<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
FOR THE FISCAL YEAR ENDED December 31, 1995 COMMISSION FILE NO. 1-6622
-------------------- ------
WASHINGTON REAL ESTATE INVESTMENT TRUST
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DISTRICT OF COLUMBIA 53-0261100
- ----------------------------------- ----------------------------------------
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
10400 CONNECTICUT AVENUE, KENSINGTON, MARYLAND 20895
- -------------------------------------------------------------------------------
(Address of principal executive office) (Zip code)
Registrant's telephone number, including area code (301) 929-5900
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Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of exchange on which registered
- -------------------------------------------------------------------------------
Shares of Beneficial Interest (No Par Value) American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
----
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 twelve (12) months (or such shorter period that the
Registrant was required to file such report) and (2) has been subject to such
filing requirements for the past ninety (90) days. YES X NO
---- ----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. X
-----
As of March 15, 1996, 31,751,734 Shares of Beneficial Interest were outstanding
and the aggregate market value of such shares held by non-affiliates of the
registrant was approximately $500,339,936 (based on the closing price of the
stock on March 15, 1996).
DOCUMENTS INCORPORATED BY REFERENCE
Part III of this Form 10-K is incorporated by reference from the Trust's 1996
Notice of Annual Meeting and Proxy Statement.
<PAGE> 2
WASHINGTON REAL ESTATE INVESTMENT TRUST
1995 FORM 10-K ANNUAL REPORT
INDEX
<TABLE>
<CAPTION>
PART I Page
----
<S> <C> <C> <C>
Item 1. Business 3
Item 2. Properties 5
Item 3. Legal Proceedings 10
Item 4. Submission of Matters to a Vote of Security Holders 10
PART II
Item 5. Market for the Registrant's Common Stock and
Related Stockholder Matters 11
Item 6. Selected Financial Data 12
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations 13
Item 8. Financial Statements and Supplementary Data 15
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 15
PART III
Item 10. Directors and Executive Officers of the Registrant 16
Item 11. Executive Compensation 16
Item 12. Security Ownership of Certain Beneficial Owners and Management 16
Item 13. Certain Relationships and Related Transactions 16
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 17
Signatures 19
</TABLE>
2
<PAGE> 3
PART I
ITEM 1. BUSINESS
Washington Real Estate Investment Trust (WRIT or the Trust) is a
self-administered qualified equity real estate investment trust. The Trust's
business consists of the ownership of income-producing real estate properties
principally in the Greater Washington-Baltimore Region. The Trust has a
fundamental strategy of regional focus, diversified property type ownership and
conservative financial management.
WRIT has elected to qualify as a real estate investment trust under the
Internal Revenue Code. Accordingly, WRIT is relieved of federal income taxes
provided that capital gains and at least 95% of its ordinary income are
distributed to shareholders in the form of dividends. Over the last five years
dividends paid per share have been $.99 for 1995, $.92 for 1994, $.89 for 1993,
$.84 for 1992 and $.79 for 1991 . The indicated annualized dividend rate for
1996, based upon the March 29, 1996 dividend, is $1.00.
The Trust has purchased real estate primarily in the Greater
Washington-Baltimore Region because of management's familiarity with the
region, its expected growth and proven stability. The CMSA (Consolidated
Metropolitan Statistical Area) which includes the Greater Washington-Baltimore
region is the nation's fourth largest with a population exceeding 6.9 million.
The region is ranked #1 in the U.S. in median household income and percentage
of population with education at the undergraduate and postgraduate level.
Total non-farm employment in the Washington area has grown 88% from 1.6 million
jobs in 1970 to 3.1 million jobs in 1995, while the percentage of Federal
Government employment in the region has decreased from 38.3% to 15.6%. Since
January 1980, seasonally-adjusted unemployment in the Washington area has
averaged 4.1% with December 1995 unemployment standing at 3.6%.
The Greater Washington-Baltimore region is a leader in the rapidly growing
technology/infocom and biotech/health care industries. It is the center of the
U.S. Space Commerce/Satellite Industry with Comsat, GTE Spacenet, Intelsat and
NASA all located here. The region has the nation's second highest
concentration of technology companies and the third highest concentration of
Biotech companies.
This region is also the headquarters for several of the largest U.S. and
international financial institutions including the World Bank, International
Monetary Fund, Inter-American Development Bank, Export-Import Bank, Federal
National Mortgage Association (Fannie Mae), Federal Home Loan Mortgage Corp
(Freddie Mac) and the Student Loan Marketing Association (Sallie Mae).
Federal spending cuts nationally have caused Federal contractors to move closer
to their clients in order to retain business. As a result, while Federal
spending decreases nationally, it becomes more concentrated and grows in the
Washington area. Total Federal procurement (outsourcing) decreased 5%
nationally from 1991 to 1994, but has increased in the Washington area by
over 23%. Despite a decrease of 1.7% in national procurement in 1994,
Washington area procurement grew 11%. In 1995, Washington area Federal
procurement grew at 9.2%, about double the national rate. U.S. Department of
Defense procurement, while shrinking nearly 10% nationally, grew 22% from
1991-1994 in the Washington area.
The Trust currently owns a diversified portfolio consisting of twelve shopping
centers, fourteen office buildings, five high-rise apartment buildings and ten
industrial distribution centers. WRIT's principal objective is to invest in
high quality real estate in prime locations and to monitor closely the
management of these properties, including active leasing and ongoing capital
improvement programs. The percentage of total real estate rental revenue by
property group for 1995, 1994 and 1993 and the percent leased as of December
31, 1995 were as follows:
3
<PAGE> 4
ITEM 1. BUSINESS, (continued)
<TABLE>
<CAPTION>
Real Estate Rental Revenue
Percent Leased --------------------------
December 31, 1995 1995 1994 1993
- ----------------- ---- ---- ----
<S> <C> <C> <C> <C>
89%* Office buildings 41% 39% 34%
93% Apartment buildings 22% 25% 27%
94% Shopping centers 26% 26% 29%
96% Industrial distribution 11% 10% 10%
---- ---- ----
100% 100% 100%
==== ==== ====
</TABLE>
*1901 Pennsylvania Avenue underwent a major renovation in 1995. See discussion
on page 9 regarding office building occupancy levels.
On a combined basis, WRIT's portfolio was 93% occupied in 1995 and 95% in 1994
and 1993.
Total revenue was $52,597,497 for 1995, $45,511,482 for 1994 and $39,375,282
for 1993 . In 1993 through 1995 there were acquisitions of seven office
buildings, two shopping centers and three industrial distribution centers.
These acquisitions were the primary reason for the shifting of each group's
percentage of total revenue. No single tenant accounted for more than 2.05% of
1995 revenue, 2.25% of 1994 or 2.5% of 1993. Various agencies of the U.S.
Government are counted separately and include the Department of Commerce,
Immigration and Naturalization Service, U.S. Postal Service, Social Security
Administration and U.S. Patent Office. All federal government tenants in the
aggregate accounted for less than 4.25% of WRIT's 1995 total revenue. The
larger non-federal government tenants include Sprint Communications, T.J. Maxx,
District of Columbia Metropolitan Police Department, Pepsi Cola, Giant Food,
Crestar Bank, Evans, CVS, Rite-Aid, George Washington University, Montgomery
County, Maryland and the State of Maryland.
As of December 31, 1995, no single property accounted for more than 10% of
total assets or more than 10% of total revenues.
The actual day-to-day property management functions at the properties owned by
the Trust are carried out by an independent management company. WRIT closely
monitors the activities of this company to assure the highest quality of
service and cost effectiveness. No WRIT Trustee or officer is a director or
officer of, or owns any interest in the management company.
The Trust expects to continue investing in additional income producing
property. Philosophically, WRIT management invests only in properties which it
believes will continue to increase in income and value. WRIT's properties
compete for tenants with other properties throughout the respective areas in
which they are located. All properties compete for tenants on the basis of
location, quality and rent charged.
Historically WRIT has acquired 100% ownership in property. However, in 1995
WRIT formed a subsidiary partnership in which WRIT currently owns substantially
all of the partnership interest. As of December 31, 1995, the WRIT partnership
has acquired two properties for cash contributed by WRIT.
WRIT intends to use the WRIT partnership to offer property owners an
opportunity to contribute properties in exchange for WRIT limited partnership
units. Such a transaction will enable property owners to diversify their
holdings and to obtain a tax deferred contribution for WRIT limited partnership
units rather than make a taxable cash sale. To date, no such transactions have
occurred. The terms of the partnership agreement provide that the
partnership's limited partnership units are entitled to distributions
substantially equivalent to the distributions on WRIT shares. A holder of
limited partnership units in the WRIT partnership will be entitled to demand
that the partnership redeem the holder's units upon 10 business days notice.
Upon such demand, WRIT, at its option, may redeem such units for cash or WRIT
shares.
4
<PAGE> 5
ITEM 1. BUSINESS, (continued)
WRIT believes that the WRIT partnership will provide WRIT an opportunity to
acquire real estate assets which might not otherwise have been offered to it.
WRIT makes capital improvements on an ongoing basis to its properties for the
purpose of maintaining and increasing their value. Major improvements and/or
renovations to the properties in 1995 and planned for 1996 are discussed by
property category on pages 7-10.
Further description of the property groups is contained in Item 2, Properties
and in Schedule III. Reference is also made to Item 7, Management's Discussion
and Analysis of Financial Condition and Results of Operations.
The number of persons employed by the Trust was 28 as of March 15, 1996.
ITEM 2. PROPERTIES
The following schedule lists the Trust's real estate investment portfolio as of
December 31, 1995. The total number of properties is 41.
As of December 31, 1995 the percent leased is the percentage of net rentable
space for which fully executed leases exist and may include signed leases for
space not yet occupied by the tenant.
Cost information is included in Schedule III of this Form 10-K Annual Report.
5
<PAGE> 6
SCHEDULE OF PROPERTIES
<TABLE>
<CAPTION>
Percent
Year Year Net Rentable * Leased
Properties Location Acquired Constructed Square Feet 12/31/95
- -------------------------- ----------------- -------- ----------- ------------ --------
<S> <C> <C> <C> <C> <C>
Shopping Centers
- ----------------
Concord Centre Springfield, VA 1973 1960 76,383 92%
Bradlee Alexandria, VA 1984 1955 167,974 100%
Clairmont Salisbury, MD 1976 1965 40,455 68%
Dover Mart Dover, DE 1973 1960 44,044 100%
Chevy Chase Metro Plaza Washington, D.C. 1985 1975 49,893 98%
Prince William Plaza Woodbridge, VA 1968 1967 54,584 68%
Takoma Park Takoma Park, MD 1963 1962 58,811 100%
Westminster Westminster, MD 1972 1969 171,531 90%
Wheaton Park Wheaton, MD 1977 1967 46,716 98%
Montgomery Village Center Gaithersburg, MD 1992 1969 196,464 92%
Shoppes of Foxchase Alexandria, VA 1994 1960 127,564 98%
Frederick County Square Frederick, MD 1995 1973 232,783 100%
---------
Subtotal 1,267,202
---------
Office Buildings
- ----------------
The WRIT Building Kensington, MD 1979 1965 65,653 97%
1901 Pennsylvania Avenue Washington, D.C. 1977 1960 97,036 56%
One Metro Square Rockville, MD 1979 1975 206,144 85%
444 N. Frederick Avenue Gaithersburg, MD 1989 1981 65,463 90%
7700 Leesburg Pike Falls Church, VA 1990 1976 122,497 94%
Arlington Financial Center Arlington, VA 1992 1963 51,655 91%
515 King Street Alexandria, VA 1992 1966 78,073 90%
The Lexington Building Rockville, MD 1993 1970 47,751 100%
The Saratoga Building Rockville, MD 1993 1977 58,237 97%
Brandywine Center Rockville, MD 1993 1969 34,982 84%
Tycon Plaza II Vienna, VA 1994 1981 139,938 95%
Tycon Plaza III Vienna, VA 1994 1978 151,594 92%
6110 Executive Boulevard Rockville, MD 1995 1971 198,796 95%
1220 19th Street Washington, D.C. 1995 1976 104,033 90%
---------
Subtotal 1,421,852
---------
Apartment Buildings/ # units
- ----------------------------
Country Club Towers/227 Arlington, VA 1969 1965 276,000 96%
Munson Hill Towers /279 Falls Church, VA 1970 1963 340,000 89%
Park Adams/200 Arlington, VA 1969 1959 210,000 95%
Roosevelt Towers/191 Falls Church, VA 1965 1964 229,000 91%
3801 Connecticut Avenue/307 Washington, D.C. 1963 1951 242,000 94%
---------
Subtotal 1,297,000
---------
Industrial Distribution Centers
- -------------------------------
Pepsi-Cola Distribution Center Forestville, MD 1987 1971 68,750 100%
Capitol Freeway Center Washington, D.C. 1974 1940 145,000 100%
Department of Commerce Springfield, VA 1971 1964 105,000 100%
Fullerton Business Center Springfield, VA 1985 1980 103,339 100%
Ravensworth Center Springfield, VA 1986 1965 29,000 100%
Shirley I-395 Business Center Arlington, VA 1961/1986 1960 112,585 100%
V Street Distribution Center Washington, D.C. 1973 1960 30,753 25%
Charleston Business Center Rockville, MD 1993 1973 85,267 92%
Tech 100 Industrial Park Elk Ridge, MD 1995 1990 167,267 96%
Crossroads Distribution Center Elk Ridge, MD 1995 1987 84,550 100%
---------
Subtotal 931,511
---------
TOTAL 4,917,565
=========
</TABLE>
* Apartment buildings are presented in gross square feet
6
<PAGE> 7
PROPERTY REPOSITIONINGS
Chevy Chase Metro Plaza
In the second quarter of 1995, WRIT completed the renovation and expansion of
Chevy Chase Metro Plaza (formerly known as Jenifer One Center). To accomplish
this, WRIT negotiated the termination of the below-market lease of the Jenifer
Theater, added 11,700 square feet to the property through the addition of a
floor in the double height portion of the former theater and installed an
escalator between the street level and the newly created floor.
T.J. Maxx has leased this newly created floor and the original lower level
floor at a per square foot rate that is double the Jenifer Theater rate. TGI
Friday's has leased the former American Cafe space with occupancy expected by
the third quarter of 1996. The leases for the other tenants in the property
have been extended at substantially increased rental rates. At this time, there
remains only one 934 square foot space vacant in the property. As a result of
these actions, the property's projected operating income will increase by over
60% from pre-renovation full occupancy.
Prince William Plaza
As of January 1, 1995, Prince William Plaza was 72% leased, but only 33%
occupied as Blockbuster and Rite-Aid had vacated their spaces with years
remaining on their leases. While Rite-Aid, with below market rent, and
Blockbuster remained liable for their rent, the vacated stores caused
substantial negative impact on the other tenants in the center.
During 1995, WRIT approached Rite-Aid and negotiated an early termination of
the lease, which included Rite-Aid paying a penalty fee. This former Rite-Aid
space has now been leased to a theater operator at more than 3 times the
previous rent and the Blockbuster space has been leased to another video store.
Additional new leases, along with the remaining in-place tenants has brought
the Center to 96% leased. Prince William Plaza's pro-forma operating income is
expected to be 34% higher than its 1994/1995 average.
1901 Pennsylvania Avenue
During 1995, WRIT completed a major renovation to the 1901 Pennsylvania Avenue
office building. Renovations to the main lobby, elevator cabs, hallways and
restrooms were supplemented by modernizations of the elevator equipment and
mechanical systems and installation of a new roof and solar film on windows.
Asbestos removal in the building is ongoing, concurrent with tenant buildouts.
During 1995, the building was 57% occupied. With the completion of the
renovations in the third quarter, leasing activity has increased. As of
March 15, 1996, the building is 65% leased and negotiations are ongoing
with additional interested potential tenants.
SHOPPING CENTERS
On August 22, 1995 WRIT acquired Frederick County Square, a shopping center,
containing approximately 233,000 rentable square feet of retail space located
on U.S. Route 40 in Frederick, Maryland for an acquisition cost of $13,392,000.
WRIT used $5,640,000 of the net proceeds from the July 1995 public offering
(See Capital Resources and Liquidity) and assumed an existing mortgage of
$7,752,000.
7
<PAGE> 8
SHOPPING CENTERS (continued)
Major improvements during 1995 included:
Chevy Chase Metro Plaza - Installation of an additional floor
containing 11,700 square feet of
rentable area and escalators to the
street level
Prince William Plaza - Parking lot repaving and cosmetic
renovations including new facia,
canopy lights and painting
The Shoppes of Foxchase* - Construction of a retaining wall and
additional parking, repaving and
partial roof replacement
Major improvements planned for 1996 include:
Wheaton Park Shopping Center - Construction of a 25,000 square foot
addition
Frederick County Square* - Parking lot repairs, lights and
upgraded pylons
* These improvements were projected during acquisition due diligence.
Occupancy rates for the Shopping Center Group averaged 97% in 1993 and 1994 and
94% in 1995. The primary reasons for the decreased Shopping Center Group
occupancy level in 1995 were vacancy increases at the Concord and Montgomery
Village Shopping Centers and the property repositionings at Prince William
Plaza and Chevy Chase Metro Plaza. Concord Shopping Center averaged 92%
occupancy during 1995 vs. 100% in 1994 due to lease expirations. Montgomery
Village Center averaged 93% in 1995 vs. 97% in 1994, primarily due to the
bankruptcy of So Fro Fabrics. With the bankruptcy of Evans Jewelers, the
center is 77% leased as of March 15, 1996. Prince William Plaza and Chevy
Chase Metro Plaza underwent significant capital improvements and releasing
during 1995 and are now 96% and 98% leased, respectively.
Most shopping center leases have automatic annual increases based on changes in
the Consumer Price Index or agreed-upon percentages. In addition, these leases
generally contain clauses for reimbursement for real estate taxes and common
area maintenance costs, and some leases provide for contingent rents based on a
percentage of the tenant's gross sales.
OFFICE BUILDINGS
On January 26, 1995 WRIT acquired 6110 Executive Boulevard, containing
approximately 198,000 rentable square feet of office space plus a three-story
parking deck in Rockville, Maryland, for an acquisition cost of $16,515,000.
On November 2, 1995 WRIT acquired 1220 Nineteenth Street, NW, containing
approximately 104,033 rentable square feet and two and-a-half levels
underground parking in Washington, D.C., for an acquisition cost of
$19,169,000.
Major improvements during 1995 included:
1901 Pennsylvania Avenue - A new roof, new spandrels, solar
film on windows, canopies, lobby,
restroom and common hallway
renovations, the replacement of the
elevator controls and asbestos
removal
One Metro Square - Replacement of elevator controls,
plaza level roofs and HVAC equipment
Tycon III* - Roof and HVAC controls replacement
6110 Executive Boulevard* - Roof replacement
8
<PAGE> 9
OFFICE BUILDINGS (continued)
Major improvements planned for 1996 include:
7700 Leesburg Pike - Installation of an energy management
system and the addition of 20,000
square feet of office space, 100%
pre-leased, to be built on top of
the existing structured parking
1901 Pennsylvania Avenue - Installation of an energy management
system, sprinklers and continued
asbestos removal
One Metro Square - A new penthouse roof, replacement of
the energy management system and
sprinkler system
WRIT Building - Installation of an energy management
system
Tycon II* - Installation of an energy management
system and exterior masonry repairs
Tycon III* - Installation of an energy management
system
6110 Executive Boulevard* - Mechanical system replacement,
installation of an energy management
system, lighting retrofit, oil tank
removal, new sprinkler system,
elevator cab renovation, building
caulking and restroom and lobby
renovations
* These improvements were projected during acquisition due diligence.
Occupancy rates for the Office Building Group overall averaged 94% in 1993, 93%
in 1994 and 89% in 1995. The primary reason for the decreased Office Building
Group occupancy level in 1995 was the vacancy at 1901 Pennsylvania Avenue
caused by the previously mentioned major renovations during 1995. However,
excluding 1901 Pennsylvania Avenue, 1995 Office Building Group occupancy
averaged 94%. As of March 15, 1996, 1901 Pennsylvania Avenue is 65% leased, as
compared to its average 1995 level of 57%.
Office building leases generally have a three to five year term. Most leases
have automatic annual increases based on changes in the Consumer Price Index
or agreed-upon percentages and additional pass through reimbursements for
increases in real estate taxes and operating expenses.
APARTMENTS
WRIT's five high-rise apartment buildings are well located and have a combined
total of 1,204 units consisting of efficiency and one, two or three bedroom
apartments. Apartment leases are generally for periods of one year or less.
There is a continuous emphasis on the upgrading of the units, quality of
management and services to residents with the goal to increase resident
retention and to enhance market place acceptance.
Four of the apartment buildings are in nearby northern Virginia with convenient
transportation routes to downtown Washington. 3801 Connecticut Avenue is in
Washington, D.C. and these apartments are subject to the rent control laws of
the District of Columbia. The laws provide landlords with annual rent increases
tied to the rate of inflation subject to an annual maximum of 10% and also
afford landlords the opportunity for additional rent increases as units are
re-rented to new tenants.
Major improvements during 1995 included:
All Apartments - Turnover upgrades (appliances, cabinets,
carpet and wallpaper)
3801 Connecticut Avenue - Replacement of the air conditioning lines and
removal of asbestos in the boiler room
Park Adams - Resurfacing of the pool deck and repair of
the pool lining
9
<PAGE> 10
APARTMENTS (continued)
Major improvements planned for 1996 include:
All Apartments - Continuation of turnover upgrades
3801 Connecticut Avenue - Completion of the replacement of the air
conditioning lines and install energy
management system
Munson Hill Towers - Parking lot/garage repairs
Park Adams - Window repairs, recaulking and/or
replacement, parking lot/garage repairs and
replacement of the elevator controls
Country Club Towers - Install energy management system, window
repairs, recaulking and/or replacement and
parking lot/garage repairs
Roosevelt Towers - Install energy management system and parking
lot/garage repairs
Occupancy rates for the Apartment Group overall averaged 95% in 1993, 97% in
1994 and 96% in 1995.
INDUSTRIAL DISTRIBUTION CENTERS
On May 17, 1995 WRIT acquired a three-building industrial distribution center,
Tech 100 Industrial Park, containing approximately 167,000 rentable square feet
of distribution space in Howard County, Maryland, for an acquisition cost of
$6,830,000. On December 21, 1995 WRIT acquired Crossroads Distribution
Center, containing approximately 85,000 rentable square feet of distribution
space in Howard County, Maryland, for an acquisition cost of $2,840,000.
Major improvements during 1995 included:
Shirley - 395 - New roofing
Pepsi - New roofing
Major improvements planned for 1996 include:
Fullerton - Repaving of the parking lot
Occupancy rates for the Industrial Distribution Center group overall averaged
89% in 1993, 94% in 1994 and 97% in 1995.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of 1995.
10
<PAGE> 11
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The Trust's shares have been traded on the American Stock Exchange since 1971
and there are approximately 39,000 shareholders. The Trust's shares were
split 3-for-1 in March, 1981, 3-for-2 in July, 1985, 3-for-2 in December, 1988,
and 3-for-2 in May, 1992.
The high and low sales price for the Trust's shares for 1995 and 1994, by
quarter, and the amount of dividends paid by the Trust are as follows:
<TABLE>
<CAPTION>
Quarterly Share Price Range
---------------------------
Dividends
Quarter Per Share High Low
------- --------- ---- ---
<S> <C> <C> <C>
1995
4 $.25 $16 1/8 $14 1/2
3 .25 15 3/4 13 7/8
2 .25 16 1/4 14 1/4
1 .24 16 5/8 15
1994
4 $.23 $18 $14 7/8
3 .23 19 7/8 17
2 .23 21 1/8 17 5/8
1 .23 21 18 5/8
</TABLE>
The Trust has historically paid dividends on a quarterly basis and there are
currently no restrictions on the Trust's present or future ability to pay such
dividends. Dividends are normally paid based on the Trust's cash flow from
operating activities. The 1996 indicated annual dividend rate is $1.00 based
on an annualization of the March 29, 1996 dividend.
11
<PAGE> 12
Item 6. Selected Financial Data
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Real estate revenue $52,597,497 $45,511,482 $39,375,282 $34,132,217 $33,311,399
Income before gain on sale of real estate $26,103,329 $23,122,240 $22,506,219 $20,429,264 $18,386,398
Gain on sale of real estate - - $741,217 - -
Net income $26,103,329 $23,122,240 $23,247,436 $20,429,264 $18,386,398
Income before gain on sale of real estate
per share $0.88 $0.82 $0.80 $0.76 $0.74
Net income per share $0.88 $0.82 $0.82 $0.76 $0.74
Total assets $241,783,507 $178,806,110 $162,010,652 $185,673,242 $135,741,092
Lines of credit payable/Short-term bank loan $28,000,000 $18,000,000 - $21,000,000 -
Mortgage payable $7,706,346 - - $1,115,193 $11,329,370
Shareholders' equity $199,734,678 $154,659,100 $157,348,056 $159,026,525 $119,944,265
Cash dividends paid $29,711,993 $25,981,388 $24,380,361 $22,513,368 $19,672,408
Distribution of gain on sale of real estate - - $741,217 - -
Cash dividends paid per share $0.99 $0.92 $0.89 $0.84 $0.79
</TABLE>
12
<PAGE> 13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
REAL ESTATE RENTAL REVENUE: 1995 VERSUS 1994
Total revenues for 1995 increased $7.1 million to $52.6 million from $45.5
million in 1994. The percentage increase in real estate rental revenue from
1994 to 1995 by property type was as follows:
<TABLE>
<CAPTION>
1994/1995
---------
<S> <C>
Office Buildings 22%
Apartments 3%
Shopping Centers 16%
Industrial Distribution Centers 20%
</TABLE>
During 1995, WRIT's Office Building Group had increases of 22% in revenues and
17.4% in operating income due primarily to the acquisition of the Tycon II and
III office buildings in 1994 and the 6110 Executive Boulevard and 1220 19th
Street office buildings in 1995. The Tycon buildings were 71% occupied at
acquisition in June of 1994 but averaged 94% occupancy during 1995. 6110
Executive Boulevard was acquired by the Trust January 31,1995 and averaged 94%
occupancy during 1995. 1220 19th Street was acquired by the Trust in November,
1995. This property was 90% leased at December 31, 1995.
WRIT's Apartment Group had increases of 3% in revenues and 2% in operating
income during 1995. This increase was the result of a 3% increase in rents
more than offsetting a 3.3% increase in operating expenses and a 1% decrease in
occupancy to 96%. The major cause of the 3.3% increase in operating expenses
was the adoption of a more conservative capitalization policy regarding
repairs, replacements, and improvements.
During 1995, WRIT's Shopping Center Group had increases of 16% in revenues and
operating income due primarily to the repositioning of Chevy Chase Metro Plaza,
as well as the acquisition of the Shoppes of Foxchase in 1994 and Frederick
County Square in 1995.
During 1995, WRIT's Industrial Distribution Center Group had increases of 20%
in revenues and 23% in operating income. This was due primarily to significant
occupancy increases at Shirley - 395 and Fullerton, rental rate increases
averaging 3.1% throughout the group, and the 1995 acquisition of Tech 100
Industrial Park. In December 1995, WRIT acquired Crossroads Distribution
Center, a 100% leased property. Occupancy rates for the Industrial
Distribution Center group overall averaged 97% in 1995.
REAL ESTATE RENTAL REVENUE: 1994 VERSUS 1993
Total revenues for 1994 increased $6.1 million to $45.5 million from $39.4
million in 1993. The percentage increase in real estate rental revenue from
1993 to 1994 by property type was as follows:
<TABLE>
<CAPTION>
1993/1994
---------
<S> <C>
Office Buildings 34%
Apartments 4%
Shopping Centers 5%
Industrial Distribution Centers 17%
</TABLE>
13
<PAGE> 14
RESULTS OF OPERATIONS - (continued)
The increase of 34% in real estate revenue from 1993 to 1994 for office
buildings was primarily attributable to the acquisitions of the three office
buildings in November 1993 and the two office buildings in June of 1994.
During 1994, WRIT's Apartment Group had increases of 4% in revenues and 7% in
operating income, due to the combination of a 2% increase in rental rates and
an overall increase in occupancy to 97% in 1994 from 95% in 1993, combined with
an increase in operating expenses of only 1%.
During 1994, WRIT's Shopping Center Group had an increase of 5% in revenues and
3% in operating income, due to the acquisition of The Shoppes at Foxchase in
June of 1994.
During 1994, WRIT's Industrial Distribution Center Group had increases of 17%
in revenues and 15% in operating income, due to the acquisition of the
Charleston Business Center in November of 1993 and major occupancy increases at
the Fullerton and Port Royal properties, only slightly offset by a vacancy
increase at the V street property.
OPERATING EXPENSES AND OTHER RESULTS OF OPERATIONS
Real estate operating expenses as a percentage of revenue was 32% for 1995 as
compared to 31% for 1994 and 30% for 1993. This increase is attributable to
the decline in occupancy levels in 1995 and to the fact that operating
expenses as a percentage of revenues are higher for office building properties
than the other property types within the WRIT portfolio. WRIT's percentage of
office buildings within its entire real estate portfolio has increased from 43%
at December 31, 1994 to 47% as of December 31, 1995. This increase is
attributable primarily to the acquisitions of 6110 Executive Boulevard in
January, 1995 and 1220 19th Street in November, 1995.
In 1995, other income (expense) increased from 1994 due to investment earnings
in 1995 on the net proceeds of approximately $48,000,000 from the sale of
3,500,000 shares of beneficial interest. 1995 other income (expense) also
increased as a result of a 1994 charge of $799,571 to other income (expense)
for the sale of a marketable investment security. Also in 1994, there was a
charge to other income (expense) of $271,000 as the result of an audit
assessment by the State of Maryland unclaimed property division.
1995 interest expense was $1,920,479 due to $18,000,000 of advances outstanding
until July 1995 on the line of credit borrowings from 1994 and $44,000,000 of
advances on the lines of credit to finance 1995 acquisitions. $36,000,000 of
repayments on the advances from the lines of credit also occurred in 1995.
WRIT incurred $249,322 of interest expense on the mortgage note payable assumed
in August 1995 for the acquisition of Frederick County Square for a total 1995
interest expense of $2,169,801. Interest expense was $614,162 for 1994 as a
result of advances on the credit commitment for the acquisitions of Tycon
Plaza and The Shoppes of Foxchase. Interest expense for 1993 was $61,462 for
a mortgage which was paid in full in that year.
General and administrative expenses were $3,355,199 for 1995 as compared to
$3,260,870 for 1994 and $2,858,035 for 1993. The majority of the increase for
1995 as compared to 1994 is attributable to personnel additions since June of
1994 and continuing into 1995, partially offset by reduced pension costs and
the completion of severance pay in June, 1995 to WRIT's former Chairman and
Chief Executive Officer, B. Franklin Kahn, who retired in March, 1995. The
majority of the increase for 1994 as compared to 1993 is attributable to
personnel additions and increased shareholder expenses.
14
<PAGE> 15
CAPITAL RESOURCES AND LIQUIDITY
WRIT has utilized the proceeds of share offerings, long-term fixed interest
rate debt, bank lines of credit and cash flow from operations for its capital
needs. External sources of capital will continue to be available to WRIT from
its existing unsecured credit commitments and management believes that
additional sources of capital are available from selling additional shares
and/or the sale of long-term senior notes. The funds raised would be used to
pay off any outstanding advances on our lines of credit and for new
acquisitions and capital improvements.
Cash flow from operating activities totaled $30,987,000 for the year ended
December 31, 1995 including net income of $26,103,000 and depreciation of
$5,084,000. Increases in other assets of $395,000 were due to increases in
rents and other receivables, prepaid real estate taxes and insurance.
Increases in other liabilities was primarily due to increases in tenant
security deposits. The majority of these increases were due to a larger
property portfolio. Rental revenue has been the principal source of funds to
pay WRIT's operating expenses, interest expense and dividends to shareholders.
In 1995, WRIT paid dividends totaling $29,712,000.
Net cash used in investing activities for the year ended December 31, 1995 was
$59,118,000 including 1995 property acquisitions of $50,994,000 and
improvements to real estate of $8,124,000.
On July 25, 1995 WRIT received $48,842,500 from the issuance and sale of
3,500,000 shares. WRIT's other underwriting expenses were $232,600 resulting
in net proceeds received by the Trust of $48,609,900. Approximately
$36,000,000 of the net proceeds were used to repay certain borrowings
outstanding under the Trust's lines of credit resulting from 1994 and 1995
property acquisitions. $6,994,000 of the net proceeds in addition to financing
was used to acquire Frederick County Square and 1220 Nineteenth Street. The
balance of the net proceeds was used to renovate, expand or improve income
producing properties.
WRIT has line of credit commitments in place from commercial banks for up to
$75,000,000. As of January 1, 1995, WRIT had $18,000,000 of borrowings on its
line of credit, which was used for 1994 acquisitions. During 1995, WRIT
acquired five properties for a total of acquisition costs of $58,746,000. WRIT
borrowed $44,000,000 for these acquisitions under its lines of credit, assumed
a mortgage for $7,752,000 and used $6,994,000 of proceeds from its July, 1995
public offering to complete these property acquisitions. During 1995 WRIT
repaid $36,000,000 of line of credit borrowings ($34,000,000 for property
acquisitions and $2,000,000 for property improvements) leaving $28,000,000 due
with a weighted average interest rate of 6.1% and $47,000,000 available for
future borrowings. Line of credit maturities range from July 26, 1996 (subject
to extension until July 25, 1997 at WRIT's option) to January 31, 1999.
Capital improvements of $8,124,000 were completed in 1995, including tenant
improvements. Improvements to WRIT properties in 1994 and 1993 were
approximately $5,787,000 and $4,712,000, respectively. WRIT's 1996 planned
capital improvements total $11,470,000, including $3,234,000 for tenant
improvements.
Management believes that it has the liquidity and the capital resources
necessary to meet all of its known obligations and to make additional property
acquisitions and capital improvements when appropriate to enhance long-term
growth.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data are listed under Item 14(a) and
filed as part of this report on the pages indicated.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
15
<PAGE> 16
PART III
Certain information required by Part III is omitted from this Report in that
the Registrant will file a definitive proxy statement pursuant to Regulation
14A (the "Proxy Statement") not later than 120 days after the end of the fiscal
year covered by this Report, and certain information included therein is
incorporated herein by reference. Only those sections of the Proxy Statement
which specifically address the items set forth herein are incorporated by
reference. Such incorporation does not include the Performance Graph included
in the Proxy Statement.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item is hereby incorporated herein by
reference to WRIT's 1996 Annual Meeting Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is hereby incorporated by reference to
WRIT's 1996 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is hereby incorporated by reference to
WRIT's 1996 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is hereby incorporated by reference to
WRIT's 1996 Proxy Statement.
16
<PAGE> 17
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
ITEM 14(a) The following documents are filed as a part of this Report:
1. Financial Statements: The following Financial Statements of
Washington Real Estate Investment Trust and Report of Independent
Accountants are included in this report.
Report of Independent Accountants.
Balance Sheets at December 31, 1995 and 1994.
Statements of Income for the years ended December 31, 1995, 1994 and
1993.
Statements of Changes in Shareholders' Equity for the years ended
December 31, 1995, 1994 and 1993.
Statements of Cash Flows for the years ended December 31, 1995, 1994
and 1993.
Notes to Financial Statements.
2. Financial Statement Schedules: The following financial statement
schedules of Washington Real Estate Investment Trust for the periods
indicated are filed as part of this Report and should be read in
conjunction with the Financial Statements of Washington Real Estate
Investment Trust.
<TABLE>
<CAPTION>
Schedule Page
- -------- ----
<S> <C> <C>
III Real Estate and Accumulated Depreciation......................................................................31-32
IV Mortgage Note Receivable.........................................................................................33
Supplementary Information: Quarterly Financial Results (unaudited)...............................................34
</TABLE>
Schedules not listed above have been omitted because they are not applicable or
are not required or the information to be set forth therein is included in the
Financial Statements or Notes thereto.
3. Exhibits:
3. Declaration of Trust and Bylaws
(a) Declaration of Trust, as amended, *
(b) Bylaws. *
17
<PAGE> 18
ITEM 14(a) (continued)
4.
(a) Credit agreement dated March 1, 1995 between
Washington Real Estate Investment Trust, as borrower,
The First National Bank of Chicago, as Lender, and
The First National Bank of Chicago as Agent.
The Trust is party to other instruments defining the
rights of holders of long-term debt. No such
instrument authorizes an amount of securities in
excess of 10% of the total assets of the Trust. On
request, the Trust agrees to furnish a copy of each
such instrument to the Securities and Exchange
Commission.
10. Management contracts, plans and arrangements
(a) Employment Agreement dated May 11, 1994 with Edmund
B. Cronin, Jr. *
(b) 1991 Incentive Stock Option Plan. *
(c) Nonqualified Stock Option Agreement dated June 27,
1990 with B. Franklin Kahn. *
(d) Nonqualified Stock Option Agreement dated December
14, 1994 with Edmund B. Cronin, Jr. *
(e) Nonqualified Stock Option Agreement dated December
19, 1995 with Edmund B. Cronin, Jr.
23. Consents
(a) Consent of Price Waterhouse LLP
ITEM 14(b)
Reports on Form 8-K: Forms 8-K and 8-K/A were filed on August 22,
1995 with the Securities and Exchange Commission.
* Incorporated herein by reference to the Exhibit of the same designation to
Amendment No. 2 to the Trust's Registration Statement on Form S-3 filed July
17, 1995.
18
<PAGE> 19
SIGNATURES
Pursuant to the requirements of Section 13 and 15 (d) 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.
WASHINGTON REAL ESTATE INVESTMENT TRUST
/ s / Edmund B. Cronin, Jr.
By
------------------------------------:
Date: March 28, 1996,
Edmund B. Cronin, Jr.
President and Chief Executive Officer
Pursuant to the requirements of the Security and Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/ s / Arthur A. Birney Chairman and Trustee March 27, 1996
- -----------------------
Arthur A. Birney
/ s / William N. Cafritz Trustee March 28, 1996
- -------------------------
William N. Cafritz
Benjamin H. Dorsey Secretary and Trustee March 28, 1996
- ------------------
Benjamin H. Dorsey
/ s / David M. Osnos Trustee March 28, 1996
- --------------------
David M. Osnos
/ s / Stanley P. Snyder Trustee March 28, 1996
- -----------------------
Stanley P. Snyder
/ s / Larry E. Finger Senior Vice President, Finance
- --------------------- and Chief Financial Officer March 28, 1996
Larry E. Finger
/ s / B. Franklin Kahn Trustee, Retired Chairman
- ---------------------- and Chief Executive Officer March 28, 1996
B. Franklin Kahn
/ s / Laura M. Franklin Vice President, Finance
- ----------------------- and Chief Accounting Officer March 28, 1996
Laura M. Franklin
</TABLE>
19
<PAGE> 20
Report of Independent Accountants
To the Trustees and Shareholders of
Washington Real Estate Investment Trust
In our opinion, the financial statements listed in the index appearing under
item 14(a)(1) and (2) on page 17 present fairly, in all material respects, the
financial position of Washington Real Estate Investment Trust at December 31,
1995 and 1994, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Trust's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Washington, D.C.
March 27, 1996
20
<PAGE> 21
WASHINGTON REAL ESTATE INVESTMENT TRUST
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, December 31,
1995 1994
------------- -------------
<S> <C> <C>
Assets
Real estate at cost $272,597,214 $206,377,733
Accumulated depreciation (41,021,586) (36,588,540)
------------ ------------
231,575,628 169,789,193
Mortgage note receivable 800,000 800,000
------------ ------------
Total investment in real estate 232,375,628 170,589,193
Cash and temporary investments 3,531,812 2,736,183
Rents and other receivables, net of allowance for doubtful
accounts of $517,934 and $650,356, respectively 2,307,314 2,207,069
Prepaid expenses and other assets 3,568,753 3,273,665
------------ ------------
$241,783,507 $178,806,110
============ ============
Liabilities
Accounts payable and other liabilities $3,032,575 $2,975,691
Tenant security deposits 1,827,725 1,517,762
Advance rents 1,482,183 1,653,557
Mortgage note payable 7,706,346 -
Lines of credit payable 28,000,000 18,000,000
------------ ------------
42,048,829 24,147,010
------------ ------------
Shareholders' Equity
Shares of beneficial interest, unlimited authorization,
without par value 184,416,013 139,340,435
Undistributed gains on real estate dispositions 15,318,665 15,318,665
------------ ------------
199,734,678 154,659,100
------------ ------------
$241,783,507 $178,806,110
============ ============
</TABLE>
See accompanying notes to financial statements
21
<PAGE> 22
WASHINGTON REAL ESTATE INVESTMENT TRUST
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Real estate rental revenue $52,597,497 $45,511,482 $39,375,282
Real estate expenses (16,600,615) (14,030,844) (11,829,702)
----------- ----------- -----------
35,996,882 31,480,638 27,545,580
Depreciation (5,083,742) (3,933,090) (3,616,190)
----------- ----------- -----------
Income from real estate 30,913,140 27,547,548 23,929,390
Other income (expense) 715,189 (550,276) 1,496,326
Interest expense (2,169,801) (614,162) (61,462)
General and administrative (3,355,199) (3,260,870) (2,858,035)
----------- ----------- -----------
Income before gain on sale of real estate 26,103,329 23,122,240 22,506,219
Gain on sale of real estate - - 741,217
----------- ----------- -----------
Net income $26,103,329 $23,122,240 $23,247,436
=========== =========== ===========
Income before gain on sale of real estate per share $0.88 $0.82 $0.80
=========== =========== ===========
Net income per share $0.88 $0.82 $0.82
=========== =========== ===========
</TABLE>
See accompanying notes to financial statemen
22
<PAGE> 23
WASHINGTON REAL ESTATE INVESTMENT TRUST
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Cash Flow From Operating Activities
Net income $26,103,329 $23,122,240 $23,247,436
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation 5,083,742 3,933,090 3,616,190
Changes in other assets (395,333) 479,493 (1,156,187)
Changes in other liabilities 195,473 1,484,414 65,938
Gain on sale of property - - (741,217)
Loss on sale of marketable investment securities - 799,571 -
----------- ----------- -----------
Cash flow provided by operating activities 30,987,211 29,818,808 25,032,160
----------- ----------- -----------
Cash Flow From Investing Activities
Improvements to real estate (8,123,995) (5,786,977) (4,711,662)
Real estate acquisitions, net * (50,994,178) (30,729,184) (11,049,907)
Purchases of marketable investment securities (75,949,280) (33,560,706) (15,524,945)
Maturities and sales of marketable investment securities 75,949,280 49,045,967 53,000,435
Proceeds from the sale of real property - - 176,000
Payments received on mortgage note receivable
for sale of property - - 74,000
----------- ----------- -----------
Net cash (used in) provided by investing activities (59,118,173) (21,030,900) 21,963,921
----------- ----------- -----------
Cash Flow From Financing Activities
Dividends paid (29,711,993) (25,981,388) (24,380,361)
Distribution of gain on sale of real estate - - (741,217)
Repayment of short-term bank loan - - (21,000,000)
Borrowings - lines of credit 46,000,000 18,000,000 -
Repayments - lines of credit (36,000,000) - -
Mortgage principal payments (45,658) - (27,269)
Mortgage principal retirements - - (1,087,924)
Net proceeds from sale of shares 48,609,895 -
Share options exercised 74,347 170,192 195,673
----------- ----------- -----------
Net cash flow provided by (used in) financing activities 28,926,591 (7,811,196) (47,041,098)
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents 795,629 976,712 (45,017)
Cash and temporary investments at beginning of year 2,736,183 1,759,471 1,804,488
----------- ----------- -----------
Cash and temporary investments at end of year $3,531,812 $2,736,183 $1,759,471
=========== =========== ===========
Supplemental disclosure of cash flow information
- ------------------------------------------------
Cash paid during the year for interest $2,111,342 $514,811 $61,462
=========== =========== ===========
Cash paid during the year for real estate taxes $3,666,005 $3,247,171 $3,026,845
=========== =========== ===========
</TABLE>
*Supplemental schedule of non-cash investing and financing activities
On August 22, 1995 WRIT purchased Frederick Square Shopping Center for an
acquisition cost of $13,392,000. WRIT assumed a mortgage in the amount of
$7,752,000 and paid the balance in cash, the $7,752,000 mortgage is not
included in the $50,994,178 amount shown as real estate acquisitions.
See accompanying notes to financial statements
23
<PAGE> 24
WASHINGTON REAL ESTATE INVESTMENT TRUST
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Undistributed
Shares of Beneficial Gains on
Interest Real Estate
Shares Amount Dispositions
------------ ------------ ------------
<S> <C> <C> <C>
Balance, December 31, 1992 28,211,387 $143,707,860 $15,318,665
Net income 22,506,219
Gain on sale of real estate 741,217
Dividends (24,380,361) (741,217)
Share options exercised 16,218 195,673
------------ ------------ ------------
Balance, December 31, 1993 28,227,605 142,029,391 15,318,665
Net income 23,122,240
Dividends (25,981,388)
Share options exercised 14,939 170,192
------------ ------------ ------------
Balance, December 31, 1994 28,242,544 139,340,435 15,318,665
Net income 26,103,329
Net proceeds from sale of shares 3,500,000 48,609,895
Dividends (29,711,993)
Share options exercised 9,190 74,347
------------ ------------ ------------
Balance, December 31, 1995 31,751,734 $184,416,013 $15,318,665
============ ============ ============
</TABLE>
See accompanying notes to financial state
24
<PAGE> 25
WASHINGTON REAL ESTATE INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS
NOTE A: NATURE OF BUSINESS
Washington Real Estate Investment Trust (WRIT or the Trust) is a
self-administered qualified equity real estate investment trust. The Trust's
business consists of the ownership of income-producing real estate properties
principally in the Greater Washington-Baltimore Region. The Trust has a
fundamental strategy of regional focus, diversified property type ownership and
conservative financial management.
Washington Real Estate Investment Trust (WRIT) operates in a manner intended to
enable it to qualify as a real estate investment trust under the Internal
Revenue Code (the "Code"). In accordance with the Code, a trust which
distributes its capital gains and at least 95% of its taxable income to its
shareholders each year, and which meets certain other conditions, will not be
taxed on that portion of its taxable income which is distributed to its
shareholders. Accordingly, no provision for Federal income taxes is required.
NOTE B: ACCOUNTING POLICIES
Residential properties are leased under operating leases with terms of
generally one year or less, and commercial properties are leased under
operating leases with average terms of three years. WRIT recognizes rental
income from its residential and commercial leases when earned, which is not
materially different than revenue recognition on a straight-line basis.
Buildings are depreciated on a straight-line basis over estimated useful lives
not exceeding 50 years. Effective January 1, 1995, WRIT revised its estimate
of useful lives for major capital improvements to real estate. All capital
improvement expenditures associated with replacements, improvements, or major
repairs to real property are depreciated using the straight-line method over
their estimated useful lives ranging from 3 to 20 years. All tenant
improvements are amortized using the straight-line method over 5 years or the
term of the lease if it differs significantly from 5 years. Capital
improvements placed in service prior to January 1, 1995 will continue to be
depreciated on a straight-line basis over their previously estimated useful
lives not exceeding 30 years. Maintenance and repair costs are charged to
expense as incurred. Depreciation expense for Federal income tax purposes
differs from that reported for financial statement purposes due to the use of
different lives and depreciation methods. As of December 31, 1995 the net
assets as reported in WRIT's financial statements exceed the net basis for
Federal Income Tax purposes by $14,571,577 due to a lower basis of certain real
estate assets acquired by tax-free exchanges.
Cash and temporary investments, mortgage note receivable, rents and other
receivables, prepaid expenses and other assets, accounts payable and other
liabilities, tenant security deposits, advance rents, mortgage note payable and
lines of credit payable are carried at historical cost which reasonably
approximate their fair values. Cash and temporary investments include
investments readily convertible to known amounts of cash generally with
original maturities of 90 days or less.
Disclosure about the fair value of financial instruments is based on
information available to WRIT as of December 31, 1995. Although WRIT is not
aware of any factors that would significantly affect the reasonable fair value
amounts, such amounts have not been comprehensively revalued for purposes of
these financial statements since that date, and current estimates of fair value
may differ from the carrying amounts.
Certain prior year amounts have been reclassified to conform to the current
year presentation.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
25
<PAGE> 26
WASHINGTON REAL ESTATE INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS
NOTE B: ACCOUNTING POLICIES (continued)
Recent Accounting Pronouncements: In March 1995, The Financial Accounting
Standards Board (FASB) issued statement No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", which
requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. Statement No. 121 also addresses the accounting for
long-lived assets that are expected to be disposed of. The Company will adopt
Statement No. 121 in the first quarter of 1996. In October 1995, the FASB
issued Statement No. 123, "Accounting for Stock-Based Compensation". Statement
No. 123 establishes financial accounting and reporting standards for
stock-based employee compensation plans and is effective for fiscal years
beginning after December 15, 1995. The company expects to continue to apply
the accounting provisions of APB opinion 25 in determining its net income.
However, beginning in 1996, additional disclosures will be made about the
estimated compensation expense under the method established by Statement No.
123. The adoption of these standards will not have a material effect on the
company's financial position or results of operations.
NOTE C: REAL ESTATE INVESTMENTS
WRIT's real estate investment portfolio, at cost, consists of properties
located in Maryland, Washington, D.C., Virginia and Delaware as follows:
<TABLE>
<CAPTION>
December 31,
1995 1994
------------ --------------
<S> <C> <C>
Office buildings $128,222,088 $ 88,968,658
Apartment buildings 27,195,617 26,369,011
Shopping centers 82,108,462 65,921,524
Industrial distribution centers 35,071,047 25,118,540
------------ ------------
$272,597,214 $206,377,733
============ ============
</TABLE>
Properties acquired by WRIT during the year ending December 31, 1995 are as
follows:
<TABLE>
<CAPTION>
Acquisition Rentable Acquisition
Date Property Type Square Feet Cost
- -------------- ------------------------------------------ ------------------------- ----------- ------------
<S> <C> <C> <C> <C>
1/26/95 6110 Executive Boulevard Office 198,800 $16,515,000
5/17/95 Tech 100 Industrial Park Industrial 167,300 6,830,000
8/22/95 Frederick County Square (Note E) Shopping center 232,800 13,392,000
11/02/95 1220 19th Street Office 104,000 19,169,000
12/23/95 Crossroads Distribution Center Industrial 84,600 2,840,000
----------- -----------
787,500 $58,746,000
=========== ===========
</TABLE>
NOTE D: MORTGAGE NOTE RECEIVABLE
In June 1993, WRIT sold its headquarters building for $1,050,000 and recognized
a gain of $741,217. Proceeds received were $176,000 in cash and $874,000 in a
mortgage note receivable. Principal payments received in 1993 totaled $74,000.
In February 1996, the mortgage note receivable was modified and the term was
extended for a period of ten years beginning July, 1996. The mortgage bears
interest at 9% through June, 1996, then 12% thereafter and matures in June,
2006. Interest only is payable monthly until June, 1996. Beginning in July,
1996, interest and principal are payable monthly, based upon a thirty year
amortization, until June, 2006. At that time all accrued and unpaid interest
and principal are due in full. At December 31, 1995, the fair value of the
mortgage note receivable approximates its carrying amount.
26
<PAGE> 27
WASHINGTON REAL ESTATE INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS
NOTE E: MORTGAGE NOTE PAYABLE
On August 22, 1995 WRIT assumed a $7,752,000 mortgage note payable as partial
consideration for its acquisition of Frederick County Square. The mortgage
bears interest at 9%. Principal and interest are payable monthly until January
1, 2003 at which time all unpaid principal and interest are payable in full.
Annual maturities of principal as of December 31, 1995 are $117,000, $128,000,
$140,000, $153,000, $167,000 and $7,001,000 thereafter. At December 31, 1995,
the fair value of the mortgage note payable approximates its carrying amount.
NOTE F: LINES OF CREDIT PAYABLE
On January 26, 1995 WRIT borrowed $16,000,000 on a short-term bank loan at the
bank's then prime rate of 8.5%. Interest only was payable monthly on the
unpaid principal balance at the bank's corporate base rate. On March 8, 1995,
the $16,000,000 short-term loan was replaced with an unsecured credit
commitment of $25,000,000 and the outstanding advance of $16,000,000 was
transferred to this new commitment. This $16,000,000 advance bore interest at
the rate of 6.8% until September 8, 1995, at which time it was paid in full
(See Capital Resources and Liquidity). Additionally under this commitment,
WRIT borrowed the following amounts: On May 15, 1995, $7,000,000 for the
acquisition of Tech 100 Industrial Park, on June 28, 1995, $2,000,000 for
capital improvements and major renovations, and on November 2, 1995,
$18,000,000 for the acquisition of 1220 19th Street. The $2,000,000 advance
bore interest at the rate of 6.42% until July 31, 1995 at which time it was
paid in full. On November 15, 1995 the initial interest rate of 6.425%
expired for the $7,000,000 advance. The new rate of 5.99% is effective until
August 12, 1996 at which time it will adjust as described below. The
$18,000,000 advance bears interest at the rate of 6.11% until August 29, 1996
at which time it will also adjust as further described. Interest only is
payable monthly, in arrears, on the unpaid principal balance. All new advances
and interest rate adjustments upon the expiration of WRIT's interest lock-in
dates will bear interest at LIBOR plus a spread based on WRIT's debt service
coverage ratio. Based on WRIT's current debt service coverage ratio, this
spread is 30 basis points over LIBOR. All unpaid interest and principal can be
prepaid prior to the expiration of WRIT's interest rate lock-in periods subject
to a yield maintenance obligation and all unpaid principal and interest are due
January 31, 1999.
This $25,000,000 credit commitment requires WRIT to pay the lender an unused
commitment fee at the rate of 0.15% per annum in the first year, and 0.20% per
annum thereafter, on the amount that the $25,000,000 commitment exceeds the
balance of outstanding advances and term loans. This fee is payable monthly
beginning March, 1995 until January, 1999. This commitment also contains
certain financial and legal covenants which WRIT is required to meet
periodically.
On July 27, 1995 WRIT renegotiated its other $25,000,000 unsecured credit
commitment that was scheduled to expire on August 25, 1995 and replaced it with
an unsecured credit commitment of $50,000,000 from the same bank and a
participating bank for the express purpose of purchasing income-producing
property and to make capital improvements to real property. On December 21,
1995 WRIT borrowed $3,000,000 under this commitment for the acquisition of
Crossroads Distribution Center. The $3,000,000 advance bears interest at the
rate of 6.15% until July 18, 1996 at which time it will adjust. Interest only
is payable monthly, in arrears, on the unpaid principal balance. All unpaid
interest and principal are due July 26, 1996, and can be prepaid prior to this
date without any prepayment fee or yield maintenance obligation. WRIT has the
option to extend this agreement until July 25, 1997. At that time, WRIT
intends to exercise this option. Any new advances shall bear interest at LIBOR
plus a spread based on WRIT's interest coverage ratio. Based on WRIT's current
interest coverage ratio, this spread is 50 basis points over LIBOR. This
credit agreement provides WRIT the option to convert any advances or portions
thereof into a term loan at any time after January 27, 1996 and prior to July
26, 1996 or July 25, 1997, if extended. The principal amount of each term
loan, if any, shall be repaid on July 27, 1999. Such term loan(s) may be
prepaid subject to a prepayment fee.
27
<PAGE> 28
WASHINGTON REAL ESTATE INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS
NOTE F: LINES OF CREDIT PAYABLE (continued)
The $50,000,000 credit commitment requires WRIT to pay the lender an unused
commitment fee at the rate of 0.15% per annum on the amount by which
$50,000,000 exceeds the balance of outstanding advances and term loans. This
fee is payable quarterly in arrears beginning October 1995 until July 26, 1996,
or July 25, 1997 if extended. This commitment also contains certain covenants
which WRIT is required to meet periodically.
As of December 31, 1995 there were advances outstanding on the above credit
facilities in the amount of $28,000,000.
NOTE G: SHARES OF BENEFICIAL INTEREST AND DIVIDENDS
Net income per share is calculated by dividing net income by the weighted
average number of shares outstanding during the year. The weighted average
shares outstanding were 29,786,933, 28,239,420 and 28,223,307 in 1995, 1994 and
1993, respectively.
The following is a breakdown of the taxable percentage of WRIT's dividends for
1995, 1994 and 1993, respectively:
<TABLE>
<CAPTION>
Ordinary Income Capital Gain Return of Capital
--------------- ------------ -----------------
<S> <C> <C> <C>
1995 89.23% -- 10.77%
1994 90.54% -- 9.46%
1993 95.80% 2.60% 1.60%
</TABLE>
NOTE H: SHARE OPTIONS
WRIT maintains an Incentive Share Option Plan under which up to 1,324,700
shares may be awarded to eligible employees. Options, which are issued at
market price on the date of grant, vest after not more than two years and
expire ten years following the date of grant. Activity under the plan is
summarized below:
<TABLE>
<CAPTION>
Number Options
of Shares Option Price Exercisable
--------- ------------ -----------
<S> <C> <C> <C> <C>
Balance,
December 31, 1992 193,142 $ 7.07 - $ 18.62 101,986
Exercised (16,218) 7.07 - 15.21
Balance,
December 31, 1993 176,924 7.07 - 18.62 119,394
Granted 57,798 15.1875 - 20.625
Exercised (14,939) 7.07 - 15.21
Canceled (23,642) 12.79 - 20.625
--------
Balance,
December 31, 1994 196,141 8.09 - 20.625 100,868
Granted 50,196 14.625
Exercised (9,190) 8.09
Canceled (56,375) 12.41
--------
Balance,
December 31, 1995 180,772 $ 9.89 - $ 20.625 112,429
</TABLE>
28
<PAGE> 29
WASHINGTON REAL ESTATE INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS
NOTE H: SHARE OPTIONS (continued)
On June 27, 1990, the then Chairman and Chief Executive Officer was granted
non-qualified share options for 150,000 shares at $11.71, the per share market
price on that day. These shares were exercisable 20% at date of grant and 20%
upon each anniversary over a four year period. Share options of 60,000 in 1991
and 30,000 in 1992 were exercised leaving 60,000 remaining to be exercised. In
June 1995, 56,375 of qualified share options granted to WRIT's former Chairman,
B. Franklin Kahn became non-qualified share options, three months after his
retirement. These shares are exercisable 10% per year. As of December 31,
1995, 24,162 of these options are exercisable.
On December 19, 1995 the President and Chief Executive Officer of WRIT was
granted non-qualified share options for 13,333 at $14.625, the per share market
price that day. On December 14, 1994, non-qualified share options were granted
for 9,091 shares at the June 1, 1994 market price of $19.25. All shares are
50% exercisable after the first anniversary date and 100% exercisable after the
second anniversary date. As of December 31, 1995, 4,546 shares are
exercisable.
NOTE I: PENSION PLAN AND OTHER BENEFIT PLANS
WRIT maintains a noncontributory defined benefit pension plan for all eligible
employees through December 31, 1995. At December 31, 1995, all benefit accruals
under the plan were frozen and thus the projected benefit obligation (PBO) and
the accumulated benefit obligation (ABO) became equal. WRIT anticipates
terminating the plan no later than December 31, 1999. Since there are no
further benefit accruals provided under the plan, WRIT has substantially
reduced its funding obligation and there will be no further increases in the
ABO or PBO. Benefits under the plan were generally based on years of service
and final average pay. Pension costs are accrued and funded annually from plan
entry date in the plan to projected retirement date and include service costs
for benefits earned during the period and interest costs on the projected
benefit obligation less the return on plan assets. Pension costs were $27,000,
$90,000, and $164,000 in 1995, 1994 and 1993, respectively. The actual return
(loss) on plan assets was $10,000, $27,000, and $(31,000) for 1995, 1994 and
1993 respectively. The assumed long-term rate of return is 8.00%. Plan
obligations in excess of amounts permitted under the Tax Equity and Fiscal
Responsibility Act of 1982 are accrued as a liability of WRIT and included in
total pension cost. The funded status of the plan is:
<TABLE>
<CAPTION>
December 31,
1995 1994
---------- ----------
<S> <C> <C>
Actuarial present value of
benefit obligations:
Vested benefit obligation $1,625,000 $3,269,000
Accumulated benefit obligation 1,663,000 3,271,000
Projected benefit obligation 1,663,000 3,364,000
Plan assets at market value 1,596,000 3,281,000
</TABLE>
The liabilities are calculated using an assumed discount rate of 8.00% for
December 31, 1995 and 1994 and an assumed compensation increase of 5% for 1994.
In 1995, annuity contracts were purchased with plan assets for two participants
who retired during 1995, one being WRIT's former Chairman and Chief Executive
Officer B. Franklin Kahn. The cost of said annuities was $1,593,000 and the
reduction in the PBO was $1,632,000.
In 1996, WRIT intends to implement a Retirement Savings Plan (the "Savings
Plan"). It will be established so that participants in the savings plan may
elect to contribute a portion of their earnings to the Savings Plan and WRIT
may, at its discretion, make a voluntary contribution to the Savings Plan.
29
<PAGE> 30
WASHINGTON REAL ESTATE INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS
NOTE I: PENSION PLAN AND OTHER BENEFIT PLANS (continued)
Management has adopted a compensation plan for its senior personnel which will
align their compensation growth with shareholders' interests. Essentially, the
plan limits future salary increases, with an emphasis on cash bonus incentives
and a stock option plan based on performance. The financial incentives to
management are earned after achieving prescribed growth. This plan is
effective for the 1996 year and will be reviewed by the Board of Trustees'
compensation Committee each year.
NOTE J: RENTALS UNDER OPERATING LEASES
Noncancelable commercial operating leases provide for minimum rental income
during each of the next five years of approximately $34,921,957, $27,065,221,
$20,109,678, $15,816,407, $9,635,551 and $12,190,221 thereafter. Apartment
leases are not included as they are generally for one year. Most of these
commercial rentals increase in future years based on changes in the Consumer
Price Index or agreed-upon percentages. Contingent rentals from the shopping
centers, based on a percentage of tenants' gross sales, were $496,000, $428,000
and $447,000 in 1995, 1994 and 1993 respectively.
NOTE K: ENVIRONMENTAL MATTERS
New Occupational Safety and Health Administration (OSHA) regulations effective
October 1995, require owners of buildings constructed before 1981 to actively
determine whether their buildings contain asbestos containing material ("ACM").
WRIT, through the services of an environmental consulting firm, determined
that ACM was located within the ceiling plaster above the ceiling tiles in most
vacant spaces and some occupied spaces at its 1901 Pennsylvania Avenue office
building. In December 1995, WRIT contracted for the removal of the ACM's at
1901 Pennsylvania Avenue in strict accordance with all applicable Federal,
State and local codes as well as OSHA regulations. An independent
environmental firm was contracted to monitor and enforce this compliance.
WRIT has retained the services of an environmental consulting firm to test for
asbestos in 29 of its properties built before 1981 which had no previous and/or
current environmental studies performed. The results of these tests are
expected to be completed in May, 1996.
A summary of costs associated with these matters are as follows:
<TABLE>
<S> <C>
1) Total Estimated Costs for ACM Removal at 1901 Pennsylvania Avenue $469,000
Total Costs Incurred and Capitalized as of December 31, 1995 $ 75,000
--------
Estimated Costs Remaining $394,000
========
2) Total Environmental Costs for Other Buildings and Survey for 29 buildings $192,000
Total Costs for Other Buildings Incurred and Capitalized as of December 31,1995 $136,000
--------
Estimated Costs Remaining (Environmental Survey) $ 56,000
========
</TABLE>
The management of WRIT anticipates that any additional costs incurred resulting
from the environmental survey will not have a material effect on the financial
position and results of operations of the company.
NOTE L: SUBSEQUENT EVENT
On March 13, 1996 WRIT acquired Walker House Apartments, a 196 unit 8 story
apartment building located in Gaithersburg, Maryland for an acquisition cost of
$10,800,000. WRIT borrowed $11,000,000 from its line of credit for this
acquisition at a rate of 5.78% until July 11, 1996 at which time the rate will
adjust (See Note F). Interest only is payable monthly, in arrears, on the
unpaid principal balance.
30
<PAGE> 31
SCHEDULE III
WASHINGTON REAL ESTATE INVESTMENT TRUST
SUMMARY OF REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
<TABLE>
<CAPTION>
Initial Cost (b) Net
--------------------------------- Improvements
Building (Retirements)
and since
Properties Location Land Improvements Acquisition
- ------------------------- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
SHOPPING CENTERS
Concord Centre Virginia $412,500 $850,038 $2,644,518
Bradlee Virginia 4,151,583 5,428,251 3,445,989
Clairmont Maryland 154,739 891,608 636,474
Dover Mart Delaware 243,500 463,858 689,376
Chevy Chase Metro Plaza Washington, D.C. 1,549,262 4,304,434 2,675,195
Prince William Plaza Virginia 171,482 820,465 562,090
Takoma Park Maryland 415,200 1,084,453 1,203
Westminster Maryland 552,745 1,889,032 1,732,596
Wheaton Park Maryland 622,908 856,683 755,172
Montgomery Village Center Maryland 11,624,500 9,105,262 491,984
Shoppes of Foxchase Virginia 5,838,138 2,979,469 646,811
Frederick County Square (e) Maryland 6,561,293 6,830,250 25,401
----------- ----------- -----------
32,297,850 35,503,803 14,306,809
----------- ----------- -----------
OFFICE BUILDINGS
The WRIT Building Maryland 222,000 1,690,497 2,969,295
1901 Pennsylvania Avenue Washington, D.C. 891,600 3,481,239 4,088,839
One Metro Square Maryland 840,000 10,868,917 5,718,453
444 North Frederick Avenue Maryland 812,901 3,817,459 1,233,834
7700 Leesburg Pike Virginia 3,669,464 4,000,406 2,241,601
Arlington Financial Center Virginia 3,000,000 3,293,122 147,273
515 King Street Virginia 4,102,276 3,931,408 627,945
The Lexington Building Maryland 1,179,700 1,262,472 236,969
The Saratoga Building Maryland 1,464,140 1,554,284 540,861
Brandywine Center Maryland 718,180 735,381 142,910
Tycon Plaza II Virginia 3,261,965 7,242,691 513,606
Tycon Plaza III Virginia 3,254,670 7,794,189 578,989
6110 Executive Boulevard Maryland 4,621,112 11,895,120 407,843
1220 19th Street Washington, D.C. 7,802,475 11,366,002 0
----------- ----------- -----------
35,840,483 72,933,187 19,448,418
----------- ----------- -----------
APARTMENT BUILDINGS
Country Club Towers Virginia 299,389 2,561,473 2,335,376
Munson Hill Towers Virginia (a) 3,337,038 3,604,475
Park Adams Virginia 286,588 1,653,833 2,390,022
Roosevelt Towers Virginia 335,831 1,996,340 1,613,750
3801 Connecticut Avenue Washington, D.C. 419,483 2,678,440 3,683,579
----------- ----------- -----------
1,341,291 12,227,124 13,627,202
----------- ----------- -----------
INDUSTRIAL DISTRIBUTION CENTERS
Pepsi-Cola Maryland 759,927 1,791,754 1,559,917
Capitol Freeway Center Washington, D.C. 300,000 1,204,748 2,624,258
Department of Commerce Virginia 346,817 1,008,864 1,291,642
Fullerton Virginia 950,000 3,317,305 605,730
Ravensworth Center Virginia 391,490 1,059,291 344,542
Shirley I-395 Business Center Virginia 652,474 1,264,695 1,030,313
V Street Distribution Center Washington, D.C. 125,500 317,019 156,996
Charleston Business Center Maryland 2,044,930 2,090,821 128,235
Tech 100 Industrial Park Maryland 2,086,212 4,743,720 33,849
Crossroads Distribution Center Maryland 894,404 1,945,594 0
----------- ----------- -----------
8,551,754 18,743,811 7,775,482
----------- ----------- -----------
Totals $78,031,378 $139,407,925 $55,157,911
=========== ============ ===========
<CAPTION>
Gross Amounts at which carried at
December 31, 1995 Accumulated
----------------------------------------- Depreciation
Buildings at
and December 31, Date of
Properties Land Improvements Total(d) 1995 Construction
- ------------------------- ---------- ------------ ----------- ------------- ------------
<S> <C> <C> <C> <C> <C>
SHOPPING CENTERS
Concord Centre $412,500 $3,494,556 $3,907,056 $931,555 1960
Bradlee 4,151,583 8,874,240 13,025,823 2,716,337 1955
Clairmont 154,739 1,528,082 1,682,821 641,328 1965
Dover Mart 243,500 1,153,234 1,396,734 402,814 1960
Chevy Chase Metro Plaza 1,549,262 6,979,629 8,528,891 990,830 1975
Prince William Plaza 171,482 1,382,555 1,554,037 582,459 1967
Takoma Park 415,200 1,085,656 1,500,856 732,347 1962
Westminster 552,745 3,621,628 4,174,373 1,726,071 1969
Wheaton Park 622,908 1,611,855 2,234,763 410,915 1967
Montgomery Village Center 11,624,500 9,597,246 21,221,746 554,996 1969
Shoppes of Foxchase 5,838,138 3,626,280 9,464,418 97,386 1960
Frederick County Square (e) 6,561,293 6,855,651 13,416,944 82,621 1973
----------- ----------- ----------- -----------
32,297,850 49,810,612 82,108,462 9,869,659
----------- ----------- ----------- -----------
OFFICE BUILDINGS
The WRIT Building 222,000 4,659,792 4,881,792 1,307,759 1965
1901 Pennsylvania Avenue 891,600 7,570,078 8,461,678 2,837,693 1960
One Metro Square 840,000 16,587,370 17,427,370 5,395,525 1975
444 North Frederick Avenue 812,901 5,051,293 5,864,194 485,222 1981
7700 Leesburg Pike 3,669,464 6,242,007 9,911,471 450,942 1976
Arlington Financial Center 3,000,000 3,440,395 6,440,395 239,538 1963
515 King Street 4,102,276 4,559,353 8,661,629 285,156 1966
The Lexington Building 1,179,700 1,499,441 2,679,141 30,706 1970
The Saratoga Building 1,464,140 2,095,145 3,559,285 51,926 1977
Brandywine Center 718,180 878,291 1,596,471 24,569 1969
Tycon Plaza II 3,261,965 7,756,297 11,018,262 229,055 1981
Tycon Plaza III 3,254,670 8,373,178 11,627,848 225,146 1978
6110 Executive Boulevard 4,621,112 12,302,963 16,924,075 385,219 1971
1220 19th Street 7,802,475 11,366,002 19,168,477 62,398 1976
----------- ----------- ----------- -----------
35,840,483 92,381,605 128,222,088 12,010,854
----------- ----------- ----------- -----------
APARTMENT BUILDINGS
Country Club Towers 299,389 4,896,849 5,196,238 2,454,666 1965
Munson Hill Towers (a) 6,941,513 6,941,513 3,389,428 1963
Park Adams 286,588 4,043,855 4,330,443 1,836,229 1959
Roosevelt Towers 335,831 3,610,090 3,945,921 1,847,471 1964
3801 Connecticut Avenue 419,483 6,362,019 6,781,502 3,560,484 1951
----------- ----------- ----------- -----------
1,341,291 25,854,326 27,195,617 13,088,278
----------- ----------- ----------- -----------
INDUSTRIAL DISTRIBUTION CENTER
Pepsi-Cola 759,927 3,351,671 4,111,598 481,661 1971
Capitol Freeway Center 300,000 3,829,006 4,129,006 1,469,734 1940
Department of Commerce 346,817 2,300,506 2,647,323 1,432,241 1964
Fullerton 950,000 3,923,035 4,873,035 785,004 1980
Ravensworth Center 391,490 1,403,833 1,795,323 266,697 1965
Shirley I-395 Business Center 652,474 2,295,008 2,947,482 1,208,762 1960
V Street Distribution Center 125,500 474,015 599,515 203,889 1960
Charleston Business Center 2,044,930 2,219,056 4,263,986 91,570 1973
Tech 100 Industrial Park 2,086,212 4,777,569 6,863,781 111,283 1990
Crossroads Distribution Center 894,404 1,945,594 2,839,998 1,954 1987
----------- ----------- ----------- -----------
8,551,754 26,519,293 35,071,047 6,052,795
----------- ----------- ----------- -----------
Totals $78,031,378 $194,565,836 $272,597,214 $41,021,586
=========== ============ ============ ===========
<CAPTION>
Date of Net Rentable Depreciation
Properties Acquisition Square Feet (f) Life (c)
- ------------------------ ----------------- --------------- ------------
<S> <C> <C> <C> <C>
SHOPPING CENTERS
Concord Centre December 1973 76,383 33 Years
Bradlee December 1984 167,974 40 Years
Clairmont December 1976 40,455 39 Years
Dover Mart January 1973 44,044 40 Years
Chevy Chase Metro Plaza September 1985 49,893 50 Years
Prince William Plaza August 1968 54,584 50 Years
Takoma Park July 1963 58,811 50 Years
Westminster September 1972 171,531 37 Years
Wheaton Park September 1977 46,716 49 Years
Montgomery Village Center December 1992 196,464 50 Years
Shoppes of Foxchase June 1994 127,564 50 Years
Frederick County Square (e) August 1995 232,783 30 Years
-----------
1,267,202
-----------
OFFICE BUILDINGS
The WRIT Building August 1979 65,653 31 Years
1901 Pennsylvania Avenue May 1977 97,036 28 Years
One Metro Square August 1979 206,144 41 Years
444 North Frederick Avenue October 1989 65,463 50 Years
7700 Leesburg Pike October 1990 122,497 50 Years
Arlington Financial Center June 1992 51,655 50 Years
515 King Street July 1992 78,073 50 Years
The Lexington Building November 1993 47,751 50 Years
The Saratoga Building November 1993 58,237 50 Years
Brandywine Center November 1993 34,982 50 Years
Tycon Plaza II June 1994 139,938 50 Years
Tycon Plaza III June 1994 151,594 50 Years
6110 Executive Boulevard January 1995 198,796 30 Years
1220 19th Street November 1995 104,033 30 Years
-----------
1,421,852
-----------
APARTMENT BUILDINGS
Country Club Towers July 1969 276,000 35 Years
Munson Hill Towers January 1970 340,000 33 Years
Park Adams January 1969 210,000 35 Years
Roosevelt Towers May 1965 229,000 40 Years
3801 Connecticut Avenue January 1963 242,000 30 Years
-----------
1,297,000
-----------
INDUSTRIAL DISTRIBUTION CENTERS
Pepsi-Cola October 1987 68,750 40 Years
Capitol Freeway Center July 1974 145,000 25 Years
Department of Commerce December 1971 105,000 43 Years
Fullerton September 1985 103,339 50 Years
Ravensworth Center December 1986 29,000 40 Years
Shirley I-395 Business Center September 1961 112,585 40 Years
V Street Distribution Center October 1973 30,753 40 Years
Charleston Business Center November 1993 85,267 50 Years
Tech 100 Industrial Park May 1995 167,267 30 Years
Crossroads Distribution Center December 1995 84,550 30 Years
-----------
931,511
-----------
Totals 4,917,565
===========
</TABLE>
Notes:
(a) The site of Munson Hill Towers is rented under a lease requiring annual
payments of $22,590 until the expiration of the lease in 2060.
(b) The purchase of real estate investments has been divided between land and
buildings and improvements on the basis of valuations by the Trust.
(c) The useful life shown is for the main structure. Buildings and
improvements are depreciated over various useful lives ranging from 3 to
50 years.
(d) At December 31, 1995 total land, buildings and improvements are carried
at $258,025,637 for federal income tax purposes.
(e) At December 31, 1995, the only mortgage encumbrance was the $7,706,346
mortgage note payable on Frederick County Square.
(f) Residential properties are presented in gross square feet
31
<PAGE> 32
SCHEDULE III
WASHINGTON REAL ESTATE INVESTMENT TRUST
SUMMARY OF REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
Continued
The following is a reconciliation of real estate assets and accumulated
depreciation for the years ended December 31, 1995, 1994, and 1993:
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994 1993
Real Estate Assets ------------ ------------ ------------
<S> <C> <C> <C>
Balance, beginning of period $206,377,733 $170,461,454 $155,765,010
Additions - property acquisitions 58,746,182 30,729,184 11,049,907
- improvements 8,123,995 5,786,977 4,711,662
Deductions - write-off of fully depreciated assets (650,696) (599,882) (410,783)
- sale of 4936 Fairmont - - (654,342)
------------ ------------ ------------
Balance, end of period $272,597,214 $206,377,733 $170,461,454
============ ============ ============
Accumulated Depreciation
Balance, beginning of period $36,588,540 $33,255,332 $30,460,618
Additions - depreciation (a) 5,083,742 3,933,090 3,616,190
Deductions - write-off of fully depreciated assets (650,696) (599,882) (410,783)
- sale of 4936 Fairmont - - (410,693)
------------ ------------ ------------
Balance, end of period $41,021,586 $36,588,540 $33,255,332
============ ============ ------------
</TABLE>
(a) Total depreciation charged to income in 1995, 1994, and 1993,
respectively, consists of the following:
<TABLE>
<CAPTION>
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Depreciation on real estate investments $5,083,742 $3,933,090 $3,616,190
Depreciation on office furniture, fixtures and equipment
(included in general and administrative expenses) 47,745 45,211 39,612
------------ ------------ ------------
$5,131,487 $3,978,301 $3,655,802
============ ============ ============
</TABLE>
32
<PAGE> 33
WASHINGTON REAL ESTATE INVESTMENT TRUST
MORTGAGE NOTE RECEIVABLE SCHEDULE IV
<TABLE>
<CAPTION>
Final Periodic Face
Interest Maturity Payment Prior Amount of
Description Rate Date Terms Liens Mortgages
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mortgage note receivable 9.00% June 1, 2006 9% interest only from N/A $874,000
dated June 28, 1993, and First July 1, 1993 until Dec.
Modification dated February 2, 1996, 28, 1993. On Dec. 28,
secured by a first lien deed of trust and 1993, principal payment
security agreement. of $70,000 due. 9% interest
only from Dec. 28, 1993
until June 30, 1996. Interest
and principal based upon
a 30 year amortization,
bearing interest at the rate
of 12%, due monthly from July
1, 1996 until June 1, 2006 at
which time all accrued and
unpaid interest and principal
are due in full.
<CAPTION>
Principal
Amount of
Mortgage
subject to
Carrying delinquent
Amount of principal or
Description Mortgages(2) interest
- --------------------------------------------------------------------------------------
<S> <C> <C>
Mortgage note receivable $800,000(1) None
dated June 28, 1993, and First
Modification dated February 2, 1996,
secured by a first lien deed of trust and
security agreement.
</TABLE>
(1) Reconciliation of Carrying Amont:
Face amount July 1, 1993 $874,000
Principal payment Dec. 28, 1993 (74,000)
--------
Carrying amount at Dec. 31, 1995 and 1994 $800,000
========
(2) Aggregate cost is equal to cost for Federal income tax purposes.
33
<PAGE> 34
SUPPLEMENTARY INFORMATION:
QUARTERLY FINANCIAL RESULTS (Unaudited)
<TABLE>
<CAPTION>
Quarter
1995 First Second Third Fourth
---- ----- ------ ----- ------
<S> <C> <C> <C> <C>
Real estate rental revenue $12,463,950 $12,827,773 $13,273,490 $14,032,284
Net income 6,159,411 6,198,440 6,835,409 6,910,069
Net income per share $0.22 $0.22 $0.22 $0.22
1994
----
Real estate rental revenue $11,312,489 $10,758,614 $11,759,339 $11,681,040
Net income 5,805,007 5,827,737 5,846,949 5,642,547
Net income per share $0.21 $0.21 $0.21 $0.20
1993
----
Real estate rental revenue $9,758,105 $9,713,873 $9,904,958 $9,998,346
Net income 5,770,868 5,580,892 5,535,365 5,619,095
Net income per share $0.20 $0.20 $0.20 $0.20
</TABLE>
34
<PAGE> 1
CREDIT AGREEMENT
DATED AS OF MARCH 1, 1995
AMONG
WASHINGTON REAL ESTATE INVESTMENT TRUST,
AS BORROWER
AND
THE FIRST NATIONAL BANK OF CHICAGO,
AS LENDER
AND
THE FIRST NATIONAL BANK OF CHICAGO,
AS AGENT
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II THE CREDIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.1. Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.2. Final Principal Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.3. Ratable Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.4. Applicable Margins . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.5. Commitment Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.6. Unused Facility Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.7. Minimum Amount of Each Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.8. Optional Principal Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.9. Method of Selecting Types and Interest Periods for New Advances . . . . . . . . . . . . . . . . 20
2.10. Conversion and Continuation of Outstanding Advances . . . . . . . . . . . . . . . . . . . . . . 21
2.11. Changes in Interest Rate. Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.12. Rates Applicable After Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.13. Method of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.14. Notes; Telephonic Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.15. Interest Payment Dates; Interest and Fee Basis . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.16. Notification of Advances, Interest Rates and Prepayments . . . . . . . . . . . . . . . . . . . . 23
2.17. Lending Installations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.18. Non-Receipt of Funds by the Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.19. Withholding Tax Exemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.20. Reduction in Aggregate Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE III CHANGE IN CIRCUMSTANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.1. Yield Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.2. Changes in Capital Adequacy Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.3. Availability of LIBOR Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.4. Funding Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.5. Lender Statements; Survival of Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.6 Replacement of Lender by Reason of Change in Circumstances . . . . . . . . . . . . . . . . . . . 26
ARTICLE IV CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.1. Initial Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.2. Each Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE V REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.1. Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.2. Authorization and Validity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.3. No Conflict; Government Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
</TABLE>
i
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5.4. Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.5. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.6. Litigation and Guarantee Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.7. No Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.8. ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.9. Accuracy of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.10. Regulation U . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.11. Material Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.12. Compliance With Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.13. Ownership of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.14. Investment Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.15. Public Utility Holding Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.16. Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.17. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.18. REIT Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE VI COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.1. Financial Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.2. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.3. Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.4. Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.5. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.6. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.7. Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.8. Maintenance of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.9. Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.10. Maintenance of Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.11. Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.12. Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.13. Delivery of Subsidiary Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.14. Sale of Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.15. Sale and Leaseback . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.16. Acquisitions and Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.17. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.18. Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.19. Cash Flow to Debt Service Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
6.20. Consolidated Tangible Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
6.21. Indebtedness and Cash Flow Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE VII DEFAULTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
</TABLE>
ii
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ARTICLE VIII ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.1. Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.2. Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.3. Preservation of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE IX GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
9.1. Survival of Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
9.2. Governmental Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
9.3. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
9.4. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.5. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.6. Several Obligations; Benefits of this Agreement . . . . . . . . . . . . . . . . . . . . . . . . 43
9.7. Expenses; Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.8. Numbers of Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.9. Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.10. Severability of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.11. Nonliability of Lenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.12. CHOICE OF LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.13. CONSENT TO JURISDICTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.14. WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE X THE AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
10.1. Appointment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
10.2. Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
10.3. General Immunity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
10.4. No Responsibility for Loans, Recitals, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . 45
10.5. Action on Instructions of Lenders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
10.6. Employment of Agents and Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
10.7. Reliance on Documents; Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
10.8. Agent's Reimbursement and Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
10.9. Rights as a Lender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
10.10. Lender Credit Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
10.11. Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
10.12. Commitment as a Lender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE XI SETOFF; RATABLE PAYMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
11.1. Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
11.2. Ratable Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE XII BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATION . . . . . . . . . . . . . . . . . . . . . . . . 48
12.1. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
12.2. Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
12.3. Assignments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
12.4. Dissemination of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
</TABLE>
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12.5. Tax Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE XIII NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
13.1. Giving Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
13.2. Change of Address . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE XIV COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE XV NO OFFICER, ETC. LIABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
</TABLE>
iv
<PAGE> 6
Exhibits:
- --------
Exhibit A Form of Note
Exhibit B Form of Opinion
Exhibit C Form of Compliance Certificate
Exhibit D Form of Assignment Agreement
Exhibit E Form of Loan/Credit Related Money Transfer Instruction
Schedules:
- ---------
Schedule 1 Subsidiaries and Other Investments
Schedule 2 Indebtedness and Liens
v
<PAGE> 7
CREDIT AGREEMENT
This Agreement, dated as of March 1, 1995, is among Washington Real
Estate Investment Trust, a real estate investment trust organized under the
laws of the District of Columbia (the "Borrower"), The First National Bank of
Chicago, a national banking association (the "Lender"), and The First National
Bank of Chicago, as "Agent."
RECITALS
A. The Borrower is primarily engaged in the business of
purchasing, developing, owning, operating and renovating apartment buildings,
shopping centers, office buildings, business centers and warehouses.
B. The Borrower is listed on the American Stock Exchange and is
qualified as a real estate investment trust.
C. The Borrower has requested that the Lender make loans
available to them pursuant to the terms of this Agreement. The Agent and the
Lender have agreed to do so.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement:
"Acquisition" means any transaction, or any series of related
transactions, consummated on or after the date of this Agreement, by which the
Borrower or any of its Subsidiaries (i) acquires any going business or all or
substantially all of the assets of any firm, corporation or division thereof,
whether through purchase of assets, merger or otherwise or (ii) directly or
indirectly acquires (in one transaction or as the most recent transaction in a
series of transactions) at least a majority (in number of votes) of the
securities of a corporation which have ordinary voting power for the election
of directors (other than securities having such power only by reason of the
happening of a contingency) or a majority (by percentage or voting power) of
the outstanding partnership interests of a partnership.
"Advance" means a borrowing hereunder consisting of the aggregate
amount of the several Loans made by the Lenders to the Borrower of the same
Type and, in the case of LIBOR Advances. for the same Interest Period.
"Affiliate" of any Person means any other Person directly or
indirectly controlling, controlled by or under common control with such Person.
A Person shall be deemed to control another Person if the controlling Person
owns 10% or more of any class of voting
<PAGE> 8
securities (or other ownership interests) of the controlled Person or
possesses, directly or indirectly, the power to direct or cause the direction
of the management or policies of the controlled Person, whether through
ownership of stock, by contract or otherwise. Lender acknowledges and agrees
that until such time as CSN's (the current property manager for Borrower's
properties) financial results are reported on a consolidated basis with the
financial results of Borrower, then CSN shall not be considered an "Affiliate"
of Borrower.
"Agent" means The First National Bank of Chicago in its capacity as
agent for the Lenders pursuant to Article X, and not in its individual capacity
as a Lender, and any successor Agent appointed pursuant to Article X.
"Aggregate Commitment" means the aggregate of the Commitments of all
the Lenders (not to exceed the Maximum Aggregate Commitment), as modified from
time to time pursuant to the terms hereof.
"Agreement" means this Credit Agreement, as it may be amended or
modified and in effect from time to time.
"Applicable Margin" is defined in Section 2.4.
"Article" means an article of this Agreement unless another document
is specifically referenced.
"Authorized Officer" means any of the Chief Executive Officer,
President, Chief Financial Officer or Chief Accounting Officer of the Borrower,
acting singly.
"Borrower" means Washington Real Estate Investment Trust, a real
estate investment trust organized under the laws of the District of Columbia,
and its successors and assigns.
"Borrowing Date" means a date on which an Advance is made hereunder.
"Borrowing Notice" is defined in Section 2.9.
"Business Day" means (i) with respect to any borrowing, payment or
rate selection of LIBOR Advances, a day (other than a Saturday or Sunday) on
which banks generally are open in Chicago, Illinois and New York, New York for
the conduct of substantially all of their commercial lending activities and on
which dealings in United States dollars are carried on in the London interbank
market and (ii) for all other purposes, a day (other than a Saturday or Sunday)
on which banks generally are open in Chicago, Illinois for the conduct of
substantially all of their commercial lending activities.
"Calculation Date" is defined in Section 2.4.
- 2 -
<PAGE> 9
"Capital Stock" means any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a corporation, any
and all equivalent ownership interests in a Person (other than a corporation)
and any and all warrants or options to purchase any of the foregoing.
"Cash Flow to Debt Service Ratio" means, as for any date for any
period, the ratio calculated by dividing (x) actual EBITDA for such period, by
(y) Consolidated Debt Service for such period.
"CBR Advance" means an Advance which bears interest at the CBR Rate.
"CBR Applicable Margin" means, as of any date, the Applicable Margin
in effect as determined in accordance with Section 2.4 hereof.
"CBR Loan" means a Loan which bears interest at the CBR Rate.
"CBR Rate" means, for any day, a rate per annum equal to (i) the
Corporate Base Rate in effect on such day, plus (ii) the CBR Applicable Margin.
"Closing Date" means the date that all the conditions precedent to the
initial Advance, as specified in Section 4.1, have been satisfied; provided,
however, that the obligations of the Lenders to make Loans hereunder shall
automatically terminate if such date does not occur on or before March 10,
1995.
"Code" means the Internal Revenue Code of 1986, as amended, reformed
or otherwise modified from time to time.
"Commitment Fee" is defined in Section 2.5.
"Commitment" means, for each Lender, the obligation of such Lender to
make Loans not exceeding the amount set forth opposite its signature below or
as set forth in any Notice of Assignment relating to any assignment that has
become effective pursuant to Section 12.3.2, as such amount may be modified
from time to time pursuant to the terms hereof.
Condemnation" is defined in Section 7.8.
"Consolidated Debt Service" for any period means (a) Consolidated
Interest Expense for such period plus (b) the aggregate amount of scheduled
principal payments of Indebtedness (excluding optional prepayments and
scheduled principal payments in respect of any Indebtedness which is payable in
a single installment at final maturity) required to be made during such period
by the Borrower or any of its consolidated Subsidiaries.
- 3 -
<PAGE> 10
"Consolidated Interest Expense," for any period, means the amount of
interest expense of the Borrower and its Subsidiaries for such period on the
aggregate principal amount of their Indebtedness, determined on a consolidated
basis in accordance with GAAP plus any capitalized interest which accrued
during such period.
"Consolidated Net Income," for any period, means consolidated net
income (or loss) of the Borrower and its Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP; provided that there
shall be excluded (a) the income (or deficit) of any other Person accrued prior
to the date it becomes a Subsidiary of the Borrower or is merged into or
consolidated with the Borrower or any of its Subsidiaries and (b) the
undistributed earnings of any Subsidiary to the extent that the declaration or
payment of dividends or similar distributions by such Subsidiary is not at the
time permitted by the terms of any contractual obligation or requirement of law
applicable to such Subsidiary.
"Consolidated Secured Indebtedness," as of any date of determination,
means the sum of (a) the aggregate principal amount of all Indebtedness of the
Borrower and its Subsidiaries outstanding at such date which does not
constitute Unsecured Indebtedness and (b) the excess, if any, of (i) the
aggregate principal amount of all Unsecured Indebtedness of the Subsidiaries of
the Borrower over (ii) $10,000,000, determined on a consolidated basis in
accordance with GAAP.
"Consolidated Senior Unsecured Indebtedness," as of any date of
determination, means the sum of (a) the aggregate principal amount of all
Indebtedness of the Borrower and its Subsidiaries outstanding at such date
which constitutes Unsecured Indebtedness (excluding (i) Indebtedness which is
contractually subordinated to the Indebtedness of the Borrower and its
Subsidiaries under the Loan Documents on customary terms acceptable to the
Agent, (ii) Indebtedness of the Borrower and its Subsidiaries under the Loan
Documents and (iii) Indebtedness incurred pursuant to any commitment referred
to in clause (c) below), (b) the aggregate Commitments then in effect under the
Facility, and (c) the aggregate commitments then in effect with respect to any
other unsecured committed line of credit extended to the Borrower or any of its
Subsidiaries, determined on a consolidated basis in accordance with GAAP.
"Consolidated Tangible Net Worth," at any date of determination, means
an amount equal to (a) Total Tangible Assets as of such date minus (b)
Consolidated Total Indebtedness as of such date.
"Consolidated Total Indebtedness," as of any date of determination,
means all Indebtedness of the Borrower and its Subsidiaries outstanding at such
date, determined on a consolidated basis in accordance with GAAP.
- 4 -
<PAGE> 11
"Controlled Group" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Borrower or any of its Subsidiaries,
are treated as a single employer under Section 414 of the Code.
"Conversion/Continuation Notice" is defined in Section 2.10.
"Corporate Base Rate" means a rate per annum equal to the corporate
base rate of interest announced by First Chicago from time to time, changing
when and as such corporate base rate changes.
"Crestar Agreement means the Credit Agreement dated as of August 26,
1994 between the Borrower and Crestar Bank, as the same may be amended from
time to time.
"Current DSC Ratio" means, as of any date, the ratio calculated by
dividing (x) the actual EBITDA for the most recently completed fiscal quarter,
by (y) the actual Consolidated Debt Service for such fiscal quarter.
"Default" means an event described in Article VII.
"EBITDA" means earnings before interest, taxes (other than real estate
taxes), depreciation and amortization, all as calculated in accordance with
GAAP.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any rule or regulation issued thereunder.
"Facility Termination Date" means January 31, 1999.
"Federal Funds Effective Rate" means, for any day, an interest rate
per annum 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 for such day (or, if such day is not a
Business Day, for the immediately preceding business Day) by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day
which is a Business Day, the average of the quotations at approximately 10 a.m.
(Chicago time) on such day on such transactions received by the Agent from
three Federal funds brokers of recognized standing selected by the Agent in its
sole discretion.
"Financing Lease" means any lease of property, real or personal, the
obligations of the lessee in respect of which are, in accordance with GAAP,
capitalized on a balance sheet of the lessee.
"First Chicago" means The First National Bank of Chicago in its
individual capacity as a Lender. and its successors.
- 5 -
<PAGE> 12
"Funded Percentage" means, with respect to any Lender at any time, a
percentage equal to a fraction the numerator of which is the amount of the
outstanding Advances from such Lender, at such time, and the denominator of
which is the outstanding Advances from all of the Lenders at such time.
"Funds From Operations," for any period, means Consolidated Net Income
for such period as adjusted by (i) excluding gains and losses from property
sales, debt restructuring and property write-downs and adjusted for the
non-cash effect of straight-lining of rents, (ii) to the extent not already
accomplished under GAAP, straight-lining various ordinary operating expenses
which are payable less frequently than monthly (e.g. real estate taxes), and
(iii) adding back depreciation, amortization and all non-cash items.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect from time to time, applied in a manner
consistent with that used in preparing the financial statements referred to in
Section 6.1.
"Guarantee Obligation" means, as to any Person (the "guaranteeing
person"), any obligation (determined without duplication) of (a) the
guaranteeing person or (b) another Person (including, without limitation, any
bank under any letter of credit) to induce the creation of which the
guaranteeing person has issued a reimbursement, counterindemnity or similar
obligation, in either case guaranteeing or in effect guaranteeing any
Indebtedness, leases, dividends or other obligations (the "primary
obligations") of any other third Person (the "primary obligor") in any manner,
whether directly or indirectly, including, without limitation, any obligation
of the guaranteeing person, whether or not contingent, (i) to purchase any such
primary obligation or any property constituting direct or indirect security
therefor, (ii) to advance or supply funds (1) for the purchase or payment of
any such primary obligation or (2) to maintain working capital or equity
capital of the primary obligor or otherwise to maintain the net worth or
solvency of the primary obligor, (iii) to purchase property, securities or
services primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such
primary obligation or (iv) otherwise to assure or hold harmless the owner of
any such primary obligation against loss in respect thereof; provided, however,
that the term Guarantee Obligation shall not include endorsements of
instruments for deposit or collection in the ordinary course of business. The
amount of any Guarantee Obligation of any guaranteeing person shall be deemed
to be the maximum stated amount of the primary obligation relating to such
Guarantee Obligation (or, if less, the maximum stated liability set forth in
the instrument embodying such Guarantee Obligation), provided, that in the
absence of any such stated amount or stated liability, the amount of such
Guarantee Obligation shall be such guaranteeing person's maximum reasonably
anticipated liability in respect thereof as determined by the Borrower in good
faith.
"Indebtedness" of any Person at any date means without duplication,
(a) all indebtedness of such Person for borrowed money (including liabilities
arising under Financing Leases), (b) all obligations of such Person for the
deferred purchase price of property or
- 6 -
<PAGE> 13
services (other than current trade liabilities incurred in the ordinary course
of business and payable in accordance with customary practices), to the extent
such obligations constitute indebtedness for the purposes of GAAP, (c) any
other indebtedness of such Person which is evidenced by a note, bond, debenture
or similar instrument, (d) all obligations of such Person in respect of
acceptances issued or created for the account of such Person, (e) all Guarantee
Obligations of such Person (excluding, in the case of the Borrower, Guarantee
Obligations of the Borrower in respect of primary obligations of any
Subsidiary), and (f) all liabilities secured by any lien (other than liens for
taxes not yet due and payable) on any property owned by such Person even though
such Person has not assumed or otherwise become liable for the payment thereof.
"Interest Period" means, with respect to a LIBOR Advance, a period of
one, two, three, six, nine or twelve months commencing on a Business Day
selected by the Borrower pursuant to this Agreement. Such Interest Period
shall end on (but exclude) the day which corresponds numerically to such date
one, two, three, six, nine or twelve months thereafter, provided, however, that
if there is no such numerically corresponding day in such next, second, third,
sixth, ninth or twelfth succeeding month, such Interest Period shall end on the
last Business Day of such next, second, third, sixth, ninth or twelfth
succeeding month. If an Interest Period would otherwise end on a day which is
not a Business Day, such Interest Period shall end on the next succeeding
Business Day, provided, however, that if said next succeeding Business Day
falls in a new calendar month, such Interest Period shall end on the
immediately preceding Business Day.
"Lenders" means the lending institutions listed on the signature pages
of this Agreement, their respective successors and assigns and any other
lending institutions that subsequently become parties to this Agreement.
"Lending Installation" means, with respect to a Lender, any office,
branch, subsidiary or affiliate of such Lender.
"Letter of Credit" of a Person means a letter of credit or similar
instrument which is issued upon the application of such Person or upon which
such Person is an account party or for which such Person is in any way liable.
"LIBOR Advance" means an Advance which bears interest at a LIBOR Rate.
"LIBOR Applicable Margin" means, as of any date with respect to any
Interest Period, the Applicable Margin in effect for such Interest Period as
determined in accordance with Section 2.4 hereof.
"LIBOR Base Rate" means, with respect to a LIBOR Advance for the
relevant Interest Period, the rate determined by the Agent to be the rate at
which deposits in U.S. dollars are offered by the Agent to first-class banks in
the London interbank market at approximately a.m. (London time) two Business
Days prior to the first day of such Interest Period, in the
- 7 -
<PAGE> 14
approximate amount of the relevant LIBOR Advance and having a maturity
approximately equal to such Interest Period.
"LIBOR Loan" means a Loan which bears interest at a LIBOR Rate.
"LIBOR Rate" means, with respect to a LIBOR Advance for the relevant
Interest Period, the sum of (i) the quotient of (a) the LIBOR Base Rate
applicable to such Interest Period, divided by (b) one minus the Reserve
Requirement (expressed as a decimal) applicable to such Interest Period, plus
(ii) the LIBOR Applicable Margin in effect on the day that such LIBOR Base Rate
was determined. The LIBOR Rate shall be rounded to the next higher multiple of
1/16 of 1% if the rate is not such a multiple.
"Lien" means any lien (statutory or other), mortgage, pledge,
hypothecation, assignment, deposit arrangement, encumbrance or preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever (including, without limitation, the interest of a vendor or
lessor under any conditional sale, capitalized lease or other title retention
agreement).
"Loan" means, with respect to a Lender, such Lender's portion of any
Advance.
"Loan Documents" means this Agreement, the Note(s) and any other
document from time to time evidencing or securing indebtedness incurred by the
Borrower under this Agreement, as any of the foregoing may be amended or
modified from time to time.
"Loan Year" means the period of 12 months ending on the first
anniversary of the date of this Agreement, and thereafter, each succeeding 12
month period ending on an anniversary of the date of this Agreement.
"Material Adverse Effect" means a material adverse effect on (i) the
business, Property, condition (financial or otherwise), results of operations,
or prospects of the Borrower and its Subsidiaries taken as a whole, (ii) the
ability of the Borrower to perform its obligations under the Loan Documents, or
(iii) the validity or enforceability of any of the Loan Documents or the rights
or remedies of the Agent or the Lenders thereunder.
"Maximum Aggregate Commitment" means $25,000,000, or at any time such
other amount as has been approved by all of the Lenders.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Multiemployer Plan" means a Plan maintained pursuant to a collective
bargaining agreement or any other arrangement to which the Borrower or any
member of the Controlled Group is a party to which more than one employer is
obligated to make contributions.
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<PAGE> 15
"Note" means a promissory note, in substantially the form of Exhibit A
hereto, duly executed by the Borrower and payable to the order of a Lender in
the amount of its Commitment, including any amendment, modification, renewal or
replacement of such promissory note.
"Notice of Assignment" is defined in Section 12.3.2.
"Obligations" means all unpaid principal of and accrued and unpaid
interest on the Notes, all accrued and unpaid fees and all expenses,
reimbursements, indemnities and other obligations of the Borrower to the
Lenders or to any Lender, the Agent or any indemnified party hereunder arising
under the Loan Documents.
"Office Building Assets" means all office buildings owned by Borrower
from time to time.
"Participants" is defined in Section 12.2.1.
"Payment Date" means, with respect to the payment of interest accrued
on any Advance, the first day of each calendar month.
"PBGC" means the Pension Benefit Guaranty Corporation, or any
successor thereto.
"Percentage" means, with respect to each Lender, the applicable
percentage of the then-current Aggregate Commitment represented by such
Lender's then-current Commitment.
"Permitted Acquisitions" are defined in Section 6.16.
"Permitted Liens" are defined in Section 6.17.
"Person" means any natural person, corporation, firm, joint venture,
partnership, association, enterprise, trust or other entity or organization, or
any government or political subdivision or any agency, department or
instrumentality thereof.
"Plan" means 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 Code as to which the Borrower or any member of the Controlled Group may
have any liability.
(ii) The definitions of "Projected EBITDA" and "Projected Consolidated
Interest Expense" are hereby deleted from the Credit Agreement.
"Property" of a Person means any and all property, whether real,
personal, tangible, intangible, or mixed, of such Person, or other assets
owned, leased or operated by such Person.
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<PAGE> 16
"Public Debt Rating Date" means the date, if any, on which Borrower
first obtains an investment grade public debt rating on long-term senior
Unsecured Indebtedness from S&P and/or Moody's.
"Purchasers" is defined in Section 12.3.1.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor or
other regulation or official interpretation of said Board of Governors relating
to the extension of credit by banks for the purpose of purchasing or carrying
margin stocks applicable to member banks of the Federal Reserve System.
"Reportable Event" means a reportable event as defined in Section 4043
of ERISA and the regulations issued under such section, with respect to a Plan,
excluding, however, such events as to which the PBGC by regulation waived the
requirement of Section 4043(a) of ERISA that it be notified within 30 days of
the occurrence of such event, provided, however, that a failure to meet the
minimum funding standard of Section 412 of the Code and of Section 302 of ERISA
shall be a Reportable Event regardless of the issuance of any such waiver of
the notice requirement in accordance with either Section 4043(a) of ERISA or
Section 412(d) of the Code.
"Required Lenders" means Lenders in the aggregate having at least
6-2/3% of the Aggregate Commitment or, if the Aggregate Commitment has been
terminated, Lenders in the aggregate holding at least 66-2/3% of the aggregate
unpaid principal amount of the outstanding Advances.
"Reserve Requirement" means, with respect to an Interest Period, the
maximum aggregate reserve requirement on Eurocurrency liabilities. On the date
of this Agreement First Chicago's Reserve Requirement is 0.
"Section" means a numbered section of this Agreement, unless another
document is specifically referenced.
"Single Employer Plan" means a Plan maintained by the Borrower or any
member of the Controlled Group for employees of the Borrower or any member of
the Controlled Group.
"Subsidiary," as to any Person, means a corporation, partnership or
other entity of which shares of stock or other ownership interests having
ordinary voting power (other than stock or such other ownership interests
having such power only by reason of the happening of a contingency) to elect a
majority of the board of directors or other managers of such corporation,
partnership or other entity are at the time owned, or the management of which
is otherwise controlled, directly or indirectly through one or more
intermediaries, or both, by such Person. Unless otherwise qualified, all
references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer
to a Subsidiary or Subsidiaries of the Borrower.
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<PAGE> 17
"Substantial Portion" means, with respect to the Property of the
Borrower and its Subsidiaries, Property which (i) represents more than 15% of
the consolidated assets of the Borrower and its Subsidiaries as would be shown
in the consolidated financial statements of the Borrower as at the beginning of
the twelve-month period ending with the month in which such determination is
made, or (ii) is responsible for more than 10% of the consolidated net sales or
of the consolidated net income of the Borrower and its Subsidiaries as
reflected in the financial statements referred to in clause (i) above.
"S&P" means Standard & Poor's Ratings Group and its successors.
"Total Tangible Assets," of any Person at any date, means the current
book value of the total assets of such Person other than that portion of such
Person's assets that constitute intangible assets as determined in accordance
with GAAP plus accumulated depreciation on the depreciable assets (excluding
intangible assets) from such Person's original book value of such assets which
is reflected in the current book value of such assets.
"Transferee" is defined in Section 12.4.
"Type" means, with respect to any Advance, its nature as a CBR Advance
or a LIBOR Advance.
"Unencumbered Asset," with respect to any asset, at any date of
determination, means the circumstance that such asset on such date (a) is not
subject to any Liens of any kind, other than Permitted Liens (excluding however
Permitted Liens of the type contemplated by the penultimate paragraph of
Section 6.17 hereof), (b) is not subject to any agreement (including (i) any
agreement governing Indebtedness incurred in order to finance or refinance the
acquisition of such asset), and (ii) if applicable, the organizational
documents of any Subsidiary) (other than the Crestar Agreement, the terms of
which restrict Borrower's ability to encumber certain of Borrower's assets)
which prohibits or limits the ability of the Borrower or any of its
Subsidiaries to create, incur, assume or suffer to exist any Lien upon any
assets or Capital Stock of the Borrower or any of its Subsidiaries (excluding
any agreement which limits generally the amount of secured Indebtedness which
may be incurred by the Borrower and its Subsidiaries), and (c) is not subject
to any agreement (including any agreement governing Indebtedness incurred in
order to finance or refinance the acquisition of such asset, but excluding the
terms of the Crestar Agreement) which entitles any Person to the benefit of any
Lien (other than Permitted Liens) on any assets or Capital Stock of the
Borrower or any of its Subsidiaries, or would entitle any Person to the benefit
of any Lien (other than Permitted Liens) on such assets or Capital Stock upon
the occurrence of any contingency (including, without limitation, pursuant to
an "equal and ratable" clause). For the purposes of this Agreement, any
Property of a Subsidiary which is not a Wholly-Owned Subsidiary shall not be
deemed to be unencumbered unless both (i) such Property and (ii) all Capital
Stock of such Subsidiary held by the Borrower is unencumbered.
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<PAGE> 18
"Unfunded Liabilities" means the amount (if any) by which the present
value of all vested nonforfeitable benefits under all Single Employer Plans
exceeds the fair market value of all such Plan assets allocable to such
benefits, all determined as of the then most recent valuation date for such
Plans.
"Unmatured Default" means an event which but for the lapse of time or
the giving of notice, or both, would constitute a Default.
"Unsecured Indebtedness" means all Indebtedness of any Person that is
not secured by a Lien on any income, Capital Stock, Property or any other asset
of such Person.
"Unused Facility Fee" is defined in Section 2.6.
"Value of Unencumbered Assets," as of any date, means the gross book
value, as determined in accordance with GAAP, of all Unencumbered Assets owned
by the Borrower or any of its Subsidiaries as of such date.
"Wholly-Owned Subsidiary" of a Person means (i) any Subsidiary all of
the outstanding voting securities of which shall at the time be owned or
controlled, directly or indirectly, by such Person or one or more Wholly-Owned
Subsidiaries of such Person, or by such Person and one or more Wholly-Owned
Subsidiaries of such Person, or (ii) any partnership, association, joint
venture or similar business organization 100% of the ownership interests having
ordinary voting power of which shall at the time be so owned or controlled.
The foregoing definitions shall be equally applicable to both the
singular and plural forms of the defined terms.
ARTICLE II
THE CREDIT
2.1. Commitment. From and including the date of this Agreement and
prior to the Facility Termination Date, each Lender severally agrees, on the
terms and conditions set forth in this Agreement, to make Loans to the Borrower
from time to time in amounts not to exceed in the aggregate at any one time
outstanding the amount of its Commitment. Subject to the terms of this
Agreement, the Borrower may borrow, repay and reborrow at any time prior to the
Facility Termination Date. The Commitments to lend hereunder shall expire on
the Facility Termination Date.
2.2. Final Principal Payment. Any outstanding Advances and all
other unpaid Obligations shall be paid in full by the Borrower on the Facility
Termination Date.
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<PAGE> 19
2.3. Ratable Loans. Each Advance hereunder shall consist of Loans
made from the several Lenders ratably in proportion to the ratio that their
respective Commitments bear to the Aggregate Commitment. The Advances may be
CBR Advances or LIBOR Advances, or a combination thereof, selected by the
Borrower in accordance with Sections 2.9 and 2.10. If any Lender shall default
in its obligation to fund all or a portion of its Percentage of any Advance (a
"Defaulting Lender"), then simultaneously with any funding by any of the
remaining Lenders (each, a "Funding Lender") of their respective Percentages of
such Advance (such an Advance is sometimes referred to herein as a "Partial
Advance"), the respective Funded Percentages of each Defaulting Lender and of
each Funding Lender shall automatically be adjusted so that following such
adjustment each Lender's Funded Percentage shall correspond to the aggregate
percentage of all then outstanding Advances (including all Partial Advances)
made by such Lender. Following any adjustment of each Lender's Funded
Percentage pursuant to the preceding sentence such Lender's Funded Percentage
shall be readjusted only upon the first to occur of (a) a Defaulting Lender
subsequently funding its Percentage of any such Partial Advance, or (b) the
repayment in full (including all interest thereon) to each Funding Lender of
its Percentage of any such Partial Advance. Notwithstanding anything contained
herein to the contrary, in no event shall any Defaulting Lender be entitled to
receive any repayment of its Percentage of any Advances (or any interest earned
thereon) until such time as the Funding Lenders have received repayment in full
of the amount of any Partial Advance, together with all interest thereon.
Borrower shall have the right to replace a Defaulting Lender in the manner set
forth in Section 3.6 below, and upon the replacement of any Defaulting Lender,
such Defaulting Lender shall refund to Borrower the pro rata share of all
commitment fees paid to such Defaulting Lender which have not been earned by
such Defaulting Lender as of the date of such replacement, determined by
multiplying the amount of all commitment fees paid by Borrower to or for the
benefit of such Defaulting Lender by a fraction, the numerator of which is the
number of months (it being understood and agreed that for purposes of this
provision a portion of any month shall constitute a complete "month") which
have elapsed in the 48 month Facility term, and the denominator of which is 48.
Solely by way of example, if Borrower has paid aggregate commitment fees of
$75,000 to a Defaulting Lender, and Borrower replaces such Defaulting Lender on
the second anniversary of the Closing Date, then concurrently with such
replacement such Defaulting Lender shall return to Borrower $37,500 of the
$75,000 in commitment fees.
2.4. Applicable Margins. Prior to the Public Debt Rating Date, the
CBR Applicable Margin and the LIBOR Applicable Margin to be used in calculating
the interest rate applicable to the different Types of Advances shall vary from
time to time in accordance with the Loan Year and the Current DSC Ratio, and
shall be adjusted on each Calculation Date (as defined below), as shown in the
following tables based on the then applicable Loan Year and the Current DSC
Ratio at that time:
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<PAGE> 20
A. Loan Year 1
<TABLE>
<CAPTION>
LIBOR CBR
CURRENT APPLICABLE APPLICABLE
DSC RATIO MARGIN MARGIN
---------- ---------- ----------
<S> <C> <C> <C> <C>
1. greater than 8X 0.30% 0%
2. greater than 6X 0.50% 0%
3. greater than 4X 1.20% 0%
4. greater than 3X 1.35% 0.375%
5. greater than 2.5X 1.50% 0.50%
6. less than
or equal to 2.5X 3.00% 1.50%
</TABLE>
B. Loan Year 2
<TABLE>
<CAPTION>
LIBOR CBR
CURRENT APPLICABLE APPLICABLE
DSC RATIO MARGIN MARGIN
---------- ---------- ----------
<S> <C> <C> <C> <C>
1. greater than 8X 0.40% 0%
2. greater than 6X 0.65% 0%
3. greater than 4X 1.40% 0.125%
4. greater than 3X 1.55% 0.50%
5. greater than 2.5X 1.70% 0.625%
6. less than
or equal to 2.5X 3.25% 1.75%
</TABLE>
- 14 -
<PAGE> 21
C. Loan Year 3
<TABLE>
<CAPTION>
LIBOR CBR
CURRENT APPLICABLE APPLICABLE
DSC RATIO MARGIN MARGIN
---------- ---------- ----------
<S> <C> <C> <C> <C>
1. greater than 8X 0.50% 0%
2. greater than 6X 0.75% 0%
3. greater than 4X 1.50% 0.125%
4. greater than 3X 1.65% 0.50%
5. greater than 2.5X 1.80% 0.625%
6. less than 2.5X 3.25% 1.75%
</TABLE>
D. Loan Year 4
<TABLE>
<CAPTION>
LIBOR CBR
CURRENT APPLICABLE APPLICABLE
DSC RATIO MARGIN MARGIN
---------- ---------- ----------
<S> <C> <C> <C> <C>
1. greater than 8X 0.60% 0%
2. greater than 6X 0.85% 0%
3. greater than 4X 1.60% 0.125%
4. greater than 3X 1.75% 0.50%
5. greater than 2.5X 1.90% 0.625%
6. less than
or equal to 2.5X 3.25% 1.75%
</TABLE>
The Current DSC Ratio shall be determined quarterly on each March 31,
June 30, September 30 and December 31 (each a "Calculation Date") based on
information contained in the then most recent Form 10Q or Form 10K filed by
Borrower with the Securities Exchange Commission.
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<PAGE> 22
From and after the Public Debt Rating Date, the CBR Applicable Margin
and the LIBOR Applicable Margin to be used in calculating the interest rate
applicable to different Types of Advances shall vary from time to time in
accordance with the Loan Year and the lower of Borrower's then applicable (x)
Moody's debt rating, and (y) S&P's debt rating, as the case may be (e.g., if
the Borrower's Moody's debt rating is Aa2 and its S&P debt rating is AA-, then
the Applicable Margins shall be computed based on the S&P rating), and the
Applicable Margins shall be adjusted effective, (i) in the case of all then
outstanding CBR Advances, on the next Business Day following any change in
Borrower's Moody's debt rating and/or S&P's debt rating, as the case may be,
and (ii) in the case of any then outstanding LIBOR Advances, on the first day
of the next succeeding Interest Period applicable to such LIBOR Advance. The
applicable debt ratings and the Applicable Margins are set forth in the
following tables:
A. Loan Year 1
<TABLE>
<CAPTION>
LIBOR CBR
Applicable Applicable
S&P Rating Moody's Rating Margin Margin
---------- -------------- -------- --------
<S> <C> <C> <C> <C>
1. AA or higher Aa2 or higher 0.30% 0%
2. A+ to AA- A1 to Aa3 0.50% 0%
3. A- to A A3 to A2 1.20% 0%
4. BBB to BBB+ Baa2 to Baa1 1.35% 0.125%
5. BBB- Baa3 1.50% 0.25%
6. Less than BBB- Less than Baa3 3.00% 1.50%
</TABLE>
B. Loan Year 2
<TABLE>
<CAPTION>
LIBOR CBR
Applicable Applicable
S&P Rating Moody's Rating Margin Margin
---------- -------------- -------- --------
<S> <C> <C> <C> <C>
1. AA or higher Aa2 or higher 0.40% 0%
2. A- to AA- A1 to Aa3 0.65% 0%
3. A- to A A3 to A2 1.40% 0.125%
</TABLE>
- 16 -
<PAGE> 23
<TABLE>
<S> <C> <C> <C> <C>
4. BBB to BBB+ Baa2 to Baa1 1.55% 0.25%
5. BBB- Baa3 1.70% 0.375%
6. Less than BBB- Less than Baa3 3.25% 1.75%
</TABLE>
C. Loan Year 3
<TABLE>
<CAPTION>
LIBOR CBR
Applicable Applicable
S&P Rating Moody's Rating Margin Margin
---------- -------------- -------- --------
<S> <C> <C> <C> <C>
1. AA or higher Aa2 or higher 0.50% 0%
2. A- to AA- A1 to Aa3 0.75% 0%
3. A- to A A3 to A2 1.50% 0.125%
4. BBB to BBB+ Baa2 to Baa1 1.65% 0.25%
5. BBB- Baa3 1.80% 0.375%
6. Less than BBB- Less than Baa3 3.25% 1.75%
</TABLE>
D. Loan Year 4
<TABLE>
<CAPTION>
LIBOR CBR
Applicable Applicable
S&P Rating Moody's Rating Margin Margin
---------- -------------- -------- --------
<S> <C> <C> <C> <C>
1. AA or higher Aa2 or higher 0.60% 0%
2. A- to AA- A1 to Aa3 0.85% 0%
3. A- to A A3 to A2 1.60% 0.125%
4. BBB to BBB+ Baa2 to Baa1 1.75% 0.25%
5. BBB- Baa3 1.90% 0.375%
6. Less than BBB- Less than Baa3 3.25% 1.75%
</TABLE>
- 17 -
<PAGE> 24
2.5. Commitment Fee. The Borrower agrees to pay to the Agent for
the account of each Lender a commitment fee (the "Commitment Fee") equal to
fifteen one hundredths of one percent (0.15%) of the Aggregate Commitment (as
such amount may be changed from time to time pursuant to the terms hereof to an
amount not to exceed the Maximum Aggregate Commitment). The Commitment Fee for
all Lenders who have provided a Commitment as of the Closing Date shall, to the
extent not previously paid, be due and payable on the Closing Date.
2.6. Unused Facility Fee. The Borrower agrees to pay to the Agent
for the account of each Lender an unused facility fee (the "Unused Facility
Fee") equal to the Applicable Percentage (as defined below) multiplied by the
daily unborrowed portion of such Lender's Commitment (calculated as the daily
average of the difference between such Lender's Commitment and the then
outstanding principal balance owed to such Lender for any calculation period)
from the Closing Date to and including the Facility Termination Date, payable
quarterly in arrears on each April 1, July 1, October 1 and January 1 during
the term, and on the Facility Termination Date, in accordance with the
following tables:
A. Prior to the Public Debt Rating Date:
Loan Year 1
<TABLE>
<CAPTION>
Current DSC Ratio Applicable Percentage (per annum)
----------------- ---------------------------------
<S> <C> <C> <C>
1. greater than 8X 0.15%
2. greater than 6X 0.20%
3. greater than 4X 0.25%
4. greater than 3X 0.25%
5. greater than 2.5X 0.30%
6. less than
or equal to 2.5X 0.625%
</TABLE>
- 18 -
<PAGE> 25
Loan Years 2, 3 and 4
<TABLE>
<CAPTION>
Current DSC Ratio Applicable Percentage (per annum)
----------------- ---------------------------------
<S> <C> <C> <C>
1. greater than 8X 0.20%
2. greater than 6X 0.25%
3. greater than 4X 0.25%
4. greater than 3X 0.30%
5. greater than 2.5X 0.35%
6. less than
or equal to 2.5X 0.625%
</TABLE>
B. From and after the Public Debt Rating Date:
Loan Year 1
<TABLE>
<CAPTION>
Applicable Percentage
S&P Rating Moody's Rating (per annum)
---------- -------------- -------------------
<S> <C> <C> <C>
1. AA or higher Aa2 or higher 0.15%
2. A+ to AA- A1 to Aa3 0.20%
3. A- to A A3 to A2 0.25%
4. BBB to BBB+ Baa2 to Baa1 0.25%
5. BBB- Baa3 0.30%
6. Less than BBB- Less than Baa3 0.625%
</TABLE>
Loan Years 2, 3 and 4
<TABLE>
<CAPTION>
Applicable Percentage
S&P Rating Moody's Rating (per annum)
---------- -------------- -------------------
<S> <C> <C> <C>
1. AA or higher Aa2 or higher 0.20%
2. A+ to AA- A1 to Aa3 0.25%
</TABLE>
- 19 -
<PAGE> 26
<TABLE>
<S> <C> <C> <C>
3. A- to A A3 to A2 0.25%
4. BBB to BBB+ Baa2 to Baa1 0.30%
5. BBB- Baa3 0.35%
6. Less than BBB- Less than Baa3 0.625%
</TABLE>
2.7. Minimum Amount of Each Advance. Each LIBOR Advance shall be
in the minimum amount of $1,000,000 (and in multiples of $250,000 if in excess
thereof), and each CBR Advance shall be in the minimum amount of $1,000,000
(and in multiples of $250,000 if in excess thereof), provided, however, that
any CBR Advance may be in the amount of the unused Aggregate Commitment.
2.8. Optional Principal Payments. The Borrower may from time to
time pay, without penalty or premium, all outstanding Advances, or, in a
minimum aggregate amount of $500,000 or any integral multiple of $250,000 in
excess thereof, any portion of the outstanding Advances upon two Business Days'
prior notice to the Agent; provided however, that the provisions of Section 3.4
hereof shall be applicable to any prepayment of any LIBOR Advance.
2.9. Method of Selecting Types and Interest Periods for New
Advances. The Borrower shall select the Type of Advance and, in the case of
each LIBOR Advance, the Interest Period applicable to each Advance from time to
time. The Borrower shall give the Agent irrevocable notice (a "Borrowing
Notice") not later than 10:00 a.m. (Chicago time) at least one Business Day
before the Borrowing Date of each CBR Advance and three Business Days before
the Borrowing Date for each LIBOR Advance, specifying:
(i) the Borrowing Date, which shall be a Business Day, of
such Advance,
(ii) the aggregate amount of such Advance,
(iii) the Type of Advance selected, and
(iv) in the case of each LIBOR Advance, the Interest
Period applicable thereto.
Not later than noon (Chicago time) on each Borrowing Date, each Lender
shall make available its Loan or Loans, in funds immediately available in
Chicago to the Agent at its address specified pursuant to Article VIII. The
Agent will make the funds so received from the Lenders available to the
Borrower at the Agent's aforesaid address.
No Interest Period may end after the Facility Termination Date and,
unless the Lenders otherwise agree in writing, in no event may there be more
than five (5) different Interest Periods for LIBOR Advances outstanding at any
one time.
- 20 -
<PAGE> 27
2.10. Conversion and Continuation of Outstanding Advances. CBR
Advances shall continue as CBR Advances unless and until such CBR Advances are
converted into LIBOR Advances. Each LIBOR Advance shall continue as a LIBOR
Advance until the end of the then applicable Interest Period therefor, at which
time such LIBOR Advance shall be automatically converted into a CBR Advance
unless the Borrower shall have given the Agent a Conversion/Continuation Notice
requesting that, at the end of such Interest Period, such LIBOR Advance
continue as an LIBOR Advance for the same or another Interest Period. Subject
to the terms of Section 2.7, the Borrower may elect from time to time to
convert all or any part of an Advance of any Type into any other Type or Types
of Advances; provided that any conversion of any LIBOR Advance shall be made
on, and only on, the last day of the Interest Period applicable thereto. The
Borrower shall give the Agent irrevocable notice (a "Conversion/Continuation
Notice") of each conversion of an Advance or continuation of a LIBOR Advance
not later than 10:00 a.m. (Chicago time) at least one Business Day, in the case
of a conversion into a CBR Advance, or three Business Days, in the case of a
conversion into or continuation of a LIBOR Advance, prior to the date of the
requested conversion or continuation, specifying:
(i) the requested date, which shall be a Business Day, of
such conversion or continuation;
(ii) the aggregate amount and Type of the Advance which is
to be converted or continued; and
(iii) the amount and Type(s) of Advance(s) into which such
Advance is to be converted or continued and, in the
case of a conversion into or continuation of a LIBOR
Advance, the duration of the Interest Period
applicable thereto.
2.11. Changes in Interest Rate. Etc. Each CBR Advance shall bear
interest on the outstanding principal amount thereof, for each day from and
including the date such Advance is made or is converted from a LIBOR Advance
into a CBR Advance pursuant to Section 2.10 to but excluding the date it
becomes due or is converted into a LIBOR Advance pursuant to Section 2.10
hereof, at a rate per annum equal to the CBR Rate for such day. Changes in the
rate of interest on that portion of any Advance maintained as a CBR Advance
will take effect simultaneously with each change in the Corporate Base Rate.
Each LIBOR Advance shall bear interest from and including the first day of the
Interest Period applicable thereto to (but not including) the last day of such
Interest Period at the interest rate determined as applicable to such LIBOR
Advance.
2.12. Rates Applicable After Default. Notwithstanding anything to
the contrary contained in Section 2.9 or 2.10, during the continuance of a
Default or Unmatured Default the Required Lenders may, at their option, by
notice to the Borrower (which notice may be revoked at the option of the
Required Lenders notwithstanding any provision of Section 8.2 requiring
unanimous consent of the Lenders to changes in interest rates), declare that no
- 21 -
<PAGE> 28
Advance may be made as, converted into or continued as a LIBOR Advance. During
the continuance of a Default the Required Lenders may, at their option, by
notice to the Borrower (which notice may be revoked at the option of the
Required Lenders notwithstanding any provision of Section 8.2 requiring
unanimous consent of the Lenders to changes in interest rates), declare that
for the duration of such Default (i) each LIBOR Advance shall bear interest at
the rate otherwise applicable to such Interest Period plus 2% per annum and
(ii) each CBR Advance shall bear interest at a rate per annum equal to the CBR
Rate otherwise applicable to the CBR Advance plus 2% per annum.
2.13. Method of Payment. All payments of the Obligations hereunder
shall be made, without setoff, deduction, or counterclaim, in immediately
available funds to the Agent at the Agent's address specified pursuant to
Article VIII, or at any other Lending Installation of the Agent specified in
writing by the Agent to the Borrower, by noon (local time) on the date when due
and shall be applied ratably by the Agent among the Lenders. Each payment
delivered to the Agent for the account of any Lender shall be delivered
promptly by the Agent to such Lender in the same type of funds that the Agent
received at its address specified pursuant to Article VIII or at any Lending
Installation specified in a notice received by the Agent from such Lender. The
Agent is hereby authorized to charge the account of the Borrower maintained
with First Chicago for each payment of principal, interest and fees as it
becomes due hereunder.
2.14. Notes; Telephonic Notices. Each Lender is hereby authorized
to record the principal amount of each of its Loans and each repayment on the
schedule attached to its Note, provided, however, that the failure to so record
shall not affect the Borrower's obligations under such Note. The Borrower
hereby authorizes the Lenders and the Agent to extend, convert or continue
Advances, effect selections of Types of Advances and to transfer funds based on
telephonic notices made by any person or persons the Agent or any Lender in
good faith believes to be acting on behalf of the Borrower. The Borrower
agrees to deliver promptly to the Agent a written confirmation, if such
confirmation is requested by the Agent or any Lender, of each telephonic notice
signed by an Authorized Officer. If the written confirmation differs from the
action taken by the Agent and the Lenders, the records of the Agent and the
Lenders shall be presumed (rebuttably) accurate.
2.15. Interest Payment Dates; Interest and Fee Basis. Interest
accrued on each CBR Advance shall be payable on each Payment Date, commencing
with the first such date to occur after the date hereof, and at maturity.
Interest accrued on each LIBOR Advance shall be payable on each Payment Date,
commencing with the first such date to occur after the date hereof, on any date
on which the LIBOR Advance is prepaid, whether by acceleration or otherwise,
and at maturity. Interest and commitment fees shall be calculated for actual
days elapsed on the basis of a 360-day year. Interest shall be payable for the
day an Advance is made but not for the day of any payment on the amount paid if
payment is received prior to noon (local time) at the place of payment. If any
payment of principal of or interest on an Advance shall become due on a day
which is not a Business Day, such payment shall be
- 22 -
<PAGE> 29
made on the next succeeding Business Day and, in the case of a principal
payment, such extension of time shall be included in computing interest in
connection with such payment.
2.16. Notification of Advances, Interest Rates and Prepayments.
Promptly after receipt thereof, the Agent will notify each Lender of the
contents of each Borrowing Notice, Conversion/Continuation Notice, and
repayment notice received by it hereunder. The Agent will notify each Lender
of the interest rate applicable to each LIBOR Advance promptly upon
determination of such interest rate and will give each Lender prompt notice of
each change in the Corporate Base Rate.
2.17. Lending Installations. Each Lender may book its Loans at any
Lending Installation selected by such Lender and may change its Lending
Installation from time to time. All terms of this Agreement shall apply to any
such Lending Installation and the Notes shall be deemed held by each Lender for
the benefit of such Lending Installation. Each Lender may, by written or telex
notice to the Agent and the Borrower, designate a Lending Installation through
which Loans will be made by it and for whose account Loan payments are to be
made.
2.18. Non-Receipt of Funds by the Agent. Unless the Borrower or a
Lender, as the case may be, notifies the Agent prior to the date on which it is
scheduled to make payment to the Agent of (i) in the case of a Lender, the
proceeds of a Loan or (ii) in the case of the Borrower, a payment of principal,
interest or fees to the Agent for the account of the Lenders, that it does not
intend to make such payment, the Agent may assume that such payment has been
made. The Agent may, but shall not be obligated to, make the amount of such
payment available to the intended recipient in reliance upon such assumption.
If such Lender or the Borrower, as the case may be, has not in fact made such
payment to the Agent, the recipient of such payment shall, on demand by the
Agent, repay to the Agent the amount so made available together with interest
thereon in respect of each day during the period commencing on the date such
amount was so made available by the Agent until the date the Agent recovers
such amount at a rate per annum equal to (i) in the case of payment by a
Lender, the Federal Funds Effective Rate for such day or (ii) in the case of
payment by the Borrower, the interest rate applicable to the relevant Loan.
2.19. Withholding Tax Exemption. At least five Business Days prior
to the first date on which interest or fees are payable hereunder for the
account of any Lender, each Lender that is not incorporated under the laws of
the United States of America, or a state thereof, agrees that it will deliver
to each of the Borrower and the Agent two duly completed copies of United
States Internal Revenue Service Form 1001 or 4224, certifying in either case
that such Lender is entitled to receive payments under this Agreement and the
Notes without deduction or withholding of any United States federal income
taxes. Each Lender which so delivers a Form 1001 or 4224 further undertakes to
deliver to each of the Borrower and the Agent two additional copies of such
form (or a successor form) on or before the date that such form expires
(currently, three successive calendar years for Form 1001 and one calendar year
for Form 4224) or becomes obsolete or after the occurrence of any event
requiring a
- 23 -
<PAGE> 30
change in the most recent forms so delivered by it, and such amendments thereto
or extensions or renewals thereof as may be reasonably requested by the
Borrower or the Agent, in each case certifying that such Lender is entitled to
receive payments under this Agreement and the Notes without deduction or
withholding of any United States federal income taxes, unless an event
(including without limitation any change in treaty, law or regulation) has
occurred prior to the date on which any such delivery would otherwise be
required which renders all such forms inapplicable or which would prevent such
Lender from duly completing and delivering any such form with respect to it and
such Lender advises the Borrower and the Agent that it is not capable of
receiving payments without any deduction or withholding of United States
federal income tax.
2.20. Reduction in Aggregate Commitment. Borrower may from time to
time during the term of this Facility upon prior written notice to Agent, elect
to permanently reduce the amount of the Aggregate Commitment to an amount to be
determined by Borrower; provided, however, that in no event shall Borrower be
entitled to reduce the Aggregate Commitment below $15,000,000 pursuant to this
Section. Each reduction notice from Borrower as described in the preceding
sentence shall be accompanied by payment of any amounts (including any amounts
payable by Borrower pursuant to Article III hereof) necessary to reduce the
outstanding balance of the Advances to the amount specified in such notice.
Each reduction of the Aggregate Commitment shall reduce each Lender's
Commitment on a pro rata basis.
ARTICLE III
CHANGE IN CIRCUMSTANCES
3.1. Yield Protection. If any law or any governmental or
quasi-governmental rule, regulation, policy, guideline or directive (whether or
not having the force of law), or any interpretation thereof, or the compliance
of any Lender therewith,
(i) subjects any Lender or any applicable Lending
Installation to any tax, duty, charge or withholding
on or from payments due from the Borrower (excluding
(i) federal taxation of the net income of any Lender
or applicable Lending Installation, (ii) state and
local taxation in the jurisdiction where a Lender's
home office is situated, (iii) state and local
taxation in a jurisdiction other than described in
(ii) above to the extent such Lender receives credit
on its tax payments in its home jurisdiction for such
taxes, and (iv) federal withholding tax imposed on
payments due hereunder or under the Notes), or
changes the basis of taxation of payments to any
Lender in respect of its Loans or other amounts due
it hereunder, or
- 24 -
<PAGE> 31
(ii) imposes or increases or deems applicable any reserve,
assessment, insurance charge, special deposit or
similar requirement against assets of, deposits with
or for the account of, or credit extended by, any
Lender or any applicable Lending Installation (other
than reserves and assessments taken into account in
determining the interest rate applicable to LIBOR
Advances), or
(iii) imposes any other condition the result of which is to
increase the cost to any Lender or any applicable
Lending Installation of making, funding or
maintaining loans or reduces any amount receivable by
any Lender or any applicable Lending Installation in
connection with loans, or requires any Lender or any
applicable Lending Installation to make any payment
calculated by reference to the amount of loans held
or interest received by it, by an amount deemed
material by such Lender,
then, within 30 days of demand by such Lender, the Borrower shall pay such
Lender that portion of such increased expense incurred or reduction in an
amount received which such Lender determines is attributable to making, funding
and maintaining its Loans and its Commitment.
3.2. Changes in Capital Adequacy Regulations. If a Lender
reasonably determines the amount of capital required or expected to be
maintained by such Lender, any Lending Installation of such Lender or any
corporation controlling such Lender is increased as a result of a Change (as
hereinafter defined), then, within 30 days of demand by such Lender, the
Borrower shall pay such Lender the amount necessary to compensate for any
shortfall in the rate of return on the portion of such increased capital which
such Lender determines is attributable to this Agreement, its Loans or its
obligation to make Loans hereunder (after taking into account such Lender's
policies as to capital adequacy). "Change" means (i) any change after the date
of this Agreement in the Risk-Based Capital Guidelines or (ii) any adoption of
or change in any other law, governmental or quasi-governmental rule,
regulation, policy, guideline, interpretation, or directive (whether or not
having the force of law) after the date of this Agreement which affects the
amount of capital required or expected to be maintained by any Lender or any
Lending Installation or any corporation controlling any Lender. "Risk-Based
Capital Guidelines" means (i) the risk-based capital guidelines in effect in
the United States on the date of this Agreement, including transition rules,
and (ii) the corresponding capital regulations promulgated by regulatory
authorities outside the United States implementing the July 1988 report of the
Basle Committee on Banking Regulation and Supervisory Practices Entitled
"International Convergence of Capital Measurements and Capital Standards,"
including transition rules, and any amendments to such regulations adopted
prior to the date of this Agreement.
3.3. Availability of LIBOR Advances. If any Lender reasonably
determines that maintenance of any of its LIBOR Loans at a suitable Lending
Installation would violate any applicable law, rule, regulation or directive,
whether or not having the force of law, the Agent
- 25 -
<PAGE> 32
shall suspend the availability of LIBOR Advances and require any LIBOR Advances
to be converted into CBR Advances; or if the Required Lenders reasonably
determine that (i) deposits of a type or maturity appropriate to match fund
LIBOR Advances are not available, the Agent shall suspend the availability of
LIBOR Advances with respect to any Advances made after the date of any such
determination, or (ii) an interest rate applicable to a LIBOR Advance does not
accurately reflect the cost of making a LIBOR Advance, then, if for any reason
whatsoever the provisions of Section 3.1 are inapplicable, the Agent shall
suspend the availability of LIBOR Advances with respect to any Advances made
after the date of any such determination.
3.4. Funding Indemnification. If any payment of a LIBOR Advance
occurs on a date which is not the last day of the applicable Interest Period,
whether because of acceleration, prepayment or otherwise, or a LIBOR Advance is
not made on the date specified by the Borrower for any reason other than
default by the Lenders, the Borrower will indemnify each Lender for any loss or
cost incurred by it resulting therefrom, including, without limitation, any
loss or cost in liquidating or employing deposits acquired to fund or maintain
the LIBOR Advance.
3.5. Lender Statements; Survival of Indemnity. To the extent
reasonably possible, each Lender shall designate an alternate Lending
Installation with respect to its LIBOR Loans to reduce any liability of the
Borrower to such Lender under Sections 3.1 and 3.2 or to avoid the
unavailability of a LIBOR Advance under Section 3.3, so long as such
designation is not disadvantageous to such Lender. Each Lender shall deliver a
written statement of such Lender as to the amount due, if any, under Sections 3
1, 3.2 or 3.4. Such written statement shall set forth in reasonable detail the
calculations upon which such Lender determined such amount and shall be
presumed (rebuttably) correct. Determination of amounts payable under such
Sections in connection with a LIBOR Loan shall be calculated as though each
Lender funded its LIBOR Loan through the purchase of a deposit of the type and
maturity corresponding to the deposit used as a reference in determining the
LIBOR Rate applicable to such Loan, whether in fact that is the case or not.
Unless otherwise provided herein, the amount specified in the written statement
shall be payable on demand after receipt by the Borrower of the written
statement. The obligations of the Borrower under Sections 3.1, 3.2 and 3.4
shall survive payment of the Obligations and termination of this Agreement.
3.6 Replacement of Lender by Reason of Change in Circumstances.
In the event that any Lender (a "Recovery Lender") requires Borrower to make
any payment to such Recovery Lender in accordance with the provisions of
Sections 3.1 and/or 3.2 hereof, then upon written notice from Borrower to
Agent, Borrower and Agent shall mutually use their respective best efforts to
find another lender to replace the Recovery Lender. If a replacement lender is
found then Borrower shall pay to the Recovery Lender all amounts owed to such
Recovery Lender under the Facility, such Recovery Lender shall no longer be a
"Lender" hereunder, and concurrently therewith the remaining parties hereto
shall execute such instruments as shall be necessary to have the replacement
lender become a "Lender" hereunder having a Commitment equal to that of the
Recovery Lender.
- 26 -
<PAGE> 33
Nothing contained in this Section 3.6 shall be deemed to relieve
Borrower of its obligations to make all payments to any Recovery Lender in the
amounts and at the times required pursuant to the terms of this Agreement
during the period of time prior to the replacement of such Recovery Lender.
ARTICLE IV
CONDITIONS PRECEDENT
4.1. Initial Advance. The Lenders shall not be required to make
the initial Advance hereunder unless the Borrower shall have furnished to the
Agent, with sufficient copies for the Lenders, the following:
(i) The duly executed originals of the Loan Documents,
including the Notes, payable to the order of each of
the Lenders, and this Agreement;
(ii) A certificate of good standing for the Borrower,
certified by the appropriate governmental officer of
the District of Columbia, and foreign qualification
certificates, certified by the appropriate
governmental officer, for each jurisdiction where the
failure to so qualify or be licensed (if required)
would have a Material Adverse Effect;
(iii) Copies, certified by an officer of the Borrower, of
its formation documents (including by-laws), together
with all amendments thereto;
(iv) An incumbency certificate, executed by an officer of
the Borrower, which shall identify by name and title
and bear the signature of the Persons authorized to
sign the Loan Documents and to make borrowings
hereunder on behalf of the Borrower, upon which
certificate the Agent and the Lenders shall be
entitled to rely until informed of any change in
writing by the Borrower;
(v) Copies, certified by the Secretary or Assistant
Secretary, of the Borrower's Board of Directors'
resolutions (and resolutions of other bodies, if any
are deemed necessary by counsel for any Lender)
authorizing the Advances provided for herein and the
execution, delivery and performance of the Loan
Documents to be executed and delivered by the
Borrower hereunder;
(vi) A written opinion of the Borrower's counsel,
addressed to the Lenders in substantially the form of
Exhibit B hereto;
- 27 -
<PAGE> 34
(vii) A certificate, signed by an officer of the Borrower,
stating that on the initial Borrowing Date no Default
or Unmatured Default has occurred and is continuing
and that all representations and warranties of the
Borrower are true and correct as of the initial
Borrowing Date;
(viii) The most recent financial statements of the Borrower
and a certificate from an officer of the Borrower
that no material adverse change in the Borrower's
financial condition has occurred since the date of
such statements;
(ix) UCC financing statement, judgment, and tax lien
searches with respect to the Borrower from the State
of Maryland;
(x) Written money transfer instructions, in substantially
the form of Exhibit E hereto, addressed to the Agent
and signed by an Authorized Officer, together with
such other related money transfer authorizations as
the Agent may have reasonably requested; and
(xi) Such other documents as any Lender or its counsel may
have reasonably requested, the form and substance of
which documents shall be acceptable to the parties
and their respective counsel.
4.2. Each Advance. The Lenders shall not be required to make any
Advance (other than an Advance that, after giving effect thereto and to the
application of the proceeds thereof, does not increase the aggregate amount of
outstanding Advances), unless on the applicable Borrowing Date:
(i) There exists no Default or Unmatured Default;
(ii) The representations and warranties contained in
Article V are true and correct in all material
respects as of such Borrowing Date with respect to
Borrower and to any Subsidiary in existence on such
Borrowing Date, except to the extent any such
representation or warranty is stated to relate solely
to an earlier date, in which case such representation
or warranty shall be true and correct on and as of
such earlier date; and
(iii) All legal matters incident to the making of such
Advance shall be reasonably satisfactory to the
Lenders and their counsel and shall impose no burden
on the Borrower greater than as set forth in Section
4.1 hereof.
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<PAGE> 35
Each Borrowing Notice with respect to each such Advance shall
constitute a representation and warranty by the Borrower that the conditions
contained in Sections 4.2(i) and (ii) have been satisfied. Any Lender may
require a duly completed compliance certificate in substantially the form of
Exhibit C hereto as a condition to making an Advance.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lenders that:
5.1. Existence. Borrower is a real estate investment trust duly
organized and validly existing under the laws of the District of Columbia, with
its principal place of business in Kensington, Maryland, and is duly qualified
as a foreign real estate investment trust, properly licensed (if required), in
good standing and has all requisite authority to conduct its business in each
jurisdiction in which its business is conducted and in which the failure to be
qualified would have a Material Adverse Effect.
5.2. Authorization and Validity. The Borrower has the power and
authority and legal right to execute and deliver the Loan Documents and to
perform its obligations thereunder. The execution and delivery by the Borrower
of the Loan Documents and the performance of its obligations thereunder have
been duly authorized by proper proceedings, and the Loan Documents constitute
legal, valid and binding obligations of the Borrower enforceable against the
Borrower in accordance with their terms, except as enforceability may be
limited by bankruptcy, insolvency or similar laws affecting the enforcement of
creditors' rights generally.
5.3. No Conflict; Government Consent. Neither the execution and
delivery by the Borrower of the Loan Documents, nor the consummation of the
transactions therein contemplated, nor compliance with the provisions thereof
will violate any law, rule, regulation, order, writ, judgment, injunction,
decree or award binding on the Borrower, or the provisions of any indenture,
investment or agreement to which the Borrower is a party or is subject, or by
which it, or its Property, is bound, or conflict with or constitute a default
thereunder, or result in the creation or imposition of any Lien in, of or on
the Property of the Borrower pursuant to the terms of any such indenture,
instrument or agreement. No order, consent, approval, license, authorization,
or validation of, or filing, recording or registration with, or exemption by,
any governmental or public body or authority, or any subdivision thereof, is
required to authorize, or is required in connection with the execution,
delivery and performance of, or the legality, validity, binding effect or
enforceability of, any of the Loan Documents.
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5.4. Material Adverse Change. Since December 31, 1994, there has
been no change in the business, Property, prospects, condition (financial or
otherwise) or results of operations of the Borrower which could have a Material
Adverse Effect.
5.5. Taxes. The Borrower has filed all United States federal tax
returns and all other tax returns which are required to be filed and have paid
all taxes due pursuant to said returns or pursuant to any assessment received
by the Borrower except such taxes, if any, as are being contested in good faith
and as to which adequate reserves have been provided. No tax liens have been
filed and no claims are being asserted with respect to any such taxes. The
charges, accruals and reserves on the books of the Borrower in respect of any
taxes or other governmental charges are adequate.
5.6. Litigation and Guarantee Obligations. There is no litigation,
arbitration, governmental investigation, proceeding or inquiry pending or, to
the knowledge of any of their officers, threatened against or affecting the
Borrower which could have a Material Adverse Effect. The Borrower has no
material contingent obligations not provided for or disclosed in the financial
statements referred to in Section 6.4.
5.7. No Subsidiaries. There are no presently existing Subsidiaries
of the Borrower.
5.8. ERISA. The Unfunded Liabilities of all Single Employer Plans
do not in the aggregate exceed $100,000. Neither the Borrower nor any other
member of the Controlled Group has incurred, or is reasonably expected to
incur, any withdrawal liability to Multiemployer Plans in excess of $100,000 in
the aggregate. Each Plan complies in all material respects with all applicable
requirements of law and regulations, no Reportable Event has occurred with
respect to any Plan, neither the Borrower nor any other members of the
Controlled Group has withdrawn from any Plan or initiated steps to do so, and
no steps have been taken to reorganize or terminate any Plan.
5.9. Accuracy of Information. No information, exhibit or report
furnished by the Borrower to the Agent or to any Lender in connection with the
negotiation of, or compliance with, the Loan Documents contained any material
misstatement of fact or omitted to state a material fact or any fact necessary
to make the statements contained therein not misleading.
5.10. Regulation U. Margin stock (as defined in Regulation U)
constitutes less than 25% of those assets of the Borrower which are subject to
any limitation on sale, pledge, or other restriction hereunder.
5.11. Material Agreements. The Borrower is not subject to any
charter or other corporate restriction which could have a Material Adverse
Effect. The Borrower is not in material default in the performance, observance
or fulfillment of any of the obligations, covenants or conditions contained in
(i) any agreement to which it is a party, which default could have a Material
Adverse Effect or (ii) any agreement or instrument evidencing or governing
Indebtedness.
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5.12. Compliance With Laws. The Borrower has complied in all
material respects with all applicable statutes, rules, regulations, orders and
restrictions of any domestic or foreign government or any instrumentality or
agency thereof, having jurisdiction over the conduct of their respective
businesses or the ownership of their respective Property. The Borrower has not
received any notice to the effect that its operations are not in material
compliance with any of the requirements of applicable federal, state and local
environmental, health and safety statutes and regulations or the subject of any
federal or state investigation evaluating whether any remedial action is needed
to respond to a release of any toxic or hazardous waste or substance into the
environment, which non-compliance or remedial action could have a Material
Adverse Effect.
5.13. Ownership of Properties. Except as set forth on Schedule 3
hereto, on the date of this Agreement, the Borrower has good title, free of all
Liens other than those permitted by Section 7.18, to all of the Property and
assets reflected in the financial statements as owned by it.
5.14. Investment Company Act. The Borrower is not an "investment
company" or a company "controlled" by an "investment company," within the
meaning of the Investment Company Act of 1940, as amended.
5.15. Public Utility Holding Company Act. The Borrower is not a
"holding company" or a "subsidiary company" of a "holding company," or an
"affiliate" of a "holding company" or of a "subsidiary company" of a "holding
company," within the meaning of the Public Utility Holding Company Act of 1935,
as amended.
5.16. Solvency. (i) Immediately after the Closing Date and
immediately following the making of each Loan and after giving effect to the
application of the proceeds of such Loans, (a) the fair value of the assets of
the Borrower and its Subsidiaries (if any) on a consolidated basis, at a fair
valuation, will exceed the debts and liabilities, subordinated, contingent or
otherwise, of the Borrower and its Subsidiaries, if any, on a consolidated
basis; (b) the present fair saleable value of the property of the Borrower and
its Subsidiaries on a consolidated basis will be greater than the amount that
will be required to pay the probable liability of the Borrower and its
Subsidiaries, if any, on a consolidated basis on their debts and other
liabilities, subordinated, contingent or otherwise, as such debts and other
liabilities become absolute and matured; (c) the Borrower and its Subsidiaries,
if any, on a consolidated basis will be able to pay their debts and
liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured; and (d) the Borrower and its
Subsidiaries, if any, on a consolidated basis will not have unreasonably small
capital with which to conduct the businesses in which they are engaged as such
businesses are now conducted and are proposed to be conducted after the date
hereof.
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(ii) The Borrower does not intend to incur debts beyond its ability
to pay such debts as they mature, taking into account the timing of and amounts
of cash to be received by it and the timing of the amounts of cash to be
payable on or in respect of its Indebtedness or the Indebtedness.
5.17. Insurance. The Borrower carries insurance on its Property
with financially sound and reputable insurance companies, in such amounts, with
such deductibles and covering such risks as are customarily carried by
companies engaged in similar businesses and owning similar Property in
localities where the Borrower operates, including, without limitation:
(i) Property and casualty insurance (including coverage
for flood and other water damage for any Properties
located within a 100-year flood plain) in the amount
of the replacement cost of the improvements at the
Properties;
(ii) Loss of rental income insurance in the amount not
less than one year's gross revenues from the
Properties; and
(iii) Comprehensive general liability insurance in the
amount of $20,000,000 per occurrence.
5.18. REIT Status. The Borrower is in good standing on the American
Stock Exchange, is qualified as a real estate investment trust and currently is
in compliance with all applicable provisions of the Code.
ARTICLE VI
COVENANTS
During the term of this Agreement, unless the Required Lenders shall
otherwise consent in writing:
6.1. Financial Reporting. The Borrower will maintain, for itself
and each Subsidiary, a system of accounting established and administered in
accordance with GAAP, and furnish to the Lenders:
(i) Within 45 days after the close of each fiscal
quarter, for the Borrower and its Subsidiaries, an
unaudited balance sheet as of the close of each such
period and profit and loss and reconciliation of
surplus statements and a statement of cash flows for
the period from the beginning of the fiscal year to
the end of such quarter, all certified by the
Borrower's chief financial officer or chief
accounting officer;
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(ii) Together with the financial statements required
hereunder, a compliance certificate in substantially
the form of Exhibit C hereto signed by the Borrower's
chief financial officer or chief accounting officer
showing the calculations necessary to determine
compliance with this Agreement and stating that no
Default or Unmatured Default exists, or if any
Default or Unmatured Default exists, stating the
nature and status thereof;
(iii) Within 45 days after the close of each fiscal
quarter, for themselves and their Subsidiaries,
related reports in form and substance satisfactory to
the Lenders, all certified by the entity's chief
financial officer or chief accounting officer,
including a statement of Funds From Operations,
listing of capital expenditures, a report listing and
describing all newly acquired Properties, including
their net operating income, cost and mortgage debt,
if any, and summary Property information and such
other information as may be reasonably requested;
(v) Within 90 days after the close of each fiscal year,
for the Borrower and its Subsidiaries, audited
financial statements, including a balance sheet as of
the close of each such period and profit and loss and
reconciliation of surplus statements and a statement
of cash flows for the period, all audited and
certified by independent accountants (which
accountants shall be reasonably satisfactory to
Agent) as fairly presenting the financial position
and results of operations and its cash flows as of
the end of such fiscal year for such entities in
accordance with GAAP;
(iv) As soon as possible and in any event within 10 days
after the Borrower knows that any Reportable Event
has occurred with respect to any Plan, a statement,
signed by the chief financial officer of the
Borrower, describing said Reportable Event and the
action which the Borrower proposes to take with
respect thereto;
(v) As soon as possible and in any event within 10 days
after receipt by the Borrower, a copy of (a) any
notice or claim to the effect that the Borrower or
any of its Subsidiaries is or may be liable to any
Person as a result of the release by the Borrower,
any of its Subsidiaries, or any other Person of any
toxic or hazardous waste or substance into the
environment, and (b) any notice alleging any
violation of any federal, state or local
environmental, health or safety law or regulation by
the Borrower or any of its Subsidiaries, which, in
either case, could have a Material Adverse Effect;
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(vi) Promptly upon the furnishing thereof to the
shareholders of the Borrower, copies of all financial
statements, reports and proxy statements so
furnished;
(vii) Promptly upon the filing thereof, copies of all
registration statements and annual, quarterly,
monthly or other reports and any other public
information which the Borrower or any of its
Subsidiaries files with the Securities Exchange
Commission; and
(viii) Such other information (including, without
limitation, financial statements for the Borrower and
non-financial information) as the Agent or any Lender
may from time to time reasonably request.
6.2. Use of Proceeds. The Borrower will, and will cause each of
its Subsidiaries to, use the proceeds of the Advances for the general business
purposes of the Borrower, including working capital needs and interim financing
for property acquisitions, and to repay outstanding Advances. The Borrower
will not, nor will it permit any Subsidiary to, use any of the proceeds of the
Advances to purchase or carry any "margin stock" (as defined in Regulation U)
or to make any Acquisition other than a Permitted Acquisition.
6.3. Notice of Default. The Borrower will, and will cause each of
its Subsidiaries to, give prompt notice in writing to the Lenders of the
occurrence of any Default or Unmatured Default and of any other development,
financial or otherwise, which could have a Material Adverse Effect.
6.4. Conduct of Business. The Borrower will, and will cause each
of its Subsidiaries to, (i) do all things necessary to remain duly incorporated
or duly qualified, validly existing and in good standing as a real estate
investment trust, domestic corporation or limited partnership, as the case may
be, in its jurisdiction of incorporation/formation and maintain all requisite
authority to conduct its business in each jurisdiction in which its business is
conducted and in which the failure to be qualified would have a Material
Adverse Effect, (ii) to carry on and conduct their businesses in substantially
the same manner as they are presently conducted, and (iii) not undertake any
business other than the development, ownership, management and operation of
apartment buildings, office buildings, shopping centers, business centers, and
warehouses, and ancillary businesses specifically related to such properties.
6.5. Taxes. The Borrower will, and will cause each of its
Subsidiaries to, pay when due all taxes, assessments and governmental charges
and levies upon them of their income, profits or Property, except those which
are being contested in good faith by appropriate proceedings and with respect
to which adequate reserves have been set aside.
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6.6. Insurance. The Borrower will, and will cause each of its
Subsidiaries to, maintain with financially sound and reputable insurance
companies insurance on all their Property in such amounts and covering such
risks as is consistent with sound business practice, and the Borrower will
furnish to any Lender upon request full information as to the insurance
carried.
6.7. Compliance with Laws. The Borrower will, and will cause each
of its Subsidiaries to, comply with all laws, rules, regulations, orders,
writs, judgments, injunctions, decrees or awards to which they may be subject.
6.8. Maintenance of Properties. The Borrower will, and will cause
each of its Subsidiaries to, do all things necessary to maintain, preserve,
protect and keep its Property in good repair, working order and condition, and
make all necessary and proper repairs, renewals and replacements so that their
businesses carried on in connection therewith may be properly conducted at all
times.
6.9. Inspection. The Borrower will, and will cause each of its
Subsidiaries to, permit the Lenders, by their respective representatives and
agents, to inspect any of the Property, corporate books and financial records
of the Borrower and each of its Subsidiaries, to examine and make copies of the
books of accounts and other financial records of the Borrower and each of its
Subsidiaries, and to discuss the affairs, finances and accounts of the Borrower
and each of its Subsidiaries, and to be advised as to the same by, their
respective officers at such reasonable times and intervals as the Lenders may
designate.
6.10. Maintenance of Status. The Borrower shall at all times (i)
remain a corporation listed and in good standing on the American Stock
Exchange, and (ii) maintain its status as a real estate investment trust in
compliance with all applicable provisions of the Code.
6.11. Dividends. The Borrower and its Subsidiaries shall be
permitted declare and pay any dividends on its Capital Stock from time to time
in amounts determined by Borrower, provided that at the time of such
declaration and/or payment (i) the ratio of annualized EBITDA (determined by
multiplying (x) EBITDA for the then most recently ended fiscal quarter, by (y)
four) to Consolidated Total Indebtedness exceeds 0.25, and (ii) the Value of
Unencumbered Assets is at least 3.0 times the Consolidated Unsecured
Indebtedness. In the event that Borrower and its Subsidiaries are not in
compliance with the provisions of the preceding sentence, then in no event
shall Borrower or any of its Subsidiaries declare or pay any dividends on its
Capital Stock if in any period of four fiscal quarters, such dividends, in the
aggregate, would exceed 95% of the Borrower's Funds From Operations for such
period; provided, however, that the Borrower shall be permitted at all times to
distribute whatever amount is necessary to maintain its tax status as a real
estate investment trust.
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6.12. Merger. The Borrower will not, nor will it permit any of its
Subsidiaries to, enter into any merger, consolidation, reorganization or
liquidation or transfer or otherwise dispose of all or a Substantial Portion of
their Properties, except for such transactions that occur between Wholly-Owned
Subsidiaries or as otherwise approved in advance by the Lenders, provided,
however, that mergers shall be permitted as a means for the Borrower to acquire
additional Properties or ancillary businesses specifically related to
Properties so long as such merger is not accomplished through a hostile
takeover and the Borrower is the surviving entity.
6.13. Delivery of Subsidiary Guaranties. Borrower shall promptly
notify Agent of any planned formation or acquisition of any Subsidiary. Within
10 days after Borrower forms or acquires any Subsidiary, Borrower shall cause
such Subsidiary to execute and deliver to the Lender's a guaranty agreement
(together with such other documents as the Lenders shall reasonably request)
whereby such Subsidiary agrees that it shall be jointly and severally liable
for all Obligations of the Borrower under the Loan Documents. The guaranty
agreement and such other documents each shall be in form and substance
satisfactory to the Lenders.
6.14. Sale of Accounts. The Borrower will not, nor will it permit
any of its Subsidiaries to, sell or otherwise dispose of any notes receivable
or accounts receivable, with or without recourse.
6.15. Sale and Leaseback. The Borrower will not, nor will it permit
any of its Subsidiaries to, sell or transfer any of its Property in order to
concurrently or subsequently lease as lessee such or similar Property.
6.16. Acquisitions and Investments. Without the prior written
consent of the Required Lenders, the Borrower will not, nor will it permit any
of its Subsidiaries to:
(i) make any Acquisition, except mergers permitted
pursuant to Section 6.12:
(ii) by a single transaction or through a series of
related transactions make any acquisition of property
if the cost of such property would be more than
$50,000,000 for any such property;
(iii) make any investments in, or loans or advances to, any
unconsolidated Person to the extent such investments,
loans and advances in the aggregate would exceed ten
percent (10%) of their Total Tangible Assets on a
consolidated basis.
Acquisitions permitted pursuant to this Section 6.16 shall be deemed to be
"Permitted Acquisitions."
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6.17. Liens. The Borrower will not, nor will it permit any of its
Subsidiaries to, create, incur, or suffer to exist any Lien in, of or on the
Property of the Borrower or any of its Subsidiaries, except:
(i) Liens for taxes, assessments or governmental charges
or levies on its Property if the same shall not at
the time be delinquent or thereafter can be paid
without penalty, or are being contested in good faith
and by appropriate proceedings and for which adequate
reserves shall have been set aside on its books;
(ii) Liens imposed by law, such as carriers',
warehousemen's and mechanics' liens and other similar
liens arising in the ordinary course of business
which secure payment of obligations not more than 60
days past due or which are being contested in good
faith by appropriate proceedings and for which
adequate reserves shall have been set aside on its
books;
(iii) Liens arising out of pledges or deposits under
worker's compensation laws, unemployment insurance,
old age pensions, or other social security or
retirement benefits, or similar legislation;
(iv) Utility easements, building restrictions and such
other encumbrances or charges against real property
as are of a nature generally existing with respect to
properties of a similar character and which do not in
any material way affect the marketability of the same
or interfere with the use thereof in the business of
the Borrower or its Subsidiaries;
(v) Liens existing on the date hereof and described in
Schedule 2 hereto; and
(vi) Liens arising in connection with any Indebtedness
permitted hereunder.
Notwithstanding anything contained in this Agreement to the contrary, Borrower
may from time to time encumber its Properties with Liens in addition to those
set forth in clauses (i) through (vi) above, provided that the granting or
existence of such other Liens shall not cause Borrower to be in breach of the
provisions of Section 6.21 hereof.
Liens permitted pursuant to this Section 6.17 shall be deemed to be "Permitted
Liens."
6.18. Affiliates. The Borrower will not, nor will it permit any of
their Subsidiaries to, enter into any transaction (including, without
limitation, the purchase or sale of any Property or service) with, or make any
payment or transfer to, any Affiliate except in the ordinary course of business
and pursuant to the reasonable requirements of the Borrower's or such
Subsidiary's business and upon fair and reasonable terms no less favorable to
the
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Borrower or such Subsidiary than the Borrower or such Subsidiary would obtain
in a comparable arms-length transaction.
6.19. Cash Flow to Debt Service Ratio. The Borrower on a
consolidated basis with its Subsidiaries shall maintain a Cash Flow to Debt
Service Ratio of not less than 2.5. Such test must be satisfied as of the end
of each fiscal quarter, based on annualized results for the preceding two
fiscal quarters.
6.20. Consolidated Tangible Net Worth. The Borrower on a
consolidated basis with its Subsidiaries shall maintain a Consolidated Tangible
Net Worth of not less than the sum of (i) $125,000,000 plus (ii) fifty percent
(50%) of the aggregate proceeds received by the Borrower (net of actual related
fees and expenses) in connection with any offering of stock in the Borrower
after the Closing Date.
6.21. Indebtedness and Cash Flow Covenants. The Borrower on a
consolidated basis with its Subsidiaries shall not, as of the last day of any
fiscal quarter, permit:
(i) Consolidated Total Indebtedness to exceed forty
percent (40%) of Total Tangible Assets;
(ii) Consolidated Secured Indebtedness to exceed fifteen
percent (15%) of Total Tangible Assets;
(iii) the Value of Unencumbered Assets to be less than 2.25
times the Consolidated Senior Unsecured Indebtedness;
(iv) annualized EBITDA (determined by multiplying (x) the
sum of EBITDA for the two most recently ended fiscal
quarters, by (y) two) to be less than twenty percent
(20%) of Consolidated Total Indebtedness; and
(v) the Value of Unencumbered Assets (excluding Office
Building Assets which constitute Unencumbered Assets)
to be less than 1.5 times the Consolidated Senior
Unsecured Indebtedness.
ARTICLE VII
DEFAULTS
The occurrence of any one or more of the following events shall
constitute a Default:
7.1. Any representation or warranty made or deemed made by or on
behalf of the Borrower or any of its Subsidiaries to the Lenders or the Agent
under or in connection with
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this Agreement, any Loan, or any certificate or information delivered in
connection with this Agreement or any other Loan Document shall be materially
false on the date as of which made.
7.2. Nonpayment of principal of any Note when due, or nonpayment of
interest upon any Note or of any commitment fee or other obligations under any
of the Loan Documents within five Business Days after the same becomes due.
7.3. The breach of any of the terms or provisions of Sections 6.2,
6.11, 6.12, 6.14, 6.15, 6.16, 6.19, 6.20, and 6.21 hereof.
7.4. The breach by the Borrower (other than a breach which
constitutes a Default under Section 7.1, 7.2, or 7.3) of any of the terms or
provisions of this Agreement which is not remedied within thirty days after
written notice from the Agent or any Lender.
7.5. Failure of the Borrower or any of its Subsidiaries to pay when
due any "recourse" Indebtedness (i.e., Indebtedness which is recoverable from
the general assets of the Borrower and/or its Subsidiaries) which is
outstanding in an aggregate amount of at least $5,000,000; or the default by
the Borrower or any of its Subsidiaries in the performance of any term,
provision or condition contained in any agreement under which such "recourse"
Indebtedness was created or is governed, or any other event shall occur or
condition exist, the effect of which is to cause such "recourse" Indebtedness
to become due prior to its stated maturity; or any "recourse" Indebtedness of
the Borrower or any of its Subsidiaries (other than "recourse" Indebtedness
which is "due on demand") shall be declared to be due and payable or required
to be prepaid (other than by a regularly scheduled payment) prior to the stated
maturity thereof; or the Borrower or any of its Subsidiaries shall not pay, or
admit in writing its inability to pay, its debts generally as they become due.
7.6. The Borrower or any of its Subsidiaries that has more than
$10,000,000 of Total Tangible Assets shall (i) have an order for relief entered
with respect to it under the Federal bankruptcy laws as now or hereafter in
effect, (ii) make an assignment for the benefit of creditors, (iii) apply for,
seek, consent to, or acquiesce in, the appointment of a receiver, custodian,
trustee, examiner, liquidator or similar official for it or any Substantial
Portion of its Property, (iv) institute any proceeding seeking an order for
relief under the Federal bankruptcy laws as now or hereafter in effect or
seeking to adjudicate it a bankrupt or insolvent, or seeking dissolution,
winding up, liquidation, reorganization, arrangement, adjustment or composition
of it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors or fail to file an answer or other pleading
denying the material allegations of any such proceeding filed against it, (v)
take any corporate action to authorize or effect any of the foregoing actions
set forth in this Section 7.6 or (vi) fail to contest in good faith any
appointment or proceeding described in Section 7.7.
7.7. A receiver, trustee, examiner, liquidator or similar official
shall be appointed for the Borrower or any Subsidiary that has more than
$10,000,000 of Total Tangible Assets
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or any Substantial Portion of their Property, or a proceeding described in
Section 7.6(iv) shall be instituted against the Borrower or any such Subsidiary
and such appointment continues undischarged or such proceeding continues
undismissed or unstayed for a period of 30 consecutive days.
7.8. Any court, government or governmental agency shall condemn,
seize or otherwise appropriate, or take custody or control of (each a
"Condemnation"), all or any portion of the Property of the Borrower and its
Subsidiaries which, when taken together with all other Property of the Borrower
and its Subsidiaries so condemned, seized, appropriated, or taken custody or
control of, during the twelve-month period ending with the month in which any
such Condemnation occurs, constitutes a Substantial Portion of their Property.
7.9. The Borrower or any of its Subsidiaries shall fail within 30
days to pay, bond or otherwise discharge any judgment or order for the payment
of money in excess of $5,000,000, which is not stayed on appeal or otherwise
being appropriately contested in good faith.
7.10. The Unfunded Liabilities of all Single Employer Plans shall
exceed in the aggregate $100,000 or any Reportable Event shall occur in
connection with any Plan.
7.11. The Borrower or any other member of the Controlled Group shall
have been notified by the sponsor of a Multiemployer Plan that it has incurred
withdrawal liability to such Multiemployer Plan in an amount which, when
aggregated with all other amounts required to be paid to Multiemployer Plans by
the Borrower or any other member of the Controlled Group as withdrawal
liability (determined as of the date of such notification), exceeds $100,000 or
requires payments exceeding $1,000,000 per annum.
7.12. The Borrower or any other member of the Controlled Group shall
have been notified by the sponsor of a Multiemployer Plan that such
Multiemployer Plan is in reorganization or is being terminated, within the
meaning of Title IV of ERISA, if as a result of such reorganization or
termination the aggregate annual contributions of the Borrower and the other
members of the Controlled Group (taken as a whole) to all Multiemployer Plans
which are then in reorganization or being terminated have been or will be
increased over the amounts contributed to such Multiemployer Plans for the
respective plan years of each such Multiemployer Plan immediately preceding the
plan year in which the reorganization or termination occurs by an amount
exceeding $100,000.
7.13. Failure to remediate within the time period permitted by law
or governmental order (or within a reasonable time give the nature of the
problem if no specific time period has been given) material environmental
problems related to Properties whose aggregate book values are in excess of
$20,000,000 or where the estimated cost of remediation is in the aggregate in
excess of $100,000, in each case after all administrative hearings and appeals
have been concluded.
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7.14. The occurrence of any default under any Loan Document or the
breach of any of the terms or provisions of any Loan Document, which default or
breach continues beyond any period of grace therein provided.
ARTICLE VIII
ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES
8.1. Acceleration. If any Default described in Section 7.6 or 7.7
occurs with respect to the Borrower, the obligations of the Lenders to make
Loans hereunder shall automatically terminate and the Obligations shall
immediately become due and payable without any election or action on the part
of the Agent or any Lender. If any other Default occurs, the Required Lenders
may terminate or suspend the obligations of the Lenders to make Loans
hereunder, or declare the Obligations to be due and payable, or both, whereupon
the Obligations shall become immediately due and payable, without presentment,
demand, protest or notice of any kind, all of which the Borrower hereby
expressly waives.
If, within 10 days after acceleration of the maturity of the
Obligations or termination of the obligations of the Lenders to make Loans
hereunder as a result of any Default (other than any Default as described in
Section 7.6 or 7.7 with respect to the Borrower) and before any judgment or
decree for the payment of the Obligations due shall have been obtained or
entered, the Required Lenders (in their sole discretion) shall so direct, the
Agent shall, by notice to the Borrower, rescind and annul such acceleration
and/or termination.
8.2. Amendments. Subject to the provisions of this Article VIII,
the Required Lenders (or the Agent with the consent in writing of the Required
Lenders) and the Borrower may enter into agreements supplemental hereto for the
purpose of adding or modifying any provisions to the Loan Documents or changing
in any manner the rights of the Lenders or the Borrower hereunder or waiving
any Default hereunder; provided, however, that no such supplemental agreement
shall, without the consent of each Lender affected thereby:
(i) Extend the maturity of any Loan or Note or forgive
all or any portion of the principal amount thereof,
or reduce the rate or extend the time of payment of
interest or fees thereon.
(ii) Reduce the percentage specified in the definition of
Required Lenders.
(iii) Extend the Facility Termination Date or reduce the
amount or extend the payment date for, the mandatory
payments required under Section 2.2 (other than as
provided for under Section 2.2), or increase the
amount of the Commitment of any Lender hereunder, or
permit the Borrower to assign its rights under this
Agreement.
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(iv) Amend this Section 8.2.
Notwithstanding any provision contained in this Section 8.2, the Aggregate
Commitment may be increased prior to the Facility Termination Date (up to the
Maximum Aggregate Commitment) solely by the consent of the Borrower and each
Lender whose Commitment is being increased. No amendment of any provision of
this Agreement relating to the Agent shall be effective without the written
consent of the Agent.
8.3. Preservation of Rights. No delay or omission of the Lenders
or the Agent to exercise any right under the Loan Documents shall impair such
right or be construed to be a waiver of any Default or an acquiescence therein,
and the making of a Loan notwithstanding the existence of a Default or the
inability of the Borrower to satisfy the conditions precedent to such Loan
shall not constitute any waiver or acquiescence. Any single or partial
exercise of any such right shall not preclude other or further exercise thereof
or the exercise of any other right, and no waiver, amendment or other variation
of the terms, conditions or provisions of the Loan Documents whatsoever shall
be valid unless in writing signed by the Lenders required pursuant to Section
8.2, and then only to the extent in such writing specifically set forth. All
remedies contained in the Loan Documents or by law afforded shall be cumulative
and all shall be available to the Agent and the Lenders until the Obligations
have been paid in full.
ARTICLE IX
GENERAL PROVISIONS
9.1. Survival of Representations. All representations and
warranties of the Borrower contained in this Agreement shall survive delivery
of the Notes and the making of the Loans herein contemplated.
9.2. Governmental Regulation. Anything contained in this Agreement
to the contrary notwithstanding, no Lender shall be obligated to extend credit
to the Borrower in violation of any limitation or prohibition provided by any
applicable statute or regulation.
9.3. Taxes. Any taxes (excluding (i) federal taxation of the net
income of any Lender or applicable Lending Installation, (ii) state and local
taxation in the jurisdiction where a Lender's home office is situated, (iii)
state and local taxation in a jurisdiction other than described in (ii) above
to the extent such Lender receives credit on its tax payments in its home
jurisdiction for such taxes, and (iv) federal withholding tax imposed on
payments due hereunder or under the Notes) or other similar assessments or
charges made by any governmental or revenue authority in respect of the Loan
Documents shall be paid by the Borrower when due (and Agent shall forward to
Borrower copies of any notices of such taxes promptly following Agent's receipt
of any such notices).
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9.4. Headings. Section headings in the Loan Documents are for
convenience of reference only, and shall not govern the interpretation of any
of the provisions of the Loan Documents.
9.5. Entire Agreement. The Loan Documents embody the entire
agreement and understanding among the Borrower, the Agent and the Lenders and
supersede all prior commitments, agreements and understandings among the
Borrower, the Agent and the Lenders relating to the subject matter thereof.
9.6. Several Obligations; Benefits of this Agreement. The
respective obligations of the Lenders hereunder are several and not joint and
no Lender shall be the partner or agent of any other (except to the extent to
which the Agent is authorized to act as such). The failure of any Lender to
perform any of its obligations hereunder shall not relieve any other Lender
from any of its obligations hereunder. This Agreement shall not be construed
so as to confer any right or benefit upon any Person other than the parties to
this Agreement and their respective successors and assigns.
9.7. Expenses; Indemnification. The Borrower shall reimburse the
Agent for any costs, internal charges and out-of-pocket expenses (including,
without limitation, all reasonable fees for consultants and reasonable fees and
reasonable expenses for attorneys for the Agent, which attorneys may be
employees of the Agent) paid or incurred by the Agent in connection with the
preparation, negotiation, execution, delivery, review, amendment, modification,
and administration of the Loan Documents; provided that the provisions of
Section 12.2.1 and 12.3.1 shall govern with respect to payment of the fees and
expenses associated with the sale of participating interests in, and
assignments of, the Loans. The Borrower also agrees to reimburse the Agent and
the Lenders for any costs, internal charges and out-of-pocket expenses
(including, without limitation, all reasonable fees and reasonable expenses for
attorneys for the Agent and the Lenders, which attorneys may be employees of
the Agent or the Lenders) paid or incurred by the Agent or any Lender in
connection with the collection and enforcement of the Loan Documents
(including, without limitation, any workout). The Borrower further agrees to
indemnify the Agent and each Lender, its directors, officers and employees
against all losses, claims, damages, penalties, judgments, liabilities and
expenses (including, without limitation, all expenses of litigation or
preparation therefor whether or not the Agent or any Lender is a party thereto)
which any of them may pay or incur arising out of or relating to this
Agreement, the other Loan Documents, the Properties, the transactions
contemplated hereby or the direct or indirect application or proposed
application of the proceeds of any Loan hereunder, except that the foregoing
indemnity shall not apply to a Lender to the extent that any losses, claims,
damages, penalties, judgments, liabilities and expenses are the result of such
Lender's gross negligence or willful misconduct. The obligations of the
Borrower under this Section shall survive the termination of this Agreement.
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9.8. Numbers of Documents. All statements, notices, closing
documents, and requests hereunder shall be furnished to the Agent with
sufficient counterparts so that the Agent may furnish one to each of the
Lenders.
9.9. Accounting. Except as provided to the contrary herein, all
accounting terms used herein shall be interpreted and all accounting
determinations hereunder shall be made in accordance with GAAP, except that any
calculation or determination which is to be made on a consolidated basis shall
be made for the Borrower and all its Subsidiaries, including those
Subsidiaries, if any, which are unconsolidated on the Borrower's official
financial statements.
9.10. Severability of Provisions. Any provision in any Loan
Document that is held to be inoperative, unenforceable, or invalid in any
jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable, or
invalid without affecting the remaining provisions in that jurisdiction or the
operation, enforceability, or validity of that provision in any other
jurisdiction, and to this end the provisions of all Loan Documents are declared
to be severable.
9.11. Nonliability of Lenders. The relationship between the
Borrower, on the one hand, and the Lenders and the Agent, on the other, shall
be solely that of borrower and lender. Neither the Agent nor any Lender shall
have any fiduciary responsibilities to the Borrower. Neither the Agent nor any
Lender undertakes any responsibility to the Borrower to review or inform the
Borrower of any matter in connection with any phase of the Borrower's business
or operations.
9.12. CHOICE OF LAW. THE LOAN DOCUMENTS (OTHER THAN THOSE
CONTAINING A CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE
OF ILLINOIS, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
9.13. CONSENT TO JURISDICTION. THE BORROWER HEREBY IRREVOCABLY
SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR
ILLINOIS STATE COURT SITTING IN CHICAGO IN ANY ACTION OR PROCEEDING ARISING OUT
OF OR RELATING TO ANY LOAN DOCUMENTS AND THE BORROWER HEREBY IRREVOCABLY AGREES
THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR
HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT
IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN
SHALL LIMIT THE RIGHT OF THE AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST
THE BORROWER IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING
BY THE BORROWER AGAINST THE AGENT OR ANY LENDER OR ANY AFFILIATE OF THE AGENT
OR ANY LENDER INVOLVING, DIRECTLY OR
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INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH
ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN CHICAGO, ILLINOIS.
9.14. WAIVER OF JURY TRIAL. THE BORROWER, THE AGENT AND EACH LENDER
HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY
WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT OR THE
RELATIONSHIP ESTABLISHED THEREUNDER.
ARTICLE X
THE AGENT
10.1. Appointment. The First National Bank of Chicago is hereby
appointed Agent hereunder and under each other Loan Document, and each of the
Lenders irrevocably authorizes the Agent to act as the agent of such Lender.
The Agent agrees to act as such upon the express conditions contained in this
Article X. The Agent shall not have a fiduciary relationship in respect of the
Borrower or any Lender by reason of this Agreement.
10.2. Powers. The Agent shall have and may exercise such powers
under the Loan Documents as are specifically delegated to the Agent by the
terms of each thereof, together with such powers as are reasonably incidental
thereto. The Agent shall have no implied duties to the Lenders, or any
obligation to the Lenders to take any action thereunder except any action
specifically provided by the Loan Documents to be taken by the Agent.
10.3. General Immunity. Neither the Agent nor any of its directors,
officers, agents or employees shall be liable to the Borrower, the Lenders or
any Lender for (i) any action taken or omitted to be taken by it or them
hereunder or under any other Loan Document or in connection herewith or
therewith except for its or their own gross negligence or willful misconduct;
or (ii) any determination by the Agent that compliance with any law or any
governmental or quasi-governmental rule, regulation, order, policy, guideline
or directive (whether or not having the force of law) requires the Advances and
Commitments hereunder to be classified as being part of a "highly leveraged
transaction."
10.4. No Responsibility for Loans, Recitals, etc. Neither the Agent
nor any of its directors, officers, agents or employees shall be responsible
for or have any duty to ascertain, inquire into, or verify (i) any statement,
warranty or representation made in connection with any Loan Document or any
borrowing hereunder; (ii) the performance or observance of any of the covenants
or agreements of any obligor under any Loan Document, including, without
limitation, any agreement by an obligor to furnish information directly to each
Lender; (iii) the satisfaction of any condition specified in Article IV, except
receipt of items required to be
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delivered to the Agent; (iv) the validity, effectiveness or genuineness of any
Loan Document or any other instrument or writing furnished in connection
therewith; or (v) the value, sufficiency, creation, perfection or priority of
any interest in any collateral security. The Agent shall have no duty to
disclose to the Lenders information that is not required to be furnished by the
Borrower to the Agent at such time, but is voluntarily furnished by the
Borrower to the Agent (either in its capacity as Agent or in its individual
capacity).
10.5. Action on Instructions of Lenders. The Agent shall in all
cases be fully protected in acting, or in refraining from acting, hereunder and
under any other Loan Document in accordance with written instructions signed by
the Required Lenders, and such instructions and any action taken or failure to
act pursuant thereto shall be binding on all of the Lenders and on all holders
of Notes. The Agent shall be fully justified in failing or refusing to take
any action hereunder and under any other Loan Document unless it shall first be
indemnified to its satisfaction by the Lenders pro rata against any and all
liability, cost and expense that it may incur by reason of taking or continuing
to take any such action.
10.6. Employment of Agents and Counsel. The Agent may execute any
of its duties as Agent hereunder and under any other Loan Document by or
through employees, agents, and attorneys-in-fact and shall not be answerable to
the Lenders, except as to money or securities received by it or its authorized
agents, for the default or misconduct of any such agents or attorneys-in-fact
selected by it with reasonable care. The Agent shall be entitled to advice of
counsel concerning all matters pertaining to the agency hereby created and its
duties hereunder and under any other Loan Document.
10.7. Reliance on Documents; Counsel. The Agent shall be entitled
to rely upon any Note, notice, consent, certificate, affidavit, letter,
telegram, statement, paper or document believed by it to be genuine and correct
and to have been signed or sent by the proper person or persons, and, in
respect to legal matters, upon the opinion of counsel selected by the Agent,
which counsel may be employees of the Agent.
10.8. Agent's Reimbursement and Indemnification. The Lenders agree
to reimburse and indemnify the Agent ratably in proportion to their respective
Commitments (i) for any amounts not reimbursed by the Borrower for which the
Agent is entitled to reimbursement by the Borrower under the Loan Documents,
(ii) for any other expenses incurred by the Agent on behalf of the Lenders, in
connection with the preparation, execution, delivery, administration and
enforcement of the Loan Documents and (iii) for any liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind and nature whatsoever which may be imposed on,
incurred by or asserted against the Agent in any way relating to or arising out
of the Loan Documents or any other document delivered in connection therewith
or the transactions contemplated thereby, or the enforcement of any of the
terms thereof or of any such other documents, provided that no Lender shall be
liable for any of the foregoing to the extent they arise from the gross
negligence or willful misconduct of the Agent. The obligations of the Lenders
under this Section 10.8 shall survive payment of the Obligations and
termination of this Agreement.
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10.9. Rights as a Lender. In the event the Agent is a Lender, the
Agent shall have the same rights and powers hereunder and under any other Loan
Document as any Lender and may exercise the same as though it were not the
Agent, and the term "Lender" or "Lenders" shall, at any time when the Agent is
a Lender, unless the context otherwise indicates, include the Agent in its
individual capacity. The Agent may accept deposits from, lend money to, and
generally engage in any kind of trust, debt, equity or other transaction, in
addition to those contemplated by this Agreement or any other Loan Document,
with the Borrower or any of its Subsidiaries in which the Borrower or such
Subsidiary is not restricted hereby from engaging with any other Person. The
Agent, in its individual capacity, is not obligated to remain a Lender.
10.10. Lender Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon the Agent or any other Lender and based
on the financial statements prepared by the Borrower and such other documents
and information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement and the other Loan Documents. Each
Lender also acknowledges that it will, independently and without reliance upon
the 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 action under this Agreement and the other Loan
Documents.
10.11. Successor Agent. The Agent may resign at any time by giving
written notice thereof to the Lenders and the Borrower, such resignation to be
effective upon the appointment of a successor Agent or, if no successor Agent
has been appointed, forty-five days after the retiring Agent gives notice of
its intention to resign. Upon any such resignation, the Required Lenders shall
have the right to appoint, on behalf of the Borrower and the Lenders, a
successor Agent. If no successor Agent shall have been so appointed by the
Required Lenders within thirty days after the resigning Agent's giving notice
of its intention to resign, then the resigning Agent may appoint, on behalf of
the Borrower and the Lenders, a successor Agent. If the Agent has resigned and
no successor Agent has been appointed, the Lenders may perform all the duties
of the Agent hereunder and the Borrower shall make all payments in respect of
the Obligations to the applicable Lender and for all other purposes shall deal
directly with the Lenders. No successor Agent shall be deemed to be appointed
hereunder until such successor Agent has accepted the appointment. Any such
successor Agent shall be a commercial bank having capital and retained earnings
of at least $50,000,000. Upon the acceptance of any appointment as Agent
hereunder by a successor Agent, such successor Agent shall thereupon succeed to
and become vested with all the rights, powers, privileges and duties of the
resigning Agent. Upon the effectiveness of the resignation of the Agent, the
resigning Agent shall be discharged from its duties and obligations hereunder
and under the Loan Documents. After the effectiveness of the resignation of an
Agent, the provisions of this Article XI shall continue in effect for the
benefit of such Agent in respect of any actions taken or omitted to be taken by
it while it was acting as the Agent hereunder and under the other Loan
Documents.
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10.12. Commitment as a Lender. First Chicago agrees to provide a
Commitment of at least $10,000,000 so long as First Chicago remains as Agent;
provided, that the foregoing agreement of First Chicago shall not apply to
assignments of all or any portion of First Chicago's Commitment which are made
at any time following a Default by Borrower hereunder and prior to the cure or
waiver of such Default.
ARTICLE XI
SETOFF; RATABLE PAYMENTS
11.1. Setoff. In addition to, and without limitation of, any rights
of the Lenders under applicable law, if a Default occurs, any and all deposits
(including all account balances, whether provisional or final and whether or
not collected or available) and any other Indebtedness at any time held or
owing by any Lender to or for the credit or account of the Borrower may be
offset and applied toward the payment of the Obligations owing to such Lender,
whether or not the Obligations, or any part hereof, shall then be due.
11.2. Ratable Payments. If any Lender, whether by setoff or
otherwise, has payment made to it upon its Loans (other than payments received
pursuant to Sections 3.1, 3.2 or 3.4) in a greater proportion than that
received by any other Lender, such Lender agrees, promptly upon demand, to
purchase a portion of the Loans held by the other Lenders so that after such
purchase each Lender will hold its ratable proportion of Loans. If any Lender,
whether in connection with setoff or amounts which might be subject to setoff
or otherwise, receives collateral or other protection for its Obligations or
such amounts which may be subject to setoff, such Lender agrees, promptly upon
demand, to take such action necessary such that all Lenders share in the
benefits of such collateral ratably in proportion to their Loans. In case any
such payment is disturbed by legal process, or otherwise, appropriate further
adjustments shall be made.
ARTICLE XII
BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATION
12.1. Successors and Assigns. The terms and provisions of the Loan
Documents shall be binding upon and inure to the benefit of the Borrower and
the Lenders and their respective successors and assigns, except that (i) the
Borrower shall not have the right to assign its rights or obligations under the
Loan Documents and (ii) any assignment by any Lender must be made in compliance
with Section 12.3. Notwithstanding clause (ii) of this Section, any Lender may
at any time, without the consent of the Borrower or the Agent, assign all or
any portion of its rights under this Agreement and its Notes to a Federal
Reserve Bank; provided, however, that no such assignment shall release the
transferor Lender from its obligations hereunder. The Agent may treat the
payee of any Note as the owner thereof for
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all purposes hereof unless and until such payee complies with Section 12.3 in
the case of an assignment thereof or, in the case of any other transfer, a
written notice of the transfer is filed with the Agent. Any assignee or
transferee of a Note agrees by acceptance thereof to be bound by all the terms
and provisions of the Loan Documents. Any request, authority or consent of any
Person, who at the time of making such request or giving such authority or
consent is the holder of any Note, shall be conclusive and binding on any
subsequent holder, transferee or assignee of such Note or of any Note or Notes
issued in exchange therefor.
12.2. Participations.
12.2.1 Permitted Participants; Effect. Any Lender may, in
the ordinary course of its business and in accordance with applicable
law, at any time sell to one or more financial institutions, pension
funds, or any other fund or entity that regularly makes or
participates in real estate loans as part of its business
("Participants") participating interests in any Loan owing to such
Lender, any Note held by such Lender, any Commitment of such Lender or
any other interest of such Lender under the Loan Documents. In the
event of any such sale by a Lender of participating interests to a
Participant, such Lender's obligations under the Loan Documents shall
remain unchanged, such Lender shall remain solely responsible to the
other parties hereto for the performance of such obligations, such
Lender shall remain the holder of any such Note for all purposes under
the Loan Documents, all amounts payable by the Borrower under this
Agreement shall be determined as if such Lender had not sold such
participating interests, and the Borrower and the Agent shall continue
to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under the Loan Documents.
Notwithstanding anything contained in this Agreement to the contrary,
Borrower shall not be obligated to pay any fees and expenses incurred
by any Lender in connection with the sale of any participating
interests in any Loan pursuant to this Section.
12.2.2. Voting Rights. Each Lender shall retain the sole
right to approve, without the consent of any Participant, any
amendment, modification or waiver of any provision of the Loan
Documents other than any amendment, modification or waiver with
respect to any Loan or Commitment in which such Participant has an
interest which forgives principal, interest or fees or reduces the
interest rate or fees payable with respect to any such Loan or
Commitment, postpones any date fixed for any regularly-scheduled
payment of principal of, or interest or fees on, any such Loan or
Commitment, releases any guarantor of any such Loan or releases any
substantial portion of collateral, if any, securing any such Loan.
12.2.3. Benefit of Setoff. The Borrower agrees each
Participant (where Borrower has received at least thirty (30) days'
prior notice of the existence of such Participant) shall be deemed to
have the right of setoff provided in Section 11.1 in respect of its
participating interest in amounts owing under the Loan Documents to
the same extent as if the amount of its participating interest were
owing directly to it as a
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Lender under the Loan Documents, provided that each Lender shall
retain the right of setoff provided in Section 11.1 with respect to
the amount of participating interests sold to each such Participant.
The Lenders agree to share with each such Participant, and each
Participant, by exercising the right of setoff provided in Section
12.1, agrees to share with each Lender, any amount received pursuant
to the exercise of its right of setoff, such amounts to be shared in
accordance with Section 11.2 as if each such Participant were a
Lender.
12.3. Assignments.
12.3.1. Permitted Assignments. Any Lender may, in the
ordinary course of its business and in accordance with applicable law,
at any time assign to one or more financial institutions, pension
funds, or any other fund or entity that regularly makes or
participates in real estate loans as part of its business
("Purchasers") all or any portion (greater than or equal to $5,000,000
per assignee) of its rights and obligations under the Loan Documents.
Such assignment shall be substantially in the form of Exhibit D hereto
or in such other form as may be agreed to by the parties thereto. The
consent of the Agent shall be required prior to an assignment becoming
effective with respect to a Purchaser which is not a Lender or an
Affiliate thereof. Such consent shall not be unreasonably withheld.
Notwithstanding anything contained in this Agreement to the contrary,
Borrower shall not be obligated to pay any fees and expenses incurred
by any Lender in connection with any assignment of any portion of the
initial $25,000,000 Maximum Aggregate Commitment pursuant to this
Section; Borrower shall pay all of Agent's reasonable fees and
expenses in connection with any future assignments of amounts
representing increases in the Aggregate Commitment above the initial
$25,000,000 Maximum Aggregate Commitment.
12.3.2. Effect; Effective Date. Upon (i) delivery to the
Agent of a notice of assignment, substantially in the form attached as
Exhibit I to Exhibit D hereto (a "Notice of Assignment"), together
with any consents required by Section 12.3.1, and (ii) payment by the
assigning party of a $2,500 fee to the Agent for processing such
assignment, such assignment shall become effective on the effective
date specified in such Notice of Assignment. The Notice of Assignment
shall contain a representation by the Purchaser to the effect that
none of the consideration used to make the purchase of the Commitment
and Loans under the applicable assignment agreement are "plan assets"
as defined under ERISA and that the rights and interests of the
Purchaser in and under the Loan Documents will not be "plan assets"
under ERISA. On and after the effective date of such assignment, such
Purchaser shall for all purposes be a Lender party to this Agreement
and any other Loan Document executed by the Lenders and shall have all
the rights and obligations of a Lender under the Loan Documents, to
the same extent as if it were an original party hereto, and no further
consent or action by the Borrower, the Lenders or the Agent shall be
required to release the transferor Lender with respect to the
percentage of the Aggregate Commitment and Loans assigned to such
Purchaser. Upon the
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consummation of any assignment to a Purchaser pursuant to this Section
12.3.2, the transferor Lender, the Agent and the Borrower shall make
appropriate arrangements so that replacement Notes are issued to such
transferor Lender and new Notes or, as appropriate, replacement Notes,
are issued to such Purchaser, in each case in principal amounts
reflecting their Commitment, as adjusted pursuant to such assignment.
12.4. Dissemination of Information. The Borrower authorize each
Lender to disclose to any Participant or Purchaser or any other Person
acquiring an interest in the Loan Documents by operation of law (each a
"Transferee") and any prospective Transferee any and all information in such
Lender's possession concerning the creditworthiness of the Borrower and its
Subsidiaries.
12.5. Tax Treatment. If any interest in any Loan Document is
transferred to any Transferee which is organized under the laws of any
jurisdiction other than the United States or any State thereof, the transferor
Lender shall cause such Transferee, concurrently with the effectiveness of such
transfer, to comply with the provisions of Section 2.19.
ARTICLE XIII
NOTICES
13.1. Giving Notice. Except as otherwise permitted by Section 2.14
with respect to borrowing notices, all notices and other communications
provided to any party hereto under this Agreement or any other Loan Document
shall be in writing or by facsimile and addressed or delivered to such party at
its address set forth below its signature hereto or at such other address as
may be designated by such party in a notice to the other parties. Any notice
transmitted by facsimile, shall be deemed given when received according to the
recipient's automatically generated answerback. Any notice transmitted by
Federal Express or other recognized overnight courier shall be presumed
(rebuttably) given the business day after it is sent. Any other notice shall
be effective only when actually received.
13.2. Change of Address. The Borrower, the Agent and any Lender may
each change the address for service of notice upon it by a notice in writing to
the other parties hereto.
ARTICLE XIV
COUNTERPARTS
This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one agreement, and any of the parties
hereto may execute this Agreement by signing any such counterpart. This
Agreement shall be effective when it has
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been executed by the Borrower, the Agent and the Lender and each party has
notified the Agent by telex or telephone, that it has taken such action.
ARTICLE XV
NO OFFICER, ETC. LIABILITY
No trustee, officer or agent of the trust shall be held to any
personal liability whatsoever, in tort, contract or otherwise, in connection
with the transactions contemplated by this Agreement.
IN WITNESS WHEREOF, the Borrower, the Lender and the Agent have
executed this Agreement as of the date first above written.
WASHINGTON REAL ESTATE
INVESTMENT TRUST
By:
------------------------------------
Print Name: Edmund B. Cronin, Jr.
Title: President and Chief Operating
Officer
10400 Connecticut Avenue, Concourse
Level
Kensington, Maryland 20895
phone: 301-929-5900
facsimile: 301-929-5910
Attention: Edmund B. Cronin, Jr.
Commitments
- -----------
$25,000,000 THE FIRST NATIONAL BANK OF
CHICAGO, Individually and as Agent
By:
------------------------------------
Print Name: James C. Rozek
- 52 -
<PAGE> 59
Title: Vice President
One First National Plaza
Chicago, Illinois 60670
Attention: Real Estate Finance
Department
- 53 -
<PAGE> 1
EXHIBIT 10(e)
WASHINGTON REAL ESTATE INVESTMENT TRUST
NONQUALIFIED STOCK OPTION AGREEMENT
This Nonqualified Stock Option Agreement dated December 19, 1995.
WITNESSETH:
1. Washington Real Estate Investment Trust, a real estate
investment trust organized under the laws of the District of Columbia (the
"Trust"), on the date set forth above has granted, and hereby evidences the
grant to Edmund B. Cronin, Jr. residing at 16320 Batchellors Forest Road,
Olney, Maryland 20832 (the "Optionee"), subject to the terms and conditions
set forth herein, of the right and option to purchase from the Trust an
aggregate of 13,333 shares of beneficial interest of the Trust ("Shares") at
the purchase price of $14.625 per share, such option to be exercisable as
hereinafter provided.
2. The above-referenced option is exercisable as follows: fifty
percent (50%) of such Shares may be purchased from the Trust in whole at any
time or in part from time-to-time after the first anniversary date hereof, and
one hundred percent (100%) may be so purchased after the second anniversary of
such date.
Notwithstanding the above, the above-referenced option shall become
exercisable in full as to the total number of Shares hereinabove referred to in
the event of Optionee's termination of employment from the Trust (i) due to
death or (ii) due to the incurrence of a total and permanent disability.
The option is cumulative; any portion of the option not exercised at
the time it first becomes exercisable may be exercised at any time thereafter
prior to the expiration of the term hereof.
The Shares may be purchased by giving the Trust written notice to
exercise by written notice specifying the number of Shares to be purchased and
the date on which the purchase will be completed. Such notice shall contain a
statement by the Optionee that the Optionee has represented to the Trust that
it is his present intention to acquire the Shares being purchased for
investment and not with a view to resale or distribution. The certificates
representing the Shares shall be legended appropriately to reflect the fact
that the Shares have not been registered under the Securities Act of 1933 and
that no sale or other distribution of such Shares may be made except pursuant
to an effective registration statement under said Act or in a transaction
exempt from such registration requirements. Upon the date of purchase so
specified, Optionee shall deliver to the Trust the purchase price of the Shares
to be purchased against delivery thereof to Optionee. The purchase price shall
be paid in the form of cash, personal check and/or Shares of the Trust (at the
current fair market value of such Shares). The Trust shall deliver such Shares
on such date of purchase or within a reasonable period of time thereafter,
provided, however, that if any law, regulation, or agreement requires the Trust
to take any action with respect to such Shares before the issuance thereof,
then the date of delivery of such Shares shall be extended for the period
necessary to take such actions.
Prior to delivery of such Shares, the Optionee shall pay to the Trust
such amount as the Trust determines is necessary to enable the Trust to meet
any Federal and state tax withholding obligations
1
<PAGE> 2
attributable to the exercise of the option or make appropriate arrangements
with the Trust to effectuate such Federal and state tax withholding
obligations.
3. Without limiting the generality of the preceding paragraphs,
it is understood and agreed that this Agreement and the option evidenced hereby
are subject to the following conditions:
(a) The option shall not in any event be exercisable
after the close of business on the day ("Expiration Date") which is ten (10)
years after the date hereof;
(b) the option shall not be assignable or transferable by
the Optionee except by will or the laws of descent and distribution, and during
the lifetime of the Optionee shall be exercisable only by the Optionee or the
Optionee's guardian or legal representative. Upon any attempt to transfer,
assign, pledge, hypothecate or otherwise dispose of the option or any of the
rights of the Optionee hereunder (other than by will or the laws of descent and
distribution), the option shall immediately become null and void and the rights
and privileges of the Optionee hereunder shall immediately terminate;
(c) upon the death or total and permanent disability of
the Optionee, the then exercisable portion of the option shall terminate one
year after the date of such event but in no event later than the Expiration
Date of the option. During this period of time, the option may be exercised by
the Optionee, or the Optionee's guardian or legal representative, or in the
event of the Optionee's death, the Optionee's estate, personal representative
or beneficiary who acquires the option by will or by the laws of descent and
distribution;
(d) if the Optionee ceases to be employed by the Trust
due to termination of his employment without cause by the Trust, or expiration
of the Optionee's Employment Agreement with the Trust without continuation of
employment by the Trust, the then non-exercisable portion of the option shall
terminate immediately and the then exercisable portion of the option shall
terminate one year after the date of such termination of employment;
(e) if the Optionee ceases to be employed by the Trust
due to termination of his employment for cause or voluntary termination by the
Optionee, the then non-exercisable portion of the option shall terminate
immediately and the then exercisable portion of the option shall terminate
ninety (90) days after the date of such termination of employment;
(f) if the Optionee ceases to be employed by the Trust
due to retirement at or after age 65, the option shall continue in accordance
with its terms and shall expire on its Expiration Date unless previously
exercised;
(g) the Optionee shall have none of the rights or
privileges of a shareholder with respect to the Shares issuable upon the
exercise of the option until certificates representing such Shares shall have
been issued and delivered to him upon the exercise of his Option;
4. The number and price of the Shares subject to this option
shall be proportionately adjusted to reflect, as deemed equitable and
appropriate by the Trust, any stock dividends, stock split or share combination
of the Shares or recapitalization of the Trust or any new equity underwriting
of the Trust. To the extent deemed equitable and appropriate by the Trust,
subject to any required
- 2 -
<PAGE> 3
action by shareholders, in any merger, consolidation, reorganization,
liquidation or dissolution, this option shall pertain to the securities and
other property to which a holder of the number of Shares covered by the option
would have been entitled to receive in connection with such event.
Upon the dissolution or liquidation of the Trust, this option shall
terminate; but the Optionee shall have the right, immediately prior to such
dissolution or liquidation, to exercise this option in full to the extent not
theretofore exercised regardless of any provision in this Agreement providing
for the deferment of the exercise thereof.
5. Neither the execution and delivery hereof, the granting of the
option evidenced hereby, nor the Trust's obligation to deliver Shares upon the
exercise of the option evidenced hereby shall constitute or be evidence of any
agreement or understanding, express or implied, on the part of the Trust to
employ the Optionee for any specific period.
6. Any notice required to be given hereunder to the Trust shall
be addressed to the Trust as follows: Washington Real Estate Investment Trust,
10400 Connecticut Avenue, Concourse Level, Kensington, MD 20895 and any notice
required to be given hereunder to the Optionee shall be addressed to him at his
address shown hereinabove, or to such other address as either party shall
furnish in writing to the other.
7. The Optionee agrees to be bound by the terms and conditions
hereof.
8. This Agreement may be amended at any time by the written
consent of both parties hereto, but shall not be amended so as to increase the
number of Shares purchasable hereunder or decrease the purchase price thereof
without the approval by vote of Shareholders owning a majority of the Trust's
outstanding Shares.
IN WITNESS WHEREOF, the Trust, by its duly authorized officer, and the
Optionee have executed this agreement in duplicate as of the day and year first
above written.
WASHINGTON REAL ESTATE
ATTEST: INVESTMENT TRUST
/s/ Mary T. Dean By: /s/ Larry Finger
- ---------------- ---------------------
WITNESS: OPTIONEE
/s/ Mary T. Dean /s/ Edmund B. Cronin, Jr.
- ---------------- -------------------------
Edmund B. Cronin, Jr.
3
<PAGE> 1
EXHIBIT 23(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders of
Washington Real Estate Investment Trust
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 of our report dated March 27, 1996, which appears on page
20 of Washington Real Estate Investment Trust's Annual Report on Form 10-K for
the year ended December 31, 1995.
PRICE WATERHOUSE LLP
Washington, D.C.
March 27, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 3,531,812
<SECURITIES> 0
<RECEIVABLES> 3,107,314
<ALLOWANCES> 517,934
<INVENTORY> 0
<CURRENT-ASSETS> 1,084,020
<PP&E> 272,597,214
<DEPRECIATION> 41,021,586
<TOTAL-ASSETS> 241,783,507
<CURRENT-LIABILITIES> 3,612,550
<BONDS> 7,706,346
0
0
<COMMON> 184,416,013
<OTHER-SE> 15,318,665
<TOTAL-LIABILITY-AND-EQUITY> 241,783,507
<SALES> 52,597,497
<TOTAL-REVENUES> 52,597,497
<CGS> 21,684,357
<TOTAL-COSTS> 21,684,357
<OTHER-EXPENSES> 2,640,010
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,169,801
<INCOME-PRETAX> 26,103,329
<INCOME-TAX> 0
<INCOME-CONTINUING> 26,103,329
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,103,329
<EPS-PRIMARY> .88
<EPS-DILUTED> .88
</TABLE>
