<PAGE>
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, 1999 COMMISSION FILE NO. 1-6622
----------------- ------
WASHINGTON REAL ESTATE INVESTMENT TRUST
---------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
MARYLAND 53-0261100
-------- ----------
<S> <C>
(State or other jurisdiction of incorporation or organization) (IRS Employer Identification Number)
</TABLE>
6110 EXECUTIVE BOULEVARD, SUITE 800, ROCKVILLE, MARYLAND 20852
(Address of principal executive office) (Zip code)
Registrant's telephone number, including area code (301) 984-9400
--------------
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of exchange on which registered
------------------- ------------------------------------
Shares of Beneficial Interest New York 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 10, 2000, 35,733,793 Shares of Beneficial Interest were
outstanding and the aggregate market value of such shares held by non-affiliates
of the registrant was approximately $531,339,000 (based on the closing price of
the stock on March 10, 2000).
DOCUMENTS INCORPORATED BY REFERENCE
Part III of this Form 10-K is incorporated by reference from the Trust's 2000
Notice of Annual Meeting and Proxy Statement.
<PAGE>
WASHINGTON REAL ESTATE INVESTMENT TRUST
1999 FORM 10-K ANNUAL REPORT
INDEX
<TABLE>
<CAPTION>
Page
PART I ----
<S> <C> <C>
Item 1. Business 3
Item 2. Properties 7
Item 3. Legal Proceedings 11
Item 4. Submission of Matters to a Vote of Security Holders 11
PART II
Item 5. Market for the Registrant's Common Equity and
Related Stockholder Matters 12
Item 6. Selected Financial Data 13
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 14
Item 7A. Qualitative and Quantitative Disclosures About Market Risk 18
Item 8. Financial Statements and Supplementary Data 19
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 19
PART III
Item 10. Directors and Executive Officers of the Registrant 20
Item 11. Executive Compensation 20
Item 12. Security Ownership of Certain Beneficial Owners and
Management 20
Item 13. Certain Relationships and Related Transactions 20
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K 21
Signatures 24
</TABLE>
<PAGE>
PART I
ITEM 1. BUSINESS
--------
The Trust
Washington Real Estate Investment Trust ("WRIT" or the "Trust") is a self-
administered, self-managed equity real estate investment trust ("REIT"). The
Trust's business consists of the ownership and operation of income-producing
real properties. The Trust has a fundamental strategy of regional focus,
diversification by property type and conservative financial management.
WRIT operates in a manner intended to enable it to qualify as a REIT under the
Internal Revenue Code (the "Code"). In accordance with the Code, a trust which
distributes its capital gains and at least 95 percent 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. Over the last five years, dividends paid per share have been
$1.16 for 1999, $1.11 for 1998, $1.07 for 1997, $1.03 for 1996 and $.99 for
1995. The indicated annualized dividend rate for 2000, based upon the December
31, 1999 dividend, is $1.17. Gains on sale of real estate of $7.9 million in
1999 were tax deferred. Such gains were used to acquire real estate assets and
will not be distributed.
WRIT's geographic focus is based on two principles:
1. Real estate is a local business and is much more effectively selected and
managed by owners located and expert in the region.
2. Geographic markets deserving of focus must be among the nation's best
markets with a strong primary industry foundation but be diversified enough
to withstand downturns in its primary industry.
WRIT considers markets to be local if they can be reached from the operations
center within two hours by car. WRIT's Washington centered market reaches north
to Philadelphia, Pennsylvania and south to Richmond, Virginia. While WRIT has
historically focused most of its investments in the Greater Washington-Baltimore
Region, in order to maximize acquisition opportunities, WRIT will consider
investments within the two-hour radius described above. WRIT also will consider
opportunities to duplicate its Washington focused approach in other geographic
markets which meet the criteria described above.
All of WRIT's Trustees, officers and employees live and work in the Greater
Washington-Baltimore region and WRIT's officers average over 19 years of
experience in this region.
The Greater Washington-Baltimore Economy and Real Estate Markets
The Greater Washington-Baltimore area today is an economic machine driven by the
federal government at its center and the growth that results from being the #1
high tech center in the nation (see below). The Technology/Biotechnology sector
has surpassed the federal government as largest employer in the region, and the
Washington region now ranks #1 in the nation in number of high technology firms
and number of high technology employees.
Washington, D.C. 12,183 230,660
Silicon Valley 11,930 199,230
Los Angeles 11,058 152,850
New York 7,874 142,410
Boston 7,442 139,400
Atlanta 6,383 98,080
Austin 2,681 44,730
Source: Greater Washington Initiative, December 1999
-3-
<PAGE>
While federal employment in the region has decreased from 22% in 1970 to 11% in
1999, federal procurement (purchase of goods and services) has continued to grow
in the region. Federal procurement in the Washington region totaled $25.7
billion in 1999 making the region #1 in the nation exceeding the combined total
of the #2 and #3 metro areas (Los Angeles and St. Louis). Though the region may
not be recession proof, this federal procurement makes it substantially better
positioned than others to withstand an economic downturn.
Mae East, located in Tysons Corner, Virginia is one of only two Internet
convergence centers in the U.S. As a result, it is estimated that up to 60% of
the world's Internet traffic flows through Northern Virginia. The presence of
Mae East and of the thousands of high tech firms in the area has spawned a
concentration of data centers in the region where large Internet and other high
tech firms process tremendous amounts of data.
This concentration of high tech companies has served to attract even more high
tech firms. Amazon.com, Cisco Systems, Global Crossing and Winstar
Communications are all new presences in the Washington-Baltimore market.
Data Centers in the Washington Metro Area
-----------------------------------------
AboveNet Global Crossing
Amazon.com GTE
AOL IBM
AT&T Intel
Bell Atlantic Interliant
Cable & Wireless Mae East
Covad MCI/Worldcom/UUNet
Digex Pacific Gateway
Equinex PSINet
Exodus Qwest
Source: Delta Associates/Transwestern Carey Winston
This region serves as 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 Student Loan Marketing Association (Sallie Mae).
Other major public companies headquartered in the region include MCI Worldcom,
USAirways, America Online, Marriott International, Lockheed-Martin, Danaher
Corp., Lafarge Corp. and Gannett. The region is the second most popular tourist
destination in the world. Most importantly, the Mid-Atlantic region is known as
a job center, with solid educational opportunities and easy access to leisure
time activities.
The region's real estate markets are the beneficiary of this high tech growth.
Vacancies are extremely low, and rental rate growth is very strong. At year-end
1999, regional vacancy rates stood at 1.1% in apartments, 2.7% in grocery
anchored shopping centers and 5.7% in office buildings. The industrial sector,
at 9.2%, is the only sector with a "normal" vacancy level, and some of this
vacancy is the result of obsolescence.
The apartment vacancy rate of 1.1% at year-end 1999 was the area's lowest since
World War II. The office vacancy rate of 5.7% was the 3rd lowest amongst major
metropolitan areas. More importantly, the cities ranked #1 and #2 had vacancy
rates only slightly lower than Washington at 5.0% and 5.3% while New York,
ranked 4th just behind Washington, had a vacancy rate of 8.8%.
-4-
<PAGE>
Development underway in the office and apartment sectors is expected to cause an
increase in vacancy rates, but Delta Associates/Transwestern Carey Winston
projects that office vacancies will only reach the 6% to 8% level at year-end
2001 - still lower than the #4 metro area in the nation today. Delta
Associates/Transwestern Carey Winston also projects that apartment vacancies
will only reach 4.9% by year-end 2002.
As of December 31, 1999, WRIT owned a diversified portfolio consisting of 12
retail centers, 22 office buildings, 9 apartment buildings and 16 industrial
distribution/flex properties. WRIT's principal objective is to invest in high
quality real properties in prime locations, then proactively manage, lease, and
develop ongoing capital improvement programs to improve their economic
performance. The percentage of total real estate rental revenue by property
group for 1999, 1998, and 1997 and the percent leased as of December 31, 1999
were as follows:
<TABLE>
<CAPTION>
Real Estate Rental Revenue
Percent Leased --------------------------------
December 31, 1999 1999 1998 1997
----------------- ---- ---- ----
<S> <C> <C> <C> <C>
98% Office buildings 52% 50% 45%
92% Retail centers 15 17 20
97% Apartment buildings 19 20 23
94% Industrial/flex properties 14 13 12
--- --- ---
100% 100% 100%
=== === ===
</TABLE>
On a combined basis, WRIT's portfolio was 96% occupied in 1999, 96% occupied in
1998, and 95% occupied in 1997.
Total revenue was $119.0 million for 1999, $103.6 million for 1998 and $79.4
million for 1997. During 1997 through 1999, WRIT acquired eight office
buildings, one retail center, two apartment buildings and eight industrial
distribution/flex properties for a total of 19 properties. These acquisitions
were the primary reason for the shifting of each group's percentage of total
revenue reflected above. During 1998 and 1999, WRIT sold two office properties,
four industrial/flex properties and one retail center for a total of seven
properties. No properties were sold in 1997. No single tenant accounted for
more than 3.81% of revenues in 1999, 3.96% of revenue in 1998 and 3.04% of
revenue in 1997. 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 approximately 2.1% of
WRIT's 1999 total revenue. The larger non-Federal government tenants include
Crestar Bank, District of Columbia Metropolitan Police Department, Giant Food,
Main Control, Inc., OAO Corporation, Pepsi Cola, Sun Microsystems, Sunrise
Assisted Living, Inc., The American Red Cross, Wang Laboratories and Xerox.
As of December 31, 1999, and for the year then ended, the 7900 Westpark office
building accounted for 13% of total assets based upon book value and 9% of total
revenues. No other single property accounted for more than 10% of total assets
or total revenues.
During 1998 and prior, the actual day-to-day property management functions at
the properties owned by the Trust were carried out by an independent management
company whose only client was WRIT. No WRIT Trustee or officer was a director
or owned any interest in the management company. Effective December 31, 1998,
WRIT acquired substantially all of the operations of the management company and
took over the property management functions of the properties.
The Trust expects to continue investing in additional income producing
properties. WRIT invests only in properties which management believes will
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 rental
rates.
-5-
<PAGE>
WRIT makes capital improvements on an ongoing basis to its properties for the
purpose of maintaining and increasing their values and income. Major
improvements and/or renovations to the properties in 1999 and 1998 are discussed
on page 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 243 as of February 4, 2000,
including 175 persons engaged in property management functions and 68 persons
engaged in corporate, financial, leasing, and asset management functions.
ITEM 2. PROPERTIES
----------
The schedule on the following page lists the Trust's real estate investment
portfolio as of December 31, 1999, which consisted of 59 properties.
As of December 31, 1999, 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 to WRIT's financial statements
included in this Form 10-K Annual Report.
-6-
<PAGE>
SCHEDULE OF PROPERTIES
----------------------
<TABLE>
<CAPTION>
Percent
Year Year Net Rentable/*/ Leased
Properties Location Acquired Constructed Square Feet 12/31/99
- ------------------------------ ---------- ---------- ------------- --------------- ----------
<S> <C> <C> <C> <C> <C>
Office Buildings
- ----------------
10400 Connecticut Avenue Kensington, MD 1979 1965 65,000 96%
1901 Pennsylvania Avenue Washington, D.C. 1977 1960 97,000 99%
51 Monroe Street Rockville, MD 1979 1975 210,000 99%
7700 Leesburg Pike Falls Church, VA 1990 1976 145,000 97%
515 King Street Alexandria, VA 1992 1966 78,000 90%
The Lexington Building Rockville, MD 1993 1970 47,000 100%
The Saratoga Building Rockville, MD 1993 1977 59,000 100%
Brandywine Center Rockville, MD 1993 1969 35,000 100%
Tycon Plaza II Vienna, VA 1994 1981 131,000 96%
Tycon Plaza III Vienna, VA 1994 1978 152,000 96%
6110 Executive Boulevard Rockville, MD 1995 1971 199,000 99%
1220 19th Street Washington, D.C. 1995 1976 104,000 100%
Maryland Trade Center I Greenbelt, MD 1996 1981 191,000 99%
Maryland Trade Center II Greenbelt, MD 1996 1984 159,000 100%
1600 Wilson Boulevard Arlington, VA 1997 1973 167,000 92%
7900 Westpark Drive McLean, VA 1997 1972/1986/1999/1/ 527,000 100%
8230 Boone Boulevard Vienna, VA 1998 1981 58,000 97%
Woodburn Medical Park I Annandale, VA 1998 1984 71,000 99%
Woodburn Medical Park II Annandale, VA 1998 1988 96,000 100%
600 Jefferson Plaza Rockville, MD 1999 1985 115,000 97%
1700 Research Boulevard Rockville, MD 1999 1982 103,000 100%
Parklawn Plaza Rockville, MD 1999 1986 40,000 72%
--------- ---
Subtotal 2,849,000 98%
========= ===
Retail Centers
- --------------
Concord Centre Springfield, VA 1973 1960 76,000 98%
Bradlee Alexandria, VA 1984 1955 168,000 98%
Clairmont Salisbury, MD 1976 1965 40,000 84%
Chevy Chase Metro Plaza Washington, D.C. 1985 1975 51,000 100%
Prince William Plaza/2/ Woodbridge, VA 1968 1967 55,000 72%
Takoma Park Takoma Park, MD 1963 1962 59,000 100%
Westminster/3/ Westminster, MD 1972 1969 165,000 58%
Wheaton Park Wheaton, MD 1977 1967 71,000 100%
Montgomery Village Center Gaithersburg, MD 1992 1969 196,000 99%
Shoppes of Foxchase Alexandria, VA 1994 1960 128,000 98%
Frederick County Square Frederick, MD 1995 1973 233,000 99%
800 S. Washington Street Alexandria, VA 1998 1955/1959 45,000 100%
--------- ---
Subtotal 1,287,000 92%
========= ===
Apartment Buildings/# units
- ---------------------------
Country Club Towers/227 Arlington, VA 1969 1965 276,000 100%
Munson Hill Towers/279 Falls Church, VA 1970 1963 340,000 97%
Park Adams/200 Arlington, VA 1969 1959 210,000 98%
Roosevelt Towers/191 Falls Church, VA 1965 1964 229,000 99%
3801 Connecticut Avenue/307 Washington, D.C. 1963 1951 242,000 98%
The Ashby at McLean/250 McLean, VA 1996 1982 349,000 96%
Walker House Apartments/196 Gaithersburg, MD 1996 1971 148,000 95%
Bethesda Hills Apartments/195 Bethesda, MD 1997 1986 226,000 97%
Avondale/237 Laurel, MD 1999 1987 162,000 91%
--------- ---
Subtotal (2,082 units) 2,182,000 97%
========= ===
</TABLE>
/1/ A 49,000 square foot addition to 7900 Westpark Drive was completed in
September 1999.
/2/ Property was sold subsequent to December 31, 1999.
/3/ Property is in the planning stages of redevelopment.
/*/ Apartment buildings are presented in gross square feet.
-7-
<PAGE>
SCHEDULE OF PROPERTIES (Cont.)
------------------------------
<TABLE>
<CAPTION>
Percent
Year Year Net Rentable/*/ Leased
Properties Location Acquired Constructed Square Feet 12/31/99
- ------------------------------ ---------- ---------- ------------- --------------- ----------
<S> <C> <C> <C> <C> <C>
Industrial Distribution/Flex Properties
- ---------------------------------------
Pepsi-Cola Distribution Center Forestville, MD 1987 1971 69,000 100%
Capitol Freeway Center Washington, D.C. 1974 1940 145,000 100%
Fullerton Business Center Springfield, VA 1985 1980 103,000 91%
Charleston Business Center Rockville, MD 1993 1973 85,000 100%
Tech 100 Industrial Park Elkridge, MD 1995 1990 167,000 98%
Crossroads Distribution Center Elkridge, MD 1995 1987 85,000 100%
The Alban Business Center Springfield, VA 1996 1981/1982 87,000 100%
The Earhart Building Chantilly, VA 1996 1987 92,000 100%
Ammendale Technology Park I Beltsville, MD 1997 1985 167,000 98%
Ammendale Technology Park II Beltsville, MD 1997 1986 108,000 100%
Pickett Industrial Park Alexandria, VA 1997 1973 246,000 100%
Northern Virginia Industrial Park Lorton, VA 1998 1968/1991 790,000 84%
8900 Telegraph Road Lorton, VA 1998 1985 32,000 100%
Dulles South IV Chantilly, VA 1999 1988 83,000 100%
Sully Square Chantilly, VA 1999 1986 95,000 100%
Amvax Beltsville, MD 1999 1986 31,000 100%
--------- ---
Subtotal 2,385,000 94%
========= ===
TOTAL 8,703,000
=========
</TABLE>
-8-
<PAGE>
OFFICE BUILDINGS
- ----------------
Operating income in WRIT's core group of office buildings (excluding 1998 and
1999 acquisitions and dispositions) increased 7% from 1998 to 1999. This
increase was a result of strong rental rate growth and moderate occupancy gains
generally throughout the sector. WRIT's office markets are strong and, while
there is a significant amount of office development underway in several
submarkets, management anticipates that this sector will continue to perform
well in 2000.
During 1999, WRIT's office building revenues and operating income increased by
20% and 23% respectively, over 1998. These increases were primarily due to 1999
acquisitions (600 Jefferson Plaza, 1700 Research Boulevard and Parklawn Plaza)
and 1998 acquisitions (8230 Boone Boulevard and Woodburn Medical Park I and II)
combined with the 7% core group operating income increase described above.
Economic occupancy rates for the core group of office buildings averaged 97% for
both 1999 and 1998.
Rental rate increases of 5% for the sector were the result of increases at
nearly all of the properties. During 1999, WRIT executed new office leases for
645,000 square feet of office space at an average face rent increase of 18% on a
non-straight line basis.
Further details about the performance of the office building sector in 1999 and
1998 are provided in Management's Discussion and Analysis commencing on page 14.
INDUSTRIAL/FLEX PROPERTIES
- --------------------------
Operating income in WRIT's core group of industrial/flex properties (excluding
1999 and 1998 acquisitions and dispositions) increased 5%. Economic occupancy
rates for the core group of industrial/flex properties averaged 97% in 1999
compared to 95% in 1998.
During 1999, WRIT's industrial/flex properties revenues and operating income
increased by 20% and 16%, respectively, over 1998. These increases were
primarily due to 1999 acquisitions (Dulles South IV, Sully Square and Amvax) and
1998 acquisitions (Northern Virginia Industrial Park and 8900 Telegraph Road)
combined with the 5% core portfolio operating income increase described below.
Rental rate increases of 5% for the sector were the result of increases at the
majority of the properties. During 1999, WRIT executed 446,000 square feet of
new industrial/ flex space leases at an average face rent increase of 9% on a
non-straight line basis.
Further details about the performance of the industrial/flex properties sector
in 1999 and 1998 are provided in Management's Discussion and Analysis commencing
on page 14.
RETAIL CENTERS
- --------------
Operating income in WRIT's core retail centers (excluding 1999 and 1998
acquisitions and dispositions) increased 6% from 1998 to 1999. Retail center
rental rates for this same group increased 3% in 1999 over 1998.
During 1999, WRIT's retail center revenues and operating income increased by 4%
and 2%, respectively, over 1998. Economic occupancy rates for the core group of
retail center properties (excluding 1999 and 1998 acquisitions and dispositions)
averaged 96% in 1999 compared to 95% in 1998.
Further details about the performance of the retail center sector in 1999 and
1998 are provided in Management's Discussion and Analysis commencing on page 14.
-9-
<PAGE>
APARTMENT BUILDINGS
- -------------------
During 1999, WRIT's apartment revenues and operating income increased by 8% and
9%, respectively, over 1998. These increases were primarily due to the 1999
acquisition of Avondale Apartments combined with the 7% operating income
increase described below.
WRIT's apartment sector core group operating income (excluding the Avondale
Apartments acquired in 1999) increased 7%. This increase was the result of
increased occupancy levels combined with 4% rental rate increases throughout the
group. Economic occupancy rates for the core group of apartments averaged 97%
in 1999 and 95% in 1998.
Further details about the performance of the apartment sector in 1999 and 1998
are provided in Management's Discussion and Analysis commencing on page 14.
PROPERTY EXPANSIONS & MAJOR RENOVATIONS
- ---------------------------------------
BRADLEE SHOPPING CENTER
- -----------------------
The facade renovation that began in 1998 was completed in June 1999. Included
in the renovation was the retenanting of the former 26,640 square-foot GC Murphy
space. The new leases associated with this space have a blended rate per square
foot of $15.28, which is approximately six times the former GC Murphy rent of
$2.42 per square foot. The total cost of the renovation was approximately $3.1
million, of which $1.1 million was incurred in 1999.
7900 WESTPARK DRIVE
- -------------------
In 1999, WRIT completed construction of a 49,000 square-foot office space
addition to its 7900 Westpark Drive office building in McLean, Virginia. This
addition commenced in 1998 and was built over the existing structured parking
deck, similar to the Trust's 1996 addition at 7700 Leesburg Pike. The addition
was 100% leased and occupied upon completion in October 1999. The total cost of
the addition will be approximately $7.5 million, of which $4.9 million was
incurred in 1999.
PROPERTY DISPOSITIONS
- ---------------------
During 1999, WRIT sold four real estate properties: 444 North Frederick Avenue,
Arlington Financial Center, Department of Commerce Industrial Center and V
Street Distribution Center. The total gain on the sales of these properties was
$7.9 million. Net proceeds from the sales of these properties of $22.0 million
were used to invest in other real estate properties acquired by WRIT in 1999.
-10-
<PAGE>
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 1999.
-11-
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
----------------------------------------------
RELATED STOCKHOLDER MATTERS
---------------------------
Effective January 4, 1999, the Trust's shares began trading on the New York
Stock Exchange.
From 1971 through December 31, 1998, the Trust's shares were traded on the
American Stock Exchange. There are approximately 37,000 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 1999 and 1998, 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>
1999
4 $.2925 $15 15/16 $13 13/16
3 .2925 17 14 15/16
2 .2925 17 15/16 15 13/16
1 .28 18 3/4 15 1/2
1998
4 $ .28 $18 3/4 $15 9/16
3 .28 18 15 3/8
2 .28 18 1/4 16 11/16
1 .27 17 5/16 15 7/8
</TABLE>
The Trust has historically paid dividends on a quarterly basis. Dividends are
normally paid based on the Trust's cash flow from operating activities. The 2000
indicated annual dividend rate is $1.17 based on the annualization of the March
31, 2000 dividend.
-12-
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
------------------------
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Real estate rental revenue $118,975 $103,597 $ 79,429 $ 65,541 $ 52,597
Income before gain on sale of real estate 36,392 34,300 30,136 27,964 26,103
Gain on sale of real estate 7,909 6,764 -- -- --
Net income 44,301 41,064 30,136 27,964 26,103
Income per share before gain on sale of
real estate 1.02 0.96 0.90 0.88 0.88
Basic and diluted earnings per share 1.24 1.15 0.90 0.88 0.88
Total assets 608,480 558,707 468,571 318,488 241,784
Lines of credit payable 33,000 44,000 95,250 5,000 28,000
Mortgage notes payable 87,038 28,912 7,461 7,590 7,706
Notes payable 210,000 210,000 100,000 100,000 --
Shareholders' equity 257,189 253,733 252,088 195,623 199,735
Cash dividends paid 41,341 39,614 36,108 32,718 29,712
Cash dividends paid per share 1.16 1.11 1.07 1.03 0.99
</TABLE>
-13-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
RESULTS OF OPERATIONS
- ---------------------
REAL ESTATE RENTAL REVENUE: 1999 VERSUS 1998
- --------------------------------------------
Total revenues for 1999 increased $15.4 million, or 15%, to $119.0 million from
$103.6 million in 1998. The percentage increase in real estate rental revenue
from 1998 to 1999 by property type was as follows:
Office Buildings 20%
Retail Centers 4%
Apartment Buildings 8%
Industrial/Flex Properties 20%
During 1999, WRIT's office building revenues and operating income increased by
20% and 23%, respectively, over 1998. These increases were primarily due to
1999 acquisitions (600 Jefferson Plaza and 1700 Research) and 1998 acquisitions
(8230 Boone Boulevard and Woodburn Medical Park I and II) combined with
increased rental rates and occupancy for the sector and offset in part by the
1999 sales of Arlington Financial Center and 444 N. Frederick Road.
During 1999, WRIT's retail center revenues and operating income increased by 4%
and 2%, respectively, over 1998. The change is primarily attributable to
increased rental rates and tenant recovery income offset by the December 1998
sale of Dover Mart retail center.
WRIT's apartment building revenues and operating income increased by 8% and 9%,
respectively, in 1999 over 1998. These increases were primarily due to the 1999
acquisition of Avondale Apartments, combined with increased rental rates and
occupancy levels across the sector.
WRIT's industrial/flex property revenues and operating income increased by 20%
and 16%, respectively, in 1999 over 1998. These increases were primarily due to
1999 acquisitions (Dulles South IV and Amvax) and 1998 acquisitions (Northern
Virginia Industrial Park and 8900 Telegraph Road) as well as increased rental
rates, offset in part by the 1999 sales of the Department of Commerce Industrial
Center and V Street Distribution Center.
REAL ESTATE RENTAL REVENUE: 1998 VERSUS 1997
- --------------------------------------------
Total revenues for 1998 increased $24.2 million, or 30%, to $103.6 million from
$79.4 million in 1997. The percentage increase in real estate rental revenue
from 1997 to 1998 by property type was as follows:
Office Buildings 43%
Retail Centers 13%
Apartment Buildings 17%
Industrial/Flex Properties 37%
During 1998, WRIT's office building revenues and operating income increased by
43% and 48%, respectively, over 1997. These increases were primarily due to
1998 acquisitions (8230 Boone Boulevard and Woodburn Medical Park I and II) and
1997 acquisitions (1600 Wilson Boulevard and 7900 Westpark Drive) combined with
increased rental rates and occupancy for the sector.
During 1998, WRIT's retail center revenues and operating income increased by 13%
and 17%, respectively, over 1997. These increases were primarily due to the
1998 acquisition of 800 South Washington Street retail center combined with
increased rental rates and increased tenant recovery income.
-14-
<PAGE>
WRIT's apartment building revenues and operating income increased by 17% and
20%, respectively, in 1998 over 1997. These increases were primarily due to the
1997 acquisition of Bethesda Hill Apartments, combined with increased rental
rates across the sector.
WRIT's industrial/flex property revenues and operating income increased by 37%
and 39%, respectively, in 1998 over 1997. These increases were primarily due to
1998 acquisitions (Northern Virginia Industrial Park and 8900 Telegraph Road)
and 1997 acquisitions (Ammendale Technology Parks I and II and Pickett
Industrial Park), offset in part by the 1998 sales of Shirley 395 and
Ravensworth.
OPERATING EXPENSES AND OTHER RESULTS OF OPERATIONS
- --------------------------------------------------
Real estate operating expenses as a percentage of revenue were 30% for 1999 and
1998 as compared to 32% for 1997. The decrease in 1998 compared to 1997 is
attributable to a 42% revenue increase in WRIT's office building segment
resulting from 1998 and 1997 property acquisitions and increased occupancy and
rental rates, combined with only a 32% increase in the office building segment's
operating expenses. WRIT's percentage of revenue from office buildings within
its entire real estate portfolio has increased to 52% at December 31, 1999, from
50% at December 31, 1998 and 45% at December 31, 1997. The increase is
attributable to 1999 and 1998 office building acquisitions. Generally, real
estate operating expenses have increased to $35.3 million in 1999 from $31.1
million in 1998 and $25.5 million in 1997 due to the acquisition of seven real
estate properties in 1999 and six real estate properties in each of 1998 and
1997.
Interest expense increased $5.2 million in 1999 from 1998. This increase is
primarily attributable to the assumption of an $8.7 million mortgage in
September 1999 in connection with the acquisition of Avondale Apartments, the
issuance of $110.0 million in medium-term notes in February 1998, and the
assumption of $21.6 million in mortgages in November 1998 in connection with the
acquisition of Woodburn Medical Park. In addition, WRIT closed on a $50.0
mortgage note in September 1999 at 7.14% interest rate that was used to pay down
WRIT's unsecured lines of credit at slightly lower interest rates. Interest
expense increased $7.4 million in 1998 from 1997. This increase was
attributable to the issuance of the $110 million medium-term notes in February
1998 and an increase in the average balance of outstanding line of credit
advances due to acquisitions in 1998 and 1997.
General and administrative expenses were $6.2 million for 1999 as compared to
$6.6 million for 1998 and $4.2 million for 1997. The decrease in general and
administrative expenses in 1999, as compared to 1998, is primarily attributable
to increased property management profits that in turn reduce the administrative
expenses of the Trust. The increase in general and administrative expenses in
1998 from 1997 was attributable to increased compensation from personnel
additions due to the increased portfolio of the Trust.
CAPITAL RESOURCES AND LIQUIDITY
- -------------------------------
WRIT has utilized the proceeds of share offerings, unsecured and secured debt
offerings, medium and long-term fixed interest rate debt, bank lines of credit
and cash flow from operations for its capital needs. Management believes that
external sources of capital will continue to be available to WRIT from its
existing unsecured credit commitments and from selling additional shares and/or
the sale of medium or long-term secured or unsecured notes. The funds raised
would be used to pay off any outstanding advances on the Trust's lines of credit
and/or for new acquisitions and capital improvements.
As of December 31, 1999, WRIT had line of credit commitments in place from
commercial banks for up to $75 million, which bear interest at an adjustable
spread over LIBOR based on the Trust's interest coverage ratio and public debt
rating. WRIT acquired seven properties for a total acquisition cost of $61.9
million in 1999, and acquired six properties for total acquisition costs of
$82.2 million in 1998. The 1999 acquisitions were financed through line of
credit advances, the use of proceeds from property sales in February 1999 and
the assumption of a mortgage payable of $8.7 million. The 1998 acquisitions
were primarily financed through line of credit advances, the February 1998
issuance of $110 million of medium-term notes (after repayment of amounts
outstanding on line-of-credit borrowings of $95 million), the assumption of
mortgages payable amounting to $21.6 million and the reinvestment of the
proceeds of the sale of three properties in 1998 of $10.8 million. On September
27, 1999, WRIT closed on a $50.0 million mortgage note payable, the proceeds of
which were used to pay down WRIT's unsecured lines of credit. The mortgage is
secured by five of WRIT's Virginia residential properties.
-15-
<PAGE>
On February 20, 1998, WRIT sold $50 million of 7.25% unsecured notes due
February 25, 2028 at 98.653% to yield approximately 7.36%. WRIT also sold $60
million of 6.898% unsecured Mandatory Par Put Remarketed Securities ("MOPPRS")
at an effective borrowing rate through the remarketing date (February 2008) of
approximately 6.74%. WRIT used the proceeds of these notes for general business
purposes, including repayment of $95 million of outstanding advances under its
lines of credit. WRIT used the remainder of the proceeds to finance
acquisitions and capital improvements to its properties. WRIT had four interest
rate lock agreements related to this transaction which settled for $5.4 million
and treated that settlement and the cost of a related interest rate cap
agreement as transaction costs of the borrowing. These costs are being
amortized over the life of the unsecured notes using the effective interest rate
method.
Cash flow from operating activities totaled $52.4 million, $53.6 million and
$42.5 million for the years ended December 31, 1999, 1998 and 1997,
respectively, including net income of $44.3 million (net of $7.9 million gain on
property sales), $41.1 million (net of $6.8 million gain on property sales) and
$30.1 million, respectively, and depreciation and amortization of $19.6 million,
$15.4 million and $10.9 million, respectively. The decrease in cash flows from
operating activities in 1999 from 1998 is primarily due to the timing of
payments for trade accounts payable. The increase in cash flows from operating
activities in 1998 from 1997 was primarily due to real estate acquisitions,
increased operating income from previously owned properties and the resultant
increase in net income.
Cash flows used in investing activities totaled $50.0 million, $68.9 million and
$152.7 million for the years ended December 31, 1999, 1998 and 1997,
respectively. The decline in cash flows used in investing activities in 1999
from 1998 and in 1998 from 1997 is attributable to a reduction in real estate
acquisitions.
Cash flows used in financing activities were $2.4 million for the year ended
December 31, 1999, compared to cash flows provided by financing activities of
$12.0 million and $116.4 million for the years ended December 31, 1998 and 1997,
respectively. Cash flows used in financing activities in 1999 declined from
1998 as a result of increased dividend payments in 1999, line of credit
repayments in excess of advances and no debt issuance in 1999. Cash flows
provided by financing activities declined in 1998 from 1997 due to line of
credit repayments in excess of advances, offset by net proceeds from the debt
offering in 1998.
Rental revenue has been the principal source of funds to pay WRIT's operating
expenses, interest expense and dividends to shareholders. In 1999, 1998 and
1997, WRIT paid dividends totaling $41.3 million, $39.6 million and $36.1
million, respectively.
CAPITAL IMPROVEMENTS
- --------------------
Capital improvements of $17.8 million were completed in 1999, including tenant
improvements. Capital improvements to WRIT properties in 1998 and 1997 were
approximately $18.7 million and $13.9 million, respectively.
Accretive Capital Improvements
- ------------------------------
Acquisition Related - These are capital improvements to properties acquired
during the current and preceding two years which were planned during WRIT's
investment analysis. In 1999, the most significant of these improvements were
made to the 7900 Westpark Drive, Woodburn Medical Park, Bethesda Hill
Apartments, Ammendale Technology Park II and Northern Virginia Industrial Park.
Expansions/Additions and Major Renovations - Expansions/Additions increase the
rentable area of a property. During 1999, WRIT completed the 49,000 square foot
addition at 7900 Westpark Drive. Major Renovations are improvements sufficient
to increase the income otherwise achievable at a property. During 1999, WRIT
completed the renovation of the Bradlee Shopping Center. See Expansions and
Major Renovations on Page 10 of this report for descriptions of these 1999
projects.
-16-
<PAGE>
Tenant Improvements - Tenant Improvements are costs associated with commercial
lease transactions such as painting and carpeting. During 1999, WRIT's average
Tenant Improvement Costs per square foot of space leased were as follows:
Office $4.59
Retail $0.69
Industrial $0.55
The Retail and Industrial Tenant Improvement costs are substantially lower than
Office Improvement costs because the tenant improvements required in these
property types are substantially less extensive than in offices. WRIT's office
tenant improvement costs are among the lowest in the industry for a number of
reasons. Approximately 66% of our office tenants renew their leases with WRIT,
and renewing tenants generally require minimal tenant improvements. In
addition, lower tenant improvement costs is one of the many benefits of WRIT's
focus on leasing to smaller office tenants. Smaller office suites have limited
configuration alternatives. Therefore, WRIT is often able to lease an existing
suite with tenant improvements being limited to new paint and carpet.
Other Capital Improvements
- --------------------------
Other Capital Improvements are those not included in the above categories.
These are also referred to as recurring capital improvements. Over time these
costs will be reincurred to maintain a property's income and value. In our
residential properties, these include new appliances, flooring, cabinets,
bathroom fixtures, and the like. These improvements are made as needed upon
vacancy of an apartment and averaged $759 for the 724 apartments turned over in
1999. WRIT also expensed an average of $303 per apartment turnover for items
which do not have a long-term life and are, therefore, not capitalized.
During 1999, WRIT's capital improvement costs were as follows (in thousands):
Accretive capital improvements:
Acquisition related $ 5,716
Expansions and major renovations 5,929
Tenant improvements 2,342
-------
Total Accretive capital
improvements 13,987
Other: 3,752
-------
Total $17,739
=======
Management believes that WRIT 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.
YEAR 2000
- ---------
WRIT's Year 2000 Project completion resulted in no interruption or failure of
normal business activities or operations. No material failures or significant
interruptions were experienced that materially or adversely affected WRIT's
results of operations, liquidity or financial condition. The total costs
incurred to become Year 2000 compliant were not material to WRIT's financial
position. Any future cost associated with Year 2000 compliancy is not expected
to be material to WRIT's financial position.
FORWARD-LOOKING STATEMENTS
- --------------------------
This Annual Report on Form 10-K contains forward-looking statements which
involve risks and uncertainties. Such forward-looking statements include (a)
WRIT's intention to invest in properties that it believes will continue to
increase in income and value; (b) WRIT's belief that its real estate markets
will continue to perform well; (c) WRIT's belief that renovations and other
changes at the Bradlee Shopping Center will increase traffic and enable it
-17-
<PAGE>
to raise rents; (d) WRIT's belief that external sources of capital will continue
to be available and that additional sources of capital will be available from
the sale of shares or notes; (e) WRIT's belief that it has the liquidity and
capital resources necessary to meet its known obligations and to make additional
property acquisitions and capital improvements when appropriate to enhance long-
term growth and (f) other statements preceded by, followed by or that include
the words "believes," "expects," "intends," "anticipates," "potential" and other
similar expressions.
WRIT claims the protection of the safe harbor for forward-looking statements
contained in the Private Securities Litigation Reform Act of 1995 for the
foregoing statements. The following important factors, in addition to those
discussed elsewhere in this Annual Report, could affect WRIT's future results
and could cause those results to differ materially from those expressed in the
forward-looking statements: (a) the economic health of WRIT's tenants; (b) the
economic health of the Greater Washington-Baltimore region, or other markets
they may enter, including the effects of changes in Federal government spending;
(c) inflation; (d) consumer confidence; (e) unemployment rates; (f) consumer
tastes and preferences; (g) stock price and interest rate fluctuations; (h)
WRIT's future capital requirements; (i) competition; (j) compliance with
applicable laws, including those concerning the environment and access by
persons with disabilities; (k) weather conditions and (l) the effects of changes
in capital availability to the technology and biotechnology sectors of the
economy.
RATIOS OF EARNINGS TO FIXED CHARGES AND DEBT SERVICE COVERAGE
- -------------------------------------------------------------
The following table sets forth the Trust's ratios of earnings to fixed charges
and debt service coverage for the periods shown:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------
1999 1998 1997
----------------- ----------------- -----------------
<S> <C> <C> <C>
Earnings to fixed charges 1.62x 2.00x 4.08x
Debt service coverage 3.42x 3.84x 5.08x
</TABLE>
ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
- -------- ----------------------------------------------------------
The only material market risk to which WRIT is exposed is interest-rate risk.
WRIT's exposure to market risk for changes in interest rates relates primarily
to refinancing long-term fixed rate obligations, the opportunity cost of fixed
rate obligations in a falling interest rate environment and its variable rate
lines of credit. WRIT primarily enters into debt obligations to support general
corporate purposes including acquisition of real estate properties, capital
improvements and working capital needs. In the past WRIT has used interest rate
hedge agreements to hedge against rising interest rates in anticipation of
imminent refinancing or new debt issuance.
-18-
<PAGE>
The table below presents principal, interest and related weighted average
interest rates by year of maturity.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
2000 2001 2002 2003 2004 Thereafter Total Fair Value
------ ------ ------ ------ ------ ---------- ----- ----------
In thousands
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DEBT (all fixed rate
except lines of credit)
Unsecured debt
Principal $ -- $ -- $ -- $50,000 $ -- $160,000 $210,000 $192,420
Interest $14,951 $14,951 $14,951 $13,467 $11,389 $103,424 $173,133
Average interest rate 7.12% 7.12% 7.12% 7.12% 7.22% 7.22% 7.20%
Mortgages
Principal amortization $ 768 $ 833 $ 902 $ 7,376 $ 820 $ 76,338 $ 87,037 $ 84,520
(30 year schedule)
Interest $ 6,502 $ 6,442 $ 6,376 $ 5,775 $ 5,645 $ 22,021 $ 52,761
Average interest rate 7.50% 7.50% 7.50% 7.50% 7.37% 7.37% 7.38%
Lines of Credit
Principal $33,000 $ 33,000 $ 33,000
Interest $ 2,283 $ 2,283
Average interest rate 6.46% 6.46%
</TABLE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
The financial statements and supplementary data listed under Item 14 (a) and
filed as part of this report on the pages indicated are incorporated herein by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
---------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
None.
-19-
<PAGE>
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") no 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 2000 Annual Meeting Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
----------------------
The information required by this Item is hereby incorporated herein by reference
to WRIT's 2000 Annual Meeting Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
The information required by this Item is hereby incorporated herein by reference
to WRIT's 2000 Annual Meeting Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
-----------------------------------------------
The information required by this Item is hereby incorporated herein by reference
to WRIT's 2000 Annual Meeting Proxy Statement.
-20-
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
---------------------------------------------------------------
ITEM 14 (a). The following documents are filed as part of this Report:
1. Financial Statements: The following Financial Statements of Washington
--------------------
Real Estate Investment Trust and Reports of Independent Accountants are
included in this report:
Report of Arthur Andersen LLP.
Consolidated Balance Sheets at December 31, 1999 and 1998.
Consolidated Statements of Income for the years ended December 31, 1999,
1998 and 1997.
Consolidated Statements of Changes in Shareholders' Equity for the years
ended December 31, 1999, 1998 and 1997.
Consolidated Statements of Cash Flows for the years ended December 31,
1999, 1998 and 1997.
Notes to Consolidated 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.
Schedule Page
- -------- ----
III Real Estate and Accumulated Depreciation 44
Supplementary Information: Quarterly Financial Results (unaudited) 45
Schedules not listed above have been omitted because they are not applicable,
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. Incorporated herein by reference to Exhibit 3
to the Trust's registration statement on Form 8-B dated July 10,
1996.
(b) Bylaws. Incorporated herein by reference to Exhibit 4 to the
Trust's registration statement on Form 8-B dated July 10, 1996.
(c) Amendment to Declaration of Trust dated September 21, 1998.
Incorporated herein by reference to Exhibit 3 to the Trust's Form
10-Q dated November 13, 1998.
(d) Articles of Amendment to Declaration of Trust dated June 24, 1999
incorporated by reference to Exhibit 4c to Amendment No. 1 to the
Trust's Form S-3 registration statement filed with the Securities
and Exchange Commission as of July 14, 1999.
-21-
<PAGE>
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
credit agreement was amended and restated as of March 17, 1999 and
is attached hereto.
(b) Credit agreement dated July 17, 1998, among Washington Real Estate
Investment Trust, as borrower, Crestar Bank, as lender, First Union
National Bank (successor by merger to Signet Bank), as lender, and
Crestar Bank, as agent. The credit agreement was amended and
restated as of July 25, 1999 and is attached hereto.
(c) Indenture dated as of August 1, 1996 between Washington Real Estate
Investment Trust and The First National Bank of Chicago.*
(d) Officers' Certificate Establishing Terms of the Notes, dated August
8, 1996.*
(e) Form of 2003 Notes.*
(f) Form of 2006 Notes.*
(g) Form of MOPPRS Notes.****
(h) Form of 30 year Notes.****
(i) Remarketing Agreement.****
(j) The Trust is a party to a number of other instruments defining the
rights of holders of long-term debt. No such instrument authorizes
an amount of securities in excess of 10 percent of the total assets
of the Trust and its Subsidiaries on a consolidated basis. On
request, the Trust agrees to furnish a copy of each such instrument
to the 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, as amended.**
(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. Incorporated herein by reference to Exhibit
10(e) to the 1995 Form 10-K.
(f) Share Grant Plan.***
(g) Share Option Plan for Trustees.***
21. Subsidiaries of Registrant
In 1995, WRIT formed a subsidiary partnership, WRIT Limited
Partnership, a Maryland limited partnership, in which WRIT owns 100% of
the partnership interest.
-22-
<PAGE>
In 1998, WRIT formed a subsidiary limited liability company, WRIT-NVIP,
L.L.C., a Virginia limited liability company, in which WRIT owns 93% of
the company interests.
In 1998, WRIT formed a subsidiary company, Real Estate Management,
Inc., a Maryland corporation, in which WRIT owns 100% of the stock.
22. Consents
(a) Consent of Arthur Andersen LLP
27. Financial Data Schedules
(a) 1999 financial data schedule
ITEM 14 (b). REPORTS ON FORM 8-K
(1) October 5, 1999 - Report pursuant to Item 2 on the acquisition of 1700
Research Boulevard, 600 Jefferson Plaza and Avondale Apartments.
(2) November 30, 1999 - Report pursuant to Item 7 to provide the financial
statements required to be included in the Current Report on Form 8-K dated
October 5, 1999 in connection with the acquisition of 1700 Research
Boulevard, 600 Jefferson Plaza and Avondale Apartments.
* Incorporated herein by reference to the Exhibit of the same designation to
the Trust's Form 8-K filed August 13, 1996.
** 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.
*** Incorporated herein by reference to Exhibits 4(a) and 4 (b), respectively,
to the Trust's Registration Statement on Form S-8 filed on March 17, 1998.
**** Incorporated herein by reference to the Exhibit of the same designation to
the Trust's Form 8-K filed February 25, 1998.
-23-
<PAGE>
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
Date: March 24, 2000 /s/ Edmund B. Cronin, Jr.
By: _____________________________________
Edmund B. Cronin, Jr.
President and Chief Executive Officer
Pursuant to the requirements of the Securities 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 24, 2000
Arthur A. Birney
/s/ John M. Derrick, Jr.
________________________ Trustee March 24, 2000
John M. Derrick, Jr.
/s/ Clifford M. Kendall
________________________ Trustee March 24, 2000
Clifford M. Kendall
/s/ John P. McDaniel
________________________ Trustee March 24, 2000
John P. McDaniel
/s/ David M. Osnos
________________________ Trustee March 24, 2000
David M. Osnos
/s/ Susan J. Williams
________________________ Trustee March 24, 2000
Susan J. Williams
/s/ Larry E. Finger
________________________ Senior Vice President and March 24, 2000
Larry E. Finger Chief Financial Officer
/s/ Laura Franklin
________________________ Vice President and March 24, 2000
Laura M. Franklin Chief Accounting Officer
</TABLE>
-24-
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of
Washington Real Estate Investment Trust:
We have audited the accompanying consolidated balance sheets of Washington Real
Estate Investment Trust (the "Trust," a Maryland real estate investment trust)
and subsidiaries as of December 31, 1999 and 1998, and the related consolidated
statements of income, changes in shareholders' equity and cash flows for each of
the three years in the period ended December 31, 1999. 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 in accordance with auditing standards generally accepted
in the United States. Those standards 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. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Trust and subsidiaries as
of December 31, 1999 and 1998, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 1999, in
conformity with accounting principles generally accepted in the United States.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The financial statement schedule
included on pages 42 through 45 of the Form 10-K is presented for the
purpose of complying with the Securities and Exchange Commission's rules and is
not a required part of the basic financial statements. This schedule has been
subjected to the auditing procedures applied in our audit of the basic financial
statements and, in our opinion, fairly states in all material respects the
financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.
Arthur Andersen LLP
Vienna, Virginia
February 4, 2000
-25-
<PAGE>
WASHINGTON REAL ESTATE INVESTMENT TRUST AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1999 AND 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998
Assets ------ ------
<S> <C> <C>
Real estate, at cost $661,870 $598,874
Accumulated depreciation (83,574) (68,301)
-------- --------
Total investment in real estate, net 578,296 530,573
Cash and cash equivalents 4,716 4,595
Rents and other receivables, net of allowance for doubtful accounts of $831 and $821,
respectively 6,572 4,130
Prepaid expenses and other assets 18,896 19,409
-------- --------
Total assets $608,480 $558,707
======== ========
Liabilities and shareholders' equity
Accounts payable and other liabilities $ 11,421 $ 13,524
Advance rents 5,006 2,680
Tenant security deposits 3,304 4,331
Mortgage notes payable 87,038 28,912
Lines of credit payable 33,000 44,000
Notes payable 210,000 210,000
-------- --------
Total liabilities 349,769 303,447
-------- --------
Minority interest 1,522 1,527
-------- --------
Shareholders' equity
Shares of beneficial interest, $.01 par value; 100,000 shares authorized: 35,721 and
35,692 shares issued and outstanding, respectively 357 357
Additional paid in capital 256,832 253,376
-------- --------
Total shareholders' equity 257,189 253,733
-------- --------
Total liabilities and shareholders' equity $608,480 $558,707
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
-26-
<PAGE>
WASHINGTON REAL ESTATE INVESTMENT TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Real estate rental revenue $118,975 $103,597 $79,429
Real estate expenses
Utilities 7,298 7,012 5,897
Real estate taxes 8,496 7,372 5,746
Repairs and maintenance 4,765 4,296 3,576
Other expenses 14,722 12,434 10,240
-------- -------- -------
Total real estate expenses 35,281 31,114 25,459
-------- -------- -------
Operating income 83,694 72,483 53,970
Depreciation and amortization 19,590 15,399 10,911
-------- -------- -------
Income from real estate 64,104 57,084 43,059
Other income 732 880 1,011
Interest expense (22,271) (17,106) (9,691)
General and administrative expenses (6,173) (6,558) (4,243)
-------- -------- -------
Income before gain on sale of real estate 36,392 34,300 30,136
Gain on sale of real estate 7,909 6,764 --
-------- -------- -------
Net income $ 44,301 $ 41,064 $30,136
======== ======== =======
Basic and diluted earnings per share $ 1.24 $ 1.15 $ 0.90
======== ======== =======
</TABLE>
The accompanying notes are an integral part of these statements.
-27-
<PAGE>
WASHINGTON REAL ESTATE INVESTMENT TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
Shares of
Beneficial Additional
Interest at Par Paid in Shareholders'
Shares Value Capital Equity
------ --------------- ---------- -------------
<S> <C> <C> <C> <C>
Balance, December 31, 1996 31,803 $318 $195,305 $195,623
Net income -- -- 30,136 30,136
Net proceeds from sale of shares 3,750 38 60,825 60,863
Dividends -- -- (36,108) (36,108)
Share options exercised 125 1 1,573 1,574
------ ---- -------- --------
Balance, December 31, 1997 35,678 357 251,731 252,088
Net income -- -- 41,064 41,064
Dividends -- -- (39,614) (39,614)
Share options exercised 14 -- 195 195
------ ---- -------- --------
Balance, December 31, 1998 35,692 357 253,376 253,733
Net income -- -- 44,301 44,301
Dividends -- -- (41,341) (41,341)
Share options exercised 29 -- 496 496
------ ---- -------- --------
Balance, December 31, 1999 35,721 $357 $256,832 $257,189
====== ==== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
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<PAGE>
WASHINGTON REAL ESTATE INVESTMENT TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Cash flows from operating activities
Net income $ 44,301 $ 41,064 $ 30,136
Adjustments to reconcile net income to cash provided by operating
activities:
Gain on sale of real estate (7,909) (6,764) --
Depreciation and amortization 19,590 15,399 10,911
Increases in other assets (2,729) (2,895) (2,047)
Increases in other liabilities (808) 6,789 3,499
-------- -------- ---------
Cash provided by operating activities 52,445 53,593 42,499
-------- -------- ---------
Cash flows from investing activities
Real estate acquisitions, net* (53,197) (59,087) (138,804)
Improvements to real estate (18,371) (18,652) (13,913)
Non-real estate capital improvements (350) (1,967) --
Net proceeds from sale of real estate 22,033 10,844 --
-------- -------- ---------
Cash used in investing activities (49,885) (68,862) (152,717)
-------- -------- ---------
Cash flows from financing activities
Dividends paid (41,341) (39,614) (36,108)
Line of credit advances 33,000 44,000 113,250
Repayments of lines of credit (44,000) (95,250) (23,000)
Proceeds from mortgage note payable 50,000 -- --
Mortgage principal payments (594) (172) (129)
Net proceeds from sale of shares -- -- 60,863
Net proceeds from debt offering -- 102,797 --
Net proceeds from the exercise of share options 496 195 1,574
-------- -------- ---------
Cash (used in) provided by financing activities (2,439) 11,956 116,450
-------- -------- ---------
Net increase (decrease) in cash and temporary investments 121 (3,313) 6,232
Cash and cash equivalents, beginning of year 4,595 7,908 1,676
-------- -------- ---------
Cash and cash equivalents, end of year $ 4,716 $ 4,595 $ 7,908
======== ======== =========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 18,968 $ 13,475 $ 9,433
======== ======== =========
</TABLE>
Supplemental schedule of non-cash investing and financing activities
- --------------------------------------------------------------------
* On September 20, 1999, WRIT purchased Avondale Apartments for an acquisition
cost of $13.0 million. WRIT assumed a mortgage in the amount of $8.7 million
and paid the balance in cash. The $8.7 million of assumed mortgage is not
included in the $53.2 million amount shown as 1999 real estate acquisitions.
* On November 30, 1998, WRIT purchased Woodburn Medical Park I and II for an
acquisition cost of $35.2 million. WRIT assumed two mortgages in the amount of
$9.2 million and $12.4 million and paid the balance in cash. The $21.6 million
is not included in the $59.1 million shown as 1998 real estate acquisitions.
The accompanying notes are an integral part of these statements.
-29-
<PAGE>
WASHINGTON REAL ESTATE INVESTMENT TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
1. Nature of Business:
Washington Real Estate Investment Trust ("WRIT" or the "Trust") is a self-
administered, self managed equity real estate investment trust, successor to a
trust organized in 1960. The Trust's business consists of the ownership and
operation of income-producing real properties.
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
percent 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.
In June 1996, WRIT changed its domicile from the District of Columbia to the
State of Maryland. Issued and outstanding shares were assigned a par value of
$.01 per share.
2. Accounting Policies:
Basis of Presentation
The accompanying consolidated financial statements include the accounts of the
Trust and its majority owned subsidiaries, after eliminating all intercompany
transactions.
Revenue Recognition
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 to five years. WRIT recognizes rental income and
rental abatements from its residential and commercial leases when earned in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 13.
Deferred Financing Costs
Costs associated with the issuance of senior subordinated notes and draws on
lines of credit are capitalized and amortized using the effective interest rate
method over the term of the related notes.
Real Estate and Depreciation
Real estate assets are recorded at cost. 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 30 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 expensed as incurred.
WRIT evaluates quarterly the carrying value of its long-lived assets in
accordance with SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of." In cases where management
is holding particular properties for sale, the Trust assesses impairment based
on whether the fair value (estimated sales price less costs of disposal) of each
individual property to be sold is less than the net book value. A
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<PAGE>
property is considered to be held for sale when the Trust has made the decision
to dispose of the property. Otherwise, the Trust assesses impairment of its real
estate properties based on whether it is probable that undiscounted future cash
flows from each individual property will be less than its net book value. If a
property is determined to be impaired, its basis is adjusted to its fair market
value. There were no property impairments recognized during the three-year
period ending December 31, 1999.
Cash and Cash Equivalents
Cash and cash equivalents include investments readily convertible to known
amounts of cash with original maturities of 90 days or less.
Interest Rate Protection Agreements
WRIT has entered into interest rate protection agreements to reduce its exposure
to interest rate risk on anticipated borrowings. The costs (if any) of such
agreements which qualify for hedge accounting are included in other assets and
are amortized over the interest rate protection agreement term. To qualify for
hedge accounting, the interest rate protection agreement must meet two criteria:
(i) the debt to be hedged exposes WRIT to interest rate risk and (ii) the
interest rate protection agreement reduces WRIT's exposure to interest rate
risk. In the event that interest rate protection agreements that qualify for
hedge accounting are terminated or are closed out, the associated gain or loss
is deferred and amortized over the term of the underlying hedged asset or
liability. Amounts to be paid or received under interest rate protection
agreements are accrued currently and are netted with interest expense for
financial statement presentation purposes. Additionally, in the event that
interest rate protection agreements do not qualify as hedges, such agreements
are reclassified to investments accounted for at fair value, with any gain or
loss included as a component of income.
Comprehensive Income
WRIT has no items of comprehensive income that would require separate reporting
in the accompanying consolidated statements of income.
Earnings Per Common Share
During 1997, WRIT adopted SFAS No. 128, "Earnings per Share." This statement
requires the computation and reporting of both "basic" and "diluted" earnings
per share.
"Basic earnings per share" is computed as net income divided by the weighted-
average common shares outstanding. "Diluted earnings per share" is computed as
net income divided by the total weighted average common shares outstanding plus
the effect of dilutive common equivalent shares outstanding for the period.
Dilutive common equivalent shares reflect the assumed issuance of additional
common shares pursuant to certain of the Trust's share based compensation plans
(see Note 8) that could potentially reduce or "dilute" earnings per share, based
on the treasury stock method.
The weighted-average number of shares outstanding for the year ended December
31, 1999, 1998 and 1997, was 35.7, 35.7 and 33.4 million shares, respectively.
There was no impact of dilution of common equivalent shares on the basic
weighted-average shares outstanding for the years ended December 31, 1999, 1998
and 1997.
Use of Estimates in the Financial Statements
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States 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.
-31-
<PAGE>
New Statements of Financial Accounting Standards
In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," was issued. This statement establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts (collectively referred to as derivatives) and for
hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value. If certain conditions are met, a derivative may
be specifically designated as (a) a hedge of the exposure to changes in the fair
value of a recognized asset or liability or an unrecognized firm commitment, (b)
a hedge of the exposure to variable cash flows of a forecasted transaction, or
(c) a hedge of the foreign currency exposure to a net investment in a foreign
operation, an unrecognized firm commitment, an available-for-sale security, or a
foreign-currency-denominated forecasted transaction. SFAS No. 137 amended the
effective date of SFAS No. 133 to be effective for all fiscal quarters of fiscal
years beginning after June 15, 2000. Although currently WRIT has no derivative
instruments, this statement could affect derivative instruments acquired by WRIT
in future periods.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year
presentation.
3. Real Estate Investments:
WRIT's real estate investment portfolio, at cost, consists of properties located
in Maryland, Washington, D.C., and Virginia as follows:
December 31,
--------------------------
1999 1998
-------- --------
(In thousands)
Office buildings $352,145 $323,152
Retail centers 97,004 95,017
Apartment buildings 99,125 83,163
Industrial distribution/flex properties 113,596 97,542
-------- --------
$661,870 $598,874
======== ========
WRIT's results of operations are dependent on the overall economic health of its
tenants and the specific segments in which WRIT holds properties, as well as the
overall economic health of the markets in which it owns property. These segments
include commercial, residential, retail and industrial/flex properties. Although
all sectors are affected by external factors, such as inflation, consumer
confidence, unemployment rates and consumer tastes and preferences, the retail
segment is particularly sensitive to such factors. A decline in the retail
sector of the economy could reduce merchant sales, which could adversely affect
the operating results of WRIT.
As of December 31, 1999, 7900 Westpark office building accounted for 13 percent
of total assets and 9 percent of total revenues. No other single property or
tenant accounted for more than 10 percent of total assets or total revenues.
Properties acquired by WRIT during the year ending December 31, 1999 are as
follows:
<TABLE>
<CAPTION>
Acquisition Rentable Acquisition Cost
Date Property Type Square Feet (In thousands)
----------- -------- ---- ----------- ----------------
<S> <C> <C> <C> <C>
January 27, 1999 Dulles South IV Industrial Distribution/Flex 83,000 $ 6,909
April 16, 1999 Sully Square Industrial Distribution/Flex 95,000 7,557
May 21, 1999 600 Jefferson Plaza Office 115,000 14,472
May 21, 1999 1700 Research Blvd. Office 103,000 12,941
September 10, 1999 Amvax Industrial Distribution/Flex 32,000 2,231
September 20, 1999 Avondale Residential 162,000 12,908
November 30, 1999 Parklawn Plaza Office 40,000 4,764
------- -------
630,000 $61,782
======= =======
</TABLE>
WRIT accounted for each acquisition using the purchase method of accounting.
-32-
<PAGE>
Properties sold by WRIT during the year ending December 31, 1999 are as follows:
<TABLE>
<CAPTION>
Disposition Rentable Sales Price
Date Property Type Square Feet (In thousands)
----------- -------- ---- ----------- --------------
<S> <C> <C> <C> <C>
February 5, 1999 444 North Frederick Avenue Office 66,000 $ 5,671
February 5, 1999 Arlington Financial Center Office 51,000 9,798
February 5, 1999 Department of Commerce Industrial Distribution/Flex 105,000 7,031
February 26, 1999 V Street Distribution Center Industrial Distribution/Flex 31,000 600
------- -------
253,000 $23,100
======= =======
</TABLE>
4. Mortgage Notes Payable:
On August 22, 1995, WRIT assumed a $7.8 million mortgage note payable as partial
consideration for its acquisition of Frederick County Square retail center. The
mortgage bears interest at 9 percent. Principal and interest are payable
monthly until January 1, 2003, at which time all unpaid principal and interest
are payable in full.
On November 30, 1998, WRIT assumed a $9.2 million mortgage note payable and a
$12.4 million mortgage note payable as partial consideration for its acquisition
of Woodburn Medical Park I and II. Both mortgages bear interest at 7.69 percent
per annum. Principal and interest are payable monthly until September 15, 2005,
at which time all unpaid principal and interest are payable in full.
On September 20, 1999, WRIT assumed an $8.7 million mortgage note payable as
partial consideration for its acquisition of the Avondale Apartments. The
mortgage bears interest at 7.88 percent per annum. Principal and interest
are payable monthly until November 1, 2005, at which time all unpaid principal
and interest are payable in full.
On September 27, 1999, WRIT executed a $50.0 million mortgage note payable
secured by Munson Hill Towers, Country Club Towers, Roosevelt Towers, Park Adams
Apartments and the Ashby Apartments. The mortgage bears interest at 7.14
percent per annum and is payable monthly until October 1, 2009, at which time
all unpaid principal and interest are payable in full. These funds were used to
repay advances received on the Unsecured Lines of Credit Payable.
-33-
<PAGE>
Annual maturities of principal as of December 31, 1999 are as follows:
(In thousands)
--------------
2000 $ 768
2001 833
2002 902
2003 7,376
2004 820
Thereafter 76,338
--------
$87,037
=======
5. Unsecured Lines of Credit Payable:
During 1999, WRIT maintained two unsecured lines of credit: a $25 million line
of credit ("Credit Facility No. 1") and a $50 million line of credit ("Credit
Facility No. 2").
Credit Facility No. 1
WRIT had $22 and $0 million outstanding as of December 31, 1999 and 1998,
respectively, related to Credit Facility No. 1.
The following advances have been made under this commitment:
<TABLE>
<CAPTION>
Advance Date Paid Amount 1999 1998 1997
Date in Full (In thousands) Rate Rate Rate
------- --------- -------------- ---- ---- ----
<S> <C> <C> <C> <C> <C>
September 26, 1996 September 26, 1997 4,000 -- -- 6.83%
November 14, 1997 February 25, 1998 25,000 -- 6.64%-8.50% 6.40%-6.64%
March 29, 1999 March 28, 2000 4,000 5.98% -- --
May 20, 1999 July 19, 1999 12,000 5.67% -- --
July 20, 1999 January 20, 2000 12,000 6.30% -- --
September 15, 1999 March 15, 2000 6,000 6.64% -- --
</TABLE>
Prior to March 17, 1999, all new advances and interest rate adjustments, upon
the expiration of WRIT's interest lock-in dates bore interest at LIBOR plus a
spread based on WRIT's public debt rating. All unpaid interest and principal
could be prepaid prior to the expiration of WRIT's interest rate lock-in periods
subject to a yield maintenance obligation.
On March 17, 1999, WRIT executed an amended and restated agreement extending the
termination date to March 17, 2002. Under the amended agreement, WRIT may take
either a Corporate Base Rate ("CBR") or a LIBOR advance. Both advances have
interest rates based on the applicable rate plus a spread based on the most
recent ratings from Moody's and/or S&P for WRIT's long-term unsecured debt.
This $25 million credit commitment requires WRIT to pay the lender an unused
commitment fee at the rate of 0.375 percent per annum on the amount by which the
$25 million commitment exceeds the balance of outstanding advances and term
loans. At December 31, 1999 and 1998, $3 million and $25.0 , respectively, of
this commitment was unused and available for subsequent acquisitions or capital
improvements. This fee is paid quarterly. This commitment also contains certain
financial and non-financial covenants including debt service coverage, net
worth, and permitted indebtedness ratios which WRIT has met as of December 31,
1999. In addition, this commitment requires approval to be obtained from the
lender for purchases by the Trust over an agreed upon amount.
Credit Facility No. 2
WRIT had $11 million and $44 million outstanding as of December 31, 1999 and
1998, respectively, related to Credit Facility No. 2.
-34-
<PAGE>
The following advances have been made under this commitment:
<TABLE>
<CAPTION>
Advance Date Paid Amount 1999 1998 1997
Date in Full (In thousands) Rate Rate Rate
------- --------- -------------- ---- ---- ----
<S> <C> <C> <C> <C> <C>
November 26, 1996 August 1, 1997 1,000 -- -- 6.29%
February 28, 1997 August 1, 1997 14,000 -- -- 6.25%
March 27, 1997 August 1, 1997 3,000 -- -- 6.25%
June 27, 1997 August 1, 1997 1,000 -- -- 6.19%
November 12, 1997 February 25, 1998 17,000 -- 6.64% 6.36%-6.64%
November 14, 1997 February 25, 1998 33,000 -- 6.61% 6.40%-6.61%
May 22, 1998 July 22, 1999 13,000 5.54% 5.54%-6.39% --
June 23, 1998 June 22, 1999 4,000 6.02% 6.02%-6.39% --
September 9, 1998 March 11, 1999 2,000 6.23% 6.23% --
September 25, 1998 September 25, 1999 3,000 5.76% 5.76% --
September 28, 1998 June 28, 1999 8,000 5.83% 5.83% --
November 30, 1998 May 30, 1999 14,000 5.82% 5.82% --
January 22, 1999 July 22, 1999 1,000 5.70% -- --
January 27, 1999 July 27, 1999 4,000 5.67% -- --
March 11, 1999 September 27, 1999 2,000 6.07% -- --
March 29, 1999 September 27, 1999 1,000 6.02% -- --
May 31, 1999 August 30, 1999 14,000 5.74% -- --
June 23, 1999 August 21, 1999 4,000 5.83% -- --
June 29, 1999 August 30, 1999 8,000 5.92% -- --
July 22, 1999 September 21, 1999 13,000 5.93% -- --
July 22, 1999 September 21, 1999 1,000 5.93% -- --
July 27, 1999 September 22, 1999 4,000 5.94% -- --
August 22, 1999 September 21, 1999 4,000 5.99% -- --
August 30, 1999 September 27, 1999 14,000 6.07% -- --
August 30, 1999 September 27, 1999 8,000 6.07% -- --
September 21, 1999 September 27, 1999 1,000 6.08% -- --
September 21, 1999 September 27, 1999 13,000 6.08% -- --
September 22, 1999 September 27, 1999 4,000 6.08% -- --
September 28, 1999 June 28, 2000 7,000 6.64% -- --
November 30, 1999 August 31, 2000 4,000 6.86% -- --
</TABLE>
On July 25, 1999, WRIT executed an agreement to amend and restate the original
Credit Facility No. 2 agreement. All unpaid interest and principal are due July
2002 and can be prepaid prior to this date without any prepayment fee or yield
maintenance obligation. Any new advances shall bear interest at LIBOR plus a
spread based on WRIT's public debt rating.
Credit Facility No. 2 provides WRIT the option to convert any advances or
portions thereof into a term loan at any time through July 2002. The principal
amount of each term loan, if any, shall be repaid in July 2002.
This $50 million credit commitment requires WRIT to pay the lender an unused
commitment fee ranging from 0.15 to 0.25 percent per annum based on WRIT's
public debt rating. The fee is paid on the amount by which the $50 million
commitment exceeds the balance of outstanding advances and term loans. At
December 31, 1999 and 1998, $39 million and $6 million, respectively, of this
commitment was unused. This fee is paid quarterly in arrears. This commitment
also contains certain financial covenants including cash flow to debt service,
net worth, capitalization and permitted indebtedness ratios which WRIT has met
as of December 31, 1999.
Bridge Loan
During 1997, WRIT temporarily expanded one of its lines of credit to provide up
to an additional $20.25 million through February 27, 1998, at which time it was
repaid. The bridge loan accrued interest at LIBOR plus 0.70 percent. At
February 27, 1998 and December 31, 1997, the interest rate was 8.50 percent and
6.64 percent, respectively.
WRIT was required to pay a commitment fee equal to 0.10 percent of the
commitment. The bridge loan also required WRIT to pay the lender an unused
commitment fee at the rate of 0.175 percent on the amount that the $20.25
million commitment exceeded the balance of outstanding advances.
-35-
<PAGE>
Information related to short-term borrowings are as follows (in thousands):
1999 1998
------ ------
Maximum Amount Outstanding $72,000 $95,250
Average Amount Outstanding 50,847 29,547
Weighted Average Interest Rate 5.93% 6.38%
6. Senior and Medium-Term Notes Payable:
Senior Notes
On August 8, 1996, WRIT entered into an underwriting agreement to sell $50
million of 7.125 percent 7-year unsecured notes due August 13, 2003, and $50
million of 7.25 percent unsecured 10-year notes due August 13, 2006. This
transaction closed on August 13, 1996. The 7-year notes were sold at 99.107
percent of par and the 10-year notes were sold at 98.166 percent of par. Net
proceeds to the Trust after deducting underwriting expenses were $97.6 million.
The 7-year notes bear an effective interest rate of 7.46 percent, and the 10-
year notes bear an effective interest rate of 7.49 percent, for a combined
effective interest rate of 7.47 percent. In 1996, WRIT used the proceeds of
these notes to pay down its lines of credit and to finance acquisitions and
capital improvements to its properties. These notes also contain certain
financial covenants including debt service coverage and permitted indebtedness
ratios which WRIT has met as of December 31, 1999.
Medium-Term Notes
On February 20, 1998, WRIT sold $50 million of 7.25 percent unsecured notes due
February 25, 2028 at 98.653 percent to yield approximately 7.36 percent. WRIT
also sold $60 million in unsecured Mandatory Par Put Remarketed Securities
("MOPPRS") at an effective borrowing rate through the remarketing date (February
2008) of approximately 6.74 percent. WRIT used the proceeds of these notes for
general business purposes, including repayment of outstanding advances under its
lines of credit and to finance acquisitions and capital improvements to its
properties. WRIT settled interest rate lock agreements for $5.4 million and
treated the cost of the interest rate caps as a transaction cost of the
borrowing. These costs are amortized over the life of the unsecured notes using
the effective interest rate method. These notes also contain certain financial
covenants including debt service coverage and permitted indebtedness ratios,
which WRIT has met as of December 31, 1999.
7. Shares of Beneficial Interest and Dividends:
In August 1997, WRIT received $61.1 million from the public sale of 3,750,000
shares. WRIT's offering costs were approximately $200,000, resulting in net
proceeds received by the Trust of $60.9 million. Approximately $23.0 million of
the net proceeds was used to repay certain borrowings outstanding under the
Trust's lines of credit resulting from 1997 property acquisitions. The balance
of the net proceeds was used to acquire income producing properties and for
capital improvements.
The following is a breakdown of the taxable percentage of WRIT's dividends for
1999, 1998 and 1997, respectively:
Ordinary Income Return of Capital
--------------- -----------------
1999 100% 0%
1998 98% 2%
1997 93% 7%
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<PAGE>
8. Share Options and Grants:
WRIT maintains an Incentive Stock Option Plan (the "Plan"), which includes
qualified and non-qualified options. As of December 31, 1999, 1.5 million
shares may be awarded to eligible employees. Under the Plan, 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. Options may be granted under
the Plan at any time prior to June 25, 2001. Activity under the Plan is
summarized below:
<TABLE>
<CAPTION>
1999 1998 1997
--------------------- ------------------- --------------------
Wtd Avg Wtd Avg Wtd Avg
Shares Ex Price Shares Ex Price Shares Ex Price
------ -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at January 1 806,000 $16.83 409,000 $15.93 365,000 $14.78
Granted 513,000 14.47 430,000 17.59 183,000 16.13
Exercised (12,000) 15.89 (8,000) 12.41 (125,000) 12.58
Expired (34,000) 17.28 (25,000) 16.76 (14,000) 18.33
Outstanding at December 31 1,273,000 15.87 806,000 16.83 409,000 15.93
Exercisable at December 31 560,000 16.54 288,000 15.90 173,000 15.84
</TABLE>
560,000 of the exercisable options outstanding at December 31, 1999 have
exercise prices between $12.410 and $20.625, with a weighted-average exercise
price of $16.54 and a weighted average remaining contractual life of 7.53 years.
The remaining 713,000 options have exercise prices between $14.47 and $17.59,
with a weighted average exercise price of $15.35 and a remaining contractual
life of 9.72 years.
WRIT accounts for the Plan and the non-qualified share options granted under APB
Opinion No. 25, under which no compensation cost has been recognized. Had
compensation cost for these plans been determined consistent with SFAS No. 123,
"Accounting for Stock-Based Compensation," WRIT's net income and earnings per
share would have been reduced to the following pro-forma amounts:
<TABLE>
<CAPTION>
1999 1998 1997
------ ------ ------
<S> <C> <C> <C> <C>
Net Income: As Reported $44,301 $41,064 $30,136
Pro-Forma 43,419 40,240 29,780
Basic Earnings Per Share: As Reported 1.24 1.15 0.90
Pro-Forma 1.22 1.13 0.89
Weighted-average fair value of options
granted 1.76 1.92 1.94
Weighted-average assumptions:
Expected lives (years) 7 7 7
Risk free interest rate 6.42% 5.09% 5.75%
Expected volatility 21.05% 19.21% 17.41%
Expected dividend yield 7.12% 6.27% 5.79%
</TABLE>
Because the method of accounting has not been applied to options granted prior
to January 1, 1995, the resulting pro-forma compensation may not be
representative of that to be expected in future years. The assumptions used in
the calculations of weighted average fair value of options granted are as
prescribed under accounting principles generally accepted in the United States.
Such assumptions may not be the same as those used by the financial community
and others in determining the fair value of such options.
WRIT has computed basic earnings per share. There was no impact of dilution of
common equivalent shares on the basic weighted-average shares outstanding for
the years ended December 31, 1999, 1998 and 1997.
During 1999 and 1998, WRIT issued 12,299 and 9,692 share grants, respectively,
to executives and trustees of the Trust. The respective compensation expense
was recorded based upon the share price at the grant date. Share grants are
awarded by the compensation committee of the Board of Trustees.
-37-
<PAGE>
9. Benefit Plans:
During 1996, management adopted an Incentive Compensation Plan ("the
Compensation Plan") for its senior personnel which is intended to align their
compensation growth with shareholders' interests. Essentially, the Compensation
Plan limits future salary increases and provides cash bonus incentives, share
options under the Incentive Share Option Plan and share grants under the Share
Grant Plan based on performance. The financial incentives to management are
earned after WRIT has achieved a prescribed level of growth. This plan is
effective from 1996 forward and is reviewed by the Board of Trustees'
Compensation Committee each year.
In 1997, WRIT implemented a Retirement Savings Plan (the "Savings Plan"). It
was 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.
WRIT maintained 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 terminated the
plan as of 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. The effects of the pension plan are immaterial to WRIT's
financial statements.
10. Fair Value of Financial Instruments:
Statement of Financial Accounting Standards No. 107 requires disclosure of the
fair value of financial instruments. Whenever possible the estimated fair value
has been determined using quoted market information as of December 31, 1999.
The estimated fair value information presented is not necessarily indicative of
amounts the Trust could realize currently in a market sale since the Trust may
be unable to sell such instruments due to contractual restrictions or the lack
of an established market. The estimated market values have not been updated
since December 31, 1999, therefore, current estimates of fair value may differ
significantly from the amounts presented.
Below is a summary of significant methodologies used in estimating fair values
and a schedule of fair values at December 31, 1999.
Cash and cash equivalents
Includes cash and commerical paper with remaining maturities of less than 90
days, which are valued at the carrying value.
Mortgage notes payable
Mortgage notes payable consist of instruments in which certain of the Trust's
real estate assets are used for collateral. The fair value of the mortgage
notes payable is estimated based upon published rates or dealer quotes for
instruments with similar terms and maturities.
Lines of credit payable
Lines of credit payable consist of bank facilities which the Trust uses for
various purposes including working capital, acquisition funding or capital
improvements. The lines of credit advances are priced at a specified rate plus
a spread. The carrying value of the lines of credit payable is estimated to be
market value since the interest rate adjusts with the market.
Notes payable
Notes payable consists of $50 million, 7.125 %, 7 year unsecured notes due
August 13, 2003, $50 million, 7.25%, 10 year unsecured notes due August 13,
2006, $50 million, 7.25%, 20 year unsecured notes due February 25, 2028 and $60
million unsecured Mandatory Par Put Remarketed Securities with an effective
yield of 6.74%. The fair value of these securities is estimated based on
published rates or dealer quotes for securities with similar terms and
characteristics.
-38-
<PAGE>
<TABLE>
<CAPTION>
1999 1998
--------------------------- ---------------------------
(In thousands) Carrying Value Fair Value Carrying Value Fair Value
-------------- ---------- -------------- ----------
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 4,716 $ 4,716 $ 4,595 $ 4,595
Mortgage notes payable $ 87,037 $ 84,520 N/A N/A
Lines of credit payable $ 33,000 $ 33,000 $ 44,000 $ 44,000
Notes payable $210,000 $192,420 $210,000 $202,900
</TABLE>
11. Rentals Under Operating Leases:
Noncancellable commercial operating leases provide for minimum rental income
during each of the next five years of approximately $79.6 million, $69.0
million, $50.6 million, $38.0 million, $27.0 million and $63.0 million
thereafter. Apartment leases are not included as they are generally for one
year. Most of these commercial leases 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
$425,000, $462,000 and $351,000 in 1999, 1998 and 1997, respectively.
12. Contingencies:
In the normal course of business, WRIT is involved in various types of pending
or unasserted claims. In the opinion of management, these claims will not have
a material impact on the financial condition or future operations of the Trust.
13. Segment Information:
WRIT has four reportable segments: Office Buildings, Industrial/Flex
Properties, Apartment Buildings, and Retail Centers. Office Buildings represent
52 percent of real estate rental revenue and provide office space for various
types of businesses. Industrial/Flex Properties represent 14 percent of real
estate rental revenue and are used for warehousing and distribution. Apartment
Buildings represent 19 percent of real estate rental revenue and provide housing
for families throughout the Washington Metropolitan area. Retail Centers
represent 15 percent of real estate rental revenue and are retail outlets for a
variety of stores.
The accounting policies of the segments are the same as those described in the
summary of significant accounting policies. WRIT evaluates performance based
upon income from real estate from the combined properties in each segment.
-39-
<PAGE>
WRIT's reportable segments are a consolidation of related properties, which
offer different products. They are managed separately because each segment
requires different operating, pricing and leasing strategies. All of the
properties have been acquired separately and are incorporated into the
applicable segment.
<TABLE>
<CAPTION>
1999
(in thousands)
---------------------------------------------------------------------------------
Industrial/
Office Flex Apartment Retail Corporate
Buildings Properties Buildings Centers and Other Consolidated
--------- ----------- --------- ------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Real estate rental revenue $ 61,657 $ 16,196 $22,926 $18,196 $ -- $118,975
Real estate expenses 18,950 3,568 8,714 4,049 -- 35,281
-------- -------- ------- ------- -------- --------
Operating income 42,707 12,628 14,212 14,147 -- 83,694
Depreciation and amortization 10,979 3,301 2,915 2,395 -- 19,590
-------- -------- ------- ------- -------- --------
Income from real estate 31,728 9,327 11,322 11,682 -- 64,104
Other income -- -- -- -- 732 732
Interest expense (1,731) -- (1,145) (653) (18,742) (22,271)
General and administrative -- -- -- -- (6,173) (6,173)
-------- -------- ------- ------- -------- --------
Income before gain on sale
of real estate 29,997 9,327 10,152 11,099 (24,183) 36,392
-------- -------- ------- ------- -------- --------
Gain on sale of real estate -- -- -- -- 7,909 7,909
-------- -------- ------- ------- -------- --------
Net income $ 29,997 $ 9,327 $10,152 $11,099 $(16,274) $ 44,301
======== ======== ======= ======= ======== ========
Capital investments $ 37,691 $ 19,591 $20,324 $ 2,049 $ 1,216 $ 80,871
======== ======== ======= ======= ======== ========
Total assets $321,741 $105,177 $79,548 $84,041 $ 17,973 $608,480
======== ======== ======= ======= ======== ========
<CAPTION>
1998
(in thousands)
---------------------------------------------------------------------------------
Industrial/
Office Flex Apartment Retail Corporate
Buildings Properties Buildings Centers and Other Consolidated
--------- ----------- --------- ------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Real estate rental revenue $ 51,311 $13,547 $21,170 $17,569 $ -- $103,597
Real estate expenses 16,610 2,703 8,096 3,705 -- 31,114
-------- ------- ------- ------- -------- --------
Operating income 34,701 10,844 13,074 13,864 -- 72,483
Depreciation and amortization 8,447 2,330 2,581 2,041 -- 15,399
-------- ------- ------- ------- -------- --------
Income from real estate 26,254 8,514 10,493 11,823 -- 57,084
Other income -- -- -- -- 880 880
Interest expense (69) -- -- (665) (16,372) (17,106)
General and administrative -- -- -- -- (6,558) (6,558)
-------- ------- ------- ------- -------- --------
Income before gain on sale of
real estate 26,185 8,514 10,493 11,158 (22,050) 34,300
-------- ------- ------- ------- -------- --------
Gain on sale of real estate -- -- -- -- 6,764 6,764
-------- ------- ------- ------- -------- --------
Net income $ 26,185 $ 8,514 $10,493 $11,158 $(15,286) $ 41,064
======== ======= ======= ======= ======== ========
Capital investments $ 54,389 $34,706 $ 3,012 $ 8,755 $ 1,967 $102,829
======== ======= ======= ======= ======== ========
Total assets $300,043 $90,077 $65,679 $84,198 $ 18,710 $558,707
======== ======= ======= ======= ======== ========
</TABLE>
-40-
<PAGE>
<TABLE>
<CAPTION>
1997
(in thousands)
---------------------------------------------------------------------------------
Industrial/
Office Flex Apartment Retail Corporate
Buildings Properties Buildings Centers and Other Consolidated
--------- ----------- --------- ------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Real estate rental revenue $ 35,972 $ 9,877 $18,040 $15,540 $ -- $ 79,429
Real estate expenses 12,579 2,051 7,145 3,684 -- 25,459
-------- ------- ------- ------- -------- --------
Operating income 23,393 7,826 10,895 11,856 -- 53,970
Depreciation and amortization 5,404 1,585 2,091 1,831 -- 10,911
-------- ------- ------- ------- -------- --------
Income from real estate 17,989 6,241 8,804 10,025 -- 43,059
Other income -- -- -- -- 1,011 1,011
Interest expense -- -- -- (667) (9,014) (9,691)
General and administrative -- -- -- -- (4,243) (4,243)
-------- ------- ------- ------- -------- --------
Net income $ 17,989 $ 6,241 $ 8,804 $ 9,348 $(12,246) $ 30,136
======== ======= ======= ======= ======== ========
Capital investments $106,264 $22,919 $19,885 $ 3,649 $ -- $152,717
======== ======= ======= ======= ======== ========
Total assets $253,233 $60,290 $65,087 $77,233 $ 12,728 $468,571
======== ======= ======= ======= ======== ========
</TABLE>
14. Subsequent Event (Unaudited):
Subsequent to December 31, 1999, WRIT closed on the sale of Prince William
Plaza. On February 29, 2000, WRIT sold this property for $2.8 million resulting
in a gain of $1.5 million. WRIT intends to use these proceeds to purchase other
real estate assets.
-41-
<PAGE>
Schedule III
WASHINGTON REAL ESTATE INVESTMENT TRUST AND SUBSIDIARIES
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>
Office Buildings
10400 Connecticut Avenue Maryland $ 222,000 $ 1,691,000 $ 3,541,000
1901 Pennsylvania Avenue Washington, D.C. 892,000 3,481,000 6,005,000
51 Monroe Street Maryland 840,000 10,869,000 9,966,000
7700 Leesburg Pike Virginia 3,669,000 4,000,000 6,037,000
515 King Street Virginia 4,102,000 3,931,000 1,173,000
The Lexington Building Maryland 1,180,000 1,263,000 668,000
The Saratoga Building Maryland 1,464,000 1,554,000 1,042,000
Brandywine Center Maryland 718,000 735,000 500,000
Tycon Plaza II Virginia 3,262,000 7,243,000 2,091,000
Tycon Plaza III Virginia 3,255,000 7,794,000 2,026,000
6110 Executive Boulevard Maryland 4,621,000 11,895,000 3,196,000
1220 19th Street Washington, D.C. 7,802,000 11,366,000 574,000
Maryland Trade Center I Maryland 3,330,000 12,747,000 2,499,000
Maryland Trade Center II Maryland 2,826,000 9,487,000 1,090,000
1600 Wilson Boulevard Virginia 6,661,000 16,740,000 878,000
7900 Westpark Drive Virginia 12,049,000 70,416,000 2,035,000
8230 Boone Boulevard Virginia 1,417,000 6,760,000 158,000
Woodburn Medical Park I/(a)/ Virginia 2,563,000 12,530,000 316,000
Woodburn Medical Park II/(a)/ Virginia 2,632,000 17,612,000 247,000
800 Jefferson Plaza Maryland 2,296,000 12,188,000 185,000
1700 Research Blvd. Maryland 1,847,000 11,105,000 86,000
Parklawn Plaza Maryland 714,000 4,049,000 14,000
------------ ------------ ------------
68,362,000 239,456,000 44,327,000
------------ ------------ ------------
Retail Centers
Concord Centre Virginia 413,000 850,000 2,905,000
Bradlee Virginia 4,152,000 5,428,000 6,836,000
Clairmont Maryland 155,000 892,000 1,016,000
Chevy Chase Metro Plaza Washington, D.C. 1,549,000 4,304,000 3,010,000
Prince William Plaza/(g)/ Virginia 181,000 820,000 1,040,000
Takoma Park Maryland 415,000 1,085,000 1,000
Westminster Maryland 553,000 1,889,000 1,818,000
Wheaton Park Maryland 796,000 857,000 3,219,000
Montgomery Village Center Maryland 11,624,000 9,105,000 959,000
Shoppes of Foxchase Virginia 5,838,000 2,980,000 1,324,000
Frederick County Square/(a)/ Maryland 6,561,000 6,830,000 1,312,000
South Washington St. Virginia 2,624,000 3,546,000 117,000
------------ ------------ ------------
34,861,000 38,586,000 23,557,000
------------ ------------ ------------
<CAPTION>
Gross Amounts at which carried at
December 31, 1999 Accumulated
------------------------------------- Depreciation
Buildings at
and December 31,
Properties Land Improvements Total/(d)/ 1999
---------- ------ ------------ ---------- ------------
<S> <C> <C> <C> <C>
Office Buildings
10400 Connecticut Avenue $ 222,000 $ 5,232,000 $ 5,454,000 $ 2,008,000
1901 Pennsylvania Avenue 892,000 9,486,000 10,378,000 4,487,000
51 Monroe Street 840,000 20,835,000 21,675,000 8,071,000
7700 Leesburg Pike 3,669,000 10,037,000 13,706,000 1,652,000
515 King Street 4,102,000 5,104,000 9,206,000 822,000
The Lexington Building 1,180,000 1,931,000 3,111,000 290,000
The Saratoga Building 1,464,000 2,596,000 4,060,000 468,000
Brandywine Center 718,000 1,235,000 1,953,000 185,000
Tycon Plaza II 3,262,000 9,334,000 12,596,000 1,312,000
Tycon Plaza III 3,255,000 9,820,000 13,075,000 1,334,000
6110 Executive Boulevard 4,621,000 15,091,000 19,712,000 2,582,000
1220 19th Street 7,802,000 11,940,000 19,742,000 1,741,000
Maryland Trade Center I 3,330,000 15,246,000 18,576,000 1,957,000
Maryland Trade Center II 2,826,000 10,577,000 13,403,000 1,289,000
1600 Wilson Boulevard 6,661,000 17,618,000 24,279,000 1,341,000
7900 Westpark Drive 12,049,000 72,451,000 84,500,000 4,673,000
8230 Boone Boulevard 1,417,000 6,918,000 8,335,000 296,000
Woodburn Medical Park I/(a)/ 2,563,000 12,846,000 15,409,000 476,000
Woodburn Medical Park II/(a)/ 2,632,000 17,859,000 20,491,000 684,000
800 Jefferson Plaza 2,296,000 12,373,000 14,669,000 256,000
1700 Research Blvd. 1,847,000 11,191,000 13,038,000 233,000
Parklawn Plaza 714,000 4,063,000 4,777,000 17,000
------------ ------------ ------------ ------------
68,362,000 283,783,000 352,145,000 36,174,000
------------ ------------ ------------ ------------
Retail Centers
Concord Centre 413,000 3,755,000 4,168,000 1,393,000
Bradlee 4,152,000 12,264,000 16,416,000 3,788,000
Clairmont 155,000 1,908,000 2,063,000 939,000
Chevy Chase Metro Plaza 1,549,000 7,314,000 8,863,000 1,947,000
Prince William Plaza/(g)/ 181,000 1,860,000 2,041,000 1,151,000
Takoma Park 415,000 1,086,000 1,501,000 814,000
Westminster 553,000 3,707,000 4,260,000 2,243,000
Wheaton Park 796,000 4,076,000 4,872,000 918,000
Montgomery Village Center 11,624,000 10,064,000 21,688,000 1,398,000
Shoppes of Foxchase 5,838,000 4,304,000 10,142,000 548,000
Frederick County Square/(a)/ 6,561,000 8,142,000 14,703,000 1,228,000
South Washington St. 2,624,000 3,663,000 6,287,000 184,000
------------ ------------ ------------ ------------
34,861,000 62,143,000 97,004,000 16,551,000
------------ ------------ ------------ ------------
<CAPTION>
Year of Date of Net Rentable Depreciation
Properties Construction Acquisition Square Feet/(f)/ Units Life/(e)/
---------- ------------ ----------- ---------------- ----- ------------
<S> <C> <C> <C> <C> <C>
Office Buildings
10400 Connecticut Avenue 1965 August 1979 65,000 31 Years
1901 Pennsylvania Avenue 1960 May 1977 97,000 28 Years
51 Monroe Street 1975 August 1979 210,000 41 Years
7700 Leesburg Pike 1976 October 1990 145,000 50 Years
515 King Street 1966 July 1992 78,000 50 Years
The Lexington Building 1970 November 1993 47,000 50 Years
The Saratoga Building 1977 November 1993 59,000 50 Years
Brandywine Center 1969 November 1993 35,000 50 Years
Tycon Plaza II 1981 June 1994 131,000 50 Years
Tycon Plaza III 1978 June 1994 152,000 50 Years
6110 Executive Boulevard 1971 January 1995 199,000 30 Years
1220 19th Street 1976 November 1995 104,000 30 Years
Maryland Trade Center I 1981 May 1996 191,000 30 Years
Maryland Trade Center II 1984 May 1996 159,000 30 Years
1600 Wilson Boulevard 1973 October 1997 167,000 30 Years
7900 Westpark Drive 1972/1986/1999 November 1997 527,000 30 Years
8230 Boone Boulevard 1981 September 1998 58,000 30 Years
Woodburn Medical Park I/(a)/ 1984 November 1998 71,000 30 Years
Woodburn Medical Park II/(a)/ 1988 November 1998 96,000 30 Years
800 Jefferson Plaza 1985 May 1999 115,000 30 Years
1700 Research Blvd. 1982 May 1999 103,000 30 Years
Parklawn Plaza 1986 November 1999 40,000 30 Years
---------
2,849,000
---------
Retail Centers
Concord Centre 1960 December 1973 76,000 33 Years
Bradlee 1955 December 1984 168,000 40 Years
Clairmont 1965 December 1976 40,000 39 Years
Chevy Chase Metro Plaza 1975 September 1985 51,000 50 Years
Prince William Plaza/(g)/ 1967 August 1968 55,000 50 Years
Takoma Park 1962 July 1963 59,000 50 Years
Westminster 1969 September 1972 165,000 37 Years
Wheaton Park 1967 September 1977 71,000 49 Years
Montgomery Village Center 1969 December 1992 196,000 50 Years
Shoppes of Foxchase 1960 June 1994 128,000 50 Years
Frederick County Square/(a)/ 1973 August 1995 233,000 30 Years
South Washington St. 1959 June 1998 45,000 30 Years
---------
1,287,000
---------
</TABLE>
-42-
<PAGE>
Schedule III (Continued)
<TABLE>
<CAPTION>
Initial Cost/(b)/ Net
----------------------------- Improvements
Building (Retirements)
and since
Properties Location Land Improvements Acquisition
---------- -------- ---- ------------ -------------
<S> <C> <C> <C> <C>
Apartment Buildings
Country Club Towers/(a)/ Virginia $ 299,000 $ 2,561,000 $ 2,735,000
Munson Hill Towers/(a)/ Virginia (c) -- 3,337,000 4,420,000
Park Adams/(a)/ Virginia 287,000 1,654,000 3,731,000
Roosevelt Towers/(a)/ Virginia 336,000 1,996,000 2,005,000
3801 Connecticut Avenue Washington, D.C. 420,000 2,678,000 4,585,000
The Ashby at McLean/(a)/ Virginia 4,356,000 17,125,000 2,603,000
Walker House Apartments Virginia 2,851,000 7,946,000 828,000
Bethesda Hill Maryland 3,900,000 13,338,000 2,029,000
Avondale/(a)/ Maryland 3,460,000 9,244,000 401,000
------------ ------------ ------------
15,909,000 59,879,000 23,337,000
------------ ------------ ------------
Industrial Distribution /Flex
Property
Pepsi-Cola Maryland 760,000 1,792,000 1,560,000
Capitol Freeway Center Washington, D.C. 300,000 1,205,000 2,637,000
Fullerton Virginia 950,000 3,317,000 944,000
Charleston Business Center Maryland 2,045,000 2,091,000 251,000
Tech 100 Industrial Park Maryland 2,086,000 4,744,000 365,000
Crossroads Distribution Center Maryland 894,000 1,945,000 160,000
The Alban Business Center Virginia 878,000 3,298,000 377,000
The Earhart Building Virginia 916,000 4,128,000 260,000
Ammendale Technology Park I Maryland 1,335,000 6,492,000 821,000
Ammendale Technology Park II Maryland 862,000 5,016,000 270,000
Pickett Industrial Park Virginia 3,300,000 4,899,000 686,000
Northern VA Industrial Park Virginia 4,971,000 26,461,000 1,780,000
8900 Telegraph Road Virginia 372,000 1,538,000 55,000
Dulles South IV Virginia 913,000 5,996,000 70,000
Sully Square Virginia 1,052,000 6,506,000 80,000
Amvax Virginia 246,000 1,972,000 --
------------ ------------ ------------
21,880,000 81,400,000 10,316,000
------------ ------------ ------------
Totals $141,012,000 $419,321,000 $101,537,000
============ ============ ============
<CAPTION>
Gross Amounts at which carried at
December 31, 1999 Accumulated
-------------------------------------- Depreciation
Buildings at
and December 31,
Properties Land Improvements Total/(d)/ 1999
---------- ---- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Apartment Buildings
Country Club Towers/(a)/ $ 299,000 $ 5,296,000 $ 5,595,000 $ 3,188,000
Munson Hill Towers/(a)/ -- 7,757,000 7,757,000 4,397,000
Park Adams/(a)/ 287,000 5,385,000 5,672,000 2,542,000
Roosevelt Towers/(a)/ 336,000 4,001,000 4,337,000 2,325,000
3801 Connecticut Avenue 420,000 7,263,000 7,683,000 4,201,000
The Ashby at McLean/(a)/ 4,356,000 19,728,000 24,084,000 2,115,000
Walker House Apartments 2,851,000 8,774,000 11,625,000 1,050,000
Bethesda Hill 3,900,000 15,367,000 19,267,000 1,006,000
Avondale/(a)/ 3,460,000 9,645,000 13,105,000 110,000
------------ ------------ ------------ -----------
15,909,000 83,216,000 99,125,000 20,934,000
------------ ------------ ------------ -----------
Industrial Distribution /Flex
Property
Pepsi-Cola 760,000 3,352,000 4,112,000 814,000
Capitol Freeway Center 300,000 3,842,000 4,142,000 1,969,000
Fullerton 950,000 4,261,000 5,211,000 1,282,000
Charleston Business Center 2,045,000 2,342,000 4,387,000 331,000
Tech 100 Industrial Park 2,086,000 5,109,000 7,195,000 834,000
Crossroads Distribution Center 894,000 2,105,000 2,999,000 289,000
The Alban Business Center 878,000 3,675,000 4,553,000 448,000
The Earhart Building 916,000 4,388,000 5,304,000 459,000
Ammendale Technology Park I 1,335,000 7,313,000 8,648,000 713,000
Ammendale Technology Park II 862,000 5,286,000 6,148,000 517,000
Pickett Industrial Park 3,300,000 5,585,000 8,885,000 375,000
Northern VA Industrial Park 4,971,000 28,241,000 33,212,000 1,436,000
8900 Telegraph Road 372,000 1,593,000 1,965,000 83,000
Dulles South IV 913,000 6,066,000 6,979,000 192,000
Sully Square 1,052,000 6,586,000 7,638,000 154,000
Amvax 246,000 1,972,000 2,218,000 19,000
------------ ------------ ------------ -----------
21,880,000 91,716,000 113,596,000 9,915,000
------------ ------------ ------------ -----------
Totals $141,012,000 $520,858,000 $661,870,000 $83,574,000
============ ============ ============ ===========
<CAPTION>
Year of Date of Net Rentable Depreciation
Properties Construction Acquisition Square Feet/(f)/ Units Life/(c)/
---------- ------------ ----------- ---------------- ----- ---------
<S> <C> <C> <C> <C> <C>
Apartment Buildings
Country Club Towers/(a)/ 1965 July 1969 276,000 227 35 Years
Munson Hill Towers/(a)/ 1963 January 1970 340,000 279 33 Years
Park Adams/(a)/ 1959 January 1969 210,000 200 35 Years
Roosevelt Towers/(a)/ 1964 May 1965 229,000 191 40 Years
3801 Connecticut Avenue 1951 January 1963 242,000 307 30 Years
The Ashby at McLean/(a)/ 1982 August 1996 349,000 250 30 Years
Walker House Apartments 1971 March 1996 148,000 196 30 Years
Bethesda Hill 1986 November 1997 226,000 195 30 Years
Avondale/(a)/ 1987 September 1999 162,000 237 40 Years
--------- -----
2,182,000 2,082
--------- -----
Industrial Distribution /Flex
Property
Pepsi-Cola 1971 October 1987 69,000 40 Years
Capitol Freeway Center 1940 July 1974 145,000 25 Years
Fullerton 1980 September 1985 103,000 50 Years
Charleston Business Center 1973 November 1993 85,000 50 Years
Tech 100 Industrial Park 1990 May 1995 167,000 30 Years
Crossroads Distribution Center 1987 December 1995 85,000 30 Years
The Alban Business Center 1981 October 1996 87,000 30 Years
The Earhart Building 1987 December 1996 92,000 30 Years
Ammendale Technology Park I 1985 February 1997 167,000 30 Years
Ammendale Technology Park II 1986 February 1997 108,000 30 Years
Pickett Industrial Park 1973 October 1997 246,000 30 Years
Northern VA Industrial Park 1968/1991 May 1998 790,000 30 Years
8900 Telegraph Road 1985 September 1998 32,000 30 Years
Dulles South IV 1988 January 1988 83,000 30 Years
Sully Square 1966 April 1999 95,000 30 Years
Amvax 1966 September 1999 31,000 30 Years
--------- -----
2,385,000 --
--------- -----
Totals 8,703,000 2,082
========= =====
</TABLE>
Notes:
/(a)/ At December 31, 1998, WRIT was obligated under the following mortgage
encumbrances: $13,700,000 on the Ashby, $8,679,000 on Avondale, $7,755,000
on Country Club Towers, $7,178,000 on Frederick County Square, $10,560,000
on Munson Hill Towers, $9,625,000 on Park Adams, $8,360,000 on Roosevelt
Towers, $9,056,000 on Woodburn Medical Park I and $12,136,000 on Woodburn
Medical Park II.
/(b)/ The purchase of real estate investments has been divided between land and
buildings and improvements on the basis of management determination of the
relative values.
/(c)/ The site of Munson Hill Towers is rented under a ground lease requiring
annual payments of $22,600 until the expiration of the lease in 2060.
/(d)/ At December 31, 1999, total land, buildings and improvements are carried
at 667,000,000 for federal income tax purposes.
/(e)/ The useful life shown is for the main structure. Buildings and
improvements are depreciated over various useful lives ranging from 3 to
50 years.
/(f)/ Residential properties are presented in gross square feet.
/(g)/ Property was sold subsequent to December 31, 1999.
-43-
<PAGE>
Schedule III
(Continued)
WASHINGTON REAL ESTATE INVESTMENT TRUST AND SUBSIDIARIES
SUMMARY OF REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
(IN THOUSANDS)
The following is a reconciliation of real estate assets and accumulated
depreciation for the years ended December 31, 1999, 1998, and 1997:
<TABLE>
<CAPTION>
Years Ended December 31
1999 1998 1997
------ ------ -----
<S> <C> <C> <C>
Real Estate Assets
Balance, beginning of period $598,874 $504,315 $352,579
Additions - property acquisitions 56,837 82,210 138,802
- improvements 23,491 18,652 13,915
Deductions - write-off of fully depreciated assets -- -- (981)
Deductions - property sales 17,332 (6,303) --
-------- -------- --------
Balance, end of period $661,870 $598,874 $504,315
======== ======== ========
Accumulated Depreciation
Balance, beginning of period $ 68,301 $ 56,015 $ 46,639
Additions - depreciation 18,654 14,566 10,357
Deductions - write-off of fully depreciated assets -- -- (981)
Deductions - property sales (3,381) (2,280) --
-------- -------- --------
Balance, end of period $ 83,574 $ 68,301 $ 56,015
======== ======== ========
</TABLE>
-44-
<PAGE>
WASHINGTON REAL ESTATE INVESTMENT TRUST AND SUBSIDIARIES
SUPPLEMENTARY INFORMATION:
QUARTERLY FINANCIAL RESULTS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Quarter
-------------------------------------
First Second Third Fourth
------- -------- ------- --------
<S> <C> <C> <C> <C>
1999:
Real estate rental revenue $27,654 $28,864 $29,566 $32,891
Net income 16,358 8,765 8,826 10,352
Net income per share*/1/ $0.46 $0.25 $0.25 $0.29
1998:
Real estate rental revenue $24,501 $25,413 $26,243 $27,440
Net income 14,499 8,351 8,277 9,937
Net income per share* $0.41 $0.23 $0.23 $0.28
1997:
Real estate rental revenue $18,498 $19,104 $19,436 $22,391
Net income 7,028 7,140 7,664 8,304
Net income per share $0.22 $0.22 $0.23 $0.23
</TABLE>
* Includes gain on the sale of real estate of $.22 per share in the fourth
quarter of 1999 and $.16 and $.02 per share in the first and fourth quarters
of 1998, respectively.
/1/ Net income per share does not sum to the total net income per share for the
year-ended December 31, 1999 due to rounding differences.
-45-
<PAGE>
Exhibit 4(a)
AMENDED AND RESTATED CREDIT AGREEMENT
DATED AS OF MARCH 17,1999
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>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I - DEFINITIONS......................................................................................................... 2
ARTICLE II - THE CREDIT......................................................................................................... 12
2.1. Commitment................................................................................................................ 12
----------
2.2. Final Principal Payment................................................................................................... 13
-----------------------
2.3. Ratable Loans............................................................................................................. 13
-------------
2.4. Applicable Margins........................................................................................................ 13
------------------
2.5. Commitment Fee............................................................................................................ 14
--------------
2.6. Facility Fee.............................................................................................................. 14
------------
2.7. Minimum Amount of Each Advance............................................................................................ 14
------------------------------
2.8. Optional Principal Payments............................................................................................... 14
---------------------------
2.9. Method of Selecting Types and Interest Periods for New Advances........................................................... 14
---------------------------------------------------------------
2.10. Conversion and Continuation of Outstanding Advances...................................................................... 15
---------------------------------------------------
2.11. Changes in Interest Rate, Etc. .......................................................................................... 15
------------------------------
2.12. Rates Applicable After Default........................................................................................... 16
------------------------------
2.13. Method of Payment........................................................................................................ 16
-----------------
2.14. Notes; Telephonic Notices................................................................................................ 16
-------------------------
2.15. Interest Payment Dates; Interest and Fee Basis........................................................................... 17
----------------------------------------------
2.16. Notification of Advances, Interest Rates and Prepayments................................................................. 17
--------------------------------------------------------
2.17. Lending Installations.................................................................................................... 17
---------------------
2.18. Non-Receipt of Funds by the Agent........................................................................................ 17
---------------------------------
2.19. Withholding Tax Exemption................................................................................................ 17
-------------------------
2.20. Reduction in Aggregate Commitment........................................................................................ 18
---------------------------------
ARTICLE III - CHANGE IN CIRCUMSTANCES........................................................................................... 18
3.1. Yield Protection.......................................................................................................... 18
----------------
3.2. Changes in Capital Adequacy Regulations................................................................................... 19
---------------------------------------
3.3. Availability of LIBOR Advances............................................................................................ 19
------------------------------
3.4. Funding Indemnification................................................................................................... 20
-----------------------
3.5. Lender Statements; Survival of Indemnity.................................................................................. 20
----------------------------------------
3.6. Replacement of Lender by Reason of Change in Circumstances................................................................ 20
----------------------------------------------------------
ARTICLE IV - CONDITIONS PRECEDENT............................................................................................... 21
4.1. Initial Advance........................................................................................................... 21
---------------
4.2. Each Advance.............................................................................................................. 22
------------
ARTICLE V - REPRESENTATIONS AND WARRANTIES...................................................................................... 22
5.1. Existence................................................................................................................. 23
---------
5.2. Authorization and Validity................................................................................................ 23
--------------------------
5.3. No Conflict; Government Consent........................................................................................... 23
-------------------------------
5.4. Material Adverse Change................................................................................................... 23
-----------------------
5.5. Taxes..................................................................................................................... 23
-----
5.6. Litigation and Guarantee Obligations...................................................................................... 23
------------------------------------
5.7. No Subsidiaries........................................................................................................... 24
---------------
5.8. ERISA..................................................................................................................... 24
-----
5.9. Accuracy of Information................................................................................................... 24
-----------------------
5.10. Regulation U............................................................................................................. 24
------------
5.11. Material Agreements...................................................................................................... 24
-------------------
5.12. Compliance With Laws..................................................................................................... 24
--------------------
5.13. Ownership of Properties.................................................................................................. 24
-----------------------
</TABLE>
i
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
5.14. Investment Company Act................................................................................................... 25
----------------------
5.15. Public Utility Holding Company Act....................................................................................... 25
----------------------------------
5.16. Solvency................................................................................................................. 25
--------
5.17. Insurance................................................................................................................ 25
---------
5.18. REIT Status.............................................................................................................. 26
-----------
5.19. Year 2000................................................................................................................ 26
---------
ARTICLE VI - COVENANTS.......................................................................................................... 26
6.1. Financial Reporting....................................................................................................... 26
-------------------
6.2. Use of Proceeds........................................................................................................... 27
---------------
6.3. Notice of Default......................................................................................................... 27
-----------------
6.4. Conduct of Business....................................................................................................... 28
-------------------
6.5. Taxes..................................................................................................................... 28
-----
6.6. Insurance................................................................................................................. 28
---------
6.7. Compliance with Laws...................................................................................................... 28
--------------------
6.8. Maintenance of Properties................................................................................................. 28
-------------------------
6.9. Inspection................................................................................................................ 28
----------
6.10. Maintenance of Status.................................................................................................... 28
---------------------
6.11. Dividends................................................................................................................ 28
---------
6.12. Merger................................................................................................................... 29
------
6.13. Delivery of Subsidiary Guaranties........................................................................................ 29
---------------------------------
6.14. Sale of Accounts......................................................................................................... 29
----------------
6.15. Sale and Leaseback....................................................................................................... 29
------------------
6.16. Acquisitions and Investments............................................................................................. 29
----------------------------
6.17. Liens.................................................................................................................... 30
-----
6.18. Affiliates............................................................................................................... 30
----------
6.19. Cash Flow to Debt Service Ratio.......................................................................................... 30
-------------------------------
6.20. Consolidated Tangible Net Worth.......................................................................................... 31
-------------------------------
6.21. Indebtedness and Cash Flow Covenants..................................................................................... 31
------------------------------------
6.22. Year 2000................................................................................................................ 31
---------
ARTICLE VII - DEFAULTS.......................................................................................................... 31
ARTICLE VIII - ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES................................................................... 33
8.1. Acceleration.............................................................................................................. 33
------------
8.2. Amendments................................................................................................................ 34
----------
8.3. Preservation of Rights.................................................................................................... 34
----------------------
ARTICLE IX - CENTRAL PROVISIONS................................................................................................. 34
9.1. Survival of Representations............................................................................................... 35
---------------------------
9.2. Governmental Regulation................................................................................................... 35
-----------------------
9.3. Taxes..................................................................................................................... 35
-----
9.4. Headings.................................................................................................................. 35
--------
9.5. Entire Agreement.......................................................................................................... 35
----------------
9.6. Several Obligations; Benefits of this Agreement........................................................................... 35
-----------------------------------------------
9.7. Expenses; Indemnification................................................................................................. 35
-------------------------
9.8. Numbers of Documents...................................................................................................... 36
--------------------
9.9. Accounting................................................................................................................ 36
----------
9.10. Severability of Provisions............................................................................................... 36
--------------------------
9.11. Nonliability of Lenders.................................................................................................. 36
-----------------------
</TABLE>
ii
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
9.12. CHOICE OF LAW............................................................................................................ 36
-------------
9.13. CONSENT TO JURISDICTION.................................................................................................. 36
-----------------------
9.14. WAIVER OF JURY TRIAL..................................................................................................... 37
--------------------
ARTICLE X - THE AGENT........................................................................................................... 37
10.1. Appointment.............................................................................................................. 37
-----------
10.2. Powers................................................................................................................... 37
------
10.3. General Immunity......................................................................................................... 37
----------------
10.4. No Responsibility for Loans, Recitals, etc. ............................................................................. 37
-------------------------------------------
10.5. Action on Instructions of Lenders........................................................................................ 38
---------------------------------
10.6. Employment of Agents and Counsel......................................................................................... 38
--------------------------------
10.7. Reliance on Documents; Counsel........................................................................................... 38
------------------------------
10.8. Agent's Reimbursement and Indemnification................................................................................ 38
-----------------------------------------
10.9. Rights as a Lender....................................................................................................... 39
------------------
10.10. Lender Credit Decision.................................................................................................. 39
----------------------
10.11. Successor Agent......................................................................................................... 39
---------------
10.12. Commitment as a Lender.................................................................................................. 40
----------------------
ARTICLE XI - SETOFF; RATABLE PAYMENTS........................................................................................... 40
11.1. Setoff................................................................................................................... 40
------
11.2. Ratable Payments......................................................................................................... 40
----------------
ARTICLE XII - BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS................................................................. 40
12.1. Successors and Assigns................................................................................................... 40
----------------------
12.2. Participations........................................................................................................... 41
--------------
12.2.1. Permitted Participants; Effect....................................................................................... 41
------------------------------
12.2.2. Voting Rights........................................................................................................ 41
-------------
12.2.3. Benefit of Setoff.................................................................................................... 41
-----------------
12.3. Assignments.............................................................................................................. 42
-----------
12.3.1. Permitted Assignments................................................................................................ 42
---------------------
12.3.2. Effect; Effective Date............................................................................................... 42
----------------------
12.4. Dissemination of Information............................................................................................. 43
----------------------------
12.5. Tax Treatment............................................................................................................ 43
-------------
ARTICLE XIII - NOTICES.......................................................................................................... 44
13.1. Giving Notice............................................................................................................ 44
-------------
13.2. Change of Address........................................................................................................ 44
-----------------
ARTICLE XIV - COUNTERPARTS...................................................................................................... 44
ARTICLE XV - NO OFFICER, ETC. LIABILITY......................................................................................... 44
</TABLE>
iii
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT
This Amended and Restated Credit Agreement, dated as of March 17, 1999, is
among Washington Real Estate Investment Trust, a real estate investment trust
organized under the laws of the State of Maryland (the "Borrower"). The First
--------
National Bank of Chicago, as "Agent", and the Lenders (as hereinafter defined).
-----
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 New York Stock Exchange and is qualified
as a real estate investment trust.
C. Borrower (as successor by merger to Washington Real Estate Investment
Trust, a District of Columbia trust), the Agent, and the Lenders are parties to
a Credit Agreement dated as of March 1, 1995, as previously amended (the
"Existing Agreement") pursuant to which the Lender identified therein agreed to
make loans available to Borrower of up to $25,000,000. Borrower has requested
that the Existing Agreement be amended and restated to extend the term and
change the pricing. The Agent and the Lenders 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.
- 2 -
<PAGE>
"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 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.
-----------
"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
- 3 -
<PAGE>
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 31, 1999.
"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.
"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
- 4 -
<PAGE>
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 Capitalization Value 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.
"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 July 25, 1997
among the Borrower, Crestar Bank, Signet Bank/Virginia, and any other bank as
party to the Credit Agreement from time to time, and Crestar Bank, as agent, as
the same may be amended from time to time.
- 5 -
<PAGE>
"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 Fee" is defined in Section 2.6.
-----------
"Facility Termination Date" means March 17, 2002.
"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.
"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 restructurings 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.
-----------
"Guarantor" means WRIT Limited Partnership, a Delaware limited partnership.
- 6 -
<PAGE>
"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.
"Guaranty" means a guaranty of all obligations of Borrower hereunder from
Guarantor.
"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 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
- 7 -
<PAGE>
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 11 a.m. (London time) two Business Days
prior to the first day of such Interest Period, in the 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), the Guaranty, 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.
- 8 -
<PAGE>
"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.
"Note" means a promissory note, in substantially the form of Exhibit B
---------
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.
- 9 -
<PAGE>
"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.
"Pro Forma EBITDA" means, for any Person for any period, EBITDA calculated
as if the Property then owned by such Person had been owned by such Person for
the entire period.
"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.
"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 66-2/3%
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.
- 10 -
<PAGE>
"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 Capitalization Value" means for any Person for any quarter, the
product of (x) annualized EBIDTA for such Person during such quarter (which
annualized EBIDTA shall be calculated by annualizing Pro Forma EBITDA for the
most recently ended fiscal quarter), and (y) ten (10).
"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>
"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.
"Value of Unencumbered Assets," as of any date for all Unencumbered Assets
shall mean the product of (x) the annualized EBITDA from all such Unencumbered
Assets for the most recent calendar quarter for which results have been reported
to Lender (which annualized net operating income shall be determined by
multiplying the EBITDA from all such Unencumbered Assets for such calendar
quarter by four (4)), and (y) ten (10).
"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.
"Year 2000 Issues" means anticipated costs, problems and uncertainties
associated with the inability of certain computer applications to effectively
handle data including dates on and after January 1, 2000, as such inability
affects the business, operations and financial condition of the Borrower and its
Subsidiaries and of the Borrower's and its Subsidiaries' material customers,
suppliers and vendors.
"Year 2000 Program" is defined in Section 5.19.
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.
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<PAGE>
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.
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 36 month Facility term,
and the denominator of which is 36. 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 $50,000 of the $75,000 in commitment fees.
2.4. Applicable Margins. 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 as set forth in Exhibit A in accordance
with the ratings from Moody's and/or S&P for Borrower's long-term unsecured
debt. If a rating has been issued by only one of S&P or Moody's, that rating
shall determine the Applicable Margin. In the event both rating agencies have
issued a rating and the rating agencies are split on the rating for the
Borrower's long-term unsecured debt or this Facility, the lower rating shall be
deemed to be the applicable rating (e.g., if the Borrower's Moody's long-term
unsecured debt rating is Baal and its S&P long-term unsecured debt rating is BBB
then the Applicable Margins shall be computed based on the S&P rating). The
Applicable Margins shall be adjusted effective on the next Business Day
following any change in the Borrower's Moody's long-term unsecured debt rating
and/or S&P's long-term unsecured debt rating, as the case may be (provided that
if Agent does not receive
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<PAGE>
notice of a change in rating within twenty days after it occurs then any
reduction in Applicable Margin shall be effective only when such notice is
received).
In the event that either S&P or Moody's shall discontinue their ratings of
the REIT industry or the Borrower's long-term unsecured debt, a mutually
agreeable substitute rating agency shall be selected by the Required Lenders and
the Borrower. If the Required Lenders and the Borrower cannot agree on a
substitute rating agency within forty-five (45) days of such discontinuance, the
Applicable Margin to be used for the calculation of interest on Advances
hereunder shall be the highest Applicable Margin set forth in Exhibit B. Lenders
acknowledge that the rating for Borrower's unsecured long term debt may be
issued even though Borrower has no outstanding unsecured long term debt.
2.5. Commitment Fee. The Borrower agrees to pay to the Agent for the
--------------
account of each Lender a upfront commitment fee (the "Commitment Fee") equal to
--------------
three eighths of one percent (0.375%) 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. Facility Fee. The Borrower agrees to pay to the Agent for the account
------------
of each Lender a facility fee (the "Facility Fee") calculated at a per annum
------------
percentage ("Facility Fee Rate") of the total Aggregate Commitment. The
-----------------
Facility Fee Rate shall vary from time to time based on the Borrower's long term
unsecured debt rating as set forth in the table attached hereto as Exhibit A.
---------
The Facility Fee shall be paid quarterly in arrears on the last day of each
calendar quarter, beginning March 31, 1999 for the period from the date hereof
to March 31, 1999.
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,
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<PAGE>
(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.
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
- 15 -
<PAGE>
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 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
- 16 -
<PAGE>
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 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 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
- 17 -
<PAGE>
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
(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
- 18 -
<PAGE>
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 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.
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<PAGE>
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.
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, the
Guaranty, and this Agreement;
(ii) A certificate of good standing for the Borrower, certified by
the appropriate governmental officer of the State of Maryland,
and foreign qualification certificates, certified by the
appropriate governmental officer, for each
- 20 -
<PAGE>
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 Borrower's
and Guarantor's 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 and Guarantor's counsel,
addressed to the Lenders in substantially the form of
Exhibit C hereto;
---------
(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 F 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;
(xi) Information satisfactory to the Agent and the Required Lenders
regarding the Borrower's Year 2000 Program; and
(xii) 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,
- 21 -
<PAGE>
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.
-----------
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 D 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 State of Maryland, with its principal
place of business in Rockville, 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, instrument or
agreement to which the Borrower is a party or is subject, or by
- 22 -
<PAGE>
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.
5.4. Material Adverse Change. Since December 31, 1998, 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 other than Guarantor. The information set forth in Schedule 2 regarding
Guarantor is true and correct.
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.
- 23 -
<PAGE>
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.
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.
(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.
- 24 -
<PAGE>
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 New York Stock
-----------
Exchange, is qualified as a real estate investment trust and currently is in
compliance with all applicable provisions of the Code.
5.19. Year 2000. The Borrower has made a full and complete assessment of
---------
the Year 2000 Issues and has a realistic and achievable program for remediating
the Year 2000 Issues on a timely basis (the "Year 2000 Program"). Based on such
assessment and on the Year 2000 Program the Borrower does not reasonably
anticipate that Year 2000 Issues will have a Material Adverse Effect.
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;
(ii) Together with the financial statements required hereunder, a
compliance certificate in substantially the form of Exhibit D
---------
hereto signed by the Borrower's chief financial officer or
chief accounting officer showing the calculations necessary to
determine compliance with this Agreement and
- 25 -
<PAGE>
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;
(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.
- 26 -
<PAGE>
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 (including, without limitation, developments with respect to Year 2000
Issues), 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.
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
-27-
<PAGE>
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 New York 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 to
---------
declare and pay any dividends on its Capital Stock from time to time, provided
that the aggregate amount of such dividends paid with respect to any period of
four (4) fiscal quarters shall not exceed 95% of the Borrower's Funds From
Operations for the most recent period of four (4) consecutive fiscal quarters
for which financial results have been reported, and; provided, further, 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.
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;
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<PAGE>
(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".
----------------------
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 3
----------
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
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business and upon fair and reasonable terms no less favorable to the 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 $225,000,000.
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 fifty percent (50%) of
Total Capitalization Value;
(ii) Consolidated Secured Indebtedness to exceed fifteen percent (15%)
of Total Capitalization Value;
(iii) the Value of Unencumbered Assets to be less than 1.75 times the
Consolidated Senior Unsecured Indebtedness; and
(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 seventeen and one-half percent (17.5%) of Consolidated
Total Indebtedness.
6.22. Year 2000. The Borrower will take and will cause each of its
---------
Subsidiaries to take all such actions as are reasonably necessary to
successfully implement the Year 2000 Program and to assure that Year 2000 Issues
will not have a Material Adverse Effect. At the request of the Agent or any
Lender, the Borrower will provide a description of the Year 2000 Program,
together with any updates or progress reports with respect thereto.
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 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.
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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 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.
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<PAGE>
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.
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.
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<PAGE>
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.
(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.
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<PAGE>
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).
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,
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<PAGE>
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.
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
-35-
<PAGE>
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 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
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<PAGE>
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 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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<PAGE>
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.
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.
-38-
<PAGE>
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; PARTICIPATIONS
-------------------------------------------------
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 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.
--------------
- 39 -
<PAGE>
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 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
- 40 -
<PAGE>
Loan Documents. Such assignment shall be substantially in the form of
Exhibit E 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 E 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
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.
------------
- 41 -
<PAGE>
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 been executed by the Borrower, the Agent and the Lenders
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.
- 42 -
<PAGE>
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
/s/ Edmund B. Cronin, Jr.
By: _______________________________
Print Name: Edmund B. Cronin, Jr.
Title: President and Chief Executive Officer
6110 Executive Blvd.
Suite 800
Rockville, MD 20858
Phone: 301-984-9400
Facsimile: 301-984-9610
Attention: Edmund B. Cronin, Jr.
Commitments
- -----------
$25,000,000 THE FIRST NATIONAL BANK OF
CHICAGO, Individually and as Agent
By: _______________________________
Print Name: Patricia Leung
Title: Managing Director
One First National Plaza
Chicago, Illinois 60670
Attention: Corporate Real Estate Division
- 43 -
<PAGE>
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
6110 Executive Blvd.
Suite 800
Rockville, MD 20858
Phone: 301-984-9400
Facsimile: 301-984-9610
Attention: Edmund B. Cronin, Jr.
Commitments
- -----------
$25,000,000 THE FIRST NATIONAL BANK OF
CHICAGO, Individually and as Agent
/s/ Patricia Leung
By: _______________________________
Print Name: Patricia Leung
Title: Managing Director
One First National Plaza
Chicago, Illinois 60670
Attention: Corporate Real Estate Division
- 43 -
<PAGE>
EXHIBIT A
---------
PRICING GRID
------------
- -----------------------------------------------------------------------------
LIBOR CBR
Applicable Applicable Facility Fee
S&P Rating Moody's Rating Margin Margin (Per Annum)
- -----------------------------------------------------------------------------
A or higher A2 or higher 0.55% 0% 0.15%
- -----------------------------------------------------------------------------
A- A3 0.65% 0% 0.175%
- -----------------------------------------------------------------------------
BBB+ Baa1 0.70% 0% 0.175%
- -----------------------------------------------------------------------------
BBB Baa2 1.00% 0% 0.20%
- -----------------------------------------------------------------------------
BBB- Baa3 1.25% 0% 0.20%
- -----------------------------------------------------------------------------
Less than BBB- Less than Baa3 2.20% 0.50% 0.25%
- -----------------------------------------------------------------------------
Other Fees:
Up-Front Commitment Fees: 3/8 of 1%
- -----------------------------------------------------------------------------
- 44 -
<PAGE>
EXHIBIT B
---------
NOTE
$25,000,000.00 March 17, 1999
Washington Real Estate Investment Trust, a real estate investment trust
organized under the laws of the State of Maryland (the "Borrower"), promises to
--------
pay to the order of The First National Bank of Chicago, a national banking
association (the "Lender") the lesser of the principal sum of Twenty-Five
------
Million and No/100 Dollars ($25,000,000.00) or the aggregate unpaid principal
amount of all Loans made by the Lender to the Borrower pursuant to Article II
of the Credit Agreement (as the same may be amended or modified from time to
time, the "Agreement") hereinafter referred to, in immediately available
---------
funds at the main office of The First National Bank of Chicago in Chicago,
Illinois, as Agent, together with interest on the unpaid principal amount hereof
at the rates and on the dates set forth in the Agreement. The Borrower shall pay
the principal of and accrued and unpaid interest on the Loans in full on the
Facility Termination Date.
The Lender shall, and is hereby authorized to, record on the schedule
attached hereto, or to otherwise record in accordance with its usual practice,
the date and amount of each Loan and the date and amount of each principal
payment hereunder.
This Note is one of the Notes issued pursuant to, and is entitled to the
benefits of, the Amended and Restated Credit Agreement, dated as of even date
herewith among the Borrower and The First National Bank of Chicago, individually
and as Agent, and the lenders named therein, including the Lender, to which
Agreement reference is hereby made for a statement of the terms and conditions
governing this Note, including the terms and conditions under which this Note
may be prepaid or its maturity date accelerated. This Note constitutes one of
the "Loan Documents." Capitalized terms used herein and not otherwise defined
herein are used with the meanings attributed to them in the Agreement.
WASHINGTON REAL ESTATE INVESTMENT
TRUST
By: _____________________________
Print Name: _____________________
Title: __________________________
- 45 -
<PAGE>
SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL
TO
NOTE OF WASHINGTON REAL ESTATE INVESTMENT TRUST
DATED AS OF MARCH 17,1999
Date Principal Maturity of Maturity Unpaid
---- Amount Interest Principal Balance
of Loan Period Amount Paid -------
--------- ----------- -----------
- 46 -
<PAGE>
EXHIBIT C
---------
FORM OF OPINION
March __, 1999
The Agent and the Lenders who are parties to the
Credit Agreement described below.
Gentlemen/Ladies:
We are counsel for Washington Real Estate Investment Trust, a real estate
investment trust organized under the laws of the District of Columbia (the
"Borrower"), and have represented the Borrower in connection with its execution
--------
and delivery of a Amended and Restated Credit Agreement dated as of March __,
1999, among the Borrower, The First National Bank of Chicago, individually and
as Agent, and the Lenders named therein, providing for Advances in an aggregate
principal amount not exceeding $25,000,000 initially at any one time outstanding
(the "Agreement"). All capitalized terms used in this opinion and not otherwise
defined shall have the meanings attributed to them in the Agreement.
We have examined the Borrower's articles of incorporation [trust
indenture?], by-laws, and resolutions, together with the Loan Documents and such
other matters of fact and law which we deem necessary in order to render this
opinion. Based upon the foregoing, it is our opinion that:
1. The Borrower is a real estate investment trust duly qualified and
formed, validly existing and in good standing under the laws of the District of
Columbia and has all requisite authority to conduct its business in each
jurisdiction in which its business is conducted.
2. The execution and delivery of the Loan Documents by the Borrower and
the performance by the Borrower of its obligations under the Loan Documents have
been duly authorized by all necessary corporate action and/or proceedings on the
part of the Borrower and will not:
(a) require any consent of the Borrower's shareholders;
(b) violate any law, rule, regulation, order, writ, judgment,
injunction, decree or award binding on the Borrower or the Borrower's
articles of incorporation [trust indenture?] or by-laws, or any indenture,
instrument or agreement binding upon the Borrower; or
(c) result in, or require, the creation or imposition of any Lien
pursuant to the provisions of any indenture, instrument or agreement
binding upon the Borrower.
3. The Loan Documents have been duly executed and delivered by the Borrower
and constitute legal, valid and binding obligations of the Borrower enforceable
in accordance with their terms, except to the extent the enforcement thereof may
be limited by bankruptcy, insolvency or similar laws affecting the enforcement
of creditors' rights generally and subject also to the availability of equitable
remedies if equitable remedies are sought.
- 47 -
<PAGE>
4. There is no litigation or proceeding against the Borrower which, if
adversely determined, could have a Material Adverse Effect.
5. No approval, authorization, consent, adjudication or order of any
governmental authority, which has not been obtained by the Borrower, is required
to be obtained by the Borrower in connection with the execution and delivery of
the Loan Documents, the borrowings under the Agreement or in connection with the
payment by the Borrower of its obligations under the Loan Documents.
This opinion may be relied upon by the Agent, the Lenders and their
participants, assignees and other transferees.
Very truly yours,
- 48 -
<PAGE>
EXHIBIT D
---------
COMPLIANCE CERTIFICATE
To: The Lenders parties to the
Credit Agreement Described Below
This Compliance Certificate is furnished pursuant to that certain Amended
and Restated Credit Agreement dated as of March 17, 1999 (as amended, modified,
renewed or extended from time to time, the "Agreement") among the Borrower, the
lenders party thereto and The First National Bank of Chicago, as Agent for the
Lenders. Unless otherwise defined herein, capitalized terms used in this
Compliance Certificate have the meanings ascribed thereto in the Agreement.
THE UNDERSIGNED HEREBY CERTIFIES THAT:
1. I am the duly appointed ________________ of the Borrower;
2. I have reviewed the terms of the Agreement and I have made, or have
caused to be made under my supervision, a detailed review of the transactions
and conditions of the Borrower [and its Subsidiaries] during the accounting
period covered by the attached financial statements;
3. The examinations described in paragraph 2 did not disclose, and I have
no knowledge of, the existence of any condition or event which constitutes a
Default or Unmatured Default during or at the end of the accounting period
covered by the attached financial statements or as of the date of this
Certificate, except as set forth below; and
4. Schedule I attached hereto sets forth financial data and computations
evidencing the Borrower's compliance with certain covenants of the Agreement.
All of such financial data fairly present the Borrower's financial position and
results of operations and its cash flows for the periods reflected. All of such
computations are accurate.
Described below are the exceptions, if any, to paragraph 3 by listing, in
detail, the nature of the condition or event, the period during which it has
existed and the action which the Borrower has taken, is taking, or proposes to
take with respect to each such condition or event:
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
- 49 -
<PAGE>
The foregoing certifications, together with the computations set forth in
Schedule I hereto and the financial statements delivered with this Certificate
in support hereof, are made and delivered this ___ day of ____________, 19__.
WASHINGTON REAL ESTATE INVESTMENT TRUST
By: _________________________________
Title: ______________________________
- 50 -
<PAGE>
[SAMPLE]
SCHEDULE I TO COMPLIANCE CERTIFICATE
Schedule of Compliance as of with
Provisions of ___ and ___ of
the Agreement
- 51 -
<PAGE>
EXHIBIT E
---------
ASSIGNMENT AGREEMENT
This Assignment Agreement (this "Assignment Agreement") between
--------------------
_________ (the "Assignor") and __________ (the "Assignee") is dated as of
-------- --------
___________, 19__. The parties hereto agree as follows:
1. PRELIMINARY STATEMENT. The Assignor is a party to an Amended and
---------------------
Restated Credit Agreement (which, as it may be amended, modified, renewed or
extended from time to time is herein called the "Credit Agreement") described in
----------------
Item 1 of Schedule 1 attached hereto ("Schedule 1"). Capitalized terms used
----------
herein and not otherwise defined herein shall have the meanings attributed to
them in the Credit Agreement.
2. ASSIGNMENT AND ASSUMPTION. The Assignor hereby sells and assigns to
-------------------------
the Assignee, and the Assignee hereby purchases and assumes from the Assignor,
an interest in and to the Assignor's rights and obligations under the Credit
Agreement such that after giving effect to such assignment the Assignee shall
have purchased pursuant to this Assignment Agreement the percentage interest
specified in Item 3 of Schedule 1 of all outstanding rights and obligations
under the Credit Agreement relating to the facilities listed in Item 3 of
Schedule 1 and the other Loan Documents. The aggregate Commitment (or Loans, if
the applicable Commitment has been terminated) purchased by the Assignee
hereunder is set forth in Item 4 of Schedule 1.
3. EFFECTIVE DATE. The effective date of this Assignment Agreement
--------------
(the "Effective Date") shall be the later of the date specified in Item 5 of
--------------
Schedule 1 or two Business Days (or such shorter period agreed to by the Agent)
after a Notice of Assignment substantially in the form of Exhibit I attached
hereto has been delivered to the Agent. Such Notice of Assignment must include
any consents required to be delivered to the Agent by Section 12.3.1 of the
Credit Agreement. In no event will the Effective Date occur if the payments
required to be made by the Assignee to the Assignor on the Effective Date under
Sections 4 and 5 hereof are not made on the proposed Effective Date. The
Assignor will notify the Assignee of the proposed Effective Date no later than
the Business Day prior to the proposed Effective Date. As of the Effective Date,
(i) the Assignee shall have the rights and obligations of a Lender under the
Loan Documents with respect to the rights and obligations assigned to the
Assignee hereunder and (ii) the Assignor shall relinquish its rights and be
released from its corresponding obligations under the Loan Documents with
respect to the rights and obligations assigned to the Assignee hereunder.
4. PAYMENTS OBLIGATIONS. On and after the Effective Date, the Assignee
--------------------
shall be entitled to receive from the Agent all payments of principal, interest
and fees with respect to the interest assigned hereby. The Assignee shall
advance funds directly to the Agent with respect to all Loans and reimbursement
payments made on or after the Effective Date with respect to the interest
assigned hereby. [In consideration for the sale and assignment of Loans
hereunder, (i) the Assignee shall pay the Assignor, on the Effective Date, an
amount equal to the principal amount of the portion of all CBR Loans assigned to
the Assignee hereunder and (ii) with respect to each LIBOR Loan made by the
Assignor and assigned to the Assignee hereunder which is outstanding on the
Effective Date, (a) on the last day of the Interest Period therefor or (b) on
such earlier date agreed to by the Assignor and the Assignee or (c) on the date
on which any such LIBOR Loan either becomes due (by acceleration or otherwise)
or is prepaid (the date as
- 52 -
<PAGE>
described in the foregoing clauses (a), (b) or (c) being hereinafter referred to
as the "Payment Date"), the Assignee shall pay the Assignor an amount equal to
------------
the principal amount of the portion of such LIBOR Loan assigned to the Assignee
which is outstanding on the Payment Date. If the Assignor and the Assignee agree
that the Payment Date for such LIBOR Loan shall be the Effective Date, they
shall agree to the interest rate applicable to the portion of such Loan assigned
hereunder for the period from the Effective Date to the end of the existing
Interest Period applicable to such LIBOR Loan (the "Agreed Interest Rate") and
--------------------
any interest received by the Assignee in excess of the Agreed Interest Rate
shall be remitted to the Assignor. In the event interest for the period from the
Effective Date to but not including the Payment Date is not paid by the Borrower
with respect to any LIBOR Loan sold by the Assignor to the Assignee hereunder,
the Assignee shall pay to the Assignor interest for such period on the portion
of such LIBOR Loan sold by the Assignor to the Assignee hereunder at the
applicable rate provided by the Credit Agreement. In the event a prepayment of
any LIBOR Loan which is existing on the Payment Date and assigned by the
Assignor to the Assignee hereunder occurs after the Payment Date but before the
end of the Interest Period applicable to such LIBOR Loan, the Assignee shall
remit to the Assignor the excess of the prepayment penalty paid with respect to
the portion of such LIBOR Loan assigned to the Assignee hereunder over the
amount which would have been paid if such prepayment penalty was calculated
based on the Agreed Interest Rate. The Assignee will also promptly remit to the
Assignor (i) any principal payments received from the Agent with respect to
LIBOR Loans prior to the Payment Date and (ii) any amounts of interest on Loans
and fees received from the Agent which relate to the portion of the Loans
assigned to the Assignee hereunder for periods prior to the Effective Date, in
the case of CBR Loans or fees, or the Payment Date, in the case of LIBOR Loans,
and not previously paid by the Assignee to the Assignor.]* In the event that
either party hereto receives any payment to which the other party hereto is
entitled under this Assignment Agreement, then the party receiving such amount
shall promptly remit it to the other party hereto.
*Each Assignor may insert its standard payment provisions in lieu of the payment
terms included in this Exhibit.
5. FEES PAYABLE BY THE ASSIGNEE. The Assignee shall pay to the
----------------------------
Assignor a fee on each day on which a payment of interest or fees (including any
Commitment Fee or Unused Facility Fee) is made under the Credit Agreement
with respect to the amounts assigned to the Assignee hereunder (other than a
payment of interest or commitment fees for the period prior to the Effective
Date or, in the case of LIBOR Loans, the Payment Date, which the Assignee is
obligated to deliver to the Assignor pursuant to Section 4 hereof). The amount
of such fee shall be the difference between (i) the interest or fee, as
applicable, paid with respect to the amounts assigned to the Assignee hereunder
and (ii) the interest or fee, as applicable, which would have been paid with
respect to the amounts assigned to the Assignee hereunder if each interest rate
was __ of 1% less than the interest rate paid by the Borrower or if the
commitment fee was __ of 1% less than the commitment fee paid by the Borrower,
as applicable. In addition, the Assignee agrees to pay __% of the recordation
fee required to be paid to the Agent in connection with this Assignment
Agreement.
6. REPRESENTATIONS OF THE ASSIGNOR; LIMITATIONS ON THE ASSIGNOR'S
--------------------------------------------------------------
LIABILITY. The Assignor represents and warrants that it is the legal and
- ---------
- 53 -
<PAGE>
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim created by the Assignor. It is
understood and agreed that the assignment and assumption hereunder are made
without recourse to the Assignor and that the Assignor makes no other
representation or warranty of any kind to the Assignee. Neither the Assignor nor
any of its officers, directors, employees, agents or attorneys shall be
responsible for (i) the due execution, legality, validity, enforceability,
genuineness, sufficiency or collectability of any Loan Document, including
without limitation, documents granting the Assignor and the other Lenders a
security interest in assets of the Borrower or any guarantor, (ii) any
representation, warranty or statement made in or in connection with any of the
Loan Documents, (iii) the financial condition or creditworthiness of the
Borrower or any guarantor, (iv) the performance of or compliance with any of the
terms or provisions of any of the Loan Documents, (v) inspecting any of the
Property, books or records of the Borrower, (vi) the validity, enforceability,
perfection, priority, condition, value or sufficiency of any collateral securing
or purporting to secure the Loans or (vii) any mistake, error of judgment, or
action taken or omitted to be taken in connection with the Loans or the Loan
Documents.
7. REPRESENTATIONS OF THE ASSIGNEE. The Assignee (i) confirms that it
-------------------------------
has received a copy of the Credit Agreement, together with copies of the
financial statements requested by the Assignee and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment Agreement, (ii) agrees that it will,
independently and without reliance upon the Agent, the Assignor 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 the Loan Documents, (iii) appoints and authorizes the Agent to take
such action as agent on its behalf and to exercise such powers under the Loan
Documents as are delegated to the Agent by the terms thereof, together with such
powers as are reasonably incidental thereto, (iv) agrees that it will perform in
accordance with their terms all of the obligations which by the terms of the
Loan Documents are required to be performed by it as a Lender, (v) agrees that
its payment instructions and notice instructions are as set forth in the
attachment to Schedule 1, (vi) confirms that none of the funds, monies, assets
or other consideration being used to make the purchase and assumption hereunder
are "plan assets" as defined under ERISA and that its rights, benefits and
interests in and under the Loan Documents will not be "plan assets" under ERISA,
(vii) confirms that it is either a financial institution, a pension fund, or a
fund or entity that regularly makes or participates in real estate loans as part
of its business [and (viii) attaches the forms prescribed by the Internal
Revenue Service of the United States certifying that the Assignee is entitled to
receive payments under the Loan Documents without deduction or withholding of
any United States federal income taxes].*
*to be inserted if the Assignee is not incorporated under the laws of the
United States, or a state thereof.
8. INDEMNITY. The Assignee agrees to indemnify and hold the Assignor
---------
harmless against any and all losses, costs and expenses (including, without
limitation, reasonable attorneys' fees) and liabilities incurred by the Assignor
in connection with or arising in any
- 54 -
<PAGE>
manner from the Assignee's non-performance of the obligations assumed under this
Assignment Agreement.
9. SUBSEQUENT ASSIGNMENTS. After the Effective Date, the Assignee
----------------------
shall have the right pursuant to Section 12.3.1 of the Credit Agreement to
assign the rights which are assigned to the Assignee hereunder to any entity or
person, provided that (i) any such subsequent assignment does not violate any of
the terms and conditions of the Loan Documents or any law, rule, regulation,
order, writ, judgment, injunction or decree and that any consent required under
the terms of the Loan Documents has been obtained and (ii) unless the prior
written consent of the Assignor is obtained, the Assignee is not thereby
released from its obligations to the Assignor hereunder, if any remain
unsatisfied, including, without limitation, its obligations under Sections 4, 5
and 8 hereof.
10. REDUCTIONS OF AGGREGATE COMMITMENT. If any reduction in the
----------------------------------
Aggregate Commitment occurs between the date of this Assignment Agreement and
the Effective Date, the percentage interest specified in Item 3 of Schedule 1
shall remain the same, but the dollar amount purchased shall be recalculated
based on the reduced Aggregate Commitment.
11. ENTIRE AGREEMENT. This Assignment Agreement and the attached
----------------
Notice of Assignment embody the entire agreement and understanding between the
parties hereto and supersede all prior agreements and understandings between the
parties hereto relating to the subject matter hereof.
12. GOVERNING LAW. This Assignment Agreement shall be governed by the
-------------
internal law, and not the law of conflicts, of the State of Illinois.
13. NOTICES. Notices shall be given under this Assignment Agreement in
-------
the manner set forth in the Credit Agreement. For the purpose hereof, the
addresses of the parties hereto (until notice of a change is delivered) shall be
the address set forth in the attachment to Schedule 1.
IN WITNESS WHEREOF, the parties hereto have executed this Assignment
Agreement by their duly authorized officers as of the date first above written.
[NAME OF ASSIGNOR]
By: _______________________________
Title: ____________________________
[NAME OF ASSIGNEE]
By: _______________________________
Title: ____________________________
- 55 -
<PAGE>
SCHEDULE 1
to Assignment Agreement
1. Description and Date of Credit Agreement:
2. Date of Assignment Agreement: ____________, 19__
3. Amounts (As of Date of Item 2 above):
a. Total of Commitments
(Loans)* under
Credit Agreement $______
b. Assignee's Percentage
of each Loan
purchased under the
Assignment Agreement** ______%
c. Amount of Assigned
Share in each Loan
purchased under the
Assignment Agreement $______
4. Assignee's Aggregate (Loan
Amount)* Commitment Amount
Purchased Hereunder: $______
5. Proposed Effective Date: _______
* If a Commitment has been terminated, insert outstanding Loans in place of
Commitment
** Percentage taken to 10 decimal places
Accepted and Agreed:
[NAME OF ASSIGNOR] [NAME OF ASSIGNEE]
By: ___________________ By: ____________________
Title: ________________ Title: _________________
- 56 -
<PAGE>
Attachment to SCHEDULE 1 to ASSIGNMENT AGREEMENT
Attach Assignor's Administrative Information Sheet, which must
include notice address for the Assignor and the Assignee
- 57 -
<PAGE>
EXHIBIT I
to Assignment Agreement
NOTICE
OF ASSIGNMENT
-------------
____________, 19__
To: [NAME OF BORROWER]
__________________
__________________
[NAME OF AGENT]
__________________
__________________
From: [NAME OF ASSIGNOR] (the "Assignor")
[NAME OF ASSIGNEE] (the "Assignee")
1. We refer to that Amended and Restated Credit Agreement (the
"Credit Agreement") described in Item 1 of Schedule 1 attached hereto ("Schedule
1"). Capitalized terms used herein and not otherwise defined herein shall have
the meanings attributed to them in the Credit Agreement.
2. This Notice of Assignment (this "Notice") is given and
delivered to the Agent pursuant to Section 12.3.2 of the Credit Agreement.
3. The Assignor and the Assignee have entered into an
Assignment Agreement, dated as of __________, 19__ (the "Assignment"), pursuant
to which, among other things, the Assignor has sold, assigned, delegated and
transferred to the Assignee, and the Assignee has purchased, accepted and
assumed from the Assignor the percentage interest specified in Item 3 of
Schedule 1 of all outstandings, rights and obligations under the Credit
Agreement relating to the facilities listed in Item 3 of Schedule 1. The
Effective Date of the Assignment shall be the later of the date specified in
Item 5 of Schedule 1 or two Business Days (or such shorter period as agreed to
by the Agent) after this Notice of Assignment and any consents and fees required
by Sections 12.3.1 and 12.3.2 of the Credit Agreement have been delivered to the
Agent, provided that the Effective Date shall not occur if any condition
precedent agreed to by the Assignor and the Assignee has not been satisfied.
4. The Assignor and the Assignee hereby give to the Borrower
and the Agent notice of the assignment and delegation referred to herein. The
Assignor will confer with the Agent before the date specified in Item 5 of
Schedule 1 to determine if the Assignment Agreement will become effective on
such date pursuant to Section 3 hereof, and will confer with
A-1
<PAGE>
the Agent to determine the Effective Date pursuant to Section 3 hereof if it
occurs thereafter. The Assignor shall notify the Agent if the Assignment
Agreement does not become effective on any proposed Effective Date as a result
of the failure to satisfy the conditions precedent agreed to by the Assignor and
the Assignee. At the request of the Agent, the Assignor will give the Agent
written confirmation of the satisfaction of the conditions precedent.
5. The Assignor or the Assignee shall pay to the Agent on or
before the Effective Date the processing fee of $2,500 required by Section
11.3.2 of the Credit Agreement.
6. If Notes are outstanding on the Effective Date, the
Assignor and the Assignee request and direct that the Agent prepare and cause
the Borrower to execute and deliver new Notes or, as appropriate, replacements
notes, to the Assignor and the Assignee. The Assignor and, if applicable, the
Assignee each agree to deliver to the Agent the original Note received by it
from the Borrower against its receipt of a new Note in the appropriate amount.
7. The Assignee advises the Agent that notice and payment
instructions are set forth in the attachment to Schedule 1.
8. The Assignee hereby represents and warrants that none of
the funds, monies, assets or other consideration being used to make the purchase
pursuant to the Assignment are "plan assets" as defined under ERISA and that its
rights, benefits, and interests in and under the Loan Documents will not be
"plan assets" under ERISA.
9. The Assignee authorizes the Agent to act as its agent under
the Loan Documents in accordance with the terms thereof. The Assignee
acknowledges that the Agent has no duty to supply information with respect to
the Borrower or the Loan Documents to the Assignee until the Assignee becomes a
party to the Credit Agreement.*
*May be eliminated if Assignee is a party to the Credit Agreement prior to the
Effective Date.
NAME OF ASSIGNOR NAME OF ASSIGNEE
By: ___________________________ By: _______________________
Title: ________________________ Title: ____________________
ACKNOWLEDGED AND CONSENTED ACKNOWLEDGED BY WASHINGTON
TO BY THE FIRST NATIONAL BANK REAL ESTATE INVESTMENT TRUST
OF CHICAGO, AS AGENT
By: ___________________________ By: _______________________
Title: ________________________ Title: ____________________
[Attach photocopy of Schedule 1 to Assignment]
- 2 -
<PAGE>
EXHIBIT F
LOAN/CREDIT RELATED MONEY TRANSFER INSTRUCTION
To The First National Bank of Chicago,
as Agent (the "Agent") under the Credit Agreement
Described Below.
Re: Amended and Restated Credit Agreement, dated as of March __, 1999 (as
the same may be amended or modified, the "Credit Agreement"), among
Washington Real Estate Investment Trust (the "Borrower"), the Agent, and
the Lenders named therein. Terms used herein and not otherwise defined
shall have the meanings assigned thereto in the Credit Agreement.
The Agent is specifically authorized and directed to act upon the
following standing money transfer instructions with respect to the proceeds of
Advances or other extensions of credit from time to time until receipt by the
Agent of a specific written revocation of such instructions by the Borrower,
provided, however, that the Agent may otherwise transfer funds as hereafter
directed in writing by the Borrower in accordance with Section 13.1 of the
Credit Agreement or based on any telephonic notice made in accordance with
Section 2.14 of the Credit Agreement.
Facility Identification Number _______________________
Customer/Account Name _________________________________
Transfer Funds To _____________________________________
_____________________________________
_____________________________________
For Account No. _____________________________________
Reference/Attention To ________________________________
Authorized Officer
(Customer Representative) Date ____________
_______________________________ ____________________________________________
(Please Print) Signature
Bank Officer Name Date ____________
_______________________________ ____________________________________________
(Please Print) Signature
- 3 -
<PAGE>
SCHEDULE 1
JURISDICTIONS
(See Section 5.1)
- 4 -
<PAGE>
SCHEDULE 2
SUBSIDIARIES AND OTHER INVESTMENTS
(See Section 5.7)
(Deliver Completed Form to Credit Support Staff For Immediate Processing)
Investment Owned Amount of Percent Jurisdiction
In By Investment Ownership of Ownership
- ---------- ----- ---------- --------- ------------
- 5 -
<PAGE>
SCHEDULE 3
INDEBTEDNESS AND LIENS
(See Sections 5.13 and 6.17)
Property Maturity
Indebtedness Indebtedness Encumbered and Amount
Incurred By Owed To (If Any) of Indebtedness
- ------------ ------------ ---------- ---------------
- 6 -
<PAGE>
Exhibit 4(b)
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT, dated as of August 26, 1999,
but effective for all purposes as of July 25, 1999 (the "Agreement"), by and
between WASHINGTON REAL ESTATE INVESTMENT TRUST, a Maryland real estate
investment trust (the "Borrower"), CRESTAR BANK, a Virginia banking corporation,
FIRST UNION NATIONAL BANK, a national banking association, successor to Signet
Bank, and any other banks that are parties to this Agreement at any time (the
"Banks"), and CRESTAR BANK, a Virginia banking corporation, in its capacity as
agent for the Banks (the "Agent"), recites and provides:
RECITALS
--------
The Borrower, the Banks and the Agent are parties to the Credit Agreement,
dated as of July 25, 1997, as amended by the letter agreement dated May 14, 1998
(the "Existing Credit Agreement"). The Borrower, the Banks and the Agent have
agreed to amend and restate the Existing Credit Agreement upon the terms and
subject to the conditions set forth below. Accordingly, the Borrower, the Banks
and the Agent agree that the Existing Credit Agreement is amended and restated
as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms have the following meanings,
which shall be equally applicable to both the singular and plural forms of the
defined terms.
"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 or membership interests of a
limited liability company.
"Agreement" means this Credit Agreement, as the same may be amended,
---------
modified or supplemented from time to time.
"Business Day" means a day of the year on which banks are not required or
------------
authorized to close in New York City, or Richmond, Virginia, and which dealings
are carried on in the London interbank market.
<PAGE>
"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 of any date for any period, the
-------------------------------
ratio calculated by dividing (a) actual EBITDA for such period, by (b)
Consolidated Debt Service for such period.
"Closing Date" means July 25, 1999.
------------
"Commitment" has the meaning assigned to such term in Section 2.1.
----------
"Commitment Percentage" means, with respect to any Bank, the percentage of
---------------------
the aggregate Commitments represented by such Bank's Commitment.
"Commitment Schedule" has the meaning assigned to such term in Section
-------------------
2.1.
"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.
"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 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
2
<PAGE>
aggregate Commitments then in effect under this Agreement, 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 Capitalization Value 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.
"Defaulting Bank" has the meaning assigned to such term in Section 2.9.
---------------
"EBITDA" means earnings before interest, taxes (other than real estate
------
taxes), depreciation and amortization expense, all as determined in accordance
with GAAP.
"ERISA" has the meaning assigned to such term in Section 5.1(a).
-----
"Event of Default" has the meaning assigned to such term in Section 6.1.
----------------
"Federal Funds Rate" means, for any period, a fluctuating interest rate per
------------------
annum equal for each day during such period to the weighted average of the rates
on overnight Federal funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers, as published for such day (or, if such
day is not a Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of Richmond, or, if such rate is not so published for any day that
is a Business Day, the average of the quotations for such day on such
transactions received by the Agent from three Federal funds brokers of
recognized standing selected by it.
"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 Agreement" means the Amended and Restated Credit Agreement,
-----------------------
dated as of March 17, 1999, between the Borrower, First National Bank of
Chicago, as agent, and the lenders party thereto, as amended from time to time.
"Funding Bank" has the meaning assigned to such term in Section 2.9.
------------
"GAAP" means generally accepted accounting principles consistent with those
----
applied in the preparation of the Borrower's financial statements for the fiscal
year ended on December 31, 1996.
3
<PAGE>
"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 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 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
"Indemnified Liabilities" has the meaning assigned to such term in Section
-----------------------
8.5.
"Interest Period" means, for each Loan, the period commencing on the date
---------------
of such Loan and ending on the last day of the period selected by the Borrower
pursuant to the provisions below and, thereafter, each subsequent period
commencing on the last day of the immediately
4
<PAGE>
preceding Interest Period and ending on the last day of the period selected by
the Borrower pursuant to the provisions below. When interest is based on the
Prime Rate, the duration of each such Interest Period may be any period of time
of up to 30 days selected by the Borrower. In all other cases, the duration of
each such Interest Period shall be one, two, three, six, nine or twelve months
for LIBOR Loans, or any period of 90 days or more for the Term Loans, as the
Borrower may select, upon notice given by the Agent not later than 11:00 A.M.
(Eastern time) on the third Business Day prior to the first day of such Interest
Period (prompt written notice of which shall be given by the Agent to the
Banks); provided, however, that (1) whenever the last day of any Interest Period
-----------------
would otherwise occur on a day other than a Business Day, the last day of such
Interest Period shall be extended to occur on the next succeeding Business Day,
unless such extension for a LIBOR Loan would cause the last day of such Interest
Period to occur in the next following calendar month, in which case the last day
of such Interest Period shall occur on the next preceding Business Day, (2) if
no Interest Period is selected by the Borrower, the Interest Period shall be one
month for LIBOR Loans and Prime Rate Loans and 90 days for Term Loans, and (3)
no Interest Period shall expire later than the Termination Date.
"LIBOR" means, with respect to each day during each Interest Period
-----
pertaining to a Loan, the rate of interest determined on the basis of the rate
for deposits in dollars for a period equal to such Interest Period commencing on
the first day of such Interest Period appearing on Page 3750 of the Telerate
Service as of 11:00 A.M., London time, two Business Days prior to the beginning
of such Interest Period. In the event that such rate does not appear on Page
3750 of the Telerate Service (or otherwise on such service), "LIBOR" shall be
-----
determined by reference to such other publicly available service for displaying
eurodollar rates as may be agreed upon by the Agent and the Borrower or, in the
absence of such agreement, "LIBOR" shall instead be the rate per annum equal to
-----
the rate at which Crestar Bank is offered dollar deposits at or about 10:00
A.M., New York City time, two (2) Business Days prior to the beginning of such
Interest Period in the interbank eurodollar market where the eurodollar and
foreign currency and exchange operations in respect of its Loan are then being
conducted for delivery on the first day of such Interest Period for the number
of days comprised therein and in an amount comparable to the amount of its Loan
to be outstanding during such Interest Period.
"LIBOR Loans" means any Loan or portion thereof with respect to which the
-----------
interest rate is calculated by reference to LIBOR.
"LIBOR Spread" has the meaning assigned to such term in Section 2.3(b).
------------
"Lien" has the meaning assigned to such term in Section 5.2(a).
----
"Loan Documents" means this Agreement, the Note, each Subsidiary Guaranty,
--------------
and any guarantees, security agreements, notes, or any other document now or
hereafter executed or delivered in connection with the Loans, in evidence
thereof or as security therefor, as any of the same may be amended, modified or
supplemented from time to time.
5
<PAGE>
"Loans" has the meaning assigned to such term in Section 2.1.
-----
"Majority Banks" has the meaning assigned to such term in Section 2.1.
--------------
"Market Area" has the meaning assigned to such term in Section 2.1.
-----------
"Moody's" means Moody's Investors Service, Inc. and its successors.
-------
"Non-Usage Fee Rate" has the meaning assigned to such term in Section 2.6.
------------------
"Note" has the meaning assigned to such term in Section 2.7.
----
"Partial Loan" has the meaning assigned to such term in Section 2.9.
------------
"Participant" has the meaning assigned to such term in Section 8.12.
-----------
"Permitted Liens" means those Liens which do not violate Section 5.2(a)
---------------
hereof.
"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.
"Prime Rate" means the rate established from time to time by the Agent as
----------
its prime rate, which rate is recorded in the Agent's Central Credit
Administration Division and used as a reference for fixing the lending rate on
commercial loans. The Borrower acknowledges that the prime rate is not
necessarily the lowest rate of interest charged by the Bank. For purposes of
this Agreement, any change in the Prime Rate shall be effective on the date such
change in the Prime Rate is announced.
"Prime Rate Loan" means any Loan or portion thereof with respect to which
---------------
the interest rate is calculated by reference to the Prime Rate.
"Prime Rate Spread" has the meaning assigned to such term in Section
-----------------
2.3(c).
"Pro Forma EBITDA" means, for any Person for any period, EBITDA calculated
----------------
as if the Property then owned by such Person had been owned by such Person for
the entire period.
"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.
"Recovery Bank" has the meaning assigned to such term in Section 2.10.
-------------
"S&P" means Standard & Poor's Ratings Group and its successors.
---
6
<PAGE>
"Subsidiary," as to any Person, means a corporation, partnership, limited
----------
partnership, limited liability company 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 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.
"Subsidiary Guaranty" has the meaning assigned to such term in Section
-------------------
5.1(c).
"Termination Date" has the meaning assigned to such term in Section 2.1.
----------------
"Term Loan" means any Loan or portion thereof with respect to which the
---------
interest rate is calculated by reference to the Treasury Rate.
"Term Loan Spread" has the meaning assigned to such term in Section 2.3(c).
----------------
"Total Capitalization Value" means for any Person for any quarter, the
--------------------------
product of (a) annualized EBITDA for such Person during such quarter (which
annualized EBITDA shall be calculated by annualizing Pro Forma EBITDA for the
most recently ended fiscal quarter), and (b) ten (10).
"Total Tangible Assets," of any Person on 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 Bank" has the meaning assigned to such term in Section 8.13.
---------------
"Treasury Rate" means, for any Interest Period, the rate per annum, rounded
-------------
upwards, if necessary, to the next higher 1/100th of 1%, which is the
average yield on United States Treasury Securities, adjusted to a constant
maturity corresponding to the length of the applicable Interest Period, as
reported for the most recent weekly reporting period covered in the weekly
statistical release (currently entitled "Weekly Summary of Banking and Credit
Measures") published by the Board of Governors of the Federal Reserve System for
the Friday immediately preceding the first day of such Interest Period (or as
reasonably established by the Agent for an Interest Period for which no such
yield is published).
"Type" means, with respect to any Loan, its designation as a Prime Rate
----
Loan, a LIBOR Loan or a Term Loan.
7
<PAGE>
"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, (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 First
Chicago Agreement, the terms of which restrict the Borrower's and its
Subsidiaries' ability to encumber certain 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 First Chicago 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.
"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.
"Value of Unencumbered Assets," as of any date, for all Unencumbered Assets
----------------------------
shall mean the product of (a) the annualized EBITDA from all such Unencumbered
Assets for the most recent calendar quarter for which results have been reported
to Lender (which annualized net operating income shall be determined by
multiplying the EBITDA from all such Unencumbered Assets for such calendar
quarter by four (4)), and (b) ten (10).
"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.
"WRIT LP" means WRIT Limited Partnership, a Delaware limited partnership.
-------
"Year 2000 Issues" means anticipated costs, problems and uncertainties
----------------
associated with the inability of certain computer applications to handle
effectively data including dates on and after January 1, 2000, as such inability
affects the business, operations and financial condition of the Borrower and its
Subsidiaries and of the Borrower's and its Subsidiaries' material customers,
suppliers and vendors.
8
<PAGE>
"Year 2000 Program" is defined in Section 4.1(k).
-----------------
ARTICLE 2
LOANS
SECTION 2.1. Loans. Subject to the terms and conditions and relying upon
-----
the representations and warranties set forth in this Agreement, each Bank
severally agrees to make loans (the "Loans") to the Borrower, from time to time
on any Business Day (as defined below) during the period from the date hereof
until July 25, 2002 (the "Termination Date") in an aggregate amount not to
exceed at any time outstanding the commitment of such Bank (as to each Bank, its
"Commitment") as set forth on the Commitment schedule attached as Schedule 2.1
------------
(as amended from time to time, the "Commitment Schedule"), provided that at no
time shall the outstanding Loans exceed $50,000,000. The Loans made on any
Business Day shall be in an amount not less than $1,000,000 or an integral
multiple thereof. The Loans shall be used only for the purpose of refinancing
existing Indebtedness of the Borrower to the Banks and purchasing income
producing real estate in the Market Area (as defined below) and to make capital
improvements to real property owned by the Borrower and located in the Market
Area. "Market Area" means Washington D.C., Virginia, Maryland, Delaware and
southeastern Pennsylvania. Loans may not be used to prepay or refinance
outstanding Loans. (The Banks agree that the continuation or conversion of a
Loan at the expiration of the current Interest Period shall not constitute a
refinancing of such Loan.) Loans may be used to purchase income producing real
estate outside of the Market Area with the prior written consent of the Majority
Banks, which shall not be unreasonably withheld. "Majority Banks" means, as of
any date, Banks whose aggregate Commitments total at least 66 2/3% of all
Commitments.
SECTION 2.2. Making Loans
------------
(a) Loans shall be made on written request, given not later than 11:00
A.M. (Eastern time) at least three Business Days prior to the date of the
proposed Loans, from the Borrower to the Agent, identifying the real estate to
be purchased or the capital improvements to be made, specifying the date and
amount of the Loans, specifying the Type of Loans and selecting the initial
Interest Period for such Loans. The Agent shall give prompt written notice of
each borrowing request to the Banks. Not later than 1:00 P.M. (Eastern time) on
the date of such Loans and upon fulfillment of the applicable conditions set
forth in Article 3, each Bank will make its ratable share of such Loans
available to the Agent in same day funds in accordance with such Bank's
Commitment Percentage. Upon the Agent's receipt of such funds, it shall credit
the proceeds to the Borrower's operating account with the Agent.
(b) At the expiration of the Interest Period for any Loan, the
Borrower will have the right to continue such Loan or a portion thereof for a
subsequent Interest Period, or to convert such Loan to another type of Loan,
subject in each case to the selection of Interest Periods in accordance with the
definition thereof and the provisions set forth below. Loans may be converted or
continued only by a written request from the Borrower to the Agent, given not
9
<PAGE>
later than 11:00 A.M. (Eastern time) at least three Business Days prior to the
end of the applicable Interest Period. Each such written request must specify
the applicable Interest Period and Type subject to continuation or conversion.
The Agent shall give prompt written notice of each continuation and conversion
request to the Banks. Each continuation or conversion of a Loan must become
effective on the last day of the Interest Period then in effect with respect to
such Loan. The aggregate amount of Loans to be continued or converted shall be
not less than $1,000,000 or an integral multiple thereof. If the Agent does not
receive a timely written request for the continuation or conversion of a Loan,
such Loan shall become, at the end of the applicable Interest Period therefor, a
Prime Rate Loan with an Interest Period of five days.
(c) Each written request from the Borrower to the Agent for the
making, continuation and conversion for Loans shall be irrevocable and binding
on the Borrower. The Borrower shall indemnify each Bank against any loss, cost
or expense incurred by such Bank as a result of any failure to fulfill on or
before the date specified in such request for such Loans the applicable
conditions set forth in Article 3, including, without limitation, any loss
(including loss of anticipated profits), cost or expense incurred by reason of
the liquidation or reemployment of deposits or other funds acquired by such Bank
to fund the Loan when the Loan, as a result of such failure, is not made on such
date.
(d) If not sooner paid, the Loans shall be repaid on the Termination
Date.
(e) Unless the Agent shall have received notice from a Bank prior to
the date of any Loans that such Bank will not make available to the Agent such
Bank's ratable portion of such Loans, the Agent may assume that such Bank has
made such portion available to the Agent on the date of such Loans in accordance
with Section 2.2(a) and the Agent may, in reliance upon such assumption, make
available to the Borrower on such date a corresponding amount. If and to the
extent that such Bank shall not have so made such ratable portion available to
the Agent, such Bank and the Borrower severally agree to repay to the Agent
forthwith on demand such corresponding amount together with interest thereon,
for each day from the date such amount is made available to the Borrower until
the date such amount is repaid to the Agent, at (1) in the case of the Borrower,
the interest rate applicable at the time to such Loans, and (2) in the case of
such Bank, the Federal Funds Rate. If such Bank shall repay to the Agent such
corresponding amount, such amount so repaid shall constitute such Bank's Loan
for purposes of this Agreement.
(f) The failure of any Bank to make the Loans to be made by such Bank
shall not relieve the other Banks of their obligations, if any, hereunder to
make their Loans, but none of the Banks shall be responsible for the failure of
the other Banks to make Loans.
SECTION 2.3. Interest.
--------
(a) The Borrower shall pay interest on the unpaid principal amount of
each Loan from the date of such Loan until such principal amount shall be paid
in full, monthly in
10
<PAGE>
arrears, on the first day of each calendar month, at the sum of (1) in the case
of a LIBOR Loan, LIBOR for the applicable Interest Period plus the applicable
LIBOR Spread, (2) in the case of a Prime Rate Loan, the Prime Rate plus the
applicable Prime Rate Spread, adjusted daily when and as the Prime Rate is
changed, and (3) in the case of a Term Loan, the Treasury Rate for the
applicable Interest Period plus the applicable Term Loan Spread.
(b) As of the date of this Agreement, the "LIBOR Spread" is 0.70% the
"Prime Rate Spread" is 0% and the Term Loan Spread is 1.50%. The applicable
LIBOR Spread, Prime Rate Spread and Term Loan Spread shall be subject to change
at any time as determined based upon the lower (i.e. less desirable) of the
-----
Borrower's Moody's debt rating, and the Borrower's S&P's debt rating, as the
case may be. The applicable Spreads shall be adjusted effective on the next
Business Day following any change in the Borrower's Moody's debt rating and/or
S&P's debt rating, as the case may be. The applicable debt ratings and
corresponding LIBOR Spreads, Prime Rate Spreads and Term Loan Spreads are as
follows:
<TABLE>
<CAPTION>
S&P Rating Moody's Rating LIBOR Spread Prime Rate Spread Term Loan Spread
- ---------- -------------- ------------ ----------------- ----------------
<S> <C> <C> <C> <C>
A or higher A2 or higher .55% 0% 1.30%
A- A3 .65% 0% 1.425%
BBB+ Baal .70% 0% 1.50%
BBB Baa2 1.00% 0% 1.80%
BBB- Baa3 1.25% 0% 2.05%
Less than BBB- Less than Baa3 2.20% .50% 3.05%
No Rating No Rating 2.25% .50% 3.05%
</TABLE>
(c) After maturity or upon the occurrence and during the continuance
of an Event of Default hereunder, the Prime Rate Spread shall be 2.50%, the
LIBOR Spread shall be 4.25%, and the Term Loan Spread shall be 5.05%.
SECTION 2.4. Prepayments.
-----------
(a) The Borrower shall have the right to prepay any Loans at any time
subject to the prepayment penalty described below for a Term Loan; provided,
--------
however, that each partial prepayment shall be in an aggregate principal amount
- -------
of not less than $1,000,000 or an integral multiple thereof. No prepayment
penalty will be imposed for LIBOR Loans or Prime Rate Loans, or for a Term Loan
that is prepaid on the last day of the Interest Period applicable thereto. The
Borrower shall give the Agent at least three Business Days' prior written notice
of prepayment (prompt written notice of which shall be given to the Banks by the
Agent) and in such notice specify the prepayment date and the principal amount
of each Loan to be prepaid.
11
<PAGE>
Such notice of prepayment shall be irrevocable and shall commit the Borrower to
prepay in the amount stated therein. All prepayments under this Section shall be
accompanied by accrued interest on the principal amount being prepaid to the
date of prepayment. Amounts prepaid shall be available to be reborrowed from the
Banks hereunder in accordance with the terms of this Agreement.
(b) The prepayment penalty for a Term Loan that is prepaid on a day
other than the last day of the Interest Period applicable thereto will be equal
to the present value of the difference between the amount that would have been
realized by the Banks for the remaining term of the applicable Interest Period,
and any lesser amount that would have been realized by the Banks by reinvesting
the prepaid amount at the Treasury Rate with a maturity most closely equal to,
but not longer than, the remaining term of the applicable Interest Period. To
determine such present value, the foregoing difference shall be discounted to
its present value at a discount rate equal to the applicable Treasury Rate.
SECTION 2.5. Funding Provisions.
(a) Increased Costs. If, due to either (1) the introduction of or any
---------------
change (other than any change by way of imposition or increase of reserve
requirements, referred to in subsection (b) below) in any law or regulation or
(2) the compliance with any guideline or request from any central bank or other
governmental authority (whether or not having the force of law), there shall be
any increase in the cost to a Bank of agreeing to make or making, funding or
maintaining the Loans, then the Borrower shall from time to time, within 20
Business Days after written demand by such Bank, pay to such Bank additional
amounts sufficient to compensate such Bank for such increased cost. A
certificate as to the amount of such increased cost shall be submitted to the
Borrower by such Bank with such demand, and such certificate shall be presumed
to be correct.
(b) Additional Interest. The Borrower shall pay to each Bank, so long
-------------------
as such Bank shall be required under regulations of the Board of Governors of
the Federal Reserve System to maintain reserves with respect to liabilities or
assets consisting of or including Eurocurrency liabilities (as such term is
defined in Regulation D of the Board of Governors of the Federal Reserve System,
as in effect from time to time), additional interest on the unpaid principal
amount of each LIBOR Loan made by such Bank, from the date of such LIBOR Loan
until such principal amount is paid in full, at an interest rate per annum
equal at all times to the remainder obtained by subtracting (1) LIBOR for the
Interest Period for such LIBOR Loan from (2) the rate obtained by dividing such
LIBOR by a percentage equal to 100% minus the reserve percentage applicable
during such Interest Period (or if more than one such percentage shall be so
applicable, the daily average of such percentages for those days in such
Interest Period during which any such percentage shall be so applicable) under
regulations issued from time to time by the Board of Governors of the Federal
Reserve System (or any successor) for determining the maximum reserve
requirement (including, without limitation, any emergency, supplemental or other
marginal reserve requirement) for such Bank with respect to liabilities or
assets consisting
12
<PAGE>
of or including Eurocurrency liabilities having a term equal to such Interest
Period, payable on each date on which interest is payable on such LIBOR Loan.
Such additional interest shall be determined by such Bank and notified to the
Borrower. The Agent acknowledges that as of the date hereof, banks are not
required to maintain reserves with respect to Eurocurrency liabilities.
(c) Increased Capital. If a Bank reasonably determines that compliance
-----------------
with any law or regulation or any guideline or request from any central bank or
other governmental authority (whether or not having the force of law) reasonably
affects or would affect the amount of capital required or expected to be
maintained by such Bank or any corporation controlling such Bank and that the
amount of such capital is increased by or based upon the existence of such
Bank's commitment to lend hereunder and other commitments of this type, then,
within 20 Business Days after written demand by such Bank, the Borrower shall
pay to such Bank, from time to time as specified by such Bank, additional
amounts sufficient to compensate such Bank or such corporation in the light of
such circumstances, to the extent that such Bank reasonably determines such
increase in capital to be allocable to the existence of such Bank's commitment
to lend hereunder. A certificate as to such amounts shall be submitted to the
Borrower by such Bank with such demand, and such certificate shall be presumed
to be correct.
(d) Illegality. Notwithstanding any other provision of this
----------
Agreement, if a Bank shall notify the Borrower that the introduction of or any
change in or in the interpretation of any law or regulation makes it unlawful,
or any central bank or other governmental authority asserts that it is unlawful,
for such Bank to perform its obligations hereunder to make, fund or maintain
Loans hereunder based on LIBOR, or if such Bank notifies the Borrower that such
Bank in good faith has determined that LIBOR will not adequately reflect the
cost to the Bank of making or maintaining Loans, such Bank shall provide the
Borrower with a comparable interest rate option for the Loans.
SECTION 2.6. Fees.
----
(a) The Borrower agrees to pay to the Banks a fee on the daily Unused
Amount (as defined below) aggregate Commitments, whether used or unused, from
the effective date hereof until the Termination Date, as extended from time to
time, at the rate per annum set forth in the schedule below (the "Non-Usage Fee
Rate"), payable in arrears on the first Business Day of each January, April,
July and October, during the term of the Commitments of the Banks, beginning on
October 1, 1999, and on the Termination Date, as extended from time to time. The
"Unused Amount" means, on a daily basis, the amount by which $50,000,000 exceeds
the aggregate outstanding balance of the Loans. The Agent shall submit a
quarterly statement for such fee to the Borrower.
13
<PAGE>
<TABLE>
<CAPTION>
S&P Rating Moody's Rating Non-Usage Fee Rate
- ---------- -------------- ------------------
<S> <C> <C>
A or higher A2 or higher .15%
A- A3 .20%
BBB+ Baal .20%
BBB Baa2 .20%
BBB- Baa3 .20%
Less than BBB- Less than Baa3 .25%
No Rating No Rating .25%
</TABLE>
The Non-Usage Fee Rate shall be determined in the same manner as the
determination of the LIBOR Spread pursuant to Section 2.3(b) hereof (e.g., if
----
the Borrower's Moody's debt rating is Baa 1 and its S&P debt rating is A, the
Non-Usage Fee Rate shall be based on the Moody's debt rating), with adjustments
becoming effective on the next Business Day following any change in the
applicable debt rating. As of the date hereof, the Non-Usage Fee Rate is .20%.
(b) On the Closing Date, the Borrower shall pay to the Agent, for the
account of the Agent, the fee set forth in the letter agreement between the
Borrower and the Agent.
SECTION 2.7. Note. The Borrower's obligation to repay the Loans made by a
----
Bank, together with accrued interest thereon, shall be evidenced by a single
promissory note in the amount of such Bank's Commitment, in the form of
Exhibit A attached hereto, duly executed on behalf of the Borrower and payable
- ---------
to such Bank (as amended from time to time, the "Notes").
SECTION 2.8. Payments and Computations.
(a) The Borrower shall make each payment hereunder and under the Notes
not later than 12:00 noon (Eastern time) on the day when due in U.S. dollars to
the Agent at its address at 8245 Boone Boulevard, 8th Floor, Vienna, Virginia
22182, Attention: Nancy B. Richards, in same day funds. The Agent will promptly
thereafter cause to be distributed in like funds relating to the payment of
principal, interest or fees ratably (other than amounts payable to a particular
Bank pursuant to Section 2.5 or to the Agent pursuant to the letter agreement
referred to in Section 2.6(b) above) to the Banks in accordance with wire
transfer instructions provided to the Agent by the Banks from time to time.
(b) The Borrower shall establish an account with the Agent into which
the proceeds of the Loans will be deposited. The Borrower hereby authorizes the
Agent, if and to the extent payment is not made when due hereunder or under the
Notes, to charge from time to time against such account with the Agent any
amount so due.
14
<PAGE>
(c) All computations of interest and non-usage fees shall be made by
the Agent on the basis of a year of 360 days, in each case for the actual number
of days (including the first day but excluding the last day) occurring in the
period for which such interest or fee is payable. Each determination by the
Agent of an interest rate hereunder shall be conclusive and binding for all
purposes, absent manifest error.
(d) Whenever any payment hereunder or under the Notes shall be stated
to be due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest and fees, as the case may be;
provided, however, if such extension would cause the payment of principal or
interest of the Loans bearing interest based on LIBOR to be made in the next
following calendar month, such payment should be made on the next preceding
Business Day.
SECTION 2.9. Sharing of Payments etc. Except to the extent otherwise
-----------------------
expressly provided herein, (a) Loans shall be made, continued and converted by
the Banks pro rata in accordance with their respective Commitment Percentages,
and (b) each payment of the principal of or interest on the Loans or of fees
(other than pursuant to the letter agreement referred to in Section 2.6 above)
shall be made for the account of the Banks pro rata in accordance with their
respective amounts thereof then due and payable. If any Bank shall obtain any
payment (whether voluntary, involuntary, through the exercise of any right of
set-off, or otherwise) on account of the Loans made by it (other than pursuant
to Sections 2.5 or 8.5(b)) in excess of its ratable share of payments on account
of the Loans obtained by all the Banks, such Bank shall forthwith purchase from
the other Banks such participations in the Loans made by them as shall be
necessary to cause such purchasing Bank to share the excess payment ratably with
each of them; provided, however, that if all or any portion of such excess
-------- -------
payment is thereafter recovered from such purchasing Bank, such purchase from
each Bank shall be rescinded and such Bank shall repay to the purchasing Bank
the purchase price to the extent of such recovery together with an amount equal
to such Bank's ratable share (according to the proportion of (1) the amount of
such Bank's required repayment to (2) the total amount so recovered from the
purchasing Bank) of any interest or other amount paid or payable by the
purchasing Bank in respect of the total amount so recovered. The Borrower agrees
that any Bank so purchasing a participation from another Bank pursuant to this
Section 2.9 may, to the fullest extent permitted by law, exercise all of its
rights of payment (including the right of set-off) with respect to such
participation as fully as if such Bank were the direct creditor of the Borrower
in the amount of such participation. If a Bank shall default in its obligation
to fund any Loan hereunder (a "Defaulting Bank"), then simultaneously with any
funding by any of the remaining Banks (each, a "Funding Bank"), of their
respective Commitment Percentages of such Loan (such a Loan is sometimes
referred to as a "Partial Loan"), the respective pro rata payments to be
received by each Funding Bank shall be adjusted to correspond to the aggregate
percentage of all then outstanding Loans (including all Partial Loans) made by
such Funding Bank. Following any adjustment of each Bank's pro rata share
pursuant to the preceding sentence, such Bank's pro rata share shall be
readjusted only
15
<PAGE>
upon the first to occur of (i) a Defaulting Bank subsequently funding its
Commitment Percentage of any such Partial Loan, or (ii) the repayment in full
(including all interest thereon) to each Bank of its Commitment Percentage of
any such Partial Loan. Notwithstanding anything contained herein to the
contrary, in no event shall any Defaulting Bank be entitled to receive any
repayment of its Commitment Percentage of any Loans (or any interest earned
thereon) until such time as the Funding Banks have received repayment in full of
the amount of any Partial Loan, together with all interest thereon. The Borrower
shall have the right to replace a Defaulting Bank in the manner set forth in
Section 2.10 below, and upon the replacement of any Defaulting Bank, such
Defaulting Bank shall refund to the Borrower the pro rata share of all
commitment fees paid to such Defaulting Bank which have not been earned by such
Defaulting Bank as of the date of such replacement, determined by multiplying
the amount of all commitment fees paid by the Borrower to or for the benefit of
such Defaulting Bank 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 term of the Commitment, and the denominator of which is 36.
SECTION 2.10. Replacement of Bank by Reason of Change in Circumstances. In
--------------------------------------------------------
the event that any Bank (a "Recovery Bank") requires the Borrower to make any
payment to such Recovery Bank in accordance with the provisions of Section 2.5,
then upon written notice from the Borrower to Agent, the Borrower and the Agent
shall mutually use their respective best efforts to find another lender to
replace the Recovery Bank. If a replacement lender is found then the Borrower
shall pay to the Recovery Bank all amounts owed to such Recovery Bank under this
Agreement and the Note (including, without limitation, any amounts owed under
Section 2.5), such Recovery Bank shall no longer be a "Bank" hereunder, and
concurrently therewith the remaining parties hereto shall execute such
instruments as shall be necessary to have the replacement lender become a "Bank"
hereunder having a Commitment equal to that of the Recovery Bank.
ARTICLE 3
CONDITIONS OF LENDING
SECTION 3.1. Condition Precedent to Initial Loan. The obligation of the
-----------------------------------
Banks to make the initial Loan under this Agreement is subject to the condition
precedent that the Agent shall have received on or before the day of such Loan
the following, each dated such day, in form and substance satisfactory to the
Agent:
(a) The Notes and a Subsidiary Guaranty from each Subsidiary;
(b) Certified copies of the declaration of trust and bylaws of the
Borrower, together with resolutions of the Board of Trustees of the Borrower
approving this Agreement and the Notes, and of all documents evidencing other
necessary trust action and governmental approvals, if any, with respect to this
Agreement or the Notes;
16
<PAGE>
(c) Current good standing certificates as to the Borrower's existence
in the State of Maryland as a real estate investment trust and as to the
existence of each Subsidiary in the jurisdiction in which it is organized;
(d) A certificate of a duly authorized officer of the Borrower
certifying the incumbency names and true signatures of the officers of the
Borrower authorized to sign this Agreement, the Notes, and the other documents
to be delivered hereunder;
(e) Certified copies of the organizational documents and resolutions
of each Subsidiary authorizing the Subsidiary Guaranty, and a certificate of a
duly authorized representative of such Subsidiary certifying the incumbency,
names and true signatures of the representatives of such Subsidiary authorized
to sign the Subsidiary Guaranty; and
(f) A favorable opinion of Arent Fox Kintner Plotkin & Kahn, counsel
for the Borrower and the Subsidiaries, as to such matters as the Banks may
reasonably request.
SECTION 3.2. Conditions Precedent to All Loans. The obligation of the Banks
---------------------------------
to make each Loan (including the initial Loan) shall be subject to the further
conditions precedent that on the date of Loan the following statements shall be
true (and each of the giving of the applicable notice requesting such Loan and
the acceptance by the Borrower of the proceeds of Loan shall constitute a
representation and warranty by the Borrower that on the date of such Loan such
statements are true):
(a) The representations and warranties contained in Section 4.1 are
correct on and as of the date of such Loan, before and after giving effect to
such Loan and to the application of the proceeds therefrom, as though made on
and as of such date, except that the representation made in Section 4.1(a)
shall be deemed to be made with respect to any Subsidiaries acquired or formed
in accordance with Section 5.1(c) and the representations made in Section 4.1(e)
shall be deemed to be made with respect to the financial statements most
recently delivered in accordance with Section 5.1(b); and
(b) No event has occurred and is continuing, or would result from such
Loan or from the application of the proceeds therefrom, which constitutes an
Event of Default or would constitute an Event of Default but for the requirement
that notice be given or time elapse or both.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
SECTION 4.1. Representations and Warranties of the Borrower. The Borrower
----------------------------------------------
represents and warrants as follows:
(a) The Borrower is a real estate investment trust duly formed,
validly existing and in good standing under the laws of the State of Maryland,
and is qualified to do
17
<PAGE>
business in each jurisdiction where such qualification is required. The only
Subsidiary of the Borrower as of the date of this Agreement is WRIT LP.
(b) The execution, delivery and performance by the Borrower of this
Agreement and the Notes are within the Borrower's trust powers, have been duly
authorized by all necessary trust action, and do not contravene (1) the
Borrower's declaration of trust or bylaws or (2) law or any contractual
restriction binding on or affecting the Borrower.
(c) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body is required for
the due execution, delivery and performance by the Borrower of this Agreement or
the Notes.
(d) This Agreement and the Notes when delivered hereunder will be
legal, valid and binding obligations of the Borrower enforceable against the
Borrower in accordance with their respective terms.
(e) The consolidated balance sheet of the Borrower and its
Subsidiaries reported on SEC Form 1O-Q for the fiscal quarter ended on March
31, 1999, and the related consolidated statements of income, equity and cash
flows of the Borrower and its Subsidiaries for the fiscal quarter then ended,
copies of which have been furnished to the Bank, fairly present the financial
condition of the Borrower and its Subsidiaries as of such date and the results
of the operations of the Borrower and its Subsidiaries for the period ended on
such date, all in accordance with generally accepted accounting principles
consistently applied, and since March 31, 1999, there has been no material
adverse change in such condition or operations.
(f) To the best of the Borrower's knowledge, there is no pending or
threatened action or proceeding affecting the Borrower before any court,
governmental agency or arbitrator, which may materially adversely affect the
financial condition or operations of the Borrower or which purports to affect
the legality, validity or enforceability of this Agreement or the Notes.
(g) No proceeds of any Loan will be used to acquire any equity
security of a class which is registered pursuant to Section 12 of the Securities
Exchange Act of 1934.
(h) The Borrower is not engaged in the business of extending credit
for the purpose of purchasing or carrying margin stock (within the meaning of
Regulation U issued by the Board of Governors of the Federal Reserve System),
and no proceeds of any Loan will be used to purchase or carry any margin stock
or to extend credit to others for the purpose of purchasing or carrying any
margin stock.
(i) The Borrower is not an "investment company" within the meaning of,
or is exempt from, the provisions of the Investment Company Act of 1940, as
amended.
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(j) The Borrower is qualified as a real estate investment trust under
Sections 856 to 860 of the Internal Revenue Code.
(k) The Borrower has made a full and complete assessment of the Year
2000 Issues and has a realistic and achievable program for remediating the Year
2000 Issues on a timely basis (the "Year 2000 Program"). Based on such
assessment and on the Year 2000 Program the Borrower does not reasonably
anticipate that Year 2000 Issues will have a material adverse effect on the
financial condition of the Borrower and its Subsidiaries.
ARTICLE 5
COVENANTS OF THE BORROWER
SECTION 5.1. Affirmative Covenants. So long as the Notes shall remain
---------------------
unpaid or any Bank shall have any Commitment hereunder, the Borrower will,
unless the Majority Banks shall otherwise consent in writing:
(a) Compliance with Laws. Comply, and cause each Subsidiary to comply,
--------------------
in all material respects with all applicable laws, rules, regulations and
orders, such compliance to include, without limitation, (1) paying before the
same become delinquent all taxes, assessments and governmental charges imposed
upon it or upon its property except to the extent contested in good faith, (2)
maintaining all employee benefit plans subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") in conformity with the provisions
-----
thereof, including the minimum funding requirements of ERISA, and (3) the
treatment, disposal, removal, storage and release of hazardous or toxic
substances in accordance with applicable environmental laws and regulations.
(b) Reporting Requirements. Furnish to each Bank:
----------------------
(1) as soon as available and in any event within 45 days after
the end of each of the first three quarters of each fiscal year of the Borrower,
the SEC Form 1O-Q of the Borrower filed for such quarter;
(2) as soon as available and in any event within 90 days after
the end of each fiscal year of the Borrower, a copy of the SEC Form 1O-K of the
Borrower for such year for the Borrower, containing audited financial statements
for such year certified by independent public accountants reasonably acceptable
to the Banks, accompanied by an operating statement for such year for each real
estate project owned by the Borrower or a Subsidiary setting forth a breakdown
of revenues, expenses, net operating income and occupancy for each such project,
and an itemization of any lease of space of 10,000 square feet or more that will
expire within 12 months after the date of such operating statement. The
operating statements and the information contained therein shall be confidential
information and, unless required by applicable law, shall not be provided to any
person except each Bank's regulators and accountants;
19
<PAGE>
(3) Within 45 days after the end of each fiscal quarter, a
certificate of the chief financial officer of the Borrower to the effect that no
Event of Default, and no event which, with the giving of notice or lapse of
time, or both, would constitute an Event of Default, occurred during the prior
quarter and containing calculations of the financial covenants set forth in
Section 5.2(d); and
(4) as soon as possible and in any event within five days after
an officer of the Borrower has knowledge of the occurrence of each Event of
Default and each event which, with the giving of notice or lapse of time, or
both, would constitute an Event of Default, continuing on the date of such
statement, a statement of the chief financial officer of the Borrower setting
forth details of such Event of Default or event and the action which the
Borrower has taken and proposes to take with respect thereto;
(5) promptly after the sending or filing thereof, copies of all
other reports which the Borrower sends to any of its security holders or
regulators, and copies of all reports and registration statements which the
Borrower or any Subsidiary files with the Securities and Exchange Commission or
any national securities exchange; and
(6) such other information respecting the condition or
operations, financial or otherwise, of the Borrower, the Subsidiaries or any of
their Properties as the Banks may from time to time reasonably request.
(c) Delivery of Subsidiary Guaranties. Payment of all Indebtedness of
---------------------------------
the Borrower arising under this Agreement and the Notes shall be guaranteed by
WRIT LP and each other Subsidiary of the Borrower formed or acquired after the
date of this Agreement. The Borrower shall promptly notify the Agent of any
planned formation or acquisition of any Subsidiary. Within 10 days after the
Borrower forms or acquires any Subsidiary, the Borrower shall cause such
Subsidiary to execute and deliver to the Banks a valid and enforceable guaranty
agreement (as "Subsidiary Guaranty") together with such other documents as the
Banks shall reasonably request. Each Subsidiary Guaranty and such other
documents each shall be in form and substance satisfactory to the Banks. Such
documents shall include, without limitation:
(1) an opinion of counsel to the Subsidiary, addressed to the
Agent, covering such matters as the Agent may reasonably request;
(2) copies of evidence of all actions taken by the Subsidiary to
authorize the execution, delivery and performance of the Subsidiary Guaranty;
(3) certified copies of the organizational documents of the
Subsidiary;
(4) a certificate as to the authority, incumbency and signatures
of the representatives of the Subsidiary authorized to execute the Subsidiary
Guaranty; and
20
<PAGE>
(5) a current certificate of good standing or formation (or
similar instrument) issued by the appropriate state official of the state of
organization of the Subsidiary.
(d) Year 2000. The Borrower will take and will cause each of its
---------
Subsidiaries to take all such actions as are reasonably necessary to
successfully implement the Year 2000 Program and to assure that the Year 2000
Issues will not have a material adverse effect on the financial condition of the
Borrower and its Subsidiaries. At the request of the Agent or any Lender, the
Borrower will provide a description of the Year 2000 Program, together with any
updates or progress reports with respect thereto.
SECTION 5.2. Negative Covenants. So long as the Notes shall remain unpaid
------------------
or any Bank shall have any Commitment hereunder, the Borrower will not, without
the written consent of the Majority Banks:
(a) Liens. Create or permit to exist, or permit any of its
-----
Subsidiaries to create or permit to exist, any lien, security interest or other
charge or encumbrance or any other type of preferential arrangement
(collectively, a "Lien"), upon or with respect to any of its Properties, whether
now owned or hereafter acquired, or assign, or permit any of its Subsidiaries to
assign, any right to receive income, in each case to secure or provide for the
payment of any Indebtedness of any person or entity, other than (1) the Lien for
real estate taxes and any similar assessments or charges which are not yet due
and payable (2) mechanics' Liens and/or judgments which the Borrower will have
released or bonded off, or otherwise provide adequate security for, within 60
days, (3) Liens existing on income producing Property at the time of its
acquisition by the Borrower, and any refinancings thereof that do not increase
the amount of such liens, (4) a Lien in an aggregate amount not to exceed
$50,000,000 securing a loan made by First Union National Bank (or an affiliate
thereof) and encumbering certain apartment Properties known as Country Club
Towers, Park Adams, Munson Hill Towers, Roosevelt Towers and The Ashby at
McLean, and (5) Liens in an aggregate amount not to exceed $500,000 at any time
outstanding. In case any Property is subjected to a Lien in violation of this
Section 5.2(a), the Borrower and the applicable Subsidiary will make or cause to
be made provision whereby the Notes will be secured equally and ratably with all
other obligations secured thereby, and in any case the Banks shall have the
benefit, to the full extent that and with such priority as the Banks may be
entitled thereto under applicable law, of an equitable lien on such property
securing the Notes. Such violation shall constitute an Event of Default
hereunder, however, whether or not such provision for an equal and ratable lien
is made.
(b) Financial Covenants. Allow or permit to exist, or permit any of
-------------------
its Subsidiaries to permit to exist, on a consolidated basis together with its
Subsidiaries: (1) a Cash Flow to Debt Service Ratio of less than 2.5, as
determined at the end of each fiscal quarter, based upon annualized results for
the preceding two fiscal quarters; (2) a Consolidated Tangible Net Worth of less
than $225,000,000; (3) Consolidated Total Indebtedness greater than fifty
percent (50%) of Total Capitalization Value; (4) Consolidated Secured
Indebtedness greater than fifteen percent (15%) of Total Capitalization Value;
(5) the Value of Unencumbered Assets to be less
21
<PAGE>
than 2.0 times the Consolidated Senior Unsecured Indebtedness; or (6) annualized
EBITDA (determined by multiplying by two (2) the sum of EBITDA for the two (2)
most recently ended fiscal quarters) to be less than seventeen and one-half
percent (17.50%) of Consolidated Total Indebtedness.
(c) Mergers. Merge or consolidate with or into, or convey, transfer,
-------
lease or otherwise dispose of (or permit any Subsidiary to do so), whether in
one transaction or in a series of transactions all or substantially all of its
assets (whether now owned or hereafter acquired) to, (1) the Borrower may form
and acquire "qualified REIT subsidiaries" (as such term is defined in the
Internal Revenue Code) and may transfer assets to such Subsidiary, provided that
each such Subsidiary complies with the provisions of Section 5.1(c), and (2)
that the Borrower may merge or consolidate with or into any other person or
entity, provided that, immediately after giving effect to such proposed
--------
transaction, no Event of Default or event which, with the giving of notice or
lapse of time, or both, would constitute an Event of Default would exist and the
Borrower is the surviving entity.
(d) Acquisition and Investments. Make nor permit any of its
---------------------------
Subsidiaries to make:
(1) any Acquisition, except mergers permitted pursuant to Section
5.2(c);
(2) by a single transaction or through a series of related
transactions any acquisition of property if the cost of such property would be
more than $50,000,000 for any such property;
(3) any investments in, or loans or advances to, any
unconsolidated Person to the extent such investments, loans or advances in the
aggregate would exceed ten percent (10%) of their Total Tangible Assets on a
consolidated basis.
(e) Asset Sales. During any fiscal year sell assets that in the
-----------
aggregate generated 10% or more of consolidated EBITDA for the Borrower and its
Subsidiaries for the immediately preceding fiscal year.
ARTICLE 6
EVENTS OF DEFAULT
SECTION 6.1. Events of Default. If any of the following events ("Events of
-----------------
Default") shall occur and be continuing, the Agent shall, at the request of the
Majority Banks, be entitled to exercise the remedies provided for in Section
6.2:
22
<PAGE>
(a) The Borrower shall fail to pay any principal of any Note when the
same becomes due and payable and such failure continues for a period of five
days after written notice to the Borrower from the Agent; or
(b) The Borrower shall fail to pay any interest on the Notes when the
same shall become due and payable and such failure continues for a period of ten
days after written notice from the Agent to the Borrower; or
(c) Any representation or warranty made by the Borrower or a
Subsidiary in any Loan Document or by the Borrower or any Subsidiary (or any of
its officers or representatives) in connection with this Agreement shall prove
to have been incorrect in any material respect when made; or
(d) The Borrower or a Subsidiary shall fail to perform or observe any
term, covenant or agreement contained in this Agreement or in the Subsidiary
Guaranty on its part to be performed or observed if such failure shall remain
unremedied for 30 days after written notice thereof shall have been given to the
Borrower or such Subsidiary, as applicable, by the Agent, provided that the
Borrower or such Subsidiary, as applicable, shall be entitled such additional
time, as may be reasonably approved by the Banks, but not more than 90 days, to
cure a default under Section 5.1(a) which cannot reasonably be cured within 30
days so long as the Borrower or such Subsidiary, as applicable, commences such
cure promptly and proceeds diligently with such cure; or
(e) The Borrower shall fail to pay any principal of or interest on any
Indebtedness which is outstanding in a principal amount of at least $100,000 in
the aggregate (but excluding Indebtedness evidenced by the Notes) of the
Borrower (as the case may be), when the same becomes due and payable (whether by
scheduled maturity, required prepayment, acceleration, demand or otherwise,
provided that a demand instrument issued by the Borrower shall not be deemed to
be due and payable until demand is made by the holder thereof), and such failure
shall continue after the applicable grace period, if any, specified in the
agreement or instrument relating to such Indebtedness; or any other event shall
occur or condition shall exist under any agreement or instrument relating to any
such Indebtedness and shall continue after the applicable grace period, if any,
specified in such agreement or instrument, if the effect of such event or
condition is to accelerate, or to permit the acceleration of, the maturity of
such Indebtedness; or any such Indebtedness shall be declared to be due and
payable, or required to be prepaid (other than by a regularly scheduled required
prepayment), redeemed, purchased or defeased, or an offer to prepay, redeem,
purchase or defease such Indebtedness shall be required to be made, in each case
prior to the stated maturity thereof; or
(f) The Borrower shall generally not pay its debts as such debts
become due, or shall admit in writing its inability to pay its debts generally,
or shall make a general assignment for the benefit of creditors; or any
proceeding shall be instituted by or against the Borrower seeking to adjudicate
it a bankrupt or insolvent, or seeking liquidation, winding up,
23
<PAGE>
reorganization, arrangement, adjustment, protection, relief, or composition of
it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of an order for relief
or the appointment of a receiver, trustee, custodian or other similar official
for it or for any substantial part of its property and, in the case of any such
proceeding instituted against it (but not instituted by it), either such
proceeding shall remain undismissed or unstayed for a period of 60 days, or any
of the actions sought in such proceeding (including, without limitation, the
entry of an order for relief against, or the appointment of a receiver, trustee,
custodian or other similar official for, it or for any substantial part of its
property) shall occur; or the Borrower shall take any action to authorize any of
the actions set forth above in this subsection (f); or
(g) The Borrower shall fail to qualify as a real estate investment
trust under Sections 856 to 860 of the Internal Revenue Code; or
(h) Any judgment or order for the payment of money in excess of
$1,000,000 shall be rendered against the Borrower and either (1) enforcement
proceedings shall have been commenced by any creditor upon such judgment or
order or (2) there shall be any period of 10 consecutive days during which a
stay of enforcement of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect; or
(i) The occurrence of an event described in Sections 6.1(e) or (h)
shall occur with respect to any Subsidiary or the occurrence of an event
described in Section 6.1(f) with respect to a Subsidiary or Subsidiaries with
aggregate Total Tangible Assets of more than $10,000,000.
SECTION 6.2. Remedies. Upon the occurrence of any Event of Default, the
--------
Agent shall, at the request of the Majority Banks:
(a) by notice to the Borrower, declare the obligation of each Bank to
make Loans to be terminated, whereupon the same shall forthwith terminate; and
(b) by notice to the Borrower, declare the Notes, all interest thereon
and all other amounts payable under this Agreement to be forthwith due and
payable, whereupon the Notes, all such interest and all such amounts shall
become and be forthwith due and payable, without presentment, demand, protest,
or further notice of any kind, all of which are hereby expressly waived by the
Borrower; provided, however, that in the event of an actual or deemed entry of
-------- -------
an order for relief with respect to the Borrower under the Federal Bankruptcy
Code, (1) the obligation of each Bank to make Loans shall automatically be
terminated and (2) the Loans, the Notes, all such interest and all such amounts
shall automatically become and be due and payable, without presentment, demand,
protest or any notice of any kind, all of which are hereby expressly waived by
the Borrower.
24
<PAGE>
ARTICLE 7
THE AGENT
SECTION 7.1. Authorization and Action. Each Bank hereby appoints and
------------------------
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers under this Agreement as are delegated to the Agent by the terms
hereof, together with such powers as are reasonably incidental thereto. As to
any matters not expressly provided for by this Agreement (including, without
limitation, enforcement or collection of the Notes), the Agent shall not be
required to exercise any discretion or take any action, but shall be required to
act or to refrain from acting (and shall be fully protected in so acting or
refraining from acting) upon the instructions of the Banks, and such
instructions shall be binding upon all Banks and all holders of Notes; provided,
--------
however, that the Agent shall not be required to take any action that exposes
- -------
the Agent to personal liability or that is contrary to this Agreement, any Note
or applicable law. The Agent agrees to give to each Bank prompt notice of each
notice given to it by the Borrower pursuant to the terms of this Agreement.
SECTION 7.2. Agent's Reliance, etc. Neither the Agent nor any of its
---------------------
directors, officers, agents or employees shall be liable for any action taken or
omitted to be taken by it or them under or in connection with this Agreement,
except for its or their own gross negligence or willful misconduct. Without
limitation of the generality of the foregoing, the Agent: (1) may treat the
payee of any Note as the holder thereof, subject to the provisions of Section
8.13; (2) may consult with legal counsel (including counsel for the Borrower),
independent public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants or experts; (3) makes no
warranty or representation to any Bank and shall not be responsible to any Bank
for any statements, warranties or representations (whether written or oral) made
by the Borrower or another Bank in or in connection with this Agreement; (4)
shall not have any duty to ascertain or to inquire as to the performance or
observance of any of the terms, covenants or conditions of this Agreement on the
part of the Borrower or to inspect the property (including the books and
records) of the Borrower; (5) shall not be responsible to any Bank for the due
execution, legality, validity, enforceability, genuineness, sufficiency or value
of this Agreement, any Note or any other instrument or document furnished
pursuant hereto; and (6) shall incur no liability under or in respect of this
Agreement by acting upon any notice, consent, certificate or other instrument or
writing (which may be by telecopier, telegram, cable or telex) reasonably
believed by it to be genuine and signed or sent by the proper party or parties.
SECTION 7.3. Agent and Affiliates. With respect to its Commitment, the
--------------------
Loans made by it, the Note issued to it and the Indebtedness due to it, the
Agent shall have the same rights and powers under this Agreement as any other
Bank and may exercise the same as though it were not the Agent, and the term
"Bank" or "Banks" shall, unless otherwise expressly indicated, include Crestar
---- -----
Bank in its individual capacity. Crestar Bank and its affiliates may accept
deposits from, lend money to, act as trustee under indentures of, and generally
engage in
25
<PAGE>
any kind of business with, the Borrower and any person or entity who may do
business with or own common stock of the Borrower, all as if Crestar Bank were
not the Agent and without any duty to account therefor to the Banks.
SECTION 7.4. Bank Credit Decision. Each Bank acknowledges that it has,
--------------------
independently and without reliance upon the Agent or any other Bank and based on
the financial statements referred to in Section 4.1(e) and such other documents
and information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Bank also acknowledges that it will,
independently and without reliance upon the Agent or any other Bank 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.
SECTION 7.5. Indemnification. The Banks agree to indemnify the Agent (to
---------------
the extent not reimbursed by the Borrower), ratably according to their
respective Commitment Percentages, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever that may be imposed
on, incurred by, or asserted against the Agent in any way relating to or arising
out of this Agreement or any action taken or omitted by the Agent under this
Agreement, provided that no Bank shall be liable for any portion of such
--------
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from the Agent's gross negligence or
willful misconduct. Without limitation of the foregoing, each Bank agrees to
reimburse the Agent promptly upon demand for its ratable share of any out-of-
pocket expenses (including counsel fees) incurred by the Agent in connection
with the preparation, execution, delivery, administration, modification,
amendment or enforcement (whether through negotiations, legal proceedings or
otherwise) of, or legal advice in respect of rights or responsibilities under,
this Agreement, to the extent that the Agent is not reimbursed for such expenses
by the Borrower.
SECTION 7.6. Successor Agent. The Agent may resign at any time by giving
---------------
written notice thereof to the Banks and the Borrower. Upon any such resignation,
the Banks shall have the right to appoint a successor Agent. If no successor
Agent shall have been so appointed by the Banks, and shall have accepted such
appointment, within 30 days after the retiring Agent's giving of notice of
resignation, then the retiring Agent, on behalf of the Banks, may appoint a
successor Agent, which shall be a commercial bank organized under the laws of
the United States of America or of any State thereof and having a combined
capital and surplus 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 retiring Agent, and the retiring Agent shall be discharged
from its duties and obligations under this Agreement. After any retiring Agent's
resignation hereunder as Agent, the provisions of this Article 7 shall inure to
its benefit as to any actions taken or omitted to be taken by it while it was
Agent under this Agreement.
26
<PAGE>
SECTION 7.7. Borrower's Reliance. The Borrower shall be entitled to rely
-------------------
upon written confirmation from the Agent as to the consent of the Banks to any
action by the Borrower for which such consent is required. Crestar Bank agrees
with the Borrower that it shall use good faith efforts to remain the Agent under
this Agreement.
ARTICLE 8
MISCELLANEOUS
SECTION 8.1. Amendments. No amendment or waiver of any provision of this
----------
Agreement or the Note, nor consent to any departure by the Borrower therefrom,
shall in any event be effective unless the same shall be in writing and signed
by the Borrower, the Agent and the Majority Banks, or where unanimous consent is
required, by all Banks, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given. The
unanimous consent of all Banks will be required for any amendment, waiver or
consent, the effect of which is to (a) reduce any amount payable hereunder or
under the Note, or (b) extend the time of payment of any amount payable
hereunder or under the Note, (c) increase the amount of any Commitment, (d)
release the Borrower from any liabilities hereunder or under the Note, (e)
change the definition of Majority Banks, or (f) amend the provisions of this
Section 8.1.
SECTION 8.2. Notices. All notices and other communications provided for
-------
hereunder shall be in writing and mailed, by certified mail, postage prepaid, or
delivered by reputable overnight courier service, if to the Borrower, at its
address at 6110 Executive Boulevard, Suite 800, Rockville, Maryland 20852,
Attention: Larry E. Finger, with a copy of any notice of an Event of Default to
David M. Osnos, Esq., at Arent Fox Kintner Plotkin & Kahn at 1050 Connecticut
Avenue, N.W., Washington, D.C. 20036, if to the Agent, at its address at 8245
Boone Boulevard, 8th Floor, Vienna, Virginia 22182, Attention: Nancy B.
Richards; and if to the Banks, at their respective addresses set forth on the
Commitment Schedule attached hereto or any updates thereof; or, as to each
party, at such other address as shall be designated by such party in a written
notice to the other party. All such notices and communications shall be
effective upon receipt.
SECTION 8.3. No Waiver; Remedies. No failure on the part of the Agent or
-------------------
the Banks to exercise, and no delay in exercising, any right hereunder or under
the Notes shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right preclude any other or further exercise thereof or the
exercise of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 8.4. Accounting Terms. All accounting terms not specifically
----------------
defined herein shall be construed in accordance with GAAP.
SECTION 8.5. Costs, Expenses and Taxes. The Borrower agrees (a) to pay or
-------------------------
reimburse the Agent on demand for all its costs and expenses incurred in
connection with the
27
<PAGE>
preparation, execution and delivery of, and any amendment, supplement or
modification to, this Agreement, the Notes and any other documents prepared in
connection herewith or therewith, and the consummation of the transactions
contemplated hereby and thereby, including, without limitation, the reasonable
fees and disbursements of counsel to the Agent; (b) to pay or reimburse the
Agent and each Bank for all of their respective costs and expenses incurred in
connection with the enforcement or preservation of any rights under this
Agreement, the Notes and any such other documents, including, without
limitation, reasonable fees and disbursements of counsel to the Agent and each
Bank, except that the Borrower shall not be responsible for any costs or
expenses attributable to disputes among the Banks or among the Agent and any
Bank; (c) to pay, indemnify and hold each Bank and the Agent harmless from any
and all recording and filing fees and any and all liabilities with respect to,
or resulting from any delay in paying, stamp, excise and other taxes, if any,
that may be payable or determined to be payable in connection with the execution
and delivery or consummation of any of the transactions contemplated by, or any
amendment, supplement or modification to, or any waiver or consent under or in
respect of, this Agreement, the Notes and any such other documents; and (d) to
pay, indemnify and hold each Bank and the Agent harmless from and against any
and all other liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever arising out of or relating to the making or maintaining of the Loans,
or the enforcement, performance and administration of this Agreement, the Notes
and any such other documents, or expenses or other liabilities arising out of
any bankruptcy or insolvency proceeding of the Borrower (all of the foregoing,
collectively, the "indemnified liabilities"), provided, that the Borrower shall
-----------------------
not have any obligations hereunder to the Agent or any Bank with respect to
indemnified liabilities arising from the gross negligence or willful misconduct
of the Agent or any such Bank. The agreements in this Section 8.5 shall survive
repayment of the Notes. The Borrower shall not be responsible for the fees and
expenses incurred by any Participant, any Transferee Bank (as such terms are
defined below), the Agent or any Bank in connection with any acquisition of any
interest in the Loans, other than the fees and expenses of counsel to the Agent
in connection with the execution and delivery of this Agreement.
SECTION 8.6. Survival of Agreements, Representations and Warranties. All
------------------------------------------------------
warranties, representations and covenants made by the Borrower herein or in any
certificate or other instrument delivered by it or on its behalf in connection
with this Agreement shall be considered to have been relied upon by the Agent
and the Banks and shall survive the making of the Loans herein contemplated and
the issuance and delivery to the Banks of the Notes regardless of any
investigation made by the Banks or on their behalf and shall continue in full
force and effect so long as any amount due or to become due hereunder is
outstanding and unpaid. All statements in any such certificate or other
instrument shall constitute representations and warranties by the Borrower
hereunder.
SECTION 8.7. Binding Effect. This Agreement and the Notes issued hereunder,
--------------
shall be binding upon and inure to the benefit of the Borrower, the Agent and
the Banks and their
28
<PAGE>
respective successors and assigns, except that the Borrower shall not have the
right to assign its rights hereunder or any interest herein without the prior
written consent of the Banks.
SECTION 8.8. Entire Agreement. Except for the other loan documents
----------------
expressly referred to in this Agreement, this Agreement represents the entire
agreement between the Agent, the Banks and the Borrower and supersedes all prior
commitments.
SECTION 8.9. Severability. In case any one or more of the provisions
------------
contained in this Agreement or the Notes shall be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and therein shall not in any way be
affected or impaired thereby. The parties shall endeavor in good faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions, the economic effect of which comes as close as possible to
that of the invalid, illegal or unenforceable provisions.
SECTION 8.10. Section Headings. The section headings used herein are for
----------------
convenience of reference only, are not part of this Agreement and are not to
affect the construction of or be taken into consideration in interpreting this
Agreement.
SECTION 8.11. No Assignment. The Borrower may not assign its rights or
-------------
obligations under this Agreement.
SECTION 8.12. Participations by Banks. Any Bank may at any time sell to one
-----------------------
or more financial institutions (each of such financial institutions being herein
called a "Participant") participating interests in any of the Loans held by such
Bank and its Commitment, provided, however, that:
(a) No participation contemplated by this Section 8.12 shall relieve
such Bank from its obligations hereunder;
(b) Such Bank shall remain solely responsible for the performance of
such obligations; and
(c) The Borrower, the Agent, and the other Banks shall continue to
deal solely and directly with such Bank in connection with such Bank's rights
and obligations under this Agreement.
SECTION 8.13. Assignments by Banks. Any Bank, with the prior written
--------------------
consent of the Agent, may at any time agree to assign a portion of such Bank's
Commitment to another financial institution (a "Transferee Bank") provided that,
--------
after giving effect to such assignment, such Bank must continue to hold a
Commitment of not less than $7,500,000 and unless the Borrower's written consent
is first obtained, there will not be more than five Banks at any time. Crestar
Bank agrees that unless an Event of Default has occurred and is continuing, it
shall not
29
<PAGE>
hold a Commitment of less than $12,500,000. In such event the Bank and the
Transferee Bank shall so notify the Agent and the Borrower of the date on which
such assignment is to be effective. On such effective date:
(a) The Agent shall deliver to the Borrower and each of the Banks a
Commitment Schedule as of such effective date, reflecting the Commitments of the
Banks after giving effect to such assignment.
(b) The Agent, the assigning Bank and the Transferee Bank shall
execute and deliver an assignment agreement, in form and substance acceptable to
the Agent, which shall constitute an amendment to this Agreement to the extent
necessary to reflect such transfer.
(c) Upon request by any Bank following an assignment made in
accordance with this Section 8.13, the Borrower shall issue, in exchange for the
existing Note held by such Bank, new Notes to the assignor and assignee
reflecting the assignment.
SECTION 8.14. Governing Law. This Agreement and the Notes shall be governed
-------------
by, and construed in accordance with, the laws of the Commonwealth of Virginia.
SECTION 8.15. 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.
[SIGNATURES ON FOLLOWING PAGE]
30
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
BORROWER:
--------
WASHINGTON REAL ESTATE
INVESTMENT TRUST
By: /s/ Larry E. Finger
-----------------------------
Name: Larry E. Finger
Title: Sr. Vice President &
Chief Financial Officer
AGENT:
-----
CRESTAR BANK
By: /s/ Nancy B. Richards
-----------------------------
Nancy B. Richards
Vice President
BANKS:
-----
CRESTAR BANK
By: /s/ Nancy B. Richards
-----------------------------
Name: Nancy B. Richards
Title: Vice President
FIRST UNION NATIONAL BANK
By: /s/ John A. Schissel
-----------------------------
Name: John A. Schissel
Title: Director
31
<PAGE>
Schedule 2.1
------------
COMMITMENT SCHEDULE
-------------------
BANKS COMMITMENT
----- ----------
Crestar Bank $30,000,000
Real Estate Finance Group
8245 Boone Boulevard, Suite 820
Vienna, Virginia 22182-3871
Attention: Nancy B. Richards
Vice President
Telephone: (703) 902-9039
Telecopier: (703) 902-9245
Wire transfer instructions:
Crestar Bank - ABA #051000020
For Credit: REFG/GWR - Vienna, VA 22182 Ref.- WRIT Loan Number #9832791
Phone Advice: Connie Dores on 703-902-9166
First Union National Bank $20,000,000
REIT Banking Group
One First Union Center, TW-6
Charlotte, North Carolina 28288-0166
Attention: John Schissel
Director
Telephone: (704) 383-1967
Telecopier: (704) 383-6205
Wire transfer instructions:
First Union National Bank
ABA# 053 000 219
Account Number: 465906 00 10352
Reference: Washington REIT
<PAGE>
EXHIBIT A
---------
PROMISSORY NOTE
---------------
$______________ ___________________,______
FOR VALUE RECEIVED, the undersigned, WASHINGTON REAL ESTATE INVESTMENT
TRUST, a Maryland real estate investment trust (the "Borrower"), HEREBY PROMISES
TO PAY to the order of _________________ (the "Bank") the principal amount of
______________________ DOLLARS($___________) or, if less, the outstanding
aggregate principal amount of all Loans made by the Bank to the Borrower
pursuant to the Credit Agreement (as hereinafter defined), on the Termination
Date (as defined in the Credit Agreement).
The Borrower promises to pay interest on the principal amount of each Loan
from the date of such Loan until such principal amount is paid in full, at such
interest rates, and payable at such times, as are specified in the Credit
Agreement referred to below.
Both principal and interest are payable in lawful money of the United
States of America to Crestar Bank, as Agent (the "Agent"), at 8245 Boone
Boulevard, Vienna, Virginia 22182 in same day funds.
This Promissory Note is one of the Notes referred to in, and is entitled to
the benefits of, the Amended and Restated Credit Agreement dated as of August
26, 1999, but effective for all purposes as of July 25, 1999 (as amended,
modified or supplemented from time to time, the "Credit Agreement"), between the
Borrower, the Agent, the Bank and the other banks that are parties thereto. The
Credit Agreement, among other things, (i) provides for the making of loans (the
"Loans") by the Bank to the Borrower from time to time in an aggregate amount
not to exceed at any time outstanding the U.S. dollar amount first above
mentioned, the indebtedness of the Borrower resulting from each such Loan being
evidenced by this Promissory Note, and (ii) contains provisions for acceleration
of the maturity hereof upon the happening of certain stated events and also for
prepayments on account of principal hereof prior to the maturity hereof upon the
terms and conditions therein specified.
WASHINGTON REAL ESTATE
INVESTMENT TRUST
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
