Pursuant to Article 4.4 of the Second Amended and Restated Partnership Agreement of the Operating Partnership

 

                                                                    Exhibit 4.10

 

                                                                    Attachment 4

 

 

                                    EXHIBIT H

 

 

                                      TERMS

                                       OF

                          SERIES S SPECIAL COMMON UNITS

                                       OF

                      CBL & ASSOCIATES LIMITED PARTNERSHIP

                          (the "Operating Partnership")

 

                         Pursuant to Article 4.4 of the

              Second Amended and Restated Partnership Agreement of

                            the Operating Partnership

 

 

     WHEREAS,  Article  4.4 of  the  Second  Amended  and  Restated  Partnership

Agreement of the Operating Partnership (as amended through July 28, 2004, and as

the same  may  hereafter  be  amended  as  permitted  therein  and  herein,  the

"Partnership Agreement") grants CBL Holdings I, Inc., the general partner of the

Operating Partnership (the "General Partner"),  authority to cause the Operating

Partnership  to issue  interests in the Operating  Partnership  to persons other

than  the  General  Partner  in  one  or  more  classes  or  series,  with  such

designations, preferences and relative, participating, optional or other special

rights,  powers and duties as may be  determined  by the General  Partner in its

sole and absolute  discretion.  (For ease of reference,  capitalized  terms used

herein and not  otherwise  defined  have the  meanings  assigned  to them in the

Partnership Agreement.)

 

     NOW THEREFORE,  the General Partner hereby  designates a series of priority

units  and  fixes  the   designations,   powers,   preferences   and   relative,

participating,  optional  or  other  special  rights,  and  the  qualifications,

limitations or restrictions thereof, of such priority units, as follows:

 

     1.  Designation  and Amount.  The units of such series shall be  designated

"Series  S  Special  Common  Units"  (the  "S-SCUs")  and the  number  of  units

constituting such series shall initially be 960,307.  The Operating  Partnership

may not issue any  additional  S-SCUs  unless  [(i) the  issuance is required to

deliver  additional  consideration  as required by the terms of the Contribution

and Exchange  Agreement,  dated as of May 21, 2004,  among Donald  Soffer,  Rita

Soffer  Leeds,   Eugene  Kessler,   Pittsburgh  Mall  Limited   Partnership  and

Monroeville   Mall  Partners,   L.P.,  as  the  same  may  be  further  amended,

supplemented  or  modified  (the  "Contribution  Agreement")  or  (ii)  ] it has

obtained the prior written consent of the holders of record of a majority of the

outstanding  S-SCUs  ("Majority  Holders").  The rights and  obligations  of the

S-SCUs  shall be as set forth  herein (to the extent not  inconsistent  with the

Partnership  Agreement)  and  in  the  Partnership  Agreement.  Nothing  in  the

foregoing shall be deemed to limit the right and power of the General Partner to

cause the Operating  Partnership to issue securities otherwise designated to the

fullest extent  permitted under the terms of the Partnership  Agreement and this

Exhibit H.

 

                                       1

<PAGE>

 

     2. Distribution Rights. (a) Holders of S-SCUs shall be entitled to receive,

when, as and if declared by the General  Partner  distributions  with respect to

the S-SCUs in the manner and to the fullest extent set forth in the  Partnership

Agreement.

 

     (b) Distributions  with respect to the S-SCUs shall be payable on the dates

designated  by the  General  Partner  for the  payment of  distributions  to the

holders of SCUs and Common Units. Any distribution payable on the S-SCUs for the

quarter in which the S-SCUs are first  issued will be prorated  and  computed on

the basis of a 360-day year  consisting of twelve 30-day  months.  Distributions

will be payable to holders of record of the S-SCUs as they appear in the records

of the Operating  Partnership at the close of business on the applicable  record

date,  which shall be the record date  designated by the General Partner for the

payment of  distributions  for such  quarter  to the  holders of SCUs and Common

Units.

 

     (c) At such  time,  if any,  as there is any  distribution  shortfall  with

respect  to the S-SCUs as  described  in Section  6.2(b)(i)  of the  Partnership

Agreement,  none of the Operating  Partnership,  the General Partner or the REIT

will redeem,  purchase or otherwise acquire for any consideration (or any moneys

be paid to or made available for any sinking fund for the redemption of any such

units) any Common Units or any other units of interest in the  Partnership  that

by their  terms  rank  junior as to  distributions  to the  rights of the S-SCUs

(except by conversion into or exchange for shares of Common Stock of the REIT or

other  units of the  Operating  Partnership  ranking  junior to the S-SCUs as to

distributions).

 

     (d)  Distributions  with  respect to the S-SCUs are  intended to qualify as

permitted  distributions of cash that are not treated as a disguised sale within

the meaning of Treasury Regulation 1.707-4, and the provisions of this Exhibit H

shall be construed and applied consistent with such Treasury Regulations.

 

     3. Special Distribution Upon Liquidation. Upon any voluntary or involuntary

liquidation,   dissolution  or  winding-up  of  the  affairs  of  the  Operating

Partnership,  the  holders  of S-SCUs  shall be  entitled  to be paid out of the

assets of the Operating  Partnership  legally  available for distribution to its

unit holders an amount equal to any  distribution  shortfall with respect to the

S-SCUs described in Section 6.2(b)(i) of the Partnership  Agreement,  before any

distribution  or payment  shall be made to holders of Common  Units or any other

series  of  Partnership  Units  ranking  junior  to the  S-SCUs  or  SCUs  as to

liquidation  rights.  In the event  that,  upon such  voluntary  or  involuntary

liquidation,  dissolution or winding-up,  the available  assets of the Operating

Partnership are  insufficient  to pay such amount on all outstanding  S-SCUs and

SCUs,  then the  holders of the S-SCUs and the SCUs shall  share  ratably in any

such distribution of assets,  based on the number of S-SCUs or SCUs held by each

such holder.  Holders of S-SCUs shall be entitled to written  notice of any such

liquidation.  In  addition,  upon  any  voluntary  or  involuntary  liquidation,

dissolution or winding-up of the affairs of the Operating Partnership, after any

such  distribution  shortfall  on account of the S-SCUs  shall have been paid in

cash, the S-SCUs shall be treated as if they had been exchanged for Common Units

pursuant to the terms of Paragraph 7(b) hereof.  The  consolidation or merger of

the  Operating  Partnership  with or into  any  partnership,  limited  liability

company, corporation,  trust or other entity shall not be deemed to constitute a

liquidation, dissolution or winding-up of the Operating Partnership.

 

                                       2

<PAGE>

 

     4. Optional  Redemption.  (a) At any time after the  Operating  Partnership

shall have achieved the Distribution  Benchmark,  the Operating Partnership,  at

its option upon not less than thirty (30) nor more than sixty (60) days' written

notice,  may redeem the S-SCUs,  in whole or in part, on the first  Business Day

following any record date established for the  determination of parties entitled

to receive any  distributions  being made to holders of S-SCUs.  Such redemption

shall be made by (i)  paying in cash to the  holders of S-SCUs  with  respect to

their S-SCUs being  redeemed,  any  distribution  shortfall  with respect to the

S-SCUs described in Section 6.2(b)(i) of the Partnership  Agreement  outstanding

on the date of  redemption  (whether or not  declared)  and (ii)  issuing to the

holders  thereof a number of Common  Units equal to the Common Unit  Amount.  If

fewer than all of the  outstanding  S-SCUs are to be redeemed,  the S-SCUs to be

redeemed  shall be redeemed  pro rata (as nearly as may be  practicable  without

creating fractional units) or by lot or by any other equitable method determined

by the Operating  Partnership.  Holders of S-SCUs to be redeemed shall surrender

the certificates  evidencing such S-SCUs, if any, at the place designated in the

Operating  Partnership's  notice  and  shall  be  entitled  to the  distribution

payments and Common Units  described  in the second  sentence of this  Paragraph

4(a) prior to or concurrently with such surrender. From and after the redemption

date distributions  shall cease to be payable with respect to such S-SCUs,  such

S-SCUs  shall no longer be deemed  outstanding  and all rights of the holders of

such units will terminate, except the right to receive the distribution payments

and Common Units  described in the second  sentence of this Paragraph  4(a). For

purposes hereof, the term "Distribution Benchmark" shall mean when the quarterly

distributions paid over a period of twelve (12) consecutive quarters pursuant to

Sections  6.2(b)(ii)  and (iii) of the  Partnership  Agreement  per  S-SCU  then

outstanding shall have equaled or exceeded 130% of the S-SCU Basic  Distribution

Amount.

 

     (b)  Notwithstanding  the provisions of Paragraph  4(a) above,  unless full

cumulative  distributions on all S-SCUs shall have been or contemporaneously are

paid in cash or a sum sufficient  for the payment  thereof in cash set apart for

payment  for all past  distribution  periods and the then  current  distribution

period or portion  thereof,  no S-SCUs shall be redeemed  unless all outstanding

units of S-SCUs are simultaneously redeemed.

 

     (c) Notice of redemption  pursuant to Paragraph  4(a) above shall be mailed

by the Operating  Partnership by registered mail, return receipt requested,  not

less than  thirty  (30) nor more than sixty  (60) days  prior to the  redemption

date, addressed to the respective holders of record of the S-SCUs to be redeemed

at their  respective  addresses  as they appear on the records of the  Operating

Partnership. Failure to give such notice or any defect thereto or in the mailing

thereof shall not affect the validity of the  proceedings  for the redemption of

any S-SCUs.  Each notice  shall state (i) the  redemption  date;  (ii) the total

number of S-SCUs to be redeemed  and the number of S-SCUs held by such holder to

be redeemed; (iii) the Common Unit Amount; (iv) the place or places where S-SCUs

are to be surrendered for payment of the distribution  shortfall with respect to

the  S-SCUs  described  in  Section  6.2(b)(i)  of  the  Partnership   Agreement

outstanding  thereon and the  issuance of a number of Common  Units equal to the

Common  Unit  Amount;  and (v) that  distributions  on the S-SCUs to be redeemed

shall cease to be payable on such redemption date.

 

     (d) All  S-SCUs  redeemed  pursuant  to this  Paragraph  4 shall be  deemed

retired and terminated.

 

                                       3

<PAGE>

 

     (e) The S-SCUs  shall have no stated  maturity  and shall not be subject to

any sinking fund or mandatory  redemption  except as otherwise  provided in this

Section 4.

 

     (f) As used herein,  the term "Common Unit Amount" shall mean, with respect

to any number of  S-SCUs,  the number of Common  Units  equal to such  number of

S-SCUs multiplied by the Common Unit Conversion Factor; provided,  however, that

in the event  that the  Operating  Partnership  issues to all  holders of Common

Units  rights,  options,  warrants or  convertible  or  exchangeable  securities

entitling such holders to subscribe for or purchase  additional Common Units, or

any other  securities  or property of the Operating  Partnership  (collectively,

"Common Unit  Additional  Rights"),  other than a right to receive  Common Units

pursuant to a Distribution  of Common Units in Lieu of Cash (as defined  below),

then the Common Unit Amount shall also  include  (other than with respect to any

Common Units or S-SCUs  "beneficially  owned" by an "Acquiring Person" (as those

terms are defined in the Company's Rights Agreement, dated as of April 30, 1999,

as amended through the date hereof and as it may be further amended from time to

time,  and  any  successor   agreement   thereof   (collectively,   the  "Rights

Agreement"))),  such Common Unit Additional  Rights that a holder of that number

of Common Units would be entitled to receive.  As used herein,  the term "Common

Unit Conversion  Factor" shall mean 1.0,  provided,  that, in the event that the

Operating  Partnership  (i) makes a  distribution  to all  holders of its Common

Units in Common Units (other than a distribution  of Common Units pursuant to an

offer to all  holders  of Common  Units and S-SCUs  permitting  each to elect to

receive a distribution  in Common Units in lieu of a cash  distribution  (such a

distribution of Common Units is referred to herein as a "Distribution  of Common

Units in Lieu of Cash")), (ii) subdivides or splits its outstanding Common Units

(which shall expressly exclude any Distribution of Common Units in Lieu of Cash,

but which may include any other distribution of Common Units), or (iii) combines

or reverse splits its  outstanding  Common Units into a smaller number of Common

Units (in each case,  without  making a  comparable  distribution,  subdivision,

split, combination or reverse split with respect to the S-SCUs), the Common Unit

Conversion Factor in effect  immediately  preceding such event shall be adjusted

by multiplying the Common Unit Conversion Factor by a fraction, the numerator of

which shall be the number of Common Units issued and  outstanding  on the record

date for such  distribution,  subdivision,  split,  combination or reverse split

(assuming  for  such  purposes  that  such  distribution,   subdivision,  split,

combination or reverse split occurred as of such time),  and the  denominator of

which shall be the actual number of Common Units  (determined  without the above

assumption)  issued and  outstanding  on the record date for such  distribution,

subdivision,  split,  combination or reverse split. Any adjustment to the Common

Unit Conversion Factor shall become effective  immediately after the record date

for such event in the case of a  distribution  or the effective date in the case

of a subdivision, split, combination or reverse split.

 

     (g)  Notwithstanding  anything  to the  contrary  in this  Section  4,  the

redemption date may not be a date prior to the eighth anniversary of the initial

closing under the Contribution Agreement.

 

     5. Put Right.

 

     (a) If an Original Holder of S-SCUs (as  hereinafter  defined) shall die on

or before the fifth  anniversary  of the issuance of the S-SCUs (a "Put Event"),

 

 

                                       4

<PAGE>

 

the  Successor  Holder of such S-SCUs (as  hereinafter  defined)  shall have the

option to deliver to the Operating Partnership, within sixty (60) days from such

date of death (the "Put  Period"),  a written  notice  (the "Put  Notice")  that

requires the Operating  Partnership to redeem for the Put  Consideration  all or

part of the S-SCUs held of record by the Original  Holder at the time of the Put

Event. The Put  Consideration  for each such S-SCU shall be an amount,  equal to

the sum of (x) the product of the Current  Per Share  Market  Price per share of

Common Stock and the Common Stock Amount applicable to such S-SCU, each computed

as of such  date of death,  plus (y) the  lesser  of the  Closing  Amount or the

Redeemable  Amount (each as defined below),  provided that in the event that the

Redeemable  Amount is a number less than $0, the amount of this clause (x) shall

be $0, minus (z) the amount of $3.91 per S-SCU,  which amount will be reduced by

5% upon each date on which  payment of a quarterly  distribution  is made to the

holders of the S-SCUs  (prorated  for the  quarter in which the S-SCUs are first

issued and computed on the basis of a 360-day year  consisting  of twelve 30-day

months).  The  Put  Consideration  shall,  at  the  election  of  the  Operating

Partnership,  be payable in any  combination  of cash or shares of Common Stock,

which  Common  Stock  shall be valued for this  purpose at the Current Per Share

Market  Price  as of  such  date of  death.  The  Closing  Amount  shall  be the

difference between (i) $78.10,  divided by the Conversion Factor, minus (ii) the

Current  Per Share  Market  Price  per  share of Common  Stock as of the date of

issuance of the S-SCUs, but in no case shall such Current Per Share Market Price

per share of Common Stock be an amount less than $56.70.  The Redeemable  Amount

shall be the difference  between (i) $78.10,  divided by the Conversion  Factor,

minus (ii) the product of the Current Per Share Market Price per share of Common

Stock and the Common Stock Amount  applicable to each S-SCU, each computed as of

such date of death.  In addition to and in  conjunction  with the payment of the

Put  Consideration,  the  holders of the S-SCUs  shall be entitled to payment in

cash of any  distribution  shortfall  with  respect to the S-SCUs  described  in

Section 6.2(b)(i) of the Partnership Agreement.

 

Set forth below is an illustration of the calculation of the Put Consideration.

The calculation assumes that the Current Per Share Market Price upon the date of

first issuance of the S-SCUs was $56.70 and that the Current Per Share Market

Price upon the date of death was $70.00. The Put Consideration for each S-SCU

shall be calculated as follows:

 

($70.00 x Common Stock Amount (calculated as of the date of death) plus

                                                                   ----

(the lesser of the Closing Amount or the Redeemable Amount (each as calculated

below)) minus

        -----

 

($3.91 per S-SCU, which amount will be reduced by 5% upon each date on which

payment of a quarterly distribution is made to the holders of the S-SCUs

(prorated for the quarter in which the S-SCUs are first issued and computed on

the basis of a 360-day year consisting of twelve 30-day months)) equals the Put

Consideration.

 

The Closing Amount shall equal: ($78.10/ the Conversion Factor) - $56.70.

 

The Redeemable Amount shall equal:  ($78.10/ the Conversion Factor) - ($70.00 x

Common Stock Amount (calculated as of the date of death).

 

     (b) A Put Notice in the form annexed hereto as Attachment 1 hereto shall be

duly  completed,   executed  and  mailed  by  registered  mail,  return  receipt

 

 

                                       5

<PAGE>

 

requested,  addressed  to  the  Operating  Partnership  at  200  Hamilton  Place

Boulevard,  CBL Center, Suite 500, Chattanooga,  Tennessee 37421-6000 Attention:

Chief  Executive  Officer.  A Put Notice once  dispatched  may not be  withdrawn

except with the written consent of the Operating Partnership. From and after the

dispatch of a Put Notice with  respect to any S-SCUs,  all  distributions  shall

cease to be payable  with  respect to the S-SCUs,  the S-SCUs shall no longer be

deemed  outstanding  and all rights of holders  with respect to the S-SCUs shall

terminate,  except  the right to  receive  the Put  Consideration  and any other

payments described in Paragraphs 5(a) or 5(c) at the Put Closing.

 

     (c)  Within  thirty  (30)  days of  receipt  of a Put  Notice  pursuant  to

Paragraph  5(b) above,  the Operating  Partnership  shall,  by registered  mail,

return receipt  requested,  addressed to the respective holders of record of the

S-SCUs  at their  respective  addresses  as they  appear on the  records  of the

Operating Partnership,  deliver a notice (a "Put Response Notice") setting forth

the date and time  (the  "Put  Closing  Date")  on which  the  S-SCUs  are to be

surrendered  for  payment  of the  Put  Consideration  and  any  other  payments

described in Paragraph  5(a) above (the "Put  Closing")  and setting  forth with

reasonable  specificity  (i) the amount and  calculation  of such payments to be

made,  and (ii) the  amount  of cash or  Common  Stock to be used to pay the Put

Consideration  (the "Put Stock").  The Put Closing Date shall be a date not more

than  thirty  (30)  days  from  the date of  receipt  of the Put  Notice  if the

Operating  Partnership  shall  elect to pay the Put  Consideration  entirely  in

shares of Common  Stock,  and not more than ninety (90) days from the receipt of

the  Put  Notice  if the  Operating  Partnership  shall  elect  to pay  the  Put

Consideration  entirely  in  cash,  provided  that if  payment  of the  cash Put

Consideration  is delayed  beyond  thirty  (30) days from the receipt of the Put

Notice, it will bear interest at the prime rate from such date until payment.

 

     (d) The Put  Closing  shall  take  place at the  offices  of the  Operating

Partnership or at such other location set forth by the Operating  Partnership in

the Put Response Notice.  At the Put Closing,  the record holders of the offered

S-SCUs shall  surrender the  certificates  evidencing  such S-SCUs,  if any, and

otherwise  execute  such  documents   reasonably   requested  by  the  Operating

Partnership  to  consummate  or  evidence  such  surrender,  and  the  Operating

Partnership  shall  pay the Put  Consideration,  including  without  limitation,

through  the  delivery  of  stock  certificates  or other  appropriate  means to

evidence any Put Stock,  together with any other payments described in Paragraph

5(a) above

 

     (e)  Notwithstanding  anything  in clause  (a) above to the  contrary,  for

purposes of this Section 5, S-SCUs issued by the Operating  Partnership  to, and

held of record by, an entity that is not an Original Holder (a "Record  Holder")

shall  nevertheless be deemed held of record by an Original Holder to the extent

that such Original  Holder  shall,  at any time (and from time to time) not less

than ninety (90) days prior to such Original  Holder's date of death, have given

written notice to the Operating Partnership of the S-SCUs held of record by such

Record Holder of which the Original Holder is the beneficial owner.

 

     (f) For purposes of this Section 5,

 

                                       6

<PAGE>

 

          (i)  the term "Original  Holder" shall mean the persons  identified in

               Attachment  2 hereof,  as of the date  hereof,  and the number of

               S-SCUs  beneficially owned by such Original Holder and the Record

               Holder  thereof (for purposes of clause (e) above) are identified

               next to such Original Holder's name; and

 

          (ii) the  term  "Successor  Holder"  shall  mean  the  eastate  of the

               deceased  Original  Holder  as well as any  successor  beneficial

               owner  (by  will or  laws of  succession)  of the  S-SCUs  of the

               deceased Original Holder,  provided however, that a Record Holder

               of S-SCUs that was deemed an  Original  Holder  under  clause (e)

               above  with  respect  to such  S-SCUs on behalf of such  deceased

               Original  Holder shall  likewise be deemed a Successor  Holder of

               such S-SCUs on behalf of such Successor Holder(s) for purposes of

               this Section 5.

 

     6. Voting  Rights.  (a) Holders of the S-SCUs shall have the voting  rights

set forth herein and in the Partnership Agreement.

 

     (b) So long as any S-SCUs remain  outstanding,  the  Operating  Partnership

shall not,  without the affirmative vote or consent of the holders of two-thirds

of the S-SCUs  outstanding at the time,  given in person or by proxy,  either in

writing or at a meeting (such series voting separately as a class):

 

          (i)  undertake,  consent to, or otherwise  participate in or acquiesce

               to   any   recapitalization   transaction   (including,   without

               limitation, an initial public offering, a merger,  consolidation,

               other business combination,  exchange,  self-tender offer for all

               or  substantially  all of the  Common  Units,  or sale  or  other

               disposition  of  all  or  substantially   all  of  the  Operating

               Partnership's  assets) (each of the foregoing  being  referred to

               herein as a "Recapitalization  Transaction") unless in connection

               with such a  Recapitalization  Transaction  (x) either each S-SCU

               outstanding  prior to the  Recapitalization  Transaction will (A)

               remain   outstanding   following   the   consummation   of   such

               Recapitalization  Transaction without any amendment to the rights

               and  obligations  of  holders of the  S-SCUs  that is  materially

               adverse to the holders of S-SCUs (as reasonably determined by the

               Board of Directors  of the  Company) or (B) be converted  into or

               exchanged  for   securities   of  the  surviving   entity  having

               preferences,   conversion   and  other  rights,   voting  powers,

               restrictions,  distribution  rights and terms and  conditions  of

               redemption  thereof  materially no less favorable than those of a

               S-SCU  under this  Exhibit H and the  Partnership  Agreement  (as

               reasonably  determined by the Board of Directors of the Company),

               and (y) each