1
Exhibit 10.15
PROGRAM AGREEMENT
FOR
RETAIL VALUE INVESTMENT PROGRAM
AMONG
RETAIL VALUE MANAGEMENT, LTD.
DEVELOPERS DIVERSIFIED REALTY CORPORATION
AND
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
2
TABLE OF CONTENTS
SECTION PAGE
- ------- ----
ARTICLE I
DEFINITIONS AND INTERPRETATION
1.1 Definitions 1
1.2 Interpretation 4
ARTICLE II
FORMATION OF VENTURES
2.1 Formation of the Ventures 4
2.2 Aggregate Commitment of DDRC and PREI
Investors 5
2.3 Funding of General Partner Shortfalls 5
ARTICLE III
COVENANTS OF THE PARTIES
3.1 Expenses 6
3.2 Implementing Agreement 6
3.3 Confidentiality 6
3.4 Public Announcements 7
3.5 Compliance with Applicable Law 7
3.6 Leverage Policy 7
3.7 Role of PREI 7
3.8 Informational Meetings 7
3.9 Restrictions on Investment 8
3.10 Formation of Similar Partnerships 9
3.11 Successive Disapprovals 9
ARTICLE IV
CONDITIONS PRECEDENT
4.1 Conditions Precedent of PIC 10
4.2 Conditions Precedent of the General Partner 10
4.3 Conditions Precedent of DDRC 11
ARTICLE V
CLOSING 12
3
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
6.1 Representations and Warranties of DDRC 12
6.2 Representations and Warranties of PREI 13
6.3 Representations and Warranties of
the General Partner 15
ARTICLE VII
TERMINATION 16
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification by DDRC 16
8.2 Indemnification by the General Partner 16
8.3 Indemnification by PIC 17
8.4 Claims 17
8.5 Insurance or Third-Party Indemnification 18
ARTICLE IX
MISCELLANEOUS
9.1 Notices 18
9.2 No Third-Party Beneficiaries 19
9.3 No Assignment 19
9.4 Execution in Counterparts 20
9.5 Amendments 20
9.6 Validity 20
9.7 Governing Law 20
9.8 Jurisdiction 20
9.9 Arbitration 20
9.10 Waiver of Jury Trial 21
9.11 Waiver 21
9.12 Binding Effect 21
9.13 Entire Agreement 21
9.14 Remedies Not Exclusive 21
EXHIBITS
- --------
Exhibit A Form of Limited Partnership Agreement
Exhibit B Capital Commitments
4
PROGRAM AGREEMENT
THIS PROGRAM AGREEMENT for RETAIL VALUE INVESTMENT PROGRAM is
made and entered into as of February 11, 1998, by and among The Prudential
Insurance Company of America, a New Jersey corporation ("PIC"), through one of
its divisions, Prudential Real Estate Investors ("PREI"), Retail Value
Management, Ltd., an Ohio limited liability company (the "General Partner"), and
Developers Diversified Realty Corporation, an Ohio corporation ("DDRC").
W I T N E S E T H :
WHEREAS, the General Partner intends to identify debt or
equity interests in real estate assets or businesses related to retail uses (or
options or other instruments related thereto) in transactions in which the asset
and/or the seller is distressed due to over-leverage, weak ownership, financial
pressures, or other factors, or where temporary imbalance in supply and demand,
market illiquidity, time-sensitive sellers or other factors permit an
opportunistic purchase (each an "Eligible Investment"), and if any such Eligible
Investment is approved by PREI and DDRC, the Eligible Investment shall be
acquired by a Venture (as defined herein) in which DDRC and an account managed
or advised by PREI are limited partners and the General Partner is the general
partner; and
WHEREAS, the Limited Partnership Agreement (as defined herein)
for each Venture shall provide that each Eligible Investment may be managed,
developed and monitored by DDRC pursuant to a management agreement between DDRC
and such Venture.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants of the parties hereto, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS. Whenever used in this Agreement, including
the Recitals, the following terms have the meanings assigned below:
"Account" shall have the meaning ascribed thereto in the
Limited Partnership Agreements.
"Affiliate" shall mean, when used with reference to a
specified Person, (a) any Person that directly or indirectly through
one or more intermediaries controls or is controlled by or is under
common control with the specified Person, (b) any Person who is an
officer or director of a specified Person or Person who serves in a
similar capacity with respect to a
5
specified Person or is a spouse or relative of a specified Person and
(c) any Person which, directly or indirectly, is the beneficial owner
10% or more of any class of equity securities of the specified Person
or of which the specified Person is directly or indirectly the owner of
10% or more of any class of equity securities. No Venture shall be
deemed to be an Affiliate of the General Partner, DDRC or PREI for the
purposes of this Agreement.
"Aggregate Contribution" shall mean the aggregate amount
committed to be invested in all Ventures by the PREI Investors, DDRC,
and the General Partner as set forth on Schedule B (without taking into
account Returned Capital).
"Agreement" shall mean this Agreement, as amended, modified,
supplemented or restated from time to time.
"Approved Investment" means an Eligible Investment proposed by
the General Partner which is approved by PREI and DDRC for acquisition
and investment by a Venture in accordance with this Agreement and the
applicable Limited Partnership Agreement.
"Available Contribution" shall have the meaning ascribed
thereto in the Limited Partnership Agreements.
"Capital Commitments" means the capital commitment and
obligation of each PREI Investor and DDRC to contribute capital and
invest in Ventures in accordance with this Agreement, subject to
Section 2.2 and subject to the limitations set forth in the Limited
Partnership Agreements.
"Closing" shall mean the consummation of the formation of the
Ventures in accordance with this Agreement.
"Closing Date" shall have the meaning set forth in
Article V.
"Commitment Period" shall have the meaning ascribed thereto in
the Limited Partnership Agreements.
"Eligible Investment" is defined in the Recital.
"ERISA" means the Employee Retirement Income Security Act
of 1974, as amended.
"Funded Contribution" shall have the meaning ascribed thereto
in the Limited Partnership Agreements.
"Funding Notice" shall have the meaning ascribed thereto in
the Limited Partnership Agreements.
-2-
6
"Full Investment Date" shall mean the date on which the
Ventures have invested or committed for investment 80% of the Aggregate
Contribution.
"Investment Committee" shall mean the investment
management committee of PREI.
"Limited Partners" shall mean the limited partners of the
Limited Partnerships.
"Limited Partnership Agreement" shall mean, with respect to a
particular Venture, a limited partnership agreement among the General
Partner, DDRC and PREI containing the substantive provisions in the
form of agreement attached hereto as Exhibit A, together with such
amendments thereto as may be necessary to reflect any additional terms
of a particular Venture to which the General Partner, DDRC and PREI
have mutually agreed.
"Loss" or "Losses" means all liabilities, losses, costs,
damages (including punitive, consequential and treble damages),
penalties or expenses (including, without limitation, reasonable
attorneys' fees and expenses and costs of investigation and
litigation), and also including any expenditures or expenses incurred
to cover, remedy or rectify any such Losses.
"Person" shall mean an individual, partnership, corporation
(including a business trust), limited liability company, joint stock
company, trust, unincorporated association, joint venture, governmental
authority or other entity.
"PREI Investors" means accounts managed or advised by
PREI.
"Program" is defined in Section 2.1.
"Real Estate Investment" means any debt or equity interest (or
options or other instruments related thereto) in or relating to real
estate used for retail purposes, including, without limitation, power,
community, entertainment, neighborhood and strip shopping centers and
enclosed malls (including pools or portfolios thereof), or companies
which own such real estate.
"Returned Capital" shall mean amounts distributed to the
partners of the Ventures, during the Commitment Period as a return of
capital pursuant to Section 5.02 of the Limited Partnership Agreements.
"Shortfalls" is defined in Section 2.3.
-3-
7
"Shortfall Contribution Amount" is defined in Section
2.3.
"Summary Proposal" shall have the meaning ascribed thereto in
the Limited Partnership Agreements.
"Transaction Documents" shall mean with respect to a
particular Venture, this Agreement and the Limited Partnership
Agreement for such Venture.
"Venture" shall mean a limited partnership formed by DDRC, the
General Partner, and PREI pursuant to this Agreement for the purpose of
acquiring Approved Investments, which limited partnership shall be
governed by a Limited Partnership Agreement.
1.2 INTERPRETATION. The headings preceding the text of
Articles and Sections included in this Agreement and the headings to the
Schedules attached to this Agreement are for convenience of reference only and
shall not be deemed a part of this Agreement or be given any effect in
interpreting this Agreement. The use of masculine, feminine or neuter gender or
the singular or plural form of words herein shall not limit the applicability of
any provision of this Agreement to such gender or form. The use of the term
"including" or "include" shall in all cases herein mean "including, without
limitation" or "include, without limitation," respectively. Underscored
references to Articles, Sections, clauses, Exhibits or Schedules shall refer to
those portions of this Agreement, and any underscored reference to a clause
shall, unless otherwise identified refer to the appropriate clause within the
same Section in which such reference occurs. The use of the terms "hereunder,"
"hereof," "hereto" and words of similar import shall refer to this Agreement as
a whole and not to any particular Article, Section or clause of, or Exhibit or
Schedule to, this Agreement.
ARTICLE II
FORMATION OF VENTURES
2.1 FORMATION OF THE VENTURES. At the Closing, the General
Partner, DDRC or a Person in which DDRC, directly or indirectly, owns 100% of
such Person's equity securities, and PREI will enter into Limited Partnership
Agreements to form the Ventures for the purposes of directly or indirectly
acquiring, owning, managing, selling and disposing of Approved Investments. The
Ventures will invest with the goal of providing a pre-tax rate of return of at
least 15% per annum, compounded annually. DDRC will contribute 25% and the PREI
Investor participating in a Venture will contribute 75%, of the aggregate
capital contributed to such Venture by its Limited Partners, subject to Sections
2.2 and 2.3. This Agreement and its exhibits and the transactions contemplated
hereby and thereby are referred to as the "Program."
-4-
8
2.2 AGGREGATE COMMITMENT OF DDRC AND PREI INVESTORS. Except as
otherwise agreed by the General Partner, DDRC and PREI, DDRC agrees to make an
aggregate Capital Commitment of $70,000,000 to the Ventures and PREI agrees to
cause the PREI Investors to make an aggregate Capital Commitment of $210,000,000
to the Ventures; provided, however, that in response to a proposed Eligible
Investment that exceeds any PREI's Investor remaining Capital Commitment, PREI
may increase such PREI Investor's Capital Commitment by an amount of up to 20%
in order for such PREI Investor to participate in such Eligible Investment; it
being understood in such event that (i) the obligations of the General Partner
under Sections 3.9 and 3.10 shall be determined as if such increase had not
taken place and (ii) each of the General Partner and DDRC shall be required to
increase its Capital Commitment with respect to such Venture by the same
percentage by which PREI increased its Capital Commitment. As of a result of
such an increase of a PREI Investor's Capital Commitment, the Program may make
investments which utilize the full amount of the Aggregate Contribution without
fully calling certain PREI Investors' Capital Commitments. The individual
Capital Commitment of each Limited Partner is not to exceed the amount set forth
opposite such partner's name on Exhibit B, subject to increase as provided in
the preceding sentence. Subject to the terms and conditions of this Agreement,
each of DDRC and the PREI Investors will fund their Capital Commitment with
respect to each Venture in such amounts and at such times as shall be specified
in the Limited Partnership Agreement applicable to such Venture.
2.3 FUNDING OF GENERAL PARTNER SHORTFALLS.
(a) DDRC shall have the option, but not the obligation, to
fund operating budget shortfalls of the General Partner in an aggregate amount
of up to $4,000,000 (the "Shortfalls"). Each of the parties hereto agrees that,
on the earlier of (a) the last day of the latest Commitment Period under each
Limited Partnership Agreement or (b) the day on which the partners in all of the
Ventures shall have invested an aggregate amount of at least $280,000,000 in the
Ventures, such party shall take all action necessary to assure that (i) DDRC
shall be given credit for making capital contributions to the Ventures for
payment of Shortfalls in an aggregate amount (the "Shortfall Contribution
Amount") equal to the aggregate amount of all of the Shortfalls funded by DDRC,
plus an amount equal to 10% per annum on each payment of a Shortfall calculated
on and from the date such Shortfall is funded by DDRC to and including such
earlier date, and (ii) the Shortfall Contribution Amount shall be allocated
among the Ventures based on the aggregate Funded Contributions of the Limited
Partners in the Ventures. In no event shall DDRC receive, pursuant to this
Section 2.3, credit for making capital contributions to any Venture in excess of
the product of (A) $4,000,000, plus an amount equal to 10% per annum on
$4,000,000 calculated on and from the date of this Agreement to and including
such earlier date, multiplied by (B) a fraction, the numerator of which is the
aggregate contributions of
-5-
9
the Limited Partners to such Venture (without regard to any capital returned to
such Limited Partners but including any Returned Capital which shall be
reinvested by such Venture) and the denominator of which is the sum of (i)
$280,000,000 plus (ii) any increase in the aggregate commitments of the Ventures
pursuant to Section 2.2 plus (iii) any Returned Capital which shall be
reinvested by any of the Ventures.
(b) DDRC shall inform PREI in writing promptly after funding
any Shortfall of the amount of such funding. PREI shall have the right, upon
reasonable notice, to review the General Partner's books and records as
necessary to confirm the General Partner's budget, Shortfalls and other matters
necessary to review the calculations set forth in this Section 2.3.
ARTICLE III
COVENANTS OF THE PARTIES
3.1 EXPENSES. Each party hereto shall bear its own expenses
with respect to this Agreement. Each Venture shall be responsible for other
expenses of organizing the Program to the extent provided in the Limited
Partnership Agreements, it being understood that each party shall be responsible
for its own attorneys' and accountants' fees incurred in connection with the
organization of the Program. Notwithstanding the foregoing, the General Partner
shall pay any fee payable to CS Securities without credit therefor as a capital
contribution under any Limited Partnership Agreement.
3.2 IMPLEMENTING AGREEMENT. Each of the General Partner, DDRC
and PREI shall take all reasonable actions required to fulfill their respective
obligations to one another hereunder and shall otherwise use their respective
reasonable efforts to facilitate the consummation of the transactions
contemplated hereby. Each of the General Partner, DDRC and PREI agrees that it
will not take any action that would have the effect of preventing or impairing
its ability to perform its obligations hereunder.
3.3 CONFIDENTIALITY. Except as otherwise provided below, each
party hereto shall maintain all information furnished to it by its
counterparties hereto with respect to the subject matter of this Agreement in
strict confidence in accordance with the procedures it uses to protect its own
information of a similar nature, provided that PREI may disclose such
information to the PREI Investors and each party and such PREI Investors may
disclose such information to its officers, directors, employees, accountants,
financial advisors, consultants, attorneys and appraisers. Notwithstanding the
foregoing, no party shall be required to maintain in confidence information
which (i) such party is compelled to disclose by judicial or administrative
requirements of law, provided that if permitted by law, such party shall
-6-
10
promptly inform its counterparties hereto of the request to disclose, and as
such counterparties may reasonably request, such party shall assist such
counterparties, at the expense of such counterparties, in any effort by such
counterparties to obtain a protective order with respect to such information,
(ii) becomes generally available to the public other than through a disclosure
by such party, (iii) is lawfully known to such party prior to its disclosure by
such counterparties to such party or (iv) becomes available to such party on a
non-confidential basis from a source which was not known by such party to be
bound by any legal or contractual obligation of confidentiality with respect to
such information.
3.4 PUBLIC ANNOUNCEMENTS. No party hereto (or any of its
Affiliates) shall make any public statement, including, without limitation, any
press release, with respect to this Agreement and the transactions contemplated
hereby, without the prior written consent of PREI, the General Partner and DDRC
(which consent may not be unreasonably withheld), except as may be required by
law. If a disclosure is required by law, the disclosing party shall make
reasonable efforts to afford the other parties hereto an opportunity to review
and comment on the proposed disclosure prior to the making of such disclosure.
3.5 COMPLIANCE WITH APPLICABLE LAW. Each of the parties hereto
agrees, and agrees to cause their respective Affiliates, shareholders,
controlling persons, officers, directors, partners, members, employees,
representatives or agents to comply in all material respects with all applicable
laws, rules and regulations in connection with any and all matters relating to
the Program or the performance of their obligations hereunder.
3.6 LEVERAGE POLICY. The parties acknowledge that, subject to
Limited Partner approval, the Ventures intend to leverage the Approved
Investments and, if desirable, to refinance the Approved Investments. The
parties anticipate that acquisition financing will range from 50% to 85% of the
cost of each acquisition and each Venture generally will maintain a leverage
ratio of 65%.
3.7 ROLE OF PREI. In no event will PREI, PIC or any of its
Affiliates be obligated with regard to the Capital Commitments of any PREI
Investor.
3.8 INFORMATIONAL MEETINGS. The General Partner agrees to hold
meetings with PREI and DDRC at reasonable times and upon reasonable notice to
review and discuss the status of Eligible Investments, Approved Investments,
Venture activities and other Program matters. Such meetings shall be held at the
corporate headquarters of PREI unless PREI otherwise agrees. PREI and DDRC may
designate any one or more representatives to attend such meetings.
-7-
11
3.9 RESTRICTIONS ON INVESTMENT.
(a) Except for the account of a Venture and except as
described below, the General Partner shall not at any time engage in any
business other than acting as general partner of limited partnerships in which a
PREI Investor is a limited partner and, without limiting the foregoing, shall
not at any time acquire any Real Estate Investment which the General Partner
believes is consistent with the Ventures' investment objectives from the date of
this Agreement until the earliest of (y) the expiration of the Commitment Period
of each Venture or (z) the date of the dissolution of a Venture or Ventures so
that no Ventures shall exist after such date and the Program shall be
terminated; provided, however, that (i) any Real Estate Investment that was not
approved by or not presented to the Investment Committee pursuant to Section
3.06 of a Limited Partnership Agreement after its Summary Proposal was approved
by DDRC and PREI shall not be subject to this restriction so long as such Real
Estate Investment shall be acquired (A) on substantially the same terms that
were presented to PREI and DDRC by the General Partner, and (B) only by the
General Partner and/or DDRC or a Person in which DDRC, directly or indirectly,
owns 100% of such Person's equity securities, and (ii) investments permitted by
Section 3.10 hereof to be made by the General Partner or its Affiliates through
partnerships or other entities shall not be subject to this restriction.
(b) Nothing in this Section 3.9 shall preclude DDRC from
acting, in its individual capacity, for its own account; provided, however, that
during the Commitment Period, DDRC will offer to a Venture any investment
opportunity that is generated by or presented to DDRC that DDRC believes is
consistent with the Ventures' investment objective and that DDRC has determined
not to pursue for investment. DDRC shall be permitted to acquire any Real Estate
Investment that was not approved by PREI pursuant to Section 3.06 of a Limited
Partnership Agreement.
(c) The PREI Investors shall be prohibited from investing in
any proposed Eligible Investment that was either disapproved by or not be
presented to the Investment Committee unless (A) more than six months have
elapsed since the date such proposed Eligible Investment was disapproved by or
PREI advised the General Partner that it would not be presented to the
Investment Committee, (B) PREI became aware of such proposed Eligible Investment
prior to the presentation by the General Partner of such proposed Eligible
Investment and informed the General Partner of such awareness as promptly as
reasonably practicable following the General Partner's presentation thereof to
PREI, (C) such Eligible Investment was presented to PREI as part of a portfolio
of properties which differed from the portfolio presented by the General Partner
and such proposed Eligible Investment represented less than 20% of the aggregate
investments in such different portfolio, (D) PREI was presented a portfolio of
properties which differed from such proposed Eligible Investment such that the
-8-
12
properties in the different portfolio which were included in such proposed
Eligible Investment represented less than 20% of such proposed Eligible
Investment, (E) no beneficiary of PREI's investment in such proposed Eligible
Investment shall include any of the Persons included on Schedule II attached
hereto or (F) the PREI Investor's investment in such proposed Eligible
Investment shall be a debt investment with no participation features or
provisions entitling the PREI Investors to a share of appreciation cash flow.
3.10. FORMATION OF SIMILAR PARTNERSHIPS. The General Partner
or its Affiliates may form and market other limited partnerships or other
entities similar to the Ventures and may sell, market or distribute limited
partnership interests or other interests or securities in such limited
partnerships or other entities formed by it; provided, however, that the General
Partner and its Affiliates shall not commence the investment activities of any
such limited partnership or entity (to the extent such investments would
otherwise be prohibited by Section 3.09) prior to the earliest of (i) the Full
Investment Date, (ii) the expiration of the Commitment Period of each Venture or
(iii) the date of the dissolution of a Venture or Ventures so that no Ventures
shall exist after such date and the Program shall be terminated. If the Ventures
shall have invested or committed for investment at least 80% of the Aggregate
Contribution, then the General Partner and its Affiliates shall have the option
of commencing the investment activities of another entity formed in accordance
with the immediately preceding sentence, if such entity offers to the Limited
Partners the opportunity to subscribe on a pro rata basis for the equity
interests therein. The portion of interests therein allocable to Limited
Partners who have not elected to invest in such entity shall be made available
to Limited Partners who have elected to invest therein, who may (but shall not
be obligated to) invest additional amounts on a pro rata basis among those
parties who elect to invest such additional amounts. Except as provided in this
Section 3.10, neither DDRC nor any of its Affiliates shall have any obligation
to offer a participation in any such subsequent limited partnership or entity to
any Limited Partner.
3.11. SUCCESSIVE DISAPPROVALS. Each time that two successive
proposed Eligible Investments that were the subject of Summary Proposals are
either disapproved by or not presented to the Investment Committee, the General
Partner and its Affiliates shall no longer be bound by the provisions of
Sections 3.09 and 3.10 with respect to the third proposed Eligible Investment
that is either disapproved by or not presented to the Investment Committee;
provided that (i) such third proposed Partnership Investment is disapproved by
the Investment Committee, or PREI advised the General Partner that it would not
be presented to the Investment Committee, on a date that is at least six months
from the date hereof and (ii) for purposes of this sentence, only an Eligible
Investment with an aggregate cost of at least $20,000,000 shall be considered a
"proposed Eligible Investment."
-9-
13
ARTICLE IV
CONDITIONS PRECEDENT
4.1 CONDITIONS PRECEDENT OF PIC. Without limiting the scope of
all conditions to be satisfied prior to PIC entering into the Limited
Partnership Agreements and making the capital contributions contemplated
thereby, it is contemplated that the following matters shall have been completed
to the satisfaction of or waived by PREI prior thereto:
(a) FULFILLMENT OF OBLIGATIONS. Each of DDRC and the General
Partner shall have complied in all material respects with all of its
obligations and covenants under this Agreement with respect to the
Ventures required to be performed by it on or before the Closing Date;
(b) REPRESENTATIONS AND WARRANTIES. All of the representations
and warranties of DDRC and the General Partner hereunder shall be true,
correct and complete in all material respects on and as of the Closing
Date as if made on the Closing Date;
(c) DELIVERY OF DOCUMENTS. Each of DDRC and the General
Partner shall have delivered all of the documents contemplated to be
delivered by it pursuant to this Agreement, all in form and substance
reasonably satisfactory to PREI;
(d) LEGAL PROCEEDINGS. No order of any court or administrative
agency shall be in effect that restrains or prohibits any of the
transactions contemplated by this Agreement, and no suit, action,
inquiry, investigation or proceeding in which it will be, or it is
sought to restrain, prohibit or change the terms of or obtain damages
or other relief in connection with this Agreement or any of the Limited
Partnership Agreements, which in the judgment of PREI makes it
inadvisable to proceed with the consummation of such transactions,
shall have been instituted by any Person; and
(e) ERISA. PREI shall have satisfied itself that the
transactions contemplated to be taken on the Closing Date will not
result in a prohibited transaction under ERISA.
4.2 CONDITIONS PRECEDENT OF THE GENERAL PARTNER. Without
limiting the scope of all conditions to be satisfied prior to the General
Partner entering into the Limited Partnership Agreements, it is contemplated
that the following matters shall have been completed to the satisfaction of or
waived by the General Partner prior thereto:
(a) FULFILLMENT OF OBLIGATIONS. Each of DDRC and PREI
shall have complied in all material respects with all of its
-10-
14
obligations and covenants under this Agreement with respect to
the Ventures required to be performed by it on or before the
Closing Date;
(b) REPRESENTATIONS AND WARRANTIES. All of the representations
and warranties of PREI and DDRC hereunder shall be true, correct and
complete in all material respects on and as of the Closing Date as if
made on the Closing Date;
(c) DELIVERY OF DOCUMENTS. Each of PREI and DDRC shall have
delivered all of the documents contemplated to be delivered by it
pursuant to this Agreement all in form and substance reasonably
satisfactory to the General Partner; and
(d) LEGAL PROCEEDINGS. No order of any court or administrative
agency shall be in effect that restrains or prohibits any of the
transactions contemplated by this Agreement, and no suit, action,
inquiry, investigation or proceeding in which it will be, or it is
sought to restrain, prohibit or change the terms of or obtain damages
or other relief in connection with this Agreement or the Limited
Partnership Agreements, which in the judgment of the General Partner
makes it inadvisable to proceed with the consummation of such
transactions, shall have been instituted by any Person.
4.3 CONDITIONS PRECEDENT OF DDRC. Without limiting the scope
of all conditions to be satisfied prior to DDRC entering into the Limited
Partnership Agreements and making the capital contributions contemplated
thereby, it is contemplated that the following matters shall have been completed
to the satisfaction of or waived by DDRC prior thereto:
(a) FULFILLMENT OF OBLIGATIONS. Each of the General Partner
and PREI shall have complied in all material respects with all of its
obligations and covenants under this Agreement with respect to the
Ventures required to be performed by it on or before the Closing Date;
(b) REPRESENTATIONS AND WARRANTIES. All of the representations
and warranties of PREI and the General Partner hereunder shall be true,
correct and complete in all material respects on and as of the Closing
Date as if made on the Closing Date;
(c) DELIVERY OF DOCUMENTS. Each of PREI and the General
Partner shall have delivered all of the documents contemplated to be
delivered by it pursuant to this Agreement all in form and substance
reasonably satisfactory to the General Partner; and
(d) LEGAL PROCEEDINGS. No order of any court or
administrative agency shall be in effect that restrains or
-11-
15
prohibits any of the transactions contemplated by this Agreement, and
no suit, action, inquiry, investigation or proceeding in which it will
be, or it is sought to restrain, prohibit or change the terms of or
obtain damages or other relief in connection with this Agreement or the
Limited Partnership Agreements, which in the judgment of the General
Partner makes it inadvisable to proceed with the consummation of such
transactions, shall have been instituted by any Person.
ARTICLE V
CLOSING
The Closing shall take place by mail or telefax on the date
hereof after the satisfaction or waiver of each of the conditions precedent with
respect to the Ventures (which shall include without limitation all of the
conditions precedent set forth in Sections 4.1, 4.2 and 4.3 hereof), or on such
other day as DDRC, the General Partner and PREI shall agree or at such other
place as DDRC, the General Partner and PREI shall agree (such date referred to
as the "Closing Date").
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
6.1 REPRESENTATIONS AND WARRANTIES OF DDRC. DDRC hereby
represents and warrants to PREI and the General Partner as follows:
(a) DDRC is a corporation duly incorporated and validly
existing under the laws of the State of Ohio, with all requisite power
and authority to own, lease and operate its properties and to carry on
its business as now being conducted. DDRC has all requisite power and
authority to enter into the Transaction Documents and to carry out the
transactions contemplated hereby and thereby.
(b) DDRC, by executing this Agreement, represents and warrants
that it is an accredited investor, that its interests in the Ventures
will be acquired by it for its own account, for investment and not with
a view to resale or distribution thereof.
(c) The execution and delivery of the Transaction Documents
and the consummation of the transactions contemplated thereby have been
duly authorized by all necessary corporate action on the part of DDRC.
The Transaction Documents have been or will be executed and delivered
by a duly authorized officer of DDRC and constitute, or will constitute
upon execution and delivery, the valid and
-12-
16
binding obligations of DDRC enforceable against DDRC in accordance with
the terms hereof and thereof, subject as to enforcement to bankruptcy,
insolvency, reorganization and other laws of general applicability
relating to or affecting creditors' rights and to general principles of
equity.
(d) The execution, delivery and performance of the Transaction
Documents by DDRC do not or will not: (i) violate any decree or
judgment of any court or governmental authority that may be applicable
to DDRC, (ii) violate any law (or regulation promulgated under any
law), (iii) violate or conflict with, or result in a breach of, or
constitute a default (or an event with or without notice or lapse of
time or both would constitute a default) under, any contract or
agreement to which DDRC is a party or (iv) violate or conflict with any
provision of the organizational documents of DDRC.
(e) No broker, finder, agent or other intermediary has been
employed by or on behalf of DDRC in connection with the negotiation or
consummation of this Agreement, and no such party has any claim for any
commission, finder's fee or similar amount payable as a result of any
engagement of such party by DDRC.
(f) None of DDRC nor any officer, director, employee, or agent
of DDRC exercising any authority or conduct with respect to this
Agreement or any Venture or the assets thereof, have prior to the date
hereof or the term of this Agreement or of any Venture, been convicted
of a crime described in Section 411 of ERISA.
6.2 REPRESENTATIONS AND WARRANTIES OF PREI. PREI hereby
represents and warrants to DDRC and the General Partner as follows:
(a) PIC is a corporation duly formed and validly existing
under the laws of the State of New Jersey, with all requisite power and
authority to carry on its business as now being conducted. PIC has all
requisite power and authority to enter into this Agreement and to carry
out the transactions contemplated hereby.
(b) PIC, by executing this Agreement, represents and warrants
that it and each PREI Investor is an accredited investor, that its
interests in the Ventures will be acquired for the PREI Investor's own
account, or for the account of a commingled pension trust or other
institutional investor previously specified in writing to the General
Partner with respect to whom it has full investment discretion, for
investment and not with a view to resale or distribution thereof.
(c) The execution and delivery of the Transaction
Documents and the consummation of the transactions
-13-
17
contemplated thereby have been duly authorized by all necessary
corporate action on the part of PIC. The Transaction Documents have
been or will be executed and delivered by a duly authorized officer of
PIC and constitute, or will constitute upon execution and delivery, the
valid and binding obligations of the PREI Investors enforceable against
the PREI Investors in accordance with the terms hereof and thereof,
subject as to enforcement to bankruptcy, insolvency, reorganization and
other laws of general applicability relating to or affecting creditors'
rights and to general principles of equity.
(d) PIC has full power and authority to act on behalf of each
PREI Investor and to bind each PREI Investor to the Limited Partnership
Agreement to which such PREI Investor is a party. Upon execution and
delivery, each Limited Partnership Agreement to which a PREI Investor
is a party will constitute the valid and binding obligations of such
PREI Investor in accordance with the terms thereof, subject as to
enforcement to bankruptcy, insolvency, reorganization and other laws of
general applicability relating to or affecting creditors' rights and to
general principles of equity.
(e) The execution, delivery and performance of the Transaction
Documents by PIC and by each PREI Investor do not or will not: (i)
violate any decree or judgment of any court or governmental authority
that may be applicable to PIC, PREI or a PREI Investor, (ii) violate
any law (or regulation promulgated under any law), (iii) violate or
conflict with, or result in a breach of, or constitute a default (or an
event with or without notice or lapse of time or both would constitute
a default) under, any contract or agreement to which PIC, PREI or a
PREI Investor is a party or (iv) violate or conflict with any provision
of the organizational documents of PIC or a PREI Investor.
(f) No broker, finder, agent or other intermediary has been
employed by or on behalf of PIC, PREI or any PREI Investor in
connection with the negotiation or consummation of this Agreement, and
no such party has any claim for any commission, finder's fee or similar
amount payable as a result of any engagement of such party by PIC, PREI
or any PREI Investor.
(g) Each PREI Investor which is deemed to hold ERISA plan
assets within the meaning of 29 CFR ss. 2510.101-3 shall either (i) be
an insurance company pooled separate account within the meaning of
Prohibited Transaction Exemption 90-1, 55 Fed. Reg. 2891 (Jan. 29,
1990) or (ii) be an investment fund with respect to which PREI serves
as a qualified professional asset manager as defined in Prohibited
Transaction Exemption 84-14, 49 Fed. Reg. 9494 (Mar. 13, 1984) and 50
Fed. Reg. 41430 (Oct. 10, 1985).
-14-
18
6.3 REPRESENTATIONS AND WARRANTIES OF THE GENERAL PARTNER. The
General Partner hereby represents and warrants to PREI and DDRC as follows:
(a) The General Partner is a limited liability company duly
organized and validly existing under the laws of the State of Ohio,
with all requisite power and authority to own, lease and operate its
properties and to carry on its business as now being conducted. DDRC
has all requisite power and authority to enter into the Transaction
Documents and to carry out the transactions contemplated thereby.
(b) The General Partner, by executing this Agreement,
represents and warrants that it is an accredited investor, that its
interests in the Ventures will be acquired by it for its own account,
for investment and not with a view to resale or distribution thereof.
(c) The execution and delivery of the Transaction Documents
and the consummation of the transactions contemplated thereby have been
duly authorized by all necessary limited liability company action on
the part of the General Partner. The Transaction Documents have been or
will be executed and delivered by a duly authorized member of the
General Partner and constitute, or will constitute upon execution and
delivery, the valid and binding obligations of the General Partner
enforceable against the General Partner in accordance with the terms
thereof, subject as to enforcement to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or
affecting creditors' rights and to general principles of equity.
(d) The execution, delivery and performance of the Transaction
Documents by the General Partner do not or will not: (i) violate any
decree or judgment of any court or governmental authority that may be
applicable to the General Partner, (ii) violate any law (or regulation
promulgated under any law), (iii) violate or conflict with, or result
in a breach of, or constitute a default (or an event with or without
notice or lapse of time or both would constitute a default) under, any
contract or agreement to which the General Partner is a party or (iv)
violate or conflict with any provision of the organizational documents
of the General Partner.
(e) Other than CS Securities, no broker, finder, agent or
other intermediary has been employed by or on behalf of the General
Partner in connection with the negotiation or consummation of this
Agreement, and no such party has any claim for any commission, finder's
fee or similar amount payable as a result of any engagement of such
party by the General Partner.
-15-
19
(f) None of the General Partner nor any member, manager,
employee, or agent of the General Partner exercising any authority or
conduct with respect to this Agreement or any Venture or the assets
thereof, have prior to the date hereof or the term of this Agreement or
of any Venture, been convicted of a crime described in Section 411 of
ERISA.
ARTICLE VII
TERMINATION
Except for the provisions of Sections 3.1, 3.3 and 3.4 as well
as Article VIII, this Agreement will terminate upon the termination of all of
the Limited Partnership Agreements.
ARTICLE VIII
INDEMNIFICATION
8.1 INDEMNIFICATION BY DDRC. DDRC agrees to indemnify each of
the General Partner, PIC, PREI and the PREI Investors against, and agrees to
hold harmless each of the General Partner, PIC, PREI and the PREI Investors
from, any and all Losses incurred or suffered by any of the General Partner,
PIC, PREI or any PREI Investor relating to or arising out of or in connection
with (i) any of the following with respect to PREI and the General Partner and
(ii) paragraph (c) with respect to each Venture:
(a) any breach of or any inaccuracy in any representation or
warranty made by DDRC in this Agreement; PROVIDED that notice of their
claim shall have been given to DDRC not later than the close of
business on the third anniversary of the Closing Date;
(b) any breach of or failure by DDRC to perform any covenant
or obligation of DDRC set out or contemplated in this Agreement;
PROVIDED that a notice of their claim shall have been given to DDRC
prior to the expiration of the statute of limitations with respect to
claims of the nature of the claim being asserted by any of the General
Partner, PIC, PREI or any PREI Investor; and
(c) all actions taken by shareholders of DDRC (acting as such)
relating to or arising out of or in connection with DDRC's
participation in the Program.
8.2 INDEMNIFICATION BY THE GENERAL PARTNER. The General
Partner agrees to indemnify each of DDRC, PIC, PREI and the PREI Investors
against, and agrees to hold harmless each of DDRC, PIC, PREI and the PREI
Investors from, any and all Losses incurred or
-16-
20
suffered by any of DDRC, PIC, PREI or any PREI Investor relating to or arising
out of or in connection with any of the following:
(a) any breach of or any inaccuracy in any representation or
warranty made by the General Partner in this Agreement; PROVIDED that
notice of their claim shall have been given to the General Partner not
later than the close of business on the third anniversary of the
Closing Date; and
(b) any breach of or failure by the General Partner to perform
any covenant or obligation of the General Partner set out or
contemplated in this Agreement; PROVIDED that a notice of their claim
shall have been given to the General Partner prior to the expiration of
the statute of limitations with respect to claims of the nature of the
claim being asserted by any of DDRC, PIC, PREI or any PREI Investor.
8.3 INDEMNIFICATION BY PIC. PIC agrees to indemnify DDRC, the
General Partner and each Venture against, and agrees to hold DDRC, the General
Partner and each Venture harmless from, any and all Losses incurred or suffered
by DDRC, the General Partner or any Venture relating to or arising out of or in
connection with (i) any of the following with respect to DDRC and the General
Partner and (ii) paragraph (c) with respect to each Venture:
(a) any breach of or any inaccuracy in any representation or
warranty made by PREI in this Agreement; PROVIDED that a notice of
their claim shall have been given to PREI not later than the close of
business on the third anniversary of the Closing Date;
(b) any breach of or failure by PREI to perform any covenant
or obligation of PREI set out or contemplated in this Agreement;
PROVIDED that a notice of their claim shall have been given to PREI
prior to the expiration of the statute of limitations with respect to
claims of the nature of the claim being asserted by any of DDRC or the
General Partner; or
(c) all actions taken by a participant in or beneficiary of a
PREI Investor (acting as such), relating to or arising out of or in
connection with PIC's or PREI's or a PREI Investor's participation in
the Program.
8.4 CLAIMS. As soon as is reasonably practicable after
becoming aware of a claim for indemnification under this Agreement, the
indemnified person shall promptly give notice to the indemnifying person of such
claim and the amount the indemnified person will be entitled to receive
hereunder from the indemnifying person; PROVIDED that the failure of the
indemnified person to give notice shall not relieve the indemnifying person of
its obligations under this Article VIII, except to the extent (if any) that the
indemnifying person shall have been prejudiced thereby. If the indemnifying
person does not object in writing to such
-17-
21
indemnification claim within 30 days of receiving notice thereof, the
indemnified person shall be entitled to recover promptly from the indemnifying
person the amount of such claim, and no later objection by the indemnifying
person shall be permitted. If the indemnifying person agrees that it has an
indemnification obligation but objects that it is obligated to pay only a lesser
amount, the indemnified person shall nevertheless be entitled to recover
promptly from the indemnifying person the lesser amount, without prejudice to
the indemnified person's claim for the difference.
8.5 INSURANCE OR THIRD-PARTY INDEMNIFICATION. Notwith-
standing anything to the contrary herein, an indemnifying person shall not be
liable for a Loss arising out of or in connection with any matter described in
this Article VIII if and to the extent such Loss is covered by a policy of
insurance or benefits from a right to indemnification from a Person not party to
this Agreement and payment is made under such policy to the indemnified person
by the insurer or under such right to indemnification by such Person, as
applicable. Notwithstanding anything to the contrary herein, PREI, DDRC and the
General Partner may acquire insurance against Losses arising in connection with
this Agreement.
ARTICLE IX
MISCELLANEOUS
9.1 NOTICES. All notices and demands under this Agreement
shall be in writing and may be either delivered personally (which shall include
deliveries by courier), by telefax or other wire transmission (with request for
assurance of receipt in a manner appropriate with respect to communications of
that type, provided that a confirmation copy is concurrently sent by a
nationally recognized express courier for overnight delivery) or mailed, postage
prepaid, by certified or registered mail, return receipt requested.
If to PREI, addressed as follows:
Prudential Real Estate Investors
8 Campus Drive
Parsippany, NJ 07054
Attention: Joseph D. Margolis
Fax: (973) 683-1752
with a copy to:
Mayer, Brown & Platt
190 S. LaSalle Street
Chicago, IL
Attention: Bert Krueger
Fax: (312) 706-9122
-18-
22
If to the General Partner, addressed as follows:
Retail Value Management, Ltd.
The Heritage
34555 Chagrin Boulevard, Suite CC-2
Moreland Hills, Ohio 44022
Attention: Scott A. Wolstein
Fax: (216) 247-0434
with a copy to:
Albert T. Adams
Baker & Hostetler LLP
3200 National City Center
1900 East 9th Street
Cleveland, Ohio 44114
Fax: (216) 696-0740
If to DDRC:
Developers Diversified Realty Corporation
The Heritage
34555 Chagrin Boulevard
Moreland Hills, Ohio 44022
Attention: James A. Schoff
Fax: (216) 247-0434
With copy to:
Albert T. Adams
Baker & Hostetler LLP
3200 National City Center
Cleveland, Ohio 44114
Fax: (216) 696-0740
Unless delivered personally or by telefax or other wire transmission (which
shall be deemed delivered on the next business day following the date of such
personal delivery or transmission), any notice shall be deemed to have been made
three days following the date so mailed. Any party hereof may designate a
different address to which notices and demands shall thereafter be directed by
written notice given in the same manner and directed to the other parties at
their offices.
9.2 NO THIRD-PARTY BENEFICIARIES. Other than the PREI
Investors, the parties do not intend to confer any benefit hereunder on any
Person other than the parties hereto and any Ventures that are formed as a
result of the terms hereof.
9.3 NO ASSIGNMENT. No party hereto shall have the right to
assign any right or obligation under this Agreement to any other
-19-
23
Person, except that (i) DDRC shall have the right to assign all or any portion
of its interest in any Venture to a Person in which DDRC, directly or
indirectly, owns 100% of such Person's equity securities and (ii) each of the
parties hereto shall be entitled to assign all or any portion of its interest in
any Venture to the extent permitted by the applicable Limited Partnership
Agreement.
9.4 EXECUTION IN COUNTERPARTS. This Agreement may be executed
in several counterparts, each of which shall be deemed an original but all of
which shall constitute one and same instrument.
9.5 AMENDMENTS. This Agreement may be amended, modified or
supplemented but only in a writing signed by all of the parties.
9.6 VALIDITY. If any provision of this Agreement or the
application of such provision to any Person or circumstance shall be held
invalid, the remainder of this agreement or the application of such provision to
Persons or circumstances other than those with respect to which it is held
invalid shall not be affected thereby and shall continue to be binding and in
force.
9.7 GOVERNING LAW. This Agreement and the rights of the
parties hereunder shall be governed by and interpreted in accordance with the
internal laws of the State of Delaware, without giving effect to the principles
of conflicts of law thereof.
9.8 JURISDICTION. The parties hereto consent to personal
jurisdiction in the State of Delaware and agree that the exclusive venue and
place of trial for their solution of any disputes arising in connection with the
interpretation or enforcement of this Agreement shall be the Federal District
Court for the District of Delaware.
9.9 ARBITRATION. The parties hereby agree to submit all
controversies, claims and matters in dispute in respect of this Agreement to
arbitration in Wilmington, Delaware, according to the commercial arbitration
rules of the American Arbitration Association from time to time in force. This
submission and agreement to arbitrate shall be specifically enforceable. The
parties may agree on a retired judge as sole arbitrator. In the absence of such
agreement, there shall be three arbitrators, selected in accordance with the
commercial arbitration rules of the American Arbitration Association: one
attorney and/or retired judge, one expert in real estate investment; and one
certified public accountant. A decision agreed on by two of the arbitrators
shall be the decision of the arbitration panel; PROVIDED, HOWEVER, that in the
case of monetary damages, if there is not agreement of two arbitrators as to the
amount of the award, then the average of the two amounts that are closest to
each other shall be the final award of the arbitration panel for the purpose of
this Agreement. The arbitration panel may elect to specifically enforce this
Agreement. The parties agree to abide by all awards rendered in such
proceedings. Any award shall include costs and reasonable
-20-
24
attorneys' fees to the successful party. Such awards shall be final and binding
on all parties. There shall be no appeal therefrom other than for fraud or
willful misconduct. All awards may be filed with the clerk of one or more
courts, State or Federal, having jurisdiction over the party against whom such
an award is rendered or its property as a basis of judgment and of the issuance
of execution for its collection. Nothing in this Agreement and/or the exhibits
hereto shall be deemed to prevent the arbitration panel from exercising
authority to permit the exercise by a party of its legal and/or equitable
remedies including right of offset and specific performance. The parties agree
that this Section shall be valid, binding and enforceable and shall survive the
termination of this Agreement.
9.10 WAIVER OF JURY TRIAL. THE PARTIES HERETO HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ANY RELATED
DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
VERBAL OR WRITTEN) OR ACTIONS OF THE PARTIES HERETO. EACH PARTY HERETO
ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION
FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH RELATED DOCUMENT TO WHICH
IT IS A PARTY) AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES
ENTERING INTO THIS AGREEMENT AND EACH SUCH OTHER RELATED DOCUMENT.
9.11 WAIVER. The waiver by any party hereto of the breach of
any term, covenant, agreement or condition herein contained shall not be deemed
a waiver of any subsequent breach of the same or any other term, covenant,
agreement or condition herein, nor shall any custom, practice or course of
dealing arising among the parties hereto in the administration hereof by
construed as a waiver or diminution of the right of any party hereto to insist
upon the strict performance by any other party hereto of the terms, covenants
agreements and conditions herein contained.
9.12 BINDING EFFECT. Except as herein otherwise provided, this
Agreement shall be binding upon and inure to the benefit of the parties, their
legal representatives, heirs, administrators, executors, successors and
permitted assigns.
9.13 ENTIRE AGREEMENT. This Agreement, including the Schedules
and Exhibits hereto, constitutes the entire understanding and agreement of the
parties hereto with respect to the subject matter hereof and supersedes all
other prior agreements and understandings, written or oral, between the parties
with respect to the subject matter hereof.
9.14 REMEDIES NOT EXCLUSIVE. Any remedies herein contained for
breaches of obligations hereunder shall not be redeemed to be exclusive and
shall not impair the right of any party to exercise any other right or remedy,
whether for damages, injunction or otherwise.
-21-
25
IN WITNESS WHEREOF, this Agreement has been executed by each
of the parties hereto as of the date of this Agreement set forth above.
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By: /s/ [ILLEGIBLE SIGNATURE]
-----------------------------
Name: [ILLEGIBLE NAME]
----------------------
Title: Vice President
----------------------
DEVELOPERS DIVERSIFIED REALTY
CORPORATION
By: /s/ Scott A. Wolstein
-----------------------------
Name: Scott A. Wolstein
----------------------
Title: President
----------------------
RETAIL VALUE MANAGEMENT, LTD.
By: /s/ Scott A. Wolstein
-----------------------------
Name: Scott A. Wolstein
----------------------
Title: Managing Member
----------------------
-22-