Exhibit 10.1.7
FIRST
AMENDMENT TO
THIRD AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
CBL & ASSOCIATES LIMITED PARTNERSHIP
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Dated as of November 16, 2005
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THIS FIRST AMENDMENT TO THE THIRD AMENDED AND RESTATED AGREEMENT OF
LIMITED PARTNERSHIP OF CBL & ASSOCIATES LIMITED PARTNERSHIP (this "Amendment")
is hereby adopted by CBL Holdings I, Inc., a Delaware corporation (the "General
Partner"), as the general partner of CBL & Associates Limited Partnership, a
Delaware limited partnership (the "Partnership"), and by CBL Holdings II, Inc.,
a Delaware corporation, a limited partner of the Partnership representing a
Majority-In-Interest of the Limited Partners of the Partnership (the "Limited
Partner"). For ease of reference, capitalized terms used herein and not
otherwise defined have the meanings assigned to them in the Third Amended and
Restated Agreement of Limited Partnership of CBL & Associates Limited
Partnership, dated as of June 15, 2005 (the "Agreement").
WHEREAS, the General Partner desires to establish and set forth the
terms of a new series of Partnership Units designated as Series K Special Common
Units (the "K-SCUs").
WHEREAS, Section 4.4(a) of the Agreement grants the General Partner
authority to cause the Partnership to issue Partnership Units in the Partnership
to any Person in one or more classes or series, with such designations,
preferences and relative, participating, optional or other special rights,
powers and duties as may be determined by the General Partner in its sole and
absolute discretion so long as the issuance does not violate Section 9.3 of the
Agreement.
WHEREAS, the General Partner desires to amend the Agreement to, among
other things, set forth the terms of the K-SCUs.
WHEREAS, Sections 4.4(a) and 14.7(b) of the Agreement grant the General
Partner power and authority to amend the Agreement (including, without
limitation, the distribution and allocation provisions thereof) without the
consent of any of the Partnership's Limited Partners to evidence any action
taken by the General Partner pursuant to Section 4.4(a) and to set forth the
rights, powers and duties of the holders of any Additional Units issued pursuant
to Section 4.4(a).
WHEREAS, Section 14.7(a) of the Agreement provides for the amendment of
the Agreement with the approval of the General Partner and the Consent of the
Limited Partners, subject to the limitations set forth therein.
NOW, THEREFORE, the General Partner, with the Consent of the Limited
Partners, hereby amends the Agreement as follows:
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1. Section 1.1 of the Agreement is hereby amended and supplemented as set
forth below:
(a) The following definitions are hereby deleted and replaced
with the following:
"Common Unit Conversion Factor" shall mean 1.0, provided,
that, in the event that the Partnership (i) makes a
distribution to all holders of its Common Units in Common
Units (other than a distribution of Common Units pursuant to
an offer to all holders of Common Units, SCUs S-SCUs, L-SCUs,
and K-SCUs permitting each to elect to receive a distribution
in Common Units in lieu of a cash distribution (such a
distribution of Common Units is referred to herein as a
"Distribution of Common Units in Lieu of Cash")), (ii)
subdivides or splits its outstanding Common Units (which shall
expressly exclude any Distribution of Common Units in Lieu of
Cash), or (iii) combines or reverse splits its outstanding
Common Units into a smaller number of Common Units (in each
case, without making a comparable distribution, subdivision,
split, combination or reverse split with respect to the SCUs,
S-SCUs, L-SCUs or K-SCUs), the Common Unit Conversion Factor
in effect immediately preceding such event shall be adjusted
by multiplying the Common Unit Conversion Factor by a
fraction, the numerator of which shall be the number of Common
Units issued and outstanding on the record date for such
distribution, subdivision, split, combination or reverse split
(assuming for such purposes that such distribution,
subdivision, split, combination or reverse split occurred as
of such time), and the denominator of which shall be the
actual number of Common Units (determined without the above
assumption) issued and outstanding on the record date for such
distribution, subdivision, split, combination or reverse
split. Any adjustment to the Common Unit Conversion Factor
shall become effective immediately after the record date for
such event in the case of a distribution or the effective date
in the case of a subdivision, split, combination or reverse
split.
"Common Stock Amount" shall mean, with respect to any number
of Common Units, SCUs, S-SCUs, L-SCUs or K-SCUs, the number of
shares of Common Stock equal to such number of Common Units,
SCUs, S-SCUs, L-SCUs or K-SCUs, as the case may be, multiplied
by the Conversion Factor; provided, however, that in the event
that the Company issues to all holders of Common Stock rights,
options, warrants or convertible or exchangeable securities
entitling the shareholders to subscribe for or purchase
additional Common Stock, or any other securities or property
of the Company, the value of which is not included in the
first sentence of the definition of Closing Price of the
shares of Common Stock (collectively, "additional rights"),
other than a right to receive a dividend or other distribution
of Common Stock that corresponds to Common Units issued to the
Company pursuant to a Distribution of Common Units in Lieu of
Cash, then the Common Stock Amount shall also include, other
than with respect to any Common Units, SCUs, S-SCUs, L-SCUs or
K-SCUs "beneficially owned" by an "Acquiring Person" (as such
terms are defined in the Company's Rights Agreement, dated as
of April 30, 1999, as amended and as it may be further amended
from time to time, and any successor agreement thereto), such
additional
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rights that a holder of that number of shares of
Common Stock would be entitled to receive.
"Conversion Factor" shall mean 1.0, provided that in the event
that the Company (i) pays a dividend on its outstanding shares
of Common Stock in shares of Common Stock or makes a
distribution to all holders of its outstanding Common Stock in
shares of Common Stock (in either case other than a dividend
or other distribution of shares of Common Stock that
corresponds to Common Units issued to the Company pursuant to
a Dividend of Common Units in Lieu of Cash), (ii) subdivides
or splits its outstanding shares of Common Stock, or (iii)
combines or reverse splits its outstanding shares of Common
Stock into a smaller number of shares of Common Stock (in each
case, without making a comparable dividend, distribution,
subdivision, split, combination or reverse split with respect
to the Common Units, the SCUs, S-SCUs, L-SCUs or K-SCUs), the
Conversion Factor in effect immediately preceding such event
shall be adjusted by multiplying the Conversion Factor by a
fraction, the numerator of which shall be the number of shares
of Common Stock issued and outstanding on the record date for
such dividend, distribution, subdivision, split, combination
or reverse split (assuming for such purposes that such
dividend, distribution, subdivision, split, combination or
reverse split occurred as of such time), and the denominator
of which shall be the actual number of shares of Common Stock
(determined without the above assumption) issued and
outstanding on the record date for such dividend,
distribution, subdivision, split, combination or reverse
split. Any adjustment to the Conversion Factor shall become
effective immediately after the record date for such event in
the case of a dividend or distribution or the effective date
in the case of a subdivision, split, combination or reverse
split.
"Partnership Units" shall mean the Common Units, the Preferred
Units, the SCUs, the S-SCUs, the L-SCUs and the K-SCUs.
(b) The following definitions are hereby added to Section 1.1 of
the Agreement: "K-SCUs" shall have the meaning set forth in
Exhibit K.
"K-SCU Basic Distribution Amount" shall mean, with respect to
an K-SCU, $.7125/quarter and, commencing with the fifth full
calendar quarter following the issuance of the K-SCUs,
$.7422/quarter; provided, however, that such amount will be
adjusted appropriately to account for any unit splits,
combinations or other similar events with respect to the
K-SCUs
"Series K Exchange Notice" shall have the meaning set forth
in Exhibit K
"Series K Exchange Rights" shall have the meaning set forth in
Exhibit K.
"Series K Offered Units" shall have the meaning set forth in
Exhibit K.
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2. Pursuant to Sections 4.5 and 7.8 of the Agreement, upon execution of a
Limited Partner Acceptance of the Partnership Agreement in the form attached
hereto as Attachment 1 (a "Limited Partner Acceptance") or by causing a Limited
Partner Acceptance to be executed on its behalf, each initial holder of K-SCUs
automatically will be admitted as an Additional Partner of the Partnership,
without any further action or approval and the General Partner hereby agrees to
cause the names of such recipients to be recorded on the books and records of
the Partnership on the date of such admission.
3. Sections 6.2(d), 6.2(e), 6.2(f) and 6.2(g) of the Agreement are hereby
renumbered as Sections 6.2(e), 6.2(f), 6.2(g) and 6.2(h), respectively, and
cross references to those provisions in other provisions of this Agreement shall
be deemed amended accordingly to the extent not expressly amended hereby.
4. The following shall be added as new Section 6.2(d) of the Agreement:
"(d) Distributions shall also be made in accordance with the
following order of priority:
(i) Concurrently, ratably and on parity with the distributions
to holders of SCUs, S-SCUs and L-SCUs provided for under
Sections 6.2(a)(iii), 6.2(b)(i) and 6.2(c)(i), respectively,
to the extent that the amount of Net Cash Flow distributed to
the holders of K-SCUs for any prior quarter was (for any
reason, including as a result of Section 6.2(e), a lack of
legally available funds or a decision by the General Partner
not to make distributions for such quarter) less than the
amount required to be distributed for such quarter on account
of the K-SCUs pursuant to subparagraph (ii) below, and such
shortfall has not been subsequently distributed pursuant to
this Section 6.2(d)(i), Net Cash Flow shall be distributed to
the holders of K-SCUs until they have received an amount per
K-SCU, as applicable, necessary to satisfy such shortfall for
all prior quarters of the current and all prior Partnership
taxable years;"
"(ii) Concurrently, ratably and on parity with the
distributions to holders of SCUs, S-SCUs and L-SCUs provided
for under Sections 6.2(a)(iv), 6.2(b)(ii) and 6.2(c)(ii), Net
Cash Flow shall be distributed among the holders of K-SCUs
until they have received for the quarter to which the
distribution relates an amount for each outstanding K-SCU
equal to the applicable K-SCU Basic Distribution Amount;
(iii) Concurrently, ratably and on parity with the
distributions to holders of SCUs, S-SCUs, L-SCUs and Common
Units provided for under Sections 6.2(a)(v), 6.2(b)(iii) and
6.2(c)(iii), the balance of the Net Cash Flow to be
distributed, if any, shall be distributed to holders of K-SCUs
pro rata in accordance with their proportionate ownership of
the aggregate number of SCUs, S-SCUs, L-SCUs, K-SCUs and
Common Units outstanding (counting each SCU, S-SCU, L-SCU or
K-SCU as the number of Common Units into which it is
convertible pursuant to the terms of Exhibit E, Exhibit H,
Exhibit J or Exhibit K, as applicable), provided, however,
that such distribution to the holders of K-SCUs shall:
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(A) be made only after the quarterly distributions on
account of each Common Unit under Section 6.2(a)(v)
for each of the four previous consecutive quarters
shall have been greater than the applicable K-SCU
Basic Distribution Amount in each of such quarters;
and
(B) be reduced by the amount of the distribution made
to such Holders on account of their K-SCUs with
respect to such quarter pursuant to subparagraph
(d)(ii) above and the reduction will be allocated
among the holders of K-SCUs pro rata in accordance
with their respective percentage interests in the
total number of K-SCUs then outstanding.
(iv) Notwithstanding the foregoing, all distributions pursuant
to this Section 6.2(d) shall remain subject to the provisions
of (i) each Certificate of Designation for any class or series
of Preferred Units, (ii) Exhibit E hereto with respect to the
SCUs, (iii) Exhibit H hereto with respect to the S-SCUs, (iv)
Exhibit J hereto with respect to the L-SCUs, and (v) Exhibit K
hereto with respect to the K-SCUs.
5. New Section 6.2(f) (formerly Section 6.2(e) is hereby amended and
replaced with the following:
(f) Notwithstanding the foregoing, all distributions pursuant
to this Section 6.2 shall remain subject to the provisions of
the Certificate of Designation for each class or series of
Preferred Units set forth in Exhibit B hereto, Exhibit E
hereto with respect to the SCUs, Exhibit H hereto with respect
to the S-SCUs, Exhibit J hereto with respect to the L-SCUs and
Exhibit K hereto with respect to the K-SCUs.
6. Section 6.6 of the Agreement shall be amended by replacing the words
"(or Series J, Series S or Series L Exchange Rights)" with the words "(or Series
J, Series S, Series L or Series K Exchange Rights)".
7. The last sentence of Section 8.2 of the Agreement is hereby deleted and
replaced in its entirety with the following:
"Notwithstanding the foregoing, all distributions pursuant to
this Section 8.2 shall remain subject to the provisions of (i)
the Certificate of Designation for each class or series of
Preferred Units set forth in Exhibit B hereto; (ii) Exhibit E
hereto with respect to the SCUs; (iii) Exhibit H hereto with
respect to the S-SCUs; (iv) Exhibit J hereto with respect to
the L-SCUs; and (v) Exhibit K hereto with respect to the
K-SCUs."
8. The following paragraph is added as Section 9.2(f) of the Agreement:
"(f) The applicable Approved Transfers permitted in Paragraph
8 of Exhibit K hereto shall also be available, mutatis
mutandis, to holders of any Common Units issued in exchange
for or upon the redemption of K-SCUs."
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9. Exhibit A of the Agreement is hereby deleted and is replaced in its
entirety by new Exhibit A attached hereto as Attachment 2.
10. Exhibit C of the Agreement is hereby deleted and is replaced in its
entirety by new Exhibit C attached hereto as Attachment 3.
11. Except as expressly amended hereby, the Agreement shall remain in full
force and effect. [Signatures on Next Page]
[Signatures on Next Page]
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IN WITNESS WHEREOF, the General Partner has executed this Third
Amendment as of the date first written above.
CBL HOLDINGS I, INC.
By: /s/ John N. Foy
--------------------------------------
Name: John n. Foy
Title: Vice Chairman of the Board
and Chief Financial Officer
Accepted and Agreed:
CBL & ASSOCIATES PROPERTIES, INC.
By:/s/ John N. Foy
--------------------------------------------------
Name: John N. Foy
Title: Vice Chairman of the Board and
Chief Financial Officer
Consented to:
CBL HOLDINGS II, INC.
By:/s/ John N. Foy
--------------------------------------------------
Name: John N. Foy
Title: Chairman of the board and Chief
Financial Officer
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Attachment 1
Form of
Acknowledgement Regarding
Issuance of Partnership Interests
and Assumption of Partnership Agreement
FOR VALUABLE CONSIDERATION, the receipt and sufficiency of which are
hereby acknowledged, the undersigned partnership, CBL & ASSOCIATES LIMITED
PARTNERSHIP, a Delaware limited partnership having an address of CBL Center,
2030 Hamilton Place Boulevard, Suite 500, Chattanooga, Tennessee 37421 (the
"Partnership"), does hereby acknowledge that there has been acquired by and
issued to _____________________, a _______________ having an address of
__________________ ("Contributor"), the partnership interests denoted as Series
K Special Common Units ("K-SCUs") containing the terms and characteristics and
as described on Schedule A, attached hereto and made a part hereof, being
interests as a limited partner in and of the Partnership on the books of the
Partnership, together with any and all right, title and interest in any
property, both real and personal, to which the K-SCUs relate and any other
rights, privileges and benefits appertaining thereto. The Partnership and
Contributor acknowledge that the issuance of the K-SCUs to Contributor (i) is in
consideration for Contributor's contribution of certain limited liability
company interests in ________________ to the capital of the Partnership as set
forth in that certain Contribution Agreement among Contributor, the Partnership
and Eastland Investments, L.P. and other contributors dated October 17, 2005
(the "Contribution Agreement"), and (ii) is being made in accordance with, and
subject to the parties' respective representations and warranties contained in
the Contribution Agreement.
Contributor further acknowledges by execution hereof that the issuance
of the K-SCUs to, and the acquisition and ownership of the K-SCUs by,
Contributor is subject to all of the terms and conditions of the Third Amended
and Restated Agreement of Limited Partnership of CBL & Associates Limited
Partnership dated June 15, 2005, as amended by the First Amendment to Third
Amended and Restated Agreement of Limited Partnership of CBL & Associates
Limited Partnership dated as of November 16, 2005 and as the same may be further
amended from time to time (the "OP Agreement"), and Contributor, by execution of
this Acknowledgement, agrees to abide by and be bound by all of the terms and
conditions of the OP Agreement as a limited partner and holder of K-SCUs of the
Partnership.
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ATTACHMENT 1 CONTINUED
IN WITNESS WHEREOF, the Partnership and Contributor have executed this
Acknowledgement as of the _____ day of __________, 2005.
PARTNERSHIP: CBL & ASSOCIATES LIMITED PARTNERSHIP
a Delaware limited partnership
By: CBL Holdings I, Inc.,
its general partner
By: _________________________
Name: _______________________
Title: ______________________
ACCEPTANCE
The Contributor hereby acknowledges its acceptance of the K-SCUs and
agrees to be bound by and subject at all times to all of the terms and
conditions of the OP Agreement, which Agreement is incorporated herein by
reference, as a limited partner and holder of K-SCUs of the Partnership.
DATED as of the _____ day of __________, 2005.
CONTRIBUTOR: ______________________________________ ,
a ____________________________________
By: _______________________________
Name: ____________________________
Title: _____________________________
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ATTACHMENT 1 CONTINUED
SCHEDULE A
DESCRIPTION OF THE INTERESTS
[to be attached as Exhibit K]
EXHIBIT K
TERMS
OF
SERIES K SPECIAL COMMON UNITS
OF
CBL & ASSOCIATES LIMITED PARTNERSHIP
(the "Operating Partnership")
Pursuant to Section 4.4 of the
Third Amended and Restated Partnership Agreement of
the Operating Partnership
WHEREAS, Section 4.4 of the Third Amended and Restated Partnership
Agreement of the Operating Partnership, dated June 15, 2005 (as amended by a
First Amendment, dated November 16, 2005, and as the same may hereafter be
amended as permitted therein and herein, the "Partnership Agreement") grants CBL
Holdings I, Inc., the general partner of the Operating Partnership (the "General
Partner"), authority to cause the Operating Partnership to issue interests in
the Operating Partnership to persons other than the General Partner in one or
more classes or series, with such designations, preferences and relative,
participating, optional or other special rights, powers and duties as may be
determined by the General Partner in its sole and absolute discretion. (For ease
of reference, capitalized terms used herein and not otherwise defined have the
meanings assigned to them in the Partnership Agreement.)
NOW THEREFORE, the General Partner hereby designates a series of
priority units and fixes the designations, powers, preferences and relative,
participating, optional or other special rights, and the qualifications,
limitations or restrictions thereof, of such priority units, as follows:
Section 1. Designation and Amount. The units of such series shall be
designated "Series K Special Common Units" (the "K-SCUs") and the number of
units constituting such series shall initially be 1,144,924. The Operating
Partnership may not issue any additional K-SCUs unless (i) the issuance is
required by the terms hereof, or (ii) it has obtained the prior written consent
of the holders of record of a majority of the outstanding K-SCUs ("Majority
Holders"). The rights and obligations of the K-SCUs shall be as set forth herein
(to the extent not inconsistent with the Partnership Agreement) and in the
Partnership Agreement. Nothing in the foregoing shall be deemed to limit the
right and power of the General Partner to cause the Operating Partnership to
issue securities otherwise designated to the fullest extent permitted under the
terms of the Partnership Agreement and this Exhibit K.
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ATTACHMENT 1 CONTINUED
Section 2. Distribution Rights.
(a) Holders of K-SCUs shall be entitled to receive, when, as and if
declared by the General Partner distributions with respect to the K-SCUs in the
manner and to the fullest extent set forth in the Partnership Agreement.
(b) Distributions with respect to the K-SCUs shall be payable on the
dates designated by the General Partner for the payment of distributions to the
holders of Common Units. Any distribution payable on the K-SCUs for the quarter
in which the K-SCUs are first issued will be prorated and computed on the basis
of a 360-day year consisting of twelve 30-day months. Distributions will be
payable to holders of record of the K-SCUs as they appear in the records of the
Operating Partnership at the close of business on the applicable record date,
which shall be the record date designated by the General Partner for the payment
of distributions for such quarter to the holders of Common Units.
(c) At such time, if any, as there is any distribution shortfall with
respect to the K-SCUs as described in Section 6.2(d)(i) of the Partnership
Agreement, none of the Operating Partnership, the General Partner or the REIT
will redeem, purchase or otherwise acquire for any consideration (or any moneys
be paid to or made available for any sinking fund for the redemption of any such
units) any Common Units or any other units of interest in the Partnership that
by their terms rank junior as to distributions to the rights of the K-SCUs
(except by conversion into or exchange for shares of Common Stock of the REIT or
other units of the Operating Partnership ranking junior to the K-SCUs as to
distributions).
(d) Distributions with respect to the K-SCUs are intended to qualify as
permitted distributions of cash that are not treated as a disguised sale within
the meaning of Treasury Regulation 1.707-4, and the provisions of this Exhibit K
shall be construed and applied consistent with such Treasury Regulations.
Section 3. Special Distribution upon Liquidation. Upon any voluntary or
involuntary liquidation, dissolution or winding-up of the affairs of the
Operating Partnership, the holders of K-SCUs shall be entitled to be paid out of
the assets of the Operating Partnership legally available for distribution to
its unit holders an amount equal to any distribution shortfall with respect to
the K-SCUs described in Section 6.2(d)(i) of the Partnership Agreement, before
any distribution or payment shall be made to holders of Common Units or any
other series of Partnership Units ranking junior to the K-SCUs as to liquidation
rights. In the event that, upon such voluntary or involuntary liquidation,
dissolution or winding-up, the available assets of the Operating Partnership are
insufficient to pay such amount on all outstanding K-SCUs, then the holders of
the K-SCUs shall share ratably in any such distribution of assets, based on the
number of K-SCUs held by each such holder. Holders of K-SCUs shall be entitled
to written notice of any such liquidation. In addition, upon any voluntary or
involuntary liquidation, dissolution or winding-up of the affairs of the
Operating Partnership, after any such distribution shortfall on account of the
K-SCUs shall have been paid in cash, the K-SCUs shall be treated as if they had
been exchanged for Common Units pursuant to the terms of Paragraph 7(b) hereof.
The consolidation or merger of the Operating Partnership with or into any
partnership, limited
ii
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ATTACHMENT 1 CONTINUED
liability company, corporation, trust or other entity shall
not be deemed to constitute a liquidation, dissolution or winding-up of the
Operating Partnership.
Section 4. Optional Redemption.
(a) At any time after the occurrence of both (i) November 16, 2015 and
(ii) achievement by the Operating Partnership of the Distribution Benchmark, the
Operating Partnership, at its option upon not less than thirty (30) nor more
than sixty (60) days' written notice, may redeem the K-SCUs, in whole or in
part, on the first Business Day following any record date established for the
determination of parties entitled to receive any distributions being made to
holders of K-SCUs. Such redemption shall be made by (i) paying in cash to the
holders of K-SCUs with respect to their K-SCUs being redeemed, any distribution
shortfall with respect to the K-SCUs described in Section 6.2(d)(i) of the
Partnership Agreement outstanding on the date of redemption (whether or not
declared) and (ii) issuing to the holders thereof a number of Common Units equal
to the Common Unit Amount. If fewer than all of the outstanding K-SCUs are to be
redeemed, the K-SCUs to be redeemed shall be redeemed pro rata (as nearly as may
be practicable without creating fractional units) or by lot or by any other
equitable method determined by the Operating Partnership. Holders of K-SCUs to
be redeemed shall surrender the certificates evidencing such K-SCUs, if any, at
the place designated in the Operating Partnership's notice and shall be entitled
to the distribution payments and Common Units described in the second sentence
of this Paragraph 4(a) prior to or concurrently with such surrender. From and
after the redemption date distributions shall cease to be payable with respect
to such K-SCUs, such K-SCUs shall no longer be deemed outstanding and all rights
of the holders of such units will terminate, except the right to receive the
distribution payments and Common Units described in the second sentence of this
Paragraph 4(a). For purposes hereof, the term "Distribution Benchmark" shall
mean when the quarterly distributions paid over a period of four (4) consecutive
quarters pursuant to Sections 6.2(d)(ii) and (iii) of the Partnership Agreement
per K-SCU then outstanding shall have equaled or exceeded the K-SCU Basic
Distribution Amount.
(b) Notwithstanding the provisions of Paragraph 4(a) above, unless full
cumulative distributions on all K-SCUs shall have been or contemporaneously are
paid in cash or a sum sufficient for the payment thereof in cash set apart for
payment for all past distribution periods and the then current distribution
period or portion thereof, no K-SCUs shall be redeemed unless all outstanding
units of K-SCUs are simultaneously redeemed.
(c) Notice of redemption pursuant to Paragraph 4(a) above shall be
mailed by the Operating Partnership by registered mail, return receipt
requested, not less than thirty (30) nor more than sixty (60) days prior to the
redemption date, addressed to the respective holders of record of the K-SCUs to
be redeemed at their respective addresses as they appear on the records of the
Operating Partnership. Failure to give such notice or any defect thereto or in
the mailing thereof shall not affect the validity of the proceedings for the
redemption of any K-SCUs. Each notice shall state (i) the redemption date; (ii)
the total number of K-SCUs to be redeemed and the number of K-SCUs held by such
holder to be redeemed; (iii) the Common Unit Amount; (iv) the place or places
where K-SCUs are to be surrendered for payment of any distribution shortfall
with respect to the K-SCUs described in Section 6.2(d)(i) of the Partnership
Agreement
iii
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ATTACHMENT 1 CONTINUED
outstanding thereon and the issuance of a number of Common Units equal
to the Common Unit Amount; and (v) that distributions on the K-SCUs to be
redeemed shall cease to be payable on such redemption date.
(d) All K-SCUs redeemed pursuant to this Paragraph 4 shall be deemed
retired and terminated from and after the redemption date.
(e) The K-SCUs shall have no stated maturity and shall not be subject
to any sinking fund or mandatory redemption except as otherwise provided in this
Section 4.
(f) As used herein, the term "Common Unit Amount" shall mean, with
respect to any number of K-SCUs, the number of Common Units equal to such number
of K-SCUs multiplied by the Common Unit Conversion Factor; provided, however,
that in the event that the Operating Partnership issues to all holders of Common
Units rights, options, warrants or convertible or exchangeable securities
entitling such holders to subscribe for or purchase additional Common Units, or
any other securities or property of the Operating Partnership (collectively,
"Common Unit Additional Rights"), other than a right to receive Common Units
pursuant to a Distribution of Common Units in Lieu of Cash (as defined below),
then the Common Unit Amount shall also include (other than with respect to any
Common Units or K-SCUs "beneficially owned" by an "Acquiring Person" (as those
terms are defined in the Company's Rights Agreement, dated as of April 30, 1999,
as amended through the date hereof and as it may be further amended from time to
time, and any successor agreement thereof (collectively, the "Rights
Agreement"))), such Common Unit Additional Rights that a holder of that number
of Common Units would be entitled to receive. As used herein, the term "Common
Unit Conversion Factor" shall mean 1.0, provided, that, in the event that the
Operating Partnership (i) makes a distribution to all holders of its Common
Units in Common Units (other than a distribution of Common Units pursuant to an
offer to all holders of Common Units and K-SCUs permitting each to elect to
receive a distribution in Common Units in lieu of a cash distribution (such a
distribution of Common Units is referred to herein as a "Distribution of Common
Units in Lieu of Cash")), (ii) subdivides or splits its outstanding Common Units
(which shall expressly exclude any Distribution of Common Units in Lieu of Cash,
but which may include any other distribution of Common Units), or (iii) combines
or reverse splits its outstanding Common Units into a smaller number of Common
Units (in each case, without making a comparable distribution, subdivision,
split, combination or reverse split with respect to the K-SCUs), the Common Unit
Conversion Factor in effect immediately preceding such event shall be adjusted
by multiplying the Common Unit Conversion Factor by a fraction, the numerator of
which shall be the number of Common Units issued and outstanding on the record
date for such distribution, subdivision, split, combination or reverse split
(assuming for such purposes that such distribution, subdivision, split,
combination or reverse split occurred as of such time), and the denominator of
which shall be the actual number of Common Units (determined without the above
assumption) issued and outstanding on the record date for such distribution,
subdivision, split, combination or reverse split. Any adjustment to the Common
Unit Conversion Factor shall become effective immediately after the record date
for such event in the case of a distribution or the effective date in the case
of a subdivision, split, combination or reverse split.
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ATTACHMENT 1 CONTINUED
Section 5. Voting Rights.
(a) Holders of the K-SCUs shall have the voting rights set forth herein
and in the Partnership Agreement.
(b) So long as any K-SCUs remain outstanding, the Operating Partnership
shall not, without the affirmative vote or consent of the holders of a
majority of the K-SCUs outstanding at the time, given in person or by
proxy, either in writing or at a meeting (such series voting separately
as a class):
(i) undertake, consent to, or otherwise participate in or acquiesce to
any recapitalization transaction (including, without limitation, an
initial public offering, a merger, consolidation, other business
combination, exchange, self-tender offer for all or substantially all
of the Common Units, or sale or other disposition of all or
substantially all of the Operating Partnership's assets) (each of the
foregoing being referred to herein as a "Recapitalization Transaction")
unless in connection with such a Recapitalization Transaction (x)
either each K-SCU outstanding prior to the Recapitalization Transaction
will (A) remain outstanding following the consummation of such
Recapitalization Transaction without any amendment to the rights and
obligations of holders of the K-SCUs that is materially adverse to the
holders of K-SCUs (as reasonably determined by the Board of Directors
of the Company) or (B) be converted into or exchanged for securities of
the surviving entity having preferences, conversion and other rights,
voting powers, restrictions, distribution rights and terms and
conditions of redemption thereof materially no less favorable than
those of a K-SCU under this Exhibit K and the Partnership Agreement (as
reasonably determined by the Board of Directors of the Company), and
(y) each holder of K-SCUs shall have the option to convert its K-SCUs
into the amount and type of consideration and/or securities receivable
by a holder of the number of Common Units into which such holder's
K-SCUs could have been exchanged immediately prior to the consummation
of the Recapitalization Transaction pursuant to Paragraph 6(b) hereof
upon the consummation of the Recapitalization Transaction; or
(ii) amend, alter or repeal the provisions of this Exhibit K or Section
6.2(d) of the Partnership Agreement, the provisions of Sections 9.2(a)
or 9.2(f) as they apply to holders of K-SCUs or Common Units issued in
respect thereof or the provisions of Section 9.2(b), in each case
whether by merger, consolidation or otherwise, in a manner materially
adverse to the holders of the K-SCUs (as reasonably determined by the
Board of Directors of the Company);
it being understood that nothing in this Exhibit K, shall be deemed to limit the
right of the Operating Partnership to issue securities to holders of any
interests in the Operating Partnership that rank on a parity with or senior to
the K-SCUs with respect to distribution rights and rights upon dissolution,
liquidation or winding-up of the Operating Partnership or to amend, alter or
repeal the terms of any such securities.
v
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ATTACHMENT 1 CONTINUED
(c) The holders of the K-SCUs shall have the right to vote with the
holders of Common Units, as a single class, on any matter on which the holders
of Common Units are entitled to vote.
(d) The foregoing voting provisions of this Paragraph 5 shall not
apply, and holders of the K-SCUs shall not be entitled to vote on matters
relating, to K-SCUs that have been (i) the subject of a notice of redemption
pursuant to Paragraph 4(a) hereof, or (ii) the subject of a Series K Exchange
Notice pursuant to Paragraph 6(a) hereof.
(e) In any matter in which the K-SCUs may vote as a class (as expressly
provided herein or as may be required by law), each K-SCU shall be entitled to
one vote. In any matter in which the K-SCUs may vote with the Common Units as a
single class, each K-SCU shall be entitled to the number of votes equal to the
number of Common Units issuable upon the exchange of one K-SCU pursuant to
Paragraph 6(b) hereof.
Section 6. Exchange.
(a) At any time following the issuance of the K-SCUs, subject to the
remainder of this Paragraph 6, a holder of K-SCUs shall have the right
(the "Series K Exchange Right") to exchange all or any portion of such
holder's K-SCU's (the "Series K Offered Units") for Series K Exchange
Consideration (as defined below), subject to the limitations contained
in Paragraphs 6(c) and 6(d) below. Any such Series K Exchange Right
shall be exercised pursuant to an exchange notice comparable to the
Exchange Notice required under Exhibit D to the Partnership Agreement
(such notice, a "Series K Exchange Notice") delivered to the Company by
the Series K Exercising Holder.
(b) The exchange consideration (the "Series K Exchange Consideration")
payable by the Company to each Series K Exercising Holder shall be
equal to the product of (x) the Common Stock Amount with respect to the
Series K Offered Units multiplied by (y) the Current Per Share Market
Price, each computed as of the date on which the Series K Exchange
Notice was delivered to the Company. In connection with a Series K
Exchange Notice delivered to the Company, the Series K Exchange
Consideration shall, in the sole and absolute discretion of the
Company, be paid in the form of (A) cash, or cashier's or certified
check, or by wire transfer of immediately available funds to the Series
K Exercising Holder's designated account or (B) subject to the
applicable Ownership Limit, by the issuance by the Company of a number
of shares of its Common Stock equal to the Common Stock Amount with
respect to the Series K Offered Units or (C) subject to the applicable
Ownership Limit, any combination of cash and Common Stock (valued at
the Current Per Share Market Price). In addition to the Series K
Exchange Consideration, concurrently with any exchange pursuant to this
Paragraph 6, the Operating Partnership shall pay the Series K
Exercising Holder cash in an amount equal to any distribution shortfall
described in Section 6.2(d)(i) of the Partnership Agreement with
respect to the Series K Offered Units outstanding on the date of the
exchange.
(c) Notwithstanding anything herein to the contrary, any Series K
Exchange Right may only be exercised to the extent that, upon exercise
of the Series K Exchange Right, assuming payment by the Company of the
Series K Exchange Consideration in shares of Common Stock,
vi
15
ATTACHMENT 1 CONTINUED
the Series K
Exercising Holder will not, on a cumulative basis, Beneficially Own or
Constructively Own shares of Common Stock, including shares of Common
Stock to be issued upon exercise of the Series K Exchange Right, in
excess of the applicable Ownership Limit. If a Series K Exchange Notice
is delivered to the Company but, as a result of the applicable
Ownership Limit or as a result of restrictions contained in the
certificate of incorporation of the Company, the Series K Exchange
Right cannot be exercised in full as aforesaid, the Series K Exchange
Notice shall be deemed to be modified to provide that the Series K
Exchange Right shall be exercised only to the extent permitted under
the applicable Ownership Limit under the certificate of incorporation
of the Company, and the Series K Exchange Notice with respect to the
remainder of such Series K Exchange Right shall be deemed to have been
withdrawn.
(d) Series K Exchange Rights may be exercised at any time after the
date set forth in Paragraph 6(a) above and from time to time, provided,
however, that,
(i) except with the prior written consent of the General Partner, (x)
only one (1) Series K Exchange Notice may be delivered by any holder to
the Company during any consecutive twelve (12) month period; and (y) no
Series K Exchange Notice may be delivered with respect to K-SCUs either
(A) having a value of less than $500,000 calculated by multiplying the
Common Stock Amount with respect to such K-SCUs by the Current Per
Share Market Price or (B) if a holder does not own K-SCUs having a
value of $500,000 or more, constituting less than all of the K-SCUs
owned by such holder, and
(ii) Series K Exchange Rights may only be exercised with respect to
K-SCUs issued at least one year prior to delivery of the Exchange
Notice.
(e) Within thirty (30) days after receipt by the Company of a Series K
Exchange Notice delivered in accordance with the requirements of
Paragraph 6(a) hereof, the Company shall deliver to the Series K
Exercising Holder a notice (a "Series K Election Notice"), which Series
K Election Notice shall set forth the computation of the Series K
Exchange Consideration and, in the case of a Series K Election Notice
delivered by the Company, shall specify the form of the Series K
Exchange Consideration (which shall be in accordance with Paragraph
6(b) hereof), to be paid by the Company to such Series K Exercising
Holder and the date, time and location for completion of the purchase
and sale of the Series K Offered Units, which date shall, to the extent
required, in no event be more than (A) in the case of Series K Offered
Units with respect to which the Company has elected to pay the Series K
Exchange Consideration by issuance of shares of Common Stock, ten (10)
days after the delivery by the Company of the Series K Election Notice
for the Series K Offered Units or (B) in the case of Series K Offered
Units with respect to which the Company has elected to pay the Series K
Exchange Consideration in cash, sixty (60) days after the initial date
of receipt by the Company of the Series K Exchange Notice for such
Series K Offered Units; provided, however, that such sixty (60) day
period may be extended for an additional sixty (60) day period to the
extent required for the Company to cause additional shares of its
Common Stock to be issued or indebtedness to be incurred to provide
financing to be used to acquire the Series K Offered Units. If the
Company has delivered a Series K Election Notice to the Series K
Exercising Holder with respect to a Series K Exchange Notice, the
Series K Exchange Notice may not be withdrawn or modified by the Series
K Exercising Holder (except to the extent of any deemed modification
required by Section 6(c)
vii
16
ATTACHMENT 1 CONTINUED
above) without the consent of the General
Partner. Similarly, if the Company delivers a Series K Election Notice
to a Series K Exercising Holder, the Company may not modify the Series
K Election Notice without the consent of the Series K Exercising
Holder.
(f) At the closing of the Exchange of Series K Offered Units, payment
of the Series K Exchange Consideration shall be accompanied by proper
instruments of transfer and assignment and by the delivery of (i)
representations and warranties of (A) the Series K Exercising Holder
with respect to (x) its due authority to sell all of the right, title
and interest in and to such Series K Offered Units to the Company, (y)
the status of the Series K Offered Units being sold, free and clear of
all Liens and (z) its intent to acquire the Common Stock for investment
purposes and not for distribution, and (B) the Company, with respect to
due authority for the purchase of such Series K Offered Units, and (ii)
to the extent that any shares of Common Stock are issued in payment of
the Series K Exchange Consideration or any portion thereof, (A) an
opinion of counsel for the Company, reasonably satisfactory to the
Series K Exercising Holder, to the effect that (I) such shares of
Common Stock or Common Units, as applicable, have been duly authorized,
are validly issued, fully-paid and non-assessable and (II) if shares of
Common Stock are issued, that the issuance of such shares will not
violate the applicable Ownership Limit, and (B) a stock certificate or
certificates evidencing the shares of Common Stock to be issued and
registered in the name of the Series K Exercising Holder or its
designee, with an appropriate legend reflecting that such shares or
units are not registered under the Securities Act of 1933, as amended,
and may not be offered or sold unless registered pursuant to the
provisions of such act or an exemption therefrom is available as
confirmed by an opinion of counsel satisfactory to the Company
.
(g) To facilitate the Company's ability to fully perform its
obligations hereunder, the Company covenants and agrees, for the
benefit of the holders from time to time of K-SCUs, as follows:
(i) At all times during the pendency of the Series K Exchange Rights,
the Company shall reserve for issuance such number of shares of Common
Stock as may be necessary to enable the Company to issue such shares in
full payment of the Series K Exchange Consideration in regard to all
K-SCUs which are from time to time outstanding.
(ii) Each holder of K-SCUs, upon request, shall be entitled to receive
from the Operating Partnership in a timely manner all communications
subsequently transmitted from time to time by the Company to its
shareholders generally.
(h) All Series K Offered Units tendered to the Company in accordance
with the exercise of Series K Exchange Rights shall be delivered to the
Company free and clear of all Liens and should any Liens exist or arise
with respect to such Units, the Company shall be under no obligation to
acquire the same unless, in connection with such acquisition, the
Company has elected to pay such portion of the Series K Exchange
Consideration in the form of cash consideration in circumstances where
such consideration will be sufficient to cause such existing Lien to be
discharged in full upon application of all or a part of such
consideration, and the Company is expressly authorized to apply such
portion of the Series K Exchange Consideration as may be necessary to
satisfy any indebtedness in full and to discharge such Lien in full. In
the
viii
17
ATTACHMENT 1 CONTINUED
event any state or local property transfer tax is payable as a
result of the transfer of Series K Offered Units to the Company, the
transferring holder thereof shall assume and pay such transfer tax.
(i) In the event that the Company shall be a party to any transaction
(including, without limitation, a merger, consolidation or statutory
share exchange with respect to the Common Stock), in each case as a
result of which shares of Common Stock are converted into the right to
receive shares of capital stock, other securities or other property
(including cash or any combination thereof), the Series K Exchange
Consideration payable thereafter by the Company pursuant to clauses (B)
and (C) of Paragraph 6(b) in lieu of a share of Common Stock shall be
the kind and amount of shares of capital stock and other securities and
property (including cash or any combination thereof) that was received
upon consummation of such transaction in return for one share of Common
Stock, and the Series K Exchange Consideration payable by the Operating
Partnership pursuant to the last sentence of Paragraph 6(b) shall be
adjusted accordingly.
(j) As of the date hereof (i) the Conversion Factor is 1.0 and (ii)
the Common Unit Conversion Factor is 1.0.
(k) The provisions of Article XI and Exhibit D of the Partnership
Agreement shall apply to any Common Units received in exchange for, or
upon the redemption of, any K-SCUs in accordance with the terms of this
Exhibit K.
Section 7. Restrictions on Transfer.
(a) In addition to Transfers permitted pursuant to Article IX of the
Partnership Agreement, but subject to Section 9.3 of the Partnership Agreement,
the General Partner hereby consents to (i) an Approved Transfer of K-SCUs, and
(ii) the admission of any transferee of a K-SCU pursuant to any Approved
Transfer as a Substituted Limited Partner (and the conditions set forth in
Section 9.2 of the Partnership Agreement for such admission will be deemed
satisfied) upon the filing with the Operating Partnership of (A) a duly executed
and acknowledged instrument of assignment between the transferor and the
transferee specifying the K-SCUs being assigned, setting forth the intention of
the transferor that such transferee succeed to the transferor's interest as a
Limited Partner with respect to the K-SCUs being assigned and agreement of the
transferee assuming all of the obligations of a Limited Partner under the
Partnership Agreement with respect to such transferred K-SCUs accruing from and
after the date of transfer, (B) a duly executed and acknowledged instrument by
which the transferee confirms to the Operating Partnership that it accepts and
adopts the provisions of the Partnership Agreement applicable to a Limited
Partner and (C) any other instruments reasonably required by the General Partner
and payment by the transferor of a transfer fee to the Operating Partnership
sufficient to cover the reasonable expenses of the transfer, if any.
(b) For the purposes of this Paragraph 7, an "Approved Transfer" shall
mean (i) any pledge by an initial holder of K-SCUs or any permitted transferee
thereof to an institutional lender as security for a bona fide obligation of the
holder, and any transfer to any such pledgee or any designee thereof or
purchaser therefrom following a default in the obligation secured by such
ix
18
ATTACHMENT 1 CONTINUED
pledge, or (ii) any transfer by a limited liability company or partnership that
is an initial holder of K-SCUs to one of its members or partners in partial or
complete redemption of their interest in such holder (a "Redeemed Transferee")
provided that such Redeemed Transferee was a member or partner of such initial
holder upon its acquisition of the K-SCUs and provided further that such
transfer is made in conjunction with the delivery of a Series K Exchange Notice
with respect to all such transferred K-SCUs.
Section 8. Headings of Subdivisions. The headings of the various
subdivisions hereof are for convenience of reference only and shall not affect
the interpretation of any of the provisions hereof.
Section 9. Severability of Provisions. If any rights, voting powers,
restrictions, limitations as to dividends or other distributions, qualifications
or terms or conditions of redemption of the K-SCUs set forth in the Partnership
Agreement and this Exhibit K are invalid, unlawful or incapable of being
enforced by reason of any rule of law or public policy, all other preferences or
other rights, voting powers, restrictions, limitations as to distributions,
qualifications or terms or conditions of redemption of K-SCUs set forth in the
Partnership Agreement which can be given effect without the invalid, unlawful or
unenforceable provision thereof shall, nevertheless, remain in full force and
effect and no rights, voting powers, restrictions, limitations as to dividends
or other distributions, qualifications or terms or conditions of redemption of
the K-SCUs herein set forth shall be deemed dependent upon any other provision
thereof unless so expressed therein.
Section 10. Preemptive Rights. No holder of K-SCUs shall be entitled to
any preemptive rights to subscribe for or acquire any unissued units of the
Operating Partnership (whether now or hereafter authorized) or securities of the
Operating Partnership convertible into or carrying a right to subscribe to or
acquire units of the Operating Partnership.
[Signature on Next Page]
x
19
ATTACHMENT 1 CONTINUED
IN WITNESS WHEREOF, CBL Holdings I, Inc., solely in its capacity as the
general partner of the Operating Partnership, has caused this Terms of Series K
Special Common Units to be duly executed by its duly authorized officer this
16th day of November, 2005.
CBL HOLDINGS I, INC.
By:/s/ John N. Foy
-----------------------------------
Name: John N. Foy
Title: Vice Chairman of the Board and
Chief Financial Officer
Acknowledged and Agreed:
CBL & ASSOCIATES PROPERTIES, INC.
By:/s/ John N. Foy__________________________
----------------
Name: John N. Foy
Title: Vice Chairman of the Board and Chief
Financial Officer
xi
20
ATTACHMENT 1 CONTINUED
Exhibit K
Attachment 1
Original Holders and Record Holders
Original Holder Record Holder Number of K-SCUs
- ----------------------------------------------- ---------------------------------------- -----------------------------
MD Associates, Inc. Same 8,120
Irene Drieseszun, Trustee, Irene Drieseszun Same 267,983
Restated Trust dated June 3, 1994, as amended
Oak Fing, LLC Same 301,493
Saleto, LLC Same 50,246
BF Partners, LP Same 268,005
BFIP Associates, LP Same 163,241
East Fing, LLC Same 57,224
Tolesa, LLC Same 28,612
xii
21
Attachment 2
EXHIBIT A
[manually attached]
22
Attachment 3
EXHIBIT C
Allocations
1. Allocations of Gross Income, Net Income and Net Loss.
(a) Except as otherwise provided herein, in each tax year in which there is
sufficient Gross Income and Net Income to make all of the allocations described
in subsections (i) through (iv) below, Gross Income, Net Income and Net Loss of
the Partnership for such tax year shall be allocated among the Partners in the
following order and priority:
(i) First, Net Income shall be allocated to the relevant Partner, on
account of the Preferred Units, in an amount equal to the excess of
(A) the amount of Net Cash Flow distributed to such Partner pursuant
to Sections 6.2(a)(i) and (ii) and Section 6.2(e) (but only to the
extent of the Preferred Distribution Requirement and Preferred
Distribution Shortfalls) for the current and all prior Partnership tax
years over (B) the amount of Net Income previously allocated to such
Partner pursuant to this Section (a)(i) or pursuant to Section (b)(i);
(ii) Second, for any Partnership tax year ending on or after a date on
which Preferred Units are redeemed, Net Income (or Net Losses) shall
be allocated to the relevant Partner, on account of the Preferred
Units, in an amount equal to the excess (or deficit) of the sum of the
applicable Preferred Redemption Amounts for the Preferred Units that
have been or are being redeemed during such Partnership tax year over
the Preferred Unit Issue Price of such Preferred Units;
(iii) Third, Gross Income shall be allocated to the relevant Partner, on
account of SCUs or S-SCUs, or Common Units received on a conversion or
redemption of SCUs or S-SCUs in an amount equal to the amount of cash
distributed to such Partner in respect of such SCUs or S-SCUs, or
Common Units pursuant to Sections 6.2(a)(iii), (iv) and (v) and
Sections 6.2(b)(i), (ii) and (iii) (the "Target Amount"). The
character of the items of Gross Income allocated to the relevant
Partners pursuant to this subsection (iii) shall proportionately
reflect the relative amounts of the Partnership's Gross Income having
such character for such year, excluding from such Gross Income Net
Capital Gain allocated pursuant to Section 1(c) below; provided,
however, that such items shall not include items described in section
(e) of the definition of Net Income or Net Loss, it being the
intention of the parties that the tax items allocated under Section
3(a) corresponding to the items of Gross Income allocated pursuant to
this Section 1(a)(iii) will equal the Target Amount. If the amount of
such items differs from the Target Amount, the items of Gross Income
allocated pursuant to this Section 1(a)(iii) shall be adjusted to
cause the amount of such tax items to equal the Target Amount. For
purposes of determining the amount of cash distributed to such
Partners, Special Tax Distributions shall not be taken into account,
and Extraordinary Return of Capital Distributions shall be taken into
account only to the extent that the amount of such Extraordinary
Return of Capital Distributions exceed the aggregate of the Excess
Allocations made to such Partners. For this purpose, "Excess
Allocations" mean the excess of the Tax Net Capital Gain allocated
under Section 3(a) to holders of SCUs or S-SCUs and holders of Common
23
Units received on a conversion or redemption of SCUs and S-SCUs in
connection with allocations of Net Capital Gain under Section 1(c)
over the Special Tax Distribution made to such Partners. A
distribution shall be treated as an Extraordinary Return of Capital
Distribution to the extent that such distribution is reasonably
attributable to (x) Net Financing Proceeds or (y) proceeds allocable
to a transaction generating Net Capital Gain allocated pursuant to
Section 1(c); in either case limited to the excess of the Tax Net
Capital Gain allocated under Section 3(a) to holders of SCUs or S-SCUs
and holders of Common Units received on a conversion or redemption of
SCUs or S-SCUs in connection with allocations of Net Capital Gain
under Section 1(c) over the Special Tax Distributions made to such
Partners;
(iv) Fourth, Gross Income shall be allocated to the relevant Partner, on
account of L-SCUs, K-SCUs or Common Units received on a conversion or
redemption of L-SCUs or K-SCUs in an amount equal to the amount of
cash distributed to such Partner in respect of such L-SCUs, K-SCUs or
Common Units pursuant to Sections 6.2(c)(i), (ii) and (iii) and
Sections 6.2(d)(i), (ii) and (iii) (the "Target Amount"). The
character of the items of Gross Income allocated to the relevant
Partners pursuant to this subsection (iv) shall proportionately
reflect the relative amounts of the Partnership's Gross Income having
such character for such year (such that if, for example, X% of the
Partnership's Gross Income for such year consisted of net capital
gain, then X% of the Gross Income allocated under this subsection (iv)
would consist of net capital gain); provided, however, that such items
shall not include items described in section (e) of the definition of
Net Income or Net Loss, it being the intention of the parties that the
tax items allocated under Section 3(a) corresponding to the items of
Gross Income allocated pursuant to this Section 1(a)(iv) will equal
the Target Amount. If the amount of such items differs from the Target
Amount, the items of Gross Income allocated pursuant to this Section
1(a)(iv) shall be adjusted to cause the amount of such tax items to
equal the Target Amount;
(v) Fifth, Gross Income shall be allocated to the relevant Partner, on
account of the Common Units issued in conjunction with the Panama City
Mall contribution, in an amount equal to the amount of cash
distributed to such Partner pursuant to Section 6.2 of the Partnership
Agreement. The character of the items of Gross Income allocated to the
relevant Partners pursuant to this subsection (v) shall
proportionately reflect the relative amounts of the Partnership's
Gross Income having such character for such year (such that if, for
example, X% of the Partnership's Gross Income for such year consisted
of net capital gain, then X% of the Gross Income allocated under this
subsection (v) would consist of net capital gain); provided, however,
that such items shall not include items described in section (e) of
the definition of Net Income or Net Loss, it being the intention of
the parties that the tax items allocated under Section 3(a)
corresponding to the items of Gross Income allocated pursuant to this
Section 1(a)(v) will equal the Target Amount. If the amount of such
items differs from the Target Amount, the items of Gross Income
allocated pursuant to this Section 1(a)(iv) shall be adjusted to cause
the amount of such tax items to equal the Target Amount;
(vi) Sixth, any remaining Net Income and Net Losses (taking into account in
determining such Net Income or Net Losses the allocation of Gross
2
24
Attachment 3 Continued
Income provided for in subsections (a)(iii), (a)(iv), and (a)(v)
above) shall be allocated among the Partners, on account of their
Common Units other than Common Units received on a conversion or
redemption of SCUs, S-SCUs, L-SCUs or K-SCUs, in accordance with their
proportionate ownership of Common Units other than Common Units
received on a conversion or redemption of SCUs, S-SCUs, L-SCUs or
K-SCUs (except as otherwise required by the Regulations).
(b) Except as otherwise provided herein, in each tax year in which there is
not sufficient Gross Income and Net Income to make all of the allocations
described in subsections (a)(i) through (a)(v) above, Gross Income, Net Income
and Net Loss of the Partnership for such tax year shall be allocated among the
Partners in the following order and priority:
(i) First, Net Income shall be allocated to the relevant Partner, on
account of the Preferred Units, in an amount equal to the excess of
(A) the amount of Net Cash Flow distributed to such Partner pursuant
to Sections 6.2(a)(i) and (ii) and Section 6.2(e) (but only to the
extent of the Preferred Distribution Requirement and Preferred
Distribution Shortfalls) for the current and all prior Partnership tax
years over (B) the amount of Net Income previously allocated to such
Partner pursuant to this Section (b)(i) or pursuant to Section (a)(i);
(ii) Second, for any Partnership tax year ending on or after a date on
which Preferred Units are redeemed, Net Income (or Net Losses) shall
be allocated to the relevant Partner, on account of the Preferred
Units, in an amount equal to the excess (or deficit) of the sum of the
applicable Preferred Redemption Amounts for the Preferred units that
have been or are being redeemed during such Partnership tax year over
the Preferred Unit Issue Price of such Preferred Units;
(iii) Third, Gross Income, to the extent not previously taken into account
in making the allocations required under subsections (a)(i) and
(a)(ii), shall be allocated to the relevant Partner, on account of
SCUs or S-SCUs, or Common Units received on a conversion or redemption
of such SCUs or S-SCUs in an amount equal to the Target Amount. The
character of the items of Gross Income allocated to the relevant
Partners pursuant to this subsection (iii) shall proportionately
reflect the relative amounts of the Partnership's Gross Income having
such character for such year, excluding from such Gross Income Net
Capital Gain allocated pursuant to Section 1(c) below; provided,
however, that such items shall not include items described in Section
(e) of the definition of Net Income or Net Loss, it being the
intention of the parties that the tax items allocated under Section
3(a) corresponding to the items of Gross Income allocated pursuant to
this Section 1(b)(iii) will equal the Target Amount. If the amount of
such items differs from the Target Amount, the items of Gross Income
allocated pursuant to this Section 1(b)(iii) shall be adjusted to
cause the amount of such tax items to equal the Target Amount. For
purposes of determining the amount of cash distributed to such
Partners, Special Tax Distributions shall not be taken into account,
and Extraordinary Return of Capital Distributions shall be taken into
account only to the extent that the amount of such Extraordinary
Return of Capital Distributions exceed the aggregate of the Excess
Allocations made to such Partners. For this purpose, "Excess
Allocations" mean the excess of the Tax Net Capital Gain allocated
3
25
Attachment 3 Continued
under Section 3(a) to holders of SCUs or S-SCUs, and holders of Common
Units received on a conversion or redemption of SCUs or S-SCUs in
connection with allocations of Net Capital Gain under Section 1(c)
over the Special Tax Distribution made to such Partners. A
distribution shall be treated as an Extraordinary Return of Capital
Distribution to the extent that such distribution is reasonably
attributable to (x) Net Financing Proceeds or (y) proceeds allocable
to a transaction generating Net Capital Gain allocated pursuant to
Section 1(c); in either case limited to the excess of the Tax Net
Capital Gain allocated under Section 3(a) to holders of SCUs or
S-SCUs, and holders of Common Units received on a conversion or
redemption of SCUs or S-SCUs in connection with allocations of Net
Capital Gain under Section 1(c) over the Special Tax Distributions
made to such Partners.
(iv) Fourth, Gross Income, to the extent not previously taken into account
in making the allocations required under subsections (a)(i), (a)(ii),
or (a)(iii) shall be allocated to the relevant Partner, on account of
L-SCUs, K-SCUs or Common Units received on a conversion or redemption
of such L-SCUs or K-SCUs in an amount equal to the Target Amount. The
character of the items of Gross Income allocated to the relevant
Partners pursuant to this subsection (b)(iv) shall proportionately
reflect the relative amounts of the Partnership's Gross Income having
such character for such year (such that if, for example, X% of the
Partnership's Gross Income for such year consisted of net capital
gain, then X% of the Gross Income allocated under this subsection (iv)
would consist of net capital gain); provided, however, that such items
shall not include items described in Section (e) of the definition of
Net Income or Net Loss, it being the intention of the parties that the
tax items allocated under Section 3(a) corresponding to the items of
Gross Income allocated pursuant to this Section 1(b)(iv) will equal
the Target Amount. If the amount of such items differs from the Target
Amount, the items of Gross Income allocated pursuant to this Section
1(b)(iv) shall be adjusted to cause the amount of such tax items to
equal the Target Amount;
(v) Fifth, Gross Income (to the extent not previously taken into account
in making the allocations required under subsections (a)(i), (a)(ii),
(a)(iii), or (a)(iv)) shall be allocated to the relevant Partner, on
account of Common Units issued in conjunction with the Panama City
Mall contribution as defined herein below. The character of the items
of Gross Income allocated to the relevant Partners pursuant to this
subsection (v) shall proportionately reflect the relative amounts of
the Partnership's Gross Income having such character for such year
(such that if, for example, X% of the Partnership's Gross Income for
such year consisted of net capital gain, then X% of the Gross Income
allocated under this subsection (v) would consist of net capital
gain); provided, however, that such items shall not include items
described in Section (e) of the definition of Net Income or Net Loss,
it being the intention of the parties that the tax items allocated
under Section 3(a) corresponding to the items of Gross Income
allocated pursuant to this Section 1(b)(v) will equal the Target
Amount. If the amount of such items differs from the Target Amount,
the items of Gross Income allocated pursuant to this Section 1(b)(v)
shall be adjusted to cause the amount of such tax items to equal the
Target Amount;
(vi) Sixth, any remaining Net Income and Net Losses (taking into account in
determining such Net Income or Net Losses the allocation of Gross
4
26
Attachment 3 Continued
Income provided for in subsections (b)(iii), (b)(iv), and (b)(v)
above) shall be allocated among the Partners, on account of their
Common Units other than Common Units received on a conversion or
redemption of SCUs, S-SCUs, L-SCUs or K-SCUs, in accordance with their
proportionate ownership of Common Units other than common units
received on a conversion or redemption of SCUs, S-SCUs, L-SCUs or
K-SCUs (except as otherwise required by the Regulations).
(c) Notwithstanding subsections (a)(iii) and (a)(vi), and subsections (b)
(iii) and (b)(vi), above, holders of SCUs or S-SCUs and holders of Common Units
received upon a conversion or redemption of SCUs or S-SCUs may be allocated
their proportionate share of Net Capital Gain recognized by the Partnership in a
taxable year (in accordance with their proportionate ownership of the aggregate
number of SCUs, S-SCUs and Common Units, counting each SCU or S-SCU, as
applicable, as the number of Common Units into which it is convertible in
accordance with Exhibit E or Exhibit H as applicable), in addition to the amount
specified in subsection (a) (iii) above and subsection (b) (iii) above, if each
of the following requirements is satisfied:
(i) the Partnership shall have distributed to each holder of SCUs and
S-SCUs in cash pursuant to Section 6.2(a)(iv) or 6.2(b)(ii) for the
last quarter of such taxable year an amount equal to the Basic
Distribution Amount or the S-SCU Basic Distribution Amount, as
applicable (determined without taking into account any Special Tax
Distribution);
(ii) during such taxable year, the Partnership has recognized Net Capital
Gain in connection with a sale of, condemnation of, or disposition of
one or more Properties;
(iii) the Partnership has made or will make prior to January 30, of the
following tax year a cash distribution (a "Special Tax Distribution")
to the Partners, and the portion of such Special Tax Distribution made
(x) to the holders of SCUs and holders of Common Units received upon a
conversion or redemption of SCUs equals or exceeds the product of the
maximum combined federal, Ohio and Cleveland rates imposed on net
capital gains of the applicable holding period (taking into account
recapture, if applicable, and the deductibility of state and local
taxes) multiplied by the amount of Tax Net Capital Gain allocated
under Section 3(a) to holders of SCUs and holders of Common Units
received upon a conversion or redemption of SCUs in connection with
the allocation under this Section 1(c) of Net Capital Gain to such
holders; and (y) to the holders of S-SCUs and holders of Common Units
received upon a conversion or redemption of S-SCUs equals or exceeds
the product of the maximum combined federal, Ohio and Cleveland rates
imposed on net capital gains of the applicable holding period (taking
into account recapture, if applicable, and the deductibility of state
and local taxes) multiplied by the amount of Tax Net Capital Gain
allocated under Section 3(a) to holders of S-SCUs and holders of
Common Units received upon a conversion or redemption of S-SCUs in
connection with the allocation under this Section 1(c) of Net Capital
Gain to such holders. For these purposes, Tax Net Capital Gain means
net capital gain, as determined for federal income tax purposes, which
is governed by Section 3(a) and not Section 3(c) hereof. For the
avoidance of doubt, no portion of any Special Tax Distribution will be
5
27
Attachment 3 Continued
taken into account when determining whether the Partnership has
satisfied the distribution requirement of Sections 6.2(a)(iii),
6.2(a)(iv), 6.2(b)(i) and 6.2(b)(ii);
(iv) (A) [intentionally left blank]
(B) with respect to Special Tax Distributions to be
made within two years of the Closing Date provided for in the
Contribution and Exchange Agreement for Monroeville Mall, the Special
Tax Distribution will not cause the aggregate distributions to a holder
of S-SCUs or a holder of Common Units received on a conversion or
redemption of S-SCUs, other than distributions to such holder in
respect of the S-SCU Basic Distribution Amount, to exceed the product
of (x) the lesser of such holder's percentage interest in Partnership
profits for the year in which the Special Tax Distribution is made or
such holder's percentage interest in Partnership profits for the life
of the Partnership (as determined for purposes of Regulations Section
1.707-4(b)) and (y) the Partnership's net cash flow from operations for
the year in which the Special Tax Distribution is made (as determined
for purposes of Regulations Section 1.707-4(b)).
(d) Notwithstanding subsections (a)(iv) and (a)(vi), and subsections
(b)(iv) and (b)(vi) above, holders of L-SCUs shall be allocated Gross
Income in excess of the amount in subsections (a)(iv) and (b)(iv) above
if and only if (i) all other Common Unit holders have received an
income and/or gain allocation equivalent to their cash distributions,
and (ii) such allocation of income and/or gain to holders of the L-SCUs
is in an amount equivalent to their pro rata portion, treating each
SCU, S-SCU, L-SCU and K-SCU as the number of Common Units into which
such SCU, S-SCU, L-SCU and K-SCU are convertible pursuant to Exhibit E,
Exhibit H, Exhibit J or Exhibit K, as applicable, of the aggregate of
the income and/or gain remaining after the other Common Unit holders
have been allocated income and/or gain in an amount equivalent to the
cash distributions that they received for such fiscal year.
(e) Notwithstanding subsections (a)(iv) and (a)(vi), and subsections
(b)(iv) and (b)(vi) above, holders of K-SCUs and holders of Common
Units received upon a conversion or redemption of K-SCUs shall be
allocated Gross Income in excess of the amount in subsections (a)(iv)
and (b)(iv) above if and only if (i) all other Common Unit holders have
received an income and/or gain allocation equivalent to their cash
distributions, and (ii) such allocation of income and/or gain to
holders of the K-SCUs is in an amount equivalent to their pro rata
portion, treating each SCU, S-SCU, L-SCU and K-SCU as the number of
Common Units into which such SCU, S-SCU, L-SCU and K-SCU is convertible
pursuant to Exhibit E, Exhibit H, Exhibit J or Exhibit K, as
applicable, of the aggregate of the income and/or gain remaining after
the other Common Unit holders have been allocated income and/or gain in
an amount equivalent to the cash distributions that they received for
such fiscal year.
(f) Notwithstanding subsections (a)(v) and (a)(vi), and subsections (b)(v)
and (b)(vi), above, holders of Common Units issued in conjunction with
the Panama City Mall contribution as defined hereinbelow, shall be
allocated Gross Income in excess of the amount in subsections (a)(v)
and (b)(v) above if and only if (i) all other Common Unit holders have
received an income and/or gain allocation equivalent to their cash
distributions, and (ii) such allocation of income and/or gain to
holders of the L-SCUs is in an amount equivalent to their pro rata
6
28
Attachment 3 Continued
portion, treating each SCU, S-SCU, L-SCU and K-SCU as the number of
Common Units into which such SCU, S-SCU, L-SCU and K-SCU are
convertible pursuant to Exhibit E, Exhibit H, Exhibit J or Exhibit K,
as applicable, of the aggregate of the income and/or gain remaining
after the other Common Unit holders have been allocated income and/or
gain in an amount equivalent to the cash distributions that they
received for such fiscal year.
(g) Notwithstanding subsections (a), (b), (c), (d), (e) and (f), Net
Income and Net Losses from a Liquidation Transaction shall be
allocated as follows:
(i) First, Net Income (or Net Losses) from the Liquidation
Transaction shall be allocated to the relevant Partner, in
connection with the Preferred Units, in an amount equal to the
excess (or deficit) of the sum of the applicable Preferred
Redemption Amounts of the Preferred Units which have been or will
be redeemed with the proceeds of the Liquidation Transaction over
the Preferred Unit Issue Price of such Preferred Units;
(ii) Second, Net Income (or Net Losses) from the Liquidation
Transaction shall be allocated among the Partners owning SCUs,
S-SCUs, L-SCUs, K-SCUs or Common Units so that the Capital
Accounts of the Partners (excluding from the Capital Account of
any Partner the amount attributable to such Partner's Preferred
Units) are proportional to the number of Common Units held by
each Partner. For purposes of this subsection (ii), each SCU,
S-SCU, L-SCU or K-SCUs shall be treated as the number of Common
Units into which the SCU, S-SCUs, L-SCUs or K-SCUs are
convertible pursuant to the terms of Exhibit E, Exhibit H,
Exhibit J or Exhibit K, as applicable, to the Agreement.
(iii) Third, any remaining Net Income or Net Losses from the
Liquidation Transaction shall be allocated among the Partners
owning SCUs, S-SCUs, L-SCUs, K-SCUs or Common Units in accordance
with their proportionate ownership of Common Units. For purposes
of this subsection (iii), each SCU, S-SCU, L-SCU or K-SCU shall
be treated as the number of Common Units into which the SCU,
S-SCU, L-SCU or K-SCU is convertible pursuant to the terms of
Exhibit E, Exhibit H, Exhibit J or Exhibit K, as applicable, to
the Agreement.
2. Special Allocations.
Notwithstanding any provisions of Section 1 of this Exhibit C, the
following special allocations shall be made in the following order:
(a) Minimum Gain Chargeback (Nonrecourse Liabilities). If there is a net
decrease in Partnership Minimum Gain for any Partnership fiscal year (except as
a result of conversion or refinancing of Partnership indebtedness, certain
capital contributions or revaluation of the Partnership property as further
outlined in Regulation Sections 1.704-2(d)(4), (f)(2) or (f)(3)), each Partner
shall be specially allocated items of Partnership income and gain for such year
(and, if necessary, subsequent years) in an amount equal to that Partner's share
of the net decrease in Partnership Minimum Gain. The items to be so allocated
shall be determined in accordance with Regulation Section 1.704-2(f). This
subsection (a) is intended to comply with the minimum gain chargeback
requirement in said section of the Regulations and shall be interpreted
7
29
Attachment 3 Continued
consistently therewith. Allocations pursuant to this subsection (a) shall be
made in proportion to the respective amounts required to be allocated to each
Partner pursuant thereto.
(b) Minimum Gain Attributable to Partner Nonrecourse Debt. If there is a
net decrease in minimum Gain Attributable to Partner Nonrecourse Debt during any
fiscal year (other than due to the conversion, refinancing or other change in
the debt instrument causing it to become partially or wholly nonrecourse,
certain capital contributions, or certain revaluations of Partnership property
as further outlined in Regulation Section 1.704-2(i)(4)), each Partner shall be
specially allocated items of Partnership income and gain for such year (and, if
necessary, subsequent years) in an amount equal to that Partner's share of the
net decrease in the Minimum Gain Attributable to Partner Nonrecourse Debt. The
items to be so allocated shall be determined in accordance with Regulation
Sections 1.704-2(i)(4) and (j)(2). This subsection (b) is intended to comply
with the minimum gain chargeback requirement with respect to Partner Nonrecourse
Debt contained in said sections of the Regulations and shall be interpreted
consistently therewith. Allocations pursuant to this subsection (b) shall be
made in proportion to the respective amounts required to be allocated to each
Partner pursuant thereto.
(c) Qualified Income Offset. In the event a Limited Partner unexpectedly
receives any adjustments, allocations or distributions described in Regulation
Sections 1.704-1(b)(2)(ii)(d)(4), (5), or (6), and such Limited Partner has an
Adjusted Capital Account Deficit, items of Partnership income and gain shall be
specially allocated to such Partner in an amount and manner sufficient to
eliminate the Adjusted Capital Account Deficit as quickly as possible. This
subsection (c) is intended to constitute a "qualified income offset" under
Regulation Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently
therewith.
(d) Nonrecourse Deductions. Nonrecourse Deductions for any fiscal year or
other applicable period shall be allocated to the Partners in accordance with
their proportionate ownership of Common Units other than Common Units issued on
a redemption or conversion of SCUs, S-SCUs L-SCUs or K-SCUs.
(e) Partner Nonrecourse Deductions. Partner Nonrecourse Deductions for any
fiscal year or other applicable period shall be specially allocated to the
Partner that bears the economic risk of loss for the debt (i.e., the Partner
Nonrecourse Debt) in respect of which such Partner Nonrecourse Deductions are
attributable (as determined under Regulation Sections 1.704-2(b)(4) and (i)(1)).
(f) Curative Allocations. The Regulatory Allocations (as defined below)
shall be taken into account in allocating other items of income (including Gross
Income), gain, loss, and deduction among the Partners so that, to the extent
possible, the cumulative net amount of allocations of Partnership Items under
Sections 1 and 2 of this Exhibit C shall be equal to the net amount that would
have been allocated to each Partner if the Regulatory Allocations had not
occurred. To the extent that there is an allocation under Section 2(a) or (b)
8
30
Attachment 3 Continued
hereof of Partnership income or gain to a holder of SCUs, S-SCUs, L-SCUs, K-SCUs
or Common Units issued on a redemption or conversion of SCUs, S-SCUs, L-SCUs or
K-SCUs, there will be a correspondingly smaller allocation of Gross Income to
such holder under Sections 1(a)(iii), 1(a)(iv),l(b)(iii), or 1(b)(iv) hereof.
This subsection (f) is intended to minimize to the extent possible and to the
extent necessary any economic distortions which may result from application of
the Regulatory Allocations and shall be interpreted in a manner consistent
therewith. For purposes hereof, "Regulatory Allocations" shall mean the
allocations provided under this Section 2.
3. Tax Allocations.
(a) Generally. Subject to subsections (b) and (c) hereof, items of income,
gain, loss, deduction and credit to be allocated for income tax purposes
(collectively, "Tax Items") shall be allocated among the Partners on the same
basis as their respective book items.
(b) Sections 1245/1250 Recapture. If any portion of gain from the sale of
property is treated as gain which is ordinary income by virtue of the
application of Code Section 1245 or 1250 ("Affected Gain"), then (A) such
Affected Gain shall be allocated among the Partners in the same proportion that
the depreciation and amortization deductions giving rise to the Affected Gain
were allocated and (B) other Tax Items of gain of the same character that would
have been recognized, but for the application of Code Section 1245 and/or 1250,
shall be allocated away from those Partners who are allocated Affected Gain
pursuant to subsection (A) so that, to the extent possible, the other Partners
are allocated the same amount, and type, of capital gain that would have been
allocated to them had Code Section 1245 and/or 1250 not applied. For purposes
hereof, in order to determine the proportionate allocations of depreciation and
amortization deductions for each fiscal year or other applicable period, such
deductions shall be deemed allocated on the same basis as Net Income and Net
Loss for such respective period.
(c) Allocations Respecting Section 704(c) and Revaluations: Curative
Allocations Resulting from the Ceiling Rule. Notwithstanding subsection (b)
hereof, Tax Items with respect to Partnership property that is subject to Code
Section 704(c) and/or Regulation Section 1.704-1(b)(2)(iv)(f) (collectively,
"Section 704(c) Tax Items") shall be allocated in accordance with said Code
section and/or Regulation Section 1.704-1(b)(4)(i), as the case may be. The
allocation of Tax Items shall be subject to the ceiling rule stated in
Regulation Section 1.704-1(c) and Regulation Section 1.704-3, except that with
respect to the properties contributed to the Partnership (the "Jacobs
Properties") pursuant to the Master Contribution Agreement dated September 25,
2000 among Jacobs Realty Investors Limited Partnership, CBL & Associates
Properties, Inc., CBL & Associates Limited Partnership and others (as amended,
the "Master Contribution Agreement"), the property ( "Monroeville Mall")
contributed to the Partnership pursuant to the Contribution and Exchange
Agreement for Monroeville Mall, the property ("Laurel Park Place") contributed
to the Partnership pursuant to the Contribution and Exchange Agreement for
Laurel Park Place and the property ("Panama City Mall") contributed to the
Partnership pursuant to the Contribution and Exchange for Panama City Mall, and
Oak Park Mall and Eastland Mall (collectively: the "CWB Properties") contributed
to the Partnership pursuant to Contribution Agreements and Joint Escrow
Instructions dated as of October 19, 2005, curative allocations of gain
9
31
Attachment 3 Continued
recognized on a disposition of a direct or indirect interest in a Jacobs
Property, the Monroeville Mall, Laurel Park Place, Panama City Mall or a CWB
Property may be made to the extent permitted in Regulation Section 1.704-3(c)
respectively. The Partnership shall allocate items of income, gain, loss and
deduction allocated to it by a Property Partnership to the Partner or Partners
contributing the interest or interests in such Property Partnership, so that, to
the greatest extent possible, such contributing Partner or Partners are
allocated the same amount and character of items of income, gain, loss and
deduction with respect to such Property Partnership that they would have been
allocated had they contributed undivided interests in the assets owned by such
Property Partnership to the Partnership in lieu of contributing the interest or
interests in the Property Partnership to the Partnership. Notwithstanding the
above, with respect to property contributed to the Partnership after the date
hereof, such Section 704(c) Tax Items may be allocated under such method
selected by the General Partner that is consistent with the Section 704(c)
Regulations.
4. Certain Allocations of Depreciation and Loss. Notwithstanding anything
in this Exhibit C to the contrary, depreciation, amortization, gain and loss
attributable to an adjustment under Section 743 or Section 734 of the Code of
the federal income tax basis of Partnership assets (including adjustments made
prior to or after the contribution of the relevant assets or indirect interests
therein to the Partnership) shall be allocated to the direct or indirect
partner, or such partner's successor or assign, whose death or acquisition of a
direct or indirect interest gave rise to the adjustments, except to the extent
such allocations would not be valid as a result of a change in tax law occurring
after the date of the Master Contribution Agreement.
5. Clarification Regarding L-SCUs' Conversion to Common Units. Throughout
this Exhibit C, reference is made to "L-SCUs or Common Units received on a
conversion or redemption of such L-SCUs" or words to similar effect. The terms
and rights of the L-SCUs are set forth on Exhibit J of the Partnership Agreement
and such rights do not include the right on the part of the holder of L-SCUs to
convert such L-SCUs to Common Units in all circumstances. However, circumstances
may arise where holders of L-SCUs receive Common Units in exchange for or in
redemption of L-SCUs, i.e., on a Recapitalization Transaction as defined in
Exhibit J. The references to L-SCUs being converted to Common Units or Common
Units being received in redemption of L-SCUs as set forth above shall not be
construed as amending, reducing, expanding or otherwise changing the terms and
rights of the L-SCUs as set forth on Exhibit J.