-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JYHTpDcyNlfI5MKgoUVrmp+Uyc/52M+T48JJQkGctGbqzKQYOGYhILB9KP+Sv1ZI XioLcq8mnXPmSwtzyw5CeQ== 0000910612-98-000017.txt : 19981116 0000910612-98-000017.hdr.sgml : 19981116 ACCESSION NUMBER: 0000910612-98-000017 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CBL & ASSOCIATES PROPERTIES INC CENTRAL INDEX KEY: 0000910612 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 621545718 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-12494 FILM NUMBER: 98749341 BUSINESS ADDRESS: STREET 1: ONE PARK PLACE STREET 2: 6148 LEE HWY SUITE 300 CITY: CHATTANOOGA STATE: TN ZIP: 37421 BUSINESS PHONE: 4238550001 MAIL ADDRESS: STREET 1: 61048 LEE HIGHWAY SUITE 300 STREET 2: ONE PARK PLACE CITY: CHATTANOOGA STATE: TN ZIP: 37421 10-Q 1 CBL & ASSOCIATES PROPERTIES, INC. FORM 10-Q, 09/30/98 Securities Exchange Act of 1934 -- Form10-Q ============================================================== SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1998 --------------------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended to ------------- ----------- Commission File Number 1-12494 ---------------------------------- CBL & Associates Properties, Inc. --------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 62-1545718 ---------------------- ----------------- (State or other jurisdiction (IRS Employer of incorporation or Identification organization) No.) One Park Place, 6148 Lee Highway, Chattanooga, TN 37421 ------------------------------------------------- --------- (Address of principal executive offices) (Zip Code) (Registrant's telephone number, including area code) (423) 855-0001 ------------------------------------------------------------- ------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes __X__ No ______ The number of shares outstanding of each of the registrants classes of common stock, as of November 9, 1998: Common Stock, par value $.01 per share, 24,194,386 shares. 1 CBL & ASSOCIATES PROPERTIES, INC. INDEX PART I FINANCIAL INFORMATION PAGE NUMBER ITEM 1: FINANCIAL INFORMATION 3 CONSOLIDATED BALANCE SHEETS - AS OF SEPTEMBER 30, 1998 AND DECEMBER 31, 1997 4 CONSOLIDATED STATEMENTS OF OPERATIONS - FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND SEPTEMBER 30, 1997 5 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND SEPTEMBER 30, 1997 6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7 ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 9 PART II OTHER INFORMATION ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K 25 SIGNATURE 26 2 CBL & ASSOCIATES PROPERTIES, INC. ITEM 1 - FINANCIAL INFORMATION The accompanying financial statements are unaudited; however, they have been prepared in accordance with generally accepted accounting principles for interim financial information and in conjunction with the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the disclosures required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting solely of normal recurring matters) necessary for a fair presentation of the financial statements for these interim periods have been included. The results for the interim periods ended September 30, 1998 are not necessarily indicative of the results to be obtained for the full fiscal year. These financial statements should be read in conjunction with the CBL & Associates Properties, Inc. (the "REIT") December 31, 1997 audited financial statements and notes thereto included in the CBL & Associates Properties, Inc. Form 10-K for the year ended December 31, 1997. 3 CBL & ASSOCIATES PROPERTIES, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except share data) (UNAUDITED) September 30, December 31, 1998 1997 ----------- ------------ ASSETS Real estate assets: Land . . . . . . . . . . . . . . . . . . . $ 258,234 $ 167,895 Buildings and improvements . . . . . . . . 1,609,231 1,019,283 ---------- ---------- 1,867,465 1,184,178 Less: Accumulated depreciation . . . . . . (174,921) (145,641) ---------- ---------- 1,692,544 1,038,537 Developments in progress . . . . . . . . . 89,369 103,787 ---------- ---------- Net investment in real estate assets . . . 1,781,913 1,142,324 Cash and cash equivalents. . . . . . . . . . 6,787 3,124 Cash in escrow . . . . . . . . . . . . . . . -- 66,108 Receivables: Tenant . . . . . . . . . . . . . . . . . . 17,665 12,891 Other. . . . . . . . . . . . . . . . . . . 1,505 1,121 Mortgage notes receivable . . . . . . . . . 11,949 11,678 Other assets . . . . . . . . . . . . . . . . 14,648 7,779 ---------- ---------- $1,834,467 $1,245,025 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Mortgage and other notes payable . . . . . . $1,184,967 $ 741,413 Accounts payable and accrued liabilities . . 41,020 41,978 ---------- ---------- Total liabilities. . . . . . . . . . . . . 1,225,987 783,391 ---------- ---------- Distributions and losses in excess of investment in unconsolidated affiliates. . 6,996 6,884 ---------- ---------- Minority interest . . . . . . . . . . . . . 193,420 123,897 ---------- ---------- Commitments and contingencies. . . . . . . . -- -- Shareholders' Equity: Preferred stock, $.01 par value, 5,000,000 shares authorized 2,875,000 issued in 1998, none in 1997 . . . . . . . . . . . 29 -- Common stock, $.01 par value, 95,000,000 shares authorized, 24,172,155 and 24,063,963 shares issued and outstanding in 1998 and 1997, respectively . . . . . 242 241 Excess stock, $.01 par value, 100,000,000 shares authorized, none issued . . . . . -- -- Additional paid - in capital . . . . . . . 431,716 359,541 Accumulated deficit. . . . . . . . . . . . (23,376) (28,433) Deferred compensation. . . . . . . . . . . (547) (496) ---------- ---------- Total shareholders' equity . . . . . . . 408,064 330,853 ---------- ---------- $1,834,467 $1,245,025 ========== ========== The accompanying notes are an integral part of these balance sheets. 4 CBL & ASSOCIATES PROPERTIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) Three Months Ended Nine Months Ended September 30, September 30, -------------------- -------------------- 1998 1997 1998 1997 --------- --------- --------- --------- REVENUES: Rentals: Minimum . . . . . . . . . . . $44,525 $28,726 $118,545 $83,266 Percentage. . . . . . . . . . 1,146 770 3,975 2,677 Other . . . . . . . . . . . . 462 256 1,282 615 Tenant reimbursements. . . . . . 20,238 12,225 52,241 36,622 Management, development and leasing fees . . . . . . . . 639 655 2,058 1,765 Interest and other . . . . . . . 703 611 2,067 1,998 ------- ------- ------- ------- Total revenues . . . . . . . . 67,713 43,243 180,168 126,943 ------- ------- ------- ------- EXPENSES: Property operating . . . . . . . 11,187 7,568 29,511 22,038 Depreciation and amortization. . 11,659 8,029 30,534 23,639 Real estate taxes. . . . . . . . 6,355 3,515 16,607 10,450 Maintenance and repairs. . . . . 3,928 2,427 10,223 7,270 General and administrative . . . 2,775 1,849 8,506 6,352 Interest . . . . . . . . . . . . 19,019 9,146 47,836 27,081 Other. . . . . . . . . . . . . . 113 3 122 45 ------- ------- ------- ------- Total expenses . . . . . . . . 55,036 35,537 143,339 96,875 ------- ------- ------- ------- Income from operations . . . . . 12,677 10,706 36,829 30,068 Gain on sales of real estate assets. . . . . . . . . . 398 774 2,910 4,156 Equity in earnings of unconsolidated affiliates. . . . 521 301 1,689 1,514 Minority interest in earnings: Operating partnership. . . . . (3,499) (3,178) (11,276) (9,763) Shopping center properties . . (101) (116) (409) (405) ------- ------- ------- ------- Income before extraordinary item . . . . . . . . . . . . . 9,996 8,487 29,743 25,570 Extraordinary loss on extinguishment of debt . . . . (676) (432) (676) (928) ------- ------- ------- ------- Net income . . . . . . . . . . . 9,320 8,055 29,067 24,642 Preferred dividend . . . . . . . (1,617) -- (1,617) -- ------- ------- ------- ------- Net income available to common shareholders . . . . . . . . . $ 7,703 $ 8,055 $27,450 $24,642 ======= ======= ======= ======= Basic per share data: Income before extraordinary item . . . . . . . . . . . . $ 0.35 $ 0.35 $ 1.17 $ 1.07 ======= ======= ======= ======= Net income . . . . . . . . . . $ 0.32 $ 0.34 $ 1.14 $ 1.03 ======= ======= ======= ======= Weighted average common shares outstanding. . . . . . . . . . 24,117 24,025 24,089 23,842 ======= ======= ======= ======= Diluted per share data: Income before extraordinary item . . . . . . . . . . . . $ 0.34 $ 0.35 $ 1.16 $ 1.06 ======= ======= ======= ======= Net income . . . . . . . . . . $ 0.32 $ 0.33 $ 1.13 $ 1.02 ======= ======= ======= ======= Weighted average common and dilutive potential common shares outstanding . . . . . . 24,409 24,300 24,345 24,104 ======= ======= ======= ======= The accompanying notes are an integral part of these statements. 5 CBL & ASSOCIATES PROPERTIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS) (UNAUDITED) Nine Months Ended September 30, ---------------------- 1998 1997 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income . . . . . . . . . . . . . . . . . . . $29,067 $24,642 Adjustments to reconcile net income to net cash provided by operating activities: Minority interest in earnings. . . . . . . . . 11,685 10,168 Depreciation . . . . . . . . . . . . . . . . . 26,032 21,397 Amortization . . . . . . . . . . . . . . . . . 5,369 2,760 Extraordinary loss on extinguishment of debt . -- 62 Gain on sales of real estate assets. . . . . . (2,910) (4,156) Issuance of stock under incentive plan . . . . 287 127 Equity in earnings of unconsolidated affiliates . . . . . . . . . . . . . . . . . (1,689) (1,514) Amortization of deferred compensation. . . . . 392 239 Write-off of development projects. . . . . . . 122 45 Distribution from unconsolidated affiliates . . . . . . . . . . . . . . . . . 2,768 1,764 Distributions to minority investors. . . . . . (13,193) (12,647) Changes in assets and liabilities - Tenant and other receivables . . . . . . . (5,158) (293) Other assets . . . . . . . . . . . . . . . (6,187) (769) Accounts payable and accrued expenses. . . 12,833 6,207 -------- -------- Net cash provided by operating activities . . . . . . . . . . . . . . . 59,418 48,032 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Construction of real estate and land acquisitions, net of payables. . . . . . . . (81,290) (101,282) Acquisition of real estate assets. . . . . . . (501,156) (36,207) Capitalized interest . . . . . . . . . . . . . (3,858) (4,702) Other capital expenditures . . . . . . . . . . (16,186) (6,580) Deposits in escrow . . . . . . . . . . . . . . 66,108 -- Proceeds from sales of real estate assets . . . . . . . . . . . . . . . . . . . 6,730 8,876 Additions to mortgage notes receivable . . . . (1,497) (3,252) Payments received on mortgage notes receivable . . . . . . . . . . . . . . . . . 1,435 1,472 Additional investments in and advances to unconsolidated affiliates. . . . . . . . . . (967) (1,724) -------- -------- Net cash used in investing activities. . . . (530,681) (143,399) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from mortgage and other notes payable. . . . . . . . . . . . . . . . . . . 586,832 251,540 Principal payments on mortgage and other notes payable. . . . . . . . . . . . . (143,278) (198,279) Additions to deferred finance costs. . . . . . (2,025) (655) Proceeds from issuance of preferred stock. . . 70,112 -- Proceeds from issuance of common stock . . . . 240 74,465 Proceeds from exercise of stock options. . . . 1,391 1,104 Purchase of minority interest. . . . . . . . . (3,012) -- Prepayment penalties on extinguishment of debt. . . . . . . . . . . . . . . . . . . (676) (866) Dividends paid . . . . . . . . . . . . . . . . (34,658) (30,038) --------- -------- Net cash provided by financing activities. . 474,926 97,271 --------- -------- NET CHANGE IN CASH AND CASH EQUIVALENTS. . . . . 3,663 1,904 CASH AND CASH EQUIVALENTS, beginning of period . . . . . . . . . . . . . . . . . . . . . 3,124 4,298 --------- -------- CASH AND CASH EQUIVALENTS, end of period . . . . . $ 6,787 $ 6,202 ========= ======== Cash paid for interest, net of amounts capitalized. . . . . . . . . . . . . . . . . . . $ 42,147 $ 22,660 ========= ======== The accompanying notes are an integral part of these statements. 6 CBL & ASSOCIATES PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 - Unconsolidated Affiliates At September 30, 1998, the Company had investments in four partnerships and joint ventures, all of which are reflected using the equity method of accounting. Condensed combined results of operations for the unconsolidated affiliates are as follows (in thousands): Comapny's Share Total For The For The Three Months Ended Nine Months Ended September 30, September 30, ------------------ ------------------ 1998 1997 1998 1997 -------- -------- -------- -------- Revenues . . . . . . . . $ 2,597 $ 2,515 $ 8,125 $ 7,856 -------- -------- -------- -------- Depreciation and amortization . . . . . 357 337 1,057 993 Interest expense . . . . 920 964 2,904 2,786 Other operating expenses . . . . . . . 799 913 2,475 2,563 -------- -------- -------- -------- Net income . . . . . . . $ 521 $ 301 $ 1,689 $ 1,514 ======== ======== ======== ======== NOTE 2 - CONTINGENCIES The Company is currently involved in certain litigation arising in the ordinary course of business. In the opinion of management, the pending litigation will not materially affect the financial statements of the Company. Additionally, based on environmental studies completed to date on the real estate properties, management believes that exposure, if any, related to environmental cleanup will be immaterial to the financial position and results of operations of the Company. 7 Note 3 - Credit Agreements The Company has credit facilities of $230 million of which $95.6 million is available at September 30, 1998. Outstanding amounts under the credit facilities bear interest at a weighted average interest rate of 6.51% at September 30, 1998. The Company's variable rate debt as of September 30, 1998 was $521.1 million with a weighted average interest rate of 6.61% as compared to 6.98% as of September 30, 1997. Through the execution of interest rate swap agreements, the Company has fixed the interest rates on $314 million of variable rate debt on operating properties at a weighted average interest rate of 6.61%. Of the Company's remaining variable rate debt of $207.1 million, interest rate caps in place of $100.0 million and conventional permanent loan commitments of $39.4 million, leave $67.7 million of debt subject to variable rates on construction properties and no debt subject to variable rates on operating properties. There were no fees charged to the Company related to these swap agreements. The Company's swap agreements in place at September 30, 1998 are as follows: Swap Amount Fixed LIBOR (in millions) Component Expiration Date Effective Date - -------------- -------------- --------------- -------------- $65 5.72% 01/07/2000 01/07/98 81 5.54% 02/04/2000 02/04/98 50 5.70% 06/15/2001 06/15/98 38 5.73% 06/30/2001 06/26/98 80 5.49% 09/01/2001 09/01/98 In December 1997, the Company obtained two $100 million interest rate caps on LIBOR-based variable rate debt, one at 7% for 1998 and one at 7.5% for 1999. There was a fee paid to obtain these caps. Note 4- Non-Cash Financing and Investing Activities During the three months ended September 30, 1998 the Company issued operating partnership units to finance acquisitions of real estate assets with a value of $69.0 million. 8 CBL & Associates Properties, Inc. Item 2: Management's Discussion And Analysis Of Financial Condition And Results Of Operations The following discussion and analysis of the financial condition and results of operations should be read in conjunction with the Company's Consolidated Financial Statements and Notes thereto. The information included herein contains "forward-looking statements" within the meaning of the federal securities laws. Such statements are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy and some of which might not even be anticipated. Future events and actual results, financial and otherwise, may differ materially from the events and results discussed in the forward-looking statements. We direct you to the Company's other filings with the Securities and Exchange Commission, including, without limitation, the Company's Annual Report on Form 10-K and the "Management's Discussion and Analysis of Financial Condition and Results of Operations" incorporated by reference therein, for a discussion of such risks and uncertainties. GENERAL BACKGROUND The Company's Consolidated Financial Statements and Notes thereto reflect the consolidated financial results of CBL & Associates Limited Partnership (the "Operating Partnership") which includes at September 30, 1998 the operations of a portfolio of properties consisting of twenty-four regional malls, thirteen associated centers, eighty-three community centers, an office building, joint venture investments in three regional malls and one associated center, and income from six mortgages ("the Properties"). The Operating Partnership also has one mall, one associated center, one power center, two community centers and one expansion currently under construction and holds options to acquire certain shopping center development sites. The consolidated financial statements also include the accounts of CBL & Associates Management, Inc. (the "Management Company"). The Company classifies its regional malls into two categories: malls which have completed their initial lease-up ("Stabilized Malls") and malls which are in their initial lease-up phase ("New Malls"). The New Mall category is presently comprised of the redeveloped and expanded Westgate Mall in Spartanburg, South Carolina, Oak Hollow Mall in High Point, North Carolina, Springdale Mall in Mobile, Alabama which is being redeveloped and Bonita Lakes Mall in Meridian, Mississippi. 9 In July 1998, the Company acquired Hickory Hollow Mall, Rivergate Mall, The Courtyard at Hickory Hollow, The Village at Rivergate and Lionshead Village, all located in the metropolitan Nashville, Tennessee area. The purchase price of $247.4 million was funded with a ten-year fixed-rate loan in the amount of $182.7 million, 631,016 operating partnership units in the Operating Partnership with a value of $15.3 million and the balance funded from the Company's credit lines. In July 1998, the Company purchased 122,008 limited partnership units valued at $3.0 million from a former executive and minority investor in the Operating Partnership. In August 1998, the Company acquired Meridian Mall in Lansing (Oskemos), Michigan and Janesville Mall in Janesville, Wisconsin. The purchase price of $138 million was funded with an acquisition loan of $80 million, 2,118,229 limited partnership units in the Operating Partnership with a value of $53 million and, the assumption of a $17.1 million mortgage loan. Excess loan proceeds of $12.1 million were used to pay down the Company's credit lines. In the third quarter of 1998, the Company closed the purchase of three parcels of land from CBL & Associates, Inc., the predecessor company, for an aggregate price of $1,538,157. The Operating Partnership issued limited partnership interests equivalent to 62,100 common shares in exchange for the property. The Company used the land to expand existing centers. RESULTS OF OPERATIONS Operational highlights for the nine months ended September 30, 1998 as compared to the nine months ended September 30, 1997 are as follows: SALES Mall shop sales, for those tenants who have reported, in the twenty-three Stabilized Malls in the Company's portfolio increased by 4.6% on a comparable per square foot basis. Nine Months Ended September 30, ------------------------------- 1998 1997 ------------ ----------- Sales per square foot $176.76 $169.07 Total sales volume in the mall portfolio, including New Malls, increased 11.1% to $871.4 million for the nine months ended September 30, 1998 from $784.2 million for the nine months ended September 30, 1997. Occupancy costs as a percentage of sales was 12.2% for the nine months ended September 30, 1998 and 13.1% for the nine months ended September 30, 1997 for the Stabilized Malls. Occupancy costs were 11.2%, 11.5% and 12.3% for the years ended December 31, 1997, 1996, and 1995, respectively. Occupancy costs as a percentage of sales are generally higher in the first three quarters of the year as compared to the fourth quarter due to the seasonality of retail sales. 10 OCCUPANCY Occupancy for the Company's overall portfolio is as follows: At September 30, -------------------- 1998 1997 -------- ------- Stabilized malls . . . . . . . . 91.7% 89.0% New malls . . . . . . . . . . . . 92.0% 87.9% Associated centers . . . . . . . 89.7% 83.1% Community centers . . . . . . . . 96.5% 97.4% Total Portfolio . . . . . . . . . 93.7% 92.6% AVERAGE BASE RENT Average base rents per square foot for the Company's three portfolio categories were as follows: At September 30, -------------------- 1998 1997 -------- ------- Malls . . . . . . . . . . . . . . $19.29 $19.02 Associated centers. . . . . . . . 9.41 9.46 Community centers . . . . . . . . 8.10 7.30 LEASE ROLLOVERS On spaces previously occupied, the Company achieved the following results from rollover leasing during the nine months ended September 30, 1998, over and above the base and percentage rent paid by the previous tenant: Per Square Per Square Foot Rent Foot Rent Percentage Prior Lease(1) New Lease(2) Increase -------------- ------------ ----------- Malls . . . . . . . . . $20.18 $22.96 13.8% Associated centers. . . 10.17 11.50 13.1% Community centers . . . 7.79 8.70 11.7% 11 (1) - Rental achieved for spaces previously occupied at the end of the lease including percentage rent. (2) - Average base rent over the term of the lease. For the nine months ended September 30, 1998, malls represented 74.0% of total revenues from the Properties; revenues from associated centers represented 3.9%; revenues from community centers represented 20.7%; and revenues from mortgages and the office building represented 1.4%. Accordingly, revenues and results of operations are disproportionately impacted by the malls' results of operations. The Company's cost recovery ratio increased to 92.7% for the nine months ended September 30, 1998 as compared to 92.1% in 1997. The shopping center business is somewhat seasonal in nature with tenant sales achieving the highest levels during the fourth quarter because of the holiday season. The malls earn most of their "temporary" rents (rents from short-term tenants) during the holiday period. Thus, occupancy levels and revenue production are generally the highest in the fourth quarter of each year. Results of operations realized in any one quarter may not be indicative of the results likely to be experienced over the course of the entire year. Comparison of Results of Operations for the three months ended September 30, 1998 to the Results of Operations for the three months ended September 30, 1997 Total revenues for the three months ended September 30, 1998 increased by $24.5 million, or 56.7%, to $67.7 million as compared to $43.2 million in 1997. Of this increase, minimum rents increased by $15.8 million, or 55.0%, to $44.5 million as compared to $28.7 million in 1997, and tenant reimbursements increased by $8.0 million, or 65.5%, to $20.2 million in 1998 as compared to $12.2 million in 1997. Improved occupancies and operations and increased rents in the Company's operating portfolio generated approximately $1.4 million of the increase in revenues. The majority of these increases were generated at Westgate Mall in Spartanburg, South Carolina and St. Clair Square in Fairview Heights, Illinois. New revenues of $23.1 million resulted from operations at the twenty new centers opened or acquired during the past fifteen months as follows: Project Name Location Total GLA Type of Addition Opening Date - ------------- -------- ---------- ----------------- ------------ Salem Crossing Virginia Beach, Virginia 289,000 New Development July, 1997 Strawbridge Marketplace Virginia Beach, Virginia 44,000 New Development August, 1997 Springhurst Towne Center Louisville, Kentucky 811,000 New Development August, 1997 Bonita Lakes Mall Meridian, Mississippi 633,000 New Development October, 1997 Bonita Lakes Crossing Meridian, Mississippi 110,000 New Development October, 1997/ March, 1998
12 Project Name Location Total GLA Type of Addition Opening Date - ------------- -------- ---------- ----------------- ------------ Cortlandt Town Center Cortlandt, New York 772,000 New Development November, 1997 Chester Plaza Richmond, Virginia 10,000 New Development October, 1997 Sterling Creek Commons Portsmouth, Virginia 65,500 New Development June, 1998 Westgate Crossing Spartanburg, South Carolina 151,000 Acquisition August, 1997 Springdale Mall Mobile, Alabama 926,000 Acquisition September, 1997 Asheville Mall Asheville, North Carolina 817,000 Acquisition January, 1998 Burnsville Center Burnsville (Minneapolis), 1,070,000 Acquisition January, 1998 Minnesota Stroud Mall Stroudsburg, Pennsylvania 427,000 Acquisition April, 1998 Hickory Hollow Mall Nashville, Tennessee 1,096,000 Acquisition July, 1998 Rivergate Mall Nashville, Tennessee 1,014,000 Acquisition July, 1998 Courtyart at Hickory Nashville, Tennessee 77,000 Acquisition July, 1998 Hollow Village at Rivergate Nashville, Tennessee 166,000 Acquisition July, 1998 Lionshead Nashville, Tennessee 93,000 Acquisition July, 1998 Meridian Mall Oskemos (Lansing), Michigan 777,000 Acquisition August, 1998 Janesville Mall Janesville, Wisconsin 615,000 Acquisition August, 1998
Interest and other income increased in the third quarter of 1998 by $0.1 million, to $0.7 million from $0.6 million in 1997. This increase is due to interest on advances to developers in the Company's co-development program. Property operating expenses, including real estate taxes and maintenance and repairs, increased in the third quarter of 1998 by $8.0 million, or 58.9%, to $21.5 million as compared to $13.5 million in the third quarter of 1997. This increase is primarily the result of the addition of the twenty new centers referred to above. Depreciation and amortization increased in the third quarter of 1998 by $3.6 million, or 45.2%, to $11.7 million as compared to $8.0 million in the third quarter of 1997. This increase is primarily the result of the addition of the twenty new centers referred to above. Interest expense increased in the third quarter of 1998 by $9.9 million, or 107.9%, to $19.0 million as compared to $9.1 million in 1997. This increase is primarily due to interest on debt related to the twenty new centers opened or acquired during the last fifteen months. The gain on sales of real estate assets decreased in the third quarter of 1998 by $0.4 million, or 48.6%, to $0.4 million as compared to $0.8 million in 1997. The outparcel sale in the third quarter of 1998 was at Sand Lake Corner in Orlando, Florida. The sales in the third quarter of 1997 were for outparcels at Springhurst Towne Center in Louisville, Kentucky. 13 The extraordinary loss in the third quarter of 1998 was from the refinancing of the loan on College Square Mall in Morristown, Tennessee. The Company reduced the interest rate from 10% to 6.75% and extended the term to fifteen years. Comparison of Results of Operations for the nine months ended September 30, 1998 to the Results of Operations for the nine months ended September 30, 1997 Total revenues for the nine months ended September 30, 1998 increased by $53.3 million, or 42.0%, to $180.2 million as compared to $126.9 million in 1997. Of this increase, minimum rents increased by $35.2 million, or 42.3%, to $118.5 million as compared to $83.3 million in 1997, and tenant reimbursements increased by $15.6 million, or 42.6%, to $52.2 million in 1998 as compared to $36.6 million in 1997. Improved occupancies and operations and increased rents in the Company's operating portfolio generated $5.5 million of increased revenues. The majority of these increases were generated at Westgate Mall in Spartanburg, South Carolina and Coolsprings Galleria in Nashville, Tennessee. New revenues of $47.7 million resulted from operations at the twenty-five new centers opened or acquired during the past twenty-one months. These centers are as follows: Project Name Location Total GLA Type of Addition Opening Date - ------------- -------- ---------- ----------------- ------------ Northpark Center Richmond, Virginia 61,000 New Development March, 1997 The Terrace Chattanooga, Tennessee 156,000 New Development February/ March 1997 Massard Crossing Fort Smith, Arkansas 291,000 New Development March, 1997 Salem Crossing Virginia Beach, Virginia 289,000 New Development July, 1997 Strawbridge Marketplace Virginia Beach, Virginia 44,000 New Development August, 1997 Springhurst Towne Center Louisville, Kentucky 811,000 New Development August, 1997 Bonita Lakes Mall Meridian, Mississippi 633,000 New Development October, 1997 Bonita Lakes Crossing Meridian, Mississippi 62,300 New Development October, 1997/ March 1998 Cortlandt Town Center Cortlandt, New York 772,000 New Development November, 1997 Chester Plaza Richmond, Virginia 10,000 New Development October, 1997 Hamilton Place Expansion Chattanooga, Tennessee 12,500 New Development April, 1998 Sterling Creek Commons Portsmouth, Virginia 65,500 New Development June, 1998 Governor's Plaza Clarksville, Tennessee 151,000 Acquisition June, 19978 Westgate Crossing Spartanburg, South Carolina 151,000 Acquisition August, 1997 Springdale Mall Mobile, Alabama 926,000 Acquisition September, 1997 Asheville Mall Asheville, North Carolina 817,000 Acquisition January, 1998 Burnsville Center Burnsville (Minneapolis), 1,070,000 Acquisition January, 1998 Minnesota Stroud Mall Stroudsburg, Pennsylvania 427,000 Acquisition April, 1998 Hickory Hollow Mall Nashville, Tennessee 1,095,946 Acquisition July, 1998 Rivergate Mall Nashville, Tennessee 1,013,970 Acquisition July, 1998 Courtyart at Hickory Nashville, Tennessee 77,460 Acquisition July, 1998 Hollow
14 Project Name Location Total GLA Type of Addition Opening Date - ------------- -------- ---------- ----------------- ------------ Village at Rivergate Nashville, Tennessee 166,366 Acquisition July, 1998 Lionshead Nashville, Tennessee 93,290 Acquisition July, 1998 Meridian Mall Oskemos (Lansing), Michigan 776,960 Acquisition August, 1998 Janesville Mall Janesville, Wisconsin 615,000 Acquisition August, 1998
Management, leasing and development fees increased by $0.3 million to $2.1 million in the first nine months of 1998 as compared to $1.8 million in 1997. This increase was primarily due to fees earned in the Company's co- development program and increases in management fees on managed properties. Property operating expenses, including real estate taxes and maintenance and repairs, increased in the first nine months of 1998 by $16.6 million, or 41.7%, to $56.3 million as compared to $39.8 million in 1997. This increase is primarily the result of the addition of the twenty-five new centers referred to above. Depreciation and amortization increased in the first nine months of 1998 by $6.9 million, or 29.2%, to $30.5 million as compared to $23.6 million in 1997. This increase is primarily the result of the addition of the twenty-five new centers referred to above. Interest expense increased in the first nine months of 1998 by $20.8 million, or 76.6%, to $47.8 million as compared to $27.1 million in 1997. This increase is primarily the result of interest on debt related to the addition of the twenty-five new centers referred to above. The gain on sales of real estate assets decreased for the first nine months of 1998 by $1.3 million, or 30.0%, to $2.9 million as compared to $4.2 million in 1997. Gain on sales in the first nine months of 1998 were for outparcel sales at the Company's developments in Springhurst Towne Center in Louisville, Kentucky and Sterling Creek Commons in Portsmouth, Virginia. The sales in the first nine months of 1997 were in connection with anchor pad and outparcel sales at developments in Courtlandt Town Center in Courtlandt, New York, Salem Crossing in Virginia Beach, Virginia, and Springhurst Towne Center in Louisville, Kentucky, off-set by a loss on sale at Kingston Overlook in Knoxville, Tennessee. The extraordinary loss in the first nine months of 1998 was from the refinancing of the loan on College Square Mall in Morristown, Tennessee. The Company reduced the interest rate from 10% to 6.75% and extended the term to fifteen years. Liquidity and Capital Resources The principal uses of the Company's liquidity and capital resources have historically been for property development, acquisitions, expansion and renovation programs, and debt repayment. 15 To maintain its qualification as a real estate investment trust under the Internal Revenue Code, the Company is required to distribute to its shareholders at least 95% of its "Real Estate Investment Trust Taxable Income" as defined in the Internal Revenue Code of 1986, as amended (the "Code"). As of October 31, 1998, the Company had $75.2 million available in unfunded construction loans to be used for completion of construction projects and replenishment of working capital previously used for construction. Additionally, as of October 31, 1998, the Company had obtained revolving credit facilities totaling $230 million of which $83.8 million was available. Also, as a publicly traded company, the Company has access to capital through both the public equity and debt markets. The Company has filed a Shelf Registration authorizing shares of the Company's preferred stock and common stock and warrants to purchase shares of the Company's common stock with an aggregate public offering price of up to $350 million, with $278 million remaining after the Company's preferred stock offering on June 30, 1998. The Company at this time thinks that the combination of these sources will, for the foreseeable future, provide adequate liquidity to enable it to continue its capital programs substantially as in the past and make distributions to its shareholders in accordance with the Code's requirements applicable to real estate investment trusts. Management expects to refinance the majority of the mortgage notes payable maturing over the next five years with replacement loans. The Company's policy is to maintain a conservative debt to total market capitalization ratio in order to enhance its access to the broadest range of capital markets, both public and private. The Company's current capital structure includes property specific mortgages, which are generally non- recourse, credit facilities, preferred stock, common stock and a minority interest in the Operating Partnership. Ownership interest in the Operating Partnership held by the Company's executive, former executive and senior officers is 26.2% which may be exchanged for approximately 9.5 million shares of common stock . Additionally, Company executive officers and directors own approximately 1.7 million shares of the outstanding common stock of the Company, for a combined total interest in the Operating Partnership of approximately 30.4%. Ownership interests granted in exchange for acquired properties may be exchanged for approximately 2.8 million shares of common stock. The minority interest in the Operating Partnership from executive ownership interest and ownership interest granted in exchange of acquired properties is 33.7%. Assuming the exchange of all limited partnership interests in the Operating Partnership for common stock, there would be outstanding approximately 36.5 million shares of common stock with a market value of approximately $938.8 million at September 30, 1998 (based on the closing price of $25.75 per share on September 30, 1998). The Company's total market equity is $1,010.7 million including 2.9 million shares of preferred stock at $25.00 per share at September 30,1998. Company executive, former executive and senior officers' ownership interests had a market value of approximately $286.0 million at September 30, 1998. Mortgage debt consists of debt on certain consolidated properties as well as on three properties in which the Company owns a non-controlling 16 interest and are accounted for under the equity method of accounting. At September 30, 1998, the Company's share of funded mortgage debt on its consolidated properties adjusted for minority investors' interests in nine properties was $1,163.4 million and its pro rata share of mortgage debt on unconsolidated properties (accounted for under the equity method) was $41.4 million for total debt obligations of $1,204.8 million with a weighted average interest rate of 7.13%. The Company's total conventional fixed rate debt as of September 30, 1998 was $683.7 million with a weighted average interest rate of 7.52% as compared to 8.1% as of September 30, 1997. The Company's variable rate debt as of September 30, 1998 was $521.1 million with a weighted average interest rate of 6.61% as compared to 6.98% as of September 30, 1997. Through the execution of interest rate swap agreements, the Company has fixed the interest rates on $314 million of variable rate debt on operating properties at a weighted average interest rate of 6.61%. Of the Company's remaining variable rate debt of $207.1 million, interest rate caps in place of $100.0 million and conventional permanent loan commitments of $39.4 million, leave $67.7 million of debt subject to variable rates on construction properties and no debt subject to variable rates on operating properties. There were no fees charged to the Company related to these swap agreements. The Company's swap agreements in place at September 30, 1998 are as follows: Swap Amount Fixed LIBOR (in millions) Component Expiration Date Effective Date - -------------- -------------- --------------- -------------- $65 5.72% 01/07/2000 01/07/98 81 5.54% 02/04/2000 02/04/98 50 5.70% 06/15/2001 06/15/98 38 5.73% 06/30/2001 06/26/98 80 5.49% 09/01/2001 09/01/98 In December 1997, the Company obtained two $100 million interest rate caps on LIBOR-based variable rate debt, one at 7% for 1998 and one at 7.5% for 1999. There was a fee paid to obtain these caps. In August 1998, Wells Fargo Reality Advisors Funding, Inc., the agent for the Company's largest credit facility, increased the Company's credit facility to $120 million from $85 million. In September 1998, the Company extended a short term loan with Compass Bank in the amount of $12.5 million at an interest rate of 50 basis points over LIBOR. The note matures in equal installments on November 15, 1998 and pays out over the next 60 days. The weighted average interest rate on the Company's credit facilities is 6.52% at September 30, 1998. 17 Based on the debt (including construction projects) and the market value of equity described above, the Company's debt to total market capitalization (debt plus market value equity) ratio was 54.4% at September 30, 1998. Development, Expansions And Acquisitions In the third quarter of 1998, the Company opened a 12,000-square-foot expansion to Coolsprings Crossing in Nashville, Tennessee. The Company's other development project under construction and scheduled to open during 1998 is Sand Lake Corners in Orlando, Florida, a 594,000 square-foot community center, the non-owned first phase of which will open in November 1998 with the remainder to open by April 1999. Projects scheduled to open in 1999 are Fiddler's Run in Morganton, North Carolina, a 203,000 square- foot community center scheduled to open in March 1999 and Arbor Place Mall in Douglasville, Georgia, a suburb of Atlanta. This 983,000 square-foot mall is scheduled to open in October 1999 with an additional 250,000 square- feet planned. Preliminary grading work has already begun for the construction of an adjacent 165,000 square-foot associated center to be called The Landing at Arbor Place. In the second quarter of 1998 the Company began construction on an 83,000 square-foot Regal Cinema in Jacksonville, Florida scheduled to open in the fall of 1999. In July 1998, the Company began sitework on a 92,000 square foot Sears expansion to Lakeshore Mall in Sebring, Florida. In July 1998, the Company acquired Hickory Hollow Mall, a 1,096,000 square-foot mall, and Rivergate Mall, a 1,074,000 square-foot mall both of which are located in the metropolitan Nashville, Tennessee area. Both malls are anchored by Dillard's, JC Penney, Proffitts and Sears. The Company also acquired The Courtyard at Hickory Hollow, a 77,000 square- foot associated center, The Village at Rivergate, a 166,000 square-foot associated center, and Lionshead Village, a 93,000 square-foot community center, all located in the metropolitan Nashville, Tennessee area. In August 1998, the Company acquired Meridian Mall, a 767,000 square-foot mall, in Lansing (Oskemos), Michigan and Janesville Mall, a 615,000 square- foot mall, in Janesville, Wisconsin. The Company has entered into standby purchase agreements with third- party developers (the "Developers") for the construction, development and potential ownership of two community centers in Georgia and Texas (the "Co- Development Projects"). The Developers have utilized these standby purchase agreements to assist in obtaining financing to fund the construction of the Co-Development Projects. The standby purchase agreements, which expire in 1999, are dependent upon certain completion requirements, rental levels, the inability of the Developers to obtain adequate permanent financing and the inability to sell the Co-Development Project before the Company becomes obligated to fund its equity contribution or purchase the Co-Development Project. In return for its commitment to purchase a Co-Development Project pursuant to a standby purchase agreement, the Company receives a fee as well as a participation interest in either the cash flow or gains from sale on each Co-Development Project. In addition to the standby purchase agreements, the Company has extended credit to a Developer to cover pre-development costs. The outstanding amount on standby purchase agreements is $49.1 18 million and the committed amount on secured credit agreements is $2.7 million of which $2.2 million is outstanding at September 30, 1998. The Company has entered into a number of option agreements for the development of future regional malls and community centers as well as contingent contracts for the purchase of certain properties. Except for these projects and as further described below, the Company currently has no other capital commitments. It is management's expectation that the Company will continue to have access to the capital resources necessary to expand and develop its business. Future development and acquisition activities will be undertaken by the Company as suitable opportunities arise. Such activities are not expected to be undertaken unless adequate sources of financing are available and a satisfactory budget with targeted returns on investment has been internally approved. The Company will fund its major development, expansion and acquisition activity with its traditional sources of construction and permanent debt financing as well as from other debt and equity financings, including public financings, and its credit facilities in a manner consistent with its intention to operate with a conservative debt to total market capitalization ratio. Other Capital Expenditures Management prepares an annual capital expenditure budget for each property which is intended to provide for all necessary recurring capital improvements. Management believes that its annual operating reserve for maintenance and recurring capital improvements and reimbursements from tenants will provide the necessary funding for such requirements. The Company intends to distribute approximately 70% - 80% of its funds from operations with the remaining 20% - 30% to be held as a reserve for capital expenditures and continued growth opportunities. The Company believes that this reserve will be sufficient to cover both tenant finish costs associated with the renewal or replacement of current tenant leases as their leases expire and capital expenditures which will not be reimbursed by tenants. Major tenant finish costs for currently vacant space are expected to be funded with working capital, operating reserves, or the credit facilities. For the nine months ended September 30, 1998, revenue generating capital expenditures, or tenant allowances for improvements, were $4.9 million. These capital expenditures generate increased rents from these tenants over the term of their leases. Revenue enhancing capital expenditures, or remodeling and renovation costs, were $7.7 million for the nine months ended September 30, 1998. Revenue neutral capital expenditures, which are recovered from the tenants, were $3.5 million for the nine months ended September 30, 1998. 19 The Company believes that the Properties are in compliance in all material respects with all federal, state and local ordinances and regulations regarding the handling, discharge and emission of hazardous or toxic substances. The Company has not been notified by any governmental authority, or is not otherwise aware, of any material noncompliance, liability or claim relating to hazardous or toxic substances in connection with any of its present or former properties. The Company has not recorded in its financial statements any material liability in connection with environmental matters. Cash Flows Cash flows provided by operating activities for the nine months ended September 30, 1998 increased by $11.4 million, or 23.7%, to $59.4 million from $48.0 million in 1997. This increase was primarily due to the increases in net income and depreciation and amortization related to the addition of twenty-five new properties over the last twenty-one months. Cash flows used in investing activities for the nine months ended September 30, 1998 increased by $387.3 million, or 270.1%, to $530.7 million compared to $143.4 million in 1997. This increase was due to the purchase of seven malls and three other centers in 1998 and continuing development of new properties as compared to 1997. Cash flows provided by financing activities for the nine months ended September 30, 1998, increased by $377.6 million, or 388.1%, to $474.9 million compared to $97.3 million in 1997. The increase was primarily due to increased borrowings related to the development and acquisition program and a decrease in the amount of debt repaid in the nine months ended September 30, 1998 as compared to the same period in 1997. Impact of Inflation In the last four years, inflation has not had a significant impact on the Company because of the relatively low inflation rate. Substantially all tenant leases do, however, contain provisions designed to protect the Company from the impact of inflation. Such provisions include clauses enabling the Company to receive percentage rentals based on tenant's gross sales, which generally increase as prices rise, and/or escalation clauses, which generally increase rental rates during the terms of the leases. In addition, many of the leases are for terms of less than ten years which may enable the Company to replace existing leases with new leases at higher base and/or percentage rentals if rents of the existing leases are below the then-existing market rate. Most of the leases require the tenants to pay their share of operating expenses, including common area maintenance, real estate taxes and insurance, thereby reducing the Company's exposure to increases in costs and operating expenses resulting from inflation. 20 YEAR 2000 READINESS DISCLOSURES The Year 2000 problem results from the use of a two digit year date instead of a four digit date in the programs that operate computers information processing technology and systems and other devices (i.e. non-information processing systems such as elevators, utility monitoring systems and time clocks that use computer chips). Systems with a Year 2000 problem have programs that were written to assume that the first two digits for any date used in the program would always be "19". Unless corrected, this assumption may result in problems when the century date occurs. On that date, these computer programs likely will misinterpret the date January 1, 2000 as January 1, 1900. This could cause systems to incorrectly process critical financial and operational information, generate erroneous information or fail altogether. The Year 2000 issue effects almost all companies and organizations. The Company has completed a program to identify both its information and non-information processing applications that are not year 2000 compliant. As a result of this identification program, the Company believes that its core accounting application and the majority of non-information processing applications are year 2000 compliant. Certain of its other information and non-information processing applications are not yet year 2000 compliant. The Company has undertaken to correct or replace all non-compliant systems and applications including embedded systems and expects the task to be completed by the end of 1998. The Company has initiated communications with its significant suppliers and tenants to determine the extent to which the Company is vulnerable to the failure of such parties to correct their year 2000 compliance issues. In addition, the Company has formed a Year 2000 Committee that includes senior personnel from most areas of the Company. These people are charged with the duty of determining the extent of the Company's exposure and taking the appropriate action to minimize any impact on the Company's operations. Costs to Address the Company's Year 2000 Issue As the Company's Year 2000 compliance issues have already been addressed, which costs were not material, the Company does not expect to incur any significant additional costs regarding the compliance of all non compliant information processing systems and non-information processing systems including embedded systems. Risks Relating to The Year 2000 Issue And Contingency Plans Although the Company is not currently aware of any specific significant Year 2000 issues involving third-parties, the Company believes that its most significant potential risk relating to the Year 2000 issue is in regard to such third parties. For example, the Company believes there could be failure in the information systems of certain service providers that the Company relies upon for electrical, telephone and data transmission and banking services. The Company believes that any service disruption with respect to these providers due to a Year 2000 issue would be of a short-term nature. The Company has existing back-up systems and procedures, developed primarily for natural disasters, that could be utilized on a short-term basis to address any service interruptions. In addition, with respect to tenants, a failure of their information systems could delay the payment of rents or even impair their ability to operate. These tenant problems are likely to be isolated and would likely not impact the operations of any particular mall or the Company as a whole. While it is not possible at this time to determine the likely impact of any of these potential problems, the Company will continue to evaluate these areas and develop additional contingency plans, as appropriate. Therefore, although the Company believes that its Year 2000 issues have been addressed and that suitable remediation and/or contingency procedures will be in place by December 31, 1999, there can be no assurance that Year 2000 issues will not have a material adverse effect on the Company's results of operations or financial condition. New Accounting Pronouncements In May 1998, the Emerging Issues Task Force ("EITF") issued EITF 98-9 "Reporting Contingent Rents" in which it reached a consensus regarding the accounting for contingent rent in interim financial periods. The Company does not expect to this to have a material impact on the Company's results of operations. 21 In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133 establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. SFAS No. 133 requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the income statement, and requires that a company must formally document, designate, and assess the effectiveness of transactions that receive hedge accounting. SFAS No. 133 is effective for fiscal years beginning after June 15, 1999. A company may also implement SFAS No. 133 as of the beginning of any fiscal quarter after issuance (that is, fiscal quarters beginning June 16, 1998 and thereafter). SFAS No. 133 cannot be applied retroactively. SFAS No. 133 must be applied to (a) derivative instruments and (b) certain derivative instruments embedded in hybrid contracts that were issued, acquired, or substantively modified after December 31, 1997 (and, at the company's election, before January 1, 1998). The Company has not yet quantified the impact of adopting SFAS No. 133 on its financial statements and has not determined the timing of or method of adoption of SFAS No. 133. However, SFAS No. 133 could increase volatility in earnings and other comprehensive income. Funds from Operations Management believes that Funds from Operations ("FFO") provides an additional indicator of the financial performance of the Properties. FFO is defined by the Company as net income (loss) before depreciation of real estate assets, other non-cash items (including the write-off of development projects not being pursued), gains or losses on sales of real estate assets and gains or losses on investments in marketable securities. FFO also includes the Company's share of FFO in unconsolidated properties and excludes minority interests' share of FFO in consolidated properties. The Company computes FFO in accordance with the National Association of Real Estate Investments Trusts' ("NAREIT") recommendation concerning finance costs and non-real estate depreciation. Beginning with the first quarter of 1998 the Company includes straight line rent in its FFO calculation. However, the Company continues to exclude gains or losses on outparcel sales, even though NAREIT permits their inclusion when calculating FFO. Gains or losses on outparcel sales would have added $0.4 million and $2.6 million to FFO in the three months and nine months ended September 30, 1998, respectively, and $0.8 million and $4.2 million in the same periods in 1997, respectively. FFO for the third quarter and first nine months of 1997 has been restated to include straight line rents. 22 The use of FFO as an indicator of financial performance is influenced not only by the operations of the Properties, but also by the capital structure of the Operating Partnership and the Company. Accordingly, management expects that FFO will be one of the significant factors considered by the Board of Directors in determining the amount of cash distributions the Operating Partnership will make to its partners (including the REIT). FFO does not represent cash flow from operations as defined by GAAP and is not necessarily indicative of cash available to fund all cash flow needs and should not be considered as an alternative to net income for purposes of evaluating the Company's operating performance or to cash flows as a measure of liquidity. For the three months ended September 30, 1998, FFO increased by $4.3 million, or 22.5%, to $23.2 million as compared to $19.0 million for the same period in 1997. For the nine months ended September 30, 1998, FFO increased by $12.2 million, or 22.1%, to $67.1 million as compared to $55.0 million for the same period in 1997. The increase in FFO for both periods was primarily attributable to the new developments opened during 1997 and 1998, the properties acquired during 1997 and 1998 and improved operations in the existing portfolio. 23 The REIT's calculation of FFO is as follows (in thousands): Three Months Ended Nine Month Ended September 30, September 30, ------------------ ------------------ 1998 1997 1998 1997 -------- -------- -------- -------- Income from operations. . . . . $ 12,677 $ 10,706 $ 36,829 $ 30,068 ADD: Depreciation & amortization from consolidated properties . . . 11,659 8,029 30,534 23,639 Income from operations of unconsolidated affiliates . . 521 301 1,689 1,514 Depreciation & amortization from unconsolidated affiliates . . 357 337 1,057 993 Write-off of development costs charged to net income . . . . 113 3 122 45 SUBTRACT: Minority investors' share of income from operations in nine properties . . . . . . . (101) (116) (409) (405) Minority investors share of depreciation and amortization in nine properties. . . . . . (216) (199) (649) (582) Depreciation and amortization of non-real estate assets and finance costs . . . . . . (168) (107) (446) (320) Preferred Dividend. . . . . . . (1,617) -- (1,617) -- -------- -------- -------- -------- TOTAL FUNDS FROM OPERATIONS . . $ 22,225 $ 18,954 $ 67,110 $ 54,952 ======== ======== ======== ======== Basic per share data: Funds from operations . . . . $ 0.66 $ 0.57 $ 1.97 $ 1.65 ======== ======== ======== ======== Weighted average common shares outstanding with operating partnership units fully converted . . . 35,073 33,501 34,067 33,281 ======== ======== ======== ======== Diluted per share data: Funds from operations . . . . $ 0.66 $ 0.56 $ 1.96 $ 1.64 ======== ======== ======== ======== Weighted average common shares and dilutive potential common shares outstanding with operating partnership units fully converted . . . . . . . . . 35,365 33,776 34,323 33,543 ======== ======== ======== ======== 24 PART II - OTHER INFORMATION ITEM 6: Exhibits and Reports on Form 8-K A. Exhibits 10 Second Amended and Restated Agreement of Limited Partnership of CBL & Associates Limited Partnership dated June 30, 1998 11.2 Amended and restated Loan Agreement between CBL & Associates, Inc. Properties and First Tennessee Bank National Association Dated June 12, 1998 11.2 First Amendment To Third Amended And Restated Credit Agreement and Third Amended And Restated Credit Agreement between CBL & Associates Properties, Inc. and Wells Fargo Bank, National Association, dated August 4, 1998 B. Reports on Form 8-K The following items were reported: Information on the purchase of Meridian Mall in Oskemos (Lansing), Michigan and Janesville Mall in Janesville, Wisconsin (Item 2) was filed on September 11, 1998. The outline from the Company's October 29, 1998 conference call with analysts and investors regarding earnings (Item 5) was filed on October 29, 1998. Additional information (Form 8-K/A) on the purchase of Meridian Mall in Oskemos (Lansing), Michigan and Janesville Mall in Janesville, Wisconsin (Item 2) was filed on November 10, 1998. 25 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CBL & ASSOCIATES PROPERTIES, INC. /s/ John N. Foy --------------------------------- John N. Foy Executive Vice President, Chief Financial Officer and Secretary (Authorized Officer of the Registrant, Principal Financial Officer and Principal Accounting Officer) Date: November 13, 1998 26 EXHIBIT INDEX Exhibit No. ------- 10 Second Amended and Restated Agreement of Limited Partnership of CBL & Associates Limited Partnership dated June 30, 1998 11.2 Amended and restated Loan Agreement between CBL & Associates, Inc. Properties and First Tennessee Bank National Association Dated June 12, 1998 11.2 First Amendment To Third Amended And Restated Credit Agreement and Third Amended And Restated Credit Agreement between CBL & Associates Properties, Inc. and Wells Fargo Bank, National Association, dated August 4, 1998 27 Financial Data Schedule 27 EX-10 2 [DESCRIPTION] EXHIBIT 10 SECOND AMENDED AND RESTATED AGREEMENT SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF CBL & ASSOCIATES LIMITED PARTNERSHIP June 30, 1998 1 TABLE OF CONTENTS ARTICLE I. Definitions, Etc. 1.1. Definitions 2 Accountants 2 Acquisition Cost 2 Act 2 Additional Partner 2 Additional Units 2 Adjusted Capital Account Deficit 3 Administrative Expenses 3 Affiliate 4 Agreement 4 Assignee 4 Assumed Liability 4 Audited Financial Statements 4 Bankruptcy 5 Capital Account 6 Capital Contribution 6 Capital Stock 6 CBL 6 Certificate of Limited Partnership 7 Claim 7 Closing Price 7 Code 8 Common Stock 8 Common Stock Amount 8 Common Units 8 Company 9 Consent of the Limited Partners 9 Contributed Property 9 Contribution Date 9 Contributing Partner 9 Control 9 Conversion Factor 10 Current Per Share Market Price 11 Demand Notice 11 Depreciation 11 Entity 11 ERISA 11 Exercise Notice 11 First Restated Agreement 12 General Partner 12 General Partner Loan 12 Gross Asset Value 12 Immediate Family 13 Incentive Option 13 Incentive Option Agreement 13 Joint Venture Partnership 13 Liens 14 Limited Partner Representatives 14 Limited Partners 14 i Liquidating Transaction 14 Liquidating Trustee 14 Major Decisions 14 Majority-In-Interest of the Limited Partners 14 Management Agreement 15 Management Company 15 Minimum Gain Attributable to Partner Nonrecourse Debt 15 Net Cash Flow 15 Net Financing Proceeds 16 Net Income or Net Loss 16 Net Sale Proceeds 18 Nonrecourse Deductions 19 Nonrecourse Liabilities 19 Offered Units 19 Office Building 19 Ownership Limit 19 Partner Nonrecourse Debt 19 Partner Nonrecourse Deductions 19 Partners 19 Partnership 19 Partnership Minimum Gain 19 Partnership Units 20 Person 20 Preferred Contributed Funds 20 Preferred Distribution Requirement 20 Preferred Distribution Shortfall 20 Preferred Redemption Amount 20 Preferred Redemption Price 20 Preferred Stock 20 Preferred Unit Designation 20 Preferred Unit Issue Price 21 Preferred Units 21 Properties 21 Property Partnerships 21 Qualified Individual 21 Registered Agent 21 Registered Office 21 Regulations 22 Regulatory Allocations 22 REIT 22 REIT Expenses 22 REIT Requirements 23 Requesting Party 23 Related Issue 23 Responding Party 23 Restricted Partner 23 Rights 23 SEC 23 Securities Act 23 Stock Incentive Plan 23 Substituted Limited Partner 23 Tax Items 23 Trading Day 24 Transfer 24 ii 1.2. Exhibits, Etc. 24 ARTICLE II. Organization 2.1. Continuation 24 2.2. Name 25 2.3. Character of the Business 25 2.4. Location of the Principal Place of Business 26 2.5. Registered Agent and Registered Office 26 ARTICLE III. Term 3.1. Commencement 27 3.2. Dissolution 27 ARTICLE IV. Contributions to Capital 4.1. Partners 27 4.2. General Partner Capital Contribution 28 4.3. Limited Partner Capital Contributions 28 4.4. Issuance of Additional Units 29 4.5. Admission of Additional Partners. 32 4.6. Stock Incentive Plan 33 4.7. No Third Party Beneficiary 34 4.8. No Interest; No Return 34 4.9. Adjustment Upon Conversion of Preferred Stock 34 ARTICLE V. Representations, Warranties and Covenants 5.1. Representations and Warranties 35 5.2. Covenants 36 ARTICLE VI. Allocations, Distributions, and Other Tax and Accounting Matters 6.1. Allocations, Distributions, and Other Tax and Accounting Matters 36 6.2. Distributions 36 6.3. Books of Account 38 6.4. Reports 39 6.5. Audits 40 6.6. Tax Elections and Returns 40 6.7. Tax Matters Partner 42 ARTICLE VII. Rights, Duties and Restrictions of the General Partner 7.1. Expenditures by Partnership 43 7.2. Powers and Duties of General Partner 44 7.3. Major Decisions 48 7.4. Actions with Respect to Certain Documents 48 7.5. Reliance by Third Parties 49 7.6. Company Participation 50 7.7. Proscriptions 50 iii 7.8. Additional Partners 51 7.9. Title Holder 51 7.10. Compensation of the General Partner 51 7.11. Waiver and Indemnification. 51 7.12. Limited Partner Representatives 52 7.13. Operation in Accordance with REIT Requirements 53 7.14. Transactions with Affiliates 54 7.15. Other Matters Concerning the General Partner 54 ARTICLE VIII. Dissolution, Liquidation and Winding-Up 8.1. Accounting 55 8.2. Distribution on Dissolution 56 8.3. Timing Requirements 56 8.4. Sale of Partnership Assets 57 8.5. Distributions in Kind 57 8.6. Documentation of Liquidation 58 8.7. Liability of the Liquidating Trustee 58 ARTICLE IX. Transfer of Partnership Units 9.1. General Partner Transfer 58 9.2. Transfers by Limited Partners 60 9.3. Restrictions on Transfer 61 ARTICLE X. Rights and Obligations of the Limited Partners 10.1. No Participation in Management 64 10.2. Bankruptcy of a Limited Partner 65 10.3. No Withdrawal 65 10.4. Duties and Conflicts 65 10.5. Limited Liability 66 ARTICLE XI. Grant of Rights to Limited Partners 11.1. Grant of Rights 66 11.2. Terms of Rights 67 ARTICLE XII. Indemnification 12.1. Indemnification of the Limited Partners 67 12.2. Indemnification of the General Partner, the Company and Others 68 ARTICLE XIII. Arbitration of Disputes 13.1. Arbitration 68 13.2. Procedures 69 13.3. Binding Character 70 13.4. Exclusivity 70 13.5. No Alternative of Agreement 70 iv ARTICLE XIV. General Provisions 14.1. Notices 70 14.2. Successor 71 14.3. Effect and Interpretation 71 14.4. Counterparts 71 14.5. Partners Not Agents 71 14.6. Entire Understanding; Etc. 72 14.7. Amendments 72 14.8. Severability 73 14.9. Pronouns and Headings 73 14.10. Assurances 74 14.11. Expenses 74 14.12. Waiver of Partition 74 EXHIBITS A Percentage Interests B Preferred Unit Designation C Allocations D Rights Terms v THE PARTNERSHIP UNITS REFERRED TO IN THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. ACCORDINGLY, NO PARTNERSHIP UNITS MAY BE RESOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED UNLESS SUBSEQUENTLY REGISTERED UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE, AND UNLESS THE OTHER TRANSFER RESTRICTIONS CONTAINED HEREIN HAVE BEEN SATISFIED. REFERENCE IS MADE TO ARTICLE IX OF THIS AGREEMENT FOR PROVISIONS RELATING TO VARIOUS RESTRICTIONS ON THE SALE OR OTHER TRANSFER OF THESE PARTNERSHIP UNITS. SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF CBL & ASSOCIATES LIMITED PARTNERSHIP THIS SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP is made and entered into as of the 30th day of June, 1998 by and among CBL Holdings I, Inc., a Delaware corporation, and those certain Persons identified on Exhibit A attached hereto as a Limited Partner. W I T N E S S E T H: WHEREAS, CBL & Associates Limited Partnership (the "Partnership") was formed by that certain Agreement of Limited Partnership dated October 29, 1993, as amended and restated in its entirety by that certain Amended and Restated Agreement of Limited Partnership dated November 3, 1993, and further amended by that certain Modification No. One to the Amended and Restated Agreement of Limited Partnership dated March 31, 1997 and by the Modification No. Two to the Amended and Restated Agreement of Limited Partnership dated February 19, 1998, (together, the "First Restated Agreement"); and WHEREAS, the parties desire to amend the First Restated Agreement in its entirety as set forth in this Agreement. 1 NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained and other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged, the parties hereto, intending legally to be bound, hereby agree that the First Restated Agreement shall be amended and restated in its entirety as follows: ARTICLE I. Definitions, Etc. 1. Definitions. Except as otherwise herein expressly provided, the following terms and phrases shall have the meanings set forth below: "Accountants" shall mean the firm or firms of independent certified public accountants selected by the General Partner on behalf of the Partnership to audit the books and records of the Partnership (and, to the extent provided under the applicable Joint Venture Partnership agreement, the Joint Venture Partnerships) and to prepare statements and reports in connection therewith. "Acquisition Cost" shall have the meaning set forth in Section 4.2(b) hereof. "Act" shall mean the Revised Uniform Limited Partnership Act as enacted in the State of Delaware, and as the same may hereafter be amended from time to time. "Additional Partner" shall have the meaning set forth in Section 4.4(a) hereof. "Additional Units" shall have the meaning set forth in Section 4.4(a) hereof. 2 "Adjusted Capital Account Deficit" shall mean with respect to any Partner, the deficit balance, if any, in such Partner's Capital Account as of the end of the relevant fiscal year, after giving effect to the following adjustments: (i) Such Capital Account shall be deemed to be increased by any amounts which such Partner is obligated to restore to the Partnership (pursuant to this Agreement or otherwise) or is deemed to be obligated to restore pursuant to the second to last sentence of Regulation Section 1.704-2(g)(1) and Section 1.704-2(i)(5) (relating to allocations attributable to nonrecourse debt); and (ii) Such Capital Account shall be deemed to be decreased by the items described in Regulation Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6). The foregoing definition of Adjusted Capital Deficit is intended to comply with the provisions of Regulation Section 1.704-1(b)(2)(ii)(d) and shall be interpreted and applied consistently therewith. "Administrative Expenses" shall mean (i) all administrative and operating costs and expenses incurred by the Partnership, (ii) all administrative, operating and other costs and expenses (including any deficits) incurred by the Property Partnerships and to be paid, advanced or reimbursed by the Partnership pursuant to the partnership agreements of such Property Partnerships, (iii) those administrative costs and expenses of the Company and the General Partner, including salaries paid to officers of the Company and the General Partner, and accounting and legal expenses undertaken by the Company and the General Partner on behalf or for the benefit of the Partnership, (iv) all amounts paid or 3 advanced by the Partnership to the Management Company pursuant to the Management Agreement, and (v) to the extent not included in clause (iii) above, REIT Expenses. "Affiliate" shall mean, with respect to any Partner (or as to any other Person the affiliates of whom are relevant for purposes of any of the provisions of this Agreement), (i) any member of the Immediate Family of such Partner; (ii) any Entity in which such Person owns of record and beneficially a majority of the capital or economic interests; or (iii) any Entity which directly or indirectly through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such Partner. "Agreement" shall mean this Second Amended and Restated Agreement of Limited Partnership, as originally executed and as hereafter amended, modified, supplemented or restated from time to time, as the context requires. "Assignee" shall mean a Person to whom one or more Partnership Units have been transferred, but who has not become a Substituted Limited Partner. "Assumed Liability" shall mean any liability of a Limited Partner or an Affiliate thereof assumed by the Partnership pursuant to Section 13.1 of the First Restated Agreement. "Audited Financial Statements" shall mean financial statements (balance sheet, statement of income, statement of partners' equity and statement of cash flows) prepared in accordance with generally accepted accounting principles and accompanied by an independent auditor's report containing an opinion thereon. 4 "Bankruptcy" shall mean, with respect to any Person, (i) the commencement by such Person of any proceeding seeking relief under any provision or chapter of the federal Bankruptcy Code, 11 U.S.C. 101 et. seq., as the same may be amended from time to time, or any other federal or state law relating to insolvency, bankruptcy or reorganization, (ii) an adjudication that such Person is insolvent or bankrupt, (iii) the entry of an order for relief under the federal Bankruptcy Code with respect to such Person, (iv) the filing of any such petition or the commencement of any such case or proceeding against such Person, unless such petition and the case or proceeding initiated thereby are stayed or dismissed within ninety (90) days from the date of such filing, (v) the filing of an answer by such Person admitting the allegations of any such petition, (vi) the appointment of a trustee, receiver or custodian for all or substantially all of the assets of such Person unless such appointment is stayed, vacated or dismissed within ninety (90) days from the date of such appointment, (vii) the execution by such Person of a general assignment for the benefit of creditors, (viii) the levy, attachment, execution or other seizure of substantially all of the assets of such Person where such seizure is not discharged within thirty (30) days thereafter, (ix) the admission by such Person in writing of its inability generally to pay its debts as they mature or that it is generally not paying its debts as they become due, or (x) the taking of any corporate or partnership action in connection with any of the foregoing. 5 "Capital Account" shall mean, with respect to any Partner, the separate "book" account which the Partnership shall establish and maintain for such Partner in accordance with Section 704(b) of the Code and Section 1.704-1(b)(2)(iv) of the Regulations and such other provisions of Section 1.704-1(b) of the Regulations that must be complied with in order for the Capital Accounts to be determined in accordance with the provisions of said Regulations. In furtherance of the foregoing, the Capital Accounts shall be maintained in compliance with Section 1.704-1(b)(2)(iv) of the Regulations; and the provisions hereof shall be interpreted and applied in a manner consistent therewith. In the event that a Partnership Unit is transferred in accordance with the terms of this Agreement, the Capital Account, at the time of the transfer, of the transferor attributable to the transferred interest shall carry over to the transferee. "Capital Contribution" shall mean, with respect to any Partner, the amount of money and the initial Gross Asset Value of any property other than money contributed to the Partnership with respect to the Partnership Units held by such Partner (net of liabilities to which such property is subject). "Capital Stock" means Common Stock, Preferred Stock and other classes and series of capital stock issued from time to time by the Company. "CBL" shall mean CBL & Associates, Inc., a Tennessee corporation. 6 "Certificate of Limited Partnership" shall mean the Certificate of Limited Partnership establishing the Partnership, filed with the office of the Secretary of State of the State of Delaware on July 16, 1993, as it may be amended from time to time in accordance with the terms of this Agreement and the Act. "Claim" shall have the meaning set forth in Section 12.1 hereof. "Closing Price" on any date shall mean the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the Common Stock is not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Common Stock is listed or admitted to trading or, if the Common Stock is not listed or admitted to trading on any national securities exchange, the last quoted price, or if not so quoted, the average of the high bid and low asked 7 prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotations System or, if such system is no longer in use, the principal other automated quotations system that may then be in use or, if the Common Stock is not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Common Stock as such person is selected from time to time by the General Partner. "Code" shall mean the Internal Revenue Code of 1986, as amended. "Common Stock" shall mean the shares of the common stock, par value $.01 per share, of the Company. "Common Stock Amount" shall mean, with respect to any number of Common Units, the number of shares of Common Stock equal to such number of Common Units multiplied by the Conversion Factor; provided, however, that in the event the Company issues to all holders of Common Stock rights, options, warrants or convertible or exchangeable securities entitling the shareholders to subscribe for or purchase additional Common Stock, or any other securities or property of the Company, the value of which is not included in the first sentence of the definition of Closing Price of the shares of Common Stock (collectively, "additional rights"), then the Common Stock Amount shall also include such additional rights that a holder of that number of shares of Common Stock would be entitled to receive. "Common Units" shall mean the ownership interest of a Partner in the Partnership from time to time, which entitles a Partner to the allocations specified in Section 6 hereof and all distributions from the Partnership, and its rights of management, consent, approval, or participation, if any, as provided in this Agreement. The number of Common Units held by each Partner at the date hereof and the percentage of the total number of outstanding Units represented thereby is as set forth opposite such Partner's name on Exhibit A hereto. Common Units do 8 not include Preferred Units. "Company" shall mean CBL & Associates Properties, Inc., a Delaware corporation, and any successor entity thereto. "Consent of the Limited Partners" shall mean the written consent of a Majority-In-Interest of the Limited Partners, which consent shall be obtained prior to the taking of any action for which it is required by this Agreement and may be given or withheld by a Majority-In-Interest of the Limited Partners, unless otherwise expressly provided herein, in their sole and absolute discretion; provided, however, that except as otherwise required by the Act, the Consent of the Limited Partners shall only be required if Charles B. Lebovitz or his Affiliates collectively own at least 15% of the then outstanding Common Units. "Contributed Property" shall have the meaning set forth in Section 4.2(b) hereof. "Contribution Date" shall have the meaning set forth in Section 4.4 hereof. "Contributing Partner" shall have the meaning set forth in Section 4.4(b) hereof. "Control" shall mean the ability, whether by the direct or indirect ownership of shares or other equity interests, by contract or otherwise, to elect a majority of the directors of a corporation, to select the managing partner of a partnership, or otherwise to select, or have the power to remove and then select, a majority of those persons exercising governing authority over an Entity. In the case of a limited 9 partnership, the sole general partner, all of the general partners to the extent each has equal management control and authority, or the managing general partner or managing general partners thereof shall be deemed to have control of such partnership and, in the case of a trust, any trustee thereof or any Person having the right to select any such trustee shall be deemed to have control of such trust. "Conversion Factor" shall mean 1.0, provided that in the event that the Company (i) pays a dividend on its outstanding shares of Common Stock in shares of Common Stock or makes a distribution to all holders of its outstanding Common Stock in shares of Common Stock, (ii) subdivides its outstanding shares of Common Stock, or (iii) combines its outstanding shares of Common Stock into a smaller number of shares of Common Stock, the Conversion Factor shall be adjusted by multiplying the Conversion Factor by a fraction, the numerator of which shall be the number of shares of Common Stock issued and outstanding on the record date for such dividend, distribution, subdivision or combination (assuming for such purposes that such dividend, distribution, subdivision or combination occurred as of such time), and the denominator of which shall be the actual number of shares of Common Stock (determined without the above assumption) issued and outstanding on the record date for such dividend, distribution, subdivision or combination. Any adjustment to the Conversion Factor shall become effective immediately after the record 10 date for such event in the case of a dividend or distribution or the effective date in the case of a subdivision or combination. "Current Per Share Market Price" on any date shall mean the average of the Closing Price for the five consecutive Trading Days ending on and including such date (or if such date is not a Trading Day, ending on the immediately preceding Trading Day). "Demand Notice" shall have the meaning set forth in Section 13.2 hereof. "Depreciation" shall mean, with respect to any asset of the Partnership for any fiscal year or other period, the depreciation, depletion or amortization, as the case may be, allowed or allowable for federal income tax purposes in respect of such asset for such fiscal year or other period; provided, however, that if there is a difference between the Gross Asset Value and the adjusted tax basis of such asset, Depreciation shall mean "book depreciation, depletion or amortization" as determined under Section 1.704-1(b)(2)(iv)(g)(3) of the Regulations. "Entity" shall mean any general partnership, limited partnership, corporation, joint venture, limited liability company, trust, business trust, cooperative or association. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time (or any corresponding provisions of succeeding laws). "Exercise Notice" shall have the meaning set forth in Schedule 1 to Exhibit D. 11 "First Restated Agreement" shall have the meaning set forth in the preamble to this Agreement. "General Partner" shall mean CBL Holdings I, Inc., a Delaware corporation, its duly admitted successors and assigns and any other Person who is a general partner of the Partnership at the time of reference thereto. "General Partner Loan" shall have the meaning set forth in Section 4.7 hereof. "Gross Asset Value" shall mean, with respect to any asset of the Partnership, such asset's adjusted basis for federal income tax purposes, except as follows: (a) the Gross Asset Value of any asset contributed by a Partner to the Partnership shall be the gross fair market value of such asset as determined under Article IV; (b) if the General Partner reasonably determines that an adjustment is necessary or appropriate to reflect the relative economic interests of the Partners, the Gross Asset Values of all Partnership assets shall be adjusted to equal their respective gross fair market values, as reasonably determined by the General Partner, as of the following times: 1. a Capital Contribution (other than a de minimis Capital Contribution) to the Partnership by a new or existing Partner as consideration for Partnership Units; 2. the distribution by the Partnership to a Partner of more than a de minimis amount of Partnership property as consideration for the redemption of Partnership Units; and 3. the liquidation of the Partnership within the meaning of Section 1.704-1(b)(2)(ii)(g) of the Regulations; (c) the Gross Asset Values of Partnership assets distributed to any Partner shall be the gross fair market values of such assets (taking Section 7701(g) of the Code into account) as reasonably determined by the General Partner as of the date of distribution; and 12 (d) the Gross Asset Values of Partnership assets shall be increased (or decreased) to reflect any adjustments to the adjusted basis of such assets pursuant to Sections 734(b) or 743(b) of the Code, but only to the extent that such adjustments are taken into account in determining Capital Accounts pursuant to Section 1.704-1(b)(2)(iv)(m) of the Regulations; provided, however, that Gross Asset Values shall not be adjusted pursuant to this paragraph to the extent that the General Partner reasonably determines that an adjustment pursuant to paragraph (b) above is necessary or appropriate in connection with a transaction that would otherwise result in an adjustment pursuant to this paragraph (d). At all times, Gross Asset Values shall be adjusted by any Depreciation taken into account with respect to the Partnership's assets for purposes of computing Net Income and Net Loss. Any adjustment to the Gross Asset Values of Partnership property shall require an adjustment to the Partners' Capital Accounts; as for the manner in which such adjustments are allocated to the Capital Accounts, see paragraph (c) of the definition of Net Income and Net Loss in the case of adjustment by Depreciation, and paragraph (d) of said definition in all other cases. "Immediate Family" shall mean, with respect to any Person, such Person's spouse, parents, or descendants by blood or adoption. "Incentive Option" means an option to purchase Common Stock granted under the Stock Incentive Plan. "Incentive Option Agreement" means the form of Incentive Option Agreement to be used under the Stock Incentive Plan. "Joint Venture Partnership" shall mean any Property Partnership in which the Partnership and the Company do not own, directly or indirectly, 100% of the ownership interests in the aggregate. 13 "Liens" shall mean any liens, security interests, mortgages, deeds of trust, charges, claims, encumbrances, pledges, options, rights of first offer or first refusal and any other similar encumbrances of any nature whatsoever. "Limited Partner Representatives" shall have the meaning set forth in Section 7.12 hereof. "Limited Partners" shall mean (i) those Persons listed under the heading "Limited Partners" on Exhibit A hereto in their respective capacities as limited partners of the Partnership, their permitted successors or assigns as a limited partners hereof, and (ii) any Person who, at the time of reference thereto, is a limited partner of the Partnership. "Liquidation Transaction" shall mean any sale of assets of the Partnership in contemplation of, or in connection with, the liquidation of the Partnership. "Liquidating Trustee" shall mean the General Partner or, if the General Partner is unable or unwilling to serve in such capacity, such other individual or Entity which, with the Consent of the Limited Partners or otherwise under the Act, shall be charged with winding up the Partnership. "Major Decisions" shall have the meaning set forth in Section 7.3 hereof. "Majority-In-Interest of the Limited Partners" shall mean Limited Partner(s) who hold in the aggregate more than fifty percent (50%) of the voting rights associated with the then outstanding Partnership Units which are entitled to vote 14 on the matter with respect to which such calculation is made, as a class. "Management Agreement" shall mean the Management Agreement dated November 3, 1993 between the Management Company and the Partnership, as such may be amended or supplemented. "Management Company" shall mean CBL & Associates Management, Inc., a Delaware corporation, or its permitted successors or assigns. "Minimum Gain Attributable to Partner Nonrecourse Debt" shall mean "partner nonrecourse debt minimum gain" as determined in accordance with Regulation Section 1.704-2(i)(2). "Net Cash Flow" shall mean, with respect to any fiscal period of the Partnership, the excess, if any, of "Receipts" over "Expenditures." For purposes hereof, the term "Receipts" means the sum of all cash receipts of the Partnership from all sources for such period (including Net Sale Proceeds and Net Financing Proceeds but excluding Capital Contributions) and any amounts held as reserves as of the last day of such period which the General Partner reasonably deems to be in excess of necessary reserves as determined below. The term "Expenditures" means the sum of (a) all cash expenses of the Partnership for such period, (b) the amount of all payments of principal of, premium, if any, and interest on account of any indebtedness of the Partnership including payments of principal of, premium, if any, and interest on account of General Partner Loans, or amounts due on such indebtedness during such period, and (c) such additions to cash reserves as of the last day of such period as the General Partner deems necessary or appropriate 15 for any capital, operating or other expenditure, including, without limitation, contingent liabilities, but the term "Expenditures" shall not include any expense paid from a cash reserve previously established by the Partnership. "Net Financing Proceeds" shall mean the cash proceeds received by the Partnership in connection with any borrowing or refinancing of borrowing by or on behalf of the Partnership or by or on behalf of any Property Partnership (whether or not secured), after deduction of all costs and expenses incurred by the Partnership or the Property Partnership in connection with such borrowing, and after deduction of that portion of such proceeds used to (i) acquire the Property with respect to which any such borrowing was specifically incurred, and (ii) repay any other indebtedness of the Partnership or Property Partnerships with respect to which any such refinancing or borrowing was specifically incurred, or any interest or premium thereon. For this purpose, cash proceeds received by a Joint Venture Partnership shall not be deemed to be received or available to the Partnership until (i) the distribution of such proceeds is actually received by the Partnership, or (ii) under the terms of the Joint Venture Partnership's partnership agreement, the Partnership controls the timing of the Joint Venture Partnership's distributions and then only to the extent of the Partnership's entitlement to such distributions. "Net Income or Net Loss" shall mean, for each fiscal year or other applicable period, an amount equal to the Partnership's net income or loss for such year or period as 16 determined for federal income tax purposes by the Accountants, determined in accordance with Section 703(a) of the Code (for this purpose, all items of income, gain, loss or deduction required to be stated separately pursuant to Section 703(a) of the Code shall be included in taxable income or loss), with the following adjustments: (a) by including as an item of gross income any tax-exempt income received by the Partnership; (b) by treating as a deductible expense any expenditure of the Partnership described in Section 705(a)(2)(B) of the Code (including amounts paid or incurred to organize the Partnership (unless an election is made pursuant to Code Section 709(b)) or to promote the sale of interests in the Partnership and by treating deductions for any losses incurred in connection with the sale or exchange of Partnership property disallowed pursuant to Section 267(a)(1) or Section 707(b) of the Code as expenditures described in Section 705(a)(2)(B) of the Code); (c) in lieu of depreciation, depletion, amortization, and other cost recovery deductions taken into account in computing total income or loss, there shall be taken into account Depreciation; (d) gain or loss resulting from any disposition of Partnership property with respect to which gain or loss is recognized for federal income tax purposes shall be computed by reference to the Gross Asset Value of such property rather than its adjusted tax basis; (e) in the event of an adjustment of the Gross Asset Value of any Partnership asset which requires that the Capital Accounts of the Partnership be adjusted pursuant to Regulation Section 1.704-1(b)(2)(iv)(e), (f) and (m), the amount of such 17 adjustment is to be taken into account as additional Net Income or Net Loss pursuant to Exhibit C; and (f) excluding any items specially allocated pursuant to Section 2 of Exhibit C. Once an item of income, gain, loss or deduction has been included in the initial computation of Net Income or Net Loss or is subject to the special allocation rules in Exhibit C, Net Income or Net Loss shall be recomputated without regard to such item. "Net Sale Proceeds" means the cash proceeds received by or available to the Partnership in connection with a sale or condemnation of, or casualty or other capital event with respect to, any asset by or on behalf of the Partnership or by or on behalf of a Property Partnership, after deduction of any costs or expenses incurred by the Partnership or a Property Partnership with respect to, or payable specifically out of the proceeds of, such transaction (including, without limitation, any repayment of any indebtedness required to be repaid as a result of such sale together with accrued interest and premium, if any, thereon and any sales commissions or other costs and expenses due and payable to any Person in connection with a sale, including to a Partner or its Affiliates). For this purpose, cash proceeds received by a Joint Venture Partnership shall not be deemed to be received or available to the Partnership until (i) the distribution of such proceeds is actually received by the Partnership, or (ii) under the terms of the Joint Venture Partnership's partnership agreement, the Partnership controls the timing of the Joint Venture Partnership's distributions and then only to the extent of the Partnership's entitlement to such distributions. 18 "Nonrecourse Deductions" shall have the meaning set forth in Sections 1.704-2(b)(1) and (c) of the Regulations. "Nonrecourse Liabilities" shall have the meaning set forth in Section 1.704-2(b)(3) of the Regulations. "Offered Units" shall have the meaning set forth in Schedule 3 to Exhibit D. "Office Building" shall mean the 49,250 square foot office building known as One Park Place located at 6148 Lee Highway, Chattanooga, Tennessee 37421-2931. "Ownership Limit" shall have the meaning set forth in Exhibit D. "Partner Nonrecourse Debt" shall mean any nonrecourse indebtedness of the Partnership that is loaned or guaranteed by any Partner and/or is treated as "partner nonrecourse debt" under Section 1.704-2(b)(4) of the Regulations. "Partner Nonrecourse Deductions" shall have the meaning set forth in Section 1.704-2(i)(2) of the Regulations. "Partners" shall mean the General Partner and the Limited Partners, their duly admitted successors or assigns or any Person who is a partner of the Partnership at the time of reference thereto. "Partnership" shall mean the limited partnership hereby constituted, as such limited partnership may from time to time be constituted. "Partnership Minimum Gain" shall have the meaning set forth in Section 1.704-2(b)(2) of the Regulations. 19 "Partnership Units" shall mean the Common Units and the Preferred Units. "Person" shall mean any individual or Entity. "Preferred Contributed Funds" shall have the meaning set forth in Section 4.4(b) hereof. "Preferred Distribution Requirement" shall have the meaning set forth in Section 4.4(b) hereof. "Preferred Distribution Shortfall" shall have the meaning set forth in Section 6.2(a)(i). "Preferred Redemption Amount" shall mean, with respect to any class or series of Preferred Units, the sum of (i) the amount of any accumulated Preferred Distribution Shortfall with respect to such class or series of Preferred Units, (ii) the Preferred Distribution Requirement with respect to such class or series of Preferred Units to the date of redemption and (iii) the Preferred Redemption Price indicated in the Preferred Unit Designation with respect to such class or series of Preferred Units. "Preferred Redemption Price" shall have the meaning set forth in Section 4.4(b) hereof. "Preferred Stock" shall mean any class of equity securities of the Company now or hereafter authorized or reclassified, other than the Common Stock, having dividend rights that are superior or prior to dividends payable on the Common Stock. "Preferred Unit Designation" shall have the meaning set forth in Section 4.4(b) hereof. 20 "Preferred Unit Issue Price" shall mean the amount of the funds contributed or deemed to have been contributed by the relevant Partner, in exchange for the Preferred Units. "Preferred Units" shall mean interests in the Partnership issued pursuant to Section 4.4 hereof. The holder of Preferred Units shall have such rights to the allocations of Net Income or Net Loss as specified in Section 6.1 hereof and to distributions pursuant to Section 6.2 hereof, but shall not, by reason of its ownership of such Preferred Units, be entitled to participate in the management of the Partnership or to consent to or approve any action which is required by the Act or this Agreement to be approved by any or all of the Partners. "Properties" or "Property" shall mean any real property in which the Partnership, directly or indirectly, holds or acquires ownership of a fee, mortgage or leasehold interest. "Property Partnerships" shall mean and include any partnership or other Entity in which the Partnership is or becomes a partner or other equity participant and which is formed for the purpose of acquiring, developing or owning a Property or a proposed Property. "Qualified Individual" shall have the meaning set forth in Section 13.2(b) hereof. "Registered Agent" shall have the meaning set forth in Section 2.5 hereof. "Registered Office" shall have the meaning set forth in Section 2.5 hereof. 21 "Regulations" shall mean the final, temporary or proposed Income Tax Regulations promulgated under the Code, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations). "Regulatory Allocations" shall have the meaning set forth in Section 2(f) of Exhibit C. "REIT" shall mean a real estate investment trust as defined in Section 856 of the Code. "REIT Expenses" shall mean (i) costs and expenses relating to the formation and continuity of existence of the Company and the General Partner, including taxes (other than the Company's and the General Partner's federal and state income and franchise taxes), fees and assessments associated therewith, any and all costs, expenses or fees payable to any director or trustee of the Company, the General Partner or any subsidiary of either the Company or the General Partner, (ii) costs and expenses relating to any offer or registration of securities by the Company and all statements, reports, fees and expenses incidental thereto, including underwriting discounts and selling commissions applicable to any such offer of securities, (iii) costs and expenses associated with the preparation and filing of any periodic reports by the Company under federal, state or local laws or regulations, including filings with the SEC, (iv) costs and expenses associated with compliance by the Company and the General Partner with laws, rules and regulations promulgated by any regulatory body, including the SEC, and (v) all other operating or administrative costs of the Company and the 22 General Partner incurred in the ordinary course of its business on behalf of the Partnership. "REIT Requirements" shall have the meaning set forth in Section 6.2 hereof. "Requesting Party" shall have the meaning set forth in Section 13.2(a) hereof. "Related Issue" shall mean, with respect to a class or series of Preferred Units, the class or series of Preferred Stock the sale of which directly or indirectly provided a Partner with the proceeds to contribute to the Partnership in exchange for such Preferred Units. "Responding Party" shall have the meaning set forth in Section 13.2(b) hereof. "Restricted Partner" shall have the meaning set forth in Section 1(b) of Exhibit C. "Rights" shall have the meaning set forth in Section 11.1 hereof. "SEC" shall mean the Securities and Exchange Commission. "Securities Act" shall mean the Securities Act of 1933, as amended. "Stock Incentive Plan" shall mean the Company's 1993 Stock Incentive Plan. "Substituted Limited Partner" shall have the meaning set forth in the Act. "Tax Items" shall have the meaning set forth in Section 3(a) of Exhibit C. 23 "Trading Day" shall mean a day on which the principal national securities exchange on which the Common Stock is listed or admitted to trading is open for the transaction of business or, if the Common Stock is not listed or admitted to trading on any national securities exchange, shall mean any day other than a Saturday, a Sunday or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close. "Transfer" as a noun, shall mean any sale, assignment, conveyance, pledge, hypothecation, gift, encumbrance or other transfer, and as a verb, shall mean to sell, assign, convey, pledge, hypothecate, give, encumber or otherwise transfer. 1. Exhibits, Etc.. References to "Exhibit" or to a "Schedule" are, unless otherwise specified, to one of the Exhibits or Schedules attached to this Agreement, and references to an "Article" or a "Section" are, unless otherwise specified, to one of the Articles or Sections of this Agreement. Each Exhibit and Schedule attached hereto and referred to herein is hereby incorporated herein by reference. ARTICLE I. Organization 1. Continuation. The parties hereto do hereby continue the Partnership as a limited partnership pursuant to the provisions of the Act, for the purposes and upon the terms and conditions hereinafter set forth. The Partners agree that the rights and liabilities of the Partners shall be as provided in the Act except as otherwise herein expressly provided. Promptly upon the execution and delivery hereof, 24 the General Partner shall, to the extent required under the Act or otherwise deemed necessary or appropriate by the General Partner, cause an amendment to the Certificate of Limited Partnership to be filed with the Delaware Secretary of State, and such other notice, instrument, document, or certificate as may be required by applicable law, and which may be necessary or desirable to enable the Partnership to conduct its business, and to own its properties, under the Partnership's name, to be filed or recorded in all appropriate public offices. 1. 1. Name. The business of the Partnership shall be conducted under the name of CBL & Associates Limited Partnership or such other name as the General Partner may select, and all transactions of the Partnership, to the extent permitted by applicable law, shall be carried on and completed in such name. 1. 2. Character of the Business. The purpose of the Partnership shall be: to acquire, hold, own, develop, redevelop, construct, improve, maintain, operate, manage, sell, lease, rent, Transfer, encumber, mortgage, convey, exchange, and otherwise dispose of, deal with, foreclose upon, or otherwise exercise all rights with respect to, any of the Properties and any other real, personal and intangible property of all kinds; exercise all of the powers of a partner in Property Partnerships; to undertake such other activities as may be necessary, advisable, desirable or convenient to the business of the Partnership; to engage in such other ancillary activities as shall be necessary, desirable or appropriate to effectuate the foregoing 25 purposes; and to otherwise engage in any enterprise, business or activity in which a limited partnership may engage or conduct under the Act. The Partnership shall have all powers necessary or desirable to accomplish the purposes enumerated. In connection with the foregoing, but subject to all of the terms, covenants, conditions and limitations contained in this Agreement and any other agreement entered into by the Partnership, the Partnership shall have full power and authority, directly or through its interest in Property Partnerships, to enter into, perform, and carry out contracts of any kind, to borrow money and to issue evidences of indebtedness, whether or not secured by mortgage, trust deed, pledge or other lien or assignment, and, directly or indirectly, to develop, acquire and construct additional Properties necessary or useful in connection with its business. 1. 3. Location of the Principal Place of Business. The location of the principal place of business of the Partnership shall be at the Office Building, or such other location as shall be selected from time to time by the General Partner in its sole discretion. 1. 4. Registered Agent and Registered Office. The Registered Agent of the Partnership shall be Corporation Trust Company or such other Person as the General Partner may select in its sole discretion. The Registered Office of the Partnership shall be 1209 Orange Street, Wilmington, Delaware 19801 or such other location as the General Partner may select in its sole and absolute discretion. 26 ARTICLE I. Term 1. Commencement. The Partnership's term commenced upon the filing of the Certificate of Limited Partnership with the Secretary of State of the State of Delaware on July 16, 1993. 1. 1. Dissolution. The Partnership shall continue until dissolved upon the occurrence of the earliest of the following events: (a) The withdrawal (as defined in the Act), dissolution, termination, retirement or Bankruptcy of the General Partner or the Bankruptcy of the Company; the Partnership's business may, however, be continued and the Partnership reconstituted as provided in Section 9.1 hereof; (b) The election to dissolve the Partnership made in writing by the General Partner with, subject to Section 7.3, the Consent of the Limited Partners; (c) The sale or other disposition of all or substantially all the assets of the Partnership unless the General Partner elects to continue the Partnership business for the purpose of the receipt and the collection of indebtedness or the collection of any other consideration to be received in exchange for the assets of the Partnership (which activities shall be deemed to be part of the winding-up of the affairs of the Partnership); (d) Dissolution required by operation of law; or (e) December 31, 2090. ARTICLE I. Contributions to Capital 1. Partners. Exhibit A hereto sets forth the names of Partners of the Partnership as of the date hereof, and the Partnership Units held by each such Partner. A Partner may be both a General 27 Partner and a Limited Partner hereunder. The Partnership shall establish and maintain a separate Capital Account for each Partner. 1. 1. General Partner Capital Contribution. A. Prior to the date hereof, the General Partner has made certain Capital Contributions to the Partnership as described in the books and records of the Partnership as of the date hereof. B. The gross fair market value of any property contributed by the General Partner to the Partnership ("Contributed Property"), other than money, shall, except as otherwise expressly provided herein, be the Acquisition Cost of such Contributed Property. For purposes hereof, the "Acquisition Cost" of Contributed Property shall be, (i) in the case of Contributed Property acquired by the General Partner or the Company in exchange for shares of Common Stock, the Current Per Share Market Price as of the closing date on which the General Partner or the Company, as applicable, acquired such Contributed Property multiplied by the number of shares of Common Stock issued in the acquisition or (ii) in the case of Contributed Property acquired by the General Partner or the Company for consideration other than Common Stock, the amount of such consideration plus, in either case, any costs and expenses incurred by the General Partner or the Company, as applicable, (and unreimbursed by the Partnership) in connection with such acquisition or contribution; provided, however, that (A) in the event the General Partner or the Company acquires the Contributed Property in exchange for shares of Common Stock or with proceeds from a public offering of the Company's securities, the Partnership shall assume and pay (or reflect on its books as additional consideration for such Contributed Properties) the expenses, including any applicable underwriting discounts, incurred by the Company in connection with the issuance of such shares or securities, and (B) in the event the Acquisition Cost of Contributed Property is financed by any borrowings by the General Partner or the Company, or is otherwise encumbered by Liens relating to obligations of the General Partner or the Company, the Partnership shall, in either case, assume any such obligations of the General Partner or the Company concurrently with the contribution of such property to the Partnership or, if impossible, shall obligate itself to the General Partner or the Company, as applicable, in an amount and on terms equal to such indebtedness or obligation, and the Acquisition Cost shall be reduced by the amount of such obligations assumed or obligations incurred by the Partnership. 28 1. Limited Partner Capital Contributions. A. Prior to the date hereof, each Limited Partner has made certain Capital Contributions to the Partnership as described in the books and records of the Partnership as of the date hereof. B. A Limited Partner shall be unconditionally liable to the Partnership for all or a portion of any deficit in its Capital Account if it so elects to be liable for such deficit or portion thereof. Such election may be for either a limited or an unlimited amount and may be amended or withdrawn at any time. The election, and any amendment thereof, shall be made by written notice to the General Partner stating that the Limited Partner elects to be liable, and specifying the limitations, if any, on the maximum amount or duration of such liability. Said election, or amendment thereof, shall be effective only from the date the written notice is received by the General Partner, and shall terminate upon the date, if any, specified therein as a termination date or upon delivery to the General Partner of a subsequent written notice withdrawing or otherwise amending such election. A withdrawal, or an amendment reducing the Limited Partner's maximum liability, shall not be effective to avoid responsibility for any loss incurred prior to such amendment or withdrawal. C. The Limited Partners acknowledge that the Partnership Units have not been registered under any federal or state securities laws and, as a result thereof, they may not be sold or otherwise transferred, except in compliance with such laws and in accordance with the provisions of this Agreement. Notwithstanding anything to the contrary contained in this Agreement, no Partnership Units may be sold or otherwise transferred unless such transfer is exempt from registration under any applicable securities laws or such transfer is registered under such laws, it being acknowledged that the Partnership has no obligation to take any action which would cause any such Units to be registered. 1. Issuance of Additional Units. (a) Without the consent of any Limited Partner, but subject to the terms of Section 9.3 below, the General Partner may from time to time cause the Partnership to issue to the Partners (including the General Partner) or other Persons additional Partnership Units ("Additional Units") in one or more classes, or one or 29 more series of any of such classes, with such designations, preferences and relative, participating, optional or other special rights, powers and duties, including, without limitation, rights, powers and duties senior to the Common Units, and admit any such other Person as an additional Limited Partner ("Additional Partner") (in accordance with Section 4.5 hereof), in exchange for the Capital Contribution by such Partner or Person of cash and/or property. Without limiting the provisions of this Article IV, the General Partner is expressly authorized to cause the Partnership to issue Additional Units for less than either, (i) the fair market value thereof, or (ii) the applicable Current Per Share Market Price multiplied by the number of shares of Common Stock issuable with respect to such Additional Units upon the exercise of the Rights with respect thereto. The General Partner shall have the right and shall possess the authority to amend this Agreement without the consent of any Limited Partner to evidence any action taken pursuant to this Section 4.4(a). (b) In the event a Partner (the "Contributing Partner") contributes to the Partnership any funds obtained directly or indirectly from the issuance by the Company of Preferred Stock (the "Preferred Contributed Funds"), then the Contributing Partner shall be issued Preferred Units of a designated class or series to reflect its contribution of such funds. Each class or series of Preferred Units so issued shall be designated by the General Partner to identify such class or series with the class or series of Preferred Stock which constitutes the Related Issue. Each class or 30 series of Preferred Units shall be described in a written document (the "Preferred Unit Designation") attached as Exhibit B that shall set forth, in sufficient detail, the economic rights, including dividend, redemption and conversion rights and sinking fund provisions, of the class or series of Preferred Units and the Related Issue. The number of Preferred Units of a class or series shall be equal to the number of shares of the Related Issue sold. The Preferred Unit Designation shall provide for such terms for the class or series of Preferred Units that shall entitle the holders thereof to substantially the same economic rights as the holders of the Related Issue. Specifically, the holders of such Preferred Units shall receive distributions on the class or series of Preferred Units pursuant to Section 6.2 equal to the aggregate dividends payable on the Related Issue at the times such dividend are paid (the "Preferred Distribution Requirement"). The Partnership shall redeem the class or series of Preferred Units for a redemption price per Preferred Unit equal to the redemption price per share of the Related Issue, exclusive of any accrued unpaid dividends (the "Preferred Redemption Price") upon the redemption of any shares of the Related Issue. Each class or series of Preferred Units shall also be converted into additional Common Units at the time and on such economic terms and conditions as the Related Issue is converted into Common Stock. Upon the issuance of any class or series of Preferred Units pursuant to this Section 4.4(b), the General Partner shall provide the Limited Partners with a copy of the Preferred Unit Designation relating to such class or series. 31 A Partner shall have the right, in lieu of contributing to the Partnership funds received directly or indirectly from the issuance of Preferred Stock as Preferred Contributed Funds, to lend such funds to the Partnership. Any such loan shall be on the same terms and conditions as the Related Issue except that dividends payable on the Related Issue shall be payable by the Partnership to such Partner as interest, any mandatory redemptions shall take the form of principal payments and no Preferred Units shall be issued to such Partner. If any such loan is made, the Partnership shall promptly reimburse such Partner for all expenses (including any applicable underwriter discounts) incurred by the Company in connection with raising the funds. Any such loan made by such Partner to the Partnership may at any time be contributed to the Partnership as Preferred Contributed Funds in exchange for Preferred Units as above provided; and if the Related Issue is by its terms convertible into Common Stock, such loan shall be so contributed to the Partnership prior to the effectuation of such conversion. (c) In the event a Partner contributes to the Partnership any funds obtained directly or indirectly from the issuance by the Company of Capital Stock, the Partnership shall reimburse such Partner for the expenses (including any applicable underwriter discounts) incurred by the Company in connection with raising such funds. 1. 1. Admission of Additional Partners. A. After the date hereof, a Person who makes a Capital Contribution to the Partnership in accordance with this Agreement shall be admitted to the Partnership as an Additional Partner only upon furnishing to the 32 General Partner (i) a written agreement in form satisfactory to the General Partner accepting all of the terms and conditions of this Agreement and (ii) such other documents or instruments as may be required in the discretion of the General Partner. B. No Person shall be admitted as an Additional Partner without the consent of the General Partner, which consent may be given or withheld in the General Partner's sole and absolute discretion and for any or no reason whatsoever. The admission of any Person as an Additional Partner shall become effective on the date upon which the name of such Person is recorded on the books and records of the Partnership, following the consent of the General Partner to such admission. C. If an Additional Partner is admitted to the Partnership on any other date than the first day of a the Partnership's tax year, then Net Income, Net Loss, each item thereof and all other items allocable among Partners and Assignees for such tax year shall be allocated among such Additional Partner and all other Partners and Assignees by taking into account their varying interests during the Fiscal Year in accordance with Section 706(d) of the Code, using the interim closing of the books method. Solely for purposes of making such allocations, each of such items for the calendar month in which an admission of any Additional Partner occurs shall be allocated among all Partners and Assignees including such Additional Partner. D. The General Partner, acting alone, shall be authorized on behalf of each of the Partners to amend this Agreement to reflect the admission of any Additional Partner or to record any change in ownership of Partnership Units of any Partner. 1. Stock Incentive Plan. If at any time or from time to time Incentive Options granted in connection with the Company's Stock Incentive Plan are exercised in accordance with the terms of the Incentive Option Agreement: (a) the Company shall, as soon as practicable after such exercise, contribute or cause to be contributed to the capital of the Partnership an amount equal to the exercise price paid to the Company by such exercising party in connection with the exercise of the Incentive Option; and (b) the Partner which makes a contribution to the capital of the Partnership pursuant to Section 4.2(a) hereof shall be deemed to have contributed to the Partnership as Capital Contributions an amount equal to the Current Per Share Market Price (as of the Trading Date immediately preceding the date on which the 33 purchase of the Common Stock by such exercising party is consummated) multiplied by the number of shares of Common Stock delivered by the Company to such exercising party and the Partnership shall issue to such contributing Partner a number of Common Units equal to such number of shares of Common Stock divided by the Conversion Factor. 1. No Third Party Beneficiary. No creditor or other third party having dealings with the Partnership shall have the right to enforce the right or obligation of any Partner to make Capital Contributions or loans or to pursue any other right or remedy hereunder or at law or in equity, it being understood and agreed that the provisions of this Agreement shall be solely for the benefit of, and may be enforced solely by, the parties hereto and their respective successors and assigns. None of the rights or obligations of the Partners herein set forth to make Capital Contributions or loans to the Partnership shall be deemed an asset of the Partnership for any purpose by any creditor or other third party, nor may such rights or obligations be sold, transferred or assigned by the Partnership or pledged or encumbered by the Partnership to secure any debt or other obligation of the Partnership or of any of the Partners. 1. 1. No Interest; No Return. No Partner shall be entitled to interest on its Capital Contribution or on such Partner's Capital Account. Except as provided herein or by law, no Partner shall have any right to demand or receive the return of its Capital Contribution from the Partnership or from any of the other Partners. 1. 2. Adjustment Upon Conversion of Preferred Stock. Upon the conversion of any shares of Preferred Stock to 34 Common Stock pursuant to the terms of such Preferred Stock, the ownership of Partnership Units of the Partners shall be adjusted in accordance with the provisions of this Agreement to reflect, on the date of such conversion, the parallel conversion of the Preferred Units that were a Related Issue of such converted Preferred Stock into Common Units equal in number to the number of shares of Common Stock issued as a result of such conversion. ARTICLE I. Representations, Warranties and Covenants 1. Representations and Warranties. Each Limited Partner hereby represents and warrants to the Partnership and the General Partner the following: A. Organization; Authority. Such Limited Partner is either (A) in the case of such persons which are corporations, duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation, or (B) in the case of such persons which are partnerships or trusts, a partnership or trust, as the case may be, duly formed, validly existing and in good standing (to the extent applicable) under the laws of its jurisdiction of formation. The Limited Partner has the requisite authority to enter into and perform this Agreement. B. Due Authorization; Binding Agreement. The execution, delivery and performance of this Agreement by such Limited Partner has been duly and validly authorized by all necessary action of such Limited Partner. This Agreement has been duly executed and delivered by such Limited Partner, or an authorized representative of such Limited Partner, and constitutes a legal, valid and binding obligation of such Limited Partner, enforceable against such Limited Partner in accordance with the terms hereof. C. Consents and Approvals. No consent, waiver, approval or authorization of, or filing, registration or qualification with, or notice to, any governmental unit or any other person is required to be made, obtained or given by such Limited Partner in connection with the execution, delivery and performance of this Agreement except for those which have been heretofore obtained. 35 D. No Violation. None of the execution, delivery or performance of this Agreement by such Limited Partner does or will, with or without the giving of notice, lapse of time or both, (i) violate, conflict with or constitute a default under any term or provision of (A) the organizational documents of such Limited Partner or any agreement to which such Limited Partner is a party or by which it is bound or (B) any term or provision of any judgment, decree, order, statute, injunction, rule or regulation of a governmental unit applicable to such Limited Partner or any agreement to which such Limited Partner is a party or by which it or its assets or properties are bound, or (ii) result in the creation of any Lien or other encumbrance upon the assets or properties of such Limited Partner other than in favor of such Partnership. 1. Covenants. Without the prior consent of the General Partner, no Limited Partner shall take any action, including acquiring, directly or indirectly, an interest in any tenant of a Property, which would have the effect of causing the percentage of the gross income of the Company that fails to be treated as "rents from real property" within the meaning of Section 856(d)(2) of the Code to exceed such percentage as of the date of the First Restated Agreement. ARTICLE I. Allocations, Distributions, and Other Tax and Accounting Matters 1. Allocations. The Net Income or Net Loss and/or other Partnership items shall be allocated pursuant to the provisions of Exhibit C hereto. All Net Income or Net Loss with respect to periods prior to the date hereof, shall be allocated to the Limited Partners pursuant to the First Restated Agreement. 1. 1. Distributions. (a) The General Partner shall cause the Partnership to distribute all or a portion of Net Cash Flow to the Partners from time to time as determined by the General Partner, but in any event not less frequently than quarterly, in such amounts as the 36 General Partner shall determine. All such distributions other than distributions of Net Financing Proceeds and Net Sales Proceeds shall be made in accordance with the following order of priority: 1. First, to the extent that the amount of Net Cash Flow distributed to the relevant Partner, on account of the Preferred Units, for any prior quarter was less than the Preferred Distribution Requirement for such quarter, and has not been subsequently distributed pursuant to this Section 6.2(a)(i) (a "Preferred Distribution Shortfall"), Net Cash Flow shall be distributed to the relevant Partner, on account of the Preferred Units, in an amount necessary to satisfy such Preferred Distribution Shortfall for the current and all prior Partnership taxable years. In the event that the Net Cash Flow distributed for a particular quarter is less than the Preferred Distribution Shortfall, then all Net Cash Flow for the current quarter shall be distributed to the relevant Partner on account of the Preferred Units; 2. Second, Net Cash Flow shall be distributed to the relevant Partner, on account of the Preferred Units, in an amount equal to the Preferred Distribution Requirement for the then current quarter for each outstanding Preferred Unit. In the event that the amount of Net Cash Flow distributed for a particular quarter pursuant to this subparagraph (a)(ii) is less than the Preferred Distribution Requirement for such quarter, then all such Net Cash Flow for such quarter shall be distributed to the relevant Partner, on account of the Preferred Units. In addition, in the event that the Partnership is liquidated pursuant to Article VIII, the allocation described above shall be made to the relevant Partner, on account of the Preferred Units, with respect to all Preferred Units then outstanding; and 3. Third, the balance of the Net Cash Flow to be distributed, if any, shall be distributed to holders of Common Units, pro rata in accordance with their proportionate ownership of Common Units. (b) Neither the Partnership nor the Limited Partners shall have any obligation to see that any funds distributed pursuant to subparagraph (a)(i) of this Section 6.2 are in turn used to pay dividends on any Capital Stock of the Company. Distributions of Net Financing Proceeds and Net Sales Proceeds shall be made, first to the relevant Partner, on account of the Preferred Units in accordance with the terms thereof, and then to the holders of Common Units, pro rata in accordance with their proportionate ownership of Common Units. Subject to the preceding sentences, (a) the General Partner shall use its reasonable efforts to cause the Partnership to distribute sufficient amounts to enable the Company to pay shareholder dividends that 37 will (i) satisfy the requirements for qualifying as a REIT under the Code and Regulations ("REIT Requirements"), and (ii) avoid any federal income or excise tax liability of the Company; and (b) in the event of a sale of a Property or an interest in a Property Partnership giving rise to a special allocation of taxable income or gain to a Limited Partner or Partners pursuant to Section 3(c) of Exhibit C, the General Partner shall cause the Partnership to distribute the Net Sales Proceeds therefrom up to an amount sufficient to enable such Limited Partner or Partners to pay any income tax liability with respect to the income or gain so specially allocated (or, if any such Limited Partner is a partnership or S corporation, to enable such Limited Partner to distribute sufficient amounts to its equity owners to enable such owners to pay any income tax liability with respect to their share of such taxable income or gain). Upon the receipt by the General Partner of each Exercise Notice pursuant to which one or more Limited Partners exercise Rights in accordance with the provisions of Article XI hereof, the General Partner shall, unless the General Partner is required or elects only to issue Common Stock to such exercising Limited Partner or Limited Partners, cause the Partnership to distribute to the Partners, pro rata in accordance with their proportionate ownership of Partnership Units on the date of delivery of such Exercise Notice, all (or such lesser portion as the General Partner shall reasonably determine to be prudent under the circumstances) of Net Cash Flow, which distribution shall be made prior to the closing of the purchase and sale of the Offered Units specified in such Exercise Notice. (c) If in any quarter the Partnership redeems any outstanding Preferred Units, unless and except to the extent that such redemption is effected out of borrowed funds, Capital Contributions or other sources, Net Cash Flow shall be distributed to the relevant Partner, on account of the Preferred Units, in an amount equal to the Preferred Redemption Amount for the Preferred Units being redeemed before being distributed pursuant to Section 6.2(a). There shall be no adjustment of the then current proportionate ownership of Partnership Units of the Partners on account of any distribution under this Section 6.2(c). (d) Notwithstanding the forgoing, all distributions pursuant to this Section 6.2 shall remain subject to the provisions of the Certificates of Designation for each class or series of Preferred Units set forth in Exhibit B hereto. 1. Books of Account. At all times during the continuance of the Partnership, the General Partner shall maintain or cause to be maintained full, true, complete and correct books 38 of account in accordance with generally accepted accounting principles wherein shall be entered particulars of all monies, goods or effects belonging to or owing to or by the Partnership, or paid, received, sold or purchased in the course of the Partnership's business, and all of such other transactions, matters and things relating to the business of the Partnership as are usually entered in books of account kept by persons engaged in a business of a like kind and character. In addition, the Partnership shall keep all records as required to be kept pursuant to the Act. The books and records of account shall be kept at the principal office of the Partnership, and each Partner shall at all reasonable times have access to such books and records and the right to inspect the same. 1. 1. Reports. The General Partner shall cause to be submitted to the Limited Partner Representatives promptly upon receipt of the same from the Accountants and in no event later than April 1 of each year, copies of Audited Financial Statements prepared on a consolidated basis for the Partnership and the Property Partnerships, together with the reports thereon, and all supplementary schedules and information, prepared by the Accountants, provided, however, that with respect to Joint Venture Partnerships which are not Controlled by the Partnership, the General Partner shall diligently seek to (i) cause the Joint Venture Partnership to distribute its Audited Financial Statements on or before April 1 of each year subject to the Joint Venture Partnership's partnership agreement, and (ii) cause such Audited Financial Statements to be submitted to the Limited 39 Partners promptly upon their receipt. The Partnership shall also cause to be prepared such reports and/or information as are necessary for the General Partner to determine its qualification as a REIT and its compliance with REIT Requirements. 1. 2. Audits. Not less frequently than annually, the General Partner shall cause the Accountants to audit books and records of the Partnership and the Property Partnerships (and, pursuant to the terms of the applicable partnership agreement, diligently seek to cause each Joint Venture Partnership not Controlled by the Partnership to annually audit such Joint Venture Partnership's books and records). 1. 3. Tax Elections and Returns. All elections required or permitted to be made by the Partnership under any applicable tax law shall be made by the General Partner in its sole discretion; provided, however, the General Partner shall, if requested by a transferee, file an election on behalf of the Partnership pursuant to Section 754 of the Code to adjust the basis of the Partnership property in the case of a Transfer of a Partnership Unit, including Transfers made in connection with the exercise of Rights, made in accordance with the provisions of the Agreement. The General Partner shall cause the Accountants to prepare and file all state and federal tax returns on a timely basis. The General Partner shall cause the Accountants to prepare and submit to the Limited Partner Representatives on or before April 1 of each year for review all federal and state income tax returns of the Partnership and cause the accountants for the Property Partnerships (and diligently seek to cause the accountants of 40 the Joint Venture Partnerships not Controlled by the Partnership) to submit to the Limited Partner Representatives on or before April 1 of each year for review all federal and state income tax returns of the Property Partnerships. If the Limited Partner Representatives determine that any modifications to the tax returns of the Partnership or any Property Partnership should be considered, such Limited Partner Representatives shall, within thirty (30) days following receipt of such tax returns from the Accountants or the General Partner, indicate to the Accountants or to the General Partner to advise the Property Partnership's accountants the suggested revisions to the tax returns, which returns shall be resubmitted to the Limited Partner Representatives for their review (but not approval). The Limited Partner Representatives shall complete their review of the resubmitted returns within ten (10) days after receipt thereof from the Accountants or the General Partner. The General Partner shall consult in good faith with the Limited Partner Representatives regarding any proposed modifications to the tax returns of the Partnership and/or the Property Partnerships. A statement of the allocation of Net Income or Net Loss of the Partnership shown on the annual income tax returns prepared by the Accountants and a statement of the allocation of Net Income or Net Loss shown on the income tax return of the Property Partnerships shall be transmitted and delivered to the Limited Partner Representatives within ten (10) days of the receipt thereof by the Partnership. The General Partner shall be responsible for preparing and filing 41 all federal and state tax returns for the Partnership and furnishing copies thereof to the Partners, together with required Partnership schedules showing allocations of tax items and copies of the tax returns of all Property Partnerships all within the period of time prescribed by law. 1. 4. Tax Matters Partner. The General Partner is hereby designated as the Tax Matters Partner within the meaning of Section 6231(a)(7) of the Code for the Partnership; provided, however, (i) in exercising its authority as Tax Matters Partner it shall be limited by the provisions of this Agreement affecting tax aspects of the Partnership; (ii) the General Partner shall consult in good faith with the Limited Partner Representatives regarding the filing of a Code Section 6227(b) administrative adjustment request with respect to the Partnership or a Property before filing such request, it being understood, however, that the provisions hereof shall not be construed to limit the ability of any Partner, including the General Partner, to file an administrative adjustment request on its own behalf pursuant to Section 6227(a) of the Code; (iii) the General Partner shall consult in good faith with the Limited Partner Representatives regarding the filing of a petition for judicial review of an administrative adjustment request under Section 6228 of the Code, or a petition for judicial review of a final partnership administrative judgment under Section 6226 of the Code relating to the Partnership before filing such petition; (iv) the General Partner shall give prompt notice to the Limited Partner Representatives of the receipt of any written notice that the Internal Revenue Service or 42 any state or local taxing authority intends to examine Partnership income tax returns for any year, receipt of written notice of the beginning of an administrative proceeding at the Partnership level relating to the Partnership under Section 6223 of the Code, receipt of written notice of the final Partnership administrative adjustment relating to the Partnership pursuant to Section 6223 of the Code, and receipt of any request from the Internal Revenue Service for waiver of any applicable statute of limitations with respect to the filing of any tax return by the Partnership; and (v) the General Partner shall promptly notify the Limited Partner Representatives if the General Partner does not intend to file for judicial review with respect to the Partnership. The General Partner, in acting on behalf of the Partnership as tax matters partner of a Property Partnership, shall afford the Limited Partners the same rights with respect to Property Partnership tax matters as afforded to the Limited Partners under this Section 6.7. ARTICLE I. Rights, Duties and Restrictions of the General Partner 1. Expenditures by Partnership. The General Partner is hereby authorized to pay compensation for accounting, administrative, legal, technical, management and other services rendered to the Partnership. All of the aforesaid expenditures shall be made on behalf of the Partnership and the General Partner shall be entitled to reimbursement by the Partnership for any expenditures incurred by it on behalf of the Partnership which shall be made other than out of the 43 funds of the Partnership. The Partnership shall also assume, and pay when due, all Administrative Expenses. 1. 1. Powers and Duties of General Partner. The General Partner shall be responsible for the management of the Partnership's business and affairs. Except as otherwise herein expressly provided, the General Partner shall have, and is hereby granted, full and complete power, authority and discretion to take such action for and on behalf of the Partnership and in its name as the General Partner shall, in its sole and absolute discretion, deem necessary or appropriate to carry out the purposes for which the Partnership was organized. Except as otherwise expressly provided herein, and subject to Section 7.3 hereof, the General Partner shall have the right, power and authority: (a) To manage, control, invest, reinvest, acquire by purchase, lease or otherwise, sell, contract to purchase or sell, grant, obtain, or exercise options to purchase, options to sell or conversion rights, assign, transfer, convey, deliver, endorse, exchange, pledge, mortgage, abandon, improve, repair, maintain, insure, lease for any term and otherwise deal with any and all property of whatsoever kind and nature, and wheresoever situated, in furtherance of the business or purposes of the Partnership; (b) To acquire, directly or indirectly, interests in real estate of any kind and of any type, and any and all kinds of interests therein (including, without limitation, Entities investing therein), and to determine the manner in which title thereto is to be held; to manage (directly or through property managers, including without limitation, the Management Company), insure against loss, protect and subdivide any of the real estate, interests therein or parts thereof; to improve, develop or redevelop any such real estate; to participate in the ownership and development of any property; to dedicate for public use, to vacate any subdivisions or parts thereof, to re-subdivide, to contract to sell, to grant options to purchase or lease, to sell on any terms; to convey, mortgage, pledge or otherwise encumber said property, or any part thereof; to lease said property or any part thereof from time to time, upon any terms and for any period of time, and to 44 renew or extend leases, to amend, change or modify the terms and provisions of any leases and to grant options to lease and options to renew leases and options to purchase; to partition or to exchange said real property, or any part thereof, for other real or personal property; to grant easements or charges of any kind; to release, convey or assign any right, title or interest in or about or easement appurtenant to said property or any part thereof; to construct and reconstruct, remodel, alter, repair, add to or take from buildings on any property in which the Partnership owns an interest; to insure any Person having an interest in or responsibility for the care, management or repair of such property; to direct the trustee of any land trust to mortgage, lease, convey or contract to convey the real estate held in such land trust or to execute and deliver deeds, mortgages, notes, and any and all documents pertaining to the property subject to such land trust or in any matter regarding such trust; to execute assignments of all or any part of the beneficial interest in any land trust in which the Partnership owns a beneficial interest; (c) To employ, engage or contract with or dismiss from employment or engagement Persons to the extent deemed necessary or appropriate by the General Partner for the operation and management of the Partnership business, including but not limited to, contractors, subcontractors, engineers, architects, surveyors, mechanics, consultants, accountants, attorneys, insurance brokers, real estate brokers and others; (d) To enter into, make, amend, perform and carry out or cancel and rescind, contracts and other obligations on behalf of the Partnership and to cause all Administrative Expenses to be paid; (e) To borrow money, procure loans and advances from any Person for Partnership purposes, and to apply for and secure, from any Person, credit or accommodations; to contract liabilities and obligations, direct or contingent and of every kind and nature (including interest rate swaps, caps and hedges) with or without security; and to repay, discharge, settle, adjust, compromise, or liquidate any such loan, advance, credit, obligation or liability; (f) To pledge, hypothecate, mortgage, assign, deposit, deliver, enter into sale and leaseback arrangements or otherwise give as security or as additional or substitute security or for sale or other disposition any and all Partnership property, tangible or intangible, including, but not limited to, real estate and beneficial interests in land trusts, and to make substitutions thereof, and to receive any proceeds thereof upon the release or surrender thereof; to sign, execute and deliver any and all assignments, deeds and 45 other contracts and instruments in writing; to authorize, give, make, procure, accept and receive moneys, payments, property, notices, demands, vouchers, receipts, releases, compromises and adjustments; to waive notices, demands, protests and authorize and execute waivers of every kind and nature; to enter into, make, execute, deliver and receive written agreements, undertakings and instruments of every kind and nature; to give oral instructions and make oral agreements; and generally to do any and all other acts and things incidental to any of the foregoing or with reference to any dealings or transactions which the General Partner may deem necessary, proper or advisable to effect or accomplish any of the foregoing or to carry out the business and purposes of the Partnership; (g) To acquire and enter into any contract of insurance which the General Partner deems necessary or appropriate for the protection of the Partnership, for the conservation of the Partnership's assets or for any purpose convenient or beneficial to the Partnership; (h) To conduct any and all banking transactions on behalf of the Partnership; to adjust and settle checking, savings, and other accounts with such institutions as the General Partner shall deem appropriate; to draw, sign, execute, accept, endorse, guarantee, deliver, receive and pay any checks, drafts, bills of exchange, acceptances, notes, obligations, undertakings and other instruments for or relating to the payment of money in, into, or from any account in the Partnership's name; to execute, procure, consent to and authorize extensions and renewals of any of the foregoing; to make deposits into and withdrawals from the Partnership's bank accounts; and to negotiate or discount commercial paper, acceptances, negotiable instruments, bills of exchange and dollar drafts; (i) To demand, sue for, receive, and otherwise take steps to collect or recover all debts, rents, proceeds, interests, dividends, goods, chattels, income from property, damages and all other property, to which the Partnership may be entitled or which are or may become due the Partnership from any Person; to commence, prosecute or enforce, or to defend, answer or oppose, contest and abandon all legal proceedings in which the Partnership is or may hereafter be interested; and to settle, compromise or submit to arbitration any accounts, debts, claims, disputes and matters which may arise between the Partnership and any other Person and to grant an extension of time for the payment or satisfaction thereof on any terms, with or without security; (j) To make arrangements for financing, including the taking of all action deemed necessary or appropriate by the General Partner to cause any approved loans to be closed; 46 (k) To take all reasonable measures necessary to insure compliance by the Partnership with applicable arrangements, and other contractual obligations and arrangements entered into by the Partnership from time to time in accordance with the provisions of this Agreement, including periodic reports as required to be submitted to lenders and using all due diligence to insure that the Partnership is in compliance with its contractual obligations; (l) To maintain the Partnership's books and records; (m) To prepare and deliver, or cause to be prepared and delivered by the Partnership's Accountants, all financial and other reports with respect to the operations of the Partnership and all Federal and state tax returns and reports; (n) To act in any state or nation in which the Partnership may lawfully act, for itself or as principal, agent or representative for any person with respect to any business of the Partnership; (o) To become a partner or member in, and perform the obligations of a partner or member of, any general or limited partnership or limited liability company; (p) To apply for, register, obtain, purchase or otherwise acquire trademarks, trade names, labels and designs relating to or useful in connection with any business of the Partnership, and to use, exercise, develop and license the use of the same; (q) To pay or reimburse any and all actual fees, costs and expenses incurred in the formation and organization of the Partnership; (r) To do all acts which are necessary, customary or appropriate for the protection and preservation of the Partnership's assets, including the establishment of reserves; and (s) In general, to exercise all of the general rights, privileges and powers permitted to be had and exercised by the provisions of the Act. Except as otherwise provided herein, to the extent the duties of the General Partner require expenditures of funds to be paid to third parties, the General Partner shall not have any obligations hereunder except to the extent that Partnership 47 funds are reasonably available to it for the performance of such duties, and nothing herein contained shall be deemed to authorize or require the General Partner, in its capacity as such, to expend its individual funds for payment to third parties on behalf of the Partnership or to undertake any individual liability or obligation on behalf of the Partnership. 1. Major Decisions. The General Partner shall not, without the prior Consent of the Limited Partners, on behalf of the Partnership, undertake any of the following actions (the "Major Decisions"): (a) Make a general assignment for the benefit of creditors or appoint or acquiesce in the appointment of a custodian, receiver or trustee for all or any part of the assets of the Partnership. (b) Take title to any personal or real property, other than in the name of the Partnership, a Property Partnership or pursuant to Section 7.9 hereof. (c) Institute any proceeding for Bankruptcy on behalf of the Partnership. (d) Dissolve the Partnership. Except as specifically provided in this Agreement, including, without limitation, this Section 7.3, the Limited Partners shall have no right to vote on any matter concerning the business and affairs of the Partnership, including, without limitation, any decisions regarding the merger of the Partnership or the sale, exchange, lease, mortgage or pledge or other transfer of, or the granting of a security interest in, all or substantially all of the assets of the Partnership and the incurrence of indebtedness by the Partnership, whether or not in the ordinary course of the Partnership's business. 48 1. Actions with Respect to Certain Documents. Notwithstanding the provisions of Section 7.3 hereof to the contrary, whenever the consent, agreement, authorization or approval of the Partnership is required under any agreement which the Limited Partners or their Affiliates have executed other than in their capacities as Limited Partners of the Partnership, the Consent of the Limited Partners shall not be required. 1. 1. Reliance by Third Parties. Notwithstanding anything to the contrary in this Agreement, any Person dealing with the Partnership shall be entitled to assume that the General Partner has full power and authority to encumber, sell or otherwise use in any manner any and all assets of the Partnership and to enter into any contracts on behalf of the Partnership, and such Person shall be entitled to deal with the General Partner as if it were the Partnership's sole party in interest, both legally and beneficially. Each Limited Partner hereby waives any and all defenses or other remedies which may be available against such Person to contest, negate or disaffirm any action of the General Partner in connection with any such dealing. In no event shall any Person dealing with the General Partner or its representatives be obligated to ascertain that the terms of this Agreement have been complied with or to inquire into the necessity or expedience of any act or action of the General Partner or its representatives. Each and every certificate, document or other instrument executed on behalf of the Partnership by the General Partner shall be conclusive evidence in favor of any and every Person relying thereon or 49 claiming thereunder that (i) at the time of the execution and delivery of such certificate, document or instrument, this Agreement was in full force and effect, (ii) the Person executing and delivering such certificate, document or instrument was duly authorized and empowered to do so for and on behalf of the Partnership and (iii) such certificate, document or instrument was duly executed and delivered in accordance with the terms and provisions of this Agreement and is binding upon the Partnership. 1. 2. Company Participation. The Company agrees that all business activities of the Company, including without limitation all activities pertaining to the acquisition, development, ownership, management and leasing of real properties, shall be conducted, directly or indirectly, through the Partnership (except for: (i) property management and leasing activities conducted through the Management Company pursuant to the Management Agreement; and (ii) the Company's direct and indirect interests in any Property Partnerships or subsidiaries other than through the Partnership). The Company agrees that all borrowings for the purpose of making distributions to its stockholders will be incurred by the Partnership or by one or more of the Property Partnerships and the proceeds of such indebtedness will be included as Net Financing Proceeds hereunder. 1. 3. Proscriptions. Except as otherwise expressly authorized herein, the General Partner shall not have the authority to: (a) Do any act in contravention of this Agreement or which would make it impossible to carry on the ordinary business of the Partnership; 50 (b) Possess any Partnership property or assign rights in specific Partnership property for other than Partnership purposes; or (c) Do any act in contravention of applicable law. Nothing herein contained shall impose any obligation on any Person or firm doing business with the Partnership to inquire as to whether or not the General Partner has properly exercised its authority in executing any contract, lease, mortgage, deed or other instrument on behalf of the Partnership, and any such third Person shall be fully protected in relying upon such authority. 1. Additional Partners. The General Partner shall have the right to admit additional Partners to the Partnership in accordance with the provisions of this Agreement. 1. 1. Title Holder. To the extent allowable under applicable law, title to all or any part of the Properties of the Partnership may be held in the name of the Partnership or in the name of any other Person, provided, however, that all of the beneficial interest in such Properties shall at all times be vested in the Partnership. Any such title holder shall perform any and all of its respective functions to the extent and upon such terms and conditions as may be determined from time to time by the General Partner, consistent with the business purposes of the Partnership. 1. 2. Compensation of the General Partner. The General Partner shall not be entitled to any compensation for services rendered to the Partnership solely in its capacity as General Partner except with respect to reimbursement for those costs and expenses constituting Administrative Expenses. 1. 3. Waiver and Indemnification. A. Neither the General Partner nor any Person acting on its behalf, pursuant hereto, shall be liable, responsible or accountable in damages or otherwise to the Partnership or to any Partner for any acts or 51 omissions performed or omitted to be performed by them within the scope of the authority conferred upon the General Partner by this Agreement and the Act, provided that the General Partner's or such other Person's conduct or omission to act was taken in good faith and in the belief that such conduct or omission was in the best interests of the Partnership and, provided further, that the General Partner or such other Person shall not be guilty of fraud, misconduct or gross negligence. The Partnership shall, and hereby does, indemnify and hold harmless the General Partner and its Affiliates and any individual acting on their behalf from any loss, damage, claim or liability, including, but not limited to, reasonable attorneys' fees and expenses, incurred by them by reason of any act performed by them in accordance with the standards set forth above or in enforcing the provisions of this indemnity; provided, however, no Partner shall have any personal liability with respect to the foregoing indemnification, any such indemnification to be satisfied solely out of the assets of the Partnership. B. Any Person entitled to indemnification under this Agreement shall be entitled to receive, upon application therefor, advances to cover the costs of defending any proceeding against such Person; provided, however, that such advances shall be repaid to the Partnership, without interest, if such Person is found by a court of competent jurisdiction upon entry of a final judgment not to be entitled to such indemnification. All rights of the indemnitee hereunder shall survive the dissolution of the Partnership; provided, however, that a claim for indemnification under this Agreement must be made by or on behalf of the Person seeking indemnification prior to the time the Partnership is liquidated hereunder. The indemnification rights contained in this Agreement shall be cumulative of, and in addition to, any and all rights, remedies and recourse to which the person seeking indemnification shall be entitled, whether at law or at equity. Indemnification pursuant to this Agreement shall be made solely and entirely from the assets of the Partnership and no Partner shall be liable therefor. 1. Limited Partner Representatives. A Majority-In-Interest of the Limited Partners shall appoint one or more representatives ("Limited Partner Representatives"). Whenever, under the terms of this Agreement, matters require the Consent of the Limited Partners, the same shall mean the consent of a majority of the Limited Partner Representatives, and any action taken by the Limited Partner Representatives 52 shall be fully binding on the Limited Partners, it being the intention of the Limited Partners that the Limited Partner Representatives shall have full power and authority, which shall be irrevocable, to take all action, or to authorize all action, which the Limited Partners are authorized to take under the provisions of this Agreement. A Majority-In-Interest of the Limited Partners shall have the right, at any time, within their sole discretion, upon not less than 10 days' prior notice, to replace any of the Limited Partner Representatives, to appoint a temporary substitute to act for any Limited Partner Representative unable to act, or to vest in only one of the Limited Partner Representatives the sole power to exercise rights of the Limited Partner Representatives hereunder. The Limited Partner Representatives shall be appointed or replaced by the Limited Partners in writing, a copy of which shall be delivered to the Partners. Any appointments of Limited Partner Representatives made hereunder shall remain effective until rescinded in a written notice, and the General Partner shall have the right and authority to rely (and shall be fully protected in so doing) on the actions taken and directions given by such Limited Partner Representatives without any further evidence of their authority or further action by the Limited Partners. 1. 1. Operation in Accordance with REIT Requirements. The Partners acknowledge and agree that the Partnership shall be operated in a manner that will enable the Company to (a) satisfy the REIT Requirements and (b) avoid the imposition of 53 any federal income or excise tax liability. The Partnership shall avoid taking any action, or permitting any Property Partnership to take any action, which would result in the Company ceasing to satisfy the REIT Requirements or would result in the imposition of any federal income or excise tax liability on the Company. The determination as to whether the Partnership has operated in the manner prescribed in this Section 7.13 shall be made without regard to any action or inaction of the Company with respect to distributions and the timing thereof. 1. 2. Transactions with Affiliates. The Partnership may lend or contribute funds to its subsidiaries or other Entities in which it has an equity investment, and such Entities may borrow funds from the Partnership, on terms and conditions established in the discretion of the General Partner. The foregoing authority shall not create any right or benefit in favor of any Person. The Partnership may also engage in other transactions and enter into contracts with an Affiliate of any Partner, which transactions and contracts are on terms fair and reasonable to the Partnership and no less favorable to the Partnership than would be obtained from unaffiliated third parties, provided however, that the affirmative determination by the Company's Board of Directors shall determine conclusively that a transaction or contract between the Partnership on the one hand and the General Partner or the Company on the other hand satisfies such requirement. 1. 3. Other Matters Concerning the General Partner. A. The General Partner may rely and shall be protected in acting or refraining from acting upon any 54 resolution, certificate, statement, instrument, opinion, report, or other document believed by it to be genuine and to have been signed or presented by the proper party or parties. B. The General Partner may consult with legal counsel, accountants, appraisers, management consultants, investment bankers and other consultants and advisers selected by it, and any act taken or omitted to be taken in reliance upon the opinion of such Persons as to matters which such General Partner reasonably believes to be within such Person's professional expertise shall be conclusively presumed to have been done or omitted in good faith and in accordance with such opinion. C. The General Partner shall have the right, in respect of any of its powers or obligations hereunder, to act through any of its duly authorized officers and any attorney or attorneys-in-fact duly appointed by the General Partner. Each such attorney shall, to the extent provided by the General Partner in the power of attorney, have full power and authority to do and perform all and every act and duty which is permitted or required to be done by the General Partner hereunder. D. Notwithstanding any other provisions of this Agreement or the Act, any action of the General Partner on behalf of the Partnership or any decision of the General Partner to refrain from acting on behalf of the Partnership, undertaken in the good faith belief that such action or omission is necessary or advisable in order (i) to protect or further the ability of the Company to continue to qualify as a REIT or (ii) to avoid the Company incurring any taxes under Section 857 or Section 4981 of the Code, is expressly authorized under this Agreement and is deemed approved by all of the Limited Partners. Nothing however in this Agreement shall be deemed to give rise to any liability on the part of the Limited Partners for the Company's failure to qualify or continue to qualify as a REIT or failure to avoid incurring any taxes under the foregoing Sections of the Code. ARTICLE E. Dissolution, Liquidation and Winding-Up 1. Accounting. In the event of the dissolution, liquidation and winding-up of the Partnership, a proper accounting (which shall be certified) shall be made of the Capital Account of each Partner and of the Net Income or Net 55 Losses of the Partnership from the date of the last previous accounting to the date of dissolution. Financial statements presenting such accounting shall include a report of a national certified public accountant (which may be the Accountant) selected by the Liquidating Trustee. 1. 1. Distribution on Dissolution. In the event of the dissolution and liquidation of the Partnership for any reason, the assets of the Partnership shall be liquidated for distribution in the following rank and order: (a) Payment of creditors of the Partnership (other than Partners) in the order of priority as provided by law; (b) Establishment of reserves as provided by the Liquidating Trustee to provide for contingent liabilities, if any; (c) Payment of debts of the Partnership to Partners, if any, in the order of priority provided by law; and (d) To the Partners in accordance with the positive balances in their Capital Accounts after giving effect to all contributions, distributions and allocations for all periods, including the period in which such distribution occurs (other than those adjustments made pursuant to this Section 8.2(d), Section 8.4 or Section 8.5 hereof). Whenever the Liquidating Trustee reasonably determines that any reserves established pursuant to paragraph (b) above are in excess of the reasonable requirements of the Partnership, the amount determined to be excess shall be distributed to the Partners in accordance with the above provisions. Notwithstanding the forgoing, all distributions pursuant to this Section 8.2 shall remain subject to the provisions of the Certificates of Designation for each class or series of Preferred Units set forth in Exhibit B hereto. 56 1. Timing Requirements. In the event that the Partnership is "liquidated" within the meaning of Section 1.704-1(b)(2)(ii)(g) of the Regulations, any and all distributions to the Partners pursuant to Section 8.2(d) hereof shall be made no later than the later to occur of (i) the last day of the taxable year of the Partnership in which such liquidation occurs or (ii) ninety (90) days after the date of such liquidation. 1. 1. Sale of Partnership Assets. In the event of the liquidation of the Partnership in accordance with the terms of this Agreement, the Liquidating Trustee may sell Partnership or Property Partnership property or Property Partnership interests on the best terms and conditions as the Liquidating Trustee in good faith believes are reasonably available at the time and under the circumstances and on a non-recourse basis to the Limited Partners. The liquidation of the Partnership shall not be deemed finally completed until the Partnership shall have received cash payments in full with respect to obligations such as notes, installment sale contracts or other similar receivables received by the Partnership in connection with the sale of Partnership assets and all obligations of the Partnership have been satisfied, released or assumed by the General Partner. The Liquidating Trustee shall continue to act to enforce all of the rights of the Partnership pursuant to any such obligations until such obligations are paid in full or otherwise satisfied. 1. 2. Distributions in Kind. In the event that it becomes necessary to make a distribution of Partnership property in kind, the General Partner may Transfer and convey 57 such property to the distributees as tenants in common, subject to any liabilities attached thereto, so as to vest in them undivided interests in the whole of such property in proportion to their respective rights to share in the proceeds of the sale of such property (other than as a creditor) in accordance with the provisions of Section 8.2 hereof. 1. 3. Documentation of Liquidation. Upon the completion of the dissolution and liquidation of the Partnership, the Partnership shall terminate and the Liquidating Trustee shall have the authority to execute and record any and all documents or instruments required to effect the dissolution, liquidation and termination of the Partnership. 1. 4. Liability of the Liquidating Trustee. The Liquidating Trustee shall be indemnified and held harmless by the Partnership from and against any and all claims, demands, liabilities, costs, damages and causes of action of any nature whatsoever arising out of or incidental to the Liquidating Trustee's taking of any action authorized under or within the scope of this Agreement; provided, however, that the Liquidating Trustee shall not be entitled to indemnification, and shall not be held harmless, where the claim, demand, liability, cost, damage or cause of action at issue arose out of: (a) A matter entirely unrelated to the Liquidating Trustee's action or conduct pursuant to the provisions of this Agreement; or (b) The proven misconduct or gross negligence of the Liquidating Trustee. 58 ARTICLE I. Transfer of Partnership Units 1. General Partner Transfer. The General Partner shall not withdraw from the Partnership and shall not sell, assign, pledge, encumber or otherwise dispose of all or any portion of its Partnership Units, in each case prior to the dissolution and winding up of the Partnership, without the Consent of the Limited Partners. Upon any Transfer of a Partnership Unit in accordance with the provisions of this Section 9.1, the transferee General Partner shall become vested with the powers and rights of the transferor General Partner, and shall be liable for all obligations and responsible for all duties of the General Partner, once such transferee has executed such instruments as may be necessary to effectuate such admission and to confirm the agreement of such transferee to be bound by all the terms and provisions of this Agreement with respect to the Partnership Unit so acquired. It is a condition to any Transfer otherwise permitted hereunder that the transferee assume by operation of law or express agreement all of the obligations of the transferor General Partner under this Agreement with respect to such transferred Partnership Units and no such Transfer (other than pursuant to a statutory merger or consolidation wherein all obligations and liabilities of the transferor General Partner are assumed by a successor corporation or other Entity to the General Partner by operation of law) shall relieve the transferor General Partner of its obligations under this Agreement without the Consent of the Limited Partners, in their reasonable discretion. In the 59 event the General Partner withdraws from the Partnership in violation of this Agreement or otherwise, dissolves or terminates or upon the Bankruptcy of the General Partner, (i) any remaining general partner may continue the Partnership business or (ii) within 90 days thereafter, all of the remaining Partners (or, to the extent permitted under the Act, such lesser number or percentage of the Partners, but in no case less than a Majority-in-Interest of the Limited Partners) may elect to continue the business of the Partnership by selecting a substitute General Partner, which substitute General Partner accepts such election and agrees to serve as the General Partner. Such successor General Partner shall thereupon succeed to the rights and obligations of the General Partner as provided in this Section 9.1. 1. 1. Transfers by Limited Partners. A. Subject to the provisions of Sections 9.2(b) and 9.3 hereof, including, without limitation, compliance with any restrictions or limitations set forth therein, each Limited Partner shall have the right to Transfer all or a portion of its Partnership Units to any Person that is the Immediate Family of such Limited Partner, an Affiliate of such Limited Partner, another Limited Partner, a bona fide pledgee after a default in the obligation secured by the pledge, or to a bona fide purchaser for value from such pledgee, provided that prior written notice of such proposed transfer is delivered to the General Partner. No other Transfers of a Limited Partner's Partnership Units may be effected without the consent of the General Partner, which consent may be given, withheld or conditioned in the General Partner's sole and absolute discretion. B. No transfer permitted or consented to under this Section 9.2 (other than pursuant to a statutory merger or consolidation wherein all obligations and liabilities of the transferor Partner are assumed by a successor corporation or other Entity by operation of law) shall relieve the transferor Limited Partner of its obligations under this Agreement without the approval of the General Partner, in its sole and absolute discretion. Upon such permitted or consented to 60 Transfer, the transferee shall be deemed to be an Assignee with respect to such Partnership Units, but shall not become or be admitted to the Partnership as a Substituted Limited Partner without the consent of the General Partner, which consent may be given or withheld in the General Partner's sole and absolute discretion and for any or no reason whatsoever. An Assignee shall be entitled as a result of such Transfer only to receive the economic benefits of the Partnership Interest to which the transferor Limited Partner would otherwise be entitled, along with such transferor Limited Partner's rights with respect to the Rights (although any transferee of any transferred Partnership Units shall be subject to any and all ownership limitations contained in the corporate charter of the Company as may be amended from time to time), and such Assignee shall have no right (a) to participate in the management of the Partnership or to vote on any matter requiring the consent or approval of the Limited Partners, (b) to demand or receive any account of the Partnership's business, or (c) to inspect the Partnership's books and records, unless and until such Assignee is admitted to the Partnership as a Substituted Limited Partner. A transferee of a Partnership Unit may become a Substituted Limited Partner only upon the satisfaction of the following conditions: (A) filing with the Partnership of a duly executed and acknowledged written instrument of assignment in a form approved by the General Partner specifying the Partnership Units being assigned, setting forth the intention of the transferor Limited Partner that such transferee succeed to the assignor's interest as a Limited Partner and assuming by operation of law or express agreement all of the obligations of the transferor Limited Partner under this Agreement with respect to such transferred Partnership Units; (B) execution and acknowledgment by the transferor Limited Partner and such transferee of any other instruments required in the sole and absolute discretion of the General Partner, including the acceptance and adoption by such transferee of the provisions of this Agreement; (C) obtaining the written consent of the General Partner as provided in Section 9.2(a) above; and (D) payment of a transfer fee to the Partnership, sufficient to cover the reasonable expenses of the substitution, if any. Any transferee, whether or not admitted as a Substituted Limited Partner, shall take subject to the obligations of the transferor Limited Partner hereunder. 1. Restrictions on Transfer. In addition to any other restrictions on transfer herein contained, in no event may any Transfer of a Partnership Unit by any Partner be made and in no event shall Additional Units be issued (i) to any 61 Person or Entity who or which lacks the legal right, power or capacity to own a Partnership Unit, or, except with the prior written consent of the General Partner, to a Person or Entity which is not an "Accredited Investor" within the meaning of Regulation D promulgated by the SEC under the Securities Act; (ii) in violation of any provision of any mortgage or trust deed (or the note or bond secured thereby) constituting a Lien against a Property or any part thereof, or other instrument, document or agreement to which the Partnership or any Property Partnership is a party or otherwise bound (including, without limitation, the organizational documents of any Property Partnership); (iii) in violation of applicable law; (iv) of any component portion of a Partnership Unit, such as the Capital Account, or rights to Net Cash Flow, separate and apart from all other components of a Partnership Unit; (v) in the event such Transfer would cause the Company to cease to comply with the REIT Requirements; (vi) if such Transfer would cause a termination of the Partnership for federal income tax purposes (except with the Consent of the General Partner and the Consent of the Limited Partners); (vii) if such Transfer would, in the opinion of counsel to the Partnership, cause the Partnership to cease to be classified as a partnership for federal income tax purposes; (viii) if such Transfer would cause the Partnership to become, with respect to any employee benefit plan subject to Title 1 of ERISA, a "party-in-interest" (as defined in Section 3(14) of ERISA) or a "disqualified person" (as defined in Section 4975(c) of the Code); (ix) if such Transfer would, in the opinion of counsel to the Partnership, 62 cause any portion of the assets of the Partnership to constitute assets of any employee benefit plan pursuant to Department of Labor Regulations Section 2510.2-101; (x) if such Transfer would result in the Transferor or Transferee owning Common Units having a value (computed as of the date of such proposed Transfer by multiplying the Common Stock Amount with respect to such Common Units by the Current Per Share market Price) less than $250,000; (xi) if such Transfer or issuance may not be effected without registration of such Partnership Units under the Securities Act, would require filing of a registration statement under the Securities Act, or would otherwise violate any Federal, state or foreign securities laws or regulations applicable to the Partnership or such Partnership Units; (xii) if such Transfer or issuance would violate any provision of the Company's certificate of incorporation, as such may be amended from time to time; (xiii) to a lender to the Partnership or any Person who is related (within the meaning of Section 1.752-4(b) of the Regulations) to any lender to the Partnership whose loan constitutes a "nonrecourse liability" (within the meaning of Section 1.752-1(a)(2) of the Regulations) without the consent of the General Partner, in its sole and absolute discretion, unless the Partnership's basis for tax purposes would not be reduced as a result of such Transfer; (xiv) except with the express written consent of the General Partner, if such Transfer would result either in the Partnership having more than one hundred Partners or in the Partnership being classified as a "publicly traded partnership" within the meaning of the Code and the Regulations; or (xv) except with 63 the express written consent of the General Partner, to any entity that is a partnership, grantor trust or S corporation if (i) substantially all of the value of the interest of a person owning an interest in such entity is attributable to the entity's (direct or indirect) interest in a Unit, and (ii) a principal purpose of the use of the tiered arrangement is to permit the Partnership to satisfy the 100-person limitation in paragraph (h)(1)(ii) of Section 1.7704-1 of the Regulations. ARTICLE I. Rights and Obligations of the Limited Partners 1. No Participation in Management. A. Except as expressly permitted hereunder, the Limited Partners, in their capacities as Limited Partners of the Partnership, shall not take part in the management of the Partnership's business, transact any business in the Partnership's name or have the power to sign documents for or otherwise bind the Partnership, provided, however, that nothing in the foregoing shall be deemed to prohibit or preclude any Limited Partner or its Affiliates from serving as an officer, director or employee of the Company, the General Partner or Management Company or otherwise transacting business with the Partnership. B. In addition to other rights provided by this Agreement or by the Act, each Limited Partner shall have the right, for a purpose reasonably related to such Limited Partner's interest as a limited partner in the Partnership, upon written demand with a statement of the purpose of such demand and at such Limited Partner's own expense (including such copying and administrative charges as the General Partner may establish from time to time): (1) to obtain a copy of the most recent annual and quarterly reports filed with the Securities and Exchange Commission by the General Partner pursuant to the Securities Exchange Act of 1934; (2) to obtain a copy of the Partnership's federal, state and local income tax returns for each Partnership Year; 64 (3) to obtain a current list of the name and last known business, resident or mailing address of each Partner; and (4) to obtain a copy of this Agreement and the Certificate of Limited Partnership and all amendments thereto, together with executed copies of all powers of attorney pursuant to which this Agreement, the Certificate and all amendments thereto have been executed. 1. Bankruptcy of a Limited Partner. The Bankruptcy of any Limited Partner shall not cause a dissolution of the Partnership, but the rights of such Limited Partner to share in the Net Income or Net Losses of the Partnership and to receive distributions of Partnership funds shall, on the happening of such event, devolve on its successors or assigns, subject to the terms and conditions of this Agreement, and the Partnership shall continue as a limited partnership. In no event, however, shall such assignee(s) become an Assignee Limited Partner except in accordance with Article IX hereof. 1. 1. No Withdrawal. No Limited Partner may withdraw from the Partnership without the prior written consent of the General Partner, other than as expressly provided in this Agreement. 1. 2. Duties and Conflicts. The General Partner recognizes that certain of the Limited Partners and their Affiliates have or may have other business interests, activities and investments, some of which may be in conflict or competition with the business of the Partnership, and that such Persons are entitled to carry on such other business interests, activities and investments. Such Limited Partners and their Affiliates may engage in or possess an interest in any other business or venture of any kind, independently or with others, on their own behalf or on behalf of other 65 entities with which they are affiliated or associated, and such Persons may engage in any activities, whether or not competitive with the Partnership, without any obligation to offer any interest in such activities to the Partnership or to any Partner. Neither the Partnership nor any Partner shall have any right, by virtue of this Agreement, in or to such activities, or the income or profits derived therefrom, and the pursuit of such activities, even if competitive with the business of the Partnership, shall not be deemed wrongful or improper. 1. 3. Limited Liability. No Limited Partner shall be bound, or personally liable for, the expenses, liabilities or obligations of the Partnership, except as provided by this Agreement or the Act. ARTICLE I. Grant of Rights to Limited Partners 1. Grant of Rights. The Company does hereby grant to each Limited Partner, and each of the Limited Partners does hereby accept, the right, but not the obligation (hereinafter referred to as the "Rights"), to require the Company and the General Partner to exchange part or all of the Limited Partner's Common Units for shares of Common Stock or their cash equivalent, at the Company's election, at any time or from time to time prior to November 3, 2043, on the terms and subject to the conditions and restrictions contained in Exhibit D hereto. The Rights granted hereunder may be exercised by any one or more of the Limited Partners, on the terms and subject to the conditions and restrictions 66 contained in Exhibit D hereto, upon delivery to the Company of an Exercise Notice, which notice shall specify the number of Common Units to be exchanged by such Limited Partner. Once delivered, the Exercise Notice shall be irrevocable, subject to delivery by the Company or the General Partnerof the exchange consideration in respect of the Common Units being exchanged in accordance with the terms hereof. Notwithstanding the forgoing, upon the issuance of any Common Units the General Partner and the Partner to who such Common Units are issued may agree that such Common Units are not entitled to the Rights. 1. 1. Terms of Rights. The terms and provisions applicable to the Rights shall be as set forth in attached Exhibit D. ARTICLE I. Indemnification 1. Indemnification of the Limited Partners. From and after the date hereof, the Partnership shall indemnify and hold harmless each of the Limited Partners and its Affiliates against and from all liability, demands, claims, actions or causes of action, assessments, losses, fines, penalties, costs, damages and expenses (including, without limitation, reasonable attorneys' and accountants' fees and expenses) (each, a "Claim") sustained or incurred by such Limited Partner or Affiliate or any assignee or successor thereof (including, without limitation, any Assignee Limited Partner) as a result of or arising out of any Assumed Liability. If a claim for indemnification is asserted against the Partnership hereunder, the Partnership shall have the right, at its own 67 expense, to participate in the defense of any Claim asserted against such Limited Partner or its Affiliate which resulted in the claim for indemnification, and if such right is exercised, the parties shall cooperate in the defense of such action or proceeding. 1. 1. Indemnification of the General Partner, the Company and Others. From and after the date hereof, the Partnership shall indemnify and hold harmless each of the General Partner, the Company and any officer, director, employee or agent of any of the Partnership, the General Partner or the Company against and from all for the same matters and to the same extent as the Company is entitled to indemnify its officers, directors, employees or agents pursuant to the Company's certificate of incorporation, as such may be amended from time to time. ARTICLE I. Arbitration of Disputes 1. Arbitration. Notwithstanding anything to the contrary contained in this Agreement, all claims, disputes and controversies between the parties hereto (including, without limitation, any claims, disputes and controversies between the Partnership and any one or more of the Partners and any claims, disputes and controversies between any one or more Partners) arising out of or in connection with this Agreement or the Partnership created hereby, relating to the validity, construction, performance, breach, enforcement or termination thereof, or otherwise, shall be resolved by binding arbitration in New York, New York, in accordance with this Article XIII and, to the extent not inconsistent herewith, 68 the Expedited Procedures and Commercial Arbitration Rules of the American Arbitration Association or any successor thereto. 1. 1. Procedures. Any arbitration called for by this Article XIII shall be conducted in accordance with the following procedures: (a) The Partnership or any Partner (the "Requesting Party") may demand arbitration pursuant to Section 13.1 hereof at any time by giving written notice of such demand (the "Demand Notice") to all other Partners and (if the Requesting Party is not the Partnership) to the Partnership, which Demand Notice shall describe in reasonable detail the nature of the claim, dispute or controversy. (b) Within fifteen (15) days after the giving of a Demand Notice, the Requesting Party, on the one hand, and each of the other Partners and/or the Partnership against whom the claim has been made or with respect to which a dispute has arisen (collectively, the "Responding Party"), on the other hand, shall select and designate in writing to the other party one reputable, disinterested individual (a "Qualified Individual") willing to act as an arbitrator of the claim, dispute or controversy in question. Each of the Requesting Party and the Responding Party shall use their best efforts to select a present or former partner of a "Big 6" accounting firm having no affiliation with any of the parties as their respective Qualified Individual to act as the second arbitrator. Within fifteen (15) days after the foregoing selections have been made, the arbitrators so selected shall jointly select a present or former partner of a "Big 6" accounting firm having no affiliation with any of the parties as the third Qualified Individual willing to act as an arbitrator of the claim, dispute or controversy in question. In the event that the two arbitrators initially selected are unable to agree on a third arbitrator within the second fifteen (15) day period referred to above, then, on the application of either party, the American Arbitration Association shall promptly select and appoint a present or former partner of a "Big 6" accounting firm having no affiliation with any of the parties as the Qualified Individual to act as the third arbitrator. The three arbitrators selected pursuant to this subsection (b) shall constitute the arbitration panel for the arbitration in question. (c) The presentations of the parties hereto in the arbitration proceeding shall be commenced and completed within sixty (60) days after the selection of the 69 arbitration panel pursuant to subsection (b) above, and the arbitration panel shall render its decision in writing within thirty (30) days after the completion of such presentations. Any decision concurred in by any two (2) of the arbitrators shall constitute the decision of the arbitration panel, and unanimity shall not be required. (d) The arbitration panel shall have the discretion to include in its decision a direction that all or part of the attorneys' fees and costs of any party or parties and/or the costs of such arbitration be paid by any other party or parties. On the application of a party before or after the initial decision of the arbitration panel, and proof of its attorneys' fees and costs, the arbitration panel shall order the other party to make any payments directed pursuant to the preceding sentence. 1. Binding Character. Any decision rendered by the arbitration panel pursuant to this Article XIII shall be final and binding on the parties hereto, and judgment thereon may be entered by any state or federal court of competent jurisdiction. 1. 1. Exclusivity. Arbitration shall be the exclusive method available for resolution of claims, disputes and controversies described in Section 13.1 hereof, and the Partnership and its Partners stipulate that the provisions hereof shall be a complete defense to any suit, action, or proceeding in any court or before any administrative or arbitration tribunal with respect to any such claim, controversy or dispute. The provisions of this Article XIII shall survive the dissolution of the Partnership. 1. 2. No Alternative of Agreement. Nothing contained herein shall be deemed to give the arbitrators any authority, power or right to alter, change, amend, modify, add to, or subtract from any of the provisions of this Partnership Agreement. 70 ARTICLE I. General Provisions 1. Notices. All notices, offers or other communications required or permitted to be given pursuant to this Agreement shall be in writing and may be personally served, telecopied or sent by United States mail and shall be deemed to have been given when delivered in person, upon receipt of telecopy or three business days after deposit in United States mail, registered or certified, postage prepaid, and properly addressed, by or to the appropriate party. For purposes of this Section 14.1, the address of the General Partner shall be: One Park Place, 6148 Lee Highway, Chattanooga, Tennessee 37421-2931 (telecopier number (423) 490-8662) and the address of each of the Limited Partners shall be c/o CBL & Associates, Inc., One Park Place, 6148 Lee Highway, Chattanooga, Tennessee 37421-2931 (telecopier number (423) 490-8662). The address of any party hereto may be changed by a notice in writing given in accordance with the provisions hereof. 1. 1. Successor. This Agreement and all the terms and provisions hereof shall be binding upon and shall inure to the benefit of all Partners, and their legal representatives, heirs, successors and permitted assigns, except as expressly herein otherwise provided. 1. 2. Effect and Interpretation. This Agreement shall be governed by and construed in conformity with the laws of the State of Delaware. 71 1. 3. Counterparts. This Agreement may be executed in counterparts, each of which shall be an original, but all of which shall constitute one and the same instrument. 1. 4. Partners Not Agents. Nothing contained herein shall be construed to constitute any Partner the agent of another Partner, except as specifically provided herein, or in any manner to limit the Partners in the carrying on of their own respective businesses or activities. Notwithstanding anything to the contrary contained herein, no recourse shall be had by the Partnership or any Partner against any director, shareholder, officer, employee, agent or attorney of the General Partner acting in such capacity for any act or omission of the General Partner or any obligation or liability of the General Partner under this Agreement, and none of the foregoing shall have any personal liability for or with respect to any of the foregoing. 1. 5. Entire Understanding; Etc. This Agreement constitutes the entire agreement and understanding among the Partners and supersedes any prior understandings and/or written or oral agreements among them respecting the subject matter within. 1. 6. Amendments. A. Except to the extent expressly otherwise provided herein (including, without limitation, in Section 14.7(b) below), this Agreement may not be amended unless such amendment is approved by the General Partner with the prior Consent of the Limited Partners; provided that no amendment of this Agreement may be made without the consent of all of the affected Limited Partners if such amendment (i) converts any Limited Partner's interest in the Partnership into a general partnership interest (other than the General Partner if the General Partner is also a Limited Partner), (ii) modifies the limited liability of any Limited Partner if the General Partner is also a Limited Partner), or (iii) 72 alters or modifies the Rights set forth in Article XI in a manner adverse to such Partner. B. Notwithstanding anything to the contrary provided in Section 14.7(a) above, the General Partner shall have the power, without the consent of any Limited Partner, to amend this Agreement as may be required to facilitate or implement any of the following: 1. to add to the obligations of the General Partner or surrender any right or power granted to the General Partner or any Affiliate of the General Partner for the benefit of the Limited Partners; 2. to reflect the admission, substitution, termination, or withdrawal of Partners in accordance with this Agreement; 3. to set forth the rights, powers and duties of the holders of any Additional Units issued pursuant to Section 4.4(a) hereof (including, without limitation, amending the distribution and allocation provisions set forth herein); 4. to reflect any change that does not adversely affect the Limited Partners in any material respect, to cure any ambiguity, to correct or supplement any defective provision in this Agreement, or to make other changes with respect to matters arising under this Agreement that will not be inconsistent with any other provision of this Agreement; and 5. to satisfy any requirements, conditions, or guidelines contained in any order, directive, opinion, ruling or regulations of a Federal or state agency or contained in Federal or state law. C. This Section 14.7 may not be amended except with the prior written consent of all the Partners. 1. Severability. If any provision of this Agreement, or the application of such provision to any person or circumstance, shall be held invalid by a court of competent jurisdiction, the remainder of this Agreement, or the application of such provision to persons or circumstances other than those to which it is held invalid by such court, shall not be affected thereby. 73 1. 1. Pronouns and Headings. As used herein, all pronouns shall include the masculine, feminine and neuter, and all defined terms shall include the singular and plural thereof wherever the context and facts require such construction. The headings, titles and subtitles herein are inserted for convenience of reference only and are to be ignored in any construction of the provisions hereof. Any references in this Agreement to "including" shall be deemed to mean "including without limitation". 1. 2. Assurances. Each of the Partners shall hereafter execute and deliver such further instruments and do such further acts and things as may be required or useful to carry out the intent and purpose of this Agreement and as are not inconsistent with the terms hereof. 1. 3. Expenses. All expenses incurred by the Partners in negotiating, drafting and executing this Agreement and the Exhibits hereto, including without limitation all expenses of counsel, shall be borne and paid by the Partnership. 1. 4. Waiver of Partition. Except as otherwise expressly provided for in this Agreement, no Partner shall, either directly or indirectly, take any action to require partition or appraisement of the Partnership or any of its assets or properties or cause the sale of any Partnership assets or property, and notwithstanding any provision of applicable law to the contrary, each Partner (for itself and its legal representatives, successors and assigns) hereby irrevocably waives any and all right to partition, or to 74 maintain any action for partition, or to compel any sale with respect to its interest in, or with respect to, any assets or properties of the Partnership, except as expressly provided in this Agreement. IN WITNESS WHEREOF, the parties hereto have executed this Agreement or caused this Agreement to be executed as of the date and year first above written. GENERAL PARTNER: CBL HOLDINGS I, INC. By: __Charles B. Lebovitz_____ Charles B. Lebovitz Chairman of the Board, President and Chief Executive Officer LIMITED PARTNERS: CBL HOLDINGS, II, INC. By:____Charles B. Lebovitz_____ Charles B. Lebovitz, Chairman of the Board, President and Chief Executive Officer CBL & ASSOCIATES, INC. By:____Charles B. Lebovitz_____ Charles B. Lebovitz, Chairman of the Board, President and Chief Executive Officer CBL EMPLOYEES PARTNERSHIP/CONWAY By: CBL & Associates, Inc. Managing Partner By:____Charles B. Lebovitz____ Charles B. Lebovitz, Chairman of the Board, President and Chief Executive Officer 75 COLLEGE STATION ASSOCIATES By:____Charles B. Lebovitz____ Charles B. Lebovitz, Managing Partner FOOTHILLS PLAZA PARTNERSHIP By: Mortgage Services, Inc. Managing Partner By:___John N. Foy_______ John N. Foy, President ____John N. Foy_____ John N. Foy GIRVIN ROAD PARTNERSHIP By: CBL & ASSOCIATES, INC., Managing Partner By:_____Charles B. Lebovitz_____ Charles B. Lebovitz, Chairman of the Board, President and Chief Executive Officer ____Ben S. Landress______ Ben S. Landress ____Alan L. Lebovitz____ Alan L. Lebovitz ____Charles B. Lebovitz____ Charles B. Lebovitz ___Charles B. Lebovitz____ Laurie Beth Lebovitz ___Michael I. Lebovitz____ Michael I. Lebovitz 76 ___Stephen D. Lebovitz___ Stephen D. Lebovitz TRUST U/W MOSES LEBOVITZ F/B/O CHARLES B. LEBOVITZ, ET AL By:___Charles B. Lebovitz_____ Charles B. Lebovitz Trustee By:____Faye L. Israel_______ Faye L. Israel, Trustee By:___Ralph Schumacker______ Ralph Schumacker, Trustee TRUST U/W MOSES LEBOVITZ F/B/O FAYE L. ISRAEL, ET AL By:___Charles B. Lebovitz_____ Charles B. Lebovitz, Trustee By:____Faye L. Israel______ Faye L. Israel, Trustee By:___Ralph Shumacker_____ Ralph Shumacker, Trustee ___Mark D. Mancuso______ Mark D. Mancuso ___Eric P. Snyder_______ Eric P. Snyder 77 ___Augustus N. Stephas_____ Augustus N. Stephas WAREHOUSE PARTNERSHIP By: CBL & Associates, Inc., Managing Partner By:___Charles B. Lebovitz_____ Charles B. Lebovitz, Chairman of the Board, President and Chief Executive Officer ___Jay Wiston_________ Jay Wiston ___James L. Wolford___ James L. Wolford SOLELY FOR PURPOSES OF SECTIONS 4.6,5.2, 7.6, 7.13 9.3 and 12.2, ARTICLEs XI, XIII AND XIV AND EXHIBIT D HEREOF: CBL & Associates Properties, INC. By:___Charles B. Lebovitz_____ Charles B. Lebovitz Chairman of the Board, President and Chief Executive Officer 78 EXHIBIT A EXHIBIT B To be provided by the General Partner pursuant to the terms of the Agreement. CERTIFICATE OF DESIGNATION OF 9.0% SERIES A CUMULATIVE REDEEMABLE PREFERRED UNITS OF CBL & ASSOCIATES PROPERTIES, LIMITED PARTNERSHIP Pursuant to Article 4.4 of the Second Amended and Restated Partnership Agreement of CBL & Associates, Limited Partnership WHEREAS, CBL & Associates Properties, Inc. (the "Company") has issued 2,875,000 shares (the "Offering") of 9.0% Series A Cumulative Redeemable Preferred Stock (the "Preferred Stock"); WHEREAS, the Company and the Operating Partnership desire that the Company contribute net proceeds of the Offering to CBL & Associates, Limited Partnership (the "Operating Partnership") in exchange for preferred units having substantially the same economic rights and terms of the Preferred Stock; WHEREAS, Article 4.4 of the Second Amended and Restated Partnership Agreement of the Operating Partnership (the "Partnership Agreement") provides for a Preferred Unit Designation, setting forth, in sufficient detail, the economic rights and terms of the class or series of preferred units. NOW THEREFORE, CBL Holdings I, Inc., the general partner of the Operating Partnership (the "General Partner") hereby designates a series of preferred units and fixes the designations, powers, preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions thereof, of such preferred units, as follows: 1. Designation and Amount. The units of such series shall be designated "9.0% Series A Cumulative Redeemable Preferred Units" (the "Series A Preferred Units") and the number of units constituting such series shall be 2,875,000. The designations, powers, preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions thereof, of the Series A Preferred Units shall be subject in all cases to the provisions of the Partnership Agreement. 2. Dividends and Distribution Rights. (a) Holders of Series A Preferred Units shall be entitled to receive, when, as and if declared by the General Partner, out of assets of the Operating Partnership legally available for the payment of dividends, cumulative preferential cash dividends at the rate of 9.0% per annum of the $25.00 liquidation preference. Such dividends shall be cumulative from the date of the original issue by the Operating Partnership of Series A Preferred Units and shall be payable quarterly in arrears on the 30th day of March, June, September, and December of each year or, if not a business day, the next succeeding business day (each, a "Dividend Payment Date"). The first dividend shall be paid on September 30, 1998. Such first dividend and any dividend payable on the Series A Preferred Units for any partial dividend period shall be computed on the basis of a 360-day year consisting of twelve 30-day months. Dividends will be payable to holders of record as they appear in the records of the Operating Partnership at the close of business on the applicable record date, which shall be the 15th day of the calendar month in which the applicable Dividend Payment Date falls or on such other date designated by the General Partner for the payment of dividends that is not more than 30 nor less than 10 days prior to such Dividend Payment Date (each, a "Dividend Record Date"). (b) No dividends on the Series A Preferred Units shall be declared by the General Partner or paid or set apart for payment by the General Partner at such time as the terms and provisions of any agreement of the Operating Partnership, including any agreement relating to its indebtedness, prohibits such declaration, payment or setting apart for payment or provides that such declaration, payment or setting apart for payment would constitute a breach thereof or a default thereunder, or if such declaration or payment shall be restricted or prohibited by law. (c) Notwithstanding anything contained herein to the contrary, dividends on the Series A Preferred Units shall accrue whether or not the Operating Partnership has earnings, whether or not there are funds legally available for the payment of such dividends, and whether or not such dividends are declared. Accrued but unpaid dividends on the Series A Preferred Units shall accumulate as of the Dividend Payment Date on which they first become payable. (d) Except as set forth in the next sentence, no dividends shall be declared or paid or set apart for payment on any of the Operating Partnership's Common Units ("Common Units"), or units of any other class or series of units of the Operating Partnership ranking, as to dividends, on a parity with or junior to the Series A Preferred Units (other than a dividend paid in units of Common Units or in units of any other class or series of units ranking junior to the Series A Preferred Units as to dividends and upon liquidation) for any period unless full cumulative dividends for all past dividend periods and the then current dividend period shall have been or contemporaneously are (i) declared and paid in cash or (ii) declared and a sum sufficient for the payment thereof in cash is set apart for such payment on the Series A Preferred Units. When dividends are not paid in full (or a sum sufficient for such full payment is not so set apart) upon the Series A Preferred Units and the units of any other series of preferred units ranking on a parity as to dividends with the Series A Preferred Units, all dividends declared upon the Series A Preferred Units and any other series of preferred units ranking on a parity as to dividends with the Series A Preferred Units shall be declared pro rata so that the amount of dividends declared per unit of Series A Preferred Units and such other series of preferred units shall in all cases bear to each other the same ratio that accrued dividends per share on the Series A Preferred Units and such other series of preferred units (which shall not include any accrual in respect of unpaid dividends on such other series of preferred units for prior dividend periods if such other series of preferred units does not have a cumulative dividend) bear to each other. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on the Series A Preferred Units which may be in arrears. (e) Except as provided in paragraph 2(d), unless full cumulative dividends on the Series A Preferred Units shall have been or contemporaneously are declared and paid in cash or declared and a sum sufficient for the payment thereof in cash is set apart for payment for all past dividend periods and the then current dividend period, no dividends (other than in Common Units or other units ranking junior to the Series A Preferred Units as to dividends and upon liquidation) shall be declared or paid or set aside for payment or other dividend shall be declared or made upon the Common Units or any other units of the Operating Partnership ranking junior to or on parity with the Series A Preferred Units as to dividends or amounts upon liquidation nor shall any units of Common Units, or any other units of capital stock of the Operating Partnership ranking junior to or on a parity with the Series A Preferred Units as to dividends or upon liquidation, shall be redeemed, purchased or otherwise acquired for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any such units) by the Operating Partnership (except by conversion into or exchange for other units of the Operating Partnership ranking junior to the Series A Preferred Units as to dividends and upon liquidation) Nothing in the foregoing shall be deemed to preclude the exercise of Rights (as defined in the Partnership Agreement) by any unit holder in accordance with the Partnership Agreement. (f) Holders of units of Series A Preferred Units shall not be entitled to any dividend, whether payable in cash, property or units, in excess of full cumulative dividends on the Series A Preferred Units as provided above. Any dividend payment made on the Series A Preferred Units shall first be credited against the earliest accrued but unpaid dividends due with respect to such units which remains payable. 3. Liquidation Rights. Upon any voluntary or involuntary liquidation, dissolution or winding-up of the affairs of the Operating Partnership, the holders of units of Series A Preferred Units shall be entitled to be paid out of the assets of the Operating Partnership legally available for distribution to its Unit holders a liquidation preference of $25.00 per unit, plus an amount equal to any accrued and unpaid dividends to the date of payment (whether or not declared), before any distribution or payment shall be made to holders of share of Common Units or any other class or series of Units of the Operating Partnership ranking junior to the Series A Preferred Units as to liquidation rights. In the event that, upon such voluntary or involuntary liquidation, dissolution or winding-up, the available assets of the Operating Partnership are insufficient to pay the amount of the liquidating distributions on all outstanding units of Series A Preferred Units and the corresponding amounts payable on all units of other classes or series of units of the Operating Partnership ranking on a parity with the Series A Preferred Units in the distribution of assets, then the holders of the Series A Preferred Units and all other such classes or series of units shall share ratably in any such distribution of assets in proportion to the full liquidating distributions to which they would otherwise be respectively entitled. Holders of Series A Preferred Units shall be entitled to written notice of any such liquidation. After payment of the full amount of the liquidating distributions to which they are entitled, the holders of Series A Preferred Units will have no right or claim to any of the remaining assets of the Operating Partnership. The consolidation or merger of the Operating Partnership with or into any corporation, trust or entity or of any corporation, trust or other entity, or the sale, lease or conveyance of all or substantially all of the property or business of the Operating Partnership shall not be deemed to constitute a liquidation, dissolution or winding-up of the Operating Partnership. 4. Redemption. (a) Series A Preferred Units shall not be redeemable prior to July 1, 2003. On or after July 1, 2003, the Operating Partnership, at its option upon not less than 30 nor more than 60 days' written notice, may redeem the Series A Preferred Units, in whole or in part, at any time or from time to time, for cash at a redemption price of $25.00 per unit, plus all accrued and unpaid dividends thereon to the date fixed for redemption (except as provided below), without interest. If fewer than all of the outstanding units of Series A Preferred Units are to be redeemed, the units of Series A Preferred Units to be redeemed shall be redeemed pro rata (as nearly as may be practicable without creating fractional units) or by lot or by any other equitable method determined by the Operating Partnership. Holders of Series A Preferred Units to be redeemed shall surrender such Series A Preferred Units at the place designated in such notice and shall be entitled to the redemption price and any accrued and unpaid dividends payable upon such redemption following such surrender. If notice of redemption of any Series A Preferred Units has been given and if the funds necessary for such redemption have been set aside by the Operating Partnership in trust for the benefit of the holders of any units of Series A Preferred Units so called for redemption, then from and after the redemption date dividends shall cease to accrue on such Series A Preferred Units, such units of Series A Preferred Units shall no longer be deemed outstanding and all rights of the holders of such units will terminate, except the right to receive the redemption price plus any accrued and unpaid dividends payable upon such redemption. (b) Unless full cumulative dividends on all Series A Preferred Units shall have been or contemporaneously are declared and paid in cash or declared and a sum sufficient for the payment thereof in cash set apart for payment for all past dividend periods and the then current dividend period, no Series A Preferred Units shall be redeemed unless all outstanding units of Series A Preferred Units are simultaneously redeemed and the Operating Partnership shall not purchase or otherwise acquire directly or indirectly any units of Series A Preferred Units (except by exchange for units of the Operating Partnership ranking junior to the Series A Preferred Units as to dividends and amounts upon liquidation). (c) Notice of redemption shall be mailed by the Operating Partnership, postage prepaid, not less than 30 nor more than 60 days prior to the redemption date, addressed to the respective holders of record of the units of Series A Preferred Units to be redeemed at their respective addresses as they appear on the records of the Operating Partnership. No failure to give such notice or any defect thereto or in the mailing thereof shall affect the validity of the proceedings for the redemption of any Series A Preferred Units except as to a holder to whom notice was defective or not given. Each notice shall state (i) the redemption date; (ii) the redemption price; (iii) the number of units of Series A Preferred Units to be redeemed; (iv) the place or places where units of Series A Preferred Units are to be surrendered for payment of the redemption price; and (v) that dividends on the Series A Preferred Units to be redeemed shall cease to accrue on such redemption date. If fewer than all of the units of Series A Preferred Units held by any holder are to be redeemed, the notice mailed to such holder shall also specify the number of units of Series A Preferred Units held by such holder to be redeemed. (d) Immediately prior to any redemption of Series A Preferred Units, the Operating Partnership shall pay, in cash, any accumulated and unpaid dividends through the redemption date, unless a redemption date falls after a Dividend Record Date and prior to the corresponding Dividend Payment Date, in which case each holder of Series A Preferred at the close of business of such Dividend Record Date shall be entitled to the dividend payable on such units on the corresponding Dividend Payment Date notwithstanding the redemption of such units before such Dividend Payment Date. Except as provided above, the Operating Partnership shall make no payment or allowance for unpaid dividends, whether or not in arrears, on Series A Preferred Units for which a notice of redemption has been given. (e) All units of the Series A Preferred Units redeemed pursuant to this paragraph 4 shall be retired and shall be restored to the status of authorized and unissued units of preferred units, without designation as to series and may thereafter be reissued as units of any series of preferred units. (f) The Series A Preferred Units shall have no stated maturity and shall not be subject to any sinking fund or mandatory redemption. 5. Voting Rights. (a) Holders of the Series A Preferred Units shall not have any voting rights, except as set forth in the Partnership Agreement. (b) So long as any units of Series A Preferred Units remain outstanding, the Operating Partnership shall not, without the affirmative vote or consent of the holders of two-thirds of the units of Series A Preferred Units outstanding at the time, given in person or by proxy, either in writing or at a meeting (such series voting separately as a class): (i) authorize or create, or increase the authorized or issued amount of, any class or series of units ranking prior to the Series A Preferred Units with respect to payment of dividends or the distribution of assets upon liquidation, dissolution or winding-up of the Operating Partnership or reclassify any authorized units of the Operating Partnership into such units, or create, authorize or issue any obligation or security convertible into or evidencing the right to purchase any such units; or (ii) amend, alter or repeal the provisions of the Partnership Agreement or this Certificate of Designations, whether by merger, consolidation or otherwise (an "Event"), so as to materially and adversely affect any right, preference, privilege or voting power of the Series A Preferred Units or the holders thereof; provided however, with respect to the occurrence of any of the Events set forth in (ii) above, so long as the Series A Preferred Units remains outstanding with the terms thereof materially unchanged, taking into account that, upon the occurrence of an Event, the Operating Partnership may not be the surviving entity, the occurrence of such Event shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting power of holders of Series A Preferred Units and provided further that (A) any increase in amount of the authorized Preferred Units or the creation or issuance of any other Series A Preferred Units or (B) any increase in the number of authorized units of Series A Preferred Units or any other series of Preferred Units in each case ranking on a parity with or junior to the Series A Preferred Units of such series with respect to the payment of dividends or the distribution of assets upon liquidation, dissolution or winding up, shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers. (c) The foregoing voting provisions of this paragraph 5 shall not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required shall be effected, all outstanding units of Series A Preferred Units shall have been redeemed or called for redemption upon proper notice and sufficient funds, in cash, shall have been deposited in trust to effect such redemption. (d) In any matter in which the Series A Preferred Units may vote (as expressly provided herein or as may be required by law), each share of Series A Preferred Units shall be entitled to one vote, except that when any other series of preferred units of the Operating Partnership shall have the right to vote with the Series A Preferred Units as a single class on any matter, the Series A Preferred Units and such other series shall have with respect to such matters one vote per each $25.00 of stated liquidation preference. 6. Conversion. The units of Series A Preferred Units shall not be convertible into or exchangeable for any other property or units of the Operating Partnership. 7. Ranking. The Series A Preferred Units shall, with respect to dividend rights and rights upon liquidation, dissolution or winding-up of the Operating Partnership, rank (a) senior to the Common Units and to all units ranking junior to such Series A Preferred Units; (b) on a parity with all units issued by the Operating Partnership the terms of which specifically provide that such units rank on a parity with the Series A Preferred Units; and (c) junior to all units issued by the Operating Partnership (in accordance with this Certificate of Designations) the terms of which specifically provide that such units rank senior to the Series A Preferred Units. For purposes of this paragraph 7, the term "units" does not include indebtedness convertible into units. 8. Exclusion of Other Rights. The Series A Preferred Units shall not have any preferences or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications or terms or conditions of redemption other than expressly set forth in the Partnership Agreement and this Certificate of Designations. 9. Headings of Subdivisions. The headings of the various subdivisions hereof are for convenience of reference only and shall not affect the interpretation of any of the provisions hereof. 10. Severability of Provisions. If any preferences or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications or terms or conditions of redemption of the Series A Preferred Units set forth in the Partnership Agreement and this Certificate of Designations is invalid, unlawful or incapable of being enforced by reason of any rule of law or public policy, all other preferences or other rights, voting powers, restrictions, limitations as to distributions, qualifications or terms or conditions of redemption of Series A Preferred Units set forth in the Partnership Agreement which can be given effect without the invalid, unlawful or unenforceable provision thereof shall, nevertheless, remain in full force and effect and no preferences or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications or terms or conditions of redemption of the Series A Preferred Units herein set forth shall be deemed dependent upon any other provision thereof unless so expressed therein. 11. No Preemptive Rights. No holder of Series A Preferred Units shall be entitled to any preemptive rights to subscribe for or acquire any unissued units of the Operating Partnership (whether now or hereafter authorized) or securities of the Operating Partnership convertible into or carrying a right to subscribe to or acquire units of the Operating Partnership. SIGNATURE APPEARS ON NEXT PAGE IN WITNESS WHEREOF, CBL Holdings I, Inc. has caused this Certificate of Designation of Series A Cumulative Redeemable Preferred Units to be duly executed by its Executive Vice President and Chief Financial Officer this _____ day of June, 1998. CBL Holdings I, Inc. By John Foy Executive Vice President and Chief Financial Officer EXHIBIT C Allocations 1. Allocation of Net Income and Net Loss. (a) Except as otherwise provided herein, Net Income and Net Loss of the Partnership for each tax year shall be allocated among the Partners in the follow order and priority: (i) First, Net Income shall be allocated to the relevant Partner, on account of the Preferred Units, in an amount equal to the excess of (A) the amount of Net Cash Flow distributed to such Partner pursuant to Sections 6.2(a)(i) and (ii) and Section 6.2(c) (but only to the extent of the Preferred Distribution Requirement and Preferred Distribution Shortfalls) for the current and all prior Partnership tax years over (B) the amount of Net Income previously allocated to such Partner pursuant to this subparagraph (i). (ii) Second, for any Partnership tax year ending on or after a date on which Preferred Units are redeemed, Net Income (or Net Losses) shall be allocated to the relevant Partner, on account of the Preferred Units, in an amount equal to the excess (or deficit) of the sum of the applicable Preferred Redemption Amounts for the Preferred Units that have been or are being redeemed during such Partnership tax year over the Preferred Unit Issue Price of such Preferred Units. (iii) Any remaining Net Income and Net Losses shall be allocated among the Partners in accordance with their proportionate ownership of Common Units (except as otherwise required by the Regulations). (iv) Notwithstanding subparagraphs (i), (ii) and (iii), Net Income and Net Losses from a Liquidation Transaction shall be allocated as follows: First, Net Income (or Net Losses) shall be allocated to the relevant Partner, in connection with the Preferred Units, in an amount equal to the excess (or deficit) of the sum of the applicable Preferred Redemption Amounts of the Preferred Units which have been or will be redeemed with the proceeds of the Liquidation Transaction over the Preferred Unit Issue Price of such Preferred Units; Second, Net Income (or Net Losses) shall be allocated among the Partners so that the Capital Accounts of the Partners (excluding from the Capital Account of any Partner the amount attributable to its Preferred Units) are proportional to the number of Common Units held by each Partner; and Third, any remaining Net Income (and Losses) shall be allocated among the Partners in accordance with their proportionate ownership of Common Units. 2. Special Allocations. Notwithstanding any provisions of paragraph 1 of this Exhibit C, the following special allocations shall be made in the following order: (a) Minimum Gain Chargeback (Nonrecourse Liabilities). If there is a net decrease in Partnership Minimum Gain for any Partnership fiscal year (except as a result of conversion or refinancing of Partnership indebtedness, certain capital contributions or revaluation of the Partnership property as further outlined in Regulation Sections 1.704- 2(d)(4), (f)(2) or (f)(3)), each Partner shall be specially allocated items of Partnership income and gain for such year (and, if necessary, subsequent years) in an amount equal to that Partner's share of the net decrease in Partnership Minimum Gain. The items to be so allocated shall be determined in accordance with Regulation Section 1.704-2(f). This paragraph (a) is intended to comply with the minimum gain chargeback requirement in said section of the Regulations and shall be interpreted consistently therewith. Allocations pursuant to this paragraph (a) shall be made in proportion to the respective amounts required to be allocated to each Partner pursuant hereto. (b) Minimum Gain Attributable to Partner Nonrecourse Debt. If there is a net decrease in Minimum Gain Attributable to Partner Nonrecourse Debt during any fiscal year (other than due to the conversion, refinancing or other change in the debt instrument causing it to become partially or wholly nonrecourse, certain capital contributions, or certain revaluations of Partnership property as further outlined in Regulation Section 1.704-2(i)(4)), each Partner shall be specially allocated items of Partnership income and gain for such year (and, if necessary, subsequent years) in an amount equal to that Partner's share of the net decrease in the Minimum Gain Attributable to Partner Nonrecourse Debt. The items to be so allocated shall be determined in accordance with Regulation Section 1.704-2(i).(4) and (j)(2). This paragraph (b) in intended to comply with the minimum gain chargeback requirement with respect to Partner Nonrecourse Debt contained in said section of the Regulations and shall be interpreted consistently therewith. Allocations pursuant to this paragraph (b) shall be made in proportion to the respective amounts required to be allocated to each Partner pursuant thereto. (c) Qualified Income Offset. In the event a Limited Partner unexpectedly receives any adjustments, allocations or distributions described in Regulation Section 1.704-1(b)(2)(ii)(d)(4), (5), or (6), and such Limited Partner has an Adjusted Capital Account Deficit, items of Partnership income and gain shall be specially allocated to such Partner in an amount and manner sufficient to eliminate the Adjusted Capital Account Deficit as quickly as possible. This paragraph (c) is intended to constitute a "qualified income offset" under Regulation Section 1.704- 1(b)(2)(ii)(d) and shall be interpreted consistently therewith. (d) Nonrecourse Deduction. Nonrecourse Deductions for any fiscal year or other applicable period shall be allocated to the Partners in accordance with their proportionate ownership of Common Units. (e) Partner Nonrecourse Deductions. Partner Nonrecourse Deductions for any fiscal year or other applicable period shall be specially allocated to the Partner that bears the economic risk of loss for the debt (i.e., the Partner Nonrecourse Debt) in respect of which such Partner Nonrecourse Deductions are attributable (as determined under Regulation Section 1.704-2(b)(4) and (i)(1). (f) Curative Allocations. The Regulatory Allocations (as defined below) shall be taken into account in allocating other item of income, gain, loss, and deduction among the Partners so that, to the extent possible, the cumulative net amount of allocations of Partnership items under paragraphs 1 and 2 of this Exhibit C shall be equal to the net amount that would have been allocated to each Partner if the Regulatory Allocations had not occurred. This subparagraph (f) is intended to minimize to the extent possible and to the extent necessary any economic distortions which may result from application of the Regulatory Allocations and shall be interpreted in a manner consistent therewith. For purposes hereof, "Regulatory Allocations" shall mean the allocations provided under this paragraph 2. 3. Tax Allocations. (a) Generally. Subject to paragraphs (b) and (c) hereof, items of income, gain, loss, deduction and credit to be allocated for income tax purposes (collectively, "Tax Items") shall be allocated among the Partners on the same basis as their respective book items. (b) Sections 1245/1250 Recapture. If any portion of gain from the sale of property is treated as gain which is ordinary income by virtue of the application of Code Section 1245 or 1250 ("Affected Gain"), then (A) such Affected Gain shall be allocated among the Partners in the same proportion that the depreciation and amortization deductions giving rise to the Affected Gain were allocated and (B) other Tax Items of gain of the same character but would have been recognized, but for the application of Code Section 1245 and/or 1250, shall be allocated away from those Partners who are allocated Affected Gain pursuant to Clause (A) so that, to the extent possible, the other Partners are allocated the same amount, and type, of capital gain that would have been allocated to them had Code Section 1245 and/or 1250 not applied. For purposes hereof, in order to determine the proportionate allocations of depreciation and amortization deductions for each fiscal year or other applicable period, such deductions shall be deemed allocated on the same basis as Net Income and Net Loss for such respective period. (c) Allocations Respecting Section 704(c) and Revaluations: Curative Allocations Resulting from the Ceiling Rule. Notwithstanding paragraph (b) hereof, Tax Items with respect to Partnership property that is subject to Code Section 704(c) and/or Regulation Section 1.704- 1(b)(2)(iv)(f) (collectively "Section 704(c) Tax Items") shall be allocated in accordance with said Code section and/or Regulation Section 1.704-1(b)(4)(i), as the case may be. The allocation of Tax Items shall be subject to the ceiling rule stated in Regulation Section 1.704-1(c) and Regulation Section 1.704-3. The General Partner will not specially allocate Tax Items (other than the Section 704(c) Tax Items) to cure for the effect of the ceiling rule. The Partnership shall allocate items of income, gain, loss and deduction allocated to it by a Property Partnership to the Partner or Partners contributing the interest or interests in such Property Partnership, so that, to the greatest extent possible, such contributing Partner or Partners are allocated the same amount and character of items of income, gain, loss and deduction with respect to such Property Partnership that they would have been allocated had they contributed undivided interests in the assets owned by such Property Partnership to the Partnership in lieu of contributing the interest or interests in the Property Partnership to the Partnership. Notwithstanding the above, with respect to property contributed to the Partnership after the date hereof, such Section 704(c) Tax Items may be allocated under such method selected by the General Partner that is consistent with the Section 704(c) Regulations. EXHIBIT D Rights Terms The Rights granted to the Limited Partners pursuant to Section 11.1 hereof shall be subject to the following terms and conditions: 1. Definitions. Capitalized terms used herein without definition shall have the meanings ascribed thereto in the Agreement, and, in addition, the following terms and phrases shall, for purposes of this Exhibit D and the Agreement, have the meanings set forth below: "Beneficially Own" shall mean the ownership of shares of Common Stock by a Person who would be treated as an owner of such shares of Common Stock either directly or indirectly through the application of Sections 542 and 544 of the Code, as modified by Section 856(h)(1)(B) of the Code, and any comparable successor provisions thereto. "Beneficial Ownership Limit" shall mean (A) with respect to any Person other than members of the Lebovitz Group and the Wolford Group, 6% of the outstanding Capital Stock of the Company, (B) with respect to the Lebovitz Group, 23% of the outstanding Capital Stock of the Company and (C) with respect to the Wolford Group, 8% of the outstanding Capital Stock of the Company, in each case, determined by (i) number of shares outstanding, (ii) voting power or (iii) value (as determined by the Board of Directors), whichever produces the smallest holding of Capital Stock under the three methods, and computed taking into account all outstanding shares of Capital Stock and, to the extent provided by the Code, all shares of Capital Stock issuable under existing options and Exchange Rights that have not been exercised or deferred stock that has not vested. "Constructively Own" shall mean the ownership of shares of Common Stock by a Person who would be treated as an owner of such shares of Common Stock either directly or indirectly through the application of Section 318 of the Code, as modified by Section 856(d)(5) of the Code, and any comparable successor provisions thereto. "Constructive Ownership Limit" shall mean (A) with respect to any Person other than members of the Lebovitz Group and the Wolford Group, 6% of the outstanding Capital Stock of the Company, (B) with respect to the Lebovitz Group, 23% of the outstanding Capital Stock of the Company and (C) with respect to the Wolford Group, 8% of the outstanding Capital Stock of the Company, in each case, determined by (i) number of shares outstanding, (ii) voting power or (iii) value (as determined by the Board of Directors), whichever produces the smallest holding of Capital Stock under the three methods, and computed taking into account all outstanding shares of Capital Stock and, to the extent provided by the Code, all shares of Capital Stock issuable under existing options and Exchange Rights that have not been exercised or deferred stock that has not vested; provided, however, that members of the Lebovitz Group or the Wolford Group shall be subject to a Constructive Ownership Limit of 9.9% of the outstanding Capital Stock of the Company at all times that (x) members of the Lebovitz Group or the Wolford Group Constructively Own (i) 10% or more of either the total combined voting power of all classes of stock entitled to vote or the total number of outstanding shares of stock of any Tenant that is treated as a corporation for federal income tax purposes or (ii) an interest of 10% or more in the assets or net profits of any Tenant that is not treated as a corporation for federal income tax purposes and (y) the aggregate amount of income derived by the Company in its immediately preceding taxable year from such Tenants whose ownership is described in clause (x) hereof exceeded the amount derived from Tenants on November 3, 1993, adjusted as provided herein. "Election Notice" shall mean the written notice to be given by the Company to the Exercising Partners in accordance with the provisions of Paragraph 6 hereof in response to the receipt by the Company of an Exchange Notice from such Exercising Partners, the form of which Election Notice is attached hereto as Schedule 2. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or any successor statute. "Exchange Consideration" shall have the meaning set forth in Paragraph 5 hereof. "Exchange Notice" shall have the meaning set forth in Paragraph 2(a) hereof. "Exchange Rights" shall have the meaning set forth in Paragraph 2(a) hereof. "Exercising Partners" shall have the meaning set forth in Paragraph 2 hereof. "Grandfathered Related Party Tenant" shall mean any Tenant which is a Related Party Tenant at the time that the Agreement of which this Exhibit is a part is entered into, as set forth on Schedule 4 hereto. "Hart-Scott Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. "Independent" shall have the meaning set forth in the Amended and Restated Certificate of Incorporation of the Company. "Lebovitz Group" shall mean (i) Charles B. Lebovitz and (ii) any Beneficial Owner or Constructive Owner of shares of Common Stock whose shares of Common Stock are Beneficially Owned or Constructively Owned by Charles B. Lebovitz or members of his family. "Offered Units" shall mean the Common Units of the Exercising Partners identified in an Exchange Notice which, pursuant to the exercise of Exchange Rights, can be acquired by the Company under the terms hereof. "Ownership Limit" shall mean the Beneficial Ownership Limit or the Constructive Ownership Limit, as appropriate. "Registration Rights" shall mean the registration rights attributable to shares of Common Stock, if any, issued to Limited Partners in accordance with the provisions hereof, as set forth in Schedule 3 hereto. "Related Party Tenant" shall mean any Tenant 10% or more of either the total combined voting power of all classes of stock entitled to vote or the total number of outstanding shares of stock of which, in the case of a corporate Tenant, or 10% or more of the assets or net profits of which, in the case of a non-corporate Tenant, is Constructively Owned by members of the Lebovitz Group or the Wolford Group. "Securities Act" shall mean the Securities Act of 1933, as amended, or any successor statute. "Tenant" shall mean any Person that rents real property owned, directly or indirectly, by the Company or the Partnership. "Wolford Group" shall mean (i) James L. Wolford and (ii) any Beneficial Owner or Constructive Owner of shares of Common Stock whose shares of Common Stock are Beneficially Owned or Constructively Owned by James L. Wolford or members of his family. 2. Delivery of Exchange Notices. Any one or more Limited Partners ("Exercising Partners") may, subject to the limitations set forth herein, deliver to the Company written notice (the "Exchange Notice") pursuant to which such Exercising Partners elect to exercise their Rights to exchange (the "Exchange Rights") all or any portion of their Common Units for Exchange Consideration subject to the limitations contained in Paragraphs 3 and 4 below. 3. Exercise Subject to Ownership Limit. Exchange Rights may be exercised at any time and from time to time, to the extent that, upon exercise of the Exchange Rights, the Exercising Partner shall not, on a cumulative basis, Beneficially Own or Constructively Own shares of Common Stock including shares of Common Stock to be issued in connection with the exercise of such Exchange Rights, in excess of the applicable Ownership Limit. If an Exchange Notice is delivered to the Company but, as a result of the applicable Ownership Limit or as a result of restrictions contained in the Certificate of Incorporation of the Company, the Exchange Rights cannot be exercised in full, the Exchange Notice shall be deemed to be modified such that the Exchange Rights shall be exercised only to the extent permitted under the applicable Ownership Limit under the Certificate of Incorporation of the Company, and the Exchange Notice with respect to the remainder of such Exchange Rights shall be deemed to have been withdrawn. 4. Limitation on Exercise of Exchange Rights. Exchange Rights may be exercised at any time and from time to time, provided, however that, except with the prior written consent of the General Partner, (a) only one (1) Exchange Notice may be delivered to the Company by any Limited Partners during any consecutive 12-month period; and (b) no Exchange Notice may be delivered with respect to Common Units having a value of less than $250,000 or result in the exchanging Limited Partner owning Common Units having a value of less than $250,000 after giving effect to the exchange, in each case calculated by multiplying the Common Stock Amount with respect to such Common Units by the Current Per Share Market Price. 5. Computation of Exchange Consideration/Form of Payment. The exchange consideration ("Exchange Consideration") payable by the Company to each Exercising Partner shall be equal to the Common Stock Amount with respect to the Offered Units multiplied by the Current Per Share Market Price, each computed as of the date on which the Exchange Notice was delivered to the Company (the "Computation Date"). The Exchange Consideration shall, in the sole and absolute discretion of the Company, be paid in the form of (a) cash, or cashier's or certified check, or by wire transfer of immediately available funds to the Exercising Partner's designated account or (b) subject to the applicable Ownership Limit, by the issuance by the Company of a number of shares of its Common Stock equal to the Common Stock Amount with respect to the Offered Units or (c) subject to the applicable Ownership Limit, any combination of cash and Common Stock (valued at the Current Per Share Market Price). 6. Closing; Delivery of Election Notice. Within thirty (30) days after receipt by the Company of any Exchange Notice delivered in accordance with the requirements of Paragraphs 2 and 4 hereof, the Company shall deliver to the Exercising Partners a notice (an "Election Notice"), which Election Notice shall set forth the computation of the Exchange Consideration and shall specify the form of the Exchange Consideration (which shall be in accordance with Paragraph 5 hereof) to be paid by the Company to such Exercising Partners and the date, time and location for completion of the purchase and sale of the Offered Units, which date shall, to the extent required, in no event be more than (A) in the case of Offered Units with respect to which the Company has elected to pay the Exchange Consideration by issuance of shares of Common Stock, the later of (i) ten (10) days after delivery by the Company of the Election Notice for Offered Units and (ii) the expiration or termination of the waiting period applicable to each Exercising Partner, if any, under the Hart-Scott Act or (B) in the case of Offered Units with respect to which the Company has elected to pay the Exchange Consideration in cash, sixty (60) days after the initial date of receipt by the Company of the Exchange Notice for such Offered Units; provided, however, that such sixty (60) day period may be extended for an additional sixty (60) day period to the extent required for the Company to cause additional shares of its Common Stock to be issued to provide financing to be used to acquire the Offered Units. Notwithstanding the foregoing, the Company agrees to use its reasonable efforts to cause the closing of the exchange hereunder to occur as quickly as possible. 7. Adjustment to Exchange Consideration. If the Company elects to pay all or any portion of the Exchange Consideration in cash and if, as a result thereof, the Company elects to raise such cash through a public offering of its securities, borrowings or otherwise, the aggregate Exchange Consideration computed under Paragraph 5 above shall be reduced by an amount ("Transaction Expenses") equal to the expenses incurred by the Company in connection with such raising of funds allocable to the amounts required to pay the Exchange Consideration hereunder; provided, however, notwithstanding the foregoing, the Exchange Consideration shall not be reduced hereunder by an amount exceeding 5% of the Exchange Consideration computed without regard to the adjustment for Transaction Expenses. 8. Closing Deliveries. At the closing of the purchase and sale of Offered Units, payment of the Exchange Consideration shall be accompanied by proper instruments of transfer and assignment and by the delivery of (i) representations and warranties of (A) the Exercising Partner with respect to (x) its due authority to sell all of the right, title and interest in and to such Offered Units to the Company, (y) the status of the Offered Units being sold, free and clear of all Liens and (z) its intent to acquire the Common Stock for investment purposes and not for distribution, and (B) the Company with respect to due authority for the purchase of such Offered Units, and (ii) to the extent that any shares of Common Stock are issued in payment of the Exchange Consideration or any portion thereof, (A) an opinion of counsel for the Company, reasonably satisfactory to the Exercising Partners, to the effect that (I) such shares of Common Stock have been duly authorized, are validly issued, fully-paid and non-assessable and (II) issuance of such shares will not violate the Ownership Limit, and (B) a stock certificate or certificates evidencing the shares of Common Stock to be issued and registered in the name of the Exercising Partner or its designee with an appropriate legend reflecting that such shares are not registered under the Securities Act of 1933, as amended, and may not be offered or sold unless registered pursuant to the provisions of such act or an exemption therefrom is available as established by an opinion of counsel satisfactory to the Company. 9. Term of Rights. Unless sooner terminated, the rights of the parties with respect to the Rights shall commence as of the date hereof and lapse for all purposes and in all respects on November 3, 2043; provided, however, that the parties hereto shall continue to be bound by an Exchange Notice delivered to the Company prior to such date. Notwithstanding any provisions of this Exhibit to the contrary, Exchange Rights associated with Exchange Rights held by members of the Lebovitz Group or the Wolford Group shall terminate, to the extent necessary to reduce the Constructive Ownership of the members of the Lebovitz Group or the Wolford Group to 9.9% of the value of the outstanding Common Stock (treating, for these purposes, shares of Common Stock subject to Exchange Rights associated with Rights held by members of the Lebovitz Group or the Wolford Group, as applicable, as outstanding), immediately if: (a) the Constructive Ownership by the members of the Lebovitz Group of any Grandfathered Related Party Tenant increases; (b) there comes to be a Related Party Tenant other than a Grandfathered Related Party Tenant; (c) the rent from Related Party Tenants to be taken into account for purposes of Section 856(d) of the Code in annual amounts exceeds the amounts derived from Related Party Tenants on the date of the Initial Public Offering or such other amount as a majority of the Independent members of the Board of Directors of the Company shall determine; or (d) there is an increase (as determined on an annualized basis at the time of any rental payment) of more than 5% in the rental payments derived by the Company or the Partnership from a Grandfathered Related Party Tenant with respect to any real property owned, directly or indirectly, by the Company or the Partnership over the rental payments made by such Grandfathered Related Party Tenant with respect to such real property at the time that the Agreement of which this Exhibit is a part is entered into. 10. Covenants of the Company. To facilitate the Company's ability to fully perform its obligations hereunder, the Company covenants and agrees as follows: (a) At all times during the pendency of the Rights, the Company shall reserve for issuance such number of shares of Common Stock as may be necessary to enable the Company to issue such shares in full payment of the Exchange Consideration in regard to all Common Units which are from time to time outstanding. (b) As long as the Company shall be obligated to file periodic reports under the Exchange Act, the Company will timely file such reports in such manner as shall enable any recipient of Common Stock issued to Limited Partners hereunder in reliance upon an exemption from registration under the Securities Act to continue to be eligible to utilize Rule 144 promulgated by the SEC pursuant to the Securities Act, or any successor rule or regulation or statute thereunder, for the resale thereof. (c) During the pendency of the Rights, the Limited Partner Representatives shall receive in a timely manner all reports filed by the Company with the SEC and all other communications transmitted from time to time by the Company to its shareholders generally. (d) The Company shall not issue or sell any shares of Common Stock or other equity securities or any instrument convertible into any equity security for a consideration less than the fair value of such Common Stock or other equity security, as determined in each case by the Board of Directors of the Company, in consultation with the Company's professional advisors, and under no circumstances shall the Company declare any stock dividend, stock split, stock distribution or the like, unless fair and equitable arrangements are provided, to the extent necessary, to fully adjust, and to avoid any dilution in, the rights of Limited Partners under this Exhibit and the Agreement. (e) Notwithstanding the Company's determination as to the form in which the Exchange Consideration shall be payable, the Company shall be required to pay the Exchange Consideration by cashier's check or wire transfer of New York clearing house funds to the extent that payment by issuance of Common Stock would disqualify the Company from being characterized as a real estate investment trust under the Code. 11. Limited Partners' Covenant. Each Limited Partner covenants and agrees with the Company that all Offered Units tendered to the Company in accordance with the exercise of Rights herein provided shall be delivered to the Company free and clear of all Liens and should any Liens exist or arise with respect to such Units, the Company shall be under no obligation to acquire the same unless, in connection with such acquisition, the Company has elected to pay such portion of the Exchange Consideration in the form of cash consideration in circumstances where such consideration will be sufficient to cause such existing Lien to be discharged in full upon application of all or a part of such consideration and the Company is expressly authorized to apply such portion of the Exchange Consideration as may be necessary to satisfy any indebtedness in full and to discharge such Lien in full. Each Limited Partner further agrees that, in the event any state or local property transfer tax is payable as a result of the transfer of its Offered Units to the Company (or its designee), such Limited Partner shall assume and pay such transfer tax. 12. Registration Rights. The Limited Partners shall have the Registration Rights set forth in Schedule 3 hereof with respect to shares of Common Stock acquired hereunder. EXHIBIT D SCHEDULE 1 EXCHANGE NOTICE To: CBL & Associates Properties, Inc. Reference is made to that certain Second Amended and Restated Agreement of Limited Partnership of CBL & Associates Limited Partnership dated June __, 1998 (the "Partnership Agreement"). Capitalized terms used but not defined herein shall have the meanings set forth in the Partnership Agreement. Pursuant to Article XI and Paragraph 2 of Exhibit D of the Partnership Agreement, each of the undersigned, being a limited partner of the Partnership (an "Exercising Partner"), hereby elects to exercise its Exchange Rights as to a portion or portions of its Partnership Units all as specified opposite its signature below: Dated: ___________________ Exercising Partner Number of Offered Units Exercising Partners: _________________________ _________________________ EXHIBIT D SCHEDULE 2 ELECTION NOTICE To: All Exercising Partners Reference is made to that certain Second Amended and Restated Agreement of Limited Partnership of CBL & Associates Limited Partnership dated June __, 1998 (the "Partnership Agreement"). All capitalized terms used but not defined herein shall have the meanings set forth in the Partnership Agreement. Pursuant to Paragraph 6 of Exhibit D to the Partnership Agreement, the undersigned, being the general partner of the Partnership, hereby notifies the Exercising Partners that (a) the Exchange Consideration for the Offered Units as to which the Exchange Rights are being or are deemed to be exercised is $ , the computation of which is set forth on an attachment hereto; (b) $ of the Exchange Consideration is payable in cash and the balance thereof is payable by issuance of shares of Common Stock; and (c) the closing of the purchase and sale of the Offered Units as to which the Exchange Rights are being or are deemed to be exercised shall take place at the offices of at a.m., local time, on . Dated: _______________________ CBL & ASSOCIATES PROPERTIES, INC., a Delaware corporation By:_______________________________ Its: _________________________ EXHIBIT D SCHEDULE 3 REGISTRATION RIGHTS EXHIBIT D SCHEDULE 4 GRANDFATHERED RELATED PARTY TENANTS EX-11.1 3 EXHIBIT 11.1 LOAN AGREEMENT DATED JUNE 12, 1998 AMENDED AND RESTATED LOAN AGREEMENT THIS AMENDED AND RESTATED LOAN AGREEMENT ("Loan Agreement") amends and restates in its entirety that certain Loan Agreement dated to be effective June 12, 1998 between the parties hereto and is made to be effective as of the 30th day of June, 1998, by and between CBL & ASSOCIATES LIMITED PARTNERSHIP, a Delaware limited partnership, whose address is One Park Place, 6148 Lee Highway, Chattanooga, Tennessee 37421-2931 (the "Borrower"), and LAKESHORE/SEBRING LIMITED PARTNERSHIP, a Florida limited partnership, whose address is the same as the Borrower's described above ("Lakeshore"), and FIRST TENNESSEE BANK NATIONAL ASSOCIATION, a national banking association organized and existing under the statutes of the United States of America, with offices at 701 Market Street, Chattanooga, Tennessee 37402 (hereinafter referred to as the "Bank"). Recitals of Fact Borrower has previously requested that the Bank commit to make loans and advances to it, and to Lakeshore, for the benefit of Borrower, on a revolving credit basis in an amount not to exceed at any one time outstanding the aggregate principal sum of Eighty Million Dollars ($80,000,000.00) for the purpose of providing working capital for pre-development expenses, development costs, equity investments, repayment of existing indebtedness, certain distributions to limited partners (as allowed herein), letters of credit and construction and for general corporate purposes. The Bank has agreed to make certain portions of such loans and advances on the terms and conditions herein set forth. KeyBank National Association, formerly Society National Bank, Compass Bank and AmSouth Bank, all as participants in the Loan have also agreed to make certain portions of such loan and advances on the terms and conditions herein set forth. This Loan Agreement is currently being amended to change The Total Obligations to Capitalized Value covenant. NOW, THEREFORE, incorporating the Recitals of Fact set forth above and in consideration of the mutual agreements herein contained, the parties agree as follows: AGREEMENTS SECTION 1: DEFINITIONS AND ACCOUNTING TERMS 1.1 CERTAIN DEFINED TERMS. For the purposes of this Loan Agreement, the following terms shall have the following meanings (such meanings to be applicable equally to both the singular and plural forms of such terms) unless the context otherwise requires: "Adjusted Loan Amount" means the combined Net Operating Income from the properties described in the CBL Mortgage as of each July 1, January 1, April -1- 1 and October 1, as the case may be, based upon the then immediately preceding twelve (12) month period, divided by 1.25 with the resulting figure being further divided by the applicable mortgage constant of .1159. "Affiliate" means as to any Person, any other Person which, directly or indirectly, owns or controls, on an aggregate basis including all beneficial ownership and ownership or control as a trustee, guardian or other fiduciary, at least ten percent (10%) of the outstanding shares of Capital Stock or other ownership interest having ordinary voting power to elect a majority of the board of directors or other governing body (irrespective of whether, at the time, stock of any other class or classes of such corporation shall have contingency) of such Person or at least ten percent (10%) of the partnership or other ownership interest of such Person; or which controls, is controlled by or is under common control with such Person. For the purposes of this definition, "control" means the possession, directly or indirectly, of the power to direct or cause the direction of management and policies, whether through the ownership of voting securities, by contract or otherwise. Notwithstanding the foregoing, a pension fund, university or other endowment funds, mutual fund investment company or similar fund having a passive investment intent owning such a ten percent (10%) or greater interest in a Person shall not be deemed an Affiliate of such Person unless such pension, mutual, endowment or similar fund either (i) owns fifty percent (50%) or more of the Capital Stock or other ownership interest in such Person, or (ii) has the right or power to select one or more members of such Person's board of directors or other governing body. "Agent" means Wells Fargo Realty Advisors Funding, Incorporated, a Colorado corporation as agent pursuant to the Credit Agreement dated July 28, 1994 between Borrower and Agent. "Applicable Law" means, in respect of any Person, all provisions of statutes, rules, regulations and orders of any governmental authority applicable to such Person, and all orders and decrees of all courts and arbitrators in proceedings or actions in which the person in question is a party. "Bank's Proportionate Share" means the Bank's undivided participating interest in the Loan which shall be equal to Twenty Two Million Five Hundred Thousand and NO/100 Dollars ($22,500,000.00). "Base Rate" means the base commercial rate of interest established from time to time by Bank. The currently existing Base Rate is eight and one-half percent (8.50%) per annum. "Borrowing Base" is the limitation on the aggregate Revolving Credit Loan indebtedness which may be outstanding at any time during the term of this Agreement. The Borrowing Base will be calculated each July 1, January 1, April 1 and October 1. The Borrowing Base will be an amount not to exceed the Borrower's Adjusted Loan Amount. "Business Day" means a banking business day of the Bank. "Capital Stock" shall mean, as to any Person, any and all shares, interests, warrants, participations or other equivalents (however designated) of corporate stock of such Person. -2- "Capitalized Value" shall mean: (a) with respect to Non-Mall Projects, an amount, calculated as of any date, equal to the quotient of (i) the sum of (A) Borrower's Funds From Operations during the most recent quarter end (not including Funds from Operations from Mall Projects), plus (minus), to the extent not already included in this calculation, Net Operating Income (loss) from any Newly Acquired Property (not including Mall Projects), annualized, plus (B) the Interest Expense (not including interest expense from Mall Projects) used in calculating Borrower's Funds From Operations pursuant to clause (A) above, and (ii) nine and one half percent (9.5%). (b) with respect to Mall Projects, an amount, calculated as of any date, equal to the quotient of (i) the sum of (A) Borrower's Funds From Operations during the most recent quarter end (from Mall Projects only), plus (minus), to the extent not already included in this calculation, Net Operating Income (loss) from any Newly Acquired Property (from Mall Projects only), annualized, plus (B) the Interest Expense (from Mall Projects only) used in calculating Borrower's Funds From Operations pursuant to clause (A) above, and (ii) eight and one half percent (8.5%). "CBL Holdings I" means CBL Holdings I, Inc., a Delaware corporation and the sole general partner of Borrower. "CBL Holdings II" means CBL Holdings II, Inc., a Delaware corporation and a limited partner of Borrower. "CBL Management, Inc." means CBL & Associates Management, Inc., a Delaware corporation. "CBL Mortgage" means the mortgages and/or deeds of trust with security agreements and assignments of rents and leases and related amendments executed by Borrower, Coolsprings Crossing Limited Partnership, East Towne Crossing Limited Partnership, Valley Crossing Associates Limited Partnership, Walnut Square Associates Limited Partnership, Lakeshore/Sebring Limited Partnership [Including the Lakeshore Mortgage (New) and the Lakeshore Mortgage (Old)] and/or Vicksburg Mall Associates, Ltd. and/or any other entity related to or owned by Borrower and/or CBL & Associates Properties, Inc. and/or CBL Holdings I, Inc. in favor of Bank covering their interest in the properties described in EXHIBIT "A," attached hereto and made a part hereof, referred to in Section 4.1(e) hereof. "CBL Properties, Inc." means CBL & Associates Properties, Inc., a Delaware corporation and a qualified public REIT and formerly until March 31, 1997 the sole general partner of Borrower. "Closing Date" means the date set out in the first paragraph of this Loan Agreement. -3- "Combined" means, as to any calculation hereunder, that such calculation shall be made on a combined basis for Borrower, CBL Holdings, CBL Properties, Inc. and CBL Management, Inc., with each such calculation being made, (a) in respect of Borrower, on a consolidated basis for Borrower and its Subsidiaries, (b) in respect of CBL Holdings, on a consolidated basis for CBL Holdings and its Subsidiaries, (c) in respect of CBL Properties, Inc., on a consolidated basis for CBL Properties, Inc. and its Subsidiaries, and (d) in respect of CBL Management, Inc., on a consolidated basis for CBL Management, Inc. and its Subsidiaries. "Contingent Obligations" means, for any Person, any material commitment, undertaking, Guarantee or material obligation constituting a continuing liability under GAAP, but only to the extent the same are required to be reflected on such Persons' audited financial statements. "Credit Agreement" means the Credit Agreement dated as of July 28, 1994 and as amended by amendments dated as of May 5, 1995, July 5, 1995 and subsequent amendments between the Borrower, Wells Fargo Realty Advisors Funding, Incorporated and others. "Debt Coverage Ratio" shall mean, as of any date the same is calculated, the ratio of (a) EBITDA for the fiscal quarter ending on or most recently ended prior to such date to (b) Debt Service during such fiscal quarter, in each case calculated on a Combined basis in accordance with GAAP. "Debt Service" means, with respect to Borrower, CBL Properties, Inc., and their respective Subsidiaries for any period, the sum of (a) Interest Expense of Borrower, CBL Properties, Inc. and their respective Subsidiaries for such period, plus (b) regularly scheduled principal payments on Indebtedness of Borrower, CBL Properties, Inc. and their respective Subsidiaries during such period other than (x) in respect of any period following the Termination Date, the scheduled principal payments of the Term Out Amount made after the Termination Date, the scheduled principal payments of the Term Out Amount made after the Termination Date and (y) any regularly scheduled principal payment payable on any Indebtedness which prepays such Indebtedness in full, to the extent the amount of such final scheduled principal payment is greater than the scheduled principal payment immediately preceding such final scheduled principal payment, determined in each case on a Combined basis in accordance with GAAP. For purposes of this definition, a voluntary prepayment of Indebtedness shall not constitute a regularly scheduled principal payment even if, under the terms of the agreement governing such Indebtedness, the notice of prepayment has the effect of causing the amount of the prepayment to become due and payable on the date set for such notice of such prepayment. "EBITDA" means, for any period, the sum of (i) Net Income of Borrower, CBL Properties, Inc. and their respective Subsidiaries for such period (excluding equity in net earnings (or loss) of their Unconsolidated Affiliates), plus (ii) depreciation and amortization expense and other non- cash charges of Borrower, CBL Properties, Inc. and their respective Subsidiaries for such period, plus (iii) interest expense of Borrower, CBL Properties, Inc. and their respective Subsidiaries for such period, plus (iv) income tax expense in respect of such period, plus (v) cash dividends and distributions actually received by Borrower, CBL Properties, Inc. and their respective Subsidiaries during such period from Unconsolidated Affiliates, plus (vi) extraordinary losses (and any unusual losses arising in or outside the ordinary course of business of Borrower, CBL Properties, Inc. and their respective Subsidiaries not included in extraordinary losses determined in -4- accordance with GAAP that have been reflected in the determination of Net Income) for such period, minus (vii) extraordinary gains of Borrower, CBL Properties, Inc. and their respective Subsidiaries (and any unusual gains arising in or outside the ordinary course of business of Borrower, CBL Properties, Inc. or such respective Subsidiaries not included in extraordinary gains determined in accordance with GAAP that have been reflected in the determination of Net Income) for such period, determined in each case on a Combined basis in accordance with GAAP. "Effective Date," which definition is used and only applies within Section 7.9 hereof, means the date the Credit Agreement between the Borrower and Wells Fargo Realty Advisors Funding Incorporated became effective in accordance with Section 4.1 thereof. "Environmental Laws" means all applicable local, state or federal laws, rules or regulations pertaining to environmental regulation, contamination or cleanup, including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, the Resource Conservation and Recovery Act of 1976 or any state lien or superlien or environmental cleanup statutes. "Event of Default" has the meaning assigned to that phrase in Section 8. "Funds from Operations" means, as to any period, an amount equal to (a) income (loss) from operations of Borrower, CBL Properties, Inc. and their respective Subsidiaries for such period, plus (b) depreciation and amortization, plus (minus) (c) to the extent not included in clause (a) above, gain (loss) on the sales of outparcels made in the ordinary course of business, plus (minus) (d) to the extent not included in clause (a) above, Net Operating Income (loss) from any Newly Acquired Property acquired by Borrower, CBL Properties, Inc. and their respective Subsidiaries during such period, calculated based upon the immediately preceding twelve (12) months period for such Newly Acquired Property, evidenced by the supporting financial information to be furnished by Borrower pursuant to Section 6.5(d) hereof, and after adjustments for Unconsolidated Affiliates, determined in each case on a Combined basis in accordance with GAAP. Adjustments for Unconsolidated Affiliates will be calculated to reflect funds from operations on the same basis. "GAAP" shall mean generally accepted accounting principles applied on a basis consistent with those which are to be used in making the calculations for purposes of determining compliance with this Agreement. All calculations made for the purposes of determining compliance with this Agreement shall (except as may be otherwise expressly provided herein) be made by application of generally accepted accounting principles applied on a basis consistent with those used in preparation of the annual and quarterly financial statements of CBL Properties, Inc. furnished to the Securities and Exchange Commission. "Guarantee" by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Indebtedness or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other -5- obligation (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise), or (ii) entered into for the purpose of assuring in any other manner the obligee of such Indebtedness or other obligation of the payment thereof or to protect such obligee against losses in respect thereof (in whole or in part), provided that the term "Guarantee" shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. "Hazardous Substances" shall mean and include all hazardous and toxic substances, wastes or materials, any pollutants or contaminants (including, without limitation, asbestos and raw materials which include hazardous constituents), or any other similar substances or materials which are included under or regulated by any applicable Environmental Laws. "Indebtedness" shall mean, as applied to any Person at any time, without duplication (a) all indebtedness, obligations or other liabilities of such Person (i) for borrowed money or evidenced by debt securities, debentures, acceptances, notes or other similar instruments, and any accrued interest, fees and charges relating thereto; (ii) with respect to letters of credit issued for such Person's account; (iii) under agreements for the prospective purchase or repurchase of assets other than obligations arising under unexercised option agreements; (iv) to make future investments in any Person; (v) to pay the deferred purchase price of property or services previously purchased or rendered, except unsecured trade accounts payable and accrued expenses required to be capitalized in accordance with GAAP; (b) all indebtedness, obligations or other liabilities of such Person or others secured by a Lien on any asset of such Person, whether or not such Person is otherwise obligated on such indebtedness, obligations or liabilities are assumed by such Person, all as of such time; (c) all indebtedness, obligations or other liabilities of such Person in respect of any foreign exchange contract or any interest rate swap, cap or collar agreement or similar arrangement, net of liabilities owed to such Person by the counterparties thereon; (d) all shares of Capital Stock or equivalent ownership interest subject (upon the occurrence of any contingency or otherwise) to mandatory redemption prior to the date the Loan is scheduled to be repaid in full; (e) obligations of others to the extent Guaranteed by such Person or to the extent such Person is otherwise liable on a recourse basis; and (f) such Person's pro rata share of non-recourse Indebtedness of a partnership in which such Person is a partner (it being understood that the remaining portion of such non-recourse partnership Indebtedness shall not constitute Indebtedness of such Person). "Interest Coverage Ratio" means, as of any date the same is calculated, the ratio of (a) EBITDA for the fiscal quarter ending on or most recently ended prior to such date to (b) Interest Expense for such fiscal quarter, determined in each case on a Combined basis in accordance with GAAP. "Interest Expense" means, for any Person for any period, total interest expense on Indebtedness of such Person, whether paid or accrued, but without duplication (including the interest component of capital leases), including, without limitation, (a) all commissions, discounts and other fees and charges owed with respect to letters of credit, and (b) one hundred percent (100%) of any interest expense, whether paid or accrued, or any other Person for which such Person is wholly or partially liable (whether by Guarantee, pursuant to Applicable Law or otherwise) but excluding (i) interest on -6- Reserved Construction Loan and (ii) swap or other interest hedging breakage costs, all as determined in conformity with GAAP. "Investment" in any Person shall mean any investment, whether by means of share purchase, loan, advance, extension of credit, capital contribution or otherwise, in or to such Person, the Guarantee of any Indebtedness of such Person, or the subordination of any claim against such Person to other Indebtedness of such Person. "Lakeshore Note" means the promissory note from Lakeshore in the original principal sum of $ 34,600,000.00 payable to the order of Agent, later assigned by Agent to Shopping Center Finance Corp., and later assigned by Shopping Center Finance Corp. to the Bank, such Promissory Note being now for the principal sum of $20,400,000.00, as amended, renewed, or replaced from time to time, but it does not include the Renewal of Promissory Note dated December 6, 1994 to be effective April 1, 1994. "Lakeshore Mortgage" means the Florida Mortgage from Lakeshore/Sebring Limited Partnership in favor of Agent later assigned by Agent to Shopping Center Finance Corp. and subsequently assigned to the Bank, as amended from time to time. "LIBOR Rate" means the London Interbank Offered Rates as established from time to time and published in The Wall Street Journal, Money Rates Section which, unless otherwise specified herein or in the Note, is a one (1) month LIBOR Rate. "Lien" means any interest in Property securing an obligation owed to, or a claim by, a Person other than the owner of the Property, whether such interest is based on the common law, statute or contract, and including but not limited to the security interest or lien arising from a deed of trust, mortgage, encumbrance, pledge, conditional sale or trust receipt or a lease, consignment or bailment for security purposes, and including but not limited to reservations, exceptions, encroachments, easements, rights-of-way, covenants, conditions, restrictions, leases, and other title exceptions and encumbrances affecting Property. "Loan" means the Revolving Credit Loan from the Bank to the Borrower, including the Lakeshore Note which was purchased by the Bank. "Loan Agreement" means this Loan Agreement between the Borrower, Lakeshore and the Bank, and any modifications, amendments, or replacements thereof, in whole or in part. "Mall Projects" means the real estate and improvement owned by the Borrower and/or it Affiliates that is in the form of an enclosed regional retail shopping mallthat includes two (2) or more anchor stores. "Maximum Rate" means the maximum variable contract rate of interest which the Bank may lawfully charge under applicable statutes and laws from time to time in effect. -7- "Mortgages" or "Mortgage" means a mortgage, deed of trust, deed to secure debt or similar security instrument made or to be made by a Person owning real estate or an interest in real estate granting a Lien on such real estate or interest in real estate as security for the payment of indebtedness. "Newly Acquired Property" means Property acquired by Borrower, CBL Properties, Inc. and/or their respective Subsidiaries during any fiscal quarter for which compliance with financial covenants is being tested. "Net Income" means, with respect to Borrower, CBL Properties, Inc., and their respective Subsidiaries for any period, net earnings (or loss) after deducting therefrom all operating expenses, income taxes and reserves and net earnings (or loss) attributable to minority interests in Subsidiaries for the period in question, determined in each case on a Combined basis in accordance with GAAP. Without limiting the generality of the foregoing, earnings (or losses) from the sale of outparcels in the ordinary course of business shall be included in determining Net Income. "Net Operating Income" means, for any Property for the period in question (a) any cash rentals, expense or cost reimbursements, or other income or gain earned by Borrower with respect to such Property, less (b) all cash expenses (excluding items capitalized under GAAP) incurred by Borrower during such period in connection with the operation or leasing of such Property. "Net Worth" means, with respect to Borrower, CBL Properties, Inc. and their Subsidiaries as of any date, the sum of (a) the total shareholders' equity of CBL Properties, Inc., plus (b) the value of all minority interests in Borrower, plus (c) depreciation and amortization since December 31, 1993, minus (d) all intangible assets, determined on a Combined basis in accordance with GAAP. "Non-Mall Projects" means the real estate and improvement owned by the Borrower and/or it Affiliates that is in the form of a retail shopping center that is not a Mall Project. "Note" means the Revolving Credit Note or Notes executed by the Borrower to the Bank in the original principal sums of Ten Million Six Hundred Thousand Dollars ($10,600,000.00) (the "$10,600,000.00 Note") and Forty Nine Million Dollars ($49,000,000.00), and the Lakeshore Note, as such note or notes may be modified, renewed or extended from time to time; and any other note or notes executed at any time to evidence the indebtedness under this Loan Agreement, in whole or in part, and any renewals, modifications and extensions thereof, in whole or in part. "Participant" means KeyBank National Association, Compass Bank, AmSouth Bank, their successors and assigns, and any other participants in the Loan. "Participant's Proportionate Share (AmSouth)" means AmSouth Bank's (or any successor to such bank's interest in the Loan) undivided participating interest in the Loan which shall be equal to Twenty Two Million Five Hundred Thousand and NO/100 Dollars ($22,500,000.00). "Participant's Proportionate Share (KeyBank)" means KeyBank's (or any successor to such bank's interest in the Loan) undivided participating interest in the Loan which shall be equal to Twenty Two Million Five Hundred Thousand and NO/100 Dollars ($22,500,000.00). "Participant's Proportionate Share (Compass)" means Compass Bank's, (or any successor to such bank's interest in the Loan) undivided participating interest in the Loan which shall be equal to Twelve Million Five Hundred Thousand Dollars ($12,500,000.00). -8- "Participants' Proportionate Share" means Participant's Proportionate Share (KeyBank), Participant's Proportionate Share (Compass), and Participant's Proportionate Share (AmSouth). "Participation Agreement" means that certain Participation Agreement entered into of even date herewith among Bank, KeyBank National Association, Compass Bank, AmSouth Bank and/or any other participants in the Loan, as amended from time to time. "Permitted Encumbrances" shall mean and include: (a) liens for taxes, assessments or similar governmental charges not in default or being contested in good faith by appropriate proceedings; (b) workmen's, vendors', mechanics' and materialmen's liens and other liens imposed by law incurred in the ordinary course of business, and easements and encumbrances which are not substantial in character or amount and do not materially detract from the value or interfere with the intended use of the properties subject thereto and affected thereby; (c) liens in respect of pledges or deposits under social security laws, worker's compensation laws, unemployment insurance or similar legislation and in respect of pledges or deposits to secure bids, tenders, contracts (other than contracts for the payment of money), leases or statutory obligations; (d) any liens and security interests specifically listed and described in EXHIBIT "B" hereto attached or in any exhibit describing permitted exceptions and attached to any CBL Mortgage; (e) such other liens and encumbrances to which Bank shall consent in writing; and (f) leases, licenses, rental agreements or other agreements for use and occupancy of the subject property. "Person" means an individual, partnership, corporation, trust, unincorporated organization, association, joint venture or a government or agency or political subdivision thereof. "Project" or "Projects," which definition is used and only applies within Section 7.9 hereof, means the real estate projects owned by Borrower, a Wholly Owned Subsidiary of Borrower, a Subpartnership or, to the extent approved by the Supermajority Lenders, any other Person and "Project" shall mean any one of the Projects. The capitalized terms used in this definition shall have the same meaning as provided in the Credit Agreement. -9- "Property" means any interest in any kind of property or asset, whether real, personal or mixed, tangible or intangible. "Reserved Construction Loan" shall mean a construction loan extended to Borrower or a Subsidiary of Borrower for the construction of a project in respect of which: (a) neither any monetary or material non-monetary default nor any event of default exists; (b) interest on such loan has been budgeted to accrue at a rate of not less than the Base Rate plus two percent (2%) at the time the interest reserve account is established; (c) the amount of such budgeted interest has been (i) included in the principal amount of such loan and (ii) segregated into an interest reserve account (which shall include any arrangement whereby loan proceeds equal to such budgeted interest are reserved and only disbursed to make interest payments in respect of such loan); (d) absent an event of default or a monetary or material non-monetary default, such interest can be paid out of such interest reserve account only for the purpose of making interest payments on such loan; (e) the amount held in such interest reserve account in respect of such loan, together with the net income if any, from such project projected by the Agent in its reasonable judgment, will be sufficient, as reasonably determined by the Agent from time to time, to pay all Interest Expense on such loan until the date that the EBITDA of the project being financed by such loan is anticipated to be sufficient to pay all Interest Expense on such loan; and (f) Borrower has delivered all certificates required by Section 6 hereof. "Revolving Credit Advances" means advances of principal on the Revolving Credit Loan by the Bank under the terms of this Loan Agreement to the Borrower during the term of the Revolving Credit Loan pursuant to Section 3.1. "Revolving Credit Loan" means the aggregate of the Borrower's and Lakeshore's indebtedness to the Bank pursuant to Section 2 of this Loan Agreement. "Revolving Credit Note" means the Notes as described in Section 2.3 hereof and the Lakeshore Note. "Subsidiary" shall mean, as to any Person, any other Person, more than fifty percent (50%) of the outstanding shares of Capital Stock, partnership interest or other ownership interest, having ordinary voting power to elect a majority of the board of directors or similar governing body of such other Person (irrespective of whether or not at the time stock or other ownership interests of any other class or classes of such other Person shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned or controlled by such Person or by one or more "Subsidiaries" of such Person, and whose financial reports are prepared on a consolidated basis with such Person. "Wholly Owned Subsidiary" shall mean any such Person of which all of the shares of Capital Stock or ownership interests (other than, in the case of a corporation, directors' qualifying shares) are so owned or controlled. For purposes of this Agreement CBL Management, Inc. shall be deemed to be a Subsidiary of Borrower. -10- "Termination Date of Revolving Credit Loan" shall mean the earlier of (a) June 1, 2000, or in the event that the Bank and Borrower shall hereafter mutually agree in writing that the Revolving Credit Loan and the Bank's commitment hereunder shall be extended to another date, such other date mutually agreed upon between Bank and Borrower to which the Bank's commitment shall have been extended, or (b) the date as of which Borrower shall have terminated the Bank's commitment under the provisions of Section 2.5 hereof. "Term Out Amount" means the then outstanding principal balance of the Loan due and owing the Bank under the Note, if the Bank elects not to extend the existing Maturity Date and the Borrower elects to cap the line of credit as provided in the Note. "Total Obligations" means, as of any date, the sum (without duplication) of (a) the Indebtedness of Borrower, CBL Properties, Inc. and their respective Subsidiaries (other than Indebtedness described in clauses (a)(iii) and (a)(iv) of the definition thereof); plus (b) the aggregate amount of Contingent Obligations of Borrower, CBL Properties, Inc. and their respective Subsidiaries in respect of Indebtedness (other than Indebtedness described in clauses (a)(iii) and (a)(iv) of the definition thereof); plus (c) Borrower's, CBL Properties, Inc's or their respective Subsidiaries' proportionate share of Indebtedness (other than Indebtedness described in clauses (a)(iii) and (a)(iv) of the definition thereof) of any Unconsolidated Affiliate, whether or not Borrower, CBL Properties, Inc. or such Subsidiary is obligated on such Indebtedness; plus (d) all other amounts which would be classified as a liability on the consolidated balance sheets of Borrower or CBL Properties, Inc., determined in each case on a Combined basis in accordance with GAAP. "Unconsolidated Affiliate" shall mean, in respect of any Person, any other Person in whom such Person holds an Investment, which Investment is accounted for in the financial statements of such Person on an equity basis of accounting. 1.2 ACCOUNTING TERMS. All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles consistent with those applied in the preparation of the financial statements required to be delivered from time to time pursuant to Section 6.5 hereof. SECTION 2: COMMITMENT; FUNDING AND TERMS OF REVOLVING CREDIT LOAN 2.1 THE COMMITMENT. Subject to the terms and conditions herein set out, Bank agrees and commits to make loan advances and letter of credit advances to the Borrower from time to time, from the Closing Date until the Termination Date of Revolving Credit Loan, in an aggregate principal amount not to exceed, at any one time outstanding, the lesser of (a) Eighty Million Dollars ($80,000,000.00) minus the sum, if any, applicable under the provisions of Section 2.8 hereof; or (b) the Borrower's Borrowing Base, as defined in Section 1. -11- 2.2 FUNDING THE LOAN. Each loan advance hereunder shall be made upon the written request of the Borrower to the Bank, specifying the date and amount and intended use thereof. All advances hereunder, whether under the Note or the Lakeshore Note, shall be made by depositing the same to the checking account of Borrower at the Bank or other methods acceptable to Borrower and Bank. LAKESHORE ACKNOWLEDGES AND AGREES THAT NO ADVANCES SHALL BE MADE DIRECTLY TO LAKESHORE EXCEPT UPON THE EXPRESS WRITTEN CONSENT OF THE BORROWER RECEIVED BY THE BANK PRIOR TO THE ADVANCE BEING MADE. 2.3 THE NOTE AND INTEREST. The Revolving Credit Loan shall be evidenced by two (2) promissory notes of the Borrower and one (1) promissory note of Lakeshore, each payable to the order of the Bank in the aggregate principal amount of Eighty Million Dollars ($80,000,000.00), in form substantially the same as the copy of the Revolving Credit Note and the Lakeshore Note attached hereto as EXHIBIT "C." The entire principal amount of the Loan shall be due and payable on the Termination Date of Revolving Credit Loan. The unpaid principal balances of the Revolving Credit Loan shall bear interest from the Closing Date on disbursed and unpaid principal balances (calculated on the basis of a year of 365 or 366 days as is appropriate) at a rate per annum as specified in the Note. Said interest shall be payable monthly on the first day of each month after the Closing Date, commencing July 1, 1998 provided the Bank has in each instance mailed to the Borrower a billing notice at least ten (10) days prior thereto setting forth the payment amount next due, with the final installment of interest, together with the entire outstanding principal balance of the Revolving Credit Loan, being due and payable on the Termination Date of Revolving Credit Loan. The first selection of the one (1) month, three (3) months, six (6) months or one (1) year LIBOR Rate shall be made by the Borrower and Lakeshore (but the rate selected by Lakeshore must always be the same as the rate selected by the Borrower) on or prior to the date of the Note and each selection thereafter shall be made at least twenty-four (24) hours prior to the end of the then applicable interest rate period. Neither the Borrower nor Lakeshore may ever select a rate period which exceeds the Termination Date of the Revolving Credit Loan. 2.4 COMMITMENT FEE/SERVICING FEE. On the Closing Date, the Borrower agrees to pay to the Bank [in addition to the commitment fee it paid in: (a) March of 1994 in the amount of Seventy-Five Thousand Dollars ($75,000.00); (b) November of 1994 in the amount of Fifty Thousand Dollars ($50,000.00); (c) July of 1995 in the amount of No Dollars ($-0-); (d) March of 1996 in the amount of Eighty Five Thousand and NO/100 Dollars ($85,000.00), and (e) February of 1997 in the amount of One Hundred Ninety Thousand and no/100 Dollars ($190,000.00)], an extension/commitment fee, of One Hundred Thousand and no/100 Dollars ($100,000.00) for the extension of the maturity dates of the Loans, the previous commitment fees having been paid in consideration of the Bank's agreement to make additional funds available to Borrower under the terms and provisions hereof from the Closing Date until the initial Termination Date of Revolving Credit Loan specified in Section 1 hereof. In addition to the commitment fee, on each November 2 hereafter, the Borrower shall pay to the Bank a servicing fee in the amount of Twenty Four Thousand and NO/100 Dollars ($24,000.00) for the Bank's services in connection with administering the Loan participation with Participant. The servicing fee shall belong solely to the Bank and the Participant shall have no interest therein. Borrower agrees that the commitment fees and servicing fee are fair and reasonable considering the condition of the money market, the creditworthiness of Borrower, the interest rate to be paid, and the nature -12- of the security for the Loan. In the event that Borrower and Bank shall hereafter mutually agree to extend the term of the Bank's commitment hereunder, they may also agree at that time as to an additional commitment fee, if any, to be paid for such further commitment by the Bank, but not to exceed the maximum permitted by applicable law. 2.5 BORROWINGS UNDER, PREPAYMENTS OR TERMINATION OF THE REVOLVING CREDIT LOAN. The Borrower may, at its option, from time to time, subject to the terms and conditions hereof including Section 2.8 hereof, without penalty, borrow, repay and reborrow amounts under the Revolving Credit Note and the Lakeshore Note, first from the Ten Million Six Hundred Thousand Dollars ($10,600,000.00) Note, then from the Forty Nine Million Dollars ($49,000,000.00) Note, then from the Lakeshore Note and principal payments received shall be applied by the Bank to the Revolving Credit Note and the Lakeshore Note in such order and amounts as the Bank deems appropriate in its sole discretion. Neither the Borrower nor Lakeshore shall be permitted to borrow, repay and reborrow up to the principal amounts of the Lakeshore Note unless documentary stamps tax and intangibles tax, required by law to be paid, has been paid on the amounts readvanced and unless the Bank has a first in priority mortgage on the Florida property owned by Lakeshore securing the Lakeshore Note. By notice to the Bank in writing, Borrower shall be entitled to terminate the Bank's commitment to make further advances on the Revolving Credit Loan; and provided that the Revolving Credit Loan and all interest and all other obligations of Borrower to Bank arising hereunder shall have been paid in full, Bank shall thereupon at Borrower's request release its security interest in all of Borrower's Property securing the Revolving Credit Loan. 2.6 SUBSTITUTION OF COLLATERAL. Upon the Bank's prior written approval, the Borrower may substitute collateral originally provided for the Revolving Credit Loan for collateral of equal value but such substituted collateral must be acceptable to the Bank and the acceptance thereof is solely within the discretion of the Bank. 2.7 SECONDARY FINANCING BY CBL PROPERTIES, INC. CBL Properties, Inc. was formerly the general partner of the Borrower. It is also a real estate investment trust. In the event CBL Properties, Inc. does any secondary offering of its securities, it will apply no less than 75% net of expenses of the monies received from such offering for the benefit of the Borrower and will not use that percentage of funds so received to capitalize or otherwise fund any other new partnerships or entities. 2.8 CAP ON LOAN. Notwithstanding anything contained in this Loan Agreement to the contrary, if at any time the Bank does not have a first-in- priority lien on the Florida property (Lakeshore Mall) pursuant to the Lakeshore Mortgage up to the sum of Thirty One Million Dollars ($31,000,000.00) the Loan shall be capped at Forty Nine Million Dollars ($49,000,000.00). -13- SECTION 3: REQUIRED PAYMENTS, PLACE OF PAYMENT, ETC. 3.1 REQUIRED REPAYMENTS. In the event that the outstanding aggregate principal balance of the Revolving Credit Loan shall at any time exceed the Borrowing Base, upon discovery of the existence of such excess borrowings, the Borrower shall, within one hundred twenty (120) days from the date of such discovery, make a principal payment which will reduce the outstanding principal balance of the Revolving Credit Loan to an amount which does not exceed the Borrowing Base and/or at Borrower's option provide the Bank with additional collateral for the Revolving Credit Loan of a value and type reasonably satisfactory to the Bank which additional collateral shall be at a minimum sufficient to secure the then outstanding balance of the Loan (after credit for any principal reduction payment received from Borrower, if any), and if Borrower intends to request additional advances under the Loan, the additional collateral shall include collateral, deemed sufficient in the Bank's discretion, to secure the Eighty Million Dollars ($80,000,000.00) credit line limitation, thereafter permitting Borrower to obtain additional advances in the manner and to the extent provided under the terms of this Loan Agreement. In addition and during such one hundred twenty (120) day period or until the principal payment or satisfactory collateral is received, whichever is less, the Borrower will not make any additional requests for advances under the Revolving Credit Loan. Once calculated, the Borrowing Base shall remain effective until the next Borrowing Base calculation date as provided in Section 1 of this Agreement. 3.2 PLACE OF PAYMENTS. All payments of principal and interest on the Revolving Credit Loan and all payments of fees required hereunder shall be made to the Bank, at its address listed in Section 9.2 of this Agreement in immediately available funds. 3.3 PAYMENT ON NON-BUSINESS DAYS. Whenever any payment of principal, interest or fees to be made on the indebtednesses evidenced by the Note shall fall due on a Saturday, Sunday or public holiday under the laws of the State of Tennessee, such payment shall be made on the next succeeding business day. SECTION 4: CONDITIONS OF LENDING 4.1 CONDITIONS PRECEDENT TO CLOSING AND FUNDING INITIAL ADVANCE. The obligation of the Bank to fund the initial Revolving Credit Loan Advance hereunder is subject to the condition precedent that the Bank shall have received, on or before the Closing Date, all of the following in form and substance satisfactory to the Bank: (a) This Loan Agreement. (b) The Note, which Bank acknowledges it has previously received. (c) The Lakeshore Note, which Bank acknowledges it has previously received. (d) The CBL Mortgage, the Lakeshore Mortgage together with a title commitment from a title insurance company acceptable to the Bank, providing -14- for the issuance of a mortgagee's loan policy insuring the lien of the CBL Mortgage in form, substance and amount satisfactory to the Bank, containing no exceptions which are unacceptable to the Bank, and containing such endorsements as the Bank may require; provided, however, with respect to the Florida (Lakeshore Mall) and Mississippi (Pemberton Mall) properties being added as collateral for the Loan, the Bank, in its sole discretion may require only a title report and may not require the issuance of a mortgagee's loan policy. The Bank acknowledges it has received all of the foregoing items except the Lakeshore Mortgage amendment to include portions of the Lakeshore Mall parking lot previously omitted from the Florida Mortgage and the related title policy endorsement. (e) Current financial statements of the Borrower in form satisfactory to the Bank to be held by the Bank in strict confidence. (f) Certified copy of Borrower's limited partnership agreement and certificate of limited partnership, and all amendments thereto and a certificate of existence for the Borrower, which the Bank acknowledges it has previously received. (g) Certified corporate resolutions of Borrower's general partner, and certificate(s) of existence for Borrower's general partner from the state of its incorporation and such other states as Bank shall require, together with a copy of the charter and bylaws of the Borrower's general partner. (h) The opinion of counsel for Borrower and the Borrower's general partner, that the transactions herein contemplated have been duly authorized by all requisite corporate and partnership authority, that this Loan Agreement and the other instruments and documents herein referred to have been duly authorized, validly executed and are in full force and effect, and pertaining to such other matters as the Bank may require. (i) A certificate from an insurance company, satisfactory to Bank, setting forth the information concerning insurance which is required by Section 6.3 of this Loan Agreement; or, if the Bank shall so require, certified copies of the original insurance policies evidencing such insurance, all of which the Bank acknowledges it has previously received. (j) Environmental audits of the properties described in the CBL Mortgage, which the Bank acknowledges it has previously received. (k) Current surveys of the property subject to the CBL Mortgage, indicating the location of all building lines, easements (visible, reflected in the public records or otherwise) and any existing improvements or encroachments, which survey shall contain no set of facts objectionable to the Bank and shall be accompanied by the Bank's usual survey certificate, all of which the Bank has previously received. (l) Copies of the appraisals of the real estate described in EXHIBIT "A" attached hereto, all of which the Bank has previously received. -15- (m) The Guaranty Agreements of the Borrower guarantying the Lakeshore Note and of CBL Properties, Inc. guarantying the Loan, all of which the Bank has previously received. (n) All the items and information shown on the Checklist for Closing, a copy of which is attached hereto and marked EXHIBIT "D". 4.2 CONDITIONS PRECEDENT TO ALL REVOLVING CREDIT LOAN ADVANCES. The obligation of the Bank to make Revolving Credit Advances pursuant hereto (including the initial advance at the Closing Date) shall be subject to the following additional conditions precedent: (a) The Borrower shall have furnished to the Bank a written request stating the amount of Revolving Credit Advance requested together with the intended use of the advance. (b) The Borrower and Lakeshore shall not be in default of any of the terms and provisions hereof or of any instrument or document now or at any time hereafter evidencing or securing all or any part of the Revolving Credit Loan indebtednesses. Each of the Warranties and Representations of the Borrower and Lakeshore, as set out in Section 5 hereof shall remain true and correct in all material respects as of the date of such Loan advance. (c) Within forty-five (45) days after each July 1, January 1, April 1 and October 1, Borrower shall furnish to the Bank a Non-Default Certificate executed by a duly authorized officer of Borrower, in the form of EXHIBIT "E" attached hereto. (d) The Borrower shall have furnished to the Bank an updated and current title report with respect to the property or properties covered by any CBL Mortgage held by the Bank. If any lien shall have been placed on the property subsequent to the date of this Agreement or the applicable CBL Mortgage, other than liens in favor of the Bank, no additional advances shall be made. SECTION 5: REPRESENTATIONS AND WARRANTIES Borrower and Lakeshore represent and warrant that: 5.1 PARTNERSHIP STATUS. The Borrower is a limited partnership duly organized, validly existing and in good standing under the laws of the State of Delaware; it has the power and authority to own its properties and assets and is duly qualified to carry on its business in every jurisdiction wherein such qualification is necessary. Lakeshore is a limited partnership duly organized, validly existing and in good standing under the laws of the State of Florida; it has the authority to own its properties and assets and is duly qualified to carry on its business in every jurisdiction wherein such qualification is necessary. Lakeshore is a wholly owned subsidiary of the Borrower. 5.2 POWER AND AUTHORITY. The execution, delivery and performance of the Loan Agreement, the Note, the CBL Mortgage and the other loan and collateral documents executed pursuant thereto by the Borrower and/or Lakeshore have been duly authorized by all requisite action and, to the best of Borrower's and Lakeshore's knowledge, will not violate any provision of law, any order of any court or other agency of government, the limited -16- partnership agreement of the Borrower or Lakeshore, any provision of any indenture, agreement or other instrument to which Borrower and/or Lakeshore is a party, or by which Borrower's and/or Lakeshore's respective properties or assets are bound, or be in conflict with, result in a breach of, or constitute (with due notice or lapse of time or both) a default under any such indenture, agreement or other instrument, or result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever upon any of the properties or assets of Borrower and/or Lakeshore, except for liens and other encumbrances provided for and securing the indebtedness covered by this Loan Agreement. 5.3 FINANCIAL CONDITION. (a) (i) The audited balance sheet of Borrower and Lakeshore for the fiscal year ended as of December 31, 1997, and the related statement of income and changes in financial conditions for the year then ended, and (ii) the unaudited interim balance sheet of Borrower and Lakeshore for March 30, 1998 and the related statement of income and changes in financial conditions for the period then ended, a copy of each of which has been furnished to the Bank, together with any explanatory notes therein referred to and attached thereto, are correct and complete and fairly present the financial condition of Borrower and Lakeshore as at the date of said balance sheets and the results of its operations for said periods and as of the date of closing of this Loan Agreement and related transactions, respectively. All such financial statements have been prepared in accordance with Generally Accepted Accounting Principles applied on a consistent basis maintained through the period involved. (b) There has been no substantial adverse change in the business, properties or condition, financial or otherwise, of Borrower and/or Lakeshore since March 30, 1998. (c) (i) The audited balance sheet of CBL Properties, Inc. for the fiscal year ended as December 31, 1997, the unaudited balance sheet of CBL Properties, Inc. for the period ended March 30, 1998, and the related statement of income and changes in financial conditions for the year ended 1997 and the period ended March 30, 1998, a copy of which has been furnished to the Bank, together with any explanatory notes therein referred to and attached thereto, are correct and complete and fairly present the financial condition of CBL Properties, Inc. as at the date of said balance sheets and the results of its operations for said periods and as of the date of closing of this Loan Agreement and related transactions, respectively. All such financial statements have been prepared in accordance with Generally Accepted Accounting Principles applied on a consistent basis maintained through the period involved. (d) There has been no substantial adverse change in the business, properties or condition, financial or otherwise, of CBL Properties, Inc. since March 30, 1998. (e) The warranties and representations made in this Section 5.3 are and were made as of the date of this Loan Agreement and any violation thereof shall be determined as of that date. -17- 5.4 TITLE TO ASSETS. Borrower and Lakeshore have good and marketable title to all its properties and assets reflected on the most recent balance sheet furnished to Bank subject to the Permitted Encumbrances with respect to the properties described in the CBL Mortgages and subject to all encumbrances, whether of record or not, with respect to all other properties. 5.5 LITIGATION. There is no action, suit or proceeding at law or in equity or by or before any governmental instrumentality or other agency now pending, or, to the knowledge of the Borrower and Lakeshore threatened against or affecting Borrower and/or Lakeshore, or any properties or rights of Borrower and/or Lakeshore, which, if adversely determined, would materially adversely affect the financial or any other condition of Borrower and/or Lakeshore except as set forth in EXHIBIT "F" attached hereto. 5.6 TAXES. Borrower and Lakeshore have filed or caused to be filed all federal, state or local tax returns which are required to be filed, and has paid all taxes as shown on said returns or on any assessment received by it, to the extent that such taxes have become due, except as otherwise permitted by the provisions hereof. 5.7 CONTRACTS OR RESTRICTIONS. In Borrower's and Lakeshore's opinions, Borrower and Lakeshore are not a party to any agreement or instrument or subject to any partnership agreement restrictions adversely affecting its business, properties or assets, operations or condition (financial or otherwise) other than this agreement, other bank loan or property partnership agreements that contain certain restrictive covenants or other agreements entered into in the ordinary course of business. 5.8 NO DEFAULT. No Event of Default (as defined herein) has occurred and not been waived under any agreement or instrument to which it is a party beyond the expiration of any applicable notice and cure period, which default if not cured would materially and substantially affect the financial condition, property or operations of the Borrower and/or Lakeshore. For the purposes of this Paragraph 5.8, monetary defaults specifically excepted under the provisions of Paragraph 8.2 (which excludes non-recourse debt) below shall not be deemed material defaults. 5.9 PATENTS AND TRADEMARKS. Borrower and Lakeshore possess all necessary patents, trademarks, trade names, copyrights, and licenses necessary to the conduct of its businesses. 5.10 ERISA. To the best of Borrower's and Lakeshore's knowledge and belief, Borrower is in compliance with all applicable provisions of the Employees Retirement Income Security Act of 1974 ("ERISA") and all other laws, state or federal, applicable to any employees' retirement plan maintained or established by it. 5.11 HAZARDOUS SUBSTANCES. No Hazardous Substances are unlawfully located on or have been unlawfully stored, processed or disposed of on or unlawfully released or discharged (including ground water contamination) from any property owned by Borrower and/or Lakeshore which is encumbered by the CBL Mortgage and no above or underground storage tanks exist unlawfully on such property. No private or governmental lien or judicial or administrative notice or action related to Hazardous Substances or other environmental matters has been filed against any property which, if adversely determined, -18- would materially adversely affect the business, operations or the financial condition of Borrower and/or Lakeshore except as set forth in EXHIBIT "F" attached hereto. 5.12 OWNERSHIP OF BORROWER. As of the date hereof, CBL Holdings I owns an approximate 2.8% general partner interest in the Borrower and CBL Holdings II owns a 69% limited partner interest in the Borrower. As of the date hereof, CBL Properties, Inc. does not own a direct interest in Borrower; however, it owns 100% of the stock of CBL Holdings I and CBL Holdings II. As of the date hereof, CBL & Associates, Inc. and its affiliates, officers and key employees own an approximate 28% limited partner interest in the Borrower. As of the date hereof, CBL Management, Inc. owns no interest in the Borrower. The Borrower has no other general partners. As of the date hereof the Borrower and its Affiliates own 100% of the partnership interests in Lakeshore. 5.13 OUTSTANDING BALANCE ON LAKESHORE NOTE. As of the date hereof, the outstanding unpaid principal balance of the Lakeshore Note is $18,000,000.00 and the undisbursed amount of the Lakeshore Note is $2,400,000.00 and no defenses or offsets exist against the holder of the Lakeshore Note or otherwise. SECTION 6: AFFIRMATIVE COVENANTS OF BORROWER AND LAKESHORE Borrower and Lakeshore covenant and agree that from the date hereof and until payment in full of the principal of and interest on indebtednesses evidenced by the Note and the Lakeshore Note, unless the Bank shall otherwise consent in writing, such consent to be at the discretion of the Bank, Borrower and Lakeshore will: 6.1 BUSINESS AND EXISTENCE. Perform all things necessary to preserve and keep in full force and effect its existence, rights and franchises, comply with all laws applicable to it and continue to conduct and operate its business in a sound and prudent manner. 6.2 MAINTAIN PROPERTY. Maintain, preserve, and protect all leases, franchises, and trade names and preserve all of its properties used or useful in the conduct of its business in a sound and prudent manner, keep the same in good repair, working order and condition, ordinary wear and tear excepted, and from time to time make, or cause to be made, all needed and proper repairs, renewals, replacements, betterments and improvements thereto so that the business carried on in connection therewith may be properly conducted at all times. 6.3 INSURANCE. (a) With respect to all of the Property which serves as collateral for the Loan, at all times maintain in some company or companies (having a Best's rating of A:XI or better) approved by Bank: (i) Comprehensive public liability insurance covering claims for bodily injury, death, and property damage, with minimum limits satisfactory to the Bank, but in any event not less than those amounts customarily maintained by companies in the same or substantially similar business; -19- (ii) Business interruption insurance and/or loss of rents insurance in a minimum amount specified by Bank, with loss payable clause in favor of Bank; (iii) Hazard insurance insuring Borrower's and Lakeshore's property and assets against loss by fire (with extended coverage) and against such other hazards and perils (including but not limited to loss by windstorm, hail, explosion, riot, aircraft, smoke, vandalism, malicious mischief and vehicle damage) as Bank, in its sole discretion, shall from time to time require, all such insurance to be issued in such form, with such deductible provision, and for such amount as shall be satisfactory to Bank, with loss payable clause in favor of Bank. The Bank is hereby authorized and empowered, at its option, to adjust or compromise any loss under any such insurance policies and to collect and receive the proceeds from any such policy or policies as provided in the CBL Mortgage; and (iv) Such other insurance as the Bank may, from time to time, reasonably require by notice in writing to the Borrower and/or to Lakeshore. (b) All required insurance policies shall provide for not less than thirty (30) days' prior written notice to the Bank of any cancellation, termination, or material amendment thereto; and in all such liability insurance policies, Bank shall be named as an additional insured. Each such policy shall, in addition, provide that there shall be no recourse against the Bank for payment of premiums or other amounts with respect thereto. Hazard insurance policies shall contain the agreement of the insurer that any loss thereunder shall be payable to the Bank notwithstanding any action, inaction or breach of representation or warranty by the Borrower and/or Lakeshore. The Borrower and Lakeshore will deliver to Bank original or duplicate policies of such insurance, or satisfactory certificates of insurance, and, as often as Bank may reasonably request, a report of a reputable insurance broker with respect to such insurance. Any insurance proceeds received by Bank shall be applied upon the indebtednesses, liabilities, and obligations of the Borrower to the Bank (whether matured or unmatured) or, at Bank's option, released to the Borrower or Lakeshore, as the case might be. 6.4 OBLIGATIONS, TAXES AND LIENS. Pay all of its indebtednesses and obligations in accordance with normal terms and practices of its business and pay and discharge or cause to be paid and discharged all taxes, assessments, and governmental charges or levies imposed upon it or upon any of its income and profits, or upon any of its properties, real, personal or mixed, or upon any part thereof, before the same shall become in default, as well as all lawful claims for labor, materials, and supplies which otherwise, if unpaid, might become a lien or charge upon such properties or any part thereof; provided, however, that the Borrower shall not be required to pay and discharge or to cause to be paid and discharged any such indebtedness, obligation, tax, assessment, trade payable, charge, levy or claim so long as the validity thereof shall be contested in good faith by appropriate proceedings satisfactory to Bank, and Bank shall be furnished, if Bank shall so request, bond or other security protecting it against loss in the event that such contest should be adversely determined. In addition, Borrower and Lakeshore shall immediately pay, upon the request of the Bank, all mortgage and/or intangible taxes and/or penalties payable to government officials with respect to any CBL Mortgage and/or the Note or, if Bank has elected to pay -20- same, Borrower shall immediately reimburse Bank therefor upon the request of the Bank; provided, however Borrower shall not be required to pay or reimburse so long as Borrower is contesting the tax and/or penalties in good faith and through continuous and appropriate proceedings. 6.5 FINANCIAL REPORTS AND OTHER DATA. Furnish to the Bank as soon as available: (a) and in any event within ninety (90) days after the end of each fiscal year of Borrower and Lakeshore, respectively, an unqualified audit as of the close of such fiscal year of Borrower and Lakeshore, including a balance sheet and statement of income and surplus of Borrower and Lakeshore together with the unqualified audit report and opinion of Arthur Andersen Company, Certified Public Accountant, or other independent Certified Public Accountant which is widely recognized and of good national repute or which is otherwise acceptable to the Bank, showing the financial condition of Borrower at the close of such year and the results of operations during such year; and, (b) within forty-five (45) days after the end of each fiscal quarter, (i) financial statements similar to those described above for Borrower and for CBL Properties, Inc., not audited but certified by the Chief Financial Officer or Controller of Borrower and CBL Properties, Inc., as the case may be, such balance sheets to be as of the end of such quarter and such statements of income and surplus to be for the period from the beginning of said year to the end of such quarter, in each case subject only to audit and year-end adjustment and the preparation of required footnotes; and (ii) a Non-Default Certificate in the form prescribed on EXHIBIT "E" Attached hereto and made a part hereof; and, (c) within thirty (30) days after the end of each fiscal quarter, rent rolls and operating statements related to the properties described in the CBL Mortgage; and, (d) simultaneously with the inclusion of Net Operating Income (loss) from Newly Acquired Property in any financial calculation provided for in this Loan Agreement, a current rent roll and a current income and expense statement, similar to those described above, not audited but certified by the Chief Financial Officer or Controller of Borrower and CBL Properties, Inc., as the case may be, such rent roll and statement of income and expense to be for the twelve (12) month period used in any such calculation and/or to also be for the period from the beginning of said year to the end of such quarter, as the case may be. 6.6 ADDITIONAL INFORMATION. Furnish such other information regarding the operations, business affairs and financial condition of the Borrower and/or Lakeshore as Bank may reasonably request, including but not limited to written confirmation of requests for loan advances, true and exact copies of its books of account and tax returns, and all information furnished to the owners of its partnership interests, or any governmental authority, and permit the copying of the same and Bank agrees that all such information shall be maintained in strict confidence. Provided, however, the Borrower and Lakeshore shall not be required to divulge the terms of other financing arrangements with other lending institutions if and to the extent Borrower and/or Lakeshore is prohibited by contractual agreement with such lending institutions from disclosing such information with the exception that Borrower and Lakeshore shall promptly notify Bank in writing of all defaults, if any, which exist beyond any applicable cure periods and the nature thereof, which occur in connection with such financing arrangements and which defaults would constitute an Event of Default hereunder. Borrower and Lakeshore shall not enter into any such contractual arrangement whereby the Borrower or Lakeshore is prohibited from disclosing such financial arrangements, without providing Bank with written notice of the nature of such prohibitions. In addition, Borrower and Lakeshore shall not enter into any such arrangement while any Event of Default hereunder exists beyond any applicable cure periods. -21- 6.7 RIGHT OF INSPECTION. Permit any person designated by the Bank, at the Bank's expense, to visit and inspect any of the properties, books and financial reports of the Borrower and Lakeshore and to discuss its affairs, finances and accounts with its principal officers, at all such reasonable times and as often as a Bank may reasonably request provided that such inspection shall not unreasonably interfere with the operation and conduct of Borrower's and/or Lakeshore's properties and business affairs and provided further that such person shall disclose such information only to the Bank, the Bank's appraisers and examiners as required by banking laws, rules and regulations. 6.8 ENVIRONMENTAL LAWS. Maintain at all times all of Borrower's and Lakeshore's property described in the CBL Mortgage in compliance with all applicable Environmental Laws, and immediately notify the Bank of any notice, action, lien or other similar action alleging either the location of any Hazardous Substances or the violation of any Environmental Laws with respect to any of such properties. 6.9 NOTICE OF ADVERSE CHANGE IN ASSETS. At the time of Borrower's and/or Lakeshore's first knowledge or notice, immediately notify the Bank of any information that may adversely affect in any material manner the properties of the Borrower and/pr Lakeshore which are subject to the CBL Mortgage. 6.10 MINIMUM NET WORTH. Borrower shall not permit Net Worth at any time to be less than an amount equal to $410,000,000.00 plus ninety percent (90%) of the net proceeds or value (whether cash, property or otherwise) received by CBL Properties, Inc. or Borrower from any issuance after the effective date of this Loan Agreement of any shares of Capital Stock of CBL Properties, Inc., any operating partnership units of Borrower or any shares of Capital Stock or other equity interest in any Subsidiary of Borrower. 6.11 TOTAL OBLIGATIONS TO CAPITALIZED VALUE. Maintain at all times (except as herein permitted) beginning on the Closing Date, a ratio of Total Obligations to Capitalized Value of not more than .60 to .65; provided however, as of the end of the Borrower's second (2nd) and fourth (4th) fiscal quarters, the Bank, in its sole discretion and consistent with trends in the real estate market, may adjust the Capitalized Value cap rates of nine and one half percent (9.5%) for Non- Mall Projects and eight and one half percent (8.5%) for Mall Projects. If the cap rate is adjusted by the Bank, the Borrower shall not be deemed out of compliance with any covenants affected by the adjustment until the end of the quarter following the effective date of the adjustment. 6.12 APPRAISALS. Deliver to the Bank upon the Bank's request but, for each property, no more frequently than once per every eighteen (18) month period, reappraisals of the property or properties described in the CBL Mortgage. -22- 6.13 INTEREST COVERAGE RATIO. Borrower shall not permit, as of the last day of any fiscal quarter, the Interest Coverage Ratio to be less than 2.00 to 1.00. 6.14 DEBT COVERAGE RATIO. Borrower shall not permit, as of the last day of any fiscal quarter of Borrower, the Debt Coverage Ratio to be less than 1.75 to 1.00. 6.15 AGREEMENTS REGARDING LAKESHORE NOTE AND LAKESHORE MORTGAGE. So long as no Event of Default then exists or with notice or lapse of time would exist, upon the request of the Borrower, but in the Bank's discretion, the Bank shall sell to the Borrower and/or the Borrower's designated subsidiary, the Lakeshore Note and/or the Lakeshore Mortgage for the balance due under the Lakeshore Note (the "Lakeshore Principal Balance") plus accrued interest. SECTION 7: NEGATIVE COVENANTS OF BORROWER AND LAKESHORE Borrower and Lakeshore covenant and agree that at all times from and after the Closing Date, unless the Bank shall otherwise consent in writing, such consent to be at the discretion of the Bank, Borrower and Lakeshore will not, either directly or indirectly: 7.1 INDEBTEDNESS. Incur, create, assume or permit to exist any indebtedness or liability, secured by any of the properties described in the CBL Mortgage, (except with respect to the Borrower only) for indebtedness, which is subordinate in all respects to the indebtedness evidenced by the Note, which indebtedness does not exceed Two Hundred Fifty Thousand Dollars ($250,000.00) in the aggregate per property and is used for renovation of the property or properties described in the CBL Mortgage. 7.2 MORTGAGES, LIENS, ETC. Create, assume or suffer to exist any mortgage, pledge, lien, charge or other encumbrance of any nature whatsoever on any of the properties subject to the CBL Mortgage except: (a) Liens in favor of the Bank securing payment of the Note and/or the Lakeshore Note; (b) Existing liens securing indebtednesses permitted under Section 7.1 above; (c) Permitted Encumbrances (as defined at Section 1); and (d) Liens securing indebtedness permitted under Section 7.1 above. 7.3 SALE OF ASSETS. Sell, lease, convert, transfer or dispose (other than in the normal course of business) of all or a substantial part of its assets for less than book value or fair market consideration without the Bank's prior written consent; provided, however, while the Revolving Credit Loan is outstanding, the Borrower and Lakeshore may not sell in a single transaction or related series of transactions properties whose GAAP base value exceeds twenty percent (20%) of the GAAP book value of the Borrower's -23- assets, without the Bank's approval or review. All transfers, whether or not the Bank's approval shall be required as set forth above, shall be reported to the Bank. 7.4 CONSOLIDATION OR MERGER; ACQUISITION OF ASSETS. Enter into any transaction of merger or consolidation, acquire any other business or corporation, or acquire all or substantially all of the property or assets of any other Person unless the Borrower and/or its general partner shall be the surviving entities. 7.5 PARTNERSHIP DISTRIBUTIONS AND OTHER PAYMENTS. Except as hereinafter provided, declare or pay, or set apart any funds for the payment of, any distributions on any partnership interest in Borrower and/or Lakeshore, or apply any of its funds, properties, or assets to or set apart any funds, properties or assets for, the purchase or other retirement of or make any other distribution (whether by reduction of partnership capital or otherwise) in respect of, any partnership interest in Borrower and/or Lakeshore; or without the consent of Bank, pay any fee or other compensation of any nature to or for the benefit of CBL & Associates, Inc., CBL Holdings, and/or CBL Properties, Inc. and/or their affiliates, officers or key employees (the "Distributees"). Notwithstanding anything stated in the foregoing to the contrary, (a) Borrower may pay to such Distributees and its other partners quarterly distributions so long as such distributions do not exceed in the aggregate 95% of Funds from Operations and (b) Borrower may pay any fee or other reasonable compensation of any nature to or for the benefit of (i) CBL Management, Inc., or (ii) any other Distributee, which payment has been made in the ordinary course of business and approved by the independent directors of CBL Holdings. Borrower may make a distribution from Loan proceeds but only once during any rolling twelve (12) month period and provided Borrower is not in default hereunder and such distribution will not create a default hereunder. 7.6 LOANS TO OFFICERS AND EMPLOYEES. Permit or allow loans to officers and employees of Borrower or holders of partnership interests in Borrower to exceed $500,000.00 in any one instance or $2,000,000.00 in the aggregate, provided that nothing in the foregoing shall be deemed to limit loans made in the ordinary course of business to CBL Properties Management, Inc. 7.7 LIMITATIONS ON FLOATING RATE INDEBTEDNESS. Incur, assume or suffer to exist any outstanding indebtedness bearing interest at a variable rate that fluctuates during the scheduled life of such indebtedness (other than indebtedness under Reserved Construction Loans, as that term is defined hereinafter) in an aggregate principal amount in excess of $175,000,000.00 at any one time outstanding unless Borrower has obtained an interest rate swap, cap or collar agreement or similar arrangement with a recognized investment grade financial institution which prevents the all-in effective interest rate payable by Borrower with respect to the principal amount of such indebtedness in excess of $175,000,000.00 (including base rate, applicable margin and reserve and similar costs) from increasing above the rate set forth below with respect to such indebtedness: -24- Principal Amount in Excess of $175,000,000.00 Interest Rate Less than or equal to $50,000,000.00 8.5% Greater than $50,000,000.00 and less than or equal to $100,000,000.00 8.0% Greater than $100,000,000.00 and less than or equal to $150,000,000.00 7.5% Greater than $150,000,000.00 7.0% For purposes of this Loan Agreement, "Reserved Construction Loan" shall mean a construction loan extended to Borrower or Lakeshore or to a subsidiary of Borrower for the construction of a project in respect to which (a) neither any monetary or material non-monetary default nor any event of default exists; (b) interest on such loan has been budgeted to accrue at a rate of not less than the Base Rate plus two percent (2%) at the time the interest reserve account is established; (c) the amount of such budgeted interest has been (i) included in the principal amount of such loan and (ii) segregated into an interest reserve account (which shall include any arrangement whereby loan proceeds equal to such budgeted interest are reserved and only disbursed to make interest payments with respect to such loan); (d) absent an event of default or a monetary or material non-monetary default, such interest can be paid out of such interest reserve account only for the purpose of making interest payments on such loan; (e) the amount held in such interest reserve account with respect to such loan, together with the net income, if any, from such project projected by the Bank in its reasonable judgment, will be sufficient, as reasonably determined by the Bank from time to time, to pay all interest expense on such loan until the date that the earnings before income, taxes, depreciation and amortization of the project being financed by such loan is anticipated to be sufficient to pay all interest expense on such loan; and (f) Borrower has delivered all certificates required by this Loan Agreement. 7.8 LIMITATIONS ON ACTIONS AGAINST BANK AND PARTICIPANTS. Take any action against: (a) Bank, if any Participant fails or refuses to fund for the account of Borrower and/or Lakeshore or to Bank for the benefit of Borrower and/or -25- Lakeshore, such Participant's respective Proportionate Share and such failure or refusal has not been caused by Bank's breach of this Loan Agreement; or (b) any Participant, if Bank fails or refuses to fund for the account of Borrower and/or Lakeshore any Participant's Proportionate Share, to the extent such Participant's Proportionate Share has been received by Bank; or (c) any Participant, if Bank fails or refuses to fund for the account of Borrower and/or Lakeshore Bank's Proportionate Share and such failure has not been caused by such Participant's breach of this Loan Agreement or the Participation Agreement. Borrower's and Lakeshore's cause of action under this Loan Agreement, if any, for failure to fund being directly against the lender which fails or refuses to fund, and then only if such failure or refusal to fund would constitute a breach of this Loan Agreement. 7.9 INVESTMENT CONCENTRATION. (a) Borrower shall not make, and shall not permit any of its Subsidiaries to make, any Investment in the following items which would cause the value of such holdings of Borrower and/or to exceed the following percentages of Borrower's Net Worth: (i) raw land, such that the aggregate book value of all such raw land (other than: (A) raw land subject to a ground lease under which Borrower is the landlord and a Person not an Affiliate of Borrower is the tenant; (B) land on which the development of a Project has commenced; (C) land subject to a binding contract of sale under which Borrower one of its Subsidiaries is the seller, the buyer is not an Affiliate of Borrower and (D) out-parcels held for lease or sale) exceeds ten percent (10%) of Net Worth; (ii) developed real estate used primarily for non-retail purposes, such that the aggregate book value of such real estate (other than the real estate located at 6148 Lee Highway, Chattanooga, Tennessee) exceeds ten percent (10%) of Net Worth; (iii) Capital Stock of any Person, such that the aggregate value of such Capital Stock in Unconsolidated Affiliates other than CBL Management, Inc., calculated on the basis of the lower of cost or market, exceeds ten percent (10%) of Net Worth; (iv) Mortgages, such that the aggregate principal amount secured by Mortgages acquired by Borrower after the Effective Date exceeds ten percent (10%) of Net Worth; (v) Investments made after the date hereof in partnerships, joint ventures and other non-corporate Persons accounted for an equity basis (determined in accordance with GAAP), such that the aggregate outstanding amount of such Investments (other than Investments in partnerships in which (A) Borrower is the sole general partner and the only limited partners are either (I) the Person from whom the real estate owned by such partnership was -26- purchased, and such Person's successors and assigns or (II) a Person operating stores which anchor the development constructed or to be constructed by such partnership or (B) Borrower owns not less than ninety percent (90%) of the partnership interests and has the unilateral right to make all operational and strategic decisions) exceeds ten percent (10%) of Net Worth. (b) Neither Borrower nor any of its Subsidiaries shall acquire the business of all or substantially all of the assets or stock of any Person, or any division of any Person, whether through Investment, purchase of assets, merger or otherwise; provided that Borrower or its Subsidiaries may make such an acquisition so long as Borrower has delivered to Agent, not less than thirty (30) days prior to the date such acquisition is consummated, (i) all information related to such acquisition as is reasonably requested by the Agent and (ii) a certificate, signed by the chief financial officer of Borrower, certifying that, giving effect to such acquisition, there shall not exist any Default or Event of Default hereunder and setting forth in reasonable detail the calculations setting forth, on a pro forma basis giving effect such acquisition, Borrower's compliance with Sections 6.8, 6.11, 6.12, 6.13, 6.14, 6.15, 6.17 or 6.18 of the loan documents which exist between Borrower and Agent. SECTION 8: EVENTS OF DEFAULT An "Event of Default" shall exist if any of the following shall occur: 8.1 PAYMENT OF PRINCIPAL, INTEREST TO BANK. The Borrower and/or Lakeshore defaults in the payment as and when due of principal or interest on any Note or the Lakeshore Note or any fees due under this Loan Agreement which default shall continue for more than ten (10) days following mailing of notice from Bank to Borrower and/or Lakeshore thereof; or the Borrower and/or Lakeshore defaults in the payment when due of any other recourse indebtednesses, liabilities, or obligations to the Bank beyond the expiration of any applicable notice and cure period, whether now existing or hereafter created or arising; direct or indirect, absolute or contingent; or 8.2 PAYMENT OF OBLIGATIONS TO OTHERS. The Borrower and/or Lakeshore defaults in the payment as and when due of any other indebtedness or obligation but only if: (a) such indebtedness or obligation is with recourse to the Borrower and/or Lakeshore; and (b) the effect of such default is to accelerate the maturity of such indebtedness or obligation, or the effect of such default is to permit the holder thereof to cause such indebtedness or obligation to become due prior to its stated maturity; and (c) the default is not cured within the applicable cure period, if any, or subsequently waived by the lender to whom payment is owed. Provided, however, even if such indebtedness or obligation is with recourse to the Borrower and/or Lakeshore, the Borrower and Lakeshore will not be considered in default hereunder if the default is either: (a) a monetary default which does not exceed One Million Dollars ($1,000,000.00) and is not a failure to pay a normal monthly, quarterly or other periodic principal or interest installment due; or, (b) is being contested by the Borrower and/or Lakeshore in good faith through appropriate proceedings acceptable to Bank; or -27- 8.3 PERFORMANCE OF OBLIGATIONS TO BANK. The Borrower and/or Lakeshore defaults with respect to the performance of any non-monetary obligation incurred in connection with the Loan other than its obligations under Section 7.8 hereof and such default continues for more thirty (30) days following mailing of notice thereof from Bank to Borrower and/or Lakeshore, or, if such default is incapable of cure within such thirty (30) day period, Borrower and/or Lakeshore fails to diligently, continuously and in good faith pursue such cure to completion; or the Borrower and/or Lakeshore defaults with respect to the performance of any other non-monetary obligation incurred in connection with any recourse indebtedness for borrowed money owed to the Bank an such default continues for more thirty (30) days following mailing of notice thereof from Bank to Borrower and/or Lakeshore, as the case may be, or, if such default is incapable of cure within such thirty (30) day period, Borrower and/or Lakeshore fails to diligently, continuously and in good faith pursue such cure to completion; or 8.4 PERFORMANCE OF OBLIGATIONS TO OTHERS. An event of default occurs with respect to the performance of non-monetary obligations incurred in connection with any recourse indebtedness for borrowed money owed to a lender other than Bank, if the default even if subsequently waived by the Lender is considered a material default by the Bank and if the default is not cured within the applicable cure period provided by the lender to whom such performance is owed; provided, however, if the indebtedness is in an amount less that $1,000,000.00, or if the lender's declaration of default is being continuously and diligently contested by the Borrower and/or Lakeshore in good faith through appropriate proceedings, such default shall not constitute a default hereunder; or 8.5 REPRESENTATION OR WARRANTY. Any representation or warranty made by the Borrower and/or Lakeshore herein, or in any report, certificate, financial statement or other writing furnished in connection with or pursuant to this Loan Agreement shall prove to be false, misleading or incomplete in any substantial material respect on the date as of which made; or 8.6 BANKRUPTCY, ETC. The Borrower or Lakeshore or CBL Holdings or CBL Properties, Inc. shall make a general assignment of assets for the benefit of creditors, file a petition in bankruptcy, petition or apply to any tribunal for the appointment of a custodian, receiver or any trustee for it or a substantial part of its assets, or shall commence on its or their behalf any proceeding under any bankruptcy, reorganization, arrangement, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction, whether now or hereafter in effect; or if there shall have been filed any such petition or application, or any such proceeding shall have been commenced against Borrower or Lakeshore or CBL Holdings or CBL Properties, Inc., in which an order for relief is entered against Borrower or CBL Properties, Inc. or which remains undismissed for a period of ninety (90) days or more; or Borrower or Lakeshore or CBL Holdings or CBL Properties, Inc. by any act or omission shall indicate its consent to, approval of or acquiescence in any such petition, application or proceeding or order for relief or the appointment of a custodian, receiver or any trustee for it or any substantial part of any of its properties, or shall suffer any such custodianship, receivership or trusteeship to continue undischarged for a period of ninety (90) days or more; or Borrower or -28- Lakeshore or CBL Holdings or CBL Properties, Inc. shall generally not pay its debts as such debts become due; or 8.7 CONCEALMENT OF PROPERTY, ETC. The Borrower or Lakeshore or CBL Holdings or CBL Properties, Inc. shall have concealed, removed, or permitted to be concealed or removed, any part of its property, with intent to hinder, delay or defraud its or his creditors or any of them, or made or suffered a transfer of any of its property which shall constitute a fraudulent act under any bankruptcy, fraudulent conveyance or similar law; or shall have made any transfer of its property to or for the benefit of a creditor at a time when other creditors similarly situated have not been paid; or shall have suffered or permitted, while insolvent, any creditor to obtain a lien upon any of its property through legal proceedings or distraint which is not vacated within thirty (30) days from the date thereof; or 8.8 MANAGEMENT CHANGE. Management of the Borrower shall, for a period of one hundred eighty (180) consecutive days, cease to be in at least one of the following persons: (a) Charles B. Lebovitz, (b) John N. Foy, (c) Jay Wiston, or (d) Stephen D. Lebovitz, who shall be in an executive management position with Borrower or who shall be a senior vice president, executive vice president, senior executive vice president or president with Borrower's general partner; or 8.9 CHANGE IN OWNERSHIP. CBL & Associates, Inc., its affiliates, officers and key employees shall have, through sale or transfer, reduced their aggregate partnership interest in Borrower (which, for this purpose, shall include a proportionate share of CBL Holdings' and CBL Properties, Inc.'s partnership interest in Borrower equal to their proportionate shareholding in CBL Holdings and CBL Properties, Inc.) to less than (50%) of such partnership interests owned by them on November 7, 1993. Provided, however, if the change in ownership occurs as a result of actions taken by Borrower in compliance with Section 2.7 of this Loan Agreement, no such change of ownership shall result in an Event of Default hereunder; or 8.10 LOAN DOCUMENTS TERMINATED OR VOID. This Loan Agreement, the Note, or any instrument securing the Note shall, at any time after their respective execution and delivery and for any reason, cease to be in full force and effect or shall be declared to be null and void; or the Borrower and/or Lakeshore shall deny it has any or further liability under this Loan Agreement or the Note, respectively; or 8.11 COVENANTS. The Borrower or Lakeshore or any grantor under any CBL Mortgage defaults in the performance or observance of any covenant, agreement or undertaking on its part to be performed or observed, contained herein, in the Security Agreement, CBL Mortgage or in any other instrument or document which now or hereafter evidences or secures all or any part of the loan indebtedness which default shall continue for more than thirty (30) days following the mailing of notice from Bank to Borrower and/or Lakeshore and/or such grantor under any CBL Mortgage thereof; or -29- 8.12 BREACH OF SECTION 7.8 OF THIS LOAN AGREEMENT. The Borrower and/or Lakeshore shall fail to observe or perform its obligations to the Bank, and/or any Participant under Section 7.8 of this Loan Agreement; 8.13 PLACEMENT OF LIENS ON PROPERTY. The Borrower or any other grantor of a CBL Mortgage shall, without the prior written consent of the Bank, create, place or permit to be created or placed, or through any act or failure to act, acquiesce in the placing of, or allow to remain, any mortgage, deed of trust, pledge, lien (statutory, constitutional or contractual), or security interest, encumbrance or charge on, or conditional sale or other title retention agreement, regardless of whether same are expressly subordinate to the liens of the CBL Mortgage, with respect to the property described in the Lakeshore Mortgage or any other CBL Mortgage. 8.14 REMEDY. Upon the occurrence of any Event of Default, as specified herein, the Bank shall, at its option, be relieved of any obligation to make further Revolving Credit Advances under this Agreement; and the Bank may at its option record the Lakeshore Mortgage (New); and the Bank may, at its option, thereupon declare the entire unpaid principal balances of the Note of Borrower and the Lakeshore Note, all interest accrued and unpaid thereon and all other amounts payable under this Loan Agreement to be immediately due and payable for all purposes, and may exercise all rights and remedies available to it under the CBL Mortgage, any other instrument or document which secures the Note and/or the Lakeshore Note, or available at law or in equity. All such rights and remedies are cumulative and nonexclusive, and may be exercised by the Bank concurrently or sequentially, in such order as the Bank may choose. SECTION 9: MISCELLANEOUS 9.1 AMENDMENTS. The provisions of this Loan Agreement, the Note or the Lakeshore Note or any instrument or document executed pursuant hereto or securing the indebtednesses may be amended or modified only by an instrument in writing signed by the parties hereto. 9.2 NOTICES. All notices and other communications provided for hereunder shall be in writing and shall be mailed, certified mail, return receipt requested, or delivered, if to the Borrower and/or Lakeshore, to it at c/o CBL & Associates Properties, Inc., One Park Place, 6148 Lee Highway, Chattanooga, Tennessee 37421, Attention: President; if to the Bank, to it at 701 Market Street, Chattanooga, Tennessee 37402, Attention: Gregory L. Cullum; or as to any such person at such other address as shall be designated by such person in a written notice to the other parties hereto complying as to delivery with the terms of this Section 9.2. All such notices and other communications shall be effective (i) if mailed, when received or three business days after mailing, whichever is earlier; or (ii) if delivered, upon delivery and receipt of an executed acknowledgment of receipt by the party to whom delivery is made. -30- 9.3 NO WAIVER, CUMULATIVE REMEDIES. No failure to exercise and no delay in exercising, on the part of the Bank, any right, power or privilege hereunder, shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege. Waiver of any right, power, or privilege hereunder or under any instrument or document now or hereafter securing the indebtedness evidenced hereby or under any guaranty at any time given with respect thereto is a waiver only as to the specified item. The rights and remedies herein provided are cumulative and not exclusive of any rights or remedies provided by law. 9.4 INDEMNIFICATION. Borrower and Lakeshore agree to indemnify Bank from and against any and all claims, losses and liabilities, including, without limitation, reasonable attorneys' fees, growing out of or resulting from this Agreement (including, without limitation, enforcement of this Agreement), except claims, losses or liabilities resulting solely and directly from Bank's gross negligence or willful misconduct or from Bank's violation of applicable banking rules and regulations. The indemnification provided for in this Section shall survive the payment in full of the loan. 9.5 SURVIVAL OF AGREEMENTS. All agreements, representations and warranties made herein shall survive the delivery of the Note. This Loan Agreement shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns, except that the Borrower shall not have the right to assign its rights hereunder or any interest therein. 9.6 GOVERNING LAW. This Loan Agreement shall be governed and construed in accordance with the laws of the State of Tennessee; except (a) that the provisions hereof which relate to the payment of interest shall be governed by (i) the laws of the United States or, (ii) the laws of the State of Tennessee, whichever permits the Bank to charge the higher rate, as more particularly set out in the Note, and (b) to the extent that the Liens in favor of the Bank, the perfection thereof, and the rights and remedies of the Bank with respect thereto, shall, under mandatory provisions of law, be governed by the laws of a state other than Tennessee. 9.7 EXECUTION IN COUNTERPARTS. This Loan Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute but one and the same instrument. 9.8 TERMINOLOGY; SECTION HEADINGS. All personal pronouns used in this Loan Agreement whether used in the masculine, feminine, or neuter gender, shall include all other genders; the singular shall include the plural, and vice versa. Section headings are for convenience only and neither limit nor amplify the provisions of this Loan Agreement. -31- 9.9 ENFORCEABILITY OF AGREEMENT. Should any one or more of the provisions of this Loan Agreement be determined to be illegal or unenforceable, all other provisions, nevertheless, shall remain effective and binding on the parties hereto. 9.10 INTEREST LIMITATIONS. (a) The loan and the Note evidencing the loan, including any renewals or extensions thereof, may provide for the payment of any interest rate (i) permissible at the time the contract to make the loan is executed, (ii) permissible at the time the loan is made or any advance thereunder is made, or (iii) permissible at the time of any renewal or extension of the loan or the Note. (b) It is the intention of the Bank and the Borrower to comply strictly with applicable usury laws; and, accordingly, in no event and upon no contingency shall the Bank ever be entitled to receive, collect, or apply as interest any interest, fees, charges or other payments equivalent to interest, in excess of the maximum rate which the Bank may lawfully charge under applicable statutes and laws from time to time in effect; and in the event that the holder of the Note ever receives, collects, or applies as interest any such excess, such amount which, but for this provision, would be excessive interest, shall be applied to the reduction of the principal amount of the indebtedness thereby evidenced; and if the principal amount of the indebtedness evidenced thereby, and all lawful interest thereon, is paid in full, any remaining excess shall forthwith be paid to the Borrower, or other party lawfully entitled thereto. In determining whether or not the interest paid or payable, under any specific contingency, exceeds the highest rate which Bank may lawfully charge under applicable law from time to time in effect, the Borrower and/or Lakeshore and the Bank shall, to the maximum extent permitted under applicable law, characterize any non-principal payment as a reasonable loan charge, rather than as interest. Any provision hereof, or of any other agreement between the Bank and the Borrower and/or Lakeshore, that operates to bind, obligate, or compel the Borrower to pay interest in excess of such maximum rate shall be construed to require the payment of the maximum rate only. The provisions of this paragraph shall be given precedence over any other provision contained herein or in any other agreement between the Bank and the Borrower and/or Lakeshore that is in conflict with the provisions of this paragraph. The Note and the Lakeshore Note shall be governed and construed according to the statutes and laws of the State of Tennessee from time to time in effect, except to the extent that Section 85 of Title 12 of the United States Code (or other applicable federal statue) may permit the charging of a higher rate of interest than applicable state law, in which event such applicable federal statute, as amended and supplemented from time to time shall govern and control the maximum rate of interest permitted to be charged hereunder; it being intended that, as to the maximum rate of interest which may be charged, received, and collected hereunder, those applicable statutes and laws, whether state or federal, from time to time in effect, which permit the charging of a higher rate of interest, shall govern and control; provided, always, however, that in no event and under no circumstances shall the Borrower and/or Lakeshore be liable for the payment of interest in excess of the maximum rate permitted by such applicable law, from time to time in effect. -32- 9.11 NON-CONTROL. In no event shall the Bank's rights hereunder be deemed to indicate that the Bank is in control of the business, management or properties of the Borrower and/or Lakeshore or has power over the daily management functions and operating decisions made by the Borrower and/or Lakeshore. 9.12 LOAN REVIEW; EXTENSIONS OF TERMINATION DATE; CONTINUING SECURITY. (a) The specific Termination Date of Revolving Credit Loan mentioned in Article One may be extended for additional periods of one (1) year. On each June 1 hereafter, so long as the Loan remains unpaid, Bank shall review the performance of the Loan. If the Bank deems performance of the Loan acceptable, it will renew the Loan for one (1) year from the then existing Termination Date of Revolving Credit Loan. If Bank deems performance of the Loan not acceptable, Bank shall not be obligated to extend the Termination Date of Revolving Credit Loan; however, the Borrower shall then have the right to repay the Loan pursuant to the repayment provisions contained in the Note. Assessment of performance and the decision whether to extend the Termination Date of Revolving Credit Loan shall be solely within Bank's discretion. The Bank will not deem the performance of the Loan acceptable unless and until the Borrower provides to the Bank, among other things, updated title commitments with respect to all properties covered by any CBL Mortgage, which title commitments must be in form and substance acceptable to the Bank and must contain no exceptions unacceptable to the Bank. Bank shall notify Borrower of the results of its review of the Loan no later than eleven (11) months prior to the then effective Termination Date of the Revolving Credit Loan. If Bank elects not to renew the Loan, Bank shall not perform or cause to be performed, except at Bank's expense, any inspections, appraisals, surveys or similar items between: (a) the date notice thereof is given Borrower or the Termination Date, whichever first occurs, and (b) the date the Note is repaid as provided herein. (b) Upon the specific Termination Date of Revolving Credit Loan so fixed in Article One, or in the event of the extension of this Agreement to a subsequent Termination Date (when no effective extension is in force), the Revolving Credit Loan and all other extensions of credit (unless sooner declared to be due and payable by the Bank pursuant to the provisions hereof), and subject to Borrower's election as set forth in subparagraph (a) above, shall become due and payable for all purposes. Until all such indebtednesses, liabilities and obligations secured by the CBL Mortgage are satisfied in full, such termination shall not affect the security interest granted to Bank pursuant to the CBL Mortgage, nor the duties, covenants, and obligations of the Borrower therein and in this Agreement; and all of such duties, covenants and obligations shall remain in full force and effect until the Revolving Credit Loan and all obligations under this Loan Agreement have been fully paid and satisfied in all respects. 9.13 FEES AND EXPENSES. The Borrower agrees to pay, or reimburse the Bank for, the reasonable actual third party out-of-pocket expenses, including counsel fees and fees of any accountants, inspectors or other similar experts, as deemed necessary by the Bank, incurred by the Bank in connection with the development, preparation, execution, amendment, recording, -33- (excluding the salary and expenses of Bank's employees and Bank's normal and usual overhead expenses) or enforcement of, or the preservation of any rights under this Loan Agreement, the Notes, and any instrument or document now or hereafter securing the and Revolving Credit Loan indebtednesses. 9.14 TIME OF ESSENCE. Time is of the essence of this Loan Agreement, the Note, and the other instruments and documents executed and delivered in connection herewith. 9.15 COMPROMISES, RELEASES, ETC. Bank is hereby authorized from time to time, without notice to anyone, to make any sales, pledges, surrenders, compromises, settlements, releases, indulgences, alterations, substitutions, exchanges, changes in, modifications, or other dispositions including, without limitation, cancellations, of all or any part of the Loan indebtedness, or of any contract or instrument evidencing any thereof, or of any security or collateral therefor, and/or to take any security for or guaranties upon any of said indebtedness; and the liability of any guarantor, if any, shall not be in any manner affected, diminished, or impaired thereby, or by any lack of diligence, failure, neglect, or omission on the part of Bank to make any demand or protest, or give any notice of dishonor or default, or to realize upon or protect any of said indebtedness or any collateral or security therefor. Bank shall have the right to apply such payments and credits first to the payment of all its expenses, including costs and reasonable attorneys' fees, then to interest due under the Note and then to principal due under the Note. Bank shall be under no obligation, at any time, to first resort to, make demand on, file a claim against, or exhaust its remedies against the Borrower and/or Lakeshore, or its property or estate, or to resort to or exhaust its remedies against any collateral, security, property, liens, or other rights whatsoever. Upon the occurrence of an Event of Default, it is expressly agreed that Bank may at any time make demand for payment on, or bring suit against, the Borrower and/or Lakeshore and any guarantor, jointly or severally and may compromise with any of them for such sums or on such terms as it may see fit, and without notice or consent, the same being hereby expressly waived. 9.16 JOINDER OF CBL PROPERTIES, INC. CBL Properties, Inc. joins herein for the purpose of acknowledging and consenting to the terms and provisions of Section 2.7 hereof. 9.17 BANK'S CONSENT. Except as otherwise expressly provided herein, in any instance hereunder where Bank's approval or consent is required or the exercise of its judgment is required, the granting or denial of such approval or consent and the exercise of such judgment shall be within the sole discretion of Bank, and Bank shall not, for any reason or to any extent, be required to grant such approval or consent or exercise such judgment provided that the Bank shall proceed at all times in good faith and in a commercially reasonable manner. Bank may consult with counsel, and the written advice or opinion of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon. 9.18 VENUE OF ACTIONS. As an integral part of the consideration for the making of the loan, it is expressly understood and agreed that no suit or action shall be commenced by the Borrower, Lakeshore, CBL Holdings, CBL -34- Properties, Inc., by any guarantor, or by any successor, personal representative or assignee of any of them, with respect to the loan contemplated hereby, or with respect to this Loan Agreement or any other document or instrument which now or hereafter evidences or secures all or any part of the loan indebtedness, other than in a state court of competent jurisdiction in and for the County of the State in which the principal place of business of the Bank is situated, or in the United States District Court for the District in which the principal place of business of the Bank is situated, and not elsewhere. Nothing in this paragraph contained shall prohibit Bank from instituting suit in any court of competent jurisdiction for the enforcement of its rights hereunder or in any other document or instrument which evidences or secures the loan indebtedness. 9.19 WAIVER OF RIGHT TO TRIAL BY JURY. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (a) ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (b) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. 9.20 CONFLICT. In the event of any conflict between the provisions hereof and any other loan document during the continuance of this Agreement (including but not limited to the Construction Loan Agreement and any other documents received by the Bank via assignment in connection with the Lakeshore Mall), the provisions of this Agreement shall control. 9.21 PARTICIPATION AGREEMENT. The Borrower and Lakeshore acknowledge that the Participation Agreement exists and that the Bank is obligated, subject to the terms and conditions hereof, to fund Eighty Million Dollars ($80,000,000.00) to the Borrower but that of that amount KeyBank National Association, formerly Society National Bank and AmSouth Bank are obligated, subject to the terms and conditions of the Participation Agreement, to fund Twenty Two Million Five Hundred Thousand Dollars ($22,500,000.00) each to the Bank and Compass Bank is obligated, subject to the terms and conditions of the Participation Agreement, to fund Twelve Million Five Hundred Thousand and NO/100 Dollars ($12,500,000.00) to the Bank. -35- -36- IN WITNESS WHEREOF, the Borrower, Lakeshore, the Bank, CBL Holdings and CBL Properties, Inc. have caused this Agreement to be executed by their duly authorized officers and/or partner, all as of the day and year first above written. CBL & ASSOCIATES LIMITED PARTNERSHIP BY: CBL HOLDINGS I, INC., Its Sole General Partner By:_____John N. Foy______________________ Title:__Executive Vice President_________ BORROWER LAKESHORE/SEBRING LIMITED PARTNERSHIP BY: CBL & ASSOCIATES LIMITED PARTNERSHIP, It's sole General Partner BY: CBL HOLDINGS I, INC., Its sole General Partner By:___John N. Foy________________________ Title:___Executive Vice President________ LAKESHORE CBL & ASSOCIATES PROPERTIES, INC. By:___John N. Foy________________________ Title:___Executive Vice President________ GUARANTOR CBL HOLDINGS I, INC. By:____John N. Foy_______________________ Title:___Executive Vice President________ FIRST TENNESSEE BANK NATIONAL ASSOCIATION By:_____________________________________ Timothy L. Collins, Vice President BANK -37- EXHIBIT "A" Real property known as: Coolsprings Crossing located in Franklin, TN Valley Crossing located in Hickory, NC East Towne Crossing located in Knoxville, TN Jean Ribaut Square located in Beaufort, SC Garden City Plaza, Garden City, Kansas North Ridge Plaza, Hilton Head, South Carolina Ladies Island, Beaufort, South Carolina Sattler Square, Big Rapids, Michigan Walnut Square Mall, Dalton, Georgia Lakeshore Mall, Sebring, Florida Pemberton Mall, Vicksburg, Mississippi all as more particularly described in the individual deeds of trust and/or mortgages applicable to the above described properties. -38- EXHIBIT "B" PERMITTED ENCUMBRANCES 1. As described in the Mortgages. -39- EXHIBIT "C" REVOLVING CREDIT NOTES AND LAKESHORE NOTE -40- EXHIBIT "D" CHECKLIST FOR CLOSING -41- EXHIBIT "E" NON-DEFAULT CERTIFICATE For Fiscal Year Ended _______________, 19__. For Fiscal Quarter Ended _______________, 19__. The undersigned, a duly authorized officer of CBL & Associates Limited Partnership, a Delaware limited partnership [referred to as "Borrower" in that certain Amended and Restated Loan Agreement (the "Loan Agreement") dated as of June 30, 1998 between Borrower, Lakeshore and First Tennessee Bank National Association ("Bank")], certifies to said Bank, in accordance with the terms and provisions of said Loan Agreement, as follows: 1. All of the representations and warranties set forth in the Loan Agreement are and remain true and correct on and as of the date of this Certificate with the same effect as though such representations and warranties had been made on and as of this date except as otherwise previously disclosed to the Bank in writing. 2. As of the date hereof, neither Borrower nor Lakeshore has knowledge of any Event of Default, as specified in Section 8 of the Loan Agreement, nor any event which, upon notice, lapse of time or both, would constitute an Event of Default, has occurred or is continuing. 3. As of the date hereof, Borrower is in full compliance with all financial covenants contained in the Loan Agreement, and the following are true, accurate and complete: (a) The Net Worth (as defined in the Loan Agreement) of the Borrower is $__________________________ as of ________________, 19___. (b) The Total Obligations to Portfolio Value Ratio of the Borrower is _____ to _____ as of _____________________, 19__. (c) The Debt Coverage Ratio of the Borrower is ____ to ____ as of ______________, 19__. (d) The Interest Coverage Ratio of the Borrower is ____ to ____ as of _____________________, 1996. DATED this ______ day of ______________________, 19__. CBL & ASSOCIATES LIMITED PARTNERSHIP BY: CBL HOLDINGS I, INC., Its Sole General Partner By:________________________________ Title:_____________________________ -42- EXHIBIT "F" LITIGATION Disclosure Pursuant to Paragraph 5.5 See Exhibit "F-1" attached for description of all litigation. ENVIRONMENTAL MATTERS Disclosure pursuant to Paragraph 5.11 None. -43- JOINDER IN AMENDED AND RESTATED LOAN AGREEMENT KEYBANK NATIONAL ASSOCIATION as "Participant" under the terms of that certain Amended and Restated Loan Agreement (the "Loan Agreement") dated effective as of June 30, 1998, between and among First Tennessee Bank National Association, CBL & Associates Limited Partnership and Lakeshore/Sebring Limited Partnership, in consideration of the mutual agreements of the parties thereto and of the undersigned therein contained, hereby joins as a party to said Loan Agreement and agrees to perform all obligations to be performed on its part thereunder. IN WITNESS WHEREOF, the undersigned has caused this Joinder in Amended and Restated Loan Agreement to be executed by its duly authorized officer effective as of June 30, 1998. KEYBANK NATIONAL ASSOCIATION By:________________________________ Title:___________________________ -44- JOINDER IN AMENDED AND RESTATED LOAN AGREEMENT COMPASS BANK as "Participant" under the terms of that certain Amended and Restated Loan Agreement (the "Loan Agreement") dated effective as of June 30, 1998, between and among First Tennessee Bank National Association, CBL & Associates Limited Partnership and Lakeshore/Sebring Limited Partnership, in consideration of the mutual agreements of the parties thereto and of the undersigned therein contained, hereby joins as a party to said Loan Agreement and agrees to perform all obligations to be performed on its part thereunder. IN WITNESS WHEREOF, the undersigned has caused this Joinder in Amended and Restated Loan Agreement to be executed by its duly authorized officer effective as of June 30, 1998. COMPASS BANK By:________________________________ Douglas Vibert, Vice President -45- JOINDER IN AMENDED AND RESTATED LOAN AGREEMENT AMSOUTH BANK as "Participant" under the terms of that certain Amended and Restated Loan Agreement (the "Loan Agreement") dated effective as of June 30, 1998, between and among First Tennessee Bank National Association, CBL & Associates Limited Partnership and Lakeshore/Sebring Limited Partnership, in consideration of the mutual agreements of the parties thereto and of the undersigned therein contained, hereby joins as a party to said Loan Agreement and agrees to perform all obligations to be performed on its part thereunder. IN WITNESS WHEREOF, the undersigned has caused this Joinder in Amended and Restated Loan Agreement to be executed by its duly authorized officer effective as of June 30, 1998. AMSOUTH BANK By:________________________________ Rusty Campbell, Vice President -46- EX-11.2 4 [DESCRIPTION] EXHIBIT 11.2 LOAN AGREEMENT DATED AUGUST 4, 1998 FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT THIS FIRST AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT (this "Amendment") is made and entered into as of the _4_ day of _August , 1998, by and among CBL & ASSOCIATES LIMITED PARTNERSHIP, a Delaware limited partnership (hereinafter referred to as "Borrower"), WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association, as successor in interest to Wells Fargo Realty Advisors Funding, Incorporated, a Colorado corporation, U.S. BANK NATIONAL ASSOCIATION, a national banking association, f/k/a First Bank National Association, FLEET NATIONAL BANK, a national banking association, and WACHOVIA BANK, N.A., a national banking association (hereinafter referred to individually as a "Lender" and collectively as "Lenders") and WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association, as successor in interest to Wells Fargo Realty Advisors Funding, Incorporated, a Colorado corporation, as agent for the benefit of each of the Lenders (in such capacity, the "Agent"). W I T N E S S E T H: WHEREAS, Borrower, Wells Fargo Bank, National Association and U.S. Bank National Association (collectively, the "Original Lenders") and Agent entered into that certain Third Amended and Restated Credit Agreement dated as of June 30, 1998 (the "Credit Agreement"), pursuant to which the Original Lenders agreed to extend to Borrower a credit facility (the "Credit Facility") in the aggregate principal amount of up to Eighty-Five Million Dollars ($85,000,000.00) at any one time outstanding; and WHEREAS, Borrower, Original Lenders, Fleet National Bank ("Fleet"), Wachovia Bank, N.A. ("Wachovia") and Agent desire to modify and amend the Credit Agreement to, among other matters, add Fleet and Wachovia as "Lenders" thereunder and increase the aggregate principal amount of the Credit Facility to up to One Hundred Twenty Million Dollars ($120,000,000.00). NOW THEREFORE, for and in consideration of the premises, for Ten and No/100 Dollars ($10.00) in hand paid by the parties to each other, and for other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged by Borrower, Lenders, and Agent, Borrower, Lenders, and Agent do hereby covenant and agree as follows: 1. Definitions. Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to such terms in the Credit Agreement; and 2. Definition Changes. Section 1.1 of the Credit Agreement is hereby amended by adding the following at the end of the definition of "Adjusted Asset Value: "and, during the fifteen months after the purchase of real property by Borrower, shall exclude any EBITDA from such real property." Furthermore, Section 1.1 of the Credit Agreement is hereby amended by deleting the definition of "Commitment" in its entirety and by 1 substituting therefor a new definition of "Commitment" to read as follows: "Commitment" means, in respect of each Lender, the obligation of such Lender to make Advances to Borrower, subject to the terms and conditions hereof, up to an aggregate principal amount not to exceed at any one time outstanding the amount set forth opposite such Lender's name on the signature pages hereto or as set forth in any amendment to this Agreement, subject to adjustment, in the case of any Lender, from time to time by assignment pursuant to Section 9.6 hereof or decrease by Borrower pursuant to Section 2.1 hereof, and "Commitments" shall mean the Commitment of all the Lenders in an aggregate principal amount not to exceed at any one time outstanding One Hundred Twenty Million Dollars ($120,000,000.00). 3. Commitment. The parties agree that, as of the date hereof, giving effect to this Amendment, the Commitment of each Lender is as follows: Commitment Lender $45,000,000.00 Wells Fargo Bank, National Association $40,000,000.00 U.S. Bank National Association $17,500,000.00 Fleet National Bank $17,500,000.00 Wachovia Bank, N.A. Borrower, Agent and the Original Lenders agree that Fleet and Wachovia, to the extent of each of its $17,500,000.00 Commitment, shall have the same rights and benefits with respect to Borrower under the Credit Agreement and the Loan Documents as each would have had if it was a Lender hereunder on June 30, 1998 with respect to its Pro Rata Share. 4. Borrowing Base. Schedule 3.1 attached to the Credit Agreement is hereby amended by deleting it in its entirety and by substituting therefor the Schedule 3.1 attached to this First Amendment. 5. Release of Eligible Projects. Section 3.1(d)(vi) of the Credit Agreement is hereby amended by inserting the phrase "plus the aggregate face amount of the outstanding Letters of Credit" after the word "Loans" in the second line thereof. 6. Assignments. Section 9.6(c) of the Credit Agreement is hereby amended by deleting the clause "(not to be unreasonably withheld)" from the fourth line thereof, and inserting the clause "(not to be unreasonably withheld, and provided that Borrower's consent shall not be required if, at the time of such assignment, any monetary Default or monetary Event of Default is in existence hereunder or under the Notes or any other Loan Document)" is inserted in lien thereof. 2 7. Conditions Precedent. Subject to the other terms and conditions hereof, this Amendment shall not become effective until the Agent shall have had delivered to it each of the following instruments, documents or agreements, each in form and substance satisfactory to the Agent and the Lenders: (a) counterparts this Amendment duly executed and delivered by the Borrower, the Agent and each of the Lenders; (b) receipt by Agent of the opinions of Mary Ann Sinnott and such other counsel located in the jurisdictions where the Eligible Projects are located, addressed to Agent and each Lender and satisfactory in form and substance to Agent covering such matters relating to the transactions contemplated by this Amendment as Agent may reasonably request; (c) an amendment to each Mortgage (collectively, the "Mortgage Amendments") encumbering a Project, amending each such Mortgage to reflect this Amendment; (d) endorsements to each of the title insurance policies insuring the validity and priority of the Mortgage, as amended pursuant to Section 5(c), covered thereby as a first priority Lien upon the Eligible Project and Collateral described therein, subject to Permitted Liens, and increasing the amount of coverage of such policies by an aggregate amount of Thirty-Five Million Dollars ($35,000,000), allocated in a manner approved by Agent and the Lenders; (e) a certificate of the Secretary of CBL Holdings I, Inc. dated as of the date hereof certifying (i) that the Certificate of Incorporation and By-laws of CBL Holdings I, Inc., have not been modified since June 30, 1998; (ii) that attached thereto is a true and complete copy of Resolutions adopted by the Board of Directors of CBL Holdings I, Inc., authorizing the execution and delivery on behalf of Borrower of this Amendment and the other instruments, documents or agreements executed and delivered by Borrower in connection herewith, authorizing the execution and delivery on behalf of Borrower as general partner of each Subpartnership of the Mortgage Amendment(s) to which such Subpartnership is a party, and authorizing the execution, delivery and performance of any instruments, documents or agreements executed and delivered by CBL Holdings I, Inc. in connection with this Amendment (all such instruments, documents or agreements executed and delivered in connection herewith by or on behalf of CBL Holdings I, Inc., Borrower or any Subpartnership are hereinafter collectively referred to as the "Amendment Documents"); and (iii) as to the incumbency and genuineness of the signatures of the officers of CBL Holdings I, Inc. executing the Amendment Documents to which CBL Holdings I, Inc., Borrower or any Subpartnership is a party; (f) receipt by Agent of a certificate of Borrower approving the execution, delivery and performance of this Amendment and the other Amendment Documents to which Borrower is a party, duly adopted by Borrower in accordance with the terms of Borrower's Partnership Agreement; and (g) receipt by Agent of a certificate of each Subpartnership approving the execution, delivery and performance of the Amendment Documents to which such Subpartnership is a party, duly adopted by such Subpartnership in accordance with the terms of such Subpartnership's partnership agreement. 3 Upon fulfillment of the foregoing conditions precedent, this Amendment shall become effective as of the date hereof. 8. Borrowing. Upon the fulfillment of the conditions precedent set forth in Section 7 above and the effectiveness of this Amendment, the Borrower shall, on such date, borrow Advances from Fleet and Wachovia, such that, after giving effect thereto, the Loan (including, without limitation, the principal amounts of the Advances, the types and (if applicable) Interest Periods thereof) shall be held by the Lenders ratably in accordance with their Commitments by reference to the principal amounts of the Loan. 9. Notes. For purposes of Note, the addresses of Fleet National Bank and Wachovia Bank, N.A. shall be as follows: Fleet National Bank Mail Stop MA BO F11C 75 State Street Boston, MA 02109 Attention: Aron Levine Wachovia Bank, N.A. 191 Peachtree Street, N.E. 30th Floor Atlanta, GA 30303 Attention: Toni Nunn provided, however, that Fleet National Bank and Wachovia Bank, N.A. shall have the right to change its address for notice hereunder to any other location within the continental United States by the giving of thirty (30) days' notice to the other parties in the manner set forth in Paragraph 9.1 of the Credit Agreement. 10. Representations and Warranties; No Default. Borrower hereby represents and warrants to the Agent and the Lenders that (a) all of Borrower's representations and warranties contained in the Credit Agreement and the other Loan Documents are true and correct on and as of the date of Borrower's execution of this Amendment; (b) no Default or Event of Default has occurred and is continuing as of such date under any Loan Document; (c) Borrower has the power and authority to enter into this Amendment and to perform all of its obligations hereunder; (d) the execution, delivery and performance of this Amendment by Borrower have been duly authorized by all necessary corporate, partnership or other action; and (e) the execution and delivery of this Amendment and performance thereof by or on behalf Borrower does not and will not violate the Partnership Agreement of Borrower or the Certificate of Incorporation, By-laws or other organizational documents of CBL Holdings I, Inc. and does not and will not violate or conflict with any law, order, writ, injunction, or decree of any court, administrative agency or other governmental authority applicable to Borrower, CBL Holdings I, Inc., or their respective properties. 4 11. Expenses. Borrower agrees to pay, immediately upon demand by the Agent, all reasonable costs, expenses, fees and other charges and expenses actually incurred by the Agent in connection with the negotiation, preparation, execution and delivery of this Amendment and the Amendment Documents. 12. Defaults Hereunder. The breach of any representation, warranty or covenant contained herein or in any document executed in connection herewith, or the failure to observe or comply with any term or agreement contained herein shall constitute a Default or Event of Default under the Credit Agreement (subject to any applicable cure period set forth in the Credit Agreement) and the Agent and the Lenders shall be entitled to exercise all rights and remedies they may have under the Credit Agreement, any other documents executed in connection therewith and applicable law. 13. Interest Expense. The definition of "Interest Expense" which appears on Page 9 of the Credit Agreement is hereby amended by deleting the phrase "and (iii) all Interest to a Project" from the eighth and ninth lines thereof, and inserting in lieu thereof the following: "and (iii) all Interest specifically attributable as an expense to a Project." 14. References. All references in the Credit Agreement and the Loan Documents to the Credit Agreement shall hereafter be deemed to be references to the Credit Agreement as amended hereby and as the same may hereafter be amended from time to time. 15. Limitation of Agreement. Except as especially set forth herein, this Amendment shall not be deemed to waive, amend or modify any term or condition of the Credit Agreement, each of which is hereby ratified and reaffirmed and which shall remain in full force and effect, nor to serve as a consent to any matter prohibited by the terms and conditions thereof. 16. Counterparts. This Amendment may be executed in any number of counterparts, and any party hereto may execute any counterpart, each of which, when executed and delivered, will be deemed to be an original and all of which, taken together will be deemed to be but one and the same agreement. 17. Further Assurances. Borrower agrees to take such further action as the Agent or the Lenders shall reasonably request in connection herewith to evidence the amendments herein contained to the Credit Agreement. 18. Successors and Assigns. This Amendment shall be binding upon and inure to the benefit of the successors and permitted assigns of the parties hereto. 19. Governing Law. This Amendment shall be governed by, and construed in accordance with, the laws of the State of Georgia, without regard to principles of conflicts of law. IN WITNESS WHEREOF, the parties hereto have executed this Amendment under seal as of the date first above written. 5 "BORROWER" CBL & ASSOCIATES LIMITED PARTNERSHIP By: CBL Holdings I, Inc. as General Partner By:__John N. Foy______________ Name: John N. Foy Title: Executive Vice President Attest:__Joan C. Perry________ Name: Joan C. Perry Title: Assistant Secretary (CORPORATE SEAL) (Signatures continued on next page) 7 Signatures continued from previous page) "LENDERS" Commitment: $45,000,000.00 WELLS FARGO BANK, NATIONAL ASSOCIATION, as successor in interest to Wells Fargo Realty Advisors Funding, Incorporated By: ___Robert W. Belson_______ Name:__Robert W. Belson_______ Title:_Senior Vice President__ (Signatures continued on next page) 7 (Signatures continued from previous page) Commitment: $40,000,000.00 U.S. BANK NATIONAL ASSOCIATION, f/k/a First Bank National Association By: ____Stephen P. Bailey_____ Name:___Stephen P. Bailey_____ Title:__Vice President________ (Signatures continued on next page) 8 (Signatures continued from previous page) Commitment: $17,500,000.00 FLEET NATIONAL BANK By: ___Aron D. Levine_________ Name:__Aron D. Levine_________ Title:_Vice President_________ (Signatures continued on next page) 9 (Signatures continued from previous page) Commitment: $17,500,000.00 WACHOVIA BANK, N.A. By: ___Judith A. Nunn_________ Name:__Judith A. Nunn_________ Title:_Vice President_________ (Signatures continued on next page) 10 (Signatures continued from previous page) "AGENT" WELLS FARGO BANK, NATIONAL ASSOCIATION, as successor in interest to Wells Fargo Realty Advisors Funding, Incorporated, as Agent By: __/s/__Robert W. Belson_____ Name:_____Robert W. Belson_____ Title:____Senior Vice President SCHEDULE 3.1 Eligible Projects Attributable Project: Borrowing Base: 1. Post Oak Mall $47,925,000 Brazos County, Texas 2. Georgia Square Mall $39,600,000 Clark County, Georgia 3. Twin Peaks Mall $33,075,000 Boulder County, Colorado _________________________________________________________ $85,000,000.00 THIRD AMENDED AND RESTATED CREDIT AGREEMENT Effective as of June 30, 1998 By and Among CBL & ASSOCIATES LIMITED PARTNERSHIP, a Delaware limited Partnership, as Borrower, and WELLS FARGO BANK, NATIONAL ASSOCIATION as successor in interest to Wells Fargo Realty Advisors Funding, Incorporated, U.S. BANK NATIONAL ASSOCIATION, f/k/a First Bank National Association, TOGETHER WITH THOSE ASSIGNEES BECOMING PARTIES HERETO PURSUANT TO SECTION 9.6 as Lenders, and WELLS FARGO BANK, NATIONAL ASSOCIATION, as successor in interest to Wells Fargo Realty Advisors Funding, Incorporated, as Agent 1 TABLE OF CONTENTS ARTICLE 1 2 DEFINITIONS 2 1.1 Definitions 2 1.2 Use of Defined Terms 17 1.3 Accounting Terms, Calculation 17 1.4 Terminology 18 ARTICLE 2. THE LOAN 19 2.1 Commitment to Lend 19 2.2 Letters of Credit 19 2.3 Method of Borrowing 21 2.4 Notes 23 2.5 Interest Rate 24 2.6 Special Provisions for LIBOR Advances 25 2.7 Payments 27 2.8 Fees 30 2.9 Computation of Interest and Fees 31 2.10 Option to Replace Lenders 31 2.11 Extension of Termination Date 32 2.12 Term Loan Conversion 32 ARTICLE 3. 33 BORROWING BASE; ELIGIBLE PROJECTS 33 3.1 Borrowing Base 33 3.2 Leases and Major Agreements 37 3.3 Appraisals 38 3.4 Major Construction 38 ARTICLE 4. 39 CONDITIONS 39 4.1 Effectiveness 39 4.2 Advances 41 4.3 Conditions Precedent to a Project Becoming An Eligible Project 42 4.4 Conditions to Conversion to Term Loan 44 ARTICLE 5 44 REPRESENTATIONS AND WARRANTIES 44 5.1 Organization and Power 44 5.2 Validity of Loan Instruments 44 5.3 Binding Effect 45 5.4 Financial Information 45 5.5 Litigation 46 5.6 ERISA 46 5.7 Hazardous Substances 46 5.8 Taxes and Other Payments 48 5.9 Not an Investment Company 48 5.10 Information 48 5.11 Insurance 49 i 5.12 Liens 49 5.13 Title to the Projects 49 5.14 Governmental Requirements 49 5.15 ERISA; Plan Assets 49 ARTICLE 6 50 COVENANTS 50 6.1 Reporting Requirements 50 6.2 Payment and Performance. 52 6.3 Maintenance of Property; Insurance 52 6.4 Business; Existence 53 6.5 Payment of Impositions 53 6.6 Compliance with Legal Requirements 54 6.7 Inspection of Property, Books and Records 54 6.8 Indebtedness 54 6.9 Consolidations, Mergers and Sales of Assets 54 6.10 Use of Proceeds 54 6.11 Investment Concentration 55 6.12 Total Obligations to Gross Asset Value 56 6.13 Minimum Net Worth 56 6.14 Interest Coverage Ratio 56 6.15 Debt Coverage Ratio 56 6.16 ERISA 56 6.17 Liens 56 6.18 Restricted Payments 57 6.19 Year 2000 Compliance 57 ARTICLE 7 57 DEFAULTS 57 7.1 Events of Default 57 7.2 Remedies 61 7.3 Actions in Respect of the Letters of Credit Upon Default 61 7.4 Curing Defaults Under Collateral Documents 62 7.5 Permitted Deficiency 62 ARTICLE 8 63 THE AGENT 63 8.1 Appointment and Authorization 63 8.2 Agent and Affiliates 64 8.3 Action by Agent 64 8.4 Consultation with Experts 64 8.5 Reliance by Agent 64 8.6 Defaults 65 8.7 Indemnification 65 8.8 Credit Decision 65 8.9 Failure to Act 66 8.10 Resignation or Removal of Agent; Co-Agent 66 8.11 Consent and Approvals 67 8.12 Agency Provisions Relating to Collateral 69 ii 8.13 Defaulting Lenders 71 8.14 Borrower Not a Beneficiary 74 ARTICLE 9 74 MISCELLANEOUS 74 9.1 Notices 74 9.2 No Waiver 74 9.3 Expenses; Documentary Taxes; Indemnification 75 9.4 Waiver of Set-Offs; Sharing of Set-Offs 76 9.5 Amendments and Waivers 76 9.6 Successors and Assigns 78 9.7 Capital Adequacy 79 9.8 Counterparts 80 9.9 Notice of Final Agreement 80 9.10 Invalid Provisions 80 9.11 Maximum Rate 80 9.12 Limitation Upon Liability 81 9.13 Course of Dealing 82 9.14 Treatment of Certain Information; Confidentiality 82 9.15 Conflict of Terms 82 9.16 Governing Law; Submission to Jurisdiction 82 9.17 Waiver of Right to Trial by Jury 83 9.18 Amendment and Restatement 83 Schedule 3.1 List of Projects Schedule 5.5 Litigation Schedule 5.6 ERISA Plans Schedule 5.11 Insurance Exhibit A Notes Exhibit B Notice of Borrowing Exhibit C Rate Selection Notice Exhibit D Form of Mortgage Exhibit E Form of Environmental Indemnity Agreement Exhibit F Form of Closing Certificate Exhibit G Form of Guaranty Exhibit H Form of Assignment Exhibit I Form of Extension Request iii THIRD AMENDED AND RESTATED CREDIT AGREEMENT THIS THIRD AMENDED AND RESTATED CREDIT AGREEMENT (the "Agreement") is made and entered into as of this 30th day of June, 1998, by and between CBL & ASSOCIATES LIMITED PARTNERSHIP, a Delaware limited partnership (hereinafter referred to as the "Borrower"), WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association, as successor in interest to Wells Fargo Realty Advisors Funding, Incorporated, a Colorado corporation, and U.S. BANK NATIONAL ASSOCIATION, f/k/a FIRST BANK NATIONAL ASSOCIATION, a national banking association, (hereinafter referred to individually as a "Lender" and collectively as the "Lenders") and WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association, as successor in interest to Wells Fargo Realty Advisors Funding, Incorporated, a Colorado corporation, as agent for the benefit of each of the Lenders (in such capacity, the "Agent"). W I T N E S S E T H: WHEREAS, Borrower, Wells Fargo Realty Advisors Funding, Incorporated, NationsBank of Georgia, N.A., and First Bank National Association (collectively, the "Original Lenders") and Agent entered into that certain Credit Agreement dated as of July 28, 1994 (the "Credit Agreement"), pursuant to which the Original Lenders agreed to extend to Borrower a credit facility (the "Credit Facility") in the aggregate principal amount of up to Seventy- Five Million Dollars ($75,000,000.00) at any one time outstanding; and WHEREAS, Borrower, Original Lenders, Union Bank of Switzerland (New York Branch) ("UBS") and Agent entered into that certain First Amendment to Credit Agreement dated as of May 5, 1995 (the "First Amendment") to, among other matters, add UBS as a "Lender" and increase the aggregate principal amount of the Credit Facility to up to Eighty-Five Million Dollars ($85,000,000.00) at any one time outstanding; and WHEREAS, Borrower, Original Lenders, UBS, and Agent entered into that certain Second Amendment to Credit Agreement dated as of July 5, 1995 (the "Second Amendment"); and WHEREAS, Borrower, Original Lenders, UBS, and Agent entered into that certain Third Amendment to Credit Agreement dated as of May 23, 1996 (the "Third Amendment"); and WHEREAS, Borrower, Original Lenders, UBS, and Agent entered into that certain Fourth Amendment to Credit Agreement dated as of July 26, 1996 (the "Fourth Amendment") (the Credit Agreement, the First Amendment, the Second Amendment, the Third Amendment and the Fourth Amendment being collectively referred to herein as the "Original Credit Agreement"); and 1 WHEREAS, Borrower, Original Lenders, UBS, and Agent entered into that certain Amended and Restated Credit Agreement dated as of September 26, 1996 (the "Restated Credit Agreement"); and WHEREAS, Borrower, Original Lenders, UBS, and Agent entered into that certain First Amendment to Amended and Restated Credit Agreement dated as of March 14, 1997 (the "First Amendment to Restated Credit Agreement"); and WHEREAS, Borrower, Original Lenders, UBS, and Agent entered into that certain Second Amended and Restated Credit Agreement dated as of June 5, 1997 to be effective as of April 1, 1997 (the "Second Restated Credit Agreement"); and WHEREAS, Borrower, Original Lenders, UBS, and Agent entered into that certain First Amendment to Second Amended and Restated Credit Agreement dated as of November 15, 1997 (the "First Amendment to Second Restated Credit Agreement")(the Second Restated Credit Agreement and the First Amendment to Second Restated Credit Agreement being collectively referred to herein as the "Second Amended and Restated Credit Agreement"); and WHEREAS, Borrower, Lenders and Agent desire to modify, amend and restate the Second Amended and Restated Credit Agreement in the manner and for the purposes set forth herein. NOW, THEREFORE, in consideration of the premises and the mutual obligations and covenants hereinafter contained, the parties hereto hereby agree as follows: ARTICLE 1 DEFINITIONS SECTION 1.1 Definitions. When used herein, the following terms shall have the following meanings: "Adjusted Asset Value" means, as of a given date, (a) EBITDA for Borrower's fiscal quarter most recently ended multiplied by (b) 4 and divided by (c) the Capitalization Rate. For purposes of determining Adjusted Asset Value, EBITDA shall be adjusted by the Agent in its reasonable discretion to take into account acquisitions and dispositions of property by Borrower and shall exclude any EBITDA from property not owned by Borrower for the entire fiscal quarter most recently ended or upon which construction was in progress at the end of the fiscal quarter most recently ended. "Advance" shall have the meaning given such term in Section 2.1 hereof. An Advance may be either a LIBOR Advance or a Base Rate Advance. "Affiliate" shall mean, as to any Person, any other Person which, directly or indirectly, owns or controls, on an aggregate basis, including all beneficial ownership and ownership or control as a trustee, guardian or other fiduciary, at least ten percent (10%) of the outstanding shares of 2 Capital Stock or other ownership interest having ordinary voting power to elect a majority of the board of directors or other governing body (irrespective of whether, at the time, stock of any other class or classes of such corporation shall have contingency) of such Person or at least ten percent (10%) of the partnership or other ownership interest of such Person; or which controls, is controlled by or is under common control with such Person. For the purposes of this definition, "control" means the possession, directly or indirectly, of the power to direct or cause the direction of management and policies, whether through the ownership of voting securities, by contract or otherwise. Notwithstanding the foregoing, a pension fund, university or other endowment funds, mutual fund investment company or similar fund having a passive investment intent owning such a ten percent (10%) or greater interest in a Person shall not be deemed an Affiliate of such Person unless such pension, mutual, endowment or similar fund either (i) owns fifty percent (50%) or more of the Capital Stock or other ownership interest in such Person, or (ii) has the right or power to select one or more members of such Person's board of directors or other governing body. "Applicable Law" means, in respect of any Person, all provisions of statutes, rules, regulations and orders of any Governmental Authority applicable to such Person, and all orders and decrees of all courts and arbitrators in proceedings or actions in which the Person in question is a party. "Appraisal" means, in respect of any Project or proposed Project, a M.A.I. appraisal commissioned by and addressed to Agent (acceptable to Agent, in Agent's reasonable judgment, as to form, substance and appraisal date), prepared by a professional appraiser acceptable to Agent, in Agent's reasonable judgment, having at least the minimum qualifications required under applicable regulations governing Agent, including FIRREA, and determining the "as is" market value of such Project or proposed Project as between a willing buyer and a willing seller. "Appraised Value" means, as to any Project or proposed Project, the "as is" market value of such Project as reflected in the then most recent Appraisal of such Project as the same may have been adjusted by Agent based upon its internal review of such Appraisal which is based on criteria and factors then generally used and considered by Agent in determining the value of similar projects, which review shall be conducted prior to acceptance of such Appraisal by Agent and in any event within thirty (30) days after receipt by Agent of such Appraisal. In the event that an Appraisal of a Project is performed after the occurrence of either (a) a casualty affecting such Project or (b) a condemnation of a portion of such Project which results in a loss of less than 10% of the acreage of the Project and of no portion of the principal structures, but prior to complete restoration of the same, the Appraised Value shall, to the extent permitted by applicable regulations, be made on an "as-restored" basis. "Approved Percentage" means with respect to the Appraised Value of any Project, a percentage not to exceed seventy five percent (75%), as determined by Agent and disclosed to Borrower prior to admission of such Project into the Borrowing Base. With respect to the Appraised Value of the Property listed in Schedule 3.1 attached hereto, the Approved Percentage is seventy five percent (75%). 3 "Base Rate" shall mean an interest rate per annum, fluctuating daily, equal to the higher of (a) the rate announced by Agent from time to time at its principal office in San Francisco, California as its prime rate in effect on such day, or (b) the Federal Funds Rate in effect on such day plus 0.5%. The Base Rate is not necessarily intended to be the lowest rate of interest charged by Agent or any Lender in connection with extensions of credit. Each change in Base Rate shall result in a corresponding change in the interest rate hereunder with respect to a Base Rate Advance and such change shall be effective on the effective date of such change in the Base Rate. "Base Rate Advance" means any Advance hereunder with respect to which the interest rate is calculated by reference to the Base Rate. "Borrowing Base" has the meaning set forth in Section 3.1(b) hereof. "Business Day" means any day on which all major departments of Agent are open for business at its downtown headquarters in San Francisco, California. "Capital Stock" shall mean, as to any Person, any and all shares, interests, warrants, participations or other equivalents (however designated) of corporate stock of such Person. "Capitalization Rate" means (a) eight and one-half percent (8.50%), as to EBITDA from regional malls and power centers or (b) nine and one-quarter percent (9.25%), as to all other EBITDA. "CBL Management, Inc." means CBL & Associates Management, Inc., a Delaware corporation. "CBL Properties, Inc." means CBL & Associates Properties, Inc., a Delaware corporation, a qualified public REIT and sole shareholder of Holdings I and Holdings II. "Collateral" means the real and personal property comprising each Eligible Project securing payment of the Loan pursuant to the Collateral Documents. "Collateral Documents" means the Mortgages, assignments, security agreements, financing statements, subordination, attornment and non- disturbance agreements, tenant estoppel letters, title insurance policies and other loan and collateral documents creating, evidencing, perfecting insuring or relating to the Liens and security interests in the Collateral. "Combined" means, as to any calculation hereunder, that such calculation shall be made on a combined basis for Borrower, Holdings I, Holdings II, CBL Properties, Inc. and CBL Management, Inc., with each such calculation being made, (a) in respect of Borrower, on a consolidated basis for Borrower and its Subsidiaries, (b) in respect of Holdings I, on a consolidated basis for Holdings I and its Subsidiaries, (c) in respect of Holdings II, on a consolidated basis for Holdings II and its Subsidiaries, (d) in respect of CBL Properties, Inc., on a consolidated basis for CBL Properties, Inc. and its Subsidiaries, and (e) in respect of CBL Management, Inc., on a consolidated basis for CBL Management, Inc. and its Subsidiaries. 4 "Commitment" means, in respect of each Lender, the obligation of such Lender to make Advances to Borrower, subject to the terms and conditions hereof, up to an aggregate principal amount not to exceed at any one time outstanding the amount set forth opposite such Lender's name on the signature pages hereto or as set forth in any amendment to this Agreement, subject to adjustment, in the case of any Lender, from time to time by assignment pursuant to Section 9.6 hereof or decrease by Borrower pursuant to Section 2.1 hereof, and "Commitments" shall mean the Commitment of all the Lenders in an aggregate principal amount not to exceed at any one time outstanding Eighty-Five Million Dollars ($85,000,000.00). "Consequential Loss" means, for any Lender with respect to (a) Borrower's payment of all or any portion of the then-outstanding principal amount of a LIBOR Advance on a day other than the last day of the Interest Period applicable thereto or (b) any of the circumstances specified in Section 2.3(c) upon which a Consequential Loss may be incurred, any loss, cost or expense incurred by such Lender as a result of the timing of such payment or Advance or in the redepositing, redeploying or reinvesting the principal amount so paid or affected by the timing of such Advance or the circumstances described in Section 2.3(c) including the sum of (i) the interest which, but for the payment or timing of the Advance, such Lender would have earned in respect of such principal amount, reduced, if such Lender is able to redeposit, redeploy, or reinvest such principal amount by the interest earned by such Lender as a result of so redepositing, redeploying or reinvesting such principal amount, plus (ii) any expense or penalty incurred by such Lender on redepositing, redeploying or reinvesting such principal amount. "Contingent Obligations" means, for any Person, any material commitment, undertaking, Guarantee or other material obligation constituting a contingent liability under GAAP, but only to the extent the same are required to be reflected on such Person's audited financial statements. "Conversion Date" has the meaning set forth in Section 2.3(c) hereof. "Debt Coverage Ratio" shall mean, as of any date the same is calculated, the ratio of (a) EBITDA for the fiscal quarter ending on or most recently ended prior to such date to (b) Debt Service during such fiscal quarter, in each case calculated on a Combined basis in accordance with GAAP. "Debt Service" means, with respect to Borrower, Holdings I, Holdings II, CBL Properties, Inc., and their respective Subsidiaries for any period, the sum of (a) Interest Expense of Borrower, Holdings I, Holdings II, CBL Properties, Inc. and their respective Subsidiaries for such period, plus (b) regularly scheduled principal payments on Indebtedness of Borrower, Holdings I, Holdings II, CBL Properties, Inc. and their respective Subsidiaries during such period other than (x) in respect of any period following the Term Loan Conversion Date, the scheduled principal payments on the Term Loan and (y) any regularly scheduled principal payment payable on any Indebtedness which repays such Indebtedness in full, to the extent the amount of such final scheduled principal payment is greater than the scheduled principal payment immediately preceding such final scheduled principal payment, determined in each case on a Combined basis in accordance with GAAP. For purposes of this definition, a voluntary prepayment of Indebtedness shall not constitute a 5 regularly scheduled principal payment even if, under the terms of the agreement governing such Indebtedness, the notice of prepayment has the effect of causing the amount of the prepayment to become due and payable on the date set for such notice for such prepayment. "Default" means any condition or event which, with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default. "Defaulting Lender" means any Lender which fails or refuses to perform its obligations under this Agreement within the time period specified for performance of such obligation or, if no time frame is specified, if such failure or refusal continues for a period of five (5) days after notice from Agent. "EBITDA" means, for any period, the sum of (i) Net Income of Borrower, Holdings I, Holdings II, CBL Properties, Inc. and their respective Subsidiaries for such period (excluding equity in net earnings (or loss) of their Unconsolidated Affiliates), plus (ii) depreciation and amortization expense and other non-cash charges of Borrower, Holdings I, Holdings II, CBL Properties, Inc. and their respective Subsidiaries for such period, plus (iii) interest expense of Borrower, Holdings I, Holdings II, CBL Properties, Inc. and their respective Subsidiaries for such period, plus (iv) income tax expense (federal and state) in respect of such period, plus (v) cash dividends and distributions actually received by Borrower, Holdings I, Holdings II, CBL Properties, Inc. and their respective Subsidiaries during such period from Unconsolidated Affiliates, plus (vi) extraordinary losses (and any unusual losses arising in or outside the ordinary course of business of Borrower, Holdings I, Holdings II, CBL Properties, Inc. and their respective Subsidiaries not included in extraordinary losses determined in accordance with GAAP that have been reflected in the determination of Net Income) for such period, minus (vii) extraordinary gains of Borrower, Holdings I, Holdings II, CBL Properties, Inc. and their respective Subsidiaries (and any unusual gains arising in or outside the ordinary course of business of Borrower, Holdings I, Holdings II, CBL Properties, Inc. or such respective Subsidiaries not included in extraordinary gains determined in accordance with GAAP that have been reflected in the determination of Net Income) for such period, determined in each case on a Combined basis in accordance with GAAP. "Effective Date" means the date this Agreement becomes effective in accordance with Section 4.1 hereof. "Eligible Project" means a Project which the Agent and the Lenders have agreed, in their reasonable discretion, to include in the Borrowing Base. "Environmental Laws" means any and all federal, state, local and foreign statutes, laws, judicial decisions, regulations, ordinances, rules, judgments, orders, decrees, plans, injunctions, permits, concession, grants, franchises, licenses, agreements and other governmental restrictions relating to the environment, the effect of the environment on human health or to emissions, discharges or releases of pollutants, contaminants, Hazardous Substances or wastes into the environment including, without limitation, ambient air, surface water, ground water, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, 6 transport or handling of pollutants, contaminants, Hazardous Substances or wastes or the clean-up or other remediation thereof. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and all rules and regulations from time to time promulgated thereunder. "ERISA Affiliate" means each trade or business (whether or not incorporated) which, together with Borrower, is treated as a single employer under Sections 414(b), (c), (m) or (o) of the Internal Revenue Code. "ERISA Plan" means any employee benefit plan subject to Title I of ERISA. "Event of Default" has the meaning set forth in Section 7.1 hereof. "Federal Funds Rate" means, on any day, the rate per annum (rounded upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day, provided that (i) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (ii) if no such rate is published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate quoted to Agent on such day of such transactions as determined by Agent. "FIRREA" means the Financial Institution Recovery, Reform and Enforcement Act of 1989, as amended from time to time. "Funds from Operations" means, as to any period, an amount equal to (a) income (loss) from operations of Borrower, Holdings I, Holdings II, CBL Properties, Inc. and their respective Subsidiaries for such period, excluding gain (loss) from debt restructuring and sale of properties, plus (b) depreciation and amortization of real estate assets, plus (minus) (c) to the extent not included in clause (a) above, gain (loss) on the sales of outparcels made in the ordinary course of business, and after adjustments for Unconsolidated Affiliates, determined in each case on a Combined basis in accordance with GAAP. Adjustments for Unconsolidated Affiliates will be calculated to reflect funds from operations on the same basis. "GAAP" shall mean generally accepted accounting principles applied on a basis consistent with those which, in accordance with the last sentence of Section 1.3(a) hereof, are to be used in making the calculations for purposes of determining compliance with this Agreement. "Governmental Authority" means, in respect any Person, any government (or any political subdivision or jurisdiction thereof) , court, bureau, agency or other governmental authority having jurisdiction over such Person or any Affiliate of such Person or any of its or their business, operations or properties. 7 "Gross Asset Value" means, at a given time, the sum of (a) Adjusted Asset Value at such time, plus (b) all of Borrower's cash and cash equivalents at the end of the fiscal quarter most recently ended, plus (c) the current book value of all real property of Borrower upon which construction was in progress at the end of the fiscal quarter most recently ended, plus (d) the purchase price paid by Borrower for any real property purchased by Borrower during the fifteen (15) months after the acquisition of such real property. "Guarantee" by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Indebtedness or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise), or (ii) entered into for the purpose of assuring in any other manner the obligee of such Indebtedness or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part), provided that the term "Guarantee" shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. "Hazardous Substances" shall mean any pollutant, contaminant, hazardous, toxic or dangerous waste, substance or material, or any other substance or material regulated or controlled pursuant to any Environmental Law, including, without limiting the generality of the foregoing, asbestos, PCBs, petroleum products (including crude oil, natural gas, natural gas liquids, liquefied natural gas or synthetic gas) or any other substance defined as a "hazardous substance," "extremely hazardous waste," "restricted hazardous waste," "hazardous material," "hazardous chemical," "hazardous waste," "regulated substance," "toxic chemical," "toxic substance" or other similar term in any Environmental Law. "Holdings I" means CBL Holdings I, Inc., a Delaware corporation, and a Wholly Owned Subsidiary of CBL Properties, Inc. and the sole general partner of Borrower. "Holdings II" means CBL Holdings II, Inc., a Delaware corporation, and a Wholly Owned Subsidiary of CBL Properties, Inc. and a limited partner of Borrower. "Impositions" shall mean (i) all real estate and personal property taxes, charges, assessments, excises and levies and any interest, costs or penalties with respect thereto, general and special, ordinary and extraordinary, foreseen and unforeseen, of any kind and nature whatsoever, which at any time prior to or after the execution hereof may be assessed, levied or imposed upon the Collateral or the ownership, use, occupancy or enjoyment thereof, or any portion thereof, or the sidewalks, streets or alleyways adjacent thereto; (ii) any charges, fees, license payments or other sums payable for any easement, license or agreement maintained for the benefit of the Collateral; and (iii) water, gas, sewer, electricity, telephone and other utility charges and fees that are or may become a Lien against the Collateral. 8 "Indebtedness" shall mean, as applied to any Person at any time, without duplication (a) all indebtedness, obligations or other liabilities of such Person (i) for borrowed money or evidenced by debt securities, debentures, acceptances, notes or other similar instruments, and any accrued interest, fees and charges relating thereto; (ii) with respect to letters of credit issued for such Person's account; (iii) under agreements for the prospective purchase or repurchase assets other than obligations arising under unexercised option agreements; (iv) to make future Investments in any Person; (v) to pay the deferred purchase price of property or services previously purchased or rendered, except unsecured trade accounts payable and accrued expenses arising in the ordinary course of business; or (vi) as a lessee arising under a lease that is required to be capitalized in accordance with GAAP; (b) all indebtedness, obligations or other liabilities of such Person or others secured by a Lien on any asset of such Person, whether or not such Person is otherwise obligated on such indebtedness, obligations or liabilities are assumed by such Person, all as of such time; (c) all indebtedness, obligations or other liabilities of such Person in respect of any foreign exchange contract or any interest rate swap, cap or collar agreement or similar arrangement, net of liabilities owed to such Person by the counterparties thereon; (d) all shares of Capital Stock or equivalent ownership interest subject (upon the occurrence of any contingency or otherwise) to mandatory redemption prior to the date the Loan is scheduled to be repaid in full; (e) obligations of others to the extent Guaranteed by such Person or to the extent such Person is otherwise liable on a recourse basis; and (f) such Person's pro rata share of non-recourse Indebtedness of a partnership in which such Person is a partner (it being understood that the remaining portion of such non-recourse partnership Indebtedness shall not constitute Indebtedness of such Person). "Indemnitee" has the meaning set forth in Section 9.3(c) hereof. "Interest Coverage Ratio" means, as of any date the same is calculated, the ratio of (a) EBITDA for the fiscal quarter ending on or most recently ended prior to such date to (b) Interest Expense for such fiscal quarter, determined in each case on a Combined basis in accordance with GAAP. "Interest Expense" means, for any Person for any period, total interest expense on Indebtedness of such Person, whether paid or accrued, but without duplication (including the interest component of capital leases), including, without limitation, (a) all commissions, discounts and other fees and charges owed with respect to letters of credit, and (b) one hundred percent (100%) of any interest expense, whether paid or accrued, of any other Person for which such Person is wholly or partially liable (whether by Guarantee, pursuant to Applicable Law or otherwise) but excluding (i) interest on Reserved Construction Loan and (ii) swap or other interest hedging breakage costs, all as determined in conformity with GAAP and (iii) all Interest to a Project. "Interest Period" means, with respect to a LIBOR Advance, a period commencing: (a) on the borrowing date of such LIBOR Advance made pursuant to Section 2.3(a) of this Agreement; or 9 (b) on the Conversion Date pertaining to such LIBOR Advance, if such LIBOR Advance is made pursuant to a conversion as described in Section 2.3(c) hereof; or (c) on the last day of the preceding Interest Period in the case of a rollover to a successive Interest Period; and ending 1, 2, 3, 6 or 12 months thereafter, as Borrower shall elect in accordance with Section 2.3(c) of this Agreement; provided, that: (i) any Interest Period that would otherwise end on a day which is not a LIBOR Business Day shall be extended to the next succeeding LIBOR Business Day, unless such LIBOR Business Day falls in another calendar month in which case such Interest Period shall end on the next preceding LIBOR Business Day; (ii) any Interest Period that begins on the last LIBOR Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month or at the end of such Interest Period) shall, subject to Clause (i) above, end on the last LIBOR Business Day of a calendar month; (iii) if the Interest Period for any LIBOR Advance would otherwise end after the final maturity date of the Loan, then such Interest Period shall end on the final maturity date of the Loan; and (iv) if Borrower elects an Interest Period of 12 months with respect to any LIBOR Advance, and any Lender determines that either deposits in United States Dollars (in the applicable amounts) are not being offered to it in the interbank eurodollar market for such Interest Period or that quotes of the LIBOR Rate are not available for such Interest Period, then Agent shall give notice thereof to Borrower, and Borrower shall be deemed to have elected an Interest Period of 6 months. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended, or any successor statute. "Investment" in any Person shall mean any investment, whether by means of share purchase, loan, advance, extension of credit, capital contribution or otherwise, in or to such Person, the Guarantee of any Indebtedness of such Person, or the subordination of any claim against such Person to other Indebtedness of such Person. "Issuing Bank" means Agent or an affiliate of Agent, as the issuer of Letters of Credit hereunder. "Lease" means any lease, sublease, license, concession or other agreement (written or verbal, now or hereafter in effect) to which Borrower, any Wholly Owned Subsidiary of Borrower or any Subpartnership is a party and which grant a possessory interest in and to, or the right to use, all or any part of an Eligible Project, save and except any lease or sublease pursuant 10 to which Borrower, any Wholly Owned Subsidiary of Borrower or any Subpartnership is granted a possessory interest in the land underlying such Eligible Project. "Legal Requirements" shall mean (i) any and all present and future judicial decisions, statutes, rulings, rules, regulations, permits, certificates or ordinances of any Governmental Authority in any way applicable to Borrower, any Wholly Owned Subsidiary of Borrower or any Subpartnership owning an Eligible Project, or the Collateral, including, without limiting the generality of the foregoing, the ownership, use, occupancy, possession, operation, maintenance, alteration, repair or reconstruction thereof; (ii) any and all covenants, conditions and restrictions contained in any deed or other form of conveyance or in any other instrument of any nature that relate in any way or are applicable to the Collateral or the ownership, use or occupancy thereof; (iii) Borrower's and each such Wholly Owned Subsidiary's and Subpartnership's presently or subsequently effective Articles of Partnership, Limited Partnership, Joint Venture, Trust or other form of business association agreement; (iv) any Major Agreements and Major Leases; and (v) any lease or other contract pursuant to which Borrower is granted a possessory interest in any land. "Lending Office" means Agent's office located 420 Montgomery Street, 6th Floor, San Francisco, California 94163, or such other office as Agent may hereafter designate as its Lending Office by notice to Borrower and Lenders. "Letter of Credit Obligations" means, collectively, (a) all reimbursement and other obligations of Borrower in respect of Letters of Credit, (b) all amounts paid by Agent to the Issuing Bank in respect of Letters of Credit and (c) all amount paid by the Lenders to the Agent and/or the Issuing Bank in respect of Letters of Credit. "Letters of Credit" means the letters of credit made in connection with the Loan issued by the Issuing Bank for the account of Borrower in an aggregate face amount not to exceed $10,000,000.00 outstanding at any one time, as they may be drawn on, advanced, replaced, or modified from time to time. "LIBOR Advance" means any Advance hereunder with respect to which the interest rate is calculated by reference to the LIBOR Rate for a particular Interest Period. "LIBOR Business Day" means a Business Day on which dealings in United States Dollars are carried out in the London interbank market. "LIBOR Rate" means, with respect to any Interest Period, the rate per annum which is equal to the quotient of the average rate per annum (determined solely by the Agent and rounded upwards, if necessary, to the next higher 1/16 of 1%) at which deposits in United States Dollars are offered to Wells Fargo Bank by brokers in the London interbank market as of 11:00 a.m. (London time) two (2) LIBOR Business Days prior to the first day of such Interest Period, in an amount equal to LIBOR Advance so requested and for a period equal to such Interest Period. Each determination of the LIBOR Rate by Agent shall, in absence of manifest error, be conclusive and binding. 11 "LIBOR Reserve Requirement" means the daily average during the Interest Period of the maximum aggregate reserve requirement (including all basic, supplemental, marginal and other reserves and taking into account any transitional adjustments or other schedule changes in reserve requirements during the Interest Period) which is imposed under Regulation D against "Eurocurrency liabilities" as defined in Regulation D. Each determination by Agent of the LIBOR Reserve Requirement shall, in the absence of manifest error, be conclusive and binding. "Lien" means any deed to secure debt, mortgage, deed of trust or similar security instruments (including any Mortgage), pledge, hypothecation, assignment, deposit arrangement, lien, charge, claim, security interest, easement or encumbrance, or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement perfecting a security interest under the Uniform Commercial Code or comparable law of any jurisdiction). "Loan" means the aggregate principal amount of outstanding Advances made by Lenders pursuant to Article 2 hereof. From and after the Term Loan Conversion Date, the term "Loan" shall mean and refer to the Term Loan. "Loan Documents" means this Agreement, the Notes and the Collateral Documents. "Major Agreements" means, at any time, (a) each operating, cross- easement, restrictions or similar agreement encumbering or affecting an Eligible Project and any adjoining property material to the use and operation of such Project; (b) each management agreement with respect to an Eligible Project; and (c) any other agreement, such as engineers' contracts, utility contracts, maintenance agreements and service contracts, which in any way relates to the use, occupancy, operation, maintenance, enjoyment or ownership of an Eligible Project, the breach or loss of which would have a material adverse effect on such Project. "Major Lease", with respect to any Eligible Project, shall mean any lease of 50,000 or more leasable square feet, in the case of any Project which is a regional mall or 20,000 or more leasable square feet, in the case of any Project which is a strip center, or (ii) collectively, the leases of space in the Projects by one or more tenants which are affiliates or operate under separate leases of space within the Projects if the aggregate leasable square footage leased by such affiliates is 50,000 or more leasable square feet, in the case of any Project which is a regional mall or 20,000 or more leasable square feet, in the case of any Project which is a strip center. "Majority Lenders" shall mean, at any time, Lenders holding at least sixty-six and two-thirds percent (66 2/3%) of the aggregate principal amount of the Commitment or, if the Commitment has been terminated, Lenders holding at least sixty-six and two-thirds percent (66 2/3%) of the aggregate outstanding principal amount of the Loan; provided however, in determining such percentage at any given time, all then existing Defaulting Lenders will be disregarded and excluded and the Pro Rata Shares of Lenders shall be redetermined, for voting purposes only, to exclude the Pro Rata Shares of such Defaulting Lenders. 12 "Maximum Rate" means the highest nonusurious rate of interest (if any) permitted from day to day by applicable law. "Mortgage" shall mean a mortgage, deed of trust, deed to secure debt or similar security instrument made or to be made by a Person owning real estate or an interest in real estate granting a Lien on such real estate or interest in real estate as security for the payment of Indebtedness. "Net Income" means, with respect to Borrower, Holdings I, Holdings II, CBL Properties, Inc., and their respective Subsidiaries for any period, net earnings (or loss) after deducting therefrom all operating expenses, income taxes and reserves and net earnings (or loss) attributable to minority interests in Subsidiaries for the period in question, determined in each case on a Combined basis in accordance with GAAP. Without limiting the generality of the foregoing, earnings (or losses) from the sale of outparcels in the ordinary course of business shall be included in determining Net Income. "Net Operating Income" means, for any Project for the period in question, but without duplication (a) any cash rentals, proceeds, expense reimbursements or income earned by such Project (but excluding security or other deposits, late fees, early lease termination or other penalties, and other charges deemed by Agent to be of a non-recurring nature and excluding rent dedicated to the repayment of Indebtedness secured by a Lien permitted by Section 6.17(b) hereof) during such period; less (b) all cash costs and expenses that Borrower incurred during such period, as a result of, or in connection with, the development, operation, or leasing of such Project (but excluding principal and interest payments during such period); plus (less) (c) gains (losses) from the sale of outparcels made in the ordinary course of business; less (d) to the extent exceeding the amounts for the applicable costs and expenses incurred by Borrower pursuant (b) above, appropriate accruals for items such as taxes, insurance, or other expenses reasonably determined by Agent, in each case determined in accordance with GAAP. "Net Worth" means, with respect to Borrower, Holdings I, Holdings II, CBL Properties, Inc. and their Subsidiaries as of any date, the sum of (a) the total shareholders' equity of CBL Properties, Inc., plus (b) the value of all minority interests in Borrower, plus (c) cumulative depreciation and amortization after June 30, 1996, minus (d) all intangible assets, determined on a Combined basis in accordance with GAAP. "Non-ERISA Plan" means any Plan subject to Section 4975 of the Internal Revenue Code. "Non Pro Rata Advance" means an Advance with respect to which less than all Lenders have funded their respective Pro Rata Shares of such Advance and the failure of the non-funding Lender or Lenders to fund its or their respective Pro Rata Shares of such Advance constitutes a breach of this Agreement. For purposes of this definition, the Pro Rate Shares of the Lenders will be calculated without regard to the proviso contained in the definition of "Pro Rata Share." 13 "Notes" means the amended and restated promissory notes executed by Borrower, substantially in the form of Exhibit A hereto, payable to each of the Lenders in an amount equal to such Lender's Commitment, as the same may be amended, supplemented, modified, or restated from time to time, evidencing the obligation of Borrower to repay the Loan, and all renewals, modifications and extensions thereof, and "Note" means any one of the Notes. "Notice of Borrowing" means a notice substantially in the form of Exhibit B attached hereto. "Obligations" means the Loan, the Letter of Credit Obligations and any and all other Indebtedness, liabilities and obligations of Borrower to the Lenders, or any of them, or to any Indemnitee, of every kind and nature (including, without limitation, interest charges, expenses, attorneys' fees and other sums chargeable to Borrower by Lenders and future advances made to or for the benefit of Borrower), arising under this Agreement or under any of the other Loan Documents, whether direct or indirect, absolute or contingent, primary or secondary, due or to become due, now existing or hereafter acquired. "Permanent Loan Estimate" means, as of any date and with respect to any Project included in the Borrowing Base, an amount equal to the quotient of (a) an amount equal to the aggregate Net Operating Income of such Project for the immediately preceding twelve (12) month period divided by (b) the product of (i) 1.25 and (ii) the percent of a principal amount of a loan required to be paid each year in order to repay the principal amount of such loan in full based on a twenty-five (25) year amortization, and to pay the amount of interest due at each installment, utilizing a rate of interest equal to 1.5% in excess of the average of the rates published during the four fiscal quarters ending on or most recently prior to such date in the United States Federal Reserve Statistical Release (H.15) for 10-year Treasury Constant Maturities, in equal monthly installments of principal and interest. "Permitted Liens" means (i) pledges or deposits made to secure payment of worker's compensation (or to participate in any fund in connection with worker's compensation insurance), unemployment insurance, pensions or social security programs, (ii) encumbrances consisting of zoning restrictions, easements, or other restrictions on the use of real property, provided that such items do not materially impair the use of such property for the purposes intended and none of which is violated in any material respect by existing or proposed structures or land use, (iii) the following to the extent no Lien has been filed in any applicable jurisdiction or agreed to: (A) Liens for taxes not yet due and payable; and (B) Liens imposed by mandatory provisions of law such as for materialmen's, mechanic's, warehousemen's and other like Liens arising in the ordinary course of business, securing payment of Indebtedness whose payment is not yet due, (iv) Liens for taxes, assessments and governmental charges or assessments that are being contested in good faith by appropriate proceedings diligently conducted, and for which reserves or other adequate security acceptable to Agent have been provided, (v) to the extent expressly approved in writing by Agent, Liens on Projects where Borrower and Agent are insured against such Liens by title insurance acceptable to the Lenders, (vi) Liens securing assessments or charges payable to a property owner association or similar entity, which assessments are not yet due and payable, or (vii) other Liens expressly permitted by the terms of the Mortgages granted by Borrower or its Affiliates in favor of the Agent. 14 "Person" means an individual, a corporation, a partnership, a limited liability company, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. "Plan" means at any time an employee pension benefit plan which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Internal Revenue Code. "Projects" means the real estate projects owned by Borrower, a Wholly Owned Subsidiary of Borrower, a Subpartnership or, to the extent approved by the Supermajority Lenders, any other Person and "Project" shall mean any one of the Projects. "Pro Rata Share" means, with respect to any Lender, the percentage obtained by dividing (a) such Lender's Commitment by (b) the aggregate Commitments of all Lenders, or, if the Commitments shall have been terminated, the percentage obtained by dividing (x) the aggregate unpaid principal amount of such Lender's Note or Notes by (y) the aggregate unpaid principal amount of all Lenders' Notes; provided however, in determining such percentage at any given time, all then existing Defaulting Lenders will be disregarded and excluded and the Pro Rata Shares of Lenders shall be redetermined to exclude the Pro Rata Shares of such Defaulting Lenders. "Protective Advance" means all sums expended as determined by Agent to be necessary to: (a) protect the priority, validity and enforceability of the Liens on, and security interests in, any Collateral and the instruments evidencing or securing the Obligations, or (b) (i) prevent the value of any Collateral from being materially diminished (assuming the lack of such a payment within the necessary time frame could potentially cause such Collateral to lose value), or (ii) protect any of the Collateral from being materially damaged, impaired, mismanaged or taken, including, without limitation, any amounts expended in accordance with Section 9.3 or post- foreclosure ownership, maintenance, operation or marketing of any Eligible Project. "Rate Selection Notice" has the meaning set forth in Section 2.3(c) hereof. Each Rate Selection Notice shall be substantially in the form of Exhibit C attached hereto. "Regulation D" shall mean Regulation D of the Board of Governors of the Federal Reserve System from time to time in effect and shall include any successor or other regulation relating to reserve requirements applicable to member banks of the Federal Reserve System. "REIT" means a real estate investment trust qualified under the Internal Revenue Code. "Reserved Construction Loan" shall mean a construction loan extended to Borrower or a Subsidiary of Borrower for the construction of a Project in respect of which: (a) neither any monetary or material non-monetary default nor any event of default exists; (b) interest on such loan has been budgeted to accrue at a rate of not less than the Base Rate plus two percent (2%) at the time the interest reserve account is established; (c) the amount of such budgeted interest has been (i) included in the principal amount of such loan and (ii) segregated into an interest reserve account (which shall include any 15 arrangement whereby loan proceeds equal to such budgeted interest are reserved and only disbursed to make interest payments in respect of such loan); (d) absent an event of default or a monetary or material non-monetary default, such interest can be paid out of such interest reserve account only for the purpose of making interest payments on such loan; (e) the amount held in such interest reserve account in respect of such loan, together with the net income if any, from such Project projected by the Agent in its reasonable judgment, will be sufficient, as reasonably determined by the Agent from time to time, to pay all Interest Expense on such loan until the date that the EBITDA of the Project being financed by such loan is anticipated to be sufficient to pay all Interest Expense on such loan; and (f) Borrower has delivered all certificates required by Section 6.1(f) hereof. "Senior Officer" shall mean, with respect to Borrower, Holdings I or CBL Properties, Inc., the President, any Senior Executive Vice President, Executive Vice President or Senior Vice President of both CBL Properties, Inc. and Holdings I. "Significant Subsidiary" shall mean any Subsidiary which either (a) owns any of the Collateral or (b) has assets having an aggregate book value in excess of $500,000. "Subpartnership" means any partnership in which Borrower is the sole general partner or managing general partner, and in which CBL Properties, Inc. is the sole limited partner or sole other general partner. For purposes of clarity, each Subpartnership is a Subsidiary of Borrower. "Subsidiary" shall mean, as to any Person, any other Person, more than fifty percent (50%) of the outstanding shares of Capital Stock, partnership interest or other ownership interest, having ordinary voting power to elect a majority of the board of directors or similar governing body of such other Person (irrespective of whether or not at the time stock or other ownership interests of any other class or classes of such other Person shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned or controlled by such Person or by one or more "Subsidiaries" of such Person, and whose financial reports are prepared on a consolidated basis with such Person. "Wholly Owned Subsidiary" shall mean any such Person of which all of the shares of Capital Stock or ownership interests (other than, in the case of a corporation, directors' qualifying shares) are so owned or controlled. For purposes of this Agreement CBL Management, Inc. shall be deemed to be a Subsidiary of Borrower and Holdings I and Holdings II shall be deemed to be Wholly Owned Subsidiaries of CBL Properties, Inc. "Supermajority Lenders" shall mean, at any time, Lenders holding at least eighty-five percent (85%) of the aggregate principal amount of the Commitment or, if the Commitment has been terminated, Lenders holding at least eighty-five percent (85%) of the aggregate outstanding principal amount of the Loan; provided however, in determining such percentage at any given time, all then existing Defaulting Lenders will be disregarded and excluded and the Pro Rata Shares of Lenders shall be redetermined, for voting purposes only, to exclude the Pro Rata Shares of such Defaulting Lenders. "Term Loan" has the meaning set forth in Section 2.12 hereof. 16 "Term Loan Conversion Date" has the meaning set forth in Section 2.12 hereof. "Term Loan Termination Date" means the date which is three (3) years after the Term Loan Conversion Date. "Termination Date" means the earlier to occur of (a) September 26, 1999, or such later date to which the Termination Date may be extended by the written agreement of the Borrower, the Agent and all the Lenders pursuant to Section 2.11 hereof, (b) the date Lenders' Commitment to fund Advances are terminated pursuant to Section 7.2 hereof or (c) the date that Lender's Commitments are reduced to zero by Borrower pursuant to Section 2.1 hereof. "Total Obligations" means, as of any date, the sum (without duplication) of (a) the Indebtedness of Borrower, Holdings I, Holdings II, CBL Properties, Inc. and their respective Subsidiaries (other than Indebtedness described in clauses (a)(iii) and (a)(iv) of the definition thereof); plus (b) the aggregate amount of Contingent Obligations of Borrower, Holdings I, Holdings II, CBL Properties, Inc. and their respective Subsidiaries in respect of Indebtedness (other than Indebtedness described in clauses (a)(iii) and (a)(iv) of the definition thereof); plus (c) Borrower's, Holdings I's, Holdings II's, CBL Properties, Inc.'s or their respective Subsidiaries' proportionate share of Indebtedness (other than Indebtedness described in clauses (a)(iii) and (a)(iv) of the definition thereof) of any Unconsolidated Affiliate, whether or not Borrower, Holdings I, Holdings II, CBL Properties, Inc. or such Subsidiary is obligated on such Indebtedness; plus (d) all other amounts which would be classified as a liability on the consolidated balance sheets of Borrower or Holdings I, Holdings II, CBL Properties, Inc., determined in each case on a Combined basis in accordance with GAAP. "Unconsolidated Affiliate" shall mean, in respect of any Person, any other Person in whom such Person holds an Investment, which Investment is accounted for in the financial statements of such Person on an equity basis of accounting. "Unused Facility Fee" has the meaning set forth in Section 2.8(a) hereof. 1.2 Use of Defined Terms. All terms defined in this Agreement and the Exhibits hereto shall have the same defined meanings when used in any other Loan Document, unless the context shall require otherwise. 1.3 Accounting Terms, Calculation. (a) Except as otherwise expressly provided herein, all accounting terms used herein shall be interpreted, and all financial statements and certificates and reports as to financial matters required to be delivered to the Lenders hereunder shall (unless otherwise disclosed to the Lenders in writing at the time of delivery thereof in the manner described in subsection (b) below) be prepared, in accordance with generally accepted accounting principles applied on a basis consistent with those used in the preparation of the latest financial statements furnished to the Lenders hereunder (which, prior to the delivery of the first financial statements under Section 6.1 hereof, shall mean the certified financial statements as at June 30, 1996 referred to in Section 5.4 hereof). All calculations made for the purposes of determining compliance with this Agreement shall (except as otherwise expressly provided herein) be made by application of generally accepted accounting principles applied on a basis 17 consistent with those used in the preparation of the annual or quarterly financial statements furnished to the Lenders pursuant to Section 6.1 hereof most recently prior to or concurrently with such calculations (or, prior to the delivery of the first financial statements under Section 6.1 hereof, used in the preparation of the certified financial statements as at June 30, 1996, referred to in Section 5.4 hereof) unless (i) either (x) Borrower shall have objected to determining such compliance on such basis at the time of delivery of such financial statements or (y) the Majority Lenders shall so object in writing within 30 days after delivery of such financial statements and (ii) Borrower and the Majority Lenders have not agreed upon amendments to the provisions of this Agreement to reflect any change in such basis, in which event such calculations shall be made on a basis consistent with those used in the preparation of the latest financial statements as to which such objection shall not have been made (which, if objection is made in respect of the first financial statements delivered under Section 6.1 hereof, shall mean the financial statements referred to in Section 5.4 hereof). (b) Borrower shall deliver to the Lenders at the same time as the delivery of any annual or quarterly financial statement under Section 6.1 hereof (i) a description in reasonable detail of any material variation between the application of accounting principles employed in the preparation of such statement and the application of accounting principles employed in the preparation of the next preceding annual or quarterly financial statements as to which no objection has been made in accordance with the last sentence of subsection (a) above and (ii) reasonable estimates of the difference between such statements arising as a consequence thereof. (c) To enable the ready and consistent determination of compliance with the covenants set forth in Article 6 hereof, Borrower will not change the last day of its fiscal year from December 31 of each year, or the last days of the first three fiscal quarters in each of its fiscal years from March 31, June 30 and September 30 of each year, respectively, without the prior written approval of the Majority Lenders. 1.4 Terminology. All personal pronouns used in this Agreement, whether used in the masculine, feminine or neuter gender, shall include all other genders; the singular shall include the plural, and the plural shall include the singular. Titles of Sections in this Agreement are for convenience only, and neither limit nor amplify the provisions of this Agreement, and all references in this Agreement to Sections, Subsections, paragraphs, clauses, subclauses, Exhibits or Schedules shall refer to the corresponding Section, Subsection, paragraph, clause, subclause of, Exhibit or Schedule attached to, this Agreement, unless specific reference is made to the articles, sections or other subdivisions of, Exhibits or Schedules to, another document or instrument. All Exhibits and Schedules attached hereto are by reference made a part hereof. All references to any instrument, document or agreement shall, unless the context otherwise requires, refer to such instrument, document or agreement as the same may be, from time to time, amended, modified, supplemented, renewed, extended, replaced or restated. In the event that the Section references contained in any Mortgage granted to the Agent on an Eligible Project (a "Project Mortgage") vary from the Section references set forth in the form of Mortgage attached hereto as Exhibit D (the "Form Mortgage"), any reference contained in this Agreement to a 18 specific section of a Mortgage shall, when applied to such Project Mortgage, be deemed to refer to the section in the Project Mortgage which most closely corresponds to the text of specified section in the Form Mortgage. ARTICLE 2. THE LOAN SECTION 2.1 Commitment to Lend. Subject to the terms and conditions set forth in this Agreement, so long as there exists no (i) Default under Sections 7.1(a), 7.1(g) or 7.1(h) hereof, (ii) other Default as to which Agent has given Borrower notice or (iii) Event of Default, each Lender severally agrees to make loans (each an "Advance" and collectively the "Advances") to Borrower from time to time on any Business Day or LIBOR Business Day, as appropriate, during the period from and including the Effective Date to, but not including, the Term Loan Conversion Date (in the event the Loan is converted into the Term Loan) or the Termination Date (in the event the Loan is not converted into the Term Loan) in a principal amount not to exceed the lesser of (a) such Lender's Commitment less such Lender's Pro Rata Share of the aggregate face amount of outstanding Letters of Credit or (b) such Lender's Pro Rata Share of the amount equal to (i) the Borrowing Base less (ii) the aggregate face amount of the outstanding Letters of Credit. Advances hereunder made at any one time shall be in an aggregate principal amount of not less than $200,000.00 or any larger multiple of $25,000.00 (except that any Base Rate Advance may be in the aggregate amount of the unused Commitments). Within the foregoing limits, Borrower may borrow under this Section 2.1, prepay the Advances as provided in this Agreement, and reborrow at any time prior to the Term Loan Conversion Date (in the event the Loan is converted into the Term Loan) or the Termination Date (in the event the Loan is not converted into the Term Loan) under this Section 2.1. Borrower shall have the right, upon (3) Business Days' prior written notice to Agent, to permanently reduce the unutilized portion of the Commitments; provided that any portion of the reduction shall be in the minimum amount of $1,000,000.00 or in any integral multiple thereof. SECTION 2.2 Letters of Credit. (a) Subject to the terms and conditions set forth in this Agreement, at any time and from time to time through the day that is the earlier to occur of the Term Loan Conversion Date or thirty (30) days prior to the Termination Date, the Agent shall cause the Issuing Bank to issue such Letters of Credit for the account of Borrower as the Borrower may request by a request for Letter of Credit; provided that (i) upon issuance of such Letters of Credit, the sum of the aggregate principal amount of all outstanding Advances plus the aggregate face amount of all outstanding Letters of Credit shall not exceed the lesser of (A) the Borrowing Base or (B) then applicable aggregate amount of the Commitments; (ii) the aggregate face amount of all outstanding Letters of Credit (including without limitation the requested Letter of Credit) shall not exceed Ten Million Dollars ($10,000,000); and (iii) unless all the Lenders otherwise consent in writing, the term of any Letter of Credit shall not extend beyond the Termination Date and no Letter of Credit shall contain an automatic extension or renewal clause. (b) Borrower shall deliver to the Agent a duly executed request for Letter of Credit not later than 9:00 A.M., Pacific Time, at least five (5) 19 Business Days prior to the date upon which the requested Letter of Credit is to be issued. The Borrower shall further deliver to the Agent and the Issuing Bank such additional instruments and documents as the Agent and/or the Issuing Bank may require, in conformity with the then standard practices of its letter of credit department, in connection with the issuance of such Letter of Credit. (c) The Agent shall, if it approves of the content of the request for Letter of Credit (which approval shall not be unreasonably withheld) give prompt written notice to the Lenders upon the approval of the request, and subject to the conditions set forth in this Agreement, cause the issuance of the Letter of Credit on or before 5:00 p.m. Pacific Time, on or before the day five (5) Business Days following receipt of the documents last due pursuant to Section 2.2(b). Upon issuance of a Letter of Credit, the Agent shall promptly notify the Lenders of the amount and terms thereof. The Agent shall provide copies of each Letter of Credit to the Lenders promptly following issuance thereof and shall notify the Lenders promptly of all payments, reimbursements, expirations, negotiations, transfers and other activity with respect to outstanding Letters of Credit. (d) Upon the issuance of a Letter of Credit, each Lender shall be deemed to have purchased a pro rata issuer participation therein from the Issuing Bank in an amount equal to the Lender's Pro Rata Share of the face amount of the Letter of Credit. (e) If and to the extent that any amounts are drawn upon any Letters of Credit the amount so drawn shall immediately be paid by Agent to the Issuing Bank, and, from the date of payment thereof by the Issuing Bank, shall be considered (i) so long as there exists no Default or Event of Default, an Advance of the Agent for all purposes hereunder and (ii) if there then exists a Default or Event of Default, a purchase by the Agent of the Issuing Bank's right to reimbursement in respect of such Letter of Credit. (f) Promptly after payment by the Issuing Bank of any amount drawn upon any Letter of Credit, the Agent shall, without notice to or the consent of the Borrower, direct the Lenders to advance to the Agent, their Pro Rata Share of the amount so drawn. The proceeds of such advances shall be applied by the Agent to reimburse it for the payment made by it to the Issuing Bank under the Letter of Credit. All amounts paid by the Lenders pursuant to this Section 2.2(f) shall be deemed to be (i) so long as there exists no Default or Event of Default, Base Rate Advances made pursuant to this Agreement and (ii) if there then exists a Default or Event of Default, a purchase by each Lender of a participation in the Letter of Credit Obligations in respect of such Letter of Credit. (g) On the occurrence of (i) the Termination Date (in the event the Loan is not converted into the Term Loan), or (ii) the Term Loan Termination Date (in the event the Loan is converted into the Term Loan), prior to the expiration of all Letters of Credit, the Borrower shall provide to the Agent a standby letter of credit issued by a bank satisfactory to the Agent, in form and substance satisfactory to the Agent, in favor of the Agent in a face amount equal to outstanding Letters of Credit on that date, or shall make other provisions satisfactory to the Agent for the full collateralization, by cash or cash equivalent, of such outstanding Letter of Credit. In the event of failure of the Borrower to comply with the requirement of this 20 Section 2.2(g), such portion of the face amount of all outstanding Letters of Credit as to which the Borrower has failed to comply shall be deemed to be immediately due and payable. (h) The issuance of any supplement, modification, amendment, renewal, or extension to or of any Letter of Credit shall be treated in all respects the same as issuance of a new Letter of Credit. (i) Borrower assumes all risks of the acts or omissions of any beneficiary or transferee of any Letter of Credit with respect to its use of such Letter of Credit. Neither the Issuing Bank, the Agent, any Lender nor any of their respective officers or directors shall be liable or responsible for, nor shall Borrower's obligations hereunder in respect of such Letters of Credit be impaired as a result of: (i) any lack of validity or enforceability of any Letter of Credit or any other agreement or instrument relating thereto (such Letter of Credit and any other agreement or instrument relating thereto being, collectively, the "Letter of Credit Documents"); (ii) the use that may be made of any Letter of Credit or any acts or omissions of any beneficiary or transferee in connection therewith; (iii) any statement or any other document presented under a Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (iv) the existence of any claim, set-off, defense or other right that the Borrower may have at any time against any beneficiary or any transferee of a Letter of Credit (or any Persons for whom any such beneficiary or any such transferee may be acting), the Issuing Bank or any other Person, whether in connection with the transactions contemplated by the Letter of Credit Documents or any unrelated transaction; (v) payment by the Issuing Bank against presentation of documents that do not comply with the terms of a Letter of Credit, including failure of any documents to bear any reference or adequate reference to the Letter of Credit; or (vi) any other circumstances whatsoever in making or failing to make payment under any Letter of Credit. In furtherance and not in limitation of the foregoing, the Issuing Bank may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary SECTION 2.3 Method of Borrowing. (a) Application for Advance. Borrower shall deliver to Agent a Notice of Borrowing not later than 10:00 A.M. (Pacific Standard Time or Pacific Daylight Time, as applicable) at least one (1) Business Day prior to the date such Advance is to be made, in the case of a Base Rate Advance, and at least 21 three (3) LIBOR Business Days prior to the date such Advance is to be made, in the case of a LIBOR Advance. Prior to delivering a Notice of Borrowing, Borrower may (without specifying whether the Advance shall be a Base Rate Advance or a LIBOR Advance) request that Agent provide Borrower with the most recent LIBOR Rate available to Agent. Agent shall endeavor to provide such quoted rate to Borrower and to Lenders on the date of such request. (b) Funding. (i) Promptly after receipt of a Notice of Borrowing under Section 2.3(a), Agent shall send a copy thereof to each Lender by telex or telecopy, or other similar form of transmission. Each Lender shall deposit an amount equal to its Pro Rata Share of the Advance requested by Borrower with Agent at its Lending Office, in immediately available funds not later than 10:00 A.M. (Pacific Standard Time or Pacific Daylight Time, as applicable) on the date such Advance is to be made. Upon fulfillment of all applicable conditions set forth herein, Agent shall make available to Borrower at Agent's Lending Office, not later than 2:00 P.M. (Pacific Standard Time or Pacific Daylight Time, as the case may be) on the date of each Advance, the proceeds of such amounts received by Agent. The failure of any Lender to deposit the amount described above with Agent shall not relieve any other Lender of its obligations hereunder to make its Pro Rata Share of the Advance. (ii) Unless Agent shall have been notified by any Lender that such Lender will not make available to Agent such Lender's Pro Rata Share of a proposed Advance, Agent may in its discretion assume that such Lender has made such Advance available to Agent in accordance with this Section 2.3(b) and Agent may, if it chooses, in reliance upon such assumption, make such Advance available to Borrower. If and to the extent such Lender shall not so make its Pro Rata Share of the proposed Advance available to Agent, such Lender and Borrower severally agree to pay or repay to Agent within two (2) days after demand the amount of such Advance together with interest thereon, for each day from the date such Advance is made available to Borrower until the date such amount is paid or repaid to Agent at (A) in the case of Borrower, the interest rate applicable at the time to other Lenders' Advances made on the date of such Advance, (B) in the case of such Lender, the Federal Funds Rate. If such Lender shall pay to Agent such amount, such amounts so repaid shall constitute such Lender's Advance for purposes of this Agreement. If such Lender shall fail to pay such amount to Agent and Borrower repays such amount to Agent, Borrower shall be entitled to pursue any remedies it might have against such Lender under this Agreement or at law or in equity for failure to make such Advance. (c) Selection of Interest Period. Upon delivering a Notice of Borrowing under Section 2.3(a) hereof, Borrower shall advise Agent as to whether the Advance shall be (i) a LIBOR Advance, in which case Borrower shall specify the applicable Interest Period therefor, or (ii) a Base Rate Advance. Prior to 2:00 P.M. at least three (3) LIBOR Business Days prior to the expiration of each Interest Period with respect to a LIBOR Advance, Borrower shall give Agent notice (a "Rate Selection Notice"), specifying whether such Advance shall, on the last day of such Interest Period, be continued as a LIBOR Advance or converted to a Base Rate Advance. With respect to any Base Rate Advance, Borrower shall have the right, on any LIBOR 22 Business Day, as the case may be ("Conversion Date"), to convert such Base Rate Advance to a LIBOR Advance, by giving Agent a Rate Selection Notice of such selection at least three (3) LIBOR Business Days prior to such Conversion Date. Each Rate Selection Notice shall either be in writing or by telephone immediately followed by written notice. If any Rate Selection Notice shall specify that said Advance shall be a LIBOR Advance, such Rate Selection Notice shall also specify the length of the succeeding Interest Period selected by Borrower with respect to such Advance. If a Rate Selection Notice shall not have been timely received by Agent in respect of a LIBOR Advance prior to the expiration of the then-relevant Interest Period for such LIBOR Advance, then Borrower shall be deemed to have elected to continue such Advance as a LIBOR Advance, with an Interest Period of thirty (30) days. Promptly after receipt of a Rate Selection Notice under this Section 2.3(c), Agent shall send a copy thereof to each Lender by telex or telecopy, or similar form of transmission. Notwithstanding anything to the contrary contained herein, (i) no more than four (4) Interest Periods shall be in effect at any one time with respect to LIBOR Advances; (ii) Borrower shall have no right to select an Interest Period of longer than one (1) month if at the time of such LIBOR Advance, the outstanding principal balance of the Loan exceeds the Borrowing Base or, to the extent Borrower is then permitted to request LIBOR Advances, if there exists any Default hereunder; (iii) Borrower shall have no right to request an Interest Period (A) in the event the Loan has not been converted into the Term Loan, that extends beyond the Termination Date, or (B) in the event the Loan has been converted into the Term Loan, that extends beyond a date on which a quarterly principal payment on the Term Loan is due unless, giving effect to such Interest Period, the aggregate amount of LIBOR Advances having Interest Periods ending after such date is not greater than the principal amount of the Term Loan scheduled to be outstanding after such date; and (iv) Borrower shall have no right to request a LIBOR Advance if (A) there then exists any (1) Event of Default; (2) Default under Sections 7.1(a), 7.1(g) or 7.1(h) hereof, (3) other Default as to which Agent has given Borrower notice, or (B) the interest rate applicable thereto under Section 2.5 would exceed the Maximum Rate in effect on the first day of the Interest Period applicable to such LIBOR Advance. Each Notice of Borrowing and each Rate Selection Notice shall be considered delivered only upon actual receipt thereof by the Agent, shall be irrevocable and binding on Borrower and, in respect of any LIBOR Advance specified in such Notice of Borrowing or Rate Selection Notice, Borrower shall indemnify Agent and each Lender against any Consequential Loss incurred by Agent and each Lender as a result of (i) any failure to fulfill, on or before the date specified for such Advance, the conditions to such Advance set forth herein, or (ii) Borrower's requesting that an Advance not be made, continued or converted on the date specified for such Advance in the Notice of Borrowing or Rate Selection Notice. A certificate of Agent and each Lender establishing the amount due from Borrower according to the preceding sentence, together with a description in reasonable detail of the manner in which such amount has been calculated, shall be conclusive in the absence of manifest error. SECTION 2.4 Notes. Each Lender's Pro Rata Share of the Loan shall be evidenced by a Note payable to the order of such Lender in the principal face amount equal to such Lender's Commitment. 23 SECTION 2.5 Interest Rate. (a) All Advances. The unpaid principal of each Base Rate Advance shall bear interest from the date of such Advance to but not including the date such Advance is either converted pursuant to Section 2.3(c) or is repaid in full at a rate per annum that shall from day to day be equal to the lesser of (i) the Base Rate in effect from day to day, or (ii) the Maximum Rate. The unpaid principal of each LIBOR Advance shall bear interest from the date of such Advance to but not including the date such Advance is either converted pursuant to Section 2.3(c) or is repaid in full at a rate per annum that shall be equal to the lesser of (i) the LIBOR Rate for the then applicable Interest Period plus one percent (1.00%), or (ii) the Maximum Rate. (b) Default Rate. Upon the occurrence of an Event of Default, all principal of, and to the extent permitted by applicable law, interest on the Obligations shall bear interest until paid at the lesser of (i) the Base Rate from time to time in effect plus two percent (2%), or (ii) the Maximum Rate. Such lesser rate is referred to herein and in the Loan Documents as the "Default Rate." (c) Late Fee. Borrower acknowledges that late payment to Agent will cause Agent and Lenders to incur costs not contemplated by this Agreement, including, but not limited to, processing and accounting charges. Accordingly, in the event Borrower fails to make any payment hereunder within fifteen (15) days after the date such payment is due and payable, Borrower shall pay to the Agent, for the benefit of the Lenders, as liquidated damages for the purpose of defraying the expense incident to handling such delinquent payment and not as a penalty, a late charge equal to three percent (3%) of the amount of such payment, whether such payment is of principal, interest, fees, expenses or other amounts due hereunder or under the Loan Documents; provided, however, that in the event that (i) Borrower has not been invoiced for any payment hereunder (other than principal payments) within fifteen (15) days after the date such payment was due, and (ii) Borrower requested in writing such invoice from Agent not later than ten (10) days after the date such payment was due, Borrower shall not be required to pay such late fee unless such payment remains unpaid fifteen (15) days after Borrower's receipt of such invoice. Borrower and Agent agree that this late charge represents a reasonable sum considering all of the circumstances existing on the date hereof and represents a fair and reasonable estimate of the costs that Agent and Lenders will incur by reason of late payment. Borrower and Agent further agree that proof of actual damages would be costly and inconvenient. Acceptance of any late charge shall not constitute a waiver of the default with respect to the overdue installment (except to the extent payment of such late charge is accompanied by payment of the Obligations in full), and shall not prevent Agent from exercising any of the other rights available hereunder or any other Loan Document. Such late charge shall be paid without prejudice to any other rights of Agent. Payment of any late charge hereunder may be waived upon the consent of the Majority Lenders. (d) Recapture Rate. If the applicable interest rate ever exceeds the Maximum Rate thereby causing the interest charged on the Obligations to be limited to the Maximum Rate, then, to the extent permitted by Applicable Law, any subsequent reductions in the applicable interest rate shall not reduce 24 the rate of interest charged hereunder below the Maximum Rate until the total amount of interest accrued on the Obligations equals the amount of interest that would have accrued thereon if the applicable contract rate had at all times been in effect. SECTION 2.6 Special Provisions for LIBOR Advances. (a) Inadequacy of LIBOR Pricing. If with respect to an Interest Period for any LIBOR Advance, Agent reasonably determines that, by reason of circumstances occurring subsequent to the date hereof affecting the interbank eurodollar market generally, either deposits in United States Dollars (in the applicable amounts) are not being offered to Wells Fargo Bank in the interbank eurodollar market for such Interest Period or that quotes of the LIBOR Rate are not generally available, then Agent shall forthwith give notice thereof to Borrower and Lenders, whereupon until Agent notifies Borrower that the circumstances giving rise to such suspension no longer exist, (A) the obligation of Lenders to make LIBOR Advances shall be suspended, and (B) Borrower shall either (x) repay in full the then- outstanding principal amount of the LIBOR Advances, together with accrued interest thereon on the last day of the then-current Interest Period applicable to such LIBOR Advances, or (y) convert such LIBOR Advances to Base Rate Advances in accordance with Section 2.3(c) of this Agreement on the last day of the then-current Interest Period applicable to each such LIBOR Advance. (b) Illegality of LIBOR Advances. If, after the date of this Agreement, the adoption of any applicable law, rule or regulation, or any change therein, or any change in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall make it unlawful or impossible for any Lender to make, maintain or fund its LIBOR Advances, such Lender shall forthwith give notice thereof to Agent and Borrower. Before giving any notice pursuant to this Section 2.6(b) such Lender shall designate a different LIBOR lending office if such designation will avoid the need for giving such notice and will not be otherwise disadvantageous to such Lender (as determined in good faith by such Lender). Upon receipt of such notice, Borrower shall either (i) repay in full the then outstanding principal amount of any of such Lender's LIBOR Advances, together with accrued interest thereon, or (ii) convert such Lender's LIBOR Advances to Base Rate Advances, on either (A) the last day of the then-current Interest Period applicable to such LIBOR Advance if such Lender may lawfully continue to maintain and fund such LIBOR Advance to such day or (B) immediately if such Lender may not lawfully continue to fund and maintain such LIBOR Advance to such day. (c) Increased Costs. If, after the date hereof, any Governmental Authority, central bank or other comparable authority, shall at any time impose, modify or deem applicable any reserve (including, without limitation, the LIBOR Reserve Requirement and any other reserve imposed by the Board of Governors of the Federal Reserve System), special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender, or shall impose on any Lender (or its eurodollar lending office) or the interbank eurodollar market any other condition affecting its LIBOR Advances, such Lender's Note, its obligation to make LIBOR Advances or its obligations to issue, maintain or participate in Letters of Credit; and the result of any of the foregoing is to increase the cost to such Lender of making or maintaining its LIBOR Advances or of 25 agreeing to issue or of issuing, maintaining or participating in Letters of Credit, or to reduce the amount of any sum received or receivable by such Lender under this Agreement, or under such Lender's Note, by an amount deemed by such Lender to be material, then, within five (5) days after demand by such Lender, Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender for such increased cost or reduction with respect to such Lender's Note, its obligation to make or maintain LIBOR Advances or its obligations to issue, maintain or participate in Letters of Credit. Such Lender will use good faith and reasonable efforts to designate a different lending office for such Lender's LIBOR Advances if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the sole opinion of such Lender, be disadvantageous to such Lender. A certificate of such Lender claiming compensation under this Section 2.6(c) and setting forth in reasonable detail the calculation of the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error. If such Lender demands compensation under this Section 2.6(c) in respect of its LIBOR Advances, then Borrower may at any time, upon at least five (5) Business Days' prior notice to such Lender, either (i) repay in full such Lender's then outstanding LIBOR Advances, together with accrued interest thereon to the date of prepayment or (ii) convert such Lender's LIBOR Advances to Base Rate Advances in accordance with the provisions of this Agreement; provided, however, that Borrower shall be liable for any Consequential Loss arising pursuant to such actions, unless the requirement or condition giving rise to the incurred costs is not generally applicable to lenders similar to the affected Lender, but rather is applicable solely to such Lender. (d) Effect on Base Rate Advances. If notice has been given pursuant to Section 2.6(a) or Section 2.6(b) requiring LIBOR Advances of a Lender to be repaid or converted, then unless and until Agent notifies Borrower that the circumstances giving rise to such repayment no longer apply, all Advances shall be Base Rate Advances. If Agent notifies Borrower that the circumstances giving rise to such repayment no longer apply, Borrower may thereafter select Advances from such Lender to be LIBOR Advances in accordance with Section 2.3(c) of this Agreement. (e) Payments Not At End of Interest Period. If Borrower makes any payment of principal with respect to any LIBOR Advance on any day other than the last day of an Interest Period applicable to such LIBOR Advance (other than any such payment required by Section 2.6(b)(ii)(B) hereof), then Borrower shall reimburse Lenders on demand the Consequential Loss incurred by Lenders as a result of the timing of such payment. A certificate of any Lender setting forth in reasonable detail the basis for the determination of the amount of Consequential Loss shall be delivered to Borrower by Agent and shall, in the absence of manifest error, be conclusive and binding. Any conversion of a LIBOR Advance to a Base Rate Advance on any day other than the last day of the Interest Period for such LIBOR Advance shall be deemed a payment for purposes of this Section 2.6(e). (f) Each Lender shall notify Borrower and the Agent of any event occurring after the date of this Agreement entitling such Lender to compensation under Section 2.6(c) within 45 days after such Lender obtains actual knowledge thereof; provided that if any Lender fails to give such notice to Borrower within 45 days after it obtains actual knowledge of such an event, such Lender shall, with respect to compensation payable pursuant to such subsection (c) in respect of any costs resulting from such event, 26 only be entitled to payment under subsection (c) for costs incurred from and after the date 45 days prior to the date that such Lender gives such notice. SECTION 2.7 Payments. (a) Payment of Interest. Interest on the unpaid principal amount of each Advance shall be payable monthly as it accrues on the first day of each month, commencing with the first such day occurring after the date of the Initial Advance, and thereafter until the Loan is paid in full. (b) Payment of Principal of Loan. Subject to Section 2.12, the Loan shall be due and payable in full on the Termination Date. (c) Payment of Principal of Term Loan. Borrower shall repay the principal balance of the Term Loan in twelve equal consecutive quarterly installments, with the first installment due on the first day of the month immediately following the date which is ninety (90) days after the Term Loan Conversion Date, the second through eleventh installments due on the first day of the month every three (3) months thereafter, and the final installment due on the Term Loan Termination Date. (d) Optional Prepayments. Borrower may, upon at least one (1) Business Day's notice to Agent, prepay the Loan in whole at any time, or from time to time in part in an amount equal to $100,000.00 or any greater amount which would reduce the outstanding principal balance of the Loan to a multiple of $100,000.00, by paying the principal amount to be prepaid together with accrued interest thereon to the date of prepayment; provided, however, that if Borrower shall prepay the principal of any LIBOR Advance on any date other than the last day of the Interest Period applicable thereto, Borrower shall simultaneously therewith make the payments required by Section 2.6(e) hereof; provided further, however, that Borrower shall not make any prepayment which would reduce the outstanding principal balance of the Loan to zero unless Borrower concurrently reduces the Commitments to zero pursuant to Section 2.1. Any such prepayment made on the Term Loan on or after the Term Loan Conversion Date shall be applied to the principal installments of the Loan in the inverse order of their maturity. (e) Mandatory Prepayments. (i) In the event the sum of the outstanding principal balance of the Advances made by any Lender plus such Lender's Pro Rata Share of the aggregate face amount of the outstanding Letters of Credit exceeds such Lender's Commitment, Borrower shall, within two (2) days after demand therefor, pay to Agent for the benefit of such Lender, the amount by which such Advances and the Lender's Pro Rata Share of the outstanding Letters of Credit exceeds such lender's Commitment. (ii) In the event the sum of the outstanding principal balance of the Loan plus the aggregate face amount of the outstanding Letters of Credit exceeds the Borrowing Base at any time other than by reason of a reduction of the Borrowing Base pursuant to Section 3.1(b)(ii), Borrower shall, within thirty (30) days after such date, deliver to each Lender a plan 27 acceptable to the Lenders for bringing the Loan within the Borrowing Base within ninety (90) days after the acceptance of such plan through the payment of such excess, the admission of additional Projects into the Borrowing Base, or through other means acceptable to Lenders in their sole discretion. Lenders agree that they will review and respond to such proposed plan in a reasonably prompt manner. In the event either (A) Borrower fails to deliver an acceptable plan to the Lenders within said thirty (30) days or (B) the Loan continues to exceed the Borrowing Base for ninety (90) days following delivery of an acceptable plan (or, if the Lenders, in their discretion, consent to a period longer than 90 days as a part of any such plan, beyond the end of such longer period), Borrower shall prepay the amount of the Loan in excess of the Borrowing Base, together with accrued interest thereon (collectively, the "Overadvance Amount"), as follows: (1) on such thirtieth (30th) day, ninetieth (90th) day or the last day of such longer period as the Lenders, in their discretion, have approved, as the case may be, (the "Applicable Date"), Borrower shall prepay an amount equal to the lesser of the Overadvance Amount and the outstanding principal amount of Base Rate Advances; (2) to the extent that the outstanding principal amount of Base Rate Advances are less than the Overadvance Amount, on the last day of each Interest Period to expiring after the Applicable Date, Borrower shall prepay an amount equal to the lesser of the amount of the LIBOR Advance to which such Interest Period relates and the unpaid portion of the Overadvance Amount; and (3) on thirtieth (30th) day after the Applicable Date, Borrower shall prepay the remaining portion of the Overadvance Amount. (iii) Failure by Borrower to have complied with the foregoing in a timely manner shall constitute an Event of Default without further notice or grace period hereunder. No further Advances, or release of all or any portion of any Eligible Project, shall be permitted so long as such excess borrowing condition shall continue to exist. Nothing in this Section 2.7(e) shall excuse Borrower's compliance with all terms, conditions, covenants and other obligations imposed upon it under the Loan Documents during the period of such excess borrowing, nor in any manner condition or impair Agent's or Lenders' rights thereunder in respect of any such breach thereof. (f) General Provisions as to Payments. Borrower shall make each payment of principal of, and interest on, the Loan or fees payable hereunder, not later than 11:00 A.M. (Pacific Standard Time or Pacific Daylight Time, as the case may be) on the date when due, without offset, deduction or counterclaim, in Federal or other funds immediately available, at Agent's Lending Office. Whenever any payment of principal of, or interest on, the Loan or fees (if any) shall be due on a day which is not a Business Day, the date for payment thereof shall be extended to the next succeeding Business Day. If the date for any payment of principal is extended by operation of law or otherwise, interest thereon shall be payable for such extended time. 28 (g) Application of Recoveries. Except to the extent otherwise provided in Section 8.13 hereof, all payments made and actually received by the Agent in respect of the Loan (from any person or source including, without limitation, proceeds of title insurance policies with respect to any Eligible Project) shall be applied in the following order of priority: (i) to the reimbursement of any reasonable costs incurred by the Agent to administer, enforce, collect or deal with the Loan (including payments made pursuant to Section 8.11 or Section 8.12 hereof) (or to reimbursement of the Lenders to the extent such costs have been paid by the Lenders) (based on Pro Rata Shares thereof); (ii) to the repayment of any Protective Advances (to the extent not paid pursuant to clause (i) above) (based on Pro Rata Shares thereof); (iii) to the payment of all interest (including default interest) due and payable on the Notes (based on Pro Rata Shares thereof); (iv) to the payment of fees payable under the Loan Documents (based on Pro Rata Shares thereof); and (v) to the payment of principal of the Notes (based on Pro Rata Shares thereof). Agent shall wire transfer to each Lender, at such Lender's bank account as designated by such Lender to Agent in writing, its Pro Rata Share of any payments (to the extent payable to Lender pursuant to this Section 2.7(g)) within one (1) Business Day of Agent's receipt of such payment. Agent shall pay to the Lenders interest thereon, at the Federal Funds Rate, from the Business Day following receipt of such funds by Agent until such funds are paid in immediately available funds to the Lender. The Agent shall in any event not be bound to inquire into or determine the validity, scope or priority of any interest or entitlement of any Lender and may suspend all payments and seek appropriate relief (including, without limitation, instructions from the Majority Lenders or all Lenders, as applicable, or an action in the nature of interpleader) in the event of any doubt or dispute as to any apportionment or distribution contemplated hereby. In the absence of gross negligence or willful misconduct, the Agent shall not be liable for any apportionment or distribution of payments made by it in good faith pursuant to this Section, and if any such apportionment or distribution is subsequently determined to have been made in error, the sole recourse of any person to whom payment was due, but not made, shall be to recover from the recipients of such payments any payment in excess of the amount to which they are determined to have been entitled. (h) Excess Payments. If any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set-off or otherwise) on account of its interest in the Loan in excess of its Pro Rata Share in the Loan, then such Lender shall forward such excess payment to Agent and Agent shall distribute such excess payment to each Lender Pro Rata 29 Shares thereof; provided, however, that if all or any portion of such excess payment is thereafter recovered by the Borrower or other party entitled thereto through legal action or otherwise, each Lender shall reimburse the party returning such excess payment in an amount equal to such Lender's Pro Rata Share of the excess payment. SECTION 2.8 Fees. (a) Unused Fee. Borrower agrees to pay to the Agent, for the benefit of the Lenders an Unused Facility Fee for each calendar quarter, or portion thereof, during which any of the Commitments are in effect, during the period commencing on the date hereof and continuing to but not including the Term Loan Conversion Date (in the event the Loan is converted into the Term Loan) or the Termination Date (in the event the Loan is not converted into the Term Loan), equal to the average daily unused portion of the Commitments during such quarter times one-eighth percent (1/8%) per annum; provided, however, that if the average daily unused portion of the Commitments is greater than fifty percent (50%) of the Commitment, during any quarter (or portion thereof for which such fee is computed), such Unused Facility Fee shall be equal to the sum of (i) fifty percent (50%) of the Commitments times one-eighth percent (1/8%) per annum, plus (ii) the amount by which the average daily unused portion of the Commitments exceeds fifty percent (50%) of the Commitments, times one-quarter percent (1/4%) per annum. Such Unused Facility Fee on the unused portion of the Commitments shall be payable quarterly in arrears on the first day of each December, March, June and September, commencing on December 1, 1996, and continuing regularly thereafter so long as the Commitment is in effect, and shall also be payable on the Term Loan Conversion Date or the Termination Date, as applicable. By way of illustration, the Unused Facility Fee for the calendar quarter ending on September 30 shall be due and payable on December 1. Borrower acknowledges that the Unused Facility Fees payable hereunder are bona fide commitment fees and are intended as reasonable compensation to Lenders for committing to make funds available to Borrower as described herein and for no other purposes. For purposes of this Section 2.8(a), the unused portion of the Commitments shall mean the amount by which the aggregate amount of the Commitments exceeds the sum of (x) the aggregate principal amount of the outstanding Advances plus (y) the aggregate face amount of the outstanding Letters of Credit. (b) Extension Fee. If, pursuant to Section 2.11, Lenders grant an extension of the Termination Date, Borrower agrees to pay to Agent, for the benefit of the Lenders, an extension fee equal to fifteen one-hundredths percent (0.15%) of the aggregate amount of the Commitments at such time. Such fee shall be payable on the date on which Lenders grant such extension. (c) Term Loan Conversion Fee. If, pursuant to Section 2.12, the outstanding balance of the Loan is converted into the Term Loan, Borrower agrees to pay to Agent, for the benefit of the Lenders, an annual conversion fee, payable on each of the first anniversary and the second anniversary of the Term Loan Conversion Date, equal to fifteen one-hundredths percent (0.15%) of the principal balance of the Term Loan outstanding on each such date (taking into account any principal payment made on such dates). (d) Other Fees. Borrower shall pay Agent such fees as are provided for in the fee agreement between Agent and Borrower, as set forth in that certain letter dated September 26, 1996 from Agent to Borrower. 30 (e) Letter of Credit Fees. As additional consideration for the issuance of any Letters of Credit pursuant to Section 2.2 hereof, Borrower agrees to pay to the Agent, for the account of the Lenders in accordance with their respective Pro Rata Shares, a letter of credit fee, in addition to the processing, administrative and similar fees normally charged by and payable to the Issuing Bank in connection with the issuance of Letters of Credit and any other sums due pursuant to Article 3 hereof, equal to one and one-half percent (11/2%) per annum of the average daily aggregate undrawn amount of the Letters of Credit, payable quarterly on the last day of each fiscal quarter of Borrower and on the Termination Date. SECTION 2.9 Computation of Interest and Fees. Fees and interest on the Loan and the Letters of Credit shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed (including the first day but excluding the last day). SECTION 2.10 Option to Replace Lenders. If any Lender, other than Agent, shall: (a) become a Defaulting Lender; (b) has either (i) declined to approve as Eligible Projects three or more Projects which the Agent and each of the remaining Lenders have approved as Eligible Projects or (ii) approved three or more Projects as Eligible Project on the condition that the Approved Percentage for each such Project is at least fifteen percent (15%) below the average Approved Percentage approved by the each of the remaining Lenders for such Project; (c) become subject to the provisions of Section 2.6(b); (d) make any demand for payment or reimbursement pursuant to Section 2.6(c) or Section 9.7 hereof; or (e) has declined to approve an Extension Request and each of the remaining Lenders have approved such Extension Request. then, in any of the foregoing cases, provided that (x) there does not then exist any Default or Event of Default and (y) in the case of the circumstances described in clauses (c) and (d), the circumstances resulting in such demand for payment or reimbursement under Section 2.6(c) or Section 9.7 or the applicability of Section 2.6(b) are not applicable to all Lenders, the Borrower may either (i) designate another financial institution (such financial institution being herein called a "Replacement Lender") acceptable to the Agent (which acceptance will not be unreasonably withheld) and which is not an Affiliate of the Borrower, to assume such Lender's Commitment hereunder and to purchase the Loan of such Lender and such Lender's rights under this Agreement and the Note held by such Lender, all without recourse to or representation or warranty (except as to title of such Lender's portion of the Loan and as to the authority of such Lender to transfer the same) by, or expense to, such Lender, for a purchase price equal to the outstanding principal amount of the Loan payable to such Lender plus any accrued but unpaid interest on such Loan and accrued but unpaid fees owing to such Lender plus any amounts payable to such Lender under Section 2.6(c) or Section 9.7, 31 if any, hereof, and upon such assumption, purchase and substitution, and subject to the execution and delivery to the Agent by the Replacement Lender of documentation reasonably satisfactory to the Agent (pursuant to which such Replacement Lender shall assume the obligations of such original Lender under this Agreement), the Replacement Lender shall succeed to the rights and obligations of such Lender hereunder or (ii) pay to the Agent, as cash collateral, an amount equal to such Lender's Pro Rata Share of the outstanding Letters of Credit and pay to such Lender the outstanding principal amount of the Advances payable to such Lender plus any accrued but unpaid interest on such Advances and accrued but unpaid fees owing to such Lender plus any amounts payable to such Lender under Section 2.6(c) or Section 9.7 hereof. In the event that the Borrower exercises its rights under the preceding sentence, the Lender against which such rights were exercised shall no longer be a party hereto or have any rights or obligations hereunder. The remedies of Borrower under this Section 2.10 shall be cumulative of any other remedies Borrower may have against a Defaulting Lender under this Agreement or at law or in equity. SECTION 2.11 Extension of Termination Date. Borrower may request Agent and Lenders to extend the current Termination Date by successive one- year intervals by executing and delivering to Agent at least ninety (90) days but no more than one hundred twenty (120) days prior to the date which is one (1) year prior to the current Termination Date, a written request in the form of Exhibit I (an "Extension Request"). Agent shall forward to each Lender a copy of each Extension Request delivered to Agent promptly upon receipt thereof. Borrower understands that this Section 2.11 has been included in this Agreement for Borrower's convenience in requesting an extension and acknowledges that none of Lenders nor Agent has promised (either expressly or impliedly), nor has any obligation or commitment whatsoever, to extend the Termination Date at any time. If all Lenders shall have notified Agent on or prior to the date which is forty-five (45) days prior to the date which is one (1) year prior to the current Termination Date that they accept such Extension Request, the Termination Date shall be extended for one (1) year. If one and only one Lender shall not have notified Agent on or prior to the date which is forty-five (45) days prior to the date one year prior to the Termination Date that it accepts such Extension Request, the Termination Date shall not be extended unless Borrower proceeds pursuant to Section 2.10, in which event the Termination Date shall be extended as to all Lenders which have accepted such Extension Request. If two or more Lenders shall not have notified Agent on or prior to the date which is forty-five (45) days prior to the date one year prior to the Termination Date that they accept such Extension Request, the Termination Date shall not be extended. Agent shall promptly notify Borrower whether the Extension Request has been accepted or rejected. SECTION 2.12 Term Loan Conversion. Subject to the terms and conditions of this Agreement, if any Extension Request of Borrower shall be denied, Borrower may then elect to convert the aggregate principal amount of the Loan then outstanding into a term loan owing to Lenders (the "Term Loan") provided (a) Borrower has given Agent notice of Borrower's intention to so convert the Loan not less than thirty (30) days following receipt by Borrower of notice from Agent that Borrower's Extension Request has been rejected, and (b) the conditions set forth in Section 4.4 have been satisfied as of the date one year prior to the current Termination Date. Any such conversion shall become effective on the date which is one (1) year prior to the Termination Date (the "Term Loan Conversion Date"). Upon the effectiveness of the conversion of the outstanding principal balance of Loan into the Term Loan as contemplated by this Section, Borrower shall have no right to request or borrow, and no Lender shall have any obligation to make, any Advance. If the Loan is not converted to the Term Loan, the Loan shall be due and payable in full on the Termination Date. 31 ARTICLE 3. BORROWING BASE; ELIGIBLE PROJECTS SECTION 3.1 Borrowing Base. (a) Admission of Projects into the Borrowing Base. (i) As of the date hereof, the Lenders have admitted into the Borrowing Base as Eligible Projects the Projects listed on Schedule 3.1 attached hereto, with the amount of the Borrowing Base attributable thereto as is set forth in respect of each such Project on Schedule 3.1. (ii) If Borrower desires that Lenders admit a Project into the Borrowing Base, Borrower shall notify Agent thereof in writing. No Project will be evaluated by Lenders for potential inclusion into the Borrowing Base unless it is a domestic operating regional retail shopping mall or retail strip shopping center, and unless and until Borrower delivers to Agent and each Lender the following, in form and substance acceptable to Agent: (A) A current operating statement for such Project audited or certified by Borrower as being true and correct in all material respects and prepared in accordance with GAAP and a comparative sales report for the current period and for the previous two (2) fiscal years or, if such Project has been in operation only for a lesser period, such lesser period; and (B) A current rent roll for such Project, certified by Borrower as being true and correct in all material respects and a operating and occupancy history of such Project for the previous three (3) fiscal years or, if such Project has been in operation only for a lesser period, such lesser period, in form satisfactory to Agent, and certified by Borrower and the management agent of such Project to be true and correct. (iii) Within ten (10) days after the Agent and the Lenders have received the foregoing documents and information, each Lender shall notify the Agent whether or not such Lender is willing to consider such Project and the Agent shall notify the Borrower as to whether the Agent and the Lenders are prepared to consider such Project for inclusion in the Borrowing Base; provided, however, that failure to give such notice within such period shall not constitute approval to consider such Project as an Eligible Project. If the Lenders agree to so consider such Project, Agent will promptly notify Borrower and obtain an Appraisal of such Project in order to determine the Appraised Value thereof. Upon request of Borrower, Agent shall notify Borrower of the reasons, to the Agent's knowledge, for any Lender's rejection of a Project as an Eligible Project. No Project will be further evaluated by Lenders for potential inclusion into the Borrowing Base unless and until Borrower delivers to the Agent and each Lender the following, in form and substance acceptable to Agent and/or the Majority Lenders: 33 (A) A copy of the most recent ALTA Owner's Policy of Title Insurance covering such Project showing the identity of the fee titleholder thereto and all matters of record; (B) Copies of all documents of record reflected in Schedule B of the Owner's Policy of Title Insurance and a copy of the most recent real estate tax bill and notice of assessment; (C) A survey of such Project certified by a surveyor licensed in the applicable jurisdiction to have been prepared in accordance with the then effective Minimum Standard Detail Requirements for ALTA/ACSM Land Title Surveys; (D) A "Phase I" environmental assessment of such Project not more than twelve (12) months old; (E) A certificate from a licensed engineer or other professional satisfactory to Agent that such Project is not located in a Special Flood Hazard Area as defined by the Federal Insurance Administration; (F) Copies of (I) all Major Leases, (II) all Major Agreements, (III) the form or forms of tenant lease used at such Project, and (IV) all material maintenance or service agreements affecting such Project; (G) In the case of a Project which was owned by Borrower or any Wholly Owned Subsidiary of Borrower or Subpartnership on the Effective Date, a summary, prepared by a Senior Officer or appropriate vice president of CBL Properties, Inc., of any engineering, mechanical, structural or maintenance studies performed with respect to such Project or, in the case of any other Project, copies of any engineering, mechanical, structural or maintenance studies performed (if not previously performed, such studies shall be required by Agent on behalf of Lenders) with respect to such Project; (H) Evidence that such Project complies with applicable zoning and land use laws; (I) A schedule of all personal property, including intangible personal property owned by Borrower or any Wholly Owned Subsidiary of Borrower or Subpartnership and used in connection with the maintenance or operation of such Project; and (J) Such other information reasonably requested by Agent in order to evaluate the Project for potential inclusion in the Borrowing Base. (iv) Within thirty (30) days after the delivery to the Lenders of all information and other documents required hereby or requested by the Agent relating to the Project proposed by Borrower as an Eligible Project (including, but not limited to, an Appraisal in respect of such Project), each Lender shall notify the Agent whether such Lender approves such Project as an Eligible Project and the Agent shall provide Borrower with written notice of whether the Supermajority Lenders have approved a Project as an 34 Eligible Project and, if so approved, the Approved Percentage applicable to such Project; provided, however, that failure to give such notice within such period shall not constitute approval of such Project as an Eligible Project; provided, further, that is such Project is not approved as an Eligible Project, the Agent shall, upon the request of Borrower, notify Borrower as to Agent's understanding of why such Project was not approved as an Eligible Project; (v) Upon acceptance by Supermajority Lenders and execution and delivery of documents and completion of all other closing requirements imposed by Agent, which shall include the Collateral Documents and other items described in Section 4.3 and such other items or documents as may be appropriate under the circumstances, including updates of the documents described in Section 3.1(a)(ii) and Section 3.1(a)(iii)(C), (D) (if then more than twelve (12) months old), (F) and (I), such Project shall become an Eligible Project admitted into the Borrowing Base. (vi) The Lenders may, in their sole discretion, notify Borrower that a Project that is not otherwise an Eligible Property, may be included in the Borrowing Base, provided that Agent or the Lenders may require additional terms and conditions (including a lower Approved Percentage or a different method of calculating the Permanent Loan Estimate) to be evidenced in writing as a supplement to this Agreement in order for such Project to be an Eligible Project and to be admitted into the Borrowing Base. (vii) If the Appraised Value of a Project is adjusted from that set forth in the Appraisal relating to such Project as a result of Agent's internal review, Agent shall advise the Borrower and, upon request of Borrower, provide a reasonably detailed report describing the nature and amount of such adjustments; provided, however, that failure to provide such a report shall not affect the Appraised Value of a Project; (viii) Pursuant to Section 9.3 hereof, Borrower shall pay to Agent all reasonable third-party out-of-pocket expenses (which shall be deemed to include, if outside counsel is not used by the Agent, the allocated cost of in-house counsel of Agent) of Agent incurred in connection with Agent's review of requests for a Project to be admitted into the Borrowing Base. (ix) If it shall be unlawful for Agent to require Borrower to pay any taxes with respect to a Project or the Collateral Documents covering a Project, then the Agent may, in its sole discretion, refuse to submit such Project to the Lenders for consideration whether such Project shall be an Eligible Project and be admitted into the Borrowing Base, or, if such Project has been admitted into the Borrowing Base, then the Agent or the Lenders may, in its or their sole discretion, elect to remove such Project from the Borrowing Base. (b) Borrowing Base. The Borrowing Base for the Projects shall be, as of any date, equal to (i) the lesser of (A) the sum of the Approved Percentage of the Appraised Value of each of the Eligible Projects or (B) the aggregate Permanent Loan Estimates for the Eligible Projects less (ii) reserves established pursuant to Section 7.5 hereof. In all events, the Borrowing Base is subject to reduction in the manner set forth in this Agreement including, without limitation, Section 6.3 and Section 7.4 hereof. 35 (c) Computation of Net Operating Income. Borrower shall deliver to Agent quarterly computations of Net Operating Income for each Eligible Project with the Borrowing Base information required pursuant to Section 6.1(d) herein. Agent shall notify Borrower in writing of any additional adjustments to Net Operating Income required by Agent and corresponding adjustments to the Borrowing Base (if any). (d) Release of Eligible Projects. Upon repayment and satisfaction in full of all Obligations and the termination of all Commitments and this Agreement, Agent will release the Collateral Documents with respect to each of the Eligible Projects. From time to time Borrower may request, upon not less than thirty (30) days prior written notice, that an Eligible Project or portion thereof be released from the Liens created by the Collateral Documents applicable thereto, which release ("Property Release") shall be delivered by Agent if all of the following conditions are satisfied as of the date of such Property Release: (i) after giving effect to such Property Release, any of Post Oak Mall, Georgia Square Mall or any regional mall which may be included in the Borrowing Base and is determined by the Majority Lenders to be of equivalent financial strength to any of the foregoing malls, will remain as an Eligible Project in the Borrowing Base; (ii) no Default or Event of Default has occurred and is then continuing or will occur after giving effect to such Property Release and the reduction in the Borrowing Base by reason of the release of all or a portion of such Eligible Project; (iii) the Termination Date has not occurred by reason of the events described in clauses (b) or (c) of the definition thereof; (iv) Borrower shall have delivered to Agent a Borrowing Base Certificate reflecting the Borrowing Base after giving effect to such Property Release; (v) Borrower shall have delivered to Agent all documents and instruments reasonably requested by Agent including, without limitation, the following: (A) a survey of the portion of the Eligible Project to be released; (B) the quitclaim deed or other instrument to be used to effect such release; and (C) an endorsement to the mortgagee title insurance policy in effect with respect to the affected Eligible Project. (vi) Agent shall have determined that the outstanding principal balance of the Loans will not exceed the Borrowing Base after giving effect to such Property Release and any prepayment to be and/or the acceptance of any prepayment to be made and/or the acceptance of any Project as an additional or replacement Eligible Project in the Borrowing Base to be given concurrently with such Property Release; and 36 (vii) with respect to a Property Release relating to a portion of an Eligible Project, (A) the value of such Property is $1,000,000.00 or less and (ii) after giving effect to the proposed Property Release, the aggregate value of all Property Releases made in respect of such Eligible Property is $5,000,000.00 or less. If following any such Property Release, the Wholly-Owned Subsidiary or Subpartnership owning the Project so released does not have any ownership interest in any of the remaining Collateral, the Agent and the Lenders shall, at Borrower's request, release such Wholly-Owned Subsidiary or Subpartnership from any guaranty of the Obligations executed by it. SECTION 3.2 Leases and Major Agreements. (a) Borrower shall, or shall cause any Wholly Owned Subsidiary of Borrower or Subpartnership Owning the applicable Eligible Project to, (i) submit any and all proposed Major Agreements and Major Leases to Agent for approval prior to the execution thereof, which approval shall not be unreasonably withheld; (ii) duly and punctually perform and comply with any and all material representations, warranties, covenants and agreements expressed as binding upon Borrower under any Major Agreement or Major Lease; (iii) proceed in a commercially reasonable manner to maintain each of the Major Agreements and Major Leases in full force and effect during the term thereof; (iv) appear in and defend any action or proceeding in any manner connected with any of the Major Agreements and Major Leases; (v) deliver to Agent execution counterparts of all Major Agreements and Leases; (vi) act in a commercially reasonable manner in entering into, performing and enforcing the Major Agreements and the Leases; and (vii) deliver to Agent such further information, and execute and deliver to Agent such further assurances and assignments, with respect to the Major Agreements and Leases as Agent may from time to time reasonably request. Without Agent's prior written consent, Borrower shall not (A) do or knowingly permit to be done anything to materially impair the value of any of the Major Agreements or Major Leases; (B) except for deposits not to exceed one month's rent for any one lessee, collect any of the Rent more than one (1) month in advance of the time when the same becomes due; (C) discount any future accruing Rent; (D) amend or modify any of the financial or other economic terms of any Major Agreement or Major Lease; (E) terminate any Major Agreement or Major Lease other than as a result of a material default thereunder; or (F) assign or grant a security interest in or to any of the Major Agreements or Leases. (b) Borrower shall not, and shall not permit any Subsidiary or Subpartnership owning an Eligible Project to, amend, modify in any material manner, or terminate its management agreement with CBL Management, Inc. except upon thirty (30) days prior written notice to Agent. If such proposed amendment or modification limits or extinguishes Borrower's absolute right to terminate the management agreement upon thirty (30) days notice or Agent notifies Borrower that, in Agent's judgment, such proposed amendment, modification or termination, as applicable, will either (i) increase the management fees, reimbursements or other payments to manager to levels which are in excess of applicable market levels or (ii) have a material adverse effect upon Borrower or any Affiliate or Subsidiary of Borrower or its ability to perform its obligations under the Collateral Documents, then Borrower shall not enter into such amendment, modification or termination without the consent of Majority Lenders; provided however, that any such 37 termination which is required by Applicable Law in order for CBL Properties, Inc. to maintain its status as a real estate investment trust shall not require such consent. Borrower shall not enter into a management agreement with a manager other than CBL Management, Inc., or another affiliate or subsidiary of Borrower, in respect of any Eligible Project without the prior written consent of Majority Lenders. (c) Within sixty (60) days after the execution of each Major Lease, Borrower agrees to deliver or to cause to be delivered to Agent a fully executed and acknowledged non-disturbance, attornment, estoppel and subordination agreement from the tenant under such Major Lease. With respect to all Leases, Borrower agrees to exercise diligent efforts to deliver to Agent fully executed estoppel certificates from each tenant at such times as Agent may reasonably request, and Agent agrees to execute attornment agreements with each such tenant who requests such an agreement; provided, however, that such tenant is not in default of any of its obligations under its Lease. At Agent's request, Borrower shall also exercise diligent efforts to deliver fully executed estoppel certificates executed by the parties to the Major Agreements. All agreements required under the terms of this Section 3.2(c) shall be in form and substance satisfactory to Agent in its sole but reasonable discretion. SECTION 3.3 Appraisals. (a) Prior to classifying any Project as an Eligible Project, the Agent will cause, at Borrower's expense, an Appraisal to be made of such Project for use in determining the Appraised Value thereof. From time to time an Eligible Project may be reappraised, at Borrower's option and expense, upon notice by Borrower to Agent of its exercise of its option to reappraise a Project, in which event Agent shall cause such Appraisal or Appraisals to be made. Agent shall disclose the results of such Appraisal to Borrower after acceptance of such Appraisal by Agent. (b) In addition, no later than June 28, 1998, upon five (5) Business Days prior written notice to Borrower, Agent shall, at Borrower's expense, cause an Appraisal of all of the Eligible Projects to be performed, to redetermine the Appraised Value thereof. (c) In addition, at any time and from time to time (but no more often than once per year as to each Eligible Project), upon five (5) Business Days prior written notice to Borrower, Agent may, at Lenders' expense, cause an Appraisal of any or all Eligible Projects to be prepared, to redetermine the Appraised Value thereof. (d) In addition, at any time and from time to time, upon five (5) Business Days prior written notice to Borrower, Agent may, at Borrower's expense, redetermine the Appraised Value of any Eligible Project if (i) in Agent's reasonable judgment a material adverse change has occurred with respect to such Eligible Project, including without limitation, an anchor or tenant under a Major Lease in an Eligible Project closes or vacates its premises and no commercially reasonably replacement is obtained, or a (ii) major casualty or condemnation has occurred with respect to such Eligible Project, or (iii) reasonably necessary or advisable in order to comply with Legal Requirements applicable to Agent or any Lender. SECTION 3.4 Major Construction. If Borrower or any Wholly owned Subsidiary or Subpartnership intends to engage in any construction, remodeling or demolition project or series of related projects, with respect 38 to an Eligible Project (each, a "Construction Project"), the aggregate cost of which will exceed $1,000,000.00, Borrower shall first notify Agent, provided that (i) if any Construction Project (whether or not carried on simultaneously or in conjunction with other Construction Projects) consists of construction of improvements which would materially adversely affect the value of such Eligible Project or (ii) the aggregate cost of such Construction Project (other than for tenant improvements) will exceed $5,000,000.00 (a "Major Construction Project"), such Major Construction Project shall be subject to approval of the Majority Lenders, which approval shall not be unreasonably withheld. ARTICLE 4. CONDITIONS SECTION 4.1 Effectiveness. This Agreement shall become effective as of June 30, 1998, provided that all of the following conditions shall have been satisfied (the "Effective Date"): (a) receipt by Agent of counterparts of this Agreement signed by each of the parties hereto; (b) receipt by Lenders of the duly executed Notes on or before the Effective Date, complying with the provisions of Section 2.4 hereof; (c) receipt by Agent of the opinions of Shumacker & Thompson, P.C. and such other counsel located in the jurisdictions where the Eligible Projects are located, addressed to Agent and each Lender and satisfactory in form and substance to Agent covering the legal matters addressed in Article 5 hereof and such additional matters relating to the transactions contemplated hereby as Agent may reasonably request; (d) receipt by Agent of a certificate of Borrower approving the execution, delivery and performance of this Agreement (when executed and delivered pursuant to this Agreement) and the transactions contemplated therein, duly adopted by Borrower in accordance with the terms of Borrower's Partnership Agreement; (e) receipt by Agent of (i) certificates of existence and good standing for Borrower issued by the State of Delaware and certificates of qualification and good standing for Borrower issued by each of the states wherein any Eligible Project is located and such qualification is required, and (ii) certificates of existence and good standing for each Subpartnership which is a party to any Collateral Document issued by the state of each such Subpartnership's formation and the state in which the Eligible Project owned by such Subpartnership is located; (f) receipt by Agent of a certificate of an officer of Borrower, certifying (A) that attached thereto are true and complete copies of (i) the Modification No. One to the Amended and Restated Agreement of Limited Partnership of CBL & Associates Limited Partnership, and (ii) the Certificate of Amendment to Certificate of Limited Partnership of CBL & Associates 39 Limited Partnership, certified by the Secretary of State of the State of Delaware, and, except for the foregoing, that there have been no amendments to Borrower's certificate of partnership, partnership agreement or other organizational documents; (B) that Holdings I is the sole general partner of Borrower and is the sole Person with authority to authorize the execution, delivery and performance of this Agreement and any other documents executed in connection herewith to which Borrower is a party; (g) a certificate of the Secretary of Holdings I, dated as of the Effective Date, certifying (A) that attached thereto is a true and complete copy of the Certificate of Incorporation of Holdings I and that there have been no amendments thereto; (B) that attached thereto is a true and complete copy of the By-laws of Holdings I and that there have been no amendments thereto; (C) that attached thereto is a true and complete copy of Resolutions adopted by the Board of Directors of Holdings I, authorizing the execution and delivery on behalf of Borrower of this Agreement and any other documents executed in connection herewith to which Borrower is a party, authorizing the execution and delivery on behalf of Borrower as general partner of each Subpartnership of each of the documents executed in connection herewith to which such Subpartnership is a party, and authorizing the execution, delivery and performance of each of the documents executed in connection herewith to which Holdings I is a party; (D) as to the incumbency and genuineness of the signatures of the officers of Holdings I executing any of the documents executed in connection herewith to which Holdings I, Borrower or any Subpartnership is a party and (E) that there have been no amendments to the certificates of partnership, partnership agreements or other organizational documents of any Subpartnership which is a party to any Collateral Document since July 28, 1994, other than such amendments as may be attached to such certificate and certified as being true, correct and complete as of the date of such certification; (h) a certificate of the Secretary of CBL Holdings I, Inc., certifying (A) that there have been no amendments to the Certificate of Incorporation or By-laws of Holdings I, Inc. since June 1, 1997, other than such amendments as may be attached thereto; and (B) that there have been no amendments to the certificates of partnership, partnership agreements or other organizational documents of any Subpartnership which is a party to any Collateral Document since July 28, 1994, other than such amendments as may be attached to such certificate and certified as being true, correct and complete as of the date of such certification; (i) good standing certificates for CBL Properties, Inc. and Holdings I, each dated as of a date close to the Effective Date, issued by the Secretaries of State of Delaware and of each state wherein CBL Properties, Inc. and Holdings I is qualified to do business and where such qualification is required; (j) since June 1, 1997, there shall not have occurred any material adverse change in the business, operations (including the operation performance of any Eligible Project), condition (financial or otherwise), assets, liabilities, properties or prospects of Borrower, or any event, condition, or state of facts which would be expected materially and adversely to affect the prospects of Borrower subsequent to consummation of the transactions contemplated by this Agreement, in each case, as determined by Agent in its reasonable discretion; 40 (k) since June 1, 1997, there shall not have occurred any material adverse change in the business, operations, condition (financial or otherwise), assets, liabilities, properties or prospects of any Eligible Project included or to be included in the Borrowing Base, or any event, condition, or state of facts which would be expected materially and adversely to affect the prospects of any such Project subsequent to consummation of the transactions contemplated by this Agreement, in each case, as determined by Agent in its reasonable discretion; (l) there shall exist no Default or Event of Default; and (m) all of the representations and warranties made by Borrower, any Wholly Owned Subsidiary of Borrower or any Subpartnership hereunder, under any of the Notes or under any of the Collateral Documents shall be true and correct in all material respects as of the Effective Date with the same force and effect as if made on and as of such date. This Agreement shall not become effective or be binding on any party hereto unless all of the foregoing conditions are satisfied on or before June 30, 1998. SECTION 4.2 Advances. The obligation of Agent and each Lender to make any Advance or to have any Letter of Credit issued is subject to the satisfaction of the following conditions: (a) receipt by Agent of a Notice of Borrowing as required by Section 2.3, in the case of an Advance, or a request for a Letter of Credit as required by Section 2.2, in the case of a Letter of Credit, and a compliance certificate as described in Section 6.1(c) hereof; (b) the fact that the proposed use of proceeds of such Advance set forth in the Notice of Borrowing or the proposed use of such Letter of Credit set forth in such request for Letter of Credit is consistent with the provisions of Section 6.10 and Section 2.2, respectively; (c) (i) in the case of the issuance of a Letter of Credit, there shall exist no Default or Event of Default nor any event or condition which, with the issuance of such Letter of Credit, would constitute a Default or Event of Default or (ii) in the case of the making of an Advance, there shall exist no (A) Event of Default, (B) Default under Sections 7.1(a), 7.1(g) or 7.1(h) hereof, or (C) other Default as to which Agent has given Borrower notice nor any event or condition which, with the making of such Advance, would constitute an Event of Default or any such Default; (d) all of the representations and warranties made by Borrower, any Wholly Owned Subsidiary of Borrower or any Subpartnership hereunder, under any of the Notes or under any of the Collateral Documents shall be true and correct in all material respects as of the date of such Advance or the date of such Letter of Credit with the same force and effect as if made on and as of such date, except to the extent such representations or warranties specifically relate to an earlier date and except for changes therein occurring in the ordinary course of business which do not otherwise constitute a Default or Event of Default hereunder; 41 (e) all of the Collateral Documents for each Eligible Project comprising the Borrowing Base shall be in full force and effect and shall constitute a first priority perfected Lien on and security interest in each such Project, subject only to Permitted Liens. Acceptance by Borrower of an Advance hereunder or the issuance of a Letter of Credit shall be deemed to be a representation and warranty by Borrower on the date of such Advance or such Letter of Credit as to the facts specified in clauses (b), (c), (d) and (e) of this Section 4.2. SECTION 4.3 Conditions Precedent to a Project Becoming An Eligible Project. No Project shall become an Eligible Project until Borrower shall have granted, or shall have caused any Wholly Owned Subsidiary or Subpartnership owning such Project to grant, to Agent, for the benefit of Lenders, as security for the payment and performance of the Obligations of Borrower, a valid, enforceable, perfected, first priority and (except for Permitted Liens) only security interest and Lien in and to such Project and all real and personal property relating thereto and, in connection therewith, Borrower shall have executed and delivered, or shall have caused any Wholly- Owned Subsidiary or Subpartnership owning such Project to execute and deliver, to Agent, in form and substance reasonably satisfactory to Agent, the following instruments, documents and agreements in respect of such Project: (a) a Mortgage encumbering such Project in favor of the Agent for the benefit of Lenders, such Mortgage to be substantially in the form of Exhibit D attached hereto and incorporated herein by reference, modified as appropriate to conform to the laws of the jurisdiction in which the Project is situate; (b) an environmental indemnity agreement, substantially in the form of Exhibit E attached hereto and incorporated herein by reference; (c) a closing certificate and affidavit, in substantially the form of Exhibit F attached hereto and incorporated herein by reference; (d) if requested by the Agent or the Majority Lenders, collateral assignments of operating agreements, reciprocal easement agreements, management agreements and other agreements requested by the Agent or the Majority Lenders, all in form and substance reasonably satisfactory to the Agent and the Lenders; (e) assurance from a title insurance company satisfactory to the Agent (the "Title Company") that such Title Company is committed to cause the Mortgage to be recorded and, upon recordation of the Mortgage, to issue its ALTA lender's title insurance policies in a form reasonably acceptable to the Agent and in an amount equal to the Borrowing Base to be attributable to the Eligible Project described therein or such higher amount as may be reasonably requested by the Agent, showing the Agent as the "insured mortgagee" and insuring the validity and priority of the Mortgage as a first priority Lien upon the Eligible Project and Collateral described therein, subject to Permitted Liens; (f) receipt by Agent of an opinion of outside counsel reasonably acceptable to the Agent, addressed to Agent and each Lender and satisfactory 42 in form and substance to Agent covering the legal matters addressed in Article 5 hereof and such additional matters relating to the transactions contemplated hereby as Agent may reasonably request; (g) receipt by Agent of a Borrowing Base report certified by the chief financial officer or the chief accounting officer of Borrower, setting forth in reasonable detail the calculations establishing the Borrowing Base; (h) if such Eligible Project is owned by a Wholly Owned Subsidiary of Borrower or Subpartnership of Borrower, a guaranty, substantially in the form of Exhibit G hereto, by such Wholly Owned Subsidiary or Subpartnerships of the obligations of Borrower under this Agreement, duly executed and delivered by such Wholly Owned Subsidiary or Subpartnership; (i) if such Eligible Project is owned by a Wholly Owned Subsidiary of Borrower, instruments, documents, certificates and items in respect of such Wholly Owned Subsidiary as are comparable to the instruments, documents, certificates and other items described in subsections (g) and (i) of Section 4.1 in respect of Holdings I, CBL Properties, Inc. and/or Borrower; (j) if such Eligible Project is owned by a Subpartnership, instruments, documents, certificates and items in respect of such Subpartnership, as are comparable to the instruments, accounts, certificates and other items described in subsections (d) through (i) of Section 4.1 in respect of Borrower. (k) receipt by Agent of all documents it may reasonably request relating to the validity and enforceability of the Loan Documents and the Collateral Documents (when executed and delivered pursuant to this Agreement) and any other matters relevant hereto, all in form and substance satisfactory to Agent; (l) such other instruments, documents, agreements, financing statements, certificates, opinions and other Collateral Documents as the Agent or the Majority Lenders may reasonably request. Borrower shall perform, and shall cause the Wholly Owned Subsidiaries and Subpartnerships to perform, any and all reasonable steps requested by Agent to perfect, maintain and protect Agent's Lien in the Projects and the Collateral pledged to the Agent, including, without limitation, executing and filing Mortgage Supplements, financing or continuation statements, or amendments thereof, in form and substance satisfactory to Agent; and delivering to Agent all documents, notes and other instruments or chattel paper included in the Collateral, the possession of which is necessary or appropriate to perfect Agent's security interest therein. Agent may file one or more financing statements disclosing Agent's Lien under the Collateral Documents without Borrower's or any such Subsidiary's signature appearing thereon and Borrower shall pay the costs of, or incidental to, any recording or filing of any financing statements concerning the Collateral. 43 SECTION 4.4 Conditions to Conversion to Term Loan. The right of Borrower to convert Loan into the Term Loan under Section 2.12 is subject to the condition precedent that the following conditions be satisfied in the judgment of Agent: (a) timely receipt by Agent of the notice required under such Section; (b) immediately before and after such conversion, no Event of Default shall have occurred and be continuing; and (c) the representations and warranties of Borrower contained in this Agreement and the other Loan Documents shall be true in all material respects on and as of the date of such conversion except to the extent such representations or warranties specifically relate to an earlier date or such representations or warranties become untrue by reason of events or conditions otherwise permitted hereunder and the other Loan Documents. The delivery of the notice required under such Section shall constitute a certification by Borrower to Agent and Lenders that the statements in the immediately preceding clauses (b) and (c) are true. ARTICLE 5 REPRESENTATIONS AND WARRANTIES Borrower hereby represents and warrants to Agent and each Lender that: SECTION 5.1 Organization and Power. Borrower is a limited partnership duly organized, validly existing and in good standing under the laws of the State of Delaware, and has all requisite partnership powers and all material governmental certificates of authority, licenses, permits, qualifications, documentation, consents and approvals required to own, lease and operate its properties and to carry on its business as now conducted. Each of Holdings I and CBL Properties, Inc. is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and has all requisite corporate powers and all material governmental certificates of authority, licenses, permits, qualifications, documentation, consents and approvals required to own, lease and operate its properties and to carry on its business as now conducted. Each of Borrower's Subsidiaries is a limited partnership or a corporation duly organized, validly existing and in good standing under the laws of its state of formation, and has all requisite partnership powers and all material governmental certificates of authority, licenses, permits, qualifications, documentation, consents and approvals required to own, lease and operate its properties and to carry on its business as now conducted. SECTION 5.2 Validity of Loan Instruments. The execution, delivery and performance by Borrower of the Loan Documents and the execution, delivery and performance by any Wholly Owned Subsidiary of Borrower or by any Subpartnership of any Collateral Documents to which such Wholly Owned Subsidiary or Subpartnership is a party, when executed and delivered pursuant 44 to the Original Credit Agreement, the First Amended and Restated Credit Agreement and/or this Agreement, (a) are within Borrower's or such Subsidiary's or Subpartnership's powers, (b) have been duly authorized by all necessary corporate, partnership or other action, (c) require no action by or in respect of, or filing with, any governmental body, agency or official and (d) do not and will not contravene, or constitute a default under, any Applicable Law or of the partnership agreement or other organizational document of Borrower or such Subsidiary or Subpartnership or of any agreement, judgment, injunction, order, decree or other instrument binding upon Borrower or such Subsidiary or Subpartnership or result in the creation or imposition of any Lien on any asset of Borrower or such Subsidiary or Subpartnership. As of the date hereof, Holdings I is the sole general partner of Borrower and possesses the sole authority to execute and deliver the Loan Documents on behalf of Borrower. The execution and delivery by CBL Properties, Inc. and/or Holdings I on behalf of Borrower of the Loan Documents and the Collateral Documents (when executed and delivered pursuant to the Original Credit Agreement and/or this Agreement) are within CBL Properties, Inc.'s and/or Holdings I's corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official and do not and will not contravene, or constitute a default under, Applicable Law or of the Certificate of Incorporation or By-laws of CBL Properties, Inc. and/or Holdings I or of any agreement, judgment, injunction, order, decree or other instrument binding upon CBL Properties, Inc. and/or Holdings I or result in the creation or imposition of any Lien on any asset of CBL Properties, Inc. and/or Holdings I. The execution and delivery by Holdings I on behalf of Borrower of this Agreement (when executed and delivered pursuant to this Agreement) are within Holdings I's corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official and do not and will not contravene, or constitute a default under, any Applicable Law or of the Certificate of Incorporation or By-laws of Holdings I or of any agreement, judgment, injunction, or order, or result in the imposition or creation of any Lien on any asset of Holdings I. SECTION 5.3 Binding Effect. This Agreement constitutes a valid and binding agreement of Borrower and the other Loan Documents (when executed and delivered in accordance with the Original Credit Agreement and/or this Agreement) do and will constitute valid and binding obligations of Borrower, enforceable in accordance with their respective terms, except as may be limited by bankruptcy, insolvency, and other similar laws affecting the rights of creditors generally. All Collateral Documents, when executed and delivered in accordance with the Original Credit Agreement, the First Amended and Restated Credit Agreement and/or this Agreement, do and will constitute valid and binding obligations of Borrower and/or the Subsidiary or Subpartnership which is a party thereto enforceable in accordance with their respective terms, except as may be limited by bankruptcy, insolvency, and other similar laws affecting the rights of creditors generally. SECTION 5.4 Financial Information. (a) The balance sheet of Borrower as of June 30, 1996 and the related statements of funds from operations, stockholders' equity and cash flows for the fiscal year then ended, certified by Borrower's Chief Financial Officer 45 or Controller, and filed with the Securities and Exchange Commission, copies of which have been delivered to Agent, fairly present, in conformity with GAAP (as modified by the rules and regulations of the Securities and Exchange Commission and the New York Stock Exchange), the financial position of Borrower as of such date and its results of operations and cash flows for such fiscal year. (b) Between June 30, 1996 and the Effective Date, there has been no material adverse change in the business, properties, financial position, results of operations or prospects of CBL Properties, Inc., Holdings I, Borrower, the Subpartnerships or any of their respective Subsidiaries, taken as a whole. SECTION 5.5 Litigation. Except as set forth in Schedule 5.5 attached hereto, there are no actions, suits or proceedings of a material nature pending or threatened in writing against or affecting Borrower, Holdings I, CBL Properties, Inc., any of their respective Subsidiaries or the Collateral before any court or arbitrator or any governmental body, agency or official which (a) could have a material adverse effect on the business, properties, financial position, results of operations or prospects of Borrower, Holdings I, CBL Properties, Inc. and their respective Subsidiaries other than a material adverse effect which Borrower has fully disclosed to the Agent unless the Agent notifies Borrower that Agent has determined that such material adverse effect is likely to result in a future Default or Event of Default under any covenant set forth in Section 8 hereof; (b) could have a material adverse effect on any Eligible Project; or (c) in any manner draw into question the validity of any Loan Document or Collateral Document or the priority of any Lien, Mortgage or security interest created hereby or pursuant to the Collateral Documents; and, subject to the provisions of Section 5.7 hereof, to the best knowledge of Borrower, no event has occurred which will violate, be in conflict with, result in the breach of or constitute (with due notice or lapse of time, or both) a default of a material nature under Applicable Law or result in the creation or imposition of any Lien, charge or encumbrance of any nature whatsoever on the Collateral. SECTION 5.6 ERISA. Except as set forth on Schedule 5.6 hereof, neither Borrower nor any ERISA Affiliate maintains, or participates in, and has not at any time maintained or participated in, any ERISA Plan. SECTION 5.7 Hazardous Substances. Borrower warrants, represents and agrees as follows: (a) Borrower has had performed reasonable investigations, studies and tests as to any environmental contamination, liabilities or problems with respect to the Collateral, including without limitation, the storage, disposal, presence, discharge or release of any Hazardous Substances at or with respect to the Collateral, copies of which have been provided to the Agent prior to the date hereof, and, except as otherwise set forth in the Mortgages, such investigations, studies, and tests have disclosed no Hazardous Substances or possible violations of any Environmental Laws. (b) No personal or real property owned by Borrower or any of its Subsidiaries is subject to any private or governmental Lien, or to the 46 best of Borrower's knowledge judicial or administrative notice or action relating to Hazardous Substances or environmental problems, impairments or liabilities with respect to such property or the direct or indirect violation of any Environmental Laws, in each case which could have a material adverse effect on the business, properties, financial position, results of operations or prospects of Borrower, Holdings I, CBL Properties, Inc. and their respective Subsidiaries other than a material adverse effect which Borrower has fully disclosed to the Agent unless the Agent notifies Borrower that Agent has determined that such material adverse effect is likely to result in a future Default or Event of Default under any covenant set forth in Section 8 hereof; (c) Except as disclosed in the Mortgages, no Hazardous Substances are located on or have been stored, processed or disposed of on or released or discharged from (including ground water contamination) the Collateral and no above or underground storage tanks exist on the Collateral. Borrower shall not allow, and shall not permit its Subsidiaries to allow, any Hazardous Substances to be stored, located, discharged, possessed, managed, processed or otherwise handled on any of their properties or the Collateral other than small quantities which are utilized in the ordinary course of business of such properties, and which are used and disposed of in a lawful manner, and shall comply, and cause said Subsidiaries to comply, with all Environmental Laws affecting such properties or the Collateral. (d) Borrower shall immediately notify Agent should Borrower become aware of (i) the existence of any Hazardous Substance in, on or beneath any of its properties or the properties of its Subsidiaries in violation of any Environmental Law, or any other violation of any Environmental Law with respect to such properties, (ii) any "release" or threatened "release" (as defined in CERCLA and rules and regulations promulgated thereunder) of any Hazardous Substances on or from the Collateral or any other real property owned by Borrower or any of its Subsidiaries, or (iii) any Lien, action, or notice of the nature described in subparagraph (b) above, in each case which could have a material adverse effect on the business, properties, financial position, results of operations or prospects of Borrower, Holdings I, CBL Properties, Inc. and their respective Subsidiaries other than a material adverse effect which Borrower has fully disclosed to the Agent unless the Agent notifies Borrower that Agent has determined that such material adverse effect is likely to result in a future Default or Event of Default under any covenant set forth in Section 8 hereof. Upon the occurrence of any such event, Borrower shall, and shall cause its Subsidiaries, at its or such Subsidiary's own cost and expense, take all actions as shall be necessary or advisable for the clean-up of any such property including all removal, containment and remedial actions to the extent required by applicable Environmental Laws, and shall further pay or cause to be paid at no expense to Agent and other Lenders all clean-up, administrative, and enforcement costs of applicable government agencies asserted against such property or the owner thereof. All costs, including, without limitation, those costs set forth above, damages, liabilities, losses, claims, expenses (including reasonable attorneys' fees actually incurred and disbursements) which are incurred by Agent (except to the extent resulting from the gross negligence or willful misconduct of Agent), without requirement of waiting for the ultimate outcome of any other proceeding, shall be paid by Borrower to Agent as incurred within ten (10) days after notice from Agent itemizing the amounts incurred to the date of such notice. (e) Upon reasonable prior notice to Borrower, and subject to the rights of tenants, Agent or its representatives may from time to time (whether before or after the commencement of a nonjudicial or judicial 47 proceeding) enter and inspect Collateral for the purpose of determining the existence, location, nature and magnitude of any past or present release or threatened release of any Hazardous Substance into, onto, beneath or from such properties. Except in cases of emergency, any such inspection shall be conducted in a manner which does not unreasonably interfere with the operation of the Collateral. All warranties and representations contained in this Section 5.7 shall be deemed to be continuing and shall remain true and correct in all material respects until the Indebtedness has been paid in full and any limitations period expires. Notwithstanding anything to the contrary contained herein or in any of the other Loan Documents, Borrower's agreements and Borrower's indemnification of Lenders contained in this Section 5.7 shall survive the exercise of any remedy by Agent under any of the Collateral Documents, including foreclosure (or deed in lieu thereof), even if, as a part of such foreclosure or deed in lieu of foreclosure, the Indebtedness is satisfied in full, but only with respect to liability or costs arising as a result of events occurring prior to the date upon which Borrower and its Subsidiaries, are divested of title to the Collateral whether voluntarily, involuntarily or by operation of law. SECTION 5.8 Taxes and Other Payments. As of the date hereof, no United States federal income tax returns of the "affiliated group" (as defined in the Internal Revenue Code) of which Borrower is a member have been examined and closed. To the best of Borrower's knowledge, each member of such affiliated group, including Borrower, have filed all federal, state, county, municipal and city income and other tax returns required to have been filed by it and has paid all taxes which have become due pursuant to such returns or pursuant to any assessments received by it, and each member, including Borrower, does not know of any basis for any material additional assessment in respect of any such taxes. Borrower has paid or will pay (or has caused to be paid or will be caused to be paid) in full (except for such retainages as may be permitted or required by any Legal Requirement to be withheld pending completion of any improvements) all sums by Borrower or its Affiliates owing or claimed from Borrower or such Affiliates for labor, material, supplies, personal property (whether or not forming a fixture hereunder) and services of every kind and character used, furnished or installed in or on the Collateral and no claim for same exists or will be permitted to be created; provided, however, that Borrower may contest such amounts in good faith by appropriate proceedings so long as Borrower provides Agent adequate security therefor. SECTION 5.9 Not an Investment Company. None of Holdings I, Borrower, any of its Subsidiaries or CBL Properties, Inc. is an "investment company" within the meaning of the Investment Company Act of 1940, as amended. SECTION 5.10 Information. All information, reports, papers and data given to Agent with respect to Holdings I, CBL Properties, Inc., Borrower, their respective Subsidiaries or others obligated under the terms of the Original Credit Agreement, this Agreement, the other Loan Documents or the Collateral Documents are, or at the time of delivery will be, when taken as a whole, accurate, complete and correct in all material respects and do not, or will not, omit any fact, the inclusion of which is necessary to prevent the facts contained therein from being materially misleading; all financial data have been, or when delivered will have been, prepared in accordance with GAAP consistently applied and fully and accurately present, or will present, in all material respects, the financial condition of the subjects thereof as 48 of the dates thereof; and with respect to the financial data heretofore furnished, no material adverse change has occurred in the financial conditions reflected therein since the dates thereof other than a material adverse change which Borrower has fully disclosed to the Agent unless the Agent notifies Borrower that Agent has determined that such material adverse effect is likely to result in a future Default or Event of Default under any covenant set forth in Section 8 hereof. SECTION 5.11 Insurance. Schedule 5.11 sets forth a true and correct description of the insurance coverage maintained by or on behalf of Borrower and its Subsidiaries currently in effect. SECTION 5.12 Liens. The liens and security interests granted to Agent pursuant to the Collateral Documents (when executed and delivered to Agent pursuant to the Original Credit Agreement, the First Amended and Restated Credit Agreement and/or this Agreement) are valid and enforceable first priority liens and security interests subject only to Permitted Liens. SECTION 5.13 Title to the Projects. Borrower or a Wholly Owned Subsidiary of Borrower or a Subpartnership holds full legal and equitable title to the Eligible Projects subject only to Liens permitted by Section 6.17 hereof. SECTION 5.14 Governmental Requirements. To the best knowledge of Borrower, no violation of any material governmental requirement exists with respect to the Eligible Projects, and the use or anticipated use thereof complies with applicable zoning ordinances, regulations and restrictive covenants affecting such Projects, and all governmental requirements for such use have been satisfied, except where such violation or noncompliance could not (a) have a material adverse effect on the business, properties, financial position, results of operations or prospects of Borrower, Holdings I, CBL Properties, Inc. and their respective Subsidiaries other than a material adverse effect which Borrower has fully disclosed to the Agent unless the Agent notifies Borrower that Agent has determined that such material adverse effect is likely to result in a future Default or Event of Default under any covenant set forth in Section 8 hereof; (b) have a material adverse effect on any Eligible Project; or (c) in any manner draw into question the validity of any Loan Document or Collateral Document or the priority of any Lien, Mortgage or security interest created hereby or pursuant to the Collateral Documents. SECTION 5.15 ERISA; Plan Assets. Borrower is a not an "employee benefit plan" as defined in Section 3(3) of ERISA and the assets of Borrower do not constitute "plan assets" within the meaning of 29 C.F.R. 2510.3-101. The execution, delivery and performance of this Agreement, and the borrowing and repayment of amounts thereunder, do not and will not constitute on the part of Borrower "prohibited transactions" under ERISA or the Internal Revenue Code. 49 ARTICLE 6. COVENANTS Borrower agrees that, so long as Lenders have any Commitment hereunder, any of the Obligations remain unpaid or any Letter of Credit remains outstanding, unless the Majority Lenders otherwise agree in writing: SECTION 6.1 Reporting Requirements. Borrower shall deliver to Agent (with copies for each Lender): (a) as soon as available and in any event within one hundred twenty (120) days after the end of each fiscal year of Borrower, Combined audited annual financial statements of Borrower, Holdings I, Holdings II and CBL Properties, Inc., for such fiscal year, consisting of Combined balance sheet of the end of such fiscal year and the related Combined statements of income and retained earnings and Combined statements of cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, and accompanied by the materially unqualified opinion of Arthur Anderson & Co. or any other nationally recognized firm of independent certified public accountants regularly retained by Borrower and acceptable to the Majority Lenders; (b) as soon as available and in any event within sixty (60) days after the end of each fiscal quarter of Borrower, Combined interim unaudited financial statements of Borrower, Holdings I, Holdings II and CBL Properties, Inc., including Combined balance sheets, Combined statements of income and retained earnings and Combined statements of cash flow, for the quarter and year-to-date period then ended, prepared in accordance with GAAP, setting forth in comparative form the figures for the corresponding quarter and the corresponding portion of Borrower's previous fiscal year, all certified (subject to normal year-end adjustments) by the chief financial officer or the chief accounting officer of Borrower; (c) simultaneously with the delivery the financial statements referred to in clauses (a) and (b) above, a certificate of the chief financial officer or the chief accounting officer of Borrower (i) setting forth in reasonable detail the calculations required to establish whether Borrower was in compliance with the requirements of Sections 6.8, 6.11 through 6.15 and 6.18 on the date of such financial statements, (ii) stating whether, to the actual knowledge of such officer, any Default or Event of Default exists on the date of such certificate and, if any Default or Event of Default then exists, setting forth the details thereof and the action which Borrower is taking or proposes to take with respect thereto, and (iii) setting forth a schedule of all Contingent Obligations of Borrower as of the date of such financial statements; (d) as soon as available and in any event within forty five (45) days after the end of each fiscal quarter of Borrower, a Borrowing Base report, certified by the chief financial officer or the chief accounting officer of Borrower, setting forth in reasonable detail the calculations required to establish the Borrowing Base for each Eligible Project and the Borrowing Base for all Eligible Projects as of the last day of such quarter, all in reasonable detail and satisfactory to Agent; provided, however, that any change in the Borrowing Base reflected in such Borrowing Base report shall 50 not become effective until Agent notifies Borrower in writing of Agent's approval of such Borrowing Base report. Agent shall use its reasonable efforts to notify Borrower of its approval or non-approval of the Borrowing Base report within ten (10) business days after Agent's receipt of the Borrowing Base report, together with a statement, in reasonable detail, of the reasons for any non-approval of such report; (e) simultaneously with the delivery of each set of financial statements referred to in clause (a) above, a statement of the firm of independent public accountants which reported on such statements (i) whether anything has come to their attention in the normal course of their audit to cause them to believe that any Default or Event of Default existed on the date of such statements and (ii) confirming the calculations set forth in the officer's certificate delivered simultaneously therewith pursuant to clause (c) above; (f) simultaneously with the delivery of each set of financial statements referred to in clause (b) above, a certificate of the chief financial officer or the chief accounting officer of Borrower, certifying as to each Reserved Construction Loan: (i) that, to the actual knowledge of such officer, no monetary or material non-monetary default or event of default exists thereunder; (ii) the amount currently available in the interest reserve available for the payment of interest on such Reserved Construction Loan; (iii) an updated cash flow projections for the project being constructed with the proceeds of such Reserved Construction Loan, setting forth the assumptions on which such projections are based; (iv) the outstanding principal balance of such Reserved Construction Loan; (v) the undisbursed amount of such Reserved Construction Loan (other than such interest reserve); and (vi) such other matters as the Agent or the Majority Lenders may reasonably request; (g) as soon as available and in any event within one hundred twenty (120) days after the end of each fiscal year of Borrower, all financial information of Borrower, Holdings I, Holdings II, CBL Properties, Inc., CBL Management Inc., and the Eligible Projects as Agent shall reasonably request and as shall be reasonably available to Borrower, Holdings I, Holdings II, CBL Properties, Inc. or CBL Management, Inc.; (h) within forty five (45) days after the end of each fiscal quarter, operating statements for each Eligible Project for such quarter and for the year-to-date period then ended, together with a rent roll, lease expiration report (unless included in the rent roll) and leasing status report for each Eligible Project; (i) promptly after obtaining actual knowledge of any Default or Event of Default, a certificate of the controller or senior vice-president in accounting of Borrower setting forth the details thereof and the action which Borrower is taking or proposes to take with respect thereto; (j) promptly upon the filing thereof, copies of all registration statements (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or their equivalents) which CBL Properties, Inc., Holdings I, Holdings II, Borrower or any of their respective Affiliates shall have filed with the Securities and Exchange Commission; 51 (k) promptly upon the consummation thereof, a description in reasonable detail of any acquisition of assets in excess of $35,000,000.00 in a single transaction or related series of transactions; (l) promptly upon obtaining actual knowledge thereof, a description in reasonable detail of any event or condition which could materially adversely affect the business, properties, financial position, results of operations or prospects of Borrower or which in any material manner draws into question the validity of any Loan Document; (m) from time to time such additional information regarding the financial position or business of Borrower, its Affiliates or any Project as Agent may reasonably request, to the extent such information is reasonably available to Borrower; (n) concurrently with, subject to the requirements of the Securities and Exchange Commission or any securities exchange on which CBL Properties, Inc.'s securities are traded, issuance to analysts and the media (after notification of the New York Stock Exchange and release to an established wire service recognized as an official disclosure source) of any press release concerning Borrower, telecopy notice of such press release and the contents thereof. SECTION 6.2 Payment and Performance. Borrower shall pay and discharge, and shall cause each of its Subsidiaries to pay and discharge, at or before maturity, subject to any applicable notice and grace periods, all material obligations and liabilities, including, without limitation, tax liabilities, except where the same may be contested in good faith by appropriate proceedings, and will maintain, in accordance with GAAP, appropriate reserves for the accrual of any of the same; and shall pay the Indebtedness, as and when called for in this Agreement, and on or before the due dates thereof, subject to any applicable notice and grace periods, and will perform all of the Obligations in full and on or before the dates same are to be performed subject to any applicable notice and grace periods. SECTION 6.3 Maintenance of Property; Insurance. (a) Borrower shall keep, or cause to be kept, all Collateral in good working order and condition, ordinary wear and tear and insured casualty losses excepted. (b) Borrower shall obtain and maintain, or cause to be obtained and maintained, insurance upon and relating to the Collateral, insuring against personal injury and death, loss by fire and such other hazards, casualties and contingencies (including business interruption insurance covering loss of rents for a period of twelve [12] months and builder's all risk coverage) as are normally and usually covered by extended coverage policies in effect where the Collateral is located and such other risks as may be reasonably specified by Agent, from time to time, all in such amounts and with such insurers of recognized responsibility as are reasonably acceptable to Agent. Each insurance policy covering the Collateral issued in connection therewith shall provide by way of endorsements, riders or otherwise that (a) proceeds will be payable to Agent as its interest may appear, it being agreed by Borrower and Agent that such payments, less Agent's expenses in collecting such insurance proceeds, shall be applied, to the restoration, repair or replacement of the Collateral to the extent provided for in the Collateral 52 Documents encumbering such Collateral, provided, however, notwithstanding anything to the contrary contained herein or in the Collateral Documents, so long as no Default or Event of Default is then in existence, Borrower may instruct Agent to apply all or any portion of casualty insurance proceeds held by Agent in connection with damage to an Eligible Project to prepayment of the Loan. In the event Borrower so instructs Agent to apply insurance proceeds to the prepayment of the Loan, the Borrowing Base shall be reduced by the amount of insurance proceeds so applied; provided however, that notwithstanding such reduction in the Borrowing Base, Borrower may reborrow, in accordance with the terms hereof, an amount not greater than the amount of such proceeds so applied to prepayment of the Loan, so long as the amount so reborrowed is used for the restoration of the Eligible Project giving rise to such proceeds in the manner required under the Collateral Documents, and upon full restoration, the Borrowing Base shall be increased by an amount equal to the prior reduction. SECTION 6.4 Business; Existence. Neither Borrower nor any of its wholly Owned Subsidiaries nor any Subpartnership shall engage to any substantial extent in any line or lines of business other than the businesses of owing, managing, leasing and operating regional malls and retail strip shopping centers and other related businesses to the extent incidental to the conduct of any of the foregoing businesses. Except as otherwise expressly permitted by the terms of this Agreement, Borrower shall, and shall cause each of its Wholly Owned Subsidiaries and each Subpartnership to, preserve and keep in full force and effect its existence, rights, franchises and trade names. SECTION 6.5 Payment of Impositions. Borrower shall duly pay and discharge, or cause to be paid and discharged, all Impositions not later than the due date thereof, or the day prior to the day any fine, penalty, interest or cost may be added thereto or imposed, or the day prior to the day any Lien may be filed, for the nonpayment thereof (if such day is used to determine the due date of the respective item); provided, however, that Borrower may, if, to the extent and in the manner permitted by law, (a) pay the Impositions in installments, whether or not interest shall accrue on the unpaid balance of such Impositions, if such installment payment would not create or permit the filing of a Lien against the Collateral, and (b) contest the payment of any Impositions in good faith and by appropriate proceedings provided that: (i) any such contests shall be prosecuted diligently and in a manner not prejudicial to the rights, liens and security interests of Agent, (ii) Borrower shall deposit funds with Agent or obtain a bond in form and substance and with an issuing company reasonably satisfactory to Agent in an amount sufficient to cover any amounts which may be owing in the event the contest may be unsuccessful (Borrower agreeing to make such deposit or obtain such bond, as the case may be, within five (5) days after demand therefor and that, if made by payment of funds to Agent, the amount so deposited shall be disbursed in accordance with the resolution of the contest either to Borrower or the adverse claimant), (iii) no contest may be conducted and no payment may be delayed beyond the date on which the Collateral could be sold for nonpayment (provided however, that such contest may be continued beyond such date so long as Borrower provides assurances, by bond, payment or otherwise, that the Collateral will not be so sold) and (iv) Agent may pay over to the taxing authority entitled thereto any or all of the funds at any time when, in the opinion of Agent's counsel, the entitlement of such authority to such funds is established and no reasonable avenues for contesting such entitlement are available to Borrower. Subject to Borrower's right to contest as provided for herein, Borrower shall submit to Agent copies of tax 53 statements and paid tax receipts evidencing the due and punctual payment of all real estate and personal property taxes, charges and assessments levied upon or assessed or charged against the Collateral on or before thirty (30) days of the delinquent date of any such taxes. SECTION 6.6 Compliance with Legal Requirements. Borrower shall, and shall cause each Wholly Owned Subsidiary or Subpartnership owing any of the Collateral to, promptly and faithfully comply with, conform to and obey all present and future material Legal Requirements, whether or not same shall necessitate structural changes in, improvements to, or interfere with the use or enjoyment of the Collateral; provided, however, that Borrower may contest a Legal Requirement in good faith by appropriate proceedings; provided further, that with respect to Legal Requirements affecting any portion of the Collateral (or any other property of Borrower) which is leased to a financially capable tenant, if such Lease provides that compliance with such Legal Requirement is the obligation of the tenant thereunder, Borrower shall be deemed to comply with its obligations under this Agreement with respect to such Legal Requirement if Borrower is continuing to exercise in good faith any remedies it may have under said Lease to compel such tenant to comply with such Legal Requirement. SECTION 6.7 Inspection of Property, Books and Records. Borrower will keep, and will cause each Subsidiary to keep, proper books of record and account in which full, true and correct entries shall be made of all dealings and transactions in relation to its business and activities; and will permit, and will cause each Subsidiary to permit, representatives of Agent to visit and inspect any of their respective properties, to examine and make abstracts from any of their respective books and records and to discuss their respective affairs, finances and accounts with their respective officers, employees and independent public accountants, all at such reasonable times and as often as may reasonably be desired. SECTION 6.8 Indebtedness. Borrower shall not incur, assume or suffer to exist any outstanding Indebtedness bearing interest at a variable rate that fluctuates during the scheduled life of such Indebtedness (other than Indebtedness under Reserved Construction Loans) in an aggregate principal amount in excess of twenty-five percent (25%) of Gross Asset Value at any one time outstanding unless Borrower has obtained an interest rate swap, cap or collar agreement or similar arrangement with a recognized investment grade financial institution which prevents the all-in effective interest rate payable by Borrower in respect of the principal amount of such Indebtedness in excess of twenty-five percent (25%) of Gross Asset Value (including base rate, applicable margin and reserve and similar costs) from increasing above ten percent (10%) per annum. SECTION 6.9 Consolidations, Mergers and Sales of Assets. Borrower shall not and shall not permit its Subsidiaries to, (i) consolidate or merge with or into any other Person (other than Borrower or another Subsidiary) (ii) sell, lease or otherwise transfer, directly or indirectly, any of its real estate properties or investments in ventures holding such properties to any other Person, other than in the ordinary course of business. SECTION 6.10 Use of Proceeds. The proceeds of the Advances made under this Agreement shall be used by Borrower (a) for the payment of pre- development and development costs incurred in connection with the Projects or proposed Projects; (b) to finance acquisitions and loans permitted by 54 Section 6.11 hereof; (c) to pay Indebtedness of Borrower and its Subsidiaries; (d) to make equity Investments permitted hereunder (e) to provide for the general working capital needs of Borrower and its Subsidiaries; and (f) to make dividend payments; provided, however, that (i) proceeds of Advances may not be used to make dividend payments (A) more than twice during any calendar year; or (B) in respect of two (2) consecutive fiscal quarters of Borrower. No portion of the proceeds of any Advance may be used by Borrower in any manner which would cause such Loan or the application of the proceeds thereof to violate any of Regulations G, T, U or X of the Board of Governor of the Federal Reserve System. SECTION 6.11 Investment Concentration. (a) Borrower shall not make, and shall not permit any of its Subsidiaries to make, any Investment in the following items which would cause the value of such holdings of Borrower to exceed the following percentages of Borrower's Gross Asset Value: (i) raw land, such that the aggregate book value of all such raw land (other than: (A) raw land subject to a ground lease under which Borrower is the landlord and a Person not an Affiliate of Borrower is the tenant; (B) land on which development of a Project has commenced; (C) land subject to a binding contract of sale under which the Borrower or one of its Subsidiaries is the seller, the buyer is not an Affiliate of Borrower and (D) out-parcels held for lease or sale) exceeds ten percent (10%) of Gross Asset Value; (ii) developed real estate used primarily for non-retail purposes, such that the aggregate book value of such real estate (other than the real estate located at 6148 Lee Highway, Chattanooga, Tennessee) exceeds ten percent (10%) of Gross Asset Value; (iii) Capital Stock of any Person, such that the aggregate value of such Capital Stock in Unconsolidated Affiliates other than CBL Management, Inc., calculated on the basis of the lower of cost or market, exceeds ten percent (10%) of Gross Asset Value; (iv) Mortgages, such that the aggregate principal amount secured by Mortgages acquired by Borrower after September 26, 1996 exceeds ten percent (10%) of Gross Asset Value; (v) Investments made after the date hereof in partnerships, joint ventures and other non-corporate Persons accounted using the equity basis of accounting (determined in accordance with GAAP), such that the aggregate outstanding amount of such Investments (other than Investments in (A) partnerships in which (I) Borrower is the sole general partner and the only limited partners are either (a) the Person from whom the real estate owned by such Partnership was purchased, and such Person's successors and assigns or (b) a Person operating stores which anchor the development constructed or to be constructed by such partnership or (II) Borrower owns not less than ninety percent (90%) of the partnership interests and has the unilateral right to make all operational and strategic decisions, or (B) partnerships, joint ventures and other non-corporate Persons whose financial reports are prepared on a consolidated basis with Borrower) exceeds fifteen percent (15%) of Gross Asset Value; 55 (vi) items described in subsections (i), (ii), (iii) and (v) of this Section 6.11(a), such that the aggregate value thereof, determined in accordance with such subsections, exceeds thirty percent (30%) of Gross Asset Value. (b) Neither Borrower nor any of its Subsidiaries shall acquire the business of or all or substantially all of the assets or stock of any Person, or any division of any Person, whether through Investment, purchase of assets, merger or otherwise; provided that Borrower or its Subsidiaries may make such an acquisition so long as Borrower has delivered to Agent, not less than thirty (30) days prior to the date such acquisition is consummated, (i) all information related to such acquisition as is reasonably requested by the Agent and (ii) a certificate, signed by the chief financial officer of Borrower, certifying that, giving effect to such acquisition, there shall not exist any Default or Event of Default hereunder and setting forth in reasonable detail the calculations setting forth, on a pro forma basis giving effect such acquisition, Borrower's compliance with Sections 6.8, 6.11, 6.12, 6.13, 6.14, 6.15, 6.17 or 6.18; and SECTION 6.12 Total Obligations to Gross Asset Value. Borrower shall not at any time permit the ratio of (a) Total Obligations to (b) Gross Asset Value to exceed 0.60 to 1.00. SECTION 6.13 Minimum Net Worth. Borrower shall not permit Net Worth at any time to be less than an amount equal to $315,330,052 plus fifty percent (50%) of the net proceeds or value (whether cash, property or otherwise) received by CBL Properties, Inc., Holdings I, Holdings II or Borrower from any issuance after September 26, 1996 of any shares of Capital Stock of CBL Properties, Inc., any operating partnership units of Borrower or any shares of Capital Stock or other equity interest in any Subsidiary of Borrower. SECTION 6.14 Interest Coverage Ratio. Borrower shall not permit, as of the last day of any fiscal quarter, the Interest Coverage Ratio to be less than 2.0 to 1.0. SECTION 6.15 Debt Coverage Ratio. Borrower shall not permit, as of the last day of any fiscal quarter of Borrower, the Debt Coverage Ratio to be less than 1.75 to 1.0. SECTION 6.16 ERISA. Borrower will operate, or will cause its ERISA Affiliates to operate, each ERISA Plan described on Schedule 5.6, and each ERISA Plan that either Borrower or its ERISA Affiliates may adopt, sponsor or participate in after the Effective Date, in accordance with the terms of such ERISA Plan and in accordance with all applicable requirements of ERISA and the Internal Revenue Code. SECTION 6.17 Liens. Borrower shall not create, assume or suffer to exist and shall not permit any Subsidiary to create, assume or suffer to exist, any Lien securing Indebtedness on any of the Collateral, except for (a) Permitted Liens; and (b) Liens to secure Indebtedness incurred for common area maintenance, improvements and leasing costs provided that: (i) such Lien is expressly subordinate, on terms and conditions satisfactory to the Agent and the Majority Lenders, to the Lien created by the Collateral Documents; (ii) the principal amount of such Indebtedness, and all interest thereon, can be repaid from common area maintenance charges or from additional rental charges (not a part of a rent for such Project used most recently to determine the Appraised Value of such Project) specifically dedicated to the repayment of such Indebtedness; and (iii) in the case of leasing costs, such 56 Indebtedness does not exceed, in respect of any single Project, $3,000,000 in aggregate principal amount at any one time outstanding. SECTION 6.18 Restricted Payments. (a) Borrower shall not directly or indirectly declare or make, or incur any liability to make, any cash or other distributions on, or in respect of, any partnership interest in Borrower, or other payments or transfers made in respect of the redemption, repurchase or acquisition of such partnership interests, except for distributions in an aggregate amount not to exceed during any fiscal year ninety-five percent (95%) of Funds from Operations for such fiscal year. (b) Borrower shall not enter into any transaction with, or pay any management or other fees to, any Affiliate, except, so long as Borrower effectively receives at least 99% of the economic benefit thereof, management or other fees payable to CBL Management, Inc. SECTION 6.19 Year 2000 Compliance . Borrower shall ensure that the following are Year 2000 Compliant in a timely manner, but in no event later than December 31, 1999: (a) the Projects; (b) Borrower itself and its Affiliates (including, without limitation, its Subsidiaries and the Subpartnerships); and (c) any other major commercial properties and entities in which Borrower holds a controlling interest. Borrower shall further make reasonable inquiries of and request reasonable validation that each of the following are similarly Year 2000 Compliant: (x) all major tenants or other entities from which Borrower or its Affiliates receives payments; and (y) all major contractors, suppliers, service providers and vendors of Borrower and its Affiliates. As used in this paragraph, "major" shall mean properties or entities the failure of which to be Year 2000 Compliant would have a material adverse economic impact upon Borrower or any Affiliate of Borrower. The term "Year 2000 Compliant" shall mean, in regard to any property or entity, that all software, hardware, equipment, goods or systems utilized by or material to the physical operations, business operations, or financial reporting of such property or entity (collectively the "systems") will properly perform date sensitive functions before, during and after the year 2000. In furtherance of this covenant, Borrower shall, in addition to any other necessary actions perform a comprehensive review and assessment of all systems of Borrower, its Affiliates and the Projects. Borrower shall, within thirty business days of Lender's written request, provide to Lender such certifications or other evidence of Borrower's compliance with the terms of this paragraph as Lender may from time to time reasonably require. ARTICLE 7. DEFAULTS SECTION 7.1 Events of Default. It shall be an event of default ("Event of Default") if one or more of the following events shall have occurred and be continuing: (a) Borrower shall fail, refuse or neglect to pay, in full, any installment or portion of the Obligations as and when the same shall become due and payable, whether at the due date thereof stipulated in this Agreement or the Notes, or at a date fixed for prepayment, or by acceleration or otherwise, and such failure, refusal or neglect continues for a period of 57 fifteen (15) days after notice thereof from Agent; provided, however, that Agent shall not be required to give such notice more than twice during any twelve consecutive month period; provided, further, that if such installment or portion of the Obligations becomes due and payable as a result of Agent's accelerating the maturity of the Obligations in accordance with the this Agreement, neither any requirement of notice nor the fifteen (15) day grace/cure period for payment set forth in this Section 7.1(a) shall apply to the accelerated due date; (b) Borrower or any of its Subsidiaries shall fail to observe or perform any covenant or agreement contained in Sections 6.8, 6.11, 6.12, 6.13, 6.14, 6.15, 6.17 or 6.18 hereof and such failure shall continue for ninety (90) days after the earlier of (i) the date any Senior Officer of Borrower has actual knowledge of such failure or (ii) the date written notice of such failure has been given to Borrower by Agent; (c) Borrower or any of its Subsidiaries shall fail to observe or perform any covenant or agreement contained in this Agreement (other than those covered by clause (a) or (b) above) for thirty (30) days after written notice thereof has been given to Borrower by Agent; provided; however, that is such failure is curable but requires work to be performed, acts to be done or conditions to be remedied which, by their nature, cannot be performed, done or remedied, as the case may be, within such thirty (30) day period, no Event Default shall be deemed to have occurred if Borrower or its Subsidiaries commence same within such thirty (30) day period and continuously prosecute the same to completion within ninety (90) days after such notice. (d) Borrower, Holdings I, CBL Properties, Inc. or any of their Subsidiaries shall fail to observe or perform any covenant or agreement contained in any of the Collateral Documents, or there occurs any other default under any of the Collateral Documents, and such failure or default shall continue beyond any applicable grace or cure period; (e) any representation, warranty or statement made by Borrower, Holdings I, CBL Properties, Inc. or any of their Subsidiaries in, under or pursuant to this Loan Documents or the Collateral Documents or any affidavit or other instrument executed in connection with the Loan Documents or Collateral Documents shall be false or misleading in any material respect as of the date hereof or shall become so at any time prior to the repayment in full of the Obligation and, except in the case of fraud, such breach is not cured with 30 days after the earlier of (i) the date any Senior Officer of Borrower, Holdings I or CBL Properties, Inc. has actual knowledge of such breach or (ii) the date written notice of such breach is given to Borrower by Agent; (f) Borrower, Holdings I, CBL Properties, Inc. or any of their Subsidiaries shall default in the payment when due of any Indebtedness under any Guarantee, note, indenture or other agreement relating to or evidencing Indebtedness (other than Indebtedness which is fully non-recourse as to Borrower, Holdings I, CBL Properties, Inc. or such Subsidiary and which has a principal balance of less than any amount equal to $10,000,000.00 less the outstanding amount of Permitted Deficiencies), or any event specified in any Guarantee, note, indenture or other agreement relating to or evidencing any such Indebtedness shall occur if the effect of such event is to cause or to permit (giving effect to any grace or cure period applicable thereto) the holder or holders of such Indebtedness to cause such Indebtedness to become due, or to be prepaid in full (whether by redemption, purchase or otherwise), prior to its stated maturity; 58 (g) Borrower, Holdings I, Holdings II, CBL Properties, Inc. or any of their Significant Subsidiaries shall (1) voluntarily be adjudicated as bankrupt or insolvent, (2) file any petition or commence any case or proceeding under any provision or chapter of the Federal Bankruptcy Code or any other federal or state law relating to insolvency, bankruptcy, rehabilitation, liquidation or reorganization, (3) make a general assignment for the benefit of its or his creditors, (4) have an order for relief entered under the Federal Bankruptcy Code with respect to it or him, (5) convene a meeting of its or his creditors, or any class thereof, for the purpose of effecting a moratorium upon or extension or composition of its or his debts, (6) admit in writing that it or he is generally not able to pay its or his debts as they mature or generally not pay its or his debts as they mature, or (7) become insolvent; (h) (1) a petition is filed or any case or proceeding described in Section 7.1(g) above is commenced against Borrower, Holdings I, Holdings II, CBL Properties, Inc. or any of their Significant Subsidiaries, or against the assets of any such persons or entities and either an order for relief is granted or such petition and the case or proceeding initiated thereby is not dismissed within ninety (90) days from the date of the filing, (2) an answer is filed by Borrower, Holdings I, Holdings II, CBL Properties, Inc. or any of their Significant Subsidiaries, admitting the allegations of any such petition, or (3) a court of competent jurisdiction enters an order, judgment or decree appointing, without the consent of Borrower, Holdings I, Holdings II, CBL Properties, Inc. or any of their Significant Subsidiaries, a custodian, trustee, agent or receiver for it or him, or for all or any part of its or his property, or authorizing the taking possession by a custodian, trustee, agent or receiver of it or him, or all or any part of its or his property unless such appointment is vacated or dismissed or such possession is terminated within ninety (90) days from the date of such appointment or commencement of such possession, but not later than five (5) days before the proposed sale of any assets of Borrower, Holdings I, Holdings II, CBL Properties, Inc. or such Significant Subsidiary, by such custodian, trustee, agent or receiver, other than in the ordinary course of the business of Borrower, Holdings I, Holdings II, CBL Properties, Inc. or such Subsidiary; (i) one or more judgments or orders for the payment of money in excess of an amount equal to $10,000,000 less the outstanding amount of Permitted Deficiencies shall be rendered against Borrower, Holdings I, Holdings II, CBL Properties, Inc. or any of their Significant Subsidiaries and such judgment(s) or order(s) shall continue unbonded, unsatisfied and unstayed for a period of sixty (60) days; (j) the failure of Charles B. Lebovitz to remain active in the management of Borrower, Holdings I, Holdings II, CBL Properties, Inc. and CBL Management, Inc.; provided, however, that in the event of the death or incapacity of Charles B. Lebovitz, no Default or Event of Default shall arise solely by virtue of this clause (j) if either (i) Borrower, Holdings I, Holdings II, CBL Properties, Inc. and CBL Management, Inc. shall have each retained, within 180 days of the date of the death or incapacity of Charles B. Lebovitz, senior management having, in the reasonable opinion of the Agent and the Majority Lenders, sufficient skill and experience in Borrower's industry to manage Borrower competently and efficiently; or (ii) at least two of John N. Foy, Stephen Lebovitz, Michael Lebovitz and/or Ron Fullam (with 59 at least one of said two [2] being either John N. Foy or Stephen Lebovitz) remain active as Senior Officers of Borrower, CBL Properties, Inc., Holdings I, Holdings II, and CBL Management, Inc. (k) (1) Borrower, Holdings I, CBL Properties, Inc. or any of their Subsidiaries shall die, dissolve, terminate or liquidate, or merge with or be consolidated into any other entity (except as permitted by Section 6.9 hereof), or shall hypothecate, pledge, mortgage or otherwise encumber all or any part of the beneficial ownership interest in Borrower or shall attempt to do any of the same; or (2) Borrower or any of its Subsidiaries shall amend or modify, in a manner which would adversely affect Agent or the Lenders, its articles of incorporation, bylaws, articles of partnership, certificate of partnership or other charter or enabling documents, and Majority Lenders have not given its prior written consent to such amendments or modifications; (l) the failure of Charles B. Lebovitz, John N. Foy, Ben S. Landress, Stephen Lebovitz, Michael Lebovitz and/or Ron Fullam to own, directly or through CBL & Associates, Inc., beneficially and of record, at least twenty percent (20%) of the shares of equity of Borrower and CBL Properties, Inc., on a Combined basis (without giving effect to the issuance after the date hereof of stock of CBL Properties, Inc. at a price equal to the fair market value of such stock on the date of such issuance); the failure of Holdings I to be the sole general partner of Borrower; the failure of CBL Properties, Inc. to own one hundred percent (100%) of the voting shares of Holdings I and Holdings II; or the failure of Charles B. Lebovitz, John N. Foy, Ben S. Landress, Stephen Lebovitz, Michael Lebovitz and/or Ron Fullam to collectively own, beneficially and of record, with power to vote, an aggregate amount of at least fifty one percent (51%) of the shares of voting stock of CBL Management, Inc., unless such failure is the result of the merger of CBL Management, Inc. with and into Borrower or CBL Properties, Inc., with Borrower or CBL Properties, Inc. as the surviving Person; provided, however, that Charles B. Lebovitz, John N. Foy, Ben S. Landress, Stephen Lebovitz, Michael Lebovitz and Ron Fullam shall be deemed to own any equity interest so long as the same is owned by (i) such Person, (ii) a Subsidiary of such Person, (iii) a trust or similar entities in which such Person and members of such Person's family, including spouses, children, parents, siblings and their descendants, are the sole beneficiaries of all of the interest therein; (m) Borrower or any of its Subsidiaries shall fail to maintain the insurance coverage described in Schedule 5.11 as being maintained by it at the date of this Agreement or any insurer listed as providing any of such insurance coverage shall cease to have an A.M Best policyholders rating of at least A-IX (with respect to liability) or A-XII (with respect to property damage); provided that it shall not constitute an Event of Default hereunder if Borrower shall establish deductibles with respect to any such listed insurance not exceeding $50,000.00 per occurrence; or (n) the assets of Borrower, Holdings I, CBL Properties, Inc. or any of their Subsidiaries at any time constitute assets, within the meaning of ERISA, the Internal Revenue Code and the respective regulations promulgated thereunder, of any ERISA Plan or Non-ERISA Plan. (o) CBL Properties, Inc. shall (i) fail to have the shares of its Capital Stock listed for trading on the New York Stock Exchange or the American Stock Exchange, or the respective successors thereto; (ii) fail to remain qualified as a REIT under the Internal Revenue Code; or (iii) amend 60 or modify its Certificate of Incorporation in a manner which would adversely affect Agent or the Lenders except (A) with the prior written consent of the Majority Lenders; (B) to the extent required in order to remain qualified as a real estate investment trust under the Internal Revenue Code; or (C) to the extent required by Applicable Law. (p) Borrower shall cease to represent one hundred percent (100%) of the book value of Holdings I and Holdings II, or the revenues of Borrower for any fiscal year shall fail to represent one hundred percent (100%) of the total revenues of Holdings I and Holdings II for such fiscal year; or Holdings I and Holdings II shall cease to represent at least ninety percent (90%) of the book value of CBL Properties, Inc., or the revenues of Holdings I and Holdings II for any fiscal year shall fail to represent at least ninety percent (90%) of the total revenues of CBL Properties, Inc. for such fiscal year. (q) At any time, for any reason (i) subject to the provisions of Section 7.3 hereof, any Collateral Document or other Loan Document ceases to be in full force and effect in any material respect or (ii) Borrower or any Affiliate of Borrower seeks to repudiate its Obligations thereunder and the Liens intended to be created thereby are, or Borrower or any Affiliate of Borrower seeks to render such Liens, invalid and unperfected, or (iii) subject to the provisions of Section 7.3 hereof, Liens in favor of the Agent and/or Lenders contemplated by the Collateral Documents shall, at any time, for any reason, be invalidated or otherwise cease to be in full force and effect, or such Liens shall be subordinated or shall not have the priority contemplated by this Agreement or the other Loan Documents, and such Default under this item (ii) continues for thirty (30) days after written notice thereof has been given to Borrower Agent. (r) Holdings I shall cease to be a Wholly Owned Subsidiary of CBL Properties, Inc., unless such is the result of a merger of Holdings I into CBL Properties, Inc., or merger of Holdings I into another Wholly Owned Subsidiary of CBL Properties, Inc. SECTION 7.2 Remedies. Upon the occurrence of an Event of Default: (a) in the case of any Event of Default specified in clauses 7.1(g) or 7.1(h) above with respect to Borrower, Holdings I, Holdings II, CBL Properties, Inc. or any of their respective Significant Subsidiaries, the Commitments shall automatically terminate and the Obligations (together with accrued interest thereon) shall become immediately due and payable, without any notice to Borrower or any other act by Agent and without presentment, demand, protest, notice of intention to accelerate or notice of acceleration, or other notice of any kind, all of which are hereby waived by Borrower; (b) the Agent shall, at the direction of the Majority Lenders (i) by notice to Borrower terminate the Commitments, which shall thereupon terminate, and (ii) by notice to Borrower declare the Obligations (together with accrued interest thereon) to be, and the Obligations shall thereupon become, immediately due and payable without presentment, demand, protest, notice of intention to accelerate or notice of acceleration, or other notice of any kind, all of which are hereby waived by Borrower; and (c) the Agent may exercise any and all other rights and remedies granted to the Agent under this Agreement or under any of the Loan Documents or pursuant to law, all of which shall be cumulative and none of which shall be exclusive. SECTION 7.3 Actions in Respect of the Letters of Credit Upon Default. If any Event of Default shall have occurred and be continuing, the Agent may, 61 irrespective of whether it is taking any of the actions described in Section 7.2 or otherwise, make demand upon Borrower to, and forthwith upon such demand Borrower will, pay to the Agent on behalf of the Lenders in same- day funds at the Agent's Lending Office, for deposit in a cash collateral account, an amount equal to the aggregate face amount of all Letters of Credit then outstanding. If at any time the Agent determines that any funds held in any such cash collateral account are subject to any right or claim of any Person other than the Agent and the Lenders or that the total amount of such funds is less than the aggregate face amount of all Letters of Credit, Borrower will, forthwith upon demand by the Agent, pay to the Agent, as additional funds to be deposited and held in such cash collateral account, an amount equal to the excess of (a) such aggregate face amount of all outstanding Letters of Credit over (b) the total amount of funds, if any, then held in such cash collateral account that the Agent determines to be free and clear of any such right and claim. SECTION 7.4 Curing Defaults Under Collateral Documents. Lenders hereby agree that Borrower may cure any Default under Section 7.1(d) hereof relating to the Collateral Documents and any Default under this Agreement which relates solely to an Eligible Project by giving Agent written notice within the applicable notice and cure period that the Eligible Project to which such Collateral Document relates shall be removed from the Borrowing Base, so long as both of the following conditions are satisfied: (a) such Default does not constitute a Default or Event of Default under any other term of this Agreement; and (b) the sum of the aggregate principal amount of the outstanding Advances plus the aggregate face amount of the outstanding Letters of Credit does not exceed the Borrowing Base after giving effect to the removal of such Eligible Project. SECTION 7.5 Permitted Deficiency. Notwithstanding anything to the contrary set forth herein, (a) failure of Borrower or any other Person owing any of the Collateral to keep such Collateral in the condition required under Section 6.3 hereof or under the comparable provisions of the Mortgage applicable thereto; (b) failure of Borrower or any of its Subsidiaries or any other Person owning an Eligible Project to pay Impositions in the manner required under Section 6.5 hereof or under the comparable provisions of the Mortgage applicable thereto; (c) failure of Borrower or any other Person owning an Eligible Project to comply with Legal Requirements applicable to the Collateral as required under Section 6.6 hereof or under the comparable provisions of the Mortgage applicable thereto; (d) failure of Borrower or any of its Subsidiaries or any other Person owning an Eligible Project to comply with any Legal Requirement required under Section 5.1 of the Mortgage applicable thereto; (e) failure of Borrower or any other Person owning an Eligible Project to prevent alterations to any Eligible Project as required under Section 5.2 of the Mortgage applicable thereto; (f) failure of Borrower or any other Person owning an Eligible Project to replace "Fixtures" or "Personalty" required under, and as such terms are defined in, Section 5.3 of the Mortgage applicable thereto; (g) the existence of any non-consensual Lien on the any of the Collateral not permitted by Section 6.17 hereof or by the applicable terms of the Collateral Documents; or (h) Borrower and/or its Subsidiary, Subpartnership or other Person owing an Eligible Project shall fail to deposit with the Agent any "Casualty Completion Deposit" or "Escrowed 62 Sums" required under, and as such terms are defined in, the Mortgage to which such Eligible Project is subject, shall not constitute a Default or Event of Default hereunder, so long as the following conditions are satisfied: (i) the sum (without duplication) of (A) the cost of correcting all failures described in (a) through (f) above, as determined by Agent in its reasonable discretion, plus (B) the amount secured by Liens described in (g) above plus (C) the amount of Indebtedness secured by Liens permitted under Section 6.17(b) hereof plus (D) the aggregate amount of unpaid Casualty Completion Deposits or Escrowed Sums (said sum being referred to herein as the "Permitted Deficiency"), plus (E) the amount of all judgments or orders for the payment of money rendered against Borrower, Holdings I, Holdings II, CBL Properties, Inc. or any of their Significant Subsidiaries which have continued unbonded, unsatisfied and unstayed for a period of sixty (60) days; plus (F) the principal balance of any Indebtedness under any Guarantee, note, indenture or other agreement relating to or evidencing Indebtedness of Borrower, Holdings I, Holdings II, CBL Properties, Inc. or any of their Subsidiaries on which any payment is past due or in respect of which any event has occurred the effect of which is to cause or to permit (giving effect to any grace or cure period applicable thereto) the holder or holders of such Indebtedness to cause such Indebtedness to become due, or to be prepaid in full (whether by redemption, purchase or otherwise), prior to its stated maturity does not exceed, in the aggregate at any one time, $5,000,000.00; (ii) Such Permitted Deficiency does not constitute a Default or Event of Default under this Agreement or the other Loan Documents except to the extent described in clauses (a) through (h) above; (iii) The aggregate amount of the Permitted Deficiencies either secured by a Lien or consisting of unpaid Casualty Completion Deposits or Escrowed Sums does not exceed the difference between (A) the Borrowing Base (prior to reduction by the amount of the Permitted Deficiency, as required by this Section 7.5), minus (B) the sum of the aggregate principal amount of all outstanding Advances plus the aggregate face amount of all outstanding Letters of Credit; (iv) Borrower is proceeding to cure all such failures in a diligent manner; and (v) The Borrowing Base shall be reduced by the amount of (A) any outstanding Permitted Deficiency secured by a Lien on any of the Collateral and (B) any outstanding Permitted Deficiency representing an unpaid Casualty Completion Deposit or Escrowed Sums. ARTICLE 8. THE AGENT SECTION 8.1 Appointment and Authorization. Each Lender irrevocably appoints and authorizes Agent to take such action as agent on its behalf and 63 to exercise such powers under the Loan Documents and the Collateral Documents as are granted to Agent by the terms thereof, together with all such powers as are reasonably incidental thereto. Borrower shall be entitled to rely upon a written notice or written response from Agent as being made pursuant to the requisite concurrence or consent of the Lenders necessary to take such action without investigation or otherwise contacting the Lenders hereunder. SECTION 8.2 Agent and Affiliates. Agent shall have the same rights and powers under the Loan Documents and the Collateral Documents as any other Lender and may exercise or refrain from exercising the same as though it were not Agent, and Agent and its Affiliates may accept deposits from, lend money to, and generally engage in any kind of business with Borrower or Affiliate of Borrower as if it were not Agent hereunder. SECTION 8.3 Action by Agent. The Agent (which term as used in this sentence and in Section 8.8 hereof and the first sentence of Section 8.8 hereof shall include reference to its Affiliates and its own and its Affiliates' shareholders, officers, directors, employees and agents): (a) shall have no duties or responsibilities except those expressly set forth in this Agreement, and shall not by reason of this Agreement be a trustee for any Lender; (b) shall not be responsible to the Lenders for any recitals, statements, representations or warranties contained in this Agreement or any of the other Loan Documents, or in any certificate or other instrument, document or agreement referred to or provided for in, or received by any of them under, this Agreement or any of the other Loan Documents, or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement, any Note or any of the other Loan Documents or for any failure by Borrower or any other Person to perform any of its obligations hereunder or thereunder; (c) subject to Section 8.6 hereof, shall not be required to initiate or conduct any litigation or collection proceedings hereunder; (d) shall have no liability to any Lender for any determination made in good faith by the Agent that such Lender is in default of its obligations hereunder; and (e) shall not be responsible for any action taken or omitted to be taken by it hereunder or under any other agreement, document or instrument referred to or provided for herein or in connection herewith, except for its own gross negligence or willful misconduct. The Agent may deem and treat the payee of any Note as the holder thereof for all purposes hereof unless and until a written notice of the assignment or transfer complying with the terms and conditions of Section 9.6 hereof. SECTION 8.4 Consultation with Experts. Agent may consult with legal counsel (who may be counsel for Borrower) , independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts. SECTION 8.5 Reliance by Agent. The Agent shall be entitled to rely upon any certification, notice or other communication (including any thereof by telephone, telex, facsimile, telegram or cable) believed by it to be genuine and correct and to have been signed or sent by or on behalf of the proper Person or Persons. As to any matters not expressly provided for by this Agreement, the Agent shall in all cases be fully protected in acting, or in refraining from acting, and no Lender shall have any right of action against Agent as a result of Agent acting or refraining from acting, hereunder or under the other Loan Documents in accordance with instructions signed by the Majority Lenders (or, where applicable, all Lenders) and such 64 instructions and any action taken or failure to act pursuant thereto shall be binding on all of the Lenders; provided, however, the Agent shall not be required to take any action which (a) the Agent reasonably believes will expose it to personal liability unless the Agent receives an indemnification satisfactory to it from the Lenders with respect to such action or (b) is contrary to this Agreement, the Notes, the other Loan Documents or Applicable Law. SECTION 8.6 Defaults. The Agent shall not be deemed to have knowledge or notice of the occurrence of a Default or Event of Default (other than the non-payment of principal of or interest on Loans or of fees) unless the Agent has received notice from a Lender or the Borrower specifying such Default or Event of Default and stating that such notice is a "Notice of Default." In the event of any such non-payment or in the event the Agent receives such a notice of the occurrence of a Default or Event of Default, the Agent shall give, and to the extent the Agent otherwise has actual knowledge of a Default or Event of Default the Agent shall use best efforts to give, prompt notice thereof to the Lenders. SECTION 8.7 Indemnification. Each Lender shall, in accordance with its Pro Rata Share, promptly (and in all events within ten [10] days after demand therefor) reimburse (to the extent not reimbursed by Borrower) Agent for, and indemnify Agent against, any third- party costs (including, without limitation, Protective Advances and costs described in Section 8.12(e) and Section 8.12(f)), expense (including attorneys' fees and disbursements provided that, if outside counsel is not used by the Agent, the allocated cost of in-house counsel of Agent shall be deemed to be a third-party cost and expense ), claim, demand, action, loss or liability (except such as result from Agent's gross negligence or willful misconduct) that Agent may pay, suffer or incur in connection with the Loan Documents, the Collateral Documents or any action taken or omitted by Agent. The obligations of Lenders under this Section 8.7 shall survive the payment in full of all Obligations and the termination of this Agreement. In the event that after payment and distribution of any amount by Agent to Lenders, any Lender or third party, including Borrower, any creditor of Borrower or a trustee in bankruptcy, recovers from Agent any amount found to have been wrongfully paid to Agent or disbursed by Agent to Lenders, then Lenders, in proportion to their respective Pro Rata Share, shall reimburse Agent for all such amounts. Notwithstanding the foregoing, Agent shall not be obligated to advance any amounts hereunder (other than Agent's Pro Rata Share of each Advance) and may require the deposit with Agent by each Lender of its Pro Rata Share of any material expenditures anticipated by Agent before they are incurred or made payable. SECTION 8.8 Credit Decision. Each Lender acknowledges that it has, independently and without reliance upon Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking any action under the Loan Documents (including without limitation decisions with respect to the matters described in clauses (i) through (x) of Section 9.5(a) of this Agreement) or the Collateral Documents. 65 SECTION 8.9 Failure to Act. Except for action expressly required of the Agent hereunder, the Agent shall in all cases be fully justified in failing or refusing to act hereunder unless it shall receive further assurances to its satisfaction from the Lenders of their indemnification obligations under Section 8.7 hereof against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. SECTION 8.10 Resignation or Removal of Agent; Co-Agent. (a) Subject to the appointment and acceptance of a successor Agent as provided below, the Agent may resign at any time by giving notice thereof to the Lenders and the Borrower. For good cause, the Majority Lenders may remove Agent at any time by giving at least thirty (30) days prior written notice to Agent, Borrower and the other Lenders. For purposes of this Section 8.10, in determining whether the Majority Lenders have approved the removal of the Agent, the Agent, in its capacity as a Lender, will be disregarded and excluded and the Pro Rata Shares of the remaining Lenders shall be redetermined, for voting purposes only, to exclude the Pro Rata Shares of the Agent. Such resignation or removal shall take effect upon the acceptance of appointment as Agent by the successor Agent. Upon any such resignation or removal, the Majority Lenders shall have the right to appoint a successor Agent consented to by Borrower, which consent shall not be unreasonably withheld. If no successor Agent shall have been so appointed by the Majority Lenders and shall have accepted such appointment within thirty (30) days after the retiring Agent's giving of notice of resignation or the Majority Lender's removal of the retiring Agent, the retiring Agent may, on behalf of the Lenders appoint a successor Agent consented to by Borrower, which consent shall not be unreasonably withheld. Any successor Agent must be a bank (i) the senior debt obligations of which (or such bank's parent's senior debt obligations) are rated not less than Baa-1 by Moody's Investors Services, Inc. or a comparable rating by a rating agency acceptable to the Majority Lenders and (ii) which has total assets in excess of $10,000,000,000.00. Upon the acceptance of any appointment as Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. After any retiring Agent's resignation or removal hereunder as Agent, the provisions of this Article 8 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as the Agent. Upon the acceptance of any appointment as Agent, such successor Agent shall confirm to Borrower, in writing, the agency fees to be paid to such successor Agent pursuant to Section 2.8(d). (b) In the event that Applicable Law imposes any restrictions on the identity of an agent such as the Agent or requires the appointment of any co- agent in connection therewith, the Agent may, in its discretion, for the purpose of complying with such restrictions, appoint one or more co-agents hereunder consented to by Borrower, which consent shall not be unreasonably withheld by Borrower. Any such Co-Agent(s) shall have the same rights, powers, privileges and obligations as the Agent and shall be subject to and entitled to the benefits of all provisions of this Agreement and the Loan Documents relative to the Agent but the appointment of a co-agent shall not increase the obligation of Borrower hereunder. In addition to any rights of the Majority Lenders set forth in Section 8.10(a) above, any such Co-Agent may be removed at any time by the Agent. 66 SECTION 8.11 Consent and Approvals. (a) Each Lender has authorized and directed, and hereby authorizes and directs, Agent to enter into the Loan Documents other than this Agreement for the benefit of Lenders. Each Lender agrees that any action taken by Agent or the Majority Lenders (or, where required by the express terms of this Agreement, a greater proportion of Lenders) in accordance with the provisions of this Agreement or any Loan Document, and the exercise by Agent or the Majority Lenders (or, where so required, such greater proportion), of the powers set forth herein or therein, together with such other powers as are reasonably incidental thereto, shall be authorized and binding upon all Lenders. Without limiting the generality of the foregoing, the Agent shall have the sole and exclusive right and authority to: (i) act as the disbursing and collecting agent for the Lenders with respect to all payments and collections arising in connection with this Agreement and the Loan Documents relating to the Collateral; (ii) execute and deliver each Collateral Document and accept delivery of each such agreement delivered by the Borrower or any of its Subsidiaries; (iii) act as collateral agent for the Lenders for purposes of the perfection of all security interests and Liens created by such agreements and all other purposes stated therein, provided, however, the Agent hereby appoints, authorizes and directs the Lenders to act as collateral sub-agents for the Agent and the Lenders for purposes of the perfection of all security interests and Liens with respect to any of the Collateral held by such Lender; (iv) manage, supervise and otherwise deal with the Collateral; (v) take such action as is necessary or desirable to maintain the perfection and priority of the security interest and Liens created or purported to be created by the Loan Documents; (vi) deliver notices, including notices of default, hereunder and under the other Loan Documents; and (vii) except as may be otherwise specifically restricted by the terms of this Agreement or any other Loan Document, exercise all remedies given to the Agent or the Lenders with respect to the Collateral under the Loan Documents, Applicable Law or otherwise. (b) Each of the following shall require the approval or consent of the Majority Lenders: (i) approval of certain actions with respect to management agreements for the Eligible Projects pursuant to Section 3.2(b) hereof; (ii) approval of a Major Construction Project under Section 3.4 hereof; 67 (iii) approval of any material amendment of the organizational documents of Borrower, Holdings I, Holdings II, CBL Properties, Inc. or their respective Subsidiaries prohibited by Section 7.1 hereof; (iv) approval of certain changes in executive officers otherwise prohibited by Section 7.1 hereof; (v) acceleration of the Obligations following an Event of Default or rescission of such acceleration under Section 7.2(b) hereof; (vi) approval of the exercise of rights and remedies under the Loan Documents following an Event of Default; (vii) removal of Agent and appointment of a successor under Section 8.10 hereof; (viii) approval of a Post-Foreclosure Plan and related matters pursuant to Section 8.12(f) hereof; and (ix) except as otherwise provided in Section 9.5, approval of any amendment, modification or termination of this Agreement. (c) Designation of a Project as an Eligible Project shall require the approval or consent of the Supermajority Lenders pursuant to Section 3.1(a) hereof. (d) Approval of certain Protective Advances shall require the approval of either the Majority Lenders or all of the Lenders, all as set forth in Section 8.12(a) hereof. (e) In addition to the required consents or approvals referred to in Section 8.11(b) above, Agent may at any time request instructions from the Majority Lenders with respect to any actions or approvals which, by the terms of this Agreement or of any of the Loan Documents, Agent is permitted or required to take or to grant without instructions from any Lenders, and if such instructions are promptly requested, Agent shall be absolutely entitled to refrain from taking any action or to withhold any approval and shall not be under any liability whatsoever to any Person for refraining from taking any action or withholding any approval under any of the Loan Documents until it shall have received such instructions from the Majority Lenders. Agent shall promptly notify each Lender at any time that the Majority Lenders have instructed Agent to act or refrain from acting pursuant hereto. (f) All communications from Agent to Lenders requesting Lenders determination, consent, approval or disapproval (i) shall be given in the form of a written notice to each Lender, (ii) shall be accompanied by a description of the matter or thing as to which such determination, approval, consent or disapproval is requested, or shall advise each Lender where such matter or thing may be inspected, or shall otherwise describe the matter or issue to be resolved, (iii) shall include, if reasonably requested by a Lender and to the extent not previously provided to such Lender, written materials and a summary of all oral information provided to Agent by Borrower 68 in respect of the matter or issue to be resolved, and (iv) shall include Agent's recommended course of action or determination in respect thereof. Each Lender shall reply promptly, but in any event within ten (10) Business Days after receipt of the request therefor by Agent (the "Lender Reply Period"). Unless a Lender shall give written notice to Agent that it objects to the recommendation or determination of Agent (together with a written explanation of the reasons behind such objection) within the Lender Reply Period, such Lender shall be deemed to have approved of or consented to such recommendation or determination. With respect to decisions requiring the approval of Majority Lenders or all Lenders, Agent shall submit its recommendation or determination for approval of or consent to such recommendation or determination to all Lenders and upon receiving the required approval or consent shall follow the course of action or determination recommended to Lenders by Agent or such other course of action recommended by Majority Lenders or all Lenders, as the case may be, and each non-responding Lender shall be deemed to have concurred with such recommended course of action. SECTION 8.12 Agency Provisions Relating to Collateral. (a) Agent is hereby authorized on behalf of all Lenders, without the necessity of any notice to or further consent from any Lender, from time to time prior to an Event of Default, to take any action with respect to any Collateral or Loan Document which may be necessary to perfect and maintain perfected Liens upon the Collateral granted pursuant to the Collateral Documents. Agent may make, and shall be reimbursed for, Protective Advance(s) during any one calendar year with respect to each Eligible Project up to the sum of (i) amounts expended to pay real estate taxes, assessments and governmental charges or levies imposed upon such Eligible Project, (ii) amounts expended to pay insurance premiums for policies of insurance related to such Eligible Project, and (iii) $500,000.00. Protective Advances in excess of said sum during any calendar year for any Eligible Project shall require the consent of Majority Lenders. Any Protective Advance which would, when aggregated with all other Advances, cause the Lenders to exceed their Commitments, shall require the consent of all of the Lenders; provided, however, that each Lender will approve or disapprove any request by the Agent for such Protective Advance within three (3) Business Days after receipt of such request from the Agent; provided, further, that any Lender who fails to so approve or disapprove within such three (3) Business Day period shall be deemed to have approved such Protective Advance. (b) Lenders hereby irrevocably authorize Agent, at its option and in its discretion, to release any Lien granted to or held by Agent upon any Collateral (i) upon termination of the Commitments and repayment and satisfaction of all Loans, and all other Obligations and the termination of this Agreement or (ii) constituting property being released in compliance with Section 3.1(d) hereof or (iii) if approved, authorized or ratified in writing by Agent at the direction of all Lenders. Without in any manner limiting Agent's authority to act without any specific or further authorization or consent by Lenders (as set forth in Section 8.5), upon request by Agent at any time, Lenders will confirm in writing Agent's authority to release the Collateral Documents with respect to any Eligible Project pursuant to Section 3.1(d) or this Section 8.12(b). (c) So long as no Default or Event of Default is then continuing, upon receipt by Agent of any such written confirmation as referenced in Section 8.12(b)(iii) from all Lenders of its authority to release Collateral, and upon at least five (5) Business Days prior written request by Borrower, 69 Agent shall (and is hereby irrevocably authorized by Lenders to) execute such documents as may be necessary to evidence the release of the Liens granted to Agent for the benefit of Lenders herein or pursuant hereto upon such Collateral; provided, that (i) Agent shall not be required to execute any such document on terms which, in Agent's opinion, would expose Agent to liability or create any obligation or entail any consequence other than the release of such Liens without recourse or warranty, and (ii) such release shall not in any manner discharge, affect or impair the Obligations or any Liens upon (or obligations of Borrower in respect of) any Project which shall continue to constitute part of the Collateral. (d) Except as provided in this Agreement, Agent shall have no obligation whatsoever to any Lender or to any other Person to assure that the Collateral exists or is owned by Borrower or is cared for, protected or insured or has been encumbered or that the Liens granted to Agent herein or in any of the other Loan Documents or pursuant hereto or thereto have been properly or sufficiently or lawfully created, perfected, protected or enforced or are entitled to any particular priority, or to exercise at all or in any particular manner or under any duty of care, disclosure or fidelity, or to continue exercising, any of the rights, authorities and powers granted or available to the Agent in this Agreement or in any of the Loan Documents, it being understood and agreed that in respect of the Collateral, or in any act, omission or event related thereto, the Agent may act in any manner it may deem appropriate, in its sole discretion, given its own interest in the Collateral as one of the Lenders and that the Agent shall have no duty or liability whatsoever to any Lender. (e) Should Agent commence any proceeding or in any way seek to enforce its rights or remedies under the Loan Documents, irrespective of whether as a result thereof Agent shall acquire title to any Collateral, either through foreclosure, deed in lieu of foreclosure, or otherwise, each Lender, upon demand therefor from time to time, shall contribute its share (based on its Pro Rata Share) of the reasonable costs and/or expenses of any such enforcement or acquisition, including, but not limited to, fees of receivers or trustees, court costs, title company charges, filing and recording fees, appraisers' fees and fees and expenses of attorneys to the extent not otherwise reimbursed by Borrower. Without limiting the generality of the foregoing, each Lender shall contribute its share (based on its Pro Rata Share) of all reasonable costs and expenses incurred by Agent (including reasonable attorneys' fees and expenses) if Agent employs counsel for advice or other representation (whether or not any suit has been or shall be filed) with respect to any Collateral or any part thereof, or any of the Loan Documents, or the attempt to enforce any security interest or Lien on any of the Collateral, or to enforce any rights of Agent or any of Borrower's or any other party's obligations under any of the Loan Documents, but not with respect to any dispute between Agent and any other Lender(s). Any loss of principal and interest resulting from any Event of Default shall be shared by Lenders in accordance with their respective Pro Rata Shares. It is understood and agreed that in the event Agent determines it is necessary to engage counsel for Lenders from and after the occurrence of an Event of Default, said counsel shall be selected by Agent and written notice of such selection, together with a copy of such counsel's engagement letter and fee estimate, shall be delivered to Lenders. (f) In the event that all or any portion of the Collateral is acquired by Agent as the result of a foreclosure or the acceptance of a deed or assignment in lieu of foreclosure, or is retained in satisfaction of all or any part the Obligations, title to any such Collateral or any portion 70 thereof shall be held in the name of Agent or a nominee or subsidiary of Agent, as agent, for the ratable benefit of Agent and Lenders. Agent shall prepare a recommended course of action for such Collateral (the "Post-Foreclosure Plan"), which shall be subject to the approval of the Majority Lenders. In the event that Majority Lenders do not approve such Post-Foreclosure Plan, any Lender shall be permitted to submit an alternative Post-Foreclosure Plan to Agent and Agent shall submit any and all such additional Post-Foreclosure Plans to the Lenders for evaluation and the approval of Majority Lenders. Agent shall manage, operate, repair, administer, complete, construct, restore or otherwise deal with the Collateral acquired and administer all transactions relating thereto, including, without limitation, employing a management agent, leasing agent and other agents, contractors and employees, including agents of the sale of such Collateral, and the collecting of rents and other sums from such Collateral and paying the expenses of such Collateral. Upon demand therefor from time to time, each Lender will contribute its share (based on its Pro Rata Share) of all reasonable costs and expenses incurred by Agent pursuant to the Post-Foreclosure Plan in connection with the construction, operation, management, maintenance, leasing and sale of such Collateral. In addition, Agent shall render or cause to be rendered by the managing agent, to each of the Lenders, monthly, an income and expense statement for such Collateral, and each of the Lenders shall promptly contribute its Pro Rata Share of any operating loss for such Collateral, and such other expenses and operating reserves as Agent shall deem reasonably necessary pursuant to and in accordance with the Post-Foreclosure Plan. To the extent there is net operating income from such Collateral, Agent shall, in accordance with the Post-Foreclosure Plan, determine the amount and timing of distributions to Lenders. All such distributions shall be made to Lenders in accordance with their respective Pro Rata Shares. Lenders acknowledge that if title to any Collateral is obtained by Agent or its nominee, such Collateral will not be held as a permanent investment but will be liquidated as soon as practicable. Agent shall undertake to sell such Collateral, at such price and upon such terms and conditions as the Majority Lenders shall reasonably determine to be most advantageous. Any purchase money mortgage or deed of trust taken in connection with the disposition of such Collateral in accordance with the immediately preceding sentence shall name Agent, as agent for Lenders, as the beneficiary or mortgagee. In such case, Agent and Lenders shall enter into an agreement with respect to such purchase money mortgage defining the rights of Lenders in the same Pro Rata Shares as provided hereunder, which agreement shall be in all material respects similar to this Agreement insofar as this Agreement is appropriate or applicable. SECTION 8.13 Defaulting Lenders. (a) If a Lender fails or refuses to fund its Pro Rata Share of an Advance hereunder and each other Lender has funded its Pro Rata Share of such Advance, Borrower may request that the Agent deliver to such non-funding Lender a notice stating that unless such Lender funds such Advance within five (5) days of its receipt of such notice, such Lender shall be a Defaulting Lender. The Agent, upon receipt of such request, shall send such notice if either (i) the Agent determines that such Lender, by not funding its Pro Rata Share of such Advance, has defaulted in its obligations hereunder or (ii) Borrower has obtained a judgment from a court of competent jurisdiction that such non-funding Lender has breach it obligations to Borrower by failing to fund its Pro Rata Share of such Advance. Any determination made in good faith by the Agent pursuant to clause (i) above 71 shall be conclusive and binding on Borrower and such Lender unless and until a judgment to contrary is obtained as described in clause (ii) above. (b) Once a Lender becomes a Defaulting Lender, the Agent shall notify the other Lenders of such occurrence, whereupon the Pro Rata Share of each of the other Lenders shall be recalculated to exclude the Pro Rata Share of such Defaulting Lender. (c) Notwithstanding any provision hereof to the contrary, until such time as a Defaulting Lender has funded its Pro Rata Share of any Advance which was previously a Non Pro Rata Advance, or such Lender is determined by a court of competent jurisdiction not to have defaulted in it obligations hereunder or all other Lenders have received payment in full (whether by repayment or prepayment) of the principal and interest due in respect of such Non Pro Rata Advance, all of the Obligations owing to such Defaulting Lender hereunder shall be subordinated in right of payment, as provided in the following sentence, to the prior payment in full of all principal, interest and fees in respect of all Non Pro Rata Advances in which the Defaulting Lender has not funded its Pro Rata Share (such principal, interest and fees being referred to as "Senior Loans"). All amounts paid by Borrower and otherwise due to be applied to the Obligations owing to the Defaulting Lender pursuant to the terms hereof shall be distributed by Agent to the other Lenders in accordance with their respective Pro Rata Shares (recalculated for purposes hereof to exclude the Defaulting Lender's Commitment), until all Senior Loans have been paid in full. This provision governs only the relationship among Agent, each Defaulting Lender, and the other Lenders; nothing hereunder shall limit the obligation of Borrower to repay all Advances in accordance with the terms of this Agreement. The provisions of this section shall apply and be effective regardless of whether an Event of Default occurs and is then continuing, and notwithstanding (i) any other provision of this Agreement to the contrary, (ii) any instruction of Borrower as to its desired application of payments or (iii) the suspension of such Defaulting Lender's right to vote on matters which are subject to the consent or approval of Majority Lenders, Supermajority Lender or all Lenders. (d) Agent shall be entitled to (i) collect interest from such Lender for the period from the date on which the payment was due until the date on which the payment is made at the Federal Funds Rate for each day during such period, (ii) withhold or setoff, and to apply to the payment of the defaulted amount and any related interest, any amounts to be paid to such Defaulting Lender under this Agreement, and (iii) bring an action or suit against such Defaulting Lender in a court of competent jurisdiction to recover the defaulted amount and any related interest. In addition, the Defaulting Lender shall indemnify, defend and hold Agent and each of the other Lenders harmless from and against any and all costs, expenses and liabilities plus interest thereon at the Default Rate set forth in the Loan Documents for funds advanced by Agent or any other Lender on account of the Defaulting Lender which they may sustain or incur by reason of or as a direct consequence of the Defaulting Lender's failure or refusal to abide by its obligations under this Agreement. (e) So long as any Lender is a Defaulting Lender, (i) no Unused Facility Fee shall accrue in favor of, or be payable to, such Defaulting Lender; (ii) the Defaulting Lender's outstanding portion of the Loan shall accrue interest during each month at a rate equal to the LIBOR Rate applicable to an Interest Period having a duration one-month and commencing 72 on the first LIBOR Business Day of such month; and (iii) at the request of Borrower, all interest payable to such Defaulting Lender shall be placed by the Agent in a cash collateral account and held as security for the Obligations owed to all of the Lenders and such interest shall not be paid to such Defaulting Lender until such time as either (A) the other Lenders have been paid in full or (B) such Lender is no longer a Defaulting Lender; provided, however, if such Lender has been found to be a Defaulting Lender pursuant to a judgment of a court of competent jurisdiction that such non- funding Lender has breached its funding obligations hereunder and such judgment is not a final, non-appealable judgment, then until Borrower obtains such a final, non-appealable judgment that such non-funding Lender is in breach of its funding obligations hereunder, Borrower shall continue to pay the Unused Facility Fee on such Defaulting Lender's Commitment and shall pay interest on the Defaulting Lender's portion of the outstanding Loan at the rate applicable to the other Lenders' portion of the outstanding Loan and the Agent shall, at the request of Borrower, deposit such Unused Facility Fee and the excess of such interest over the interest payable at the rate set forth in clause (ii) above into a cash collateral account, held as security for the Obligations owed to all of the Lenders and paid (x) to the Borrower, if such non-funding Lender is determined, in a final, non-appealable judgment from a court of competent jurisdiction to have breached its funding obligations hereunder, or (y) to such non-funding Lender, if such non-funding Lender is determined, in a final, non-appealable judgment from a court of competent jurisdiction not to have breached its funding obligations hereunder. (f) A Defaulting Lender shall cease to be a Defaulting Lender upon (i) the payment by such Defaulting Lender to the Agent, for the benefit of the Agent and the Lenders, as appropriate, of its Pro Rata Share (determined without giving affect to any recalculation thereof as a result of such Lender being a Defaulting Lender) of an amount equal to the amount of each Advance which was previously a Non Pro Rata Advance plus all other amounts required to be paid or funded by Lenders hereunder since the date such Lender became a Defaulting Lender and for which such Defaulting Lender has not paid or funded its Pro Rata Share, (ii) any judgment that such non-funding Lender has breached its obligations to Borrower in respect of such Non Pro Rata Advance is reversed or vacated for any reason; or (iii) the Agent and all other Lenders receiving payment in full (whether by repayment or prepayment) of the principal and interest due in respect of all such Non Pro Rata Advances and all such other amounts. (g) In the event a non-funding Lender is designated as a Defaulting Lender as a result of a judgment that such non-funding Lender has breached its obligations to Borrower in respect of such Non Pro Rata Advance and such judgment is subsequently reversed for any reason, then (i) such Lender shall not longer be a Defaulting Lender, (ii) the Pro Rata Share of each Lender shall be adjusted to include the Commitment of such Lender, (iii) such Lender shall be entitled to immediate payment of any and all amounts owed to it and held in any cash collateral account established pursuant to Section 8.13; (iv) the Borrower shall, within three (3) Business Days, repay to the Agent, for the benefit of the other Lenders, the aggregate amount by which the outstanding Advances made by each Lender exceeds such Lender's Pro Rata Share of the Loan (giving effect to the recomputation of Pro Rata Share pursuant to clause (ii) above); and (v) such Lender shall have the right to recover from Borrower any damages that such Lender may have suffered as a result of having been categorized as "Defaulting Lender" and (vi) such Lender such other remedies against Borrower as it may have under this Agreement, at law or in equity. 73 SECTION 8.14 Borrower Not a Beneficiary. The provisions of this Article 8 are solely for the benefit of the Agent and the Lenders and neither the Borrower nor any Affiliate of the Borrower shall have any right to rely on or enforce any of the provisions hereof; provided, however, that the Borrower shall have the rights granted to it in subsections (a), (b), (e) and (f) of Section 8.13 hereof. In performing its functions and duties under this Agreement, the Agent shall act solely as the agent of the Lenders and does not assume and shall not be deemed to have assumed any obligations or relationship of agency, trustee or fiduciary with or for the Borrower or any Affiliate of the Borrower. Lenders represent to Borrower that, other than letter agreements relating to the payment of fees and letters committing to participate as a Lender, the Loan Documents contain as of the date hereof all of the written agreements establishing the relationships between the Agent and the Lenders and among the Lenders in connection with the Loan. ARTICLE 9 MISCELLANEOUS SECTION 9.1 Notices. All notices or other communications required or permitted to be given pursuant to this Agreement shall be in writing and shall be considered as properly given if mailed by first-class United States mail, postage prepaid, registered or certified with return receipt requested, if sent by national overnight courier providing documentation of receipt, if delivered in person to the intended addressee or if sent by prepaid telegram, telex or telecopy, with a copy of such telegram, telex or telecopy sent by mail, overnight courier or personal delivery as aforesaid. Notice so mailed shall be effective three (3) Business Days after its deposit (provided however, that any Notice of Borrowing or Rate Selection Notice so mailed shall be effective only if and when received by Agent). Notice given in any other manner shall be effective only if and when received by the addressee. For purposes of notice, the addresses of the parties shall be as set forth on the signature pages hereto; provided, however, that any party shall have the right to change its address for notice hereunder to any other location within the continental United States by the giving of thirty (30) days' notice to the other parties in the manner set forth hereinabove. SECTION 9.2 No Waiver. Any failure by Agent or any Lender to insist, or any election by Agent or any Lender not to insist, upon strict performance by Borrower or its Affiliates of any of the terms, provisions or conditions of the Loan Documents shall not be deemed to be a waiver of same or of any other term, provision or condition thereof, and Agent and the Lenders shall have the right at any time or times thereafter to insist upon strict performance by Borrower and its Affiliates of any and all such terms, provisions and conditions. No delay or omission by Agent or any Lender to exercise any right, power or remedy accruing upon any Default or Event of Default shall exhaust or impair any such right, power or remedy or shall be construed to be a waiver of any such Default or Event of Default, or acquiescence therein, and every right, power and remedy given by this Agreement to Agent or any Lender may be exercised from time to time and as often as may be deemed expedient by Agent or any Lender. No consent or waiver, expressed or implied, by Agent or any Lender to or of any Default or 74 Event of Default by Borrower or its Affiliates in the performance of the Obligations of Borrower and its Affiliates hereunder or to any other Event of Default shall be deemed or construed to be a consent or waiver to or of any other Default or Event of Default in the performance of the same or any other Obligations of Borrower or its Affiliates hereunder. Failure on the part of Agent or any Lender to complain of any act or failure to act or to declare an Event of Default, irrespective of how long such failure continues, shall not constitute a waiver by Agent or any such Lender of its rights hereunder or impair any rights, powers, or remedies of Agent or any Lender hereunder. SECTION 9.3 Expenses; Documentary Taxes; Indemnification. (a) Borrower agrees to reimburse the Agent for all of the Agent's reasonable costs and expenses incurred in connection with the development, preparation, execution, delivery, modification or amendment of this Agreement, the Notes and the Collateral Documents, including reasonable audit costs, appraisal costs, the cost of searches, filings and filing fees, taxes and the fees and disbursements of Agent's attorneys, Messrs. Troutman Sanders and any counsel retained by them. Borrower further agrees to reimburse the Agent and each Lender for all reasonable third-party costs and expenses incurred by the Agent or such Lender (including attorneys' fees and disbursements provided that, if outside counsel is not used by the Agent, the allocated cost of in-house counsel of Agent shall be deemed to be a third- party cost and expense) from and after the occurrence of a Default to: (i) commence, defend or intervene in any court proceeding; (ii) file a petition, complaint, answer, motion or other pleading, or to take any other action in or with respect to any suit or proceeding (bankruptcy or otherwise) relating to the Collateral or this Agreement, the Notes or any of the Collateral Documents; (iii) protect, collect, lease, sell, take possession of, or liquidate any of the Collateral; (iv) attempt to enforce any security interest in any of the Collateral or to seek any advice with respect to such enforcement; and (v) enforce any of the Agent's and the Lenders' rights to collect any of the Obligations. (b) Borrower also agrees to pay, and to save harmless the Agent and the Lenders from any delay in paying, any intangibles, documentary stamp and other taxes, if any, which may be payable in connection with the execution and delivery of this Agreement, the Notes, the Letters of Credit or any of the Collateral Documents, or the recording of any thereof, or in any modification hereof or thereof. (c) Borrower agrees to indemnify Agent and each Lender, their respective Affiliates and the respective directors, officers, agents and employees of the foregoing (each an "Indemnitee") and hold each Indemnitee harmless from and against any and all liabilities, losses, damages, costs and expenses of any kind, including, without limitation, the reasonable fees and disbursements of counsel, which may be incurred by such indemnitee in connection with any investigative, administrative or judicial proceeding (whether or not such Indemnitee shall be designated a party thereto) brought or threatened relating to or arising out of the Loan Documents or the Collateral Documents or any actual or proposed use of proceeds of the Loan hereunder; provided that no Indemnitee shall have the right to be indemnified hereunder for such Indemnitee's own gross negligence or willful misconduct as determined by a court of competent jurisdiction. 75 (d) In the event of the passage of any state, federal, municipal or other governmental law, order, rule or regulation, subsequent to the date hereof, in any manner changing or modifying the laws now in force governing the taxation of Mortgages, security agreements, or assignments of leases or debts secured thereby or the manner of collecting such taxes so as to adversely affect Agent or any Lender, Borrower will pay any such tax on or before the due date thereof. If Borrower fails to make such prompt payment or if, in the opinion of Agent, any such state, federal, municipal, or other governmental law, order, rule or regulation prohibits Borrower from making such payment or would penalize Agent if Borrower makes such payment or if, in the opinion of Agent, the making of such payment might result in the imposition of interest beyond the maximum amount permitted by applicable law, then the entire balance of the Obligations and all interest accrued thereon shall, at the option of Agent, become immediately due and payable. SECTION 9.4 Waiver of Set-Offs; Sharing of Set-Offs. (a) Each Lender hereby waives any right of set-off against the Obligations it has with respect to any deposit account of Borrower, its Subsidiaries or Affiliates maintained with such Lender or any other account or property of Borrower, its Subsidiaries or its Affiliates held by such Lender other than the Collateral; provided however, that the within waiver is not intended, and shall not be deemed, to waive any right of set-off (i) any Lender has with respect to any account required to be maintained pursuant to this Agreement or any other Loan Document or (ii) arising other than pursuant to this Agreement, the Collateral Documents or the other Loan Documents. (b) As to any set-off permitted pursuant to Section 9.4(a) above, each Lender agrees that if it shall, by exercising any right of set-off or counterclaim or otherwise, receive payment of a proportion of the aggregate amount of principal and interest due with respect to the Obligations held by it which is greater than the proportion received by any other Lender in respect of the aggregate amount of principal and interest due with respect to the Obligations held by such other Lender, such Lender receiving such proportionately greater payment shall promptly purchase such participation in the Obligations held by the other Lenders, and such other adjustments shall be made, as may be required so that all such payments of principal and interest with respect to the Obligations held by Lenders shall be shared by Lenders based upon each Lender's Pro Rata Share; provided that nothing in this Section shall impair the right of any Lender to exercise any right of set-off or counterclaim it may have and to apply the amount subject to such exercise to the payment of Indebtedness of Borrower other than the Obligations. Borrower agrees, to the fullest extent it may effectively do so under applicable law, that any holder of a participation in a Obligations, whether or not acquired pursuant to the foregoing arrangements, may exercise rights of set-off or counterclaim and other rights with respect to such participation as fully as if such holder of a participation were a direct creditor of Borrower in the amount of such participation. SECTION 9.5 Amendments and Waivers. (a) No amendment or modification of any provision of this Agreement shall be effective without the written agreement of the Majority Lenders (after notice to all Lenders) and Borrower (except for amendments which by the express terms of this Agreement do not require the consent of Borrower), and (b) no termination or waiver of any provision of this Agreement, or consent to any departure by Borrower therefrom (except as expressly provided 76 in Section 9.5(a)(v) below with respect to waivers of late fees), shall in any event be effective without the written concurrence of the Majority Lenders (after notice to all Lenders), which Majority Lenders shall have the right to grant or withhold at their sole discretion; provided, however, that any amendment to Section 8.11(c) shall require the consent of the Supermajority Lenders; provided, further, that the following amendments, modifications or waivers shall require the consent of all Lenders: (i) increasing or decreasing the Commitment of any Lender (except for ratable decreases in the Commitments by Borrower pursuant to Section 2.1); (ii) changing the principal amount or final maturity of the Loan; (iii) reducing the interest rates applicable to the Loan; (iv) reducing the rates on which fees payable pursuant hereto are determined; (v) forgiving or delaying any amount payable or receivable under Article 2 or waiving any Default or Event of Default in respect thereof; (vi) changing the definition of "Majority Lenders", "Supermajority Lenders," "Pro Rata Share" or "Borrowing Base"; (vii) changing any provision contained in this Section 9.5; (viii) releasing any obligor under any Loan Document or any Collateral, unless such release is otherwise required or permitted by the terms of this Agreement; or (ix) consent to assignment by Borrower of all of its duties and Obligations hereunder pursuant to Section 9.6; (x) permitting the term of any Letter of Credit to extend beyond the Termination Date; provided, further, any amendment, waiver or modification of the provisions of Article 8 (other than subsections (a), (b), (e), (f) and (g) of Section 8.13) may be made without the consent of the Borrower. Agent agrees to provide Borrower with notice of any such amendment, waiver or modification; provided, however, that the failure to give such notice shall not invalidate such amendment, waiver or modification. No amendment, modification, termination or waiver of any provision of Article 8 or any other provision referring to Agent shall be effective without the written concurrence of Agent, but only if such amendment, modification, termination or waiver alters the obligations or rights of Agent. Any waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given. No notice to or demand on Borrower in any case shall entitle Borrower to any other further notice or demand in similar or other circumstances. Any amendment, modification, termination, waiver or consent effected in accordance with this Section 9.5 77 shall be binding on each assignee, transferee or recipient of Agent's or any Lender's Commitment under this Agreement or the Advances at the time outstanding. SECTION 9.6 Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that Borrower may not assign or otherwise transfer any of its rights under this Agreement without the prior written consent of all Lenders. (b) Any Lender may, in accordance with applicable law, at any time sell to one or more banks or other institutions (each a "Participant") participating interests in any Advances owing to such Lender, the Note held by such Lender, the Commitment held by such Lender hereunder or any other interests of such Lender hereunder. Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.6, 9.3(c) and 9.7 hereof with respect to its participation; provided that no Participant shall be entitled to receive any greater amount pursuant to such Section than such Lender would have been entitled to receive in respect of the amount of the participation transferred by such Lender to such Participant had no such transfer occurred. In no event shall a Lender that sells a participation be obligated to the Participant to take or refrain from taking any action hereunder, under such Lender's Note or in respect of such Lender's Commitment except that such Lender may agree that it will not, without the consent of the Participant, agree to (i) the increase or extension of the term, or the extension of the time or waiver of any requirement for the reduction or termination, of such Lender's Commitment, (ii) the extension of any date fixed for the payment of principal of or interest on the related Loan or Loans or any portion of any fees payable to the Participant, (iii) the reduction of any payment of principal thereof, or (iv) the reduction of the rate at which either interest is payable thereon to a level below the rate at which the Participant is entitled to receive interest in respect of such participation. (c) Each Lender may at any time assign, pursuant to an assignment substantially in the form of Exhibit H attached hereto and incorporated herein by reference, with (unless such assignment is to an existing Lender or to an Affiliate of any such Lender) the consent of the Agent and the Borrower (not to be unreasonably withheld) to one or more banks or other institutions (in either case, an "Assignee") all or any part of any Advances owing to such Lender, the Note held by such Lender, the Commitment held by such Lender or any other interest of such Lender hereunder; provided, however, that (i) each such assignment by a Lender shall be made in such manner so that the same portion of its Advances, Note and Commitment is assigned to the Assignee and (ii) unless Borrower and the Agent consent otherwise, and except in the case of an assignment to another Lender, any partial assignment of a Lender's Commitment shall be in a minimum principal amount of $10,000,000.00, and (iii) at all times prior to its resignation or replacement, Agent's Commitment shall be equal to or greater than the Commitment of each other Lender. Without restricting the right of Borrower or Agent to reasonably object to any bank or financial institutional becoming an assignee of an interest of a Lender hereunder, each proposed assignee must be an existing Lender or a bank or financial institution which (i) has (or, in the case of a bank which is a subsidiary, such bank's parent has) a rating of its senior debt obligations of not less than Baa-1 by Moody's Investors 78 Services, Inc. or a comparable rating by a rating agency acceptable to Agent and (ii) has total assets in excess of $10,000,000,000.00. Borrower and the Lenders agree that, to the extent of any assignment, the Assignee shall be deemed to have the same rights and benefits with respect to Borrower under this Agreement and the Notes as it would have had if it were a Lender hereunder on the date hereof with respect to its Pro Rata Share and the assigning Lender shall be released from its Commitment hereunder, to the extent of such assignment. Upon the making of an assignment, the assigning Lender shall pay to the Agent an assignment fee of $2,500. (d) In addition to the assignments and participations permitted under the foregoing provisions of this Section 9.6, any Lender may assign and pledge all or any portion of its Advances and its Note to any Federal Reserve Bank as collateral security pursuant to Regulation A and any Operating Circular issued by such Federal Reserve Bank. No such assignment shall release the assigning Lender from its obligations hereunder. (e) Borrower authorizes each Lender to disclose to any Participant or Assignee ("Transferee") and any prospective Transferee any and all financial information in such Lender's possession concerning Borrower which has been delivered to such Lender by Borrower or the Agent pursuant to this Agreement or which has been delivered to such Lender by Borrower in connection with such Lender's credit evaluation of Borrower prior to entering into this Agreement. (f) Any Lender, at such Lender's sole cost and expense, shall be entitled to have the Note held by it subdivided in connection with a permitted assignment of all or any portion of such Note and the respective Advances evidenced thereby pursuant to Section 9.6(c) above. Any Lender, which by reason of an assignment pursuant to Section 9.6(c) hereof or otherwise, has or would have more than one (1) Note hereunder shall be entitled to have such Notes consolidated into a single Note. In the case of any such subdivision or consolidation, the new Note (the "New Note") issued in exchange for a Note or Notes (the "Old Note(s)") previously issued hereunder (i) shall be substantially in the form of Exhibit A hereto, as appropriate, (ii) shall be dated the date of such assignment or of the most recent Note held by such Lender, as the case may be, (iii) shall be otherwise duly completed and (iv) shall bear a legend, to the effect that such New Note is issued in exchange for such Old Note(s) and that the indebtedness represented by such Old Note(s) shall not have been extinguished by reason of such exchange. (g) Borrower will use reasonable efforts to cooperate with Agent and Lenders in connection with the assignment of interests under this Agreement or the sale of participations herein. SECTION 9.7 Capital Adequacy. If, after the date hereof, any Lender shall have determined that either (i) the adoption or implementation of any applicable law, rule, regulation or guideline of general applicability regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or (ii) compliance by such Lender (or any lending office of such Lender) with any request or directive of general applicability regarding capital adequacy (whether or not having the force of law) of any 79 such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on such Lender's capital as a consequence of its or Borrower's obligations hereunder to a level below that which such Lender could have achieved but for such adoption, implementation, change or compliance (taking into consideration such Lender's policies with respect to capital adequacy) by an amount deemed by such Lender to be material, then from time to time, within ten (10) days after demand by such Lender, which demands shall include a calculation and a reference to the applicable law, rule or regulation, Borrower shall pay to such Lender such additional amount of amounts as will adequately compensate such Lender for such reduction. Such Lender will use good faith and reasonable efforts to designate a different lending office for such Lender's Advances if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the sole opinion of such Lender, be disadvantageous to such Lender. Each Lender shall notify the Agent and the Borrower of any event occurring after the date of this Agreement entitling such Lender to compensation under this Section 9.7 within 45 days, after such Lender obtains actual knowledge thereof; provided that if any Lender fails to give such notice within 45 days after it obtains actual knowledge of such an event, such Lender shall, with respect to compensation payable pursuant to this Section 9.7 in respect of any costs resulting from such event, only be entitled to payment for costs incurred from and after the date 45 days prior to the date that such Lender gives such notice. A certificate of such Lender claiming compensation under this Section 9.7 and setting forth the additional amount of amounts to be paid to it hereunder, together with the description of the manner in which such amounts have been calculated, shall be conclusive in the absence of manifest error. In determining such amount, such Lender may use any reasonable averaging and attribution methods. SECTION 9.8 Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. SECTION 9.9 Notice of Final Agreement. THIS AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO ORAL AGREEMENTS BETWEEN THE PARTIES. SECTION 9.10 Invalid Provisions. Any provision of any Loan Document held by a court of competent jurisdiction to be illegal, invalid or unenforceable shall not invalidate the remaining provisions of such Loan Document which shall remain in full force and effect and the effect thereof shall be confined to the provision held invalid or illegal. SECTION 9.11 Maximum Rate. Regardless of any provision contained in any of the Loan Documents, Lenders shall never be entitled to receive, collect or apply as interest (whether termed interest herein or deemed to be interest by operation of law or judicial determination) on the Obligations any amount in excess of interest calculated at the Maximum Rate, and, in the event that any Lender ever receives, collects or applies as interest any such excess, the amount which would be excessive interest shall be deemed to be a partial prepayment of principal and treated hereunder as such; and, if the principal amount of the Obligations are paid in full, any remaining excess shall forthwith be paid to Borrower. In determining whether or not the interest paid or payable under any specific contingency exceeds interest 80 calculated at the Maximum Rate, Borrower and Lenders shall, to the maximum extent permitted under applicable law, (i) characterize any non-principal payment as an expense, fee or premium rather than as interest; (ii) exclude voluntary prepayments and the effects thereof; and (iii) amortize, prorate, allocate and spread, in equal parts, the total amount of interest throughout the entire contemplated term of the Obligations; provided that, if the Obligations are paid and performed in full prior to the end of the full contemplated term thereof, and if the interest received for the actual period of existence thereof exceeds interest calculated at the Maximum Rate, Lenders shall refund to Borrower the amount of such excess or credit the amount of such excess against the principal amount of the Obligations and, in such event, Lenders shall not be subject to any penalties provided by any laws for contracting for, charging, taking, reserving or receiving interest in excess of interest calculated at the Maximum Rate. SECTION 9.12 Limitation Upon Liability. Subject to the exceptions and qualifications described below, Holdings I, Borrower's sole general partner, its successors and assigns (the "General Partner"), shall not be personally liable for the payment of the Obligations. Notwithstanding the foregoing provisions of this paragraph: (a) if an Event of Default occurs, nothing hereinabove stated shall in any way prevent or hinder the Agent or the Lenders in the enforcement or foreclosure of the Liens now or at any time hereafter securing the payment of the Obligations, or in the pursuit or enforcement of any remedy or judgment against Borrower and its assets; and (b) the General Partner shall be fully liable to the Agent and the Lenders to the same extent that the General Partner would be liable absent the foregoing provisions of this Section 9.12: (i) for fraud or willful misrepresentation by the General Partner, its Affiliates or predecessor general partner (i.e., CBL Properties, Inc.), (to the full extent of losses suffered by the Agent or any Lender by reason of such fraud or willful misrepresentations); (ii) for the retention of any rental income or other income in excess of operating expenses of the property arising with respect to the property covered by any Loan Document and collected by Borrower after the Agent has given Borrower any notice that Borrower is in default under any of the Loan Documents and that the Agent and the Lenders have exercised their option to accelerate the maturity of the Obligations, foreclose or require the foreclosure of the Liens securing payment thereof or exercise any of the other rights, remedies and recourses of the Agent or the Lenders under the Loan Documents (to the full extent of the rental income or other income in excess of such operating expenses collected by Borrower after the giving of any such notice); (iii) for the fair market value, as of the time of the giving of any notice referred to in (ii) above, of any personalty or fixtures removed or disposed of by Borrower (other than in accordance with the terms of the Mortgage encumbering the same) after the giving of any notice referred to in (ii) above; and (iv) for the misapplication by Borrower (contrary to the provisions of this Agreement or the Loan Documents) of (x) any proceeds paid under any insurance policy by reason of damage, loss or destruction to any portion of the Collateral or the Projects (to the full extent of such proceeds so misapplied); or (y) any proceeds or awards resulting from the condemnation of all or any part of the Collateral or Projects (to the full extent of such proceeds or awards so misapplied). No subsequent owner of the Collateral or the Projects shall be liable under the foregoing clause (b) for the acts and omissions of any prior owner, provided such subsequent owner and any partner therein or other party thereto is not an Affiliate of such prior owner or any partner therein or other party thereto, and further provided 81 that the Agent and the Majority Lenders have given their prior written approval to the transfer of such Collateral or Projects to such subsequent owner, if such approval is required under the Loan Documents. SECTION 9.13 Course of Dealing. Borrower and Lenders mutually agree that each shall proceed at all times in good faith and in a commercially reasonable manner in the performance of its obligations and in the exercise of its judgment or discretion hereunder and under the other loan documents. SECTION 9.14 Treatment of Certain Information; Confidentiality. (a) Borrower acknowledges that from time to time financial advisory, investment banking and other services may be offered or provided to Borrower or one or more of its Subsidiaries (in connection with this Agreement or otherwise) by any Lender or by one or more Subsidiaries or Affiliates of such Lender and Borrower hereby authorizes each Lender to share any information delivered to such Lender by Borrower and its Subsidiaries pursuant to this Agreement, or in connection with the decision of such Lender to enter into this Agreement, to any such Subsidiary or Affiliate, it being understood that any such Subsidiary or Affiliate receiving such information shall be bound by the provisions of clause (b) below as if it were a Lender hereunder. (b) Each Lender agrees (on behalf of itself and each of its Affiliates, directors, officers, employees and representatives) to keep confidential, in accordance with their customary procedures for handling confidential information of this nature and in accordance with safe and sound banking practices, any non-public information supplied to it by Borrower pursuant to this Agreement which is identified by Borrower as being confidential at the time the same is delivered to the Lenders, provided that nothing herein shall limit the disclosure of any such information (i) to the extent required by statute, rule, regulation or judicial process, (ii) to counsel for any of the Lenders, (iii) to bank examiners, auditors or accountants, (iv) to any other Lender, (v) in connection with any litigation to which any one or more of the Lenders is a party (provided, that each such Lender will promptly notify Borrower of such litigation and of such proposed disclosure prior to the disclosure of such information (unless prohibited from doing so by the relevant court)) or (vi) to any Transferee (or prospective Transferee) so long as such Transferee (or prospective Transferee) first executes and delivers to the respective Lender a Confidentiality Agreement containing substantially the term of this Section 9.14. SECTION 9.15 Conflict of Terms. In the event of a conflict between the terms and provisions of this Agreement and the terms and provisions of any of the other Loan Documents, the terms of this Agreement shall govern; provided, however, that any term or provision of any Collateral Document applicable to the Collateral shall be deemed to be supplemental to, and not in conflict with, the terms and provisions of this Agreement. SECTION 9.16 Governing Law; Submission to Jurisdiction. THIS AGREEMENT AND EACH NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF GEORGIA. BORROWER HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT 82 OF GEORGIA AND OF ANY GEORGIA STATE COURT SITTING IN ATLANTA, GEORGIA FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED HEREBY. BORROWER IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. SECTION 9.17 Waiver of Right to Trial by Jury. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (1) ARISING UNDER THIS AGREEMENT, ANY NOTE OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION THEREWITH, OR (2) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS AGREEMENT, ANY NOTE OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. ________________ Initials SECTION 9.18 Amendment and Restatement. This Agreement constitutes an amendment to and a restatement in the entirety of the Original Credit Agreement, and the obligations set forth therein, as amended and restated hereby, continue in full force and effect. This Agreement is not and shall not be deemed to constitute a novation of the underlying obligations. The Original Credit Agreement shall govern the relationship of the parties and the Loan through the date preceding the Effective Date; from and after the Effective Date, this Agreement shall govern and control. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. 83 "Borrower" CBL & ASSOCIATES LIMITED PARTNERSHIP By: CBL Holdings I, Inc. as General Partner By:_____John N. Foy________________ Name: ____John N. Foy___________ Title:_____Vice President_______ Attest:___Jeffrey V. Curry_________ Name: ___Jeffrey V. Curry_______ Secretary:__Assistant Secretary_ Address for Notices: CBL & Associates Limited Partnership c/o CBL & Associates Properties, Inc. One Park Place 6148 Lee Highway Chattanooga, Tennessee 37421 Attn: President Telecopy Number: (615) 490-8662 with a copy to: CBL & Associates Properties, Inc. One Park Place 6148 Lee Highway Chattanooga, Tennessee 37421 Attn: Mary Ann Okrasinski, Esq. Telecopy Number: (615) 490-8662 Signatures Continued on Next Page 84 Signatures Continued from Previous Page "Lenders" Commitment: $45,000,000 WELLS FARGO BANK, NATIONAL ASSOCIATION., as successor in interest to Wells Fargo Realty Advisors Funding, Incorporated By: ___Robert W. Belson____________ Name: __Robert W. Belson________ Title:__Senior Vice President___ Wells Fargo Bank, National Association 2859 Paces Ferry Road, Suite 1805 Atlanta, Georgia 30339 Attn: Loan Administration Manager Telecopy Number: (770) 435-2262 with copies to: Wells Fargo Bank, National Association 420 Montgomery Street, 9th Floor San Francisco, California 94163 Attn: Leslie Eckstein Telecopy Number: (415) 391-2971 Wells Fargo Bank, National Association 2030 Main Street, Suite 800 Irvine, California 92714 Attn: Debra Autry Telecopy Number: (714) 261-0946 Troutman Sanders LLP Suite 5200 600 Peachtree Street Atlanta, Georgia 30308-2216 Attn: Joseph R. White, Esq. Telecopy Number: (404) 885-3900 Signatures Continued on Next Page 85 Signatures Continued from Previous Page Commitment: $40,000,000 U.S. BANK NATIONAL ASSOCIATION, f/k/a FIRST BANK NATIONAL ASSOCIATION By:___Stephen P. Bailey___________ Name: ___Stephen P. Bailey_____ Title:___Vice President________ U.S. Bank National Association First Bank Place 601 Second Avenue South Minneapolis, Minnesota 55402-4302 Attn: Real Estate Banking Division Telecopy Number: (612) 973-0830 Signatures Continued on Next Page 86 Signatures Continued from Previous Page "Agent" WELLS FARGO BANK, NATIONAL ASSOCIATION, as successor in interest to Wells Fargo Realty Advisors Funding, Incorporated, as Agent By: _____Robert W. Belson__________ Name: ___Robert W. Belson_______ Title:___Senior Vice President__ Wells Fargo Bank, National Association 2859 Paces Ferry Road, Suite 1805 Atlanta, Georgia 30339 Attn: Loan Administration Manager Telecopy Number: (770) 435-2262 with copies to: Wells Fargo Bank, National Association 420 Montgomery Street, 9th Floor San Francisco, California 94163 Attn: Leslie Eckstein Telecopy Number: (415) 391-2971 Wells Fargo Bank, National Association 2030 Main Street, Suite 800 Irvine, California 92714 Attn: Debra Autry Telecopy Number: (714) 261-0946 Troutman Sanders LLP Suite 5200 600 Peachtree Street Atlanta, Georgia 30308-2216 Attn: Joseph R. White, Esq. Telecopy Number: (404) 885-3900 87 EXHIBIT I FORM OF EXTENSION REQUEST ______________ __, 199_ Wells Fargo Bank, National Association 2859 Paces Ferry Road Suite 1805 Atlanta, Georgia 30339 Attention: ________________ Ladies and Gentlemen: Reference is made to that certain Third Amended and Restated Credit Agreement dated as of _________ __, 1998, (the "Credit Agreement"), by and among CBL & Associates Limited Partnership (the "Borrower"), Wells Fargo Bank, National Association, and U.S. Bank National Association and their assignees under Section 9.6 thereof ("Lenders"), and Wells Fargo Bank, National Association, as Agent (the "Agent"). Capitalized terms used herein, and not otherwise defined herein, have their respective meanings given them in the Credit Agreement. Pursuant to Section 2.11 of the Credit Agreement, the Borrower hereby requests that the Lenders and Agent extend the current Termination Date of _____________ __, 199_ by a one-year period to _________________ __, 1999_. The Borrower hereby certifies to the Agent and the Lenders that as of the date hereof (a) no Default or Event of Default has occurred and is continuing, and (b) the representations and warranties of the Borrower contained in the Credit Agreement and the other Loan Documents are true and correct in all material respects, except to the extent such representations or warranties specifically relate to an earlier date or such representations or warranties become untrue by reason of events or conditions otherwise permitted under the Credit Agreement or the other Loan Documents. CBL & ASSOCIATES LIMITED PARTNERSHIP By: CBL Holdings I, Inc., as General Partner By: Name: Title: Attest: Name: Title: Schedule 3.1 Eligible Projects Attributable Project Borrowing Base - ------------ --------------- 1. Post Oak Mall $39,000,000 Brazos County, Texas 2. Georgia Square Mall $28,600,000 Clark County, Georgia 3. Twin Peaks Mall $19,500,000 Boulder County, Colorado EX-27 5 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Consolidated Balance Sheet at September 30, 1998 (unaudited) and the Consolidated Statement of Operations for the nine months ended September 30, 1998 (unaudited) and is qualified in its entirety by reference to such financial statements. 1,000 9-MOS DEC-31-1998 JAN-1-1998 SEP-30-1998 6,787 0 17,665 0 0 0 0 174,921 1,834,467 0 0 0 29 242 407,793 1,834,467 0 180,168 0 0 95,503 0 47,836 29,743 0 29,743 0 676 0 29,067 1.14 1.13 -----END PRIVACY-ENHANCED MESSAGE-----