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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------------------------------------
SCHEDULE TO/A
TENDER OFFER STATEMENT UNDER SECTION 14(d)(1) OR 13(e)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
(Amendment No. 28)
TAUBMAN CENTERS, INC.
(Name of Subject Company (Issuer))
SIMON PROPERTY ACQUISITIONS, INC.
SIMON PROPERTY GROUP, INC.
WESTFIELD AMERICA, INC.
(Names of Filing Persons (Offerors))
COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of Class of Securities)
876664103
(CUSIP Number of Class of Securities)
James M. Barkley, Esq. Peter R. Schwartz, Esq.
Simon Property Group, Inc. Westfield America Inc.
National City Center 11601 Wilshire Boulevard
115 West Washington Street 12th Floor
Suite 15 East Los Angeles, CA 90025
Indianapolis, IN 46024 Telephone: (310) 445-2427
Telephone: (317) 636-1600
(Name, Address and Telephone Numbers of Person
Authorized to Receive Notices and Communications on Behalf of Filing Persons)
---------------------------------------------------------------
Copies to:
Steven A. Seidman, Esq. Scott V. Simpson, Esq.
Robert B. Stebbins, Esq. Skadden, Arps, Slate, Meagher & Flom LLP
Willkie Farr & Gallagher One Canada Square
787 Seventh Avenue Canary Wharf
New York, New York 10019 London, E14 5DS, England
Telephone: (212) 728-8000 Telephone: (44) 20 7519 7000
CALCULATION OF FILING FEE
- --------------------------------------------------------------------------------
TRANSACTION VALUATION* AMOUNT OF FILING FEE**
- --------------------------------------------------------------------------------
$1,193,880,540 $238,776.11
- --------------------------------------------------------------------------------
* Estimated for purposes of calculating the amount of the filing fee only.
Calculated by multiplying $20.00, the per share tender offer price, by
59,694,027 shares of Common Stock, consisting of (i) 50,908,965 outstanding
shares of Common Stock, (ii) 2,270 shares of Common Stock issuable upon
conversion of 31,784,842 outstanding shares of Series B Non-Participating
Convertible Preferred Stock, (iii) 7,202,785 shares of Common Stock
issuable upon conversion of outstanding partnership units of The Taubman
Realty Group, Limited Partnership ("TRG") and (iv) 1,580,007 shares of
Common Stock issuable upon conversion of outstanding options (each of which
entitles the holder thereof to purchase one partnership unit of TRG which,
in turn, is convertible into one share of Common Stock), based on Amendment
No. 1 to the Registrant's Preliminary Proxy Statement on Schedule 14A filed
on February 25, 2003, the Registrant's Schedule 14D-9 filed on December 11,
2002 and the Registrant's Annual Report on Forms10-K and 10-K/A for the
year ended December 31, 2002.
** The amount of the filing fee calculated in accordance with Regulation
240.0-11 of the Securities Exchange Act of 1934, as amended, equals 1/50th
of one percent of the value of the transaction.
|X| Check the box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
Amount Previously Paid: $248,745.11 Filing Party: Simon Property Group, Inc.; Simon Property
Form or Registration No.: Schedule TO (File No. 005-42862), Acquisitions, Inc.; Westfield America, Inc
Amendment No. 1 to the Schedule TO Date Filed: December 5, 2002, December 16, 2002 and
and Amendment No. 5 to the January 15, 2003
Schedule TO
|_| Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.
|_| Check the appropriate boxes below to designate any transactions to which
the statement relates.
|X| third-party tender offer subject to Rule 14d-1.
|_| issuer tender offer subject to Rule 13e-4.
|_| going-private transaction subject to Rule 13e-3.
|_| amendment to Schedule 13D under Rule 13d-2.
Check the following box if the filing is a final amendment reporting
the results of the tender offer: |_|
================================================================================
SCHEDULE TO
This Amendment No. 28 amends and supplements the Tender Offer
Statement on Schedule TO originally filed with the Securities and Exchange
Commission (the "Commission") on December 5, 2002, as amended and supplemented
by Amendment No. 1 thereto filed with the Commission on December 16, 2002, by
Amendment No. 2 thereto filed with the Commission on December 27, 2002, by
Amendment No. 3 thereto filed with the Commission on December 30, 2002, by
Amendment No. 4 thereto filed with the Commission on December 31, 2002, by
Amendment No. 5 thereto filed with the Commission on January 15, 2003, by
Amendment No. 6 thereto filed with the Commission on January 15, 2003, by
Amendment No. 7 thereto filed with the Commission on January 16, 2003, by
Amendment No. 8 thereto filed with the Commission on January 22, 2003, by
Amendment No. 9 thereto filed with the Commission on January 23, 2003, by
Amendment No. 10 thereto filed with the Commission on February 7, 2003, by
Amendment No. 11 thereto filed with the Commission on February 11, 2003, by
Amendment No. 12 thereto filed with the Commission on February 18, 2003, by
Amendment No. 13 thereto filed with the Commission on February 21, 2003, by
Amendment No. 14 thereto filed with the Commission on February 21, 2003, by
Amendment No. 15 thereto filed with the Commission on February 27, 2003, by
Amendment No. 16 thereto filed with the Commission on February 27, 2003, by
Amendment No. 17 thereto filed with the Commission on February 28, 2003, by
Amendment No. 18 thereto filed with the Commission on March 3, 2003, by
Amendment No. 19 thereto filed with the Commission on March 6, 2003, by
Amendment No. 20 thereto filed with the Commission on March 18, 2003, by
Amendment No. 21 thereto filed with the Commission on March 21, 2003, by
Amendment No. 22 thereto filed with the Commission on March 28, 2003, by
Amendment No. 23 thereto filed with the Commission on March 31, 2003, by
Amendment No. 24 thereto filed with the Commission on April 30, 2003, by
Amendment No. 25 thereto filed with the Commission on May 2, 2003, by Amendment
No. 26 thereto filed with the Commission on May 9, 2003 and by Amendment No. 27
thereto filed with the Commission on May 12, 2003 (as amended and supplemented,
the "Schedule TO") relating to the offer by Simon Property Acquisitions, Inc., a
Delaware corporation (the "Purchaser") and wholly owned subsidiary of Simon
Property Group, Inc., a Delaware corporation ("SPG Inc."), to purchase all of
the outstanding shares of common stock, par value $.01 per share (the "Shares"),
of Taubman Centers, Inc. (the "Company") at a purchase price of $20.00 per
Share, net to the seller in cash, without interest thereon, upon the terms and
subject to the conditions set forth in the Offer to Purchase, dated December 5,
2002 (the "Offer to Purchase"), and the Supplement to the Offer to Purchase,
dated January 15, 2003 (the "Supplement"), and in the related revised Letter of
Transmittal (which, together with any supplements or amendments, collectively
constitute the "Offer"). This Amendment No. 28 to the Schedule TO is being filed
on behalf of the Purchaser, SPG Inc. and Westfield America, Inc. ("WEA").
Capitalized terms used and not defined herein shall have the
meanings assigned to such terms in the Offer to Purchase, the Supplement and the
Schedule TO, as applicable.
The item numbers and responses thereto below are in accordance
with the requirements of Schedule TO.
Item 7. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Item 7 of the Schedule TO is hereby amended and supplemented by
deleting the penultimate paragraph under Section 8, "Source and Amount
of Funds," in the Supplement to the Offer to Purchase and inserting in
its place the following paragraphs:
Westfield America Limited Partnership ("WALP") has obtained from UBS
Warburg Real Estate Investments Inc. and Lehman Brothers Bank FSB (or
an affiliate thereof), a commitment letter, dated April 8, 2003
providing for a credit facility (the "WALP Credit Facility") in an
aggregate amount of up to $750 million for a 36 month term. The WALP
Credit Facility will provide sufficient funds for WEA or its designated
assignee to acquire 50% of the Purchaser (or its designee) upon
completion of the Offer. WEA will unconditionally guarantee all
obligations under the WALP Credit Facility. The commitment letter dated
January 15, 2003 from Deutsche Bank AG, Cayman Islands Branch, and UBS
AG, Stamford Branch to WEA which provided for a credit facility in an
aggregate amount of up to $550 million expired undrawn on May 14, 2003.
The WALP Credit Facility will consist of two tranches: Tranche A in an
amount up to $450 million ("Tranche A") and Tranche B in an amount up
to $300 million ("Tranche B"). Amounts drawn and outstanding under
Tranche A will bear interest at WALP's option at a rate equal to (i)
the greater of (A) 30-day LIBOR and (B) 1.20% per annum plus, in each
case, a margin of 1.15% (the "Tranche A Margin") or (ii) the "Adjusted
Base Rate" for such day plus the Tranche A Margin, where the "Adjusted
Base Rate" is equal to the higher of (A) the Prime Rate for such day
and (B) 0.50% plus the Federal Funds Rate. Tranche A will be secured by
a first mortgage lien on certain real estate properties of WALP or one
or more of its subsidiaries.
Amounts drawn and outstanding under Tranche B will bear interest at
WALP's option at a rate equal to (i) the greater of (A) 30-day LIBOR
and (B) 1.20% per annum plus, in each case, a margin of 2.50% (the
"Tranche B Margin") or (ii) the "Adjusted Base Rate" for such day plus
the Tranche B Margin. Tranche B will be secured by, if not restricted
by the terms of certain existing agreements or the terms of certain
existing indebtedness, a pledge of WALP's equity interest in any U.S.
subsidiary that owns, directly or indirectly, real estate assets, which
equity interests must have an aggregate value of the lesser of (i) 200%
of the then outstanding principal balance of the Tranche B facility and
(ii) $500,000.
The WALP Credit Facility will contain customary representations and
warranties, covenants, voluntary and mandatory repayment provisions and
events of default.
WALP expects to repay the borrowings under the WALP Credit Facility out
of cash from operations, the proceeds from other short- and long-term
debt financings, joint venture equity, asset sales and/or issuances of
securities. WEA currently does not have alternative financing
arrangements in the event that it does not obtain financing under its
primary financing plans.
A copy of the commitment letter for the WALP Credit Facility, dated
April 8, 2003, is filed herewith as Exhibit (a)(5)(zz).
Item 11. ADDITIONAL INFORMATION.
On May 12, 2003, the SPG Plaintiffs filed a Brief in Opposition
to Defendants' Motion to Suspend Injunction Pending Appeal (the
"Brief") in the United States District Court for the Eastern
District of Michigan, in response to the Motion to Suspend
Injunction Pending Appeal filed on May 9, 2003 by the Company,
the Company Board and certain members of the Taubman family. A
copy of the Brief is filed herewith as Exhibit (a)(5)(YY).
Item 12. EXHIBITS.
(a)(5)(YY) Brief of SPG Plaintiffs in Opposition to Defendants' Motion to
Suspend Injunction Pending Appeal, filed by Simon Property Group,
Inc. and Simon Property Acquisitions, Inc. on May 12, 2003 in
the United States District Court for the Eastern District of
Michigan.
(a)(5)(ZZ) Commitment Letter, dated April 8, 2003, between Westfield
America Limited Partnership, UBS Warburg Real Estate Investments
Inc. and Lehman Brothers Bank FSB.
SIGNATURE
After due inquiry and to the best of their knowledge and
belief, the undersigned hereby certify as of May 13, 2003 that the information
set forth in this statement is true, complete and correct.
SIMON PROPERTY GROUP, INC.
By: /s/ JAMES M. BARKLEY
--------------------------------------
Name: James M. Barkley
Title: Secretary and General Counsel
SIMON PROPERTY ACQUISITIONS, INC.
By: /s/ JAMES M. BARKLEY
--------------------------------------
Name: James M. Barkley
Title: Secretary and Treasurer
After due inquiry and to the best of its knowledge and belief,
the undersigned hereby certifies as of May 13, 2003 that the information set
forth in this statement is true, complete and correct.
WESTFIELD AMERICA, INC.
By: /s/ PETER R. SCHWARTZ
----------------------------------------
Name: Peter R. Schwartz
Title: Senior Executive Vice President
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- ------------
(a)(5)(YY) Brief of SPG Plaintiffs in Opposition to Defendants' Motion
to Suspend Injunction Pending Appeal, filed by Simon P
roperty Group, Inc. and Simon Property Acquisitions, Inc.
on May 12, 2003 in the United States District Court for the
Eastern District of Michigan.
(a)(5)(ZZ) Commitment Letter, dated April 8, 2003, between Westfield
America Limited Partnership, UBS Warburg Real Estate
Investments Inc. and Lehman Brothers Bank FSB.
EXHIBIT 99(a)(5)(YY)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
- ----------------------------------------x
:
SIMON PROPERTY GROUP, INC.,
SIMON PROPERTY ACQUISITIONS, INC., :
AND RANDALL J. SMITH,
:
Plaintiffs,
:
- against -
: CIVIL ACTION NO. 02-74799
TAUBMAN CENTERS, INC., A. ALFRED
TAUBMAN, ROBERT S. TAUBMAN, LISA : JUDGE VICTORIA A. ROBERTS
A. PAYNE, GRAHAM T. ALLISON, PETER
KARMANOS, JR., WILLIAM S. TAUBMAN, :
ALLAN J. BLOOSTEIN, JEROME A.
CHAZEN, AND S. PARKER GILBERT. :
Defendants. :
:
- ----------------------------------------x
BRIEF OF SPG PLAINTIFFS IN OPPOSITION TO DEFENDANTS'
MOTION TO SUSPEND INJUNCTION PENDING APPEAL
Carl H. von Ende (P21867)
Todd A. Holleman (P57699)
MILLER, CANFIELD, PADDOCK &
STONE, P.L.C.
150 West Jefferson, Suite 2500
Detroit, Michigan 48226-4415
Telephone: (313) 963-6420
Facsimile: (313) 496-7500
WILLKIE FARR & GALLAGHER
787 Seventh Avenue
New York, New York 10019
Telephone: (212) 728-8000
Facsimile: (212) 728-8111
TABLE OF CONTENTS
TABLE OF AUTHORITIES.....................................................................ii
STATEMENT OF THE ISSUES PRESENTED........................................................iv
CONTROLLING OR MOST APPROPRIATE AUTHORITIES...............................................v
PRELIMINARY STATEMENT.....................................................................1
INTRODUCTION..............................................................................1
ARGUMENT..................................................................................5
A. The Standards Under Fed. R. Civ. P. 62(c)...........................................5
B. Defendants Have Not Established A Likelihood of Reversal On Appeal, Nor "Serious
Questions Going to the Merits.".....................................................7
1. The Court Correctly Found That The 33.6% Controlling Block of Shares
May Not Be Voted Unless A Majority of Disinterested Shareholders Confer
Voting Rights On Those Shares In Accordance With The Control Share Act..........7
2. The Court Correctly Found That The Meeting Delay Amendment Had No
Compelling Justification And Was Designed To Interfere With Shareholder
Voting Rights...................................................................9
C. Defendants Have Failed to Establish That They Will Suffer Irreparable Harm
If A Stay is Not Granted...........................................................11
D. A Stay Will Injure Other Parties Interested in the Proceeding......................18
E. A Stay Is Not In The Public Interest...............................................19
CONCLUSION...............................................................................20
i
TABLE OF AUTHORITIES
CASES
BLASIUS INDUSTRIAL INC. V ATLAS CORP, 564 A.2d 651 (Del. Ch. 1988)........................................10
BOND PURCHASE, L.L.C., V. PATRIOT TAX CREDIT PROPERTIES, L.P., C.A. No. 16643-NC,
1999 Del. Ch. LEXIS 170 (1990)......................................................................15
CAMBRIDGE PLATING CO., INC. V. NAPCO, INC., 85 F.3d 752 (1st Cir. 1996)...................................10
COLUMBIA PICTURES INDUS., INC. V. KERKORIAN, No. CIV. A. 6334,
1980 WL 268104 (Del. Ch. Dec. 16, 1980).............................................................15
EDGAR V. MITE CORP., 457 U.S. 624 (1981)..................................................................18
FULLMER V. MICHIGAN DEP'T OF STATE POLICE, 207 F. Supp. 2d 663 (E.D. Mich. 2002)...........................5
GAF V. MILSTEIN, 453 F.2d 709 (2d Cir. 1971)...............................................................7
HOMAC INC. V. DSA FINANCE CORP., 661 F. Supp. 776 (E.D. Mich. 1987).......................................17
IN RE HOLLY FARMS CORP. SHAREHOLDERS LITIG., Civ. A. No. 10350,
1989 WL 25810 (Del. Ch. Mar. 22, 1989)..............................................................14
L.P. ACQUISITION CO. V. TYSON, 772 F.2d 201 (6th Cir. 1985)...............................................18
MENTOR GRAPHICS CORP. V. QUICKTURN DESIGN SYSTEMS, INC., 728 A.2d 25 (Del. Ch. 1998)......................11
MICHIGAN COALITION OF RADIOACTIVE MATERIAL USERS, INC. V. GRIEPENTROG,
945 F.2d 150 (6th Cir. 1991).......................................................5, 6, 10-11, 16, 17
NERKEN V. SOLAREX CORP., No. 6788 ,1982 WL 8785 (Del. Ch. April 30, 1982).................................14
SCHNELL V. CHRIS-CRAFT INDUS. INC., 285 A.2d 437 (Del. 1971)..............................................11
PLANT INDUS. INC. V. BERGMAN, 490 F. Supp. 265 (S.D.N.Y. 1980)............................................14
UNION PACIFIC CORP. V. SANTA FE PACIFIC CORP., Civ. A. Nos. 13778, 13587,
1994 WL 586924 (Del. Ch. Oct. 18, 1994 )............................................................14
WASHINGTON MET. AREA TRANSIT COMMISSION V. HOLIDAY TOURS, INC.,
559 F.2d 841 (D.C. Cir. 1977).......................................................................17
ii
STATUTES AND COURT RULES
Fed. R. Civ. P. 7.........................................................................................10
Fed. R. Civ. P. 62(c)......................................................................................5
Ind. Code 23-1-42-1........................................................................................7
Mich. Comp. Laws Section 450.1790 ET SEQ...................................................................1
Mich. Comp. Law. Section 450.1791..........................................................................7
15 U.S.C. Section 78m(d)...................................................................................8
17 C.F.R. Section 240.13d-5(b)(1)..........................................................................8
OTHER AUTHORITIES
11 Charles A. Wright, Arthur Miller & Mary Kane, FEDERAL PRACTICE & PROCEDURE, Section 2904
(2d ed. 2003)........................................................................................6
5 Charles A. Wright, Arthur Miller & Mary Kane, FEDERAL PRACTICE AND PROCEDURE Section 1192
(2d ed. 2003).......................................................................................10
iii
STATEMENT OF THE ISSUE PRESENTED
1. Whether this Court should suspend the injunction issued in an
Opinion and Order dated May 8, 2003, pending defendants' appeal to the United
States Court of Appeals for the Sixth Circuit where (1) defendants are unlikely
to prevail on the merits of the appeal, (2) defendants will not suffer any harm,
much less irreparable harm by the denial of a stay, (3) granting of a stay would
be tantamount to an injunction against shareholders of TCI from exercising their
voting rights, and (4) the public interest counsels strongly in favor of
assuring exercise of the shareholder franchise and respecting corporate
democracy.
The SPG Plaintiffs say no.
iv
CONTROLLING OR MOST APPROPRIATE AUTHORITIES
BLASIUS INDUS. INC. V ATLAS CORP, 564 A.2d 651 (Del. Ch. 1988)
FULLMER V. MICHIGAN DEP'T OF STATE POLICE, 207 F. Supp.2d 663 (E.D. Mich. 2002)
MICHIGAN COALITION OF RADIOACTIVE MATERIAL USERS, INC. V. GRIEPENTROG, 945 F.2d
150 (6th Cir. 1991)
UNION PACIFIC CORP. V. SANTA FE PACIFIC CORP., Civ. A. Nos. 13778, 13587, 1994
WL 586924 (Del. Ch. Oct. 18, 1994)
Fed. R. Civ. P. 62(c)
Mich. Comp. Laws Section 450.1790 ET SEQ.
15 U.S.C. Section 78m(d)
17 C.F.R. Section 240.13d-5(b)(1)
Official Comments to Ind. Code 23-1-42-1
v
PRELIMINARY STATEMENT
Plaintiffs Simon Property Group, Inc. and Simon Property Acquisitions,
Inc. (collectively "SPG") submit this brief in opposition to defendants' motion
to suspend injunction pending appeal. Defendants seek to suspend this Court's
preliminary injunction granted in an Amended Opinion and Order entered on May 8,
2003 (the "Order"), which ordered that (i) none of the 33.6% of the outstanding
voting stock of Taubman Centers, Inc. ("TCI" or the "Company") outlined in
defendants' November 14, 2002 Schedule 13D/A can be voted unless voting rights
are conferred on those shares in accordance with the Michigan Control Share
Acquisitions Act (the "Control Share Act"), Mich. Comp. Laws 450.1790 ET SEQ.,
and (ii) defendants are enjoined from enforcing the December 20, 2002 amendment
to the TCI bylaws (the "Meeting Delay Amendment") and must, instead, honor the
provision in place immediately prior to the amendment.
INTRODUCTION
Defendants' motion is based on nothing more than threats, accusations
and scare tactics. No sooner was the ink dry on the Court's May 8 Order when
defendants issued a press release calling the basis for the ruling on the
Control Share Act "outlandish" and excoriating the ruling as "so wrong." (Ex. A,
attached hereto.) Thus, the disrespect the Taubmans have shown for their
shareholders since last October has now extended to this Court.
1
Defendants' brief is replete with overblown rhetoric, with references
to claimed adverse effects on "hundreds of jobs,"(1) the "life or death of the
Company,"(2) the loss of hundreds of millions of dollars in revenues from
speculative business deals, and so on. Defendants speak of the publicly-traded
shares of TCI being "forcibly acquired" by SPG before appeal at $20 per share
(the all-time high for the Company's stock price), and of the "untenable"
position the Board would be in if it had to put the Company up for auction.
These assertions raise serious questions about defendants' credibility --
defendants have repeatedly told the shareholders that the Company is not for
sale, and that the SPG offer is futile. In fact, the actions taken by the
Taubmans to date have demonstrated that they will take whatever steps to ensure
that "their" company is NOT put up for auction. It is plain at this stage of the
proceedings just how desperate the Taubmans are in their refusal to allow TCI's
shareholders an opportunity to decide their own economic future.
None of defendants' overblown assertions can withstand scrutiny. The
Court's rulings on the Control Share Act and the Meeting Delay Amendment were
correct on the merits, and defendants cannot demonstrate a likelihood of
reversal on appeal, much less a showing of "strong likelihood" of reversal. In
particular, defendants' central contention that no "acquisition" of a 33.6%
controlling block of shares occurred at the time of the 13D filing in November
2002 ignores the fact that under settled 13D law and rules, a "group" acquires
all shares of each
- ----------
(1) Defs.' Br. at 2, 17.
(2) Defs.' Br. at 14.
2
member of the group upon formation of the group. And the new materials submitted
by defendants regarding adoption of the Meeting Delay Amendment merely confirm
the Court's finding that this amendment was, indeed, a defensive reaction to the
SPG tender offer having no purpose other than to frustrate shareholder voting
rights. The "spin" put on the amendment in the board minutes submitted by
defendants--that the amendment was merely intended to "create an orderly Board
controlled process" for holding a shareholder meeting -- is self-serving
nonsense.
Nor will defendants be irreparably harmed if the injunction is
maintained through appeal. Defendants misleadingly characterize the injunction
as the death knell for the Company, conveniently ignoring the fact that the
injunction is not against the Company but against the Taubman family voting
group and the directors the family obviously controls. The injunction does not
threaten the Company itself, only the family's control and domination of it.
All the injunction does is permit TCI's shareholders to VOTE on
whether to amend the Company's charter to make the Excess Share Provision
inapplicable to SPG and Westfield(3), and prevent defendants from making it more
difficult for shareholders to exercise their voting rights by delaying a meeting
called to vote on such an amendment. The injunction does not guarantee the
outcome of any such vote, it does not "force" TCI's common shareholders (99% of
- ----------
(3) The Excess Share Provision in TCI's Articles of Incorporation generally
prevents anyone from acquiring in excess of 8.23% of the value of the
outstanding capital stock of TCI; an acquisition in excess of this amount voids
AB INITIO any voting rights attached to the acquired shares.
3
whom are public) to tender to SPG/Westfield(4) and thus it does not guarantee
acceptance of the SPG tender offer -- only an opportunity for shareholders to
accept it. And the injunction does not prevent the TCI Board from putting up the
Company for a fair public auction today, tomorrow or indeed after the injunction
is affirmed.
The injunction also does not irrevocably strip the Taubman family of
voting rights for their Series B Preferred Stock, since they can restore those
voting rights as long as they get 51% of the disinterested shareholders to agree
to do so. And finally, the injunction does not impede the running of the
day-to-day business of TCI. It prevents (at least for the time being) the
Taubman family, as SHAREHOLDERS, from voting their Series B Preferred Stock, but
it does nothing to interfere with the management or operation of the business.
The notion that retail tenants will not deal with defendant "lame ducks" is
unsupported speculation -- and even if true, it would remain true throughout the
appeal whether or not the injunction is stayed. A stay will serve no purpose
other than to give the Taubmans an opportunity to falsely claim victory (yet
again) in another press release.
In order to further allay any unfounded fears as to the effect of the
injunction, SPG is willing to commit that it will not effectuate a merger
involving TCI until the appeal is decided. This commitment is, however,
conditioned on maintenance of the STATUS QUO during the pendency of the appeal
- -- that is, the defendants agreeing, or being ordered, not to take any
- ----------
(4) Consistent with federal tender offer rules, the SPG/Westfield offer permits
tendering shareholders to withdraw their previously tendered shares at any time
prior to expiration of the offer. (SPG App. at A6) ("Can I withdraw my
previously tendered shares?").
4
further actions that will have the effect of impeding or interfering with the
SPG/Westfield offer during the pendency of the appeal. It is also conditioned on
the Sixth Circuit granting expedited treatment of the appeal as defendants have
indicated they intend to seek.
ARGUMENT
A. THE STANDARDS UNDER FED. R. CIV. P. 62(c)
A motion to stay an injunction pending appeal is governed by Rule
62(c) of the Federal Rules of Civil Procedure. Courts in this circuit consider
the following factors in determining whether to issue the stay: "(1) whether the
stay applicant has made a strong showing that he is likely to succeed on the
merits; (2) whether the applicant will be irreparably injured absent a stay; (3)
whether issuance of the stay will injure the other parties interested in the
proceeding; and (4) where the public interest lies." FULLMER V. MICHIGAN DEP'T
OF STATE POLICE, 207 F. Supp.2d 663, 664 (E.D. Mich. 2002) (citations omitted).
In balancing these factors "the probability of success that must be
demonstrated is inversely proportional to the amount of irreparable injury that
[the stay applicant] will suffer absent the stay." MICHIGAN COALITION OF
RADIOACTIVE MATERIAL USERS, INC. V. GRIEPENTROG, 945 F.2d 150, 153 (6th Cir.
1991); FULLMER, 207 F. Supp.2d at 664. Thus, "even if a movant demonstrates
irreparable harm that DECIDEDLY OUTWEIGHS ANY POTENTIAL HARM TO THE DEFENDANT if
a stay is granted, he IS STILL REQUIRED TO SHOW, AT A MINIMUM, 'SERIOUS
QUESTIONS GOING TO THE MERITS.'" MICHIGAN COALITION, 945 F.2d at 153-4
(citations omitted) (emphasis added); SEE ALSO FULLMER, 207 F. Supp.2d at 664.
In evaluating the irreparable harm that might occur absent a stay, the
Sixth Circuit has expressly stated:
5
[W]e generally look to three factors (1) the
substantiality of the injury alleged; (2) the
likelihood of its occurrence; and (3) the adequacy
of the proof provided .... In addition, the harm
alleged MUST BE BOTH CERTAIN AND IMMEDIATE, RATHER
THAN SPECULATIVE OR THEORETICAL .... In order to
substantiate a claim that irreparable injury is
likely to occur, a movant MUST PROVIDE SOME
EVIDENCE THAT THE HARM HAS OCCURRED IN THE PAST
AND IS LIKELY TO OCCUR AGAIN. Of course, in order
for a reviewing court to adequately consider these
four factors, the movant must address each factor,
regardless of its relative strength, PROVIDING
SPECIFIC FACTS AND AFFIDAVITS SUPPORTING
ASSERTIONS THAT THESE FACTORS EXIST.
MICHIGAN COALITION, 945 F.2d at 153-154 (citations omitted) (emphasis added).
The Sixth Circuit has quoted with approval the following statement by the
Supreme Court on the element of irreparable harm:
[T]he key word in this consideration is
IRREPARABLE. Mere injuries, however substantial,
in terms of money, time and energy necessarily
expended in the absence of a stay, are not enough.
The possibility that adequate compensatory or
other corrective relief will be available at a
later date, in the ordinary course of litigation,
weighs heavily against a claim of irreparable
harm.
MICHIGAN COALITION, 945 F.2d at 154 (quoting SAMPSON V. MURRAY 415 U.S. 61, 90
(1974)) (emphasis in original). As Wright & Miller conclude, "[b]ecause the
burden of meeting this standard [irreparable injury] is a heavy one, more
commonly stay requests will not meet this standard and will be denied." 11
Charles A. Wright, Arthur Miller & Mary Kane, FEDERAL PRACTICE & PROCEDURE,
Section 2904 (2d ed. 2003).
6
B. DEFENDANTS HAVE NOT ESTABLISHED A LIKELIHOOD OF REVERSAL ON APPEAL,
NOR "SERIOUS QUESTIONS GOING TO THE MERITS."
1. The Court Correctly Found That The 33.6% Controlling Block of
Shares May Not Be Voted Unless A Majority of Disinterested
Shareholders Confer Voting Rights On Those Shares In Accordance
With The Control Share Act.
The Court correctly held that the Taubman family's formation of a
group in November 2002, together with their friends and associates, to vote
their combined 33.6% voting power against the SPG/Westfield offer constituted a
control share acquisition within the meaning of the Control Share Act. First,
the Court's finding that a "group" was formed with the filing of the Schedule
13D/A is unassailable. As the Court found, "[t]he family formed a group and
stated its intentions to combine its holdings with the shares obtained through
the Voting Agreements, amassing the ability to block the Simon takeover." (Order
at 40.)
Second, the Court correctly held that the termination of the voting
agreements between Robert Taubman and certain family friends holding 3% of TCI's
voting power did nothing to alter the conclusion that a group had been formed in
November 2002 to oppose the SPG offer. (Order at 43.)
Third, the Court correctly rejected defendants' contention that only
an acquisition of new shares can constitute a control share acquisition. The Act
"speaks not only in terms of the acquisition of ownership of shares, but also of
the power to direct the exercise of voting power with respect to shares." (Order
at 39.) SEE Mich. Comp. Law. Section 450.1791. In addition, citing the seminal
case of GAF V. MILSTEIN, 453 F.2d 709 (2d Cir. 1971), the Court correctly noted
that a "group" under the federal securities laws is deemed to be an entity
"separate and
7
distinct from its members," so that the group could only have gained voting
power over the group-held shares upon formation of the group. (Order at 40.)
This conclusion is also compelled by SEC Rule 13d-5, which provides
that "when two or more person agree to act together ... the group formed thereby
shall be DEEMED to have ACQUIRED ... all equity securities ... owned by any such
persons." 17 C.F.R. Section 240.13d-5(b)(1) (SPG App. at A1418). Rule 13d-5 was,
in turn, specifically cited and adopted by the Indiana Commentary on the Indiana
Control Share Act (SPG App. at A1421, Official Comments to Ind. Code 23-1-42-1).
As the Court correctly noted (and as defendants themselves have argued), the
Indiana Commentary provides authoritative guidance for interpretation of the
Michigan Control Share Act. (Order at 40-41.) Thus, under settled law, upon the
formation of the group outlined in the 13D/A, the group is deemed to have
acquired the entire 33.6% voting power held by individual members of the group.
This was a control share acquisition.
Defendants' assertion that SPG lacks standing to bring suit under the
Control Share Act can readily be rejected. SPG's claim under the Act is a
statutory claim, not a common law claim for breach of fiduciary duty. SPG is a
current shareholder of TCI seeking to enjoin the future voting of shares in
contravention of the Control Share Act. Thus, SPG is a shareholder of TCI at
precisely the time of the alleged wrong. Its standing is no greater, but no
lesser, than any other current TCI shareholder on this claim.
Lastly, defendants' claim that there was no "consideration" for the
acquisition of control shares by the group is belied by the text of the 13D/A,
which clearly sets forth the purpose of the formation of the group -- to thwart
the SPG offer. The group members' mutual
8
understanding and agreement toward that end, even if informal, is plainly
sufficient consideration under the Act.
In sum, in ruling on the Control Share Act claim, the Court did no
more than follow settled law and commentary as well as common sense. There is no
likelihood of reversal of this ruling.
2. The Court Correctly Found That The Meeting Delay Amendment Had No
Compelling Justification And Was Designed To Interfere With
Shareholder Voting Rights.
The Court also correctly struck down the Meeting Delay Amendment as an
improper interference with the shareholder franchise. Defendants claim that the
Meeting Delay Amendment issue was not before the Court, but they are wrong: both
the Amended Complaint and the Second Amended Complaint were explicit in claiming
that the "Meeting Delay Amendment is a breach of fiduciary duty by the board"
that "impede[s] and interfere[s] with the ability of the Company's shareholders
to exercise the right to vote." (Second Am. Compl. PARA 85.) Plaintiffs also
sought a declaration that the amendment is "null and void and of no further
force and effect." (ID. at PARA 87.) In addition, plaintiffs requested that the
Court "enjoin[] the Director Defendants from enforcing or applying the Meeting
Delay Amendment...." (ID. at PARA 94.) Defendants cannot seriously contend that
they did not have "notice" that plaintiffs sought to have the Meeting Delay
Amendment enjoined, particularly because the SPG Plaintiffs AMENDED THEIR
COMPLAINT specifically to add the Meeting Delay Amendment claim and a request
for an
9
injunction on that claim.(5) Both the Court and the parties were clearly "on
notice" that the Meeting Delay Amendment was subject to challenge.(6)
The Court correctly concluded that the Meeting Delay Amendment was a
defensive measure whose primary purpose was to make it "more difficult for
shareholders to exercise their voting rights." (Order at 35.) Defendants did not
offer any justification, much less a "compelling justification" for the Meeting
Delay Amendment. BLASIUS INDUS. INC. V ATLAS CORP., 564 A.2d 651 (Del. Ch.
1988). It is undisputed that the Meeting Delay Amendment, adopted just four days
after SPG announced its intention to call a special meeting of shareholders,
took the power to schedule a special meeting out of the hands of the public
shareholders and placed it with the incumbent TCI board. (Order at 35.) Based on
these facts, the Court determined that "the [Meeting Delay Amendment]
effectively makes it more difficult to call a special meeting, which in turn,
makes it more difficult for shareholders to vote...."
- ----------
(5) SPG's January 31, 2003 motion for preliminary injunction sought all relief
"the Court deems fair and equitable." (Mem. of Law In Supp. of SPG Pls.' Mot.
for a Prelim. Inj. at 25.) Furthermore, SPG Plaintiffs argued that the amended
bylaw was part of defendants' scheme of continuous wrongs directed at SPG and
TCI shareholders. (Reply Mem. of Law in Supp. of SPG Pls.' and Randall Smith's
Mot. for a Prelim. Inj. at 10.) Before its ruling, the Court was also provided
by defendants with a blacklined copy of the bylaws reflecting the December 20,
2002 amendment. SEE Letter dated May 1, 2003 from Bruce L. Segal to Ms. Linda
Vertriest.
(6) Rule 7 of the Federal Rules of Civil Procedure and L.R. 7.1(c)(2) are
designed to ensure that the Court and parties have notice of the grounds for
relief. CAMBRIDGE PLATING CO., INC. V. NAPCO, INC., 85 F.3d 752, 760 (1st Cir.
1996). "When a motion is challenged for lack of particularity the question is
'whether any party is prejudiced... or whether the court can comprehend the
basis for the motion and deal with it fairly.'" ID. (citing REGISTRATION CONTROL
SYS. INC. V. COMPUSYSTEMS, INC., 922 F.2d 805, 808 (Fed. Cir. 1990)). SEE ALSO 5
Charles A. Wright, Arthur Miller & Mary Kane, FEDERAL PRACTICE AND PROCEDURE
Section1192 (2d ed. 2003).
10
(ID.) Applying well-settled law, this Court enjoined enforcement of the Meeting
Delay Amendment finding that the defendants enacted it primarily to interfere
with the effectiveness of a shareholder vote without a compelling justification.
(ID.) (citing BLASIUS INDUS. INC. V ATLAS CORP., 564 A.2d 651 (Del. Ch. 1988)).
SEE ALSO SCHNELL V. CHRIS-CRAFT INDUS. INC., 285 A.2d 437 (Del. 1971)
Defendants' post-injunction justifications for the Meeting Delay
Amendment ring hollow. Defendants' submission of a December 18, 2002 lawyers'
memorandum (selectively redacted) and minutes of the December 20, 2002 TCI board
meeting (portions of which were hidden from SPG during discovery) are heavily
peppered with self-serving statements designed to create a litigation record.
These documents simply confirm that the Meeting Delay Amendment WAS TARGETED AT
SPG.(7)
C. DEFENDANTS HAVE FAILED TO ESTABLISH THAT THEY WILL SUFFER IRREPARABLE
HARM IF A STAY IS NOT GRANTED
As set forth by the Sixth Circuit in MICHIGAN COALITION, any
evaluation of irreparable harm should examine "(1) the substantiality of the
injury alleged; (2) the likelihood of
- ----------
(7) By contrast, in MENTOR GRAPHICS CORP. V. QUICKTURN DESIGN SYSTEMS, INC.,
728 A.2d 25 (Del. Ch. 1998), cited by defendants (Defs.' Br. at 8), the bylaw
amendment was justified on the grounds that it was necessary to allow the target
board "sufficient time to adequately inform itself about [the target company],
its business, and its true value," and also "to allow stockholders sufficient
time to consider alternatives, BEFORE THE BOARD DECIDED TO SELL THE COMPANY to
any acquiror." ID. at 36 (emphasis added). No such justification was offered by
defendants here, nor could it have been: the TCI board had already decided,
prior to adoption of the Meeting Delay Amendment, to reject the SPG offer as
"inadequate" and had concluded that the Company was not for sale. The Meeting
Delay Amendment was designed purely and simply to thwart SPG because the
Taubmans do NOT want to sell the company.
11
its occurrence; and (3) the adequacy of the proof provided." MICHIGAN COALITION
OF RADIOACTIVE MATERIAL USERS, INC. V. GRIEPENTROG, 945 F.2d 150, 153 (6th Cir.
1991). "In addition, the harm alleged must be both certain and immediate, rather
than speculative or theoretical." MICHIGAN COALITION, 945 F.2d at 153-154.
Defendants assert that absent a stay there will be no "meaningful
appellate review" because the failure to grant the stay "will end the Company's
existence as a publicly-traded corporation" and will lead to the "forcible"
acquisition of shares "by SPG before appeal." (Defs.' Br. at 5, 15). These
contentions are completely unfounded. This Court has simply held that (i) 33.6%
of the outstanding voting stock of TCI outlined in defendants' November 14, 2002
Schedule 13D/A cannot be VOTED unless voting rights are conferred on those
shares in accordance with the Control Share Act, and (ii) defendants are
enjoined from enforcing the Meeting Delay Amendment and that the bylaws in
effect prior to December 20, 2002 should be given effect.
TCI's shareholders should be allowed to vote their shares while the
Sixth Circuit resolves the issues on appeal. Defendants will suffer no
irreparable harm if the public shareholders are allowed to vote at a special
meeting during the appeal (indeed, the Taubmans can seek to restore voting
rights to their shares at the meeting, thereby mooting the appeal on the Control
Share Act claim). If the Sixth Circuit affirms the May 8 Order, defendants will
not be irreparably harmed. If the Sixth Circuit reverses the May 8 Order, any
vote on the Excess Share Provision at which the enjoined 33.6% block is not
permitted to vote can simply be set aside and treated as a nullity.
Assuming there is no stay of the May 8 Order, SPG expects the
following to occur: once SPG's and Westfield's revised preliminary proxy
materials receive clearance from
12
the SEC -- they were filed with the SEC today -- SPG and Westfield will solicit
TCI shareholders for the purpose of calling a special meeting to amend the
Excess Share Provision. The solicitation process could take a number of weeks.
If SPG and Westfield are successful in obtaining proxies from holders of 25% of
shares entitled to vote, they will then be able to call a special meeting on not
less than 10 days (and not more than 60 days) notice. SEE TCI Bylaws Sections
1.03, 1.04 (in effect prior to December 20, 2002) (attached as TCI 0011269-270
to the letter of Bruce L. Segal dated May 1, 2003). At that special meeting, the
shareholders will vote on whether to amend TCI's Charter to provide that the
Excess Share Provision does not apply to SPG or Westfield. In other words, the
only event on the relatively immediate horizon is A MEETING OF SHAREHOLDERS AND
A SHAREHOLDER VOTE.
Defendants themselves say there is no guarantee that 25% of the
shareholders will support the calling of a special meeting or that a shareholder
vote on the Excess Share Provision would be in SPG's and Westfield's favor. In
opposing the injunction, defendants argued to this Court that "[t]he fact that
shareholders tendered their stock, which can always be revoked, is hardly
indicative of the way those shareholders would vote EITHER TO CALL A MEETING OR
AT A MEETING if SPG ever does solicit proxies." (Defs.' Br. in Opp. to Pls.'
Mot. for a Prelim. Inj. at 41 n.37) (emphasis added).
Defendants will not be irreparably harmed by allowing the common
shareholders to call a special meeting and vote their shares. Quite the
opposite. The practical effect of a stay of the Court's May 8 Order would be to
"enjoin" the shareholders from calling a special meeting under the old bylaws
and exercising their voting rights to amend the Charter. It would in effect
"strip" them of their voting rights and the benefit of the Court's ruling. If
the Order is stayed and
13
the 33.6% controlling block is allowed to vote, the outcome of the vote would be
a foregone conclusion and there would be no point to holding it. And if
enforcement of the amended bylaw is stayed, the board will be able to delay the
special meeting for months. In either event, as a practical matter, SPG's
efforts to convene a special meeting will be stymied and TCI shareholders will
be denied their right to vote unencumbered by the defendants' unlawful
maneuvers.
In injunction cases involving contests for corporate control, courts
routinely allow the shareholder vote to proceed, on the basis that the results
of the vote can always be nullified if a court later finds that there are
grounds for setting aside the vote. The same principle militates in favor of
allowing TCI's shareholders to vote pending the Sixth Circuit's determination of
whether the 33.6% block of shares controlled by the Taubman family and friends
have voting rights under the Control Share Act. SEE, E.G., UNION PACIFIC CORP.
V. SANTA FE PACIFIC CORP., Civ. A. Nos. 13778, 13587, 1994 WL 586924 at *1 (Del.
Ch. Oct. 18, 1994) (refusing to enjoin shareholders from voting because "if a
shareholder vote were taken and shareholders rejected [merger], no judicial
action would be needed... [a]ssuming (arguendo) that the vote was tainted ...
then the shareholders' vote could be judicially nullified after the meeting. Any
judicially nullified shareholder approval could not have the legal effect of
'vesting' irremediable rights...."); IN RE HOLLY FARMS CORP. SHAREHOLDERS
LITIG., Civ. A. No. 10350, 1989 WL 25810 at *11 (Del. Ch. Mar. 22, 1989) ("I
will enjoin completion of the merger if it be approved, but will not enjoin
holding of the vote."); PLANT INDUS. INC. V. BERGMAN, 490 F. Supp. 265, 271
(S.D.N.Y. 1980) (lack of irreparable injury where election can be voided after
the fact); NERKEN V. SOLAREX CORP., No. 6788, 1982 WL 8785 at *2 (Del. Ch. Apr.
30, 1982) ("[T]here is considerable
14
reluctance on the part of this Court to enjoin an actual meeting of shareholders
itself as opposed to enjoining the consummation of some action taken at such a
meeting in the event that it receives the necessary vote."); COLUMBIA PICTURES
INDUS., INC. V. KERKORIAN, No. CIV. A. 6334, 1980 WL 268104 at *1 (Del. Ch. Dec.
16, 1980) ("[a] court should be extremely reluctant to enjoin the convening of a
meeting of stockholders and will do so only on rare occasions such as on a
showing of fraud....").
Once SPG obtains SEC clearance to solicit proxies, and if SPG succeeds
in obtaining proxies from 25% of the shareholders, and a special meeting is then
called, and if the Company's shareholders in turn vote in favor of amending the
Charter, then (and only then) will SPG and Westfield be in a position to
effectuate the merger. Assuming an expedited appeal to the Sixth Circuit, it is
not clear that SPG and Westfield could even be in a position to complete the
merger before the Sixth Circuit rules.
Furthermore, there is no guarantee that the tender offer will be
consummated. Contrary to defendants' assertion, no shareholder is "forced" to
tender to SPG/Westfield and whether shareholders elect to do so will depend on
whether, at the time, the $20 per share all cash offer is the best alternative
on the table.(8) If a better bid emerges before consummation of
- ----------
(8) SEE BOND PURCHASE, L.L.C., V. PATRIOT TAX CREDIT PROPERTIES, L.P., C.A. No.
16643-NC, 1999 Del. Ch. Lexis 170 (1990), where the Delaware Chancery Court
refused to stay its injunction requiring defendants to produce a shareholder
list to a potential acquiror, even though its disclosure would further
consummation of the tender offer. The BOND court rejected defendants' arguments
that failure to stay the injunction would moot its appeal, in part because,
under the offer, "investors are left free to decide independently whether to
respond to any prospective overture, sell in the secondary market or hold their
units." ID. at *29.
15
the SPG/Westfield tender offer, shareholders will be free to accept that offer.
And if, as defendants claim, an auction of the company would produce an offer of
between $25 to $30 per share (Defs. Br. at 3), then defendants are free (perhaps
even obliged) to maximize shareholder value by conducting a free and fair public
auction, REGARDLESS OF WHETHER THE ORDER IS AFFIRMED OR REVERSED OR WHETHER THE
INJUNCTION IS STAYED PENDING APPEAL. In truth, defendants' allusions to an
auction are a smokescreen: the reality is that defendants have been saying for
the past seven months that the Company is not for sale, and the Taubmans have no
intention whatsoever of allowing TCI to be sold. SEE, E.G., Taubman press
release issued May 1, 2003 (board's alleged belief that maximum value will not
"be realized by selling the Company at this time.")
Finally, even if the tender offer is consummated, effectuation of the
merger of TCI into SPG would take time and, as set forth in the tender offer
document, would be subject to a number of conditions and variables. (SPG App. at
A35) ("the timing and details of the Proposed Merger will depend on a variety of
factors and legal requirements...."). There is virtually no chance that a
merger could take place before an expedited appeal is resolved.
Defendants' further speculative assertions that they will suffer
monetary harm of hundreds of millions of dollars because they MIGHT not obtain
leases from retail tenants at a leasing convention in Las Vegas in two weeks
borders on the frivolous. Mall retail tenants primarily look to the LOCATION,
QUALITY AND RENT OF any potential space, not the identity of the landlord. If a
retailer wants to locate in one of TCI's current malls and can secure a
favorable long-term lease, it is not going to be deterred by the possibility
that at some future date SPG and Westfield acquire all the outstanding common
stock of the Company and thereafter effectuate a merger. In fact, the notion
that TCI's potential tenants would eschew a desirable lease because
16
of the prospect that SPG and Westfield might become their landlord some day
ignores the reality that TCI, SPG and Westfield share many of the same tenants.
(As defendants acknowledge, SPG is a competitor of TCI (Defs.' Br. at 16), a
reflection of the fact that they share and compete for many of the same
tenants). Indeed, SPG is the largest retail REIT in the nation and owns and
manages many high quality malls, so any insinuation that "high class" tenants
will not want to lease with SPG is utterly false. And even if tenants were
reluctant to deal with TCI as "lame ducks," as to which there is no proof, that
reluctance would stem from the prospect of defendants' losing their appeal,
separate and apart from whether a stay is or is not granted. Simply put,
defendants' assertion that failure to grant a STAY will create great financial
injury is, under the standards established in MICHIGAN COALITION, insubstantial,
unlikely, inadequately proven, uncertain, speculative and theoretical. MICHIGAN
COALITION, 945 F.2d at 153-154.
But in any event, absent a stay, defendants will not suffer any harm,
much less irreparable harm, in light of SPG Plaintiffs' assurances that if SPG
and Westfield do receive the requisite shareholder approval to amend the Charter
with respect to the Excess Share Provision, they nonetheless will not seek
effectuate a merger until the Sixth Circuit resolves the appeal. In other words,
SPG commits that it will not, as defendants state, "merge the Company into SPG"
(Defs.' Br. at 1) pending a resolution of the Sixth Circuit appeal.(9) SPG's
assurance is
- ----------
(9) In light of this assurance, defendants' cases involving companies being
"put out of business" before the appeal is heard (WASHINGTON MET. AREA TRANSIT
COMM'N V. HOLIDAY TOURS, INC., 559 F.2d 841 (D.C. Cir. 1977)) or where the eggs
cannot be "unscrambled" because the company has been "taken over" (HOMAC INC. V.
DSA FIN. CORP., 661 F. Supp. 776 (E.D. Mich. 1987)) are inapposite.
17
conditioned on maintenance of the STATUS QUO during the pendency of
the appeal, that is, defendants agreeing, or being ordered, not to take any
further actions that will have the effect of impeding or interfering with the
SPG/Westfield offer -- such as further bylaw amendments, appointments of
directors, share repurchases, or extraordinary transactions outside the ordinary
course of business -- during the pendency of the appeal. It is also conditioned
on an expedited briefing in the Sixth Circuit as defendants have indicated they
intend to seek.
D. A STAY WILL INJURE OTHER PARTIES INTERESTED IN THE PROCEEDING
This Court has already found that a "shareholder's right to vote
his/her shares is to be vigorously protected absent a compelling justification
for impeding or otherwise frustrating that right." (Order at 44.) Furthermore,
the Court has already ruled that SPG will be harmed -- both as a shareholder and
a tender offeror -- if the Taubman family is allowed to vote its shares to block
shareholders from considering the SPG/Westfield offer. (ID.) SPG will clearly be
injured if the shareholders cannot vote to amend the charter to make the Excess
Share Provision inapplicable to SPG and Westfield, and the shareholders
themselves, who own 99% of TCI, will be harmed if they cannot vote on such an
amendment.
Defendants' argument that SPG would not be harmed by a "modest delay
in proceeding with its tender offer" (Defs.' Br. at 17) misses the point. It is
well established that delay is the "most potent weapon" against a tender offer.
EDGAR V. MITE CORP., 457 U.S. 624, 638 n.12 (1981); L.P. ACQUISITION CO. V.
TYSON, 772 F.2d 201, 208-9 (6th Cir. 1985). Thus, TCI's shareholders should be
permitted to vote on amending the Excess Share Provision, in furtherance of the
tender offer, so that, if the shareholders vote to amend the Charter, SPG and
18
Westfield can be in a position to effectuate a merger upon a favorable ruling
from the Sixth Circuit.
E. A STAY IS NOT IN THE PUBLIC INTEREST.
This Court has ruled that "the public interest is served in ensuring
that corporate democracy is respected." (Order at 44.) Allowing shareholders to
exercise their voting rights is clearly in the public interest. Defendants'
assertion that "[h]undreds of jobs and a substantial number of the Company's
business transactions" (Defs.' Br. at 2) will be irreparably affected if SPG
consummates a merger is unsupported hyperbole. These and the rest of defendants'
speculative parade of horribles should be disregarded. And lest it be forgotten,
the Taubman group can always solicit their own proxies for a vote at the special
meeting to confer voting rights on their shares. If consummation of the
SPG/Westfield offer would be as damaging to TCI as defendants claim, the
Taubmans should be able to make that case in a free and fair election.
19
CONCLUSION
For all the foregoing reasons, defendants' motion to suspend the
injunction pending appeal should be denied.(10)
Dated: May 12, 2003
MILLER, CANFIELD, PADDOCK &
STONE, P.L.C.
By: /s/ Carl H. von Ende
------------------------------------
Carl H. von Ende (P21867)
Todd A. Holleman (P57699)
150 West Jefferson, Suite 2500
Detroit, Michigan 48226-4415
Telephone: (313) 963-6420
Facsimile: (313) 496-7500
WILLKIE FARR & GALLAGHER
787 Seventh Avenue
New York, New York 10019
Telephone: (212) 728-8000
Facsimile: (212) 728-8111
Attorneys for SPG Plaintiffs
DELIB:2415473.1\121245-00001
DRAFT 05/12/03 4:02 PM
- ----------
(10) In the event a stay is granted, SPG submits that an appeal bond of $325
million would be appropriate in light of the approximately $6.50 per share
spread between the SPG/Westfield offer price and the price of TCI before the
offer, times approximately 50 million public common shares of TCI. Of course,
any such bond should be put up by the Taubman family for whose benefit the
appeal is being prosecuted, not with Company funds that belong to the public
shareholders.
20
Exhibit 99(a)(5)(ZZ)
UBS WARBURG REAL ESTATE LEHMAN BROTHERS BANK FSB
INVESTMENTS INC. 1000 WEST STREET, SUITE 200
1285 AVENUE OF THE AMERICAS WILMINGTON, DELAWARE 19801
NEW YORK, NEW YORK 10019
April 8, 2003
Westfield America, Inc.
11601 Wilshire Boulevard
Los Angeles, California 90025-1748
Attention: Mark A. Stefanek
Re: $750,000,000 REVOLVING CREDIT FACILITY
Ladies and Gentlemen:
UBS Warburg Real Estate Investments Inc. and Lehman Brothers Bank FSB or an
affiliate thereof (together with their respective successors and/or assigns,
"LENDER") hereby issues this commitment (the "COMMITMENT") to make available to
Westfield America Limited Partnership ("BORROWER") a revolving line of credit in
the aggregate amount of up to $750,000,000 (the "FACILITY") on the terms and
subject to the conditions described in this letter and in the term sheets
attached hereto as EXHIBIT A and EXHIBIT B (collectively, the "TERM SHEETS"),
which Facility will consist of two tranches (collectively, the "TRANCHES") as
follows:
(a) TRANCHE A LOANS. A revolving term facility in the amount
of up to $450,000,000 (the "TRANCHE A FACILITY") to be subject to the
terms and conditions outlined in the Term Sheet attached hereto as
EXHIBIT A; and
(b) TRANCHE B LOANS. A revolving term facility in the amount
of up to $300,000,000 (the "TRANCHE B FACILITY") to be subject to the
terms and conditions outlined in the Term Sheet attached hereto as
EXHIBIT B.
Certain fees payable with respect to the Facility are set forth in that certain
letter agreement (the "LETTER AGREEMENT") dated the date hereof between Lender
and Westfield America, Inc. ("WESTFIELD").
The Facility will be fully recourse to Borrower and Applicant and will be
governed by New York law.
Westfield acknowledges that this Commitment, the Term Sheets and the Letter
Agreement do not set forth all of the terms and conditions of the Facility, but
are intended as an outline of the major points of understanding between the
parties that will be set forth in the final loan documentation, which must be
reasonably acceptable to Lender in
all respects. Westfield further acknowledges that Lender shall have no
obligation to provide the Facility unless Lender's due diligence review is
completed with satisfactory results, all conditions precedent are satisfied,
internal investment committee approval has been obtained and definitive loan
documentation has been executed and delivered by Borrower, Westfield, Lender and
any other applicable parties. No agreement (oral or otherwise) that may be
reached during negotiations shall be binding upon the parties until final loan
documentation has been executed by all parties.
The Commitment and the pricings of the various tranches are subject to (a) there
not occurring or becoming known to us any material adverse condition or material
adverse change in or affecting the business, operations, property, condition
(financial or otherwise) or prospects of the Borrower, Westfield and their
respective subsidiaries, taken as a whole, (b) the completion by the Lender of,
and reasonable satisfaction in all respects with, a due diligence investigation
of Borrower, Westfield and any properties or direct or indirect interests in
properties that are to secure the Facility, (c) Lender not becoming aware after
the date hereof of any information or other matter affecting Borrower, Westfield
or the transactions contemplated by the Commitment and the Term Sheets which is
inconsistent in a material and adverse manner with any such information or other
matter disclosed to Lender prior to the date hereof, (d) the negotiation,
execution and delivery on or before July 3, 2003 of definitive documentation
with respect to the Facility reasonably satisfactory to Lender and its counsel
and (e) the other conditions set forth or referred to in the Commitment, the
Term Sheets and the Letter Agreement.
Westfield represents that (i) the proposed finance transaction described herein
is not the subject of a commitment from another lender and (ii) no other party
has a right of refusal or any other option which could cause the transaction
contemplated herein not to be consummated. Borrower represents and warrants to
Lender that no broker(s), agent(s) or finder(s) retained or engaged by Borrower,
Westfield or any of their affiliates arranged for this Commitment or were
otherwise involved in any manner in the financing or any aspect thereof.
Westfield hereby acknowledges and represents that it is working solely with
Lender to procure the Facility and agrees not to, and will cause its principals
and affiliates to not, obtain or attempt to arrange comparable financing with
any party other than Lender during the term of this Commitment.
The Commitment is confidential to Westfield and its affiliates and should not be
disclosed in whole or in part to any other person or entity without the prior
written consent of Lender, except as may be required by law, court order or any
regulatory body.
This Commitment, together with the attachments hereto and the Letter Agreement,
contains the entire agreement between Borrower, Westfield and Lender, and any
other agreements shall be deemed to have merged herewith. The Commitment is for
the benefit only of the parties hereto and their respective affiliates and no
third party shall have any interest herein or in any proceeds of the Facility.
The Commitment is not assignable by Westfield or Borrower to any other person,
entity or corporation without Lender's prior written consent. The terms and
provisions of this Commitment cannot be waived or
2
modified except in writing and signed by both Westfield and Lender. Except as
otherwise expressly provided in this Commitment, whenever Lender's judgment or
decision is required as to any matter under this Commitment and/or the Term
Sheets, such judgment or decision of Lender shall be in Lender's reasonable
discretion. Except for the provisions concerning fees and expenses, the terms of
this Commitment shall not survive the closing of the Facility. This Commitment
may be executed in counterpart, each of which when executed and delivered shall
be an original and together shall constitute one and the same instrument. This
Commitment shall be governed and construed in accordance with the laws of the
State of New York, without regard to principles of conflicts of laws. Each party
hereto hereby submits to the exclusive jurisdiction of the courts of the State
of New York for any legal action or proceeding resulting from the transaction
contemplated herein. This Commitment has been negotiated, issued and accepted in
New York City, New York. Each party hereto hereby waives its right to a trial by
jury. Please indicate your acceptance of the matters set forth herein by signing
in the place provided below.
[NO FURTHER TEXT ON THIS PAGE]
3
We look forward to a timely and efficient transaction. If you have any questions
regarding the foregoing or the Term Sheets, please call Ahmed Alali at
212-713-8518, Andrew B. Cohen at 212-713-8485, Paul Hughson at (212) 526-5911 or
Frank Gilhool at (212) 526-6970.
Very truly yours,
UBS WARBURG REAL ESTATE INVESTMENTS INC.
By: /s/ AHMED ALALI
--------------------------------------
Name: Ahmed Alali
Title: Managing Director
By: /s/ ANDREW COHEN
--------------------------------------
Name: Andrew Cohen
Title: Director
LEHMAN BROTHERS BANK FSB
By: /s/ PAUL A. HUGHSON
--------------------------------------
Name: Paul A. Hughson
Title: Authorized Signatory
4
Agreed to and Acknowledged by:
WESTFIELD AMERICA, INC.
By: /s/ MARK A. STEFANEK
-----------------------------------------
Name: Mark A. Stefanek
Title: Chief Financial Officer
5
EXHIBIT A
TRANCHE A FACILITY TERM SHEET
FACILITY TYPE/COMMITMENT
AMOUNT:........................ A $450,000,000 revolving credit facility
(the "Tranche A Facility") secured by (a) a
first mortgage lien on each of the Tranche A
Collateral Properties (as defined below),
and (b) a full guarantee of payment from the
Payment Guarantor.
PURPOSE:......................... Advances under the Tranche A Facility are to
be used for working capital and general
corporate purposes related to Borrower's
ownership of primarily retail properties,
all of which are domiciled in the U.S.A., or
such other purposes as to which Lender and
Borrower reasonably agree.
PAYMENT GUARANTOR:............... Westfield America, Inc.
TERM............................. To terminate on the date that is 36 months
following the closing date (the "MATURITY
DATE").
INTEREST RATE:................... At Borrower's option, (i) the greater of (A)
30-day LIBOR and (B) a rate equal to 1.20%
per annum plus, in each case, a margin of
1.15% (the "TRANCHE A MARGIN") or (ii)
Adjusted Base Rate plus the Tranche A
Margin.
ADJUSTED BASE RATE:.............. A rate per annum equal to the higher of the
Prime Rate for such day and the sum of 0.50%
plus the Federal Funds Rate.
INTEREST PAYMENT PERIOD:......... Interest will be payable monthly in arrears.
DEFAULT INTEREST RATES:.......... Interest Rate + 4%.
LETTERS OF CREDIT:............... Letters of Credit shall be issued in an
amount of at least $100,000 in each case, or
such lesser amount as may be agreed to by
the issuer. No Letter of shall have an
expiration date later than 12 months
following the issuance date and in no event
later than the Maturity Date of the Tranche
A Facility.
OPTIONAL COMMITMENT
REDUCTION:..................... On terms consistent with the applicable
terms and provisions of the credit agreement
and other documentation for Borrower's
current revolving credit facility with
modifications to be agreed upon by Borrower
and Lender.
VOLUNTARY PREPAYMENTS:........... On terms consistent with the applicable
terms and provisions of the credit agreement
and other documentation for Borrower's
current revolving credit facility with
modifications to be agreed upon by Borrower
and Lender.
MANDATORY PREPAYMENTS:........... On terms consistent with the applicable
terms and provisions of the credit agreement
and other documentation for Borrower's
current revolving credit facility with
modifications to be agreed upon by Borrower
and Lender.
A-1
TRANCHE A COLLATERAL
PROPERTIES:.................... "TRANCHE A COLLATERAL PROPERTIES" shall mean
certain real estate assets owned by Borrower
or one or more subsidiaries of Borrower to
be agreed upon by the parties.
Additional properties may be added as
collateral for the Tranche A Facility upon
Borrower's compliance with conditions
precedent substantially similar to those
under Borrower's current revolving credit
facility with modifications to be agreed
upon by Borrower and Lender.
Tranche A Collateral Properties may be
released from the pool upon Borrower's
compliance with certain conditions precedent
substantially similar to conditions
precedent to the release of properties under
Borrower's current revolving credit facility
with modifications to be agreed upon by
Borrower and Lender.
MORTGAGORS:...................... "MORTGAGORS" shall mean the fee or leasehold
owners, as applicable, of the Tranche A
Collateral Properties. Each Mortgagor shall
be a single purpose, bankruptcy remote
entity, wholly owned, directly or
indirectly, by Borrower, duly authorized to
do business in the state in which the
applicable Property is located.
DOCUMENTATION:................... Customary for facilities of this type,
including but not limited to:
o First Mortgages/Deeds of Trust/Deed to
Secure Debt in recordable form for the
Tranche A Collateral Properties;
o Payment Guarantee(s);
o UCC Financing Statements;
o Pledges of Hedging Contracts (it being
understood that Borrower will be required
to maintain at all times interest rate
protection with respect to not less than
67% of the outstanding balance of the
Tranche A Facility; provided, however,
that Lender will review Borrower's
portfolio-wide hedging strategy and, to
the extent such strategy is reasonably
acceptable, Lender will accept such
strategy for the Tranche A Facility);
o Assignments of Leases and Rents in
recordable form;
o Environmental Indemnities;
o Notes;
o SNDA's (as requested by Lender); and
o Opinions of counsel (as requested by
Lender).
GENERAL CONDITIONS PRECEDENT:.... Customary due diligence and conditions
precedent for facilities of this type,
including:
o negotiation and execution of satisfactory
closing documentation;
o accuracy of representations and
warranties;
o no Events of Default;
o title policies with tie in endorsements
(to the extent available) and other
endorsements as requested by Lender for
all Tranche A Collateral Properties;
A-2
o ALTA surveys for all Tranche A Collateral
Properties containing survey
certifications as requested by Lender;
o copies of all leases, REA's and occupancy
agreements with respect to all Tranche A
Collateral Properties;
o estoppel certificates from anchor
tenants, major in-line tenants and a
percentage of the remaining in-line
tenants at each Property reasonably
acceptable to Lender;
o acceptable M.A.I. appraisals for all
Tranche A Collateral Properties;
o review and approval of all management
agreements for Tranche A Collateral
Properties;
o delivery of such consents and approvals
as may be necessary and appropriate to
consummation of the transactions
contemplated herein; and
o review and approval of current profit and
loss statements for each Tranche A
Collateral Property;
o covenant projections of Borrower and
Guarantor; organizational chart of
Borrower, Guarantor and affiliates;
Absence of any change, occurrence or
development that could in the good faith
opinion of Lender, have a material
adverse effect on the business, condition
(financial or otherwise) of Borrower or
Guarantor; and completion of due
diligence.
CONDITIONS TO ADVANCES:.......... In addition to other due diligence and
conditions precedent customary for a
facility of this nature, among others:
o Total outstanding LIBOR-based interest
rate contracts not to exceed five
contracts at any one time with respect to
the Facility.
o Notice period for drawings, three (3)
Euro-Dollar business days for LIBOR
advances and one (1) Domestic business
day for Adjusted Base Rate advances.
o Incremental Borrowings for each Tranche -
$1 million, or an integral multiple of
$500,000 in excess thereof.
o Draws under the Tranche A Facility
limited to 3 per month.
REPRESENTATIONS & WARRANTIES:.... Usual representations and warranties for a
facility of this type.
AFFIRMATIVE AND NEGATIVE
COVENANTS:..................... Usual Borrower/Guarantor covenants for a
facility of this type including but not
limited to:
o financial reporting;
o payment and discharge of obligations
prior to maturity;
o no further indebtedness secured directly
or indirectly by Tranche A Collateral
Properties or ownership interest therein
(other than pledges of equity interests
securing the Tranche B Facility);
o maintenance of properties and insurance;
A-3
o conduct of business;
o compliance with laws;
o maintenance of existence;
o restriction on fundamental changes,
including (i) no merger, (unless in a
merger of Guarantor or Borrower,
Guarantor or Borrower, respectively, is
the surviving entity), (ii) no material
amendments to organizational documents
without consent of Lender, (iii)
Westfield America Trust will continue to
own, directly or indirectly, not less
than 25% of the beneficial interests in
each of Borrower and Guarantor and (iv)
Borrower and Guarantor will continue to
be controlled directly or indirectly by
Westfield America Trust; and
o notification of Lender of default,
material claim or material adverse
change.
TRANCHE A AVAILABILITY AND
FINANCIAL COVENANTS:........... Limitation on Funding. Funds advanced or
outstanding at any time under Tranche A
Facility shall not exceed the lesser of (a)
$450,000,000 and (b) the lesser of (x) 65%
of the capitalized value of the Tranche A
Collateral Properties (which capitalized
value with respect to any property currently
securing Borrower's current revolving credit
facility will be calculated using a
capitalization rate of 8.25%, provided that
no material adverse change has occurred with
respect to such property) and (y) the
maximum amount advanced that satisfies an
assumed DSCR using a loan constant based
upon a 30-year amortization schedule and an
interest rate equal to the greater of (i)
2.00% plus the 10 year Treasury rate and
(ii) 6.00%, (the "ASSUMED DSCR") for the
Tranche A Collateral Properties of 1.40 to
1, each as determined by Lender on a
quarterly basis. The capitalization rate to
be used for determining the capitalized
value of the Tranche A Collateral Properties
on an ongoing basis will be the greater of
(A) the weighted average capitalization rate
based upon the appraised value of each
property and (B) 8.25%; provided, however,
that if the capitalization rate determined
in this manner is not reasonably acceptable
to Lender and Borrower, such parties will
cooperate in good faith to determine a
capitalization rate that is reasonably
acceptable to such parties.
DEBT YIELD: At any time, the ratio of (i)
net operating income of the Tranche A
Collateral Properties to (ii) an amount
equal to the outstanding principal amount
under the Tranche A Facility plus the total
amount of outstanding Letters of Credit
shall not be less than 12%.
TRANCHE A REPORTING
COVENANTS:..................... Reporting requirements to be consistent with
the applicable terms and provisions of the
credit agreement and other documentation for
Borrower's current revolving credit facility
with modifications to be agreed upon by
Borrower and Lender.
BORROWER & GUARANTOR
REPORTING COVENANTS:........... Reporting requirements to be consistent with
the applicable terms and provisions of the
credit agreement and other documentation for
Borrower's current revolving credit
A-4
facility with modifications to be agreed
upon by Borrower and Lender.
EVENTS OF DEFAULT: .............. Customary defaults substantially similar to
defaults under Borrower's current revolving
credit facility with modifications to be
agreed upon by Borrower and Lender.
CHANGES IN CIRCUMSTANCES
INCREASED COSTS................ Agreement to contain customary provisions
protecting Lender and other Lenders in the
event of unavailability of funding, capital
adequacy and increased costs.
EXPENSES:........................ Borrower to reimburse Lender for all
reasonable fees and expenses in connection
with this transaction, and any subsequent
amendments or waivers, including legal fees
and expenses.
INDEMNIFICATION:................. Borrower and Guarantor to indemnify Lender
against all losses, liabilities, claims,
damages or expenses relating to the
Facility, any violation of environmental law
and the exercise of any rights or remedies
under the Facility, including attorneys'
fees and settlement costs, except if such
losses, liabilities, claims, damages or
expenses result from Lenders' gross
negligence or willful misconduct.
A-5
EXHIBIT B
TRANCHE B FACILITY TERM SHEET
FACILITY TYPE/COMMITMENT AMOUNT:. a $300,000,000 revolving credit facility
(the "TRANCHE B FACILITY") secured by (a) if
not restricted by the terms of existing
property level financing, relevant joint
venture agreements or the terms of the
existing $245,000,000 unsecured facility
provided by Deutsche Bank to Westfield
Growth L.P., a pledge of Borrower's equity
interest in any U.S. subsidiary that owns,
directly or indirectly, real estate assets,
which equity interests must have an
aggregate value of the lesser of (i) 200% of
the then outstanding principal balance of
the Tranche B Facility (the "Required
Pledged Value") and (ii) $500,000 (the
"Capped Pledged Value") and (b) a full
guarantee of payment from the Payment
Guarantor. Subject to Lender's due
diligence, Lender intends to accept pledges
of certain equity interests in properties
with respect to which one or more of the
entities comprising Lender or their
affiliates have provided mortgage financings
(considering such properties that are
subject to fixed-rate financings before
considering such properties that are subject
to floating-rate financings) in satisfaction
of the requirements described in clause (a)
above. Notwithstanding anything to the
contrary contained in clause (a) above,
should the Required Pledged Value at any
time exceed the Capped Pledged Value,
Borrower will pledge additional equity
interests in real estate assets that are
subsequently financed pursuant to Additional
Financings (as defined below) to the extent
such pledges are not otherwise restricted
until the aggregate value of the equity
interests pledged as security for the
Tranche B Facility have an aggregate value
of not less than the Required Pledged Value.
The pledged value of a property will be
equal to (i) the most recent appraised value
of a property, subject to no material
adverse change having occurred with respect
to such property and Lender's reasonable due
diligence, less (ii) the outstanding
principal amount of debt on such property
multiplied by the percentage of equity to be
pledged.
PURPOSE:......................... Advances under the Tranche B Facility may be
used only for working capital and general
corporate purposes related to Borrower's
ownership of primarily retail properties all
of which are domiciled in the U.S.A., or
such other purposes as to which Lender and
Borrower reasonably agree.
PAYMENT GUARANTOR:............... Westfield America, Inc.
TERM:............................ To terminate on the date that is 36 months
following the closing date (the "MATURITY
DATE").
INTEREST RATE:................... At Borrower's option, (i) the greater of (A)
30-day LIBOR and (B) a rate equal to 1.20%
per annum plus, in each case, a
B-1
margin of 2.50% (the "TRANCHE B MARGIN") or
(ii) Adjusted Base Rate plus the Tranche B
Margin.
ADJUSTED BASE RATE:.............. A rate per annum equal to the higher of the
Prime Rate for such day and the sum of 0.50%
plus the Federal Funds Rate.
INTEREST PAYMENT PERIOD:......... Interest will be payable monthly in arrears.
DEFAULT INTEREST RATES:.......... Applicable Interest Rate + 4%.
OPTIONAL COMMITMENT REDUCTION:... On terms consistent with the applicable
terms and provisions of the credit agreement
and other documentation for Borrower's
current revolving credit facility with
modifications to be agreed upon by Borrower
and Lender.
VOLUNTARY PREPAYMENTS:........... On terms consistent with the applicable
terms and provisions of the credit agreement
and other documentation for Borrower's
current revolving credit facility with
modifications to be agreed upon by Borrower
and Lender.
MANDATORY PREPAYMENTS:........... On terms consistent with the applicable
terms and provisions of the credit agreement
and other documentation for Borrower's
current revolving credit facility with
modifications to be agreed upon by Borrower
and Lender.
TRANCHE B COLLATERAL
PROPERTIES:.................... "TRANCHE B COLLATERAL PROPERTIES" shall mean
collectively the real estate assets in which
Borrower owns a direct or indirect ownership
interest which interests are pledged as
collateral for the Tranche B Facility
subject to, among other conditions
precedent, Lender's property level and
organizational document due diligence and
the terms of applicable property level
financing and joint venture agreements.
Pledges of interests in additional
properties may be added as collateral for
the Tranche B Facility upon Borrower's
compliance with certain conditions precedent
substantially similar to conditions
precedent to the addition of collateral
properties under Borrower's current
revolving credit facility with modifications
to be agreed upon by Borrower and Lender.
Pledges of interests in Tranche B Collateral
Properties may be released subject to the
pro rata reduction in the outstanding
balance of the Tranche B Facility if
required based on the Required Pledged Value
and upon Borrower's compliance with certain
conditions precedent substantially similar
to conditions precedent to the release of
pledged interests under Borrower's current
revolving credit facility with modifications
to be agreed upon by Borrower and Lender.
DOCUMENTATION:................... Customary for facilities of this type,
including but not limited to:
o Payment Guarantee(s);
B-2
o Pledge of the Borrower's equity in each
subsidiary that owns, indirectly, real
estate assets (to the extent existing
documentation permits such pledges);
o UCC Financing Statements;
o Pledges of Hedging Contracts (subordinate
to such pledges securing the Tranche A
Facility) (it being understood that
Borrower will be required to maintain at
all times interest rate protection with
respect to not less than 67% of the
outstanding balance of the Tranche B
Facility; provided, however, that Lender
will review Borrower's portfolio-wide
hedging strategy and, to the extent such
strategy is reasonably acceptable, Lender
will accept such strategy for the Tranche
B Facility);
o Environmental Indemnities;
o Notes; and
o Opinions of counsel (as requested by
Lender).
GENERAL CONDITIONS PRECEDENT:.... Customary due diligence and conditions
precedent for facilities of this type,
including:
o negotiation and execution of satisfactory
closing documentation;
o accuracy of representations and
warranties;
o no Events of Default;
o UCC Policies with respect to Pledges of
Equity Interests;
o copies of all leases, REA's and occupancy
agreements with respect to all Tranche B
Collateral Properties;
o most recently obtained estoppel
certificates from tenants at each
Property and, to the extent reasonably
requested by Lender, Borrower will
provide Lender with current estoppel
certificates from anchor/major tenants at
each Property or a Landlord's estoppel
with respect to such tenants;
o most recently obtained M.A.I. appraisals
for all Tranche B Collateral Properties
(provided that Borrower will cooperate
with Lender to the extent updated
appraisals are needed by Lender);
o review and approval of all management
agreements for Tranche B Collateral
Properties;
o delivery of such consents and approvals
as may be necessary and appropriate to
consummation of the transactions
contemplated herein;
o review and approval of current profit and
loss statements for each Tranche B
Collateral Property;
o covenant projections of Borrower and
Guarantor;
o organizational chart of Borrower,
Guarantor and affiliates;
o Absence of any change, occurrence or
development that could in the good faith
opinion of Lender, have a material
adverse effect on the business, condition
(financial or otherwise) of Borrower or
Guarantor; and
o completion of due diligence.
CONDITIONS TO ADVANCES:.......... In addition to other due diligence and
conditions precedent
B-3
customary for a facility of this nature. See
Tranche A Facility Term Sheet.
REPRESENTATIONS & WARRANTIES:.... Usual representations and warranties for a
facility of this type.
AFFIRMATIVE AND NEGATIVE
COVENANTS:..................... Usual Borrower/Guarantor covenants for a
facility of this type. See Tranche A
Facility Term Sheet.
GENERAL FINANCIAL COVENANTS OF
CONSOLIDATED ENTITIES:......... Financial covenants with respect to the
Borrower, Guarantor and their consolidated
subsidiaries to be consistent with the
Westfield America covenants contained in the
existing $245,000,000 unsecured facility
provided by Deutsche Bank Trust Company
Americas to Borrower and certain affiliates
of Borrower.
APPRAISAL RIGHTS ................ Following the closing date, Borrower will
furnish to Lender an updated M.A.I.
appraisal for each Tranche B Collateral
Property upon request by Lender but on not
more than one occasion for each Tranche B
Collateral Property throughout the term of
the Tranche B Facility. If there is an event
of default, Lender shall have the right to
call for an appraisal on one or more Tranche
B Collateral Properties, no more than once a
year. All appraisals are to be at the
Borrower's cost, except that Lender can call
for an appraisal more regularly than this
provision requires at Lender's expense.
BORROWER & GUARANTOR
REPORTING COVENANTS ........... See Tranche A Facility Term Sheet.
EVENTS OF DEFAULT:............... Customary defaults substantially similar to
defaults under Borrower's current revolving
credit facility with modifications to be
agreed upon by Borrower and Lender.
CHANGES IN CIRCUMSTANCES/
INCREASED COSTS:............... See Tranche A Facility Term Sheet.
EXPENSES:........................ See Tranche A Facility Term Sheet.
INDEMNIFICATION:................. See Tranche A Facility Term Sheet.
B-4
