in seven regional malls and three associated centers. Because major decisions such as the acquisition, sale or refinancing of principal partnership or joint venture assets must be approved by one or more of the other partners, the Operating Partnership does not control these partnerships and joint ventures and, accordingly, accounts for these investments using the equity method. The Operating Partnership had two mall expansions, two open-air shopping centers, one open-air shopping center expansion, two associated centers, one community center, which is owned in a joint venture, and one community center expansion under construction at December 31, 2005. The Operating Partnership also holds options to acquire certain development properties owned by third parties. CBL is the 100% owner of two qualified REIT subsidiaries, CBL Holdings I, Inc. and CBL Holdings II, Inc. At December 31, 2005, CBL Holdings I, Inc., the sole general partner of the Operating Partnership, owned a 1.6% general partnership interest in the Operating Partnership and CBL Holdings II, Inc. owned a 52.6% limited partnership interest for a combined interest held by CBL of 54.2%. The minority interest in the Operating Partnership is held primarily by CBL & Associates, Inc. and its affiliates (collectively "CBL's Predecessor") and by affiliates of The Richard E. Jacobs Group, Inc. ("Jacobs"). CBL's Predecessor contributed their interests in certain real estate properties and joint ventures to the Operating Partnership in exchange for a limited partnership interest when the Operating Partnership was formed in November 1993. Jacobs contributed their interests in certain real estate properties and joint ventures to the Operating Partnership in exchange for a limited partnership interest when the Operating Partnership acquired the majority of Jacobs' interests in 23 properties in January 2001 and the balance of such interests in February 2002. At December 31, 2005, CBL's Predecessor owned a 15.2% limited partnership interest, Jacobs owned a 20.6% limited partnership interest and third parties owned a 10.0% limited partnership interest in the Operating Partnership. CBL's Predecessor also owned 5.6 million shares of CBL's common stock at December 31, 2005, for a combined total interest of 20.1% in the Operating Partnership. The Operating Partnership conducts CBL's property management and development activities through CBL & Associates Management, Inc. (the "Management Company") to comply with certain requirements of the Internal Revenue Code of 1986, as amended (the "Code"). The Operating Partnership owns 100% of both of the Management Company's preferred stock and its common stock. CBL, the Operating Partnership and the Management Company are collectively referred to herein as "the Company." All significant intercompany balances and transactions have been eliminated in the consolidated presentation. At the Company's annual meeting of shareholders on May 9, 2005, the Company's shareholders approved an increase in the authorized shares of the common stock under the Company's amended and restated certificate of 70 incorporation to 180,000,000 shares from 95,000,000 shares. On May 10, 2005, the Company's board of directors approved a two-for-one stock split of the Company's common stock, which was effected in the form of a stock dividend. The record date for the stock split was June 1, 2005, and the distribution date was June 15, 2005. The Company retained the current par value of $0.01 per share for all shares of common stock. All references to numbers of common shares and per share data in the accompanying consolidated financial statements and notes thereto have been adjusted to reflect the stock split on a retroactive basis. Shareholders' equity reflects the stock split through a reclassification of $313 from Additional Paid-In Capital to Common Stock, which represents the par value of the additional shares resulting from the stock split. The Operating Partnership has common units and special common units of limited partner interest outstanding that may be exchanged by their holders, under certain circumstances, for shares of common stock on a one-for-one basis. These common units and special common units were also split on a two-for-one basis so that they continue to be exchangeable on a one-for-one basis into shares of the Company's common stock. NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Real Estate Assets - ------------------ The Company capitalizes predevelopment project costs paid to third parties. All previously capitalized predevelopment costs are expensed when it is no longer probable that the project will be completed. Once development of a project commences, all direct costs incurred to construct the project, including interest and real estate taxes, are capitalized. Additionally, certain general and administrative expenses are allocated to the projects and capitalized based on the amount of time applicable personnel work on the development project. Ordinary repairs and maintenance are expensed as incurred. Major replacements and improvements are capitalized and depreciated over their estimated useful lives. All acquired real estate assets have been accounted for using the purchase method of accounting and accordingly, the results of operations are included in the consolidated statements of operations from the respective dates of acquisition. The Company allocates the purchase price to (i) tangible assets, consisting of land, buildings and improvements, as if vacant, and tenant improvements, and (ii) identifiable intangible assets and liabilities, generally consisting of above-market leases, in-place leases and tenant relationships, which are included in other assets, and below-market leases, which are included in accounts payable and accrued liabilities. The Company uses estimates of fair value based on estimated cash flows, using appropriate discount rates, and other valuation techniques to allocate the purchase price to the acquired tangible and intangible assets. Liabilities assumed generally consist of mortgage debt on the real estate assets acquired. Assumed debt is recorded at its fair value based on estimated market interest rates at the date of acquisition. Depreciation is computed on a straight-line basis over estimated lives of 40 years for buildings, 10 to 20 years for certain improvements and 7 to 10 years for equipment and fixtures. Tenant improvements are capitalized and depreciated on a straight-line basis over the term of the related lease. Lease-related intangibles from acquisitions of real estate assets are amortized over the remaining terms of the related leases. The amortization of above- and below-market leases is recorded as an adjustment to minimum rental revenue, while the amortization of all other lease-related intangibles is recorded as amortization expense. Any difference between the face value of the debt assumed and its fair value is amortized to interest expense over the remaining term of the debt using the effective interest method. 71 The Company's acquired intangibles and their balance sheet classifications as of December 31, 2005 and 2004, are summarized as follows:
December 31, 2005 December 31, 2004 ------------------------------- -------------------------------- Accumulated Accumulated Cost Amortization Cost Amortization -------------- -------------- ------------- -------------- Other assets: Above-market leases $42,026 $(4,921) $12,250 $ (1,335) In-place leases 72,584 (14,992) 53,850 (5,810) Tenant relationships 49,796 (53) -- -- Accounts payable and accrued liabilities: Below-market leases 91,148 (14,816) 38,967 (4,870)
The total net amortization expense of the above acquired intangibles for the next five succeeding years will be $3,420 in 2006, $3,236 in 2007, $3,334 in 2008, $2,148 in 2009 and $1,021 in 2010. Total interest expense capitalized was $8,385, $4,517 and $5,974 in 2005, 2004 and 2003, respectively. Carrying Value of Long-Lived Assets - ----------------------------------- The Company evaluates the carrying value of long-lived assets to be held and used when events or changes in circumstances warrant such a review. The carrying value of a long-lived asset is considered impaired when its estimated future undiscounted cash flows are less than its carrying value. If it is determined that an impairment has occurred, the excess of the asset's carrying value over its estimated fair value is charged to operations. The Company determined that two community centers met the criteria to be reflected as held for sale as of December 31, 2005 and recognized a loss on impairment of $1,029. During 2004, the Company recognized a loss of $114 on the sale of one community center as a loss on impairment of real estate assets. During 2004, the Company determined that the carrying value of a vacant community center exceeded the community center's estimated fair value by $402. The Company recorded the reduction in the carrying value of the related real estate assets to their estimated fair value as a loss on impairment of real estate assets. The Company sold this community center in October 2005 and recognized an additional impairment of $43. In January 2005, the Company made the decision to sell five community centers and, as a result, recognized an aggregate loss on impairment of real estate assets of $617 on these community centers in 2004 to reduce the carrying values of these centers to their estimated fair values based on their selling prices. In January 2005, the Company completed the third phase of the Galileo America joint venture transaction discussed in Note 5. The Company recognized a loss of $1,947 on this transaction as an impairment of real estate assets in 2004 and reduced the carrying value of the related assets, which were classified as real estate assets held for sale as of December 31, 2004. The Company recognized an additional impairment loss of $262 in the first quarter of 2005 related to these centers when certain estimated amounts were adjusted when the actual amounts became known. There were no impairment charges in 2003. 72 Cash and Cash Equivalents - ------------------------- The Company considers all highly liquid investments with original maturities of three months or less as cash equivalents. Restricted Cash - --------------- Restricted cash of $34,448 and $29,337 was included in other assets at December 31, 2005 and 2004, respectively. Restricted cash consists primarily of cash held in escrow accounts for debt service, insurance, real estate taxes, capital improvements and deferred maintenance as required by the terms of certain mortgage notes payable, as well as contributions from tenants to be used for future marketing activities. Joint Ventures - -------------- Initial investments in joint ventures that are in economic substance a capital contribution to the joint venture are recorded in an amount equal to the Company's historical carryover basis in the real estate contributed. Initial investments in joint ventures that are in economic substance the sale of a portion of the Company's interest in the real estate are accounted for as a contribution of real estate recorded in an amount equal to the Company's historical carryover basis in the ownership percentage retained and as a sale of real estate with profit recognized to the extent of the other joint venturers' interests in the joint venture. Profit recognition assumes the Company has no commitment to reinvest with respect to the percentage of the real estate sold and the accounting requirements of the full accrual method under SFAS No. 66 are met. The Company accounts for its investment in joint ventures where it owns a non-controlling interest using the equity method of accounting. Under the equity method, the Company's cost of investment is adjusted for its share of equity in the earnings of the unconsolidated affiliate and reduced by distributions received. Generally, distributions of cash flows from operations and capital events are first made to partners to pay cumulative unpaid preferences on unreturned capital balances and then to the partners in accordance with the terms of the joint venture agreements. Any differences between the cost of the Company's investment in an unconsolidated affiliate and its underlying equity as reflected in the unconsolidated affiliate's financial statements generally result from costs of the Company's investment that are not reflected on the unconsolidated affiliate's financial statements, capitalized interest on its investment and the Company's share of development and leasing fees that are paid by the unconsolidated affiliate to the Company for development and leasing services provided to the unconsolidated affiliate during any development periods. At December 31, 2005 and 2004, the difference between the Company's investment in unconsolidated affiliates and the underlying equity of unconsolidated affiliates was $4,323 and $18,730, respectively, which is generally amortized over a period of 40 years. Deferred Financing Costs - ------------------------ Net deferred financing costs of $10,849 and $13,509 were included in other assets at December 31, 2005 and 2004, respectively. Deferred financing costs include fees and costs incurred to obtain financing and are amortized to interest expense over the terms of the related notes payable. Amortization expense was $5,031, $4,390, and $3,268 in 2005, 2004 and 2003, respectively. Accumulated amortization was $11,532 and $7,815 as of December 31, 2005 and 2004, respectively. 73 Revenue Recognition - ------------------- Minimum rental revenue from operating leases is recognized on a straight-line basis over the initial terms of the related leases. Certain tenants are required to pay percentage rent if their sales volumes exceed thresholds specified in their lease agreements. Percentage rent is recognized as revenue when the thresholds are achieved and the amounts become determinable. The Company receives reimbursements from tenants for real estate taxes, insurance, common area maintenance, and other recoverable operating expenses as provided in the lease agreements. Tenant reimbursements are recognized as revenue in the period the related operating expenses are incurred. Tenant reimbursements related to certain capital expenditures are billed to tenants over periods of 5 to 15 years and are recognized as revenue when billed. The Company receives management, leasing and development fees from third parties and unconsolidated affiliates. Management fees are charged as a percentage of revenues (as defined in the management agreement) and are recognized as revenue when earned. Development fees are recognized as revenue on a pro rata basis over the development period. Leasing fees are charged for newly executed leases and lease renewals and are recognized as revenue when earned. Development and leasing fees received from unconsolidated affiliates during the development period are recognized as revenue only to the extent of the third-party partners' ownership interest. Development and leasing fees during the development period to the extent of the Company's ownership interest are recorded as a reduction to the Company's investment in the unconsolidated affiliate. Gain on Sales of Real Estate Assets - ----------------------------------- Gains on sales of real estate assets are recognized when it is determined that the sale has been consummated, the buyer's initial and continuing investment is adequate, the Company's receivable, if any, is not subject to future subordination, and the buyer has assumed the usual risks and rewards of ownership of the asset. When the Company has an ownership interest in the buyer, gain is recognized to the extent of the third party partner's ownership interest and the portion of the gain attributable to the Company's ownership interest is deferred. Income Taxes - ------------ The Company is qualified as a REIT under the provisions of the Code. To maintain qualification as a REIT, the Company is required to distribute at least 90% of its taxable income to shareholders and meet certain other requirements. As a REIT, the Company is generally not liable for federal corporate income taxes. If the Company fails to qualify as a REIT in any taxable year, the Company will be subject to federal and state income taxes on its taxable income at regular corporate tax rates. Even if the Company maintains its qualification as a REIT, the Company may be subject to certain state and local taxes on its income and property, and to federal income and excise taxes on its undistributed income. State income taxes were not material in 2005, 2004 and 2003. The Company has also elected taxable REIT subsidiary status for some of its subsidiaries. This enables the Company to receive income and provide services that would otherwise be impermissible for REITs. For these entities, deferred tax assets and liabilities are established for temporary differences between the financial reporting basis and the tax basis of assets and liabilities at the enacted tax rates expected to be in effect when the temporary differences reverse. A valuation allowance for deferred tax assets is provided if the Company believes all or some portion of the deferred tax asset may not be realized. An increase or decrease in the valuation allowance that results from the change in circumstances that causes a change in our judgment about the realizability of the related deferred tax asset is included in income. The Company had a net deferred tax asset of $1,541 and $16,636 at December 31, 2005 and 2004, respectively, which consisted primarily of net operating loss 74 carryforwards, that were reduced to zero by a valuation allowance because of uncertainty about the realization of the net deferred tax asset considering all available evidence. Derivative Financial Instruments - -------------------------------- The Company records derivative financial instruments as either an asset or liability measured at the instrument's fair value. Any fair value adjustments affect either shareholders' equity or net income depending on whether the derivative instrument qualifies as a hedge for accounting purposes and, if so, the nature of the hedging activity. See Note 15 for more information. Concentration of Credit Risk - ---------------------------- The Company's tenants include national, regional and local retailers. Financial instruments that subject the Company to concentrations of credit risk consist primarily of tenant receivables. The Company generally does not obtain collateral or other security to support financial instruments subject to credit risk, but monitors the credit standing of tenants. The Company derives a substantial portion of its rental income from various national and regional retail companies; however, no single tenant collectively accounted for more than 10.0% of the Company's total revenues in 2005, 2004 and 2003. Earnings Per Share - ------------------ Basic earnings per share ("EPS") is computed by dividing net income available to common shareholders by the weighted average number of unrestricted common shares outstanding for the period. Diluted EPS assumes the issuance of common stock for all potential dilutive common shares outstanding. The limited partners' rights to convert their minority interest in the Operating Partnership into shares of common stock are not dilutive (Note 9). The following summarizes the impact of potential dilutive common shares on the denominator used to compute earnings per share:
Year Ended December 31, -------------------------------------------------- 2005 2004 2003 ---------------- ----------------- --------------- Weighted average shares 63,004 61,878 60,108 Effect of nonvested stock awards (283) (276) (236) ---------------- ----------------- --------------- Denominator - basic earnings per share 62,721 61,602 59,872 Dilutive effect of: Stock options 1,741 1,970 2,106 Nonvested stock awards 223 232 236 Deemed shares related to deferred compensation arrangements 195 200 172 ---------------- ----------------- --------------- Denominator - diluted earnings per share 64,880 64,004 62,386 ================ ================= ===============
Stock-Based Compensation - ------------------------ Historically, the Company accounted for its stock-based compensation plans, which are described in Note 19, under the recognition and measurement principles of Accounting Principles Board Opinion No. 25 "Accounting for Stock Issued to Employees" ("APB No. 25") and related interpretations. Effective January 1, 2003, the Company elected to begin recording the expense associated with stock options granted after January 1, 2003, on a prospective basis in accordance with the fair value and transition provisions of SFAS No. 123, "Accounting for Stock-Based Compensation", as amended by SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure - An Amendment of FASB Statement No. 123." There were no stock options granted during 2005, 2004 and 2003. No stock-based compensation expense related to stock options granted prior to January 1, 2003, has been reflected in net income since all options granted had an exercise price equal to the fair value of the Company's common stock on the date of grant. Therefore, stock-based compensation expense included in net 75 income available to common shareholders in 2005, 2004 and 2003 is less than that which would have been recognized if the fair value method had been applied to all stock-based awards since the effective date of SFAS No. 123. The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123 to all outstanding and unvested awards in each period:
Year Ended December 31, ------------------------------------------------- 2005 2004 2003 ---------------- ---------------- --------------- Net income available to common shareholders, as reported $131,907 $ 102,802 $124,506 Add: Stock-based compensation expense included in reported net income available to common shareholders 4,775 2,890 2,742 Less: Total stock-based compensation expense determined under fair value method (5,186) (3,398) (3,344) ---------------- ---------------- --------------- Pro forma net income available to common shareholders $131,496 $ 102,294 $123,904 ================ ================ =============== Earnings per share: Basic, as reported $ 2.10 $ 1.67 $ 2.08 ================ ================ =============== Basic, pro forma $ 2.10 $ 1.66 $ 2.07 ================ ================ =============== Diluted, as reported $ 2.03 $ 1.61 $ 2.00 ================ ================ =============== Diluted, pro forma $ 2.03 $ 1.60 $ 1.99 ================ ================ ===============
Comprehensive Income - -------------------- Comprehensive income includes all changes in shareholders' equity during the period, except those resulting from investments by shareholders and distributions to shareholders. Use of Estimates - ---------------- The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. Recent Accounting Pronouncements - -------------------------------- In December 2004, the FASB issued Statement of Financial Accounting Standards ("SFAS") No. 153, "Exchanges of Nonmonetary Assets, an amendment of APB No. 29, Accounting for Nonmonetary Transactions." SFAS No. 153 requires exchanges of productive assets to be accounted for at fair value, rather than at carryover basis, unless (1) neither the asset received nor the asset surrendered has a fair value that is determinable within reasonable limits or (2) the transactions lack commercial substance. SFAS No. 153 became effective for nonmonetary asset exchanges occurring in fiscal periods that began after June 15, 2005. See Note 5. In December 2004, the FASB released its final revised standard, SFAS No. 123 (Revised 2004), "Share-Based Payment." SFAS No. 123(R) requires that a public entity measure the cost of equity-based service awards based on the grant-date fair value of the award. That cost will be recognized over the period during which an employee is required to provide service in exchange for the award or the vesting period. No compensation cost is recognized for equity instruments for which employees do not render the requisite service. In April 2005, the Securities and Exchange Commission issued a Staff Accounting Bulletin to modify the effective date so that SFAS No. 123(R) can be adopted beginning with the first interim reporting period of the next fiscal year beginning after June 15, 2005, instead of the first interim period beginning after June 15, 2005. The Company previously adopted the fair value provisions of SFAS No. 123 as amended by SFAS No. 148 effective January 1, 2003. The Company will adopt SFAS No. 123(R) on January 1, 2006, using a modified prospective application. The Company estimates that this will result in the recognition of additional 76 compensation expense of approximately $310 and $91 during the years ending December 31, 2006 and 2007, respectively, which represents the unamortized deferred compensation expense associated with all remaining stock options that were not vested as of December 31, 2005. In May 2005, the FASB issued SFAS No. 154 entitled, "Accounting Changes and Error Corrections," which will be effective in the first quarter of fiscal year 2006. This statement addresses the retrospective application of such changes and corrections and the Company will follow the provision of this standard in the event of any future accounting changes. In June 2005, the FASB issued Emerging Issues Task Force ("EITF") Issue No. 04-05, "Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights." EITF Issue No. 04-05 provides a framework for determining whether a general partner controls, and should consolidate, a limited partnership or a similar entity. EITF Issue No. 04-05 is effective after June 29, 2005, for all newly formed limited partnerships and for any pre-existing limited partnerships that modify their partnership agreements after that date. General partners of all other limited partnerships are required to apply the consensus no later than the beginning of the first reporting period in fiscal years beginning after December 15, 2005. The Company does not expect that the adoption of EITF Issue No. 04-05 will have a material impact on its financial position, results of operations or cash flows. In June 2005, the FASB issued FASB Staff Position ("FSP") 78-9-1, "Interaction of AICPA Statement of Position 78-9 and EITF Issue No. 04-05." The EITF acknowledged that the consensus in EITF Issue No. 04-05 conflicts with certain aspects of Statement of Position ("SOP") 78-9, "Accounting for Investments in Real Estate Ventures." The EITF agreed that the assessment of whether a general partner, or the general partners as a group, controls a limited partnership should be consistent for all limited partnerships, irrespective of the industry within which the limited partnership operates. Accordingly, the guidance in SOP 78-9 was amended in FSP 78-9-1 to be consistent with the guidance in EITF Issue No. 04-05. The effective dates for this FSP are the same as those for EITF Issue No. 04-05 described above. The Company does not expect that the adoption of FSP 78-9-1 will have a material impact on its financial position, results of operations or cash flows. In March 2005, the FASB issued Interpretation No. 47 ("FIN 47"), "Accounting for Conditional Asset Retirement Obligations," which clarifies the accounting for conditional asset retirement obligations as used in SFAS No. 143, "Accounting for Asset Retirement Obligations." A conditional asset retirement obligation is an unconditional legal obligation to perform an asset retirement activity in which the timing and (or) method of settlement are conditional on a future event that may or may not be within the control of the entity. Therefore, an entity is required to recognize a liability for the fair value of a conditional asset retirement obligation under SFAS No. 143 if the fair value of the liability can be reasonably estimated. FIN 47 permits, but does not require, restatement of interim financial information. The provisions of FIN 47 are effective for reporting periods ending after December 15, 2005. In accordance with the transition provisions of FIN 47, the Company recorded an asset of $1,906 and a liability of $2,358 related to conditional asset retirement obligations as of December 31, 2005. The difference between the amounts of the asset and liability of $452 was recognized as maintenance and repairs expense in the accompanying consolidated statement of operations for the year ended December 31, 2005. Had the Company applied the provisions of FIN 47 retroactively, the liability for conditional asset retirement obligations would have been $2,254, $2,153 and $2,057 at December 31, 2004, 2003 and January 1, 2003, respectively. Reclassifications - ----------------- Certain prior period amounts in the consolidated statements of operations have been reclassified to present marketing fund revenues and expenses on a gross basis in accordance with Emerging Issues Task Force Issue No. 99-19, "Reporting Revenue Gross as a Principal versus Net as an Agent." As a result, the following amounts in the consolidated statements of operations have changed from the previously reported amounts for the years ended December 31, 2004 and 2003: tenant reimbursements have increased by $27,281 and $25,884, respectively, 77 other revenues have decreased by $3,093 and $0, respectively, and property operating expenses have increased by $24,188 and $25,884, respectively. This reclassification did not change previously reported amounts of net income available to common shareholders. NOTE 3. ACQUISITIONS The Company includes the results of operations of real estate assets acquired in the consolidated statement of operations from the date of the related acquisition. 2005 Acquisitions - ----------------- Effective June 1, 2005, the Company acquired a 70% joint venture interest in Laurel Park Place, a regional mall in Livonia, MI, for a purchase price of $80,363. The purchase price consisted of $2,828 in cash, the assumption of $50,654 of non-recourse debt that bears interest at a stated rate of 8.50% and matures in December 2012 and the issuance of 571,700 Series L special common units (the "L-SCUs") in the Operating Partnership with a fair value of $26,881. The Company recorded a debt premium of $10,552, computed using an estimated market interest rate of 5.00%, since the debt assumed was at an above-market interest rate compared to similar debt instruments at the date of acquisition. The terms of the L-SCUs are described in Note 9. The Company may elect to acquire the remaining 30% ownership interest in the joint venture, or a portion thereof, at any time following the acquisition date for a purchase price of $14,000, which will be paid either through the issuance of common units of limited partner interest in the Operating Partnership or with cash, at the Company's election. If the Company exercises its right to acquire the remaining 30% joint venture interest, or a portion thereof, prior to December 2012 through the issuance of common units, the common units issued will not be entitled to receive distributions until after December 2012. If the Company does not exercise its right to acquire the remaining 30% joint venture interest by December 2012, then the joint venture partner owning that interest will thereafter receive a preferred return equal to the greater of 12% or the 10-year treasury rate plus 800 basis points on the portion of its joint venture interest that has not yet been acquired by the Company. The Company receives all of the profits and losses of this joint venture and is responsible for all of its debt. The $14,000 value of the minority partner's interest has been recorded in Accounts Payable and Accrued Liabilities. On July 14, 2005, the Company acquired The Mall of Acadiana, a super-regional mall in Lafayette, LA, for a cash purchase price, including transaction costs, of $175,204. The Company also entered into 10-year lease agreements for 13.4 acres of land adjacent to The Mall of Acadiana, which provide the Company the right to purchase the land for a cash purchase price of $3,327 during the first year of the lease term, $3,510 during the second year and amounts increasing by 10% per year for each year of the lease term thereafter. After the first year, the seller may put the land to the Company for a price equal to the amounts set forth in the previous sentence. The Company also obtained a ten-year option to acquire another adjacent 14.9 acre tract of land for a cash purchase price of $3,245 during the first six months of the option, which increases to $3,407 during the second six months of the option and to $3,570 during the remaining nine years of the option. On November 7, 2005, the Company acquired Layton Hills Mall in Salt Lake City, UT, for a cash purchase price, including transaction costs, of $120,926. The Company funded a portion of the purchase price with a new, short-term loan of $102,850 that bears interest at the London Interbank Offered Rate ("LIBOR") plus 95 basis points and has a maturity of March 2006 plus a 60-day extension option. The Company intends to retire or refinance this short-term loan. On November 16, 2005, the Company acquired Oak Park Mall in Overland, KS, Hickory Point Mall in Forsyth, IL, and Eastland Mall in Bloomington, IL, for a purchase price, including transaction costs, of $508,180, which consisted of $127,111 in cash, the assumption of $335,100 of interest-only, non-recourse loans that bear interest at a stated rate of 5.85% and mature in November 2015 and the issuance of 1,144,924 Series K special common units (the "K-SCUs") of 78 limited partner interest in the Operating Partnership with a fair value of $45,969. The Company funded part of the cash portion of the purchase price with a new, non-recourse loan of $33,150 that bears interest at 5.85% and matures in November 2015. The terms of the K-SCUs are described in Note 9. The results of operations of the acquired properties have been included in the consolidated financial statements since their respective dates of acquisition. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of the respective acquisition dates during the year ended December 31, 2005:
Land $ 95,863 Buildings and improvements 763,523 Above-market leases 30,759 Tenant relationships 49,796 In-place leases 24,021 --------------- Total assets 963,962 Mortgage note payables assumed (385,754) Premiums on mortgage note payables assumed (10,552) Below-market leases (54,263) Other long-term liabilities (14,474) --------------- Net assets acquired $498,919 ===============
The following unaudited pro forma financial information is for the years ended December 31, 2005 and 2004. It presents the results of the Company as if each of the 2005 acquisitions had occurred on January 1, 2004. However, the unaudited pro forma financial information does not represent what the consolidated results of operations or financial condition actually would have been if the acquisitions had occurred on January 1, 2004. The pro forma financial information also does not project the consolidated results of operations for any future period. The pro forma results for the years ended December 31, 2005 and 2004 are as follows:
2005 2004 -------------- ------------- Total revenues $972,900 $867,948 Total expenses (550,526) (499,528) -------------- ------------- Income from operations $422,374 $368,420 ============== ============= Income before discontinued operations $153,984 $109,200 ============== ============= Net income available to common shareholders $123,526 $ 93,149 ============== ============= Basic per share data: Income before discontinued operations, net of preferred dividends $ 1.96 $ 1.48 Net income available to common shareholders $ 1.96 $ 1.51 Diluted per share data: Income before discontinued operations, net of preferred dividends $ 1.90 $ 1.42 Net income available to common shareholders $ 1.90 $ 1.46
2004 Acquisitions - ----------------- On March 12, 2004, the Company acquired Honey Creek Mall in Terre Haute, IN, for a purchase price, including transaction costs, of $83,114, which consisted of $50,114 in cash and the assumption of $33,000 of non-recourse debt that bears interest at a stated rate of 6.95% and matures in May 2009. The Company recorded a debt premium of $3,146, computed using an estimated market interest rate of 4.75%, since the debt assumed was at an above-market interest rate compared to similar debt instruments at the date of acquisition. On March 12, 2004, the Company acquired Volusia Mall in Daytona Beach, FL, for a purchase price, including transaction costs, of $118,493, which consisted of $63,686 in cash and the assumption of $54,807 of non-recourse debt that bears interest at a stated rate of 6.70% and matures in March 2009. The Company 79 recorded a debt premium of $4,615, computed using an estimated market interest rate of 4.75%, since the debt assumed was at an above-market interest rate compared to similar debt instruments at the date of acquisition. On April 8, 2004, the Company acquired Greenbrier Mall in Chesapeake, VA, for a cash purchase price, including transaction costs, of $107,450. The purchase price was partially financed with a new recourse term loan of $92,650 that bears interest at LIBOR plus 100 basis points, matures in April 2006 and has three one-year extension options that are at the Company's election. On April 21, 2004, the Company acquired Fashion Square, a community center in Orange Park, FL, for a cash purchase price, including transaction costs, of $3,961. On May 20, 2004, the Company acquired Chapel Hill Mall and its associated center, Chapel Hill Suburban, in Akron, OH, for a cash purchase price, including transaction costs, of $78,252. The purchase price was partially financed with a new recourse term loan of $66,500 that bears interest at LIBOR plus 100 basis points, matures in May 2006 and has three one-year extension options that are at the Company's election. On June 22, 2004, the Company acquired Park Plaza Mall in Little Rock, AR, for a purchase price, including transaction costs, of $77,526, which consisted of $36,213 in cash and the assumption of $41,313 of non-recourse debt that bears interest at a stated rate of 8.69% and matures in May 2010. The Company recorded a debt premium of $7,737, computed using an estimated market interest rate of 4.90%, since the debt assumed was at an above-market interest rate compared to similar debt instruments at the date of acquisition. On July 28, 2004, the Company acquired Monroeville Mall, and its associated center, the Annex, in the eastern Pittsburgh suburb of Monroeville, PA, for a total purchase price, including transaction costs, of $231,621, which consisted of $39,455 in cash, the assumption of $134,004 of non-recourse debt that bears interest at a stated rate of 5.73% and matures in January 2013, an obligation of $11,950 to pay for the fee interest in the land underlying the mall and associated center on or before July 28, 2007, and the issuance of 780,470 Series S Special Common Units (the "S-SCUs") in the Operating Partnership with a fair value of $46,212. The Company recorded a debt premium of $3,270, computed using an estimated market interest rate of 5.30%, since the debt assumed was at an above-market interest rate compared to similar debt instruments at the date of acquisition. On November 22, 2004, the Company acquired Mall del Norte in Laredo, TX, for a cash purchase price, including transaction costs, of $170,413. The purchase price was partially financed with a new non-recourse, interest-only loan of $113,400 that bears interest at 5.04% and matures in December 2014. On November 22, 2004, the Company acquired Northpark Mall in Joplin, MO, for a purchase price, including transaction costs, of $79,141. The purchase price consisted of $37,619 in cash and the assumption of $41,522 of non-recourse debt that bears interest at a stated rate of 5.75% and matures in March 2014. The Company recorded a debt premium of $687, computed using an estimated market interest rate of 5.50%, since the debt assumed was at an above-market interest rate compared to similar debt instruments at the date of acquisition. 80 The results of operations of the acquired properties have been included in the consolidated financial statements since their respective dates of acquisition. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed as of the respective acquisition dates during the year ended December 31, 2004:
Land $ 81,673 Buildings and improvements 872,855 Above-market leases 8,329 In-place leases 33,921 --------------- Total assets 996,778 Mortgage note payables assumed (304,646) Premiums on mortgage note payables assumed (19,455) Below-market leases (27,352) Land purchase obligation (11,950) --------------- Net assets acquired $633,375 ===============
The following unaudited pro forma financial information is for the years ended December 31, 2004 and 2003. It presents the results of the Company as if each of the 2004 acquisitions had occurred on January 1, 2003. However, the unaudited pro forma financial information does not represent what the consolidated results of operations or financial condition actually would have been if the acquisitions had occurred on January 1, 2003. The pro forma financial information also does not project the consolidated results of operations for any future period. The pro forma results for the years ended December 31, 2004 and 2003 are as follows:
2004 2003 -------------- ------------- Total revenues $ 836,962 $ 809,825 Total expenses (470,910) (444,688) -------------- ------------- Income from operations $ 366,052 $ 365,137 ============== ============= Income before discontinued operations $ 121,094 $ 145,198 ============== ============= Net income available to common shareholders $ 105,043 $ 131,563 ============== ============= Basic per share data: Income before discontinued operations, net of preferred dividends $ 1.67 $ 2.10 Net income available to common shareholders $ 1.71 $ 2.20 Diluted per share data: Income before discontinued operations, net of preferred dividends $ 1.61 $ 2.01 Net income available to common shareholders $ 1.64 $ 2.11
2003 Acquisitions - ----------------- On April 30, 2003, the Company acquired Sunrise Mall and its associated center, Sunrise Commons, which are located in Brownsville, TX. The total purchase price, including transaction costs, of $80,686 consisted of $40,686 in cash and the assumption of $40,000 of variable-rate debt that matured in May 2004. On September 10, 2003, the Company acquired Cross Creek Mall in Fayetteville, NC for a purchase price, including transaction costs, of $116,729, which consisted of $52,484 in cash and the assumption of $64,245 of non-recourse debt that bears interest at a stated rate of 7.4% and matures in April 2012. The Company recorded a debt premium of $10,209, computed using an estimated market interest rate of 5.00%, since the debt assumed was at an above-market interest rate compared to similar debt instruments at the date of acquisition. On October 1, 2003, the Company acquired River Ridge Mall in Lynchburg, VA for a purchase price, including transaction costs, of $61,933, which consisted of $38,622 in cash, a short-term note payable of $793 and the assumption of $22,518 of non-recourse debt that bears interest at a stated rate of 8.05% and 81 matures in January 2007. The Company also recorded a debt premium of $2,724, computed using an estimated market interest rate of 4.00%, since the debt assumed was at an above-market interest rate compared to similar debt instruments at the date of acquisition. On October 1, 2003, the Company acquired Valley View Mall in Roanoke, VA for a purchase price, including transaction costs, of $86,094, which consisted of $35,351 in cash, a short-term note payable of $5,708 and the assumption of $45,035 of non-recourse debt that bears interest at a weighted-average stated rate of 8.61% and matures in September 2010. The Company also recorded a debt premium of $8,813, computed using an estimated market interest rate of 5.10%, since the debt assumed was at an above-market interest rate compared to similar debt instruments at the date of acquisition. On December 15, 2003, the Company acquired Southpark Mall in Colonial Heights, VA for a purchase price, including transaction costs, of $78,031, which consisted of $34,879 in cash, a short-term note payable of $5,116 and the assumption of $38,036 of non-recourse debt that bears interest at a stated rate of 7.00% and matures in May 2012. The Company also recorded a debt premium of $4,544, computed using an estimated market interest rate of 5.10%, since the debt assumed was at an above-market interest rate compared to similar debt instruments at the date of acquisition. On December 30, 2003, the Company acquired Harford Mall Business Trust, a Maryland business trust that owns Harford Mall and its associated center, Harford Annex, in Bel Air, MD for a cash purchase price, including transaction costs, of $71,110. The following summarizes the allocation of the purchase prices to the assets acquired and liabilities assumed for the 2003 acquisitions:
Land $ 72,620 Buildings and improvements 434,318 Above-market leases 5,709 In-place leases 19,542 --------------- Total assets 532,189 Mortgage note payables assumed (209,834) Short-term notes payable (11,617) Premiums on mortgage note payables assumed (26,290) Below-market leases (11,384) --------------- Net assets acquired $ 273,064 ===============
The following unaudited pro forma financial information is for the year ended December 31, 2003. It presents the results of the Company as if each of the 2003 acquisitions had occurred on January 1, 2003. However, the unaudited pro forma financial information does not represent what the consolidated results of operations or financial condition actually would have been if the acquisitions had occurred on January 1, 2003. The pro forma financial information also does not project the consolidated results of operations for any future period. The pro forma results for the year ended December 31, 2003 are as follows:
2003 -------------- Total revenues $ 743,241 Total expenses (412,949) -------------- Income from operations $ 330,292 ============== Income before discontinued operations $ 139,778 ============== Net income available to common shareholders $ 125,568 ============== Basic per share data: Income before discontinued operations, net of preferred dividends $ 2.02 Net income available to common shareholders $ 2.08 Diluted per share data: Income before discontinued operations, net of preferred dividends $ 1.94 Net income available to common shareholders $ 2.01
82 NOTE 4. DISCONTINUED OPERATIONS During 2005, the Company sold six community centers for an aggregate sales price of $12,600. The Company previously recognized an aggregate loss on impairment of real estate assets of $617 on these community centers in 2004. Additionally, the Company determined that two community centers met the criteria to be reflected as held for sale as of December 31, 2005 and recognized a loss on impairment of $1,029. During 2004, the Company sold three community centers for a total sales price $7,250 and recognized a total gain of $845 on two of the community centers that is recorded as gain on discontinued operations. The Company recognized a loss of $114 in December 2004 on one of the community centers, which is included in loss on impairment of real estate assets in the consolidated statement of operations. During 2003, the Company sold six community centers for a total sales price $17,280 and recognized a net gain on discontinued operations of $4,042. Total revenues of the centers described above that are included in discontinued operations were $3,549, $2,734 and $4,524 in 2005, 2004 and 2003, respectively. All periods presented have been restated to reflect the operations of the centers described above as discontinued operations. NOTE 5. JOINT VENTURES Unconsolidated Affiliates - ------------------------- At December 31, 2005, the Company had investments in the following 11 partnerships and joint ventures, which are accounted for using the equity method of accounting:
Company's Joint Venture Property Name Interest - ------------------------------------------------------------------------------------------------ Governor's Square IB Governor's Square Plaza 50.0% Governor's Square Company Governor's Square 47.5% High Pointe Commons , LP High Pointe Commons 50.0% Imperial Valley Mall L.P. Imperial Valley Mall 60.0% Kentucky Oaks Mall Company Kentucky Oaks Mall 50.0% Mall of South Carolina L.P. Coastal Grand-Myrtle Beach 50.0% Mall of South Carolina Outparcel L.P Coastal Grand Crossing 50.0% Mall Shopping Center Company Plaza del Sol 50.6% Parkway Place L.P. Parkway Place 45.0% Triangle Town Member LLC Triangle Town Center, Triangle Town 50.0% Commons and Triangle Town Place York Town Center, LP York Town Center 50.0%
83 Condensed combined financial statement information of the unconsolidated affiliates is presented as follows:
December 31, ----------------------------- 2005 2004 ----------------------------- ASSETS: Net investment in real estate assets $586,715 $1,013,475 Other assets 37,759 63,903 ----------------------------- Total assets $624,474 $1,077,378 ============================= LIABILITIES : Mortgage notes payable $474,773 $ 603,664 Other liabilities 17,270 41,995 ----------------------------- Total liabilities 492,043 645,659 ----------------------------- OWNERS' EQUITY: The Company 88,461 103,512 Other investors 43,970 328,207 ----------------------------- Total owners' equity 132,431 431,719 ----------------------------- Total liabilities and owners' equity $624,474 $1,077,378 =============================
Year Ended December 31, ---------------------------------------------- 2005 2004 2003 ---------------------------------------------- Revenues $118,823 $109,696 $ 49,855 Depreciation and amortization (30,273) (24,994) (9,338) Other operating expenses (32,738) (27,479) (14,067) ---------------------------------------------- Income from operations 55,812 57,223 26,450 Interest income 246 138 - Interest expense (35,083) (27,353) (13,981) Gain on sales of real estate assets 6,717 4,555 892 Discontinued operations 55 1,945 207 ---------------------------------------------- Net income $ 27,747 $ 36,508 $ 13,568 ==============================================
All debt on these properties is non-recourse. See Note 17 for a description of guarantees the Company has issued related to certain unconsolidated affiliates. In September 2004, Mall of South Carolina L.P. obtained a long-term, non-recourse, fixed-rate mortgage loan totaling $118,000. The loan is comprised of a $100,000 A-note to a financial institution that bears interest at 5.09%, which matures in September 2014, and two 10-year B-notes of $9,000 each that bear interest at 7.75% and mature in September 2014. The Company and its third party partner in Mall of South Carolina L.P. each hold one of the B-notes. The total net proceeds from these loans were used to retire $80,493 of outstanding borrowings under the construction loan that partially financed the development of Coastal Grand-Myrtle Beach. In September 2005, Imperial Valley Mall L.P. obtained a ten-year, non-recourse mortgage note payable of $60,000 that has a fixed interest rate of 4.985% and matures in September 2015. The proceeds of the loan were used to retire the outstanding borrowings of $58,265 under the construction loan that was incurred to develop Imperial Valley Mall. On November 16, 2005, the Company formed a 50/50 joint venture with Jacobs to own Triangle Town Center and its associated and lifestyle centers, Triangle Town Place and Triangle Town Commons, in Raleigh, NC. The Company assumed management, leasing and any future development responsibilities of the properties. 84 Jacobs' initial contribution consisted of the three shopping centers and the Company made an initial cash contribution of $1,560. Concurrent with its formation, the joint venture entered into a new ten-year, fixed rate non-recourse loan of $200,000, secured by the collective centers. The proceeds from the loan were used to retire an existing construction loan totaling $121,828 and the balance was paid to Jacobs as a partial return of Jacobs' equity. The joint venture equity will be equalized between Jacobs and the Company through future contributions by the Company and through property cash flow distributions. Under the terms of the joint venture agreement, the Company is required to fund any additional equity necessary for capital expenditures, including future development or expansion of the property, and any operating deficits of the joint venture. The Company has guaranteed funding of such items up to a maximum of $50,000. The joint venture's profits are allocated 50/50 to Jacobs and the Company. The Company receives a preferred return on its invested capital in the joint venture and will, after payment of such preferred return and repayment of the Company's invested capital, and repayment of the balance of Jacobs' equity, share equally with Jacobs in the joint venture's cash flows. Galileo America Joint Venture - ----------------------------- On September 24, 2003, the Company formed Galileo America LLC ("Galileo America"), a joint venture with Galileo America, Inc., the U.S. affiliate of Australia-based Galileo America Shopping Trust, to invest in community centers throughout the United States. The arrangement provided for the Company to sell, in three phases, its interests in 51 community centers for a total price of $516,000 plus a 10% interest in Galileo America. The first phase of the transaction closed on October 23, 2003, when the Company sold its interests in 41 community centers to Galileo America for $393,925, which consisted of $250,705 in cash, the retirement of $24,922 of debt on one of the community centers, a note receivable of $4,813, Galileo America's assumption of $93,037 in debt and $20,448 representing the Company's 10% interest in Galileo America. The Company used the net proceeds to fund escrow amounts used in like-kind exchange acquisitions and to reduce outstanding borrowings under the Company's credit facilities. The Company recognized a gain of $71,886 from the first phase and recorded its investment in Galileo America at the carryover basis of the real estate assets contributed for its 10% interest. The note receivable was paid subsequent to December 31, 2003. The second phase of the Galileo America transaction closed on January 5, 2004, when the Company sold its interest in six community centers for $92,375, which consisted of $62,687 in cash, the retirement of $25,953 of debt on one of the community centers, the joint venture's assumption of $2,816 of debt and closing costs of $919. The real estate assets and related mortgage notes payable of the properties in the second phase were reflected as held for sale from October 23, 2003, the date that it was determined these assets met the criteria to be reflected as held for sale. There was no depreciation expense recorded on these assets subsequent to October 23, 2003. The Company sold a community center expansion to Galileo America during September 2004 for $3,447 in cash. The Company recognized gain of $1,316 to the extent of the third party partner's ownership interest and recorded an investment of $147 in Galileo America at the carryover basis of the real estate assets contributed for its 10% interest. In October 2004, the Company sold its interests in one community center to Galileo America for a purchase price of $17,900, which consisted of $2,900 in cash, Galileo America's assumption of $10,500 of debt and a limited partnership interest in Galileo America, Inc. The community center was originally scheduled to be included in the third phase of the transaction that closed in January 2005. The Company recognized a gain of $2,840 on the sale of this property and recorded an investment of $3,820 in Galileo America at the carryover basis of the real estate assets contributed for its 10% interest in this property. 85 The third phase of the joint venture closed on January 5, 2005, when the Company sold its interests in two power centers, one community center and one community center expansion to Galileo America for $58,600, which consisted of $42,529 in cash, the joint venture's assumption of $12,141 of debt, $3,596 representing the Company's interest in Galileo America and closing costs of $334. The real estate assets and related mortgage notes payable of the properties in the third phase were reflected as held for sale as of January 1, 2004, the date that it was determined these assets met the criteria to be reflected as held for sale. The Company did not record any depreciation expense on these assets during 2004. The Company recognized a loss on impairment of real estate assets of $1,947 in December 2004 and an additional loss on impairment of real estate assets of $262 during the year ended December 31, 2005 related to the properties included in the third phase. The Company, as tenant, entered into separate master lease agreements with Galileo America, as landlord, covering certain spaces in certain of the properties sold to the joint venture. Under each master lease agreement, the Company was obligated to pay Galileo America an agreed-upon minimum annual rent, plus a pro rata share of common area maintenance expenses and real estate taxes, for each designated space for a term of five years from the applicable property's closing date. Two properties in the first phase and one in the second phase were subject to master lease agreements. The Company had a liability of $3,789 at December 31, 2004 for the amounts to be paid over the remaining terms of the master lease obligations. During 2005, 2004 and 2003, the Company recognized gain of $2,505, $7,206 and $0, respectively, as a result of being relieved of its obligation under the master lease arrangements as spaces were leased to third parties. The Company also received $8,000 of additional contingent consideration since, as the exclusive manager of the properties, it achieved certain leasing objectives related to spaces that were vacant, or projected to soon be vacant, at the time the first phase closed. The Company earned $4,167 in 2004 for leasing objectives that were met during 2004, of which $3,750 was recognized as gain on sales of real estate assets and $417, representing the portion attributable to the Company's ownership interest, was recorded as a reduction of the Company's investment in Galileo America. In 2003, the Company earned $3,833 for leasing objectives that were met as of December 31, 2003, of which $3,450 was recognized as gain on sales of real estate assets and $383, representing the portion attributable to the Company's 10% ownership interest, was recorded as a reduction of the Company's investment in Galileo America. On August 10, 2005, the Company transferred all of its 8.4% ownership interest in Galileo America to Galileo America in exchange for Galileo America's interest in two community centers: Springdale Center in Mobile, AL, and Wilkes-Barre Township Marketplace in Wilkes-Barre Township, PA. The two properties had a fair value of $60,000. The Company recognized a gain of $42,022, in accordance with SFAS No. 153, on the redemption of its interest in Galileo America, which represents the excess of the fair value of the two properties over the carrying amount of the Company's investment in Galileo America of $17,978. The Company has the right to put the two properties to Galileo America for $60,000 in cash at any time for one year following the redemption, as well as additional property at Springdale Center that the Company currently holds in a ground lease for $3,000 in cash. The Company also entered into an agreement to provide advisory services to Galileo America for a period of three years in exchange for $1,000 per year. The Company recorded a loss on impairment during 2005 related to these properties, which is discussed in Note 4. The Company sold its management and advisory contracts with Galileo America to New Plan Excel Realty Trust, Inc. ("New Plan") for $22,000 in cash and, after reductions for closing costs, recognized a gain of $21,619 during 2005. The Company also transferred its remaining obligations of $3,818 under the master lease agreement to New Plan by paying New Plan a cash payment of $1,925. The Company recognized a gain of $1,893 during 2005 as a result of the settlement of the remaining master lease liability. New Plan retained the Company to manage nine properties that Galileo America had recently acquired from a third party for a term of 17 years beginning on the third anniversary of the closing and will pay the Company a management fee of $1,000 per year. At any time after November 22, 2007, New Plan 86 may terminate the agreement by paying the Company a termination fee of $7,000. The Company will recognize management fee income beginning on the third anniversary of the closing as it provides services under the management contract. If and when New Plan should terminate the management agreement with the Company, the Company will recognize the $7,000 termination fee as gain. Separately, Galileo America entered into an agreement to acquire New Plan's interest in a portfolio of properties. Under the terms of its agreement with Galileo America, the Company received an acquisition fee of $8,000 related to that transaction, which was recognized as management fee revenues during 2005. As a result of the disposition of its ownership interest in Galileo America and the sale of the related management and advisory contracts, the Company recorded additional compensation expense of $1,301 in 2005 related to the severance of affected personnel, including $736 related to the accelerated vesting of stock-based compensation awards for certain affected personnel. Consolidated Joint Ventures - --------------------------- In April 2005, the Company formed a joint venture with Jacobs to develop Gulf Coast Town Center in Lee County (Ft. Myers/Naples), Florida. Under the terms of the joint venture agreement, the Company initially contributed $40,335 for a 50% interest in the joint venture, the proceeds of which were used to refund the aggregate acquisition and development costs incurred with respect to the project that were previously paid by Jacobs. The Company must also provide any additional equity necessary to fund the development of the property, as well as to fund up to an aggregate of $30,000 of operating deficits of the joint venture. The Company receives a preferred return of 11% on its invested capital in the joint venture and will, after payment of such preferred return and repayment of the Company's invested capital, share equally with Jacobs in the joint venture's profits. The joint venture arrangement provides the Company with the right to put its 50% ownership interest to Jacobs if certain approvals of tenants and government entities that are required for the continued development of the project are not obtained by the second anniversary of the joint venture agreement. The put right provides that Jacobs will acquire the Company's 50% ownership interest for an amount equal to the total unreturned equity funded by the Company plus any accrued and unpaid preferred return on that equity. The Company determined that the joint venture is a variable interest entity in which it is the primary beneficiary in accordance with FASB Interpretation No. 46(R), "Consolidation of Variable Interest Entities." At December 31, 2005, this joint venture had total assets of $73,885 and a recourse term loan of $42,020. NOTE 6. MORTGAGE AND OTHER NOTES PAYABLE Mortgage and other notes payable consisted of the following:
December 31, 2005 December 31, 2004 --------------------------------- ------------------------------- Weighted Weighted Average Average Amount Interest Rate(1) Amount Interest Rate(1) ------------- ------------------ ------------ ------------------ Fixed-rate debt: Non-recourse loans on operating properties $ 3,281,939 6.02% $ 2,688,186 6.38% ------------- ------------ Variable-rate debt: Recourse term loans on operating properties 292,000 5.33% 207,500 3.45% Lines of credit 690,285 5.29% 461,400 3.37% Construction loans 76,831 5.76% 14,593 3.94% ------------- ------------ Total variable-rate debt 1,059,116 5.33% 683,493 3.41% ------------- ------------ Total $ 4,341,055 5.85% $ 3,371,679 5.78% ============= ============ (1) Weighted average interest rate including the effect of debt premiums, but excluding the amortization of deferred financing costs.
87 Non-recourse and recourse term loans include loans that are secured by properties owned by the Company that have a net carrying value of $4,709,032 at December 31, 2005. Fixed-Rate Debt - --------------- At December 31, 2005, fixed-rate loans bear interest at stated rates ranging from 4.52% to 10.125%. Outstanding borrowings under fixed-rate loans include unamortized debt premiums of $42,187 that were recorded when the Company assumed debt to acquire real estate assets that was at an above-market interest rate compared to similar debt instruments at the date of acquisition. Fixed-rate loans generally provide for monthly payments of principal and/or interest and mature at various dates from March 2007 through April 2016, with a weighted average maturity of 6.1 years. Variable-Rate Debt - ------------------ Recourse term loans bear interest at variable interest rates indexed to the prime lending rate or LIBOR. At December 31, 2005, interest rates on recourse loans varied from 5.29% to 5.375%. These loans mature at various dates from March 2006 to June 2006, with a weighted average maturity of 0.5 years. Unsecured Line of Credit - ------------------------ In September 2005, the Company increased the availability under its unsecured credit facility from $400,000 to $500,000. This credit facility bears interest at LIBOR plus a margin of 90 to 145 basis points based on the Company's leverage, as defined in the agreement. The credit facility matures in August 2006 and has three one-year extension options, which are at the Company's election. At December 31, 2005, the outstanding borrowings of $278,000 under the credit facility had a weighted average interest rate of 5.29%. Secured Lines of Credit - ----------------------- The Company has four secured lines of credit that are used for construction, acquisition, and working capital purposes. The following summarizes certain information about the secured lines of credit as of December 31, 2005:
Total Total Maturity Available Outstanding Date - ---------------------------------------------------- $ 373,000 $ 358,150 February 2006 100,000 52,135 June 2007 20,000 1,000 March 2007 10,000 1,000 April 2007 - ---------------------------------- $ 503,000 $ 412,285 ==================================
The secured lines of credit are secured by 21 of the Company's properties, which had an aggregate net carrying value of $476,839 at December 31, 2005. Borrowings under the secured lines of credit had a weighted average interest rate of 5.29% at December 31, 2005. Letters of Credit - ----------------- At December 31, 2005, the Company had additional secured lines of credit with a total commitment of $27,123 that can only be used for issuing letters of credit. The total amount outstanding under these lines of credit was $22,143 at December 31, 2005. Covenants and Restrictions - -------------------------- The secured and unsecured line of credit agreements contain, among other restrictions, certain financial covenants including the maintenance of certain financial coverage ratios, minimum net worth requirements, and limitations on cash flow distributions. Additionally, certain property-specific mortgage notes 88 payable require the maintenance of debt service coverage ratios on their respective properties. The Company was in compliance with all covenants and restrictions at December 31, 2005. Twenty-three malls, five associated centers, two community centers and the corporate office building are owned by special purpose entities that are included in the Company's consolidated financial statements. The sole business purpose of the special purpose entities is to own and operate these properties, each of which is encumbered by a commercial-mortgage-backed-securities loan. The real estate and other assets owned by these special purpose entities are restricted under the loan agreements in that they are not available to settle other debts of the Company. However, so long as the loans are not under an event of default, as defined in the loan agreements, the cash flows from these properties, after payments of debt service, operating expenses and reserves, are available for distribution to the Company. Debt Maturities - --------------- As of December 31, 2005, the scheduled principal payments on all mortgage and other notes payable, including construction loans and lines of credit, are as follows:
2006 $1,033,398 2007 231,223 2008 430,520 2009 387,013 2010 451,335 Thereafter 1,765,379 ------------- 4,298,868 Net unamortized premiums 42,187 ------------- $4,341,055 =============
Of the $1,033,398 of scheduled principal payments in 2006, $978,720 is related to loans that are scheduled to mature in 2006. In January 2006, the Company extended the maturity of $358,150 of this debt to 2009. The Company has extension options in place for $509,170 of these loans that will extend their scheduled maturities to 2007. The Company intends to retire or refinance the remaining loans of $111,400. NOTE 7. LOSS ON EXTINGUISHMENT OF DEBT The losses on extinguishment of debt resulted from prepayment penalties and the write-off of unamortized deferred financing costs and unamortized debt premiums when notes payable were retired before their scheduled maturity dates as follows:
Year Ended December 31, ------------------------------------ 2005 2004 2003 ------------------------------------ Prepayment penalties $ 6,524 $ - $ - Unamortized deferred financing costs 976 - 167 Unamortized debt premiums (1,329) - - ------------------------------------ $ 6,171 $ - $ 167 ====================================
89 NOTE 8. SHAREHOLDERS' EQUITY Common Stock Repurchase Plan - ---------------------------- In November 2005, the Company's board of directors approved a plan to repurchase up to $60,000 of the Company's common stock by December 31, 2006. The Company had repurchased 1,371,034 shares of its common stock as of December 31, 2005 for a total of $54,998, or a weighted average cost of $40.11 per share. The Company does not intend to repurchase any additional shares subsequent to December 31, 2005. The Company had a payable of $6,706 at December 31, 2005, related to repurchased common stock. Preferred Stock - --------------- In June 1998, the Company issued 2,875,000 shares of 9.0% Series A Cumulative Redeemable Preferred Stock (the "Series A Preferred Stock") with a liquidation preference of $25.00 per share in a public offering. In June 2002, the Company purchased 200,000 shares of the Series A Preferred Stock for $5,093. On November 28, 2003, the Company redeemed the remaining 2,675,000 outstanding shares of the Series A Preferred Stock at its liquidation preference of $25.00 per share plus accrued and unpaid dividends. In connection with the redemption of the Series A Preferred Stock, the Company recorded a charge of $2,181 to write-off direct issuance costs that were recorded as a reduction of additional paid-in capital when the Series A Preferred Stock was issued. The charge is included in preferred dividends in the accompanying consolidated statement of operations. In June 2002, the Company completed an offering of 2,000,000 shares of 8.75% Series B Cumulative Redeemable Preferred Stock (the "Series B Preferred Stock"), having a par value of $.01 per share, at its liquidation preference of $50.00 per share. The net proceeds of $96,370 were used to reduce outstanding balances under the Company's credit facilities and to retire term loans on several properties. The dividends on the Series B Preferred Stock are cumulative and accrue from the date of issue and are payable quarterly in arrears at a rate of $4.375 per share per annum. The Series B Preferred Stock has no stated maturity, is not subject to any sinking fund or mandatory redemption, and is not convertible into any other securities of the Company. The Series B Preferred Stock cannot be redeemed by the Company prior to June 14, 2007. After that date, the Company may redeem shares, in whole or in part, at any time for a cash redemption price of $50.00 per share plus accrued and unpaid dividends. On August 22, 2003, the Company issued 4,600,000 depositary shares in a public offering, each representing one-tenth of a share of 7.75% Series C Cumulative Redeemable Preferred Stock (the "Series C Preferred Stock") with a par value of $0.01 per share. The Series C Preferred Stock has a liquidation preference of $250.00 per share ($25.00 per depositary share). The dividends on the Series C Preferred Stock are cumulative, accrue from the date of issuance and are payable quarterly in arrears at a rate of $19.375 per share ($1.9375 per depositary share) per annum. The Series C Preferred Stock has no stated maturity, is not subject to any sinking fund or mandatory redemption, and is not convertible into any other securities of the Company. The Series C Preferred Stock cannot be redeemed by the Company prior to August 22, 2008. After that date, the Company may redeem shares, in whole or in part, at any time for a cash redemption price of $250.00 per share ($25.00 per depositary share) plus accrued and unpaid dividends. The net proceeds of $111,227 were used to partially fund certain acquisitions discussed in Note 3 and to reduce outstanding borrowings on the Company's credit facilities. On December 13, 2004, the Company issued 7,000,000 depositary shares in a public offering, each representing one-tenth of a share of 7.375% Series D Cumulative Redeemable Preferred Stock (the "Series D Preferred Stock") with a par value of $0.01 per share. The Series D Preferred Stock has a liquidation preference of $250.00 per share ($25.00 per depositary share). The dividends on the Series D Preferred Stock are cumulative, accrue from the date of issuance and are payable quarterly in arrears at a rate of $18.4375 per share ($1.84375 per depositary share) per annum. The Series D Preferred Stock has no stated maturity, is not subject to any sinking fund or mandatory redemption, and is not convertible into any other securities of the Company. The Series D Preferred 90 Stock cannot be redeemed by the Company prior to December 13, 2009. After that date, the Company may redeem shares, in whole or in part, at any time for a cash redemption price of $250.00 per share ($25.00 per depositary share) plus accrued and unpaid dividends. The net proceeds of $169,333 were used to reduce outstanding borrowings on the Company's credit facilities. Holders of each series of preferred stock will have limited voting rights if dividends are not paid for six or more quarterly periods and in certain other events. NOTE 9. MINORITY INTERESTS Minority interests represent (i) the aggregate partnership interest in the Operating Partnership that is not owned by the Company and (ii) the aggregate ownership interest in 18 of the Company's shopping center properties that is held by third parties. Minority Interest in Operating Partnership - ------------------------------------------ The minority interest in the Operating Partnership is represented by common units and special common units of limited partnership interest in the Operating Partnership (the "Operating Partnership Units") that the Company does not own. The assets and liabilities allocated to the Operating Partnership's minority interests are based on their ownership percentage of the Operating Partnership at December 31, 2005 and 2004. The ownership percentage is determined by dividing the number of Operating Partnership Units held by the minority interests at December 31, 2005 and 2004 by the total Operating Partnership Units outstanding at December 31, 2005 and 2004, respectively. The minority interest ownership percentage in assets and liabilities of the Operating Partnership was 45.8% and 45.0% at December 31, 2005 and 2004, respectively. Income is allocated to the Operating Partnership's minority interests based on their weighted average ownership during the year. The ownership percentage is determined by dividing the weighted average number of Operating Partnership Units held by the minority interests by the total weighted average number of Operating Partnership Units outstanding during the year. A change in the number of shares of common stock or Operating Partnership Units changes the percentage ownership of all partners of the Operating Partnership. An Operating Partnership Unit is considered to be equivalent to a share of common stock since it generally is redeemable for cash or shares of the Company's common stock. As a result, an allocation is made between shareholders' equity and minority interest in the Operating Partnership in the accompanying balance sheet to reflect the change in ownership of the Operating Partnership's underlying equity when there is a change in the number of shares and/or Operating Partnership Units outstanding. During 2005 and 2004, the Company allocated $37,157 and $12,661, respectively, from minority interest to shareholders' equity. In 2003, the Company allocated $11,759 from shareholders' equity to minority interest. The total minority interest in the Operating Partnership was $596,803 and $554,629 at December 31, 2005 and 2004, respectively. Minority Interest in Operating Partnership-Conversion Rights - ------------------------------------------------------------ Under the terms of the Operating Partnership's limited partnership agreement, each of the limited partners has the right to exchange all or a portion of its partnership interests for shares of CBL's common stock or, at CBL's election, their cash equivalent. When an exchange occurs, CBL assumes the limited partner's ownership interests in the Operating Partnership. The number of shares of common stock received by a limited partner of the Operating Partnership upon exercise of its exchange rights will be equal, on a one-for-one basis, to the number of Operating Partnership Units exchanged by the limited 91 partner. The amount of cash received by the limited partner, if CBL elects to pay cash, will be based on the five-day trailing average of the trading price at the time of exercise of the shares of common stock that would otherwise have been received by the limited partner in the exchange. Neither the limited partnership interests in the Operating Partnership nor the shares of common stock of CBL are subject to any right of mandatory redemption. As of January 31, 2004, holders of 26,318,804 Series J special common units ("J-SCUs") may exchange them for shares of common stock or cash. The J-SCUs received a minimum distribution of $1.45125 per unit per year until the distribution on the common units exceeded $1.45125 per unit per year during 2004. The J-SCUs now receive a distribution equal to that paid on the common units. In July 2004, the Company issued 1,560,940 S-SCUs in connection with the acquisition of Monroeville Mall, which is discussed in Note 3. The S-SCUs receive a minimum distribution of $2.53825 per unit per year for the first three years, and a minimum distribution of $2.92875 per unit per year thereafter. In June 2005, the Company issued 571,700 L-SCUs in connection with the acquisition of Laurel Park Place, which is discussed in Note 3. The L-SCUs receive a minimum distribution of $0.7575 per unit per quarter ($3.03 per unit per year). Upon the earlier to occur of June 1, 2020, or when the distribution on the common units exceeds $0.7575 per unit for four consecutive calendar quarters, the L-SCUs will thereafter receive a distribution equal to the amount paid on the common units. In November 2005, the Company issued 1,144,924 K-SCUs in connection with the acquisition of Oak Park Mall, Eastland Mall and Hickory Point Mall, which is discussed in Note 3. The K-SCUs receive a dividend at a rate of 6.0%, or $2.85 per K-SCU, for the first year following the close of the transaction and 6.25%, or $2.96875 per K-SCU, thereafter. When the quarterly distribution on the Operating Partnership's common units exceeds the quarterly K-SCU distribution for four consecutive quarters, the K-SCUs will receive distributions at the rate equal to that paid on the Operating Partnership's common units. At any time following the first anniversary of the closing date, the holders of the K-SCUs may exchange them, on a one-for-one basis, for shares of the Company's common stock or, at the Company's election, their cash equivalent. The Company issued 237,390 common units in connection with the acquisition of Panama City Mall in 2002. These common units receive a minimum annual dividend of $1.6875 per unit until May 2012. When the distribution on the common units exceeds $1.6875 per unit, these common units will receive a distribution equal to that paid on the common units. Additionally, if the annual distribution on the common units should ever be less than $1.11 per unit, the $1.6875 per unit dividend will be reduced by the amount the per unit distribution is less than $1.11 per unit. The annual distribution on the common units exceeded $1.6875 per unit during 2005. During 2005, holders elected to exchange 48,618 special common units and 3,518 common units and the Company elected to exchange $2,172 of cash for these units. During 2004, holders elected to exchange 62,392 special common units and 683,250 common units and the Company elected to exchange $5,949 of cash and 525,636 shares of common stock for these units. The Company purchased 920,166 common units from a former executive of the Company who retired in 1997 for $21,013 during 2003. Outstanding rights to convert minority interests in the Operating Partnership to common stock were held by the following parties at December 31, 2005 and 2004:
December 31, -------------------------------- 2005 2004 --------------- ---------------- The Company 62,512,816 62,667,104 Jacobs 23,796,796 23,845,414 CBL's Predecessor 17,511,224 17,511,224 Third parties 11,617,592 9,904,486 --------------- ---------------- Total Operating Partnership Units 115,438,428 113,928,228 =============== ================
92 Minority Interest in Shopping Center Properties - ----------------------------------------------- The Company's consolidated financial statements include the assets, liabilities and results of operations of 18 properties that the Company does not wholly own. The minority interests in shopping center properties represents the aggregate ownership interest of third parties in these properties. The total minority interests in shopping center properties was $12,672 and $11,977 at December 31, 2005 and 2004, respectively. The assets and liabilities allocated to the minority interests in shopping center properties are based on the third parties' ownership percentages in each shopping center property at December 31, 2005 and 2004. Income is allocated to the minority interests in shopping center properties based on the third parties' weighted average ownership in each shopping center property during the year. NOTE 10. MINIMUM RENTS The Company receives rental income by leasing retail shopping center space under operating leases. Future minimum rents are scheduled to be received under noncancellable tenant leases at December 31, 2005, as follows: 2006 $501,560 2007 426,930 2008 371,773 2009 320,679 2010 264,937 Thereafter 806,409 Future minimum rents do not include percentage rents or tenant reimbursements that may become due. NOTE 11. MORTGAGE NOTES RECEIVABLE Mortgage notes receivable are collateralized by first mortgages, wrap-around mortgages on the underlying real estate and related improvements or by assignment of 100% of the partnership interests that own the real estate assets. Interest rates on notes receivable range from 3.63% to 9.50%, with a weighted average interest rate of 6.68%, at December 31, 2005. Maturities of notes receivable range from December 2006 to June 2019. NOTE 12. SEGMENT INFORMATION The Company measures performance and allocates resources according to property type, which is determined based on differences such as nature of tenants, capital requirements, economic risks and leasing terms. Rental income and tenant reimbursements from tenant leases provide the majority of revenues from all segments. The accounting policies of the reportable segments are the same as those described in Note 2. Information on the Company's reportable segments is presented as follows: 93
Associated Community Year Ended December 31, 2005 Malls Centers Centers All Other(2) Total - ---------------------------------------------------------------------------------------------------------------------- Revenues $ 827,679 $ 34,293 $ 9,421 $ 37,319 $ 908,712 Property operating expenses (1) (280,122) (8,833) (2,603) 21,603 (269,955) Interest expense (183,120) (4,674) (2,872) (17,517) (208,183) Other expense - - - (15,444) (15,444) Gain on sales of real estate assets 18 - 3,802 49,763 53,583 ------------------------------------------------------------------- Segment profit and loss $ 364,455 $ 20,786 $ 7,748 $ 75,724 468,713 ======================================================= Depreciation and amortization expense (179,651) General and administrative expense (39,197) Interest income 6,831 Loss on extinguishment of debt (6,171) Gain on sale of management contracts 21,619 Loss on impairment of real estate assets (1,334) Equity in earnings of unconsolidated affiliates 8,495 Minority interest in earnings (116,940) ------------ Income before discontinued operations $ 162,365 ============ Total assets $ 5,619,923 $ 272,364 $151,970 $308,065 $6,352,322 Capital expenditures $ 1,182,349 $ 21,577 $ 77,026 $ 85,037 $1,365,989
Associated Community Year Ended December 31, 2004 Malls Centers Centers All Other(2) Total - ---------------------------------------------------------------------------------------------------------------------- Revenues $ 720,106 $ 30,000 $ 15,072 $ 16,255 $ 781,433 Property operating expenses (1) (250,512) (6,672) (4,860) 21,102 (240,942) Interest expense (159,998) (4,804) (3,154) (9,263) (177,219) Other expense - - - (16,373) (16,373) Gain on sales of real estate assets 848 322 27,784 318 29,272 ------------------------------------------------------------------- Segment profit and loss $ 310,444 $ 18,846 $ 34,842 $ 12,039 376,171 ======================================================= Depreciation and amortization expense (142,012) General and administrative expense (35,338) Interest income 3,355 Loss on impairment of real estate assets (3,080) Equity in earnings of unconsolidated affiliates 10,308 Minority interest in earnings (90,551) ------------ Income before discontinued operations $ 118,853 ============ Total assets $ 4,653,707 $ 273,166 $155,042 $122,585 $5,204,500 Capital expenditures $ 1,081,529 $ 56,109 $ 18,631 $ 20,541 $1,176,810
Associated Community Year Ended December 31, 2003 Malls Centers Centers All Other(2) Total - ---------------------------------------------------------------------------------------------------------------------- Revenues $ 609,489 $ 24,095 $ 49,202 $ 11,027 $ 693,813 Property operating expenses (1) (223,665) (5,747) (11,338) 17,374 (223,376) Interest expense (139,900) (5,157) (6,746) (1,518) (153,321) Other expense - - - (11,489) (11,489) Gain(loss) on sales of real estate assets 2,207 - 75,559 (1) 77,765 ------------------------------------------------------------------- Segment profit and loss $ 248,131 $ 13,191 $106,677 $ 15,393 383,392 ======================================================= Depreciation and amortization expense (112,825) General and administrative expense (30,395) Interest income 2,485 Loss on extinguishment of debt (167) Equity in earnings of unconsolidated affiliates 4,941 Minority interest in earnings (109,290) ------------ Income before discontinued operations $ 138,141 ============ Total assets $ 3,682,158 $ 199,356 $265,467 $117,329 $4,264,310 Capital expenditures $ 651,567 $ 28,901 $ 32,063 $ 31,274 $ 743,805 (1) Property operating expenses include property operating, real estate taxes and maintenance and repairs. (2) The All Other category includes mortgage notes receivable, the Company's office building and the Management Company.
94 NOTE 13. OPERATING PARTNERSHIP Condensed consolidated financial statement information for the Operating Partnership is presented as follows:
December 31, ------------------------------------- 2005 2004 ------------------------------------- ASSETS: Net investment in real estate assets $5,944,428 $4,894,780 Investment in unconsolidated affiliates 84,138 84,782 Other assets 323,353 224,476 ------------------------------------- Total assets $6,351,919 $5,204,038 ===================================== LIABILITIES: Mortgage and other notes payable $4,341,055 $3,371,679 Other liabilities 279,315 185,839 ------------------------------------- Total liabilities 4,620,370 3,557,518 Minority interests 12,672 11,977 PARTNERS' CAPITAL 1,718,877 1,634,543 ------------------------------------- Total liabilities and partners' capital $6,351,919 $5,204,038 =====================================
Year Ended December 31, --------------------------------------------------------- 2005 2004 2003 --------------------------------------------------------- Total revenues $908,712 $781,433 $693,810 Depreciation and amortization (179,651) (142,012) (112,825) Other operating expenses (323,493) (294,342) (263,774) --------------------------------------------------------- Income from operations 405,568 345,079 317,211 Interest income 6,828 3,355 2,485 Interest expense (208,180) (177,191) (153,314) Loss on extinguishment of debt (6,171) -- (167) Gain on sales of real estate assets 53,583 29,272 77,765 Gain on sale of management contracts 21,619 -- -- Equity in earnings of unconsolidated affiliates 8,495 10,308 4,941 Minority interest in shopping center properties (4,879) (5,365) (2,758) --------------------------------------------------------- Income before discontinued operations 276,863 205,458 246,163 Operating income of discontinued operations 192 1,413 1,956 Gain (loss) on discontinued operations (82) 845 4,042 --------------------------------------------------------- Net income $276,973 $207,716 $252,161 =========================================================
NOTE 14. SUPPLEMENTAL AND NONCASH INFORMATION The Company paid cash for interest, net of amounts capitalized, in the amount of $207,861, $174,496 and $151,012 during 2005, 2004 and 2003, respectively. The Company's noncash investing and financing activities were as follows for 2005, 2004 and 2003:
2005 2004 2003 --------------- ---------------- ---------------- Debt assumed to acquire property interests $385,754 $304,646 $209,834 Premiums related to debt assumed to acquire property interests 10,552 19,455 26,290 Issuance of minority interest to acquire property interests 72,850 46,212 -- Purchase obligation related to acquired property 14,000 11,950 -- Conversion of Operating Partnership units into common stock 10,304 5,630 -- Payable related to repurchased common stock 6,706 -- -- Note receivable from sale of real estate assets 2,627 -- 4,813 Debt consolidated from application of FIN 46(R) -- 38,147 -- Short-term notes payable issued to acquire property interests -- -- 11,617
95 NOTE 15. DERIVATIVE FINANCIAL INSTRUMENTS The Company uses derivative financial instruments to manage its exposure to changes in interest rates. The Company does not use derivative financial instruments for speculative purposes. The Company's interest rate risk management policy requires that derivative instruments be used for hedging purposes only and that they be entered into only with major financial institutions based upon their credit ratings and other factors. The Company's objective in using derivatives is to manage its exposure to changes in interest rates. To accomplish this objective, the Company primarily uses interest rate swap and cap agreements as part of its cash flow hedging strategy. Interest rate swap agreements designated as cash flow hedges involve the receipt of variable-rate amounts in exchange for fixed-rate payments over the life of the agreements without the exchange of the underlying principal amount. The change in net unrealized gains on cash flow hedges in 2003 reflects a reclassification of net unrealized gains from accumulated other comprehensive loss to interest expense in the amount of $2,397 related to an interest rate swap agreement that was in place during 2003. There were no other derivative financial instruments outstanding during 2005, 2004 and 2003. NOTE 16. RELATED PARTY TRANSACTIONS CBL's Predecessor and certain officers of the Company have a significant minority interest in the construction company that the Company engaged to build substantially all of the Company's development properties. The Company paid approximately $96,246, $81,153 and $163,617 to the construction company in 2005, 2004 and 2003, respectively, for construction and development activities. The Company had accounts payable to the construction company of $8,097 and $7,774 at December 31, 2005 and 2004, respectively. The Management Company provides management, development and leasing services to the Company's unconsolidated affiliates and other affiliated partnerships. Revenues recognized for these services amounted to $14,290, $5,970 and $3,030 in 2005, 2004 and 2003, respectively. NOTE 17. CONTINGENCIES The Company is currently involved in certain litigation that arises in the ordinary course of business. It is management's opinion that the pending litigation will not materially affect the financial position or results of operations of the Company. Additionally, management believes that, based on environmental studies completed to date, any exposure to environmental cleanup will not materially affect the financial position and results of operations of the Company. The Company has guaranteed 50% of the debt of Parkway Place L.P., an unconsolidated affiliate in which the Company owns a 45% interest. The total amount outstanding at December 31, 2005 and 2004, was $53,200 and $53,323, respectively, of which the Company had guaranteed $26,600 and $26,662, respectively. The guaranty will expire when the related debt matures in June 2008. The Company did not receive a fee for this guaranty. Under the terms of the partnership agreement of Mall of South Carolina L.P., an unconsolidated affiliate in which the Company owns a 50% interest, the Company had guaranteed 100% of the construction debt incurred to develop Coastal Grand - Myrtle Beach in Myrtle Beach, SC. The Company received a fee of $1,572 for this guaranty when it was issued during 2003. The Company recognized one-half of this fee as revenue pro rata over the term of the guaranty until its expiration in May 2006, which represents the portion of the fee attributable to the third-party partner's ownership interest. As discussed in Note 5, Mall of South Carolina L.P. refinanced the construction loan with new mortgage loans in 96 September 2004. As a result, the Company was release from the guaranty and recognized one-half of the unamortized balance of the guaranty fee, or $328, as revenue when the construction loan was retired. The remaining $328 attributable to the Company's ownership interest was recorded as a reduction to the Company's investment in the partnership. The Company recognized total revenue of $568 and $218 related to this guaranty during 2004 and 2003, respectively. The Company had guaranteed 100% of the debt of Imperial Valley Mall L.P., an unconsolidated affiliate in which the Company owns a 60% interest, as of December 31, 2004. As discussed in Note 5, Imperial Valley Mall L.P. refinanced the construction loan with a new mortgage loan in September 2005 and the Company was released from its guaranty. The Company has issued various bonds that it would have to satisfy in the event of non-performance. The total amount outstanding on these bonds was $24,100 and $11,789 at December 31, 2005 and 2004, respectively. NOTE 18. FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying values of cash and cash equivalents, receivables, accounts payable and accrued liabilities are reasonable estimates of their fair values because of the short maturity of these financial instruments. Based on the interest rates for similar financial instruments, the carrying value of mortgage notes receivable is a reasonable estimate of fair value. The fair value of mortgage and other notes payable was $4,336,474 and $3,667,151 at December 31, 2005 and 2004, respectively. The fair value was calculated by discounting future cash flows for the notes payable using estimated rates at which similar loans would be made currently. NOTE 19. STOCK INCENTIVE PLAN The Company maintains the CBL & Associates Properties, Inc. Amended and Restated Stock Incentive Plan, as amended, which permits the Company to issue stock options and common stock to selected officers, employees and directors of the Company. The shares available under the plan were increased from 8,000,000 to 10,400,000 during 2002. The compensation committee of the board of directors (the "Committee") administers the plan. Stock Options - ------------- Stock options issued under the plan allow for the purchase of common stock at the fair market value of the stock on the date of grant. Stock options granted to officers and employees vest and become exercisable in installments on each of the first five anniversaries of the date of grant and expire 10 years after the date of grant. Stock options granted to independent directors are fully vested upon grant. However, the independent directors may not sell, pledge or otherwise transfer their stock options during their board term or for one year thereafter. 97 The Company's stock option activity for the years ended December 31, 2005, 2004 and 2003 is summarized as follows:
2005 2004 2003 --------------------------- -------------------------- ---------------------------- Weighted Weighted Weighted Average Average Average Exercise Exercise Exercise Shares Price Shares Price Shares Price --------------------------- ------------- ------------ ---------------------------- Outstanding, beginning of year 3,033,542 $13.39 4,368,216 $12.84 5,066,834 $12.76 Exercised (812,302) 11.99 (1,324,374) 11.53 (646,518) 12.00 Canceled (12,800) 16.88 (10,300) 15.76 (52,100) 15.46 --------------- -------------- --------------- Outstanding, end of year 2,208,440 13.89 3,033,542 13.39 4,368,216 12.84 =============== ============== =============== Options exercisable at end of year 1,781,440 $13.15 2,150,242 $12.35 2,923,316 $11.60 =============== ============== ===============
The following is a summary of the stock options outstanding at December 31, 2005:
Weighted Weighted Weighted Average Average Average Remaining Exercise Price Exercise Price Options Contractual of Options Options of Options Exercise Price Range Outstanding Life in Years Outstanding Exercisable Exercisable - ------------------------ -------------- ----------------- ----------------- --------------- ----------------- $10.2500 - $12.8125 1,199,956 2.6 $11.78 1,199,956 $11.78 $13.8375 - $19.9000 1,008,484 5.9 16.40 581,484 15.99 -------------- ----------------- ----------------- --------------- ----------------- Totals 2,208,440 4.1 $13.89 1,781,440 $13.15 ============== ================= ================= =============== =================
Stock Awards - ------------ Under the plan, common stock may be awarded either alone, in addition to, or in tandem with other stock awards granted under the plan. The Committee has the authority to determine eligible persons to whom common stock will be awarded, the number of shares to be awarded and the duration of the vesting period, as defined. The Committee may also provide for the issuance of common stock under the plan on a deferred basis pursuant to deferred compensation arrangements, as described in Note 20. The Company had issued awards of stock totaling 1,091,776 shares under the plan as of December 31, 2005. Compensation expense related to these awards is determined based on the market value of the Company's common stock on the grant date and is amortized over the vesting period on a straight-line basis when the award is related to future services. Awards related to past services are expensed when granted, regardless of the vesting period, if any. The Company granted awards for 208,200, 93,600 and 86,450 shares of the Company's common stock to employees in May 2005, 2004 and 2003, respectively. The terms of the awards allow for a recipient to vest and receive shares of common stock in equal installments on each of the first five anniversaries of the date of grant. Under the terms of the awards, the Company pays the recipient additional compensation, in an amount equal to the dividends paid on the Company's common stock, on the unvested portion of the award. The Company recorded deferred compensation of $8,162, $2,206 and $1,870 when the awards were granted in May 2005, 2004 and 2003, respectively, based on the market value of the Company's common stock on the grant dates, which was $39.24, $23.57 and $21.53 per share, respectively. The deferred compensation is amortized on a straight-line basis as compensation expense over the five-year vesting period. During 2005, 2004 and 2003, the Company issued an additional 37,299, 63,314 and 87,212 shares of common stock, respectively, to employees and nonemployee directors with a weighted-average grant date fair value of $37.99, $30.56 and $21.51, respectively. 98 NOTE 20. EMPLOYEE BENEFIT PLANS 401(k) Plan - ----------- The Management Company maintains a 401(k) profit sharing plan, which is qualified under Section 401(a) and Section 401(k) of the Code to cover employees of the Management Company. All employees who have attained the age of 21 and have completed at least 90 days of service are eligible to participate in the plan. The plan provides for employer matching contributions on behalf of each participant equal to 50% of the portion of such participant's contribution that does not exceed 2.5% of such participant's compensation for the plan year. Additionally, the Management Company has the discretion to make additional profit-sharing-type contributions not related to participant elective contributions. Total contributions by the Management Company were $727, $657 and $518 in 2005, 2004 and 2003, respectively. Employee Stock Purchase Plan - ---------------------------- The Company maintains an employee stock purchase plan that allows eligible employees to acquire shares of the Company's common stock in the open market without incurring brokerage or transaction fees. Under the plan, eligible employees make payroll deductions that are used to purchase shares of the Company's common stock. The shares are purchased by the fifth business day of the month following the month when the deductions were withheld. The shares are purchased at the prevailing market price of the stock at the time of purchase. Deferred Compensation Arrangements - ---------------------------------- The Company has entered into agreements with certain of its officers that allow the officers to defer receipt of selected salary increases and/or bonus compensation for periods ranging from 5 to 10 years. For certain officers, the deferred compensation arrangements provide that when the salary increase or bonus compensation is earned and deferred, shares of the Company's common stock issuable under the Amended and Restated Stock Incentive Plan are deemed set aside for the amount deferred. The number of shares deemed set aside is determined by dividing the amount of compensation deferred by the fair value of the Company's common stock on the deferral date, as defined in the arrangements. The shares set aside are deemed to receive dividends equivalent to those paid on the Company's common stock, which are then deemed to be reinvested in the Company's common stock in accordance with the Company's dividend reinvestment plan. When an arrangement terminates, the Company will issue shares of the Company's common stock to the officer equivalent to the number of shares deemed to have accumulated under the officer's arrangement. In October 2005, the Company issued 174,403 shares of common stock to one officer as a result of the termination of that officer's deferred compensation agreement. The Company had accrued all compensation expense related to the agreement as it was earned during the term of the agreement. At December 31, 2005 and 2004, respectively, there were 63,882 and 214,196 shares that were deemed set aside in accordance with these arrangements. For other officers, the deferred compensation arrangements provide that their bonus compensation is deferred in the form of a note payable to the officer. Interest accumulates on these notes at 7.0%. When an arrangement terminates, the note payable plus accrued interest is paid to the officer in cash. At December 31, 2005 and 2004, respectively, the Company had notes payable, including accrued interest, of $107 and $52 related to these arrangements. 99 NOTE 21. DIVIDENDS On October 5, 2005, the Company declared a special one-time cash dividend of $0.09 per share of common stock as a result of the taxable gains generated from the sale of the Company's management contracts with Galileo America as discussed in Note 5. On October 27, 2005, the Company declared a cash dividend of $0.4575 per share of common stock for the quarter ended December 31, 2005. Both dividends were paid on January 16, 2006, to shareholders of record as of December 30, 2005. The total dividend of $34,228 is included in accounts payable and accrued liabilities at December 31, 2005. On October 27, 2005, the Operating Partnership declared a distribution of $29,014 to the Operating Partnership's limited partners. The distribution was paid on January 16, 2006. This distribution represented a distribution of $0.5475 per unit for each common unit and $0.6346 to $.7125 per unit for certain special common units in the Operating Partnership. The total distribution is included in accounts payable and accrued liabilities at December 31, 2005. On November 4, 2004, the Company declared a cash dividend of $0.40625 per share of common stock for the quarter ended December 31, 2004. The dividend was paid on January 14, 2005, to shareholders of record as of December 31, 2004. The total dividend of $25,459 is included in accounts payable and accrued liabilities at December 31, 2004. On November 4, 2004, the Operating Partnership declared a distribution of $21,185 to the Operating Partnership's limited partners. The distribution was paid on January 14, 2005. This distribution represented a distribution of $0.40625 per unit for each common unit and $0.40625 to $0.6480 per unit for the special common units in the Operating Partnership. The total distribution is included in accounts payable and accrued liabilities at December 31, 2004. The allocations of dividends declared and paid for income tax purposes are as follows:
Year Ended December 31, ---------------------------------------------------- 2005 2004 2003 --------------- ------------------ ---------------- Dividends declared: Common stock $ 1.76625 $ 1.49375 $ 1.345 Series A preferred stock $ -- $ -- $ 2.05 Series B preferred stock $ 4.37500 $ 4.37505 $ 4.3752 Series C preferred stock $ 19.3750 $ 19.3750 $ 6.99653 Series D preferred stock $19.359375 $ -- $ -- Allocations: (1) Ordinary income 100.00% 87.41% 98.83% Capital gains 15% rate 0.00% 11.27% 0.00% Capital gains 20% rate 0.00% 0.00% 0.00% Capital gains 25% rate 0.00% 1.32% 1.17%(2) Return of capital 0.00% 0.00% 0.00% --------------- ------------------ ---------------- Total 100.0% 100.00% 100.00% =============== ================== ================ (1) The allocations for income tax purposes are the same for the common stock and each series of preferred stock for each period presented. (2) All of the 2003 capital gains represent pre-May 6, 2003 capital gains.
NOTE 22. SUBSEQUENT EVENTS Subsequent to December 31, 2005, holders of 1,480,067 common units of limited partnership interest in the Operating Partnership and holders of 27,582 J-SCUs exercised their conversion rights, which are described in Note 9. The Company has elected to issue 1,480,067 shares of common stock in exchange for the common units and to pay cash of $1,112 in exchange for the J-SCUs. 100 NOTE 23. QUARTERLY INFORMATION (UNAUDITED) The following quarterly information differs from previously reported results since the results of operations of long-lived assets disposed of subsequent to each quarter end in 2004 have been reclassified to discontinued operations for all periods presented. Additionally, certain prior period amounts have been reclassified to present marketing fund revenues and expenses on a gross basis in accordance with Emerging Issues Task Force Issue No. 99-19, Reporting Revenue Gross as a Principal versus Net as an Agent. This reclassification did not change previously reported amounts of net income available to common shareholders. As a result, total revenues increased from the previously reported amounts for the first, second and third quarters of the year ended December 31, 2005 by $3,973, $4,189 and $4,938, respectively. Total revenues increased from the previously reported amounts for the first, second, third and fourth quarters of the year ended December 31, 2004 by $5,129, $5,557, $4,757 and $8,744, respectively. The increase in total revenues was offset by a corresponding increase in property operation expenses; therefore, there were no changes to previously reported amounts of any other line items presented below.
First Second Third Fourth Year Ended December 31, 2005 Quarter Quarter Quarter Quarter Total (1) ---------- ---------- ---------- ---------- ---------- Total revenues $ 214,878 $ 203,185 $ 228,038 $ 262,611 $ 908,712 Income from operations 97,299 87,204 99,829 118,799 403,131 Income before discontinued operations 32,758 28,535 67,635 33,437 162,365 Discontinued operations 255 (109) 100 (136) 110 Net income available to common shareholders 25,372 20,783 60,093 25,659 131,907 Basic per share data: Income before discontinued operations, net of preferred dividends $ 0.40 $ 0.33 $ 0.95 $ 0.41 $ 2.10 Net income available to common shareholders $ 0.41 $ 0.33 $ 0.95 $ 0.41 $ 2.10 Diluted per share data: Income before discontinued operations, net of preferred dividends $ 0.39 $ 0.32 $ 0.92 $ 0.40 $ 2.03 Net income available to common shareholders $ 0.39 $ 0.32 $ 0.92 $ 0.40 $ 2.03
First Second Third Fourth Year Ended December 31, 2004 Quarter Quarter Quarter Quarter Total (1) ---------- ---------- ---------- ---------- ---------- Total revenues $ 177,280 $ 181,059 $ 198,394 $ 224,700 $ 781,433 Income from operations 77,427 79,103 83,457 103,701 343,688 Income before discontinued operations 34,290 24,989 23,581 35,993 118,853 Discontinued operations 317 1,134 598 209 2,258 Net income available to common shareholders 30,189 21,708 19,764 31,141 102,802 Basic per share data: Income before discontinued operations, net of preferred dividends $ 0.49 $ 0.34 $ 0.31 $ 0.50 $ 1.63 Net income available to common shareholders $ 0.50 $ 0.36 $ 0.32 $ 0.50 $ 1.67 Diluted per share data: Income before discontinued operations, net of preferred dividends $ 0.47 $ 0.32 $ 0.30 $ 0.48 $ 1.57 Net income available to common shareholders $ 0.48 $ 0.34 $ 0.31 $ 0.48 $ 1.61 (1) The sum of quarterly earnings per share may differ from annual earnings per share due to rounding.
101 CBL & Associates Properties, Inc. Schedule II Valuation and Qualifying Accounts (in thousands)
Year Ended December 31, ----------------------------------------------------- 2005 2004 2003 ----------------------------------------------------- Allowance for doubtful accounts: Balance, beginning of year $ 3,237 $ 3,237 $ 2,861 Provision for credit losses 1,296 2,754 2,083 Bad debts charged against allowance (1,094) (2,754) (1,707) ----------------------------------------------------- Balance, end of year $ 3,439 $ 3,237 $ 3,237 =====================================================
102 Schedule III CBL & ASSOCIATES PROPERTIES, INC. REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION At December 31, 2005 (In thousands)
Gross Amounts at Which Carried at Close of Period Initial Cost(A) -------------------------- ------------------ (D) Buildings Costs Buildings Accumu- Date of (B) and Capitalized Sales of and lated Const- Encumbr- Improv- Subsequent to Outparcel Improve- Depre- ruction/ Description /Location ances Land ments Acquisition Land Land ments Total(C) ciation Acquisition - --------------------- -------- -------- ---------- -------------- ---------- ------- --------- -------- -------- ------------ MALLS: Arbor Place $76,525 $7,862 $95,330 $18,675 $ 0 $ 7,862 114,005 $121,867 $(21,117) 1998-1999 Douglasville, GA Asheville Mall 67,780 7,139 58,747 30,551 (805) 6,334 89,298 95,632 (16,444) 1998 Asheville, NC Bonita Lakes Mall 25,789 4,924 31,933 5,768 (985) 4,924 36,716 41,640 (9,796) 1997 Meridian, MS Brookfield Square 104,876 8,646 78,703 10,982 0 8,646 89,685 98,331 (10,867) 2001 Brookfield, WI Burnsville Center 68,272 12,804 71,355 25,619 0 12,804 96,974 109,778 (19,159) 1998 Burnsville, MN Cary Towne Center 86,114 23,688 74,432 11,498 0 23,688 85,930 109,618 (11,010) 2001 Cary, NC Chapel Hill Mall 64,000 6,578 68,043 1,590 0 6,578 69,633 76,211 (3,207) 2004 Akron, OH Cherryvale Mall 93,774 11,892 63,973 25,750 (1,667) 11,608 88,340 99,948 (9,696) 2001 Rockford, IL Citadel Mall 29,939 11,443 44,008 9,896 0 11,896 53,451 65,347 (6,356) 2001 Charleston, SC Cross Creek Mall 70,446 18,717 101,983 7,562 0 19,155 109,107 128,262 (7,969) 2003 Fayetteville, NC College Square 0 2,954 17,787 11,123 (27) 2,927 28,910 31,837 (10,452) 1987-1988 Morristown, TN Columbia Place 32,471 9,645 52,348 2,896 (423) 9,222 55,244 64,466 (6,803) 2002 Columbia, SC Coolsprings Galleria 128,574 13,527 86,755 29,201 0 13,527 115,956 129,483 (40,736) 1989-1991 Nashville, TN 103 Gross Amounts at Which Carried at Close of Period Initial Cost(A) -------------------------- ------------------ (D) Buildings Costs Buildings Accumu- Date of (B) and Capitalized Sales of and lated Const- Encumbr- Improv- Subsequent to Outparcel Improve- Depre- ruction/ Description /Location ances Land ments Acquisition Land Land ments Total(C) ciation Acquisition - --------------------- -------- -------- ---------- -------------- ---------- ------- --------- -------- -------- ------------ Eastland Mall 59,400 5,746 75,893 0 0 5,746 75,893 81,639 (229) 2005 Bloomington, IL East Towne Mall 79,807 4,496 63,867 35,626 0 4,496 99,493 103,989 (10,557) 2002 Madison, WI Eastgate Mall 56,335 13,046 44,949 22,142 0 13,046 67,091 80,137 (7,797) 2001 Cincinnati, OH Fashion Square 58,591 15,218 64,971 9,807 0 15,218 74,778 89,996 (9,809) 2001 Saginaw, MI Fayette Mall 93,028 20,707 84,267 35,295 0 20,707 119,562 140,269 (11,501) 2001 Lexington, KY Frontier Mall (E) 0 2,681 15,858 11,372 0 2,681 27,230 29,911 (11,080) 1984-1985 Cheyenne, WY Foothills Mall 0 4,536 14,901 9,086 0 4,536 23,987 28,523 (9,383) 1996 Maryville, TN Georgia Square (E) 0 2,982 31,071 12,985 (23) 2,959 44,056 47,015 (20,025) 1982 Athens, GA Greenbrier Mall 92,650 3,181 107,355 2,233 0 2,555 110,214 112,769 (5,338) 2004 Chesapeake, VA Gulf Coast Town Center 42,020 18,816 40,471 0 0 18,816 40,471 59,287 (210) 2005 Ft. Meyers, FL Hamilton Place 61,640 3,202 42,619 18,338 (441) 2,761 60,957 63,718 (23,434) 1986-1987 Chattanooga, TN Hanes Mall 105,990 17,176 133,376 24,035 (948) 16,808 156,831 173,639 (19,592) 2001 Winston-Salem, NC Harford Mall (E) 0 8,699 45,704 627 0 8,699 46,331 55,030 (3,815) 2003 Bel Air, MD 104 Gross Amounts at Which Carried at Close of Period Initial Cost(A) -------------------------- ------------------ (D) Buildings Costs Buildings Accumu- Date of (B) and Capitalized Sales of and lated Const- Encumbr- Improv- Subsequent to Outparcel Improve- Depre- ruction/ Description /Location ances Land ments Acquisition Land Land ments Total(C) ciation Acquisition - --------------------- -------- -------- ---------- -------------- ---------- ------- --------- -------- -------- ------------ Hickory Hollow Mall 86,136 13,813 111,431 16,901 0 13,813 128,332 142,145 (23,693) 1998 Nashville, TN Hickory Point 33,116 10,732 31,728 0 0 10,732 31,728 42,460 (124) 2005 Forsyth, IL Honey Creek Mall 34,339 3,108 83,358 1,048 0 3,108 84,406 87,514 (4,386) 2004 Terre Haute, IN JCPenney (E) 0 0 2,650 0 0 0 2,650 2,650 (1,413) 1983 Maryville, TN Janesville Mall 12,816 8,074 26,009 2,878 0 8,074 28,887 36,961 (6,419) 1998 Janesville, WI Jefferson Mall 42,629 13,125 40,234 11,499 0 13,125 51,733 64,858 (6,218) 2001 Louisville, KY The Lakes Mall (E) 0 3,328 42,366 9,672 0 3,328 52,038 55,366 (9,520) 2000-2001 Muskegon, MI Lakeshore Mall (E) 0 1,443 28,819 4,070 (169) 1,274 32,889 34,163 (10,792) 1991-1992 Sebring, FL Laurel Park 60,104 13,291 92,579 0 13,291 92,579 105,870 (2,490) 2005 Livonia, MI Layton Hills Mall 102,850 20,464 99,846 0 0 20,464 99,846 120,310 (291) 2005 Layton, UT Madison Square (E) 0 17,596 39,186 4,196 0 17,596 43,382 60,978 (5,603) 1984 Huntsville, AL Mall del Norte 113,400 21,734 142,062 3,939 0 21,734 146,001 167,735 (5,070) 2004 Laredo, TX Mall of Acadiana 0 22,511 145,769 0 0 22,511 145,769 168,280 (3,366) 2005 Lafayette, LA 105 Gross Amounts at Which Carried at Close of Period Initial Cost(A) -------------------------- ------------------ (D) Buildings Costs Buildings Accumu- Date of (B) and Capitalized Sales of and lated Const- Encumbr- Improv- Subsequent to Outparcel Improve- Depre- ruction/ Description /Location ances Land ments Acquisition Land Land ments Total(C) ciation Acquisition - --------------------- -------- -------- ---------- -------------- ---------- ------- --------- -------- -------- ------------ Meridian Mall 91,090 529 103,678 55,560 0 2,232 157,535 159,767 (27,798) 1998 Lansing, MI Midland Mall 30,000 10,321 29,429 6,080 0 10,321 35,509 45,830 (4,979) 2001 Midland, MI Monroeville Mall 133,053 21,217 177,214 2,519 0 21,263 179,687 200,950 (7,288) 2004 Pittsburgh, PA Northpark Mall 41,294 9,977 65,481 4,294 0 10,962 68,790 79,752 (2,766) 2004 Joplin, MO Northwoods Mall 61,033 14,867 49,647 15,465 (777) 14,090 65,112 79,202 (7,303) 2001 Charleston, SC Oak Hollow Mall 43,073 5,237 54,775 4,438 0 5,237 59,213 64,450 (17,886) 1994-1995 High Point, NC Oak Park Mall 276,174 23,119 318,759 0 23,119 318,759 341,878 (886) 2005 Overland Park, KS Old Hickory Mall 33,803 15,527 29,413 3,343 0 15,527 32,756 48,283 (4,243) 2001 Jackson, TN Panama City Mall 39,290 9,017 37,454 11,088 0 12,168 45,391 57,559 (4,258) 2002 Panama City, FL Parkdale Mall 54,274 20,723 47,390 30,172 (307) 20,416 77,562 97,978 (8,432) 2001 Beaumont, TX Park Plaza Mall 46,607 6,297 81,638 3,560 0 6,304 85,191 91,495 (3,299) 2004 Little Rock, AR Pemberton Square(E) 0 1,191 14,305 580 (947) 244 14,885 15,129 (6,601) 1986 Vicksburg, MS Post Oak Mall (E) 0 3,936 48,948 (1,471) (327) 3,608 47,478 51,086 (14,323) 1984-1985 College Station, TX 106 Gross Amounts at Which Carried at Close of Period Initial Cost(A) -------------------------- ------------------ (D) Buildings Costs Buildings Accumu- Date of (B) and Capitalized Sales of and lated Const- Encumbr- Improv- Subsequent to Outparcel Improve- Depre- ruction/ Description /Location ances Land ments Acquisition Land Land ments Total(C) ciation Acquisition - --------------------- -------- -------- ---------- -------------- ---------- ------- --------- -------- -------- ------------ Randolph Mall 14,740 4,547 13,927 7,036 0 4,547 20,963 25,510 (2,513) 2001 Asheboro, NC Regency Mall 33,427 3,384 36,839 12,444 0 4,188 48,479 52,667 (6,367) 2001 Racine, WI Richland Mall (E) 0 9,874 35,238 4,035 0 9,887 39,260 49,147 (3,893) 2002 Waco, TX Rivergate Mall 69,614 17,896 86,767 16,817 0 17,896 103,584 121,480 (20,483) 1998 Nashville, TN River Ridge Mall 0 4,824 59,052 715 0 4,825 59,766 64,591 (5,101) 2003 Lynchburg, VA Southaven Towne Center 27,849 8,255 29,380 0 0 8,255 29,380 37,635 (237) 2005 Southaven, MS Southpark Mall 40,192 9,501 73,262 2,734 0 9,503 75,994 85,497 (5,198) 2003 Colonial Heights, VA Stroud Mall 31,252 14,711 23,936 9,522 0 14,711 33,458 48,169 (6,013) 1998 Stroudsburg, PA St. Clair Square 65,596 11,027 75,620 24,584 0 11,027 100,204 111,231 (20,023) 1996 Fairview Heights, IL Sunrise Mall (E) 0 11,156 59,047 3,386 0 11,156 62,433 73,589 (5,913) 2003 Brownsville, TX Towne Mall (E) 0 3,101 17,033 830 0 3,101 17,863 20,964 (2,523) 2001 Franklin, OH Turtle Creek Mall 0 2,345 26,418 7,083 0 3,535 32,311 35,846 (11,695) 1993-1995 Hattiesburg, MS Twin Peaks (E) 0 1,874 22,022 20,178 (46) 1,828 42,200 44,028 (17,165) 1984 Longmont, CO 107 Gross Amounts at Which Carried at Close of Period Initial Cost(A) -------------------------- ------------------ (D) Buildings Costs Buildings Accumu- Date of (B) and Capitalized Sales of and lated Const- Encumbr- Improv- Subsequent to Outparcel Improve- Depre- ruction/ Description /Location ances Land ments Acquisition Land Land ments Total(C) ciation Acquisition - --------------------- -------- -------- ---------- -------------- ---------- ------- --------- -------- -------- ------------ Valley View 50,112 15,985 77,771 2,916 0 15,987 80,685 96,672 (8,430) 2003 Roanoke, VA Volusia Mall 56,806 2,526 120,242 545 0 2,526 120,787 123,313 (5,965) 2004 Daytona, FL Walnut Square (E) 0 50 15,138 6,654 0 50 21,792 21,842 (10,911) 1984-1985 Dalton, GA Wausau Center 12,927 5,231 24,705 7,973 (5,231) 0 32,678 32,678 (4,208) 2001 Wausau, WI West Towne Mall 112,728 9,545 83,084 29,709 0 9,545 112,793 122,338 (12,433) 2002 Madison, WI WestGate Mall 52,953 2,149 23,257 41,727 (432) 1,742 64,959 66,701 (17,862) 1995 Spartanburg, SC Westmoreland Mall 79,996 4,621 84,215 11,822 0 4,621 96,037 100,658 (8,016) 2002 Greensburg, PA York Galleria 49,965 5,757 63,316 3,384 0 5,757 66,700 72,457 (11,441) 1995 York, PA ASSOCIATED CENTERS Annex at Monroeville 0 716 29,496 22 0 717 29,517 30,234 (1,305) 2004 Monroeville, PA Bonita Lakes Crossin 8,081 794 4,786 8,037 0 794 12,823 13,617 (2,372) 1997 Meridian, MS Chapel Hill Suburban 2,500 925 2,520 80 0 925 2,600 3,525 (198) 2004 Akron, OH Coolsprings Crossing (E) 0 2,803 14,985 4,428 0 3,554 18,662 22,216 (6,221) 1991-1993 Nashville, TN 108 Gross Amounts at Which Carried at Close of Period Initial Cost(A) -------------------------- ------------------ (D) Buildings Costs Buildings Accumu- Date of (B) and Capitalized Sales of and lated Const- Encumbr- Improv- Subsequent to Outparcel Improve- Depre- ruction/ Description /Location ances Land ments Acquisition Land Land ments Total(C) ciation Acquisition - --------------------- -------- -------- ---------- -------------- ---------- ------- --------- -------- -------- ------------ Courtyard at Hickory Hollow 4,010 3,314 2,771 420 0 3,314 3,191 6,505 (559) 1998 Nashville, TN Eastgate Crossing 9,980 707 2,424 854 0 707 3,278 3,985 (345) 2001 Cincinnati, OH Foothills Plaza (E) 0 132 2,132 558 0 148 2,674 2,822 (1,398) 1984-1988 Maryville, TN Foothills Plaza Expansion 0 137 1,960 240 0 141 2,196 2,337 (919) 1984-1988 Maryville, TN Frontier Square (E) 0 346 684 236 (86) 260 920 1,180 (391) 1985 Cheyenne, WY General Cinema (E) 0 100 1,082 177 0 100 1,259 1,359 (798) 1984 Athens, GA Gunbarrel Pointe (E) 0 4,170 10,874 214 0 4,170 11,088 15,258 (1,475) 2000 Chattanooga, TN Hamilton Corner 2,023 960 3,670 6,355 (226) 734 10,025 10,759 (1,842) 1986-1987 Chattanooga, TN Hamilton Crossing 0 4,014 5,906 701 (1,370) 2,644 6,607 9,251 (2,492) 1987 Chattanooga, TN Harford Annex (E) 0 2,854 9,718 7 0 2,854 9,725 12,579 (486) 2003 Bel Air, MD The Landing at Arbor Place 8,638 4,993 14,330 467 0 4,993 14,797 19,790 (3,196) 1998-1999 Douglasville, GA 109 Gross Amounts at Which Carried at Close of Period Initial Cost(A) -------------------------- ------------------ (D) Buildings Costs Buildings Accumu- Date of (B) and Capitalized Sales of and lated Const- Encumbr- Improv- Subsequent to Outparcel Improve- Depre- ruction/ Description /Location ances Land ments Acquisition Land Land ments Total(C) ciation Acquisition - --------------------- -------- -------- ---------- -------------- ---------- ------- --------- -------- -------- ------------ Madison Plaza (E) 0 473 2,888 1,014 0 473 3,902 4,375 (1,624) 1984 Huntsville, AL Parkdale Crossing 8,570 2,994 7,408 1,919 (355) 2,639 9,327 11,966 (707) 2002 Beaumont, TX The Shoppes At Hamilton Place 0 4,894 11,700 26 0 4,894 11,726 16,620 (781) 2003 Chattanooga, TN Sunrise Commons (E) 0 1,013 7,525 (153) 0 1,013 7,372 8,385 (492) 2003 Brownsville, TX The Shoppes at Panama City 0 1,010 8,140 78 0 1,010 8,218 9,228 (349) 2004 Panama City, FL The Terrace 0 4,166 9,929 14 0 4,166 9,943 14,109 (2,224) 1997 Chattanooga, TN Village at Monroeville 0 932 0 17,731 0 934 17,729 18,663 (562) 2004 Monroeville, PA Village at Rivergate 3,288 2,641 2,808 2,596 0 2,641 5,404 8,045 (790) 1998 Nashville, TN West Towne Crossing 0 1,151 2,955 0 0 1,151 2,955 4,106 (326) 1998 Madison, WI WestGate Crossing 9,483 1,082 3,422 5,721 0 1,082 9,143 10,225 (2,616) 1997 Spartanburg, SC Westmoreland South 0 2,898 21,167 6,052 0 2,898 27,219 30,117 (1,726) 2002 Greensburg, PA COMMUNITY CENTERS Chicopee Marketplace 0 4,341 14,491 0 0 4,341 14,491 18,832 (116) 2005 Chicopee, MA 110 Gross Amounts at Which Carried at Close of Period Initial Cost(A) -------------------------- ------------------ (D) Buildings Costs Buildings Accumu- Date of (B) and Capitalized Sales of and lated Const- Encumbr- Improv- Subsequent to Outparcel Improve- Depre- ruction/ Description /Location ances Land ments Acquisition Land Land ments Total(C) ciation Acquisition - --------------------- -------- -------- ---------- -------------- ---------- ------- --------- -------- -------- ------------ CBL Center 14,369 140 24,675 842 - 140 25,517 25,657 (5,057) 2001 Chattanooga, TN Cobblestone Village 0 2,122 6,972 0 0 2,122 6,972 9,094 (15) 2005 Royal Palm Beach, FL Fashion Square 0 4,169 69 2,876 0 4,169 2,945 7,114 (34) 2004 Orange Park, FL Massard Crossing 5,792 2,879 5,176 37 0 2,879 5,213 8,092 (537) 2004 Ft. Smith, AR Pemberton Plaza 1,979 1,284 1,379 0 0 1,284 1,379 2,663 (136) 2004 Vicksburg, MS Willowbrook Plaza 29,636 15,079 27,376 377 0 15,079 27,753 42,832 (2,823) 2004 Houston, TX OTHER Other - Land 11,162 591 833 690 - 592 1,522 2,114 (775) Developments in Progress Consisting of Construction and Development Properties (F) 690,285 - - - - - - 133,509 ------------ -------- ---------- ------------ --------- -------- --------- ------------ TOTALS $4,341,055 $780,665 $4,871,387 $839,198 $(15,592) $776,989 $5,698,669 $6,609,167 $(727,907) ============ ======== ========== ============ ========= ======== ========= ============ ============ HELD FOR SALE - - - - - - $ 63,168 $ 63,168 ------------ -------- ---------- ------------ --------- -------- --------- ------------ TOTALS $4,341,055 $780,665 $4,871,387 $839,198 $(15,592) $776,989 $5,698,669 $6,672,335 $(727,907) ============ ======== ========== ============ ========= ======== ========= ============ ============ (A) Initial cost represents the total cost capitalized including carrying cost at the end of the first fiscal year in which the property opened or was acquired. (B) Encumbrances represent the mortgage notes payable balance at December 31, 2005. (C) The aggregate cost of land and buildings and improvements for federal income tax purposes is approximately $5.3 billion. 111 (D) Depreciation for all properties is computed over the useful life which is generally 40 years for buildings, 10-20 years for certain improvements and 7 to 10 years for equipment and fixtures. (E) Property is pledged as collateral on the secured lines of credit used for developments and acquisitions. (F) Includes non-property mortgages and credit line mortgages.
112 CBL & ASSOCIATES PROPERTIES, INC. REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION The changes in real estate assets and accumulated depreciation for the years ending December 31, 2005, 2004, and 2003 are set forth below (in thousands):
Year Ended December 31, ----------------------------------------------------- 2005 2004 2001 ----------------------------------------------------- REAL ESTATE ASSETS: Balance at beginning of period $5,470,244 $4,379,834 $4,046,325 Additions during the period: Additions and improvements 376,319 222,233 227,025 Acquisitions of real estate assets 916,769 954,528 506,865 Consolidation of real estate assets as a result of FIN 46(R) - 52,860 - Deductions during the period: Cost of sales and retirements (87,869) (121,598) (389,693) Accumulated depreciation on assets held for sale (A) (1,539) (5,093) (8,632) Accumulated depreciation on impaired assets (B) - (5,840) - Loss on impairment of real estate assets (C) (1,029) (2,966) - Abandoned projects (560) (3,714) (2,056) ----------------------------------------------------- Balance at end of period $6,672,335 $5,470,244 $4,379,834 =====================================================
ACCUMULATED DEPRECIATION: Balance at beginning of period $575,464 $467,614 $434,840 Depreciation expense 169,240 134,146 111,473 Consolidation of real estate assets as a result of FIN 46(R) - 1,988 - Accumulated depreciation on assets held for sale (A) (1,539) (5,093) (8,632) Accumulated depreciation on impaired assets (B) - (5,840) - Real estate assets sold or retired (15,258) (17,351) (70,067) ----------------------------------------------------- Balance at end of period $727,907 $575,464 $467,614 ===================================================== (A) Reflects the reclassification of accumulated depreciation against the cost of the assets to reflect assets held for sale at net carrying value. (B) Reflects the write-off of accumulated depreciation against the cost of the assets to establish a new cost basis for assets that were determined to be impaired. (C) Represents loss on impairment recorded to reduce the carrying values of impaired assets to their estimated fair values.
113 SCHEDULE IV CBL & ASSOCIATES PROPERTIES, INC. MORTGAGE NOTES RECEIVABLE ON REAL ESTATE AT DECEMBER 31, 2005 (In thousands)
Principal Amount Of Mortgage Carrying Subject To Final Monthly Balloon Amount Of Delinquent Name Of Interest Maturity Payment Payment At Face Amount Mortgage Principal Center/Location Rate Date Amount(1) Maturity Prior Liens Of Mortgage (2) Or Interest --------------- --------- -------- ---------- --------- ----------- ----------- ---------- ----------- FIRST MORTGAGES: Coastal Grand-Myrtle 7.75% Oct-2014 $ 58(3) $ 9,000 None $9,000 $ 9,000 $ - Beach Myrtle Beach, SC Gaston Square 7.50% Jun-2019 None Gastonia, NC 16 - 1,870 1,560 - Park Place 3.63% Apr-2007 2,602 None Chattanooga, TN 19 3,118 2,789 - Signal Hills Crossing 7.50% Jun-2019 14 - None 1,415 1,378 - Statesville, NC Village Square 4.50% Mar-2007 10(3) 2,627 None 2,627 2,627 - Houghton Lake, MI and Village at Wexford Wexford, MI Aug-2006- OTHER 9.50% Jan-2047 36 204 6,387 763 - ---------- --------- ----------- ----------- ---------- ----------- $ 153 $14,433 $24,417 $ 18,117 $ - ========== ========= =========== =========== ========== =========== (1) Equal monthly installments comprised of principal and interest unless otherwise noted. (2) The aggregate carrying value for federal income tax purposes was $18,117 at December 31, 2005. (3) Payment represents interest only.
The changes in mortgage notes receivable for the years ending December 31, 2005, 2004, and 2003 were as follows (in thousands):
Year Ended December 31, ------------------------------------------------------- 2005 2004 2003 ------------------------------------------------------- Beginning balance $ 27,804 $ 36,169 $ 23,074 Additions 3,486 9,225 14,934 Payments (13,173) (17,590) (1,839) --------------- --------------- ----------------- Ending balance $ 18,117 $ 27,804 $ 36,169 =============== =============== =================
114 EXHIBIT INDEX
Exhibit Number Description - -------- ----------- 3.1 Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Company, dated May 10, 2005 (s) 3.2 Amended and Restated Certificate of Incorporation of the Company, as amended through May 10, 2005 (s) 3.3 Amended and Restated Bylaws of the Company, dated October 27, 1993(a) 4.1 See Amended and Restated Certificate of Incorporation of the Company, as amended, relating to the Common Stock, Exhibits 3.1, 3.2 and 3.3 above 4.2 Certificate of Designations, dated June 25, 1998, relating to the 9.0% Series A Cumulative Redeemable Preferred Stock (g) 4.3 Certificate of Designation, dated April 30, 1999, relating to the Series 1999 Junior Participating Preferred Stock (g) 4.4 Terms of Series J Special Common Units of the Operating Partnership, pursuant to Article 4.4 of the Second Amended and Restated Partnership Agreement of the Operating Partnership (g) 4.5 Certificate of Designations, dated June 11, 2002, relating to the 8.75% Series B Cumulative Redeemable Preferred Stock (h) 4.6 Acknowledgement Regarding Issuance of Partnership Interests and Assumption of Partnership Agreement (j) 4.7 Certificate of Designations, dated August 13, 2003, relating to the 7.75% Series C Cumulative Redeemable Preferred Stock (i) 4.8 Certificate of Correction of the Certificate of Designations relating to the 7.75% Series C Cumulative Redeemable Preferred Stock (m) 4.9 Certificate of Designations, dated December 10, 2004, relating to the 7.375% Series D Cumulative Redeemable Preferred Stock (m) 4.10 Terms of the Series S Special Common Units of the Operating Partnership, pursuant to the Third Amendment to the Second Amended and Restated Partnership Agreement of the Operating Partnership (o) 4.11 Terms of the Series L Special Common Units of the Operating Partnership, pursuant to the Fourth Amendment to the Second Amended and Restated Partnership Agreement of the Operating Partnership, see Exhibit 10.1.1 115 Exhibit Number Description - -------- ----------- 4.12 Terms of the Series K Special Common Units of the Operating Partnership, pursuant to the First Amendment to the Third Amended and Restated Partnership Agreement of the Operating Partnership, see Exhibit 10.1.3 10.1.1 Fourth Amendment to the Second Amended and Restated Partnership Agreement of the Operating Partnership, dated as of June 1, 2005 (s) 10.1.2 Third Amended and Restated Agreement of Limited Partnership of the Operating Partnership, dated June 15, 2005 (r) 10.1.3 First Amendment to Third Amended and Restated Agreement of Limited Partnership of the Operating Partnership, dated as of November 16, 2005 (v) 10.2.1 Rights Agreement by and between the Company and BankBoston, N.A., dated as of April 30, 1999 (d) 10.2.2 Amendment No. 1 to Rights Agreement by and between the Company and SunTrust Bank (successor to BankBoston), dated January 31, 2001 (g) 10.3 Property Management Agreement between the Operating Partnership and the Management Company (a) 10.4 Property Management Agreement relating to Retained Properties (a) 10.5.1 CBL & Associates Properties, Inc. Amended and Restated Stock Incentive Plan (k)+ 10.5.2 Form of Non-Qualified Stock Option Agreement for all participants+ (j) 10.5.3 Form of Stock Restriction Agreement for restricted stock awards+ (j) 10.5.4 Deferred Compensation Arrangement, dated January 1, 1997, for Eric P. Snyder+ (j) 10.5.5 Form of Stock Restriction agreement for restricted stock awards with annual installment vesting+ (k) 10.5.6 Amendment No. 1 to CBL & Associates Properties, Inc. Amended and Restated Stock Incentive Plan+ (o) 10.5.7 Amendment No. 2 to CBL & Associates Properties, Inc. Amended and Restated Stock Incentive Plan+ (o) 10.5.8 Form of Senior Executive Deferred Compensation Arrangements, dated as of January 1, 2004, between the Company and Charles B. Lebovitz, Stephen D. Lebovitz, John N. Foy and Ben Landress+] 10.5.9 Form of Stock Restriction Agreement for restricted stock awards in 2004 and subsequent years+ (q) 116 Exhibit Number Description - -------- ----------- 10.5.10 Letter amending Deferred Compensation Arrangement for Eric P. Snyder, dated October 24, 2005+ (t) 10.6 Form of Indemnification Agreements between the Company and the Management Company and their officers and directors (a) 10.7.1 Employment Agreement for Charles B. Lebovitz (a)+ 10.7.2 Employment Agreement for John N. Foy (a)+ 10.7.3 Employment Agreement for Stephen D. Lebovitz (a)+ 10.7.4 Summary Description of CBL & Associates Properties, Inc. Director Compensation Arrangements+ (o) 10.7.5 Summary Description of CBL & Associates Properties, Inc. Annual Base Salary and Bonus Arrangements Approved for Named Executive Officers in October 2004+ (o) 10.7.6 Summary Description of May 9, 2005 Compensation Committee Action Confirming 2005 Executive Base Salary Levels+ (s) 10.7.7 Summary Description of May 9, 2005 Compensation Committee Action Approving 2005 Executive Bonus Opportunities+ (s) 10.7.8 Summary Description of October 26, 2005 Compensation Committee Action Approving 2006 Executive Base Salary Levels+] 10.7.9 Summary Description of October 26, 2005 Compensation Committee Action Approving Adjustments to 2005 Executive Bonus Opportunities+] 10.7.10 Summary Description of May 9, 2005 Compensation Committee Action Approving 2006 Executive Bonus Opportunities+] 10.8 Subscription Agreement relating to purchase of the Common Stock and Preferred Stock of the Management Company (a) 10.9.1 Option Agreement relating to certain Retained Properties (a) 10.9.2 Option Agreement relating to Outparcels (a) 10.10.1 Property Partnership Agreement relating to Hamilton Place (a) 10.10.2 Property Partnership Agreement relating to CoolSprings Galleria (a) 10.11.1 Acquisition Option Agreement relating to Hamilton Place (a) 10.11.2 Acquisition Option Agreement relating to the Hamilton Place Centers (a) 117 Exhibit Number Description - -------- ----------- 10.12.1 Unsecured Credit Agreement by and among the Operating Partnership and Wells Fargo Bank, N.A., et al., dated as of August 27, 2004 (l) 10.12.2 First Amendment to Unsecured Credit Agreement by and among the Operating Partnership and Wells Fargo Bank, N.A., et al., dated as of September 21, 2005 (u) 10.12.3 Second Amendment to Unsecured Credit Agreement by and among the Operating Partnership and Wells Fargo Bank, N.A., et al., dated as of February 14, 2006] 10.13 Loan agreement between Rivergate Mall Limited Partnership, The Village at Rivergate Limited Partnership, Hickory Hollow Mall Limited Partnership, and The Courtyard at Hickory Hollow Limited Partnership and Midland Loan Services, Inc., dated July 1, 1998 (b) 10.14.1 Master Contribution Agreement, dated as of September 25, 2000, by and among the Company, the Operating Partnership and the Jacobs entities (e) 10.14.2 Amendment to Master Contribution Agreement, dated as of September 25, 2000, by and among the Company, the Operating Partnership and the Jacobs entities (f) 10.15.1 Share Ownership Agreement by and among the Company and its related parties and the Jacobs entities, dated as of January 31, 2001 (f) 10.15.2 Voting and Standstill Agreement dated as of September 25, 2000 (x) 10.15.3 Amendment, effective as of January 1, 2006, to Voting and Standstill Agreement dated as of September 25, 2000 10.16.1 Registration Rights Agreement by and between the Company and the Holders of SCU's listed on Schedule 1 thereto, dated as of January 31, 2001 (f) 10.16.2 Registration Rights Agreement by and between the Company and Frankel Midland Limited Partnership, dated as of January 31, 2001 (f) 10.16.3 Registration Rights Agreement by and between the Company and Hess Abroms Properties of Huntsville, dated as of January 31, 2001 (f) 10.16.4 Registration Rights Agreement by and between the Company and the Holders of Series S Special Common Units of the Operating Partnership listed on Schedule A thereto, dated July 28, 2004 (o) 10.16.5 Form of Registration Rights Agreements between the Company and Certain Holders of Series K Special Common Units of the Operating Partnership, dated as of November 16, 2005 (v) 10.17.1 Sixth Amended and Restated Credit Agreement by and among the Operating Partnership and Wells Fargo Bank, National Association, et al., dated February 28, 2003 (o) 118 Exhibit Number Description - -------- ----------- 10.17.2 First Amendment to Sixth Amended and Restated Credit Agreement between the Operating Partnership and Wells Fargo Bank, National Association, et al., dated May 3, 2004 (o) 10.17.3 Second Amendment to Sixth Amended and Restated Credit Agreement between the Operating Partnership and Wells Fargo Bank, National Association, et al., dated September 21, 2005 (u) 10.17.4 Third Amendment to Sixth Amended and Restated Credit Agreement between the Operating Partnership and Wells Fargo Bank, National Association, et al., dated February 14, 2006 10.18 Revolving Credit Loan Agreement between the Operating Partnership and SouthTrust Bank, dated September 24, 2003 (o) 10.19.1 Third Amended and Restated Loan Agreement by and between the Operating Partnership and SunTrust Bank, dated as of September 24, 2003 (o) 10.19.2 First Amendment to Third Amended and Restated Loan Agreement by and between the Operating Partnership and SunTrust Bank, dated April 1, 2004 (o) 10.19.3 Second Amendment to Third Amended and Restated Loan Agreement by and between the Operating Partnership and SunTrust Bank, dated July 11, 2005 to be effective as of April 1, 2005 10.20.1 Amended and Restated Loan Agreement between the Operating Partnership, The Lakes Mall, LLC, Lakeshore Sebring Limited Partnership and First Tennessee Bank National Association, dated December 30, 2004 (o) 10.20.2 Amended and Restated Loan Agreement between the Operating Partnership, The Lakes Mall, LLC, Lakeshore Sebring Limited Partnership and First Tennessee Bank National Association, dated July 29, 2004 (o) 10.20.3 Amended and Restated Loan Agreement between the Operating Partnership, The Lakes Mall, LLC, Lakeshore/Sebring Limited Partnership and First Tennessee Bank National Association, dated March 9, 2005 (p) 10.20.4 Amended and Restated Loan Agreement between the Operating Partnership, The Lakes Mall, LLC, Lakeshore/Sebring Limited Partnership and First Tennessee Bank National Association, dated December 16, 2005 10.21 Amended and Restated Limited Liability Company Agreement of JG Gulf Coast Town Center LLC by and between JG Gulf Coast Member LLC, an Ohio limited liability company and CBL/Gulf Coast, LLC, a Florida limited liability company, dated April 27, 2005 (s) 10.23.1 Contribution Agreement and Joint Escrow Instructions between the Company and the owners of Oak Park Mall named therein, dated as of October 17, 2005 (v) 119 Exhibit Number Description - -------- ----------- 10.23.2 First Amendment to Contribution Agreement and Joint Escrow Instructions between the Company and the owners of Oak Park Mall named therein, dated as of November 8, 2005 (v) 10.23.3 Contribution Agreement and Joint Escrow Instructions between the Company and the owners of Eastland Mall named therein, dated as of October 17, 2005 (v) 10.23.4 First Amendment to Contribution Agreement and Joint Escrow Instructions between the Company and the owners of Eastland Mall named therein, dated as of November 8, 2005 (v) 10.23.5 Purchase and Sale Agreement and Joint Escrow Instructions between the Company and the owners of Hickory Point Mall named therein, dated as of October 17, 2005 (v) 10.23.6 Purchase and Sale Agreement and Joint Escrow Instructions between the Company and the owner of Eastland Medical Building, dated as of October 17, 2005 (v) 10.23.7 Letter Agreement, dated as of October 17, 2005, between the Company and the other parties to the acquisition agreements listed above for Oak Park Mall, Eastland Mall, Hickory Point Mall and Eastland Medical Building (v) 10.24.1 Master Transaction Agreement by and among REJ Realty LLC, JG Realty Investors Corp., JG Manager LLC, JG North Raleigh L.L.C., JG Triangle Peripheral South LLC, and the Operating Partnership, effective October 24, 2005 10.24.2 Amended and Restated Limited Liability Company Agreement of Triangle Town Member, LLC by and among CBL Triangle Town Member, LLC and REJ Realty LLC, JG Realty Investors Corp. and JG Manager LLC, effective as of November 16, 2005 12.1 Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Dividends 14 CBL & Associates Properties, Inc. Code of Business Conduct and Ethics, as amended by the First Amendment thereto dated February 8, 2006 (w) 21 Subsidiaries of the Company 23 Consent of Deloitte & Touche LLP 24 Power of Attorney 31.1 Certification pursuant to Securities Exchange Act Rule 13a-14(a) by the Chief Executive Officer, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification pursuant to Securities Exchange Act Rule 13a-14(a) by the Chief Financial Officer, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 120 Exhibit Number Description - -------- ----------- 32.1 Certification pursuant to Securities Exchange Act Rule 13a-14(b) by the Chief Executive Officer, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2 Certification pursuant to Securities Exchange Act Rule 13a-14(b) by the Chief Financial Officer as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(a) Incorporated by reference to Post-Effective Amendment No. 1 to the Company's Registration Statement on Form S-11 (No. 33-67372), as filed with the Commission on January 27, 1994.* (b) Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998.* (c) Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1999.* (d) Incorporated by reference to the Company's Current Report on Form 8-K, filed on May 4, 1999.* (e) Incorporated by reference from the Company's Current Report on Form 8-K, filed on October 27, 2000.* (f) Incorporated by reference from the Company's Current Report on Form 8-K, filed on February 6, 2001.* (g) Incorporated by reference from the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2001.* (h) Incorporated by reference from the Company's Current Report on Form 8-K, dated June 10, 2002, filed on June 17, 2002.* (i) Incorporated by reference from the Company's Registration Statement on Form 8-A, filed on August 21, 2003.* (j) Incorporated by reference from the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2002.* (k) Incorporated by reference from the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2003.* (l) Incorporated by reference from the Company's Current Report on Form 8-K, filed on October 21, 2004.* (m) Incorporated by reference from the Company's Registration Statement on Form 8-A, filed on December 10, 2004.* 121 (n) Incorporated by reference from the Company's Current Report on Form 8-K, filed December 14, 2004.* (o) Incorporated by reference from the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2004.* (p) Incorporated by reference from the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2005.* (q) Incorporated by reference from the Company's Current Report on Form 8-K, filed on May 13, 2005.* (r) Incorporated by reference from the Company's Current Report on Form 8-K, filed on June 21, 2005.* (s) Incorporated by reference from the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2005.* (t) Incorporated by reference from the Company's Current Report on Form 8-K, filed on October 28, 2005.* (u) Incorporated by reference from the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2005.* (v) Incorporated by reference from the Company's Current Report on Form 8-K, filed on November 22, 2005.* (w) Incorporated by reference from the Company's Current Report on Form 8-K, filed on February 14, 2006.* (x) Incorporated by reference from the Company's Proxy Statement dated December 19, 2000 for the Special Meeting of Shareholders held January 19, 2001.* + A management contract or compensatory plan or arrangement required to be filed pursuant to Item 15(b) of this report. * Commission File No. 1-12494 122 EX-10 3 exhibit1058.txt EXHIBIT 10.5.8 FORM OF COMPENSATION AGREEMENT Exhibit 10.5.8 SENIOR EXECUTIVE DEFERRED COMPENSATION ARRANGEMENT THIS SENIOR EXECUTVE DEFERRED COMPENSATION ARRANGEMENT (the "Arrangement") is put in place this 1st day of January, 2004 by CBL & Associates Management, Inc. and its affiliated entities (collectively, "CBL"), including but not limited to CBL & Associates Properties, Inc. (the "REIT"), for the benefit of __________________ (the "Executive"). The Arrangement is specifically designed and intended to be a non-funded and unsecured promise on the part of CBL to make certain payments to the Executive within the time parameters set forth herein. The Arrangement is not intended nor shall it be deemed an employee benefit plan subject to the Employee Retirement Income Security Act of 1974 ("ERISA") or a qualified retirement plan subject to provisions of the Internal Revenue Code of 1986 (the "Code"). 1. Objective. The objective and purpose of the Arrangement is to allow the Executive to defer compensation which shall be payable to him in the future as set forth herein. Pursuant to the elections provided to the Executive in this Arrangement, he may defer portions of his salary from CBL to be paid to him to dates in the future as set forth herein. 2. Creditor Status. The Executive shall be afforded no priority by virtue of this Arrangement over the secured or unsecured creditors of CBL but shall be a general unsecured creditor of CBL as to the amounts to be payable to him under this Arrangement. CBL's obligations under this Arrangement are merely promises to make the payments set forth herein at a future point in time pursuant to this Arrangement. Such payments shall not be funded in any way and shall be payable only from the general assets of CBL. 3. Elections. Prior to the beginning of any period for which the Executive may earn compensation (salary) from CBL, the Executive shall notify CBL of his desire to have all or any portion of said amounts deferred and paid to him pursuant to the terms of this Arrangement. By his execution below, the Executive has elected to defer salary increases that he may be entitled to receive from CBL from the date of this Arrangement and forward pursuant to the terms of this Arrangement. The parties acknowledge that Executive has been receiving salary increases for the years 1995 - 2003 in the form of shares of unrestricted common stock of the REIT ("REIT Stock") and that the Executive now has elected to receive such salary increases and his salary increase for the 2004 year and future years pursuant to the terms of this Arrangement. 4. Specific Calculation of Amounts, Issuance of REIT Stock, Vesting Period and Deemed Reinvestment of Dividends. On any specific salary increase to which the Executive may be entitled and for which the Executive has elected to defer pursuant to this Arrangement, the dollar amount of the salary increase shall be determined by CBL. Said amount shall then be divided into 12 equal amounts which shall, except as set forth in Section 5(b) below, vest in four equal quarterly increments on the last day of each calendar quarter over the period beginning in January of the year at issue and terminating on December 31 1 of the year at issue (the "Vesting Period"). Within fifteen days following the end of each calendar quarter of the Vesting Period, an amount of REIT Stock shall be issued to the Executive pursuant to this Arrangement equal to the amount of REIT Stock that could have been purchased by the Executive with the amount of the salary increase allocable to each calendar month during the quarter at the closing trading price of the REIT Stock on the New York Stock Exchange ("NYSE") on the last trading day of the particular months within the calendar quarter at issue. Following each calendar quarter there shall be additional shares of REIT Stock issued to the Executive in amounts equivalent to the shares of REIT Stock that could have been purchased by the reinvestment of dividends paid by the REIT on its common stock for the Vesting Period under the REIT's Dividend Reinvestment Plan (the "DRIP") as if dividends had been paid on the REIT Stock the Executive receives following the conclusion of the calendar quarter at issue. These additional shares shall be issued to the Executive due to the possibility that the Executive may not have received the shares of REIT Stock by the particular record date at issue with respect to the shares of REIT Stock issued to the Executive for the particular calendar quarter; provided, however, if the Executive has received the shares of REIT stock by the particular record date at issue, no further shares will be issued to Executive based on the deemed reinvestment of dividends as the Executive will receive those dividends by virtue of having the REIT Stock on the particular record date. An example of how the above stated procedures would work is as set forth below: Example: Executive receives a salary increase of $120,000 for year one. That amount is then broken down into equal monthly amounts of $10,000 per month. The trading price of the REIT's common stock on the last trading day of January was $50/share, of February was $52/share and of March was $53/share; a dividend of $.75/share is declared for shareholders of record as of March 30 and payable on April 18; and on April 18, the DRIP reinvestment price is $53.50/share. Monthly accruals of 200, 192.3 and 188.68 shares, respectively, occur under this Arrangement and Executive is issued 580.98 shares following the end of March after the March 30 record date. Executive is then issued an additional 8.15 shares representing the deemed dividend on the shares of REIT Stock that Executive received since Executive was not issued the shares by the record date of March 30. Had the Executive received the 580.98 shares on March 30, no further shares would be issued to the Executive via deemed dividend reinvestment as the Executive would receive the actual cash dividend on the 580.98 shares. On any issuance of REIT Stock to the Executive pursuant to this Arrangement, CBL shall determine, in its sole and absolute discretion, whether to cause the issuance of fractional shares or whether to cause the issuance of a whole number of shares or whether to pay fractional shares in the form of cash based on the closing trading price of the REIT Stock on the date one day prior to the date upon which the REIT Stock is to be issued to the Executive. 5. Termination of Arrangement. (a) This Arrangement shall be terminated and all vested amounts herein shall be paid to the Executive, his executor or representative, in the form of shares of REIT Stock, upon the earlier to occur of the following: (i) The death or disability of the Executive; 2 (ii) The termination of the Executive's employment with CBL; (iii) The sale or disposition of all assets of CBL to a non-related third party or a merger or consolidation of CBL where CBL is not the surviving entity; and/or (iv) On ten (10) days prior written notice by CBL to the Executive. (b) On any termination of this Arrangement other than a termination which is effective on the first day of a particular calendar quarter, Executive shall be entitled to receive the shares of REIT Stock that would have accrued and been payable to him at the end of the calendar quarter within which the termination occurs but such accrual shall be only from the first day of such calendar quarter to the date of termination and shall not include any increase for deemed DRIP reinvestment of dividends. 6. Restriction on Transfer of the Executive's Rights. During the term of this Arrangement, the Executive may not transfer, pledge, alienate, assign or otherwise dispose of all or any of his rights under this Arrangement. 7. Income Tax Recognition and Corresponding Compensation Deduction; Employment Taxes and Withholding. (a) Upon the issuance of the REIT Stock to Executive as set forth herein, the Executive shall recognize ordinary taxable income upon his receipt of same and CBL shall be entitled to deduct, as compensation paid, the said amount. (b) CBL, in its sole and absolute discretion, shall make such provisions and take such steps as it may deem necessary or appropriate for the withholding of all Federal, state, local and other taxes required by law to be withheld with respect to the shares of REIT Stock issued pursuant to this Arrangement pursuant to applicable provisions of the Internal Revenue Code of 1986, as amended (the "Code") including, but not limited to, the following: (i) deducting the amount of any such withholding taxes therefrom or from any other amounts then or thereafter payable to the Executive by CBL or any of its subsidiaries or affiliates; (ii) requiring the Executive, or the beneficiary or legal representative of the Executive, to pay to CBL the amount required to be withheld or to execute such documents as CBL deems necessary or desirable to enable CBL to satisfy its withholding obligations; and/or (iii) withholding from the shares of REIT Stock otherwise payable and/or deliverable one or more of such shares having an aggregate fair market value, determined as of the date the withholding tax obligation arises, less than or equal to the amount of the total withholding tax obligation. 8. Accredited Investor Status; Representations. Executive acknowledges that his interests under this Arrangement may be considered a security for purposes of the Securities Act of 1933, as amended (the "Securities Act"), and that CBL has not filed and will not file any registration statement in respect of such interests, and that CBL is relying on the Executive's representation in this Section 8 in order to qualify the offering of such securities (if the 3 interests are considered as securities) for exemption from registration under the Securities Act. Executive hereby represents and warrants that he is an "Accredited Investor" within the meaning of Section 501(a) of Regulation D promulgated under the Securities Act. Executive agrees that he will immediately notify CBL if, at any time during the term of this Arrangement, he ceases to be, or has reason to believe that he does not qualify as an Accredited Investor; and, in such event, CBL may immediately terminate this Arrangement and thereupon pay all vested amounts to Executive. Executive (i) understands and acknowledges the risks inherent in deferring amounts pursuant to this Arrangement and having said amounts credited as if invested in REIT Stock, (ii) has the financial ability to bear the economic risk of this Arrangement (including possible loss), (iii) has adequate means for providing for his current needs and personal contingencies and has no need for liquidity with respect to the amounts deferred under this Arrangement, and (iv) has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of this Arrangement and has obtained, in his judgment, sufficient information from CBL to evaluate the merits and risks of this Arrangement. 9. Miscellaneous. (a) This Arrangement is not intended to be nor shall it be deemed to be an agreement of employment between the Executive and CBL. (b) This Arrangement shall be governed by and construed under the laws of the State of Tennessee. (c) This Arrangement shall not be construed as requiring CBL to pay any amount of salary or bonus to the Executive other than the amounts of salary increases that the Executive has elected or may elect in the future to defer into the Arrangement. (d) This Arrangement shall not be construed in any fashion as a guarantee or assurance by CBL of the price or value of the REIT stock and whether it shall fluctuate positively or negatively during the course of this Arrangement. IN WITNESS WHEREOF, CBL and the Executive have executed this Arrangement to be effective as of the date first above written. CBL & ASSOCIATES MANAGEMENT, INC. (for itself and its affiliates) By:_______________________________ Name: Title: ---------------------------------- [Name of Executive] EX-10 4 exhibit1078.txt EXHIBIT 10.7.8 COMPENSATION COMMITTIEE ACTION Exhibit 10.7.8 Summary Description of October 26, 2005 Compensation Committee Action Setting 2006 Executive Base Salary Levels On October 26, 2005, the Compensation Committee of the Board of Directors of CBL & Associates Properties, Inc. (the "Company") approved 2006 Base Salary levels for the Company's officers and members of senior management, including setting the following 2006 Base Salary levels for those individuals who qualify as "named executive officers" of the Company (pursuant to Item 402(a)(3) of Securities and Exchange Commission Regulation S-K):
Name: Title: 2006 Base Salary Charles B. Lebovitz Chairman of the Board and $558,802 Chief Executive Officer John N. Foy Vice Chairman of the Board, Chief $486,320 Financial Officer and Treasurer Stephen D. Lebovitz Director, President and Secretary $475,000 Eric P. Snyder Senior Vice President and $446,000 Director of Corporate Leasing Augustus N. Stephas Senior Vice President - Accounting $456,600 and Controller
In the case of Charles B. Lebovitz, John N. Foy and Stephen D. Lebovitz, these adjusted base salaries were approved to take effect as of January 1, 2006. In the case of Mr. Stephas, the effective date is February 28, 2006, and in the case of Mr. Snyder, the effective date is September 15, 2006. Each of Charles B. Lebovitz, John N. Foy and Stephen D. Lebovit are parties to deferred compensation agreements issued under the Company's Amended and Restated Stock Incentive Plan, as amended, pursuant to which the amounts representing annual increases over their base salaries since 1995 are paid in quarterly installments in the form of the Company's Common Stock rather than cash. EX-10 5 exhibit1079.txt EXHIBIT 10.7.9 COMPENSATION COMMITTIEE ACTION Exhibit 10.7.9 Summary Description of October 26, 2005 Compensation Committee Action Approving Adjustments to 2005 Executive Bonus Opportunities On October 26, 2005, the Compensation Committee of the Board of Directors of CBL & Associates Properties, Inc. (the "Company") approved certain adjustments to the criteria or matters pursuant to which designated Company executives are eligible to earn bonuses during the 2005 fiscal year based upon the successful continuation and/or completion of development, financing, leasing and re-leasing, temporary leasing, sponsorships, management, accounting, marketing, remodelings, expansions, peripheral property sales, acquisitions and joint ventures with respect to the Company and its properties identified by the Compensation Committee as being within each such executive's areas of responsibility. These adjustments affected the maximum potential bonuses that could be earned by two of the three executives covered by these bonus criteria who qualify as "named executive officers" of the Company (pursuant to Item 402(a)(3) of Securities and Exchange Commission Regulation S-K), as follows: the maximum potential bonus payments that could be earned by John N. Foy and Stephen D. Lebovitz for specified projects completed during 2005 was increased from $575,000 to $675,000 for each of such named executive officers. The actual amount of any bonus payouts will be dependent on the successful continuation or completion of the projects or matters upon which each such officer's bonus is based, as well as the officer's continued employment with the Company at such time. In addition to the adjustments to the potential bonus levels approved as described above for certain officers, the Compensation Committee also approved an increase from $1,000,000 to $1,075,000 in the amount of a separate allocation of funds to be available as bonus compensation for payment to three designated senior executives, in conjunction with the Compensation Committee's decision concerning the actual bonuses to be paid to such officers based upon the Committee's evaluation of their performance during 2005. Two of the officers who participated in such bonus pool for fiscal 2005 are named executive officers, and the Compensation Committee approved the following 2005 bonus amounts for such officers: Charles B. Lebovitz - $675,000 and Augustus N. Stephas - $225,000. In the case of both of the bonus mechanisms described above for 2005, each officer who receives a bonus has the option of electing whether to have his or her bonus paid in cash or in shares of the Company's Common Stock pursuant to the terms of the Company's Amended and Restated Stock Incentive Plan, as amended. The number of shares issued with respect to any bonus that an officer elects to receive in the Company's Common Stock will be determined based on the market value of the Common Stock on the date when such bonus becomes payable. EX-10 6 exhibit10710.txt EXHIBIT 10.7.10 COMP COMMITTIEE EXEC BONUS Exhibit 10.7.10 Summary Description of October 26, 2005 Compensation Committee Action Approving 2006 Executive Bonus Opportunities On October 26, 2005, the Compensation Committee of the Board of Directors of CBL & Associates Properties, Inc. (the "Company") approved the criteria or matters pursuant to which designated Company executives will be eligible to earn bonuses for the 2006 fiscal year. The amount of the bonus paid to each executive will be based upon the successful continuation and/or completion of development, financing, leasing and re-leasing, temporary leasing, sponsorships, management, accounting, marketing, remodelings, expansions, peripheral property sales, acquisitions and joint ventures with respect to the Company and its properties identified by the Compensation Committee as being within each such executive's areas of responsibility. Three of the executives covered by these bonus criteria qualify as "named executive officers" of the Company (pursuant to Item 402(a)(3) of Securities and Exchange Commission Regulation S-K). The potential bonuses that the Compensation Committee provided that such named executive officers could earn pursuant to the above-stated criteria or matters are as follows: John N. Foy - $725,000; Stephen D. Lebovitz - $725,000; and Eric P. Snyder - $325,000. The actual amount of any bonus payouts will be dependent on the successful continuation or completion of the projects or matters upon which each such officer's bonus is based, as well as the officer's continued employment with the Company at such time. In addition to the potential bonus levels approved as described above for certain officers, the Compensation Committee also approved a separate allocation of up to an aggregate of $1,325,000 to be available as bonus compensation for payment to three designated senior executives, consisting of specified maximum bonuses that could be earned by each of the three executives totaling $1,175,000 plus the opportunity to share in an unallocated discretionary bonus pool of up to $150,000. The actual bonus payments to such officers, including the amount (if any) to be paid out of the $150,000 unallocated pool, will be determined during the fourth quarter of 2006 by the Compensation Committee, based upon its evaluation of such officers' performance during the year. Two of the officers for whom any fiscal 2006 bonuses will be determined pursuant to this method are named executive officers, and the potential bonus payouts set by the Compensation Committee for each of these officers is as follows: Charles B. Lebovitz - $725,000 plus any additional participation in the unallocated $150,000 pool, and Augustus N. Stephas - $250,000 plus any additional participation in the unallocated $150,000 pool. As with the 2005 bonuses, in the case of both of the bonus mechanisms described above for 2006, each officer who receives a bonus will have the option of electing whether to have his or her bonus paid in cash or in shares of the Company's Common Stock pursuant to the terms of the Company's Amended and Restated Stock Incentive Plan, as amended. The number of shares issued with respect to any bonus that an officer elects to receive in the Company's Common Stock will be determined based on the market value of the Common Stock on the date when such bonus becomes payable. EX-10 7 exhibit10123.txt EXHIBIT 10.12.3 CREDIT AGREEMENT 2ND AMENDMENT Exhibit 10.12.3 SECOND AMENDMENT TO UNSECURED CREDIT AGREEMENT THIS SECOND AMENDMENT TO UNSECURED CREDIT AGREEMENT (this "Amendment") is made and entered into as of the 14th day of February, 2006, by and among CBL & ASSOCIATES LIMITED PARTNERSHIP, a Delaware limited partnership (hereinafter referred to as "Borrower"), CBL & ASSOCIATES PROPERTIES, INC., a Delaware corporation (hereinafter referred to as the "Parent"), WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association, KEYBANK NATIONAL ASSOCIATION, a national banking association, WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking association, U.S. BANK NATIONAL ASSOCIATION, a national banking association, LASALLE BANK NATIONAL ASSOCIATION, a national banking association, NATIONAL CITY BANK OF KENTUCKY, a national banking association, SOCIETE GENERALE, UNION BANK OF CALIFORNIA, N.A., a national banking association, and PNC BANK, NATIONAL ASSOCIATION, a national banking association (hereinafter referred to individually as an "Existing Lender" and collectively as the "Original Lenders"), COMMERZBANK AG, NEW YORK AND GRAND CAYMAN BRANCHES, a German banking corporation (hereinafter referred to as "New Lender") (the Existing Lenders and New Lender hereinafter referred to individually as a "Lender" and collectively as the "Lenders"), WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association, as contractual representative of the Lenders (in such capacity, the "Agent") and as a Co-Lead Arranger (in such capacity, a "Co-Lead Arranger"), KEYBANK NATIONAL ASSOCIATION, a national banking association, as Syndication Agent (in such capacity, the "Syndication Agent") and as a Co-Lead Arranger (in such capacity, a "Co-Lead Arranger") WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking association, as a Documentation Agent (in such capacity a "Documentation Agent") and U.S. BANK NATIONAL ASSOCIATION a national banking association, as a Documentation Agent (in such capacity, a "Documentation Agent"). W I T N E S S E T H: - - - - - - - - - - WHEREAS, Borrower, Parent, Original Lenders and Agent entered into that certain Unsecured Credit Agreement dated as of August 27, 2004 (the "Credit Agreement"), pursuant to which the Lenders agreed to extend to Borrower a revolving credit facility (the "Credit Facility") in the aggregate principal amount of up to Four Hundred Million and No/100 Dollars ($400,000,000.00) at any one time outstanding; and WHEREAS, Borrower, Parent, Lenders and Agent entered into that certain First Amendment to the Credit Agreement dated September 21, 2005 (the First Amendment; the Credit Agreement as amended by the First Amendment being hereinafter referred to as the "Credit Agreement") to, among other matters, increase the aggregate principal amount of the Credit Facility to up to Five Hundred Million and No/100 Dollars ($500,000,000.00) at any one time outstanding; and 1 WHEREAS, Borrower, Parent, Lenders and Agent desire to modify and amend the Credit Agreement in the manner and for the purposes set forth herein. NOW THEREFORE, for and in consideration of the premises, for Ten and No/100 Dollars ($10.00) in hand paid by the parties to each other, and for other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged by Borrower, Parent, Lenders, and Agent, Borrower, Parent, Lenders, and Agent do hereby covenant and agree as follows: 1. Definitions. Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to such terms in the Credit Agreement. 2. Tangible Net Worth. The definition of Tangible Net Worth contained in Section 1.1 of the Credit Agreement, which did read: "`Tangible Net Worth' means, as of a given date, the stockholders' equity of the Parent and its Subsidiaries determined on a consolidated basis plus (x) increases in accumulated depreciation accrued after September 30, 2002 and (y) minority interests in the Borrower minus (to the extent reflected in determining stockholders' equity of the Parent and its Subsidiaries): (a) the amount of any write-up in the book value of any assets contained in any balance sheet resulting from revaluation thereof or any write-up in excess of the cost of such assets acquired, and (b) all amounts appearing on the assets side of any such balance sheet for assets which would be classified as intangible assets under GAAP, all determined on a consolidated basis." is hereby deleted in its entirety and the following is hereby inserted in lieu thereof "`Tangible Net Worth' means, as of a given date, the stockholders' equity of the Parent and its Subsidiaries determined on a consolidated basis plus (x) increases in accumulated depreciation accrued after September 30, 2002 and (y) minority interests in the Borrower minus (to the extent reflected in determining stockholders' equity of the Parent and its Subsidiaries): (a) the amount of any write-up in the book value of any assets contained in any balance sheet resulting from revaluation thereof or any write-up in excess of the cost of such assets acquired (but excluding any such write-up for purchase price adjustments of acquisition properties based on GAAP), and (b) all amounts appearing on the assets side of any such balance sheet for assets which would be classified as intangible assets under GAAP, all determined on a consolidated basis." 3. Funds Transfer Disbursements. Section 2.1(c) of the Credit Agreement is hereby amended by inserting the following as the second full paragraph thereof: "Borrower hereby authorizes Agent to disburse the proceeds of any Advance as requested by an authorized representative of the Borrower to 2 any of the accounts designated in Exhibit H hereto. Borrower agrees to be bound by any transfer request: (i) authorized or transmitted by Borrower; or, (ii) made in Borrower's name and accepted by Agent in good faith and in compliance with these transfer instructions, even if not properly authorized by Borrower. Borrower further agrees and acknowledges that Agent may rely solely on any bank routing number or identifying bank account number or name provided by Borrower to effect a wire or funds transfer even if the information provided by Borrower identifies a different bank or account holder than named by the Borrower. Agent is not obligated or required in any way to take any actions to detect errors in information provided by Borrower. If Agent takes any actions in an attempt to detect errors in the transmission or content of transfer or requests or takes any actions in an attempt to detect unauthorized funds transfer requests, Borrower agrees that no matter how many times Agent takes these actions Agent will not in any situation be liable for failing to take or correctly perform these actions in the future and such actions shall not become any part of the transfer disbursement procedures authorized under this provision, the Loan Documents, or any agreement between Agent and Borrower or between any Lender and Borrower. Borrower agrees to notify Agent of any errors in the transfer of any funds or of any unauthorized or improperly authorized transfer requests within 14 days after Agent's confirmation to Borrower of such transfer. Agent will, in its sole discretion, determine the funds transfer system and the means by which each transfer will be made. Agent may delay or refuse to accept a funds transfer request if the transfer would: (i) violate the terms of this authorization; (ii) require use of a bank unacceptable to Agent or prohibited by Government Authority; (iii) cause Agent to violate any Federal Reserve or other regulatory risk control program or guideline, or (iii) otherwise cause Agent to violate any applicable law or regulation. Neither Agent nor any Lender shall be liable to Borrower or any other parties for (i) errors, acts or failures to act of others, including other entities, banks, communications carriers or clearinghouses, through which Borrower's transfers may be made or information received or transmitted, and no such entity shall be deemed an agent of the Agent , (ii) any loss, liability or delay caused by fires, earthquakes, wars, civil disturbances, power surges or failures, acts of government, labor disputes, failures in communications networks, legal constraints or other events beyond Agent's control, or (iii) any special, consequential, indirect or punitive damages, whether or not (a) any claim for these damages is based on tort or contract or (b) Agent, any Lender or Borrower knew or should have known the likelihood of these damages in any situation. Agent makes no representations or warranties other than those expressly made in this Agreement." (b) The Credit Agreement is hereby amended by (i) inserting the phrase "EXHIBIT H Form of Transfer Authorizer Designation" immediately below the phrase "EXHIBIT G Form of Compliance Certificate" on page iii of the Table of Contents, and (ii) by attaching Exhibit "A" to this Second Amendment as Exhibit H thereto. 4. Minimum Tangible Net Worth. Section 9.1(a) of the Credit Agreement is hereby amended by deleting the figure "$1,000,000,000" therefrom, and by inserting the figure "1,370,000,000" in lieu thereof. 3 5. Litigation. Borrower warrants and represents that Schedule 6.1(f) attached to the Credit Agreement is true, accurate and complete as of the date hereof. 6. Conditions Precedent. Subject to the other terms and conditions hereof, this Amendment shall not become effective until the Agent shall have received each of the following instruments, documents or agreements, each in form and substance satisfactory to the Agent: (a) counterparts of this Amendment duly executed and delivered by Borrower, Parent, Agent and each of the Lenders; (b) an Acknowledgement and Consent executed by the Parent (the "Guarantor Consent"), consenting to this Amendment and the transactions contemplated hereby; (c) a certificate of the Secretary of CBL Holdings I, Inc. dated as of the date hereof certifying (i) that the Certificate of Incorporation and By-laws of CBL Holdings I, Inc. have not been modified since September 6, 2005; (ii) that the Partnership Agreement and Certificate of Limited Partnership of Borrower have not been modified since September 6, 2005; (iii) that attached thereto is a true and complete copy of Resolutions adopted by the Board of Directors of CBL Holdings I, Inc., authorizing the execution and delivery on behalf of Borrower of this Amendment and the other instruments, documents or agreements executed and delivered by or on behalf of Borrower in connection herewith (all such instruments, documents or agreements executed and delivered in connection herewith by or on behalf of CBL Holdings I, Inc. or Borrower are hereinafter collectively referred to as the "Borrower Amendment Documents"); and (iv) as to the incumbency and genuineness of the signatures of the officers of CBL Holdings I, Inc. executing the Borrower Amendment Documents to which CBL Holdings I, Inc. or Borrower is a party; (d) a certificate of the Secretary of CBL & Associates Properties, Inc. dated as of the date hereof certifying (i) that the Certificate of Incorporation and By-laws of CBL & Associates Properties, Inc. have not been modified since September 6, 2005; (ii) that attached thereto is a true and complete copy of Resolutions adopted by the Board of Directors of CBL & Associates Properties, Inc., authorizing the execution and delivery on behalf of CBL & Associates Properties, Inc. of this Amendment and the other instruments, documents or agreements executed and delivered by CBL & Associates Properties, Inc. in connection herewith (all such instruments, documents or agreements executed and delivered in connection herewith by or on behalf of CBL & Associates Properties, Inc. are hereinafter collectively referred to as the "Properties Amendment Documents"); and (iii) as to the incumbency and genuineness of the signatures of the officers of CBL & Associates Properties, Inc. executing the Properties Amendment Documents to which CBL & Associates Properties, Inc. is a party; (e) the opinions of Borrower's in-house counsel, addressed to Agent and each Lender and satisfactory in form and substance to Agent, covering such matters relating to the transaction contemplated by this Amendment as Agent may reasonably request; and 4 (f) payment to Agent, for the benefit of Lenders, of all loan fees due in connection with this Amendment. Upon fulfillment of the foregoing conditions precedent, this Amendment shall become effective as of the date hereof. 7. Representations and Warranties; No Default. Borrower hereby represents and warrants to the Agent and the Lenders that: (a) all of Borrower's representations and warranties contained in the Credit Agreement and the other Loan Documents are true and correct on and as of the date of Borrower's execution of this Amendment; (b) no Default or Event of Default has occurred and is continuing as of such date under any Loan Document; (c) Borrower and Parent have the power and authority to enter into this Amendment and to perform all of its obligations hereunder; (d) the execution, delivery and performance of this Amendment by Borrower and Parent have been duly authorized by all necessary corporate, partnership or other action; (e) the execution and delivery of this Amendment and performance thereof by Borrower and Parent does not and will not violate the Partnership Agreements or other organizational documents of Borrower or Parent or the Certificate of Incorporation, By-laws or other organizational documents of CBL Holdings I, Inc. and does not and will not violate or conflict with any law, order, writ, injunction, or decree of any court, administrative agency or other governmental authority applicable to Borrower, Parent, CBL Holdings I, Inc., or their respective properties; and (f) this Amendment, the Guarantor Consent, and all other documents executed in connection herewith, constitute legal, valid and binding obligations of the parties thereto, in accordance with the respective terms thereof, subject to bankruptcy, insolvency and similar laws of general application affecting the rights and remedies of creditors and, with respect to the availability of the remedies of specific enforcement, subject to the discretion of the court before which any proceeding therefor may be brought. 8. Expenses. Borrower agrees to pay, immediately upon demand by the Agent, all reasonable costs, expenses, fees and other charges and expenses actually incurred by the Agent in connection with the negotiation, preparation, execution and delivery of this Amendment, the Borrower Amendment Documents and the Properties Amendment Documents. 9. Defaults Hereunder. The breach of any representation, warranty or covenant contained herein or in any document executed in connection herewith, or the failure to observe or comply with any term or agreement contained herein shall constitute a Default or Event of Default under the Credit Agreement (subject to any applicable cure period set forth in the Credit Agreement) and the Agent and the Lenders shall be entitled to exercise all rights and remedies they may have under the Credit Agreement, any other documents executed in connection therewith and applicable law. 5 10. References. All references in the Credit Agreement and the Loan Documents to the Credit Agreement shall hereafter be deemed to be references to the Credit Agreement as amended hereby and as the same may hereafter be amended from time to time. 11. Limitation of Agreement. Except as especially set forth herein, this Amendment shall not be deemed to waive, amend or modify any term or condition of the Credit Agreement, each of which is hereby ratified and reaffirmed and which shall remain in full force and effect, nor to serve as a consent to any matter prohibited by the terms and conditions thereof. 12. Counterparts. To facilitate execution, this Amendment may be executed in as many counterparts as may be convenient or required. It shall not be necessary that the signature of, or on behalf of, each party, or that the signature of all persons required to bind any party, appear on each counterpart. All counterparts shall collectively constitute a single document. It shall not be necessary in making proof of this document to produce or account for more than a single counterpart containing the respective signatures of, or on behalf of, each of the parties hereto. Any signature page to any counterpart may be detached from such counterpart without impairing the legal effect of the signature thereon and thereafter attached to another counterpart identical thereto having attached to it additional signature pages. 13. Further Assurances. Borrower agrees to take such further action as the Agent or the Lenders shall reasonably request in connection herewith to evidence the amendments herein contained to the Credit Agreement. 14. Successors and Assigns. This Amendment shall be binding upon and inure to the benefit of the successors and permitted assigns of the parties hereto. 15. Governing Law. This Amendment shall be governed by, and construed in accordance with, the laws of the State of Georgia, without regard to principles of conflicts of law. [Signatures Begin on Following Page] 6 IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to Unsecured Credit Agreement to be executed by their authorized officers all as of the day and year first above written. BORROWER: CBL & ASSOCIATES LIMITED PARTNERSHIP, a Delaware limited partnership By: CBL Holdings I, Inc., a Delaware corporation, its sole general partner By: /s/ John N. Foy_________________________ ---------------------------------------- Name: John N. Foy Title: Vice Chairman and Chief Financial Officer PARENT: CBL & ASSOCIATES PROPERTIES, INC., a Delaware corporation, solely for the limited purposes set forth in Section 12.19 of the Credit Agreement. By: /s/ John N. Foy_________________________ ---------------------------------------- Name: John N. Foy Title: Vice Chairman and Chief Financial Officer [Signatures Continued on Following Page] 7 [Signature Page to Second Amendment to Unsecured Credit Agreement] WELLS FARGO BANK, NATIONAL ASSOCIATION, as Agent, Co-Lead Arranger and as a Lender By: /s/ James Phelps ----------------------------------------------------- Name: James Phelps Title: Senior Vice President Commitment Amount: $100,000,000.00 Lending Office (all Types of Advances) and Address for Notices: 2859 Paces Ferry Road, Suite 1805 Atlanta, GA 30339 Attn: Loan Administration Telecopier: (770) 435-2262 Telephone: (770) 435-3800 [Signatures Continued on Following Page] 8 [Signature Page to Second Amendment to Unsecured Credit Agreement] KEYBANK NATIONAL ASSOCIATION, as Syndication Agent, Co-Lead Arranger and as a Lender By: /s/ Michael P. Szuba -------------------------------------------- Name: Michael P. Szuba Title: Vice President Commitment Amount: $75,000,000.00 Lending Office (all Types of Advances) and Address for Notices: Keybank REC - Institutional 127 Public Square, 6th Floor Cleveland, OH 44114 Attn: Mike Szuba Telecopier: (216) 689-4997 Telephone: (216) 689-5984 [Signatures Continued on Following Page] 9 [Signature Page to Second Amendment to Unsecured Credit Agreement] WACHOVIA BANK, NATIONAL ASSOCIATION, as Documentation Agent and as a Lender By: /s/ Rex E. Rudy ------------------------------------------- Name: Rex E. Rudy Title: Managing Director Commitment Amount: $70,000,000.00 Lending Office (all Types of Advances) and Address for Notices: 301 South College Street NC - 0172 Charlotte, NC 28288-0172 Attention: Rex Rudy Telecopier: (704) 383-6505 Telephone: (704) 383-7534 [Signatures Continued on Following Page] 10 [Signature Page to Second Amendment to Unsecured Credit Agreement] U.S. BANK NATIONAL ASSOCIATION, as Documentation Agent and as a Lender By: /s/ Kelly Armstrong Name: Kelly Armstrong Title: Assistant Vice President Commitment Amount: $50,000,000.00 Lending Office (all Types of Advances) and Address for Notices: 800 Nicollet Mall 3rd Floor Minneapolis, MN 55402 Attn: Michael Raarup Telecopier: (612) 303-2270 Telephone: (612) 303-3586 [Signatures Continued on Following Page] 11 [Signature Page to Second Amendment to Unsecured Credit Agreement] LASALLE BANK NATIONAL ASSOCIATION, as a Lender By: /s/ Stephen J. Shockey ----------------------------------------------- Name: Stephen J. Shockey Title: First Vice President Commitment Amount: $50,000,000.00 Lending Office (all Types of Advances) and Address for Notices: 135 South LaSalle Street Suite 1225 Chicago, Illinois 60603 Attention: Stephen Shockey Telecopier: (312) 904-6691 Telephone: (312) 904-7096 [Signatures Continued on Following Page] 12 [Signature Page to Second Amendment to Unsecured Credit Agreement] NATIONAL CITY BANK OF KENTUCKY, as a Lender By: /s/ Joseph C. Seiler ------------------------------------------------ Name: Joseph C. Seiler Title: Executive Vice President Commitment Amount: $25,000,000.00 Lending Office (all Types of Advances) and Address for Notices: 301 E. Main Street 31-3 PLA Lexington, KY 40507 Attn: Megan Barlow Telecopier: (859) 281-5467 Telephone: (859) 281-5428 [Signatures Continued on Following Page] 13 [Signature Page to Second Amendment to Unsecured Credit Agreement] SOCIETE GENERALE, as a Lender By: /s/ C. H. Butterworth ----------------------------------------------------- Name: C/ H. Butterworth Title: Director Commitment Amount: $25,000,000.00 Lending Office (all Types of Advances) and Address for Notices: Trammell Crow Center 2001 Ross Avenue Suite 4900 Dallas, TX 75201 Attn: Chuck Butterworth Telecopier: (214) 979-2740 Telephone: (214) 979-2779 [Signatures Continued on Following Page] 14 [Signature Page to Second Amendment to Unsecured Credit Agreement] UNION BANK OF CALIFORNIA N.A., as a Lender By: /s/ Lawrence Andow ------------------------------------------------- Name: Lawrence Andow Title: Vice Presedent Commitment Amount: $25,000,000.00 Lending Office (all Types of Advances) and Address for Notices: Lending Office: --------------- 350 California Street 7th Floor San Francisco, CA 94104 Attn: Larry Andow Telecopier: (415) 433-7438 Telephone: (415) 705-5032 E-mail Address: Lawrence.Andow@uboc.com Loan Administration: Commercial Real Estate Loan Administration 18300 Von Karman Avenue, Suite 200 Irvine, CA 92612 Attn: Amelida Carreno Telecopier: (949) 553-7123 Telephone: (949) 553-2568 E-mail Address: Amelida.Carreno@uboc.com ------------------------ [Signatures Continued on Following Page] 15 [Signature Page to Second Amendment to Unsecured Credit Agreement] PNC BANK, NATIONAL ASSOCIATION, as a Lender By: /s/ Andrew T. White --------------------------------------------- Name: Andrew T. White Title: Vice President Commitment Amount: $30,000,000.00 Lending Office (all Types of Advances) and Address for Notices: PNC Real Estate Finance 1600 Market Street, 30th Floor Philadelphia, PA 19103 Attention: Andrew White Telecopier: (215) 585-5806 Telephone: (215) 585-6123 [Signatures Continued on Following Page] 16 [Signature Page to Second Amendment to Unsecured Credit Agreement] COMMERZBANK AG, NEW YORK AND GRAND CAYMAN BRANCHES, as a Lender By: /s/ Ralph C. Marra, Jr/. ----------------------------------------------- Name: Ralph C. Marra, Jr. Title: Vice President By: /s/ Kerstin Micke ----------------------------------------------- Name: Kerstin Micke Title: Assistant Vice President Commitment Amount: $50,000,000.00 Lending Office (all Types of Advances) and Address for Notices: 2 World Financial Center 34th Floor New York, NY 10281-1050 Attention: Ralph Marra Telecopier: (212) 266-7565 Telephone: (212) 266-7661 [End of Signatures] 17 EXHIBIT A TRANSFER AUTHORIZER DESIGNATION (For Disbursement of Loan Proceeds by Funds Transfer) |_| NEW |X| REPLACE PREVIOUS DESIGNATION |_| ADD |_| CHANGE |_| DELETE LINE NUMBER _____ The following representatives of CBL & Associates Limited Partnership ("Borrower") are authorized to request the disbursement of Advances and initiate funds transfers for Loan Number 101012 dated February ___, 2006 between Wells Fargo Bank, National Association ("Agent"), the lenders party thereto and Borrower. Agent is authorized to rely on this Transfer Authorizer Designation until it has received a new Transfer Authorizer Designation signed by Borrower, even in the event that any or all of the foregoing information may have changed.
Name Title Maximum Wire Amount - ----------------------------------------------------------------------------------------------------------------------------------- 1. Charles B. Lebovitz Chairman of the Board and $500,000,000 Chief Executive Officer - ----------------------------------------------------------------------------------------------------------------------------------- 2. John N. Foy Vice Chairman of the Board, Chief $500,000,000 Financial Officer and Treasurer - ----------------------------------------------------------------------------------------------------------------------------------- 3. Charles A. Willett, Jr. Senior Vice President $500,000,000 - ----------------------------------------------------------------------------------------------------------------------------------- 4. - ----------------------------------------------------------------------------------------------------------------------------------- 5. - ----------------------------------------------------------------------------------------------------------------------------------- 1. - --------------------------------------------------------------------------------------------------------------------- Transfer Funds to (Receiving Party Account Name): CBL & Associates Limited Partnership - --------------------------------------------------------------------------------------------------------------------- Receiving Party Account Number: 4441630 - --------------------------------------------------------------------------- ----------------------------------------- Receiving Bank Name, City and State: Receiving Bank Routing (ABA) Number First Tennessee Bank, N.A., Memphis, TN 084000026 - --------------------------------------------------------------------------- ----------------------------------------- Maximum Transfer Amount: $500,000,000 - --------------------------------------------------------------------------- ----------------------------------------- Further Credit Information/Instructions: Attention: Zelma Pack at (423) 757-4249 - --------------------------------------------------------------------------------------------------------------------- 2. - --------------------------------------------------------------------------------------------------------------------- Transfer Funds to (Receiving Party Account Name): - --------------------------------------------------------------------------------------------------------------------- Receiving Party Account Number: - --------------------------------------------------------------------------------------------------------------------- Receiving Bank Name, City and State: Receiving Bank Routing (ABA) Number - --------------------------------------------------------------------------- ----------------------------------------- Maximum Transfer Amount: - --------------------------------------------------------------------------- ----------------------------------------- Further Credit Information/Instructions: - --------------------------------------------------------------------------------------------------------------------- 18 3. - --------------------------------------------------------------------------------------------------------------------- Transfer Funds to (Receiving Party Account Name): - --------------------------------------------------------------------------------------------------------------------- Receiving Party Account Number: - -------------------------------------------------------------------------------- ------------------------------------ Receiving Bank Name, City and State: Receiving Bank Routing (ABA) Number - --------------------------------------------------------------------------- ----------------------------------------- Maximum Transfer Amount: - --------------------------------------------------------------------------- ----------------------------------------- Further Credit Information/Instructions: - --------------------------------------------------------------------------------------------------------------------- (1) Maximum Wire Amount may not exceed the Loan Amount.
Date: _____________________________ "BORROWER" CBL & ASSOCIATES LIMITED PARTNERSHIP, a Delaware limited partnership By: CBL Holding I, Inc., a Delaware corporation, its sole general partner By:_____________________________________ Name:___________________________________ Title:__________________________________ (CORPORATE SEAL) EX-10 8 exhibit10153.txt EXHIBIT 10.15.3 AMEND STANDSTILL AGREEMENT Exhibit 10.15.3 AMENDMENT TO VOTING AND STANDSTILL AGREEMENT THIS AMENDMENT TO VOTING AND STANDSTILL AGREEMENT (the "Amendment") is made to be effective as of the 1st day of January, 2006, by and among CBL & Associates Properties, Inc., a Delaware Corporation (the "REIT"); CBL & Associates Limited Partnership, a Delaware limited partnership (the "Operating Partnership", the Operating Partnership and the REIT are referred to herein collectively as "CBL"); the CBL Principals (Charles B. Lebovitz, Stephen D. Lebovitz, John N. Foy, and CBL & Associates, Inc.); Jacobs Realty Investors Limited Partnership, a Delaware limited partnership ("JRI"); Richard E. Jacobs, solely as Trustee for the Richard E. Jacobs Revocable Living Trust ("REJ'"); Richard E. Jacobs, solely as Trustee for the David H. Jacobs Marital Trust ("DHJ" and together with REJ, the "Jacobs Trusts"); and Martin J. Cleary ("Cleary"). W I T N E S S E T H: ------------------- WHEREAS, the parties entered into that certain Voting and Standstill Agreement with an effective date of September 25, 2000 ("Agreement"), for the purpose of regulating certain relationships between the parties; WHEREAS, the parties have agreed that Cleary shall no longer be a party to the Agreement; and WHEREAS, the parties, among other things, desire to amend the Agreement to remove Cleary as a party to the Agreement, and to confirm that Cleary no longer has any rights or obligations with respect to the Agreement. NOW, THEREFORE, in consideration of the terms and conditions contained in this Amendment, the mutual covenants herein contained and other good and valuable consideration, the mutual receipt and legal sufficiency of which are hereby acknowledged, parties hereby agree as follows: 1. Except to the extent modified by this Amendment, the Agreement remains in full force and effect according to its terms. 2. Subject to the terms hereof, Cleary is hereby released and removed as a party to the Agreement. 3. In each instance in which "Martin J. Cleary" or "Cleary" appears in the Agreement, those words and name are hereby deleted. 4. For purposes of Section 9 of the Agreement, the notice address of CBL & Associates Properties, Inc. is hereby changed to CBL Center, Suite 500, 2030 Hamilton Place Boulevard, Chattanooga, Tennessee 37421, Attention: Charles B. Lebovitz and H. Jay Wiseman, Jr. With a copy simultaneously to CBL's attorneys: Morrison & Foerster LLP 1290 Avenue of the Americas New York, New York 10104-0185 Attention: Yaacov M. Gross, Esq. and 1 Shumacker Witt Gaither & Whitaker, P.C. CBL Center, Suite 210 2030 Hamilton Place Boulevard Chattanooga, TN 37421 Attention: Jeffery V. Curry, Esq. 5. If there is any conflict, ambiguity or inconsistency between the terms, covenants and conditions of this Amendment and the terms, covenants and conditions of the Agreement, then the terms, covenants and conditions of this Amendment shall be controlling. 6. Except as herein provided, all terms used herein with initial capital letters shall have the meaning ascribed to such terms by the Agreement. 7. This Amendment may be signed in several counterparts, each of which shall be deemed an original, and all such counterparts, when taken together, shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment to be effective as of the date first written above. OPERATING PARTNERSHIP: CBL & ASSOCIATES LIMITED PARTNERSHIP By: CBL Holdings I, Inc. /s/ Charles B. Lebovitz By: ----------------------------------------- Name: Charles B. Lebovitz Title: Chairman of the Board and Chief Executive Officer REIT: CBL & ASSOCIATES PROPERTIES, INC. /s/ Charles B. Lebovitz By: ----------------------------------------- Name: Charles B. Lebovitz Title: Chairman of the Board and Chief Executive Officer CBL PRINCIPALS: CBL & ASSOCIATES, INC. /s/ Charles B. Lebovitz By: ----------------------------------------- Name: Charles B. Lebovitz Title: Chairman of the Board and Chief Executive Officer 2 /s/ Charles B. Lebovitz ------------------------------ Charles B. Lebovitz /s/ Stephen D. Lebovitz ------------------------------ Stephen D. Lebovitz /s/ John N. Foy ------------------------------ John N. Foy JRI: JACOBS REALTY INVESTORS LIMITED PARTNERSHIP By: JG Realty Investors Corp. By: /s/ Richard E. Jacobs ----------------------------------------- Name: Richard E. Jacobs ------------------------------ Title: President -------------------------------------- JACOBS TRUSTS: /s/ Richard E. Jacobs -------------------------------------------- Richard E. Jacobs, solely as Trustee for the Richard E. Jacobs Revocable Living Trust /s/ Richard E. Jacobs -------------------------------------------- Richard E. Jacobs, solely as Trustee for the David H. Jacobs Marital Trust /s/ Martin J. Cleary ------------------------------ Martin J. Cleary 3 EX-10 9 exhibit10174.txt EXHIBIT 10.17.4 CREDIT AGREEMENT 3RD AMENDMENT Exhibit 10.17.4 THIRD AMENDMENT TO SIXTH AMENDED AND RESTATED CREDIT AGREEMENT THIS THIRD AMENDMENT TO SIXTH AMENDED AND RESTATED CREDIT AGREEMENT (this "Amendment") is made and entered into as of the 14th day of February, 2006, by and among CBL & ASSOCIATES LIMITED PARTNERSHIP, a Delaware limited partnership (hereinafter referred to as "Borrower"), CBL & ASSOCIATES PROPERTIES, INC., a Delaware corporation (hereinafter referred to as the "Parent"), WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association, WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking association, U.S. BANK NATIONAL ASSOCIATION, a national banking association, COMMERZBANK AG, NEW YORK AND GRAND CAYMAN BRANCHES, a German banking corporation, PNC BANK, NATIONAL ASSOCIATION, a national banking association, SUNTRUST BANK, a Georgia banking corporation, KEYBANK NATIONAL ASSOCIATION, a national banking association (hereinafter referred to individually as an "Existing Lender" and collectively as "Existing Lenders"), and ALLIED IRISH BANKS, P.L.C., an Irish publicly quoted company, LASALLE BANK NATIONAL ASSOCIATION, a national banking association, SOCIETE GENERALE, UNION BANK OF CALIFORNIA, N.A., a national banking association, and WESTDEUTSCHE IMMOBILIENBANK, a German banking corporation (hereinafter referred to individually as a "New Lender" and collectively as "New Lenders") (New Lenders and Existing Lenders are sometimes hereinafter referred to individually as a "Lender" and collectively as the "Lenders") and WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association, as contractual representative of the Lenders (in such capacity, the "Agent"). W I T N E S S E T H: - - - - - - - - - - WHEREAS, Borrower, Parent, Existing Lenders and Agent entered into that certain Sixth Amended and Restated Credit Agreement dated as of February 28, 2003 (the "Credit Agreement"), pursuant to which the Lenders agreed to extend to Borrower a credit facility (the "Credit Facility") in the aggregate principal amount of up to Two Hundred Fifty-Five Million and No/100 Dollars ($255,000,000.00) at any one time outstanding; and WHEREAS, Borrower, Parent, Existing Lenders and Agent entered into that certain First Amendment to Sixth Amended and Restated Credit Agreement dated as of May 3, 2004 (the "First Amendment"), pursuant to which the parties modified and amended the Credit Agreement to, among other matters, increase the aggregate principal amount of the Credit Facility to up to Three Hundred Seventy-Three Million and No/100 Dollars ($373,000,000.00) at any one time outstanding; and WHEREAS, Borrower, Parent, Existing Lenders and Agent entered into that certain Second Amendment to Sixth Amended and Restated Credit Agreement dated as of September 21, 2005 (the "Second Amendment"), pursuant to which the parties modified and amended the Credit Agreement as more particularly set forth therein (the Credit Agreement as modified by the First Amendment and the Second Amendment being hereinafter referred to as the "Credit Agreement"); and 1 WHEREAS, Borrower, Parent, Lenders and Agent desire to further modify and amend the Credit Agreement in order to increase the maximum aggregate principal amount of the Credit Facility to up to Four Hundred Seventy-Six Million Dollars ($476,000,000.00), to extend the maturity date to February 28, 2009, to make the New Lenders a party thereto, and for the other purposes set forth herein, all as more particularly set forth hereinbelow. NOW THEREFORE, for and in consideration of the premises, for Ten and No/100 Dollars ($10.00) in hand paid by the parties to each other, and for other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged by Borrower, Parent, Lenders, and Agent, Borrower, Parent, Lenders, and Agent do hereby covenant and agree as follows: 1. Definitions. Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to such terms in the Credit Agreement. 2. Commitment. (a) From and after the effective date hereof, the Commitment of each Lender shall be the amount set forth beside each Lender's name below: Lender Commitment Wells Fargo Bank, National Association $85,000,000.00 Wachovia Bank, National Association $47,000,000.00 U.S. Bank National Association $71,000,000.00 Commerzbank AG, New York and Grand Cayman $47,000,000.00 Branches PNC Bank, National Association $47,000,000.00 SunTrust Bank $32,000,000.00 KeyBank National Association $47,000,000.00 LaSalle Bank National Association $20,000,000.00 Allied Irish Banks, p.l.c. $20,000,000.00 Societe Generale $20,000,000.00 Union Bank of California N.A. $20,000,000.00 Westdeutsche ImmobilienBank $20,000,000.00 2 (b) Section 2.11 of the Credit Agreement is hereby amended by deleting the figure "$500,000,000" therefrom, and by inserting the figure "$650,000,000" in lieu thereof. 3. Extension of Termination Date. (a) The definition of Termination Date contained in Section 1.1 of the Credit Agreement, which did read: " `Termination Date' means February 28, 2006, or such later date to which such date may be extended in accordance with Section 2.13." is hereby deleted in its entirety and the following is hereby inserted in lieu thereof: " `Termination Date' means February 28, 2009." (b) The within extension of the Termination Date to February 28, 2009 is made in lieu of Borrower's rights under Section 2.13 of the Credit Agreement, and Borrower shall continue to have the right to extend the Termination Date pursuant to, and on and subject to the terms and conditions set forth in, said Section 2.13. 4. Tangible Net Worth. The definition of Tangible Net Worth contained in Section 1.1 of the Credit Agreement, which did read: "`Tangible Net Worth' means, as of a given date, the stockholders' equity of the Parent and its Subsidiaries determined on a consolidated basis plus (x) increases in accumulated depreciation accrued after September 30, 2002 and (y) minority interests in the Borrower minus (to the extent reflected in determining stockholders' equity of the Parent and its Subsidiaries): (a) the amount of any write-up in the book value of any assets contained in any balance sheet resulting from revaluation thereof or any write-up in excess of the cost of such assets acquired, and (b) all amounts appearing on the assets side of any such balance sheet for assets which would be classified as intangible assets under GAAP, all determined on a consolidated basis." 3 is hereby deleted in its entirety and the following is hereby inserted in lieu thereof "`Tangible Net Worth' means, as of a given date, the stockholders' equity of the Parent and its Subsidiaries determined on a consolidated basis plus (x) increases in accumulated depreciation accrued after September 30, 2002 and (y) minority interests in the Borrower minus (to the extent reflected in determining stockholders' equity of the Parent and its Subsidiaries): (a) the amount of any write-up in the book value of any assets contained in any balance sheet resulting from revaluation thereof or any write-up in excess of the cost of such assets acquired (but excluding any such write-up for purchase price adjustments of acquisition properties based on GAAP), and (b) all amounts appearing on the assets side of any such balance sheet for assets which would be classified as intangible assets under GAAP, all determined on a consolidated basis." 5. Funds Transfer Disbursements. (a) Section 2.1(c) of the Credit Agreement is hereby amended by inserting the following as the second full paragraph thereof: "Borrower hereby authorizes Agent to disburse the proceeds of any Revolving Advance as requested by an authorized representative of the Borrower to any of the accounts designated in Exhibit O hereto. Borrower agrees to be bound by any transfer request: (i) authorized or transmitted by Borrower; or, (ii) made in Borrower's name and accepted by Agent in good faith and in compliance with these transfer instructions, even if not properly authorized by Borrower. Borrower further agrees and acknowledges that Agent may rely solely on any bank routing number or identifying bank account number or name provided by Borrower to effect a wire or funds transfer even if the information provided by Borrower identifies a different bank or account holder than named by the Borrower. Agent is not obligated or required in any way to take any actions to detect errors in information provided by Borrower. If Agent takes any actions in an attempt to detect errors in the transmission or content of transfer or requests or takes any actions in an attempt to detect unauthorized funds transfer requests, Borrower agrees that no matter how many times Agent takes these actions Agent will not in any situation be liable for failing to take or correctly perform these actions in the future and such actions shall not become any part of the transfer disbursement procedures authorized under this provision, the Loan Documents, or any agreement between Agent and Borrower or between any Lender and Borrower. Borrower agrees to notify Agent of any errors in the transfer of any funds or of any unauthorized or improperly authorized transfer requests within 14 days after Agent's confirmation to Borrower of such transfer. Agent will, in its sole discretion, determine the funds transfer system and the means by which each transfer will be made. Agent may delay or refuse to accept a funds transfer request if the transfer would: (i) violate the terms of this authorization; (ii) require use of a bank unacceptable to Agent or prohibited by Government Authority; (iii) cause Agent to violate any Federal Reserve or other regulatory risk control program or guideline, or (iii) otherwise cause Agent to violate any applicable law or regulation. 4 Neither Agent nor any Lender shall be liable to Borrower or any other parties for (i) errors, acts or failures to act of others, including other entities, banks, communications carriers or clearinghouses, through which Borrower's transfers may be made or information received or transmitted, and no such entity shall be deemed an agent of the Agent, (ii) any loss, liability or delay caused by fires, earthquakes, wars, civil disturbances, power surges or failures, acts of government, labor disputes, failures in communications networks, legal constraints or other events beyond Agent's control, or (iii) any special, consequential, indirect or punitive damages, whether or not (a) any claim for these damages is based on tort or contract or (b) Agent, any Lender or Borrower knew or should have known the likelihood of these damages in any situation. Agent makes no representations or warranties other than those expressly made in this Agreement." (b) Section 2.3 (b) of the Credit Agreement is hereby amended by inserting the following as the second, third, and fourth full paragraphs thereof: "Borrower hereby authorizes Swingline Lender to disburse the proceeds of any Swingline Loan as requested by an authorized representative of the Borrower to any of the accounts designated in Exhibit O hereto. Borrower agrees to be bound by any transfer request: (i) authorized or transmitted by Borrower; or, (ii) made in Borrower's name and accepted by Swingline Lender in good faith and in compliance with these transfer instructions, even if not properly authorized by Borrower. Borrower further agrees and acknowledges that Swingline Lender may rely solely on any bank routing number or identifying bank account number or name provided by Borrower to effect a wire or funds transfer even if the information provided by Borrower identifies a different bank or account holder than named by the Borrower. Swingline Lender is not obligated or required in any way to take any actions to detect errors in information provided by Borrower. If Swingline Lender takes any actions in an attempt to detect errors in the transmission or content of transfer or requests or takes any actions in an attempt to detect unauthorized funds transfer requests, Borrower agrees that no matter how many times Swingline Lender takes these actions Swingline Lender will not in any situation be liable for failing to take or correctly perform these actions in the future and such actions shall not become any part of the transfer disbursement procedures authorized under this provision, the Loan Documents, or any agreement between Swingline Lender and Borrower. Borrower agrees to notify Swingline Lender of any errors in the transfer of any funds or of any unauthorized or improperly authorized transfer requests within 14 days after Swingline Lender's confirmation to Borrower of such transfer. Swingline Lender will, in its sole discretion, determine the funds transfer system and the means by which each transfer will be made. Swingline Lender may delay or refuse to accept a funds transfer request if the transfer would: (i) violate the terms of this authorization; (ii) require use of a bank unacceptable to Swingline Lender or prohibited by Government Authority; (iii) cause Swingline Lender to violate any Federal Reserve or other regulatory risk control program or guideline, or (iii) otherwise cause Swingline Lender to violate any applicable law or regulation. Swingline Lender shall not be liable to Borrower or any other parties for (i) errors, acts or failures to act of others, including other entities, banks, communications carriers or clearinghouses, through 5 which Borrower's transfers may be made or information received or transmitted, and no such entity shall be deemed an Swingline Lender of the Swingline Lender , (ii) any loss, liability or delay caused by fires, earthquakes, wars, civil disturbances, power surges or failures, acts of government, labor disputes, failures in communications networks, legal constraints or other events beyond Swingline Lender's control, or (iii) any special, consequential, indirect or punitive damages, whether or not (a) any claim for these damages is based on tort or contract or (b) Swingline Lender or Borrower knew or should have known the likelihood of these damages in any situation. Swingline Lender makes no representations or warranties other than those expressly made in this Agreement." (c) The Credit Agreement is hereby amended by (i) inserting the phrase "EXHIBIT O Form of Transfer Authorizer Designation" immediately below the phrase "EXHIBIT N Form of Compliance Certificate" on page iv of the Table of Contents, and (ii) by attaching Exhibit "A" to this Third Amendment as Exhibit O thereto. 6. Minimum Tangible Net Worth. Section 10.1(a) of the Credit Agreement is hereby amended by deleting the figure "$1,000,000,000" therefrom, and by inserting the figure "1,370,000,000" in lieu thereof. 7. Litigation. Borrower warrants and represents that Schedule 7.1(f) attached to the Credit Agreement is true, accurate and complete as of the date hereof. 8. Conditions Precedent. Subject to the other terms and conditions hereof, this Amendment shall not become effective until the Agent shall have received each of the following instruments, documents or agreements, each in form and substance satisfactory to the Agent: (a) counterparts of this Amendment duly executed and delivered by Borrower, Parent, Agent and each of the Lenders; (b) Amended and Restated Promissory Notes executed by the Borrower, payable to each Existing Lender whose Commitment is being increased pursuant to this Amendment, in the face amount of each such Existing Lender's new Commitment (the "Amended Notes"); (c) Promissory Notes executed by the Borrower, payable to each New Lender, in the face amount of each New Lender's Commitment (the "Notes"); (d) an amendment to each Mortgage (collectively, the "Mortgage Amendments") encumbering a Collateral Property, amending each such Mortgage to reflect this Amendment and the transactions contemplated hereby; (e) Acknowledgements and Consents executed by the Parent and each Guarantor (collectively, the "Guarantor Consents"), consenting to this Amendment and the transactions contemplated hereby; (f) endorsements to each of the title insurance policies insuring the validity and priority of the Mortgages (as amended by the Mortgage Amendments) covered thereby as a first priority Lien upon the Property described therein, subject to Permitted Liens, and increasing the amounts of such policies to amount approved by Agent; 6 (g) a certificate of the Secretary of CBL Holdings I, Inc. dated as of the date hereof certifying (i) that the Certificate of Incorporation and By-laws of CBL Holdings I, Inc. have not been modified since September 21, 2005; (ii) that the Partnership Agreement and Certificate of Limited Partnership of Borrower have not been modified since September 21, 2005; (iii) that attached thereto is a true and complete copy of Resolutions adopted by the Board of Directors of CBL Holdings I, Inc., authorizing the execution and delivery on behalf of Borrower of this Amendment and the other instruments, documents or agreements executed and delivered by or on behalf of Borrower in connection herewith (all such instruments, documents or agreements executed and delivered in connection herewith by or on behalf of CBL Holdings I, Inc. or Borrower are hereinafter collectively referred to as the "Borrower Amendment Documents"); and (iv) as to the incumbency and genuineness of the signatures of the officers of CBL Holdings I, Inc. executing the Borrower Amendment Documents to which CBL Holdings I, Inc. or Borrower is a party; (h) a certificate of the Secretary of CBL Holdings I, Inc. dated as of the date hereof certifying (i) that the Partnership Agreements, Certificates of Limited Partnership, Articles of Incorporation, Articles of Organization, Bylaws and other organizational documents of each Loan Party owning a Collateral Property have not been modified since September 21, 2005; (ii) that attached thereto is a true and complete copy of Resolutions adopted by the Board of Directors of CBL Holdings I, Inc., authorizing the execution and delivery on behalf of each Loan Party owning a Collateral Property of the Mortgage Amendments, the Guarantor Consents and the other instruments, documents or agreements executed and delivered by or on behalf of such Loan Parties in connection herewith (all such instruments, documents or agreements executed and delivered in connection herewith by or on behalf of CBL Holdings I, Inc. or any Loan Party are hereinafter collectively referred to as the "Loan Party Amendment Documents"); and (iii) as to the incumbency and genuineness of the signatures of the officers of CBL Holdings I, Inc. executing the Loan Party Amendment Documents to which any Loan Party is a party; (i) a certificate of the Secretary of CBL & Associates Properties, Inc. dated as of the date hereof certifying (i) that the Certificate of Incorporation and By-laws of CBL & Associates Properties, Inc. have not been modified since September 21, 2005; (ii) that attached thereto is a true and complete copy of Resolutions adopted by the Board of Directors of CBL & Associates Properties, Inc., authorizing the execution and delivery on behalf of CBL & Associates Properties, Inc. of this Amendment and the other instruments, documents or agreements executed and delivered by CBL & Associates Properties, Inc. in connection herewith (all such instruments, documents or agreements executed and delivered in connection herewith by or on behalf of CBL & Associates Properties, Inc., Inc., Borrower or any Subpartnership are hereinafter collectively referred to as the "Properties Amendment Documents"); and (iii) as to the incumbency and genuineness of the signatures of the officers of CBL & Associates Properties, Inc. executing the Properties Amendment Documents to which CBL & Associates Properties, Inc. is a party; (j) the opinions of Borrower's in-house counsel, addressed to Agent and each Lender and satisfactory in form and substance to Agent, covering such matters relating to the transaction contemplated by this Amendment as Agent may reasonably request; and (k) payment to Agent, for the benefit of Lenders, of all loan fees due in connection with the increase in the amount of the Commitments and this Amendment. 7 Upon fulfillment of the foregoing conditions precedent, this Amendment shall become effective as of the date hereof. 9. Representations and Warranties; No Default. Borrower hereby represents and warrants to the Agent and the Lenders that: (a) all of Borrower's representations and warranties contained in the Credit Agreement and the other Loan Documents are true and correct on and as of the date of Borrower's execution of this Amendment; (b) no Default or Event of Default has occurred and is continuing as of such date under any Loan Document; (c) Borrower and Parent have the power and authority to enter into this Amendment and to perform all of its obligations hereunder; (d) the execution, delivery and performance of this Amendment by Borrower and Parent have been duly authorized by all necessary corporate, partnership or other action; (e) the execution and delivery of this Amendment and performance thereof by Borrower and Parent does not and will not violate the Partnership Agreements or other organizational documents of Borrower or Parent or the Certificate of Incorporation, By-laws or other organizational documents of CBL Holdings I, Inc. and does not and will not violate or conflict with any law, order, writ, injunction, or decree of any court, administrative agency or other governmental authority applicable to Borrower, Parent, CBL Holdings I, Inc., or their respective properties; and (f) this Amendment, the Amended Notes, the Notes, the Guarantor Consents, the Mortgage Amendments and all other documents executed in connection herewith, constitute legal, valid and binding obligations of the parties thereto, in accordance with the respective terms thereof, subject to bankruptcy, insolvency and similar laws of general application affecting the rights and remedies of creditors and, with respect to the availability of the remedies of specific enforcement, subject to the discretion of the court before which any proceeding therefor may be brought. 10. Expenses. Borrower agrees to pay, immediately upon demand by the Agent, all reasonable costs, expenses, fees and other charges and expenses actually incurred by the Agent in connection with the negotiation, preparation, execution and delivery of this Amendment, the Borrower Amendment Documents, the Loan Party Amendment Documents, and the Properties Amendment Documents. 11. Defaults Hereunder. The breach of any representation, warranty or covenant contained herein or in any document executed in connection herewith, or the failure to observe or comply with any term or agreement contained herein shall constitute a Default or Event of Default under the Credit Agreement (subject to any applicable cure period set forth in the Credit Agreement) and the Agent and the Lenders shall be entitled to exercise all rights and remedies they may have under the Credit Agreement, any other documents executed in connection therewith and applicable law. 8 12. References. All references in the Credit Agreement and the Loan Documents to the Credit Agreement shall hereafter be deemed to be references to the Credit Agreement as amended hereby and as the same may hereafter be amended from time to time. 13. Limitation of Agreement. Except as especially set forth herein, this Amendment shall not be deemed to waive, amend or modify any term or condition of the Credit Agreement, each of which is hereby ratified and reaffirmed and which shall remain in full force and effect, nor to serve as a consent to any matter prohibited by the terms and conditions thereof. 14. Counterparts. To facilitate execution, this Amendment may be executed in as many counterparts as may be convenient or required. It shall not be necessary that the signature of, or on behalf of, each party, or that the signature of all persons required to bind any party, appear on each counterpart. All counterparts shall collectively constitute a single document. It shall not be necessary in making proof of this document to produce or account for more than a single counterpart containing the respective signatures of, or on behalf of, each of the parties hereto. Any signature page to any counterpart may be detached from such counterpart without impairing the legal effect of the signature thereon and thereafter attached to another counterpart identical thereto having attached to it additional signature pages. 15. Further Assurances. Borrower agrees to take such further action as the Agent or the Lenders shall reasonably request in connection herewith to evidence the amendments herein contained to the Credit Agreement. 16. Successors and Assigns. This Amendment shall be binding upon and inure to the benefit of the successors and permitted assigns of the parties hereto. 17. Governing Law. This Amendment shall be governed by, and construed in accordance with, the laws of the State of Georgia, without regard to principles of conflicts of law. [Signatures Begin on Following Page] 9 IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment to Sixth Amended and Restated Credit Agreement to be executed by their authorized officers all as of the day and year first above written. BORROWER: CBL & ASSOCIATES LIMITED PARTNERSHIP, a Delaware limited partnership By: CBL Holdings I, Inc., a Delaware corporation, its sole general partner By: /s/ John N. Foy ----------------------------------- Name: John N. Foy Title: Vice Chairman and Chief Financial Officer PARENT: CBL & ASSOCIATES PROPERTIES, INC., a Delaware corporation, solely for the limited purposes set forth in Section 13.20 of the Credit Agreement. By: /s/ John N. Foy ------------------------------------- Name: John N. Foy Title: Vice Chairman and Chief Financial Officer [Signatures Continued on Following Page] 10 [Signature Page to Third Amendment to Sixth Amended and Restated Credit Agreement] WELLS FARGO BANK, NATIONAL ASSOCIATION, as Agent and as a Lender By: /s/ James A. Phelps Name: James A. Phelps Title: Senior Vice President Commitment Amount: $85,000,000.00 Lending Office (all Types of Advances) and Address for Notices: 2859 Paces Ferry Road, Suite 1805 Atlanta, GA 30339 Attn: Loan Administration Telecopier: (770) 435-2262 Telephone: (770) 435-3800 [Signatures Continued on Following Page] 11 [Signature Page to Third Amendment to Sixth Amended and Restated Credit Agreement] U.S. BANK NATIONAL ASSOCIATION By: /s/ Kelly Armstrong__________________________ Name: Kelly Armstrong Title: Assistant Vice President Commitment Amount: $71,000,000.00 Lending Office (all Types of Advances) and Address for Notices: 800 Nicollet Mall 3rd Floor Minneapolis, MN 55402 Attn: Michael Raarup Telecopier: (612) 303-2270 Telephone: (612) 303-3586 [Signatures Continued on Following Page] 12 [Signature Page to Third Amendment to Sixth Amended and Restated Credit Agreement] COMMERZBANK AG, NEW YORK AND GRAND CAYMAN BRANCHES By: /s/ Ralph C. Marra, Jr.______________________ --------------------------------------------- Name: Ralph C. Marra, Jr. Title: Vice President By: /s/ Kerstin Micke -------------------------------------------- Name: Kerstin Micke Title: Assistant Vice President Commitment Amount: $47,000,000.00 Lending Office (all Types of Advances) and Address for Notices: 2 World Financial Center 34th Floor New York, NY 10281-1050 Attention: Ralph Marra Telecopier: (212) 266-7565 Telephone: (212) 266-7661 [Signatures Continued on Following Page] 13 [Signature Page to Third Amendment to Sixth Amended and Restated Credit Agreement] WACHOVIA BANK, NATIONAL ASSOCIATION By: /s/ Rex E. Rudy______________________________ --------------------------------------------- Name: Rex E. Rudy Title: Managing Director Commitment Amount: $47,000,000.00 Lending Office (all Types of Advances) and Address for Notices: 301 South College Street NC - 0172 Charlotte, NC 28288-0172 Attention: Rex Rudy Telecopier: (704) 383-6505 Telephone: (704) 383-7534 [Signatures Continued on Following Page] 14 [Signature Page to Third Amendment to Sixth Amended and Restated Credit Agreement] KEYBANK NATIONAL ASSOCIATION By: /s/ Michael P. Szuba________________________ --------------------------------------------- Name: Michael P. Szuba Title: Vice President Commitment Amount: $47,000,000.00 Lending Office (all Types of Advances) and Address for Notices: Keybank REC - Institutional 127 Public Square, 6th Floor Cleveland, OH 44114-1306 Attn: Mike Szuba Telecopier: (216) 689-4997 Telephone: (216) 689-5984 [Signatures Continued on Following Page] 15 [Signature Page to Third Amendment to Sixth Amended and Restated Credit Agreement] PNC BANK, NATIONAL ASSOCIATION By: /s/ Andrew T. White__________________________ ---------------------------------------------- Name: Andrew T. White Title: Vice President Commitment Amount: $47,000,000.00 Lending Office (all Types of Advances) and Address for Notices: PNC Real Estate Finance 1600 Market Street, 30th Floor Philadelphia, PA 19103 Attention: Andrew White Telecopier: (215) 585-5806 Telephone: (215) 585-6123 [Signatures Continued on Following Page] 16 [Signature Page to Third Amendment to Sixth Amended and Restated Credit Agreement] SUNTRUST BANK By: /s/ Blake K. Thompson________________________ --------------------------------------------- Name: Blake K. Thompson Title: Vice President Commitment Amount: $32,000,000.00 Lending Office (all Types of Advances) and Address for Notices: Mail Code ALX 2608 8330 Boone Blvd. 8th Floor Vienna, VA 22182-3871 Attention: John Wendler Telecopier: (703) 442-1570 Telephone: (703) 442-1563 [Signatures Continued on Following Page] 17 [Signature Page to Third Amendment to Sixth Amended and Restated Credit Agreement] ALLIED IRISH BANKS, P.L.C. By: /s/ Kathryn E. Murdoch_______________________ --------------------------------------------- Name: Kathryn E. Murdoch Title: Vice President By: /s/ Brian Deegan_____________________________ Name: Brian Deegan Title: Assistant Vice President Commitment Amount: $20,000,000.00 Lending Office (all Types of Advances) and Address for Notices: Allied Irish Banks, p.l.c. 405 Park Avenue 10th Floor New York, NY 10022 Attention: Kathryn Murdoch Telecopier: (212) 515-6710 Telephone: (212) 515-6811 [Signatures Continued on Following Page] 18 [Signature Page to Third Amendment to Sixth Amended and Restated Credit Agreement] LASALLE BANK NATIONAL ASSOCIATION By: /s/ Stephen J. Shockey ------------------------------------------------- Name: Stephen J. Schockey Title: First Vice President Commitment Amount: $20,000,000.00 Lending Office (all Types of Advances) and Address for Notices: 135 South LaSalle Street Suite 1225 Chicago, Illinois 60603 Attention: Stephen Shockey Telecopier: (312) 904-6691 Telephone: (312) 904-7096 [Signatures Continued on Following Page] 19 [Signature Page to Third Amendment to Sixth Amended and Restated Credit Agreement] SOCIETE GENERALE By: /s/ C. H. Butterworth ---------------------------------------------- Name: C. H. Butterworth Title: Director Commitment Amount: $20,000,000.00 Lending Office (all Types of Advances) and Address for Notices: Trammell Crow Center 2001 Ross Avenue Suite 4900 Dallas, TX 75201 Attn: Chuck Butterworth Telecopier: (214) 979-2740 Telephone: (214) 979-2779 [Signatures Continued on Following Page] 20 [Signature Page to Third Amendment to Sixth Amended and Restated Credit Agreement] UNION BANK OF CALIFORNIA N.A. By: /s/ Lawrence Andow ------------------------------------------ Name: Lawrence Andow Title: Vice President Commitment Amount: $20,000,000.00 Lending Office (all Types of Advances) and Address for Notices: Lending Office: --------------- 350 California Street 7th Floor San Francisco, CA 94104 Attn: Larry Andow Telecopier: (415) 433-7438 Telephone: (415) 705-5032 E-mail Address: Lawrence.Andow@uboc.com Loan Administration: Commercial Real Estate Loan Administration 18300 Von Karman Avenue, Suite 200 Irvine, CA 92612 Attn: Amelida Carreno Telecopier: (949) 553-7123 Telephone: (949) 553-2568 E-mail Address: Amelida.Carreno@uboc.com ------------------------ [Signatures Continued on Following Page] 21 [Signature Page to Third Amendment to Sixth Amended and Restated Credit Agreement] WESTDEUTSCHE IMMOBILIENBANK By: /s/ Armin Gemmerich__________________________ Name: Armin Bemmerich Title: Executive Director By: /s/ Martin Stevenger_________________________ Name: Martin Stevenger Title: Senior Manager Commitment Amount: $20,000,000.00 Lending Office (all Types of Advances) and Address for Notices: Grosse Bieiche 46 55131 Mainz Germany Attention: Martin Stevener Telecopier: 1 6131 9280 7308 Telephone: 1 6131 9280 7426 [End of Signatures] 22 Loan No. 5593ZMA EXHIBIT A TRANSFER AUTHORIZER DESIGNATION (For Disbursement of Loan Proceeds by Funds Transfer) |_| NEW |X| REPLACE PREVIOUS DESIGNATION |_| ADD |_| CHANGE |_| DELETE LINE NUMBER _____ The following representatives of CBL & Associates Limited Partnership ("Borrower") are authorized to request the disbursement of [Revolving Advances][Swingline Loans] and initiate funds transfers for Loan Number 5593ZMA dated February ___, 2006 between Wells Fargo Bank, National Association ("Agent"), the lenders party thereto and Borrower. Agent is authorized to rely on this Transfer Authorizer Designation until it has received a new Transfer Authorizer Designation signed by Borrower, even in the event that any or all of the foregoing information may have changed.
Name Title Maximum Wire Amount - ----------------------------------------------------------------------------------------------------------------------------------- 1. Charles B. Lebovitz Chairman of the Board and $476,000,000 Chief Executive Officer - ----------------------------------------------------------------------------------------------------------------------------------- 2. John N. Foy Vice Chairman of the Board, Chief $476,000,000 Financial Officer and Treasurer - ----------------------------------------------------------------------------------------------------------------------------------- 3. Charles A. Willett, Jr. Senior Vice President $476,000,000 - ----------------------------------------------------------------------------------------------------------------------------------- 4. - ----------------------------------------------------------------------------------------------------------------------------------- 5. - ----------------------------------------------------------------------------------------------------------------------------------- 1. - --------------------------------------------------------------------------------------------------------------------- Transfer Funds to (Receiving Party Account Name): CBL & Associates Limited Partnership - --------------------------------------------------------------------------------------------------------------------- Receiving Party Account Number: 4441630 - --------------------------------------------------------------------------- ----------------------------------------- Receiving Bank Name, City and State: Receiving Bank Routing (ABA) Number First Tennessee Bank, N.A., Memphis, TN 084000026 - --------------------------------------------------------------------------- ----------------------------------------- Maximum Transfer Amount: $476,000,000 - --------------------------------------------------------------------------------------------------------------------- Further Credit Information/Instructions: Attention: Zelma Pack at (423) 757-4249 - --------------------------------------------------------------------------------------------------------------------- 2. - --------------------------------------------------------------------------------------------------------------------- Transfer Funds to (Receiving Party Account Name): - --------------------------------------------------------------------------------------------------------------------- Receiving Party Account Number: - -------------------------------------------------------------------------------- ------------------------------------ Receiving Bank Name, City and State: Receiving Bank Routing (ABA) Number - -------------------------------------------------------------------------------- ------------------------------------ Maximum Transfer Amount: - --------------------------------------------------------------------------------------------------------------------- Further Credit Information/Instructions: - --------------------------------------------------------------------------------------------------------------------- 3. - --------------------------------------------------------------------------------------------------------------------- Transfer Funds to (Receiving Party Account Name): - --------------------------------------------------------------------------------------------------------------------- Receiving Party Account Number: - --------------------------------------------------------------------------------------------------------------------- Receiving Bank Name, City and State: Receiving Bank Routing (ABA) Number - --------------------------------------------------------------------------- ----------------------------------------- Maximum Transfer Amount: - --------------------------------------------------------------------------------------------------------------------- Further Credit Information/Instructions: - --------------------------------------------------------------------------------------------------------------------- (1) Maximum Wire Amount may not exceed the Loan Amount.
Date: _____________________________ "BORROWER" CBL & ASSOCIATES LIMITED PARTNERSHIP, a Delaware limited partnership By: CBL Holding I, Inc., a Delaware corporation, its sole general partner By:_____________________________________ Name:___________________________________ Title:__________________________________ (CORPORATE SEAL) EX-10 10 exhibit10193.txt EXHIBIT 10.19.3 CREDIT AGREEEMENT 2ND AMENDMENT Exhibit 10.19.3 SECOND AMENDMENT TO THIRD AMENDED AND RESTATED LOAN AGREEMENT THIS SECOND AMENDMENT TO THE THIRD AMENDED AND RESTATED LOAN AGREEMENT (this "Amendment") is made and entered into as of this 11th day of July, 2005, but effective as of the 1st day of April, 2005, by and among CBL & ASSOCIATES LIMITED PARTNERSHIP, a Delaware limited partnership (hereinafter referred to as "Borrower"), and SUNTRUST BANK, a Georgia banking corporation (the "Bank"). WITNESSETH: WHEREAS, Borrower and Bank entered into that certain Third Amended and Restated Loan Agreement dated as of September 24, 2003 (the "Original Loan Agreement"), pursuant to which the Bank agreed to extend to Borrower a loan on a credit revolving basis (the "Loan") not to exceed the principal sum of Ten Million and No/100 Dollars ($10,000,000) at any one time outstanding; WHEREAS, Borrower and Bank previously amended the Original Loan Agreement pursuant to that certain First Amendment to the Third Amended and Restated Loan Agreement (the "First Amendment") by, inter alia, extending the Termination Date by one (1) year; and WHEREAS, Borrower and Bank again desire to extend the Maturity Date for the Loan by extending the Termination Date by one (1) year; NOW THEREFORE, for and in consideration of the premises, for Ten and No/100 Dollars ($10.00) in hand paid by the parties to each other, and for other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged by Borrower and Bank, Borrower and Bank do hereby covenant and agree as follows: 1. Definitions. Capitalized terms used herein and not otherwise defined shall have the meaning ascribed to such terms in the Credit Agreement. 2. Termination Date. The definition of Termination Date contained in the Loan Agreement, as previously amended by the First Amendment, is hereby deleted and in lieu thereof the following definition shall be inserted and added to replace the same: "Termination Date" means April 1, 2007, or such later date to which such date may be extended in accordance with Section 11.12." 3. Conditions Precedent. Subject to the other terms and conditions hereof, this Amendment shall not become effective until the Agent shall have received each of 1 the following instruments, documents or agreements, each in form and substance satisfactory to the Agent: (a) Counterparts this Amendment duly executed and delivered by Borrower and Bank; (b) a certificate of Secretary of CBL Holdings I, Inc. dated as of the date hereof certifying (i) that the Certificate of Incorporation and By-laws of CBL Holdings I, Inc. have not been modified; (ii) that the Partnership Agreement and Certificate of Limited Partnership of Borrower and Guarantor have not been modified since June 15, 2005; (iii) that attached thereto is a true and complete copy of Resolutions adopted by the Executive Committee Board of Directors of CBL Holdings I, Inc., authorizing the execution and delivery on behalf of Borrower and Guarantor of this Amendment and the other instruments, documents or agreements executed and delivered by or on behalf of Borrower and/or Guarantor in connection herewith remain in full force and effect (all such instruments, documents or agreements executed and delivered in connection herewith by or on behalf of CBL Holdings I, Inc., Borrower and/or Guarantor are hereinafter collectively referred to as the "Borrower Amendment Documents"); and (iv) as to the incumbency and genuineness of the signatures of the officers of CBL Holdings I, Inc. executing the Borrower Amendment Documents to which Borrower and/or Guarantor is a party; (c) a certificate of the Secretary of CBL & Associates Properties, Inc. dated as of the date hereof certifying (i) that the Certificate of Incorporation and By-laws of CBL & Associates Properties, Inc. have not been modified since June 15, 2005; (ii) that copy Resolutions adopted by the Executive Committee Board of Directors of CBL & Associates Properties, Inc. authorizing the execution and delivery on behalf of CBL & Associates Properties, Inc. of this Amendment and the other instruments, documents or agreements executed and delivered by CBL & Associates Properties, Inc. in connection herewith (all such instruments, documents or agreement executed and delivered in connection herewith by or on behalf of CBL Holdings I, Inc., Borrower may or any Subpartnership are hereinafter collectively referred to as the "Properties Amendment Documents"); and (iii) as to the incumbency and genuineness of the signatures of the offices of CBL & Associates Properties, Inc. executing the Properties Amendment Documents to which CBL & Associates Properties, Inc. is a party; (d) the opinions of Borrower's in-house counsel addressed to the Bank and satisfactory in form and substance to the Bank, covering such matters relating to the transaction contemplated by this Amendment as the Bank may reasonably request. 2 Upon fulfillment of the foregoing conditions precedent, this Amendment shall become effective as of the date hereof. 4. Representations and Warranties; No Default. Borrower hereby represents and warrants to the Bank that: (a) all of Borrower's representations and warranties contained in the Loan Agreement and the other Loan Documents, except for those representations and warranties which by their terms date specific only to a stated date, are true and correct on and as of the date of Borrower's execution of this Amendment; (b) no Default or Event of Default has occurred and is continuing as of such date under any Loan Document; (c) Borrower has the power and authority to enter into this Amendment and to perform all of its obligations hereunder; (d) the execution, delivery and performance of this Amendment by Borrower has been duly authorized by all necessary corporate, partnership or other action; (e) the execution and delivery of this Amendment and performance thereof by Borrower does not and will not violate the Partnership Agreements or other organizational documents of Borrower or the Certificate of Incorporation, By-laws or other organizational documents of CBL Holdings I, Inc. and does not and will not violate or conflict with any law, order, writ, injunction, or decree of any court, administrative agency or other governmental authority applicable to Borrower or their respective properties; and (f) this Amendment, the Guarantor consent, and all other documents executed in connection herewith, constitute legal, valid and binding obligations of the parties thereto, in accordance with the respective terms thereof, subject to bankruptcy, insolvency and similar laws of general application affecting the rights and remedies of creditors and, which respect to the availability of remedies of specific enforcement, subject to the discretion of the court before which any proceeding therefor may be brought. 5. Expenses. Borrower agrees to pay, immediately upon demand by the Bank, all reasonable costs, expenses, fees and other charges and expenses actually incurred by the Bank in connection with the negotiation, preparation, execution and delivery of this Amendment and the Amendment Documents. 3 6. Defaults Hereunder. The breach of any representation, warranty or covenant contained herein or in any document executed in connection herewith, or the failure to observe or comply with any term or agreement contained herein shall constitute a Default or Event of Default under the Loan Agreement (subject to any applicable cure period set forth in the Loan Agreement) and the Bank shall be entitled to exercise all rights and remedies they may have under the Loan Agreement, any other documents executed in connection therewith and applicable law. 7. References. All references in the Loan Agreement and the Loan Documents to the Loan Agreement shall hereafter be deemed to be references to the Loan Agreement as amended hereby and as the same may hereafter be amended from time to time. 8. Limitation of Agreement. Except as especially set forth herein, this Amendment shall not be deemed to waive, amend or modify any term or condition of the Loan Agreement, each of which is hereby ratified and reaffirmed and which shall remain in full force and effect, nor to serve as a consent to any matter prohibited by the terms and conditions thereof. 9. Counterparts. To facilitate execution, this Amendment may be executed in as many counterparts as may be convenient or required. It shall not be necessary that the signature of, or on behalf of, each party, or that the signature of all persons required to bind any party, appear on each counterpart. All counterparts shall collectively constitute a single document. It shall not be necessary in making proof of this document to produce or account for more than a single counterpart containing the respective signatures of, or on behalf of, each of the parties hereto. Any signature page to any counterpart may be detached from such counterpart without impairing the legal effect of the signature thereon and thereafter attached to another counterpart identical thereto having attached to it additional signature pages. 10. Further Assurances. Borrower agrees to take such further action as the Bank shall reasonably request in connection herewith to evidence the amendments herein contained to the Loan Agreement. 11. Successors and Assigns. This Amendment shall be binding upon and inure to the benefit of the successors and permitted assigns of the parties hereto. 12. Governing Law. This Amendment shall be governed by, and construed in accordance with, the laws of the State of Georgia, without reference to principles of conflicts of law. 4 IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to Third Amended and Restated Loan Agreement to be executed by their authorized officers all as of the day and year first above written. BORROWER: CBL & ASSOCIATES LIMITED PARTNERSHIP By: CBL Holdings I, Inc., its sole general partner By: /s/ John N. Foy ------------------------- Name: John N. Foy Title: Vice Chairman and Chief Financial Officer 5 [ SIGNATURE PAGES CONTINUE ON NEXT PAGE ] [SIGNATURE PAGE TO THE SECOND AMENDMENT TO THIRD AMENDED AND RESTATED LOAN AGREEMENT DATED AS OF SEPTEMBER 24, 2003] SUNTRUST BANK, a Georgia Banking Corporation By: /s/ W. John Wendler ------------------------------------------------ Name: W. John Wendler ----------------------------------------- Title: Senior Vice President ------------------------------- 6 [SIGNATURE PAGE TO THE SECOND AMENDMENT TO THIRD AMENDED AND RESTATED LOAN AGREEMENT DATED AS OF SEPTEMBER 24, 2003] CONSENT OF PARENT AND GUARANTOR Cool Springs Crossing Limited Partnership, a Tennessee limited partnership ("Guarantor") and CBL & Associates Properties, Inc., a Delaware corporation ("Parent") hereby consents to and approves the Borrower's execution of the foregoing Second Amendment to Third Amended and Restated Loan Agreement by and between SunTrust Bank and CBL & Associates Limited Partnership. GUARANTOR: COOL SPRINGS CROSSING LIMITED PARTNERSHIP a Tennessee limited partnership By: CBL & Associates Limited Partnership, a Delaware Limited partnership and its general partner By: CBL Holdings I, Inc., a Delaware Corporation and its sole general partner of CBL & Associates Limited Partnership By: /s/ John N. Foy -------------------------------------------------------- Name: John N. Foy Title: Vice Chairman and Chief Financial Officer PARENT: CBL & ASSOCIATES PROPERTIES, INC. By: /s/ John N. Foy -------------------------------------------------------- Name: John N. Foy Title: Vice Chairman and Chief Financial Officer EX-10 11 exhibit10204.txt EXHIBIT 10.20.4 CREDIT AGREEMENT FTB Exhibit 10.20.4 AMENDED AND RESTATED LOAN AGREEMENT (This Amended and Restated Loan Agreement amends, restates, and replaces that certain Amended and Restated Loan Agreement dated as of March 9, 2005 between the undersigned Borrower, Lakeshore, Lakes Mall and the Bank.) THIS AMENDED AND RESTATED LOAN AGREEMENT ("Loan Agreement") is made as of December 16th, 2005 by and between CBL & ASSOCIATES LIMITED PARTNERSHIP, a Delaware limited partnership, whose address is CBL Center, Suite 500, 2030 Hamilton Place Boulevard, Chattanooga, Tennessee 37421-6000 ("Borrower"), and LAKESHORE/SEBRING LIMITED PARTNERSHIP, a Florida limited partnership, whose address is the same as the Borrower's described above ("Lakeshore") and THE LAKES MALL, LLC, a Michigan limited liability company whose address is the same as the Borrower's described above ("Lakes Mall"), and FIRST TENNESSEE BANK NATIONAL ASSOCIATION, a national banking association organized and existing under the statutes of the United States of America, with a principal office at 701 Market Street, Chattanooga, Tennessee 37402 (hereinafter referred to as the "Bank"). Recitals of Fact Borrower has requested that the Bank commit to make loans and advances to it, and to Lakeshore and to Lakes Mall, for the benefit of Borrower, on a revolving credit basis in an amount not to exceed at any one time outstanding the aggregate principal sum of One Hundred Million Dollars ($100,000,000.00) for the purpose of providing working capital for pre-development expenses, development costs, equity investments, repayment of existing indebtedness, certain distributions to limited partners (as allowed herein), letters of credit and construction and for general corporate purposes. The Bank has agreed to make certain portions of such loans and advances on the terms and conditions herein set forth. Manufacturers and Traders Trust Company, Compass Bank, Amsouth Bank of Tennessee and Branch Banking and Trust Company, all as participants in the Loan have previously agreed to make certain portions of such loan and advances on the terms and conditions previously set forth and now on the terms and conditions herein set forth. This Loan Agreement is currently being amended to: (a) change certain definitions to conform to definitions being used by Wells Fargo in its loan documents with the Borrower; and (b) to decrease the interest rate. NOW, THEREFORE, incorporating the Recitals of Fact set forth above and in consideration of the mutual agreements herein contained, the parties agree as follows: AGREEMENTS SECTION 1: DEFINITIONS AND ACCOUNTING TERMS 1.1 Certain Defined Terms. For the purposes of this Loan Agreement, the following terms shall have the following meanings (such meanings to be applicable equally to both the singular and plural forms of such terms) unless the context otherwise requires: 1 "Adjusted Asset Value" means, as of a given date, the sum of: (a)(i) EBITDA attributable to malls, power centers and all other assets for the fiscal quarter most recently ended times (ii) 4; divided by (iii) 7.25%. In determining Adjusted Asset Value (i) EBITDA attributable to real estate properties acquired during such fiscal quarter, and EBITDA attributable to Properties development of which was completed during such fiscal quarter, shall be disregarded, (ii) EBITDA attributable to any Property which is currently under development shall be excluded, (iii) with respect to any Subsidiary that is not a Wholly Owned Subsidiary, only the Borrower's Ownership Share of the EBITDA attributable to such Subsidiary shall be used when determining Adjusted Asset Value, and (iv) EBITDA shall be attributed to malls and power centers based on the ratio of (x) revenues less property operating expenses (to be determined exclusive of interest expense, depreciation and general and administrative expenses) of malls and power centers to (y) total revenues less total property operating expenses (similarly determined), such revenues and expenses to be determined on a quarterly basis in a manner consistent with the Parent's method of reporting of segment information in the notes to its financial statements for the fiscal quarter ended September 30, 2004 as filed with the Securities and Exchange Commission, and otherwise in a manner reasonably acceptable to the Bank. In addition, in the case of any operating Property acquired in the immediately preceding period of eighteen (18) consecutive months for a purchase price indicative of a capitalization rate of less than 7.25%, EBITDA attributable to such Property shall be excluded from the determination of Adjusted Asset Value, if that particular operating Property is valued in Parent's financial statement at its purchase price. "Adjusted Loan Amount" means the lesser of (a) 75% of the Appraised Value the real estate and improvements described in the Mortgages (excluding the Lakes Mall Mortgage), plus 67.5% of the value of the real estate and improvements described in the Lakes Mall Mortgage; or (c) the Permanent Loan Estimate of all Collateral Properties; or (c) $100,000,000.00. "Affiliate" means as to any Person, any other Person which, directly or indirectly, owns or controls, on an aggregate basis including all beneficial ownership and ownership or control as a trustee, guardian or other fiduciary, at least ten percent (10%) of the outstanding shares of Capital Stock or other ownership interest having ordinary voting power to elect a majority of the board of directors or other governing body (irrespective of whether, at the time, stock of any other class or classes of such corporation shall have contingency) of such Person or at least ten percent (10%) of the partnership or other ownership interest of such Person; or which controls, is controlled by or is under common control with such Person. For the purposes of this definition, "control" means the possession, directly or indirectly, of the power to direct or cause the direction of management and policies, whether through the ownership of voting securities, by contract or otherwise. Notwithstanding the foregoing, a pension fund, university or other endowment funds, mutual fund investment company or similar fund having a passive investment intent owning such a ten percent (10%) or greater interest in a Person shall not be deemed an Affiliate of such Person unless such pension, mutual, endowment or similar fund either (i) owns fifty percent (50%) or more of the Capital Stock or other ownership interest in such Person, or (ii) has the right or power to select one or more members of such Person's board of directors or other governing body. "Agreement Date" means the date as of which this Loan Agreement is dated. 2 "Applicable Law" means, in respect of any Person, all provisions of statutes, rules, regulations and orders of any governmental authority applicable to such Person, and all orders and decrees of all courts and arbitrators in proceedings or actions in which the person in question is a party. "Bank's Proportionate Share" means the Bank's undivided participating interest in the Loan which shall be equal to Twenty Five Million and NO/100 Dollars ($25,000,000.00). "Base Rate" means the base commercial rate of interest established from time to time by Bank. The Base Rate existing as of the date hereof is seven percent (7.00%) per annum. "Borrower" has the meaning set forth in the introductory paragraph hereof and shall include the Borrower's successors and permitted assigns. "Borrowing Base" is the limitation on the aggregate Revolving Credit Loan indebtedness which may be outstanding at any time during the term of this Loan Agreement. The Borrowing Base will normally be calculated each July 1, January 1, April 1 and October 1 but shall be subject to recalculation upon the occurrence of any extraordinary event, such as the addition or release of any collateral, or an extraordinary event that materially affects the value of any collateral. The Borrowing Base will be an amount not to exceed the Adjusted Loan Amount. "Borrowing Base Certificate" means a report certified by the controller or chief financial officer or Senior Vice President of the Borrower, setting forth the calculations required to establish the Borrowing Base as of a specified date, all in form and detail reasonably satisfactory to Bank. "Business Day" means a banking business day of the Bank and which is also a day on which dealings are carried on in the interbank eurodollar market. "Capital Stock" shall mean, as to any Person, any and all shares, interests, warrants, participations or other equivalents (however designated) of corporate stock of such Person. "CBL Holdings I" means CBL Holdings I, Inc., a Delaware corporation and the sole general partner of Borrower, and shall include CBL Holdings It's successors and permitted assigns. "CBL Holdings II" means CBL Holdings II, Inc., a Delaware corporation and a limited partner of Borrower, and shall include CBL Holdings, its successors and permitted assigns. "CBL & Associates Management, Inc." means CBL & Associates Management, Inc., a Delaware corporation, and shall include CBL & Associates Management, Inc.'s successors and permitted assigns. "CBL Mortgage" means the mortgages and/or deeds of trust with security agreements and assignments of rents and leases and related amendments executed by Borrower, Walnut Square Associates Limited Partnership, Lakeshore/Sebring Limited Partnership, Vicksburg Mall Associates, Ltd., The Lakes Mall, LLC and Towne Mall and/or any other entity related to or owned by Borrower and/or Parent and/or CBL Holdings I in favor of Bank covering their interest in the properties described in Exhibit "A," attached hereto and made a part hereof. 3 "Closing Date" means the date of this Loan Agreement set out in the first paragraph of this Loan Agreement. "Collateral Document" means any Guaranty, the CBL Mortgage, any security deed, mortgage, deed of trust, assignment of leases and rents, any property management contract assignments, and any other security agreement, financing statement, or other document, instrument or agreement creating, evidencing or perfecting the Bank's Liens in any of the Collateral. "Collateral Property" means the property described in the CBL Mortgage. "Credit Agreement" means the Credit Agreement dated as of July 28, 1994 and as amended by amendments dated as of May 5, 1995, July 5, 1995 and subsequent amendments among the Borrower, Wells Fargo and others. "Debt Service" means, with respect to a Person and for a given period, the sum of the following: (a) such Person's Interest Expense for such period; (b) regularly scheduled principal payments on Indebtedness of such Person made during such period, other than any balloon, bullet or similar principal payment payable on any Indebtedness of such Person which repays such Indebtedness in full; and (c) such Person's Ownership Share of the amount of any payments of the type described in the immediately preceding clause (b) of Unconsolidated Affiliates of such Person. "Default Rate" means the rate of interest described in the Note, which shall accrue at the Bank's option after the occurrence of an Event of Default which remains uncured after any applicable grace period. "EBITDA" means, for any period, net income (loss) of the Parent and its Subsidiaries determined on a consolidated basis for such period excluding the following amounts (but only to the extent included in determining net income (loss) for such period and without duplication): (a) depreciation and amortization expense and other non-cash charges for such period less depreciation and amortization expense allocable to minority interest in Subsidiaries of the Borrower for such period; (b) interest expense for such period less interest expense allocable to minority interest in Subsidiaries of the Borrower for such period; (c) minority interest in earnings of the Borrower for such period; (d) extraordinary and nonrecurring net gains or losses (other than gains or losses from the sale of outparcels of Properties) for such period and expense relating to the extinquishments of Indebtedness for such period; 4 (e) net gains or losses on the disposal of discontinued operations for such period; (f) expenses incurred during such period with respect to any real estate project abandoned by the Parent or any Subsidiary in such period; (g) income tax expense in respect of such period; (h) the Parent's Ownership Share of depreciation and amortization expense and other non-cash charges of Unconsolidated Affiliates of the Parent for such period; and (i) the Parent's Ownership Share of interest expense of Unconsolidated Affiliates of the Parent for such period; and; and (j) non-cash impairment charges as defined by Financial Accounting Standards Board (FASB) Statement 144 Accounting for the Impairment or Disposal of Long-Lived Assets. "Effective Date," which definition is used and only applies within Section 7.12 hereof, means the date the Credit Agreement became effective in accordance with Section 4.1 thereof. "Environmental Laws" means all applicable local, state or federal laws, rules or regulations pertaining to environmental regulation, contamination or cleanup, including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, the Resource Conservation and Recovery Act of 1976 or any state lien or superlien or environmental cleanup statutes all as amended from time to time. "Equity Interest" means, with respect to any Person, any share of Capital Stock of (or other ownership or profit interests in) such Person, any warrant, option or other right for the purchase or other acquisition from such Person of any share of Capital Stock of (or other ownership or profit interests in) such Person, any security convertible into or exchangeable for any share of Capital Stock of (or other ownership or profit interests in) such Person or warrant, right or option for the purchase or other acquisition from such Person of such shares (or such other interests), and any other ownership or profit interest in such Person (including, without limitation, partnership, member or trust interests therein), whether voting or nonvoting, whether or not certificated and whether or not such share, warrant, option, right or other interest is authorized or otherwise existing on any date of determination. "Equity Issuance" means any issuance or sale by a Person of any Equity Interest. "Event of Default" has the meaning assigned to that phrase in Section 8. "Extension of Credit" means, with respect to a Person, any of the following, whether secured or unsecured: (a) loans to such Person, including without limitation, lines of credit and mortgage loans; (b) bonds, debentures, notes and similar instruments issued by such Person; (c) reimbursement obligations of such Person under or in respect of any letter of credit; and (d) any of the foregoing of other Persons, the payment of which such Person Guaranteed or is otherwise recourse to such Person. 5 "Funds from Operations" means, as to any period, on a consolidated basis, an amount equal to (a) income (loss) from operations of Borrower, Parent and their respective Subsidiaries for such period, plus (b) depreciation and amortization from consolidated and unconsolidated property, plus depreciation and amortization from property included in discontinued operation, plus (c) to the extent not included in clause (a) above, gain (loss) on the sales of outparcels made in the ordinary course of business, minus (d) Minority investors share of depreciation and amortization of certain property, minus (e) Minority investors share of income from certain property, minus (f) depreciation and amortization from non-real estate property, plus (g) income from operations of Unconsolidated Affiliates and discontinued operations determined in each case in accordance with GAAP. Adjustments for Unconsolidated Affiliates will be calculated to reflect funds from operations on the same basis. "GAAP" means United States generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity, including without limitation, the Securities and Exchange Commission, as may be approved by a significant segment of the accounting profession, which are applicable to the circumstances as of the date of determination. "Gross Asset Value" means, at a given time, the sum (without duplication) of the following: (a) Adjusted Asset Value at such time; (b) all cash and cash equivalents of the Parent and its Subsidiaries determined on a consolidated basis as of the end of the fiscal quarter most recently ended (excluding tenant deposits and other cash and cash equivalents the disposition of which is restricted in any way (other than restrictions in the nature of early withdrawal penalties)); (c) with respect to any Property which is under construction or the development of which was completed during the fiscal quarter most recently ended, the book value of construction in process as determined in accordance with GAAP for all such Properties at such time (including without duplication the Parent's Ownership Share of all construction in process of Unconsolidated Affiliates of the Parent); (d) the book value of all unimproved real property of the Parent and its Subsidiaries determined on a consolidated basis; (e) the purchase price paid by the Parent or any Subsidiary (less any amounts paid to the Parent or such Subsidiary as a purchase price adjustment, held in escrow, retained as a contingency reserve, or other similar arrangements) as required to be disclosed in a consolidated balance sheet (including the notes thereto) of the Parent for: (i) any Property (other than a property under development) acquired by the Parent or such Subsidiary during the Parent's fiscal quarter most recently ended; and 6 (ii) any operating Property acquired in the immediately preceding period of eighteen (18) consecutive months for a purchase price indicative of a capitalization rate of less than 7.25%; provided, that if the Parent or a Subsidiary acquired such Property together with other Properties or other assets and paid an aggregate purchase price for such Properties and other assets, then the Parent shall allocate the portion of the aggregate purchase price attributable to such Property in a manner consistent with reasonable accounting practices; provided further in no event shall the aggregate of value of such operating Properties included in the Gross Asset Value pursuant to this clause (e)(ii) exceed $2,000,000,000.00; (f) with respect to any purchase obligation, repurchase obligation or forward commitment evidenced by a binding contract included when determining the Total Liabilities of the Parent and its Subsidiaries, the reasonably determined value of any amount that would be payable, or property that would be transferable, to the Parent or any Subsidiary if such contract were terminated as of such date; and (g) to the extent not included in the immediately preceding clauses (a) through (f), the value of any real property owned by a Subsidiary (that is not a Wholly Owned Subsidiary) of the Borrower or an Unconsolidated Affiliate of the Borrower (such Subsidiary or Unconsolidated Affiliate being a "JV") and which property secures Recourse Indebtedness of such JV. For purposes of this clause (g): (x) the value of such real property shall be the lesser of (A) the Permanent Loan Estimate which would be applicable to such real property were such property a Collateral Property and (B) the amount of Recourse Indebtedness secured by such real property; (y) in no event shall the aggregate value of such real property included in Gross Asset Value pursuant to this clause (g) exceed $500,000,000.00; and (z) the value of any such real property shall only be included in Gross Asset Value if the organizational documents of such JV provide that if, and to the extent, such Indebtedness is paid by the Borrower or a Subsidiary of the Borrower or by resort to such real property, then the Borrower or a Subsidiary of the Borrower shall automatically acquire, without the necessity of any further payment or action, all Equity Interests in such JV not owned by the Borrower or any Subsidiary. "Guaranty", "Guaranteed" or to "Guarantee" as applied to any obligation means and includes (a) a guaranty (other than by endorsement of negotiable instruments for collection in the ordinary course of business), directly or indirectly, in any manner, of any part or all of such obligation, or (b) an agreement, direct or indirect, contingent or otherwise, and whether or not constituting a guaranty, the practical effect of which is to assure the payment or performance (or payment of damages in the event of nonperformance) of any part or all of such obligation. "Hazardous Substances" shall mean and include all hazardous and toxic substances, wastes or materials, any pollutants or contaminants (including, without limitation, asbestos and raw materials which include hazardous constituents), or any other similar substances or materials which are included under or regulated by any applicable Environmental Laws. 7 "Indebtedness" means, with respect to a Person, at the time of computation thereof, all of the following (without duplication): (a) all obligations of such Person in respect of money borrowed; (b) all obligations of such Person (other than trade debt incurred in the ordinary course of business), whether or not for money borrowed: (i) represented by notes payable, or drafts accepted, in each case representing extensions of credit, (ii) evidenced by bonds, debentures, notes or similar instruments, or (iii) constituting purchase money indebtedness, conditional sales contracts, title retention debt instruments or other similar instruments, upon which interest charges are customarily paid or that are issued or assumed as full or partial payment for property; (c) capitalized lease obligations of such Person; (d) all reimbursement obligations of such Person under or in respect of any letters of credit or acceptances (whether or not the same have been presented for payment); and (e) all Indebtedness of other Persons which (i) such Person has guaranteed or is otherwise recourse to such Person or (ii) is secured by a Lien on any property of such Person. "Interest Expense" means, with respect to a Person and for any period, (a) the total interest expense (including, without limitation, interest expense attributable to capitalized lease obligations) of such Person and in any event shall include all letter of credit fees amortized as interest expense and all interest expense with respect to any Indebtedness in respect of which such Person is wholly or partially liable whether pursuant to any repayment, interest carry, performance Guarantee or otherwise, plus (b) to the extent not already included in the foregoing clause (a) such Person's Ownership Share of all paid or accrued interest expense for such period of Unconsolidated Affiliates of such Person. Interest Expense allocable to minority interest in Subsidiaries of the Borrower shall be excluded from Interest Expense of the Parent and its Subsidiaries when determined on a consolidated basis. "Investment" means, with respect to any Person, any acquisition or investment (whether or not of a controlling interest) by such Person, whether by means of (a) the purchase or other acquisition of any Equity Interest in another Person, (b) a loan, advance or extension of credit to, capital contribution to, Guaranty of Indebtedness of, or purchase or other acquisition of any Indebtedness of, another Person, including any partnership or joint venture interest in such other Person, or (c) the purchase or other acquisition (in one transaction or a series of transactions) of assets of another Person that constitute the business or a division or operating unit of another Person. Any commitment or option to make an Investment in any other Person shall constitute an Investment. Except as expressly provided otherwise, for purposes of determining compliance with any covenant contained in a Loan Document, the amount of any Investment shall be the amount actually invested, without adjustment for subsequent increases or decreases in the value of such Investment. 8 "Lakeshore Note" means the promissory note from Lakeshore in the original principal sum of $34,600,000.00 payable to the order of Wells Fargo, later assigned by Wells Fargo to Shopping Center Finance Corp., and later assigned by Shopping Center Finance Corp. to the Bank, such Promissory Note being now for the principal sum of $20,400,000.00, as amended, renewed, or replaced from time to time, but it does not include the Renewal of Promissory Note dated December 6, 1994 to be effective April 1, 1994. "Lakeshore Mortgage" means the Florida Mortgage from Lakeshore/Sebring Limited Partnership in favor of Wells Fargo later assigned to Shopping Center Finance Corp. and subsequently assigned to the Bank, as amended from time to time. "Lakes Mall Note" means the promissory note from Lakes Mall in the original principal sum of $38,100,000.00 payable to U.S. Bank National Association later assigned on March 18, 2002 to Mortgage Holdings, LLC and later assigned to the Bank, as amended from time to time. "Lakes Mall Mortgage" means the Michigan Mortgage from Lakes Mall in favor of U.S. Bank National Association later assigned on March 18, 2002 to Mortgage Holdings, LLC and later assigned to the Bank, as amended from time to time. "Letter of Credit Documents" means, with respect to any letter of credit issued in connection with the Loan, collectively, any application therefor, any certificate or other document presented in connection with a drawing under such letter of credit and any other agreement, instrument or other document governing or providing for (a) the rights and obligations of the parties concerned or at risk with respect to such letter of credit or (b) any collateral security for any of such obligations. "LIBOR Rate" means the London Interbank Offered Rates as established from time to time and published in The Wall Street Journal, Money Rates Section which, unless otherwise specified herein or in the Note, is a one (1) month LIBOR Rate. "Lien" as applied to the property of any Person means: (a) any security interest, encumbrance, mortgage, deed to secure debt, deed of trust, assignment of leases and rents, pledge, lien, charge or lease constituting a capitalized lease obligation, conditional sale or other title retention agreement, or other security title or encumbrance of any kind in respect of any property of such Person, or upon the income, rents or profits therefrom; (b) any arrangement, express or implied, under which any property of such Person is transferred, sequestered or otherwise identified for the purpose of subjecting the same to the payment of Indebtedness or performance of any other obligation in priority to the payment of the general, unsecured creditors of such Person; (c) the filing of any financing statement under the UCC or its equivalent in any jurisdiction; and (d) any agreement by such Person to grant, give or otherwise convey any of the foregoing. "Loan" means the Revolving Credit Loan from the Bank to the Borrower. 9 "Loan Agreement" means this Loan Agreement between the Borrower, Lakeshore, Lakes Mall and the Bank, and any modifications, amendments, or replacements thereof, in whole or in part. "Loan Document" means this Loan Agreement, each Note, each Collateral Document, each Letter of Credit Document and each other document or instrument now or hereafter executed and delivered by a Loan Party or the Parent in connection with, pursuant to or relating to this Loan Agreement. "Loan Party" means Borrower, Parent, and each other Person who guarantees all or a portion of the Loan and/or who pledges any Collateral to secure all or a portion of the Loan. "Maximum Rate" means the maximum variable contract rate of interest which the Bank may lawfully charge under applicable statutes and laws from time to time in effect. "Mortgages" or "Mortgage" means a mortgage, deed of trust, deed to secure debt or similar security instrument made or to be made by a Person owning real estate or an interest in real estate granting a Lien on such real estate or interest in real estate as security for the payment of indebtedness. "Net Operating Income" means, for any Collateral Property and for the period of twelve (12) consecutive calendar months most recently ending, the sum of the following (without duplication): (a) rents and all other revenues received in the ordinary course from such Property (including proceeds of rent loss insurance but excluding pre-paid rents and revenues and security deposits except to the extent applied in satisfaction of tenants' obligations for rent); minus (b) all expenses paid related to the ownership, operation or maintenance of such Property, including without limitation, taxes and assessments, insurance, utilities, payroll costs, maintenance, repair and landscaping expenses and marketing expenses; minus (c) an amount equal to (i) the aggregate square footage of all owned space of such Property times (ii) $0.20; minus (d) an imputed management fee in the amount of three percent (3.0%) of the aggregate base rents and percentage rents received for such Property for such period. "Net Proceeds" means with respect to an Equity Issuance by a Person, the aggregate amount of all cash received by such Person in respect of such Equity Issuance net of investment banking fees, legal fees, accountants fees, underwriting discounts and commissions and other customary fees and expenses actually incurred by such Person in connection with such Equity Issuance. "Newly Acquired Property" means Property acquired by Borrower, Parent and/or their respective Subsidiaries during any fiscal quarter for which compliance with financial covenants is being tested. 10 "Nonrecourse Indebtedness" means, with respect to a Person, an Extension of Credit or other Indebtedness in respect of which recourse for payment (except for customary exceptions for fraud, misapplication of funds, environmental indemnities, and other similar customary exceptions to recourse liability) is contractually limited to specific assets of such Person encumbered by a Lien securing such Extension of Credit or other Indebtedness. "Note" or "Notes" means the revolving credit notes executed by the Borrower to the Bank in the original principal sums of Fifteen Million Dollars ($15,000,000.00) (the "$15,000,000.00 Note"), of Twenty Six Million Five Hundred Thousand and No/100 Dollars ($26,500,000.00) (the "$26,500,000.00 Note"), respectively, the Lakeshore Note and the Lakes Mall Note, as such note or notes may be modified, renewed or extended from time to time; and any other note or notes executed at any time to evidence the indebtedness under this Loan Agreement, in whole or in part, and any renewals, modifications and extensions thereof, in whole or in part. "Off-Balance Sheet Liabilities" means liabilities and obligations of the Parent, the Borrower, any Subsidiary or any other Person in respect of "off-balance sheet arrangements" (as defined in the SEC Off-Balance Sheet Rules) which the Parent would be required to disclose in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section of the Parent's report on Form 10-Q or Form 10-K (or their equivalents) which the Parent would be required to file with the Securities and Exchange Commission (or any Governmental Authority substituted therefor). As used in this definition, the term "SEC Off-Balance Sheet Rules" means the Disclosure in Management's Discussion and Analysis About Off-Balance Sheet Arrangements, Securities Act Release No. 33-8182,68 Fed. Reg. 5982 (Feb. 5, 2003) (to be codified at 17 CFR pts. 228, 229 and 249). "Ownership Share" means, with respect to any Subsidiary of a Person (other than a Wholly Owned Subsidiary) or any Unconsolidated Affiliate of a Person, the greater of (a) such Person's relative nominal direct and indirect ownership interest (expressed as a percentage) in such Subsidiary or Unconsolidated Affiliate or (b) subject to compliance with Section 9.4 of the Credit Agreement, such Person's relative direct and indirect economic interest (calculated as a percentage) in such Subsidiary or Unconsolidated Affiliate determined in accordance with the applicable provisions of the declaration of trust, articles or certificate of incorporation, articles of organization, partnership agreement, joint venture agreement or other applicable organizational document of such Subsidiary or Unconsolidated Affiliate. "Parent" means CBL & Associates Properties, Inc., a Delaware corporation and a qualified public REIT and formerly until March 31, 1997 the sole general partner of Borrower and shall include the Parent's successors and permitted assigns. "Participant" means each of the following to the extent each of the following owns an interest in the Loan pursuant to the Participation Agreement: Compass Bank, AmSouth Bank, Branch Banking and Trust Company and Manufacturers and Traders Trust Company, their respective successors and assigns, and any other participants in the Loan. "Participant's Proportionate Share (AmSouth)" means AmSouth Bank's (or any successor to such bank's interest in the Loan) undivided participating interest in the Loan and the letters of credit issued hereunder which, as of the date of this Loan Agreement, shall be equal to Twenty Five Million and NO/100 Dollars ($25,000,000.00) divided by One Hundred Million Dollars ($100,000,000.00). 11 "Participant's Proportionate Share (BB&T)" means Branch Banking and Trust Company's (or any successor to such bank's interest in the Loan) undivided participating interest in the Loan and the letters of credit issued hereunder which, as of the date of this Loan Agreement, shall be equal to Fifteen Million Dollars ($15,000,000.00) divided by One Hundred Million Dollars ($100,000,000.00). "Participant's Proportionate Share (Compass)" means Compass Bank's, (or any successor to such bank's interest in the Loan) undivided participating interest in the Loan and the letters of credit issued hereunder which, as of the date of this Loan Agreement, shall be equal to Fifteen Million and NO/100 Dollars ($15,000,000.00) divided by One Hundred Million Dollars ($100,000,000.00). "Participant's Proportionate Share (M&T)" means Manufacturers and Traders Trust Company (or any successor to such bank's interest in the Loan) undivided participating interest in the Loan and the letters of credit issued hereunder which, as of the date of this Loan Agreement, shall be equal to Twenty Million and NO/100 Dollars ($20,000,000.00) divided by One Hundred Million Dollars ($100,000,000.00). "Participants' Proportionate Share" means Participant's Proportionate Share (M&T), Participant's Proportionate Share (Compass), Participant's Proportionate Share (AmSouth) and Participant's Proportionate Share (BB&T), as such proportionate shares may change from time to time pursuant to the Participation Agreement. "Participation Agreement" means that certain Participation Agreement entered into of even date herewith among Bank, M&T, Compass Bank, AmSouth Bank of Tennessee and Branch Banking and Trust Company and/or any other participants in the Loan, as amended from time to time. "Permanent Loan Estimate" means, as of any date of determination and with respect to any Collateral Property, an amount equal to (a) the Net Operating Income of such Collateral Property divided by (b) the product of (i) 1.25 and (ii) the mortgage constant for a 25-year loan bearing interest at a per annum rate equal to the average rate published in the United States Federal Reserve Statistical Release (1-1.15) for 10-year Treasury Constant Maturities during the previous four fiscal quarters plus 1.5%. "Permitted Encumbrances" shall mean and include: (a) liens for taxes, assessments or similar governmental charges not in default or being contested in good faith by appropriate proceedings; (a) workmen's, vendors', mechanics' and materialmen's liens and other liens imposed by law incurred in the ordinary course of business, and easements and encumbrances which are not substantial in character or amount and do not materially detract from the value or interfere with the intended use of the properties subject thereto and affected thereby; 12 (b) liens in respect of pledges or deposits under social security laws, worker's compensation laws, unemployment insurance or similar legislation and in respect of pledges or deposits to secure bids, tenders, contracts (other than contracts for the payment of money), leases or statutory obligations; (c) any liens and security interests specifically listed and described in Exhibit "B" hereto attached or in any exhibit describing permitted exceptions and attached to any CBL Mortgage; (d) such other liens and encumbrances to which Bank shall consent in writing; and (e) leases, licenses, rental agreements or other agreements for use and occupancy of the subject property. "Person" means an individual, corporation, partnership, limited liability company, association, trust or unincorporated organization, or a government or any agency or political subdivision thereof "Project" or "Projects," which definition is used and only applies within Section 7.12 hereof, means the real estate projects owned by Borrower, a Wholly Owned Subsidiary or, to the extent approved by the Bank, any other Person. "Project" shall also mean any one of the Projects. "Property" or "Properties" means a parcel (or group of related parcels) of real property developed (or to be developed) for use as regional mall or retail strip shopping center and any interest in any kind of property or asset, whether real, personal or mixed, tangible or intangible.. "Recourse Indebtedness" means any Indebtedness other than Nonrecourse Indebtedness. "Related Entities" or "Related Entity" means any entity which executed a promissory note, guaranty or mortgage, deed of trust, deed to secure debt or any other collateral or security documents in connection with or as a part of the Loan. "Revolving Credit Advances" means advances of principal on the Revolving Credit Loan by the Bank under the terms of this Loan Agreement to the Borrower during the term of the Revolving Credit Loan pursuant to Section 3.1. "Revolving Credit Loan" means the aggregate of the Borrower's, Lakeshore's and Lakes Mall's indebtedness to the Bank pursuant to Section 2 of this Loan Agreement. "Subsidiary" or "Subsidiaries" means, for any Person, any corporation, partnership, limited liability company or other entity of which at least a majority of the securities or other ownership interests having by the terms thereof ordinary voting power to elect a majority of the board of directors or other persons performing similar functions of such corporation, partnership or other entity (without regard to the occurrence of any contingency) is at the time directly or indirectly owned or controlled by such Person or one or more Subsidiaries of such Person or by such Person and one or more Subsidiaries of such Person. 13 "Tangible Net Worth" means, as of a given date, the stockholders' equity of the Parent and its Subsidiaries determined on a consolidated basis plus (x) increases in accumulated depreciation accrued after September 30, 2004 and (y) minority interests in the Borrower minus (to the extent reflected in determining stockholders' equity of the Parent and its Subsidiaries): (a) the amount of any write-up in the book value of any assets contained in any balance sheet resulting from revaluation thereof or any write-up in excess of the cost of such assets acquired, and (b) all amounts appearing on the assets side of any such balance sheet for assets which would be classified as intangible assets under GAAP, all determined on a consolidated basis. "Termination Date of Revolving Credit Loan" shall mean the earlier of (a) June 1, 2007, or in the event that the Bank and Borrower shall hereafter mutually agree in writing that the Revolving Credit Loan and the Bank's commitment hereunder shall be extended to another date, such other date mutually agreed upon between Bank and Borrower to which the Bank's commitment shall have been extended, or (b) the date as of which Borrower shall have terminated the Bank's commitment under the provisions of Section 2.5 hereof. "Total Liabilities" means, as to any Person as of a given date, all liabilities which would, in conformity with GAAP, be properly classified as a liability on a consolidated balance sheet of such Person as of such date, and in any event shall include (without duplication and whether or not a liability under GAAP) all of the following: (a) all letter of credits of such Person; (b) all purchase and repurchase obligations and forward commitments evidenced by binding contracts, including forward equity commitments and contracts to purchase real property, reasonably determined to be owing under any such contract assuming such contract were terminated as of such date; (c) all quantifiable contingent obligations of such Person including, without limitation, all Guarantees of Indebtedness by such Person and exposure under swap agreements; (d) all Off-Balance Sheet Liabilities of such Person and the Ownership Share of the Off-Balance Sheet Liabilities of Unconsolidated Affiliates of such Person; (e) all Indebtedness of Subsidiaries of such Person, provided that Indebtedness of a Subsidiary that is not a Wholly Owned Subsidiary shall be included in Total Liabilities only to the extent of the Borrower's Ownership Share of such Subsidiary (unless the Borrower or a Wholly Owned Subsidiary of the Borrower is otherwise obligated in respect of such Indebtedness); and (f) such Person's Ownership Share of the Indebtedness of any Unconsolidated Affiliate of such Person. For purposes of this definition: (1) Total Liabilities shall not include Indebtedness with respect to letters of credit if, and to the extent, such letters of credit are issued 14 (i) to secure obligations to municipalities to perform work in connection with construction of projects, such exclusion under this clause (i) to be to the extent there are reserves for such obligations under the construction loan for the applicable project; (ii) in support of permanent loan commitments, in lieu of a deposit; (iii) as a credit enhancement for Indebtedness incurred by an Subsidiary of Borrower, but only to the extent such Indebtedness is already included in Total Liabilities; or (iv) as a credit enhancement for Indebtedness incurred by a Person which is not an Affiliate of Borrower, such exclusion under this clause (iv) to be to the extent of the value of any collateral provided by such Person to secure such letter of credit. (2) obligations under short-term repurchase agreements entered into as part of a cash management program shall not be included as Total Liabilities; (3) all items included in line item "Accounts Payable and Accrued Liabilities" under the category of "Liabilities and Shareholder's Equity" in the Consolidated Balance Sheets included in the Parent's Form 10-Q or Form 10-K (or their equivalent) filed with the Securities and Exchange Commission (or any Governmental Authority substituted therefor) shall not be included as Total Liabilities. "Towne Mall Mortgage" means the Ohio Mortgage from Towne Mall in favor of the Bank, as amended from time to time. "UCC" means the Uniform Commercial Code as in effect in any applicable jurisdiction. "Unconsolidated Affiliate" means, with respect to any Person, any other Person in whom such Person holds an Investment, which Investment is accounted for in the financial statements of such Person on an equity basis of accounting and whose financial results would not be consolidated under GAAP with the financial results of such Person on the consolidated financial statements of such Person. "Wells Fargo" means Wells Fargo Realty Advisors Funding, Incorporated, a Colorado corporation. "Wholly Owned Subsidiary" means any Subsidiary of a Person in respect of which all of the equity securities or other ownership interests (other than, in the case of a corporation, directors' qualifying shares) are at the time directly or indirectly owned or controlled by such Person or one or more other Subsidiaries of such Person or by such Person and one or more other Subsidiaries of such Person. 1.2 Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles consistent with those applied in the preparation of the financial statements required to be delivered from time to time pursuant to Section 6.5 hereof. 15 SECTION 2: COMMITMENT; FUNDING AND TERMS OF REVOLVING CREDIT LOAN 2.1 The Commitment. Subject to the terms and conditions herein set out, Bank agrees and commits to make loan advances to and issue letters of credit for the account of the Borrower, Lakeshore and Lakes Mall from time to time, from the Closing Date until the Termination Date of Revolving Credit Loan, in an aggregate principal amount of the loan advances and the face amount of any letters of credit not to exceed, at any one time outstanding, the lesser of (a) One Hundred Million Dollars ($100,000,000.00); or (b) the Borrower's Borrowing Base, as defined in Section 1. 2.2 Funding the Loan. Each loan advance hereunder shall be made upon the written request of the Borrower to the Bank, specifying the date and amount and intended use thereof. All advances hereunder, whether under any of the Notes, shall be made by depositing the same to the checking account of Borrower at the Bank or other methods acceptable to Borrower and Bank. LAKESHORE ACKNOWLEDGES AND AGREES THAT NO ADVANCES SHALL BE MADE DIRECTLY TO LAKESHORE EXCEPT UPON THE EXPRESS WRITTEN CONSENT OF THE BORROWER RECEIVED BY THE BANK PRIOR TO THE ADVANCE BEING MADE. LAKES MALL ACKNOWLEDGES AND AGREES THAT NO ADVANCES SHALL BE MADE DIRECTLY TO LAKES MALL EXCEPT UPON THE EXPRESS WRITTEN CONSENT OF THE BORROWER RECEIVED BY THE BANK PRIOR TO THE ADVANCE BEING MADE. 2.3 The Note and Interest. The Revolving Credit Loan shall be evidenced by two (2) promissory notes of the Borrower, one (1) promissory note of Lakeshore and one (1) promissory note of Lakes Mall, each payable to the order of the Bank in the aggregate principal amount of One Hundred Million Dollars ($100,000,000.00), in form substantially the same as the copy of the Notes, attached hereto as Exhibit "C." The entire principal amount of the Loan shall be due and payable on the Termination Date of Revolving Credit Loan. The unpaid principal balances of the Revolving Credit Loan shall bear interest from the Closing Date on disbursed and unpaid principal balances (calculated on the basis of a year of 365 or 366 days as is appropriate) at a rate per annum as specified in the Note. Said interest shall be payable monthly on the first day of each month after the Closing Date, commencing April 1, 2005. The Bank shall mail to the Borrower a billing notice at least ten (10) days prior thereto setting forth the payment amount next due, but any failure to send such notice shall not relieve the Borrower, Lakeshore or Lakes Mall of the obligation to pay accrued interest. The final installment of interest, together with the entire outstanding principal balance of the Revolving Credit Loan, shall be due and payable on the Termination Date of Revolving Credit Loan. The first selection of the one (1) month, three (3) months, six (6) months or, if funds are available in the interbank eurodollar market, twelve (12) months LIBOR Rate shall be made by the Borrower, Lakeshore and Lakes Mall (but the rate selected by Lakeshore and Lakes Mall must always be the same as the rate selected by the Borrower) on or prior to the date of the Note and each selection thereafter shall be made at least twenty four (24) hours prior to the end of the then applicable interest rate period. Neither the Borrower, Lakeshore nor Lakes Mall may ever select a rate period which exceeds the Termination Date of the Revolving Credit Loan. In the event funding at the LIBOR Rate is not available as a matter of law, funding to the extent allowed hereunder shall be at the Base Rate minus one and one half percent (1 1/2%). 16 2.4 Commitment Fee/Servicing Fee. On the prior Closing Date (March 9, 2005), the Borrower, Lakeshore and Lakes Mall paid to the Bank (in addition to the commitment fees it has previously paid) an additional commitment/extension fee of Two Hundred Thousand and NO/100 Dollars ($200,000.00). In addition to the commitment/extension fee, on each November 2 hereafter, the Borrower shall pay to the Bank a servicing fee in the amount of Thirty Six Thousand and NO/100 Dollars ($36,000.00) for the Bank's services in connection with administering the Loan participation with the Participants. The servicing fee shall belong solely to the Bank and the Participants shall have no interest therein. Borrower , Lakeshore and Lakes Mall agree that the commitment fees and servicing fee are fair and reasonable considering the condition of the money market, the creditworthiness of Borrower, the interest rate to be paid, and the nature of the security for the Loan. 2.5 Borrowings under, Prepayments or Termination of the Revolving Credit Loan. The Borrower may, at its option, from time to time, subject to the terms and conditions of this Loan Agreement, without penalty, borrow, repay and reborrow amounts under the Notes, and principal payments received shall be applied by the Bank to the Notes all in such order and amounts as the Bank deems appropriate in its sole discretion. Neither the Borrower nor Lakeshore shall be permitted to borrow, repay and reborrow up to the principal amounts of the Lakeshore Note unless documentary stamps tax and intangibles tax, required by law to be paid, has been paid on the amounts readvanced and unless the Bank has a first in priority mortgage on the Florida property owned by Lakeshore securing the Lakeshore Note. Neither the Borrower nor Lakes Mall shall be permitted to borrow, repay and reborrow up to the principal amounts of the Lakes Mall Note unless documentary stamps tax and intangibles tax, required by law to be paid, has been paid on the amounts readvanced and unless the Bank has a first in priority mortgage on the Michigan property owned by Lakes Mall securing the Lakes Mall Note. By notice to the Bank in writing, Borrower shall be entitled to terminate the Bank's commitment to make further advances on the Revolving Credit Loan; and provided that the Revolving Credit Loan and all interest and all other obligations of Borrower to Bank arising hereunder shall have been paid in full, Bank shall thereupon at Borrower's request release its security interest in all of Borrower's Property securing the Revolving Credit Loan. 2.6 Substitution of Collateral. Upon the Bank's prior written approval, the Borrower may substitute collateral originally provided for the Revolving Credit Loan for collateral of equal value but such substituted collateral must be acceptable to the Bank and the acceptance thereof is solely within the discretion of the Bank. 2.7 Cap On Loan. Notwithstanding anything contained in this Loan Agreement to the contrary, if the Borrower does not have outstanding the sum of Thirty Five Million Four Hundred Thousand Dollars ($35,400,000.00) evidenced by the Lakeshore Note and the $15,000,000.00 Note secured by the Lakeshore Mortgage at all times while the Loan is outstanding, the Loan shall be capped at Sixty Four Million Six Hundred Thousand Dollars ($64,600,000.00). 2.8 Secondary Financing by Parent Parent was formerly the general partner of the Borrower. It is also a real estate investment trust. In the event Parent does any additional offering of its securities, if required by the Bank, it will 17 apply no less than 75% net of expenses of the monies received from such offering for the benefit of the Borrower and will not use that percentage of funds so received to capitalize or otherwise fund any other new partnerships or entities that are not affiliates of the Borrower or Lakeshore or Lakes Mall. 2.9 Issuance of Letters of Credit. To the extent that letters of credit are requested by the Borrower to be issued in connection with the Loan, the Borrower agrees to execute and deliver to the Bank any documents reasonably requested by the Bank related to the issuance of the letters of credit, including but not limited to the Bank's standard form of reimbursement agreement. The letters of credit shall not have an expiry date beyond the maturity date of the Notes. Subject to compliance with the other terms and provisions of this Loan Agreement, up to Twenty Million Dollars ($20,000,000.00) of the Loan may be used for issuance of letters of credit for any purpose acceptable to the Bank. While the face amount of the letters of credit shall be counted against availability under the Loan as described in Section 2.1, such amounts shall only be deemed actual Loan advances when the letter of credit is drawn upon. SECTION 3: REQUIRED PAYMENTS, PLACE OF PAYMENT, ETC. 3.1 Required Repayments. In the event that the outstanding aggregate principal balance of the Revolving Credit Loan including outstanding letters of credit, shall at any time exceed the Borrowing Base, upon discovery of the existence of such excess borrowings, the Borrower shall, within one hundred twenty (120) days from the date of such discovery, make a principal payment which will reduce the outstanding principal balance of the Revolving Credit Loan to an amount which does not exceed the Borrowing Base and/or at Borrower's option provide the Bank with additional collateral for the Revolving Credit Loan of a value and type reasonably satisfactory to the Bank which additional collateral shall be at a minimum sufficient to secure the then outstanding balance of the Loan (after credit for any principal reduction payment received from Borrower, if any), and if Borrower intends to request additional advances under the Loan, the additional collateral shall include collateral, deemed sufficient in the Bank's discretion, to secure the One Hundred Million Dollars ($100,000,000.00) credit line limitation, thereafter permitting Borrower to obtain additional advances in the manner and to the extent provided under the terms of this Loan Agreement. In addition and during such one hundred twenty (120) day period or until the principal payment or satisfactory collateral is received, whichever is less, the Borrower will not make any additional requests for advances under the Revolving Credit Loan. Once calculated, the Borrowing Base shall remain effective until the next Borrowing Base calculation date as provided in Section 1 of this Loan Agreement. 3.2 Place of Payments. All payments of principal and interest on the Revolving Credit Loan and all payments of fees required hereunder shall be made to the Bank, at its address listed in Section 9.2 of this Loan Agreement in immediately available funds. 3.3 Payment on Non-Business Days. Whenever any payment of principal, interest or fees to be made on the indebtednesses evidenced by the Note shall fall due on a Saturday, Sunday or public holiday under the laws of the State of Tennessee, such payment shall be made on the next succeeding Business Day. 18 SECTION 4: CONDITIONS OF LENDING 4.1 Conditions Precedent to Closing and Funding Initial Advance. The obligation of the Bank to fund the initial Revolving Credit Loan Advance after the date of this Loan Agreement is subject to the condition precedent that the Bank shall have received, on or before the Closing Date, all of the following in form and substance satisfactory to the Bank: (a) This Loan Agreement. (b) The Notes. (c) The CBL Mortgage, together with a title commitment from a title insurance company acceptable to the Bank, providing for the issuance of a mortgagee's loan policy insuring the lien of the CBL Mortgage, in form, substance and amount satisfactory to the Bank, containing no exceptions which are unacceptable to the Bank, and containing such endorsements as the Bank may require. (d) Current financial statements of the Borrower in form satisfactory to the Bank. (e) Copies of the limited partnership agreements, certificates of limited partnership, charters, bylaws, articles of organization and operating agreements for all Loan Parties and Related Entities (which the Bank acknowledges it has previously received), and all amendments thereto, and current certificates of existence and certificates of authority for all Loan Parties and Related Entities. (f) Copies of corporate resolutions of Borrower's general partner, and all Loan Parties and Related Entities. (g) The opinion of counsel for all Loan Parties and Related Entities, that the transactions herein contemplated have been duly authorized by all requisite corporate, partnership and/or limited liability company authority, that this Loan Agreement and the other instruments and documents herein referred to have been duly authorized, validly executed and are in full force and effect, and pertaining to such other matters as the Bank may require. (h) A certificate from an insurance company, satisfactory to Bank, setting forth the information concerning insurance which is required by Section 6.3 of this Loan Agreement; or, if the Bank shall so require, certified copies of the original insurance policies evidencing such insurance, all of which the Bank acknowledges it has previously received. (i) Environmental audits of the properties described in the CBL Mortgage. (j) Surveys of the property subject to the CBL Mortgage, indicating the location of all building lines, easements (visible, reflected in the public records or otherwise) and any existing improvements or encroachments, which surveys shall contain no set of facts objectionable to the Bank and shall be accompanied by the Bank's usual survey certificate. (k) Copies of the appraisals of the real estate described in Exhibit "A" attached hereto. 19 (l) The Guaranty Agreements of the Borrower guarantying the indebtedness evidenced by the Lakeshore Note and the Lakes Mall Note and of Parent guarantying the Loan (the "Guaranty Agreements"). (m) All the items and information shown on the Checklist for Closing, a copy of which is attached hereto and marked Exhibit "D". 4.2 Conditions Precedent to All Revolving Credit Loan Advances. The obligation of the Bank to make Revolving Credit Advances pursuant hereto (including the initial advance at the Closing Date) shall be subject to the following additional conditions precedent: (a) The Borrower shall have furnished to the Bank, a written request stating the amount of Revolving Credit Advance requested together with the intended use of the advance. (b) The Borrower and all Related Entities shall not be in default of any of the terms and provisions hereof or of any instrument or document now or at any time hereafter evidencing or securing all or any part of the Revolving Credit Loan indebtednesses. (c) Each of the Warranties and Representations of the Borrower, Lakeshore and Lakes Mall, as set out in Section 5 hereof shall remain true and correct in all material respects as of the date of such Loan advance. (d) Each Guaranty Agreement shall be and remain in full force and effect. (e) Within forty-five (45) days after each July 1, January 1, April 1 and October 1, Borrower shall furnish to the Bank a Non-Default Certificate executed by a duly authorized officer of Borrower, in the form of Exhibit "E" attached hereto. (f) If required by the Bank, the Borrower shall have furnished to the Bank an updated and current title report with respect to the property or properties covered by any CBL Mortgage held by the Bank. If any lien shall have been placed on the property subsequent to the date of this Loan Agreement or the applicable CBL Mortgage, other than liens in favor of the Bank, no additional advances shall be made. SECTION 5: REPRESENTATIONS AND WARRANTIES Borrower, Lakeshore and Lakes Mall represent and warrant that: 5.1 Partnership/Limited Liability Company Status. The Borrower is a limited partnership duly organized, validly existing and in good standing under the laws of the State of Delaware; it has the power and authority to own its properties and assets and is duly qualified to carry on its business in every jurisdiction wherein such qualification is necessary. Lakeshore is a limited partnership duly organized, validly existing and in good standing under the laws of the State of Florida; it has the authority to own its properties and assets and is duly qualified to carry on its business in every jurisdiction wherein such qualification is necessary. Lakeshore is a wholly owned subsidiary of the Borrower. Lakes Mall is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Michigan; it has 20 the authority to own its properties and assets and is duly qualified to carry on its business in every jurisdiction wherein such qualification is necessary. Lakes Mall is a ninety percent (90%) owned subsidiary of the Borrower. Walnut Square Associate Limited Partnership is a wholly owned subsidiary of the Borrower. Towne Mall is a wholly owned subsidiary of the Borrower. Vicksburg Mall Associates, Ltd. is a wholly owned subsidiary of the Borrower. 5.2 Power and Authority. The execution, delivery and performance of the Loan Agreement, the Notes, the CBL Mortgage and the other loan and collateral documents executed pursuant hereto by the Borrower and all Related Entities have been duly authorized by all requisite action and, to the best of Borrower's, Lakeshore's and Lakes Mall's knowledge, will not violate any provision of law, any order of any court or other agency of government, the limited partnership agreements, charter, bylaws or limited liability company agreements of the Borrower, Lakeshore, Lakes Mall, or any Related Entity, any provision of any indenture, agreement or other instrument to which Borrower, Lakeshore, Lakes Mall, or any Related Entity is a party, or by which Borrower's, Lakeshore's, Lakes Mall's and all Related Entities' respective properties or assets are bound, or be in conflict with, result in a breach of, or constitute (with due notice or lapse of time or both) a default under any such indenture, agreement or other instrument, or result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever upon any of the properties or assets of Borrower, Lakeshore, Lakes Mall, or any Related Entities, except for liens and other encumbrances provided for and securing the indebtedness covered by this Loan Agreement. 5.3 Financial Condition. (a) (i) Parent and Borrower's consolidated balance sheets (which includes Lakeshore and Lakes Mall) for the fiscal year ended as of December 31, 2004, and the related consolidated statements of operations and Consolidated statements of cash flows for the year then ended filed with the SEC in the Forms 10-Q and 10-K, and (ii) the unaudited interim consolidated balance sheet of Borrower, Lakeshore and Lakes Mall for September 30, 2005 and the related consolidated statements of operations and consolidated statements of cash flows for the period then ended, a copy of each of which has been furnished to the Bank, together with any explanatory notes therein referred to and attached thereto, are correct and complete and fairly present the financial condition of Parent, Borrower, Lakeshore and Lakes Mall as at the date of said balance sheets and the results of its operations for said periods and as of the date of closing of this Loan Agreement and related transactions, respectively. All such financial statements have been prepared in accordance with GAAP applied on a consistent basis maintained through the period involved. (b) Since September 30, 2005, there has been no substantial adverse change in the business, properties, condition (financial or otherwise), or results of operations of Borrower, Lakeshore and/or Lakes Mall. (c) (i) The audited balance sheet of Parent for the fiscal year ended on December 31, 2004, the unaudited balance sheet of Parent for the period ended September 30, 2005, and the related statements of operations and of cash flows for the year ended 2004 and the period ended September 30, 2005, a copy of which has been furnished to the Bank, together with any explanatory notes therein referred to and attached thereto, are correct and complete and fairly present 21 the financial condition of Parent as at the date of said balance sheets and the results of its operations for said periods and as of the date of closing of this Loan Agreement and related transactions, respectively. All such financial statements have been prepared in accordance with GAAP applied on a consistent basis maintained through the period involved. (d) Since September 30, 2005, there has been no substantial adverse change in the business, properties, condition (financial or otherwise), or results of operations of Parent. (e) The warranties and representations made in this Section 5.3 are and were made as of the date of this Loan Agreement and any violation thereof shall be determined as of that date. 5.4 Title to Assets. Borrower and all Related Entities have good and marketable title to all its properties and assets reflected on the most recent balance sheet furnished to Bank subject to the Permitted Encumbrances with respect to the properties described in the CBL Mortgages and subject to all encumbrances, whether of record or not, with respect to all other properties. 5.5 Litigation. There is no action, suit or proceeding at law or in equity or by or before any governmental instrumentality or other agency now pending, or, to the knowledge of the Borrower, Lakeshore and Lakes Mall threatened against or affecting Borrower or any Related Entity, or any properties or rights of Borrower or any Related Entities, which, if adversely determined, would materially adversely affect the financial or any other condition of Borrower or any Related Entity except as set forth in Exhibit "F" attached hereto. 5.6 Taxes. Borrower, Lakeshore and Lakes Mall have filed or caused to be filed all federal, state or local tax returns which are required to be filed, and has paid all taxes as shown on said returns or on any assessment received by it, to the extent that such taxes have become due, except as otherwise permitted by the provisions hereof. 5.7 Contracts or Restrictions. In Borrower's, Lakeshore's and Lakes Mall's opinions, Borrower, Lakeshore, Lakes Mall and the Related Entities are not a party to any agreement or instrument or subject to any partnership agreement or limited liability company or corporate restrictions adversely affecting its business, properties or assets, operations or condition (financial or otherwise) other than this Loan Agreement, other bank loan or property partnership agreements that contain certain restrictive covenants or other agreements entered into in the ordinary course of business. 5.8 No Default. No Event of Default (as defined herein) has occurred and not been waived under any agreement or instrument to which it is a party beyond the expiration of any applicable notice and cure period, which default if not cured would materially and substantially affect the financial condition, property or operations of the Borrower or any Related Entity. For the purposes of this Paragraph 5.8, monetary defaults specifically excepted under the provisions of Paragraph 8.2 (which excludes non-recourse debt) below shall not be deemed material defaults. 5.9 Patents and Trademarks. Borrower and all Related Entities possess all necessary patents, trademarks, trade names, copyrights, and licenses necessary to the conduct of its businesses. 22 5.10 ERISA. To the best of Borrower's, Lakeshore's and Lakes Mall's knowledge and belief, Borrower, Lakeshore, Lakes Mall and all Related Entities are in compliance with all applicable provisions of the Employees Retirement Income Security Act of 1974 ("ERISA") and all other laws, state or federal, applicable to any employees' retirement plan maintained or established by it. 5.11 Hazardous Substances. To the best knowledge of Borrower, Lakeshore and Lakes Mall, no Hazardous Substances are unlawfully located on or have been unlawfully stored, processed or disposed of on or unlawfully released or discharged (including ground water contamination) from any property owned by Borrower, Lakeshore, Lakes Mall and/or any Related Entity which is encumbered by the CBL Mortgage and no above or underground storage tanks exist unlawfully on such property. No private or governmental lien or judicial or administrative notice or action related to Hazardous Substances or other environmental matters has been filed against any property which, if adversely determined, would materially adversely affect the business, operations or the financial condition of Borrower, Lakeshore, Lakes Mall and/or any Related Entity except as set forth in Exhibit "F" attached hereto. 5.12 Ownership of Borrower. As of the date hereof, CBL Holdings I owns an approximate 1.648% general partner interest in the Borrower and CBL Holdings II owns a 53.358% limited partner interest in the Borrower. As of the date hereof, Parent does not own a direct interest in Borrower; however, it owns 100% of the stock of CBL Holdings I and CBL Holdings II. As of the date hereof, Parent and its affiliates, officers and key employees own an approximate 15.68% limited partner interest in the Borrower. As of the date hereof, CBL & Associates Management, Inc. owns no interest in the Borrower. As of the date hereof, Richard E. Jacobs Group, Inc. owns an approximate 21.41% limited partner interest in the Borrower and other investors own an approximate 8.93% limited partner interest in the Borrower The Borrower has no other general partners. As of the date hereof the Borrower and its Affiliates own 100% of the partnership interests in Walnut Square Associates Limited Partnership, Lakeshore, Towne Mall and Vicksburg Mall Associates, Ltd. and 90% of the limited liability company interests of Lakes Mall. 5.13 Outstanding Balance on Lakeshore Note. As of the date hereof, the outstanding unpaid principal balance of the Lakeshore Note is $20,400,000.00 and the undisbursed amount of the Lakeshore Note is $-0- and no defenses or offsets exist against the holder of the Lakeshore Note or otherwise. 5.14 Outstanding Balance on Lakes Mall Note. As of the date hereof, the outstanding unpaid principal balance of the Lakes Mall Note is $3,735,000.00 and the undisbursed amount of the Lakes Mall Note is $25,565,000.00 and no defenses or offsets exist against the holder of the Lakes Mall Note or otherwise. 5.15 Outstanding Balance on $15,000,000 Note. As of the date hereof, the outstanding unpaid principal balance of the $15,000,000.00 Note is $- 0- and the undisbursed amount of the $15,000,000.00 Note is $15,000,000.00 and no defenses or offsets exist against the holder of the $15,000,000.00 Note or otherwise. 23 5.16 Outstanding Balance on $26,500,000 Note. As of the date hereof, the outstanding unpaid principal balance of the $26,500,000.00 Note is $-0- and the undisbursed amount of the $26,500,000.00 Note is $26,500,000.00 and no defenses or offsets exist against the holder of the $26,500,000.00 Note or otherwise. 5.17 Anti-Terrorism. Neither Parent, Borrower nor any of their Subsidiaries nor any Related Entity is or has been designated, or is owned or controlled by, a "suspected terrorist" as defined in Executive Order 13224, which prohibits transactions with terrorists and terrorist organizations. SECTION 6: AFFIRMATIVE COVENANTS OF BORROWER, LAKESHORE AND LAKES MALL Borrower, Lakeshore and Lakes Mall covenant and agree that from the date hereof and until payment in full of the principal of and interest on indebtednesses evidenced by the Notes, unless the Bank shall otherwise consent in writing, such consent to be at the discretion of the Bank, Borrower, Lakeshore and Lakes Mall will and will cause all Related Entities to: 6.1 Business and Existence. Perform all things necessary to preserve and keep in full force and effect its existence, rights and franchises, comply with all laws applicable to it and continue to conduct and operate its business in a sound and prudent manner. 6.2 Maintain Property. Maintain, preserve, and protect all leases, franchises, and trade names and preserve all of its properties used or useful in the conduct of its business in a sound and prudent manner, keep the same in good repair, working order and condition, ordinary wear and tear excepted, and from time to time make, or cause to be made, all needed and proper repairs, renewals, replacements, betterments and improvements thereto so that the business carried on in connection therewith may be properly conducted at all times. 6.3 Insurance. --------- (a) With respect to all of the Property which serves as collateral for the Loan, at all times maintain in some company or companies (having a Best's rating of A:XI or better) approved by Bank: (i) Comprehensive public liability insurance covering claims for bodily injury, death, and property damage, with minimum limits satisfactory to the Bank, but in any event not less than those amounts customarily maintained by companies in the same or substantially similar business; (ii) Business interruption insurance and/or loss of rents insurance in a minimum amount specified by Bank, with loss payable clause in favor of Bank; (iii) Hazard insurance insuring all the Property which serves as collateral for the Loan against loss by fire (with extended coverage) and against such other hazards and perils (including but not limited to loss by windstorm, hail, explosion, riot, aircraft, smoke, vandalism, malicious mischief and vehicle damage) as Bank, in its sole discretion, shall from time to time require, all such insurance to be issued in such form, with such deductible provision, and for such amount as shall be 24 satisfactory to Bank, with loss payable clause in favor of Bank. The Bank is hereby authorized and empowered, at its option, to adjust or compromise any loss under any such insurance policies and to collect and receive the proceeds from any such policy or policies as provided in the CBL Mortgage; and (iv) Such other insurance as the Bank may, from time to time, reasonably require by notice in writing to the Borrower, Lakeshore and/or Lakes Mall. (b) All required insurance policies shall provide for not less than thirty (30) days' prior written notice to the Bank of any cancellation, termination, or material amendment thereto; and in all such liability insurance policies, Bank shall be named as an additional insured. Each such policy shall, in addition, provide that there shall be no recourse against the Bank for payment of premiums or other amounts with respect thereto. Hazard insurance policies shall contain the agreement of the insurer that any loss thereunder shall be payable to the Bank notwithstanding any action, inaction or breach of representation or warranty by the Borrower or any Related Entity. The Borrower, Lakeshore and Lakes Mall will deliver to Bank original or duplicate policies of such insurance, or satisfactory certificates of insurance, and, as often as Bank may reasonably request, a report of a reputable insurance broker with respect to such insurance. Any insurance proceeds received by Bank shall be applied upon the indebtednesses, liabilities, and obligations of the Borrower, Lakeshore or Lakes Mall to the Bank (whether matured or unmatured) or, at Bank's option, released to the Borrower, Lakeshore or Lakes Mall, as the case might be. 6.4 Obligations, Taxes and Liens. Pay all of its indebtednesses and obligations in accordance with normal terms and practices of its business and pay and discharge or cause to be paid and discharged all taxes, assessments, and governmental charges or levies imposed upon it or upon any of its income and profits, or upon any of its properties, real, personal or mixed, or upon any part thereof, before the same shall become in default, as well as all lawful claims for labor, materials, and supplies which otherwise, if unpaid, might become a lien or charge upon such properties or any part thereof; provided, however, that the Borrower and Related Entities shall not be required to pay and discharge or to cause to be paid and discharged any such indebtedness, obligation, tax, assessment, trade payable, charge, levy or claim so long as the validity thereof shall be contested in good faith by appropriate proceedings satisfactory to Bank, and Bank shall be furnished, if Bank shall so request, bond or other security protecting it against loss in the event that such contest should be adversely determined. In addition, Borrower, Lakeshore and Lakes Mall shall immediately pay, upon the request of the Bank, all mortgage and/or intangible taxes and/or penalties payable to government officials with respect to any CBL Mortgage and/or the Notes or, if Bank has elected to pay same, Borrower, Lakeshore and Lakes Mall shall immediately reimburse Bank therefor upon the request of the Bank; provided, however Borrower, Lakeshore and Lakes Mall shall not be required to pay so long as Borrower, Lakeshore, Lakes Mall or any Related Entity is contesting the tax and/or penalties in good faith and through continuous and appropriate proceedings but Borrower, Lakeshore and Lakes Mall shall be required to reimburse to the extent Bank has made any payment. 6.5 Financial Reports and Other Data. Furnish to the Bank as soon as available: (a) and in any event within ninety (90) days after the end of each fiscal year 25 of Borrower, an unqualified audit as of the close of such fiscal year of Borrower, including a consolidated balance sheet and consolidated statements of operations and consolidated statements of cash flows together with the unqualified audit report and opinion of Deloitte & Touche, LP, Certified Public Accountant, or other independent Certified Public Accountant which is widely recognized and of good national repute or which is otherwise acceptable to the Bank, showing the financial condition of Borrower at the close of such year and the results of operations during such year; and, (b) within forty-five (45) days after the end of each fiscal quarter, (i) consolidated financial statements similar to those described above for Borrower and for Parent, not audited but certified by the Chief Executive Officer or the Chief Financial Officer or Controller or a Senior Vice President of Borrower and Parent, as the case may be, such balance sheets to be as of the end of such quarter and such consolidated statements of operations and consolidated statements of cash flows to be for the period from the beginning of said year to the end of such quarter, in each case subject only to audit and year-end adjustment and the preparation of required footnotes; (ii) a Non-Default Certificate in the form prescribed on Exhibit "E" attached hereto and made a part hereof; and (iii) a Borrowing Base Certificate; and, (c) within forty-five (45) days after the end of each fiscal quarter, rent rolls and operating statements related to the properties described in the CBL Mortgage; and, (d) simultaneously with the inclusion of Net Operating Income (loss) from Newly Acquired Property in any financial calculation provided for in this Loan Agreement, certification, in a form acceptable to Bank, of the purchase price for such Newly Acquired Property and a current rent roll and a current income and expense statement, similar to those described above, not audited but certified by the Chief Financial Officer or Controller of Borrower and Parent, as the case may be, such rent roll and statement of income and expense to be for the twelve (12) month period, if available, used in any such calculation and/or to also be for the period from the beginning of said year to the end of such quarter, as the case may be. 6.6 Additional Information. Furnish such other information regarding the operations, business affairs and financial condition of the Borrower and all Related Entities as Bank may reasonably request, including but not limited to written confirmation of requests for loan advances, true and exact copies of its books of account and tax returns, and all information furnished to the owners of its partnership interests, or any governmental authority, and permit the copying of the same, and Bank agrees that such information shall be maintained in strict confidence unless it is publicly available and except that it may be disclosed to any participants in the Loan and their counsel and Bank's counsel. Provided, however, the Borrower, Lakeshore and Lakes Mall shall not be required to divulge the terms of other financing arrangements with other lending institutions if and to the extent Borrower, Lakeshore and/or Lakes Mall is prohibited by contractual agreement with such lending institutions from disclosing such information with the exception that Borrower, Lakeshore and Lakes Mall shall promptly notify Bank in writing of all defaults, if any, which exist beyond any applicable cure periods and the nature thereof, which occur in connection with such financing arrangements and which defaults or defaults would constitute an Event of Default hereunder. Borrower, Lakeshore and Lakes Mall shall not enter into any such contractual arrangement whereby the Borrower or Lakeshore or Lakes Mall is prohibited from disclosing such financial arrangements, without providing Bank with written notice of the nature of such prohibitions. In addition, Borrower, Lakeshore and Lakes Mall shall not enter into any such arrangement while any Event of Default hereunder exists beyond any applicable cure periods. 26 6.7 Right of Inspection. Permit any person designated by the Bank, at the Bank's expense, to visit and inspect any of the properties, books and financial reports of the Borrower and all Related Entities and to discuss its affairs, finances and accounts with its principal officers, at all such reasonable times and as often as a Bank may reasonably request provided that such inspection shall not unreasonably interfere with the operation and conduct of Borrower's or any Related Entity's properties and business affairs and provided further that such person shall disclose such information only to the Bank, the Bank's appraisers and examiners as required by banking laws, rules and regulations. 6.8 Environmental Laws. Maintain at all times all property described in the CBL Mortgage in compliance with all applicable Environmental Laws, and immediately notify the Bank of any notice, action, lien or other similar action alleging either the location of any Hazardous Substances or the violation of any Environmental Laws with respect to any of such properties. 6.9 Notice of Adverse Change in Assets. At the time of Borrower's, Lakeshore's and/or Lake Mall's first knowledge or notice, immediately notify the Bank of any information that may adversely affect in any material manner the properties of the Borrower and/or any Related Entity which are subject to any CBL Mortgage. 6.10 Appraisals. Upon the Bank's request, but no more frequently than once per every eighteen (18) month period, allow appraisers employed by the Bank to make updated reappraisals of the property or properties described in the CBL Mortgage, at the Borrower's expense. 6.11 Agreements regarding Lakeshore Note and Lakeshore Mortgage. So long as no Event of Default then exists or with notice or lapse of time would exist, upon the request of the Borrower, but in the Bank's discretion, the Bank shall sell to the Borrower and/or the Borrower's designated subsidiary, the Lakeshore Note and/or the Lakeshore Mortgage for the balance due under the Lakeshore Note plus accrued interest. Any such sale would be without recourse, representation and warranty. 6.12 Agreements regarding Lakes Mall Note and Lakes Mall Mortgage. So long as no Event of Default then exists or with notice or lapse of time would exist, upon the request of the Borrower, but in the Bank's discretion, the Bank shall sell to the Borrower and/or the Borrower's designated subsidiary, the Lakes Mall Note and/or the Lakes Mall Mortgage for the balance due under the Lakes Mall Note plus accrued interest. Any such sale would be without recourse, representation and warranty. 6.13 Notice of Event of Default. As soon as practicable, and in any event within two (2) Business Days after a senior officer of Borrower or any Subsidiary becomes aware of the existence of any condition or event which constitutes a default or Event of Default, the Borrower shall provide telephonic notice to the Bank specifying the nature and period of existence thereof, and, no more than two (2) Business Days after such telephonic notice, written notice again specifying the nature and period of existence thereof and specifying what action Borrower is taking or proposes to take with respect thereto. 27 6.14 REIT. Parent shall at all times maintain its status as a "real estate investment trust" under the Internal Revenue Code. SECTION 7: NEGATIVE COVENANTS OF BORROWER, LAKESHORE AND LAKES MALL Borrower, Lakeshore and Lakes Mall covenant and agree that at all times from and after the Closing Date, unless the Bank shall otherwise consent in writing, such consent to be at the discretion of the Bank, Borrower, Lakeshore and Lakes Mall will not, and will not allow any Related Entity, to either directly or indirectly: 7.1 Minimum Tangible Net Worth. Permit Tangible Net Worth at any time to be less than (i) $1,140,494,000.00 plus (ii) 50% of the Net Proceeds of all Equity Issuances effected at any time after the Agreement Date by the Parent, Borrower or any Subsidiaries to any Person other than the Parent or any of its Subsidiaries. 7.2 Ratio of Total Liabilities to Gross Asset Value. Permit the ratio of (i) Total Liabilities of the Parent, Borrower and its Subsidiaries determined on a consolidated basis to (ii) Gross Asset Value of the Parent, Borrower and any Subsidiaries determined on a consolidated basis, to exceed 0.650 to 1.00 at any time. 7.3 Ratio of EBITDA to Interest Expense. Permit the ratio of (i) EBITDA of the Parent, Borrower and the Subsidiaries determined on a consolidated basis for the fiscal quarter most recently ending to (ii) Interest Expense of the Parent and its Subsidiaries determined on a consolidated basis for such period, to be less than 1.750 to 1.00. 7.4 Ratio of EBITDA to Debt Service. Permit the ratio of (i) EBITDA of the Parent, Borrower and the Subsidiaries determined on a consolidated basis for the fiscal quarter most recently ending to (ii) Debt Service of the Parent, Borrower and the Subsidiaries determined on a consolidated basis for such period, to be less than 1.550 to 1.00. 7.5 Indebtedness. Incur, create, assume or permit to exist any indebtedness or liability, secured by any of the properties described in the CBL Mortgage, except, with respect to the Borrower only, for indebtedness, which is subordinate in all respects to the indebtedness evidenced by the Notes which indebtedness does not exceed Five Hundred Thousand Dollars ($500,000.00) in the aggregate per property and is used for renovation, repair or improvement of the property or properties described in the CBL Mortgage. 7.6 Mortgages, Liens, Etc. Create, assume or suffer to exist any mortgage, pledge, lien, charge or other encumbrance of any nature whatsoever on any of the properties subject to the CBL Mortgage except: (a) Liens in favor of the Bank securing payment of the Notes; (b) Existing liens securing indebtednesses permitted under Section 7.5 above; (c) Permitted Encumbrances (as defined at Section 1); and 28 (d) Liens securing indebtedness permitted under Section 7.5 above. 7.7 Sale of Assets. Sell, lease, convert, transfer or dispose of all or a substantial part of its assets for less than book value or for less than fair market value, or, sell, lease, convert, transfer or dispose of all or a substantial part of its assets, without the Bank's prior written consent, if GAAP book value or fair market value exceeds 20% of the GAAP book value of all of its assets at that time. In other words, the Borrower may sell its assets without the Bank's consent so long as such sale is not more than 20% of the book value of all of its assets and only so long as such sale does not cause the Borrower to be in violation of any covenant in this Loan Agreement. 7.8 Consolidation or Merger; Acquisition of Assets. Enter into any transaction of merger or consolidation, acquire any other business or corporation, or acquire all or substantially all of the property or assets of any other Person unless the Borrower and/or its general partner shall be the surviving entities or the transaction or acquisition is permitted by and effected in accordance with the provisions of Section 7.12(b). 7.9 Partnership Distributions and Other Payments. Except as hereinafter provided, declare or pay, or set apart any funds for the payment of, any distributions on any partnership, limited liability or corporate interest in Borrower or any Related Entity or apply any of its funds, properties, or assets to or set apart any funds, properties or assets for, the purchase or other retirement of or make any other distribution (whether by reduction of capital or otherwise) in respect of, any partnership, limited liability or corporate interest in Borrower or any Related Entity; or without the consent of Bank, pay any fee or other compensation of any nature to or for the benefit of CBL Holdings, and/or Parent and/or their affiliates, officers or key employees (the "Distributees"). Notwithstanding anything stated in the foregoing to the contrary, as long as no Event of Default then exists or would exist as a result of the following, (a) Borrower may pay to such Distributees and its other partners quarterly distributions so long as such distributions do not exceed in the aggregate 95% of Funds from Operations and (b) Borrower may pay any fee or other reasonable compensation of any nature to or for the benefit of (i) CBL & Associates Management, Inc., or (ii) any other Distributee, which payment has been made in the ordinary course of business and approved by the independent directors of CBL Holdings. Borrower may make a distribution from Loan proceeds but only once during any rolling twelve (12) month period and provided Borrower is not in default hereunder and such distribution will not create a default hereunder. Notwithstanding anything contained in the foregoing to the contrary, the restriction on distributions shall not preclude the Parent from making the minimum distributions (as that term is used in the Internal Revenue Code) required to maintain REIT status under the Internal Revenue Code. 7.10 Loans to Officers and Employees. Permit or allow loans to officers and employees of Borrower or any Related Entity or holders of partnership interests in Borrower to exceed $500,000.00 in any one instance or $2,000,000.00 in the aggregate, provided that nothing in the foregoing shall be deemed to limit loans made in the ordinary course of business to CBL & Associates Management, Inc.. 7.11 Limitations on Actions Against Bank and Participants. Take any action against: 29 (a) Bank, if any Participant fails or refuses to fund pursuant to the terms of the Participation Agreement to Bank for the benefit of Borrower, Lakeshore and/or Lakes Mall, such Participant's Proportionate Share of the amount the Bank is obligated to advance hereunder and such failure or refusal has not been caused by Bank's breach of this Loan Agreement or the Participation Agreement; or (b) any Participant, if Bank fails or refuses to fund for the account of Borrower, Lakeshore and/or Lakes Mall any Participant's Proportionate Share of the amount the Bank is obligated to advance hereunder, to the extent such Participant's Proportionate Share has been received by Bank; or (c) any Participant, if such Participant fails or refuses to fund to Bank for the benefit of Borrower, Lakeshore and/or Lakes Mall, such Participant's Proportionate Share of the amount the Bank is obligated to advance hereunder and such failure or refusal is not a breach of the Participation Agreement; or (d) any Participant, if Bank fails or refuses to fund for the account of Borrower, Lakeshore and/or Lakes Mall Bank's Proportionate Share. Borrower's, Lakeshore's and Lake Mall's cause of action under this Loan Agreement, if any, for failure to fund being directly against the lender which fails or refuses to fund, and then only if such failure or refusal to fund would constitute a breach of this Loan Agreement or, with respect to the Participants, the Participation Agreement. 7.12 Investment Concentration. (a) Borrower shall not make, and shall not permit any of its Subsidiaries to make, any Investment in the following items which would cause the value of such holdings of Borrower and/or Subsidiaries to exceed the following percentages of Borrower's Tangible Net Worth: (i) raw land, such that the aggregate book value of all such raw land (other than: (A) raw land subject to a ground lease under which Borrower is the landlord and a Person not an Affiliate of Borrower is the tenant; (B) land on which the development of a Project has commenced; (C) land subject to a binding contract of sale under which Borrower or one of its Subsidiaries is the seller, the buyer is not an Affiliate of Borrower and (D) out-parcels held for lease or sale) exceeds ten percent (10%) of Tangible Net Worth; (ii) developed real estate used primarily for non-retail purposes, such that the aggregate book value of such real estate (other than the real estate located at 2030 Hamilton Place Boulevard, Chattanooga, Tennessee and a small office building located at Richland Mall in Waco, Texas) exceeds ten percent (10%) of Tangible Net Worth; (iii) Capital Stock of any Person, such that the aggregate value of such Capital Stock in Unconsolidated Affiliates other than CBL & Associates Management, Inc., calculated on the basis of the lower of cost or market, exceeds ten percent (10%) of Tangible Net Worth; 30 (iv) Mortgages, such that the aggregate principal amount secured by Mortgages acquired by Borrower after the Effective Date exceeds ten percent (10%) of Tangible Net Worth, except for mortgages held by Mortgage Holdings, LLC (on real estate owned by Borrower or any entity related to Borrower) for the purpose of avoiding mortgage taxes and title charges and mortgages granted upon the sale of assets as more particular set out in Borrower's 10k; (v) Investments made after the date hereof in partnerships, joint ventures and other non-corporate Persons accounted for on an equity basis (determined in accordance with GAAP), such that the aggregate outstanding amount of such Investments (other than Investments in partnerships in which (A) Borrower is the sole general partner and the only limited partners are either (i) the Person from whom the real estate owned by such partnership was purchased, and such Person's successors and assigns or (ii) a Person operating stores which anchor the development constructed or to be constructed by such partnership or (B) Borrower owns not less than ninety percent (90%) of the partnership interests and has the unilateral right to make all operational and strategic decisions) exceeds ten percent (10%) of Tangible Net Worth. (b) Neither Borrower nor any of its Subsidiaries shall acquire the business of all or substantially all of the assets or stock of any Person, or any division of any Person, whether through Investment, purchase of assets, merger or otherwise; provided that Borrower or its Subsidiaries may make such an acquisition so long as Borrower has delivered to Bank, not less than thirty (30) days prior to the date such acquisition is consummated, (i) all information related to such acquisition as is reasonably requested by the Bank and (ii) a certificate, signed by the chief financial officer of Borrower, certifying that, giving effect to such acquisition, there shall not exist any Default or Event of Default hereunder and setting forth in reasonable detail the calculations setting forth, on a pro forma basis giving effect such acquisition, Borrower's compliance with the loan documents which exist between Borrower and Bank. SECTION 8: EVENTS OF DEFAULT An "Event of Default" shall exist if any of the following shall occur: 8.1 Payment of Principal, Interest to Bank. The Borrower, Lakeshore and/or Lakes Mall defaults in the payment as and when due of principal or interest on any Note or any fees due under this Loan Agreement which default shall continue for more than ten (10) days following mailing of notice from Bank to Borrower, Lakeshore and/or Lakes Mall thereof; or the Borrower, Lakeshore and/or Lakes Mall defaults in the payment when due of any other recourse indebtednesses, liabilities, or obligations to the Bank beyond the expiration of any applicable notice and cure period, whether now existing or hereafter created or arising; direct or indirect, absolute or contingent provided however, there shall be no notice requirement or cure periods if this Note has matured; or 8.2 Payment of Obligations to Others. The Borrower, Lakeshore, Lakes Mall or any Related Entity defaults in the payment as and when due of any other recourse indebtedness or obligation for borrowed money owed to a lender other than Bank or to Bank unrelated to the Loan, but only if the effect of such default causes 31 the holder of any other recourse indebtedness or obligation (after expiration of any applicable cure period) to accelerate the maturity of such indebtedness or obligation prior to the stated maturity date of such indebtedness or obligation; provided however, the Borrower, Lakeshore, Lakes Mall and the Related Entity will not be considered in default hereunder if: (a) the monetary payment default is less than One Million Dollars ($1,000,000.00) and is not a failure to pay a regular monthly, quarterly or other periodic installment payment of principal and/or interest or interest only, as the case may be, on the due date [subject to any applicable grace or cure period and specifically excluding any regularly scheduled balloon payment not paid in full within sixty (60) days of the actual due date of the balloon payment unless the lender has issued a notice of default with respect to such balloon payment] or (b) such default is being contested by the Borrower, Lakeshore, Lakes Mall or the Related Entity in good faith through appropriate proceedings reasonably acceptable to Bank; or 8.3 Performance of Obligations to Bank. The Borrower, Lakeshore, Lakes Mall or any Related Entity defaults with respect to the performance of any non-monetary obligation incurred in connection with the Loan and such default continues for more than thirty (30) days following mailing of notice thereof from Bank to Borrower, Lakeshore, Lakes Mall and/or the Related Entity, as the case may be, or, if such default is incapable of cure within such thirty (30) day period, Borrower, Lakeshore, Lakes Mall and/or the Related Entity, as the case may be, fails to diligently, continuously and in good faith pursue such cure to completion; or the Borrower, Lakeshore, Lakes Mall and/or the Related Entity, as the case may be, defaults with respect to the performance of any other non-monetary obligation incurred in connection with any recourse indebtedness for borrowed money owed to the Bank in connection with the Loan and such default continues for more thirty (30) days following mailing of notice thereof from Bank to Borrower, Lakeshore, Lakes Mall and/or the Related Entity, as the case may be, or, if such default is incapable of cure within such thirty (30) day period, Borrower, Lakeshore, Lakes Mall and/or the Related Entity fails to diligently, continuously and in good faith pursue such cure to completion; or 8.4 Performance of Obligations to Others. An event of default occurs with respect to the performance of non-monetary obligations incurred in connection with any recourse indebtedness for borrowed money owed to a lender other than Bank, provided the default has not been waived by such lender or the default has not been cured within the applicable cure period; provided further however, if such lender's declaration of default is being continuously and diligently contested by the Borrower, Lakeshore, Lakes Mall and/or the Related Entity, as the case may be, in good faith through appropriate proceedings reasonably acceptable to Bank, such default shall not constitute a default hereunder; or 8.5 Representation or Warranty. Any representation or warranty made by the Borrower, Lakeshore and/or Lakes Mall herein, or in any report, certificate, financial statement or other writing furnished in connection with or pursuant to this Loan Agreement shall prove to be false, misleading or incomplete in any substantial material respect on the date as of which made; or 8.6 Bankruptcy, Etc. The Borrower or Lakeshore or Lakes Mall or CBL Holdings or Parent or any Related Entity shall make a general assignment of assets for the benefit of creditors, file a petition in bankruptcy, petition or apply to any tribunal for the appointment of a custodian, receiver or any trustee for it or a substantial part of its assets, or shall commence on its or their behalf any 32 proceeding under any bankruptcy, reorganization, arrangement, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction, whether now or hereafter in effect; or if there shall have been filed any such petition or application, or any such proceeding shall have been commenced against Borrower or Lakeshore or Lakes Mall or CBL Holdings or Parent or any Related Entity, in which an order for relief is entered against Borrower or Lakeshore or Lakes Mall or CBL Holdings or Parent which remains undismissed for a period of ninety (90) days or more; or Borrower or Lakeshore or CBL Holdings or Parent or any Related Entity by any act or omission shall indicate its consent to, approval of or acquiescence in any such petition, application or proceeding or order for relief or the appointment of a custodian, receiver or any trustee for it or any substantial part of any of its properties, or shall suffer any such custodianship, receivership or trusteeship to continue undischarged for a period of ninety (90) days or more; or 8.7 Concealment of Property, Etc. The Borrower, Lakeshore, Lakes Mall, any Related Entity, or CBL Holdings or Parent shall have concealed, removed, or permitted to be concealed or removed, any part of its property, with intent to hinder, delay or defraud its or his creditors or any of them, or made or suffered a transfer of any of its property which shall constitute a fraudulent act under any bankruptcy, fraudulent conveyance or similar law; or shall have made any transfer of its property to or for the benefit of a creditor at a time when other creditors similarly situated have not been paid; or shall have suffered or permitted, while insolvent, any creditor to obtain a lien upon any of its property through legal proceedings or distraint which is not vacated within thirty (30) days from the date thereof; or 8.8 Management Change. Management of the Borrower shall, for a period of one hundred eighty (180) consecutive days, cease to be in at least two of the following persons: (a) Charles B. Lebovitz, (b) John N. Foy, (c) Michael Lebovitz, (d) Stephen D. Lebovitz or (e) Ron Fullam, who shall be in an executive management position with Borrower or who shall be a senior vice president, executive vice president, senior executive vice president or president with Borrower's general partner; or 8.9 Change in Ownership. Parent, its affiliates, officers and key employees, and CBL Holdings shall have through any means reduced their aggregate partnership interest in Borrower to less than fifteen percent (15%) of the aggregate of such partnership interests; or 8.10 Loan Documents Terminated or Void. This Loan Agreement, any Note, the Guaranty, or any instrument securing any Note shall, at any time after their respective execution and delivery and for any reason, cease to be in full force and effect or shall be declared to be null and void; or the Borrower, Lakeshore, Lakes Mall and/or any Related Entity shall deny it has any or further liability under this Loan Agreement, any Note, , the Guaranty, or under the CBL Mortgage; or 8.11 Covenants. The Borrower or any Related Entity defaults in the performance or observance of any other covenant, agreement or undertaking on its part to be performed or observed, contained herein, in the CBL Mortgage or in any other instrument or document which now or hereafter evidences or secures all or any part of the loan indebtedness which default shall continue for more than thirty (30) days following the mailing of notice from Bank to Borrower, Lakeshore, 33 Lakes Mall and/or such Related Entity, as the case may be; provided however, and notwithstanding anything contained in this Loan Agreement, in the CBL Mortgage or in any other instrument or document which now or hereafter evidences or secures all or any part of the loan indebtedness, failure to comply with a financial covenant shall not be an Event of Default unless such failure continues for ninety (90) days after the earlier of (i) the date any senior officer of the Borrower or any Related Entity has actual knowledge of such failure; or (ii) the date notice of such failure has been given to the Borrower by the Bank; or 8.12 Breach of Section 7.12 of this Loan Agreement. The Borrower, Lakeshore and/or Lakes Mall shall fail to observe or perform its obligations to the Bank, and/or any Participant under Section 7.12 of this Loan Agreement; or 8.13 Placement of Liens on Property. The Borrower or any Related Entity shall, without the prior written consent of the Bank and except as permitted by Section 7.5 and 7.6 hereof, create, place or permit to be created or placed, or through any act or failure to act, acquiesce in the placing of, or allow to remain, any mortgage, deed of trust, pledge, lien (statutory, constitutional or contractual), or security interest, encumbrance or charge on, or conditional sale or other title retention agreement, regardless of whether same are expressly subordinate to the liens of the CBL Mortgage, with respect to the property described in any CBL Mortgage. 8.14 Remedy. Upon the occurrence of any Event of Default, as specified herein, the Bank shall, at its option, be relieved of any obligation to make further Revolving Credit Advances under this Loan Agreement; and the Bank may at its option charge interest on the outstanding indebtedness at the Default Rate; and the Bank may, at its option, thereupon declare the entire unpaid principal balances of the Notes, all interest accrued and unpaid thereon and all other amounts payable under this Loan Agreement to be immediately due and payable for all purposes, and may exercise all rights and remedies available to it under the CBL Mortgage, any other instrument or document which secures any Note, or available at law or in equity. All such rights and remedies are cumulative and nonexclusive, and may be exercised by the Bank concurrently or sequentially, in such order as the Bank may choose. SECTION 9: MISCELLANEOUS 9.1 Amendments. The provisions of this Loan Agreement, any Note, the CBL Mortgage or any instrument or document executed pursuant hereto or securing the indebtednesses may be amended or modified only by an instrument in writing signed by the parties hereto and thereto. 9.2 Notices. All notices and other communications provided for hereunder shall be in writing and shall be mailed, certified mail, return receipt requested, or delivered, if to the Borrower, Lakeshore and/or Lakes Mall, to it at c/o CBL & Associates Properties, Inc., CBL Center, Suite 500, 2030 Hamilton Place Boulevard, Chattanooga, Tennessee 37421-6000, Attention: President, with a copy to Charles Willett, Jr.; if to the Bank, to it at 701 Market Street, Chattanooga, Tennessee 37402, Attention: Gregory L. Cullum; or as to any such person at such other address as shall be designated by such person in a written notice to the other parties hereto complying as to delivery with the terms of this Section 9.2. All such notices and other communications shall be effective (i) if mailed, when received or three (3) Business Days after mailing, whichever 34 is earlier; or (ii) if delivered, upon delivery and receipt of an executed acknowledgment of receipt by the party to whom delivery is made. Notwithstanding the foregoing, the Bank shall not be required to send a copy of any notice or communication to Charles Willett, Jr. but the Bank will use good faith efforts to copy Charles Willett, Jr. on any such notices or communications via regular mail, fax or email. 9.3 No Waiver, Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of the Bank, any right, power or privilege hereunder, shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege. Waiver of any right, power, or privilege hereunder or under any instrument or document now or hereafter securing the indebtedness evidenced hereby or under any guaranty at any time given with respect thereto is a waiver only as to the specified item. The rights and remedies herein provided are cumulative and not exclusive of any rights or remedies provided by law. 9.4 Indemnification. Borrower, Lakeshore and Lakes Mall agree to indemnify Bank from and against any and all claims, losses and liabilities, including, without limitation, reasonable attorneys' fees, growing out of or resulting from this Loan Agreement (including, without limitation, enforcement of this Loan Agreement), except claims, losses or liabilities resulting solely and directly from Bank's gross negligence or willful misconduct or from Bank's violation of applicable banking rules and regulations. The indemnification provided for in this Section shall survive the payment in full of the loan. The Borrower agrees to indemnify the Bank and the Participants and to hold the Bank and the Participants harmless from any loss or expense that such Bank or the Participants may sustain or incur as a consequence of a default by the Borrower in making any prepayment of or conversion from an advance bearing interest at the LIBOR Rate after the Borrower has given a notice thereof in accordance with the provisions of this Loan Agreement. 9.5 Survival of Agreements. All agreements, representations and warranties made herein shall survive the delivery of the Note. This Loan Agreement shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns, except that the Borrower, Lakeshore and the Lakes Mall shall not have the right to assign its rights hereunder or any interest therein. 9.6 Governing Law. This Loan Agreement shall be governed and construed in accordance with the laws of the State of Tennessee; except (a) that the provisions hereof which relate to the payment of interest shall be governed by (i) the laws of the United States or, (ii) the laws of the State of Tennessee, whichever permits the Bank to charge the higher rate, as more particularly set out in the Note, and (b) to the extent that the Liens in favor of the Bank, the perfection thereof, and the rights and remedies of the Bank with respect thereto, shall, under mandatory provisions of law, be governed by the laws of a state other than Tennessee. 9.7 Execution in Counterparts. This Loan Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute but one and the same instrument. 35 9.8 Terminology; Section Headings. All personal pronouns used in this Loan Agreement whether used in the masculine, feminine, or neuter gender, shall include all other genders; the singular shall include the plural, and vice versa. Section headings are for convenience only and neither limit nor amplify the provisions of this Loan Agreement. 9.9 Enforceability of Agreement. Should any one or more of the provisions of this Loan Agreement be determined to be illegal or unenforceable, all other provisions, nevertheless, shall remain effective and binding on the parties hereto. 9.10 Interest Limitations. (a) The Loan and the Notes evidencing the Loan, including any renewals or extensions thereof, may provide for the payment of any interest rate (i) permissible at the time the contract to make the Loan is executed, (ii) permissible at the time the Loan is made or any advance thereunder is made, or (iii) permissible at the time of any renewal or extension of the loan or any Note. (b) It is the intention of the Bank, the Borrower, Lakeshore and the Lakes Mall to comply strictly with applicable usury laws; and, accordingly, in no event and upon no contingency shall the Bank ever be entitled to receive, collect, or apply as interest any interest, fees, charges or other payments equivalent to interest, in excess of the maximum rate which the Bank may lawfully charge under applicable statutes and laws from time to time in effect; and in the event that the holder of the Note ever receives, collects, or applies as interest any such excess, such amount which, but for this provision, would be excessive interest, shall be applied to the reduction of the principal amount of the indebtedness thereby evidenced; and if the principal amount of the indebtedness evidenced thereby, and all lawful interest thereon, is paid in full, any remaining excess shall forthwith be paid to the Borrower, Lakeshore and/or Lakes Mall or other party lawfully entitled thereto. In determining whether or not the interest paid or payable, under any specific contingency, exceeds the highest rate which Bank may lawfully charge under applicable law from time to time in effect, the Borrower, Lakeshore and/or Lakes Mall and the Bank shall, to the maximum extent permitted under applicable law, characterize any non-principal payment as a reasonable loan charge, rather than as interest. Any provision hereof, or of any other agreement between the Bank and the Borrower, Lakeshore and/or Lakes Mall, that operates to bind, obligate, or compel the Borrower to pay interest in excess of such maximum rate shall be construed to require the payment of the maximum rate only. The provisions of this paragraph shall be given precedence over any other provision contained herein or in any other agreement between the Bank and the Borrower, Lakeshore and/or Lakes Mall that is in conflict with the provisions of this paragraph. The Notes shall be governed and construed according to the statutes and laws of the State of Tennessee from time to time in effect, except to the extent that Section 85 of Title 12 of the United States Code (or other applicable federal statue) may permit the charging of a higher rate of interest than applicable state law, in which event such applicable federal statute, as amended and supplemented from time to time shall govern and control the maximum rate of interest permitted to be charged hereunder; it being intended that, as to the 36 maximum rate of interest which may be charged, received, and collected hereunder, those applicable statutes and laws, whether state or federal, from time to time in effect, which permit the charging of a higher rate of interest, shall govern and control; provided, always, however, that in no event and under no circumstances shall the Borrower, Lakeshore and/or Lakes Mall be liable for the payment of interest in excess of the maximum rate permitted by such applicable law, from time to time in effect. 9.11 Non-Control. In no event shall the Bank's rights hereunder be deemed to indicate that the Bank is in control of the business, management or properties of the Borrower, Lakeshore, Lakes Mall and/or any Related Entity or has power over the daily management functions and operating decisions made by the Borrower, Lakeshore, Lakes Mall and/or any Related Entity. 9.12 Loan Review; Extensions of Termination Date; Continuing Security. (a) The specific Termination Date of Revolving Credit Loan mentioned in Article One may be extended for additional periods of one (1) year. On each June 1 hereafter, so long as the Loan remains unpaid, Bank shall review the performance of the Loan. If the Bank deems performance of the Loan acceptable, it will renew the Loan for one (1) year from the then existing Termination Date of Revolving Credit Loan. If the Bank renews the Loan at anytime or from time to time prior to June 1, 2007, the Bank and the Borrower, Lakeshore and Lakes Mall agree the Loan shall be renewed with covenants as contained in Sections 7.2, 7.3 and 7.4 of this Loan Agreement or such other covenants, terms and conditions as may be mutually agreed upon by Borrower, Lakeshore and Lakes Mall Bank and Bank. If Bank deems performance of the Loan not acceptable, Bank shall not be obligated to extend the Termination Date of Revolving Credit Loan; however, the Borrower, Lakeshore and Lakes Mall shall then have the right to repay the Loan pursuant to the repayment provisions contained in the Notes. Assessment of performance and the decision whether to extend the Termination Date of Revolving Credit Loan shall be solely within Bank's discretion. The Bank will not deem the performance of the Loan acceptable unless and until the Borrower provides to the Bank, among other things, updated title commitments with respect to all properties covered by any CBL Mortgage, which title commitments must be in form and substance acceptable to the Bank and must contain no exceptions unacceptable to the Bank. Bank shall notify Borrower of the results of its review of the Loan no later than eleven (11) months prior to the then effective Termination Date of the Revolving Credit Loan. If Bank elects not to renew the Loan, Bank shall not perform or cause to be performed, except at Bank's expense unless an Event of Default has occurred, any inspections, appraisals, surveys or similar items between: (a) the date notice thereof is given Borrower or the Termination Date, whichever first occurs, and (b) the date the Notes are repaid as provided herein. Anything contained in the foregoing to the contrary notwithstanding, upon any such extension, the Borrower, Lakeshore and Lakes Mall agree to pay to the Bank (in addition to the commitment fees it has previously paid under this Loan Agreement) an extension fee of Two Hundred Thousand and NO/100 Dollars ($200,000.00). (b) Upon the specific Termination Date of Revolving Credit Loan so fixed in Article One, or in the event of the extension of this Loan Agreement to a subsequent Termination Date (when no effective extension is in force), the Revolving Credit Loan and all other extensions of credit (unless sooner declared to be due and payable by the Bank pursuant to the provisions hereof), and subject to Borrower's election as set forth in subparagraph (a) above, shall become due and payable for all purposes. Until all such indebtednesses, 37 liabilities and obligations secured by the CBL Mortgage are satisfied in full, such termination shall not affect the security interest granted to Bank pursuant to the CBL Mortgage, nor the duties, covenants, and obligations of the Borrower therein and in this Loan Agreement; and all of such duties, covenants and obligations shall remain in full force and effect until the Revolving Credit Loan and all obligations under this Loan Agreement have been fully paid and satisfied in all respects. 9.13 Fees and Expenses. The Borrower, Lakeshore and Lakes Mall agree to pay, or reimburse the Bank for, the reasonable actual third party out-of-pocket expenses, including counsel fees and fees of any accountants, inspectors or other similar experts, as deemed necessary by the Bank, incurred by the Bank in connection with the development, preparation, execution, amendment, recording, (excluding the salary and expenses of Bank's employees and Bank's normal and usual overhead expenses) or enforcement of, or the preservation of any rights under this Loan Agreement, the Notes and any instrument or document now or hereafter securing the and Revolving Credit Loan indebtednesses. 9.14 Time of Essence. Time is of the essence of this Loan Agreement, the Notes and the other instruments and documents executed and delivered in connection herewith. 9.15 Compromises, Releases, Etc. Bank is hereby authorized from time to time, without notice to anyone, to make any sales, pledges, surrenders, compromises, settlements, releases, indulgences, alterations, substitutions, exchanges, changes in, modifications, or other dispositions including, without limitation, cancellations, of all or any part of the Loan indebtedness, or of any contract or instrument evidencing any thereof, or of any security or collateral therefor, and/or to take any security for or guaranties upon any of said indebtedness; and the liability of any guarantor, if any, shall not be in any manner affected, diminished, or impaired thereby, or by any lack of diligence, failure, neglect, or omission on the part of Bank to make any demand or protest, or give any notice of dishonor or default, or to realize upon or protect any of said indebtedness or any collateral or security therefor. Bank shall have the right to apply such payments and credits first to the payment of all its expenses, including costs and reasonable attorneys' fees, then to interest due under the Note and then to principal due under the Note. Bank shall be under no obligation, at any time, to first resort to, make demand on, file a claim against, or exhaust its remedies against the Borrower, Lakeshore and/or Lakes Mall, or its property or estate, or to resort to or exhaust its remedies against any collateral, security, property, liens, or other rights whatsoever. Upon the occurrence of an Event of Default, it is expressly agreed that Bank may at any time make demand for payment on, or bring suit against, the Borrower, Lakeshore and/or Lakes Mall and any guarantor, jointly or severally and may compromise with any of them for such sums or on such terms as it may see fit, and without notice or consent, the same being hereby expressly waived. 9.16 Joinder of Parent. Parent joins herein for the purpose of acknowledging and consenting to the terms and provisions hereof. 9.17 Bank's Consent. Except as otherwise expressly provided herein, in any instance hereunder where Bank's approval or consent is required or the exercise of its judgment is required, the granting or denial of such approval or consent and the exercise of such judgment shall be within the sole but reasonable 38 discretion of Bank, and Bank shall not, for any reason or to any extent, be required to grant such approval or consent or exercise such judgment provided that the Bank shall proceed at all times in good faith and in a commercially reasonable manner. 9.18 Venue of Actions. As an integral part of the consideration for the making of the loan, it is expressly understood and agreed that no suit or action shall be commenced by the Borrower, Lakeshore, Lakes Mall, Related Entities, CBL Holdings, Parent, by any guarantor, or by any successor, personal representative or assignee of any of them, with respect to the loan contemplated hereby, or with respect to this Loan Agreement or any other document or instrument which now or hereafter evidences or secures all or any part of the loan indebtedness, other than in a state court of competent jurisdiction in and for the County of the State in which the principal place of business of the Bank is situated, or in the United States District Court for the District in which the principal place of business of the Bank is situated, and not elsewhere. Nothing in this paragraph contained shall prohibit Bank from instituting suit in any court of competent jurisdiction for the enforcement of its rights hereunder or in any other document or instrument which evidences or secures the loan indebtedness. 9.19 Waiver of Right to Trial By Jury. EACH PARTY TO THIS LOAN AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (a) ARISING UNDER THIS LOAN AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (b) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS LOAN AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS LOAN AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. 9.20 Conflict. In the event of any conflict between the provisions hereof and any other loan document during the continuance of this Loan Agreement (including but not limited to any other documents received by the Bank via assignment in connection with the Lakeshore Mall and the Lakes Mall), the provisions of this Loan Agreement shall control. 9.21 Participation Agreement. The Borrower, Lakeshore and Lakes Mall acknowledge that the Participation Agreement exists and that the Bank is obligated, subject to the terms and conditions hereof, to fund One Hundred Million Dollars ($100,000,000.00) to the Borrower but that of that amount , Compass Bank, AmSouth Bank, Branch Banking and Trust Company and Manufacturers and Traders Trust Company are obligated, subject to the terms and conditions of the Participation Agreement, to fund as follows: Compass is to fund Fifteen Million and NO/100 Dollars ($15,000,000.00), AmSouth Bank is to fund Twenty Five Million and NO/100 Dollars ($25,000,000.00), Branch Banking and Trust Company is to fund 39 Fifteen Million and NO/100 Dollars ($15,000,000.00) and Manufacturers and Traders Trust Company to fund Twenty Million and NO/100 Dollars ($20,000,000.00). 9.22 USA Patriot Act Notice and Compliance. The USA Patriot Act of 2001 (Public Law 107-56) and federal regulations issued with respect thereto require all financial institutions to obtain, verify and record certain information that identifies individuals or business entities which open an "account" with such financial institution. Consequently, the Bank may from time to time request, and Borrower shall provide to the Bank, Borrower's, Parent's, each Guarantor's and each other Loan party's name, address, tax identification number and/or such other identification information as shall be necessary for the Bank to comply with federal law. An "account" for this purpose may include, without limitation, a deposit account, cash management service, a transaction or asset account, a credit account, a loan or other extension of credit, and/or other financial services product. (Signatures on Next Page) 40 IN WITNESS WHEREOF, the Borrower, Lakeshore, Lakes Mall, the Bank, CBL Holdings and Parent have caused this Loan Agreement to be executed by their duly authorized officers, managers and/or partners, all as of the day and year first above written. CBL & ASSOCIATES LIMITED PARTNERSHIP BY: CBL HOLDINGS I, INC., Its Sole General Partner By: /s/ John N. Foy -------------------------------------------------- Title: Vice Chairman and Chief Financial Officer -------------------------------------------- BORROWER LAKESHORE/SEBRING LIMITED PARTNERSHIP BY: CBL & ASSOCIATES LIMITED PARTNERSHIP, It's sole General Partner BY: CBL HOLDINGS I, INC., Its sole General Partner By: /s/ John N. Foy ---------------------------------------------------- Title: Vice Chairman and Chief Financial Officer ------------------------------------------------- LAKESHORE THE LAKES MALL, LLC By: CBL & Associates Limited Partnership, Its Managing Member By: CBL Holdings I, Inc., its General Partner By: /s/ John N. Foy -------------------------------------------------- Title: Vice Chairman and Chief Financial Officer ----------------------------------------------- LAKES MALL CBL & ASSOCIATES PROPERTIES, INC. By: /s/ John N. Foy ------------------------------------------------ Title: Vice Chairman and Chief Financial Officer ---------------------------------------------- PARENT/GUARANTOR 41 FIRST TENNESSEE BANK NATIONAL ASSOCIATION By: /s/ Gregory L. Cullum ----------------------------------------------- Gregory L. Cullum, Senior Vice President BANK 42 EXHIBIT "A" Real property known as: Walnut Square Mall, Dalton, Georgia Lakeshore Mall, Sebring, Florida Pemberton Mall, Vicksburg, Mississippi The Lakes Mall, Fruitport, Michigan Towne Mall, Middleton, Ohio all as more particularly described in the individual deeds of trust, deeds to secure debt and/or mortgages applicable to the above described properties. 43 EXHIBIT "B" PERMITTED ENCUMBRANCES 1. As described in the Mortgages. 44 EXHIBIT "C" NOTES 45 EXHIBIT "D" CHECKLIST FOR CLOSING 46 EXHIBIT "E" NON-DEFAULT CERTIFICATE For Fiscal Year Ended _______________, 20__. For Fiscal Quarter Ended _______________, 20__. The undersigned, a duly authorized officer of CBL & Associates Limited Partnership, a Delaware limited partnership [referred to as "Borrower" in that certain Amended and Restated Loan Agreement (the "Loan Agreement") dated as of December __, 2005 between Borrower, Lakeshore, Lakes Mall and First Tennessee Bank National Association ("Bank")], certifies to said Bank, in accordance with the terms and provisions of said Loan Agreement, as follows: 1. All of the representations and warranties set forth in the Loan Agreement are and remain true and correct on and as of the date of this Certificate with the same effect as though such representations and warranties had been made on and as of this date except as otherwise previously disclosed to the Bank in writing. 2. As of the date hereof, neither Borrower, Lakeshore nor Lakes Mall has knowledge of any Event of Default, as specified in Section 8 of the Loan Agreement, nor any event which, upon notice, lapse of time or both, would constitute an Event of Default, has occurred or is continuing. 3. As of the date hereof, Borrower is in full compliance with all financial covenants contained in the Loan Agreement, and the following are true, accurate and complete: (a) The Tangible Net Worth (as defined in the Loan Agreement) is $__________________________ as of ________________, 20___. (b) The Total Liabilities to Gross Asset Value is _____ to _____ as of _____________________, 20__. (c) The ratio of EBITDA to Debt Service Debt is ____ to ____ as of ______________, 20__. (d) The ratio of EBITDA to Interest Expense is ____ to ____ as of _____________________, 20_____. DATED this ______ day of ______________________, 20____. CBL & ASSOCIATES LIMITED PARTNERSHIP BY: CBL HOLDINGS I, INC., Its Sole General Partner By: --------------------------------------------- Title: ------------------------------------------ 47 EXHIBIT "F" LITIGATION Disclosure Pursuant to Paragraph 5.5 See Exhibit "F-1" attached for description of all litigation. ENVIRONMENTAL MATTERS Disclosure pursuant to Paragraph 5.11 None. 48 JOINDER IN AMENDED AND RESTATED LOAN AGREEMENT COMPASS BANK as "Participant" under the terms of that certain Amended and Restated Loan Agreement (the "Loan Agreement") dated effective as of December __, 2005, between and among First Tennessee Bank National Association, CBL & Associates Limited Partnership, Lakeshore/Sebring Limited Partnership and The Lakes Mall, LLC, in consideration of the mutual agreements of the parties thereto and of the undersigned therein contained, hereby joins as a party to said Loan Agreement and agrees to perform all obligations to be performed on its part thereunder. IN WITNESS WHEREOF, the undersigned has caused this Joinder in Amended and Restated Loan Agreement to be executed by its duly authorized officer effective as of December __, 2005. COMPASS BANK By: ---------------------------------------- C. Douglas Vibert, Senior Vice President 49 JOINDER IN AMENDED AND RESTATED LOAN AGREEMENT AMSOUTH BANK as "Participant" under the terms of that certain Amended and Restated Loan Agreement (the "Loan Agreement") dated effective as of December __, 2005 between and among First Tennessee Bank National Association, CBL & Associates Limited Partnership, Lakeshore/Sebring Limited Partnership and The Lakes Mall, LLC, in consideration of the mutual agreements of the parties thereto and of the undersigned therein contained, hereby joins as a party to said Loan Agreement and agrees to perform all obligations to be performed on its part thereunder. IN WITNESS WHEREOF, the undersigned has caused this Joinder in Amended and Restated Loan Agreement to be executed by its duly authorized officer effective as of December __, 2005. AMSOUTH BANK By: ------------------------------------------- Sarah A. McKenzie, Vice President 50 JOINDER IN AMENDED AND RESTATED LOAN AGREEMENT BRANCH BANKING AND TRUST COMPANY as "Participant" under the terms of that certain Amended and Restated Loan Agreement (the "Loan Agreement") dated effective as of December __, 2005, between and among First Tennessee Bank National Association, CBL & Associates Limited Partnership, Lakeshore/Sebring Limited Partnership and The Lakes Mall, LLC, in consideration of the mutual agreements of the parties thereto and of the undersigned therein contained, hereby joins as a party to said Loan Agreement and agrees to perform all obligations to be performed on its part thereunder. IN WITNESS WHEREOF, the undersigned has caused this Joinder in Amended and Restated Loan Agreement to be executed by its duly authorized officer effective as of December __, 2005. BRANCH BANKING AND TRUST COMPANY By: ------------------------------------------- Robert M. Searson Title: Senior Vice President 51 JOINDER IN AMENDED AND RESTATED LOAN AGREEMENT MANUFACTURERS AND TRADERS TRUST COMPANY as "Participant" under the terms of that certain Amended and Restated Loan Agreement (the "Loan Agreement") dated effective as of December __, 2005, between and among First Tennessee Bank National Association, CBL & Associates Limited Partnership, Lakeshore/Sebring Limited Partnership and The Lakes Mall, LLC, in consideration of the mutual agreements of the parties thereto and of the undersigned therein contained, hereby joins as a party to said Loan Agreement and agrees to perform all obligations to be performed on its part thereunder. IN WITNESS WHEREOF, the undersigned has caused this Joinder in Amended and Restated Loan Agreement to be executed by its duly authorized officer effective as of December __, 2005. MANUFACTURERS AND TRADERS TRUST COMPANY By: -------------------------------------------- Steven P. Deck, Vice President EX-10 12 exhibit10241.txt EXHIBIT 10.24.1 TRIANGLE MASTER AGREEMENT Exhibit 10.24.1 MASTER TRANSACTION AGREEMENT by and among REJ REALTY LLC, a Delaware limited liability company, JG REALTY INVESTORS CORP., an Ohio corporation, JG MANAGER LLC, an Ohio limited liability company, JG NORTH RALEIGH L.L.C., an Ohio limited liability company, JG TRIANGLE PERIPHERAL SOUTH LLC, an Ohio limited liability company, CBL & ASSOCIATES LIMITED PARTNERSHIP, a Delaware limited partnership, Effective October 24, 2005
TABLE OF CONTENTS ARTICLE 1 MEMBER NEWCO LLC AGREEMENT AND CLOSING........................................2 1.1 Member Newco LLC Agreement..................................................2 1.2 Acknowledgments.............................................................2 1.3 Closing Date................................................................2 1.4 Closing Transactions........................................................3 ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF EACH OF THE PARTIES.........................3 2.1 Corporate Status; Authorization.............................................4 2.2 Noncontravention............................................................4 2.3 Consents and Approvals......................................................4 2.4 No Actions or Suits.........................................................4 ARTICLE 3 ADDITIONAL REPRESENTATIONS AND WARRANTIES OF THE JG MEMBERS...................5 3.1 Real Estate Matters.........................................................5 ARTICLE 4 ADDITIONAL AGREEMENTS.........................................................6 4.1 Access to Information.......................................................6 4.2 Further Actions.............................................................6 4.3 CBL Member Parent Guarantee.................................................6 4.4 Project Employees...........................................................8 4.5 Release of JG Member and Affiliates from Existing Guarantees, etc...........8 4.6 Procedures in the event of a Shortfall......................................9 4.7 Service Contracts and Other Contracts......................................10 4.8 New Encumbrances on the Real Estate........................................10 ARTICLE 5 CONDITIONS TO CLOSING........................................................10 5.1 Conditions Precedent to Obligations of All Parties.........................10 5.2 Conditions Precedent to Obligations of CBL Member Parent...................11 5.3 Conditions Precedent to Obligations of the JG Parties......................11 ARTICLE 6 TERMINATION AND WAIVER.......................................................12 6.1 General....................................................................12 6.2 Effect of Termination......................................................13 ARTICLE 7 MISCELLANEOUS................................................................13 7.1 Notices....................................................................13 7.2 Governing Law..............................................................15 7.3 Entire Agreement; Amendment................................................15 7.4 Section Headings...........................................................15 7.5 Severability...............................................................15 7.6 Successors; No Third-Party Beneficiaries...................................15 7.7 Expenses...................................................................15 7.8 Confidentiality; Public Announcements......................................16 7.9 Survival...................................................................16 7.10 Counterparts...............................................................16
MASTER TRANSACTION AGREEMENT This MASTER TRANSACTION AGREEMENT (the "Agreement") is made as of October 24, 2005, by and among: REJ REALTY LLC, a Delaware limited liability company ("REJ Realty"), JG REALTY INVESTORS CORP., an Ohio corporation ("JGRI"), JG MANAGER LLC, an Ohio limited liability company ("JG Manager"; together with REJ Realty and JGRI, the "JG Members"), JG NORTH RALEIGH L.L.C., an Ohio limited liability company (the "JG North Raleigh"), JG TRIANGLE PERIPHERAL SOUTH LLC, an Ohio limited liability company ("JG Triangle South"), and CBL & ASSOCIATES LIMITED PARTNERSHIP, a Delaware limited partnership ("CBL Member Parent"). RECITALS WHEREAS, JG North Raleigh owns and operates the two-level regional enclosed mall shopping center known as Triangle Town Center and the Commons, located on approximately 43.328 acres of land near the I-540 - US 1 interchange in Raleigh, North Carolina (together, "Triangle Town Center"); and WHEREAS, JG Triangle South owns and operates the power center know as Triangle Town Place, located on approximately 15.749 acres of land and adjacent to Triangle Town Center ( "Triangle Town Place"); and WHEREAS, as of the date of this Agreement, REJ Realty and JGRI collectively own one hundred percent (100%) of the member interests in JG North Raleigh; and WHEREAS, as of the date of this Agreement, REJ Realty and JG Manager collectively own one hundred percent (100%) of the member interests in JG Triangle South; and WHEREAS, the JG Members intend to cause the formation of a new limited liability company, to be known as Triangle Town Member LLC ("Member Newco") and, on the terms and subject to the conditions set forth in this Agreement, to contribute all of their respective member interests in JG North Raleigh and JG Triangle South to Member Newco in exchange for member interests in Member Newco; and WHEREAS, the JG Members intend to cause the formation of another new limited liability company, to be known as Triangle Town Center LLC (the "Company") and, on the terms and subject to the conditions set forth in this Agreement, to cause JG North Raleigh and JG Triangle South to contribute Triangle Town Center and Triangle Town Place to the Company by limited warranty deed; and WHEREAS, CBL Member Parent intends to cause the formation of a new limited liability company in which CBL Member Parent will own one hundred percent (100%) of the member interests ("CBL Member"); and 1 WHEREAS, on the terms and subject to the conditions set forth in this Agreement, CBL Member Parent and the JG Members intend that CBL Member will be admitted as a member in Member Newco; and WHEREAS, the parties hereto desire to make provision for the other agreements and transactions contemplated by this Agreement; and WHEREAS, the definitions of capitalized terms used in this Agreement and not otherwise defined herein are set forth on Appendix A attached hereto and made a part hereof, and if not defined in Appendix A, shall be as set forth in the Member Newco LLC Agreement. NOW, THEREFORE, in consideration of the foregoing premises and other good, valid, and binding consideration, the receipt and sufficiency of which is hereby acknowledged and intending to be legally bound, the Parties agree as follows: ARTICLE 1 MEMBER NEWCO LLC AGREEMENT AND CLOSING 1.1 Member Newco LLC Agreement. For the purposes of this Agreement, the term Member Newco LLC Agreement shall have the meaning set forth in Appendix A and shall include the agreements, exhibits, schedules and other documents set forth in such definition. 1.2 Acknowledgments. The Parties acknowledge that: (a) As of the date hereof, and before giving effect to the transactions contemplated by this Agreement to take place on the Closing Date, the aggregate net equity of the JG Members in JG North Raleigh and JG Triangle South is approximately One Hundred Sixty-Two Million Five Hundred Thousand Dollars ($162,500,000.00), of which approximately One Hundred Fifty-Seven Million Three Hundred Fifty Thousand Dollars ($157,350,000.00) is attributable to JG North Raleigh and approximately Five Million One Hundred Fifty Thousand ($5,150,000.00) is attributable to JG Triangle South, given the current principal amount of mortgage indebtedness of JG North Raleigh and JG Triangle South of approximately $106 million and approximately $15 million, respectively, subject to adjustment by mutual agreement of the JG Members and CBL Member Parent to reflect the principal amounts of such mortgage indebtedness immediately prior to the Closing (the "Pre-Closing Project Net Equity"). (b) After giving effect to the transactions contemplated by this Agreement to take place on the Closing Date, the aggregate amount of the JG Members' Capital Account will be equal to the JG Members Initial Contribution, and the amount of CBL Member's Capital Account will be zero, except as otherwise provided in Section 4.6 below. 1.3 Closing Date. Subject to the prior satisfaction or waiver of all of the conditions set forth in Article 5, the closing of the transactions contemplated 2 by this Agreement (the "Closing") shall be held at a location that is agreeable to all of the Parties no later than the fifth (5th) Day following the date as of which all of the conditions precedent set forth in Article 5 have been satisfied or waived by the Party entitled to the benefit of such condition(s), or on such other date as may be agreed to in writing by the Parties (the "Closing Date"). 1.4 Closing Transactions. On the Closing Date, subject to the satisfaction or waiver of the conditions precedent set forth in Article 5, the following transactions shall take place in the order set forth below (and as further reflect in the charts attached as Exhibit C hereto (the "Transaction Chart"): (a) The JG Members shall contribute all of their respective member interests in JG North Raleigh and JG Triangle South to Member Newco in exchange for all of the member interests in Member Newco; (b) JG North Raleigh and JG Triangle South shall respectively contribute Triangle Town Center and Triangle Town Place to the Company, by limited warranty deed, in exchange for all of the member interests in the Company; (c) JG North Raleigh and JG Triangle South shall distribute all of the member interests in the Company to Member Newco; (d) the JG Members shall execute and deliver the Member Newco LLC Agreement; (e) CBL Member Parent shall cause CBL Member to execute and deliver the Member Newco LLC Agreement; (f) CBL Member Parent shall cause CBL Member and the other parties thereto to execute and deliver the Company LLC Agreement; (g) CBL Member Parent shall cause Property Manager to execute and deliver the Property Management Agreement; (h) CBL Member shall cause Member Newco to cause the Company to execute and deliver the Property Management Agreement; (i) CBL Member shall cause Member Newco to cause the Company to enter into the Initial JV Financing; and (j) The Company shall distribute the Net Proceeds of the Initial JV Financing to Member Newco, which shall distribute the Net Proceeds to the JG Members pro rata by wire transfer of immediately available funds to the account designated by the JG Members. ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF EACH OF THE PARTIES Except as otherwise set forth below, each of the Parties hereby represents and warrants to each other Party, as of the date hereof and the Closing Date, as follows: 3 2.1 Corporate Status; Authorization. Such Party is duly organized, validly existing and in good standing under and by virtue of the laws of the state of its organization. The Person(s) executing this Agreement on such Party's behalf are duly elected, qualified and acting as its officer(s), manager(s) or member(s) (as the case may be). All actions and resolutions, whether partnership, corporate or otherwise, necessary to authorize such Party to enter into this Agreement have been taken and adopted. Such Party has, and the Persons executing this Agreement on its behalf have, all requisite power and authority and has (have) been duly authorized to enter into this Agreement. This Agreement has been duly executed on behalf of such Party. Such Party has full right and lawful authority to enter into and perform its covenants and obligations under this Agreement for the full term hereof, and has full right and lawful authority to make its representations and warranties hereunder. Upon execution of this Agreement by each Party hereto, this Agreement will constitute the legal, valid and binding obligation of such Party and will be enforceable against it and its successors and assigns in accordance with its terms, except as such enforcement may be limited by (a) bankruptcy, insolvency, moratorium, or other similar laws affecting a creditor's rights and remedies or the relief of debtors generally at the time in effect, (b) the discretion of the court before which any proceeding involving the same may be brought, and (c) equitable principles at the time in effect limiting the remedy of specific performance. 2.2 Noncontravention. Neither the execution, delivery or performance by such Party of this Agreement or the transactions contemplated hereby will conflict with, or will result in a breach of, or will constitute a default under, (a) any agreement or instrument by which such Party or any of its Affiliates may be bound or (b) any judgment, statute, rule, law, order, decree, writ or injunction of any court or Governmental Agency, as defined below, applicable to such Party or any of their Affiliates and/or their respective property and assets for which consent has not been obtained. 2.3 Consents and Approvals. All consents by third Persons which such Party is, by the terms of its agreements, if any, with any such third Persons, required to obtain prior to its execution of this Agreement have been so obtained by them. 2.4 No Actions or Suits. There are no actions, suits, proceedings, or investigations pending or, to the knowledge of such Party, threatened against such Party, any of its Affiliates, or any of their respective properties, assets, or businesses in any court or before or by any federal, state, provincial, or other governmental department or agency, whether of the United States, of any of its states, possessions or territories, or of any foreign nation (a "Governmental Agency") or any arbitrator that could, if adversely determined, reasonably be expected to materially impair such Party's ability to perform its obligations under this Agreement or any Affiliate's ability to perform its obligations under the Member Newco LLC Agreement. Neither such Party nor any of its Affiliates has received any currently effective notice of any default, and neither such Party nor any of its Affiliates is in default, under any applicable order, writ, injunction, decree, or award of any court, any Governmental Agency, or any arbitrator, in each case, that could reasonably be expected to materially impair such Party's ability to perform its obligations under this Agreement or any Affiliate's ability to perform its obligations under the Member Newco LLC Agreement. 4 ARTICLE 3 ADDITIONAL REPRESENTATIONS AND WARRANTIES OF THE JG MEMBERS 3.1 Real Estate Matters. To the best knowledge of the JG Members: (a) There are no violations of any restrictive covenants affecting the Real Estate; (b) There are no uncured notices, suits, orders, decrees or judgments relating to violations of any laws, ordinances, codes, regulations or other requirements of any Governmental Agency having jurisdiction over the Real Estate or any part thereof which would have a materially adverse effect upon the development or operation of the Real Estate or the Project, including, but not limited to, any eminent domain proceedings; (c) There are no suits, actions or proceedings pending or threatened against or affecting the JG Parties and/or the Real Estate before any court or Governmental Agency that, if adversely determined, would have a materially adverse effect upon the development or operation of the Real Estate or the Project, including, but not limited to, any eminent domain proceedings; (d) None of the JG Parties is in default with respect to, nor has notice of violation of, any judgment, order, writ, injunction, rule or regulation of any court or Governmental Agency to which any of the JG Parties is subject in any way affecting the Real Estate that would have a materially adverse effect upon the development or operation of the Real Estate or the Project, including, but not limited to, any eminent domain proceedings; (e) There are no material agreements to which any of the JG Parties or any of their Affiliates is a party affecting any of JG North Raleigh, JG Triangle South and/or the Real Estate or any use of the Real Estate that have not been disclosed to CBL Member Parent or its Affiliates; (f) Except as disclosed in the environmental reports and studies identified on Exhibit B attached hereto (the "Environmental Reports"), there are no Hazardous Substances on, under, in or about the Real Estate. For the purposes of this Agreement, "Hazardous Substances" shall mean and include, but shall not be limited to, materials which are included under or regulated by any local, state or federal law, rule or regulation pertaining to environmental regulation, contamination, clean up or disclosure; (g) Except as disclosed in writing to CBL Member Parent and/or its Affiliates prior to the date hereof, there are no tenancies, occupancies or licenses in or to the Real Estate under agreements entered into by any of the JG Parties or any of their Affiliates: and (h) The JG Parties have made a good-faith, reasonable effort to provide CBL Member Parent with all of the facts within the knowledge and possession of the JG Parties concerning JG North Raleigh, JG Triangle South, the 5 Real Estate and the Project that, in their reasonable judgment, could be expected to be material to CBL Member Parent's due diligence evaluation of JG North Raleigh, JG Triangle South, the Real Estate and the Project. ARTICLE 4 ADDITIONAL AGREEMENTS 4.1 Access to Information. Each Party agrees that, from and after the date hereof and until the first to occur of the Closing and the termination of this Agreement in accordance with Article 6, each other Party and their respective authorized representatives will have reasonable access during normal business hours to the premises, properties, books and records of JG North Raleigh, JG Triangle South and, from and after their formation, Member Newco and the Company, as such other Parties may reasonably request; provided, in each case, that such access does not disrupt the normal business activities of JG North Raleigh, JG Triangle South, Member Newco and/or the Company and shall be at the expense of the Party requesting such access. 4.2 Further Actions. Subject to the terms and conditions hereof, each Party agrees to act reasonably and in good faith and to use its commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper, or advisable to consummate and make effective the transactions contemplated hereunder and under the Member Newco LLC Agreement to be entered into by it or its Affiliates, except that no Party shall be required to waive or cause to be waived or cause its Affiliates to waive or cause to be waived any of the conditions to closing set forth in Article 5. Each Party shall furnish to each other Party all information and assistance that such other Party may reasonably request in connection with the foregoing. 4.3 CBL Member Parent Guarantee. Subject to the limitations set forth in this Section 4.3, CBL Member Parent hereby irrevocably and unconditionally guarantees to the JG Members the full and prompt performance of each obligation of CBL Member in connection with the Project, including without limitation CBL Member's obligations under the Member Newco LLC Agreement (the "CBL Member Guaranteed Obligations"), and CBL Member Parent shall indemnify and hold harmless the Company, Member Newco, and the JG Members from and against any and all liability, obligation, loss, costs, damage, or expense (including, without limitation, reasonable and documented attorneys' fees and the costs of investigation) howsoever arising from the failure of CBL Member to perform such obligations. This Section 4.3 is a guarantee of performance and not of payment alone, and neither the JG Members, Member Newco nor the Company shall be under any obligation to take any action against CBL Member with respect to any of the CBL Member Guaranteed Obligations if such CBL Member Guaranteed Obligations are due and have not been performed. The liability of CBL Member Parent under this Section 4.3 shall not be reduced or discharged by (a) any forbearance or indulgence granted to CBL Member and/or CBL Member Parent, whether as to payment, time, performance, or otherwise, (b) the fact that CBL Member ceases to be a Member of the Company or (c) the fact that CBL Member and/or CBL Member Parent makes an assignment for the benefit of its creditors, a receiver of CBL Member and/or CBL Member Parent is appointed or applied for, or a petition under 6 Title 11, United States Code (Bankruptcy), as from time to time amended, is filed by or against CBL Member and/or CBL Member Parent. Notwithstanding the foregoing provisions of this Section 4.3: (a) CBL Member Parent's obligations under this Section 4.3 shall terminate, and this Section 4.3 shall thereafter be null and void and of no further force or effect (except with respect to claims, if any, made under this Section 4.3 prior to such termination, which shall survive until such claims are resolved), when none of the JG Members nor any of their respective permitted assignees under clauses (i), (ii), (iii) or (iv) of Section 16.03(a) of the Member Newco LLC Agreement, nor any permitted assignees under such clauses of any such permitted assignees, owns any Membership Interest or any other direct or indirect member interest in the Company; and (b) CBL Member Parent's aggregate liability under the guarantees and indemnities provided in this Section 4.3 shall be limited to Fifty Million Dollars ($50,000,000), reduced on a dollar-for-dollar basis by the aggregate amount of Mandatory Contributions or additional Non-Required Contributions, if any, made by CBL Member to the Company for any purpose, and, following such reduction, then increased on a dollar-for-dollar basis (but not in excess of $50,000,000) by the aggregate amount of the distributions made by the Company to the CBL Member that constitute a return of Mandatory Contributions described in Section 11.01(b)(iii)(A) of the Member Newco LLC Agreement made by CBL Member (i.e., to fund capital improvements to the Project (including allowances for tenant improvements)). Distributions received by the CBL Member that constitute the return of any Non-Required Contributions or Mandatory Contributions made by CBL Member other than Mandatory Contributions described in Section 11.01(b)(iii)(A) of the Member Newco LLC Agreement shall not be deemed to result in any increases as referenced above. For the avoidance of doubt, the following examples illustrate the operation of this Section 4.3(b) (Examples 1 and 2 below assume that CBL Member Parent has not previously incurred any liability under this Section 4.3 at the time of the example): (i) Example 1. If CBL Member had made $5,000,000 in unreturned Mandatory Contributions described in Section 11.01(b)(iii)(A) of the Member Newco LLC Agreement to fund capital improvements to the Project and $25,000,000 in other Mandatory Contributions and Non-Required Contributions, then CBL Member Parent's aggregate liability under the guarantees and indemnities provided in this Section 4.3 would be limited to $20,000,000; (ii) Example 2. If, after Example 1, the Company returned to CBL Member all of the $5,000,000 in Mandatory Contributions described in Section 11.01(b)(iii)(A) of the Member Newco LLC Agreement made by CBL Member in Example 1 and returned $7,000,000 of the $25,000,000 in other Mandatory Contributions and Non-Required Contributions made by CBL Member in Example 1, then CBL Member Parent's aggregate liability under the guarantees and indemnities provided in this Section 4.3 would be limited to $25,000,000, i.e., CBL Member Parent's aggregate liability in Example 1 plus the amount of Mandatory Contributions described in Section 11.01(b)(iii)(A) of the Member Newco LLC Agreement made by CBL Member in Example 1 and returned to CBL Member in this Example 2; and 7 (iii) Example 3. If, after Example 1 but before Example 2, CBL Member Parent paid a liability of $20,000,000 under the guarantees and indemnities provided in this Section 4.3, then CBL Member Parent would have no further liability under the guarantees and indemnities provided in this Section 4.3 unless and until the Company returned to CBL Member all or a portion of the $5,000,000 in Mandatory Contributions described in Section 11.01(b)(iii)(A) of the Member Newco LLC Agreement made by CBL Member in Example 1; if the Company subsequently returned CBL Member's Mandatory Contributions and Non-Required Contributions as described in Example 2, CBL Member Parent's aggregate liability under the guarantees and indemnities provided in this Section 4.3 would be limited to $5,000,000, i.e., the amount of Mandatory Contributions to fund capital improvements described in Section 11.01(b)(iii)(A) of the Member Newco LLC Agreement made by CBL Member in Example 1 and returned to CBL Member in Example 2. 4.4 Project Employees. At and effective as of the Closing, REJ Realty shall cause the appropriate Affiliate(s) of REJ Realty to terminate all shopping center managers and other employees of Affiliates of REJ Realty located at the Project (such persons, the "Project Employees") and to pay all severance payments, if any, due in connection with such terminations of the Project Employees. At the Closing, CBL Member Parent shall cause the appropriate Affiliate(s) of CBL Member Parent (including, as to janitorial staff and maintenance and security personnel, ERMC, which shall, for purposes of this Section 4.4, be deemed to be an Affiliate of CBL Member Parent) to offer employment at the Project to substantially all of the Project Employees for base salaries and benefits substantially comparable in the aggregate to the base salaries being earned by and benefits being offered to persons currently employed by Affiliates of CBL Member Parent in comparable positions at regional malls owned directly or indirectly by Affiliates of CBL Member Parent in a market comparable to the market in which the Project is located. The foregoing covenant is made to and solely for the benefit of REJ Realty, and no Project Employee is entitled or shall be deemed to be entitled to make any claim against CBL Member Parent or any Affiliate of CBL Member Parent, or any other Person, based on this Section 4.5 or any other provision of this Agreement. In addition to the foregoing, unless Affiliates of the CBL Member Parent specifically agree otherwise with a particular Project Employee or group of Project Employees, all such Project Employees that become employees of Affiliates of CBL Member Parent shall be "employees-at-will" and no written employment contract shall be required. 4.5 Release of JG Member and Affiliates from Existing Guarantees, etc. Promptly after the Closing, CBL Member and CBL Member Parent will use their commercially reasonable efforts to obtain the release of the JG Members and their respective Affiliates from any guarantees of existing financing for the Project, letters of credit securing obligations to anchors, other tenants or other parties, and other credit enhancements for the benefit of the JG North Raleigh and/or JG Triangle South heretofore made or provided by any of the JG Members or their respective Affiliates. For the purposes of this Section 4.5, "commercially reasonable efforts" shall include but not be limited to substituting CBL Member Parent and/or its Affiliates as the obligor under such credit enhancements and/or replacing such credit enhancements with other credit enhancements satisfactory to the obligee. In the event that CBL Member and CBL Member Parent 8 are unable to obtain any such release, CBL Member Parent shall indemnify the JG Members and their respective Affiliates against and hold them harmless from any and all cost, loss and liability with respect to such credit enhancements. 4.6 Procedures in the event of a Shortfall. (a) Obtaining the Initial JV Financing. Following the execution of this letter, CBL Member Parent will use its commercially reasonable efforts to obtain the Initial JV Financing. Without limiting the generality of the immediately preceding sentence, CBL Member Parent, an Affiliate of CBL Member Parent, or the Company (whichever shall be acceptable to the lender) will provide to the lender of the Initial JV Financing, if the applicable tenant estoppels are not otherwise obtained, certificates for up to ten percent (10%) of the "Non-Majors", as contemplated by the UBS Real Estate Investments Inc. term sheet, dated October [ ], 2005, a copy of which CBL Member Parent has heretofore provided to the JG Members. The JG Parties will extend to CBL Member Parent commercially reasonable cooperation in CBL Member Parent's efforts to obtain the Initial JV Financing. The Net Proceeds of the Initial JV Financing shall be not less than 50% of the Pre-Closing Project Net Equity (the "50% Distribution Amount"). The 50% Distribution Amount will be adjusted to reflect any adjustments in the Pre-Closing Project Net Equity, as provided in Section 1.2(a) above. (b) Inability to Obtain Initial JV Financing. If CBL Member Parent is unable to obtain the Initial JV Financing by November 15, 2005 (the "Contemplated Closing Date"), or if the Net Proceeds of the Initial JV Financing are anticipated to be less than the 50% Distribution Amount (determined by reference to term sheets, commitment letters or other written proposals for the Initial JV Financing that CBL Member Parent has received from prospective lenders for the JV Financing and that are under active negotiation as of the Contemplated Closing Date), the JG Members, in their sole discretion, may either (i) terminate this Agreement as provided in Section 6.1(e) below; (ii) extend the Contemplated Closing Date for such additional period of time as the JG Members may elect (not to exceed sixty (60) additional days), so as to afford CBL Member Parent additional time to obtain the Initial JV Financing that will provide Net Proceeds at least equal to the 50% Distribution Amount; or (iii), subject to the satisfaction or waiver by the appropriate party of the other conditions to closing stated in this Agreement, elect to proceed with the Closing. The amount by which the 50% Distribution Amount exceeds the Net Proceeds of the Initial JV Financing, if any, is hereinafter referred to as the "Shortfall." (c) Election by JG Members to Proceed with Closing. If the JG Members make the election described in clause (iii) of Section 4.6(b) above, at the Closing: (i) the entire Net Proceeds of the Initial JV Financing, if any, shall be distributed to the JG Members as provided in Section 1.4(j) above; (ii) CBL Member shall make a capital contribution to Member Newco, which shall in turn make a corresponding capital contribution to the Company, in an amount equal to the Shortfall, up to a maximum of $3 million (the "Shortfall Initial Contribution"), and (iii) the Company will immediately distribute to Member Newco, and Member Newco shall thereupon immediately distribute pro rata to the JG Members an amount equal to the Shortfall Initial Contribution. The Shortfall Initial Contribution, if any, shall be deemed to be CBL Member's Initial Contribution. The amount, if any, by which the Shortfall 9 exceeds the Shortfall Initial Contribution (the "Remaining Shortfall"), shall be a part of the JG Members Initial Contribution and shall carry a preferred return equal the rate of interest from time to time on the outstanding principal amount of the Initial JV Financing, except that, if the amount of the Interest/Return on the Remaining Shortfall exceeds (the "Excess Amount") the amount computed using the "safe harbor" interest rate set forth in Treasury Regulation Section 1.707-4(a)(3)(ii) (the "Safe Harbor Amount"), then the amount of the preferred return paid each year shall be the Safe Harbor Amount until the expiration of a two year period ending after the Closing at which time the Excess Amount will be paid at the next cash distribution date. The unpaid Excess Amount, if any, will not bear interest or carry a preferred return. The Remaining Shortfall and the preferred return shall have a priority over all other distributions to members of Member Newco, other than tax distributions, until the JG Members have received the Remaining Shortfall in its entirety. The form of Member Newco LLC Agreement shall be revised as appropriate to reflect the provisions of this Section 4.6(c) in the event that the provisions of this Section 4.6(c) become operable. 4.7 Service Contracts and Other Contracts. The JG Parties have delivered or caused to be delivered to CBL Member any and all service contracts, maintenance agreements and other agreements relating to the performance by third parties of services for the Company, JG Triangle South, the Real Estate and/or the Project that are not cancelable on 30 days or less notice. 4.8 New Encumbrances on the Real Estate. From and after the date hereof and until the first to occur of the Closing and the termination of this Agreement in accordance with Article 6, the JG Members shall cause JG North Raleigh and JG Triangle South to use their respective commercially reasonable efforts to ensure that none of the Real Estate becomes subject to any liens, encumbrances, mortgages, security interests or other adverse rights not in existence as of the date of this Agreement, other than (a) liens for current real and personal property taxes and assessments and other similar taxes and assessments not yet due and payable; (b) easements, licenses, covenants, rights-of-way and other similar restrictions (including building and zoning restrictions) that could not reasonably be expected to materially and adversely affect the use or operation of the Project as currently used and operated; and (c) leases, licenses and other occupancy rights entered into or modified in the ordinary course of business of the Project (collectively, "Permitted Encumbrances") ARTICLE 5 CONDITIONS TO CLOSING 5.1 Conditions Precedent to Obligations of All Parties. The respective obligations of each Party to consummate the transactions contemplated by this Agreement are subject to the satisfaction or waiver on or before the Closing Date of each of the following: (a) No Injunctions. No court or Governmental Agency of competent jurisdiction shall have enacted, issued, promulgated, enforced, or entered any statute, rule, regulation, non-appealable judgment, decree, injunction, or other order that is in effect on the Closing Date and that enjoins, restrains, restricts, makes unlawful, or prohibits this Agreement or the Member Newco LLC Agreement or the consummation of any of the transactions contemplated hereby or thereby. 10 (b) No Pending or Threatened Actions. There shall not be pending or threatened any material action or proceeding seeking to enjoin or restrain consummation of the transactions contemplated by this Agreement or seeking material damages in connection with such transactions. (c) Revisions to Member Newco LLC Agreement. The JG Members and CBL Member shall have agreed to revisions to the form of Member Newco LLC Agreement as contemplated by the definition of Member Newco LLC Agreement. (d) Company LLC Agreement. The JG Members and CBL Member shall have agreed to a form of limited liability company agreement for the Company (the "Company LLC Agreement"). 5.2 Conditions Precedent to Obligations of CBL Member Parent. The obligations of CBL Member Parent to consummate the transactions contemplated by this Agreement are subject to the satisfaction or waiver on or before the Closing Date of each of the following: (a) Accuracy of Representations and Warranties. The representations and warranties of each of the JG Parties contained herein that are qualified by materiality shall be true and correct on and as of the Closing Date, and the representations and warranties that are not so qualified shall be true and complete in all material respects on and as of the Closing Date, in each case as if made on and as of such date, and the JG Parties shall have executed and delivered to CBL Member Parent a certificate, dated as of the Closing Date, to such effect. (b) Covenants. The covenants and agreements of each of the JG Parties to be performed on or prior to the Closing shall have been duly performed in all material respects, and the JG Parties shall have executed and delivered to CBL Member Parent a certificate, dated as of the Closing Date, to such effect. (c) No New Encumbrances. None of the Real Estate shall have become subject to any liens, encumbrances, mortgages, security interests or other adverse rights not in existence as of the date of this Agreement, other than the Permitted Encumbrances. 5.3 Conditions Precedent to Obligations of the JG Parties. The obligations of the JG Parties to consummate the transactions contemplated by this Agreement are subject to the satisfaction or waiver on or before the Closing Date of each of the following: (a) Accuracy of Representations and Warranties. The representations and warranties of CBL Member Parent contained herein that are qualified by materiality shall be true and correct on and as of the Closing Date, and the representations and warranties that are not so qualified shall be true and complete in all material respects on and as of the Closing Date, in each case as if made on and as of such date, and CBL Member 11 Parent shall have executed and delivered to the JG Parties a certificate, dated as of the Closing Date, to such effect. (b) Covenants. The covenants and agreements of CBL Member Parent to be performed on or prior to the Closing shall have been duly performed in all material respects, and CBL Member Parent shall have executed and delivered to the JG Parties a certificate, dated as of the Closing Date, to such effect. (c) Initial JV Financing Closing. Unless the JG Members have elected to proceed under Section 4.6(b)(iii), CBL Member Parent has (i) obtained the Initial JV Financing and (ii) the Net Proceeds of the JV Financing are not anticipated to be less than the 50% Distribution Amount. ARTICLE 6 TERMINATION AND WAIVER 6.1 General. At any time prior to the Closing, this Agreement may be terminated and the transactions contemplated herein may be voided only as follows: (a) by written agreement of each of the Parties; (b) by the JG Members, on one hand, and by CBL Member Parent, on the other hand, if a material breach of any provision of this Agreement (i) has been committed by the other or by one of the other's Affiliates that is a Party and such breach has not been cured and cannot reasonably be expected to be cured within thirty (30) Days after all other conditions to Closing set forth in Section 5.1 have been satisfied or (ii) has not otherwise been waived; (c) by any Party, by giving written notice of such termination to the other Party, if the Closing shall not have occurred on or prior to the later of (i) November 30, 2005 and (ii) the date to which the JG Members extend the Contemplated Closing Date pursuant to Section 4.6(b)(ii) above, if the JG Members exercise their rights under such Section 4.6(b)(ii), unless the failure of such occurrence shall be due to the delay or failure of the Party seeking to terminate this Agreement under this clause (c), or its Affiliates, to perform in all material respects each of its or their obligations under this Agreement required to be performed by it at or prior to the Closing; (d) by either Party, if there shall be in effect any law or regulation that prohibits the consummation of the Closing or if consummation of the Closing would violate any non-appealable final order, decree, injunction, or judgment of any Governmental Agency having competent jurisdiction; and (e) by the JG Members, if CBL Member Parent has not obtained the Initial JV Financing by the Contemplated Closing Date. 12 6.2 Effect of Termination. In the event of the termination of this Agreement in accordance with this Article 6, this Agreement shall thereafter become null and void and of no further force or effect, and neither Party hereto shall have any liability to the other Party hereto or its Affiliates, directors, officers, or employees; except that this Section 6.2 and Sections 7.1, 7.2, 7.3, 7.4, 7.5, 7.6, 7.7, 7.9 and 7.10 shall survive such termination; and except that nothing herein will relieve either Party from liability for any breach of this Agreement prior to such termination. The rights of termination provided in Section 6.1 may only be exercised prior to the Closing in accordance with their respective terms. ARTICLE 7 MISCELLANEOUS 7.1 Notices. Any notices or other communications required or permitted to be given by this Agreement shall be given in writing and either (a) personally hand-delivered, (b) mailed by prepaid certified or registered mail, with return receipt requested, (c) sent by generally recognized overnight delivery service to the party to whom such notice or communication is directed with delivery fee prepaid, or (d) sent via fax transmission. If personally delivered, notices or other communications shall be effective when received as evidenced by affidavit of the Person making such delivery; if sent by overnight courier delivery service, notices or other communications shall be deemed to have been received by the addressee on the next Day following the date so sent that is not a Saturday, Sunday or a day upon which national banks located in Chattanooga, Tennessee or Cleveland, Ohio are permitted to be closed; if mailed, notices or other communications shall be deemed to have been received by the addressee on the date received, as evidenced by the return receipt; and if sent via fax transmission, notices or other communications shall be deemed to have been received upon actual receipt by the Party to which such notices or other communications are addressed. The inability to make delivery because of changed address of which no notice was given or by reason of rejection or refusal to accept delivery of any notice shall be deemed to be receipt of the notice as of the date of such inability to deliver or rejection or refusal to accept. Any such notices shall be sent to the address of such Party as follows, or to such other address or facsimile number as such Party may designate by written notice in accordance with the provisions of this Section 7.1: If to the JG Parties, to: JG North Raleigh L.L.C. c/o The Richard E. Jacobs Group, Inc. 25425 Center Ridge Road Cleveland, Ohio 44145-4122 Attention: President (440) 808-6903 (fax) JG Triangle Peripheral South LLC c/o The Richard E. Jacobs Group, Inc. 25425 Center Ridge Road Cleveland, Ohio 44145-4122 Attention: President (440) 808-6903 (fax) 13 REJ Realty LLC c/o The Richard E. Jacobs Group, Inc. 25425 Center Ridge Road Cleveland, Ohio 44145-4122 Attention: President (440) 808-6903 (fax) JG Realty Investors Corp. c/o The Richard E. Jacobs Group, Inc. 25425 Center Ridge Road Cleveland, Ohio 44145-4122 Attention: President (440) 808-6903 (fax) JG Manager LLC c/o The Richard E. Jacobs Group, Inc. 25425 Center Ridge Road Cleveland, Ohio 44145-4122 Attention: President (440) 808-6903 (fax) with a copy (as to each of the JG Parties) to: General Counsel The Richard E. Jacobs Group, Inc. 25425 Center Ridge Road Cleveland, Ohio 44145-4122 (440) 808-6903 (fax) If to CBL Member Parent, to: CBL & Associates Limited Partnership 2030 Hamilton Place Boulevard Suite 500, CBL Center Chattanooga, Tennessee 37421 Attention: Charles B. Lebovitz (423) 490-8662 (fax) with a copy to: Jeffery V. Curry, Esq. Shumacker Witt Gaither & Whitaker, P.C. 2030 Hamilton Place Blvd. Suite 210, CBL Center Chattanooga, Tennessee 37421 (423) 899-1278 (fax) 14 7.2 Governing Law. This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Ohio, including all matters of construction, validity, and performance but excluding all other choice of law and conflicts of law rules. 7.3 Entire Agreement; Amendment. Except as provided in Section 7.8 below, this Agreement, together with all Exhibits hereto, is the Parties' entire agreement with respect to the subject matter hereof and supersedes all prior or contemporaneous oral or written communications, proposals, and representations with respect to the subject matter hereof. No modification to this Agreement will be binding unless in writing and signed by a duly authorized representative of each Party. 7.4 Section Headings. The section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 7.5 Severability. If at any time subsequent to the date hereof, any provision of this Agreement shall be held by any court of competent jurisdiction to be illegal, void, or unenforceable, that provision shall be of no force and effect, but the illegality or non-enforceability of such provision shall have no effect upon and shall not impair the enforceability of any other provision of this Agreement. 7.6 Successors; No Third-Party Beneficiaries. This Agreement shall be binding upon and shall inure to the benefit of the Parties and their respective successors and permitted assigns, and shall not confer any rights or remedies upon any other third party other than such successors and permitted assigns. This Agreement and the respective Parties' rights and obligations hereunder may not be assigned or transferred by any Party, directly or indirectly, or by operation of law, without the prior written consent of the other Parties hereto. 7.7 Expenses. Each Party shall pay its own legal fees and other expenses in connection with the negotiation and execution of this Agreement, except that (a) the JG Members (in the aggregate) and CBL Member will each bear one-half of the cost of any transfer and similar taxes, if any, payable in connection with the transactions contemplated by this Agreement; (b) if this Agreement is terminated under Section 6.1 above (other than under Section 6.1(b)), REJ Realty and CBL Member Parent shall each pay one-half of the expenses of and fees payable to UBS Real Estate Investments Inc., the proposed lender of the Initial JV Financing, that the Company, CBL Member Parent or its Affiliates are obligated to pay, including without limitation fees and expenses of lender's counsel (capped at $75,000 in the aggregate), any fixed or per diem rate lock and/or hedge loss fees, and the good faith deposit in the amount of $100,000 (collectively, the "Lender Fees and Expenses"); 15 (c) if this Agreement is terminated by CBL Member Parent under Section 6.1(b) above by reason of a breach of this Agreement by one or more of the JG Parties, REJ Realty shall pay or reimburse CBL Member Parent for all of the Lender Fees and Expenses; and (d) if this Agreement is terminated by the JG Members under Section 6.1(b) above by reason of a breach of this Agreement by CBL Member Parent, none of the JG Parties nor any of their respective Affiliates shall have any obligation to pay or reimburse CBL Member Parent or its Affiliates for all or any part of the Lender Fees and Expenses, all of which shall be paid by CBL Member Parent or its Affiliates. 7.8 Confidentiality; Public Announcements. From the date hereof until the first to occur of the Closing and the termination of this Agreement in accordance with Article 6, the Parties will be bound by the provisions of Part VI of the Letter Agreement to the same extent as if it were rewritten in its entirety herein. 7.9 Survival. The representations and warranties contained in Article 2 shall survive the Closing until the expiration or earlier termination of the Member Newco LLC Agreement. The representations and warranties contained in Article 3 shall survive for a period of one (1) year after the Closing. Subject to Section 6.2, the provisions of Section 4.2 and Article 7 shall survive the Closing until the termination of the Member Newco LLC Agreement, and the provisions of Sections 4.3 and 4.5 shall survive without limitation as to time. 7.10 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument. [Signatures on following page] 16 IN WITNESS WHEREOF, the Parties have duly executed this Agreement as of the day and year first above written. REJ REALTY LLC By: /s/ Judson E. Smith Judson E. Smith, Executive Vice President JG NORTH RALEIGH L.L.C By:/s/ Judson E. Smith Judson E. Smith, Executive Vice President JG TRIANGLE PERIPHERAL SOUTH LLC By:/s/ Judson E. Smith Judson E. Smith, Executive Vice President JG MANAGER LLC By:/s/ Judson E. Smith Judson E. Smith, Executive Vice President JG REALTY INVESTORS CORP. By:/s/ Judson E. Smith Judson E. Smith, Executive Vice President CBL & ASSOCIATES LIMITED PARTNERSHIP By: CBL Holdings I, Inc., its sole general partner By:/s/ John N. Foy John N. Foy Vice Chairman and Chief Financial Officer 17 APPENDIX A DEFINITIONS "Affiliate" means, with respect to any Person, (i) any Person, which directly or indirectly, through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such Person and/or (ii) any Person, ten percent (10%) or more of the equity or beneficial interests of which are owned by such Person or owned by an Affiliate of such Person that is an Affiliate pursuant to clause (i) of this paragraph. Notwithstanding the definition of Affiliate set forth above, (A) EMJ Corporation, a Tennessee corporation, shall not be deemed an Affiliate of CBL Member Parent for purposes of this Agreement, (B) REJ Realty and its Affiliates shall not be deemed Affiliates of CBL Member Parent for purposes of this Agreement and (C) CBL Member Parent and its Affiliates shall not be deemed Affiliates of REJ Realty for purposes of this Agreement. "Agreement" has the meaning set forth in the Preamble to this Agreement. "CBL Member" has the meaning set forth in the Preamble to this Agreement. "CBL Member Parent" has the meaning set forth in the Preamble to this Agreement. "CBL Member Guaranteed Obligations" has the meaning set forth in Section 4.3 of this Agreement. "Closing" has the meaning set forth in Section 1.3 of this Agreement. "Closing Date" has the meaning set forth in Section 1.3 of this Agreement. "Company" has the meaning set forth in the Preamble to this Agreement. "Company LLC Agreement" has the meaning set forth in Section 5.1(d) of this Agreement. "Contemplated Closing Date" has the meaning set forth in Section 4.6(b) of this Agreement. "Control" or "Controlled by" means the power, directly or indirectly, to direct the actions, operation or management of another Person or business entity by contract, the ownership of voting rights or otherwise. "Entity" means any general partnership, limited partnership, limited liability company, corporation, joint venture, trust, business trust, cooperative or association or any foreign trust or foreign business organization. "Environmental Reports" has the meaning set forth in Section 3.1(f) of this Agreement. "Excess Amount" has the meaning set forth in Section 4.6(c) of this Agreement. "50% Distribution Amount" has the meaning set forth in Section 4.6(a) of this Agreement. "Governmental Agency" has the meaning set forth in Section 2.4 of this Agreement. A-1 18 "Hazardous Substances" has the meaning set forth in Section 3.1(f) of this Agreement. "Initial JV Financing" means the financing to be obtained by CBL Member Parent, on terms and conditions satisfactory to CBL Member Parent and the JG Members, by the Closing Date for purposes of refinancing the existing mortgage indebtedness of JG North Raleigh and JG Triangle South and providing funds for the distribution of the 50% Distribution Amount to the JG Members "JG Manager" has the meaning set forth in the Preamble to this Agreement. "JG Members" has the meaning set forth in the Preamble to this Agreement. "JG Members Initial Contribution" means the sum equal to one-half of the Pre-Closing Project Net Equity plus the Remaining Shortfall, if any. "JG Parties" means the JG Members, JG Triangle South, and JG North Raleigh "JGRI" has the meaning set forth in the Preamble to this Agreement. "JG Triangle South" has the meaning set forth in the Preamble to this Agreement. "Lender Fees and Expenses" has the meaning set forth in Section 7.7 of this Agreement. "Letter Agreement" means that certain letter agreement, dated September 14, 2005, and effective as of September 15, 2005, by and between The Richard E. Jacobs Group, Inc. and CBL & Associates Properties, Inc. "Member Newco" has the meaning set forth in the Preamble to this Agreement. "Member Newco LLC Agreement" means that certain Limited Liability Agreement of Member Newco, to be entered into as of the Closing Date, by and among the JG Members and CBL Member, and the other exhibits and schedules attached to and incorporated therein, substantially in the form of Exhibit A attached hereto and made a part hereof, with technical corrections, exhibits completed, blanks appropriately filled and questions indicated by brackets resolved and with such further revisions as shall be necessary or appropriate to conform said Exhibit A to the Transaction Chart, e.g., to reflect that Member Newco will be the sole Member of the Company and not the direct owner of the Project. References in this Agreement to specific numbered sections of the Member Newco LLC Agreement shall, from and after the Closing, be deemed, without the need for any amendment to this Agreement, to refer to the sections in the executed version of the Member Newco LLC Agreement that correspond to the sections referenced in this Agreement, after giving effect to any changes in the numbering or wording of such sections as a result of the revisions to the Member Newco LLC Agreement contemplated by the immediately preceding sentence. "Net Proceeds" means the entire gross proceeds of the Initial JV Financing, minus the principal amount of and accrued and unpaid interest on the existing indebtedness of JG North Raleigh and JG Triangle South that is refinanced by the Initial JV Financing and closing costs A-2 19 "Parties" means JG Triangle South, JG Manager, JGRI, REJ Realty, and CBL Member Parent, and "Party" means any one of them. "Permitted Encumbrances" has the meaning set forth in Section 4.8 of this Agreement. "Person" means any individual or Entity, and the heirs, executors, administrators, legal representatives, successors, and assigns of such "Person", where the context so permits. "Pre-Closing Project Net Equity" has the meaning set forth in Section 1.2(a) of this Agreement. "Project" means the retail shopping center heretofore developed on the Real Estate, including Triangle Town Center and Triangle Town Place, together with any and all additional development/redevelopment or expansion of any phase or portion of such shopping center and/or Real Estate from and after the Closing Date. "Project Employees" has the meaning set forth in Section 4.4 of this Agreement. "Property Management Agreement" means that certain Property Management Agreement, to be entered into as of the Closing Date, by and among CBL Manager and the Company, in the form of Exhibit G to the form of the Member Newco LLC Agreement. "Real Estate" means the approximately 43.328 acres of land owned by JG North Raleigh and the approximately 15.749 acres of land owned by JG Triangle South, in both cases near the I-540 - US 1 interchange in Raleigh, North Carolina, and any other real estate acquired by the Company from and after the Closing Date. "REJ Realty" has the meaning set forth in the Preamble to this Agreement. "Remaining Shortfall" has the meaning set forth in Section 4.6(c) of this Agreement, "Shortfall" has the meaning set forth in Section 4.6(b) of this Agreement. "Shortfall Initial Contribution" has the meaning set forth in Section 4.6(c) of this Agreement. "Transaction Chart" has the meaning set forth in Section 1.4 of this Agreement. "Triangle Town Center" has the meaning set forth in the Preamble to this Agreement. "Triangle Town Place" has the meaning set forth in the Preamble to this Agreement. A-3 20 EXHIBIT A EXHIBIT A The Member Newco LLC Agreement 21 LIMITED LIABILITY COMPANY AGREEMENT OF [TRIANGLE TOWN MEMBER LLC] BY AND AMONG [CBL TRIANGLE TOWN MEMBER], LLC a [North Carolina] limited liability company and REJ REALTY LLC, a Delaware limited liability company, JG REALTY INVESTORS CORP., an Ohio corporation, and JG MANAGER LLC, an Ohio limited liability company Effective Date: October __, 2005 22 TABLE OF CONTENTS OF LIMITED LIABILITY COMPANY AGREEMENT OF [TRIANGLE TOWN MEMBER LLC] BY AND AMONG [CBL TRIANGLE TOWN MEMBER], LLC AND REJ REALTY LLC, JG REALTY INVESTORS CORP. AND JG MANAGER LLC (EFFECTIVE DATE OCTOBER [ ], 2005
ARTICLE I DEFINITIONS......2 - --------------------- 1.01 Definitions...........................................................................................2 ---- ------------ 1.02 Other Definitional Provisions........................................................................15 ---- ------------------------------ 1.03 Statement as to Member's Approval/Voting Rights......................................................15 ---- ------------------------------------------------ ARTICLE II FORMATION.......15 - -------------------- 2.01 Formation............................................................................................16 ---- ---------- 2.02 Name.................................................................................................16 ---- ----- 2.03 Principal Place of Business..........................................................................16 ---- ---------------------------- 2.04 Statutory Agent......................................................................................16 ---- ---------------- 2.05 Term.................................................................................................16 ---- ----- ARTICLE III PURPOSE OF COMPANY; ADMISSION OF MEMBERS; 16 - ----------------------------------------------------- 3.01 General Business Purpose of Member Newco.............................................................16 ---- ----------------------------------------- 3.02 Admission of Members; Distribution of Initial JV Financing Proceeds .................................16 ---- --------------------------------------------------------------------- 3.03 Capital Accounts.....................................................................................16 ---- ----------------- 3.04 Financing............................................................................................17 ---- ---------- 3.05 Outparcel Venture....................................................................................24 ---- ------------------ ARTICLE IV NAMES AND ADDRESSES OF MEMBERS 25 - ----------------------------------------- ARTICLE V GOVERNANCE.......25 - -------------------- 5.01 General Powers.......................................................................................25 ---- --------------- 5.02 Standard of Conduct..................................................................................25 ---- -------------------- 5.03 Governance; Unanimous Approval Items.................................................................25 ---- ------------------------------------- ARTICLE VI SPECIFIC DUTIES OF MEMBERS 29 - ------------------------------------- 6.01 Managing Member......................................................................................29 ---- ---------------- 6.02 Managing Member; Managing Member's Specific Duties...................................................29 ---- --------------------------------------------------- 6.03 Construction Contract................................................................................34 ---- ---------------------- 6.04 Removal and Resignation..............................................................................35 ---- ------------------------ 6.05 Compensation.........................................................................................35 ---- ------------- ARTICLE VII CONFLICT OF INTEREST TRANSACTIONS 35 - --------------------------------------------- ARTICLE VIII INDEMNIFICATION 36 - ---------------------------- 8.01 Indemnification......................................................................................36 ---- ---------------- 8.02 Expenses.............................................................................................36 ---- --------- 8.03 Insurance............................................................................................37 ---- ---------- ARTICLE IX LIMITATION OF LIABILITY OF MEMBERS; MEMBER LISTS 37 - ----------------------------------------------------------- 23 9.01 Limitation on Liability..............................................................................37 ---- ------------------------ 9.02 No Liability for Company Obligations.................................................................37 ---- ------------------------------------- 9.03 List of Members......................................................................................37 ---- ---------------- ARTICLE X LIABILITY, PROPERTY AND CASUALTY INSURANCE 37 - ---------------------------------------------------- ARTICLE XI CAPITAL CONTRIBUTIONS TO MEMBER NEWCO 37 - ------------------------------------------------ 11.01 Members' Required Member Funding.....................................................................37 ----- --------------------------------- 11.02 Additional Non-Required Contributions................................................................40 ----- -------------------------------------- 11.03 No Third-Party Rights................................................................................41 ----- ---------------------- 11.04 Member Construction Loans not Member Funding.........................................................41 ----- --------------------------------------------- 11.05 No Further Assessments on Membership Interests.......................................................41 ----- ----------------------------------------------- ARTICLE XII DISTRIBUTIONS TO MEMBERS 41 - ------------------------------------ 12.01 Distributions of Distributable Cash..................................................................41 ----- ------------------------------------ 12.02 Capital Events Distributions.........................................................................42 ----- ----------------------------- 12.03 Distribution of Incoming Equalizing Contribution to CBL Member.......................................42 ----- -------------------------------------------------------------- 12.04 Limitation Upon Distributions........................................................................43 ----- ------------------------------ ARTICLE XIII ALLOCATIONS OF NET PROFITS AND NET LOSSES 43 - ------------------------------------------------------ 13.01 Net Profits..........................................................................................43 ----- ------------ 13.02 Net Losses...........................................................................................44 ----- ----------- 13.03 2005 Fiscal Year.....................................................................................44 ----- ----------------- ARTICLE XIV BOOKS AND RECORDS.......44 - ----------------------------- 14.01 Accounting Period....................................................................................44 ----- ------------------ 14.02 Records and Reports..................................................................................44 ----- -------------------- 14.03 Inspection of Records by Members.....................................................................45 ----- --------------------------------- 14.04 Tax Returns..........................................................................................45 ----- ------------ 14.05 Financial Statements.................................................................................45 ----- --------------------- ARTICLE XV TERMINATION OF MEMBERSHIP INTEREST 46 - --------------------------------------------- 15.01 Termination of Interest..............................................................................46 ----- ------------------------ 15.02 Withdrawal...........................................................................................46 ----- ----------- 15.03 Effect of Termination of Membership..................................................................46 ----- ------------------------------------ ARTICLE XVI TRANSFERS OF MEMBERSHIP INTERESTS AND RESTRICTIONS ON TRANSFERS; IMPASSE PROVISIONS; PLEDGE OF - ----------------------------------------------------------------------------------------------------------- MEMBERSHIP INTERESTS 46 - -------------------- 16.01 Definition of "Assignment"...........................................................................46 ----- --------------------------- 16.02 Restriction on Assignment............................................................................47 ----- -------------------------- 16.03 Exempt Assignments...................................................................................47 ----- ------------------- 16.04 Mandatory Buy/Sell on Impasse........................................................................49 ----- ------------------------------ 16.05 Right of First Refusal; Buy/Sell.....................................................................52 ----- --------------------------------- 16.06 Conditions of Assignments............................................................................55 ----- -------------------------- 16.07 Lender Approval......................................................................................56 ----- ---------------- 16.08 Pledge of Membership Interests.......................................................................56 ----- ------------------------------- 16.09 Mutually Exclusive Rights............................................................................57 ----- -------------------------- ARTICLE XVII DISSOLUTION, TERMINATION AND WINDING-UP 57 - ---------------------------------------------------- 17.01 Events Causing Dissolution...........................................................................57 ----- --------------------------- 17.02 Continuation.........................................................................................57 ----- ------------- 17.03 Effect of Dissolution................................................................................57 ----- ---------------------- 17.04 Winding-Up, Liquidation and Distribution of Assets...................................................57 ----- --------------------------------------------------- 17.05 Articles of Termination..............................................................................58 ----- ------------------------ 17.06 Return of Contribution Nonrecourse to Other Members..................................................59 ----- ---------------------------------------------------- ARTICLE XVIII MISCELLANEOUS PROVISIONS 59 - -------------------------------------- 18.01 Applicable Law.......................................................................................59 ----- --------------- 18.02 No Action or Partition...............................................................................59 ----- ----------------------- 18.03 Execution of Additional Instruments..................................................................59 ----- ------------------------------------ 24 18.04 Waivers..............................................................................................59 ----- -------- 18.05 Rights and Remedies Cumulative.......................................................................59 ----- ------------------------------- 18.06 Heirs, Successors and Assigns........................................................................59 ----- ------------------------------ 18.07 Creditors............................................................................................59 ----- ---------- 18.08 Counterparts.........................................................................................59 ----- ------------- 18.09 Federal Income Tax Elections; Tax Matters Member.....................................................60 ----- ------------------------------------------------- 18.10 Notices..............................................................................................60 ----- -------- 18.11 Amendments...........................................................................................61 ----- ----------- 18.12 Enforceability.......................................................................................61 ----- --------------- 18.13 Drafting.............................................................................................61 ----- --------- 18.14 Further Assurances...................................................................................61 ----- ------------------- 18.15 Time.................................................................................................61 ----- ----- 18.16 Integration..........................................................................................61 ----- ------------ 18.17 Termination of Letter Agreement......................................................................61 ----- -------------------------------- 18.18 Public Announcements; Precedence in Publicity........................................................61 ----- ---------------------------------------------- 18.19 Estoppel Certificates................................................................................62 ----- ---------------------- 18.20 Legal Counsel........................................................................................62 ----- -------------- ARTICLE XIX REPRESENTATIONS AND WARRANTIES 63 - ------------------------------------------ 19.01 Representations of the JG Members....................................................................63 ----- ---------------------------------- 19.02 Representations of CBL Member........................................................................64 ----- ------------------------------ 19.03 Survival of Representations and Warranties...........................................................65 ----- ------------------------------------------- ARTICLE XX DEFAULT PROVISIONS.......65 - ----------------------------- 20.01 Events of Default....................................................................................65 ----- ------------------ 20.02 Remedies Upon Default................................................................................67 ----- ---------------------- 20.03 Purchase Upon Default................................................................................68 ----- ---------------------- 20.04 Default Approval Rights; Loss of Approval Rights on Defaults.........................................70 ----- ------------------------------------------------------------- 20.05 Attorney's Fees......................................................................................70 ----- ---------------- 20.06 Closing..............................................................................................71 ----- -------- ARTICLE XXI APPOINTMENT OF MANAGING MEMBER AS ATTORNEY-IN-FACT 73 - -------------------------------------------------------------- 21.01 Appointment..........................................................................................73 ----- ------------ 21.02 Survival.............................................................................................73 ----- ---------
25 LIST OF EXHIBITS TO LIMITED LIABILITY COMPANY AGREEMENT OF [TRIANGLE TOWN MEMBER LLC] BY AND AMONG [CBL TRIANGLE TOWN MEMBER], LLC AND REJ REALTY LLC, JG REALTY INVESTORS CORP. AND JG MANAGER LLC, (EFFECTIVE DATE OCTOBER [ ], 2005 Exhibit A ........Description of the Real Estate Exhibit B.........Membership Interests Exhibit C.........Fees to Members Exhibit D.........Appraisal Procedure Exhibit E.........Site Plan Exhibit F.........Property Management Agreement Exhibit G.........2006 Operating Budget Exhibit H.........Tax Matters 26 LIMITED LIABILITY COMPANY AGREEMENT OF [TRIANGLE TOWN MEMBER LLC] THIS LIMITED LIABILITY COMPANY AGREEMENT (the "Agreement") of [TRIANGLE TOWN MEMBER LLC], an [Ohio] limited liability company ("Member Newco"), is made and entered into as of the [ ]th day of October, 2005, by and among [CBL TRIANGLE TOWN MEMBER], LLC, a [North Carolina] limited liability company ( herein referred to as "CBL Member"), and REJ REALTY LLC, a Delaware limited liability company ("REJ Realty"), JG REALTY INVESTORS CORP., an Ohio corporation ("JGRI"), and JG MANAGER LLC, an Ohio limited liability company (("JG Manager"; with REJ Realty and JGRI, each, a "JG Member" and, collectively, the "JG Members")). W I T N E S S E T H: WHEREAS, Member Newco was formed by filing Articles of Organization with the Secretary of State of Ohio on October [ ], 2005; WHEREAS, Member Newco owns all of the member interests in Triangle Town Center LLC, a North Carolina limited liability company (the "Company"); and WHEREAS, the Company owns certain real property located in Raleigh, North Carolina, consisting of approximately 59.077 acres of land (said real property being more particularly described on Exhibit A attached hereto and is herein referred to, together with any other real property from time to time hereafter acquired by the Company, as the "Real Estate") which Real Estate is the site of retail shopping centers known as Triangle Town Center and Triangle Town Place (together with the result of any Future Development Activities, the "Project"); WHEREAS, upon execution of this Agreement and in consideration of its covenants and agreements set forth herein, CBL Member has been admitted to Member Newco as a member; WHEREAS, upon CBL Member's admission to Member Newco and after giving effect to the transactions occurring as of the date hereof, CBL Member and the JG Members own the respective Capital Interests and Profits Interests set forth on Exhibit B attached hereto; WHEREAS, the Members desire to enter into this Agreement to set forth the rules, regulations, and provisions regarding the management of the business of Member Newco, the regulation of the affairs of Member Newco, the governance of Member Newco, the conduct of Member Newco's business and the rights and privileges of the Members. 27 NOW, THEREFORE, in consideration of the covenants and agreements hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: The operating agreement or limited liability company agreement governing Member Newco and its Members shall be as set forth herein. o DEFINITIONS 7.11 Definitions. For purposes of this Agreement, unless the context otherwise requires, the following terms shall have the following meanings: "Accountants" shall mean Deloitte & Touche LLP or such other national accounting firm as selected by the Members. "Act" shall mean the Ohio Limited Liability Company Law, Chapter 1705 of the Ohio Revised Code, as the same exists or may hereafter be amended. "Active Right" shall have the meaning assigned to that term in Section 16.09. "Affiliate" shall mean, with respect to any Person (i) any Person, which directly or indirectly, through one or more intermediaries, Controls (as hereinafter defined), is Controlled by, or is under common Control with, such Person and/or (ii) any Person, ten percent (10%) or more of the equity or beneficial interests of which are owned by a Member or owned by an Affiliate of a Member that is an Affiliate pursuant to clause (i) of this paragraph. Notwithstanding the definition of Affiliate set forth above, (A) EMJ Corporation, a Tennessee corporation ("EMJ"), shall not be deemed an Affiliate of CBL Member for purposes of this Agreement, (B) the JG Members and their respective Affiliates shall not be deemed Affiliates of CBL Member for purposes of this Agreement and (C) CBL Member and its Affiliates shall not be deemed Affiliates of the JG Members for purposes of this Agreement. "Affiliate Loan Guarantee(s)" shall have the meaning assigned to that term in Section 3.04(c). "Agreement" shall mean this Agreement as originally executed and as may be modified or amended from time to time, and shall include all Exhibits attached hereto and incorporated herein, each as originally executed and as may be modified or amended from time to time. "Anchor" shall mean any department store or other tenant or occupant of the Project whose leased or owned floor space is greater than 70,000 square feet. "Appraisal Procedure" shall mean the procedure set forth on Exhibit D attached hereto for determining the fair market value of the Project in the event such is called for pursuant to this Agreement. 2 28 "Appraised Value" shall have the meaning assigned to that term in Exhibit D attached hereto. "Articles of Organization" shall mean the Articles of Organization of Member Newco as filed with the Secretary of State of Ohio, as the same exists or may hereafter be amended as set forth in this Agreement. "Buy/Sell Initiator" shall have the meaning assigned to that term in Section 16.05(b). "Buy/Sell Initiator Offer Price" shall have the meaning assigned to that term in Section 16.05(b). "Buy/Sell Offer Notice" shall have the meaning assigned to that term in Section 16.05(b). "Buy/Sell Project Value" shall have the meaning assigned to that term in Section 16.05(b). "Buy/Sell Respondent" shall have the meaning assigned to that term in Section 16.05(b). "Buy/Sell Respondent Purchase Price" shall have the meaning assigned to that term in Section 16.05(b). "Capital Account" shall have the meaning assigned to that term in Section 3.03(a). "Capital Events" shall mean the following events: (a) Any financing or refinancing of Company indebtedness that produces a surplus of funds available for distribution to the Members after deduction for (A) all transaction costs, (B) repayment of any refinanced indebtedness (but not Member Funding made by a Member or its Affiliate in the form of a loan to Member Newco), and (C) the establishment of any Reserves; and (b) Any sale of all or any of the assets of Member Newco that produces a surplus of funds available for distribution to the Members after deduction for (A) all transaction costs, (B) repayment of any underlying indebtedness (but not Member Funding made by a Member or its Affiliate in the form of a loan to Member Newco), and (C) the establishment of any Reserves. "Capital Events Distribution" shall mean any distribution of cash arising from the occurrence of a Capital Event in the order as set forth in Section 12.01 below. "Capital Interest" shall mean that portion of the Membership Interest of a Member that represents such Member's interest in the capital of Member Newco. 3 29 "CBL Member" shall have the meaning assigned to that term in the Preamble above. "CBL Member Construction Loan Guarantee Share" shall have the meaning assigned to that term in Section 3.04(a). "CBL Member Construction Loan Response Notice" shall have the meaning assigned to that term in Section 3.04(a). "CBL Member Mandatory Contributions" shall have the meaning assigned to that term in Section 11.01(b). "CBL Member Permanent Financing/Refinancing Guarantee Share" shall have the meaning assigned to that term in Section 3.04(b). "CBL Member Parent" shall mean CBL & Associates Limited Partnership, a Delaware limited partnership. "Code" shall mean the Internal Revenue Code of 1986, as the same exists or may hereafter be amended. "Company" shall have the meaning assigned to that term in the Preamble above. "Construction Contract(s)" shall mean the contract(s) for the construction of the phases of the Project as further described in Section 6.03 below. "Construction Funds" shall have the meaning assigned to that term in Section 11.01(b). "Construction Loan(s)" shall mean the loan(s) obtained by Member Newco on behalf of the Company from a lender of the funds necessary to (i) proceed with construction of the Project or any Future Development Activity and (ii) to fund any interim or bridge loan required in order to secure public financing for on or off-site improvements, including but not limited to tax incremental financing or transportation development districts or similar governmental/public financing programs in connection with the development of the Project. A Member may act as the lender of a Construction Loan as provided in Section 3.04(a), and subject to Section 5.03(g), below. Member Funding made by a Member or its Affiliate in the form of a loan to Member Newco shall not be considered to be Construction Loan(s) for purposes of this definition. "Construction Loan Unavailability Notice" shall have the meaning assigned to that term in Section 3.04(a). "Construction Period(s)" shall mean, as to any Future Development Activity, the period from the date on which construction of the improvements or developments constituting such Future Development Activity shall commence 4 30 (including pre-construction activity with respect thereto) to the opening for business to the general public of improvements or development constituting such Future Development Activity. "Control" or "Controlled by" shall mean the power, directly or indirectly, to direct the actions, operation or management of another Person by contract, the ownership of voting rights or otherwise, except that (i) CBL Member shall not be deemed to be Controlled by CBL Member Parent, for the purposes of Section 16.03(c), unless CBL Member Parent has the power, directly or indirectly, to vote or exercise consent or approval rights with respect to more than fifty percent (50%) of the equity interests of CBL Member; (ii) the JG Members shall not be deemed to be Controlled by Richard E. Jacobs, for the purposes of Section 16.03(c), unless Richard E. Jacobs, any JG Member, and Jacobs Realty Investors Limited Partnership, or any of them, in the aggregate, has the power, directly or indirectly, to vote or exercise consent or approval rights with respect to more than fifty percent (50%) of the equity interests of the JG Members; and (iii) an entity shall not be deemed to be Controlled by Richard E. Jacobs, the JG Members, or Jacobs Realty Investors Limited Partnership, for the purposes of Section 16.03(a)(iii)(A) unless Richard E. Jacobs, any JG Member, and Jacobs Realty Investors Limited Partnership, or any of them, in the aggregate, directly or indirectly control or own a majority of the capital, income and loss and voting interests or is the sole general partner, sole managing member or sole manager of such entity. "Day" or "Days" (whether or not set forth in initial capital letters) shall mean a calendar day or days unless specifically stated otherwise. "Default" shall have the meaning assigned to that term in Section 20.01. "Default Approval Rights" shall have the meaning assigned to that term in Section 20.04. "Default Formula Price" shall have the meaning assigned to that term in Section 20.03(b). "Default Purchase Closing Date" shall have the meaning assigned to that term in Section 20.06(c). "Default Purchase Price" shall have the meaning assigned to that term in Section 20.03(b). "Defaulting Member" shall have the meaning assigned to that term in Section 20.01. "Development Fee" shall have the meaning assigned to that term in Exhibit C. "Development Schedule(s)" shall mean the schedule for development and construction of the Project or any Future Development Activity. The Development Schedule may be revised by the Members as set forth in this Agreement. "Distributable Cash" shall mean, as to any period for which Distributable Cash is to be calculated, all cash received by Member Newco during such period 5 31 from Company operations but not from Capital Events, plus any cash that becomes available as the result of the reversal of previously established Reserves, less the sum of the following, to the extent paid or set aside by Member Newco during such period: (i) all principal and interest payments on indebtedness of Member Newco and all other sums paid to lenders (but excluding payments of principal of and Interest/Return on Member Funding made by a Member or its Affiliate in the form of a loan to Member Newco); (ii) all cash expenditures incurred in the operation of Member Newco's business and/or maintaining Member Newco's status and qualification as a limited liability company including the fees listed on Exhibit C due and payable during such period; and (iii) Reserves (to the extent not expended or reversed during such period). "EMJ" shall mean EMJ Corporation, a Tennessee corporation. "Entity" shall mean any general partnership, limited partnership, limited liability company, corporation, joint venture, trust, business trust, cooperative or association or any foreign trust or foreign business organization. "Events of Dissolution" shall have the meaning assigned to that term in Section 17.01. "Exercise Notice" shall have the meaning assigned to that term in Section 20.03(b). "Expedited Impasse Event" shall have the meaning assigned to that term in Section 16.04(a). "Fiscal Year" shall mean Member Newco's Fiscal Year, which shall be the calendar year. "Future Development Activity" or "Future Development Activities" shall mean any and all additional development/redevelopment or expansion of any portion of the Project or the Real Estate from and after the date of this Agreement "GAAP" shall mean generally accepted accounting principles consistently applied. GAAP is a combination of authoritative accounting standards established by policy boards in the accounting profession or overseeing the accounting profession. As to any matter involving Member Newco's books and records, financial statements and/or accounting procedures, the determination of whether such complies with GAAP shall be made by the Accountants. "Governmental Authority" shall mean any federal, state, local, provincial or other governmental department, agency, court or other authority or instrumentality, whether of the United States, or of any of its states, possessions, or territories, or of any foreign nation, or of any subdivision of any of the foregoing "HVAC" shall mean heating, ventilation and air conditioning. "Impasse" shall have the meaning assigned to that term in Section 16.04(a). 6 32 "Impasse Initiator" shall have the meaning assigned to that term in Section 16.04(b). "Impasse Initiator Offer Price" shall have the meaning assigned to that term in Section 16.04(b). "Impasse Notice Sender" shall have the meaning assigned to that term in Section 16.04(a). "Impasse Notice Recipient" shall have the meaning assigned to that term in Section 16.04(a). "Impasse Offer Notice" shall have the meaning assigned to that term in Section 16.04(b). "Impasse Project Value" shall have the meaning assigned to that term in Section 16.04(b). "Impasse Respondent" shall have the meaning assigned to that term in Section 16.04(b). "Impasse Respondent Purchase Price" shall have the meaning assigned to that term in Section 16.04(b). "Incoming Equalizing Contribution" shall have the meaning assigned to that term in Section 16.06(f). "Indemnitee" shall have the meaning assigned to that term in Section 8.01. "Initial Contribution" shall mean the initial contribution to the capital of Member Newco made by a Member pursuant to this Agreement as set forth in Section 11.01(a). "Initial Impasse Notice" shall have the meaning assigned to that term in Section 16.04(a). "Initial JV Financing" shall mean the refinancing of the existing indebtedness of Member Newco pursuant to that certain [Credit Agreement] by and between Member Newco and [Lender], dated as of the date of this Agreement. "Initial Operating Agreement" shall have the meaning assigned to that term in the Whereas clauses above. "Interest/Return" shall have the meaning assigned to that term in Section 3.03(d). "JG Manager" shall have the meaning assigned to that term in the Preamble to this Agreement. 7 33 "JG Members Construction Loan Guarantee Share" shall have the meaning assigned to that term in Section 3.04(a). "JG Members Construction Loan Response Notice" shall have the meaning assigned to that term in Section 3.04(a). "JG Members Exit Event" shall have the meaning assigned to that term in Section 16.06(f). "JG Member" and "JG Members" shall have the meaning assigned to those terms in the Preamble above. References to the JG Members shall be deemed to refer to each of the JG Members, individually, and all of the JG Members, collectively. "JG Members Permanent Financing/Refinancing Guarantee Share" shall have the meaning assigned to that term in Section 3.04(b). "JG Members Substituted Default Contribution" shall have the meaning assigned to that term in Section 11.01(b). "JG Members Substitute Member" shall have the meaning assigned to that term in Section 16.06(f). "JGRI" shall have the meaning assigned to that term in the Preamble to this Agreement. "Key Construction Loan Terms" shall mean the following terms of any proposed Construction Loan for the Company, as embodied in a written term sheet, commitment letter or similar document provided by a potential financing source, and such following terms shall be subject to unanimous approval of the Members as set forth in Section 5.03 below: (i) The amount of the Construction Loan, unless the amount of the proposed Construction Loan is as set forth in the approved Pro Forma, and the equity requirements of the Construction Loan, unless the amount of equity is as set forth in the approved Pro Forma; (ii) The rate(s) of interest and whether such rate(s) of interest is/are fixed or variable; (iii) The cross defaulting of the Construction Loan with any other financing of CBL Member, CBL Member Parent or any Affiliates of CBL Member or CBL Member Parent; (iv) Any provision calling for the personal guarantee of or indemnification or contribution by any of the JG Members or their respective Affiliates; (v) Representations warranties or undertakings that may create personal liability of the Members beyond their interest in Member Newco, other than representations or warranties that are made by the Managing Member and/or its Affiliates; 8 34 (vi) The term, if less than one (1) year beyond the projected end of the Construction Period for the Future Development Activity to which the Construction Loan relates; and (vii) Any document evidencing or securing the Construction Loan that does not permit the transfer of Membership Interests that would otherwise be permitted under Article XVI of this Agreement; except that any provision in any such document that provides that prior notice must be given to the lender of the Construction Loan of a transfer of Membership Interests shall not be deemed to be a Key Construction Loan Term if such lender has no rights to prohibit or restrict such transfers otherwise permitted under Article XVI of this Agreement. Once the Members have unanimously approved the Key Construction Loan Terms, any change or modification to such terms as approved by the Members (other than non-substantive wording changes or typographical errors) shall require the unanimous re-approval of the Members pursuant to Section 5.03 below. "Key Permanent Loan Terms" shall mean the following terms of any proposed Permanent Financing/Refinancing for the Company, as embodied in a written term sheet, commitment letter or similar document provided by a potential financing source, and such following terms shall be subject to unanimous approval as set forth in Section 5.03 below: (i) The amount of the Permanent Loan, unless the amount of the proposed Permanent Financing/Refinancing is as set forth in the approved Pro Forma; (ii) The rate(s) of interest and whether such rate(s) of interest is/are fixed or variable; (iii) The cross defaulting of the Permanent Financing/Refinancing with any other financing of CBL Member, CBL Member Parent or any Affiliates of CBL Member or CBL Member Parent; (iv) Any provision calling for the personal guarantee of or indemnification or contribution by any Member or its Affiliates other than the Managing Member and/or its Affiliates; (v) Representations, warranties or undertakings that may create personal liability of the Members beyond their interest in Member Newco, other than representations or warranties that are made by the Managing Member and/or its Affiliates and other than personal liability for standard recourse carve out provisions customary in the industry relating to (i) fraud, (ii) willful misrepresentation; (iii) waste, (iv) retention or diversion of rent or other revenue after an event of default; (v) retention or diversion of tenant security deposits; (vi) misapplication of insurance proceeds; and (vii) misapplication of condemnation awards; (vi) The term, if less than a period of five (5) years; and (vii) Any document evidencing or securing the Permanent Financing/Refinancing that does not permit the transfer of Membership Interests that would otherwise be permitted under Article XVI of this Agreement; except that any provision in any such document that provides that prior notice must be 9 35 given to the lender of the Permanent Financing/Refinancing of a transfer of Membership Interests shall not be deemed to be a Key Permanent Loan Term if such lender has no rights to prohibit or restrict such transfers otherwise permitted under Article XVI of this Agreement. Once the Members have unanimously approved the Key Permanent Loan Terms, any change or modification to such terms as approved by the Members (other than non-substantive wording changes or typographical errors) shall require the unanimous re-approval of the Members pursuant to Section 5.03 below. "Letter Agreement" shall mean that certain letter agreement dated September 14, 2005 and effective as of September 15, 2005 entered into by and between (i) CBL Member or its Affiliate and (ii) the JG Members or their Affiliate with respect to the entering into of this Agreement. "Losses" shall have the meaning assigned to that term in Section 8.01. "Majority Vote" shall mean the vote or written consent of Members holding a majority (i.e., in excess of fifty percent (50%)) of the Voting Interests held by all Members. "Management Fee" shall have the meaning assigned to that term on Exhibit C. "Managing Member" shall mean CBL Member, unless and until replaced pursuant to the terms of this Agreement and, upon such replacement, shall mean the Member who has assumed such position. "Mandatory Contribution(s)" shall have the meaning assigned to that term in Section 11.01(b). "Material Development Deviation" shall have the meaning assigned to that term in Section 6.02(c). "Material Operating Deviation" shall have the meaning assigned to that term in Section 6.02(b). "Maximum Required Funding" shall have the meaning assigned to that term in Section 11.01(b). "Member" shall mean any Person reflected in the required records of Member Newco as the owner of a Membership Interest. "Member Construction Loan" shall have the meaning assigned to that term in Section 3.04(a). "Member Funding" shall mean any funding provided by a Member to Member Newco in cash or property (including Initial Contributions, Mandatory Contributions and Non-Required Contributions), whether made in the form of a contribution to capital or a loan, but excluding any Member Construction Loan. 10 36 "Member Lender" shall have the meaning set forth in Section 3.04(c). "Member Newco" shall have the meaning assigned to that term in the Preamble above. "Membership Interest" shall mean a Member's entire interest in Member Newco, consisting of such Member's rights to any distributions of Distributable Cash or property of Member Newco, a Member's Voting Interests, a Member's rights to otherwise participate in the management of the affairs of Member Newco and any rights of a Member to assign all or any portion of such Member's interest in Member Newco. The term Membership Interest shall include a Member's Capital Interest and such Member's Profits Interest. "Merger" shall have the meaning assigned to that term in Section 17.01. "Net Proceeds" shall mean, as to any financing or refinancing with respect to Member Newco, the entire gross proceeds of such financing/refinancing minus the principal amount of and accrued and unpaid interest on the existing indebtedness of Member Newco that is refinanced by such financing/refinancing and closing costs. "Net Profits" and "Net Losses" shall mean, with respect to any Fiscal Year, Member Newco's taxable income or loss determined in accordance with Section 703(a) of the Code for such Fiscal Year (for this purpose, all items of income, gain, loss, deduction or credit required to be stated separately pursuant to Section 703(a)(1) of the Code will be included in taxable income or loss); provided, such Net Profits and Net Losses will be computed as if items of tax-exempt income and nondeductible, non-capital expenditures (under Sections 705(a)(1)(B) and 705(a)(2)(B) of the Code) were included in the computation of taxable income or loss. If any Member contributes property to Member Newco with an initial book value to Member Newco different from its adjusted tax basis for federal income tax purposes to Member Newco, or if Company property is revalued pursuant to Section 1.704-1(b)(2)(iv)(f) of the Regulations or as otherwise required by the Regulations, Net Profits and Net Losses will be computed as if the initial adjusted tax basis for federal income tax purposes to Member Newco of such contributed or revalued property equaled its initial book value to Member Newco as of the date of contribution or revaluation. Credits or debits to Capital Accounts due to a revaluation of Company assets in accordance with Section 1.704-1(b)(2)(iv)(f) of the Regulations, or due to a distribution of non-cash assets, will be taken into account as gain or loss from the disposition of such assets for purposes of Article XIII hereof. Interest/Return on Member Funding made by a Member or its Affiliate in the form of a loan to Member Newco will not be deductible for purposes of computing Net Profits and Net Losses. "Non-Affiliated Members" shall have the meaning assigned to that term in Section 20.03(a). "Non-Defaulting Member(s)" shall have the meaning assigned to that term in Section 20.01. 11 37 "Non-Required Contribution(s)" shall mean any contribution to the capital of Member Newco or loan to Member Newco by a Member that is not a Mandatory Contribution, as further defined in and pursuant to Section 11.02 below. "Non-Transferring Member" shall have the meaning assigned to that term in Section 16.05(a). "Operating Budget" shall have the meaning assigned to that term in Section 6.02(b). "Operating Deficits" shall mean the amount by which the sum of: (i) the expenditures and costs incurred by the Company in the operation of the Project from and after the date of this Agreement; (ii) as to any Future Development Activity for which the applicable Construction Period ends after the date of this Agreement, the expenditures and costs incurred by the Company from and after the end of the Construction Period for such Future Development Activity; and (iii) deferred maintenance obligations (other than deferred maintenance obligations of a capital nature) in the year in which the cash expense corresponding to such deferred maintenance obligations is paid (each of (i), (ii) and (iii) shall include, without limitation, current debt service (other than principal of and accrued and unpaid Interest/Return on Member Funding made by a Member or its Affiliate in the form of a loan to Member Newco)) exceeds the cash receipts generated from the ordinary day-to-day operations of the business of the Company from all sources available to the Company without deduction of depreciation, cost recovery, and other non-cash charges. "Outparcel" shall mean any parcel identified as an outlot or outparcel on any Site Plan. "Outparcel Venture" shall have the meaning set forth in Section 3.05. "Outparcel Venture Agreement" shall have the meaning set forth in Section 3.05. "Payment Amount" shall have the meaning assigned to that term in Section 20.06(i). "Permanent Financing/Refinancing" shall mean any loan or financing obtained by Member Newco on behalf of the Company to refinance/replace any Construction Loan, or to refinance, replace or substitute for the Initial JV Financing or any other subsequent financings of the Company, that provides the permanent financing for the operation of the Project and the Company's business. Member Funding made by a Member or its Affiliate in the form of a loan to Member Newco shall not be considered to be Permanent Financing/Refinancing for purposes of this definition. Neither CBL Member nor any of its Affiliates shall act as the lender of the Permanent Financing/Refinancing. 12 38 "Person" shall mean any individual or Entity, and the heirs, executors, administrators, legal representatives, successors, and assigns of such "Person" where the context so permits. "Proceeding" shall have the meaning assigned to that term in Section 8.01. "Profits Interest" shall mean that portion of the Membership Interest of a Member that represents such Member's interest in the Net Profits and Net Losses of Member Newco for each Fiscal Year, as allocated under Article XIII below and as set forth on Exhibit B. "Pro Forma" shall mean a pro forma budget(s) for the development and construction of the Project or any Future Development Activity, as unanimously approved by the Members pursuant to Section 5.03 below in accordance with the procedures set forth in Article VI. There shall be a Pro Forma for each Future Development Activity. "Project" shall have the meaning assigned to that term in the Preamble to this Agreement. "Property Management Agreement" shall mean the Property Management Agreement, dated as of the date hereof, to be entered into between the Company and the Property Manager, substantially in the form of Exhibit F attached hereto. "Property Manager" shall mean CBL Member or its Affiliate in its capacity as "Manager" under the Property Management Agreement, and any successor or replacement "Manager" as provided therein, and any successor or replacement property manager under any subsequent agreement superseding or replacing the Property Management Agreement.. "Purchasing Member" shall have the meaning assigned to that term in Section 20.06(a). "Real Estate" shall mean the real property described in the Whereas clauses above. "REJ Realty" shall have the meaning assigned to that term in the Preamble to this Agreement. "Representative" shall have the meaning assigned to that term in Section 6.02(f) below. "Reserves" shall mean, with respect to any fiscal period or any Capital Event, funds set aside and held in reserve by the Company at the direction of Member Newco (i) in an Operating Budget or Pro Forma as amounts allocated for (A) normal and customary reserves for working capital; (B) capital expenditures; (C) to pay taxes, insurance and/or debt service as reflected in an Operating Budget or Pro Forma (other than debt service on Member Funding made by a Member or its Affiliate in the form of a loan to Member Newco); (D) to pay any other costs or expenses incident to the ownership or operation of the Company's business, including, but not limited to, reserves established for contingent 13 39 liabilities arising out of claims or lawsuits; and/or (ii) from proceeds from a Capital Event, with the unanimous approval of the Members pursuant to Section 5.03 below, for any purpose determined by the Managing Member. Reserves shall also include amounts required to be held in reserve by the lender on any financing or refinancing of any Company indebtedness. "RoFR Notice" shall have the meaning assigned to that term in Section 16.05(a). "RoFR Period" shall have the meaning assigned to that term in Section 16.05(a). "Selling Member" shall have the meaning assigned to that term in Section 20.06(a). "Site Plan" shall mean the site plan for the Project, including any revisions or modifications to the site plan, subject to any unanimous approval rights set forth in Section 5.03 below. The existing Site Plan for the Project is set forth on Exhibit E attached hereto. "SWGW" shall have the meaning assigned to that term in Section 18.20. "Tax Distribution" shall have the meaning assigned to that term in Section 12.01. "TH" shall have the meaning assigned to that term in Section 18.20. "Third-Party Purchaser" shall have the meaning assigned to that term in Section 16.05. "TMM" shall have the meaning assigned to that term in Section 18.09. "Transferring Member" shall have the meaning assigned to that term in Section 16.05. "Treasury Regulations" or "Regulations" shall mean the federal income tax final regulations or temporary regulations, promulgated under the Code, as such regulations exist or may hereafter be amended from time to time (including corresponding provisions of succeeding regulations). "Triangle Town Center" shall mean the two-level regional enclosed mall shopping center known as Triangle Town Center and the Commons, located on approximately 43.328 acres of land near the I-540 - US 1 interchange in Raleigh, North Carolina, together with the improvements and/or development resulting from any Future Development Activity with respect thereto. "Triangle Town Place" shall mean the power center know as Triangle Town Place, located on approximately 15.749 acres of land and adjacent to Triangle Town Center, together with the improvements and/or development resulting from any Future Development Activity with respect thereto. "Voting Interests" shall mean each Member's rights to vote or approve any matter set forth in this Agreement requiring a Member's vote or requiring unanimous approval of the Members. The Voting Interests of the Members shall be 14 40 the JG Members (in the aggregate) - fifty percent (50%) and CBL Member - fifty percent (50%). Any reference in this Agreement to approvals of the Members or voting of Members shall be deemed to refer to each Member's Voting Interest. A Member's Voting Interest shall not change with fluctuations, if any, in such Member's Capital Interest and/or such Member's Profits Interest. 7.12 Other Definitional Provisions. (a) All personal pronouns used in this Agreement, whether used in the masculine, feminine or neuter gender, shall include all other genders; the singular shall include the plural, and the plural shall include the singular. Titles of Articles and Sections in this Agreement are for convenience only, and neither limit nor amplify the provisions of this Agreement, and all references in this Agreement to Articles, Sections, Exhibits or Schedules shall refer to the corresponding Article or Section of, or Exhibit or Schedule attached to, this Agreement, unless specific reference is made to the articles, sections or other subdivisions of, or Exhibits or Schedules to, another document or instrument. All Exhibits or Schedules attached hereto are by this reference made a part hereof. All references to any instrument, document or agreement shall, unless the context otherwise requires, refer to such instrument, document or agreement as the same may be, from time to time, amended, modified, supplemented, renewed, extended, replaced or restated. (b) Terms not otherwise defined in this Agreement shall have the meanings set forth in the Act. 7.13 Statement as to Member's Approval/Voting Rights. Notwithstanding any provision in this Agreement to the contrary, the Members hereby agree that in any decision calling for a vote or approval of the Members, the following Members shall be solely authorized to make such decision, vote or approval and, once made, such decision shall be binding on the Affiliates of such Member who are currently Members of Member Newco or who may be in the future admitted as Members of Member Newco: (a) As to any vote, approval or decision by CBL Member and/or any of its Affiliates who may be admitted as Members of Member Newco - CBL Member shall be solely authorized to cast such vote, exercise such approval or make such decision; and (b) As to any vote, approval or decision by the JG Members and/or any of its Affiliates who may be admitted as Members of Member Newco - [JG Manager] shall be solely authorized to cast such vote, exercise such approval or make such decision. FORMATION 15 41 7.14 Formation. Member Newco was formed as an Ohio limited liability company by the filing of the Articles of Organization with the Secretary of State of Ohio in accordance with the provisions of the Act on [ ], 2005. 7.15 Name. The name of Member Newco is [Triangle Town Member LLC]. 7.16 Principal Place of Business. The principal place of business of Member Newco shall be 2030 Hamilton Place Boulevard, Suite 500, CBL Center, Chattanooga, Tennessee, 37421. Member Newco may locate its places of business at any other place or places as the Members may from time to time deem advisable. 7.17 Statutory Agent. Member Newco's statutory agent for service of process is TH&F Statutory Agent Corp., One Columbus, 10 West Broad Street, Suite 700, Columbus, Ohio 42315. The statutory agent may be changed from time to time pursuant to the Act and the applicable rules promulgated thereunder. 7.18 Term. The term of Member Newco commenced on the date the Articles of Organization were filed with the Secretary of State of Ohio and shall continue until Member Newco is dissolved and its affairs wound up in accordance with the provisions of this Agreement or the Act. Member Newco shall have a perpetual existence unless terminated as stated above. PURPOSE OF COMPANY; ADMISSION OF MEMBERS; CAPITAL ACCOUNTS AND INTEREST/RETURN; FINANCING 7.19 General Business Purpose of Member Newco. The business of Member Newco shall be to engage in any lawful activity related to its activities of owning member interests in and acting as manager of the Company, which is the owner of the Project on the Real Estate. In furtherance thereof, Member Newco may exercise all powers necessary to or reasonably connected with Member Newco's business which may be legally exercised by limited liability companies under the Act, and may engage in all activities necessary, customary, convenient, or incident to any of the foregoing. 7.20 Admission of Members; Distribution of Initial JV Financing Proceeds . As of the date of this Agreement, CBL Member has been admitted to Member Newco as a Member having the Capital Interest (initially zero) and the Profits Interest set forth on Exhibit B, and Member Newco received from the Company the Net Proceeds of the Initial JV Financing. Member Newco then distributed the Net Proceeds of the Initial JV Financing to the JG Members, in part as a reimbursement for preformation expenditures under Treas. Reg. 1.707-4(d) to the extent available, reducing (diluting) the JG Members' Capital Interest and Profits Interest to the amounts and percentages set forth on Exhibit B. 7.21 Capital Accounts. (a) An individual capital account shall be maintained for each Member in accordance with Exhibit H attached hereto (a "Capital Account"). 16 42 (b) The provisions of Exhibit H and any other provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Treasury Regulations Section 1.704-1(b)(2)(iv), and shall be interpreted and applied in a manner consistent with such Regulations. In the event that the Managing Member shall determine that it is prudent to modify the manner in which Capital Accounts, or any debits or credits thereto (including, without limitation, any debits or credits relating to liabilities which are secured by contributed or distributed property or which are assumed by Member Newco or the Members) are computed in order to comply with such Regulations, the Managing Member may make such modification, provided, that such modification would not reasonably be expected to have a material adverse effect on the amount distributable to any Member pursuant to the provisions of this Agreement upon the dissolution and liquidation of Member Newco. The Managing Member also shall make any appropriate modifications in the event unanticipated events might otherwise cause this Agreement not to comply with Treasury Regulations Section 1.704-1(b). (c) The Capital Accounts of the Members as of the date of this Agreement following CBL Member's admission as a Member are as follows: the JG Members (in the aggregate) - $[81,250,000.00] CBL Member - ..... $0.00 (d) Interest/Return. Except as set forth below, the Members agree that interest/return shall accrue on any and all Member Funding by Members at the rate of eleven percent (11%) per annum (simple, not compounded) interest/return (the "Interest/Return") until fully repaid or returned; except that the Members also agree that in the event one Member or its Affiliates shall make a Construction Loan, the interest rate on such Construction Loan may not be at a rate equivalent to the Interest/Return but such interest rate shall be on market rate terms and except that no Interest/Return shall accrue on the JG Members' Initial Contribution. 7.22 Financing. (a) Construction Loan. (a) Subject to the unanimous approval rights of the Members and the procedures set forth in Section 5.03(g) below, the Managing Member shall cause Member Newco to cause the Company to enter into Construction Loan(s) to fund the construction of any Future Development Activity to be constructed from and after the date of this Agreement. The Managing Member shall use its reasonable efforts to cause Member Newco obtain such Construction Loans on arm's length terms that are the most favorable market-rate terms to the Company as reasonably possible from an institutional lender that is not an Affiliate of or Controlled by any Member. (b) If CBL Member determines in its reasonable judgment that it is not possible to obtain a Construction Loan on commercially reasonable terms from an institutional lender that is not an Affiliate of or Controlled by any Member, CBL Member shall provide written notice of such determination (the "Construction Loan Unavailability Notice") to the JG Members, specifying in reasonable detail the basis of such determination and specifying the Key Construction Loan 17 43 Terms, if any, upon which CBL Member would be willing to be the lender of such Construction Loan (any Construction Loan made by a Member being hereinafter referred to as a "Member Construction Loan") and otherwise complying in form and content with the requirements of Section 5.03(g) below. The Key Construction Loan Terms and the other terms and conditions of all Member Construction Loans shall be on such arm's length and market rate terms (defined by reference to third-party unaffiliated loans for the most nearly comparable projects for which third-party unaffiliated loans are commercially available) as referenced above and as set forth in the definition of Construction Loan set forth in Section 1.01 above and shall include notice and cure periods for all defaults, including, but not limited to, payment defaults. (c) the JG Members shall, by written notice to CBL Member given within fourteen (14) days of the JG Members' receipt of the Construction Loan Unavailability Notice, respond to CBL Member in writing (the "JG Members Construction Loan Response Notice") and shall in the JG Members Construction Loan Response Notice either (A) approve the Key Construction Loan Terms, if any, proposed for the Member Construction Loan by CBL Member in the Construction Loan Unavailability Notice and elect to participate in the Member Construction Loan with CBL Member, on an equal basis with CBL Member, in which case each of the JG Members and CBL Member shall act as lender to Member Newco for their proportionate share of the Member Construction Loan, on the terms and conditions specified in the Construction Loan Unavailability Notice; (B) approve the Key Construction Loan Terms, if any, proposed for the Member Construction Loan by CBL Member in the Construction Loan Unavailability Notice and elect not to participate in the Member Construction Loan, in which case CBL Member shall act as lender to Member Newco of the entire Member Construction Loan, on the terms and conditions, if any, specified in the Construction Loan Unavailability Notice; (C) specify the Key Construction Loan Terms, if any, which shall in the aggregate be superior to the terms, if any, offered by CBL Member in the Construction Loan Unavailability Notice, upon which the JG Members would be willing to be the lender of the entire Member Construction Loan; or (D) disapprove the Key Construction Loan Terms, if any, proposed for the Member Construction Loan by CBL Member in the Construction Loan Unavailability Notice. (d) If the JG Members elect to respond under clause (C) of the immediately preceding paragraph (iii) of this Section 3.04(a), CBL Member shall, by written notice to the JG Members given within fourteen (14) days of CBL Member's receipt of the JG Members Construction Loan Response Notice, respond to the JG Members in writing (the "CBL Member Construction Loan Response Notice") and shall in the CBL Member Construction Loan Response Notice either (A) approve the Key Construction Loan Terms for the Member Construction Loan proposed by the JG Members in the JG Members Construction Loan Response Notice and elect to participate in the Member Construction Loan with the JG Members, on an equal basis with the JG Members, in which case each of the 18 44 JG Members and CBL Member shall act as lender to Member Newco for their proportionate share of the Member Construction Loan, on the terms and conditions specified in the JG Members Construction Loan Response Notice; (B) approve the Key Construction Loan Terms for the Member Construction Loan proposed by the JG Members in the JG Members Construction Loan Response Notice and elect not to participate in the Member Construction Loan, in which case the JG Members shall act as lender to Member Newco of the entire Member Construction Loan, on the terms and conditions specified in the JG Members Construction Loan Response Notice; or (C) disapprove the Key Construction Loan Terms for the Member Construction Loan proposed by the JG Members in the JG Members Construction Loan Response Notice. (e) the JG Members' approval of the Key Construction Loan Terms for the Member Construction Loan under either clause (A) or clause (B) of paragraph (iii) of this Section 3.04(a) shall be deemed to be the JG Members' approval of such Key Construction Loan Terms for purposes of Section 5.03(g) below. The JG Members' disapproval of the Key Construction Loan Terms for the Member Construction Loan under clause (D) of paragraph (iii) of this Section 3.04(a) shall be deemed to be the JG Members' disapproval of such Key Construction Loan Terms for purposes of Section 5.03(g) below. CBL Member, by reason of having given the Construction Loan Unavailability Notice, shall be deemed to have approved the Key Construction Loan Terms, if any, for the Member Construction Loan proposed by CBL Member in the Construction Loan Unavailability Notice, whether or not the JG Members elect to act as lender with respect to its proportionate share of such Member Construction Loan. (f) CBL Member's approval of the Key Construction Loan Terms for the Member Construction Loan under either clause (A) or clause (B) of paragraph (iv) of this Section 3.04(a) shall be deemed to be CBL Member's approval of such Key Construction Loan Terms for purposes of Section 5.03(g) below. CBL Member's disapproval of the Key Construction Loan Terms for the Member Construction Loan under clause (C) of paragraph (iv) of this Section 3.04(a) shall be deemed to be CBL Member's disapproval of such Key Construction Loan Terms for purposes of Section 5.03(g) below. The JG Members, by reason of having given the JG Members Construction Loan Response Notice, shall be deemed to have approved the Key Construction Loan Terms, if any, for the Member Construction Loan proposed by the JG Members in the JG Members Construction Loan Response Notice, whether or not CBL Member elects to act as lender with respect to its proportionate share of such Member Construction Loan. (g) CBL Member shall provide an Affiliate Loan Guarantee of CBL Member Parent for all Member Construction Loans. To the extent the lender of the Construction Loan shall require additional personal guarantees for any Construction Loan, CBL Member shall provide such guarantees (or shall provide Affiliate Loan Guarantees), except as otherwise provided in this clause (vii), and neither the JG Members nor their respective Affiliates shall have any obligation to provide such guarantees. If CBL Member intends to guarantee or provide an Affiliate Loan Guarantee of any Construction Loan, CBL Member will provide to the JG Members an opportunity, exercisable in the JG Members' sole and 19 45 absolute discretion within thirty (30) days from the receipt of the notice from CBL Member, for the JG Members or their Affiliate to provide a guarantee on the same terms as the guarantee to be provided by CBL Member or its Affiliate (except that the JG Members may elect, in its sole and absolute discretion, to cap the JG Members' or its Affiliate's guarantee obligation at an amount determined by the JG Members (the "JG Members Construction Loan Guarantee Share"), which may be less than fifty percent (50%) of the Construction Loan and less than the amount of the Construction Loan to be guaranteed by CBL Member and its Affiliate (the "CBL Member Construction Loan Guarantee Share"). In the event the JG Members or their Affiliate elects to provide a guarantee, CBL Member will use its commercially reasonable efforts to cause the lender to accept "several" guarantees from CBL Member or its Affiliate guaranteeing the CBL Member Construction Loan Guarantee Share and the JG Members or their Affiliate guaranteeing the JG Members Construction Loan Guarantee Share, but the lender may require "joint and several" guarantees and, in such event, CBL Member and the JG Members (or their Affiliates) will provide the guarantees on a joint and several basis, but, as between CBL Member and the JG Members (or their Affiliates), CBL Member's and its Affiliate's liability on such guarantees shall be limited to the CBL Member Construction Loan Guarantee Share, and the JG Members' and its Affiliate's liability on such guarantees shall be limited to the JG Members Construction Loan Guarantee Share, and each guarantor will have a right of contribution and indemnity against the co-guarantor for any payments on such guarantees in excess of the JG Members Construction Loan Guarantee Share (as to the JG Members and its Affiliate) or the CBL Member Construction Loan Guarantee Share (as to CBL Member and its Affiliate). Notwithstanding the foregoing, from and after a JG Members Exit Event, to the extent that the lender of any Construction Loan shall require additional personal guarantees for such Construction Loan, if the lender will accept several guarantees, CBL Member or its Affiliate and the JG Members Substitute Member or its Affiliate shall provide such guarantees on a several basis pro rata based on their respective Capital Interests and, if the lender requires joint and several guarantees, CBL Member or its Affiliate and the JG Members Substitute Member or its Affiliate will provide the guarantees on a joint and several basis, but, as between CBL Member and the JG Members Substitute Member (or their Affiliates), CBL Member's and its Affiliate's liability on such guarantees and the JG Members Substitute Member's and its Affiliate's liability on such guarantee shall be pro rata in the same proportion as their respective Capital Interests, and each guarantor will have a right of contribution and indemnity against the co-guarantor for any payments on such guarantees in excess of such guarantor's pro rata share. Notwithstanding anything in this Section 3.04(a)(vii) or Section 5.03, any guarantor shall be indemnified by the co-guarantor against any and all claims, losses, liability or damages incurred by such guarantor arising out of such guarantee (including, without limitation, such guarantor's pro rata share of the liability, if any, on such guarantee) that results from the gross negligence or willful misconduct of the co-guarantor or its Affiliates. (b) Permanent Financing/Refinancing. 20 46 (a) At or prior to the maturity of each Construction Loan, and subject to the unanimous approval rights of the Members and procedures set forth in Section 5.03(h) below, the Managing Member shall cause Member Newco to cause the Company to enter into the Permanent Financing/Refinancing. The Managing Member shall use its reasonable efforts to cause Member Newco to obtain the Permanent Financing/Refinancing on arm's length terms that are the most favorable market-rate terms to the Company as reasonably possible. The Managing Member may also cause Member Newco to cause the Company to enter into one or more subsequent Permanent Financings/Refinancings to replace the Initial JV Financing or a then-existing Permanent Financing/Refinancing under the same parameters as set forth herein and subject to the unanimous approval rights and procedures set forth in Section 5.03(h) below. To the extent the lender of the Permanent Financing/Refinancing shall require personal guarantees for such loan, CBL Member shall provide such guarantees (or shall provide Affiliate Loan Guarantees), together with all indemnifications, including, without limitation, environmental indemnifications, and neither the JG Members nor their respective Affiliates shall have any obligation to provide such guarantees or indemnifications, except as provided in the balance of this paragraph. (b) To the extent the lender of the Permanent Financing/Refinancing shall require personal guarantees for such loan, CBL Member shall provide such guarantees (or shall provide Affiliate Loan Guarantees), except as otherwise provided in this clause (ii), and neither the JG Members nor their respective Affiliates shall have any obligation to provide such guarantees. If CBL Member intends to guarantee or provide an Affiliate Loan Guarantee of any nonrecourse Permanent Financing/Refinancing, CBL Member will provide to the JG Members an opportunity, exercisable in the JG Members' sole and absolute discretion within thirty (30) days from the receipt of the notice from CBL Member, for the JG Members or their Affiliate to provide a guarantee on the same terms as the guarantee to be provided by CBL Member or its Affiliate (except that the JG Members may elect, in its sole and absolute discretion, to cap the JG Members' or its Affiliate's guarantee obligation at an amount determined by the JG Members (the "JG Members Permanent Financing/Refinancing Guarantee Share"), which may be less than fifty percent (50%) of the Permanent Financing/Refinancing and less than the amount of the Permanent Financing/Refinancing to be guaranteed by CBL Member and its Affiliate (the "CBL Member Permanent Financing/Refinancing Guarantee Share"). In the event the JG Members or their Affiliate elects to provide a guarantee, CBL Member will use its commercially reasonable efforts to cause the lender to accept "several" guarantees from CBL Member or its Affiliate guaranteeing the CBL Member Permanent Financing/Refinancing Guarantee Share and the JG Members or their Affiliate guaranteeing the JG Members Permanent Financing/Refinancing Guarantee Share, but the lender may require "joint and several" guarantees and, in such event, CBL Member and the JG Members (or their Affiliates) will provide the guarantees on a joint and several basis, but, as between CBL Member and the JG Members (or their Affiliates), CBL Member's and its Affiliate's liability on such guarantees shall be limited to the CBL Member Permanent Financing/Refinancing Guarantee Share, and the JG Members' and its Affiliate's liability on such 21 47 guarantees shall be limited to the JG Members Permanent Financing/Refinancing Guarantee Share, and each guarantor will have a right of contribution and indemnity against the co-guarantor for any payments on such guarantees in excess of the JG Members Permanent Financing/Refinancing Guarantee Share (as to the JG Members and its Affiliate) or the CBL Member Permanent Financing/Refinancing Guarantee Share (as to CBL Member and its Affiliate). Notwithstanding the foregoing, from and after a JG Members Exit Event, to the extent that the lender of any Permanent Financing/Refinancing shall require additional personal guarantees for such Permanent Financing/Refinancing, if the lender will accept several guarantees, CBL Member or its Affiliate and the JG Members Substitute Member or its Affiliate shall provide such guarantees on a several basis pro rata based on their respective Capital Interests and, if the lender requires joint and several guarantees, CBL Member or its Affiliate and the JG Members Substitute Member or its Affiliate will provide the guarantees on a joint and several basis, but, as between CBL Member and the JG Members Substitute Member (or their Affiliates), CBL Member's and its Affiliate's liability on such guarantees and the JG Members Substitute Member's and its Affiliate's liability on such guarantee shall be pro rata in the same proportion as their respective Capital Interests, and each guarantor will have a right of contribution and indemnity against the co-guarantor for any payments on such guarantees in excess of such guarantor's pro rata share. Notwithstanding anything in this Section 3.04(b)(ii) or Section 5.03, any guarantor shall be indemnified by the co-guarantor against any and all claims, losses, liability or damages incurred by such guarantor arising out of such guarantee (including, without limitation, such guarantor's pro rata share of the liability, if any, on such guarantee) that results from the gross negligence or willful misconduct of the co-guarantor or its Affiliates. (c) Affiliate Loan Guarantees; Rights of Guarantors and Member Lenders. (a) As set forth in Sections 3.04(a) and (b) above, the lender(s) of the Construction Loan and/or the Permanent Financing/Refinancing may require the personal guarantees of CBL Member or Affiliates of CBL Member (the "Affiliate Loan Guarantees"). If such a lender requires an Affiliate Loan Guarantee other than or in addition to CBL Member's Affiliate Loan Guarantee, CBL Member shall cause CBL Member Parent (or such other Affiliate(s) as may be acceptable to the lender) to provide an Affiliate Loan Guarantee. (b) If CBL Member or CBL Member Parent or any other Member or Affiliate of a Member extends credit to or for the benefit of the Company by providing an Affiliate Loan Guarantee or other guarantee for the Construction Loan and/or the Permanent Financing/Refinancing, the guarantor parties shall have the right to request and receive indemnification from Member Newco and/or the Company (but not from Member Newco's Members) against any and all loss, cost and expense incurred in connection therewith (except to the extent that such loss, cost or expense results from to the gross negligence or willful misconduct of the guarantor or its Affiliates) and such guarantor shall be entitled to step into the shoes of the lender upon payment under such guarantee. As guarantor, the guarantor party(ies) shall have certain 22 48 rights in the event of any default under financing guaranteed, i.e., indemnity rights from Member Newco and/or the Company (but not from Member Newco's Members), to step into the primary lender's position on default and other similar rights. The Members acknowledge that upon the occurrence of such event, the guarantor party(ies) may be deemed to have a conflict of interest with respect to Member Newco, the Company and the other Members. The Members acknowledge this potential conflict of interest and hereby agree that it shall not be deemed a breach of any fiduciary duty that the guarantor party(ies) or Affiliates of the guarantor party(ies) may have to another Member or to Member Newco or the Company if the guarantor party(ies) exercise the rights and remedies of the lender or rights under any indemnity agreement or similar agreement when called upon or required to pay under a guaranty, and the guarantor party(ies) shall have the right to exercise such rights and remedies, except that in exercising such rights and remedies the guarantor shall have no right to take or cause Member Newco to take any action that would create or increase the personal liability of any other Member beyond such other Member's personal liability, if any, as set forth in the applicable loan document. The provisions of Section 5.03 below shall not apply to the exercise by the guarantor of such rights and remedies. Notwithstanding the foregoing provisions of this Section 3.04(c)(ii), if the guarantor is CBL Member or an Affiliate of CBL Member and if the default giving rise to the right to exercise such rights is a default curable by the payment of money or a non-monetary default caused by CBL Member or an Affiliate of CBL Member, the guarantor shall have no right to exercise such rights and remedies at any time when the sum of (i) the aggregate unreturned amount of Mandatory Contributions made by CBL Member to fund capital improvements to the Project and (ii) the aggregate amount of Mandatory Contributions made by CBL Member for all purposes other than funding capital improvements to the Project, whether returned or unreturned, is less than the Maximum Required Funding. (c) In the event a Member or its Affiliates serve as the lender on any Member Construction Loan (the "Member Lender") pursuant to the provisions of this Agreement, the other Members acknowledge that the Member Lender may be deemed to have a conflict of interest with respect to Member Newco, the Company and the other Members. The other Members acknowledge this potential conflict of interest and hereby agree that it shall not be deemed a breach of any fiduciary duty that the Member Lender may have to another Member or to Member Newco or the Company if the Member Lender or the Member Lender's Affiliate who has provided the Member Construction Loan exercises the rights and remedies of the lender or lender's rights under the loan documents with respect to such financing, except that in exercising such rights and remedies the Member Lender or the Member Lender's Affiliate shall have no right to take or cause Member Newco to take any action that would create or increase the personal liability of the Members beyond the Members' personal liability, if any, as set forth in the applicable loan documents. The provisions of Section 5.03 below shall not apply to the exercise by the Member Lender or the Member Lender's Affiliate of such rights and remedies. The Members also agree that in the situation where (i) the Member Lender 23 49 has provided a Member Construction Loan on a particular phase of the Project and (ii) a third-party lender has provided a Construction Loan and/or Permanent Financing/Refinancing on another phase of the Project and (iii) there is a default on the third-party lender's financing, then in such events, the foreclosure by the third-party lender shall not be deemed to extinguish or otherwise foreclose any equity or rights of the Member Lender as to any phase of the Project or asset of the Company other than the assets specifically pledged to secure the third-party lender's loan. Notwithstanding the foregoing provisions of this Section 3.04(c)(iii), if the Member Lender is CBL Member or an Affiliate of CBL Member, the Member Lender shall have no right to exercise such rights and remedies at any time when the sum of (i) the aggregate unreturned amount of Mandatory Contributions made by CBL Member to fund capital improvements to the Project and (ii) the aggregate amount of Mandatory Contributions made by CBL Member for all purposes other than funding capital improvements to the Project, whether returned or unreturned, is less than the Maximum Required Funding and, if a Member Lender or its Affiliates is in default pursuant to Article XX of this Agreement, then such Member Lender shall be prohibited from exercising its rights under this Section 3.04(c)(iii) while such default is continuing. (d) No third-party, non-Member lender to Member Newco or the Company or creditor of any Member or of any Affiliate of any Member shall be a third-party beneficiary of the provisions of this Section 3.04(c) or any other provision of this Agreement. (d) Consultation with Other Members. Upon request of any Member and upon reasonable notice, the Managing Member shall advise the requesting Member of the status of the Managing Member's efforts to obtain Construction Loans and/or Permanent Financing/Refinancing and the material terms of financing proposals then under negotiation. 7.23 Outparcel Venture. The Members acknowledge that the Company owns the entirety of the Real Estate in the name of the Company. The Members may cause Member Newco to cause the Company to designate certain portions of the Real Estate as Outparcels. Upon such designation, CBL Member may elect to require Member Newco to cause the Company to transfer the Outparcels to a new entity (the "Outparcel Venture") which shall be in the form of a limited liability company and whose members shall be the Members of this Company or their Affiliates and the capital interests, profits interests and voting interests of the members of the Outparcel Venture shall be in the same proportions as their or their Affiliates' Capital Interests, Profits Interests and Voting Interests in Member Newco. The rights, duties, obligations, privileges, remedies, transfer restrictions, buy-sell provisions and other provisions of this Agreement shall be part of a definitive limited liability company agreement for the Outparcel Venture (the "Outparcel Venture Agreement"). CBL Member shall prepare a draft of the Outparcel Venture Agreement and shall deliver it to the JG Members for its review and approval. Each Member shall be entitled to designate its member to be included in the Outparcel Venture but such designation shall only be allowed as to the Member itself or an Affiliate of such Member. The Outparcel Venture Agreement shall contain distribution provisions that will coordinate with the distribution provisions of this Agreement as to return of capital and other matters. The Outparcel Venture Agreement will provide for cross-defaults and cross buy-sell provisions such 24 50 that the acquisition by one Member of the interests of another non-Affiliated Member under this Agreement shall likewise entail the acquisition of such non-Affiliated Member's interests in the Outparcel Venture. o NAMES AND ADDRESSES OF MEMBERS The names and addresses of the Members are set out on Exhibit B. GOVERNANCE 7.24 General Powers. Subject to the terms of this Agreement, the business and affairs of Member Newco shall be managed by CBL Member, and CBL Member shall be the Managing Member of Member Newco. A Member shall not have the authority to act as an agent of Member Newco or legally bind Member Newco, unless such Person is: (a) the Managing Member; or (b) a Person designated in writing by action of the Members as being so authorized. 7.25 Standard of Conduct. A Member shall discharge such Member's duties as a Member in good faith, in a manner the Member reasonably believes to be in the best interest of Member Newco, and with the care an ordinarily prudent Person in a like position would exercise under similar circumstances. Each Member shall be entitled to rely on information, opinions, reports or statements, including financial statements and other financial data, if prepared or presented by: (a) one (1) or more employees of Member Newco or one (1) or more employees of one of Member Newco's Members, in either case, whom the Member reasonably believes to be reliable and competent in the matters presented; or (b) legal counsel, public accountants or other Persons as to matters the Member reasonably believes are within such Person's professional or expert competence. A Member shall not be liable for any action taken as a Member, or any failure to take any action, if the Member performed the duties of the position as a Member in compliance with this Section 5.02. Except as specifically set forth in this Agreement or in the Act, no Member shall be personally liable to Member Newco, any Member or any third party for any action taken as a Member or for any failure to take any action as a Member other than due to the gross negligence or willful misconduct of such Member. 7.26 Governance; Unanimous Approval Items. The day-to-day operational decisions of Member Newco shall be made by the Managing Member unless specifically set forth in this Agreement to the contrary. Subject to the provisions of Section 1.03, the following decisions shall require the unanimous approval of the Members, and, neither the JG Members, pursuant to the JG Members' responsibilities set forth herein, nor CBL Member, as Managing Member and/or pursuant to CBL Member's responsibilities set forth herein, shall be authorized to take or to cause Member Newco to cause the Company to take the following actions unless such approval has been obtained: (a) The sale, lease or other disposition of all or any portion of the Project or all or any of the Real Estate either in one transaction or in a series of interrelated transactions (including, without limitation, the sale or ground lease of any of the Real Estate to an Anchor or other third-party and all 25 51 Anchor leases), except (A) as set forth in Article XVI and Article XVII; (B) as reflected in an approved Pro Forma and/or Operating Budget; (C) for the leasing of the space in the Project to individual non-Anchor tenants in the course of the Company's business; (D) sales or ground leases of Outparcels to occupants that are consistent with a first-class shopping center; and (E) for normal and customary easements and access rights granted in the course of development of the Project. If Member approval is required under this Section 5.03(a), the sale, lease or other disposition of all or a portion of the Project shall be submitted to the Members for approval at the time that the Managing Member has received a purchase agreement, term sheet, letter of intent or other evidence of interest on terms the Managing Member determines to be reasonably satisfactory; (b) The approval of the Site Plan for any expansions or additional development/redevelopment of the Project and any material and/or substantial modifications or amendments to the existing or any future Site Plan, the approval of expansions or additional development/redevelopment of the Project, the approval of any future Development Schedules for the Project; (c) The approval of the Pro Forma for any Future Development Activities and construction of the Project, the approval of any modifications or adjustment(s) to a previously approved Pro Forma that constitute Material Development Deviations; (d) The approval of the Operating Budget for the Project for the 2007 and subsequent Fiscal Years and the incurrence of expenditures or obligations that constitute a Material Operating Deviation; (e) Unless set forth in this Agreement, in an approved Pro Forma or in an approved Operating Budget, the incurring or payment of any fees to a Member or to an Affiliate of a Member or the entering into any agreement or contract with any Member or an Affiliate of a Member; except that Member Newco may enter into or cause the Company to enter into a contract for the maintenance/janitorial/security for the Project with ERMC II, LP or its affiliates without further approvals provided the terms of such contracts are on terms that are competitive in the market and within an approved Pro Forma and/or Operating Budget; and except that Member Construction Loans shall be subject to Section 5.03(g) below and shall not be subject to this Section 5.03(e). (f) Except for required funding set forth in this Agreement, the required funding by Members of any obligation, capital expenditure, cost or other expense, and the entering into any contract or agreement, including guarantees or indemnities, that creates personal liability of the Members, other than CBL Member, beyond their Member Funding to Member Newco or that requires the personal guarantees or indemnities of the Members or their Affiliates, other than CBL Member or its Affiliates. If a Member, other than CBL Member, fails to approve such funding or such entering into of a contract or agreement, such failure shall not be an Impasse, and Section 16.04 shall not apply to such failure; (g) The approval of the Key Construction Loan Terms on the procedures set forth in this clause (g) or, as to Member Construction Loans, the procedures set forth in Section 3.04(a). CBL Member shall notify the JG Members, in writing, prior to the placement of the Construction Loan, which notice shall include a 26 52 written term sheet for the proposed Construction Loan and identify the Key Construction Loan Terms and the proposed lender(s). The JG Members shall either approve or disapprove said terms by written notice delivered and received by CBL Member within fourteen (14) Days of the date on which the JG Members shall receive CBL Member's notice. In the event the JG Members do not respond within said fourteen (14) Day period, such failure to respond shall be deemed an approval of terms of the Construction Loan as set forth in CBL Member's notice; (h) The approval of the Key Permanent Loan Terms on the procedures set forth in this clause (h). CBL Member shall notify the JG Members, in writing, prior to the placement of the Permanent Financing/Refinancing, which notice shall include a written term sheet for the proposed Permanent Financing/Refinancing and identify the Key Permanent Loan Terms and the proposed lenders(s). The JG Members shall either approve or disapprove said terms by written notice delivered and received by CBL Member within fourteen (14) Days of the date on which the JG Members shall receive CBL Member's notice. In the event the JG Members do not respond within said fourteen (14) Day period, such failure to respond shall be deemed an approval of the Permanent Financing/Refinancing as set forth in CBL Member's notice; (i) The approval of the architects and engineers for any Future Development Activities (except that the Members agree that they may establish, by the same unanimous approval as would be required to approve an architect or engineer under this clause, an approved list of architects and engineers that then may be engaged without further approval by the Members) and the approval of any fees payable to such architects and engineers collectively with respect to any Future Development Activities where the aggregate of such fees will exceed four and one-half percent (4.5%) of the total construction costs for such Future Development Activities; (j) The selection of the general contractor for construction of any Future Development Activities (it being agreed that EMJ shall be entitled to bid on the construction contract for any such Future Development Activities) and the entering into of a Construction Contract by Member Newco or the Company that does not meet the parameters set forth in Section 6.03 below; (k) Any employment agreement through which Member Newco shall, or shall cause the Company to, hire, retain or employ any individual as an "employee" of Member Newco or the Company. For these purposes, the Members acknowledge that it is their initial intention that Member Newco and the Company shall not have any "employees"; (l) The establishment of any Reserve described in clause (ii) of the definition of such term in Section 1.01 above; (m) The filing of bankruptcy or the filing for the appointment of a receiver for the assets of Member Newco or the Company; 27 53 (n) In the event of any default under any financing secured by assets of Member Newco or the Company, the decision as to whether to allow foreclosure by the creditor or provide a deed in lieu of foreclosure; (o) The dissolution or termination of Member Newco or the Company; (p) The payment to the JG Members or any Affiliate of any compensation for the performance of the JG Members' obligations pursuant to Article VI of this Agreement or for any other services to Member Newco or the Company other than as set forth on Exhibit C of this Agreement. The failure to approve such payment shall not constitute an Impasse, and Section 16.04 shall not apply to such failure; (q) The payment to CBL Member or any Affiliate of any compensation for the performance of CBL Member's obligations as Managing Member of Member Newco, or Member Newco's obligations as manager of the Company, or for any other services to Member Newco or the Company pursuant to Article VI of this Agreement other than as set forth on Exhibit C of this Agreement and/or in the Property Management Agreement. The failure to approve such payment shall not constitute an Impasse, and Section 16.04 shall not apply to such failure; (r) The entering into any agreement or contract between Member Newco or the Company and a Member or any Affiliate of a Member other than as referenced or authorized in this Agreement. The failure to approve such entering into of a contract or agreement shall not constitute an Impasse, and Section 16.04 shall not apply to such failure. The Members acknowledge that CBL Member or its Affiliates shall enter into the Property Management Agreement as referenced herein and serve as the Property Manager in accordance with the terms and conditions of the Property Management Agreement; (s) Except as provided in the Property Management Agreement, any replacement of the Property Manager and any amendment to the Property Management Agreement; (t) The removal of the Managing Member as contemplated by Section 6.04 below (other than upon Default of the Managing Member under Section 20.01 below); (u) Any distribution to the Members of Distributable Cash or any other funds or assets of Member Newco other than as set forth in a Pro Forma, an Operating Budget or as otherwise specifically provided in this Agreement; (v) The termination of or any amendment or modification of this Agreement, other than the exercise of the authority of the Managing Member to the limited extent required to revise Exhibit B to reflect any assignment of a Membership Interest, receipt of an additional Member Funding, or distribution to a Member, in each case as permitted under this Agreement, the Members likewise acknowledging that the authority of the Managing Member to make such revisions to Exhibit B is may only be exercised if the circumstance giving rise to such revision is otherwise in accordance with the applicable provisions of this Agreement; 28 54 (w) The admission of any new Member, other than pursuant to an assignment expressly permitted by Article XVI or the admission of any new member to the Company; and (x) Any amendment to the Articles of Organization or the articles of organization of the Company. o SPECIFIC DUTIES OF MEMBERS 7.27 Managing Member. Member Newco shall not have managers but shall have a Managing Member as set forth above. Member Newco shall be a "member-managed" limited liability company. 7.28 Managing Member; Managing Member's Specific Duties. CBL Member shall be the Managing Member of Member Newco. CBL Member shall serve as the Managing Member until its successor shall have been duly elected and shall have qualified or until its termination, dissolution, resignation or removal pursuant to this Agreement. (a) Authority of the Managing Member. Subject to the terms of this Agreement and the matters requiring unanimous Member approval as set forth in Section 5.03 above, CBL Member, as the Managing Member, shall in general supervise and administer all the business and affairs of the operation of Member Newco as a limited liability company. The Managing Member shall be responsible for the maintenance of Member Newco's books and records and shall have authority to collect all rents and other amounts due to Member Newco from third parties. The Managing Member shall have financial oversight of Member Newco and shall deal directly with the Accountants in the preparation of financial statements and tax returns for Member Newco, consistent with this Agreement. The Managing Member, shall preside at all meetings of the Members. The Managing Member, shall, if necessary, see that all orders and resolutions of the Members are carried into effect. The Managing Member, shall sign and deliver in the name of Member Newco any deeds, leases, mortgages, bonds, contracts or other instruments pertaining to the business of Member Newco, except in cases in which the authority to sign and deliver is required by law to be exercised by another Person or is expressly delegated or governed by the Articles of Organization, this Agreement or by the Members; and in general shall perform all duties incident to the office of the Managing Member. The Managing Member shall, at all times, maintain Member Newco's assets, bank and investment accounts titled to and in Member Newco's name. (b) Authority of the Managing Member as to the Operation of Member Newco and as to the Operating Budget. Subject to the provisions of this Section 6.02(b), the Managing Member shall prepare or cause to be prepared an annual operating budget (including separate sub-budgets for Triangle Town Center and Triangle Town Place) setting forth the projected expenditures, costs and revenues for the phases or portions of the Project for which construction has been completed or will be completed and that are open and operating or will be open and operating for the upcoming Fiscal Year (such operating budget, when approved as provided in this Section 6.02(b) and as required pursuant to Section 5.03, the "Operating Budget"; for purposes of this Agreement, the "Operating Budget" for the 2006 Fiscal Year shall be as set forth on Exhibit G attached 29 55 hereto, and the Members shall be deemed to have approved such 2006 Operating Budget for the purposes of this Section 6.02(b) and Section 5.03 above). Except as otherwise provided in this Section 6.02(b), each Operating Budget shall be subject to the prior unanimous written approval of the Members pursuant to Section 5.03 above, which shall not be unreasonably withheld or delayed. (a) Not later than December 1 of each Fiscal Year commencing with 2006, the Managing Member shall prepare and deliver a preliminary Operating Budget to the Members for Member Newco's next succeeding Fiscal Year. The Members shall have thirty (30) Days in which to review and approve or disapprove (and, if disapproving, such disapproval to specify the line items disapproved) each such Operating Budget, during which period the Members shall meet, if necessary, to discuss said proposed Operating Budget and revisions thereto and if the Members do not respond with any suggested changes or revisions within such thirty- (30) Day period, such shall be deemed an approval of the proposed Operating Budget as submitted by the Managing Member by the Member failing to respond. The Managing Member shall thereafter revise such Operating Budget as may be necessary in accordance with the agreements reached by the Members and deliver same in final form to all Members not later than December 15 of each year. If any proposed Operating Budget is not approved or not deemed approved by the Members as and when provided for herein, the Operating Budget that has been most recently approved by the Members as required hereunder shall remain in effect, and the Managing Member shall cause Member Newco to operate the Project pursuant to said most recently approved Operating Budget, until a new Operating Budget is approved in accordance with the provisions hereof, except that the Managing Member shall be entitled to use as the Operating Budget for the fiscal year in question the line items in the preliminary Operating Budget to which no Member objected within such 30-Day period (instead of the corresponding line items in the most recently approved Operating Budget), and except that the following-described annual costs contained in the most recently approved Operating Budget that has been approved by the Members as required herein shall be increased on January 1 by the actual amount (if greater than the amount otherwise permitted under this Section 6.02(b)) of any annual increase in said costs to Member Newco or the Company during the then-current Fiscal Year, it being recognized that any increases in said costs are generally beyond the control of the Members and that the goods and services relative thereto are necessary for the proper functioning of the Project: (i) ad valorem taxes; (ii) utility expenses, including but not limited to water, sewer, electricity, natural gas and telephone; (iii) property and casualty insurance premiums; 30 56 (iv) maintenance costs relative to (x) the furnishing of HVAC service as required by leases for occupancy of the Project and (y) landscaping; (v) debt service (interest and principal, if any) due with respect to mortgage financing encumbering the Project that has been incurred in accordance with the provisions of this Agreement; (vi) compensation, fees, costs and expenses of Member Newco's and the Company's Accountants, attorneys, architects, engineers and other professionals; and (vii) postage. (b) The Managing Member shall be authorized to make those expenditures and to incur those obligations provided for in the then current Operating Budget. Except as set forth in Section 6.02(b)(iii) below, the Managing Member shall not exceed the expenditure limits set forth in said Operating Budget without the prior unanimous written approval of the Members required under Section 5.03 above. (c) The Managing Member shall cause Member Newco to endeavor to operate the Project within the Operating Budget in effect from time to time, as same may be revised from time to time in accordance with the provisions of this Agreement. The Managing Member's authority shall be limited to the authority to cause Member Newco to cause the Company to (A) expend up to the respective amounts for the respective purposes set forth in the Operating Budget (as same may be increased pursuant to and in accordance with the provisions of this Agreement), and (B) operate the Project in accordance with the provisions of this Agreement and the parameters set forth in the Operating Budget. The Managing Member shall secure the Members' prior unanimous written approval, as required under Section 5.03 above, for any expenditures that will result in cost overruns of the Operating Budget that exceed, individually or in the aggregate, five percent (5%) of the aggregate annual budgeted expense amount set forth in the Operating Budget then in effect (any expenditure resulting in an overrun in excess of the aforesaid limits is herein referred to as a "Material Operating Deviation"), and the Operating Budget, as revised, shall become the Operating Budget for all purposes under this Agreement for the remainder of such Fiscal Year. During each Fiscal Year, the Managing Member shall promptly inform the Members of any increases in costs and expenses that were not foreseen during the budget preparation period and thus were not reflected in the Operating Budget then in effect that could, individually or in the aggregate, be reasonably expected to constitute a Material Operating Deviation. In the event a Material Operating Deviation from any Operating Budget becomes necessary prior to the annual review of an Operating Budget as set forth in Section 6.02(b)(i) above, CBL Member may 31 57 revise said Operating Budget, but only after receiving any unanimous approval of the Members required under Section 5.03 above (for purposes of this clause (iii) and Section 5.03 above, CBL Member shall be conclusively deemed to have approved any such Material Operating Deviation). (c) Authority of Managing Member as to the Development and Construction of the Project. (a) Development and Construction Responsibilities. From the effective date of this Agreement and subject to the terms of this Agreement and the matters requiring unanimous approval as set forth in Section 5.03 above, the Managing Member shall have primary responsibility for all development and construction activities relating to the Future Development Activities and construction of the Project in accordance with the applicable approved Site Plan(s) and Pro Forma(s), including but not limited to the procuring and/or amending all rights, entitlements and appurtenances necessary or desirable in connection with the Future Development Activities, planning, procuring traffic and roadway studies and improvements, securing governmental approvals, performing soils and hazardous waste investigations, and procuring conservation, environmental and utility studies and approvals. (b) Pro Formas; Development Schedule. (i) The Members agree that all Pro Forma(s) shall be subject to the unanimous approval of the Members, except as otherwise set forth in this Section 6.02(c)(ii). The "projected net project cost" category in a pro forma represents the anticipated hard and soft costs to construct the particular Future Development Activity and is sometimes referred to in the industry as the capital expense budget. (ii) The Managing Member shall cause Member Newco to cause the Company to develop/redevelop or expand the Project according to the applicable approved Site Plan(s) and shall use its commercially reasonable efforts to do so within the projected net project cost parameters set forth in the approved Pro Forma(s). The Managing Member shall use its commercially reasonable efforts to cause Member Newco to cause the Company to meet the applicable approved Development Schedule(s). Notwithstanding the foregoing but subject to the approval rights of the Members set forth in Section 5.03 as to Material Development Deviations, the Managing Member shall cause Member Newco to cause the Company to expend, the amounts required to complete any Future Development Activities subject to and in accordance with the provisions of this Agreement and the Pro Formas for such Future Development Activities. In the event a Material Development Deviation from a Pro Forma becomes necessary, the Managing Member may revise such Pro Forma but only after securing the unanimous approval of the Members pursuant to and in accordance with Section 5.03 above (for purposes of this clause (B) and Section 5.03 above, the Managing Member shall be conclusively deemed to have approved any such Material Development Deviation). 32 58 (iii) During any Future Development Activities, the Managing Member shall review the applicable Development Schedule to determine whether specific items set forth therein can be accomplished within the time parameters set forth therein and advise the JG Members if it determines that a modification of the Development Schedule is necessary or appropriate, and the Managing Member shall review the Pro Formas periodically to determine whether such Future Development Activities may be completed within the projected net project cost parameters set forth therein. If the Managing Member determines that a Material Development Deviation to a Pro Forma is necessary, the Managing Member shall notify the JG Members of the necessary revisions and shall request the unanimous approval of said revisions pursuant to Section 5.03 above. The JG Members shall approve or disapprove the requested revisions, by written notice given to the Managing Member, within twenty (20) Days of the date upon which it receives the requested revisions to a Pro Forma and, if the JG Members disapprove the requested revision, shall include in such notice an explanation of the reasons therefor. The failure of the JG Members to respond within the twenty- (20) Day period shall be construed as an approval of the requested revisions by the JG Members. In the event the JG Members approve the requested revisions or the revisions do not rise to the level of a Material Development Deviation, the Managing Member shall revise the Pro Forma to make the approved revisions and the Pro Forma, as revised, shall become the Pro Forma for all purposes under this Agreement with respect to such Future Development Activities. For purposes of this clause (C) and Section 5.03 above, the Managing Member shall be conclusively deemed to have approved any such Material Development Deviation. For purposes of this Agreement and except as may be specifically set forth above, a "Material Development Deviation" requiring the approvals set forth in Section 5.03 above shall mean, as relates to any Pro Forma, any incurrence of expenditures or costs (whether the subject of change orders or otherwise) that will result in cost overruns of such Pro Forma that exceed individually or in the aggregate, more than ten percent (10%) of the aggregate projected construction cost set forth on the approved Pro Forma at issue. (d) Other Specific Duties of CBL Member. In addition to the authorities, duties and responsibilities of CBL Member as set forth above, CBL Member shall, subject to the provisions of the Property Management Agreement, be responsible for and authorized to cause Member Newco to cause the Company to carry out the following items: (a) Negotiating and entering into leases or other occupancy agreements and similar transactions with Anchors, small shop, big box and other tenants and occupants to be entered into after the date of this Agreement; (b) Tenant inducement/tenant allowance coordination and lease coordination; and 33 59 (c) The negotiation and documentation of any governmental financing, governmental funding or entitlements to provide funding for infrastructure or any other portion of the Project. (e) Consultation with Other Members. Upon request of any Member and upon reasonable notice, the Managing Member shall provide the requesting Member with such information concerning the Managing Member's activities in such capacity and the business and financial condition of Member Newco and the Company as the requesting Member may reasonably request for any purpose reasonably related to the Member's Membership Interest in Member Newco; except that, the Managing Member shall not be obligated to provide any such information at any unreasonable time or place. (f) Attendance at Meetings; Access to Project Site. Any Member shall have the right, upon reasonable notice to the Managing Member, to attend meetings concerning the Project between the Managing Member and/or its Affiliates and third parties that are not Affiliates of the Managing Member, except that the Managing Member shall have no obligation to permit such attendance if the meeting is an internal meeting of the Managing Member, its Affiliates, its or its Affiliates' officers, employees or agents and/or its or its Affiliates' attorneys, accountants and/or other advisors or service providers. Without limiting the generality of the foregoing, the JG Members or their respective Affiliates shall be entitled, at the JG Members' or its Affiliates' cost, to have a representative (the "Representative") on site at the Project during the Construction Period for any Future Development Activity. Such Representative shall be entitled to (i) reasonable access, upon request, to the Project and to CBL Member's or its Affiliates' personnel involved in the construction of the Project, (ii) request and receive information concerning the development and construction of the particular phase of the Project from CBL Member or its Affiliates; and (iii) attend construction progress meetings. (g) Limitations on Managing Member's Authority. The Managing Member, shall not have the authority to take the following actions: (a) Any action set forth in Section 5.03 above unless the requisite unanimous approval of the Members as set forth in Section 5.03 has been obtained and any action otherwise set forth in this Agreement as requiring the approval of all Members unless such approval shall have been obtained; (b) Any action directly in contravention to the terms of this Agreement, the Articles of Organization or the Act; and/or (c) Any action, except those specifically authorized hereunder, which would make it impossible to carry out the business of Member Newco. 7.29 Construction Contract. A Construction Contract for construction of any phase of the Project must contain the following terms: (a) The cost of the Construction Contract must provide no more than a one and three-quarters percent (1.75%) fee to the general contractor; and 34 60 (b) Major subcontracts must be competitively bid to at least three qualified subcontractors. 7.30 Removal and Resignation. The Managing Member may be removed by the vote of the Members required under Section 5.03 above, whenever, in their judgment, the best interests of Member Newco would be served thereby or upon default of the Managing Member as provided in Section 20.01 below, but such removal shall be without prejudice to the contract rights, if any, of the Person so removed. Election of a Person as the Managing Member does not, of itself, create contract rights beyond the rights of the Managing Member specified in this Agreement. Unless otherwise provided in an employment contract or an agreement with Member Newco, a Managing Member may resign at any time, provided the Managing Member gives at least thirty (30) days prior written notice. Such resignation shall be in writing and shall take effect upon delivery to Member Newco and to each Member, unless a later effective date is specified in the notice. The acceptance of a resignation shall not be necessary in order to make it effective, unless so specified therein. Such resignation or removal shall not affect the Managing Member's status as a Member. If CBL Member resigns or is removed as the Managing Member, the JG Members shall thereupon become the Managing Member and shall thereafter have all of the rights and powers of the Managing Member, including, but not limited to, CBL Member's rights under Section 6.02 above. The Members agree that in the event an Affiliate of CBL Member is no longer the Property Manager and CBL Member or its Affiliates are still Members of Member Newco at such time, then, regardless of any provision herein to the contrary, the replacement Property Management Agreement must contain a provision or provisions (acceptable to CBL Member) that restricts leasing activities and other operations in a manner so as to ensure that the status of CBL Member's Affiliate as a "Real Estate Investment Trust" under the Code is not jeopardized. 7.31 Compensation. The JG Members shall be entitled to the fees as so designated and listed on Exhibit C and CBL Member shall be entitled to the fees as so designated and listed on Exhibit C. No other fees or compensation shall be paid to a Member or its Affiliates except as may be set forth herein or as may be approved by the Members in accordance with Section 5.03 above. CONFLICT OF INTEREST TRANSACTIONS A transaction with Member Newco in which a Member has a direct or indirect interest is not voidable by Member Newco solely because of the Member's interest in the transaction if the material facts of the transaction and the Member's interest were disclosed or known to the Members entitled to vote and they unanimously authorized, approved or ratified the transaction pursuant to Section 5.03 above. As set forth in Section 3.04(c) above, the Members acknowledge and waive any potential conflict of interest that a Member may have if such Member or its Affiliate is called upon or required to pay under any Affiliate Loan Guarantee or other guarantee. The Members also acknowledge that a Member or its Affiliate that may loan funds to Member Newco may be deemed to have a conflict of interest with respect to Member Newco and the other Members. The Members acknowledge this potential conflict of interest and hereby agree that it shall 35 61 not be deemed a breach of any fiduciary duty that a Member may have to another Member or to Member Newco if the Member or an Affiliate of a Member who has loaned funds to Member Newco, as permitted under this Agreement, exercises its rights and remedies as a lender pursuant to any such loan and the terms of the promissory note for such loan by a Member or its Affiliate to Member Newco, and such Member or its Affiliate shall have the right to exercise such rights and remedies, except that in exercising such rights and remedies such Member or its Affiliate shall have no right to take, or cause Member Newco to take, any action that would create or increase the personal liability of any other Member beyond such other Member's personal liability, if any, as set forth in the applicable loan documents. The provisions of Section 5.03 above shall not apply to the exercise by such Member or its Affiliate of such rights and remedies. INDEMNIFICATION 7.32 Indemnification. Each Member or other Person who was named, is named, or is threatened to be a named a defendant or respondent to any threatened, pending, or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, and whether formal or informal (hereinafter a "proceeding"), by reason of the fact that it, he or she, or a Person of whom it, he or she is the legal representative or Affiliate, is or was a Member, officer, employee or agent of Member Newco, or is or was serving at the request of Member Newco as a director, officer, governor, manager, partner, trustee, employee or agent of any other Person or employee benefit plan (hereinafter, an "Indemnitee"), whether the basis of such proceeding is alleged action in an official capacity as a Member, director, officer, governor, manager, partner, trustee, employee or agent, or in any other capacity while serving as a Member, director, officer, governor, manager, partner, trustee, employee or agent, shall be indemnified and held harmless by Member Newco to the fullest extent authorized by the Act against any obligation to pay a judgment, settlement, penalty, fine (including an excise tax assessed with respect to an employee benefit plan), and reasonable expenses (including counsel fees) (hereinafter, "Losses") incurred by the Indemnitee in connection therewith and such indemnification shall continue as to a Person who has ceased to be a Member, director, governor, officer, manager, partner, trustee, employee or agent and shall inure to the benefit of its, his or her heirs, executors and administrators or successors and assigns. Notwithstanding the above statements, no indemnity shall be provided by Member Newco to any Indemnitee for any acts of gross negligence or willful misconduct of such Person nor for any Losses arising out of acts or omissions of any Indemnitee taking place, or events or circumstances occurring, prior to the date of this Agreement. 7.33 Expenses. The right to indemnification conferred in this Article VIII shall be a contract right and shall include the right to be reimbursed by Member Newco for the reasonable expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that if the Act requires, payment of such expenses incurred by Indemnitee shall be made only upon (a) the receipt of a written affirmation by the Indemnitee that the Indemnitee has met the required standard of conduct; (b) the receipt of a written undertaking, executed by or on behalf of the Indemnitee, to repay the advance if it is ultimately determined that it, he or she is not entitled to indemnification by Member Newco; and (c) a determination is made that the facts then known to those making the determination would not preclude indemnification under this Article VIII. 36 62 7.34 Insurance. As further described in Article X below, Member Newco shall maintain insurance, at its expense, to protect itself and any Indemnitee(s) against any Losses, whether or not Member Newco would have the power to indemnify the Indemnitee against such Losses under the Act. LIMITATION OF LIABILITY OF MEMBERS; MEMBER LISTS 7.35 Limitation on Liability. Except as set forth in this Agreement, each Member's liability shall be limited as set forth in the Act. 7.36 No Liability for Company Obligations. Except as set forth in this Agreement, no Member will have any personal liability for any debts or losses of Member Newco. 7.37 List of Members. Upon written request of any Member, Member Newco shall provide a list showing the names, addresses and Membership Interest of all Members and the other information required by the Act and maintained pursuant to Section 14.02. LIABILITY, PROPERTY AND CASUALTY INSURANCE In addition to the insurance to be provided with respect to matters set forth in Section 8.03 above, Member Newco shall maintain property and casualty insurance to provide adequate and necessary coverage for the assets of Member Newco and the Members with respect to their interests in Member Newco and the assets of Member Newco and the liabilities resulting therefrom and shall also cause the Company to maintain property and casualty insurance to provide adequate and necessary coverage for (i) the Project, the Real Estate and the assets of the Company and (ii) Member Newco with respect to its interests in the Project, the Real Estate, the Company and the assets of the Company and liabilities resulting therefrom. All insurance contracts to be entered into by Member Newco or the Company shall be negotiated by CBL Member, as the Managing Member, and shall be upon such terms of coverage and with such insurance carriers as CBL Member shall reasonably determine. In CBL Member's discretion, all or any such insurance contracts may be included as part of CBL Member's overall blanket policy or program. The Members agree that Member Newco and the Company shall not self-insure except for deductibles and self-insured retentions that are equivalent to or less than the levels of deductibles and/or self-insured retentions that are part of CBL Member's overall blanket policy or program. CAPITAL CONTRIBUTIONS TO MEMBER NEWCO 7.38 Members' Required Member Funding. (a) Initial Contributions. As of the date of this Agreement, the unreturned Member Funding of each Member are as set forth opposite such Member's name on Exhibit B as such Member's Initial Contribution ("Initial Contributions"). Notwithstanding any provision in this Agreement to the contrary, neither the JG 37 63 Members nor their respective Affiliates shall have any obligation under this Agreement to make any additional Member Funding to Member Newco beyond the JG Members' Initial Contribution. [For purposes of this Agreement, any Incoming Equalizing Contribution made by the JG Members Substitute Member in connection with a JG Members Exit Event pursuant to Section 16.06(f) shall, from and after the date upon which such Incoming Equalizing Contribution is made, be treated for all purposes as an Initial Contribution by the JG Members Substitute Member.] (b) Mandatory Contributions. Subject to the provisions of this Agreement: (a) Except as otherwise provided in this Section 11.01(b), CBL Member shall contribute as additional Member Funding (A) any and all necessary equity funding that is set forth in an approved Pro Forma as equity contributions from Members/owners to fund any and all construction in connection with Future Development Activities; (B) any and all costs in excess of such amounts of necessary equity funding from Members/owners that do not rise to the level of a Material Development Deviation; and (C) any and all costs in excess of such equity funding necessary to complete such construction (construction cost overruns) that rise to the level of Material Development Deviations and for which the approvals required in Section 5.03 have been obtained (for purposes of this clause (i) and Section 5.03 above, CBL Member and its Affiliates shall be conclusively deemed to have approved any such costs with respect to Future Development Activities) (the funding referenced in subparagraphs (A), (B) and (C) hereof being collectively referred to herein as the "Construction Funds"). Such contributions of Construction Funds shall be in the form of cash or cash equivalents and such contributions may be contributed in installments when and as needed in CBL Member's reasonable judgment consistent with the applicable Pro Forma(s) and Development Schedule(s), Member Newco's lender's requirements and the needs of the Project. Notwithstanding the foregoing, from and after a JG Members Exit Event, any additional Member Funding of Construction Funds that CBL Member would thereafter, but for the operation of this sentence, have been required to make shall instead be made by CBL Member and the JG Members Substitute Member pro rata on the basis of their respective Capital Interests. (b) Except as provided in this Section 11.01(b), CBL Member shall contribute as additional Member Funding any and all amounts in order to fund Operating Deficits of Member Newco. Such contributions of funds to cover Operating Deficits shall be in the form of cash or cash equivalents and such contributions may be contributed in installments when and as needed in CBL Member's reasonable judgment consistent with the Pro Forma(s), the Development Schedule(s), the Operating Budget(s) and Member Newco's lender's requirements and the needs of the Project. Notwithstanding the foregoing, from and after a JG Members Exit Event, any additional Member Funding to fund Operating Deficits that CBL Member would thereafter, but for the operation of this sentence, have been required to make shall instead be made by CBL Member and the JG Members Substitute Member pro rata on the basis of their respective Capital Interests. 38 64 (c) In the event that at any time from and after the date of this Agreement the sum of (A) the aggregate unreturned amount of Mandatory Contributions made by CBL Member to fund capital improvements to the Project (including allowances for tenant improvements) and (B) the aggregate amount of Mandatory Contributions made by CBL Member for all purposes other than funding capital improvements to the Project, whether returned or unreturned, equals or exceeds $30,000,000.00 (the "Maximum Required Funding"), CBL Member shall thereafter have no further obligation to make Mandatory Contributions for any purpose, until such time, if ever, that the sum of the amounts described in clause (A) and clause (B) of this paragraph is less than the Maximum Required Funding, and then only to the extent that such sum is less than the Maximum Required Funding. For the avoidance of doubt, the following examples illustrate the operation of this Section 4.3(b) (Examples 1 and 2 below assume that CBL Member Parent has not previously incurred any liability under this Section 4.3 at the time of the example): (1) Example 1. If CBL Member had made $5,000,000 in unreturned Mandatory Contributions described in Section 11.01(b)(iii)(A) of this Agreement to fund capital improvements to the Project and $25,000,000 in other Mandatory Contributions and Non-Required Contributions, then CBL Member would have no further obligation to make Mandatory Contributions unless and until Member Newco returned to CBL Member all or a portion of the $5,000,000 in Mandatory Contributions described in Section 11.01(b)(iii)(A) of this Agreement made by CBL Member in this Example 1; (2) Example 2. If, after Example 1, Member Newco returned to CBL Member all of the $5,000,000 in Mandatory Contributions described in Section 11.01(b)(iii)(A) of this Agreement made by CBL Member in Example 1 and returned $7,000,000 of the $25,000,000 in other Mandatory Contributions and Non-Required Contributions made by CBL Member in Example 1, then CBL Member's obligation to make additional Mandatory Contributions would be limited to $5,000,000, i.e., the amount of Mandatory Contributions described in Section 11.01(b)(iii)(A) of this Agreement made by CBL Member in Example 1 and returned to CBL Member in this Example 2; (3) Example 3. If, after Example 2, CBL Member made $5,000,000 in Mandatory Contributions described in Section 11.01(b)(iii)(B), CBL Member would have no further obligation to make any Mandatory Contributions of any kind, whether or not Member Newco thereafter returned to CBL Member any Mandatory Contributions of any kind that CBL Member had previously made. 39 65 (d) In the event that CBL Member or its Affiliate and/or any of the JG Members or their respective Affiliates are required to pay any amounts to the lender of any Construction Loan or Permanent Financing/Refinancing on account of any guarantee provided to such lender, the amount of any such payments (after adjusting as between the Members for any contribution received from or made to the other Member or the other Member's Affiliates, as contemplated by Section 3.04 above) shall be credited as Mandatory Contributions to the Capital Account of the Member who made or whose Affiliate made such payments to such lender. (e) The additional Member Funding of CBL Member described in clauses (i) and (ii) of this Section 11.01(b) are hereinafter referred to as "CBL Member Mandatory Contributions". If CBL Member defaults in its obligation to make any CBL Member Mandatory Contribution when and as required by this Section 11.01(b), the JG Members shall have the right, but not the obligation, in the JG Members' sole and absolute discretion, and without limiting the JG Members' other rights and remedies under Article XX below, upon ten (10) days' prior written notice to CBL Member, to make a Member Funding to Member Newco in an amount equal to the amount of the CBL Member Mandatory Contribution that CBL Member has failed to make (such Member Funding by the JG Members, a "JG Members Substituted Default Contribution"), if, by the end of such ten (10)-day period, CBL Member has not contributed the defaulted CBL Member Mandatory Contribution to Member Newco. (f) All additional Member Funding required to be made by CBL Member and/or the JG Members Substitute Member hereunder and all JG Members Substituted Default Contributions that the JG Members elect to make hereunder may be made in the form of a capital contribution to Member Newco or a loan to Member Newco. All additional Member Funding required to be made by CBL Member and/or the JG Members Substitute Member under this Section 11.01 and all JG Members Substituted Default Contributions, if any, elected to be made by the JG Members under this Section 11.01 are collectively referred to herein as the "Mandatory Contributions". Any loan may be made by an Affiliate of a Member but only if such Affiliate is a wholly-owned subsidiary or wholly-owned entity of the Member. Any Mandatory Contributions made in the form of a capital contribution shall be credited to the Capital Account of the Member making such Mandatory Contribution and shall be entitled to a return equal to the Interest/Return, but shall not affect or modify the respective Profits Interests of any of the Members. Any Mandatory Contributions made in the form of a loan to Member Newco shall be unsecured, shall be evidenced by a non-negotiable promissory note, shall bear interest at a rate equal to the Interest/Return and shall be repaid only from Distributable Cash or Capital Events Distributions as set forth below. 7.39 Additional Non-Required Contributions. Except for the CBL Member Mandatory Contributions, and, from and after a JG Members Exit Event, the Mandatory Contributions of the JG Members Substitute Member, as set forth in Section 11.01, no Member shall be required to make any Member Funding or loans 40 66 to Member Newco. To the extent requested by the Managing Member, from time to time, one (1) or more Members may be permitted to make additional Member Funding or loans if and to the extent they so desire. In such event, the Members shall have the opportunity (but not the obligation) to participate in such Member Funding or loans on a pro rata basis in accordance with their Profits Interests. Any such additional contributions of capital or loans are referred to herein as the "Non-Required Contributions". If any Member shall decline to make such Non-Required Contributions, such declining Member shall not be deemed to be in default under this Agreement, and the other Members may make such Non-Required Contributions on behalf of the declining Members, but there shall be no change in any Member's Profits Interest. If a Member elects to make such Non-Required Contributions, however, such Member shall be entitled to either loan or contribute such funds to Member Newco. Any Non-Required Contributions made in the form of a capital contribution shall be credited to the contributing Member's Capital Account and shall be entitled to a return equal to the Interest/Return, but shall not affect or modify the respective Profits Interests of any of the Members. Any Non-Required Contributions made in the form of a loan to Member Newco shall be unsecured, shall be evidenced by a non-negotiable promissory note, shall bear interest at a rate equal to the Interest/Return and shall be repaid from Distributable Cash or Capital Events Distributions as set forth below. 7.40 No Third-Party Rights. This Agreement is not intended to create and/or confer, and shall not be construed to create and/or confer (directly, indirectly, contingent or otherwise), any rights or benefits (including but not limited to any right to require any additional contributions or loans to Member Newco by the Members, and/or any so-called third-party beneficiary rights) on any Person who is not a Member or Affiliate of a Member. 7.41 Member Construction Loans not Member Funding. Member Constructions Loans and accrued and unpaid interest thereon shall not be deemed to be either Initial Contributions, Mandatory Contributions, or Non-Required Contributions. 7.42 No Further Assessments on Membership Interests. Except as set forth in this Agreement, the Members are not subject to any further assessments of their Membership Interests. All Membership Interests of the Members, when first issued and paid for as described herein, shall be fully paid and nonassessable, subject to the provisions of this Article XI. DISTRIBUTIONS TO MEMBERS 7.43 Distributions of Distributable Cash. Subject to the provisions of Article XI above, all Distributable Cash shall be distributed to the Members on a periodic basis but not less frequently than quarterly in the following amounts and in the following order of priority: (a) To the Members, as an advance on distributions, if any, described in clauses (b) through (i) of this Section 12.01, until each Member has received an amount of Distributable Cash that is equal to (i) forty percent (40%) of the amount of net taxable income (other than long term capital gains) allocated to such Member for the previous taxable year of Member Newco and (ii) twenty 41 67 percent (20%) of any long term capital gains allocated to such Member for the previous taxable year of Member Newco (such distribution to the Members for a given period being collectively referred to herein as the "Tax Distribution"). [For purposes of this Agreement, there shall be no Tax Distribution for Member Newco's 2005 taxable year and Tax Distribution shall commence with Member Newco's 2006 taxable year and the first of such Tax Distributions shall equal forty percent (40%) of the amount of net taxable income allocated to such for Member Newco's 2005 taxable year but only for the period from the date of this Agreement to the end of Member Newco's 2005 taxable year and allocations of net taxable income of Member Newco that relate to the period from January 1, 2005 to the date of this Agreement shall be disregarded hereunder]; (b) The balance, if any, to the respective Members, in proportion to each Member's pro rata share of the accrued and unpaid Interest/Return on the aggregate unreturned Mandatory Contributions of all of the Members, to the extent of any accrued and unpaid Interest/Return on unreturned Mandatory Contributions; (c) The balance, if any, to the respective Members, in proportion to each Member's pro rata share of the aggregate unreturned Mandatory Contributions of all of the Members, to the extent of any unreturned Mandatory Contributions; (d) The balance, if any, to the respective Members, in proportion to each Member's pro rata share of the accrued and unpaid Interest/Return on the aggregate unreturned Non-Required Contributions of all of the Members, to the extent of any accrued and unpaid Interest/Return on unreturned Non-Required Contributions; (e) The balance, if any, to the respective Members, in proportion to each Member's pro rata share of the aggregate unreturned Non-Required Contributions of all of the Members, to the extent of any unreturned Non-Required Contributions; (f) The balance, if any, to CBL Member, to the extent of any accrued and unpaid Interest/Return on any unreturned Initial Contribution of CBL Member; (g) The balance, if any, to CBL Member, to the extent of any unreturned Initial Contribution of CBL Member; (h) The balance, if any, to the JG Members, pro rata, to the extent of any unreturned Initial Contribution of the JG Members; and (i) The balance, if any, to the Members, as follows: the JG Members (pro rata, in the aggregate) fifty percent (50%) CBL Member fifty percent (50%) 7.44 Capital Events Distributions. Subject to the provisions of Article XI and Section 12.01 above, all Capital Events Distributions shall be made to the Members in the same manner as set forth in Section 12.01 above. 7.45 Distribution of Incoming Equalizing Contribution to CBL Member. The entire amount of any Incoming Equalizing Contribution shall be distributed by 42 68 Member Newco to CBL Member and shall be applied to reduce (as to CBL Member only) the unpaid and/or unreturned amounts described in clauses (b) through (g) of Section 12.01 in reverse order. 7.46 Limitation Upon Distributions. No distributions shall be made to Members if prohibited by the Act. ALLOCATIONS OF NET PROFITS AND NET LOSSES 7.47 Net Profits. Member Newco will elect the traditional method with curative allocations on sale for purposes of allocation of gain under Section 704(c) of the Code. The JG Members and CBL Member will agree upon the amounts to be allocated to land and depreciable property. Net Profits shall be allocated for each Fiscal Year to the Members as follows, except as otherwise required by the relevant provisions of the Code including but not limited to Subchapter K and the Treasury Regulations applicable thereto: (a) First, to each Member in an amount of the "unrecovered" Net Losses allocated to such Member under Section 13.02(a) and Section 13.02(b) below, pro rata in reverse order according to the amount of such "unrecovered" Net Losses as between the Members; (b) The balance, if any, to the respective Members, in proportion to each Member's pro rata share of the Interest/Returns on the aggregate unreturned Mandatory Contributions of all of the Members, to the extent of any Interest/Return on such unreturned Mandatory Contributions distributed pursuant to Section 12.01(b); (c) The balance, if any, to the respective Members, in proportion to each Member's pro rata share of the Interest/Returns on the aggregate unreturned Non-Required Contributions of all of the Members, to the extent of any Interest/Return on such unreturned Non-Required Contributions distributed pursuant to Section 12.01(d); (d) The balance, if any, to CBL Member, to the extent of any Interest/Return on any unreturned Initial Contributions of CBL Member distributed pursuant to Section 12.02(f); and (e) The balance, if any, to the Members, as follows: the JG Members (pro rata, in the aggregate) fifty percent (50%) CBL Member fifty percent (50%) For purposes hereof, the term "unrecovered" Net Losses means Net Losses allocated to a Member for a Fiscal Year for which such Member has not received a corresponding Net Profits allocation in a subsequent Fiscal Year. Once such allocation of Net Profits is made to a Member equivalent to all or any portion of previously allocated Net Losses, such amounts of Net Losses shall no longer be deemed "unrecovered". 43 69 7.48 Net Losses. Subject to Section 13.03 below, Net Losses shall be allocated for each Fiscal Year to the Members as follows, except as otherwise required by the relevant provisions of the Code including but not limited to Subchapter K and the Treasury Regulations applicable thereto: (a) First, to each Member until the aggregate Net Losses allocated pursuant to this Section 13.02(a) for the current Fiscal Year and all previous Fiscal Years is equal to the aggregate amount of Net Profits allocated pursuant to Sections 13.01(b)-(e) in reverse order; (b) Second, to each Member until the aggregate Net Losses allocated pursuant to this Section 13.02(b) for the current Fiscal Year and all previous Fiscal Years is equal to the amount of the unreturned Mandatory Contributions, Non-Required Contributions, and Initial Contributions credited to each Member's Capital Account in the same proportion that each Member's respective contribution bears to the total of all Member's contributions to each category of Member Funding in reverse order; and (c) The balance, if any, to the Members, as follows: the JG Members (pro rata, in the aggregate) fifty percent (50%) CBL Member fifty percent (50%) 7.49 2005 Fiscal Year. For Member Newco's 2005 Fiscal Year, Net Profits and Net Losses from and including January 1, 2005 to and including the date of this Agreement shall be allocated one hundred percent (100%) to the JG Members, pro rata, and Net Profits and Net Losses after the date of this Agreement through and including December 31, 2005 shall be allocated as set forth in Sections 13.01 and 13.02, respectively. BOOKS AND RECORDS 7.50 Accounting Period. Member Newco's accounting period shall be the Fiscal Year. 7.51 Records and Reports. Member Newco shall keep at its principal place of business and at the Project the following records: (a) A current list of the full name and last-known address of each Member; 44 70 (b) A current list of the full name and last-known address of each assignee of any Member's rights to Distributable Cash or other property of Member Newco and a description of the rights assigned; (c) A copy of the Articles of Organization; (d) Copies of this Agreement and any agreements concerning classes or series of Membership Interests; (e) Copy of Member Newco's federal, state and local income tax returns and reports, if any, for the three (3) most recent Fiscal Years; (f) Copies of Member Newco's financial statements for all Fiscal Years from Member Newco's inception, which statements must include a balance sheet as of the end of such year and an income statement for such year, and accounting records of Member Newco; (g) Records of all proceedings of Members, if any; (h) Any written consents obtained from Members under the Act; (i) A statement of all contributions accepted by and all Member loans made to Member Newco, the identity of the contribution and the agreed value of the contribution and the amount of all such Member loans; and (j) A copy of all contribution agreements and loan agreements and/or promissory notes or similar instruments executed by Member Newco in favor of any Member. 7.52 Inspection of Records by Members. A Member shall have the right to inspect and copy, during regular business hours at Member Newco's principal executive office, the books and records described in Section 14.02 upon the Member giving Member Newco written notice not less than five (5) Days prior to the date the Member wishes to inspect and copy. 7.53 Tax Returns. The Managing Member shall cause the Accountants to prepare and timely file all tax returns required to be filed by Member Newco pursuant to the Code and all other tax returns deemed necessary and required in each jurisdiction in which Member Newco does business. Prior to filing such returns, the Managing Member shall provide drafts of such returns, or pertinent information therefrom, to the Members on or prior to March 1 of each Fiscal Year for review by such Members. The Members shall provide comments to Member Newco on such draft returns within seven (7) Days after receiving them. CBL Member shall use its reasonable good faith efforts to cause a delivery of K-1 forms to the Members by March 15 of each Fiscal Year. CBL Member shall provide each Member with CBL Member's reasonable good faith estimate of the projected taxable income and projected debt allocation to each Member for the next Fiscal Year by December 1 of each Fiscal Year. 7.54 Financial Statements. The Managing Member, shall deliver to the Members copies of unaudited internal annual financial statements as soon as available and in any event within thirty (30) Days after the close of each Fiscal Year of Member Newco and copies of audited annual financial statements as soon as available and in any event within ninety (90) Days after the close of 45 71 the Fiscal Year of Member Newco, including in each case a balance sheet as of the end of such Fiscal Year and the related statement of income for such Fiscal Year, in each case setting forth in comparative form the figures for the preceding Fiscal Year and each prepared according to GAAP. TERMINATION OF MEMBERSHIP INTEREST 7.55 Termination of Interest. Subject to Article XX of this Agreement, a Member's continued membership in Member Newco shall terminate upon the: (a) acquisition of the Member's complete Membership Interest by Member Newco; (b) bankruptcy of the Member; (c) dissolution of the Member; (d) a merger in which Member Newco is not the surviving entity; (e) an attempt by the Member to withdraw or retire from being a Member in violation of Section 15.02 below; or (f) the occurrence of any other event under the Act or applicable law that terminates the continued membership of the Member in Member Newco. 7.56 Withdrawal. Notwithstanding the foregoing, a Member shall not have the right under this Agreement to withdraw or retire from being a Member, to assign all or any portion of the Member's Membership Interest except as provided in Article XVI and Article XX hereof, to voluntarily become bankrupt, to voluntarily dissolve, or to otherwise voluntarily terminate the Member's Membership Interest, each of which is an Event of Default under Article XX of this Agreement. Nothing in this Section 15.02 shall prejudice the rights or remedies of the Members under Article XX. 7.57 Effect of Termination of Membership. If for any reason the continued membership of a Member is terminated, then, if such termination causes an Event of Dissolution, but the business of Member Newco is continued as provided in Section 17.02 of this Agreement, unless otherwise approved by the Members (other than the Member whose membership has been terminated) by a Majority Vote, a Member whose status as a Member is terminated, regardless of whether or not such termination was a result of a voluntary act by such Member, shall have only the right to receive distributions of Distributable Cash or Capital Events Distributions and shall thereafter no longer be or be deemed to be a Member. Additionally, if for any reason the continued membership of a Member is terminated, then (i) if such Member whose Membership Interest is terminated is the Managing Member, the Member shall immediately cease being the Managing Member, and (ii) such Member's voting rights shall terminate, subject to the provisions of Section 20.04 below. TRANSFERS OF MEMBERSHIP INTERESTS AND RESTRICTIONS ON TRANSFERS; IMPASSE PROVISIONS; PLEDGE OF MEMBERSHIP INTERESTS 7.58 Definition of "Assignment". For purposes of this Article, the words "assign" or "assignment" when used in the context of the assignment of all or any portion of a Member's Membership Interest, shall mean and include any transfer, alienation, sale, assignment, pledge, grant of security interest, lien or encumbrance, or other disposition, whether voluntarily or by operation of law. 46 72 7.59 Restriction on Assignment. Except as expressly permitted in this Article XVI, no Member shall assign all or any part of its Membership Interest in Member Newco. Any attempted assignment of all or any portion of a Membership Interest other than as permitted in this Article XVI shall be null and void and shall have no effect whatsoever. 7.60 Exempt Assignments. (a) Subject to the provisions of Sections 16.06 and 16.07 which shall be applicable to all assignments of Membership Interests, the prohibition on assignments set forth in Section 16.02 above shall not apply to an assignment of all or any part of a Membership Interest of any Member: (a) to any of the other Members or a wholly-owned Affiliate of a Member; (b) to family partnerships, family trusts, family limited liability companies or similar family entities so long as such Member or its principals continue to Control such Membership Interests and either the proposed transferee has sufficient net worth to cover any funding obligations of the transferring Member or the transferring Member agrees to and does guarantee the funding obligations of the proposed transferee; (c) With respect to the JG Members, to (A) any entity Controlled by Richard E. Jacobs, any JG Member, or Jacobs Realty Investors Limited Partnership; or (B) to a trust Controlled by the transferor or a trust benefiting any one or more Persons who bear the following family relationship to Richard E. Jacobs: (1) children (natural and adopted) and their natural and adopted descendants; (2) stepchildren and their natural and adopted descendants; (3) siblings and their natural and adopted descendants; or (4) a spouse of any Person described in subclause (1), (2) or (3); (d) where such assignments are part of a merger, consolidation or sale of all or substantially all of the assets or stock of the JG Members and/or its Affiliates or of CBL Member and/or Affiliates; (e) where such assignments are pursuant to the admission of an additional member(s) to Member Newco in accordance with this Agreement; and/or (f) where such assignments are pursuant to transfers set forth in Sections 16.04, 16.05, Article XVII and/or Section 20.03 below. In the event of any assignment permitted hereunder, the transferring Member shall provide written notice of such assignment to all of the Members and, if required, Member Newco's lender and shall take commercially reasonable steps so as to minimize, if practical, the possibility of termination under Section 708 of the Code. 47 73 (b) For purposes of clauses (ii), (iii) and (iv) of Section 16.03(a) above: (a) any Person having a right to revoke the trust in whole or in part shall be regarded as the beneficiary of the portion of the trust such Person has the right to revoke; (b) to the extent that more than one trustee is acting for a single trust, such trustees shall deliver to the Managing Member a written designation of one of them as their representative to Member Newco; (c) if, in case of clause (ii), the trustees fail to so designate a representative, their representative shall be such one of them as the Managing Member shall designate by written designation delivered to all of them from time to time; (d) all acts permitted to be taken by and all communications to be given to the owner of a Membership Interest in Member Newco shall be taken by or given to such representative with respect to the Membership Interest in Member Newco owned by the trust of which such representative is a trustee; and (e) any action taken by such a representative shall be deemed to be the act of and shall be binding upon each trust owning a Membership Interest in Member Newco for which such representative is trustee or is designated to act. (c) The restrictions on assignments set forth in this Article XVI shall apply to assignments of equity interests in a Member, provided that: (a) any assignment of equity interests in a Member to a Person described in clauses (i), (ii) or (iii) of Section 16.03(a) that would be permitted if such assignment were an assignment of all or any part of the Membership Interest of a Member shall also be permitted hereunder, as long as, after giving effect to such assignment, CBL Member Parent continues to Control CBL Member (in the case of an assignment of equity interests in CBL Member) and Richard E. Jacobs continues to Control the JG Member during his lifetime (in the case of an assignment of equity interests in any JG Member); (b) the restrictions on assignments set forth in this Article XVI shall not apply to any assignment of not more than fifteen percent (15%) of the equity interests in any JG Member to a third party or third parties who is not a Person described in clause (i) of this Section 16.03(c), as long as Richard E. Jacobs continues to Control the JG Member during his lifetime; (c) the restrictions on assignments set forth in this Article XVI shall not apply to any assignment of not more than fifteen percent (15%) of the equity interests in CBL Member to a third party or third parties who is not a Person described in clause (i) of this Section 16.03(c), as long as CBL Member Parent, continues to Control CBL Member; and 48 74 (d) the restrictions on assignments set forth in this Article XVI shall not apply to the sale or issuance of equity interests of CBL Member Parent or any Person that Controls CBL Member Parent or to any merger, consolidation or sale of all of the assets or partnership interests of CBL Member Parent or any Person that Controls CBL Member Parent. The parties hereto agree that neither party may transfer or issue or allow the transfer or issuance of equity interests in such Member in such manner as to violate the purposes of the transfer restrictions under this Article XVI. Upon the assignment of a Membership Interest of any Member to such Member's successor in an assignment permitted under this Article XVI, and the assumption by such successor of the assigning Member's obligations under this Agreement with respect to the Membership Interest so assigned, and the delivery to the other Members of a true and complete copy of the assignment and assumption agreement(s), such successor shall, upon such assignment and assumption, be considered a Member and may exercise all of such Member's rights. 7.61 Mandatory Buy/Sell on Impasse. (a) Impasse. Except as otherwise set forth in this Agreement, any dispute or disagreement arising between the Members in connection with any decision set forth in this Agreement that requires the unanimous approval of the Members under Section 5.03, which is not settled to the mutual satisfaction of CBL Member and the JG Members shall constitute an "Impasse," except that no dispute or disagreement arising between CBL Member and the JG Members with respect to matters referred to in Section 5.03(a) shall be an Impasse for purposes of this Section 16.04 before the January 1, 200[ ]. Either Member (the "Impasse Notice Sender") may notify the other Member (the "Impasse Notice Recipient") that an Impasse exists (the "Initial Impasse Notice") and that, unless the Impasse Notice Recipient shall provide its approval of the item in question, the Impasse Notice Sender may invoke the provisions of this Section 16.04. The Impasse Notice Recipient shall have (i) thirty (30) Days in the event of all matters other than an Impasse with respect to matters described in Sections 5.03(b), (c), (g), or (h) above (each, an "Expedited Impasse Event"), as set forth in subclause (ii) of this sentence; or (ii) ten (10) Days in the case of an Expedited Impasse Event, within which to either (x) note its continuing disapproval of the item in question, or (y) provide its consent to, approval of or agreement with the position of Impasse Notice Sender as to the decision or matter creating the Impasse. In the event the Impasse Notice Recipient does not respond to the Initial Impasse Notice within such 30-Day period or 10-Day period, as the case may be, the Impasse Notice Recipient shall be deemed to have consented to or approved of the decision or matter creating the Impasse in accord with the Impasse Notice Sender. If the Impasse Notice Recipient shall respond within such 30-Day or 10-Day period, as the case may be, by notifying the Impasse Notice Sender that the Impasse Notice Recipient continues to disapprove of the item in question, then either Member may thereupon give the other Member an Impasse Offer Notice as referenced below. If a Member gives the Initial Impasse Notice as provided in this Section 16.04, the other Member shall no longer have any right to give an Initial Impasse Notice with respect to the same Impasse. (b) Put/Call on Impasse. In the event that an Impasse occurs and the Initial Impasse Notice has been sent to the Impasse Notice Recipient and the Impasse Notice Recipient has responded within the applicable time parameters set 49 75 forth above with a response setting forth its continued disapproval of the item in question, then either Member (the "Impasse Initiator") may give written notice (the "Impasse Offer Notice") to the other Member (the "Impasse Respondent"), setting forth the Impasse Initiator's estimation of the aggregate asset value of the Project (net of any outstanding Constructions Loans and/or Permanent Financing/Refinancing) (the "Impasse Project Value") and stating the Impasse Initiator's intent to buy all, but not less than all, of the Impasse Respondent's and its Affiliates', if any, Membership Interest, whereupon the provisions set forth in this Section 16.04(b) and Section 16.04(c) shall apply. Notwithstanding the foregoing, if both CBL Member and the JG Members, or Affiliates of each of CBL Member and the JG Members, are also members or other equity holders in the Outparcel Venture or any other Entity that directly or indirectly owns or leases any real property that is contiguous with the Project, no Impasse Offer Notice shall be effective unless a contemporaneous notice is given under any comparable provision of any operating, partnership or similar agreement with respect to such real property between CBL Member and the JG Members, or their respective Affiliates, as the case may be. (a) Purchase Price. The Impasse Project Value shall provide the basis for determining the cash purchase price at which the Impasse Initiator would be willing to purchase the Membership Interests of the Impasse Respondent and its Affiliates (the "Impasse Initiator Offer Price") and the cash purchase price at which the Impasse Respondent may elect to acquire the Membership Interests of the Impasse Initiator and its Affiliates (the "Impasse Respondent Purchase Price") as follows: (i) The Impasse Initiator Offer Price shall be an amount equal to the amount that would be distributed to the Impasse Respondent upon a Capital Events Distribution in an amount equal to the Impasse Project Value (ii) The Impasse Respondent Purchase Price shall be an amount equal to the amount that would be distributed to the Impasse Initiator upon a Capital Events Distribution in an amount equal to the Impasse Project Value. (b) Exercise of Impasse Put/Call. Upon receipt of the Impasse Offer Notice, the Impasse Respondent and its Affiliates, if any, shall then be obligated either : To sell to the Impasse Initiator for cash the entire Membership Interest of the Impasse Respondent and its Affiliates, if any, in Member Newco for the Impasse Initiator Offer Price, as described above and subject to adjustments as provided in Section 16.04(c) below; (Y) To purchase the entire Membership Interest of the Impasse Initiator and its Affiliates, if any, in Member Newco for the Impasse Respondent Purchase Price, as described above and subject to adjustments as provided in Section 16.04(c) below; or 50 76 (Z) To consent to, approve of or agree with the position of the Impasse Initiator as to the decision or matter creating the Impasse. (c) The Impasse Respondent shall notify the Impasse Initiator of its election within (x) thirty (30) Days after the date of receipt of the Impasse Offer Notice as to any Impasse that occurs with respect to any matter other than an Expedited Impasse Event, or (y) ten (10) Days after the date of receipt of the Impasse Offer Notice as to any Impasse that occurs relating to an Expedited Impasse Event. Failure of a Impasse Respondent to give the Impasse Initiator notice that such Impasse Respondent has elected to proceed under Section 16.04(b)(ii)(Y) or Section 16.04(b)(ii)(Z) above shall be conclusively deemed to be an election under Section 16.04(b)(ii)(X) (i.e., to sell). (d) If the Impasse Respondent timely notifies the Impasse Initiator that such Impasse Respondent has elected to proceed under Section 16.04(b)(ii)(Z), the Impasse shall be deemed resolved, and neither Member shall be required or entitled to purchase the other Member's Membership Interest or sell its own Membership Interest pursuant to this Section 16.04 with respect to the resolved Impasse. If the Impasse Respondent timely notifies the Impasse Initiator that such Impasse Respondent has elected to proceed under Section 16.04(b)(ii)(X) or Section 16.04(b)(ii)(Y), or if the Impasse Respondent is deemed to have elected to proceed under Section 16.04(b)(ii)(X), then the Impasse Initiator shall have a further fifteen (15) Days after receipt of such notice or the effective date of such deemed election to notify the Impasse Respondent that the Impasse Initiator consents to, approves of or agrees with the position of the Impasse Respondent as to the decision or matter creating the Impasse. If the Impasse Initiator timely so notifies the Impasse Respondent, the Impasse shall be deemed resolved, and neither Member shall be required or entitled to purchase the other Member's Membership Interest or sell its own Membership Interest pursuant to this Section 16.04 with respect to the resolved Impasse. If the Impasse Initiator does not timely so notify the Impasse Respondent, the parties shall proceed pursuant to the foregoing election or deemed election of the Impasse Respondent. (c) Closings. (a) Location and Time Periods. The closing of any sale of a Membership Interest in Member Newco pursuant to this Section 16.04 shall be held at the principal offices of Member Newco, unless otherwise mutually agreed, on a mutually acceptable date not more than ninety (90) Days after (A) the receipt by the Impasse Initiator of the written notice of election by the Impasse Respondent, or (B) after the expiration of the time within which the Impasse Respondent must so elect, as provided in Section 16.04(b)(iii). (b) Closing Adjustments. At the closing, any closing adjustments as set forth in the Impasse Offer Notice (and if not so designated in the Impasse Offer Notice then those adjustments which are then usual and customary in Raleigh, North Carolina) shall be made between the purchasing party and the selling party as of the date of closing. Any Member transferring its Membership Interest shall 51 77 transfer such Membership Interest free and clear of any liens, encumbrances or any interests of any third party and shall execute or cause to be executed any and all documents required to fully transfer such Membership Interest to the acquiring Member including, but not limited to, any documents necessary to evidence such transfer, and all documents required to release the interest of any other party who may claim an interest in such Member's Membership Interest. Any monetary default or obligation of the selling Member must be cured out of the proceeds from such sale at the closing. Following the date of closing, the selling Member shall have no further rights to any distributions of Distributable Cash or Capital Events Distributions, and all such rights shall vest in the selling Member's transferee. 7.62 Right of First Refusal; Buy/Sell. (a) Right of First Refusal. No transfer of any Membership Interests shall be permitted under this Section 16.05(a) before January 1, 20[ ]. If, at any time after December 31, 20[ ], a Member shall desire to transfer all (and not less than all) of its Membership Interest (which shall include its Affiliates' Membership Interest, if any) to any Person and such transfer is not an exempt assignment pursuant to Section 16.03 above nor a transfer otherwise permitted under this Article XVI, then, in such event and subject to the rights of the Non-Transferring Members set forth in this Section 16.05(a), said Member (the "Transferring Member", which term shall include said Member's Affiliates holding a Membership Interest) may transfer its Membership Interest to such third party (the "Third-Party Purchaser") only after compliance with the procedures of this Section 16.05(a). The Transferring Member shall give written notice (the "RoFR Notice") to the other Members (the "Non-Transferring Members") of its intent to transfer its Membership Interest and the Third-Party Purchaser to whom it desires or intends to transfer same, the terms of such proposed purchase including the price to be paid, method of payment and any contingencies or other material provisions of such proposed purchase, and the time parameters within which said transfer is to take place. Notwithstanding the foregoing, if both CBL Member and the JG Members, or Affiliates of each of CBL Member and the JG Members, are also members or other equity holders in the Outparcel Venture or any other Entity that directly or indirectly owns or leases any real property that is contiguous with the Project, no RoFR Notice shall be effective unless a contemporaneous notice is given under any comparable provision of any operating, partnership or similar agreement with respect to such real property between CBL Member and the JG Members, or their respective Affiliates, as the case may be. The Non-Transferring Members shall have sixty (60) Days from the date of their receipt of the RoFR Notice (the "RoFR Period") to elect to purchase all and not less than all of the Transferring Member's Membership Interest for the price upon which said Third-Party Purchaser is willing to pay for said Membership Interest. In the event the Non-Transferring Members either elect not to purchase the Transferring Member's Membership Interest or do not notify the Transferring Member in writing of their decision by the end of the RoFR Period referred to above, then the Transferring Member may, for a period of one-hundred twenty (120) Days after the end of the RoFR Period referred to above, transfer the referenced Membership Interest to the Third-Party Purchaser but only upon such terms as are substantially similar to the terms at which said Membership Interest was offered to the Non-Transferring Members. If the Transferring Member shall not have closed on the transfer of the referenced Membership Interest to said Third-Party Purchaser within said 120-Day period, said transfer shall once again become subject to the terms and conditions of this Section 16.05(a), the Transferring Member shall be required to once again to comply with the 52 78 procedures set forth in this Section 16.05(a), and the Transferring Member shall be precluded from giving another RoFR Notice under this Section 16.05(a) for a period of six (6) months following the expiration of said 120-Day period. In the event the Non-Transferring Member(s) exercise their right to purchase the Membership Interest of the Transferring Member, the closing of said transaction shall occur no later than one-hundred twenty (120) Days from the end of the RoFR Period referenced above. Notwithstanding the provision of this Section 16.05(a), in the event that during the RoFR Period the Third-Party Purchaser shall revoke its offer to purchase or the Transferring Member shall determine to not accept the offer of the Third-Party Purchaser, then the Transferring Member shall be entitled to revoke, in writing, the RoFR Notice and the Non-Transferring Members shall not have the right to purchase the Transferring Member's Membership Interest on the terms of such RoFR Notice. (b) Buy/Sell. (a) No transfer of any Membership Interests shall be permitted under this Section 16.05(b) before January 1, 20[ ]. At any time after December 31, 20[ ], a Member (the "Buy/Sell Initiator") may give written notice (the "Buy/Sell Offer Notice") to the other Member (the "Buy/Sell Respondent"), setting forth the Buy/Sell Initiator's intent to buy all, but not less than all, of the Membership Interests of the Buy/Sell Respondent and its Affiliates, if any, whereupon the provisions set forth in this Section 16.05(b) shall apply. Notwithstanding the foregoing, if both CBL Member and the JG Members, or Affiliates of each of CBL Member and the JG Members, are also members or other equity holders in the Outparcel Venture or any other Entity that directly or indirectly owns or leases any real property that is contiguous with the Project, no Buy/Sell Offer Notice shall be effective unless a contemporaneous notice is given under any comparable provision of any operating, partnership or similar agreement with respect to such real property between CBL Member and the JG Members, or their respective Affiliates, as the case may be. If a Member gives a Buy/Sell Offer Notice as provided in this paragraph, the other Member shall no longer have any right to give its own Buy/Sell Offer Notice under this paragraph while a sale or purchase of a Membership Interest under this Section 16.05(b) pursuant to such Buy/Sell Offer Notice is pending. 53 79 (i) Purchase Price. The Buy/Sell Initiator shall specify in its Buy/Sell Offer Notice the Buy/Sell Initiator's estimation of the aggregate asset value of the Project (net of any outstanding Constructions Loans and/or Permanent Financing/Refinancing) (the "Buy/Sell Project Value"). The Buy/Sell Project Value shall provide the basis for determining the cash purchase price at which the Buy/Sell Initiator would be willing to purchase the Membership Interests of the Buy/Sell Respondent and its Affiliates (the "Buy/Sell Initiator Offer Price") and the cash purchase price at which the Buy/Sell Respondent may elect to acquire the Membership Interests of the Buy/Sell Initiator and its Affiliates (the "Buy/Sell Respondent Purchase Price") as follows: (I) The Buy/Sell Initiator Offer Price shall be an amount equal to the amount that would be distributed to the Buy/Sell Respondent upon a Capital Events Distribution in an amount equal to the Buy/Sell Project Value. (II) The Buy/Sell Respondent Purchase Price shall be an amount equal to the amount that would be distributed to the Buy/Sell Initiator upon a Capital Events Distribution in an amount equal to the Buy/Sell Project Value. (ii) Exercise of Buy/Sell. Upon receipt of the Buy/Sell Offer Notice, the Buy/Sell Respondent shall then be obligated either: (I) To sell to the Buy/Sell Initiator for cash the entire Membership Interest of the Buy/Sell Respondent and its Affiliates, if any, in Member Newco for the Buy/Sell Initiator Offer Price, as described above and subject to adjustments as provided in Section 16.05(b)(ii)(B) below; or (II) To purchase the entire Membership Interest of the Buy/Sell Initiator and its Affiliates, if any, in Member Newco for the Buy/Sell Respondent Purchase Price, as described above and subject to adjustments as provided in Section 16.05(b)(ii)(B) below. (iii) The Buy/Sell Respondents shall notify the Buy/Sell Initiator of their election within thirty (30) Days after the date of receipt of the Buy/Sell Offer Notice. Failure of Buy/Sell Respondents to give the Buy/Sell Initiator notice 54 80 that such Buy/Sell Respondents have elected to proceed under Section 16.05(b)(i)(B)(II) above shall be conclusively deemed to be an election under Section 16.05(b)(i)(B)(I) (i.e., to sell). (b) Closings. (i) Location and Time Periods. The closing of any sale of a Membership Interest in Member Newco pursuant to this Section 16.05(b) shall be held at the principal offices of Member Newco, unless otherwise mutually agreed, on a mutually acceptable date not more than ninety (90) Days after (1) the receipt by the Buy/Sell Initiator of the written notice of election by the Buy/Sell Respondent, or (2) after the expiration of the time within which the Buy/Sell Respondents must so elect, as provided in Section 16.05(b)(i)(C). (ii) Closing Adjustments. At the closing, any closing adjustments as set forth in the Buy/Sell Offer Notice (and if not so designated in the Buy/Sell Offer Notice then those adjustments which are then usual and customary in Raleigh, North Carolina) shall be made between the purchasing party and the selling party as of the date of closing. Any Member transferring its Membership Interest shall transfer such Membership Interest free and clear of any liens, encumbrances or any interests of any third party and shall execute or cause to be executed any and all documents required to fully transfer such Membership Interest to the acquiring Member including, but not limited to, any documents necessary to evidence such transfer, and all documents required to release the interest of any other party who may claim an interest in such Member's Membership Interest. Any monetary default or obligation of the selling Member must be cured out of the proceeds from such sale at the closing. Following the date of closing, the selling Member shall have no further rights to any distributions of Distributable Cash or Capital Event Distributions, and all such rights shall vest in the selling Member's transferee. 7.63 Conditions of Assignments. Prior to any assignee of a Membership Interest becoming a Member, the following conditions must have been satisfied: (a) The assignor, his legal representative or authorized agent must have executed a written instrument of assignment of such Membership Interest in form and substance reasonably satisfactory to the Members; (b) The assignee must have executed a written agreement, in form and substance reasonably satisfactory to the Members, to assume all of the duties and obligations of the assignor under this Agreement with respect to the assigned Membership Interest and to be bound by and subject to all of the terms and conditions of this Agreement; 55 81 (c) The assignor, his legal representative or authorized agent, and the assignee must have executed a written agreement, in form and substance reasonably satisfactory to the Members, to indemnify and hold Member Newco and the Members harmless from and against any loss or liability arising out of the assignment; (d) The assignee must have executed such other documents and instruments as the Members may deem necessary to effect the admission of the assignee as a Member; and (e) The assignee (if not previously a Member of Member Newco) or the assignor must have paid the expenses incurred by Member Newco in connection with the admission of the assignee to Member Newco. (f) In the case of an assignment to a Third-Party Purchaser pursuant to Section 16.05(a) in which the JG Members are the Transferring Member (a "JG Members Exit Event"), (i) such Third-Party Purchaser (the "JG Members Substitute Member") shall have made a Member Funding to Member Newco (a "Incoming Equalizing Contribution") (which Incoming Equalizing Contribution Member Newco shall thereupon immediately distribute to CBL Member) in an amount such that, after giving effect to the distribution of the Incoming Equalizing Contribution to CBL Member, the JG Members Substitute Member's Capital Interest (expressed as a percentage) shall be equal to the JG Members Substitute Member's Profits Interest and (ii) the JG Members Substitute Member or its Affiliates shall provide CBL Member and its Affiliates, if any, and/or third-party lenders to Member Newco, as the case may be, with such additional agreements or undertakings as CBL Member or such lenders may reasonably require to replace or hold CBL Member and its Affiliates harmless from any liability, loss, cost or expense arising out of that portion of any then-outstanding loans (other than loans that are Mandatory Contributions or Non-Required Contributions) and/or Affiliate Loan Guarantees theretofore provided by CBL Member or its Affiliates that corresponds to the JG Members Substitute Member's Capital Interest (expressed as a percentage). 7.64 Lender Approval. In the event that, pursuant to the terms of any loan agreement, security agreement, deed of trust or other agreement existing at any time between Member Newco and any lender, the approval of such lender is required prior to the time that any transfer or assignment of any Membership Interest in Member Newco may occur, then, notwithstanding any provision of this Article XVI to the contrary, no transfer or assignment of any Membership Interest in Member Newco shall occur until all required approvals and/or consents of any such lender have been obtained. Notwithstanding anything herein to the contrary, if the required lender's approval has not been obtained within the time period set forth in Section 16.04(b)(iii) or the RoFR Period, then such period will be extended to a date that is three (3) Days after all Members have received written notice of lender's consent, but in no event shall such extension be longer than thirty (30) Days. 7.65 Pledge of Membership Interests. Except as relates to any pledge of Membership Interests required by any financing by Member Newco or any collateral assignment of a Member's rights to receive distributions in respect of such Member's Membership Interest, no Member may pledge, mortgage, hypothecate, assign as security, create a security interest in or charge against or other encumbrance of all or any part of its Membership Interest, whether directly or indirectly, voluntarily or involuntarily or by operation of law. Notwithstanding the foregoing, no Member shall be obligated to pledge its Membership Interests in connection with any such financing. Failure of a Member to agree to pledge its Membership Interests in connection with any such financing shall not constitute an Impasse, and Section 16.04 shall not apply to such failure. The JG Members and CBL Member agree that each of them will, upon request of a lender to Member Newco or the Company, collaterally assign for the benefit of the lender, their respective rights to receive distributions in respect of their Membership Interests. 7.66 Mutually Exclusive Rights. The rights of the Members described in Section 16.04, Section 16.05(a), and Section 16.05(b) in this Article XVI and in Section 20.03 are mutually exclusive, meaning that, if the exercise, or the right to exercise, one of such rights is pending or in process (the "Active Right"), neither of the other rights can be initiated, and no assignment that would be subject to either of the other rights can be initiated or completed, until the Active Right closes, lapses, or is otherwise terminated. 56 82 DISSOLUTION, TERMINATION AND WINDING-UP 7.67 Events Causing Dissolution. Member Newco shall be dissolved upon the occurrence of any of the following events (collectively, "Events of Dissolution"): (a) when the period, if any, fixed for the duration of Member Newco shall expire pursuant to Section 2.05 of this Agreement; (b) by action of the Members pursuant to the Act; (c) by action of and at the option of the remaining Members in the event of (i) the termination of any Member as provided in Section 15.01 of this Agreement; (ii) the acquisition by Member Newco of the complete Membership Interest of any Member; or (iii) the occurrence of any other event that terminates the continued membership of any Member; or (d) a merger in which Member Newco is not the surviving organization ("Merger"). 7.68 Continuation. Notwithstanding Section 17.01(c), Member Newco is not dissolved and is not required to be wound up by reason of any Event of Dissolution arising out of the termination of the continued Membership of a Member if there is at least one (1) remaining Member and the existence and business of Member Newco are continued by the remaining Member or by the affirmative Majority Vote of the Members if there is more than one remaining Member other than the Member as to whom the Event of Dissolution occurred, obtained no later than ninety (90) Days after the occurrence of the Event of Dissolution. 7.69 Effect of Dissolution. Upon dissolution of Member Newco, Member Newco shall cease to carry on its business, except to the extent necessary (or appropriate) for the winding-up of the business of Member Newco. Upon the occurrence of an Event of Dissolution (other than by reason of a Merger), the Managing Member shall file with the Secretary of State of Ohio a notice of dissolution pursuant to the Act. 7.70 Winding-Up, Liquidation and Distribution of Assets. 57 83 (a) Upon the occurrence of an Event of Dissolution, other than as a result of a Merger, an accounting shall be made by the Accountants of the accounts of Member Newco and Member Newco's assets, liabilities and operations, from the date of the last previous accounting until the date of the occurrence of such Event of Dissolution. The Managing Member shall immediately proceed to wind-up the affairs of Member Newco. (b) If Member Newco is dissolved and its affairs are to be wound-up, the Managing Member shall: (a) Sell or otherwise liquidate all of Member Newco's assets as promptly as practicable (except to the extent the Members may determine to distribute any assets to the Members in kind); (b) Allocate any Net Profit or Net Loss resulting from such sales to the Members in accordance with Article XIII hereof; (c) Discharge all liabilities of Member Newco, including liabilities to Members who are creditors, to the extent otherwise permitted by law, other than liabilities to Members for distributions, and establish such Reserves as may be reasonably necessary to provide for contingent or other liabilities of Member Newco; (d) Distribute the remaining assets to the Members, either in cash or in kind, in accordance with the positive balance (if any) in the Capital Account of each Member (as determined after taking into account all Capital Account adjustments for Member Newco's Fiscal Year during which the liquidation occurs), with any balance in excess thereof being distributed in proportion to the Members' respective Profits Interests. Any such distributions in respect of Capital Accounts shall, to the extent practicable, be made in accordance with the time requirements set forth in Section 1.704-1(b)(2)(ii)(b)(2) of the Treasury Regulations; and (e) If any assets of Member Newco are to be distributed in kind, the net fair market value of such assets shall be determined. Such assets shall be deemed to have been sold as of the date of dissolution for their fair market value, and the Capital Accounts of the Members shall be adjusted pursuant to the provisions of this Agreement to reflect such deemed sale. (c) Notwithstanding anything to the contrary in this Agreement, upon a liquidation within the meaning of Section 1.704-1(b)(2)(ii)(g) of the Treasury Regulations, if any Member has a deficit Capital Account (after giving effect to all contributions, distributions, allocations and other Capital Account adjustments for all taxable years, including the year during which such liquidation occurs), such Member shall have no obligation to make any Member Funding to reduce or eliminate the negative balance of the Capital Account of such Member. 7.71 Articles of Termination. Upon the dissolution and the completion of winding-up of Member Newco, the Managing Member or such other Member as may be designated by the Members, shall execute articles of termination of Member Newco 58 84 and file same with the Secretary of State of Ohio and execute and file with the Secretary of State of North Carolina such filings as are required to withdraw Member Newco from North Carolina. Upon such filing, the existence of Member Newco shall be terminated. 7.72 Return of Contribution Nonrecourse to Other Members. Except as provided by law or as expressly provided in this Agreement, upon dissolution, each Member shall look solely to the assets of Member Newco for the return of the Capital Account of the Member. If Member Newco property remaining after the payment or discharge of the debts and liabilities of Member Newco is insufficient to return the Capital Account of one or more Members, including, without limitation, all or any part of that Capital Account attributable to Member Funding, then such Member or Members shall have no recourse against any other Member. MISCELLANEOUS PROVISIONS 7.73 Applicable Law. This Agreement, and the application or interpretation hereof, shall be governed exclusively by its terms and by the laws of the State of Ohio, and specifically the Act. 7.74 No Action or Partition. No Member has any right to maintain any action for partition with respect to the property of Member Newco. 7.75 Execution of Additional Instruments. Each Member hereby agrees to execute such other and further statements of interest and holdings, designations, powers of attorney and other instruments necessary to comply with any laws, rules or regulations. 7.76 Waivers. The failure of any party to seek redress for violation of or to insist upon the strict performance of any covenant or condition of this Agreement shall not prevent a subsequent act, which would have originally constituted a violation, from having the effect of an original violation. 7.77 Rights and Remedies Cumulative. The rights and remedies provided by this Agreement are cumulative and the use of any one right or remedy by any party shall not preclude or waive the right to use any or all other remedies. Such rights and remedies are given in addition to any other rights the parties may have by law, statute, ordinance or otherwise. 7.78 Heirs, Successors and Assigns. Each and all of the covenants, terms, provisions and agreements herein contained shall be binding upon and inure to the benefit of the parties hereto and, to the extent permitted by this Agreement, their respective heirs, legal representatives, successors and assigns. 7.79 Creditors. None of the provisions of this Agreement shall be for the benefit of or enforceable by any creditors of Member Newco or by any Person not a party hereto. 7.80 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which shall constitute one and the same instrument. 59 85 7.81 Federal Income Tax Elections; Tax Matters Member. All elections required or permitted to be made by Member Newco under the Code shall be made by the unanimous consent of the JG Members and CBL Member, except that the Tax Matters Member (the "TMM") shall make an election under Sections 108/1017 or Section 754 of the Code upon request of any Member. The TMM shall be responsible for all administrative and judicial proceedings for the assessment and collection of tax deficiencies or the refund of tax overpayments arising out of a Member's distributive share of items of income, gain, deduction and/or credit of any other Company item (as that term is defined in the Code or in the Treasury Regulations) allocated to the Members affecting any Member's tax liability. The Members hereby appoint CBL Member as the initial TMM. The TMM shall promptly give notice to all Members of any administrative or judicial proceeding pending before the Internal Revenue Service involving any Company item and the progress of any such proceeding. Such notice shall be in compliance with such regulations as are issued by the Internal Revenue Service, except that, if such notice is not required by such regulations to be given to the Members, the TMM shall nevertheless give such notice to all of the Members. The TMM shall have all the powers provided to a tax matters partner in Sections 6221 through 6233 of the Code, including the power to select the forum to litigate any tax issue or liability arising from Company items, except that the TMM shall not settle any tax controversy without the consent of all of the Members or extend the statute of limitations with respect to any matter which is attributable to any Company item or affecting any item pending before the Internal Revenue Service. The provisions on limitations of liability of the Members and indemnification set forth in Article VIII shall be fully applicable to the TMM in its, his or her capacity as such. The TMM may resign at any time by giving written notice to Member Newco and each of the other Members. If CBL Member resigns as TMM, [JG Manager] shall immediately become the successor TMM. If [JG Manager] thereafter resigns as the TMM, then CBL Member shall immediately become the successor TMM, unless CBL Member elects not to become the successor TMM, in which event a new TMM shall be elected from among the Members by a Majority Vote. Additionally, if CBL Member is serving as the TMM at any time, but neither CBL Member nor any of its Affiliates is then a Member, CBL Member shall thereupon be deemed to have resigned as the TMM, and, if any JG Member is serving as the TMM at any time, but no JG Member nor any Affiliate of a JG Member is then a Member, such JG Member shall thereupon be deemed to have resigned as TMM. 7.82 Notices. Unless oral notice is expressly permitted by this Agreement, any notices or other communications required or permitted to be given by this Agreement must be given in writing and either (i) personally hand-delivered, (ii) mailed by prepaid certified or registered mail, with return receipt requested, (iii) sent by generally recognized overnight delivery service to the party to whom such notice or communication is directed with delivery fee prepaid, or (iv) sent via telefax transmission, and, in the case of notices sent by any medium other than as set forth in (ii) above, the burden of proof of receipt of such notice shall be on the sender thereof. Any such notices shall be sent to the address of such party as follows: If to Member Newco, to: [Triangle Town Member LLC] 2030 Hamilton Place Boulevard Suite 500, CBL Member Center Chattanooga, Tennessee 37421 60 86 Attention: Charles B. Lebovitz (423) 490-8662 (fax) If to any of the Members, to: The address of such Member as set forth on Exhibit B. Any party may change such party's address for purposes of this Agreement by giving notice of such change to the other parties pursuant to this Section 18.10. 7.83 Amendments. This Agreement may be amended, modified or supplemented only by a writing executed by each of the Members; provided, however, that CBL Member is hereby authorized and directed to amend Exhibit B to reflect changes in the information set forth on Exhibit B. 7.84 Enforceability. Wherever possible each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. 7.85 Drafting. The Members acknowledge that each has participated substantially in the negotiation and drafting of this Agreement and agree that this Agreement shall not be construed more favorably toward one Member than another due to the fact that this Agreement may have been physically drafted by one Member or its counsel. 7.86 Further Assurances. The Members each agree to cooperate, and to execute and deliver in a timely fashion any and all additional documents to effectuate the purposes of Member Newco and this Agreement. 7.87 Time. Time is of the essence of this Agreement, and to any payments, allocations and distributions provided for under this Agreement. 7.88 Integration. This Agreement and the Master Transaction Agreement, dated as of October [ ], 2005, by and among the JG Members, JG North Raleigh L.L.C., an Ohio limited liability company, JG Triangle Peripheral South LLC, an Ohio limited liability company, and CBL Member Parent, and the exhibits hereto and thereto, embody the entire agreement and understanding among the Members and supersede all prior agreements and understandings, if any, among and between the Members relating to the subject matter hereof and thereof. 7.89 Termination of Letter Agreement. As set forth in Section 18.16 above, the Letter Agreement is hereby terminated and of no further force and effect. 7.90 Public Announcements; Precedence in Publicity. Any release to the public of information with respect to the Project, Member Newco or any of Member Newco's assets or activities contemplated herein or any matters set forth in this Agreement will be made only after CBL's approval and only in the form 61 87 approved by CBL and its counsel; except that, in any advertising or promotional materials or communications relating to Member Newco and/or the Project, in any form and in any media, including without limitation print, outdoor advertising, broadcast or online, The Richard E. Jacobs Group, Inc. or its designated Affiliate shall receive "first billing" in relation to any reference to CBL or any Affiliate and in no less prominent typeface or positioning within the material or communication, and any reference to CBL or any Affiliate shall be accompanied by a reference to The Richard E. Jacobs Group, Inc. or its designated Affiliate that meets the foregoing requirements. The provisions of the immediately preceding sentence shall no longer apply if Richard E Jacobs ceases to Control The Richard E. Jacobs Group, Inc., but thereafter, so long as any Affiliate of The Richard E. Jacobs Group, Inc. is a Member, The Richard E. Jacobs Group, Inc. or its designated Affiliate shall receive at least "equal billing" in relation to any reference to CBL or any Affiliate and in no less prominent typeface or positioning within the material or communication, and any reference to CBL or any Affiliate shall be accompanied by a reference to The Richard E. Jacobs Group, Inc. or its designated Affiliate that meets the foregoing requirements. 7.91 Estoppel Certificates. Each Member shall, at any time and from time to time upon not less than fifteen (15) Days' prior written request by another Member, execute and deliver to the Member making such request a written certificate stating whether: (i) this Agreement is in full force and effect; (ii) this Agreement has been modified or amended and, if so, identifying and describing each and every such modification or amendment; and (iii) to the best knowledge of the Member executing said certificate, whether: (A) any facts or circumstances exist that, with the passage of time, the giving of any required notices, or both, would constitute a default hereunder, or (B) any uncured default then exists on the part of any Member under this Agreement and, if so, specifying the nature and extent of such facts, circumstances, or default (as the case may be), including those which may give rise to offsets, defenses and counterclaims. The obligations set forth in this Section 18.19 shall apply only to matters known to the certifying Member. Any such certificate may be relied upon by the Member requesting same, but only to the extent that such Member is without knowledge to the contrary. A Member who executes such a certificate shall not be liable for any erroneous statements contained therein, provided that such statements shall have been made in good faith and that any such errors were unintentional. 7.92 Legal Counsel. The parties hereto acknowledge that the law firm of Shumacker Witt Gaither & Whitaker, P.C. ("SWGW"), legal counsel to CBL Member, may act as legal counsel to Member Newco following the execution of this Agreement and with respect to matters concerning Member Newco and CBL Member as a Member, and with respect to the Project. Likewise, the parties agree that Thompson Hine LLP ("TH"), legal counsel to the JG Members, may serve as legal counsel to Member Newco following the execution of this Agreement and with respect to matters concerning Member Newco and the JG Members as Members, and with respect to the Project. Each Member does hereby waive any conflict of interest that such counsel may have or be deemed to have when representing Member Newco, CBL Member or the JG Members as to any matter that does not involve a dispute between the Members. In any such dispute between the Members, the Members acknowledge that SWGW may represent CBL Member and TH may represent the JG Members unless applicable ethics rules prevent SWGW and/or TH from acting in such capacities and each Member does hereby waive any conflict of interest that such counsel may have or be deemed to have as the result of that representation. Each Member may from time to time designate additional or alternative counsel to such Member for the purposes of this Section 18.20, and 62 88 the foregoing waivers, subject to the foregoing limitations and exceptions, shall also apply as to such additional or alternative counsel. o REPRESENTATIONS AND WARRANTIES 7.93 Representations of the JG Members. Each of the JG Members hereby represents to CBL Member and to Member Newco as of the date hereof that: (a) Organization. (a) such JG Member is a limited liability company or (as to JGRI) corporation, existing and in full force and effect or (as to JGRI) in good standing under and by virtue of the laws of its state of organization or incorporation; (b) That the Persons executing this Agreement on behalf of such JG Member are duly elected, qualified and acting as its officers or members, as the case may be. (b) Authority. (a) That all actions and resolutions, whether partnership, corporate or otherwise, necessary to authorize such JG Member to enter into this Agreement have been taken and adopted; (b) That all consents by third Persons which such JG Member is by the terms of its agreements, if any, with any such third Persons, required to obtain prior to its execution of this Agreement have been so obtained by such JG Member; (c) That such JG Member has, and the Persons executing this Agreement on their behalf have, all requisite power and authority and has (have) been duly authorized to enter into this Agreement; (d) That this Agreement has been duly executed on such JG Member's behalf; (e) That such JG Member has full right and lawful authority to enter into and perform its covenants and obligations under this Agreement for the full term hereof, and has full right and lawful authority to make its representations and warranties hereunder; and (f) That upon execution of this Agreement by each party hereto, this Agreement will constitute the legal, valid and binding obligation of such JG Member and will be enforceable against it and its successors and assigns in accordance with its terms, except as such enforcement may be limited by (A) bankruptcy, insolvency, moratorium, or other similar laws 63 89 affecting a creditor's rights and remedies or the relief of debtors generally at the time in effect, (B) the discretion of the court before which any proceeding involving the same may be brought, and (C) equitable principles at the time in effect limiting the remedy of specific performance. (c) Conflict. Neither the execution, delivery or performance by such JG Member of this Agreement or the transactions contemplated hereby will conflict with, or will result in a breach of, or will constitute a default under, (i) any agreement or instrument by which such JG Member or any of its Affiliates may be bound or (ii) any judgment, statute, rule, law, order, decree, writ or injunction of any court or Governmental Authority applicable to such JG Member or any of its Affiliates and/or its or their respective property and assets for which consent has not been obtained. 7.94 Representations of CBL Member. CBL Member hereby represents to the JG Members and to Member Newco as of the date hereof that: (a) Organization. (a) CBL Member is a limited liability company, organized, existing and in good standing under and by virtue of the laws of the State of [North Carolina]; (b) That the Person(s) executing this Agreement on CBL Member's behalf are duly elected, qualified and acting as its officer(s), manager(s) or member(s) (as the case may be). (b) Authority. (a) That all actions and resolutions, whether partnership, corporate or otherwise, necessary to authorize CBL Member to enter into this Agreement have been taken and adopted; (b) That all consents by third Persons which CBL Member is, by the terms of their agreements, if any, with any such third Persons, required to obtain prior to their execution of this Agreement have been so obtained by CBL Member; (c) That CBL Member has, and the Persons executing this Agreement on its behalf have, all requisite power and authority and has (have) been duly authorized to enter into this Agreement; (d) That this Agreement has been duly executed on behalf of CBL Member; (e) That CBL Member has full right and lawful authority to enter into and perform its covenants and obligations under this 64 90 Agreement for the full term hereof, and has full right and lawful authority to make CBL Member's representations and warranties hereunder; and (f) That upon execution of this Agreement by each party hereto, this Agreement will constitute the legal, valid and binding obligation of CBL Member and will be enforceable against CBL Member and its successors and assigns in accordance with its terms, except as such enforcement may be limited by (A) bankruptcy, insolvency, moratorium, or other similar laws affecting a creditor's rights and remedies or the relief of debtors generally at the time in effect, (B) the discretion of the court before which any proceeding involving the same may be brought, and (C) equitable principles at the time in effect limiting the remedy of specific performance. (c) Conflict. Neither the execution, delivery or performance by CBL Member of this Agreement or the transactions contemplated hereby will conflict with, or will result in a breach of, or will constitute a default under, (i) any agreement or instrument by which CBL Member or any of its Affiliates may be bound or (ii) any judgment, statute, rule, law, order, decree, writ or other judgment, statute, rule, law, order, decree, writ or injunction of any court or Governmental Authority applicable to CBL Member or any of its Affiliates and/or their respective property and assets for which consent has not been obtained. 7.95 Survival of Representations and Warranties. All representations and warranties contained in this Agreement will be effective on the date of this Agreement and shall survive until the termination of this Agreement in accordance with its terms. DEFAULT PROVISIONS 7.96 Events of Default. A Member is in default or breach (each a "Default") hereunder if: (a) Monetary Defaults. CBL Member or its Affiliates fails to make a CBL Member Mandatory Contribution within the time parameters, including applicable cure periods, set forth in Section 11.01; (b) Bankruptcy. Such Member or any Affiliate of such Member that has provided an Affiliate Loan Guarantee shall (i) voluntarily commence any proceeding or file any petition for liquidation (a liquidating Chapter 11 bankruptcy) or a petition for a Chapter 7 bankruptcy, (ii) consent to the institution of, or fail to contravene in a timely and appropriate manner, any such proceeding or the filing of such petition, (iii) apply for or consent to the appointment of a receiver, custodian, sequestrator or similar official for such Member or Affiliate or for a substantial part of any of its property or assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors, (vi) become unable, admit in writing its inability, or fail generally to pay its debts as they become due, or (vii) take corporate or partnership action for the purpose of effecting any of the foregoing; 65 91 (c) Insolvency. Any involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction, and in either case shall continue undismissed for one-hundred eighty (180) Days or an order or decree approving or ordering any of the following shall continue unstayed and in effect for one-hundred eighty (180) Days, seeking (i) relief in respect of such Member or any Affiliate of such Member that has provided an Affiliate Loan Guarantee or of a substantial part of any of its property or assets, (ii) the appointment of a receiver, trustee, custodian, sequestrator or similar official for such Member or Affiliate, or for a substantial part of any of its property or assets or (iii) the winding-up or liquidation of such Member or Affiliate; (d) Seizure of Assets. All or substantially all of such Member's assets, or the assets of an Affiliate of such Member that has provided an Affiliate Loan Guarantee, or such Member's Membership Interest, or any part of such Member's Membership Interest is assigned following their attachment, execution or other judicial seizure thereof, excluding any such attachment, execution or other judicial seizure that results from a lender to Member Newco exercising its rights under a guaranty; (e) Transfers. Either: (i) an assignment prohibited by Article XVI occurs with respect to such Member and such assignment or other transaction is not rescinded within ninety (90) Days after the non-assigning Member gives written notice to the assigning Member specifying such default; or (ii) an indirect transfer of a Member's equity interests occurs other than as permitted in Article XVI and such assignment is not rescinded within ninety (90) Days after the non-assigning Member gives written notice to the Member whose equity interests were assigned specifying such default; or (iii) an assignment otherwise permitted by Article XVI occurs or is attempted with respect to such Member but such assignment or the assignee thereof fails to comply with or violates the provisions of Article XVI with respect to such assignment, i.e., the failure to observe the requirements set forth in Section 16.07 above, and such failure or violation is not corrected within ninety (90) Days after a non-assigning Member gives written notice to such assigning Member specifying such default; (f) Dissolution. A Member dissolves or causes itself to be dissolved (unless prior to or simultaneous with such dissolution, a successor acquires such Member's entire Membership Interest in an assignment permitted under Article XVI) or a court of competent jurisdiction determines that a Member is completely and totally unable to perform its duties and obligations under this Agreement; (g) Breach of Representation or Warranty. Any material breach by a Member of any representation or warranty set forth in Article XIX above and such breach is not corrected within ninety (90) Days after the Non-Defaulting Member delivers to the Defaulting Member a written notice specifying the breach of representation or warranty; and (h) Other Material Default. Except as to specific defaults or breaches set forth in this Section 20.01 other than in this Section 20.01(h), a breach of or default under any other material provision of this Agreement which is to be observed or performed by such Member, or by an Affiliate of such Member under any Affiliate Loan Guarantee, occurs and remains uncured for more than thirty (30) Days after Member Newco or, if such default or breach is by the Managing Member or its Affiliates, after any other Member gives written notice to the Defaulting Member specifying such default; except that, if the breach or default 66 92 being claimed is a breach or default by an Affiliate of a Member in the performance of its duties under any Affiliate Loan Guarantee, the other Member(s) must give written notice to the Defaulting Member claiming such breach or default, and the Defaulting Member shall have thirty (30) Days within which to either cure or cause its Affiliate to cure the breach or default or contest the breach or default; and except that, if the breach or default being claimed is a breach or default by a Member in the performance of its duties as a Member, the other Member(s) (excluding Affiliates of the Member who is claimed to be in breach or default) must give written notice to the Defaulting Member claiming such breach or default and the Defaulting Member shall have one-hundred twenty (120) Days within which to either cure the breach or default or contest the breach or default; and except that, if the breach or default being claimed is a breach or default by the Managing Member under Section 6.02 above, the other Member(s) must give written notice to the Defaulting Member claiming such breach or default, and the Defaulting Member shall have sixty (60) Days (thirty (30) Days in the case of a breach or default under Section 6.02) above within which to either cure the breach or default or contest the breach or default; and, except that if the breach or default being claimed is a breach or default under the Property Management Agreement by the Managing Member in its capacity as the Property Manager or by an Affiliate of the Managing Member in its capacity as the Property Manager, the provisions of this Article XX shall not apply to such breach or default, and the provisions of the Property Management Agreement shall control. A Member in Default hereunder is referred to as the "Defaulting Member". The Member(s) who are not in Default and who are not Affiliates of the Member who is in Default are herein sometimes referred to as the "Non-Defaulting Member(s)." For purposes hereof, a "Default" shall not be deemed to occur so as to trigger the remedies set forth below until the expiration of any applicable notice, grace and cure periods. 7.97 Remedies Upon Default. In the event of the occurrence of a Default, the Defaulting Member shall, pursuant to Section 20.04 below, cease to have any approval rights with respect to Member Newco, except for the Default Approval Rights defined in Section 20.04, until the Default has been cured by the Defaulting Member, and the Non-Defaulting Member(s) shall have the right to exercise the following remedies as their exclusive remedies for the particular type of Default: (a) For Defaults described in Section 20.01(a), the exclusive remedies to the Non-Defaulting Members shall be an action for injunctive relief and/or monetary damages and/or the remedy set forth in Section 20.03; (b) For Defaults described in Sections 20.01(b), (c), (d) and/or (f), the exclusive remedy to the Non-Defaulting Member(s) shall be as set forth in Section 20.03; (c) For Defaults described in Section 20.01(e), the exclusive remedies to the Non-Defaulting Member(s) shall be an action for injunctive relief and/or money damages; (d) For Defaults described in Section 20.01(g), the exclusive remedy to the Non-Defaulting Member(s) shall be an action for money damages; (e) For Defaults described in Section 20.01(h) involving any claim of breach or default by the Managing Member in its capacity as the Managing Member 67 93 in the performance of its duties, the exclusive remedy to the Non-Defaulting Members shall be to replace the Managing Member, after the notice and cure periods and other procedures set forth in Section 20.01(h) have expired and/or a claim has been made that the Managing Member has failed to perform its duties as the Managing Member and the Managing Member has not contested such claim), and in the event of any such replacement, [JG Manager} automatically, if the Managing Member to be replaced is CBL Member, and, otherwise, another Member elected by a Majority Vote, shall thereupon, without any other action taken by the Members, become the Managing Member, the replaced Managing Member shall thereafter have only the rights of a Member with respect to the management of the affairs of Member Newco, and the replaced Managing Member or any Affiliate of the replaced Managing Member then serving as the Property Manager shall thereupon automatically be removed as the Property Manager pursuant to the Property Management Agreement; and (f) For Defaults described in Section 20.01(h) involving any claim of breach or default by a Member, other than the Managing Member in its capacity as the Managing Member, in the performance of its duties, the exclusive remedy to the Non-Defaulting Member(s) shall be that the Defaulting Member shall lose all approval rights except Default Approval Rights as set forth in Section 20.04 after the notice and cure periods and other procedures set forth in Section 20.01(h) have expired and/or a claim has been made that such Defaulting Member has failed to perform its duties as a Member and such Defaulting Member has not contested such claim and any duties or responsibilities of such Defaulting Member may be undertaken by the Non-Defaulting Members. 7.98 Purchase Upon Default. (a) Reasons for Granting Option to Purchase. To more fully protect the Members against certain Defaults of other Members as set forth in Section 20.02 above where such Defaults provide for the remedy set forth in this Section 20.03, each Member hereby grants to the other Members that are not its Affiliate (which grantee shall be the JG Members if CBL Member were the Defaulting Member, and which grantee shall be CBL Member if any JG Member were the Defaulting Member, and which grantee would include any other Affiliates of such JG Member or CBL Member, respectively, if either of such JG Member or CBL Member had transferred all or a portion of its Membership Interests to Affiliates pursuant to exempt transfers under Section 16.03 above) (the "Non-Affiliated Members") and are not in default hereunder the right and option to purchase the entire Membership Interest of the Defaulting Member and its Affiliates, if any, upon the occurrence of a Default by the Defaulting Member and/or its Affiliate(s) and the failure of the Defaulting Member to cure the Default within the applicable cure period, if any, provided in Section 20.01 above on and subject to the terms and conditions set forth in this Section 20.03. Once said option has been exercised, the Non-Affiliated Members shall have the right to complete the purchase pursuant to its exercise of said option regardless of any potential or actual detriment that exercising such option may cause the Defaulting Member; provided, however, that the Defaulting Member may cure the Default that gave rise to said option to purchase and pay all of the Non-Affiliated Members' costs, expenses and reasonable attorney's fees incurred in connection therewith, at any time prior to the required date of closing, in which event the Non-Defaulting Member shall not have the right to purchase the Membership Interests of the Defaulting Member and its Affiliates, if any, pursuant to this Section 20.03 with respect to such Default. 68 94 (b) Exercise of Option. If the Non-Affiliated Members shall at any time desire to purchase the entire Membership Interest of a Defaulting Member and its Affiliates, if any, when allowed so to do as the result of circumstances triggering the use of this Section 20.03, they may exercise said right and option to purchase a Defaulting Member and its Affiliates' entire Membership Interest by giving written notice to all Members unequivocally stating that they are exercising such right and option (said notice is hereinafter referred to as the "Exercise Notice"). Except as provided in the immediately following sentence of this Section 20.03(b), the purchase price for said Defaulting Member and its Affiliates' entire Membership Interest (said amount being hereinafter referred to as the "Default Purchase Price") shall be an amount equivalent to seventy-five percent (75%) of the value of the Defaulting Member and its Affiliates' Membership Interest computed by utilization of the Appraisal Procedure set forth on Exhibit D, with such Appraisal Procedure being used to determine the Appraised Value of the Project and the resulting value of a Member's Membership Interest as set forth on Exhibit D (the "Default Formula Price"). If the Appraised Value of the Project as so determined, net of any outstanding Constructions Loans and/or Permanent Financing/Refinancing, is less than the sum of all unreturned Initial Contributions, Mandatory Contributions and Non-Required Contributions of the Members and accrued and unpaid Interest/Return thereon, the Default Purchase Price shall be the greater of (i) the Default Formula Price and (ii) an amount equal to the amount that would be distributed to the Defaulting Member and its Affiliates upon a Capital Events Distribution in an amount equal to the Appraised Value of the Project as so determined, net of any outstanding Constructions Loans and/or Permanent Financing/Refinancing. The Default Purchase Price, as determined under the two immediately preceding sentences, shall be adjusted pursuant to the provisions of Section 20.06 below. Said purchase shall be on the terms and pursuant to the procedures set forth herein and the closing of said transaction shall take place in accordance with the provisions of Section 20.06 below. If Non-Affiliated Members do not exercise said right and option in the manner and within the time aforesaid, the Non-Affiliated Members shall be deemed to have waived said right and option to purchase, but only as to the specific default giving rise to said right and option to purchase, and not others, and the Non-Affiliated Members shall continue to have and enjoy the right and option to so purchase created under and by virtue of this Article XX in all other, further and/or subsequent cases to which this Section 20.03 applies. As between the Non-Affiliated Members, they shall have the right to purchase the Defaulting Member and its Affiliates' entire Membership Interest in proportion to their Profits Interests but without the inclusion of the Defaulting Member and its Affiliates' Profits Interests and if one or less than all Non-Affiliated Members do not desire to purchase the Defaulting Member and its Affiliates' Membership Interest, the Non-Affiliated Members so desiring to purchase shall have the right to purchase the entire (but no fractional portion of the) Membership Interest of the Defaulting Member. (c) Expenses. All reasonable fees, costs and expenses of the appraisers and otherwise associated with the Appraisal Procedure and the purchase of the Defaulting Member and its Affiliates' Membership Interest shall be the responsibility of and shall be paid by the Defaulting Member. (d) Membership Interest Will be Acquired by Non-Affiliated Members for the Default Purchase Price. It is the intention and express agreement of the Members that if a default shall occur hereunder to which this Section 20.03 applies, the Non-Affiliated Members shall have the right to purchase the Membership Interest of a Defaulting Member and its Affiliates, if any, for the Default Purchase 69 95 Price and shall not (directly, indirectly, contingent or otherwise) be obligated to pay more than the Default Purchase Price, as determined in accordance with this Agreement, in order to acquire the Membership Interest of the Defaulting Member and its Affiliates, if any, regardless of whether the aggregate amount of the indebtedness, obligations and/or liabilities secured by any liens or encumbrances on such Membership Interest exceeds the Default Purchase Price determined under this Agreement. 7.99 Default Approval Rights; Loss of Approval Rights on Defaults. The Members agree that a Defaulting Member shall forfeit its rights to approve Company decisions and activities during the pendency of a Default until such time as the Default is cured but subject to the provisions of this Section 20.04. Notwithstanding any provision in this Section 20.04 to the contrary, a Member shall retain its rights (herein, the "Default Approval Rights") under this Agreement to approve the following actions regardless of any default by such Member: (a) The filing of bankruptcy by Member Newco or the filing by Member Newco for the appointment of a receiver for the assets of Member Newco; (b) Dissolution or termination of Member Newco; (c) Except as set forth in a Pro Forma and/or an Operating Budget as required funding from the Members, the entering into any contract or agreement, including guarantees, that creates liability of the Defaulting Member beyond its Member Funding or that requires the guarantees of the Defaulting Member or its Affiliates; or (d) Except for typographical errors or corrections or the amendment of Exhibit B to reflect changes to the information set forth thereon in accordance with this Agreement, the amendment or modification of this Agreement. 7.100 Attorney's Fees. Except as otherwise provided herein, if (i) any party fails to perform any of its obligations under this Agreement, or (ii) any litigation is commenced between the parties concerning any provision of this Agreement or any rights or duties of any person relative thereto, or (iii) any party institutes any proceeding in any bankruptcy or similar court which has jurisdiction over any party (or any or all of its property or assets), the non-defaulting party or party prevailing in such litigation, or the non-bankrupt party (as the case may be) shall be entitled, in addition to damages and such other and further relief as may be granted, to all costs incurred in enforcing and defending its rights and remedies under this Agreement, including but not limited to reasonable attorney's fees, out-of-pocket costs and expenses, and court costs, together with interest on the foregoing from the date same are incurred until fully repaid at a rate equal to the Interest/Return, or such lesser rate of interest as may from time to time be the maximum rate of interest which may, under the circumstances, be charged under applicable law. If neither party is the sole prevailing party or each party prevails on its claims against the other party, then each party shall be responsible for its own attorney's fees, out-of-pocket expenses and costs and court costs. 70 96 7.101 Closing. (a) Closing Terms. This Section 20.06 sets forth and will govern the procedures, terms and conditions pursuant to which a Member selling its Membership Interest (the "Selling Member") will be transferred to a Member purchasing the Selling Member's Membership Interest (the "Purchasing Member") pursuant to Section 20.03. (b) Purchase Price. As used herein, the term purchase price shall mean in the case of a transfer pursuant to Section 20.03, the Default Purchase Price, as the same may be increased or decreased pursuant to the provisions of this Section 20.06. (c) Default Purchase Closing Date and Place. The closing of the purchase/sale of a Member's Membership Interest pursuant to Section 20.03 and this Section 20.06 shall be held at the principal office of Member Newco on a business Day that is determined by the Purchasing Member, but in any event unless the closing is delayed through no fault of the Purchasing Member, no later than thirty (30) Days following the date of the Exercise Notice; provided, however, in the event that the closing of such purchase/sale has not occurred by the date that is one-hundred eighty (180) Days following the date of such Exercise Notice and such delay or failure to close is not the result of any action or inaction of the Selling Member and the Selling Member is otherwise ready and willing to close and/or the delay or failure to close is not the result of any court action or inaction or restraining order or injunction, then such failure to close within such time parameter shall be deemed a waiver of the Purchasing Member's rights to purchase the Selling Member's Membership Interest by reason of the Default that triggered the Purchasing Member's rights under Section 20.03 above. Such waiver shall not, however, be deemed to be a waiver of any other Default that may exist at the time or that may occur thereafter. The date determined in accordance with the foregoing provisions for closing of any transaction to which this Section 20.06 is applicable is hereinafter referred to as the "Default Purchase Closing Date". (d) Payment; Escrow. On the Default Purchase Closing Date, the Default Purchase Price may be deposited in good federal funds that are immediately available at the place of closing in escrow with the title company involved with the transaction or with either Purchasing Member's or Selling Member's counsel. (e) Title. Title to the Selling Member's Membership Interest shall be transferred free and clear of all liens and encumbrances (and the possibility thereof) of every nature and description whatsoever. (f) Selling Member's Default. If a Selling Member shall fail or refuse to complete a transfer after the Purchasing Member becomes obligated to purchase pursuant to Section 20.03, as the case may be, the Purchasing Member may, at its option, elect to pursue any and all rights and remedies under this Agreement, at law, in equity, or otherwise against the Selling Member. Furthermore, each Member takes cognizance of the fact that a breach of the Selling Member's obligations under Section 20.03, as the case may be, may cause irreparable injury to the business and property of the Purchasing Member, and that there are inadequate remedies available at law to redress such injury. Consequently, the Purchasing Member shall have the right to seek and obtain specific performance of the obligations of the Selling Member that arise under this Article XX (as 71 97 well as any collateral obligations under other provisions of this Agreement, at law, in equity, or otherwise). The foregoing provisions shall not be construed to preclude, restrict or limit any other or further rights or remedies that the Purchasing Member may have under this Agreement, at law, in equity, or otherwise. (g) Adjustments. On the Default Purchase Closing Date, the following adjustments shall be made to the Default Purchase Price and the following disbursements shall be made from the escrow by the escrow holder: (a) the aggregate amount of all amounts owed by the Selling Member and its Affiliates to Member Newco, including accrued and unpaid interest thereon, shall be subtracted from the Default Purchase Price; and (b) the aggregate amount of all liens of a definite and ascertainable amount upon the Membership Interest of the Selling Member shall be deducted in determining the Default Purchase Price. (h) Costs. In the event of a transfer pursuant to the provisions of Section 20.03, all title charges, recording fees, transfer taxes, and other fees, costs and expenses of the purchase, sale and transfer of the Membership Interest shall be charged to and paid in cash by the Selling Member through the escrow on the Default Purchase Closing Date. (i) Payment. On the Default Purchase Closing Date, that portion of the Default Purchase Price that is held in escrow after the adjustments, payments and disbursements that are described in Section 20.06(g) and (h) (hereinafter referred to as the "Payment Amount") shall be disbursed to the Selling Member in immediately available Federal funds through the escrow, except that if the Payment Amount is a negative amount, the Selling Member shall pay such amount to the Purchasing Member in immediately available Federal funds through the escrow on the Default Purchase Closing Date. If the Selling Member fails to pay such amount, the Purchasing Member may elect to complete its purchase of the Selling Member's Membership Interest and the amount owed by the Selling Member shall accrue interest from the date of transfer until all principal and accrued interest is paid in full at a rate equal to the Interest/Return plus five percent (5%) but not in excess of the maximum amount allowable under applicable law. (j) Transfer of Title. On the Default Purchase Closing Date: (a) the Selling Member shall, simultaneously with the payment of the Payment Amount (or if a negative number, at the time same would be payable if it was a positive number) sell, assign and transfer the Selling Member and its Affiliates' entire Membership Interest to the Purchasing Member by written assignment containing (A) a warranty of the Selling Member's authority, (B) a special or limited warranty of title against the Selling Member's own acts, and (C) confirmation of the provisions set forth in Section 20.06(i); (b) the Purchasing Member shall, simultaneously with its receipt of the assignment referred to in this Section 20.06(j), execute an agreement whereby it accepts such assignment and assumes the 72 98 obligations of the Selling Member under this Agreement with respect to the Membership Interest of the Selling Member that the Purchasing Member is acquiring; and (c) all other Members shall simultaneously with the events described in Sections 20.06(j)(i) and (ii), agree in writing to and shall consent to such assignment and the transactions effected thereby. All such documents of assignment, acceptance, assumption, consent and confirmation shall be in form and substance reasonably satisfactory to the Purchasing Member, and shall be duly executed by all Members required to execute same in recordable form. APPOINTMENT OF MANAGING MEMBER AS ATTORNEY-IN-FACT 7.102 Appointment. Each Member hereby irrevocably constitutes and appoints the Managing Member as such Member's true and lawful attorney-in-fact with full power and authority in said Member's name, place and stead for the limited purposes of executing, acknowledging, delivering, swearing to, filing and recording at the appropriate public office such documents as may be necessary or appropriate to carry out the provisions of this Agreement, as follows: (a) All certificates and other instruments (including counterparts of this Agreement), and any amendment thereof, which the Managing Member deems appropriate to qualify or continue Member Newco as a limited liability company in any jurisdiction in which Member Newco may conduct business; (b) All instruments which the Managing Member deems appropriate to reflect a change or modification of this Agreement approved by the Members in accordance with the terms of this Agreement; and (c) All instruments, documents, consents and agreements, financing statements, security agreements, and continuation statements which the Managing Member deems appropriate or necessary to effect and consummate any decision that the Managing Member is authorized to make under this Agreement and any decision unanimously approved or deemed unanimously approved by the Members if such approval is necessary pursuant this Agreement. 7.103 Survival. The appointment by all Members of the Managing Member as their attorney-in-fact shall be deemed to be a power coupled with an interest, in recognition of the fact that each of the Members under this Agreement will be relying upon the power of the Managing Member to act as contemplated by this Agreement in any filing and other action on behalf of Member Newco and shall survive the bankruptcy, death, dissolution, disability or incompetence of any Member hereby giving such power or the transfer or assignment of all or any part of the Membership Interest of such Member; provided, however, that in the event of the transfer by a Member of all or any part of said Member's Membership Interest, the foregoing power of attorney of a transferor Member shall survive such transfer only until such time as the transferee shall have been admitted to 73 99 Member Newco as a Member and has, among other things contained herein, agreed to appoint the Managing Member as its attorney-in-fact as provided in this Article XXI, and all required documents and instruments shall have been duly executed, filed and recorded to effect such substitution. [Signatures on next page] 74 100 IN WITNESS WHEREOF, the undersigned have entered into this Agreement as of the date and year first written above. [CBL TRIANGLE TOWN MEMBER], LLC By: -------------------------------------------- REJ REALTY LLC By: _______________________________ Judson E. Smith Executive Vice President JG REALTY INVESTORS CORP. By: _______________________________ Judson E. Smith Executive Vice President JG MANAGER LLC By: _______________________________ Judson E. Smith Executive Vice President 75 101 Attached to and made a part of that certain Limited Liability Company Agreement of [Triangle Town Member LLC], dated as of the date first above written. EXHIBIT A Description of the Real Estate 102 Attached to and made a part of that certain Limited Liability Company Agreement of [Triangle Town Member LLC], dated as of the date first above written. EXHIBIT B Members Profits Initial Capital Name, Address Interest Contribution - ------------- -------- ------------ REJ Realty LLC c/o The Richard E. Jacobs Group, Inc. [ ]% $[ ] 25425 Center Ridge Road Cleveland, Ohio 44145-4122 Attention: President (440) 808-6903 (fax) JG Realty Investors Corp. c/o The Richard E. Jacobs Group, Inc. [ ]% $[ ] 25425 Center Ridge Road Cleveland, Ohio 44145-4122 Attention: President (440) 808-6903 (fax) JG Manager LLC c/o The Richard E. Jacobs Group, Inc. [ ]% $[ ] 25425 Center Ridge Road Cleveland, Ohio 44145-4122 Attention: President (440) 808-6903 (fax) with a copy (as to each JG Member) to: General Counsel The Richard E. Jacobs Group, Inc. 25425 Center Ridge Road Cleveland, Ohio 44145-4122 (440) 808-6903 (fax) - ------------------------------------------------------------------------------ [CBL Triangle Town Member], LLC..... 50% $0.00 2030 Hamilton Place Boulevard Suite 500, CBL Member Center Chattanooga, Tennessee 37421....... Attention: Charles B. Lebovitz (423) 490-8662 (fax) with a copy to: 103 Jeffery V. Curry, Esq. Shumacker Witt Gaither & Whitaker, P.C. 2030 Hamilton Place Blvd. Suite 210, CBL Member Center Chattanooga, Tennessee 37421 (423) 899-1278 (fax) 104 Attached to and made a part of that certain Limited Liability Company Agreement of [Triangle Town Member LLC], dated as of the date first above written. EXHIBIT C FEES TO MEMBERS The following fees shall be paid by Member Newco to the JG Members (pro rata) and CBL Member or their Affiliates, as so designated: Construction Management Fee - for services of CBL Member and/or its Affiliates in the construction management of the Project with respect to Future Development Activities a Construction Management Fee of three-and-one-quarter percent (3.25%) of the construction costs of the Project with respect to such Future Development Activities, as set forth in the approved Pro Forma, plus, as to Future Development Activities for which EMJ serves as general contractor, a further fee to be paid to EMJ to be set forth in the approved Pro Forma for with respect to such Future Development Activities. The referenced Construction Management Fees shall be paid as set forth in the applicable approved Pro Forma. Development Fee - for services of CBL Member and/or its Affiliates and the JG Members and/or their Affiliates in Future Development Activities, a Development Fee in an amount to be agreed by the Members prior to the commencement of Future Development Activities. The Development Fee shall be paid in equal monthly increments over the Construction Period of the Project with respect to such Future Development Activities. Management Fee - for services of CBL Member or its Affiliate pursuant to CBL Member's asset/financial management responsibility for the Project, CBL Member or its Affiliate shall receive an amount equal to three percent (3%) of the "Project Income" as hereinafter defined, from the date of this Agreement until the earlier of the termination of this Agreement or the termination of CBL Member or its Affiliate as the Property Manager pursuant to the Property Management Agreement. The entitlement of CBL Member or its Affiliate to the Management Fee described herein shall be further outlined and subject to the terms of the Property Management Agreement. Leasing Fees - for services of CBL Member or its Affiliate pursuant to CBL Member's leasing responsibility for the Project, CBL Member or its Affiliate shall receive the following: A. With respect to each tenant who executes a renewal lease after the expiration of its initial lease, including the expiration of any options to extend such lease, which renewal lease has a term of at least three (3) years, an amount equal to Two Dollars ($2.00) per square foot of said tenant's space, payable upon the date the such tenant is open and paying rent; B. With respect to the replacement of any tenant (other than an Anchor) with another tenant, an amount equal to Four Dollars ($4.00) per square foot of said tenant's space, payable upon the date the such tenant is open and paying rent; 1 105 C. With respect to the replacement of an Anchor with another Anchor or replacement tenant(s) and/or upon the addition of an Anchor to the Project, an amount equal to Two Dollars ($2.00) per square foot of said Anchor's or replacement tenant(s)' space in the Project, payable (i) for leases, upon the date the such Anchor or replacement tenant(s) is/are open and paying rent and (ii) for non-lease transactions where the Anchor owns its space, upon the date such Anchor is open; D. With respect to each temporary tenant in the Project who executes an occupancy agreement, as defined below, an amount equal to ten percent (10%) of the rent generated from said occupancy agreement, payable on full execution of the license agreement with such licensee. The term "occupancy agreement" shall mean a lease or license to occupy space in the Project that has a term of one year or less and the term "rent" shall mean only the minimum annual rent and percentage rent paid by the tenant; and E. With respect to each sponsorship or co-branding transaction at or relating to the Project (other than such sponsorship(s) with the Coca Cola company or other soft-drink companies and their respective affiliates and/or affiliated or unaffiliated bottlers regarding the placement of vending machines in the common areas of the Project, for which the Members agree no sponsorship fee shall be paid by Member Newco), an amount equal to five percent (5%) of the gross revenues generated by such sponsorship or co-branding transaction, payable on full execution of the sponsorship or co-branding agreement (as to the portion of such gross revenues paid upon such execution) and monthly as to gross revenues paid during the term of such sponsorship or co-branding agreement. The entitlement of CBL Member or its Affiliate to the Leasing Fees described herein shall be further outlined and subject to the terms of the Property Management Agreement Outparcel and Pad Sales/Lease Fees - for services of CBL Member in selling or ground leasing Outparcels and pads, a fee of five percent (5%) of the sales price on a sale of an Outparcel or pad, payable on the closing of such sale, or five percent (5%) of the ground lease value on any ground lease of an Outparcel or pad, payable one-half (1/2) on the full execution of the ground lease and one-half (1/2) on the date the ground lessee is open and paying rent. The "ground lease value" shall be the sum of the annual rent to be paid over the greater of (i) ten years or (ii) term of the ground lease (but in no event more than twenty years). Financing Fee - for services of CBL Member in the placement of Permanent Financing/Refinancing on behalf of Member Newco, CBL Member shall receive a fee equal to twenty-five hundredths percent (.25%) of the amount of such Permanent Financing/Refinancing. The Financing Fee shall be paid at the closing of such Permanent Financing/Refinancing. DEFINITIONS "Project Income"- subject to the exceptions noted below, shall mean (i) all revenue derived from the Project on a cash basis, including without limitation, (A) all minimum rents, (B) percentage rents, if any, (C) license fees paid by licensees and ninety-five percent of sponsorship income, (D) receipts from public telephones, storage lockers, vending machines, (E) stroller and other 2 106 equipment rentals, (F) advertising revenues, (G) gift card or gift certificate sales revenues, and (H) interest on tenant security deposits unless such interest is required to be paid to such tenants; and (ii) payments by tenants for utilities, insurance, real estate taxes, common area maintenance and operating expenses but, with respect to such payments referred to in this clause (ii), only to the extent that there is a profit (i.e., an excess of such payments over the actual costs paid/recovered) generated therefrom to Member Newco. Project Income shall not include proceeds from the Construction Loan and Permanent Financing/Refinancing; proceeds from settlement of fire/casualty losses (except for such proceeds from loss of rents insurance), condemnation proceeds, sales of outparcels and other peripheral property, or items of a similar nature. ADDITIONAL FEES, LIMITATIONS AND CERTAIN THIRD-PARTY FEES The Members may be entitled to other fees pursuant to the terms of the Property Management Agreement and any consulting agreements or other agreements that may be entered into between Member Newco and such Member or its Affiliates, subject to the provisions of Section 5.03 of this Agreement. In addition, Member Newco will pay a fee to the JG Members (pro rata) and CBL Member in an amount equal to the applicable hourly rates charged by the JG Members and CBL Member, respectively, and approved by the Members, for in-house legal services provided for the benefit of Member Newco in connection with the development, financing, leasing or operation of the Project and will reimburse each Member for third-party costs incurred by such Member for such services. The Members agree that, except as may be provided in an approved Pro Forma, there shall be no Leasing Fees or leasing expenses for the initial lease-up of particular phases or portions of the Project. Likewise, any in-house costs a Member may incur during a Construction Period for any particular Future Development Activity, including but not limited to travel costs and personnel costs, shall not be reimbursed by Member Newco to such Member. The Members shall bear their own legal fees and other costs for the negotiation and entering into of this Agreement and Member Newco shall not reimburse any Member for any costs or expenses incurred by such Member or its Affiliates prior to the date of this Agreement. No fee or compensation shall be paid by Member Newco to any Member or its Affiliates on the placement of any Construction Loan. Except for the Construction Management Fee to be paid to CBL Member as set forth above, no additional fees or compensation shall be paid by Member Newco to any Member or its Affiliates for the performance of construction management services. 3 107 Attached to and made a part of that certain Limited Liability Company Agreement of [Triangle Town Member LLC], dated as of the date first above written. EXHIBIT D APPRAISAL PROCEDURE Procedure for Appraisals. For purposes of determining the appraised value of the Project pursuant to this Agreement, the following procedure (the "Appraisal Procedure") shall be followed: (a) The Member initiating this Appraisal Procedure shall, in a written notice to the other Members, set forth the name, business address and phone number of an appraiser having the qualifications set forth in Section (b) below who has accepted said Member's appointment and agreed to act as said Member's appraiser hereunder in accordance with this Appraisal Procedure. The other Members shall, in a written notice to the initiating Member given not less than fifteen (15) Days after receipt of the said notice from the initiating Member, set forth the name, business address and telephone number of an appraiser having the qualifications set forth in Section (b) below who has accepted said Member's(s') appointment and agreed to act as the second appraiser hereunder in accordance with this Appraisal Procedure. The two appraisers so appointed shall appoint, and give each of the Members written notice of the name, business address and telephone number of, a third appraiser having the qualifications set forth in Section (b) below. (b) Each appraiser shall, in all events, be independent and disinterested. All appraisers shall be members in good standing of the American Institute of Real Estate Appraisers ("AIREA") and shall have at least five years experience in appraising first class shopping centers that are similar to the Project and that are in the same general geographic area as the Project. Each appraiser shall appraise the Project on an "as is" basis. (c) (i) The Managing Member and the Accountants shall, promptly upon request of any appraiser appointed pursuant to the provisions of this Section, furnish all such appraisers with any financial or other information in their possession relative to the Project that is reasonably requested by such appraiser. (ii) Each of the three appraisers, acting independently of each other, shall, within sixty (60) Days after appointment of the last required appraiser, submit to the Members a written appraisal report that has been prepared in accordance with the provisions hereof stating his or her opinion as to the fair market value of the Project as of the relevant date. After all three appraisers have submitted written appraisal reports as aforesaid, they shall meet and reevaluate their appraisals and, if they agree on a single appraised fair market value within seventy-five (75) Days after appointment of the last required appraiser, such single appraised fair market value shall be the Appraised fair market value of the Project and is hereinafter referred to as the "Appraised Value." If the appraisers are unable to agree on a single appraised fair market value within such seventy-five (75) Day period, then the "Appraised Value" shall be deemed to be the arithmetic average of the three appraised fair 108 market values originally submitted, provided, however, that, if any of the appraised fair market values are more than five percent (5%) greater or less than the median value of the three appraised fair market values, such appraised fair market values shall be disregarded, and the Appraised Value shall be deemed to be the arithmetic average of the remaining two fair market values originally submitted, and, if two of the three appraised fair market values are five percent (5%) greater or less than the median value of the three appraised fair market values, both shall be disregarded and the appraised fair market value that is not so disregarded shall be taken as the Appraised Value. If the Appraisal Procedure is being utilized for purposes of establishing the value of a Member's Membership Interest, the Appraisal Procedure shall be utilized to establish the Appraised Value of the Project, and fifty percent (50%) of the Appraised Value of the Project shall be deemed the value of the Membership Interests of the JG Members (pro rata, in the aggregate) and fifty percent (50%) of the Appraised Value of the Project shall be deemed to be the value of the Membership Interests of the CBL Member (collectively if applicable, i.e., if any JG Member or CBL Member has assigned a portion of its Membership Interest to Affiliates pursuant to transfers permitted by Article XVI). (iii) Any determination of appraised fair market value and Appraised Value pursuant to this procedure shall, in the absence of fraud, bad faith, or collusion, be binding and conclusive upon all Members. (d) All reasonable costs, expenses and fees relative to the Appraisal Procedure shall, in all cases, be the responsibility of and paid by the Defaulting Member in the event the Appraisal Procedure is implemented pursuant to a Default and in all other cases, shall be the responsibility of Member Newco. 109 Attached to and made a part of that certain Limited Liability Company Agreement of [Triangle Town Member LLC], dated as of the date first above written. EXHIBIT E SITE PLAN 110 Attached to and made a part of that certain Limited Liability Company Agreement of [Triangle Town Member LLC], dated as of the date first above written. EXHIBIT F PROPERTY MANAGEMENT AGREEMENT 111 Attached to and made a part of that certain Limited Liability Company Agreement of [Triangle Town Member LLC], dated as of the date first above written. EXHIBIT G 2006 OPERATING BUDGET 112 Attached to and made a part of that certain Limited Liability Company Agreement of [Triangle Town Member LLC], dated as of the date first above written. EXHIBIT H TAX MATTERS This Exhibit is attached to and is a part of the Limited Liability Company Agreement (the "Agreement") of Member Newco. The provisions of this Exhibit are intended to comply with the requirements of Treas. Reg. 1.704-1(b)(2) and Treas. Reg. 1.704-2 with respect to partnership allocations and maintenance of capital accounts, and shall be interpreted and applied accordingly. ARTICLE I Definitions 1.01 Definitions. For purposes of this Exhibit, the capitalized terms listed below shall have the meanings indicated. "Adjusted Fair Market Value" of an item of Member Newco property means the greater of (i) the fair market value of such property or (ii) the amount of any nonrecourse indebtedness to which such property is subject within the meaning of Section 7701(g) of the Code. "Applicable Federal Rate" means the applicable Federal rate within the meaning of Section 1[ ]4(d) of the Code. "Capital Account" means the capital account of a Member maintained in accordance with ARTICLE II of this Exhibit to the Agreement. "Code" means the Internal Revenue Code of 1986, as amended. References to specific sections of the Code shall be deemed to include references to corresponding provisions of succeeding Internal Revenue law. "Member Newco Minimum Gain" means partnership minimum gain determined pursuant to Treas. Reg. 1.704-2(d). "Excess Nonrecourse Liabilities" means the excess of (i) Member Newco's aggregate Nonrecourse Liabilities over (ii) the aggregate amount of such Nonrecourse Liabilities allocable to the Members pursuant to Treas. Reg. 1.752-3(a)(1) (relating to the Members' shares of Member Newco Minimum Gain) and Treas. Reg. 1.752-3(a)(2) (relating to allocations of taxable gain under Section 4.02 of this Exhibit). "Investment Credit" means the investment credit determined under Section 46(a) of the Code. "Member" has the meaning set forth in the Agreement. 113 "Minimum Gain" means, collectively, Member Newco Minimum Gain and Member Nonrecourse Debt Minimum Gain. "Nonrecourse Distribution" means a distribution to a Member that is allocable to a net increase in Member Newco Minimum Gain pursuant to Treas. Reg. 1.704-2(h) or to a net increase in such Member's share of Member Nonrecourse Debt Minimum Gain pursuant to Treas. Reg. 1.704-2(i)(5) and (6). "Nonrecourse Liability" means any Member Newco liability (or portion thereof) which is a nonrecourse liability within the meaning of Treas. Reg. 1.704-2(b)(3). "Nontradable Note" means a promissory note that is not readily tradable on an established securities market. "Partner Nonrecourse Debt" means any nonrecourse debt of the Member within the meaning of Treas. Reg. 1.704-2(b)(4). "Partner Nonrecourse Deduction" means any item of Book loss or deduction that is attributable to a Partner Nonrecourse Debt pursuant to Treas. Reg. 1.704-2(i)(1) and 1.704-2(i)(2). "Partner Nonrecourse Debt Minimum Gain" means minimum gain attributable to Partner Nonrecourse Debt pursuant to Treas. Reg. 1.704-2(i). "Recourse Debt" means any recourse liability of Member Newco within the meaning of Treas. Reg. 1.752-1(a)(1). "Revaluation Event" means (i) a liquidation of Member Newco (within the meaning of Treas. Reg. 1.704-1(b)(2)(ii)(g), (ii) a contribution of more than a de minimis amount of money or other property to Member Newco by a new or existing Member, or (iii) a distribution of more than a de minimis amount of money or other property to a retiring or continuing Member, in each case as consideration for an interest in Member Newco. "Treasury Regulation" or "Treas. Reg." means the temporary or final regulation(s) promulgated pursuant to the Code by U.S. Department of the Treasury, as amended, and any successor regulation(s). ARTICLE II CAPITAL ACCOUNTS 2.01 Maintenance. A single Capital Account shall be maintained for each Member in the manner set forth in this Article II. 2.02 Net Profits and Net Losses. (a) The Net Profits and Net Losses of Member Newco for purposes of determining allocations to the Capital Accounts of the Members shall be 114 determined in the same manner as set forth in the definition of "Net Profits" and "Net Losses" in Section 1.01 of the Agreement. (b) For purposes of Section 2.02(a), in the event that the book value of any item of Member Newco property differs from its tax adjusted basis, the amount of book depreciation, depletion, or amortization for a period with respect to such property shall be computed so as to bear the same relationship to the book value of such property as the depreciation, depletion, or amortization computed for tax purposes with respect to such property for such period bears to the adjusted tax basis of such property. If the adjusted tax basis of such property is zero, the depreciation, depletion, or amortization with respect to such property shall be computed by using any reasonable method selected by Member Newco. 2.03 Positive Adjustments. Each Member's Capital Account shall from time to time be increased by: the amount of money contributed by such Member to Member Newco (including the amount of any Member Newco liabilities which the Member assumes (within the meaning of Treas. Reg. 1.704-1(b)(2)(iv)(c)) but excluding liabilities assumed in connection with the distribution of Member Newco property and excluding increases in such Member's share of Member Newco liabilities pursuant to Section 752 of the Code); (c) except as otherwise provided by Section 2.07 of this Exhibit, the fair market value of property contributed by such Member to Member Newco (net of any liabilities secured by such property that Member Newco is considered to assume or take subject to under Section 752 of the Code); (d) allocations to such Member of Member Newco Net Profits (or items thereof); (e) upon the occurrence of a Revaluation Event, the Net Profits (or items thereof), if any, that would have been allocated to each Member if all Member Newco property had been sold at its Adjusted Fair Market Value immediately prior to the Revaluation Event, but only to the extent not already reflected in Capital Accounts; and (f) upon the distribution of Member Newco property to a Member under circumstances not constituting a Revaluation Event, the Net Profits (or items thereof), if any, that would have been allocated to such Member if such Member Newco property had been sold at its Adjusted Fair Market Value immediately prior to the distribution, but only to the extent not already reflected in Capital Accounts. 2.04 Negative Adjustments. Each Member's Capital Account shall from time to time be reduced by: the amount of money distributed to such Member by Member Newco (including the amount of such Member's individual liabilities for which Member Newco becomes personally and primarily liable but excluding liabilities assumed in connection with the contribution of property to Member Newco and excluding decreases in such Member's share of Member Newco liabilities pursuant to Section 752 of the Code); 115 (g) except as otherwise provided by Section 2.07 of this Exhibit, the fair market value of property distributed to such Member by Member Newco (net of any liabilities secured by such property that such Member is considered to assume or take subject to under Section 752 of the Code); (h) allocations to such Member of non-deductible expenditures of Member Newco that are described in Section 705(a)(2)(B) of the Code, and of organization and syndication expenditures and disallowed losses to the extent that such expenditures or losses are treated as Section 705(a)(2)(B) expenditures pursuant to Treas. Reg. 1.704-1(b)(2)(iv)(i); (i) allocations to such Member of Member Newco Net Losses (or items thereof); (j) upon the occurrence of a Revaluation Event, the Net Losses (or items thereof), if any, that would have been allocated to such Member if all Member Newco property had been sold at its Adjusted Fair Market Value immediately prior to the Revaluation Event, but only to the extent not already reflected in Capital Accounts; and (k) upon the distribution of Member Newco property under circumstances not constituting a Revaluation Event, the Net Losses (or items thereof), if any, that would have been allocated to such Member if such Member Newco property had been sold at its Adjusted Fair Market Value immediately prior to the distribution, but only to the extent not already reflected in Capital Accounts. 2.05 Determination of Balances. Except as otherwise provided in this Exhibit, whenever it is necessary to determine the Capital Account of any Member, the Capital Account of that Member shall be determined after giving effect to all allocations of Net Profits and Net Losses of Member Newco for the current year (including a portion thereof) as well as all distributions for such year in respect of transactions effected prior to the date such determination is to be made. 2.06 Revaluation of Member Newco Property. Upon the occurrence of a Revaluation Event, Member Newco property (whether tangible or intangible) shall be revalued, and the Capital Accounts of the Members shall be adjusted in accordance with Sections 2.03(d) and 2.04(e) of this Exhibit, to reflect the Adjusted Fair Market Value of Member Newco property immediately prior to the Revaluation Event. (l) Upon the distribution of Member Newco property to a Member under circumstances not constituting a Revaluation Event, such property shall be revalued, and the Capital Account of each Member shall be adjusted in accordance with Sections 2.03(e) and 2.04(f) of this Exhibit, to reflect the Adjusted Fair Market Value of such property immediately prior to such distribution. The 116 Capital Account of the Member receiving such distribution shall then be adjusted in accordance with Section 2.04(b) of this Exhibit to reflect such distribution. (m) In the event that the adjusted tax basis of Member Newco property is increased or decreased under Section 732, 734, or 743 of the Code, a corresponding adjustment shall be made to the value of Member Newco assets to the extent that such increase or decrease is reflected in Capital Accounts pursuant to Section 2.09 of this Exhibit. 2.07 Promissory Notes. In the event that a Member contributes to Member Newco a Nontradable Note of which such Member is the maker, such note shall not be treated as contributed property for purposes of Section 2.03(b) of this Exhibit. Such Member's Capital Account will be increased with respect to such note only when there is a taxable disposition of such note by Member Newco or when such Member makes principal payments on such note. (n) In the event that Member Newco distributes to a Member a Nontradable Note of which Member Newco is the maker, then except as otherwise provided in Section 2.07(c) or (d) of this Exhibit, such note shall not be treated as distributed property for purposes of Section 2.04(b) of this Exhibit. Such Member's Capital Account will be decreased with respect to such note only when there is a taxable disposition of such note by such Member or when Member Newco makes principal payments on such note. (o) Section 2.07(b) of this Exhibit shall not apply to any negotiable note (of which Member Newco is the maker) distributed by Member Newco to a Member in liquidation of Member Newco or of such Member's interest in Member Newco if such distribution is made not later than the later of (i) the end of the taxable year in which such liquidation occurs, or (ii) a date which is ninety (90) Days after the date of such liquidation. If such note bears interest at no less than the Applicable Federal Rate at the time of distribution, such Member's Capital Account shall be reduced by the outstanding principal amount of such note; otherwise such Member's Capital Account shall be reduced by the fair market value of such note at the time of distribution. (p) In the event that Member Newco distributes to a Member a negotiable note to which Section 2.07(b) of this Exhibit applies, and Member Newco or such Member's interest in Member Newco is subsequently liquidated at a time when all or a portion of such note remains unsatisfied, then such Member's Capital Account shall be reduced as follows: if such note bears interest at no less than the Applicable Federal Rate at the time of such liquidation, such Member's Capital Account shall be reduced by the outstanding principal balance of such note; otherwise such Member's Capital Account shall be reduced by the fair market value of such note at the time of such liquidation. 2.08 Adjustments for Investment Credit Property. In the event that the adjusted tax basis for federal income tax purposes of Member Newco Investment Credit property is reduced or increased, the Capital Accounts of the Members shall be adjusted in the manner set forth in Treas. Reg. 1.704-1(b)(2)(iv)(i). 117 2.09 Section 754 Elective Adjustments. In the event that the adjusted tax basis of Member Newco property is adjusted under Section 732, 734, or 743 of the Code, the Capital Accounts of the Members shall be adjusted to the extent required by Treas. Reg. 1.704-1(b)(2)(iv)(m). 2.10 Additional Capital Account Adjustments. Member Newco shall make any further adjustments to Capital Accounts that may be necessary in order to comply with the rules set forth in Treas. Reg. 1.704-1(b)(2)(iv) as it may be amended from time to time. If the provisions of this Exhibit and the rules of Treas. Reg. 1.704-1(b)(2)(iv) fail to provide guidance as to how the Capital Accounts of the Members should be adjusted to reflect particular items, the Capital Accounts of the Members shall be adjusted in a manner that (i) maintains equality between the aggregate Capital Accounts of the Members and the amount of Member Newco capital reflected on Member Newco's balance sheet, (ii) is consistent with the underlying economic arrangement of the Members, and (iii) is based, wherever practicable, on Federal income tax accounting principles. 2.11 Transfers of Membership Interests. Upon the transfer of a Member's entire membership interest, the Capital Account of such Member shall carry over to the transferee. (q) Upon the transfer of a portion of a Member's membership interest, the portion of such Member's Capital Account attributable to the transferred portion shall carry over to the transferee. ARTICLE III ALLOCATION OF NET PROFITS AND NET LOSSES 3.01 In General. Allocations to the Capital Accounts of the Members shall be based on the Net Profits and Net Losses of Member Newco as determined pursuant to Section 2.02 of this Exhibit. Such allocations shall be made as provided in the Agreement except to the extent modified by the provisions of this Article III. 3.02 Limitations on Allocation of Net Losses and Deductions. Subject to Section 3.03 of this Exhibit, but notwithstanding any other provisions of the Agreement: Partner Nonrecourse Deductions. Any item of Partner Nonrecourse Deduction with respect to a Partner Nonrecourse Debt shall be allocated to the Member or Members who bear the economic risk loss for such Partner Nonrecourse Debt in accordance with Treas. Reg. 1.704-2(i). (r) Excess Deficit Balances. Subject to paragraph (a) immediately preceding, no Net Losses or deduction shall be allocated to any Member to the extent that such allocation would cause or increase an Excess Deficit Balance in the Capital Account of such Member. Such Net Losses or deduction shall be reallocated away from such Member and to the other Members in accordance with the Agreement, but only to the extent that such reallocation would not cause or increase Excess Deficit Balances in the Capital Accounts of such other Members. 118 3.03 Chargebacks of Net Profits. Notwithstanding any other provisions of the Agreement: Member Newco Minimum Gain. In the event that there is a net decrease in Member Newco Minimum Gain for a taxable year of Member Newco, then before any other allocations are made for such taxable year, each Member shall be allocated items of Net Profits (or items thereof) for such year equal to that Member's share of the net decrease in Member Newco Minimum Gain within the meaning of Treas. Reg. 1.704-2(g)(2). The allocation required by the preceding sentence (the "Minimum Gain Chargeback Requirement") shall not apply to a Member to the extent that: (a) the Member's share of the net decrease in Member Newco Minimum Gain is caused by a guarantee, refinancing, or other change in the debt instrument causing it to become partially or wholly Recourse Debt or Partner Nonrecourse Debt, and the Member bears the economic risk of loss (within the meaning of Treas. Reg. 1.752-2) for the newly guaranteed, refinanced, or otherwise changed liability, or (b) the Member contributes capital to Member Newco that is used to repay the Nonrecourse Liability, and the Member's share of the net decrease in Member Newco Minimum Gain results from the repayment. If in any taxable year of Member Newco, Member Newco has a net decrease in Partnership Minimum Gain and the Minimum Gain Chargeback Requirement causes a distortion in the economic arrangement among the Members and it is not expected that Member Newco will have sufficient other income to correct the distortion, the Managing Member with the unanimous consent of the other members may seek a waiver from the Internal Revenue Service of the Minimum Gain Chargeback Requirement as permitted by Treas. Reg. 1.704-2(f)(4). Any Minimum Gain Chargeback required for a taxable year of Member Newco shall consist first of gains recognized from the disposition of Member Newco property subject to one or more Nonrecourse Liabilities of Member Newco and then if necessary shall consist of a pro rata portion of Member Newco's other items of income and gain for the taxable year of Member Newco. If the amount of the Minimum Gain Chargeback Requirement exceeds Member Newco's income and gains for the taxable year, the excess carries over to the succeeding taxable year. See Treas. Reg. 1.704-2(j)(2)(i) and (iii). (s) Partner Nonrecourse Debt Minimum Gain. In the event that there is a net decrease in Partner Nonrecourse Debt Minimum Gain for a taxable year of Member Newco, then after taking into account allocations pursuant to paragraph (a) immediately preceding, but before any other allocations are made for such taxable year, each Member with a share of Partner Nonrecourse Debt Minimum Gain (determined under Treas. Reg. 1.704-2(i)(5)) as of the beginning of such year shall be allocated items of Net Profits for such year (and, if necessary, for succeeding years) equal to such Member's share of such net decrease in the Partner Nonrecourse Debt Minimum Gain (the "Nonrecourse Debt Minimum Gain Chargeback Requirement"). A Member's share of the net decrease in Partner Nonrecourse Debt Minimum Gain shall be determined in a manner consistent with the provisions of Treas. Reg. 1.704-2(g)(2). A Member shall not be subject to 119 the Nonrecourse Debt Minimum Gain Chargeback Requirement to the extent the net decrease in Partner Nonrecourse Debt Minimum Gain arises because the liability ceases to be a Partner Nonrecourse Debt due to a conversion, refinancing, or other change in the debt instrument that causes it to become partially or wholly a Nonrecourse Liability. The amount that would otherwise be subject to the Nonrecourse Debt Minimum Gain Chargeback Requirement shall be added to the Member's share of Member Newco Minimum Gain under paragraph (a) immediately preceding. In addition, the allocation required by the first sentence of this paragraph (b) shall not apply to a Member to the extent that: (a) the Member's share of the net decrease in Member Newco Nonrecourse Debt Minimum Gain is caused by a guarantee, refinancing, or other change in the debt instrument causing it to become partially or wholly Recourse Debt or Partner Recourse Debt, and the Member bears the economic risk of loss (within the meaning of Treas. Reg. 1.752-2) for the newly guaranteed, refinanced, or otherwise changed liability, or (b) the Member contributes capital to Member Newco that is used to repay the Nonrecourse Liability, and the Member's share of the net decrease in Member Newco Minimum Nonrecourse Debt Gain results from the repayment. If in any taxable year of Member Newco, Member Newco has a net decrease in Member Newco Minimum Nonrecourse Debt Gain and the Nonrecourse Debt Minimum Gain Chargeback Requirement causes a distortion in the economic arrangement among the Members and it is not expected that Member Newco will have sufficient other income to correct the distortion, the Manager(s) will seek a waiver from the Internal Revenue Service of the Nonrecourse Debt Minimum Gain Chargeback Requirement as permitted by Treas. Reg. 1.704-2(i)(4). Any Nonrecourse Debt Minimum Gain Chargeback required for a taxable year of Member Newco shall consist first of gains recognized from the disposition of Member Newco property subject to one or more Partner Nonrecourse Liabilities of Member Newco and then if necessary shall consist of a pro rata portion of Member Newco's other items of income and gain for the taxable year of Member Newco. If the amount of the Nonrecourse Debt Minimum Gain Chargeback Requirement exceeds Member Newco's income and gains for the taxable year, the excess carries over to the succeeding taxable year. See Treas. Reg. 1.704-2(j)(2)(ii) and (iii). (t) Qualified Income Offset. If, at the end of any taxable year, the Capital Accounts of any Members have Excess Deficit Balances after taking into account all other allocations and adjustments under this Agreement, then items of Net Profits for such year (and, if necessary, for subsequent years) will be reallocated to such Members in the amount and in the proportions needed to eliminate such Excess Deficit Balances as quickly as possible. 3.04 Offsetting Allocations. Subject to the provisions of Sections 3.02 and 3.03 of this Exhibit, but notwithstanding any other provision of this Agreement, in the event that any allocation or reallocation is made pursuant to Section 3.02 or 3.03 of this Exhibit (a "Regulatory Allocation"), then offsetting allocations of remaining Net Profits or Net Losses, or items thereof, for such year (and, if necessary, items of Net Profits or Net Losses for subsequent 120 years) shall be made in such amounts and proportions as are appropriate to restore the Capital Accounts of the Members to the position in which such Capital Accounts would have been if such Regulatory Allocation had not been made. ARTICLE IV ALLOCATION OF TAX ITEMS 4.01 In General. Except as otherwise provided in this Article IV, all items of income, gain, loss, and deduction shall be allocated among the Members for federal income tax purposes in the same manner as the corresponding allocation for Net Profits and Net Losses. 4.02 Section 704(c) Allocations. In the event that the value of an item of Member Newco property differs from its adjusted tax basis, allocations of depreciation, depletion, amortization, gain, and loss with respect to such property will be made for federal income tax purposes in a manner that takes account of the variation between the adjusted tax basis and value of such property in accordance with Section 704(c) of the Code and Treas. Reg. 1.704-1(b)(2)(iv)(f)(4). 4.03 Tax Credits. Any tax credit that is attributable to an expenditure that gives rise to an allocation of loss or deduction (or other downward Capital Account adjustment) shall be allocated among the Members in the same proportion as such Member's distributive shares of such loss or deduction (or other adjustment). (u) Any tax credit whose allocation is not otherwise specified in this Section 4.03 shall be allocated among the Members in accordance with Treas. Reg. 1.704-1(b)(4)(ii). ARTICLE V OTHER TAX MATTERS 5.01 Minimum Gain. Partnership Minimum Gain shall be allocated among the Members in accordance with Treas. Reg. 1.704-2(g). Partner Nonrecourse Debt Minimum Gain shall be allocated among the Members in accordance with Treas. Reg. 1.704-2(i)(5). 5.02 Excess Nonrecourse Liabilities. The Members' shares of Member Newco's Excess Nonrecourse Liabilities pursuant to Treas. Reg. 1.752-3(a) shall be determined in accordance with Section 18.09 of the Agreement requiring unanimous consent for tax elections. 5.03 Withholding. Member Newco shall withhold any amounts required to be withheld pursuant to any applicable provisions of the Code, including without limitation Sections 1441 through 1446 of the Code, or pursuant to any applicable provisions of state or local law. 121 (v) Any amounts withheld with respect to a Member's distributive share of Member Newco income (whether or not distributed) shall be treated by Member Newco and by such Member for all purposes as amounts distributed to such Member. Any amounts withheld with respect to any payment to a Member shall be treated by Member Newco and by such Member for all purposes as amounts paid to such Member. Amounts so treated as distributed or paid to any Member shall reduce the amount otherwise distributable or payable to such Member. (w) In the event that Member Newco withholds with respect to a Member's distributive share of Member Newco income for a taxable year, and such distributive share exceeds the amount distributed to such Member in such taxable year, then subsequent distributions to such Member shall be deemed to be made first from income with respect to which Member Newco has already withheld. 122 EXHIBIT B Environmental Reports 123 EXHIBIT C Transaction Chart 124 Exhibit C TRANSACTION STEPS Existing Structure: ____________ ______ ____________ ____________ | REJ Realty | | JGRI | | REJ Realty | | JG Manager | |____________| |______| |____________| |____________| | | | | | | | | |_____________| |_________________| | | | | __________________ ____________________ | JG North Raleigh | | JG Triangle South | |__________________| |____________________| Step 1: - -------
| ____________ ______ | ____________ ____________ | REJ Realty | | JGRI | | | REJ Realty | | JG Manager | |____________| |______| | |____________| |____________| Member ^ | Member ^ |JG North |Member ^ | Member ^ | Newco | | Newco | |Raleigh |Newco | | Newco | | Interest | | JG North Interest | |Interest |Interest | |JG Triangle Interest | |JG Triangle | | Raleigh | | | | |South | |South | | Interest | | | | |Interest | |Interest | v | v | v | v | | | | | | | | __________________________________________________________________________________ | Member Newco | | | __________________________________________________________________________________
Result of Sept 1: - ---------------- _____________ ___________ ______________ | REJ Realty | | JGRI | | JG Manager | |_____________| |_____|_____| |______________| | | | | | | |________________________|________________________| | | | ____________|______________ | Member | Newco | |____________|______________| | | | ___________________________________ | | | | _________________________ _____________________________ | JG North Raleigh | | JG Triangle South | |_________________________| |_____________________________| Step 2: - ------- _______________________ ______________________ | JG North Raleigh | | JG Triangle South | |_______________________| |______________________| ^ | ^ | | | | | Company | |Real Company | |Real Interest | |Property Interest | |Property | | | | | | | | | v | v ________________________________________________ | Company | |________________________________________________| Result of Step 2: - ----------------- _____________ ___________ ______________ | REJ Realty | | JGRI | | JG Manager | |_____________| |_____|_____| |______________| | | | | | | |________________________|________________________| | | | ____________|______________ | Member | Newco | |____________|______________| | | | ___________________________________ | | | | _________________________ _____________________________ | JG North Raleigh | | JG Triangle South | |_________________________| |_____________________________| | | |___________________________________| | | ___________________________________________________________ | Company | | (Owner of Triangle Town Center and Triangle Town Place) | |___________________________________________________________| Step 3: - ------- _________________________ | Member Newco | |_________________________| ^ ^ | | Distribution of | | Distribution of Company Interest | | Company Interest | | | | _____________________ _____________________ | JG North Raleigh | | JG Triangle South | |_____________________| |_____________________| Result of Step 3: - ----------------- _____________ ___________ ______________ | REJ Realty | | JGRI | | JG Manager | |_____________| |_____|_____| |______________| | | | | | | |________________________|________________________| | | | ____________|______________ | Member | Newco | |____________|______________| | | | ________________________ | Company | |________________________| Step 4: - ------- ___________________________________________________________ | CBL Member admitted as Member in | | Member Newco | |___________________________________________________________| ^ | 50% | Member Newco | Interest | ____________________________________ | Member Newco | |____________________________________| Result of Step 4: - ----------------- _____________ ___________ ______________ ______________ | REJ Realty | | JGRI | | JG Manager | | CBL Member | |_____________| |_____|_____| |______________| |______________| | | | | | | | | |____________________|____________________|____________________| | | | ____________|______________ | Member | Newco | |____________|______________| | | | __________|__________ | Comp|any | |__________|__________| EX-10 13 exhibit10242.txt EXHIBIT 10.24.2 TRIANGLE LLC AGREEMENT Exhibit 10.24.2 AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF TRIANGLE TOWN MEMBER, LLC BY AND AMONG CBL TRIANGLE TOWN MEMBER, LLC a North Carolina limited liability company and REJ REALTY LLC, a Delaware limited liability company, JG REALTY INVESTORS CORP., an Ohio corporation, and JG MANAGER LLC, an Ohio limited liability company Effective Date: November 16, 2005 TABLE OF CONTENTS OF AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF TRIANGLE TOWN MEMBER, LLC BY AND AMONG CBL TRIANGLE TOWN MEMBER, LLC AND REJ REALTY LLC, JG REALTY INVESTORS CORP. AND JG MANAGER LLC (EFFECTIVE DATE NOVEMBER 16, 2005
ARTICLE I DEFINITIONS.............................................................................................2 - --------------------- 1.01 Definitions...........................................................................................2 ---- ------------ 1.02 Other Definitional Provisions........................................................................16 ---- ------------------------------ 1.03 Statement as to Member's Approval/Voting Rights......................................................16 ---- ------------------------------------------------ 1.04 Ownership of the Project and the Real Estate by the Company; Interpretation of this Agreement........16 ---- ---------------------------------------------------------------------------------------------- ARTICLE II FORMATION.............................................................................................17 - -------------------- 2.01 Formation............................................................................................17 ---- ---------- 2.02 Name.................................................................................................17 ---- ----- 2.03 Principal Place of Business..........................................................................17 ---- ---------------------------- 2.04 Statutory Agent......................................................................................17 ---- ---------------- 2.05 Term.................................................................................................17 ---- ----- ARTICLE III PURPOSE OF COMPANY; ADMISSION OF MEMBERS;............................................................17 - ----------------------------------------------------- 3.01 General Business Purpose of Member Newco.............................................................17 ---- ----------------------------------------- 3.02 Admission of Members; Distribution of Initial JV Financing Proceeds .................................17 ---- --------------------------------------------------------------------- 3.03 Capital Accounts.....................................................................................18 ---- ----------------- 3.04 Financing............................................................................................19 ---- ---------- 3.05 Outparcel Venture....................................................................................26 ---- ------------------ ARTICLE IV NAMES AND ADDRESSES OF MEMBERS........................................................................26 - ----------------------------------------- ARTICLE V GOVERNANCE.............................................................................................27 - -------------------- 5.01 General Powers.......................................................................................27 ---- --------------- 5.02 Standard of Conduct..................................................................................27 ---- -------------------- 5.03 Governance; Unanimous Approval Items.................................................................27 ---- ------------------------------------- ARTICLE VI SPECIFIC DUTIES OF MEMBERS............................................................................31 - ------------------------------------- 6.01 Managing Member......................................................................................31 ---- ---------------- 6.02 Managing Member; Managing Member's Specific Duties...................................................31 ---- --------------------------------------------------- 6.03 Construction Contract................................................................................36 ---- ---------------------- 6.04 Removal and Resignation..............................................................................36 ---- ------------------------ 6.05 Compensation.........................................................................................37 ---- ------------- ARTICLE VII CONFLICT OF INTEREST TRANSACTIONS....................................................................37 - --------------------------------------------- ARTICLE VIII INDEMNIFICATION.....................................................................................38 - ---------------------------- 8.01 Indemnification......................................................................................38 ---- ---------------- 8.02 Expenses.............................................................................................38 ---- --------- 8.03 Insurance............................................................................................38 ---- ---------- ARTICLE IX LIMITATION OF LIABILITY OF MEMBERS; MEMBER LISTS......................................................38 - ----------------------------------------------------------- 9.01 Limitation on Liability..............................................................................38 ---- ------------------------ 9.02 No Liability for Company Obligations.................................................................39 ---- ------------------------------------- 9.03 List of Members......................................................................................39 ---- ---------------- ARTICLE X........................................................................................................39 - --------- LIABILITY, PROPERTY AND CASUALTY INSURANCE.......................................................................39 - ------------------------------------------ ARTICLE XI CAPITAL CONTRIBUTIONS TO MEMBER NEWCO.................................................................39 - ------------------------------------------------ 11.01 Members' Required Member Funding..................................................................39 ----- --------------------------------- 11.02 Additional Non-Required Contributions.............................................................42 ----- -------------------------------------- 11.03 No Third-Party Rights.............................................................................43 ----- ---------------------- 11.04 Member Construction Loans not Member Funding......................................................43 ----- --------------------------------------------- 11.05 No Further Assessments on Membership Interests....................................................43 ----- ----------------------------------------------- ARTICLE XII DISTRIBUTIONS TO MEMBERS.............................................................................43 - ------------------------------------ 12.01 Distributions of Distributable Cash...............................................................43 ----- ------------------------------------ 12.02 Capital Events Distributions......................................................................45 ----- ----------------------------- 12.03 Distribution of Incoming Equalizing Contribution to CBL Member....................................45 ----- -------------------------------------------------------------- 12.04 Limitation Upon Distributions.....................................................................45 ----- ------------------------------ ARTICLE XIII ALLOCATIONS OF NET PROFITS AND NET LOSSES...........................................................45 - ------------------------------------------------------ 13.01 Net Profits.......................................................................................45 ----- ------------ 13.02 Net Losses........................................................................................46 ----- ----------- 13.03 2005 Fiscal Year..................................................................................46 ----- ----------------- ARTICLE XIV BOOKS AND RECORDS....................................................................................46 - ----------------------------- 14.01 Accounting Period.................................................................................46 ----- ------------------ 14.02 Records and Reports...............................................................................46 ----- -------------------- 14.03 Inspection of Records by Members..................................................................47 ----- --------------------------------- 14.04 Tax Returns.......................................................................................47 ----- ------------ 14.05 Financial Statements..............................................................................47 ----- --------------------- ARTICLE XV TERMINATION OF MEMBERSHIP INTEREST....................................................................48 - --------------------------------------------- 15.01 Termination of Interest...........................................................................48 ----- ------------------------ 15.02 Withdrawal........................................................................................48 ----- ----------- 15.03 Effect of Termination of Membership...............................................................48 ----- ------------------------------------ ARTICLE XVI TRANSFERS OF MEMBERSHIP INTERESTS AND RESTRICTIONS ON TRANSFERS; IMPASSE PROVISIONS; PLEDGE - ---------------------------------------------------------------------------------------------------------- OF MEMBERSHIP INTERESTS.................................................................................48 ----------------------- 16.01 Definition of "Assignment"........................................................................48 ----- --------------------------- 16.02 Restriction on Assignment.........................................................................49 ----- -------------------------- 16.03 Exempt Assignments................................................................................49 ----- ------------------- 16.04 Mandatory Buy/Sell on Impasse.....................................................................51 ----- ------------------------------ 16.05 Right of First Refusal; Buy/Sell..................................................................54 ----- --------------------------------- 16.06 Conditions of Assignments.........................................................................57 ----- -------------------------- 16.07 Lender Approval...................................................................................58 ----- ---------------- 16.08 Pledge of Membership Interests....................................................................58 ----- ------------------------------- 16.09 Mutually Exclusive Rights.........................................................................59 ----- -------------------------- ARTICLE XVII DISSOLUTION, TERMINATION AND WINDING-UP.............................................................59 - ---------------------------------------------------- 17.01 Events Causing Dissolution........................................................................59 ----- --------------------------- 17.02 Continuation......................................................................................59 ----- ------------- 17.03 Effect of Dissolution.............................................................................59 ----- ---------------------- 17.04 Winding-Up, Liquidation and Distribution of Assets................................................59 ----- --------------------------------------------------- 17.05 Articles of Termination...........................................................................60 ----- ------------------------ 17.06 Return of Contribution Nonrecourse to Other Members...............................................60 ----- ---------------------------------------------------- ARTICLE XVIII MISCELLANEOUS PROVISIONS...........................................................................61 - -------------------------------------- 18.01 Applicable Law....................................................................................61 ----- --------------- 18.02 No Action or Partition............................................................................61 ----- ----------------------- 18.03 Execution of Additional Instruments...............................................................61 ----- ------------------------------------ 18.04 Waivers...........................................................................................61 ----- -------- 18.05 Rights and Remedies Cumulative....................................................................61 ----- ------------------------------- 18.06 Heirs, Successors and Assigns.....................................................................61 ----- ------------------------------ 18.07 Creditors.........................................................................................61 ----- ---------- 18.08 Counterparts......................................................................................61 ----- ------------- 18.09 Federal Income Tax Elections; Tax Matters Member..................................................61 ----- ------------------------------------------------- 18.10 Notices...........................................................................................62 ----- -------- 18.11 Amendments........................................................................................63 ----- ----------- 18.12 Enforceability....................................................................................63 ----- --------------- 18.13 Drafting..........................................................................................63 ----- --------- 18.14 Further Assurances................................................................................63 ----- ------------------- 18.15 Time..............................................................................................63 ----- ----- 18.16 Integration.......................................................................................63 ----- ------------ 18.17 Termination of Letter Agreement...................................................................63 ----- -------------------------------- 18.18 Public Announcements; Precedence in Publicity.....................................................63 ----- ---------------------------------------------- 18.19 Estoppel Certificates.............................................................................64 ----- ---------------------- 18.20 Legal Counsel.....................................................................................64 ----- -------------- ARTICLE XIX REPRESENTATIONS AND WARRANTIES.......................................................................65 - ------------------------------------------ 19.01 Representations of the JG Members.................................................................65 ----- ---------------------------------- 19.02 Representations of CBL Member.....................................................................66 ----- ------------------------------ 19.03 Survival of Representations and Warranties........................................................67 ----- ------------------------------------------- ARTICLE XX DEFAULT PROVISIONS....................................................................................67 - ----------------------------- 20.01 Events of Default.................................................................................67 ----- ------------------ 20.02 Remedies Upon Default.............................................................................69 ----- ---------------------- 20.03 Purchase Upon Default.............................................................................70 ----- ---------------------- 20.04 Default Approval Rights; Loss of Approval Rights on Defaults......................................72 ----- ------------------------------------------------------------- 20.05 Attorney's Fees...................................................................................72 ----- ---------------- 20.06 Closing...........................................................................................72 ----- -------- ARTICLE XXI APPOINTMENT OF MANAGING MEMBER AS ATTORNEY-IN-FACT...................................................75 - -------------------------------------------------------------- 21.01 Appointment.......................................................................................75 ----- ------------ 21.02 Survival..........................................................................................75 ----- ---------
LIST OF EXHIBITS TO AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF TRIANGLE TOWN MEMBER, LLC BY AND AMONG CBL TRIANGLE TOWN MEMBER, LLC AND REJ REALTY LLC, JG REALTY INVESTORS CORP. AND JG MANAGER LLC, (EFFECTIVE DATE NOVEMBER 16, 2005 Exhibit A ........Description of the Real Estate Exhibit B.........Membership Interests Exhibit C.........Fees to Members Exhibit D.........Appraisal Procedure Exhibit E.........Site Plan Exhibit F.........Property Management Agreement Exhibit G.........2006 Operating Budget Exhibit H.........Tax Matters Exhibit I-A.......Tenant Allowances Included in the JG Members Closing TA Payment Exhibit I-B.......Tenant Allowances Eligible for Inclusion in the JG Members Subsequent TA Contribution Exhibit J.........Closing Statement AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF TRIANGLE TOWN MEMBER, LLC THIS AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT (the "Agreement") of TRIANGLE TOWN MEMBER, LLC, a North Carolina limited liability company ("Member Newco"), is made and entered into as of the 16th day of November, 2005, by and among CBL TRIANGLE TOWN MEMBER, LLC, a North Carolina limited liability company ( herein referred to as "CBL Member"), and REJ REALTY LLC, a Delaware limited liability company ("REJ Realty"), JG REALTY INVESTORS CORP., an Ohio corporation ("JGRI"), and JG MANAGER LLC, an Ohio limited liability company (("JG Manager"; with REJ Realty and JGRI, each, a "JG Member" and, collectively, the "JG Members")). W I T N E S S E T H: WHEREAS, Member Newco was formed by filing Articles of Organization with the Secretary of State of North Carolina on November 8, 2005; WHEREAS, REJ Realty, JGRI and JG Manager entered into an Operating Agreement of Member Newco, dated as of November 16, 2005 (the "Initial Operating Agreement"); WHEREAS, Member Newco owns all of the member interests in Triangle Town Center LLC, a Delaware limited liability company (the "Company"); WHEREAS, the Company owns certain real property located in Raleigh, North Carolina, consisting of approximately 59.077 acres of land (said real property being more particularly described on Exhibit A attached hereto and is herein referred to, together with any other real property from time to time hereafter acquired by the Company, as the "Real Estate") which Real Estate is the site of retail shopping centers known as Triangle Town Center and Triangle Town Place (together with the result of any Future Development Activities, the "Project"); WHEREAS, upon execution of this Agreement and in consideration of its covenants and agreements set forth herein, CBL Member has been admitted to Member Newco as a member; WHEREAS, upon CBL Member's admission to Member Newco and after giving effect to the transactions occurring as of the date hereof, CBL Member and the JG Members own the respective Capital Interests and Profits Interests set forth on Exhibit B attached hereto; and WHEREAS, the Members desire to enter into this Agreement to set forth the rules, regulations, and provisions regarding the management of the business of Member Newco, the regulation of the affairs of Member Newco, the governance of Member Newco, the conduct of Member Newco's business and the rights and privileges of the Members. NOW, THEREFORE, in consideration of the covenants and agreements hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: The Initial Operating Agreement is hereby amended and restated in its entirety and the operating agreement or limited liability company agreement governing Member Newco and its Members shall be as set forth herein. ARTICLE I DEFINITIONS 1.01 Definitions. For purposes of this Agreement, unless the context otherwise requires, the following terms shall have the following meanings: "Accountants" shall mean Deloitte & Touche LLP or such other national accounting firm as selected by the Members. "Act" shall mean the North Carolina Limited Liability Company Act, Chapter 57C of the North Carolina General Statutes, as the same exists or may hereafter be amended. "Active Right" shall have the meaning assigned to that term in Section 16.09. "Affiliate" shall mean, with respect to any Person (i) any Person, which directly or indirectly, through one or more intermediaries, Controls (as hereinafter defined), is Controlled by, or is under common Control with, such Person and/or (ii) any Person, ten percent (10%) or more of the equity or beneficial interests of which are owned by a Member or owned by an Affiliate of a Member that is an Affiliate pursuant to clause (i) of this paragraph. Notwithstanding the definition of Affiliate set forth above, (A) EMJ Corporation, a Tennessee corporation ("EMJ"), shall not be deemed an Affiliate of CBL Member for purposes of this Agreement, (B) the JG Members and their respective Affiliates shall not be deemed Affiliates of CBL Member for purposes of this Agreement and (C) CBL Member and its Affiliates shall not be deemed Affiliates of the JG Members for purposes of this Agreement. "Affiliate Loan Guarantee(s)" shall have the meaning assigned to that term in Section 3.04(c). "Agreement" shall mean this Agreement as originally executed and as may be modified or amended from time to time, and shall include all Exhibits attached hereto and incorporated herein, each as originally executed and as may be modified or amended from time to time. "Anchor" shall mean any department store or other tenant or occupant of the Project whose leased or owned floor space is greater than 70,000 square feet. 2 "Appraisal Procedure" shall mean the procedure set forth on Exhibit D attached hereto for determining the fair market value of the Project in the event such is called for pursuant to this Agreement. "Appraised Value" shall have the meaning assigned to that term in Exhibit D attached hereto. "Articles of Organization" shall mean the Articles of Organization of Member Newco as filed with the Secretary of State of North Carolina, as the same exists or may hereafter be amended as set forth in this Agreement. "Buy/Sell Initiator" shall have the meaning assigned to that term in Section 16.05(b). "Buy/Sell Initiator Offer Price" shall have the meaning assigned to that term in Section 16.05(b). "Buy/Sell Offer Notice" shall have the meaning assigned to that term in Section 16.05(b). "Buy/Sell Project Value" shall have the meaning assigned to that term in Section 16.05(b). "Buy/Sell Respondent" shall have the meaning assigned to that term in Section 16.05(b). "Buy/Sell Respondent Purchase Price" shall have the meaning assigned to that term in Section 16.05(b). "Capital Account" shall have the meaning assigned to that term in Section 3.03(a). "Capital Events" shall mean the following events: (i) Any financing or refinancing of Company indebtedness that produces a surplus of funds available for distribution to the Members after deduction for (A) all transaction costs, (B) repayment of any refinanced indebtedness (but not Member Funding made by a Member or its Affiliate in the form of a loan to Member Newco), and (C) the establishment of any Reserves; and (ii) Any sale of all or any of the assets of Member Newco that produces a surplus of funds available for distribution to the Members after deduction for (A) all transaction costs, (B) repayment of any underlying indebtedness (but not Member Funding made by a Member or its Affiliate in the form of a loan to Member Newco), and (C) the establishment of any Reserves. 3 "Capital Events Distribution" shall mean any distribution of cash arising from the occurrence of a Capital Event in the order as set forth in Section 12.01 below. "Capital Interest" shall mean that portion of the Membership Interest of a Member that represents such Member's interest in the capital of Member Newco. "CBL Member" shall have the meaning assigned to that term in the Preamble above. "CBL Member Construction Loan Guarantee Share" shall have the meaning assigned to that term in Section 3.04(a). "CBL Member Construction Loan Response Notice" shall have the meaning assigned to that term in Section 3.04(a). "CBL Member Mandatory Contributions" shall have the meaning assigned to that term in Section 11.01(b). "CBL Member Permanent Financing/Refinancing Guarantee Share" shall have the meaning assigned to that term in Section 3.04(b). "CBL Member Parent" shall mean CBL & Associates Limited Partnership, a Delaware limited partnership. "Closing Statement" shall mean the Closing Statement in the form of Exhibit J attached hereto, setting forth the calculation of the JG Members Baseline Equity Amount, the Net Proceeds of the Initial JV Financing, and the Shortfall, if any. "Code" shall mean the Internal Revenue Code of 1986, as the same exists or may hereafter be amended. "Company" shall have the meaning assigned to that term in the Preamble above. "Construction Contract(s)" shall mean the contract(s) for the construction of the phases of the Project as further described in Section 6.03 below. "Construction Funds" shall have the meaning assigned to that term in Section 11.01(b). "Construction Loan(s)" shall mean the loan(s) obtained by Member Newco on behalf of the Company from a lender of the funds necessary to (i) proceed with construction of the Project or any Future Development Activity and (ii) to fund any interim or bridge loan required in order to secure public financing for on or off-site improvements, including but not limited to tax incremental financing or transportation development districts or similar governmental/public financing programs in connection with the development of the Project. A Member may act as the lender of a Construction Loan as provided in Section 3.04(a), and subject to Section 5.03(g), below. Member Funding made by a Member or its Affiliate in the form of a loan to Member Newco shall not be considered to be Construction Loan(s) for purposes of this definition. 4 "Construction Loan Unavailability Notice" shall have the meaning assigned to that term in Section 3.04(a). "Construction Period(s)" shall mean, as to any Future Development Activity, the period from the date on which construction of the improvements or developments constituting such Future Development Activity shall commence (including pre-construction activity with respect thereto) to the opening for business to the general public of improvements or development constituting such Future Development Activity. "Control" or "Controlled by" shall mean the power, directly or indirectly, to direct the actions, operation or management of another Person by contract, the ownership of voting rights or otherwise, except that (i) CBL Member shall not be deemed to be Controlled by CBL Member Parent, for the purposes of Section 16.03(c), unless CBL Member Parent has the power, directly or indirectly, to vote or exercise consent or approval rights with respect to more than fifty percent (50%) of the equity interests of CBL Member; (ii) the JG Members shall not be deemed to be Controlled by Richard E. Jacobs, for the purposes of Section 16.03(c), unless Richard E. Jacobs, any JG Member, and Jacobs Realty Investors Limited Partnership, or any of them, in the aggregate, has the power, directly or indirectly, to vote or exercise consent or approval rights with respect to more than fifty percent (50%) of the equity interests of the JG Members; and (iii) an entity shall not be deemed to be Controlled by Richard E. Jacobs, the JG Members, or Jacobs Realty Investors Limited Partnership, for the purposes of Section 16.03(a)(iii)(A) unless Richard E. Jacobs, any JG Member, and Jacobs Realty Investors Limited Partnership, or any of them, in the aggregate, directly or indirectly control or own a majority of the capital, income and loss and voting interests or is the sole general partner, sole managing member or sole manager of such entity. "Day" or "Days" (whether or not set forth in initial capital letters) shall mean a calendar day or days unless specifically stated otherwise. "Default" shall have the meaning assigned to that term in Section 20.01. "Default Approval Rights" shall have the meaning assigned to that term in Section 20.04. "Default Formula Price" shall have the meaning assigned to that term in Section 20.03(b). "Default Purchase Closing Date" shall have the meaning assigned to that term in Section 20.06(c). "Default Purchase Price" shall have the meaning assigned to that term in Section 20.03(b). "Defaulting Member" shall have the meaning assigned to that term in Section 20.01. 5 "Development Fee" shall have the meaning assigned to that term in Exhibit C. "Development Schedule(s)" shall mean the schedule for development and construction of the Project or any Future Development Activity. The Development Schedule may be revised by the Members as set forth in this Agreement. "Distributable Cash" shall mean, as to any period for which Distributable Cash is to be calculated, all cash received by Member Newco during such period from Company operations but not from Capital Events, plus any cash that becomes available as the result of the reversal of previously established Reserves, less the sum of the following, to the extent paid or set aside by Member Newco during such period: (i) all principal and interest payments on indebtedness of Member Newco and all other sums paid to lenders (but excluding payments of principal of and Interest/Return on Member Funding made by a Member or its Affiliate in the form of a loan to Member Newco); (ii) all cash expenditures incurred in the operation of Member Newco's business and/or maintaining Member Newco's status and qualification as a limited liability company including the fees listed on Exhibit C due and payable during such period; and (iii) Reserves (to the extent not expended or reversed during such period). "EMJ" shall mean EMJ Corporation, a Tennessee corporation. "Entity" shall mean any general partnership, limited partnership, limited liability company, corporation, joint venture, trust, business trust, cooperative or association or any foreign trust or foreign business organization. "Events of Dissolution" shall have the meaning assigned to that term in Section 17.01. "Excess Amount" shall have the meaning assigned to that term in Section 3.03(d). "Exercise Notice" shall have the meaning assigned to that term in Section 20.03(b). "Expedited Impasse Event" shall have the meaning assigned to that term in Section 16.04(a). "Fiscal Year" shall mean Member Newco's Fiscal Year, which shall be the calendar year. "Future Development Activity" or "Future Development Activities" shall mean any and all additional development/redevelopment or expansion of any portion of the Project or the Real Estate from and after the date of this Agreement "GAAP" shall mean generally accepted accounting principles consistently applied. GAAP is a combination of authoritative accounting standards established by policy boards in the accounting profession or overseeing the accounting profession. As to any matter involving Member Newco's books and records, financial statements and/or accounting procedures, the determination of whether such complies with GAAP shall be made by the Accountants. 6 "Governmental Authority" shall mean any federal, state, local, provincial or other governmental department, agency, court or other authority or instrumentality, whether of the United States, or of any of its states, possessions, or territories, or of any foreign nation, or of any subdivision of any of the foregoing "HVAC" shall mean heating, ventilation and air conditioning. "Impasse" shall have the meaning assigned to that term in Section 16.04(a). "Impasse Initiator" shall have the meaning assigned to that term in Section 16.04(b). "Impasse Initiator Offer Price" shall have the meaning assigned to that term in Section 16.04(b). "Impasse Notice Sender" shall have the meaning assigned to that term in Section 16.04(a). "Impasse Notice Recipient" shall have the meaning assigned to that term in Section 16.04(a). "Impasse Offer Notice" shall have the meaning assigned to that term in Section 16.04(b). "Impasse Project Value" shall have the meaning assigned to that term in Section 16.04(b). "Impasse Respondent" shall have the meaning assigned to that term in Section 16.04(b). "Impasse Respondent Purchase Price" shall have the meaning assigned to that term in Section 16.04(b). "Incoming Equalizing Contribution" shall have the meaning assigned to that term in Section 16.06(f). "Indemnitee" shall have the meaning assigned to that term in Section 8.01. "Initial Contribution" shall mean the initial contribution to the capital of Member Newco made by a Member pursuant to this Agreement as set forth in Section 11.01(a). "Initial Impasse Notice" shall have the meaning assigned to that term in Section 16.04(a). 7 "Initial JV Financing" shall mean the refinancing of the existing mortgage indebtedness of the Project pursuant to that certain loan agreement by and between the Company and UBS Real Estate Investments Inc., dated as of the date of this Agreement. "Initial Operating Agreement" shall have the meaning assigned to that term in the Whereas clauses above. "Interest/Return" shall have the meaning assigned to that term in Section 3.03(d). "JG Manager" shall have the meaning assigned to that term in the Preamble to this Agreement. "JG Member" and "JG Members" shall have the meaning assigned to those terms in the Preamble above. References to the JG Members shall be deemed to refer to each of the JG Members, individually, and all of the JG Members, collectively. "JG Members Baseline Equity Amount" shall mean one-half of the amount by which (i) Two Hundred Eighty-Three Million Five Hundred Thousand Dollars ($283,500,000.00) exceeds (ii) the principal amount of the existing indebtedness of JG North Raleigh and JG Triangle South that is refinanced by the Initial JV Financing plus the Triangle Town Place Construction Payables. "JG Members Closing TA Payment" shall mean an amount equal to the tenant allowances due and payable as of the date of this Agreement set forth on Exhibit I-A attached hereto. "JG Members Construction Loan Guarantee Share" shall have the meaning assigned to that term in Section 3.04(a). "JG Members Construction Loan Response Notice" shall have the meaning assigned to that term in Section 3.04(a). "JG Members Exit Event" shall have the meaning assigned to that term in Section 16.06(f). "JG Members Permanent Financing/Refinancing Guarantee Share" shall have the meaning assigned to that term in Section 3.04(b). "JG Members Subsequent TA Contribution" shall have the meaning assigned to that term in Section 11.01(b)(v). "JG Members Substituted Default Contribution" shall have the meaning assigned to that term in Section 11.01(b). "JG Members Substitute Member" shall have the meaning assigned to that term in Section 16.06(f). "JG North Raleigh" shall have the meaning assigned to that term in Section 18.16. 8 "JGRI" shall have the meaning assigned to that term in the Preamble to this Agreement. "JG Triangle South" shall have the meaning assigned to that term in Section 18.16. "Key Construction Loan Terms" shall mean the following terms of any proposed Construction Loan for the Company, as embodied in a written term sheet, commitment letter or similar document provided by a potential financing source, and such following terms shall be subject to unanimous approval of the Members as set forth in Section 5.03 below: (i)......The amount of the Construction Loan, unless the amount of the proposed Construction Loan is as set forth in the approved Pro Forma, and the equity requirements of the Construction Loan, unless the amount of equity is as set forth in the approved Pro Forma; (ii).....The rate(s) of interest and whether such rate(s) of interest is/are fixed or variable; (iii)....The cross defaulting of the Construction Loan with any other financing of CBL Member, CBL Member Parent or any Affiliates of CBL Member or CBL Member Parent; (iv).....Any provision calling for the personal guarantee of or indemnification or contribution by any of the JG Members or their respective Affiliates; (v)......Representations warranties or undertakings that may create personal liability of the Members beyond their interest in Member Newco, other than representations or warranties that are made by the Managing Member and/or its Affiliates; (vi).....The term, if less than one (1) year beyond the projected end of the Construction Period for the Future Development Activity to which the Construction Loan relates; and (vii)....Any document evidencing or securing the Construction Loan that does not permit the transfer of Membership Interests that would otherwise be permitted under Article XVI of this Agreement; except that any provision in any such document that provides that prior notice must be given to the lender of the Construction Loan of a transfer of Membership Interests shall not be deemed to be a Key Construction Loan Term if such lender has no rights to prohibit or restrict such transfers otherwise permitted under Article XVI of this Agreement. Once the Members have unanimously approved the Key Construction Loan Terms, any change or modification to such terms as approved by the Members (other than non-substantive wording changes or typographical errors) shall require the unanimous re-approval of the Members pursuant to Section 5.03 below. "Key Permanent Loan Terms" shall mean the following terms of any proposed Permanent Financing/Refinancing for the Company, as embodied in a written term sheet, commitment letter or similar document provided by a potential financing source, and such following terms shall be subject to unanimous approval as set forth in Section 5.03 below: 9 (i)......The amount of the Permanent Loan, unless the amount of the proposed Permanent Financing/Refinancing is as set forth in the approved Pro Forma; (ii).....The rate(s) of interest and whether such rate(s) of interest is/are fixed or variable; (iii)....The cross defaulting of the Permanent Financing/Refinancing with any other financing of CBL Member, CBL Member Parent or any Affiliates of CBL Member or CBL Member Parent; (iv).....Any provision calling for the personal guarantee of or indemnification or contribution by any Member or its Affiliates other than the Managing Member and/or its Affiliates; (v)......Representations, warranties or undertakings that may create personal liability of the Members beyond their interest in Member Newco, other than representations or warranties that are made by the Managing Member and/or its Affiliates and other than personal liability for standard recourse carve out provisions customary in the industry relating to (i) fraud, (ii) willful misrepresentation; (iii) waste, (iv) retention or diversion of rent or other revenue after an event of default; (v) retention or diversion of tenant security deposits; (vi) misapplication of insurance proceeds; and (vii) misapplication of condemnation awards; (vi).....The term, if less than a period of five (5) years; and (vii)....Any document evidencing or securing the Permanent Financing/Refinancing that does not permit the transfer of Membership Interests that would otherwise be permitted under Article XVI of this Agreement; except that any provision in any such document that provides that prior notice must be given to the lender of the Permanent Financing/Refinancing of a transfer of Membership Interests shall not be deemed to be a Key Permanent Loan Term if such lender has no rights to prohibit or restrict such transfers otherwise permitted under Article XVI of this Agreement. Once the Members have unanimously approved the Key Permanent Loan Terms, any change or modification to such terms as approved by the Members (other than non-substantive wording changes or typographical errors) shall require the unanimous re-approval of the Members pursuant to Section 5.03 below. "Letter Agreement" shall mean that certain letter agreement dated September 14, 2005 and effective as of September 15, 2005 entered into by and between (i) CBL Member or its Affiliate and (ii) the JG Members or their Affiliate with respect to the entering into of this Agreement. "Losses" shall have the meaning assigned to that term in Section 8.01. "Majority Vote" shall mean the vote or written consent of Members holding a majority (i.e., in excess of fifty percent (50%)) of the Voting Interests held by all Members. 10 "Management Fee" shall have the meaning assigned to that term on Exhibit C. "Managing Member" shall mean CBL Member, unless and until replaced pursuant to the terms of this Agreement and, upon such replacement, shall mean the Member who has assumed such position. "Mandatory Contribution(s)" shall have the meaning assigned to that term in Section 11.01(b). "Material Development Deviation" shall have the meaning assigned to that term in Section 6.02(c). "Material Operating Deviation" shall have the meaning assigned to that term in Section 6.02(b). "Maximum Required Funding" shall have the meaning assigned to that term in Section 11.01(b). "Member" shall mean any Person reflected in the required records of Member Newco as the owner of a Membership Interest. "Member Construction Loan" shall have the meaning assigned to that term in Section 3.04(a). "Member Funding" shall mean any funding provided by a Member to Member Newco in cash or property (including Initial Contributions, Mandatory Contributions and Non-Required Contributions), whether made in the form of a contribution to capital or a loan, but excluding any Member Construction Loan. "Member Lender" shall have the meaning set forth in Section 3.04(c). "Member Newco" shall have the meaning assigned to that term in the Preamble above. "Membership Interest" shall mean a Member's entire interest in Member Newco, consisting of such Member's rights to any distributions of Distributable Cash or property of Member Newco, a Member's Voting Interests, a Member's rights to otherwise participate in the management of the affairs of Member Newco and any rights of a Member to assign all or any portion of such Member's interest in Member Newco. The term Membership Interest shall include a Member's Capital Interest and such Member's Profits Interest. "Merger" shall have the meaning assigned to that term in Section 17.01. "Net Proceeds" shall mean, as to any financing or refinancing with respect to Member Newco, the entire gross proceeds of such financing/refinancing minus the principal amount of the existing indebtedness of 11 Member Newco (or, as to the Initial JV Financing, the principal amount of the existing indebtedness of JG North Raleigh and JG Triangle South plus the Triangle Town Place Construction Payables) that is refinanced by such financing/refinancing and closing costs. "Net Profits" and "Net Losses" shall mean, with respect to any Fiscal Year, Member Newco's taxable income or loss determined in accordance with Section 703(a) of the Code for such Fiscal Year (for this purpose, all items of income, gain, loss, deduction or credit required to be stated separately pursuant to Section 703(a)(1) of the Code will be included in taxable income or loss); provided, such Net Profits and Net Losses will be computed as if items of tax-exempt income and nondeductible, non-capital expenditures (under Sections 705(a)(1)(B) and 705(a)(2)(B) of the Code) were included in the computation of taxable income or loss. If any Member contributes property to Member Newco with an initial book value to Member Newco different from its adjusted tax basis for federal income tax purposes to Member Newco, or if Company property is revalued pursuant to Section 1.704-1(b)(2)(iv)(f) of the Regulations or as otherwise required by the Regulations, Net Profits and Net Losses will be computed as if the initial adjusted tax basis for federal income tax purposes to Member Newco of such contributed or revalued property equaled its initial book value to Member Newco as of the date of contribution or revaluation. Credits or debits to Capital Accounts due to a revaluation of Company assets in accordance with Section 1.704-1(b)(2)(iv)(f) of the Regulations, or due to a distribution of non-cash assets, will be taken into account as gain or loss from the disposition of such assets for purposes of Article XIII hereof. Interest/Return on Member Funding made by a Member or its Affiliate in the form of a loan to Member Newco will not be deductible for purposes of computing Net Profits and Net Losses. "Non-Affiliated Members" shall have the meaning assigned to that term in Section 20.03(a). "Non-Defaulting Member(s)" shall have the meaning assigned to that term in Section 20.01. "Non-Required Contribution(s)" shall mean any contribution to the capital of Member Newco or loan to Member Newco by a Member that is not a Mandatory Contribution, as further defined in and pursuant to Section 11.02 below. "Non-Transferring Member" shall have the meaning assigned to that term in Section 16.05(a). "Operating Budget" shall have the meaning assigned to that term in Section 6.02(b). "Operating Deficits" shall mean the amount by which the sum of: (i)......the expenditures and costs incurred by the Company in the operation of the Project from and after the date of this Agreement; (ii).....as to any Future Development Activity for which the applicable Construction Period ends after the date of this Agreement, the expenditures and costs incurred by the Company from and after the end of the Construction Period for such Future Development Activity; and 12 (iii)....deferred maintenance obligations (other than deferred maintenance obligations of a capital nature) in the year in which the cash expense corresponding to such deferred maintenance obligations is paid (each of (i), (ii) and (iii) shall include, without limitation, current debt service (other than principal of and accrued and unpaid Interest/Return on Member Funding made by a Member or its Affiliate in the form of a loan to Member Newco)) exceeds the cash receipts generated from the ordinary day-to-day operations of the business of the Company from all sources available to the Company without deduction of depreciation, cost recovery, and other non-cash charges. "Outparcel" shall mean any parcel identified as an outlot or outparcel on any Site Plan. "Outparcel Venture" shall have the meaning set forth in Section 3.05. "Outparcel Venture Agreement" shall have the meaning set forth in Section 3.05. "Payment Amount" shall have the meaning assigned to that term in Section 20.06(i). "Permanent Financing/Refinancing" shall mean any loan or financing obtained by Member Newco on behalf of the Company to refinance/replace any Construction Loan, or to refinance, replace or substitute for the Initial JV Financing or any other subsequent financings of the Company, that provides the permanent financing for the operation of the Project and the Company's business. Member Funding made by a Member or its Affiliate in the form of a loan to Member Newco shall not be considered to be Permanent Financing/Refinancing for purposes of this definition. Neither CBL Member nor any of its Affiliates shall act as the lender of the Permanent Financing/Refinancing...... "Person" shall mean any individual or Entity, and the heirs, executors, administrators, legal representatives, successors, and assigns of such "Person" where the context so permits. "Proceeding" shall have the meaning assigned to that term in Section 8.01. "Profits Interest" shall mean that portion of the Membership Interest of a Member that represents such Member's interest in the Net Profits and Net Losses of Member Newco for each Fiscal Year, as allocated under Article XIII below and as set forth on Exhibit B. "Pro Forma" shall mean a pro forma budget(s) for the development and construction of the Project or any Future Development Activity, as unanimously approved by the Members pursuant to Section 5.03 below in accordance with the procedures set forth in Article VI. There shall be a Pro Forma for each Future Development Activity. .... "Project" shall have the meaning assigned to that term in the Preamble to this Agreement. 13 "Property Management Agreement" shall mean the Property Management Agreement, dated as of the date hereof, to be entered into between the Company and the Property Manager, substantially in the form of Exhibit F attached hereto. "Property Manager" shall mean CBL Member or its Affiliate in its capacity as "Manager" under the Property Management Agreement, and any successor or replacement "Manager" as provided therein, and any successor or replacement property manager under any subsequent agreement superseding or replacing the Property Management Agreement.. "Purchasing Member" shall have the meaning assigned to that term in Section 20.06(a). "Real Estate" shall mean the real property described in the Whereas clauses above. "REJ Realty" shall have the meaning assigned to that term in the Preamble to this Agreement. "Representative" shall have the meaning assigned to that term in Section 6.02(f) below. "Reserves" shall mean, with respect to any fiscal period or any Capital Event, funds set aside and held in reserve by the Company at the direction of Member Newco (i) in an Operating Budget or Pro Forma as amounts allocated for (A) normal and customary reserves for working capital; (B) capital expenditures; (C) to pay taxes, insurance and/or debt service as reflected in an Operating Budget or Pro Forma (other than debt service on Member Funding made by a Member or its Affiliate in the form of a loan to Member Newco); (D) to pay any other costs or expenses incident to the ownership or operation of the Company's business, including, but not limited to, reserves established for contingent liabilities arising out of claims or lawsuits; and/or (ii) from proceeds from a Capital Event, with the unanimous approval of the Members pursuant to Section 5.03 below, for any purpose determined by the Managing Member. Reserves shall also include amounts required to be held in reserve by the lender on any financing or refinancing of any Company indebtedness. "RoFR Notice" shall have the meaning assigned to that term in Section 16.05(a). "RoFR Period" shall have the meaning assigned to that term in Section 16.05(a). "Safe Harbor Amount" shall have the meaning assigned to that term in Section 3.03(d). "Selling Member" shall have the meaning assigned to that term in Section 20.06(a). "Shortfall" shall mean the amount, if any, by which (i) the JG Members Baseline Equity Amount exceeds (ii) the Net Proceeds of the Initial JV Financing. 14 "Site Plan" shall mean the site plan for the Project, including any revisions or modifications to the site plan, subject to any unanimous approval rights set forth in Section 5.03 below. The existing Site Plan for the Project is set forth on Exhibit E attached hereto. "SWGW" shall have the meaning assigned to that term in Section 18.20. "Tax Distribution" shall have the meaning assigned to that term in Section 12.01. "TH" shall have the meaning assigned to that term in Section 18.20. "Third-Party Purchaser" shall have the meaning assigned to that term in Section 16.05. "TMM" shall have the meaning assigned to that term in Section 18.09. "Transferring Member" shall have the meaning assigned to that term in Section 16.05. "Treasury Regulations" or "Regulations" shall mean the federal income tax final regulations or temporary regulations, promulgated under the Code, as such regulations exist or may hereafter be amended from time to time (including corresponding provisions of succeeding regulations). "Triangle Town Center" shall mean the two-level regional enclosed mall shopping center known as Triangle Town Center and the Commons, located on approximately 43.328 acres of land near the I-540 - US 1 interchange in Raleigh, North Carolina, together with the improvements and/or development resulting from any Future Development Activity with respect thereto. "Triangle Town Place" shall mean the power center know as Triangle Town Place, located on approximately 15.749 acres of land and adjacent to Triangle Town Center, together with the improvements and/or development resulting from any Future Development Activity with respect thereto. "Triangle Town Place Construction Payables" shall mean payables of JG Triangle South in the amount of $138,857.05 arising out of construction activity at Triangle Town Place that in the ordinary course would have been eligible to be paid with the proceeds of draws on the construction financing for Triangle Town Place, had such construction financing not been paid off and terminated as of the date hereof with proceeds of the Initial JV Financing. "Voting Interests" shall mean each Member's rights to vote or approve any matter set forth in this Agreement requiring a Member's vote or requiring unanimous approval of the Members. The Voting Interests of the Members shall be the JG Members (in the aggregate) - fifty percent (50%) and CBL Member - - fifty percent (50%). Any reference in this Agreement to approvals of the Members or voting of Members shall be deemed to refer to each Member's Voting Interest. A Member's Voting Interest shall not change with fluctuations, if any, in such Member's Capital Interest and/or such Member's Profits Interest. 15 1.02 Other Definitional Provisions. (a) All personal pronouns used in this Agreement, whether used in the masculine, feminine or neuter gender, shall include all other genders; the singular shall include the plural, and the plural shall include the singular. Titles of Articles and Sections in this Agreement are for convenience only, and neither limit nor amplify the provisions of this Agreement, and all references in this Agreement to Articles, Sections, Exhibits or Schedules shall refer to the corresponding Article or Section of, or Exhibit or Schedule attached to, this Agreement, unless specific reference is made to the articles, sections or other subdivisions of, or Exhibits or Schedules to, another document or instrument. All Exhibits or Schedules attached hereto are by this reference made a part hereof. All references to any instrument, document or agreement shall, unless the context otherwise requires, refer to such instrument, document or agreement as the same may be, from time to time, amended, modified, supplemented, renewed, extended, replaced or restated. (b) Terms not otherwise defined in this Agreement shall have the meanings set forth in the Act. 1.03 Statement as to Member's Approval/Voting Rights. Notwithstanding any provision in this Agreement to the contrary, the Members hereby agree that in any decision calling for a vote or approval of the Members, the following Members shall be solely authorized to make such decision, vote or approval and, once made, such decision shall be binding on the Affiliates of such Member who are currently Members of Member Newco or who may be in the future admitted as Members of Member Newco: (i) As to any vote, approval or decision by CBL Member and/or any of its Affiliates who may be admitted as Members of Member Newco, including without limitation the exercise of rights under Article XVI and Section 20.03 of this Agreement - CBL Member shall be solely authorized to cast such vote, exercise such approval or make such decision; and (ii) As to any vote, approval or decision by the JG Members and/or any of its Affiliates who may be admitted as Members of Member Newco, including without limitation the exercise of rights under Article XVI and Section 20.03 of this Agreement - JG Manager shall be solely authorized to cast such vote, exercise such approval or make such decision. 1.04 Ownership of the Project and the Real Estate by the Company; Interpretation of this Agreement. The Members acknowledge that, as of the date of this Agreement, the Company owns the legal title to the Real Estate and the Project and that Member Newco owns 100% of the membership interests of the Company. As a result of this structure, the Members agree that terms and provisions of this Agreement that provide for the operation of the Project and all other matters impacting the Project and the Real Estate will be construed as if Member Newco owned the Project and the Real Estate directly and as if the Company did not exist. The Members agree that any decisions requiring the approval of the Members under the terms of this Agreement, including without limitation the matters requiring unanimous approval of the Members under Section 5.03 below, 16 will be deemed to apply to the Company such that the Company will not take such action, and the Managing Member will not cause or permit the Company to take such action, without the requisite approval set forth in this Agreement. As required but pursuant to the terms and provisions of this Agreement, the Managing Member may execute such documentation and take such action on behalf of and in the name of Member Newco as the sole member of the Company. ARTICLE II FORMATION 2.01 Formation. Member Newco was formed as an North Carolina limited liability company by the filing of the Articles of Organization with the Secretary of State of North Carolina in accordance with the provisions of the Act on November 8, 2005. 2.02 Name. The name of Member Newco is Triangle Town Member, LLC. 2.03 Principal Place of Business. The principal place of business of Member Newco shall be 2030 Hamilton Place Boulevard, Suite 500, CBL Center, Chattanooga, Tennessee, 37421. Member Newco may locate its places of business at any other place or places as the Members may from time to time deem advisable. 2.04 Statutory Agent. Member Newco's statutory agent for service of process is Corporation Service Company, 327 Hillsborough Street, Raleigh, NC 27603. The statutory agent may be changed from time to time pursuant to the Act and the applicable rules promulgated thereunder. 2.05 Term. The term of Member Newco commenced on the date the Articles of Organization were filed with the Secretary of State of North Carolina and shall continue until Member Newco is dissolved and its affairs wound up in accordance with the provisions of this Agreement or the Act. Member Newco shall have a perpetual existence unless terminated as stated above. ARTICLE III PURPOSE OF COMPANY; ADMISSION OF MEMBERS; CAPITAL ACCOUNTS AND INTEREST/RETURN; FINANCING 3.01 General Business Purpose of Member Newco. The business of Member Newco shall be to engage in any lawful activity related to its activities of owning member interests in and acting as manager of the Company, which is the owner of the Project on the Real Estate. In furtherance thereof, Member Newco may exercise all powers necessary to or reasonably connected with Member Newco's business which may be legally exercised by limited liability companies under the Act, and may engage in all activities necessary, customary, convenient, or incident to any of the foregoing. 3.02 Admission of Members; Distribution of Initial JV Financing Proceeds . As of the date of this Agreement, CBL Member has been admitted to Member Newco as a Member having the Capital Interest (initially zero) and the Profits Interest set forth on Exhibit B, the JG Members, pro rata, paid the JG Members Closing TA Payment to Member Newco, Member Newco received from the Company the Net Proceeds 17 of the Initial JV Financing, and Member Newco then distributed the Net Proceeds of the Initial JV Financing to the JG Members, in part as a reimbursement for preformation expenditures under Treas. Reg. 1.707-4(d) to the extent available, reducing (diluting) the JG Members' Capital Interest and Profits Interest to the amounts and percentages set forth on Exhibit B 3.03 Capital Accounts. (a) An individual capital account shall be maintained for each Member in accordance with Exhibit H attached hereto (a "Capital Account"). (b) The provisions of Exhibit H and any other provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Treasury Regulations Section 1.704-1(b)(2)(iv), and shall be interpreted and applied in a manner consistent with such Regulations. In the event that the Managing Member shall determine that it is prudent to modify the manner in which Capital Accounts, or any debits or credits thereto (including, without limitation, any debits or credits relating to liabilities which are secured by contributed or distributed property or which are assumed by Member Newco or the Members) are computed in order to comply with such Regulations, the Managing Member may make such modification, provided, that such modification would not reasonably be expected to have a material adverse effect on the amount distributable to any Member pursuant to the provisions of this Agreement upon the dissolution and liquidation of Member Newco. The Managing Member also shall make any appropriate modifications in the event unanticipated events might otherwise cause this Agreement not to comply with Treasury Regulations Section 1.704-1(b). (c) The Capital Accounts of the Members as of the date of this Agreement following CBL Member's admission as a Member are as follows: the JG Members (in the aggregate) - the sum of the JG Members Baseline Equity Amount and the Shortfall, if any CBL Member - $0.00 18 (d) Interest/Return. Except as set forth below, the Members agree that interest/return shall accrue on any and all Member Funding by Members at the rate of eleven percent (11%) per annum (simple, not compounded) interest/return (the "Interest/Return") until fully repaid or returned; except that the Members also agree that in the event one Member or its Affiliates shall make a Construction Loan, the interest rate on such Construction Loan may not be at a rate equivalent to the Interest/Return but such interest rate shall be on market rate terms and except that no Interest/Return shall accrue on the JG Members' Initial Contribution (other than the Shortfall, if any), and except that the Interest/Return on the Shortfall, if any, shall equal two percent (2%) per annum (simple, not compounded), unless the amount of the Interest/Return on the Shortfall exceeds (the "Excess Amount") the amount computed using the "safe harbor" interest rate set forth in Treasury Regulation Section 1.707-4(a)(3)(ii) (the "Safe Harbor Amount"), in which case the Interest/Return paid each year on the Shortfall shall be the Safe Harbor Amount until the expiration of a two year period ending after the Closing at which time the Excess Amount will be paid at the next cash distribution date. The unpaid Excess Amount, if any, will not bear any Interest/Return. 3.04 Financing. (a) Construction Loan. (i) Subject to the unanimous approval rights of the Members and the procedures set forth in Section 5.03(g) below, the Managing Member shall cause Member Newco to cause the Company to enter into Construction Loan(s) to fund the construction of any Future Development Activity to be constructed from and after the date of this Agreement. The Managing Member shall use its reasonable efforts to cause Member Newco obtain such Construction Loans on arm's length terms that are the most favorable market-rate terms to the Company as reasonably possible from an institutional lender that is not an Affiliate of or Controlled by any Member. (ii) If CBL Member determines in its reasonable judgment that it is not possible to obtain a Construction Loan on commercially reasonable terms from an institutional lender that is not an Affiliate of or Controlled by any Member, CBL Member shall provide written notice of such determination (the "Construction Loan Unavailability Notice") to the JG Members, specifying in reasonable detail the basis of such determination and specifying the Key Construction Loan Terms, if any, upon which CBL Member would be willing to be the lender of such Construction Loan (any Construction Loan made by a Member being hereinafter referred to as a "Member Construction Loan") and otherwise complying in form and content with the requirements of Section 5.03(g) below. The Key Construction Loan Terms and the other terms and conditions of all Member Construction Loans shall be on such arm's length and market rate terms (defined by reference to third-party unaffiliated loans for the most nearly comparable projects for which third-party unaffiliated loans are commercially available) as referenced above and as set forth in the definition of Construction Loan set forth in Section 1.01 above and shall include notice and cure periods for all defaults, including, but not limited to, payment defaults. 19 (iii) the JG Members shall, by written notice to CBL Member given within fourteen (14) days of the JG Members' receipt of the Construction Loan Unavailability Notice, respond to CBL Member in writing (the "JG Members Construction Loan Response Notice") and shall in the JG Members Construction Loan Response Notice either (A) approve the Key Construction Loan Terms, if any, proposed for the Member Construction Loan by CBL Member in the Construction Loan Unavailability Notice and elect to participate in the Member Construction Loan with CBL Member, on an equal basis with CBL Member, in which case each of the JG Members and CBL Member shall act as lender to Member Newco for their proportionate share of the Member Construction Loan, on the terms and conditions specified in the Construction Loan Unavailability Notice; (B) approve the Key Construction Loan Terms, if any, proposed for the Member Construction Loan by CBL Member in the Construction Loan Unavailability Notice and elect not to participate in the Member Construction Loan, in which case CBL Member shall act as lender to Member Newco of the entire Member Construction Loan, on the terms and conditions, if any, specified in the Construction Loan Unavailability Notice; (C) specify the Key Construction Loan Terms, if any, which shall in the aggregate be superior to the terms, if any, offered by CBL Member in the Construction Loan Unavailability Notice, upon which the JG Members would be willing to be the lender of the entire Member Construction Loan; or (D) disapprove the Key Construction Loan Terms, if any, proposed for the Member Construction Loan by CBL Member in the Construction Loan Unavailability Notice. (iv) If the JG Members elect to respond under clause (C) of the immediately preceding paragraph (iii) of this Section 3.04(a), CBL Member shall, by written notice to the JG Members given within fourteen (14) days of CBL Member's receipt of the JG Members Construction Loan Response Notice, respond to the JG Members in writing (the "CBL Member Construction Loan Response Notice") and shall in the CBL Member Construction Loan Response Notice either (A) approve the Key Construction Loan Terms for the Member Construction Loan proposed by the JG Members in the JG Members Construction Loan Response Notice and elect to participate in the Member Construction Loan with the JG Members, on an equal basis with the JG Members, in which case each of the JG Members and CBL Member shall act as lender to Member Newco for their proportionate share of the Member Construction Loan, on the terms and conditions specified in the JG Members Construction Loan Response Notice; (B) approve the Key Construction Loan Terms for the Member Construction Loan proposed by the JG Members in the JG Members Construction Loan Response Notice and elect not to participate in the Member Construction Loan, in which case the JG Members shall act as lender to Member Newco of the entire Member Construction Loan, on the terms and conditions specified in the JG Members Construction Loan Response Notice; or (C) disapprove the Key Construction Loan Terms for the Member Construction Loan proposed by the JG Members in the JG Members Construction Loan Response Notice. (v) the JG Members' approval of the Key Construction Loan Terms for the Member Construction Loan under either clause (A) or clause (B) of paragraph (iii) of this Section 3.04(a) shall 20 be deemed to be the JG Members' approval of such Key Construction Loan Terms for purposes of Section 5.03(g) below. The JG Members' disapproval of the Key Construction Loan Terms for the Member Construction Loan under clause (D) of paragraph (iii) of this Section 3.04(a) shall be deemed to be the JG Members' disapproval of such Key Construction Loan Terms for purposes of Section 5.03(g) below. CBL Member, by reason of having given the Construction Loan Unavailability Notice, shall be deemed to have approved the Key Construction Loan Terms, if any, for the Member Construction Loan proposed by CBL Member in the Construction Loan Unavailability Notice, whether or not the JG Members elect to act as lender with respect to its proportionate share of such Member Construction Loan. (vi) CBL Member's approval of the Key Construction Loan Terms for the Member Construction Loan under either clause (A) or clause (B) of paragraph (iv) of this Section 3.04(a) shall be deemed to be CBL Member's approval of such Key Construction Loan Terms for purposes of Section 5.03(g) below. CBL Member's disapproval of the Key Construction Loan Terms for the Member Construction Loan under clause (C) of paragraph (iv) of this Section 3.04(a) shall be deemed to be CBL Member's disapproval of such Key Construction Loan Terms for purposes of Section 5.03(g) below. The JG Members, by reason of having given the JG Members Construction Loan Response Notice, shall be deemed to have approved the Key Construction Loan Terms, if any, for the Member Construction Loan proposed by the JG Members in the JG Members Construction Loan Response Notice, whether or not CBL Member elects to act as lender with respect to its proportionate share of such Member Construction Loan. (vii) CBL Member shall provide an Affiliate Loan Guarantee of CBL Member Parent for all Member Construction Loans. To the extent the lender of the Construction Loan shall require additional personal guarantees for any Construction Loan, CBL Member shall provide such guarantees (or shall provide Affiliate Loan Guarantees), except as otherwise provided in this clause (vii), and neither the JG Members nor their respective Affiliates shall have any obligation to provide such guarantees. If CBL Member intends to guarantee or provide an Affiliate Loan Guarantee of any Construction Loan, CBL Member will provide to the JG Members an opportunity, exercisable in the JG Members' sole and absolute discretion within thirty (30) days from the receipt of the notice from CBL Member, for the JG Members or their Affiliate to provide a guarantee on the same terms as the guarantee to be provided by CBL Member or its Affiliate (except that the JG Members may elect, in its sole and absolute discretion, to cap the JG Members' or its Affiliate's guarantee obligation at an amount determined by the JG Members (the "JG Members Construction Loan Guarantee Share"), which may be less than fifty percent (50%) of the Construction Loan and less than the amount of the Construction Loan to be guaranteed by CBL Member and its Affiliate (the "CBL Member Construction Loan Guarantee Share"). In the event the JG Members or their Affiliate elects to provide a guarantee, CBL Member will use its commercially reasonable efforts to cause the lender to accept "several" guarantees from CBL Member or its Affiliate guaranteeing the CBL Member Construction Loan Guarantee 21 Share and the JG Members or their Affiliate guaranteeing the JG Members Construction Loan Guarantee Share, but the lender may require "joint and several" guarantees and, in such event, CBL Member and the JG Members (or their Affiliates) will provide the guarantees on a joint and several basis, but, as between CBL Member and the JG Members (or their Affiliates), CBL Member's and its Affiliate's liability on such guarantees shall be limited to the CBL Member Construction Loan Guarantee Share, and the JG Members' and its Affiliate's liability on such guarantees shall be limited to the JG Members Construction Loan Guarantee Share, and each guarantor will have a right of contribution and indemnity against the co-guarantor for any payments on such guarantees in excess of the JG Members Construction Loan Guarantee Share (as to the JG Members and its Affiliate) or the CBL Member Construction Loan Guarantee Share (as to CBL Member and its Affiliate). Notwithstanding the foregoing, from and after a JG Members Exit Event, to the extent that the lender of any Construction Loan shall require additional personal guarantees for such Construction Loan, if the lender will accept several guarantees, CBL Member or its Affiliate and the JG Members Substitute Member or its Affiliate shall provide such guarantees on a several basis pro rata based on their respective Capital Interests and, if the lender requires joint and several guarantees, CBL Member or its Affiliate and the JG Members Substitute Member or its Affiliate will provide the guarantees on a joint and several basis, but, as between CBL Member and the JG Members Substitute Member (or their Affiliates), CBL Member's and its Affiliate's liability on such guarantees and the JG Members Substitute Member's and its Affiliate's liability on such guarantee shall be pro rata in the same proportion as their respective Capital Interests, and each guarantor will have a right of contribution and indemnity against the co-guarantor for any payments on such guarantees in excess of such guarantor's pro rata share. Notwithstanding anything in this Section 3.04(a)(vii) or Section 5.03, any guarantor shall be indemnified by the co-guarantor against any and all claims, losses, liability or damages incurred by such guarantor arising out of such guarantee (including, without limitation, such guarantor's pro rata share of the liability, if any, on such guarantee) that results from the gross negligence or willful misconduct of the co-guarantor or its Affiliates. (b) Permanent Financing/Refinancing. (i) At or prior to the maturity of each Construction Loan, and subject to the unanimous approval rights of the Members and procedures set forth in Section 5.03(h) below, the Managing Member shall cause Member Newco to cause the Company to enter into the Permanent Financing/Refinancing. The Managing Member shall use its reasonable efforts to cause Member Newco to obtain the Permanent Financing/Refinancing on arm's length terms that are the most favorable market-rate terms to the Company as reasonably possible. The Managing Member may also cause Member Newco to cause the Company to enter into one or more subsequent Permanent Financings/Refinancings to replace the Initial JV Financing or a then-existing Permanent Financing/Refinancing under the same parameters as set forth herein and subject to the unanimous approval rights and procedures set forth in Section 5.03(h) below. To the extent the lender of the 22 Permanent Financing/Refinancing shall require personal guarantees for such loan, CBL Member shall provide such guarantees (or shall provide Affiliate Loan Guarantees), together with all indemnifications, including, without limitation, environmental indemnifications, and neither the JG Members nor their respective Affiliates shall have any obligation to provide such guarantees or indemnifications, except as provided in the balance of this paragraph. (ii) To the extent the lender of the Permanent Financing/Refinancing shall require personal guarantees for such loan, CBL Member shall provide such guarantees (or shall provide Affiliate Loan Guarantees), except as otherwise provided in this clause (ii), and neither the JG Members nor their respective Affiliates shall have any obligation to provide such guarantees. If CBL Member intends to guarantee or provide an Affiliate Loan Guarantee of any nonrecourse Permanent Financing/Refinancing, CBL Member will provide to the JG Members an opportunity, exercisable in the JG Members' sole and absolute discretion within thirty (30) days from the receipt of the notice from CBL Member, for the JG Members or their Affiliate to provide a guarantee on the same terms as the guarantee to be provided by CBL Member or its Affiliate (except that the JG Members may elect, in its sole and absolute discretion, to cap the JG Members' or its Affiliate's guarantee obligation at an amount determined by the JG Members (the "JG Members Permanent Financing/Refinancing Guarantee Share"), which may be less than fifty percent (50%) of the Permanent Financing/Refinancing and less than the amount of the Permanent Financing/Refinancing to be guaranteed by CBL Member and its Affiliate (the "CBL Member Permanent Financing/Refinancing Guarantee Share"). In the event the JG Members or their Affiliate elects to provide a guarantee, CBL Member will use its commercially reasonable efforts to cause the lender to accept "several" guarantees from CBL Member or its Affiliate guaranteeing the CBL Member Permanent Financing/Refinancing Guarantee Share and the JG Members or their Affiliate guaranteeing the JG Members Permanent Financing/Refinancing Guarantee Share, but the lender may require "joint and several" guarantees and, in such event, CBL Member and the JG Members (or their Affiliates) will provide the guarantees on a joint and several basis, but, as between CBL Member and the JG Members (or their Affiliates), CBL Member's and its Affiliate's liability on such guarantees shall be limited to the CBL Member Permanent Financing/Refinancing Guarantee Share, and the JG Members' and its Affiliate's liability on such guarantees shall be limited to the JG Members Permanent Financing/Refinancing Guarantee Share, and each guarantor will have a right of contribution and indemnity against the co-guarantor for any payments on such guarantees in excess of the JG Members Permanent Financing/Refinancing Guarantee Share (as to the JG Members and its Affiliate) or the CBL 23 Member Permanent Financing/Refinancing Guarantee Share (as to CBL Member and its Affiliate). Notwithstanding the foregoing, from and after a JG Members Exit Event, to the extent that the lender of any Permanent Financing/Refinancing shall require additional personal guarantees for such Permanent Financing/Refinancing, if the lender will accept several guarantees, CBL Member or its Affiliate and the JG Members Substitute Member or its Affiliate shall provide such guarantees on a several basis pro rata based on their respective Capital Interests and, if the lender requires joint and several guarantees, CBL Member or its Affiliate and the JG Members Substitute Member or its Affiliate will provide the guarantees on a joint and several basis, but, as between CBL Member and the JG Members Substitute Member (or their Affiliates), CBL Member's and its Affiliate's liability on such guarantees and the JG Members Substitute Member's and its Affiliate's liability on such guarantee shall be pro rata in the same proportion as their respective Capital Interests, and each guarantor will have a right of contribution and indemnity against the co-guarantor for any payments on such guarantees in excess of such guarantor's pro rata share. Notwithstanding anything in this Section 3.04(b)(ii) or Section 5.03, any guarantor shall be indemnified by the co-guarantor against any and all claims, losses, liability or damages incurred by such guarantor arising out of such guarantee (including, without limitation, such guarantor's pro rata share of the liability, if any, on such guarantee) that results from the gross negligence or willful misconduct of the co-guarantor or its Affiliates. (c) Affiliate Loan Guarantees; Rights of Guarantors and Member Lenders. (i) As set forth in Sections 3.04(a) and (b) above, the lender(s) of the Construction Loan and/or the Permanent Financing/Refinancing may require the personal guarantees of CBL Member or Affiliates of CBL Member (the "Affiliate Loan Guarantees"). If such a lender requires an Affiliate Loan Guarantee other than or in addition to CBL Member's Affiliate Loan Guarantee, CBL Member shall cause CBL Member Parent (or such other Affiliate(s) as may be acceptable to the lender) to provide an Affiliate Loan Guarantee. (ii) If CBL Member or CBL Member Parent or any other Member or Affiliate of a Member extends credit to or for the benefit of the Company by providing an Affiliate Loan Guarantee or other guarantee for the Construction Loan and/or the Permanent Financing/Refinancing, the guarantor parties shall have the right to request and receive indemnification from Member Newco and/or the Company (but not from Member Newco's Members) against any and all loss, cost and expense incurred in connection therewith (except to the extent that such loss, cost or expense results from to the gross negligence or willful misconduct of the guarantor or its Affiliates) and such guarantor shall be entitled to step into the shoes of the lender upon payment under such guarantee. As guarantor, the guarantor party(ies) shall have certain rights in the event of any default under financing guaranteed, i.e., indemnity rights from Member Newco and/or the Company (but not from Member Newco's Members), to step into the primary lender's position on default and other similar rights. The Members acknowledge that upon the occurrence of such event, the guarantor party(ies) may be deemed to have a conflict of interest with respect to Member Newco, the Company and the other Members. The Members acknowledge this potential conflict of interest and hereby agree that it shall not be deemed a breach of any fiduciary duty that the guarantor party(ies) or Affiliates of the guarantor party(ies) may have to another Member or to Member 24 Newco or the Company if the guarantor party(ies) exercise the rights and remedies of the lender or rights under any indemnity agreement or similar agreement when called upon or required to pay under a guaranty, and the guarantor party(ies) shall have the right to exercise such rights and remedies, except that in exercising such rights and remedies the guarantor shall have no right to take or cause Member Newco to take any action that would create or increase the personal liability of any other Member beyond such other Member's personal liability, if any, as set forth in the applicable loan document. The provisions of Section 5.03 below shall not apply to the exercise by the guarantor of such rights and remedies. Notwithstanding the foregoing provisions of this Section 3.04(c)(ii), if the guarantor is CBL Member or an Affiliate of CBL Member and if the default giving rise to the right to exercise such rights is a default curable by the payment of money or a non-monetary default caused by CBL Member or an Affiliate of CBL Member, the guarantor shall have no right to exercise such rights and remedies at any time when the sum of (i) the aggregate unreturned amount of Mandatory Contributions made by CBL Member to fund capital improvements to the Project and (ii) the aggregate amount of Mandatory Contributions made by CBL Member for all purposes other than funding capital improvements to the Project, whether returned or unreturned, is less than the Maximum Required Funding. (iii) In the event a Member or its Affiliates serve as the lender on any Member Construction Loan (the "Member Lender") pursuant to the provisions of this Agreement, the other Members acknowledge that the Member Lender may be deemed to have a conflict of interest with respect to Member Newco, the Company and the other Members. The other Members acknowledge this potential conflict of interest and hereby agree that it shall not be deemed a breach of any fiduciary duty that the Member Lender may have to another Member or to Member Newco or the Company if the Member Lender or the Member Lender's Affiliate who has provided the Member Construction Loan exercises the rights and remedies of the lender or lender's rights under the loan documents with respect to such financing, except that in exercising such rights and remedies the Member Lender or the Member Lender's Affiliate shall have no right to take or cause Member Newco to take any action that would create or increase the personal liability of the Members beyond the Members' personal liability, if any, as set forth in the applicable loan documents. The provisions of Section 5.03 below shall not apply to the exercise by the Member Lender or the Member Lender's Affiliate of such rights and remedies. The Members also agree that in the situation where (i) the Member Lender has provided a Member Construction Loan on a particular phase of the Project and (ii) a third-party lender has provided a Construction Loan and/or Permanent Financing/Refinancing on another phase of the Project and (iii) there is a default on the third-party lender's financing, then in such events, the foreclosure by the third-party lender shall not be deemed to extinguish or otherwise foreclose any equity or rights of the Member Lender as to any phase of the Project or asset of the Company other than the assets specifically pledged to secure the third-party lender's loan. Notwithstanding the foregoing provisions of this Section 3.04(c)(iii), if the Member Lender is CBL Member or an Affiliate of CBL Member, the Member Lender shall have no right to exercise such rights 25 and remedies at any time when the sum of (i) the aggregate unreturned amount of Mandatory Contributions made by CBL Member to fund capital improvements to the Project and (ii) the aggregate amount of Mandatory Contributions made by CBL Member for all purposes other than funding capital improvements to the Project, whether returned or unreturned, is less than the Maximum Required Funding and, if a Member Lender or its Affiliates is in default pursuant to Article XX of this Agreement, then such Member Lender shall be prohibited from exercising its rights under this Section 3.04(c)(iii) while such default is continuing. (iv) No third-party, non-Member lender to Member Newco or the Company or creditor of any Member or of any Affiliate of any Member shall be a third-party beneficiary of the provisions of this Section 3.04(c) or any other provision of this Agreement. (d) Consultation with Other Members. Upon request of any Member and upon reasonable notice, the Managing Member shall advise the requesting Member of the status of the Managing Member's efforts to obtain Construction Loans and/or Permanent Financing/Refinancing and the material terms of financing proposals then under negotiation. 3.05 Outparcel Venture. The Members acknowledge that the Company owns the entirety of the Real Estate in the name of the Company. The Members may cause Member Newco to cause the Company to designate certain portions of the Real Estate as Outparcels. Upon such designation, CBL Member may elect to require Member Newco to cause the Company to transfer the Outparcels to a new entity (the "Outparcel Venture") which shall be in the form of a limited liability company and whose members shall be the Members of this Company or their Affiliates and the capital interests, profits interests and voting interests of the members of the Outparcel Venture shall be in the same proportions as their or their Affiliates' Capital Interests, Profits Interests and Voting Interests in Member Newco. The rights, duties, obligations, privileges, remedies, transfer restrictions, buy-sell provisions and other provisions of this Agreement shall be part of a definitive limited liability company agreement for the Outparcel Venture (the "Outparcel Venture Agreement"). CBL Member shall prepare a draft of the Outparcel Venture Agreement and shall deliver it to the JG Members for its review and approval. Each Member shall be entitled to designate its member to be included in the Outparcel Venture but such designation shall only be allowed as to the Member itself or an Affiliate of such Member. The Outparcel Venture Agreement shall contain distribution provisions that will coordinate with the distribution provisions of this Agreement as to return of capital and other matters. The Outparcel Venture Agreement will provide for cross-defaults and cross buy-sell provisions such that the acquisition by one Member of the interests of another non-Affiliated Member under this Agreement shall likewise entail the acquisition of such non-Affiliated Member's interests in the Outparcel Venture. ARTICLE IV NAMES AND ADDRESSES OF MEMBERS The names and addresses of the Members are set out on Exhibit B. 26 ARTICLE V GOVERNANCE 5.01 General Powers. Subject to the terms of this Agreement, the business and affairs of Member Newco shall be managed by CBL Member, and CBL Member shall be the Managing Member of Member Newco. A Member shall not have the authority to act as an agent of Member Newco or legally bind Member Newco, unless such Person is: (a) the Managing Member; or (b) a Person designated in writing by action of the Members as being so authorized. 5.02 Standard of Conduct. A Member shall discharge such Member's duties as a Member in good faith, in a manner the Member reasonably believes to be in the best interest of Member Newco, and with the care an ordinarily prudent Person in a like position would exercise under similar circumstances. Each Member shall be entitled to rely on information, opinions, reports or statements, including financial statements and other financial data, if prepared or presented by: (a) one (1) or more employees of Member Newco or one (1) or more employees of one of Member Newco's Members, in either case, whom the Member reasonably believes to be reliable and competent in the matters presented; or (b) legal counsel, public accountants or other Persons as to matters the Member reasonably believes are within such Person's professional or expert competence. A Member shall not be liable for any action taken as a Member, or any failure to take any action, if the Member performed the duties of the position as a Member in compliance with this Section 5.02. Except as specifically set forth in this Agreement or in the Act, no Member shall be personally liable to Member Newco, any Member or any third party for any action taken as a Member or for any failure to take any action as a Member other than due to the gross negligence or willful misconduct of such Member. 5.03 Governance; Unanimous Approval Items. The day-to-day operational decisions of Member Newco shall be made by the Managing Member unless specifically set forth in this Agreement to the contrary. Subject to the provisions of Section 1.03, the following decisions shall require the unanimous approval of the Members, and, neither the JG Members, pursuant to the JG Members' responsibilities set forth herein, nor CBL Member, as Managing Member and/or pursuant to CBL Member's responsibilities set forth herein, shall be authorized to take or to cause Member Newco to cause the Company to take the following actions unless such approval has been obtained: (a) The sale, lease or other disposition of all or any portion of the Project or all or any of the Real Estate either in one transaction or in a series of interrelated transactions (including, without limitation, the sale or ground lease of any of the Real Estate to an Anchor or other third-party and all Anchor leases), except (A) as set forth in Article XVI and Article XVII; (B) as reflected in an approved Pro Forma and/or Operating Budget; (C) for the leasing of the space in the Project to individual non-Anchor tenants in the course of the Company's business; (D) sales or ground leases of Outparcels to occupants that are consistent with a first-class shopping center; and (E) for normal and customary easements and access rights granted in the course of development of the Project. Without limiting the generality of the foregoing, a sale, assignment or other disposition by Member Newco of all or any portion of its member interest in the Company, either in one transaction or a series of interrelated transactions, shall be deemed to be a sale, lease or other disposition of the Project or the Real Estate for the purposes of this Section 5.03(a). If Member approval is required under this Section 5.03(a), the sale, 27 lease or other disposition of all or a portion of the Project shall be submitted to the Members for approval at the time that the Managing Member has received a purchase agreement, term sheet, letter of intent or other evidence of interest on terms the Managing Member determines to be reasonably satisfactory; (b) The approval of the Site Plan for any expansions or additional development/redevelopment of the Project and any material and/or substantial modifications or amendments to the existing or any future Site Plan, the approval of expansions or additional development/redevelopment of the Project, the approval of any future Development Schedules for the Project; (c) The approval of the Pro Forma for any Future Development Activities and construction of the Project, the approval of any modifications or adjustment(s) to a previously approved Pro Forma that constitute Material Development Deviations; (d) The approval of the Operating Budget for the Project for the 2007 and subsequent Fiscal Years and the incurrence of expenditures or obligations that constitute a Material Operating Deviation; (e) Unless set forth in this Agreement, in an approved Pro Forma or in an approved Operating Budget, the incurring or payment of any fees to a Member or to an Affiliate of a Member or the entering into any agreement or contract with any Member or an Affiliate of a Member; except that Member Newco may enter into or cause the Company to enter into a contract for the maintenance/janitorial/security for the Project with ERMC II, LP or its affiliates without further approvals provided the terms of such contracts are on terms that are competitive in the market and within an approved Pro Forma and/or Operating Budget; and except that Member Construction Loans shall be subject to Section 5.03(g) below and shall not be subject to this Section 5.03(e). (f) Except for required funding set forth in this Agreement, the required funding by Members of any obligation, capital expenditure, cost or other expense, and the entering into any contract or agreement, including guarantees or indemnities, that creates personal liability of the Members, other than CBL Member, beyond their Member Funding to Member Newco or that requires the personal guarantees or indemnities of the Members or their Affiliates, other than CBL Member or its Affiliates. If a Member, other than CBL Member, fails to approve such funding or such entering into of a contract or agreement, such failure shall not be an Impasse, and Section 16.04 shall not apply to such failure; (g) The approval of the Key Construction Loan Terms on the procedures set forth in this clause (g) or, as to Member Construction Loans, the procedures set forth in Section 3.04(a). CBL Member shall notify the JG Members, in writing, prior to the placement of the Construction Loan, which notice shall include a written term sheet for the proposed Construction Loan and identify the Key Construction Loan Terms and the proposed lender(s). The JG Members shall either approve or disapprove said terms by written notice delivered and received by CBL Member within fourteen (14) Days of the date on which the JG Members shall receive CBL Member's notice. In the event the JG Members do not respond within said fourteen (14) Day period, such failure to respond shall be deemed an approval of terms of the Construction Loan as set forth in CBL Member's notice; 28 (h) The approval of the Key Permanent Loan Terms on the procedures set forth in this clause (h). CBL Member shall notify the JG Members, in writing, prior to the placement of the Permanent Financing/Refinancing, which notice shall include a written term sheet for the proposed Permanent Financing/Refinancing and identify the Key Permanent Loan Terms and the proposed lenders(s). The JG Members shall either approve or disapprove said terms by written notice delivered and received by CBL Member within fourteen (14) Days of the date on which the JG Members shall receive CBL Member's notice. In the event the JG Members do not respond within said fourteen (14) Day period, such failure to respond shall be deemed an approval of the Permanent Financing/Refinancing as set forth in CBL Member's notice; (i) The approval of the architects and engineers for any Future Development Activities (except that the Members agree that they may establish, by the same unanimous approval as would be required to approve an architect or engineer under this clause, an approved list of architects and engineers that then may be engaged without further approval by the Members) and the approval of any fees payable to such architects and engineers collectively with respect to any Future Development Activities where the aggregate of such fees will exceed four and one-half percent (4.5%) of the total construction costs for such Future Development Activities; (j) The selection of the general contractor for construction of any Future Development Activities (it being agreed that EMJ shall be entitled to bid on the construction contract for any such Future Development Activities) and the entering into of a Construction Contract by Member Newco or the Company that does not meet the parameters set forth in Section 6.03 below; (k) Any employment agreement through which Member Newco shall, or shall cause the Company to, hire, retain or employ any individual as an "employee" of Member Newco or the Company. For these purposes, the Members acknowledge that it is their initial intention that Member Newco and the Company shall not have any "employees"; (l) The establishment of any Reserve described in clause (ii) of the definition of such term in Section 1.01 above; (m) The filing of bankruptcy or the filing for the appointment of a receiver for the assets of Member Newco or the Company; (n) In the event of any default under any financing secured by assets of Member Newco or the Company, the decision as to whether to allow foreclosure by the creditor or provide a deed in lieu of foreclosure; (o) The dissolution or termination of Member Newco or the Company, or the removal or resignation of Member Newco as a member or chief manager of the Company; (p) The payment to the JG Members or any Affiliate of any compensation for the performance of the JG Members' obligations pursuant to Article VI of this Agreement or for any other services to Member Newco or the Company other than as set forth on Exhibit C of this Agreement. The failure to approve such payment shall not constitute an Impasse, and Section 16.04 shall not apply to such failure; 29 (q) The payment to CBL Member or any Affiliate of any compensation for the performance of CBL Member's obligations as Managing Member of Member Newco, or Member Newco's obligations as manager of the Company, or for any other services to Member Newco or the Company pursuant to Article VI of this Agreement other than as set forth on Exhibit C of this Agreement and/or in the Property Management Agreement. The failure to approve such payment shall not constitute an Impasse, and Section 16.04 shall not apply to such failure; (r) The entering into any agreement or contract between Member Newco or the Company and a Member or any Affiliate of a Member other than as referenced or authorized in this Agreement. The failure to approve such entering into of a contract or agreement shall not constitute an Impasse, and Section 16.04 shall not apply to such failure. The Members acknowledge that CBL Member or its Affiliates shall enter into the Property Management Agreement as referenced herein and serve as the Property Manager in accordance with the terms and conditions of the Property Management Agreement; (s) Except as provided in the Property Management Agreement, any replacement of the Property Manager and any amendment to the Property Management Agreement; (t) The removal of the Managing Member as contemplated by Section 6.04 below (other than upon Default of the Managing Member under Section 20.01 below); (u) Any distribution to the Members of Distributable Cash or any other funds or assets of Member Newco other than as set forth in a Pro Forma, an Operating Budget or as otherwise specifically provided in this Agreement; (v) The termination of or any amendment or modification of this Agreement, other than the exercise of the authority of the Managing Member to the limited extent required to revise Exhibit B to reflect any assignment of a Membership Interest, receipt of an additional Member Funding, or distribution to a Member, in each case as permitted under this Agreement, the Members likewise acknowledging that the authority of the Managing Member to make such revisions to Exhibit B is may only be exercised if the circumstance giving rise to such revision is otherwise in accordance with the applicable provisions of this Agreement; (w) The admission of any new Member, other than pursuant to an assignment expressly permitted by Article XVI or the admission of any new member to the Company; and (x) Any amendment to the Articles of Organization or the articles of organization of the Company. 30 ARTICLE VI SPECIFIC DUTIES OF MEMBERS 6.01 Managing Member. Member Newco shall not have managers but shall have a Managing Member as set forth above. Member Newco shall be a "member-managed" limited liability company. 6.02 Managing Member; Managing Member's Specific Duties. CBL Member shall be the Managing Member of Member Newco. CBL Member shall serve as the Managing Member until its successor shall have been duly elected and shall have qualified or until its termination, dissolution, resignation or removal pursuant to this Agreement. (a) Authority of the Managing Member. Subject to the terms of this Agreement and the matters requiring unanimous Member approval as set forth in Section 5.03 above, CBL Member, as the Managing Member, shall in general supervise and administer all the business and affairs of the operation of Member Newco as a limited liability company. The Managing Member shall be responsible for the maintenance of Member Newco's books and records and shall have authority to collect all rents and other amounts due to Member Newco from third parties. The Managing Member shall have financial oversight of Member Newco and shall deal directly with the Accountants in the preparation of financial statements and tax returns for Member Newco, consistent with this Agreement. The Managing Member, shall preside at all meetings of the Members. The Managing Member, shall, if necessary, see that all orders and resolutions of the Members are carried into effect. The Managing Member, shall sign and deliver in the name of Member Newco any deeds, leases, mortgages, bonds, contracts or other instruments pertaining to the business of Member Newco, except in cases in which the authority to sign and deliver is required by law to be exercised by another Person or is expressly delegated or governed by the Articles of Organization, this Agreement or by the Members; and in general shall perform all duties incident to the office of the Managing Member. The Managing Member shall, at all times, maintain Member Newco's assets, bank and investment accounts titled to and in Member Newco's name. (b) Authority of the Managing Member as to the Operation of Member Newco and as to the Operating Budget. Subject to the provisions of this Section 6.02(b), the Managing Member shall prepare or cause to be prepared an annual operating budget (including separate sub-budgets for Triangle Town Center and Triangle Town Place) setting forth the projected expenditures, costs and revenues for the phases or portions of the Project for which construction has been completed or will be completed and that are open and operating or will be open and operating for the upcoming Fiscal Year (such operating budget, when approved as provided in this Section 6.02(b) and as required pursuant to Section 5.03, the "Operating Budget"; for purposes of this Agreement, the "Operating Budget" for the 2006 Fiscal Year shall be as set forth on Exhibit G attached hereto, and the Members shall be deemed to have approved such 2006 Operating Budget for the purposes of this Section 6.02(b) and Section 5.03 above). Except as otherwise provided in this Section 6.02(b), each Operating Budget shall be subject to the prior unanimous written approval of the Members pursuant to Section 5.03 above, which shall not be unreasonably withheld or delayed. (i) Not later than December 1 of each Fiscal Year commencing with 2006, the Managing Member shall prepare and deliver a preliminary Operating Budget to the Members for Member Newco's next succeeding Fiscal Year. 31 The Members shall have thirty (30) Days in which to review and approve or disapprove (and, if disapproving, such disapproval to specify the line items disapproved) each such Operating Budget, during which period the Members shall meet, if necessary, to discuss said proposed Operating Budget and revisions thereto and if the Members do not respond with any suggested changes or revisions within such thirty- (30) Day period, such shall be deemed an approval of the proposed Operating Budget as submitted by the Managing Member by the Member failing to respond. The Managing Member shall thereafter revise such Operating Budget as may be necessary in accordance with the agreements reached by the Members and deliver same in final form to all Members not later than December 15 of each year. If any proposed Operating Budget is not approved or not deemed approved by the Members as and when provided for herein, the Operating Budget that has been most recently approved by the Members as required hereunder shall remain in effect, and the Managing Member shall cause Member Newco to operate the Project pursuant to said most recently approved Operating Budget, until a new Operating Budget is approved in accordance with the provisions hereof, except that the Managing Member shall be entitled to use as the Operating Budget for the fiscal year in question the line items in the preliminary Operating Budget to which no Member objected within such 30-Day period (instead of the corresponding line items in the most recently approved Operating Budget), and except that the following-described annual costs contained in the most recently approved Operating Budget that has been approved by the Members as required herein shall be increased on January 1 by the actual amount (if greater than the amount otherwise permitted under this Section 6.02(b)) of any annual increase in said costs to Member Newco or the Company during the then-current Fiscal Year, it being recognized that any increases in said costs are generally beyond the control of the Members and that the goods and services relative thereto are necessary for the proper functioning of the Project: (A) ad valorem taxes; (B) utility expenses, including but not limited to water, sewer, electricity, natural gas and telephone; (C) property and casualty insurance premiums; (D) maintenance costs relative to (x) the furnishing of HVAC service as required by leases for occupancy of the Project and (y) landscaping; (E) debt service (interest and principal, if any) due with respect to mortgage financing encumbering the Project that has been incurred in accordance with the provisions of this Agreement; 32 (F) compensation, fees, costs and expenses of Member Newco's and the Company's Accountants, attorneys, architects, engineers and other professionals; and (G) postage. (ii) The Managing Member shall be authorized to make those expenditures and to incur those obligations provided for in the then current Operating Budget. Except as set forth in Section 6.02(b)(iii) below, the Managing Member shall not exceed the expenditure limits set forth in said Operating Budget without the prior unanimous written approval of the Members required under Section 5.03 above. (iii) The Managing Member shall cause Member Newco to endeavor to operate the Project within the Operating Budget in effect from time to time, as same may be revised from time to time in accordance with the provisions of this Agreement. The Managing Member's authority shall be limited to the authority to cause Member Newco to cause the Company to (A) expend up to the respective amounts for the respective purposes set forth in the Operating Budget (as same may be increased pursuant to and in accordance with the provisions of this Agreement), and (B) operate the Project in accordance with the provisions of this Agreement and the parameters set forth in the Operating Budget. The Managing Member shall secure the Members' prior unanimous written approval, as required under Section 5.03 above, for any expenditures that will result in cost overruns of the Operating Budget that exceed, individually or in the aggregate, five percent (5%) of the aggregate annual budgeted expense amount set forth in the Operating Budget then in effect (any expenditure resulting in an overrun in excess of the aforesaid limits is herein referred to as a "Material Operating Deviation"), and the Operating Budget, as revised, shall become the Operating Budget for all purposes under this Agreement for the remainder of such Fiscal Year. During each Fiscal Year, the Managing Member shall promptly inform the Members of any increases in costs and expenses that were not foreseen during the budget preparation period and thus were not reflected in the Operating Budget then in effect that could, individually or in the aggregate, be reasonably expected to constitute a Material Operating Deviation. In the event a Material Operating Deviation from any Operating Budget becomes necessary prior to the annual review of an Operating Budget as set forth in Section 6.02(b)(i) above, CBL Member may revise said Operating Budget, but only after receiving any unanimous approval of the Members required under Section 5.03 above (for purposes of this clause (iii) and Section 5.03 above, CBL Member shall be conclusively deemed to have approved any such Material Operating Deviation). (c) Authority of Managing Member as to the Development and Construction of the Project. (i) Development and Construction Responsibilities. From the effective date of this Agreement and subject to the terms of this Agreement 33 and the matters requiring unanimous approval as set forth in Section 5.03 above, the Managing Member shall have primary responsibility for all development and construction activities relating to the Future Development Activities and construction of the Project in accordance with the applicable approved Site Plan(s) and Pro Forma(s), including but not limited to the procuring and/or amending all rights, entitlements and appurtenances necessary or desirable in connection with the Future Development Activities, planning, procuring traffic and roadway studies and improvements, securing governmental approvals, performing soils and hazardous waste investigations, and procuring conservation, environmental and utility studies and approvals. (ii) Pro Formas; Development Schedule. (A) The Members agree that all Pro Forma(s) shall be subject to the unanimous approval of the Members, except as otherwise set forth in this Section 6.02(c)(ii). The "projected net project cost" category in a pro forma represents the anticipated hard and soft costs to construct the particular Future Development Activity and is sometimes referred to in the industry as the capital expense budget. (B) The Managing Member shall cause Member Newco to cause the Company to develop/redevelop or expand the Project according to the applicable approved Site Plan(s) and shall use its commercially reasonable efforts to do so within the projected net project cost parameters set forth in the approved Pro Forma(s). The Managing Member shall use its commercially reasonable efforts to cause Member Newco to cause the Company to meet the applicable approved Development Schedule(s). Notwithstanding the foregoing but subject to the approval rights of the Members set forth in Section 5.03 as to Material Development Deviations, the Managing Member shall cause Member Newco to cause the Company to expend, the amounts required to complete any Future Development Activities subject to and in accordance with the provisions of this Agreement and the Pro Formas for such Future Development Activities. In the event a Material Development Deviation from a Pro Forma becomes necessary, the Managing Member may revise such Pro Forma but only after securing the unanimous approval of the Members pursuant to and in accordance with Section 5.03 above (for purposes of this clause (B) and Section 5.03 above, the Managing Member shall be conclusively deemed to have approved any such Material Development Deviation). (C) During any Future Development Activities, the Managing Member shall review the applicable Development Schedule to determine whether specific items set forth therein can be accomplished within the time parameters set forth therein and advise the JG Members if it determines that a modification of the Development Schedule is necessary or appropriate, and the Managing Member shall review the Pro Formas periodically to determine whether such Future Development Activities may be completed within the projected net project cost parameters set forth therein. If the 34 Managing Member determines that a Material Development Deviation to a Pro Forma is necessary, the Managing Member shall notify the JG Members of the necessary revisions and shall request the unanimous approval of said revisions pursuant to Section 5.03 above. The JG Members shall approve or disapprove the requested revisions, by written notice given to the Managing Member, within twenty (20) Days of the date upon which it receives the requested revisions to a Pro Forma and, if the JG Members disapprove the requested revision, shall include in such notice an explanation of the reasons therefor. The failure of the JG Members to respond within the twenty- (20) Day period shall be construed as an approval of the requested revisions by the JG Members. In the event the JG Members approve the requested revisions or the revisions do not rise to the level of a Material Development Deviation, the Managing Member shall revise the Pro Forma to make the approved revisions and the Pro Forma, as revised, shall become the Pro Forma for all purposes under this Agreement with respect to such Future Development Activities. For purposes of this clause (C) and Section 5.03 above, the Managing Member shall be conclusively deemed to have approved any such Material Development Deviation. For purposes of this Agreement and except as may be specifically set forth above, a "Material Development Deviation" requiring the approvals set forth in Section 5.03 above shall mean, as relates to any Pro Forma, any incurrence of expenditures or costs (whether the subject of change orders or otherwise) that will result in cost overruns of such Pro Forma that exceed individually or in the aggregate, more than ten percent (10%) of the aggregate projected construction cost set forth on the approved Pro Forma at issue. (d) Other Specific Duties of CBL Member. In addition to the authorities, duties and responsibilities of CBL Member as set forth above, CBL Member shall, subject to the provisions of the Property Management Agreement, be responsible for and authorized to cause Member Newco to cause the Company to carry out the following items: (i) Negotiating and entering into leases or other occupancy agreements and similar transactions with Anchors, small shop, big box and other tenants and occupants to be entered into after the date of this Agreement; (ii) Tenant inducement/tenant allowance coordination and lease coordination; and (iii) The negotiation and documentation of any governmental financing, governmental funding or entitlements to provide funding for infrastructure or any other portion of the Project. (e) Consultation with Other Members. Upon request of any Member and upon reasonable notice, the Managing Member shall provide the requesting Member with such information concerning the Managing Member's activities in such capacity and the business and financial condition of Member Newco and the Company as the requesting Member may reasonably request for any purpose reasonably related to the Member's Membership Interest in Member Newco; except that, the Managing Member shall not be obligated to provide any such information at any unreasonable time or place. 35 (f) Attendance at Meetings; Access to Project Site. Any Member shall have the right, upon reasonable notice to the Managing Member, to attend meetings concerning the Project between the Managing Member and/or its Affiliates and third parties that are not Affiliates of the Managing Member, except that the Managing Member shall have no obligation to permit such attendance if the meeting is an internal meeting of the Managing Member, its Affiliates, its or its Affiliates' officers, employees or agents and/or its or its Affiliates' attorneys, accountants and/or other advisors or service providers. Without limiting the generality of the foregoing, the JG Members or their respective Affiliates shall be entitled, at the JG Members' or its Affiliates' cost, to have a representative (the "Representative") on site at the Project during the Construction Period for any Future Development Activity. Such Representative shall be entitled to (i) reasonable access, upon request, to the Project and to CBL Member's or its Affiliates' personnel involved in the construction of the Project, (ii) request and receive information concerning the development and construction of the particular phase of the Project from CBL Member or its Affiliates; and (iii) attend construction progress meetings. (g) Limitations on Managing Member's Authority. The Managing Member, shall not have the authority to take the following actions: (i) Any action set forth in Section 5.03 above unless the requisite unanimous approval of the Members as set forth in Section 5.03 has been obtained and any action otherwise set forth in this Agreement as requiring the approval of all Members unless such approval shall have been obtained; (ii) Any action directly in contravention to the terms of this Agreement, the Articles of Organization or the Act; and/or (iii) Any action, except those specifically authorized hereunder, which would make it impossible to carry out the business of Member Newco. 6.03 Construction Contract. A Construction Contract for construction of any phase of the Project must contain the following terms: (a) The cost of the Construction Contract must provide no more than a one and three-quarters percent (1.75%) fee to the general contractor; and (b) Major subcontracts must be competitively bid to at least three qualified subcontractors. 6.04 Removal and Resignation. The Managing Member may be removed by the vote of the Members required under Section 5.03 above, whenever, in their judgment, the best interests of Member Newco would be served thereby or upon default of the Managing Member as provided in Section 20.01 below, but such removal shall be without prejudice to the contract rights, if any, of the Person so removed. Election of a Person as the Managing Member does not, of itself, create contract rights beyond the rights of the Managing Member specified in this Agreement. Unless otherwise provided in an employment contract or an 36 agreement with Member Newco, a Managing Member may resign at any time, provided the Managing Member gives at least thirty (30) days prior written notice. Such resignation shall be in writing and shall take effect upon delivery to Member Newco and to each Member, unless a later effective date is specified in the notice. The acceptance of a resignation shall not be necessary in order to make it effective, unless so specified therein. Such resignation or removal shall not affect the Managing Member's status as a Member. If CBL Member resigns or is removed as the Managing Member, the JG Members shall thereupon become the Managing Member and shall thereafter have all of the rights and powers of the Managing Member, including, but not limited to, CBL Member's rights under Section 6.02 above. The Members agree that in the event an Affiliate of CBL Member is no longer the Property Manager and CBL Member or its Affiliates are still Members of Member Newco at such time, then, regardless of any provision herein to the contrary, the replacement Property Management Agreement must contain a provision or provisions (acceptable to CBL Member) that restricts leasing activities and other operations in a manner so as to ensure that the status of CBL Member's Affiliate as a "Real Estate Investment Trust" under the Code is not jeopardized. 6.05 Compensation. The JG Members shall be entitled to the fees as so designated and listed on Exhibit C and CBL Member shall be entitled to the fees as so designated and listed on Exhibit C. No other fees or compensation shall be paid to a Member or its Affiliates except as may be set forth herein or as may be approved by the Members in accordance with Section 5.03 above. ARTICLE VII CONFLICT OF INTEREST TRANSACTIONS A transaction with Member Newco or the Company in which a Member has a direct or indirect interest is not voidable by Member Newco solely because of the Member's interest in the transaction if the material facts of the transaction and the Member's interest were disclosed or known to the Members entitled to vote and they unanimously authorized, approved or ratified the transaction pursuant to Section 5.03 above. As set forth in Section 3.04(c) above, the Members acknowledge and waive any potential conflict of interest that a Member may have if such Member or its Affiliate is called upon or required to pay under any Affiliate Loan Guarantee or other guarantee. The Members also acknowledge that a Member or its Affiliate that may loan funds to Member Newco may be deemed to have a conflict of interest with respect to Member Newco and the other Members. The Members acknowledge this potential conflict of interest and hereby agree that it shall not be deemed a breach of any fiduciary duty that a Member may have to another Member or to Member Newco if the Member or an Affiliate of a Member who has loaned funds to Member Newco, as permitted under this Agreement, exercises its rights and remedies as a lender pursuant to any such loan and the terms of the promissory note for such loan by a Member or its Affiliate to Member Newco, and such Member or its Affiliate shall have the right to exercise such rights and remedies, except that in exercising such rights and remedies such Member or its Affiliate shall have no right to take, or cause Member Newco to take, any action that would create or increase the personal liability of any other Member beyond such other Member's personal liability, if any, as set forth in the applicable loan documents. The provisions of Section 5.03 above shall not apply to the exercise by such Member or its Affiliate of such rights and remedies. 37 ARTICLE VIII INDEMNIFICATION 8.01 Indemnification. Each Member or other Person who was named, is named, or is threatened to be a named a defendant or respondent to any threatened, pending, or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, and whether formal or informal (hereinafter a "proceeding"), by reason of the fact that it, he or she, or a Person of whom it, he or she is the legal representative or Affiliate, is or was a Member, officer, employee or agent of Member Newco, or is or was serving at the request of Member Newco as a director, officer, governor, manager, partner, trustee, employee or agent of any other Person or employee benefit plan (hereinafter, an "Indemnitee"), whether the basis of such proceeding is alleged action in an official capacity as a Member, director, officer, governor, manager, partner, trustee, employee or agent, or in any other capacity while serving as a Member, director, officer, governor, manager, partner, trustee, employee or agent, shall be indemnified and held harmless by Member Newco to the fullest extent authorized by the Act against any obligation to pay a judgment, settlement, penalty, fine (including an excise tax assessed with respect to an employee benefit plan), and reasonable expenses (including counsel fees) (hereinafter, "Losses") incurred by the Indemnitee in connection therewith and such indemnification shall continue as to a Person who has ceased to be a Member, director, governor, officer, manager, partner, trustee, employee or agent and shall inure to the benefit of its, his or her heirs, executors and administrators or successors and assigns. Notwithstanding the above statements, no indemnity shall be provided by Member Newco to any Indemnitee for any acts of gross negligence or willful misconduct of such Person nor for any Losses arising out of acts or omissions of any Indemnitee taking place, or events or circumstances occurring, prior to the date of this Agreement. 8.02 Expenses. The right to indemnification conferred in this Article VIII shall be a contract right and shall include the right to be reimbursed by Member Newco for the reasonable expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that if the Act requires, payment of such expenses incurred by Indemnitee shall be made only upon (a) the receipt of a written affirmation by the Indemnitee that the Indemnitee has met the required standard of conduct; (b) the receipt of a written undertaking, executed by or on behalf of the Indemnitee, to repay the advance if it is ultimately determined that it, he or she is not entitled to indemnification by Member Newco; and (c) a determination is made that the facts then known to those making the determination would not preclude indemnification under this Article VIII. 8.03 Insurance. As further described in Article X below, Member Newco shall maintain insurance, at its expense, to protect itself and any Indemnitee(s) against any Losses, whether or not Member Newco would have the power to indemnify the Indemnitee against such Losses under the Act. ARTICLE IX LIMITATION OF LIABILITY OF MEMBERS; MEMBER LISTS 9.01 Limitation on Liability. Except as set forth in this Agreement, each Member's liability shall be limited as set forth in the Act. 38 9.02 No Liability for Company Obligations. Except as set forth in this Agreement, no Member will have any personal liability for any debts or losses of Member Newco. 9.03 List of Members. Upon written request of any Member, Member Newco shall provide a list showing the names, addresses and Membership Interest of all Members and the other information required by the Act and maintained pursuant to Section 14.02. ARTICLE X LIABILITY, PROPERTY AND CASUALTY INSURANCE In addition to the insurance to be provided with respect to matters set forth in Section 8.03 above, Member Newco shall maintain property and casualty insurance to provide adequate and necessary coverage for the assets of Member Newco and the Members with respect to their interests in Member Newco and the assets of Member Newco and the liabilities resulting therefrom and shall also cause the Company to maintain property and casualty insurance to provide adequate and necessary coverage for (i) the Project, the Real Estate and the assets of the Company and (ii) Member Newco with respect to its interests in the Project, the Real Estate, the Company and the assets of the Company and liabilities resulting therefrom. All insurance contracts to be entered into by Member Newco or the Company shall be negotiated by CBL Member, as the Managing Member, and shall be upon such terms of coverage and with such insurance carriers as CBL Member shall reasonably determine. In CBL Member's discretion, all or any such insurance contracts may be included as part of CBL Member's overall blanket policy or program. The Members agree that Member Newco and the Company shall not self-insure except for deductibles and self-insured retentions that are equivalent to or less than the levels of deductibles and/or self-insured retentions that are part of CBL Member's overall blanket policy or program. ARTICLE XI CAPITAL CONTRIBUTIONS TO MEMBER NEWCO 11.01 Members' Required Member Funding. (a) Initial Contributions. As of the date of this Agreement, the unreturned Member Funding of each Member are as set forth opposite such Member's name on Exhibit B as such Member's Initial Contribution ("Initial Contributions"). Notwithstanding any provision in this Agreement to the contrary, neither the JG Members nor their respective Affiliates shall have any obligation under this Agreement to make any additional Member Funding to Member Newco beyond the JG Members' Initial Contribution and the JG Members Subsequent TA Contribution. For purposes of this Agreement, any Incoming Equalizing Contribution made by the JG Members Substitute Member in connection with a JG Members Exit Event pursuant to Section 16.06(f) shall, from and after the date upon which such Incoming Equalizing Contribution is made, be treated for all purposes as an Initial Contribution by the JG Members Substitute Member. (b) Mandatory Contributions. Subject to the provisions of this Agreement: (i) Except as otherwise provided in this Section 11.01(b), CBL Member shall contribute as additional Member Funding (A) any and all 39 necessary equity funding that is set forth in an approved Pro Forma as equity contributions from Members/owners to fund any and all construction in connection with Future Development Activities; (B) any and all costs in excess of such amounts of necessary equity funding from Members/owners that do not rise to the level of a Material Development Deviation; and (C) any and all costs in excess of such equity funding necessary to complete such construction (construction cost overruns) that rise to the level of Material Development Deviations and for which the approvals required in Section 5.03 have been obtained (for purposes of this clause (i) and Section 5.03 above, CBL Member and its Affiliates shall be conclusively deemed to have approved any such costs with respect to Future Development Activities) (the funding referenced in subparagraphs (A), (B) and (C) hereof being collectively referred to herein as the "Construction Funds"). Such contributions of Construction Funds shall be in the form of cash or cash equivalents and such contributions may be contributed in installments when and as needed in CBL Member's reasonable judgment consistent with the applicable Pro Forma(s) and Development Schedule(s), Member Newco's lender's requirements and the needs of the Project. Notwithstanding the foregoing, from and after a JG Members Exit Event, any additional Member Funding of Construction Funds that CBL Member would thereafter, but for the operation of this sentence, have been required to make shall instead be made by CBL Member and the JG Members Substitute Member pro rata on the basis of their respective Capital Interests. (ii) Except as provided in this Section 11.01(b), CBL Member shall contribute as additional Member Funding any and all amounts in order to fund Operating Deficits of Member Newco. Such contributions of funds to cover Operating Deficits shall be in the form of cash or cash equivalents and such contributions may be contributed in installments when and as needed in CBL Member's reasonable judgment consistent with the Pro Forma(s), the Development Schedule(s), the Operating Budget(s) and Member Newco's lender's requirements and the needs of the Project. Notwithstanding the foregoing, from and after a JG Members Exit Event, any additional Member Funding to fund Operating Deficits that CBL Member would thereafter, but for the operation of this sentence, have been required to make shall instead be made by CBL Member and the JG Members Substitute Member pro rata on the basis of their respective Capital Interests. (iii) In the event that at any time from and after the date of this Agreement the sum of (A) the aggregate unreturned amount of Mandatory Contributions made by CBL Member to fund capital improvements to the Project (including allowances for tenant improvements) and (B) the aggregate amount of Mandatory Contributions made by CBL Member for all purposes other than funding capital improvements to the Project, whether returned or unreturned, equals or exceeds $30,000,000.00 (the "Maximum Required Funding"), CBL Member shall thereafter have no further obligation to make Mandatory Contributions for any purpose, until such time, if ever, that the sum of the amounts described in 40 clause (A) and clause (B) of this paragraph is less than the Maximum Required Funding, and then only to the extent that such sum is less than the Maximum Required Funding. For the avoidance of doubt, the following examples illustrate the operation of this Section 4.3(b) (Examples 1 and 2 below assume that CBL Member Parent has not previously incurred any liability under this Section 4.3 at the time of the example): (1) Example 1. If CBL Member had made $5,000,000 in unreturned Mandatory Contributions described in Section 11.01(b)(iii)(A) of this Agreement to fund capital improvements to the Project and $25,000,000 in other Mandatory Contributions and Non-Required Contributions, then CBL Member would have no further obligation to make Mandatory Contributions unless and until Member Newco returned to CBL Member all or a portion of the $5,000,000 in Mandatory Contributions described in Section 11.01(b)(iii)(A) of this Agreement made by CBL Member in this Example 1; (2) Example 2. If, after Example 1, Member Newco returned to CBL Member all of the $5,000,000 in Mandatory Contributions described in Section 11.01(b)(iii)(A) of this Agreement made by CBL Member in Example 1 and returned $7,000,000 of the $25,000,000 in other Mandatory Contributions and Non-Required Contributions made by CBL Member in Example 1, then CBL Member's obligation to make additional Mandatory Contributions would be limited to $5,000,000, i.e., the amount of Mandatory Contributions described in Section 11.01(b)(iii)(A) of this Agreement made by CBL Member in Example 1 and returned to CBL Member in this Example 2; (3) Example 3. If, after Example 2, CBL Member made $5,000,000 in Mandatory Contributions described in Section 11.01(b)(iii)(B), CBL Member would have no further obligation to make any Mandatory Contributions of any kind, whether or not Member Newco thereafter returned to CBL Member any Mandatory Contributions of any kind that CBL Member had previously made. (iv) In the event that CBL Member or its Affiliate and/or any of the JG Members or their respective Affiliates are required to pay any amounts to the lender of any Construction Loan or Permanent Financing/Refinancing on account of any guarantee provided to such lender, the amount of any such payments (after adjusting as between the Members for any contribution received from or made to the other Member or the other Member's Affiliates, as contemplated by Section 3.04 above) shall be credited as Mandatory Contributions to the Capital Account of the Member who made or whose Affiliate made such payments to such lender. (v) In the event that any of the current tenants of the Project listed on Exhibit I-B attached hereto claim from the Company after the date of this Agreement tenant allowances with respect to tenant improvements made by such tenants prior to 41 the date of this Agreement, the JG Members, pro rata, shall provide additional Member Funding, up to the respective amounts for each such tenant as set forth on Exhibit 1-2 attached hereto, promptly upon written notice from the Managing Member (the "JG Members Subsequent TA Contributions"). (vi) The additional Member Funding of CBL Member described in clauses (i) and (ii) of this Section 11.01(b) are hereinafter referred to as "CBL Member Mandatory Contributions". If CBL Member defaults in its obligation to make any CBL Member Mandatory Contribution when and as required by this Section 11.01(b), the JG Members shall have the right, but not the obligation, in the JG Members' sole and absolute discretion, and without limiting the JG Members' other rights and remedies under Article XX below, upon ten (10) days' prior written notice to CBL Member, to make a Member Funding to Member Newco in an amount equal to the amount of the CBL Member Mandatory Contribution that CBL Member has failed to make (such Member Funding by the JG Members, a "JG Members Substituted Default Contribution"), if, by the end of such ten (10)-day period, CBL Member has not contributed the defaulted CBL Member Mandatory Contribution to Member Newco. (vii) All additional Member Funding required to be made by CBL Member, and/or the JG Members Substitute Member hereunder and all JG Members Substituted Default Contributions that the JG Members elect to make hereunder and JG Members Subsequent TA Contributions that the JG Members are required to make hereunder may be made in the form of a capital contribution to Member Newco or a loan to Member Newco. All additional Member Funding required to be made by CBL Member and/or the JG Members Substitute Member under this Section 11.01 and all JG Members Substituted Default Contributions, if any, elected to be made by the JG Members under this Section 11.01 and all JG Members Subsequent TA Contributions required to be made by the JG Members under this Section 11.01 are collectively referred to herein as the "Mandatory Contributions". Any loan may be made by an Affiliate of a Member but only if such Affiliate is a wholly-owned subsidiary or wholly-owned entity of the Member. Any Mandatory Contributions made in the form of a capital contribution shall be credited to the Capital Account of the Member making such Mandatory Contribution and shall be entitled to a return equal to the Interest/Return, but shall not affect or modify the respective Profits Interests of any of the Members. Any Mandatory Contributions made in the form of a loan to Member Newco shall be unsecured, shall be evidenced by a non-negotiable promissory note, shall bear interest at a rate equal to the Interest/Return and shall be repaid only from Distributable Cash or Capital Events Distributions as set forth below. 11.02 Additional Non-Required Contributions. Except for the CBL Member Mandatory Contributions, the JG Members Subsequent TA Contributions and , from and after a JG Members Exit Event, the Mandatory Contributions of the JG Members Substitute Member, as set forth in Section 11.01, no Member shall be required to make any Member Funding or loans to Member Newco. To the extent requested by the Managing Member, from time to time, one (1) or more Members may be permitted to make 42 additional Member Funding or loans if and to the extent they so desire. In such event, the Members shall have the opportunity (but not the obligation) to participate in such Member Funding or loans on a pro rata basis in accordance with their Profits Interests. Any such additional contributions of capital or loans are referred to herein as the "Non-Required Contributions". If any Member shall decline to make such Non-Required Contributions, such declining Member shall not be deemed to be in default under this Agreement, and the other Members may make such Non-Required Contributions on behalf of the declining Members, but there shall be no change in any Member's Profits Interest. If a Member elects to make such Non-Required Contributions, however, such Member shall be entitled to either loan or contribute such funds to Member Newco. Any Non-Required Contributions made in the form of a capital contribution shall be credited to the contributing Member's Capital Account and shall be entitled to a return equal to the Interest/Return, but shall not affect or modify the respective Profits Interests of any of the Members. Any Non-Required Contributions made in the form of a loan to Member Newco shall be unsecured, shall be evidenced by a non-negotiable promissory note, shall bear interest at a rate equal to the Interest/Return and shall be repaid from Distributable Cash or Capital Events Distributions as set forth below. 11.03 No Third-Party Rights. This Agreement is not intended to create and/or confer, and shall not be construed to create and/or confer (directly, indirectly, contingent or otherwise), any rights or benefits (including but not limited to any right to require any additional contributions or loans to Member Newco by the Members, and/or any so-called third-party beneficiary rights) on any Person who is not a Member or Affiliate of a Member. 11.04 Member Construction Loans not Member Funding. Member Constructions Loans and accrued and unpaid interest thereon shall not be deemed to be either Initial Contributions, Mandatory Contributions, or Non-Required Contributions. 11.05 No Further Assessments on Membership Interests. Except as set forth in this Agreement, the Members are not subject to any further assessments of their Membership Interests. All Membership Interests of the Members, when first issued and paid for as described herein, shall be fully paid and nonassessable, subject to the provisions of this Article XI. ARTICLE XII DISTRIBUTIONS TO MEMBERS 12.01 Distributions of Distributable Cash. Subject to the provisions of Article XI above, all Distributable Cash shall be distributed to the Members on a periodic basis but not less frequently than quarterly in the following amounts and in the following order of priority: (a) To the Members, as an advance on distributions, if any, described in clauses (b) through (k) of this Section 12.01, until each Member has received an amount of Distributable Cash that is equal to (i) forty percent (40%) of the amount of net taxable income (other than long term capital gains) allocated to such Member for the previous taxable year of Member Newco and (ii) twenty percent (20%) of any long term capital gains allocated to such Member for the previous taxable year of Member Newco (such distribution to the Members for a given period being collectively referred to herein as the "Tax Distribution"). For purposes of this Agreement, there shall be no Tax Distribution for Member Newco's 2005 taxable year and Tax Distribution shall commence with Member Newco's 2006 taxable year 43 and the first of such Tax Distributions shall equal forty percent (40%) of the amount of net taxable income allocated to such for Member Newco's 2005 taxable year but only for the period from the date of this Agreement to the end of Member Newco's 2005 taxable year and allocations of net taxable income of Member Newco that relate to the period from January 1, 2005 to the date of this Agreement shall be disregarded hereunder; (b) From and after the second anniversary of the date of this Agreement, the balance, if any, to the JG Members, pro rata, to the extent of the accrued and unpaid Interest/Return on the Shortfall; (c) From and after the second anniversary of the date of this Agreement, the balance, if any, to the JG Members, pro rata, to the extent of any unreturned Shortfall; (d) The balance, if any, to the respective Members, in proportion to each Member's pro rata share of the accrued and unpaid Interest/Return on the aggregate unreturned Mandatory Contributions of all of the Members, to the extent of any accrued and unpaid Interest/Return on unreturned Mandatory Contributions; (e) The balance, if any, to the respective Members, in proportion to each Member's pro rata share of the aggregate unreturned Mandatory Contributions of all of the Members, to the extent of any unreturned Mandatory Contributions; (f) The balance, if any, to the respective Members, in proportion to each Member's pro rata share of the accrued and unpaid Interest/Return on the aggregate unreturned Non-Required Contributions of all of the Members, to the extent of any accrued and unpaid Interest/Return on unreturned Non-Required Contributions; (g) The balance, if any, to the respective Members, in proportion to each Member's pro rata share of the aggregate unreturned Non-Required Contributions of all of the Members, to the extent of any unreturned Non-Required Contributions; (h) The balance, if any, to CBL Member, to the extent of any accrued and unpaid Interest/Return on any unreturned Initial Contribution of CBL Member; (i) The balance, if any, to CBL Member, to the extent of any unreturned Initial Contribution of CBL Member; (j) The balance, if any, to the JG Members, pro rata, to the extent of any unreturned Initial Contribution of the JG Members; and (k) The balance, if any, to the Members, as follows: the JG Members (pro rata, in the aggregate) fifty percent (50%) CBL Member fifty percent (50%) 44 12.02 Capital Events Distributions. Subject to the provisions of Article XI and Section 12.01 above, all Capital Events Distributions shall be made to the Members in the same manner as set forth in Section 12.01 above. 12.03 Distribution of Incoming Equalizing Contribution to CBL Member. The entire amount of any Incoming Equalizing Contribution shall be distributed by Member Newco to CBL Member and shall be applied to reduce (as to CBL Member only) the unpaid and/or unreturned amounts described in clauses (d) through (i) of Section 12.01 in reverse order. 12.04 Limitation Upon Distributions. No distributions shall be made to Members if prohibited by the Act. ARTICLE XIII ALLOCATIONS OF NET PROFITS AND NET LOSSES 13.01 Net Profits. Net Profits shall be allocated for each Fiscal Year to the Members as follows, except as otherwise required by the relevant provisions of the Code including but not limited to Subchapter K and the Treasury Regulations applicable thereto: (a) First, to each Member in an amount of the "unrecovered" Net Losses allocated to such Member under Section 13.02(a) and Section 13.02(b) below, pro rata in reverse order according to the amount of such "unrecovered" Net Losses as between the Members; (b) The balance, if any, to the JG Members, pro rata, to the extent of any Interest/Return on any unreturned Shortfall distributed pursuant to Section 12.01(b); (c) The balance, if any, to the respective Members, in proportion to each Member's pro rata share of the Interest/Returns on the aggregate unreturned Mandatory Contributions of all of the Members, to the extent of any Interest/Return on such unreturned Mandatory Contributions distributed pursuant to Section 12.01(d); (d) The balance, if any, to the respective Members, in proportion to each Member's pro rata share of the Interest/Returns on the aggregate unreturned Non-Required Contributions of all of the Members, to the extent of any Interest/Return on such unreturned Non-Required Contributions distributed pursuant to Section 12.01(f); (e) The balance, if any, to CBL Member, to the extent of any Interest/Return on any unreturned Initial Contributions of CBL Member distributed pursuant to Section 12.02(h); and (f) The balance, if any, to the Members, as follows: the JG Members (pro rata, in the aggregate) fifty percent (50%) CBL Member fifty percent (50%) For purposes hereof, the term "unrecovered" Net Losses means Net Losses allocated to a Member for a Fiscal Year for which such Member has not received a corresponding Net Profits allocation in a subsequent Fiscal Year. Once such allocation of Net Profits is made to a Member equivalent to all or any portion of previously allocated Net Losses, such amounts of Net Losses shall no longer be deemed "unrecovered". 45 13.02 Net Losses. Subject to Section 13.03 below, Net Losses shall be allocated for each Fiscal Year to the Members as follows, except as otherwise required by the relevant provisions of the Code including but not limited to Subchapter K and the Treasury Regulations applicable thereto: (a) First, to each Member until the aggregate Net Losses allocated pursuant to this Section 13.02(a) for the current Fiscal Year and all previous Fiscal Years is equal to the aggregate amount of Net Profits allocated pursuant to Sections 13.01(b)-(f) in reverse order; (b) Second, to the JG Members, pro rata, until the aggregate Net Losses allocated pursuant to this Section 13.02(b) for the current Fiscal Year and all previous Fiscal Years is equal to the amount of the unreturned Shortfall; (c) Third, to each Member until the aggregate Net Losses allocated pursuant to this Section 13.02(c) for the current Fiscal Year and all previous Fiscal Years is equal to the amount of the unreturned Mandatory Contributions, Non-Required Contributions, and Initial Contributions credited to each Member's Capital Account in the same proportion that each Member's respective contribution bears to the total of all Member's contributions to each category of Member Funding in reverse order; and (d) The balance, if any, to the Members, as follows: the JG Members (pro rata, in the aggregate) fifty percent (50%) CBL Member fifty percent (50%) 13.03 2005 Fiscal Year. For Member Newco's 2005 Fiscal Year, Net Profits and Net Losses from and including January 1, 2005 to and including the date of this Agreement shall be allocated one hundred percent (100%) to the JG Members, pro rata, and Net Profits and Net Losses after the date of this Agreement through and including December 31, 2005 shall be allocated as set forth in Sections 13.01 and 13.02, respectively. ARTICLE XIV BOOKS AND RECORDS 14.01 Accounting Period. Member Newco's accounting period shall be the Fiscal Year. 14.02 Records and Reports. Member Newco shall keep at its principal place of business and at the Project the following records: (a) A current list of the full name and last-known address of each Member; 46 (b) A current list of the full name and last-known address of each assignee of any Member's rights to Distributable Cash or other property of Member Newco and a description of the rights assigned; (c) A copy of the Articles of Organization; (d) Copies of this Agreement and any agreements concerning classes or series of Membership Interests; (e) Copy of Member Newco's federal, state and local income tax returns and reports, if any, for the three (3) most recent Fiscal Years; (f) Copies of Member Newco's financial statements for all Fiscal Years from Member Newco's inception, which statements must include a balance sheet as of the end of such year and an income statement for such year, and accounting records of Member Newco; (g) Records of all proceedings of Members, if any; (h) Any written consents obtained from Members under the Act; (i) A statement of all contributions accepted by and all Member loans made to Member Newco, the identity of the contribution and the agreed value of the contribution and the amount of all such Member loans; and (j) A copy of all contribution agreements and loan agreements and/or promissory notes or similar instruments executed by Member Newco in favor of any Member. 14.03 Inspection of Records by Members. A Member shall have the right to inspect and copy, during regular business hours at Member Newco's principal executive office, the books and records described in Section 14.02 upon the Member giving Member Newco written notice not less than five (5) Days prior to the date the Member wishes to inspect and copy. 14.04 Tax Returns. The Managing Member shall cause the Accountants to prepare and timely file all tax returns required to be filed by Member Newco pursuant to the Code and all other tax returns deemed necessary and required in each jurisdiction in which Member Newco does business. Prior to filing such returns, the Managing Member shall provide drafts of such returns, or pertinent information therefrom, to the Members on or prior to March 1 of each Fiscal Year for review by such Members. The Members shall provide comments to Member Newco on such draft returns within seven (7) Days after receiving them. CBL Member shall use its reasonable good faith efforts to cause a delivery of K-1 forms to the Members by March 15 of each Fiscal Year. CBL Member shall provide each Member with CBL Member's reasonable good faith estimate of the projected taxable income and projected debt allocation to each Member for the next Fiscal Year by December 1 of each Fiscal Year. 14.05 Financial Statements. The Managing Member, shall deliver to the Members copies of unaudited internal annual financial statements as soon as available and in any event within thirty (30) Days after the close of each Fiscal Year of Member Newco and copies of audited annual financial statements as soon as available and in any event within ninety (90) Days after the close of the Fiscal 47 Year of Member Newco, including in each case a balance sheet as of the end of such Fiscal Year and the related statement of income for such Fiscal Year, in each case setting forth in comparative form the figures for the preceding Fiscal Year and each prepared according to GAAP. ARTICLE XV TERMINATION OF MEMBERSHIP INTEREST 15.01 Termination of Interest. Subject to Article XX of this Agreement, a Member's continued membership in Member Newco shall terminate upon the: (a) acquisition of the Member's complete Membership Interest by Member Newco; (b) bankruptcy of the Member; (c) dissolution of the Member; (d) a merger in which Member Newco is not the surviving entity; (e) an attempt by the Member to withdraw or retire from being a Member in violation of Section 15.02 below; or (f) the occurrence of any other event under the Act or applicable law that terminates the continued membership of the Member in Member Newco. 15.02 Withdrawal. Notwithstanding the foregoing, a Member shall not have the right under this Agreement to withdraw or retire from being a Member, to assign all or any portion of the Member's Membership Interest except as provided in Article XVI and Article XX hereof, to voluntarily become bankrupt, to voluntarily dissolve, or to otherwise voluntarily terminate the Member's Membership Interest, each of which is an Event of Default under Article XX of this Agreement. Nothing in this Section 15.02 shall prejudice the rights or remedies of the Members under Article XX. 15.03 Effect of Termination of Membership. If for any reason the continued membership of a Member is terminated, then, if such termination causes an Event of Dissolution, but the business of Member Newco is continued as provided in Section 17.02 of this Agreement, unless otherwise approved by the Members (other than the Member whose membership has been terminated) by a Majority Vote, a Member whose status as a Member is terminated, regardless of whether or not such termination was a result of a voluntary act by such Member, shall have only the right to receive distributions of Distributable Cash or Capital Events Distributions and shall thereafter no longer be or be deemed to be a Member. Additionally, if for any reason the continued membership of a Member is terminated, then (i) if such Member whose Membership Interest is terminated is the Managing Member, the Member shall immediately cease being the Managing Member, and (ii) such Member's voting rights shall terminate, subject to the provisions of Section 20.04 below. ARTICLE XVI TRANSFERS OF MEMBERSHIP INTERESTS AND RESTRICTIONS ON TRANSFERS; IMPASSE PROVISIONS; PLEDGE OF MEMBERSHIP INTERESTS 16.01 Definition of "Assignment". For purposes of this Article, the words "assign" or "assignment" when used in the context of the assignment of all or any portion of a Member's Membership Interest, shall mean and include any transfer, alienation, sale, assignment, pledge, grant of security interest, lien or encumbrance, or other disposition, whether voluntarily or by operation of law. 48 16.02 Restriction on Assignment. Except as expressly permitted in this Article XVI, no Member shall assign all or any part of its Membership Interest in Member Newco. Any attempted assignment of all or any portion of a Membership Interest other than as permitted in this Article XVI shall be null and void and shall have no effect whatsoever. 16.03 Exempt Assignments. (a) Subject to the provisions of Sections 16.06 and 16.07 which shall be applicable to all assignments of Membership Interests, the prohibition on assignments set forth in Section 16.02 above shall not apply to an assignment of all or any part of a Membership Interest of any Member: (i) to any of the other Members or a wholly-owned Affiliate of a Member; (ii) to family partnerships, family trusts, family limited liability companies or similar family entities so long as such Member or its principals continue to Control such Membership Interests and either the proposed transferee has sufficient net worth to cover any funding obligations of the transferring Member or the transferring Member agrees to and does guarantee the funding obligations of the proposed transferee; (iii) With respect to the JG Members, to (A) any entity Controlled by Richard E. Jacobs, any JG Member, or Jacobs Realty Investors Limited Partnership; or (B) to a trust Controlled by the transferor or a trust benefiting any one or more Persons who bear the following family relationship to Richard E. Jacobs: (1) children (natural and adopted) and their natural and adopted descendants; (2) stepchildren and their natural and adopted descendants; (3) siblings and their natural and adopted descendants; or (4) a spouse of any Person described in subclause (1), (2) or (3); (iv) where such assignments are part of a merger, consolidation or sale of all or substantially all of the assets or stock of a JG Member and/or its Affiliates or of CBL Member and/or its Affiliates; (v) where such assignments are pursuant to the admission of an additional member(s) to Member Newco in accordance with this Agreement; and/or (vi) where such assignments are pursuant to transfers set forth in Sections 16.04, 16.05, Article XVII and/or Section 20.03 below. In the event of any assignment permitted hereunder, the transferring Member shall provide written notice of such assignment to all of the Members and, if required, Member Newco's lender and shall take commercially reasonable steps so as to minimize, if practical, the possibility of termination under Section 708 of the Code. 49 (b) For purposes of clauses (ii), (iii) and (iv) of Section 16.03(a) above: (i) any Person having a right to revoke the trust in whole or in part shall be regarded as the beneficiary of the portion of the trust such Person has the right to revoke; (ii) to the extent that more than one trustee is acting for a single trust, such trustees shall deliver to the Managing Member a written designation of one of them as their representative to Member Newco; (iii) if, in case of clause (ii), the trustees fail to so designate a representative, their representative shall be such one of them as the Managing Member shall designate by written designation delivered to all of them from time to time; (iv) all acts permitted to be taken by and all communications to be given to the owner of a Membership Interest in Member Newco shall be taken by or given to such representative with respect to the Membership Interest in Member Newco owned by the trust of which such representative is a trustee; and (v) any action taken by such a representative shall be deemed to be the act of and shall be binding upon each trust owning a Membership Interest in Member Newco for which such representative is trustee or is designated to act. (c) The restrictions on assignments set forth in this Article XVI shall apply to assignments of equity interests in a Member, provided that: (i) any assignment of equity interests in a Member to a Person described in clauses (i), (ii) or (iii) of Section 16.03(a) that would be permitted if such assignment were an assignment of all or any part of the Membership Interest of a Member shall also be permitted hereunder, as long as, after giving effect to such assignment, CBL Member Parent continues to Control CBL Member (in the case of an assignment of equity interests in CBL Member) and Richard E. Jacobs continues to Control the JG Member during his lifetime (in the case of an assignment of equity interests in any JG Member); (ii) the restrictions on assignments set forth in this Article XVI shall not apply to any assignment of not more than fifteen percent (15%) of the equity interests in any JG Member to a third party or third parties who is not a Person described in clause (i) of this Section 16.03(c), as long as Richard E. Jacobs continues to Control the JG Member during his lifetime; (iii) the restrictions on assignments set forth in this Article XVI shall not apply to any assignment of not more than fifteen percent (15%) of the equity interests in CBL Member to a third party or third parties who is not a Person described in clause (i) of this Section 16.03(c), as long as CBL Member Parent, continues to Control CBL Member; and 50 (iv) the restrictions on assignments set forth in this Article XVI shall not apply to the sale or issuance of equity interests of CBL Member Parent or any Person that Controls CBL Member Parent or to any merger, consolidation or sale of all of the assets or partnership interests of CBL Member Parent or any Person that Controls CBL Member Parent. The parties hereto agree that neither party may transfer or issue or allow the transfer or issuance of equity interests in such Member in such manner as to violate the purposes of the transfer restrictions under this Article XVI. Upon the assignment of a Membership Interest of any Member to such Member's successor in an assignment permitted under this Article XVI, and the assumption by such successor of the assigning Member's obligations under this Agreement with respect to the Membership Interest so assigned, and the delivery to the other Members of a true and complete copy of the assignment and assumption agreement(s), such successor shall, upon such assignment and assumption, be considered a Member and may exercise all of such Member's rights. 16.04 Mandatory Buy/Sell on Impasse. (a) Impasse. Except as otherwise set forth in this Agreement, any dispute or disagreement arising between the Members in connection with any decision set forth in this Agreement that requires the unanimous approval of the Members under Section 5.03, which is not settled to the mutual satisfaction of CBL Member and the JG Members shall constitute an "Impasse," except that no dispute or disagreement arising between CBL Member and the JG Members with respect to matters referred to in Section 5.03(a) shall be an Impasse for purposes of this Section 16.04 before the January 1, 2008. Either Member (the "Impasse Notice Sender") may notify the other Member(s) that are not Affiliates of the Impasse Notice Sender (the "Impasse Notice Recipient"; for purposes of this Section 16.04, if CBL Member is the Impasse Notice Sender, references to the Impasse Notice Recipient will be deemed to refer to the JG Members collectively) that an Impasse exists (the "Initial Impasse Notice") and that, unless the Impasse Notice Recipient shall provide its approval of the item in question, the Impasse Notice Sender may invoke the provisions of this Section 16.04. The Impasse Notice Recipient shall have (i) thirty (30) Days in the event of all matters other than an Impasse with respect to matters described in Sections 5.03(b), (c), (g), or (h) above (each, an "Expedited Impasse Event"), as set forth in subclause (ii) of this sentence; or (ii) ten (10) Days in the case of an Expedited Impasse Event, within which to either (x) note its continuing disapproval of the item in question, or (y) provide its consent to, approval of or agreement with the position of Impasse Notice Sender as to the decision or matter creating the Impasse. In the event the Impasse Notice Recipient does not respond to the Initial Impasse Notice within such 30-Day period or 10-Day period, as the case may be, the Impasse Notice Recipient shall be deemed to have consented to or approved of the decision or matter creating the Impasse in accord with the Impasse Notice Sender. If the Impasse Notice Recipient shall respond within such 30-Day or 10-Day period, as the case may be, by notifying the Impasse Notice Sender that the Impasse Notice Recipient continues to disapprove of the item in question, then either the Impasse Notice Sender or the Impasse Notice Recipient may thereupon give the other an Impasse Offer Notice as referenced below. If a Member gives the Initial Impasse Notice as provided in this Section 16.04, the other Member shall no longer have any right to give an Initial Impasse Notice with respect to the same Impasse. 51 (b) Put/Call on Impasse. In the event that an Impasse occurs and the Initial Impasse Notice has been sent to the Impasse Notice Recipient and the Impasse Notice Recipient has responded within the applicable time parameters set forth above with a response setting forth its continued disapproval of the item in question, then either the Impasse Notice Sender or the Impasse Notice Recipient (the "Impasse Initiator") may give written notice (the "Impasse Offer Notice") to the other (the "Impasse Respondent"; for purposes of this Section 16.04, if CBL Member is the Impasse Initiator, references to the Impasse Respondent will be deemed to refer to the JG Members collectively), setting forth the Impasse Initiator's estimation of the aggregate asset value of the Project (net of any outstanding Constructions Loans and/or Permanent Financing/Refinancing) (the "Impasse Project Value") and stating the Impasse Initiator's intent to buy all, but not less than all, of the Impasse Respondent's and its Affiliates', if any, Membership Interest, whereupon the provisions set forth in this Section 16.04(b) and Section 16.04(c) shall apply. Notwithstanding the foregoing, if both CBL Member and the JG Members, or Affiliates of each of CBL Member and the JG Members, are also members or other equity holders in the Outparcel Venture or any other Entity that directly or indirectly owns or leases any real property that is contiguous with the Project, no Impasse Offer Notice shall be effective unless a contemporaneous notice is given under any comparable provision of any operating, partnership or similar agreement with respect to such real property between CBL Member and the JG Members, or their respective Affiliates, as the case may be. (i) Purchase Price. The Impasse Project Value shall provide the basis for determining the cash purchase price at which the Impasse Initiator would be willing to purchase the Membership Interests of the Impasse Respondent and its Affiliates (the "Impasse Initiator Offer Price") and the cash purchase price at which the Impasse Respondent may elect to acquire the Membership Interests of the Impasse Initiator and its Affiliates (the "Impasse Respondent Purchase Price") as follows: (A) The Impasse Initiator Offer Price shall be an amount equal to the amount that would be distributed to the Impasse Respondent and its Affiliates upon a Capital Events Distribution in an amount equal to the Impasse Project Value (B) The Impasse Respondent Purchase Price shall be an amount equal to the amount that would be distributed to the Impasse Initiator and its Affiliates upon a Capital Events Distribution in an amount equal to the Impasse Project Value. (ii) Exercise of Impasse Put/Call. Upon receipt of the Impasse Offer Notice, the Impasse Respondent and its Affiliates, if any, shall then be obligated either : (X) To sell to the Impasse Initiator for cash the entire Membership Interest of the Impasse Respondent and its Affiliates, if any, in Member Newco for the Impasse Initiator Offer Price, as described above and subject to adjustments as provided in Section 16.04(c) below; 52 (Y) To purchase the entire Membership Interest of the Impasse Initiator and its Affiliates, if any, in Member Newco for the Impasse Respondent Purchase Price, as described above and subject to adjustments as provided in Section 16.04(c) below; or (Z) To consent to, approve of or agree with the position of the Impasse Initiator as to the decision or matter creating the Impasse. (iii) The Impasse Respondent shall notify the Impasse Initiator of its election within (x) thirty (30) Days after the date of receipt of the Impasse Offer Notice as to any Impasse that occurs with respect to any matter other than an Expedited Impasse Event, or (y) ten (10) Days after the date of receipt of the Impasse Offer Notice as to any Impasse that occurs relating to an Expedited Impasse Event. Failure of a Impasse Respondent to give the Impasse Initiator notice that such Impasse Respondent has elected to proceed under Section 16.04(b)(ii)(Y) or Section 16.04(b)(ii)(Z) above shall be conclusively deemed to be an election under Section 16.04(b)(ii)(X) (i.e., to sell). (iv) If the Impasse Respondent timely notifies the Impasse Initiator that such Impasse Respondent has elected to proceed under Section 16.04(b)(ii)(Z), the Impasse shall be deemed resolved, and neither the Impasse Initiator nor the Impasse Respondent shall be required or entitled to purchase the other's Membership Interest or sell its own Membership Interest pursuant to this Section 16.04 with respect to the resolved Impasse. If the Impasse Respondent timely notifies the Impasse Initiator that such Impasse Respondent has elected to proceed under Section 16.04(b)(ii)(X) or Section 16.04(b)(ii)(Y), or if the Impasse Respondent is deemed to have elected to proceed under Section 16.04(b)(ii)(X), then the Impasse Initiator shall have a further fifteen (15) Days after receipt of such notice or the effective date of such deemed election to notify the Impasse Respondent that the Impasse Initiator consents to, approves of or agrees with the position of the Impasse Respondent as to the decision or matter creating the Impasse. If the Impasse Initiator timely so notifies the Impasse Respondent, the Impasse shall be deemed resolved, and neither the Impasse Initiator nor the Impasse Respondent shall be required or entitled to purchase the other's Membership Interest or sell its own Membership Interest pursuant to this Section 16.04 with respect to the resolved Impasse. If the Impasse Initiator does not timely so notify the Impasse Respondent, the parties shall proceed pursuant to the foregoing election or deemed election of the Impasse Respondent. 53 (c) Closings. (i) Location and Time Periods. The closing of any sale of a Membership Interest in Member Newco pursuant to this Section 16.04 shall be held at the principal offices of Member Newco, unless otherwise mutually agreed, on a mutually acceptable date not more than ninety (90) Days after (A) the receipt by the Impasse Initiator of the written notice of election by the Impasse Respondent, or (B) after the expiration of the time within which the Impasse Respondent must so elect, as provided in Section 16.04(b)(iii). (ii) Closing Adjustments. At the closing, any closing adjustments as set forth in the Impasse Offer Notice (and if not so designated in the Impasse Offer Notice then those adjustments which are then usual and customary in Raleigh, North Carolina) shall be made between the purchasing party and the selling party as of the date of closing. Any Member transferring its Membership Interest shall transfer such Membership Interest free and clear of any liens, encumbrances or any interests of any third party and shall execute or cause to be executed any and all documents required to fully transfer such Membership Interest to the acquiring Member including, but not limited to, any documents necessary to evidence such transfer, and all documents required to release the interest of any other party who may claim an interest in such Member's Membership Interest. Any monetary default or obligation of the selling Member must be cured out of the proceeds from such sale at the closing. Following the date of closing, the selling Member shall have no further rights to any distributions of Distributable Cash or Capital Events Distributions, and all such rights shall vest in the selling Member's transferee. 16.05 Right of First Refusal; Buy/Sell. (a) Right of First Refusal. No transfer of any Membership Interests shall be permitted under this Section 16.05(a) before January 1, 2008. If, at any time after December 31, 2007, a Member shall desire to transfer all (and not less than all) of its Membership Interest (which shall include its Affiliates' Membership Interest, if any) to any Person and such transfer is not an exempt assignment pursuant to Section 16.03 above nor a transfer otherwise permitted under this Article XVI, then, in such event and subject to the rights of the Non-Transferring Members set forth in this Section 16.05(a), said Member (the "Transferring Member", which term shall include said Member's Affiliates holding a Membership Interest) may transfer its Membership Interest to such third party (the "Third-Party Purchaser") only after compliance with the procedures of this Section 16.05(a). The Transferring Member shall give written notice (the "RoFR Notice") to the other Members that are not Affiliates of the Transferring Member (the "Non-Transferring Members"; for the purposes of this Section 16.05(a), if CBL Member is the Transferring Member, references to the Non-Transferring Members will be deemed to refer to the JG Members collectively) of its intent to transfer its Membership Interest and the Third-Party Purchaser to whom it desires or intends to transfer same, the terms of such proposed purchase 54 including the price to be paid, method of payment and any contingencies or other material provisions of such proposed purchase, and the time parameters within which said transfer is to take place. Notwithstanding the foregoing, if both CBL Member and the JG Members, or Affiliates of each of CBL Member and the JG Members, are also members or other equity holders in the Outparcel Venture or any other Entity that directly or indirectly owns or leases any real property that is contiguous with the Project, no RoFR Notice shall be effective unless a contemporaneous notice is given under any comparable provision of any operating, partnership or similar agreement with respect to such real property between CBL Member and the JG Members, or their respective Affiliates, as the case may be. The Non-Transferring Members shall have sixty (60) Days from the date of their receipt of the RoFR Notice (the "RoFR Period") to elect to purchase all and not less than all of the Transferring Member's Membership Interest for the price upon which said Third-Party Purchaser is willing to pay for said Membership Interest. In the event the Non-Transferring Members either elect not to purchase the Transferring Member's Membership Interest or do not notify the Transferring Member in writing of their decision by the end of the RoFR Period referred to above, then the Transferring Member may, for a period of one-hundred twenty (120) Days after the end of the RoFR Period referred to above, transfer the referenced Membership Interest to the Third-Party Purchaser but only upon such terms as are substantially similar to the terms at which said Membership Interest was offered to the Non-Transferring Members. If the Transferring Member shall not have closed on the transfer of the referenced Membership Interest to said Third-Party Purchaser within said 120-Day period, said transfer shall once again become subject to the terms and conditions of this Section 16.05(a), the Transferring Member shall be required to once again to comply with the procedures set forth in this Section 16.05(a), and the Transferring Member shall be precluded from giving another RoFR Notice under this Section 16.05(a) for a period of six (6) months following the expiration of said 120-Day period. In the event the Non-Transferring Member(s) exercise their right to purchase the Membership Interest of the Transferring Member, the closing of said transaction shall occur no later than one-hundred twenty (120) Days from the end of the RoFR Period referenced above. Notwithstanding the provision of this Section 16.05(a), in the event that during the RoFR Period the Third-Party Purchaser shall revoke its offer to purchase or the Transferring Member shall determine to not accept the offer of the Third-Party Purchaser, then the Transferring Member shall be entitled to revoke, in writing, the RoFR Notice and the Non-Transferring Members shall not have the right to purchase the Transferring Member's Membership Interest on the terms of such RoFR Notice. (b) Buy/Sell. (i) No transfer of any Membership Interests shall be permitted under this Section 16.05(b) before January 1, 2008. At any time after December 31, 2007, a Member (the "Buy/Sell Initiator") may give written notice (the "Buy/Sell Offer Notice") to the other Members that are not Affiliates of the Buy/Sell Initiator (the "Buy/Sell Respondent"; for the purposes of this Section 16.05(b), if CBL Member is the Buy/Sell Initiator, references to the Buy/Sell Respondent will be deemed to refer to the JG Members collectively), setting forth the Buy/Sell Initiator's intent to buy all, but not less than all, of the Membership Interests of the Buy/Sell Respondent and its Affiliates, if any, whereupon the provisions set forth in this Section 16.05(b) shall apply. Notwithstanding the foregoing, if both CBL Member and the JG Members, or Affiliates of each of CBL Member and the JG Members, are also members or other equity holders in the Outparcel Venture or any other Entity that directly or indirectly owns or leases any real property that is contiguous with the Project, no Buy/Sell Offer Notice shall be effective unless a contemporaneous notice is given under any comparable provision of any operating, partnership or similar agreement with respect to such real property between CBL Member and the JG Members, or their 55 respective Affiliates, as the case may be. If a Member gives a Buy/Sell Offer Notice as provided in this paragraph, the other Member shall no longer have any right to give its own Buy/Sell Offer Notice under this paragraph while a sale or purchase of a Membership Interest under this Section 16.05(b) pursuant to such Buy/Sell Offer Notice is pending. (A) Purchase Price. The Buy/Sell Initiator shall specify in its Buy/Sell Offer Notice the Buy/Sell Initiator's estimation of the aggregate asset value of the Project (net of any outstanding Constructions Loans and/or Permanent Financing/Refinancing) (the "Buy/Sell Project Value"). The Buy/Sell Project Value shall provide the basis for determining the cash purchase price at which the Buy/Sell Initiator would be willing to purchase the Membership Interests of the Buy/Sell Respondent and its Affiliates (the "Buy/Sell Initiator Offer Price") and the cash purchase price at which the Buy/Sell Respondent may elect to acquire the Membership Interests of the Buy/Sell Initiator and its Affiliates (the "Buy/Sell Respondent Purchase Price") as follows: (I) The Buy/Sell Initiator Offer Price shall be an amount equal to the amount that would be distributed to the Buy/Sell Respondent and its Affiliates upon a Capital Events Distribution in an amount equal to the Buy/Sell Project Value. (II) The Buy/Sell Respondent Purchase Price shall be an amount equal to the amount that would be distributed to the Buy/Sell Initiator and its Affiliates upon a Capital Events Distribution in an amount equal to the Buy/Sell Project Value. (B) Exercise of Buy/Sell. Upon receipt of the Buy/Sell Offer Notice, the Buy/Sell Respondent shall then be obligated either: (I) To sell to the Buy/Sell Initiator for cash the entire Membership Interest of the Buy/Sell Respondent and its Affiliates, if any, in Member Newco for the Buy/Sell Initiator Offer Price, as described above and subject to adjustments as provided in Section 16.05(b)(ii)(B) below; or (II) To purchase the entire Membership Interest of the Buy/Sell Initiator and its Affiliates, if any, in Member Newco for the Buy/Sell Respondent Purchase Price, as described above and subject to adjustments as provided in Section 16.05(b)(ii)(B) below. (C) The Buy/Sell Respondents shall notify the Buy/Sell Initiator of their election within thirty (30) Days after the date of receipt of the Buy/Sell Offer Notice. Failure of Buy/Sell Respondents to give the Buy/Sell Initiator notice that such Buy/Sell Respondents have elected to proceed under Section 16.05(b)(i)(B)(II) above shall be conclusively deemed to be an election under Section 16.05(b)(i)(B)(I) (i.e., to sell). 56 (ii) Closings. (A) Location and Time Periods. The closing of any sale of a Membership Interest in Member Newco pursuant to this Section 16.05(b) shall be held at the principal offices of Member Newco, unless otherwise mutually agreed, on a mutually acceptable date not more than ninety (90) Days after (1) the receipt by the Buy/Sell Initiator of the written notice of election by the Buy/Sell Respondent, or (2) after the expiration of the time within which the Buy/Sell Respondents must so elect, as provided in Section 16.05(b)(i)(C). (B) Closing Adjustments. At the closing, any closing adjustments as set forth in the Buy/Sell Offer Notice (and if not so designated in the Buy/Sell Offer Notice then those adjustments which are then usual and customary in Raleigh, North Carolina) shall be made between the purchasing party and the selling party as of the date of closing. Any Member transferring its Membership Interest shall transfer such Membership Interest free and clear of any liens, encumbrances or any interests of any third party and shall execute or cause to be executed any and all documents required to fully transfer such Membership Interest to the acquiring Member including, but not limited to, any documents necessary to evidence such transfer, and all documents required to release the interest of any other party who may claim an interest in such Member's Membership Interest. Any monetary default or obligation of the selling Member must be cured out of the proceeds from such sale at the closing. Following the date of closing, the selling Member shall have no further rights to any distributions of Distributable Cash or Capital Event Distributions, and all such rights shall vest in the selling Member's transferee. 16.06 Conditions of Assignments. Prior to any assignee of a Membership Interest becoming a Member, the following conditions must have been satisfied: (a) The assignor, his legal representative or authorized agent must have executed a written instrument of assignment of such Membership Interest in form and substance reasonably satisfactory to the Members; (b) The assignee must have executed a written agreement, in form and substance reasonably satisfactory to the Members, to assume all of the duties and obligations of the assignor under this Agreement with respect to the assigned Membership Interest and to be bound by and subject to all of the terms and conditions of this Agreement; (c) The assignor, his legal representative or authorized agent, and the assignee must have executed a written agreement, in form and substance reasonably satisfactory to the Members, to indemnify and hold Member Newco and the Members harmless from and against any loss or liability arising out of the assignment; 57 (d) The assignee must have executed such other documents and instruments as the Members may deem necessary to effect the admission of the assignee as a Member; and (e) The assignee (if not previously a Member of Member Newco) or the assignor must have paid the expenses incurred by Member Newco in connection with the admission of the assignee to Member Newco. (f) In the case of an assignment to a Third-Party Purchaser pursuant to Section 16.05(a) in which the JG Members are the Transferring Member (a "JG Members Exit Event"), (i) such Third-Party Purchaser (the "JG Members Substitute Member") shall have made a Member Funding to Member Newco (a "Incoming Equalizing Contribution") (which Incoming Equalizing Contribution Member Newco shall thereupon immediately distribute to CBL Member) in an amount such that, after giving effect to the distribution of the Incoming Equalizing Contribution to CBL Member, the JG Members Substitute Member's Capital Interest (expressed as a percentage) shall be equal to the JG Members Substitute Member's Profits Interest and (ii) the JG Members Substitute Member or its Affiliates shall provide CBL Member and its Affiliates, if any, and/or third-party lenders to Member Newco, as the case may be, with such additional agreements or undertakings as CBL Member or such lenders may reasonably require to replace or hold CBL Member and its Affiliates harmless from any liability, loss, cost or expense arising out of that portion of any then-outstanding loans (other than loans that are Mandatory Contributions or Non-Required Contributions) and/or Affiliate Loan Guarantees theretofore provided by CBL Member or its Affiliates that corresponds to the JG Members Substitute Member's Capital Interest (expressed as a percentage). 16.07 Lender Approval. In the event that, pursuant to the terms of any loan agreement, security agreement, deed of trust or other agreement existing at any time between Member Newco and any lender, the approval of such lender is required prior to the time that any transfer or assignment of any Membership Interest in Member Newco may occur, then, notwithstanding any provision of this Article XVI to the contrary, no transfer or assignment of any Membership Interest in Member Newco shall occur until all required approvals and/or consents of any such lender have been obtained. Notwithstanding anything herein to the contrary, if the required lender's approval has not been obtained within the time period set forth in Section 16.04(b)(iii) or the RoFR Period, then such period will be extended to a date that is three (3) Days after all Members have received written notice of lender's consent, but in no event shall such extension be longer than thirty (30) Days. 16.08 Pledge of Membership Interests. Except as relates to any pledge of Membership Interests required by any financing by Member Newco or any collateral assignment of a Member's rights to receive distributions in respect of such Member's Membership Interest, no Member may pledge, mortgage, hypothecate, assign as security, create a security interest in or charge against or other encumbrance of all or any part of its Membership Interest, whether directly or indirectly, voluntarily or involuntarily or by operation of law. Notwithstanding the foregoing, no Member shall be obligated to pledge its Membership Interests in connection with any such financing. Failure of a Member to agree to pledge its Membership Interests in connection with any such financing shall not constitute an Impasse, and Section 16.04 shall not apply to such failure. The JG 58 Members and CBL Member agree that each of them will, upon request of a lender to Member Newco or the Company, collaterally assign for the benefit of the lender, their respective rights to receive distributions in respect of their Membership Interests. 16.09 Mutually Exclusive Rights. The rights of the Members described in Section 16.04, Section 16.05(a), and Section 16.05(b) in this Article XVI and in Section 20.03 are mutually exclusive, meaning that, if the exercise, or the right to exercise, one of such rights is pending or in process (the "Active Right"), neither of the other rights can be initiated, and no assignment that would be subject to either of the other rights can be initiated or completed, until the Active Right closes, lapses, or is otherwise terminated. ARTICLE XVII DISSOLUTION, TERMINATION AND WINDING-UP 17.01 Events Causing Dissolution. Member Newco shall be dissolved upon the occurrence of any of the following events (collectively, "Events of Dissolution"): (a) when the period, if any, fixed for the duration of Member Newco shall expire pursuant to Section 2.05 of this Agreement; (b) by action of the Members pursuant to the Act; (c) by action of and at the option of the remaining Members in the event of (i) the termination of any Member as provided in Section 15.01 of this Agreement; (ii) the acquisition by Member Newco of the complete Membership Interest of any Member; or (iii) the occurrence of any other event that terminates the continued membership of any Member; or (d) a merger in which Member Newco is not the surviving organization ("Merger"). 17.02 Continuation. Notwithstanding Section 17.01(c), Member Newco is not dissolved and is not required to be wound up by reason of any Event of Dissolution arising out of the termination of the continued Membership of a Member if there is at least one (1) remaining Member and the existence and business of Member Newco are continued by the remaining Member or by the affirmative Majority Vote of the Members if there is more than one remaining Member other than the Member as to whom the Event of Dissolution occurred, obtained no later than ninety (90) Days after the occurrence of the Event of Dissolution. 17.03 Effect of Dissolution. Upon dissolution of Member Newco, Member Newco shall cease to carry on its business, except to the extent necessary (or appropriate) for the winding-up of the business of Member Newco. Upon the occurrence of an Event of Dissolution (other than by reason of a Merger), the Managing Member shall file with the Secretary of State of North Carolina a notice of dissolution pursuant to the Act. 17.04 Winding-Up, Liquidation and Distribution of Assets. (a) Upon the occurrence of an Event of Dissolution, other than as a result of a Merger, an accounting shall be made by the Accountants of the accounts of Member Newco and Member Newco's assets, liabilities and operations, from the date of the last previous accounting until the date of the occurrence of such Event of Dissolution. The Managing Member shall immediately proceed to wind-up the affairs of Member Newco. 59 (b) If Member Newco is dissolved and its affairs are to be wound-up, the Managing Member shall: (i) Sell or otherwise liquidate all of Member Newco's assets as promptly as practicable (except to the extent the Members may determine to distribute any assets to the Members in kind); (ii) Allocate any Net Profit or Net Loss resulting from such sales to the Members in accordance with Article XIII hereof; (iii) Discharge all liabilities of Member Newco, including liabilities to Members who are creditors, to the extent otherwise permitted by law, other than liabilities to Members for distributions, and establish such Reserves as may be reasonably necessary to provide for contingent or other liabilities of Member Newco; (iv) Distribute the remaining assets to the Members, either in cash or in kind, in accordance with the positive balance (if any) in the Capital Account of each Member (as determined after taking into account all Capital Account adjustments for Member Newco's Fiscal Year during which the liquidation occurs), with any balance in excess thereof being distributed in proportion to the Members' respective Profits Interests. Any such distributions in respect of Capital Accounts shall, to the extent practicable, be made in accordance with the time requirements set forth in Section 1.704-1(b)(2)(ii)(b)(2) of the Treasury Regulations; and (v) If any assets of Member Newco are to be distributed in kind, the net fair market value of such assets shall be determined. Such assets shall be deemed to have been sold as of the date of dissolution for their fair market value, and the Capital Accounts of the Members shall be adjusted pursuant to the provisions of this Agreement to reflect such deemed sale. (c) Notwithstanding anything to the contrary in this Agreement, upon a liquidation within the meaning of Section 1.704-1(b)(2)(ii)(g) of the Treasury Regulations, if any Member has a deficit Capital Account (after giving effect to all contributions, distributions, allocations and other Capital Account adjustments for all taxable years, including the year during which such liquidation occurs), such Member shall have no obligation to make any Member Funding to reduce or eliminate the negative balance of the Capital Account of such Member. 17.05 Articles of Termination. Upon the dissolution and the completion of winding-up of Member Newco, the Managing Member or such other Member as may be designated by the Members, shall execute articles of termination of Member Newco and file same with the Secretary of State of North Carolina. Upon such filing, the existence of Member Newco shall be terminated. 17.06 Return of Contribution Nonrecourse to Other Members. Except as provided by law or as expressly provided in this Agreement, upon dissolution, each Member shall look solely to the assets of Member Newco for the return of the Capital Account of the Member. If Member Newco property remaining after the payment or 60 discharge of the debts and liabilities of Member Newco is insufficient to return the Capital Account of one or more Members, including, without limitation, all or any part of that Capital Account attributable to Member Funding, then such Member or Members shall have no recourse against any other Member. ARTICLE XVIII MISCELLANEOUS PROVISIONS 18.01 Applicable Law. This Agreement, and the application or interpretation hereof, shall be governed exclusively by its terms and by the laws of the State of North Carolina, and specifically the Act. 18.02 No Action or Partition. No Member has any right to maintain any action for partition with respect to the property of Member Newco. 18.03 Execution of Additional Instruments. Each Member hereby agrees to execute such other and further statements of interest and holdings, designations, powers of attorney and other instruments necessary to comply with any laws, rules or regulations. 18.04 Waivers. The failure of any party to seek redress for violation of or to insist upon the strict performance of any covenant or condition of this Agreement shall not prevent a subsequent act, which would have originally constituted a violation, from having the effect of an original violation. 18.05 Rights and Remedies Cumulative. The rights and remedies provided by this Agreement are cumulative and the use of any one right or remedy by any party shall not preclude or waive the right to use any or all other remedies. Such rights and remedies are given in addition to any other rights the parties may have by law, statute, ordinance or otherwise. 18.06 Heirs, Successors and Assigns. Each and all of the covenants, terms, provisions and agreements herein contained shall be binding upon and inure to the benefit of the parties hereto and, to the extent permitted by this Agreement, their respective heirs, legal representatives, successors and assigns. 18.07 Creditors. None of the provisions of this Agreement shall be for the benefit of or enforceable by any creditors of Member Newco or by any Person not a party hereto. 18.08 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which shall constitute one and the same instrument. 18.09 Federal Income Tax Elections; Tax Matters Member. All elections required or permitted to be made by Member Newco under the Code shall be made by the unanimous consent of the JG Members and CBL Member, except that the Tax Matters Member (the "TMM") shall make an election under Sections 108/1017 or Section 754 of the Code upon request of any Member. The TMM shall be responsible for all administrative and judicial proceedings for the assessment and collection of tax deficiencies or the refund of tax overpayments arising out of a Member's distributive share of items of income, gain, deduction and/or credit of any other Company item (as that term is defined in the Code or in the Treasury 61 Regulations) allocated to the Members affecting any Member's tax liability. The Members hereby appoint CBL Member as the initial TMM. The TMM shall promptly give notice to all Members of any administrative or judicial proceeding pending before the Internal Revenue Service involving any Company item and the progress of any such proceeding. Such notice shall be in compliance with such regulations as are issued by the Internal Revenue Service, except that, if such notice is not required by such regulations to be given to the Members, the TMM shall nevertheless give such notice to all of the Members. The TMM shall have all the powers provided to a tax matters partner in Sections 6221 through 6233 of the Code, including the power to select the forum to litigate any tax issue or liability arising from Company items, except that the TMM shall not settle any tax controversy without the consent of all of the Members or extend the statute of limitations with respect to any matter which is attributable to any Company item or affecting any item pending before the Internal Revenue Service. The provisions on limitations of liability of the Members and indemnification set forth in Article VIII shall be fully applicable to the TMM in its, his or her capacity as such. The TMM may resign at any time by giving written notice to Member Newco and each of the other Members. If CBL Member resigns as TMM, JG Manager shall immediately become the successor TMM. If JG Manager thereafter resigns as the TMM, then CBL Member shall immediately become the successor TMM, unless CBL Member elects not to become the successor TMM, in which event a new TMM shall be elected from among the Members by a Majority Vote. Additionally, if CBL Member is serving as the TMM at any time, but neither CBL Member nor any of its Affiliates is then a Member, CBL Member shall thereupon be deemed to have resigned as the TMM, and, if any JG Member is serving as the TMM at any time, but no JG Member nor any Affiliate of a JG Member is then a Member, such JG Member shall thereupon be deemed to have resigned as TMM. 18.10 Notices. Unless oral notice is expressly permitted by this Agreement, any notices or other communications required or permitted to be given by this Agreement must be given in writing and either (i) personally hand-delivered, (ii) mailed by prepaid certified or registered mail, with return receipt requested, (iii) sent by generally recognized overnight delivery service to the party to whom such notice or communication is directed with delivery fee prepaid, or (iv) sent via telefax transmission, and, in the case of notices sent by any medium other than as set forth in (ii) above, the burden of proof of receipt of such notice shall be on the sender thereof. Any such notices shall be sent to the address of such party as follows: If to Member Newco, to: Triangle Town Member, LLC 2030 Hamilton Place Boulevard Suite 500, CBL Member Center Chattanooga, Tennessee 37421 Attention: Charles B. Lebovitz (423) 490-8662 (fax) If to any of the Members, to: The address of such Member as set forth on Exhibit B. 62 Any party may change such party's address for purposes of this Agreement by giving notice of such change to the other parties pursuant to this Section 18.10. 18.11 Amendments. This Agreement may be amended, modified or supplemented only by a writing executed by each of the Members; provided, however, that CBL Member is hereby authorized and directed to amend Exhibit B to reflect changes in the information set forth on Exhibit B. 18.12 Enforceability. Wherever possible each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. 18.13 Drafting. The Members acknowledge that each has participated substantially in the negotiation and drafting of this Agreement and agree that this Agreement shall not be construed more favorably toward one Member than another due to the fact that this Agreement may have been physically drafted by one Member or its counsel. 18.14 Further Assurances. The Members each agree to cooperate, and to execute and deliver in a timely fashion any and all additional documents to effectuate the purposes of Member Newco and this Agreement. 18.15 Time. Time is of the essence of this Agreement, and to any payments, allocations and distributions provided for under this Agreement. 18.16 Integration. This Agreement and the Master Transaction Agreement, dated as of October 24, 2005, by and among the JG Members, JG North Raleigh L.L.C., an Ohio limited liability company ("JG North Raleigh"), JG Triangle Peripheral South LLC, an Ohio limited liability company ("JG Triangle South"), and CBL Member Parent, and the exhibits hereto and thereto, embody the entire agreement and understanding among the Members and supersede all prior agreements and understandings, if any, among and between the Members relating to the subject matter hereof and thereof. 18.17 Termination of Letter Agreement. As set forth in Section 18.16 above, the Letter Agreement is hereby terminated and of no further force and effect. 18.18 Public Announcements; Precedence in Publicity. Any release to the public of information with respect to the Project, Member Newco or any of Member Newco's assets or activities contemplated herein or any matters set forth in this Agreement will be made only after CBL's approval and only in the form approved by CBL and its counsel; except that, in any advertising or promotional materials or communications relating to Member Newco and/or the Project, in any form and in any media, including without limitation print, outdoor advertising, broadcast or online, The Richard E. Jacobs Group, Inc. or its designated Affiliate shall receive "first billing" in relation to any reference to CBL or any Affiliate and in no less prominent typeface or positioning within the 63 material or communication, and any reference to CBL or any Affiliate shall be accompanied by a reference to The Richard E. Jacobs Group, Inc. or its designated Affiliate that meets the foregoing requirements. The provisions of the immediately preceding sentence shall no longer apply if Richard E Jacobs ceases to Control The Richard E. Jacobs Group, Inc., but thereafter, so long as any Affiliate of The Richard E. Jacobs Group, Inc. is a Member, The Richard E. Jacobs Group, Inc. or its designated Affiliate shall receive at least "equal billing" in relation to any reference to CBL or any Affiliate and in no less prominent typeface or positioning within the material or communication, and any reference to CBL or any Affiliate shall be accompanied by a reference to The Richard E. Jacobs Group, Inc. or its designated Affiliate that meets the foregoing requirements. 18.19 Estoppel Certificates. Each Member shall, at any time and from time to time upon not less than fifteen (15) Days' prior written request by another Member, execute and deliver to the Member making such request a written certificate stating whether: (i) this Agreement is in full force and effect; (ii) this Agreement has been modified or amended and, if so, identifying and describing each and every such modification or amendment; and (iii) to the best knowledge of the Member executing said certificate, whether: (A) any facts or circumstances exist that, with the passage of time, the giving of any required notices, or both, would constitute a default hereunder, or (B) any uncured default then exists on the part of any Member under this Agreement and, if so, specifying the nature and extent of such facts, circumstances, or default (as the case may be), including those which may give rise to offsets, defenses and counterclaims. The obligations set forth in this Section 18.19 shall apply only to matters known to the certifying Member. Any such certificate may be relied upon by the Member requesting same, but only to the extent that such Member is without knowledge to the contrary. A Member who executes such a certificate shall not be liable for any erroneous statements contained therein, provided that such statements shall have been made in good faith and that any such errors were unintentional. 18.20 Legal Counsel. The parties hereto acknowledge that the law firm of Shumacker Witt Gaither & Whitaker, P.C. ("SWGW"), legal counsel to CBL Member, may act as legal counsel to Member Newco following the execution of this Agreement and with respect to matters concerning Member Newco and CBL Member as a Member, and with respect to the Project. Likewise, the parties agree that Thompson Hine LLP ("TH"), legal counsel to the JG Members, may serve as legal counsel to Member Newco following the execution of this Agreement and with respect to matters concerning Member Newco and the JG Members as Members, and with respect to the Project. Each Member does hereby waive any conflict of interest that such counsel may have or be deemed to have when representing Member Newco, CBL Member or the JG Members as to any matter that does not involve a dispute between the Members. In any such dispute between the Members, the Members acknowledge that SWGW may represent CBL Member and TH may represent the JG Members unless applicable ethics rules prevent SWGW and/or TH from acting in such capacities and each Member does hereby waive any conflict of interest that such counsel may have or be deemed to have as the result of that representation. Each Member may from time to time designate additional or alternative counsel to such Member for the purposes of this Section 18.20, and the foregoing waivers, subject to the foregoing limitations and exceptions, shall also apply as to such additional or alternative counsel. 64 ARTICLE XIX REPRESENTATIONS AND WARRANTIES 19.01 Representations of the JG Members. Each of the JG Members hereby represents to CBL Member and to Member Newco as of the date hereof that: (a) Organization. (i) such JG Member is a limited liability company or (as to JGRI) corporation, existing and in full force and effect or (as to JGRI) in good standing under and by virtue of the laws of its state of organization or incorporation; (ii) That the Persons executing this Agreement on behalf of such JG Member are duly elected, qualified and acting as its officers or members, as the case may be. (b) Authority. (i) That all actions and resolutions, whether partnership, corporate or otherwise, necessary to authorize such JG Member to enter into this Agreement have been taken and adopted; (ii) That all consents by third Persons which such JG Member is by the terms of its agreements, if any, with any such third Persons, required to obtain prior to its execution of this Agreement have been so obtained by such JG Member; (iii) That such JG Member has, and the Persons executing this Agreement on their behalf have, all requisite power and authority and has (have) been duly authorized to enter into this Agreement; (iv) That this Agreement has been duly executed on such JG Member's behalf; (v) That such JG Member has full right and lawful authority to enter into and perform its covenants and obligations under this Agreement for the full term hereof, and has full right and lawful authority to make its representations and warranties hereunder; and (vi) That upon execution of this Agreement by each party hereto, this Agreement will constitute the legal, valid and binding obligation of such JG Member and will be enforceable against it and its successors and assigns in accordance with its terms, except as such enforcement may be limited by (A) bankruptcy, insolvency, moratorium, or other similar laws affecting a creditor's rights and remedies or the relief of debtors generally at the time in 65 effect, (B) the discretion of the court before which any proceeding involving the same may be brought, and (C) equitable principles at the time in effect limiting the remedy of specific performance. (c) Conflict. Neither the execution, delivery or performance by such JG Member of this Agreement or the transactions contemplated hereby will conflict with, or will result in a breach of, or will constitute a default under, (i) any agreement or instrument by which such JG Member or any of its Affiliates may be bound or (ii) any judgment, statute, rule, law, order, decree, writ or injunction of any court or Governmental Authority applicable to such JG Member or any of its Affiliates and/or its or their respective property and assets for which consent has not been obtained. 19.02 Representations of CBL Member. CBL Member hereby represents to the JG Members and to Member Newco as of the date hereof that: (a) Organization. (i) CBL Member is a limited liability company, organized, existing and in good standing under and by virtue of the laws of the State of North Carolina; (ii) That the Person(s) executing this Agreement on CBL Member's behalf are duly elected, qualified and acting as its officer(s), manager(s) or member(s) (as the case may be). (b) Authority. (i) That all actions and resolutions, whether partnership, corporate or otherwise, necessary to authorize CBL Member to enter into this Agreement have been taken and adopted; (ii) That all consents by third Persons which CBL Member is, by the terms of their agreements, if any, with any such third Persons, required to obtain prior to their execution of this Agreement have been so obtained by CBL Member; (iii) That CBL Member has, and the Persons executing this Agreement on its behalf have, all requisite power and authority and has (have) been duly authorized to enter into this Agreement; (iv) That this Agreement has been duly executed on behalf of CBL Member; (v) That CBL Member has full right and lawful authority to enter into and perform its covenants and obligations under this Agreement for the full term hereof, and has full right and lawful authority to make CBL Member's representations and warranties hereunder; and 66 (vi) That upon execution of this Agreement by each party hereto, this Agreement will constitute the legal, valid and binding obligation of CBL Member and will be enforceable against CBL Member and its successors and assigns in accordance with its terms, except as such enforcement may be limited by (A) bankruptcy, insolvency, moratorium, or other similar laws affecting a creditor's rights and remedies or the relief of debtors generally at the time in effect, (B) the discretion of the court before which any proceeding involving the same may be brought, and (C) equitable principles at the time in effect limiting the remedy of specific performance. (c) Conflict. Neither the execution, delivery or performance by CBL Member of this Agreement or the transactions contemplated hereby will conflict with, or will result in a breach of, or will constitute a default under, (i) any agreement or instrument by which CBL Member or any of its Affiliates may be bound or (ii) any judgment, statute, rule, law, order, decree, writ or other judgment, statute, rule, law, order, decree, writ or injunction of any court or Governmental Authority applicable to CBL Member or any of its Affiliates and/or their respective property and assets for which consent has not been obtained. 19.03 Survival of Representations and Warranties. All representations and warranties contained in this Agreement will be effective on the date of this Agreement and shall survive until the termination of this Agreement in accordance with its terms. ARTICLE XX DEFAULT PROVISIONS 20.01 Events of Default. A Member is in default or breach (each a "Default") hereunder if: (a) Monetary Defaults. CBL Member or its Affiliates fails to make a CBL Member Mandatory Contribution within the time parameters, including applicable cure periods, set forth in Section 11.01; (b) Bankruptcy. Such Member or any Affiliate of such Member that has provided an Affiliate Loan Guarantee shall (i) voluntarily commence any proceeding or file any petition for liquidation (a liquidating Chapter 11 bankruptcy) or a petition for a Chapter 7 bankruptcy, (ii) consent to the institution of, or fail to contravene in a timely and appropriate manner, any such proceeding or the filing of such petition, (iii) apply for or consent to the appointment of a receiver, custodian, sequestrator or similar official for such Member or Affiliate or for a substantial part of any of its property or assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors, (vi) become unable, admit in writing its inability, or fail generally to pay its debts as they become due, or (vii) take corporate or partnership action for the purpose of effecting any of the foregoing; (c) Insolvency. Any involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction, and in either case shall continue undismissed for one-hundred eighty (180) Days or an order or decree approving or ordering any of the following shall continue unstayed and in effect for one-hundred eighty (180) Days, seeking (i) relief in respect of such 67 Member or any Affiliate of such Member that has provided an Affiliate Loan Guarantee or of a substantial part of any of its property or assets, (ii) the appointment of a receiver, trustee, custodian, sequestrator or similar official for such Member or Affiliate, or for a substantial part of any of its property or assets or (iii) the winding-up or liquidation of such Member or Affiliate; (d) Seizure of Assets. All or substantially all of such Member's assets, or the assets of an Affiliate of such Member that has provided an Affiliate Loan Guarantee, or such Member's Membership Interest, or any part of such Member's Membership Interest is assigned following their attachment, execution or other judicial seizure thereof, excluding any such attachment, execution or other judicial seizure that results from a lender to Member Newco exercising its rights under a guaranty; (e) Transfers. Either: (i) an assignment prohibited by Article XVI occurs with respect to such Member and such assignment or other transaction is not rescinded within ninety (90) Days after the non-assigning Member gives written notice to the assigning Member specifying such default; or (ii) an indirect transfer of a Member's equity interests occurs other than as permitted in Article XVI and such assignment is not rescinded within ninety (90) Days after the non-assigning Member gives written notice to the Member whose equity interests were assigned specifying such default; or (iii) an assignment otherwise permitted by Article XVI occurs or is attempted with respect to such Member but such assignment or the assignee thereof fails to comply with or violates the provisions of Article XVI with respect to such assignment, i.e., the failure to observe the requirements set forth in Section 16.07 above, and such failure or violation is not corrected within ninety (90) Days after a non-assigning Member gives written notice to such assigning Member specifying such default; (f) Dissolution. A Member dissolves or causes itself to be dissolved (unless prior to or simultaneous with such dissolution, a successor acquires such Member's entire Membership Interest in an assignment permitted under Article XVI) or a court of competent jurisdiction determines that a Member is completely and totally unable to perform its duties and obligations under this Agreement; (g) Breach of Representation or Warranty. Any material breach by a Member of any representation or warranty set forth in Article XIX above and such breach is not corrected within ninety (90) Days after the Non-Defaulting Member delivers to the Defaulting Member a written notice specifying the breach of representation or warranty; and (h) Other Material Default. Except as to specific defaults or breaches set forth in this Section 20.01 other than in this Section 20.01(h), a breach of or default under any other material provision of this Agreement which is to be observed or performed by such Member, or by an Affiliate of such Member under any Affiliate Loan Guarantee, occurs and remains uncured for more than thirty (30) Days after Member Newco or, if such default or breach is by the Managing Member or its Affiliates, after any other Member gives written notice to the Defaulting Member specifying such default; except that, if the breach or default being claimed is a breach or default by an Affiliate of a Member in the performance of its duties under any Affiliate Loan Guarantee, the other Member(s) must give written notice to the Defaulting Member claiming such breach or default, and the Defaulting Member shall have thirty (30) Days within which 68 to either cure or cause its Affiliate to cure the breach or default or contest the breach or default; and except that, if the breach or default being claimed is a breach or default by a Member in the performance of its duties as a Member, the other Member(s) (excluding Affiliates of the Member who is claimed to be in breach or default) must give written notice to the Defaulting Member claiming such breach or default and the Defaulting Member shall have one-hundred twenty (120) Days within which to either cure the breach or default or contest the breach or default; and except that, if the breach or default being claimed is a breach or default by the Managing Member under Section 6.02 above, the other Member(s) must give written notice to the Defaulting Member claiming such breach or default, and the Defaulting Member shall have sixty (60) Days (thirty (30) Days in the case of a breach or default under Section 6.02) above within which to either cure the breach or default or contest the breach or default; and, except that if the breach or default being claimed is a breach or default under the Property Management Agreement by the Managing Member in its capacity as the Property Manager or by an Affiliate of the Managing Member in its capacity as the Property Manager, the provisions of this Article XX shall not apply to such breach or default, and the provisions of the Property Management Agreement shall control. A Member in Default hereunder is referred to as the "Defaulting Member". The Member(s) who are not in Default and who are not Affiliates of the Member who is in Default are herein sometimes referred to as the "Non-Defaulting Member(s)." For purposes hereof, a "Default" shall not be deemed to occur so as to trigger the remedies set forth below until the expiration of any applicable notice, grace and cure periods. 20.02 Remedies Upon Default. In the event of the occurrence of a Default, the Defaulting Member shall, pursuant to Section 20.04 below, cease to have any approval rights with respect to Member Newco, except for the Default Approval Rights defined in Section 20.04, until the Default has been cured by the Defaulting Member, and the Non-Defaulting Member(s) shall have the right to exercise the following remedies as their exclusive remedies for the particular type of Default: (a) For Defaults described in Section 20.01(a), the exclusive remedies to the Non-Defaulting Members shall be an action for injunctive relief and/or monetary damages and/or the remedy set forth in Section 20.03; (b) For Defaults described in Sections 20.01(b), (c), (d) and/or (f), the exclusive remedy to the Non-Defaulting Member(s) shall be as set forth in Section 20.03; (c) For Defaults described in Section 20.01(e), the exclusive remedies to the Non-Defaulting Member(s) shall be an action for injunctive relief and/or money damages; (d) For Defaults described in Section 20.01(g), the exclusive remedy to the Non-Defaulting Member(s) shall be an action for money damages; (e) For Defaults described in Section 20.01(h) involving any claim of breach or default by the Managing Member in its capacity as the Managing Member in the performance of its duties, the exclusive remedy to the Non-Defaulting Members shall be to replace the Managing Member, after the notice and cure periods and other procedures set forth in Section 20.01(h) have expired and/or a claim has been made that the Managing Member has failed to perform its duties as the 69 Managing Member and the Managing Member has not contested such claim), and in the event of any such replacement, JG Manager automatically, if the Managing Member to be replaced is CBL Member, and, otherwise, another Member elected by a Majority Vote, shall thereupon, without any other action taken by the Members, become the Managing Member, the replaced Managing Member shall thereafter have only the rights of a Member with respect to the management of the affairs of Member Newco, and the replaced Managing Member or any Affiliate of the replaced Managing Member then serving as the Property Manager shall thereupon automatically be removed as the Property Manager pursuant to the Property Management Agreement; and (f) For Defaults described in Section 20.01(h) involving any claim of breach or default by a Member, other than the Managing Member in its capacity as the Managing Member, in the performance of its duties, the exclusive remedy to the Non-Defaulting Member(s) shall be that the Defaulting Member shall lose all approval rights except Default Approval Rights as set forth in Section 20.04 after the notice and cure periods and other procedures set forth in Section 20.01(h) have expired and/or a claim has been made that such Defaulting Member has failed to perform its duties as a Member and such Defaulting Member has not contested such claim and any duties or responsibilities of such Defaulting Member may be undertaken by the Non-Defaulting Members. 20.03 Purchase Upon Default. (a) Reasons for Granting Option to Purchase. To more fully protect the Members against certain Defaults of other Members as set forth in Section 20.02 above where such Defaults provide for the remedy set forth in this Section 20.03, each Member hereby grants to the other Members that are not its Affiliate (which grantee shall be the JG Members if CBL Member were the Defaulting Member, and which grantee shall be CBL Member if any JG Member were the Defaulting Member, and which grantee would include any other Affiliates of such JG Member or CBL Member, respectively, if either of such JG Member or CBL Member had transferred all or a portion of its Membership Interests to Affiliates pursuant to exempt transfers under Section 16.03 above) (the "Non-Affiliated Members") and are not in default hereunder the right and option to purchase the entire Membership Interest of the Defaulting Member and its Affiliates, if any, upon the occurrence of a Default by the Defaulting Member and/or its Affiliate(s) and the failure of the Defaulting Member to cure the Default within the applicable cure period, if any, provided in Section 20.01 above on and subject to the terms and conditions set forth in this Section 20.03. Once said option has been exercised, the Non-Affiliated Members shall have the right to complete the purchase pursuant to its exercise of said option regardless of any potential or actual detriment that exercising such option may cause the Defaulting Member; provided, however, that the Defaulting Member may cure the Default that gave rise to said option to purchase and pay all of the Non-Affiliated Members' costs, expenses and reasonable attorney's fees incurred in connection therewith, at any time prior to the required date of closing, in which event the Non-Defaulting Member shall not have the right to purchase the Membership Interests of the Defaulting Member and its Affiliates, if any, pursuant to this Section 20.03 with respect to such Default. (b) Exercise of Option. If the Non-Affiliated Members shall at any time desire to purchase the entire Membership Interest of a Defaulting Member and its Affiliates, if any, when allowed so to do as the result of circumstances triggering the use of this Section 20.03, they may exercise said right and option to purchase a Defaulting Member and its Affiliates' entire Membership Interest by giving written notice to all Members unequivocally stating that they 70 are exercising such right and option (said notice is hereinafter referred to as the "Exercise Notice"). Except as provided in the immediately following sentence of this Section 20.03(b), the purchase price for said Defaulting Member and its Affiliates' entire Membership Interest (said amount being hereinafter referred to as the "Default Purchase Price") shall be an amount equivalent to seventy-five percent (75%) of the value of the Defaulting Member and its Affiliates' Membership Interest computed by utilization of the Appraisal Procedure set forth on Exhibit D, with such Appraisal Procedure being used to determine the Appraised Value of the Project and the resulting value of a Member's Membership Interest as set forth on Exhibit D (the "Default Formula Price"). If the Appraised Value of the Project as so determined, net of any outstanding Constructions Loans and/or Permanent Financing/Refinancing, is less than the sum of all unreturned Initial Contributions, Mandatory Contributions and Non-Required Contributions of the Members and accrued and unpaid Interest/Return thereon, the Default Purchase Price shall be the greater of (i) the Default Formula Price and (ii) an amount equal to the amount that would be distributed to the Defaulting Member and its Affiliates upon a Capital Events Distribution in an amount equal to the Appraised Value of the Project as so determined, net of any outstanding Constructions Loans and/or Permanent Financing/Refinancing. The Default Purchase Price, as determined under the two immediately preceding sentences, shall be adjusted pursuant to the provisions of Section 20.06 below. Said purchase shall be on the terms and pursuant to the procedures set forth herein and the closing of said transaction shall take place in accordance with the provisions of Section 20.06 below. If Non-Affiliated Members do not exercise said right and option in the manner and within the time aforesaid, the Non-Affiliated Members shall be deemed to have waived said right and option to purchase, but only as to the specific default giving rise to said right and option to purchase, and not others, and the Non-Affiliated Members shall continue to have and enjoy the right and option to so purchase created under and by virtue of this Article XX in all other, further and/or subsequent cases to which this Section 20.03 applies. As between the Non-Affiliated Members, they shall have the right to purchase the Defaulting Member and its Affiliates' entire Membership Interest in proportion to their Profits Interests but without the inclusion of the Defaulting Member and its Affiliates' Profits Interests and if one or less than all Non-Affiliated Members do not desire to purchase the Defaulting Member and its Affiliates' Membership Interest, the Non-Affiliated Members so desiring to purchase shall have the right to purchase the entire (but no fractional portion of the) Membership Interest of the Defaulting Member. (c) Expenses. All reasonable fees, costs and expenses of the appraisers and otherwise associated with the Appraisal Procedure and the purchase of the Defaulting Member and its Affiliates' Membership Interest shall be the responsibility of and shall be paid by the Defaulting Member. (d) Membership Interest Will be Acquired by Non-Affiliated Members for the Default Purchase Price. It is the intention and express agreement of the Members that if a default shall occur hereunder to which this Section 20.03 applies, the Non-Affiliated Members shall have the right to purchase the Membership Interest of a Defaulting Member and its Affiliates, if any, for the Default Purchase Price and shall not (directly, indirectly, contingent or otherwise) be obligated to pay more than the Default Purchase Price, as determined in accordance with this Agreement, in order to acquire the Membership Interest of the Defaulting 71 Member and its Affiliates, if any, regardless of whether the aggregate amount of the indebtedness, obligations and/or liabilities secured by any liens or encumbrances on such Membership Interest exceeds the Default Purchase Price determined under this Agreement. 20.04 Default Approval Rights; Loss of Approval Rights on Defaults. The Members agree that a Defaulting Member shall forfeit its rights to approve Company decisions and activities during the pendency of a Default until such time as the Default is cured but subject to the provisions of this Section 20.04. Notwithstanding any provision in this Section 20.04 to the contrary, a Member shall retain its rights (herein, the "Default Approval Rights") under this Agreement to approve the following actions regardless of any default by such Member: (i) The filing of bankruptcy by Member Newco or the filing by Member Newco for the appointment of a receiver for the assets of Member Newco; (ii) Dissolution or termination of Member Newco; (iii) Except as set forth in a Pro Forma and/or an Operating Budget as required funding from the Members, the entering into any contract or agreement, including guarantees, that creates liability of the Defaulting Member beyond its Member Funding or that requires the guarantees of the Defaulting Member or its Affiliates; or (iv) Except for typographical errors or corrections or the amendment of Exhibit B to reflect changes to the information set forth thereon in accordance with this Agreement, the amendment or modification of this Agreement. 20.05 Attorney's Fees. Except as otherwise provided herein, if (i) any party fails to perform any of its obligations under this Agreement, or (ii) any litigation is commenced between the parties concerning any provision of this Agreement or any rights or duties of any person relative thereto, or (iii) any party institutes any proceeding in any bankruptcy or similar court which has jurisdiction over any party (or any or all of its property or assets), the non-defaulting party or party prevailing in such litigation, or the non-bankrupt party (as the case may be) shall be entitled, in addition to damages and such other and further relief as may be granted, to all costs incurred in enforcing and defending its rights and remedies under this Agreement, including but not limited to reasonable attorney's fees, out-of-pocket costs and expenses, and court costs, together with interest on the foregoing from the date same are incurred until fully repaid at a rate equal to the Interest/Return, or such lesser rate of interest as may from time to time be the maximum rate of interest which may, under the circumstances, be charged under applicable law. If neither party is the sole prevailing party or each party prevails on its claims against the other party, then each party shall be responsible for its own attorney's fees, out-of-pocket expenses and costs and court costs. 20.06 Closing. (a) Closing Terms. This Section 20.06 sets forth and will govern the procedures, terms and conditions pursuant to which a Member selling its Membership Interest (the "Selling Member") will be transferred to a Member 72 purchasing the Selling Member's Membership Interest (the "Purchasing Member") pursuant to Section 20.03. (b) Purchase Price. As used herein, the term purchase price shall mean in the case of a transfer pursuant to Section 20.03, the Default Purchase Price, as the same may be increased or decreased pursuant to the provisions of this Section 20.06. (c) Default Purchase Closing Date and Place. The closing of the purchase/sale of a Member's Membership Interest pursuant to Section 20.03 and this Section 20.06 shall be held at the principal office of Member Newco on a business Day that is determined by the Purchasing Member, but in any event unless the closing is delayed through no fault of the Purchasing Member, no later than thirty (30) Days following the date of the Exercise Notice; provided, however, in the event that the closing of such purchase/sale has not occurred by the date that is one-hundred eighty (180) Days following the date of such Exercise Notice and such delay or failure to close is not the result of any action or inaction of the Selling Member and the Selling Member is otherwise ready and willing to close and/or the delay or failure to close is not the result of any court action or inaction or restraining order or injunction, then such failure to close within such time parameter shall be deemed a waiver of the Purchasing Member's rights to purchase the Selling Member's Membership Interest by reason of the Default that triggered the Purchasing Member's rights under Section 20.03 above. Such waiver shall not, however, be deemed to be a waiver of any other Default that may exist at the time or that may occur thereafter. The date determined in accordance with the foregoing provisions for closing of any transaction to which this Section 20.06 is applicable is hereinafter referred to as the "Default Purchase Closing Date". (d) Payment; Escrow. On the Default Purchase Closing Date, the Default Purchase Price may be deposited in good federal funds that are immediately available at the place of closing in escrow with the title company involved with the transaction or with either Purchasing Member's or Selling Member's counsel. (e) Title. Title to the Selling Member's Membership Interest shall be transferred free and clear of all liens and encumbrances (and the possibility thereof) of every nature and description whatsoever. (f) Selling Member's Default. If a Selling Member shall fail or refuse to complete a transfer after the Purchasing Member becomes obligated to purchase pursuant to Section 20.03, as the case may be, the Purchasing Member may, at its option, elect to pursue any and all rights and remedies under this Agreement, at law, in equity, or otherwise against the Selling Member. Furthermore, each Member takes cognizance of the fact that a breach of the Selling Member's obligations under Section 20.03, as the case may be, may cause irreparable injury to the business and property of the Purchasing Member, and that there are inadequate remedies available at law to redress such injury. Consequently, the Purchasing Member shall have the right to seek and obtain specific performance of the obligations of the Selling Member that arise under this Article XX (as well as any collateral obligations under other provisions of this Agreement, at law, in equity, or otherwise). The foregoing provisions shall not be construed to preclude, restrict or limit any other or further rights or remedies that the Purchasing Member may have under this Agreement, at law, in equity, or otherwise. 73 (g) Adjustments. On the Default Purchase Closing Date, the following adjustments shall be made to the Default Purchase Price and the following disbursements shall be made from the escrow by the escrow holder: (i) the aggregate amount of all amounts owed by the Selling Member and its Affiliates to Member Newco, including accrued and unpaid interest thereon, shall be subtracted from the Default Purchase Price; and (ii) the aggregate amount of all liens of a definite and ascertainable amount upon the Membership Interest of the Selling Member shall be deducted in determining the Default Purchase Price. (h) Costs. In the event of a transfer pursuant to the provisions of Section 20.03, all title charges, recording fees, transfer taxes, and other fees, costs and expenses of the purchase, sale and transfer of the Membership Interest shall be charged to and paid in cash by the Selling Member through the escrow on the Default Purchase Closing Date. (i) Payment. On the Default Purchase Closing Date, that portion of the Default Purchase Price that is held in escrow after the adjustments, payments and disbursements that are described in Section 20.06(g) and (h) (hereinafter referred to as the "Payment Amount") shall be disbursed to the Selling Member in immediately available Federal funds through the escrow, except that if the Payment Amount is a negative amount, the Selling Member shall pay such amount to the Purchasing Member in immediately available Federal funds through the escrow on the Default Purchase Closing Date. If the Selling Member fails to pay such amount, the Purchasing Member may elect to complete its purchase of the Selling Member's Membership Interest and the amount owed by the Selling Member shall accrue interest from the date of transfer until all principal and accrued interest is paid in full at a rate equal to the Interest/Return plus five percent (5%) but not in excess of the maximum amount allowable under applicable law. (j) Transfer of Title. On the Default Purchase Closing Date: (i) the Selling Member shall, simultaneously with the payment of the Payment Amount (or if a negative number, at the time same would be payable if it was a positive number) sell, assign and transfer the Selling Member and its Affiliates' entire Membership Interest to the Purchasing Member by written assignment containing (A) a warranty of the Selling Member's authority, (B) a special or limited warranty of title against the Selling Member's own acts, and (C) confirmation of the provisions set forth in Section 20.06(i); (ii) the Purchasing Member shall, simultaneously with its receipt of the assignment referred to in this Section 20.06(j), execute an agreement whereby it accepts such assignment and assumes the obligations of the Selling Member under this Agreement with respect to the Membership Interest of the Selling Member that the Purchasing Member is acquiring; and 74 (iii) all other Members shall simultaneously with the events described in Sections 20.06(j)(i) and (ii), agree in writing to and shall consent to such assignment and the transactions effected thereby. All such documents of assignment, acceptance, assumption, consent and confirmation shall be in form and substance reasonably satisfactory to the Purchasing Member, and shall be duly executed by all Members required to execute same in recordable form. ARTICLE XXI APPOINTMENT OF MANAGING MEMBER AS ATTORNEY-IN-FACT 21.01 Appointment. Each Member hereby irrevocably constitutes and appoints the Managing Member as such Member's true and lawful attorney-in-fact with full power and authority in said Member's name, place and stead for the limited purposes of executing, acknowledging, delivering, swearing to, filing and recording at the appropriate public office such documents as may be necessary or appropriate to carry out the provisions of this Agreement, as follows: (i) All certificates and other instruments (including counterparts of this Agreement), and any amendment thereof, which the Managing Member deems appropriate to qualify or continue Member Newco as a limited liability company in any jurisdiction in which Member Newco may conduct business; (ii) All instruments which the Managing Member deems appropriate to reflect a change or modification of this Agreement approved by the Members in accordance with the terms of this Agreement; and (iii) All instruments, documents, consents and agreements, financing statements, security agreements, and continuation statements which the Managing Member deems appropriate or necessary to effect and consummate any decision that the Managing Member is authorized to make under this Agreement and any decision unanimously approved or deemed unanimously approved by the Members if such approval is necessary pursuant this Agreement. 21.02 Survival. The appointment by all Members of the Managing Member as their attorney-in-fact shall be deemed to be a power coupled with an interest, in recognition of the fact that each of the Members under this Agreement will be relying upon the power of the Managing Member to act as contemplated by this Agreement in any filing and other action on behalf of Member Newco and shall survive the bankruptcy, death, dissolution, disability or incompetence of any Member hereby giving such power or the transfer or assignment of all or any part of the Membership Interest of such Member; provided, however, that in the event of the transfer by a Member of all or any part of said Member's Membership Interest, the foregoing power of attorney of a transferor Member shall survive such transfer only until such time as the transferee shall have been admitted to Member Newco as a Member and has, among other things contained herein, agreed to appoint the Managing Member as its attorney-in-fact as provided in this Article XXI, and all required documents and instruments shall have been duly executed, filed and recorded to effect such substitution. 75 [Signatures on next page] 76 [Signature Page for Amended and Restated Limited Liability Company Agreement] IN WITNESS WHEREOF, the undersigned have entered into this Agreement as of the date and year first written above. CBL TRIANGLE TOWN MEMBER, LLC, a North Carolina limited liability company By: CBL & Associates Limited Partnership, its sole member and chief manager By: CBL Holdings I, Inc., its sole general partner By:/s/ John N. Foy John N. Foy Vice Chairman and Chief Financial Officer REJ REALTY LLC, a Delaware limited liability company By: /s/ Judson E. Smith Judson E. Smith Executive Vice President JG REALTY INVESTORS CORP., an Ohio corporation By: /s/ Judson E. Smith Judson E. Smith Executive Vice President JG MANAGER LLC, an Ohio limited liability company By: /s/ Judson E. Smith Judson E. Smith Executive Vice President 77 Attached to and made a part of that certain Amended and Restated Limited Liability Company Agreement of Triangle Town Member, LLC, dated as of the date first above written. EXHIBIT A Description of the Real Estate 78 Attached to and made a part of that certain Amended and Restated Limited Liability Company Agreement of Triangle Town Member, LLC, dated as of the date first above written. EXHIBIT B Members Profits Initial Capital Name, Address Interest Contribution REJ Realty LLC c/o The Richard E. Jacobs Group, Inc. 49.5% 99% of the sum of 25425 Center Ridge Road the JG Members Cleveland, OH 44145-4122 Baseline Equity Attention: President Amount of the (440)808-6903 (fax) Shortfall, if any JG Realty Investors Corp. c/o The Richard E. Jacobs Group, Inc. .0484% 0.968% of the sum of 25425 Center Ridge Road the JG Members Cleveland, OH 44145-4122 Baseline Equity Attention: President Amount of the (440)808-6903 (fax) Shortfall, if any JG Manager LLC c/o The Richard E. Jacobs Group, Inc. .016% 0.032% of the sum of 25425 Center Ridge Road the JG Members Cleveland, OH 44145-4122 Baseline Equity Attention: President Amount of the (440)808-6903 (fax) Shortfall, if any with a copy (as to each JG Member) to: General Counsel The Richard E. Jacobs Group, Inc. 25425 Center Ridge Road Cleveland, Ohio 44145-4122 (440) 808-6903 (fax) - ------------------------------------------------------------------------------ CBL Triangle Town Member, LLC 50% $0.00 2030 Hamilton Place Boulevard Suite 500, CBL Member Center Chattanooga, Tennessee 37421 Attention: Charles B. Lebovitz (423) 490-8662 (fax) with a copy to: 79 Jeffery V. Curry, Esq. Shumacker Witt Gaither & Whitaker, P.C. 2030 Hamilton Place Blvd. Suite 210, CBL Member Center Chattanooga, Tennessee 37421 (423) 899-1278 (fax) 80 Attached to and made a part of that certain Amended and Restated Limited Liability Company Agreement of Triangle Town Member, LLC, dated as of the date first above written. EXHIBIT C FEES TO MEMBERS The following fees shall be paid by Member Newco to the JG Members (pro rata) and CBL Member or their Affiliates, as so designated: Construction Management Fee - for services of CBL Member and/or its Affiliates in the construction management of the Project with respect to Future Development Activities a Construction Management Fee of three-and-one-quarter percent (3.25%) of the construction costs of the Project with respect to such Future Development Activities, as set forth in the approved Pro Forma, plus, as to Future Development Activities for which EMJ serves as general contractor, a further fee to be paid to EMJ to be set forth in the approved Pro Forma for with respect to such Future Development Activities. The referenced Construction Management Fees shall be paid as set forth in the applicable approved Pro Forma. Development Fee - for services of CBL Member and/or its Affiliates and the JG Members and/or their Affiliates in Future Development Activities, a Development Fee in an amount to be agreed by the Members prior to the commencement of Future Development Activities. The Development Fee shall be paid in equal monthly increments over the Construction Period of the Project with respect to such Future Development Activities. Management Fee - for services of CBL Member or its Affiliate pursuant to CBL Member's asset/financial management responsibility for the Project, CBL Member or its Affiliate shall receive an amount equal to three percent (3%) of the "Project Income" as hereinafter defined, from the date of this Agreement until the earlier of the termination of this Agreement or the termination of CBL Member or its Affiliate as the Property Manager pursuant to the Property Management Agreement. The entitlement of CBL Member or its Affiliate to the Management Fee described herein shall be further outlined and subject to the terms of the Property Management Agreement. Leasing Fees - for services of CBL Member or its Affiliate pursuant to CBL Member's leasing responsibility for the Project, CBL Member or its Affiliate shall receive the following: A. With respect to each tenant who executes a renewal lease after the expiration of its initial lease, including the expiration of any options to extend such lease, which renewal lease has a term of at least three (3) years, an amount equal to Two Dollars ($2.00) per square foot of said tenant's space, payable upon the date the such tenant is open and paying rent; B. With respect to the replacement of any tenant (other than an Anchor) with another tenant, an amount equal to Four Dollars ($4.00) per square foot of said tenant's space, payable upon the date the such tenant is open and paying rent; 1 81 C. With respect to the replacement of an Anchor with another Anchor or replacement tenant(s) and/or upon the addition of an Anchor to the Project, an amount equal to Two Dollars ($2.00) per square foot of said Anchor's or replacement tenant(s)' space in the Project, payable (i) for leases, upon the date the such Anchor or replacement tenant(s) is/are open and paying rent and (ii) for non-lease transactions where the Anchor owns its space, upon the date such Anchor is open; D. With respect to each temporary tenant in the Project who executes an occupancy agreement, as defined below, an amount equal to ten percent (10%) of the rent generated from said occupancy agreement, payable on full execution of the license agreement with such licensee. The term "occupancy agreement" shall mean a lease or license to occupy space in the Project that has a term of one year or less and the term "rent" shall mean only the minimum annual rent and percentage rent paid by the tenant; and E. With respect to each sponsorship or co-branding transaction at or relating to the Project (other than such sponsorship(s) with the Coca Cola company or other soft-drink companies and their respective affiliates and/or affiliated or unaffiliated bottlers regarding the placement of vending machines in the common areas of the Project, for which the Members agree no sponsorship fee shall be paid by Member Newco), an amount equal to five percent (5%) of the gross revenues generated by such sponsorship or co-branding transaction, payable on full execution of the sponsorship or co-branding agreement (as to the portion of such gross revenues paid upon such execution) and monthly as to gross revenues paid during the term of such sponsorship or co-branding agreement. The entitlement of CBL Member or its Affiliate to the Leasing Fees described herein shall be further outlined and subject to the terms of the Property Management Agreement Outparcel and Pad Sales/Lease Fees - for services of CBL Member in selling or ground leasing Outparcels and pads, a fee of five percent (5%) of the sales price on a sale of an Outparcel or pad, payable on the closing of such sale, or five percent (5%) of the ground lease value on any ground lease of an Outparcel or pad, payable one-half (1/2) on the full execution of the ground lease and one-half (1/2) on the date the ground lessee is open and paying rent. The "ground lease value" shall be the sum of the annual rent to be paid over the greater of (i) ten years or (ii) term of the ground lease (but in no event more than twenty years). Financing Fee - for services of CBL Member in the placement of Permanent Financing/Refinancing on behalf of Member Newco, CBL Member shall receive a fee equal to twenty-five hundredths percent (.25%) of the amount of such Permanent Financing/Refinancing. The Financing Fee shall be paid at the closing of such Permanent Financing/Refinancing. DEFINITIONS "Project Income"- subject to the exceptions noted below, shall mean (i) all revenue derived from the Project on a cash basis, including without limitation, (A) all minimum rents, (B) percentage rents, if any, (C) license fees paid by licensees and ninety-five percent of sponsorship income, (D) receipts from public telephones, storage lockers, vending machines, (E) stroller and other equipment rentals, (F) advertising revenues, (G) gift card or gift certificate sales revenues, and (H) interest on tenant security deposits unless such 2 82 interest is required to be paid to such tenants; and (ii) payments by tenants for utilities, insurance, real estate taxes, common area maintenance and operating expenses but, with respect to such payments referred to in this clause (ii), only to the extent that there is a profit (i.e., an excess of such payments over the actual costs paid/recovered) generated therefrom to Member Newco. Project Income shall not include proceeds from the Construction Loan and Permanent Financing/Refinancing; proceeds from settlement of fire/casualty losses (except for such proceeds from loss of rents insurance), condemnation proceeds, sales of outparcels and other peripheral property, or items of a similar nature. ADDITIONAL FEES, LIMITATIONS AND CERTAIN THIRD-PARTY FEES The Members may be entitled to other fees pursuant to the terms of the Property Management Agreement and any consulting agreements or other agreements that may be entered into between Member Newco and such Member or its Affiliates, subject to the provisions of Section 5.03 of this Agreement. In addition, Member Newco will pay a fee to the JG Members (pro rata) and CBL Member in an amount equal to the applicable hourly rates charged by the JG Members and CBL Member, respectively, and approved by the Members, for in-house legal services provided for the benefit of Member Newco in connection with the development, financing, leasing or operation of the Project and will reimburse each Member for third-party costs incurred by such Member for such services. The Members agree that, except as may be provided in an approved Pro Forma, there shall be no Leasing Fees or leasing expenses for the initial lease-up of particular phases or portions of the Project. Likewise, any in-house costs a Member may incur during a Construction Period for any particular Future Development Activity, including but not limited to travel costs and personnel costs, shall not be reimbursed by Member Newco to such Member. The Members shall bear their own legal fees and other costs for the negotiation and entering into of this Agreement and Member Newco shall not reimburse any Member for any costs or expenses incurred by such Member or its Affiliates prior to the date of this Agreement. No fee or compensation shall be paid by Member Newco to any Member or its Affiliates on the placement of any Construction Loan. Except for the Construction Management Fee to be paid to CBL Member as set forth above, no additional fees or compensation shall be paid by Member Newco to any Member or its Affiliates for the performance of construction management services. 3 83 Attached to and made a part of that certain Amended and Restated Limited Liability Company Agreement of Triangle Town Member, LLC, dated as of the date first above written. EXHIBIT D APPRAISAL PROCEDURE Procedure for Appraisals. For purposes of determining the appraised value of the Project pursuant to this Agreement, the following procedure (the "Appraisal Procedure") shall be followed: (a) The Member initiating this Appraisal Procedure shall, in a written notice to the other Members, set forth the name, business address and phone number of an appraiser having the qualifications set forth in Section (b) below who has accepted said Member's appointment and agreed to act as said Member's appraiser hereunder in accordance with this Appraisal Procedure. The other Members shall, in a written notice to the initiating Member given not less than fifteen (15) Days after receipt of the said notice from the initiating Member, set forth the name, business address and telephone number of an appraiser having the qualifications set forth in Section (b) below who has accepted said Member's(s') appointment and agreed to act as the second appraiser hereunder in accordance with this Appraisal Procedure. The two appraisers so appointed shall appoint, and give each of the Members written notice of the name, business address and telephone number of, a third appraiser having the qualifications set forth in Section (b) below. (b) Each appraiser shall, in all events, be independent and disinterested. All appraisers shall be members in good standing of the American Institute of Real Estate Appraisers ("AIREA") and shall have at least five years experience in appraising first class shopping centers that are similar to the Project and that are in the same general geographic area as the Project. Each appraiser shall appraise the Project on an "as is" basis. (c) (i) The Managing Member and the Accountants shall, promptly upon request of any appraiser appointed pursuant to the provisions of this Section, furnish all such appraisers with any financial or other information in their possession relative to the Project that is reasonably requested by such appraiser. (ii) Each of the three appraisers, acting independently of each other, shall, within sixty (60) Days after appointment of the last required appraiser, submit to the Members a written appraisal report that has been prepared in accordance with the provisions hereof stating his or her opinion as to the fair market value of the Project as of the relevant date. After all three appraisers have submitted written appraisal reports as aforesaid, they shall meet and reevaluate their appraisals and, if they agree on a single appraised fair market value within seventy-five (75) Days after appointment of the last required appraiser, such single appraised fair market value shall be the Appraised fair market value of the Project and is hereinafter referred to as the "Appraised Value." If the appraisers are unable to agree on a single appraised fair market value within such seventy-five (75) Day period, then the "Appraised 1 84 Value" shall be deemed to be the arithmetic average of the three appraised fair market values originally submitted, provided, however, that, if any of the appraised fair market values are more than five percent (5%) greater or less than the median value of the three appraised fair market values, such appraised fair market values shall be disregarded, and the Appraised Value shall be deemed to be the arithmetic average of the remaining two fair market values originally submitted, and, if two of the three appraised fair market values are five percent (5%) greater or less than the median value of the three appraised fair market values, both shall be disregarded and the appraised fair market value that is not so disregarded shall be taken as the Appraised Value. If the Appraisal Procedure is being utilized for purposes of establishing the value of a Member's Membership Interest, the Appraisal Procedure shall be utilized to establish the Appraised Value of the Project, and fifty percent (50%) of the Appraised Value of the Project shall be deemed the value of the Membership Interests of the JG Members (pro rata, in the aggregate) and fifty percent (50%) of the Appraised Value of the Project shall be deemed to be the value of the Membership Interests of the CBL Member (collectively if applicable, i.e., if any JG Member or CBL Member has assigned a portion of its Membership Interest to Affiliates pursuant to transfers permitted by Article XVI). (iii) Any determination of appraised fair market value and Appraised Value pursuant to this procedure shall, in the absence of fraud, bad faith, or collusion, be binding and conclusive upon all Members. (d) All reasonable costs, expenses and fees relative to the Appraisal Procedure shall, in all cases, be the responsibility of and paid by the Defaulting Member in the event the Appraisal Procedure is implemented pursuant to a Default and in all other cases, shall be the responsibility of Member Newco. 2 85 Attached to and made a part of that certain Amended and Restated Limited Liability Company Agreement of Triangle Town Member, LLC, dated as of the date first above written. EXHIBIT E SITE PLAN 86 Attached to and made a part of that certain Amended and Restated Limited Liability Company Agreement of Triangle Town Member, LLC, dated as of the date first above written. EXHIBIT F PROPERTY MANAGEMENT AGREEMENT 87 Attached to and made a part of that certain Amended and Restated Limited Liability Company Agreement of Triangle Town Member, LLC, dated as of the date first above written. EXHIBIT G 2006 OPERATING BUDGET 88 Attached to and made a part of that certain Amended and Restated Limited Liability Company Agreement of Triangle Town Member, LLC, dated as of the date first above written. EXHIBIT H TAX MATTERS This Exhibit is attached to and is a part of the Amended and Restated Limited Liability Company Agreement (the "Agreement") of Member Newco. The provisions of this Exhibit are intended to comply with the requirements of Treas. Reg. 1.704-1(b)(2) and Treas. Reg. 1.704-2 with respect to partnership allocations and maintenance of capital accounts, and shall be interpreted and applied accordingly. ARTICLE I Definitions 1.01 Definitions. For purposes of this Exhibit, the capitalized terms listed below shall have the meanings indicated. "Adjusted Fair Market Value" of an item of Member Newco property means the greater of (i) the fair market value of such property or (ii) the amount of any nonrecourse indebtedness to which such property is subject within the meaning of Section 7701(g) of the Code. "Applicable Federal Rate" means the applicable Federal rate within the meaning of Section 1274(d) of the Code. "Capital Account" means the capital account of a Member maintained in accordance with ARTICLE II of this Exhibit to the Agreement. "Code" means the Internal Revenue Code of 1986, as amended. References to specific sections of the Code shall be deemed to include references to corresponding provisions of succeeding Internal Revenue law. "Excess Nonrecourse Liabilities" means the excess of (i) Member Newco's aggregate Nonrecourse Liabilities over (ii) the aggregate amount of such Nonrecourse Liabilities allocable to the Members pursuant to Treas. Reg. 1.752-3(a)(1) (relating to the Members' shares of Member Newco Minimum Gain) and Treas. Reg. 1.752-3(a)(2) (relating to allocations of taxable gain under Section 4.02 of this Exhibit). "Fiscal Year" means Member Newco's fiscal year, which shall be the calendar year. "Investment Credit" means the investment credit determined under Section 46(a) of the Code. "Member" has the meaning set forth in the Agreement. "Member Newco Minimum Gain" means partnership minimum gain determined pursuant to Treas. Reg. 1.704-2(d). 89 "Member Newco Nonrecourse Deductions" means the excess, if any, of the net increase, if any, in the amount of Member Newco Minimum Gain during the Fiscal Year over the aggregate amount of distributions during the Fiscal Year of Nonrecourse Liability, as defined in Treasury Regulation Sections 1.704-2(b)(i) and 1.704-2(c). "Member Nonrecourse Debt" means any nonrecourse debt of the Member within the meaning of Treas. Reg. 1.704-2(b)(4). "Member Nonrecourse Deduction" means any item of Book loss or deduction that is attributable to a Member Nonrecourse Debt pursuant to Treas. Reg. 1.704-2(i)(1) and 1.704-2(i)(2). "Member Nonrecourse Debt Minimum Gain" means minimum gain attributable to Member Nonrecourse Debt pursuant to Treas. Reg. 1.704-2(i). "Minimum Gain" means, collectively, Member Newco Minimum Gain and Member Nonrecourse Debt Minimum Gain. "Nonrecourse Distribution" means a distribution to a Member that is allocable to a net increase in Member Newco Minimum Gain pursuant to Treas. Reg. 1.704-2(h) or to a net increase in such Member's share of Member Nonrecourse Debt Minimum Gain pursuant to Treas. Reg. 1.704-2(i)(5) and (6). "Nonrecourse Liability" means any Member Newco liability (or portion thereof) which is a nonrecourse liability within the meaning of Treas. Reg. 1.704-2(b)(3). "Nontradable Note" means a promissory note that is not readily tradable on an established securities market. "Recourse Debt" means any recourse liability of Member Newco within the meaning of Treas. Reg. 1.752-1(a)(1). "Revaluation Event" means (i) a liquidation of Member Newco (within the meaning of Treas. Reg. 1.704-1(b)(2)(ii)(g), (ii) a contribution of more than a de minimis amount of money or other property to Member Newco by a new or existing Member, or (iii) a distribution of more than a de minimis amount of money or other property to a retiring or continuing Member, in each case as consideration for an interest in Member Newco. "Treasury Regulation" or "Treas. Reg." means the temporary or final regulation(s) promulgated pursuant to the Code by U.S. Department of the Treasury, as amended, and any successor regulation(s). ARTICLE II CAPITAL ACCOUNTS 2.01 Maintenance. A single Capital Account shall be maintained for each Member in the manner set forth in this Article II. 90 2.02 Net Profits and Net Losses. (a) The Net Profits and Net Losses of Member Newco for purposes of determining allocations to the Capital Accounts of the Members shall be determined in the same manner as set forth in the definition of "Net Profits" and "Net Losses" in Section 1.01 of the Agreement. (b) For purposes of Section 2.02(a), in the event that the book value of any item of Member Newco property differs from its tax adjusted basis, the amount of book depreciation, depletion, or amortization for a period with respect to such property shall be computed so as to bear the same relationship to the book value of such property as the depreciation, depletion, or amortization computed for tax purposes with respect to such property for such period bears to the adjusted tax basis of such property. If the adjusted tax basis of such property is zero, the depreciation, depletion, or amortization with respect to such property shall be computed by using any reasonable method selected by Member Newco. 2.03 Positive Adjustments. Each Member's Capital Account shall from time to time be increased by: (a) the amount of money contributed by such Member to Member Newco (including the amount of any Member Newco liabilities which the Member assumes (within the meaning of Treas. Reg. 1.704-1(b)(2)(iv)(c)) but excluding liabilities assumed in connection with the distribution of Member Newco property and excluding increases in such Member's share of Member Newco liabilities pursuant to Section 752 of the Code); (b) except as otherwise provided by Section 2.07 of this Exhibit, the fair market value of property contributed by such Member to Member Newco (net of any liabilities secured by such property that Member Newco is considered to assume or take subject to under Section 752 of the Code); (c) allocations to such Member of Member Newco Net Profits (or items thereof); (d) upon the occurrence of a Revaluation Event, the Net Profits (or items thereof), if any, that would have been allocated to each Member if all Member Newco property had been sold at its Adjusted Fair Market Value immediately prior to the Revaluation Event, but only to the extent not already reflected in Capital Accounts; and (e) upon the distribution of Member Newco property to a Member under circumstances not constituting a Revaluation Event, the Net Profits (or items thereof), if any, that would have been allocated to such Member if such Member Newco property had been sold at its Adjusted Fair Market Value immediately prior to the distribution, but only to the extent not already reflected in Capital Accounts. 2.04 Negative Adjustments. Each Member's Capital Account shall from time to time be reduced by: 91 (a) the amount of money distributed to such Member by Member Newco (including the amount of such Member's individual liabilities for which Member Newco becomes personally and primarily liable but excluding liabilities assumed in connection with the contribution of property to Member Newco and excluding decreases in such Member's share of Member Newco liabilities pursuant to Section 752 of the Code); (b) except as otherwise provided by Section 2.07 of this Exhibit, the fair market value of property distributed to such Member by Member Newco (net of any liabilities secured by such property that such Member is considered to assume or take subject to under Section 752 of the Code); (c) allocations to such Member of non-deductible expenditures of Member Newco that are described in Section 705(a)(2)(B) of the Code, and of organization and syndication expenditures and disallowed losses to the extent that such expenditures or losses are treated as Section 705(a)(2)(B) expenditures pursuant to Treas. Reg. 1.704-1(b)(2)(iv)(i); (d) allocations to such Member of Member Newco Net Losses (or items thereof); (e) upon the occurrence of a Revaluation Event, the Net Losses (or items thereof), if any, that would have been allocated to such Member if all Member Newco property had been sold at its Adjusted Fair Market Value immediately prior to the Revaluation Event, but only to the extent not already reflected in Capital Accounts; and (f) upon the distribution of Member Newco property under circumstances not constituting a Revaluation Event, the Net Losses (or items thereof), if any, that would have been allocated to such Member if such Member Newco property had been sold at its Adjusted Fair Market Value immediately prior to the distribution, but only to the extent not already reflected in Capital Accounts. 2.05 Determination of Balances. Except as otherwise provided in this Exhibit, whenever it is necessary to determine the Capital Account of any Member, the Capital Account of that Member shall be determined after giving effect to all allocations of Net Profits and Net Losses of Member Newco for the current year (including a portion thereof) as well as all distributions for such year in respect of transactions effected prior to the date such determination is to be made. 2.06 Revaluation of Member Newco Property. (a) Upon the occurrence of a Revaluation Event, Member Newco property (whether tangible or intangible) shall be revalued, and the Capital Accounts of the Members shall be adjusted in accordance with Sections 2.03(d) and 2.04(e) of this Exhibit, to reflect the Adjusted Fair Market Value of Member Newco property immediately prior to the Revaluation Event. (b) Upon the distribution of Member Newco property to a Member under circumstances not constituting a Revaluation Event, such property shall be revalued, and the Capital Account of each Member shall be adjusted in accordance with Sections 2.03(e) and 2.04(f) of this Exhibit, to reflect the Adjusted Fair Market Value of such property immediately prior to such distribution. The Capital Account of the Member receiving such distribution shall then be adjusted in accordance with Section 2.04(b) of this Exhibit to reflect such distribution. 92 (c) In the event that the adjusted tax basis of Member Newco property is increased or decreased under Section 732, 734, or 743 of the Code, a corresponding adjustment shall be made to the value of Member Newco assets to the extent that such increase or decrease is reflected in Capital Accounts pursuant to Section 2.09 of this Exhibit. 2.07 Promissory Notes. (a) In the event that a Member contributes to Member Newco a Nontradable Note of which such Member is the maker, such note shall not be treated as contributed property for purposes of Section 2.03(b) of this Exhibit. Such Member's Capital Account will be increased with respect to such note only when there is a taxable disposition of such note by Member Newco or when such Member makes principal payments on such note. (b) In the event that Member Newco distributes to a Member a Nontradable Note of which Member Newco is the maker, then except as otherwise provided in Section 2.07(c) or (d) of this Exhibit, such note shall not be treated as distributed property for purposes of Section 2.04(b) of this Exhibit. Such Member's Capital Account will be decreased with respect to such note only when there is a taxable disposition of such note by such Member or when Member Newco makes principal payments on such note. (c) Section 2.07(b) of this Exhibit shall not apply to any negotiable note (of which Member Newco is the maker) distributed by Member Newco to a Member in liquidation of Member Newco or of such Member's interest in Member Newco if such distribution is made not later than the later of (i) the end of the taxable year in which such liquidation occurs, or (ii) a date which is ninety (90) Days after the date of such liquidation. If such note bears interest at no less than the Applicable Federal Rate at the time of distribution, such Member's Capital Account shall be reduced by the outstanding principal amount of such note; otherwise such Member's Capital Account shall be reduced by the fair market value of such note at the time of distribution. (d) In the event that Member Newco distributes to a Member a negotiable note to which Section 2.07(b) of this Exhibit applies, and Member Newco or such Member's interest in Member Newco is subsequently liquidated at a time when all or a portion of such note remains unsatisfied, then such Member's Capital Account shall be reduced as follows: if such note bears interest at no less than the Applicable Federal Rate at the time of such liquidation, such Member's Capital Account shall be reduced by the outstanding principal balance of such note; otherwise such Member's Capital Account shall be reduced by the fair market value of such note at the time of such liquidation. 2.08 Adjustments for Investment Credit Property. In the event that the adjusted tax basis for federal income tax purposes of Member Newco Investment Credit property is reduced or increased, the Capital Accounts of the Members shall be adjusted in the manner set forth in Treas. Reg. 1.704-1(b)(2)(iv)(i). 93 2.09 Section 754 Elective Adjustments. In the event that the adjusted tax basis of Member Newco property is adjusted under Section 732, 734, or 743 of the Code, the Capital Accounts of the Members shall be adjusted to the extent required by Treas. Reg. 1.704-1(b)(2)(iv)(m). 2.10 Additional Capital Account Adjustments. Member Newco shall make any further adjustments to Capital Accounts that may be necessary in order to comply with the rules set forth in Treas. Reg. 1.704-1(b)(2)(iv) as it may be amended from time to time. If the provisions of this Exhibit and the rules of Treas. Reg. 1.704-1(b)(2)(iv) fail to provide guidance as to how the Capital Accounts of the Members should be adjusted to reflect particular items, the Capital Accounts of the Members shall be adjusted in a manner that (i) maintains equality between the aggregate Capital Accounts of the Members and the amount of Member Newco capital reflected on Member Newco's balance sheet, (ii) is consistent with the underlying economic arrangement of the Members, and (iii) is based, wherever practicable, on Federal income tax accounting principles. 2.11 Transfers of Membership Interests. (a) Upon the transfer of a Member's entire membership interest, the Capital Account of such Member shall carry over to the transferee. (b) Upon the transfer of a portion of a Member's membership interest, the portion of such Member's Capital Account attributable to the transferred portion shall carry over to the transferee. ARTICLE III ALLOCATION OF NET PROFITS AND NET LOSSES 3.01 In General. Allocations to the Capital Accounts of the Members shall be based on the Net Profits and Net Losses of Member Newco as determined pursuant to Section 2.02 of this Exhibit. Such allocations shall be made as provided in the Agreement except to the extent modified by the provisions of this Article III. 3.02 Limitations on Allocation of Net Losses and Deductions. Subject to Section 3.03 of this Exhibit, but notwithstanding any other provisions of the Agreement: (a) Member Newco Nonrecourse Deductions and Member Nonrecourse Deductions. Member Newco Nonrecourse Deductions for any period shall be allocated to the Members in the same proportions as their respective allocations of Net Profits for such period pursuant to Section 13.01(f) of the Agreement. Any item of Member Nonrecourse Deduction with respect to a Member Nonrecourse Debt shall be allocated to the Member or Members who bear the economic risk loss for such Member Nonrecourse Debt in accordance with Treas. Reg. 1.704-2(i). (b) Excess Deficit Balances. Subject to paragraph (a) immediately preceding, no Net Losses or deduction shall be allocated to any Member to the extent that such allocation would cause or increase an Excess Deficit Balance in the Capital Account of such Member. Such Net Losses or deduction shall be reallocated away 94 from such Member and to the other Members in accordance with the Agreement, but only to the extent that such reallocation would not cause or increase Excess Deficit Balances in the Capital Accounts of such other Members. 3.03 Chargebacks of Net Profits. Notwithstanding any other provisions of the Agreement: (a) Member Newco Minimum Gain. In the event that there is a net decrease in Member Newco Minimum Gain for a taxable year of Member Newco, then before any other allocations are made for such taxable year, each Member shall be allocated items of Net Profits (or items thereof) for such year equal to that Member's share of the net decrease in Member Newco Minimum Gain within the meaning of Treas. Reg. 1.704-2(g)(2). The allocation required by the preceding sentence (the "Minimum Gain Chargeback Requirement") shall not apply to a Member to the extent that: (i) the Member's share of the net decrease in Member Newco Minimum Gain is caused by a guarantee, refinancing, or other change in the debt instrument causing it to become partially or wholly Recourse Debt or Member Nonrecourse Debt, and the Member bears the economic risk of loss (within the meaning of Treas. Reg. 1.752-2) for the newly guaranteed, refinanced, or otherwise changed liability, or (ii) the Member contributes capital to Member Newco that is used to repay the Nonrecourse Liability, and the Member's share of the net decrease in Member Newco Minimum Gain results from the repayment. If in any taxable year of Member Newco, Member Newco has a net decrease in Member Newco Nonrecourse Gain and the Minimum Gain Chargeback Requirement causes a distortion in the economic arrangement among the Members and it is not expected that Member Newco will have sufficient other income to correct the distortion, the Managing Member with the unanimous consent of the other members may seek a waiver from the Internal Revenue Service of the Minimum Gain Chargeback Requirement as permitted by Treas. Reg. 1.704-2(f)(4). Any Minimum Gain Chargeback required for a taxable year of Member Newco shall consist first of gains recognized from the disposition of Member Newco property subject to one or more Nonrecourse Liabilities of Member Newco and then if necessary shall consist of a pro rata portion of Member Newco's other items of income and gain for the taxable year of Member Newco. If the amount of the Minimum Gain Chargeback Requirement exceeds Member Newco's income and gains for the taxable year, the excess carries over to the succeeding taxable year. See Treas. Reg. 1.704-2(j)(2)(i) and (iii). (b) Member Nonrecourse Debt Minimum Gain. In the event that there is a net decrease in Member Nonrecourse Debt Minimum Gain for a taxable year of Member Newco, then after taking into account allocations pursuant to paragraph (a) immediately preceding, but before any other allocations are made for such taxable year, each Member with a share of Member Nonrecourse Debt Minimum Gain (determined under Treas. Reg. 1.704-2(i)(5)) as of the beginning of such year shall be allocated items of Net Profits for such year (and, if necessary, for succeeding years) equal to such Member's share of such net decrease in the 95 Member Nonrecourse Debt Minimum Gain (the "Nonrecourse Debt Minimum Gain Chargeback Requirement"). A Member's share of the net decrease in Member Nonrecourse Debt Minimum Gain shall be determined in a manner consistent with the provisions of Treas. Reg. 1.704-2(g)(2). A Member shall not be subject to the Nonrecourse Debt Minimum Gain Chargeback Requirement to the extent the net decrease in Member Nonrecourse Debt Minimum Gain arises because the liability ceases to be a Member Nonrecourse Debt due to a conversion, refinancing, or other change in the debt instrument that causes it to become partially or wholly a Nonrecourse Liability. The amount that would otherwise be subject to the Nonrecourse Debt Minimum Gain Chargeback Requirement shall be added to the Member's share of Member Newco Minimum Gain under paragraph (a) immediately preceding. In addition, the allocation required by the first sentence of this paragraph (b) shall not apply to a Member to the extent that: (i) the Member's share of the net decrease in Member Newco Nonrecourse Debt Minimum Gain is caused by a guarantee, refinancing, or other change in the debt instrument causing it to become partially or wholly Recourse Debt or Partner Recourse Debt, and the Member bears the economic risk of loss (within the meaning of Treas. Reg. 1.752-2) for the newly guaranteed, refinanced, or otherwise changed liability, or (ii) the Member contributes capital to Member Newco that is used to repay the Nonrecourse Liability, and the Member's share of the net decrease in Member Newco Minimum Nonrecourse Debt Gain results from the repayment. If in any taxable year of Member Newco, Member Newco has a net decrease in Member Newco Minimum Nonrecourse Debt Gain and the Nonrecourse Debt Minimum Gain Chargeback Requirement causes a distortion in the economic arrangement among the Members and it is not expected that Member Newco will have sufficient other income to correct the distortion, the Manager(s) will seek a waiver from the Internal Revenue Service of the Nonrecourse Debt Minimum Gain Chargeback Requirement as permitted by Treas. Reg. 1.704-2(i)(4). Any Nonrecourse Debt Minimum Gain Chargeback required for a taxable year of Member Newco shall consist first of gains recognized from the disposition of Member Newco property subject to one or more Member Nonrecourse Liabilities of Member Newco and then if necessary shall consist of a pro rata portion of Member Newco's other items of income and gain for the taxable year of Member Newco. If the amount of the Nonrecourse Debt Minimum Gain Chargeback Requirement exceeds Member Newco's income and gains for the taxable year, the excess carries over to the succeeding taxable year. See Treas. Reg. 1.704-2(j)(2)(ii) and (iii). (c) Qualified Income Offset. If, at the end of any taxable year, the Capital Accounts of any Members have Excess Deficit Balances after taking into account all other allocations and adjustments under this Agreement, then items of Net Profits for such year (and, if necessary, for subsequent years) will be reallocated to such Members in the amount and in the proportions needed to eliminate such Excess Deficit Balances as quickly as possible. 3.04 Offsetting Allocations. Subject to the provisions of Sections 3.02 and 3.03 of this Exhibit, but notwithstanding any other provision of this Agreement, in the event that any allocation or reallocation is made pursuant to Section 3.02 or 3.03 of this Exhibit (a "Regulatory Allocation"), then offsetting allocations of remaining Net Profits or Net Losses, or items thereof, for such year (and, if necessary, items of Net Profits or Net Losses for subsequent years) shall be 96 made in such amounts and proportions as are appropriate to restore the Capital Accounts of the Members to the position in which such Capital Accounts would have been if such Regulatory Allocation had not been made. ARTICLE IV ALLOCATION OF TAX ITEMS 4.01 In General. Except as otherwise provided in this Article IV, all items of income, gain, loss, and deduction shall be allocated among the Members for federal income tax purposes in the same manner as the corresponding allocation for Net Profits and Net Losses. 4.02 Section 704(c) Allocations. Member Newco will elect the traditional method with curative allocations on sale for purposes of allocation of gain under Section 704(c) of the Code. The JG Members and CBL Member will agree upon the amounts to be allocated to land and depreciable property. In the event that the value of an item of Member Newco property differs from its adjusted tax basis, allocations of depreciation, depletion, amortization, gain, and loss with respect to such property will be made for federal income tax purposes in a manner that takes account of the variation between the adjusted tax basis and value of such property in accordance with Section 704(c) of the Code and Treas. Reg. 1.704-1(b)(2)(iv)(f)(4). 4.03 Tax Credits. (a) Any tax credit that is attributable to an expenditure that gives rise to an allocation of loss or deduction (or other downward Capital Account adjustment) shall be allocated among the Members in the same proportion as such Member's distributive shares of such loss or deduction (or other adjustment). (b) Any tax credit whose allocation is not otherwise specified in this Section 4.03 shall be allocated among the Members in accordance with Treas. Reg. 1.704-1(b)(4)(ii). ARTICLE V OTHER TAX MATTERS 5.01 Minimum Gain. Member Newco Nonrecourse Gain shall be allocated among the Members in accordance with Treas. Reg. 1.704-2(g). Member Nonrecourse Debt Minimum Gain shall be allocated among the Members in accordance with Treas. Reg. 1.704-2(i)(5). 5.02 Excess Nonrecourse Liabilities. The Members' shares of Member Newco's Excess Nonrecourse Liabilities pursuant to Treas. Reg. 1.752-3(a) shall be determined in accordance with Section 18.09 of the Agreement requiring unanimous consent for tax elections. 97 5.03 Withholding. (a) Member Newco shall withhold any amounts required to be withheld pursuant to any applicable provisions of the Code, including without limitation Sections 1441 through 1446 of the Code, or pursuant to any applicable provisions of state or local law. (b) Any amounts withheld with respect to a Member's distributive share of Member Newco income (whether or not distributed) shall be treated by Member Newco and by such Member for all purposes as amounts distributed to such Member. Any amounts withheld with respect to any payment to a Member shall be treated by Member Newco and by such Member for all purposes as amounts paid to such Member. Amounts so treated as distributed or paid to any Member shall reduce the amount otherwise distributable or payable to such Member. (c) In the event that Member Newco withholds with respect to a Member's distributive share of Member Newco income for a taxable year, and such distributive share exceeds the amount distributed to such Member in such taxable year, then subsequent distributions to such Member shall be deemed to be made first from income with respect to which Member Newco has already withheld. 98 Attached to and made a part of that certain Amended and Restated Limited Liability Company Agreement of Triangle Town Member, LLC, dated as of the date first above written. EXHIBIT I-A Tenant Allowances Included in the JG Members Closing TA Payment Aldo $30,000 Gap $314,088 Charlotte Russe $226,944.38 Southwest Silver $58,416.42 Saks $175,000 Ulta Salon $319,037.95 DSW, Inc. $310,000 Total $1,433,486.75 99 Attached to and made a part of that certain Amended and Restated Limited Liability Company Agreement of Triangle Town Member, LLC, dated as of the date first above written. EXHIBIT I-B Tenant Allowances Eligible for Inclusion in the JG Members Subsequent TA Contribution William-Sonoma $36,500 California Pizza $102,811 Jos. A. Bank $70,381 Coldwater Creek $35,661 Z Gallerie $67,880 Picture People $100,000 Total $413,233 100 Attached to and made a part of that certain Amended and Restated Limited Liability Company Agreement of Triangle Town Member, LLC, dated as of the date first above written. EXHIBIT J Closing Statement EX-12 14 exhibit121.txt EXHIBIT 12.1 COMPUTATION OF RATIOS Exhibit 12.1 CBL & Associates Properties, Inc. Computation of Ratios of Earnings to Combined Fixed Charges and Preferred Dividends (in thousands, except ratios)
Year Ended December 31, ----------------------------------------------------------------- 2005 2004 2003 2002 2001 ----------------------------------------------------------------- Earnings: Income before discontinued operations, equity in earnings and minority interest in earnings $478,993 $376,315 $395,811 $283,571 $256,531 Fixed charges less capitalized interest and preferred dividends 210,914 177,219 154,116 143,125 156,404 Distributed income of equity investees 7,492 8,801 4,150 5,599 5,964 Equity in losses of equity investees for which charges arise from guarantees (1,020) - (39) (12) - Minority interest in earnings of subsidiaries that have not incurred fixed charges (3,700) (3,554) (2,254) (1,782) (136) ----------------------------------------------------------------- Total earnings $692,679 $558,781 $551,784 $430,501 $418,763 ================================================================= Combined fixed charges and preferred dividends (1): Interest expense (2) $210,914 $177,219 $154,116 $143,125 $156,404 Capitalized interest 8,715 4,517 5,974 5,593 5,860 Preferred dividends 30,568 18,309 19,633 10,919 6,468 ----------------------------------------------------------------- Total combined fixed charges and preferred dividends $250,197 $200,045 $179,723 $159,637 $168,732 ================================================================= Ratio of earnings to combined fixed charges 2.77 2.79 3.07 2.70 2.48 ================================================================= (1) The interest portion of rental expense is not calculated because the rental expense of the company is not significant. (2) Interest expense includes amortization of capitalized debt expenses and amortization of premiums and discounts.
The Company computes the ratios of earnings to combined fixed charges and preferred stock dividends by dividing earnings by combined fixed charges and preferred stock dividends. For this purpose, earnings consist of pre-tax income from continuing operations before extraordinary items and fixed charges (excluding capitalized interest), adjusted, as applicable, for our proportionate share of earnings of 50 percent-owned affiliates and distributed earnings from less than 50 percent-owned affiliates. Fixed charges consist of interest expense (including interest costs capitalized), amortization of debt costs and the portion of rent expense representing an interest factor. EX-21 15 exhibit21.txt EXHIBIT 21 SUBSIDIARIES OF THE COMPANY Exhibit 21 SUBSIDIARIES OF THE COMPANY
STATE OF INCORPORATION OR SUBSIDIARY FORMATION - --------------------------------------------------------------------------------------- Acadiana Mall of Delaware, LLC Delaware Acadiana Outparcel, LLC Delaware Akron Mall Land, LLC Delaware Alamance Crossing, LLC North Carolina APWM, LLC Georgia Arbor Place GP, Inc. Georgia Arbor Place II, LLC Delaware Arbor Place Limited Partnership Georgia Asheville, LLC North Carolina BJ/Portland Limited Partnership Maine Bonita Lakes Mall Limited Partnership Mississippi Brookfield Square Joint Venture Ohio Brookfield Square Parcel, LLC Wisconsin Burnsville Minnesota II, LLC Minnesota Burnsville Minnesota, LLC Minnesota C.H. of Akron II, LLC Delaware C.H. of Akron, LLC Delaware Cadillac Associates Limited Partnership Tennessee Capital Crossing Limited Partnership North Carolina Cary Venture Limited Partnership Delaware CBL & Associates Limited Partnership Delaware CBL & Associates Management, Inc. Delaware CBL Holdings I, Inc. Delaware CBL Holdings II, Inc. Delaware CBL Jarnigan Road, LLC Delaware CBL Morristown, LTD. Tennessee CBL Old Hickory Mall, Inc. Tennessee CBL Terrace Limited Partnership Tennessee CBL Triangle Town Member, LLC North Carolina CBL/34th Street St. Petersburg Limited Partnership Florida CBL/BFW Kiosks, LLC Delaware CBL/Brookfield I, LLC Delaware CBL/Brookfield II, LLC Delaware CBL/Cary I, LLC Delaware CBL/Cary II, LLC Delaware CBL/Cherryvale I, LLC Delaware CBL/Citadel I, LLC Delaware CBL/Citadel II, LLC Delaware CBL/Columbia I, LLC Delaware CBL/Columbia II, LLC Delaware CBL/Columbia Place, LLC Delaware 1 STATE OF INCORPORATION OR SUBSIDIARY FORMATION - --------------------------------------------------------------------------------------- CBL/Eastgate I, LLC Delaware CBL/Eastgate II, LLC Delaware CBL/Eastgate Mall, LLC Delaware CBL/Fayette I, LLC Delaware CBL/Fayette II, LLC Delaware CBL/Foothills Plaza Partnership Tennessee CBL/GP Cary, Inc. North Carolina CBL/GP I, Inc. Tennessee CBL/GP II, Inc. Wyoming CBL/GP III, Inc. Mississippi CBL/GP V, Inc. Tennessee CBL/GP VI, Inc. Tennessee CBL/GP, Inc. Wyoming CBL/Gulf Coast, LLC Florida CBL/High Pointe GP, LLC Delaware CBL/High Pointe, LLC Delaware CBL/Huntsville, LLC Delaware CBL/Imperial Valley GP, LLC California CBL/J I, LLC Delaware CBL/J II, LLC Delaware CBL/Jefferson I, LLC Delaware CBL/Jefferson II, LLC Delaware CBL/Kentucky Oaks, LLC Delaware CBL/Laurel Park Member, LLC Delaware CBL/Low Limited Partnership Wyoming CBL/Madison I, LLC Delaware CBL/Madison I, LLC Delaware CBL/Midland I, LLC Delaware CBL/Midland II, LLC Delaware CBL/Monroeville Expansion I, LLC Pennsylvania CBL/Monroeville Expansion II, LLC Pennsylvania CBL/Monroeville Expansion III, LLC Pennsylvania CBL/Monroeville Expansion Partner, L.P. Pennsylvania CBL/Monroeville Expansion, L.P. Pennsylvania CBL/Monroeville I, LLC Delaware CBL/Monroeville II, LLC Pennsylvania CBL/Monroeville III, LLC Pennsylvania CBL/Monroeville Partner, L.P. Pennsylvania CBL/Monroeville, L.P. Pennsylvania CBL/MSC II, LLC South Carolina CBL/MSC, LLC South Carolina 2 STATE OF INCORPORATION OR SUBSIDIARY FORMATION - --------------------------------------------------------------------------------------- CBL/Nashua Limited Partnership New Hampshire CBL/Northwoods I, LLC Delaware CBL/Northwoods II, LLC Delaware CBL/Old Hickory I, LLC Delaware CBL/Old Hickory II, LLC Delaware CBL/Park Plaza GP, LLC Arkansas CBL/Park Plaza Mall, LLC Delaware CBL/Park Plaza, Limited Partnership Arkansas CBL/Parkdale Crossing GP, LLC Delaware CBL/Parkdale Crossing, L.P. Texas CBL/Parkdale Mall GP, LLC Delaware CBL/Parkdale Mall, L.P. Texas CBL/Parkdale, LLC Texas CBL/Plantation Plaza, L.P. Virginia CBL/Regency I, LLC Delaware CBL/Regency II, LLC Delaware CBL/Richland G.P., LLC Texas CBL/Richland Mall, L.P. Texas CBL/Stroud, Inc. Pennsylvania CBL/Suburban, Inc. Tennessee CBL/Sunrise Commons GP, LLC Delaware CBL/Sunrise Commons, L.P. Texas CBL/Sunrise GP, LLC Delaware CBL/Sunrise Land, LLC Texas CBL/Sunrise Mall, L.P. Texas CBL/Sunrise XS Land, L.P. Texas CBL/Tampa Keystone Limited Partnership Florida CBL/Towne Mall I, LLC Delaware CBL/Towne Mall II, LLC Delaware CBL/Uvalde, Ltd. Texas CBL/Wausau I, LLC Delaware CBL/Wausau II, LLC Delaware CBL/Wausau III, LLC Delaware CBL/Wausau IV, LLC Delaware CBL/Westmoreland Ground, LLC Pennsylvania CBL/Westmoreland I, LLC Pennsylvania CBL/Westmoreland II, LLC Pennsylvania CBL/Westmoreland, L.P. Pennsylvania CBL/Weston I, LLC Delaware CBL/Weston II, LLC Delaware CBL/York Town Center GP, LLC Delaware CBL/York Town Center, LLC Delaware 3 STATE OF INCORPORATION OR SUBSIDIARY FORMATION - --------------------------------------------------------------------------------------- CBL/York, Inc. Pennsylvania Charleston Joint Venture Ohio Charter Oak Marketplace, LLC Connecticut Cherryvale Mall, LLC Delaware Chester Square Limited Partnership Virginia Chesterfield Crossing, LLC Virginia Chicopee Marketplace II, LLC Massachusetts Chicopee Marketplace, LLC Massachusetts Citadel Mall DSG, LLC South Carolina Coastal Grand, LLC Delaware Cobblestone Village at Palm Coast, LLC Florida Cobblestone Village at Royal Palm Beach, LLC Florida College Station Partners, Ltd. Texas Columbia Joint Venture Ohio Coolsprings Crossing Limited Partnership Tennessee Cortlandt Town Center Limited Partnership New York Cortlandt Town Center, Inc. New York Courtyard at Hickory Hollow Limited Partnership Delaware Creekwood Gateway, LLC Florida Cross Creek Mall, LLC North Carolina Crossville Associates Limited Partnership Tennessee CV at North Columbus, LLC Georgia Development Options, Inc. Wyoming Development Options/Cobblestone, LLC Florida Eastgate Company Ohio Eastland Mall, LLC Delaware Eastland Medical Building, LLC Illinois Eastridge, LLC North Carolina ERMC II, L.P. Tennessee ERMC III, L.P. Tennessee ERMC IV, LP Tennessee ERMC V, L.P. Tennessee Fashion Square - Orange Park, LLC Florida Fayette Development Property, LLC Kentucky Foothills Mall Associates, LP Tennessee Foothills Mall, Inc. Tennessee Frontier Mall Associates Limited Partnership Wyoming Galileo Wilkes-Barre Limited Partnership Delaware Galileo Wilkes-Barre Member I, LLC Delaware Galileo Wilkes-Barre Member, LLC Delaware 4 STATE OF INCORPORATION OR SUBSIDIARY FORMATION - --------------------------------------------------------------------------------------- Galileo Wilkes-Barre Sub, LLC Delaware Galleria Associates, L.P., The Tennessee Georgia Square Associates, Ltd. Georgia Georgia Square Partnership Georgia Governor's Square Company IB Ohio Governor's Square Company Ohio Greenbrier Mall, LLC Delaware Gunbarrel Commons, LLC Tennessee Hanes Mall DSG, LLC North Carolina Harford Mall Business Trust Maryland Henderson Square Limited Partnership North Carolina Hickory Hollow Courtyard, Inc. Delaware Hickory Hollow Mall Limited Partnership Delaware Hickory Hollow Mall, Inc. Delaware Hickory Point Outparcels, LLC Illinois Hickory Point, LLC Delaware High Point Development Limited Partnership North Carolina High Point Development Limited Partnership II North Carolina High Pointe Commons Holding GP, LLC Delaware High Pointe Commons Holding, LP Pennsylvania High Pointe Commons, LP Pennsylvania Honey Creek Mall, LLC Indiana Houston Willowbrook LLC Texas Imperial Valley Commons, L.P. California Imperial Valley Mall GP, LLC Delaware Imperial Valley Mall II, L.P. California Imperial Valley Mall, L.P. California Imperial Valley Peripheral, L.P. California IV Commons, LLC California IV Outparcels, LLC California Janesville Mall Limited Partnership Wisconsin Janesville Wisconsin, Inc. Wisconsin Jarnigan Road II, LLC Delaware Jarnigan Road Limited Partnership Tennessee Jefferson Mall Company Ohio Jefferson Mall Company II, LLC Delaware JG Gulf Coast Town Center, LLC Ohio JG Randolph II, LLC Delaware JG Randolph, LLC Ohio JG Saginaw II, LLC Delaware JG Saginaw, LLC Ohio 5 STATE OF INCORPORATION OR SUBSIDIARY FORMATION - --------------------------------------------------------------------------------------- JG Winston-Salem, LLC Ohio Kentucky Oaks Mall Company Ohio LaGrange Commons Limited Partnership New York Lakes Mall, LLC, The Michigan Lakeshore/Sebring Limited Partnership Florida Lakeview Pointe, LLC Oklahoma Landing at Arbor Place II, LLC, The Delaware Laredo/MDN II Limited Partnership Texas Laredo/MDN Limited Partnership Texas Laurel Park Retail Holding LLC Michigan Laurel Park Retail Properties LLC Delaware LeaseCo., Inc. New York Lebcon Associates Tennessee Lebcon I, Ltd. Tennessee Lee Partners Tennessee Lexington Joint Venture Ohio LHM-Utah, LLC Delaware Madison Joint Venture Ohio Madison Plaza Associates, Ltd. Alabama Madison Square Associates, Ltd. Alabama Madison/East Towne, LLC Delaware Madison/West Towne, LLC Delaware Mall of South Carolina Limited Partnership South Carolina Mall of South Carolina Outparcel Limited Partnership South Carolina Mall Shopping Center Company, L.P. Texas Maryville Department Store Associates Tennessee Maryville Partners, L.P. Tennessee Massard Crossing Limited Partnership Arkansas MDN/Laredo GP II, LLC Delaware MDN/Laredo GP, LLC Delaware Meridian Mall Company, Inc. Michigan Meridian Mall Limited Partnership Michigan Midland Venture Limited Partnership Michigan Milford Marketplace, LLC Connecticut Montgomery Partners, L.P. Tennessee Mortgage Holdings II, LLC Delaware Mortgage Holdings, LLC Delaware Mortgage Holdings/Eastgate, LLC Delaware NewLease Corp. Tennessee North Charleston Joint Venture Ohio North Charleston Joint Venture II, LLC Delaware 6 STATE OF INCORPORATION OR SUBSIDIARY FORMATION - --------------------------------------------------------------------------------------- Northpark Mall/Joplin, LLC Delaware Oak Park Mall, LLC Delaware Old Hickory Mall Venture Tennessee Old Hickory Mall Venture II, LLC Delaware Panama City Mall, LLC Delaware Panama City Peripheral, LLC Florida Park Village Limited Partnership Florida Parkdale Crossing GP, Inc. Texas Parkdale Crossing Limited Partnership Texas Parkdale Mall Associates Texas Parkway Place Limited Partnership Alabama Parkway Place, Inc. Alabama Pearland Town Center GP, LLC Delaware Pearland Town Center Limited Partnership Texas Post Oak Mall Associates Limited Partnership Texas PPG Venture I, LP Delaware Property Taxperts, LLC Nevada Racine Joint Venture Ohio Racine Joint Venture II, LLC Delaware RC Jacksonville, LC Florida River Ridge Mall, LLC Virginia Rivergate Mall Limited Partnership Delaware Rivergate Mall, Inc. Delaware Salem Crossing Limited Partnership Virginia Sand Lake Corners Limited Partnership Florida Sand Lake Corners, LC Florida Seacoast Shopping Center Limited Partnership New Hampshire Shoppes at Hamilton Place, LLC, The Tennessee Shoppes at St. Clair Square, LLC Illinois Shopping Center Finance Corp. Wyoming Shops at Pineda Ridge, LLC, The Florida Southaven Towne Center, LLC Mississippi Southpark Mall, LLC Virginia Springdale/Mobile GP II, Inc. Alabama Springdale/Mobile GP, Inc. Alabama Springdale/Mobile Limited Partnership Alabama Springdale/Mobile Limited Partnership II Alabama Springhill/Coastal Landing, LLC Florida St. Clair Square GP, Inc. Illinois St. Clair Square Limited Partnership Illinois Stoney Brook Landing LLC Kentucky 7 STATE OF INCORPORATION OR SUBSIDIARY FORMATION - --------------------------------------------------------------------------------------- Stroud Mall LLC Pennsylvania Sutton Plaza GP, Inc. New Jersey Towne Mall Company Ohio Triangle Town Center, LLC Delaware Triangle Town Member, LLC North Carolina Turtle Creek Limited Partnership Mississippi Twin Peaks Mall Associates, Ltd. Colorado Valley View Mall, LLC Virginia Vicksburg Mall Associates, Ltd. Mississippi Village at Newnan Crossing LLC, The Georgia Village at Newnan Crossing, LLC, The Georgia Village at Rivergate Limited Partnership Delaware Village at Rivergate, Inc. Delaware Volusia Mall, LLC Florida Walnut Square Associates Limited Partnership Wyoming Waterford Commons of CT II, LLC Delaware Waterford Commons of CT III, LLC Connecticut Waterford Commons of CT, LLC Delaware Wausau Joint Venture Ohio Westgate Crossing Limited Partnership South Carolina Westgate Mall II, LLC Delaware Westgate Mall Limited Partnership South Carolina Wilkes-Barre Marketplace GP, LLC Pennsylvania Wilkes-Barre Marketplace I, LLC Pennsylvania Wilkes-Barre Marketplace, L.P. Pennsylvania Wilkes-Barre Member, LLC Delaware Willowbrook Plaza Limited Partnership Maine York Galleria Limited Partnership Virginia York Town Center Holding GP, LLC Delaware York Town Center Holding, LP Pennsylvania York Town Center, LP Pennsylvania Yorktown Center, LLC Delaware Yorktown/Butterfield, LLC Illinois
8 EX-23 16 exhibit23.txt CONSENT OF DELOITTE & TOUCHE LLP Exhibit 23 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We consent to the incorporation by reference in Registration Statements Nos. 333-73376, 333-04295, 333-41768, and 333-88914 on Form S-8 and Registration Statements Nos. 033-92218, 333-47041, 333-90395, 333-62830, 333-97831, 333-104882 and 333-108947 on Form S-3 of our reports dated March 10, 2006 relating to the financial statements and financial statement schedules of CBL & Associates Properties, Inc. and management's report on the effectiveness of internal control over financial reporting, appearing in this Annual Report on Form 10-K of CBL & Associates Properties, Inc. for the year ended December 31, 2005. /s/ DELOITTE & TOUCHE LLP Atlanta, Georgia March 14, 2006 EX-24 17 exhibit24.txt EXHIBIT 24 POWER OF ATTORNEY Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Charles B. Lebovitz, John N. Foy and Stephen D. Lebovitz and each of them, with full power to act without the other, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign the Annual Report of CBL & Associates Properties, Inc. on Form 10-K for the fiscal year ended December 31, 2005, including one or more amendments to such Form 10-K, which amendments may make such changes as such person deems appropriate, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary fully to all intents and purposes as he might or could do in person thereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power-of-Attorney on the date set opposite his respective name.
Signature Title Date /s/ Charles B. Lebovitz Chairman of the Board, and Chief Executive March 14, 2006 - ------------------------------ Charles B. Lebovitz Officer (Principal Executive Officer) /s/ John N. Foy Vice Chairman of the Board, Chief Financial March 14, 2006 - ------------------------------ John N. Foy Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer) /s/ Stephen D. Lebovitz Director, President and Secretary March 14, 2006 - ------------------------------ Stephen D. Lebovitz /s/ Claude M. Ballard Director March 14, 2006 - ------------------------------ Claude M. Ballard /s/ Gary L. Bryenton Director March 14, 2006 - ------------------------------ Gary L. Bryenton /s/ Martin J. Cleary Director March 14, 2006 - ------------------------------ Martin J. Cleary /s/ Leo Fields Director March 14, 2006 - ------------------------------ Leo Fields /s/ Matthew S. Dominski Director March 14, 2006 - ------------------------------ Matthew S. Dominski /s/ Winston W. Walker Director March 14, 2006 - ------------------------------ Winston W. Walker
EX-31 18 exhibit311.txt EXHIBIT 31.1 CERTIFICATION SECTION 302 Exhibit 31.1 CERTIFICATION I, Charles B. Lebovitz, certify that: (1) I have reviewed this annual report on Form 10-K of CBL & Associates Properties, Inc.; (2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; (3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; (4) The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and (5) The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: March 15, 2006 /s/ Charles B. Lebovitz ------------------------------------ Charles B. Lebovitz, Chief Executive Officer EX-31 19 exhibit312.txt EXHIBIT 31.2 CERTIFICATION SECTION 302 Exhibit 31.2 CERTIFICATION I, John N. Foy, certify that: (1) I have reviewed this annual report on Form 10-K of CBL & Associates Properties, Inc.; (2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; (3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; (4) The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and (5) The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: March 15, 2006 /s/ John N. Foy ------------------------------------ John N. Foy, Chief Financial Officer EX-32 20 exhibit321.txt EXHIBIT 32.1 CERTIFICATIONS RULE 13A-14(B) Exhibit 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of CBL & ASSOCIATES PROPERTIES, INC. (the "Company") on Form 10-K for the year ending December 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Charles B. Lebovitz, Chief Executive Officer of the Company, certify, pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Charles B. Lebovitz - ------------------------------------ Charles B. Lebovitz, Chief Executive Officer March 15, 2006 - ------------------------------------ Date EX-32 21 exhibit322.txt EXHIBIT 32.2 CERTIFICATIONS RULE 13A-14(B) Exhibit 32.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of CBL & ASSOCIATES PROPERTIES, INC. (the "Company") on Form 10-K for the year ending December 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, John N. Foy, Chief Financial Officer of the Company, certify, pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ John N. Foy - ------------------------------------ John N. Foy, Vice Chairman of the Board, Chief Financial Officer and Treasurer March 15, 2006 - ------------------------------------ Date -----END PRIVACY-ENHANCED MESSAGE-----