<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FORM 10-K
For Fiscal Year Ended: December 31, 1998 Commission File No.17533
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FEDERAL REALTY INVESTMENT TRUST
-------------------------------
(Exact name of registrant as specified in its charter)
District of Columbia 52-0782497
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
1626 East Jefferson Street, Rockville, Maryland 20852
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(Address of principal executive offices) (Zip Code)
(301) 998-8100
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
- ------------------- ---------------------
Common Shares of Beneficial Interest New York Stock Exchange
Common Stock Purchase Rights New York Stock Exchange
7.95% Series A Cumulative Redeemable
Preferred Shares New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
6 5/8% Senior Notes 6.74% Medium-Term Notes
7.48% Senior Debentures 6.99% Medium-Term Notes
8 7/8% Senior Notes 6.82% Medium-Term Notes
8% Senior Notes
Subordinated Debt Securities*
* None issued, registered pursuant to a shelf registration
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
----- -----
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 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. [_]
At March 12, 1999, the aggregate market value of Common Shares of Beneficial
Interest of Federal Realty Investment Trust held by nonaffiliates was $883.6
million based upon the closing price of such Shares on the New York Stock
Exchange.
Indicate the number of shares outstanding of each of the issuers' classes of
common stock.
Class Outstanding at March 12, 1999
- ----- -----------------------------
Common Shares of Beneficial Interest 40,165,744
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DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
PART III
- --------
Portions of the Trust's Proxy Statement in connection with its Annual
Meeting to be held on May 5, 1999 (hereinafter called "1999 Proxy
Statement"). Specifically, the Sections entitled "Summary Compensation
Table", "Employment Agreements;Termination of Employment and Change in
Control Arrangements", "Aggregated Option Exercises in 1998 and December 31,
1998 Option Values", "Retirement and Disability Plans", and "Compensation
Committee Interlocks and Insider Participation", "Ownership of Shares by
Trustees and Officers", "Certain Transactions" and "Section 16(a) Beneficial
Ownership Reporting Compliance" appearing in the 1999 Proxy Statement are
incorporated herein by reference.
The Exhibit Index for this report is found on page 32.
This report, including Exhibits, contains 188 pages.
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PART I & II
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Item 1. Business
- ------- --------
Federal Realty Investment Trust (the "Trust") is engaged in the ownership,
management, development and redevelopment of prime retail properties. Founded in
1962 as a District of Columbia business trust of unlimited duration, the Trust
is a self-administered equity real estate investment trust. The Trust
consolidates the financial statements of various entities which it controls. At
December 31, 1998 the Trust owned 120 retail properties and one apartment
complex.
The Trust operates in a manner intended to enable it to qualify as a real
estate investment trust (REIT) under Sections 856- 860 of the Internal Revenue
Code. Under those sections, a REIT which distributes at least 95% of its real
estate investment trust 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. Therefore, no provision for
Federal income taxes is required.
An important part of the Trust's strategy is to acquire older, well-located
properties in prime, densely populated and affluent areas and to enhance their
operating performance through a program of renovation, expansion,
reconfiguration and retenanting. The Trust's traditional focus has been on
community and neighborhood shopping centers that are anchored by supermarkets,
drug stores or high volume, value oriented retailers that provide consumer
necessities. Late in 1994 the Trust expanded this strategy to include retail
buildings and shopping centers in prime established main street shopping areas.
In addition, the Trust has various land parcels under its control for the
purpose of developing multi-use projects that center around the retail
component. The Trust believes that development is an important source of growth
in the future.
The Trust continually evaluates its properties for renovation, retenanting
and expansion opportunities. Similarly, the Trust regularly reviews its
portfolio and from time to time considers selling certain of its properties.
The Trust's portfolio of properties has grown from 49 as of January 1, 1994
to 121 at December 31, 1998. During this five year period the Trust acquired 77
retail properties for approximately $798 million. During this same period five
shopping centers were sold. Also during this period the Trust spent over $297
million to develop, renovate, expand, improve and retenant its properties.
Although the Trust usually purchases a 100% fee interest in its acquisitions, on
occasion, it has entered into leases as a means of acquiring properties. In
addition, the Trust has purchased certain properties in partnership with others.
Certain of the partnerships, known as "downreits", are a means of allowing
property owners to make a tax deferred contribution of their property in
exchange for partnership units, which receive the same distributions as Trust
common shares and may be convertible into common shares of the
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Trust. The majority of acquisitions are funded with cash, but, on occasion,
usually in connection with the partnerships, debt financing is used. Since a
significant portion of cash provided by operating activities is distributed to
common and preferred shareholders, capital outlays for acquisitions,
developments and redevelopments require debt or equity funding.
The Trust's 120 retail properties are located in 16 states and the District
of Columbia. Twenty-four of the properties are located in the Washington, D.C.
metropolitan area; twenty-two are in California; fourteen are in Connecticut;
eleven are in Pennsylvania, primarily in the Philadelphia area; ten are in New
Jersey; ten are in Texas; seven are in Illinois; three are in Virginia; four are
in Massachusetts; seven are in New York; two are in Florida; two are in Arizona;
and there is one in each of the following states: Georgia, Michigan, North
Carolina and Oregon. No single property accounts for over 10% of the Trust's
revenues.
The Trust has traditionally operated its business as a single business
segment. During the fourth quarter of 1998, however, the Trust completed a
comprehensive restructuring program which, among other things, changed the
Trust's operating structure from a functional hierarchy to an asset management
model, where small, focused teams are responsible for a portfolio of assets. As
a result the Trust has divided its portfolio of properties into three operating
regions: the Northeast, Mid-Atlantic and West. Each region is operated under the
direction of a chief operating officer, with dedicated leasing, property
management and financial staff and operates largely autonomously with respect to
day to day operating decisions. (See "Segment Results" in Item 7, Management's
Discussion and Analysis of Financial Condition and Results of Operations for a
further discussion of the segments and their results.)
The Trust has approximately 2,290 tenants, ranging from sole proprietors to
major national retailers; no one tenant or corporate group of tenants accounts
for 3% or more of revenue. The Trust's leases with these tenants are classified
as operating leases and typically are structured to include minimum rents,
percentage rents based on tenants' sales volumes and reimbursement of certain
operating expenses and real estate taxes.
The Trust continues to seek older, well-located shopping centers and retail
buildings to acquire, renovate, retenant and remerchandise, thereby enhancing
their revenue potential. The Trust also continues to identify and secure
additional sites for new development. During each of the years ended December
31, 1998, 1997 and 1996, retail properties have contributed 96% of the Trust's
total revenue. The extent to which the Trust might mortgage or otherwise finance
investments varies with the investment involved and the economic climate.
The success of the Trust depends upon, among other factors, the trends of
the economy, including interest rates, construction costs, retailing trends,
income tax laws, increases or decreases in operating expenses, governmental
regulations, population
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trends, zoning laws, legislation and the ability of the Trust to keep its
properties leased at profitable levels. The Trust competes for tenants with
other real estate owners and the Trust's properties account for only a small
fraction of the retail space available for lease. The Trust competes for
investment opportunities and debt and equity capital with individuals,
partnerships, corporations, financial institutions, life insurance companies,
pension funds, trust funds and other real estate investment trusts.
Investments in real property create a potential for environmental liability
on the part of the current and previous owners of, or any mortgage lender on,
such real property. If hazardous substances are discovered on or emanating from
any property, the owner or operator of the property may be held liable for costs
and liabilities relating to such hazardous substances. The Trust has
environmental insurance on many of its properties. Subject to certain exclusions
and deductibles, the insurance provides coverage for unidentified, pre-existing
conditions and for future contamination caused by tenants and third parties.
The Trust's current policy is to require an environmental study on each
property it seeks to acquire. On recent acquisitions, any substances identified
prior to closing which are required, by applicable laws, to be remediated have
been or are in the process of investigation and remediation. Costs related to
the abatement of asbestos which increase the value of Trust properties are
capitalized. Other costs are expensed. In 1998 and 1997 approximately $616,000
and $1.3 million, respectively, of which $453,000 and $732,000, respectively,
was capitalized abatement costs, was spent on environmental matters. The Trust
has budgeted approximately $800,000 for 1999 for environmental matters, a
majority of which is projected for asbestos abatement.
Current Developments
- --------------------
In 1998 the Trust acquired real estate at a cost of $120.4 million,
consisting primarily of four shopping centers and fifteen street retail
properties. The Trust spent another $73.0 million in improvements to its
properties, including $25.0 million on its predevelopment and development
projects in Bethesda, Maryland; Los Gatos, California; San Jose, California; and
Arlington, Virginia. The Trust invested $21.4 million in mortgage notes
receivable with an average weighted stated interest rate of 10%. Mortgages on
six properties,totaling $53.3 million, were paid upon their maturity in 1998.
The Trust utilized its unsecured line of credit to fund these acquisitions,
capital expenditures and balloon debt repayments. Repayments on the line of
credit were made from the issuance in December 1998 of a $125 million four year
loan from five institutional lenders and from the issuance of $80.0 million of
Medium-Term Notes in March 1998.
In September 1998 the Trust filed a $500 million shelf registration
statement with the Securities and Exchange
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Commission which allows for the issuance of debt securities, preferred shares
and common shares.
At December 31, 1998 the Trust had 225 full-time employees.
The Trust, in its 1999 Proxy Statement, has proposed for shareholder
consideration the reorganization of the Trust under the laws of the State of
Maryland through an amendment and restatement of its declaration of trust.
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Item 2. Properties
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Retail Properties
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The following table sets forth information concerning each retail property in
which the Trust owns an equity interest or has a leasehold interest as of
December 31, 1998. Except as otherwise noted, retail properties are 100% owned
in fee by the Trust.
<TABLE>
<CAPTION>
Year Year Number of Occupancy (1)
NORTHEAST Completed Acquired Square Feet (2) Tenants Acres Overall / Economic
------------- ----------- -------------------- ----------- ------- ------------------------
<S> <C> <C> <C> <C> <C> <C>
Allwood 1958 1988 52,000 8 5 100% / 100%
Clifton, NJ 07013 (3)
Andorra 1953 1988 259,000 43 23 98% / 97%
Philadelphia, PA 19128 (4)
Bala Cynwyd 1955 1993 279,000 28 22 98% / 98%
Bala Cynwyd, PA 19004
Blue Star 1959 1988 392,000 30 55 89% / 89%
Watchung, NJ 07060 (3)
Brick Plaza 1958 1989 404,000 34 42 99% / 99%
Brick Township, NJ 08723 (3)
Bristol 1959 1995 296,000 34 22 90% / 90%
Bristol, CT 06010
Brunswick 1957 1988 261,000 21 22 100% / 96%
North Brunswick, NJ 08902 (3)
Clifton 1959 1988 80,000 13 8 96% / 96%
Clifton, NJ 07013 (3)
Dedham 1959 1993 250,000 32 18 92% / 90%
Dedham, MA 02026
Ellisburg Circle 1959 1992 255,000 35 27 97% / 97%
Cherry Hill, NJ 08034
Feasterville 1958 1980 116,000 9 12 90% / 90%
Feasterville, PA 19047
<CAPTION>
Principal
Tenants
-----------------
<S> <C>
Allwood Grand Union
Clifton, NJ 07013 (3) Mandee Shop
Andorra Acme Markets
Philadelphia, PA 19128 (4) Andorra Theater
Kohl's
Bala Cynwyd Lord & Taylor
Bala Cynwyd, PA 19004 Acme Markets
Blue Star Caldor
Watchung, NJ 07060 (3) Shop Rite
Toys R Us
Brick Plaza A&P Supermarket
Brick Township, NJ 08723 (3) Loews Theatre
Steinbach's
Bristol Bradlees
Bristol, CT 06010 Super Stop & Shop
TJ Maxx
Brunswick Caldor
North Brunswick, NJ 08902 (3) Grand Union
Schwartz Furniture
Clifton Acme Markets
Clifton, NJ 07013 (3)
Dedham Ames
Dedham, MA 02026 Cherry & Webb
Ellisburg Circle Bed, Bath & Beyond
Cherry Hill, NJ 08034 Ross Dress For Le
Shop Rite
Feasterville Office Max
Feasterville, PA 19047 Genuardi Markets
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Year Year Number of Occupancy (1)
Completed Acquired Square Feet (2) Tenants Acres Overall / Economic
------------- ----------- ------------------- ----------- ------- --------------------
<S> <C> <C> <C> <C> <C> <C>
Flourtown 1957 1980 191,000 20 15 100% /100%
Flourtown, PA 19031
Fresh Meadows 1949 1997 411,000 68 147 96% / 96%
Queens, NY 11365
Hamilton 1961 1988 190,000 13 18 100% / 97%
Hamilton, NJ 08690 (3)
Hauppauge 1963 1998 131,000 21 15 100% / 100%
Hauppauge, NY 11788
Huntington 1962 1988 274,000 12 21 99% / 99%
Huntington, NY 11746 (3)
Lancaster 1958 1980 107,000 16 11 97% /97%
Lancaster, PA 17601 (3)
Langhorne Square 1966 1985 200,000 28 21 100% / 77%
Levittown, PA 19056
Lawrence Park 1972 1980 340,000 40 28 79% / 79%
Broomall, PA 19008
Northeast 1959 1983 296,000 34 19 92% / 92%
Philadelphia, PA 19114
Queen Anne Plaza 1967 1994 149,000 11 18 100% / 100%
Norwell, MA 02061
Rutgers 1973 1988 216,000 19 27 99% / 99%
Franklin, N.J. 08873 (3)
Saugus Plaza 1976 1996 171,000 7 19 100% / 100%
Saugus, MA 01906
Troy 1966 1980 202,000 21 19 100% /100%
Parsippany-Troy, NJ 07054
Willow Grove 1953 1984 213,000 27 14 100% / 100%
Willow Grove, PA 19090
<CAPTION>
Principal
Tenants
----------------------
<S> <C>
Flourtown K Mart
Flourtown, PA 19031 Genuardi Markets
Fresh Meadows Cineplex Odeon
Queens, NY 11365 Filene's
K Mart
Hamilton Shop Rite
Hamilton, NJ 08690 (3) Steven's Furniture
A.C. Moore
Hauppauge Shop Rite
Hauppauge, NY 11788 Office Max
Huntington Bed, Bath and Beyond
Huntington, NY 11746 (3) Service Merchandise
Toys R Us
Lancaster Giant Eagle
Lancaster, PA 17601 (3) A.C. Moore
Langhorne Square Drug Emporium
Levittown, PA 19056 Marshalls
Lawrence Park Acme Markets
Broomall, PA 19008
Northeast Burlington Coat Factory
Philadelphia, PA 19114 Marshalls
Med Max
Queen Anne Plaza TJ Maxx
Norwell, MA 02061 Star Markets
Rutgers Edwards Super Food
Franklin, N.J. 08873 (3) K Mart
Saugus Plaza K Mart
Saugus, MA 01906 Super Stop & Shop
Troy Comp USA
Parsippany-Troy, NJ 07054 Pathmark
Toys R Us
Willow Grove Barnes and Noble
Willow Grove, PA 19090 Marshalls
Toys R Us
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Year Year Number of
Completed Acquired Square Feet (2) Tenants Acres
------------- ----------- ----------------- --------- --------
<S> <C> <C> <C> <C> <C>
Wynnewood 1948 1996 257,000 27 16
Wynnewood, PA 19096
Retail buildings
- ----------------
Thirteen buildings in CT 1900 - 1991 1994 -1996 232,000 81
One building in MA 1930 1995 13,000 8
Four buildings in NY (4) 1937 - 1987 1997 87,000 20
One building in NJ 1940 1995 11,000 2
MID ATLANTIC
Barracks Road 1958 1985 479,000 82 39
Charlottesville, VA 22905
Bethesda Row 1945-1991 1993 275,000 69 8
Bethesda, MD 20814 (3)
Congressional Plaza 1965 1965 341,000 46 22
Rockville, MD 20852 (5)
Courthouse Center 1970 1997 38,000 10 1
Rockville, MD 20852 (6)
Eastgate 1963 1986 159,000 32 17
Chapel Hill, NC 27514
Falls Plaza 1962 1967 69,000 10 6
Falls Church, VA 22046
Falls Plaza - East 1960 1972 71,000 19 5
Falls Church, VA 22046
<CAPTION>
Occupancy (1) Principal
Overall / Economic Tenants
----------------------- ----------------------
<S> <C> <C>
Wynnewood 96% / 96% Bed, Bath and Beyond
Wynnewood, PA 19096 Borders Books
Food Fare
Retail buildings
- ----------------
Thirteen buildings in CT 98% / 94% Eddie Bauer
Pottery Barn
One building in MA 100% / 100%
Four buildings in NY (4) 99% / 98% Midway Theatre
One building in NJ 100% / 100% Legg Mason
MID ATLANTIC
Barracks Road 98% / 97% Harris Teeter
Charlottesville, VA 22905 Kroger
Superfresh
Bethesda Row 100% / 98% Barnes and Noble
Bethesda, MD 20814 (3) Giant Food
Giant Pharmacy
Congressional Plaza 99% / 99% Buy Buy Baby
Rockville, MD 20852 (5) Fresh Fields
Tower Records
Courthouse Center 88% / 88% Rockville Interiors
Rockville, MD 20852 (6)
Eastgate 100% / 100% Food Lion
Chapel Hill, NC 27514 Southern Season
Falls Plaza 100% / 77% Giant Food
Falls Church, VA 22046
Falls Plaza - East 100% / 100% CVS Pharmacy
Falls Church, VA 22046 Staples
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Year Year Number of
Completed Acquired Square Feet (2) Tenants Acres
------------- ----------- ------------------ ---------- --------
<S> <C> <C> <C> <C> <C>
Federal Plaza 1970 1989 242,000 38 18
Rockville, MD 20852
Gaithersburg Square 1966 1993 208,000 36 17
Gaithersburg, MD 20878
Governor Plaza 1963 1985 252,000 22 26
Glen Burnie, MD 21961 (4)
Idylwood Plaza 1991 1994 73,000 16 6
Falls Church, VA 22030
Laurel Centre 1956 1986 384,000 54 26
Laurel, MD 20707
Leesburg Plaza 1967 1998 247,000 25 24
Leesburg, VA 20176 (6)
Loehmann's Plaza 1971 1983 242,000 55 18
Fairfax, VA 22042 (7)
Magruder's Center 1955 1997 109,000 22 5
Rockville, MD 20852 (6)
Mid-Pike Plaza 1963 1982 315,000 23 20
Rockville, MD 20852 (3)
Northeast Plaza 1952 1986 448,000 45 44
Atlanta, GA 30329
Old Keene Mill 1968 1976 92,000 20 11
Springfield, VA 22152
Pan Am 1979 1993 218,000 31 25
Fairfax, VA 22031
<CAPTION>
Occupancy (1) Principal
Overall / Economic Tenants
----------------------- ----------------------
<S> <C> <C>
Federal Plaza 98% / 98% Comp USA
Rockville, MD 20852 TJ Maxx
Gaithersburg Square 94% / 94% Borders Books
Gaithersburg, MD 20878 Bed, Bath & Beyond
Governor Plaza 99% / 99% Office Depot
Glen Burnie, MD 21961 (4) Syms
Idylwood Plaza 95% / 77% Fresh Fields
Falls Church, VA 22030
Laurel Centre 90% / 89% Giant Food
Laurel, MD 20707 Marshalls
Toys R Us
Leesburg Plaza 97% / 97% K Mart
Leesburg, VA 20176 (6) Giant Food
Peebles
Loehmann's Plaza 98% / 98% Loehmann's Dress Shop
Fairfax, VA 22042 (7) Linens N Things
Magruder's Center 97% / 97% Magruder's
Rockville, MD 20852 (6) Tuesday Morning
Mid-Pike Plaza 100% / 100% Bally's Total Fitness
Rockville, MD 20852 (3) Filene's Basement
Toys R Us
Northeast Plaza 66% / 66% Publix
Atlanta, GA 30329 Cinema 12
Mars Music
Old Keene Mill 100% / 98% Fresh Fields
Springfield, VA 22152 One Stop Pet & Aquarium
Pan Am 98% / 98% Micro Center
Fairfax, VA 22031 Safeway
MJ Designs
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Year Year Number of Occupancy (1)
Completed Acquired Square Feet (2) Tenants Acres Overall / Economic
------------- ----------- ------------------ ------------ -------- --------------------
<S> <C> <C> <C> <C> <C> <C>
Park & Shop 1930 1995 50,000 12 1 100% / 100%
Washington, DC 20036
Perring Plaza 1963 1985 412,000 16 27 100% / 100%
Baltimore, MD 21134 (4)
Pike 7 Plaza 1968 1997 163,000 25 13 96% / 96%
Vienna, VA 22180
Quince Orchard 1975 1993 240,000 31 16 96% / 85%
Gaithersburg, MD 20877 (8)
Shirlington 1940 1995 212,000 46 16 94% / 94%
Arlington, VA 22206
Tower Shopping Center 1960 1998 109,000 34 12 97% / 97%
Springfield, VA 22150
Tysons Station 1954 1978 50,000 16 4 100% / 100%
Falls Church, VA 22043
Wildwood 1958 1969 85,000 35 13 100% / 100%
Bethesda, MD 20814
Williamsburg 1961 1986 251,000 33 21 100% / 100%
Williamsburg, VA 23187
The Shops at Willow Lawn 1957 1983 450,000 104 37 91% / 91%
Richmond, VA 23230
Development
- -----------
Land in Bethesda, MD 20814 1997 - 1998 3 2
Retail buildings
- ----------------
Two buildings in FL 1920 1996 28,000 10 100% / 100%
<CAPTION>
Principal
Tenants
-----------------------------
<S> <C>
Park & Shop Petco
Washington, DC 20036 Pizzeria Uno
Perring Plaza Burlington Coat Factory
Baltimore, MD 21134 (4) Home Depot
Metro Foods
Pike 7 Plaza Staples
Vienna, VA 22180 TJ Maxx
Quince Orchard Circuit City
Gaithersburg, MD 20877 (8) Dyncorp
Shirlington Carlyle Grand Cafe
Arlington, VA 22206 Cineplex Odeon
Tower Shopping Center Virginia Fine Wines
Springfield, VA 22150 Talbot's Outlet
Tysons Station Trader Joe's
Falls Church, VA 22043
Wildwood CVS Pharmacy
Bethesda, MD 20814 Sutton Place Gourmet
Williamsburg Food Lion
Williamsburg, VA 23187 Peebles
Rose's
The Shops at Willow Lawn Cineplex Odeon
Richmond, VA 23230 Leggett Stores
Hannaford Brothers
Development
- -----------
Land in Bethesda, MD 20814
Retail buildings
- ----------------
Two buildings in FL Express
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Year Year Number of Occupancy (1)
Completed Acquired Square Feet (2) Tenants Acres Overall / Economic
------------- ----------- ------------------- ----------- -------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
WEST COAST
Crossroads 1959 1993 173,000 25 15 99% / 99%
Highland Park, IL 60035
Escondido Promenade 1987 1996 221,000 56 18 93% / 93%
Escondido, CA 92029 (9)
Finley Square 1974 1995 308,000 16 21 87% / 87%
Downers Grove, IL 60515
Garden Market 1958 1994 134,000 20 12 188% / 88%
Western Springs, IL 60558
Gratiot Plaza 1964 1973 154,000 5 20 100% / 100%
Roseville, MI 48066
King's Court 1960 1998 79,000 19 8 100% / 100%
Los Gatos, CA 95032 (6) (8)
North Lake Commons 1989 1994 129,000 20 14 98% / 97%
Lake Zurich, IL 60047
Peninsula Center 1962 1997 300,000 69 24 93% / 86%
Palos Verdes, CA 90274
150 Post Street 1965 1997 96,000 28 .3 94% / 91%
San Francisco, CA 94108
Uptown Shopping Center Various 1997 100,000 68 7 99% / 98%
Portland, OR 97210
Development
- -----------
Old Town Center 1962 1997 65,000 10 4 88%/83%
Los Gatos, CA 95030 (9) (10)
Town & Country 1962 1997 316,000 87 39 75%/75%
San Jose, CA 95128 (9) (11)
Ten buildings in San Antonio, TX (12) 1890 - 1935 1998 235,000 4 n/a
<CAPTION>
<S> <C>
WEST COAST
Crossroads Comp USA
Highland Park, IL 60035 Binny's
Golfsmith
Escondido Promenade Toys R Us
Escondido, CA 92029 (9) TJ Maxx
Finley Square Bed, Bath & Beyond
Downers Grove, IL 60515 Service Merchandise
Garden Market Dominick's
Western Springs, IL 60558
Gratiot Plaza Bed, Bath & Beyond
Roseville, MI 48066 Farmer Jack
King's Court Lunardi's Supermarket
Los Gatos, CA 95032 (6) (8) Longs Drug
North Lake Commons Dominick's
Lake Zurich, IL 60047
Peninsula Center In Shape
Palos Verdes, CA 90274 TJ Maxx
Von's Pavillions
150 Post Street Episode
San Francisco, CA 94108 Williams - Sonoma
Uptown Shopping Center Elephant's Delicatessen
Portland, OR 97210 Zupan's Markets
Development
- -----------
Old Town Center
Los Gatos, CA 95030 (9) (10)
Town & Country AMC Theatre
San Jose, CA 95128 (9) (11) Courtesy Chevrolet
Ten buildings in San Antonio, TX (12)
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Year Year Number of
Completed Acquired Square Feet (2) Tenants Acres
------------- ----------- ------------------ ----------- -------
<S> <C> <C> <C> <C> <C>
Retail buildings
- ----------------
Nine buildings in Santa Monica, CA (4) 1888 - 1995 1996 - 1998 153,000 44
Five buildings in San Diego, CA (4) 1888 - 1995 1996 - 1997 64,000 1
Three buildings in CA (4) 1922 1996 - 1998 72,000 23
Two buildings in AZ (15) 1996 - 1998 1998 40,000 10
Three buildings in IL 1920 - 1927 1995 - 1997 24,000 3
<CAPTION>
Occupancy (1) Principal
Overall/ Economic Tenants
--------------------- ---------------
<S> <C> <C>
Nine buildings in Santa Monica, CA (4) 98% / 97% Abercrombie & Fitch
J. Crew
The Gap
Five buildings in San Diego, CA (4) 23% / 19% (13) Urban Outfitters
Three buildings in CA (4) 65% / 65% (14) Pottery Barn
Two buildings in AZ (15) 95% / 95% Gordon Biersch Brewing Co.
Three buildings in IL 69% / 69% Foodstuffs
Gianni Versace
</TABLE>
(1) Overall occupancy is expressed as a percentage of rentable square feet
and includes square feet covered by leases for stores not yet opened.
Economic occupancy is expressed as a percentage of rentable square feet ,
but only includes leases currently generating rental income.
(2) Represents the physical square feet of the property, which may exceed the
rentable square feet used to express occupancy.
(3) The Trust has a leasehold interest in this property
(4) The Trust owns the general partnership interest in these buildings.
(5) The Trust owns a 55.7% equity interest in this center.
(6) The Trust owns this property in a "downreit" partnership.
(7) The Trust has a 1% general partnership interest and manages the
partnership. A 99% interest is held by a limited partner.
(8) The Trust owns this property subject to a ground lease.
(9) The Trust owns the controlling interest in this center. A minority owner
has an interest in the profits of the center.
(10) An additional 35,000 square feet is being developed.
(11) Under development.
(12) The Trust plans to develop these properties, most of which are currently
vacant.
(13) Occupancy is based on one occupied building. The other four buildings are
under redevelopment.
(14) Occupancy is based on two occupied buildings.
(15) The Trust owns 100% of one building and an 85% partnership interest in
the second property.
APARTMENTS
- ----------
The following table sets forth information concerning the Trust's apartment
development as of December 31, 1998 which is 100% owned by the Trust in fee.
This development is not subject to rent control.
<TABLE>
<CAPTION>
Year Year
Property Completed Acquired Acres 1-BR 2-BR 3-BR Total Occupancy
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Rollingwood 1960 1971 14 58 163 61 282 99%
Silver Spring, MD
9 three-story buildings
</TABLE>
13
<PAGE>
Item 3. Legal Proceedings.
- ------ -----------------
None
Item 4. Submission of Matters to a Vote of Security Holders
- ------ ---------------------------------------------------
None
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
- ------ ---------------------------------------------------------------------
Market Quotations
<TABLE>
<CAPTION>
Dividends
Quarter ended High Low Paid
------------- ---- --- ---------
<S> <C> <C> <C>
December 31, 1998 $ 24 1/2 $ 20 $ .44
September 30, 1998 25 1/8 19 3/8 .43
June 30, 1998 25 7/8 23 1/2 .43
March 31, 1998 25 15/16 23 5/8 .43
December 31, 1997 $ 27 11/16 $ 25 $ .43
September 30, 1997 27 1/4 24 9/16 .42
June 30, 1997 28 25 1/8 .42
March 31, 1997 28 3/4 25 3/4 .42
</TABLE>
The number of holders of record for Federal Realty's common shares of
beneficial interest at December 31, 1998 was 7,051.
For the years ended December 31, 1998 and 1997, $.31 and $.19, respectively,
of dividends paid on common shares represented a return of capital.
Dividends declared on common shares per quarter during the last two fiscal
years were as follows:
<TABLE>
<CAPTION>
Quarter Ended 1998 1997
------------------- ---- ----
<S> <C> <C>
March 31 $ .43 $ .42
June 30 .43 .42
September 30 .44 .43
December 31 .44 .43
</TABLE>
The Trust's common shares of beneficial interest are listed on the New York
Stock Exchange.
On March 11, 1999 the Trust entered into an Amended and Restated Rights
Agreement with American Stock Transfer and Trust Company, pursuant to which
(i)the expiration date of the Trust's shareholder rights plan was extended for
an additional ten years to April 24, 2009, (ii)the beneficial ownership
percentage at which a person becomes an "Acquiring Person" under the plan was
reduced from 20% to 15%, and (iii)certain other amendments were made. A
description of the shareholder rights plan, as amended, is included in the Form
8-A/A filed with the Securities and Exchange Commission on March 11, 1999.
14
<PAGE>
Item 6. Selected Financial Data.
-----------------------
In thousands, except per share data
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING DATA
Rental Income $222,186 $188,529 $164,887 $142,841 $128,133
Income before gain
on sale of real
estate 44,960 40,129 28,754 23,655 20,466
Gain (loss) on sale
of real estate --- 6,375 (12) (545) ---
Net income 44,960 46,504 28,742 23,110 20,466
Net income available for
common shareholders 37,010 44,627 28,742 23,110 20,466
Net cash provided
by operating
activities (1) 90,427 72,170 65,648 65,117 45,199
Dividends declared
on common shares 69,512 66,636 56,607 51,392 48,196
Weighted average number
of common shares
outstanding:
basic 39,174 38,475 33,175 31,481 30,267
diluted 40,080 38,988 33,573 31,860 30,679
PER SHARE:
Earnings per common share:
basic .94 1.16 .87 .73 .68
diluted .94 1.14 .86 .72 .67
Dividends declared
per common share 1.74 1.70 1.66 1.61 1.57
OTHER DATA
Funds from
Operations (2) 86,536 79,733 65,254 57,034 50,404
- --------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1998 1997 1996 1995 1994
BALANCE SHEET DATA
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Real estate
at cost $1,642,136 $1,453,639 $1,147,865 $1,009,682 $852,722
Total assets 1,484,317 1,316,573 1,035,306 886,154 751,804
Mortgage and
capital lease
obligations 173,480 221,573 229,189 222,317 235,705
Notes payable 263,159 119,028 66,106 49,980 61,883
Senior notes 335,000 255,000 215,00 165,000 ---
Convertible
subordinated
debentures 75,289 75,289 75,289 75,289 75,289
Redeemable preferred
shares 100,000 100,000 --- --- ---
Shareholders' equity 529,947 553,810 388,885 327,468 343,222
Number of common shares
outstanding 40,080 39,148 35,886 32,160 31,609
</TABLE>
(1) Determined in accordance with Financial Accounting Standards Board Statement
No. 95.
(2) Defined as income available for common shareholders before depreciation and
amortization of real estate assets and before extraordinary items and
significant nonrecurring events less gains on sale of real estate. Funds from
operations differs from net cash provided by operating activities primarily
because funds from operations does not include changes in operating assets and
liabilities. Funds from operations is a supplemental measure of performance that
does not replace net income as a measure of performance or net cash provided by
operating activities as a measure of liquidity.
16
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
- -------------------------------------------------------------------------------
of Operations
- -------------
The following discussion should be read in conjunction with the Consolidated
Financial Statements and Notes thereto of Federal Realty Investment Trust (the
"Trust"). Certain statements made in this report contain forward-looking
statements, within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause actual results, performance or
achievements of the Trust to be materially different from the results of
operations or plans expressed or implied by such forward-looking statements.
Such factors include, among others, general economic and business conditions
which will affect credit-worthiness of tenants, financing availability and cost,
retailing trends and rental rates; risks of real estate development and
acquisitions; governmental and environmental regulations; and competition with
other real estate companies and technology.
The Trust is engaged in the ownership, management, development and
redevelopment of prime retail properties for the purpose of increasing funds
from operations per share and enhancing shareholder value. At December 31, 1998
the Trust owned 120 retail properties.
Liquidity and Capital Resources
- -------------------------------
The Trust meets its liquidity requirements through net cash provided by
operating activities, along with traditional debt and equity funding
alternatives available to it. A significant portion of cash provided by
operating activities is distributed to common and preferred shareholders in the
form of dividends. Accordingly, capital outlays for property acquisitions, major
renovation and development projects and balloon debt repayments require debt or
equity funding. On occasion, asset sales provide an additional source of
capital.
Net cash provided by operating activities was $90.4 million in 1998, $72.2
million in 1997, and $65.6 million in 1996 of which $74.3 million, $62.6
million, and $52.1 million, respectively, was distributed to shareholders.
Contributions from newly acquired properties and from retenanted and redeveloped
properties, as more fully described below, were the primary sources of these
increases.
Net cash used in investing activities was $187.6 million in 1998, $279.3
million in 1997 and $161.8 million in 1996. The Trust acquired properties
totaling $120.4 million in 1998, $275.2 million in 1997 and $105.6 million in
1996 requiring cash outlays of $92.9 million, $251.4 million and $85.8 million
in 1998, 1997 and 1996, respectively. During these same three years the Trust
expended an additional $73.0 million, $50.3 million and $42.4 million,
respectively, in capital improvements to its properties, of which $25.0 million
related to new development in 1998 (1997 and 1996 amounts related to new
development were insignificant). The Trust invested $21.4 million, $10.4 million
and $14.4 million in 1998, 1997, and 1996, respectively, in mortgage notes
receivable, with an average weighted stated interest rate of 10%, 9% and 9%,
respectively. Certain of these mortgages also participate in the
17
<PAGE>
gross revenues and appreciation and are convertible into ownership interests in
the properties by which they are secured. Cash of $9.4 million in 1997 and $4.7
million in 1996 was received from the sale of properties in accordance with the
Trust's policy of disposing of properties that no longer meet its long-term
investment objectives.
Real estate acquisitions during 1998 were as follows (in thousands, except
for square footage):
<TABLE>
<CAPTION>
Existing
Total Cash Leasable
Property Cost Portion Square Footage
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Shopping Centers
Hauppauge, Long Island,NY $24,053 $24,053 131,000
Leesburg, Leesburg, VA (1)(2) 18,906 5,556 247,000
Tower, Springfield, VA 17,688 17,688 109,000
Kings Court, Los Gatos, CA (1)(3) 10,714 4,340 79,000
Leasehold buyout and other 7,736 2,012 -
Street Retail
Ten properties, San Antonio,TX (4) 14,163 14,163 235,000
Two properties, Tempe,AZ (5) 10,557 9,807 40,000
Two properties, Santa Monica,CA (6) 8,685 8,028 19,000
One property, Pasadena,CA (6) 6,366 5,733 17,000
Other 1,566 1,566 -
-------- ------- -------
$120,434 $92,946 877,000
======== ======= =======
</TABLE>
1)The Trust acquired these properties in partnership with third
parties, whose partnership units, valued at $3.5 million and $6.4
million, respectively, may be converted into shares of the Trust.
2)The Trust placed a $9.9 million mortgage on this property.
3)The Trust acquired a leasehold interest in this property.
4)The Trust plans to develop these properties on Houston Street, most
of which are currently vacant.
5)The Trust owns 100% of one property and an 85% partnership
interest in the second property
6)The Trust acquired a 90% partnership interest in these
properties.
The minority owners in Leesburg and Kings Court shopping centers may exchange
their 138,000 and 260,163 partnership units, respectively, into the same number
of common shares of the Trust or cash, at the Trust's option, after September
15, 2000 and August 24, 1999, respectively. A $9.9 million mortgage was placed
on Leesburg Plaza which bears interest at 6.51%, requires interest only payments
until October 2005 and is due September 1, 2008.
Approximately $25.0 million was invested in 1998 in predevelopment and
development projects in Bethesda, Maryland; Los Gatos, California; San Jose,
California; and in Arlington, Virginia. Other major capital expenditures include
$4.7 million on the renovation of Gratiot Plaza, $4.9 million on the renovation
of Feasterville shopping center, $3.3 million on the renovation of Falls Plaza,
and $3.1 million on the retenanting of Finley shopping
18
<PAGE>
center.
Net cash provided by financing activities, before dividend payments, was
$171.7 million in 1998, $275.8 million in 1997 and $148.8 million in 1996. The
Trust utilized its unsecured lines of credit to fund acquisitions, capital
expenditures and balloon debt repayments.
In December 1997 the Trust replaced its unsecured medium-term revolving
credit facilities with four banks with a five-year syndicated credit facility,
thereby increasing the aggregate amount available from $135 million to $300
million and decreasing the interest rate from LIBOR plus 75 basis points to
LIBOR plus 65 basis points. As did prior credit facilities, the syndicated
facility requires fees and has various covenants including the maintenance of a
minimum shareholders' equity and a maximum ratio of debt to net worth. At
December 31, 1998, 1997 and 1996, $134.1 million, $114.8 million, and $59.4
million, respectively, was borrowed under these facilities. The maximum amount
borrowed during 1998, 1997 and 1996 was $259.1 million, $114.8 million, and
$76.2 million, respectively. The weighted average interest rate on borrowings
during 1998, 1997 and 1996 was 6.1%, 6.5%, and 6.4%, respectively. Repayments
on the credit facilities were made from the following debt and equity issuances.
In December 1998 the Trust obtained a four-year loan of $125 million from five
institutional lenders. The loan, which bears interest at LIBOR plus 75 basis
points, 6.3% at December 31, 1998, requires fees and has the same covenants as
the syndicated credit facility. Proceeds were used to repay amounts drawn on
the syndicated credit facility.
On March 5, 1998 the Trust issued $39.5 million of 6.74% Medium-Term Notes due
2004, netting approximately $39.3 million, and $40.5 million of 6.99% Medium-
Term Notes due 2006, netting approximately $40.2 million. The notes pay
interest semi-annually on March 30 and September 30.
In order to minimize the risk of changes in interest rates, from time to time
in connection with the issuance of certain debt issues the Trust will enter into
interest rate hedge agreements. In anticipation of the March 1998 Medium-Term
Note issuance, the Trust purchased a Treasury Yield Hedge (notional amount of
$50 million) on January 13, 1998 which was terminated on March 5, 1998 at a gain
of $1.1 million. The gain is being recognized as a reduction in interest
expense over the terms of the notes. There were no open hedge agreements at
December 31, 1998.
On February 4, 1997 the Trust sold three million common shares to an
institutional investor for $28 per share, netting $83.9 million. On July 29,
1997 the Trust sold $40 million of 6.82% Medium-Term Notes, netting
approximately $39.8 million. On October 6, 1997 the Trust issued four million
7.95% Series A Cumulative Redeemable Preferred Shares at $25 per share in a
public offering, netting approximately $96.8 million.
Capital requirements in 1999 will depend on acquisition opportunities, new
development efforts, improvements and
19
<PAGE>
redevelopments on existing properties, and tenant work and allowances. Initial
funding for such projects is expected to be provided under the line of credit
facility.
The Trust's long term debt has varying maturity dates and in a number of
instances includes balloon payments or other contractual provisions that could
require significant repayments during a particular period. The next significant
maturity is of the Trust's $100 million 8 7/8% Senior Notes in January 2000.
The Trust will need additional capital in order to fund acquisitions,
expansions, developments and refinancings. Sources of this funding may be
additional debt, additional equity, proceeds from the sale of properties and the
issuance of operating partnership units. The timing and choice of capital
sources will depend on the cost and availability of that capital, among other
things. In September 1998 the Trust filed a $500 million shelf registration
statement with the Securities and Exchange Commission which allows for the
issuance of debt securities, preferred shares and common shares. The Trust
believes, based on past experience, that access to the capital needed to execute
its business plan will be available to it.
Contingencies
- -------------
The Trust is involved in various lawsuits and environmental matters arising in
the normal course of business. Management believes that such matters will not
have a material effect on the financial condition or results of operations of
the Trust.
Pursuant to the provisions of the respective partnership agreements, in the
event of the exercise of put options by the other partners, the Trust would be
required to purchase the 99% limited partnership interest at Loehmann's Plaza at
its then fair market value and an 18.75% interest at Congressional Plaza at its
then fair market value.
Under the terms of certain partnerships, if certain leasing and revenue levels
are obtained for the properties, the limited partners may require the Trust to
purchase their partnership interests at a formula price based upon net operating
income. The purchase price may be paid in cash or common shares of the Trust,
at the election of the limited partners. If the limited partners do not redeem
their interest, the Trust may choose to purchase the limited partnership
interests upon the same terms. Under the terms of other partnerships, the
partners may exchange their 879,541 operating partnership units into cash or the
same number of common shares of the Trust, at the option of the Trust.
The Trust has reviewed the software and hardware systems used internally to
operate its business, in order to assess their ability to handle the "Year 2000
Issue" which generally refers to the inability of systems hardware and software
to correctly identify two-digit references to specific calendar years, beginning
with 2000. The Year 2000 Issue may affect the Trust directly by impairing its
internal data-based operations or processing and indirectly by impairing its
suppliers' and tenants' data-based operations or processing. The Trust has
identified and evaluated
20
<PAGE>
the Year 2000 compliance of its internal systems; the Trust believes that the
remediation of all accounting systems and other systems of high priority is
complete. The Trust will endeavor to remediate the remaining internal systems
throughout 1999.
The Trust is currently requesting information from its major banks, tenants,
suppliers and manufacturers of computerized components of its real estate
properties to determine their Year 2000 compliance. Based on costs spent to
date and projections of future costs, costs of addressing and solving potential
internal problems are not expected to have a material adverse impact on the
Trust's financial condition.
Results of Operations
- ---------------------
Net income and funds from operations have been affected by the Trust's recent
acquisition, redevelopment and financing activities. The Trust has historically
reported its funds from operations in addition to its net income and net cash
provided by operating activities. Funds from operations is a supplemental
measure of real estate companies' operating performance. The National
Association of Real Estate Investment Trusts (NAREIT) defines funds from
operations as follows: income available for common shareholders before
depreciation and amortization of real estate assets and before extraordinary
items and significant non-recurring events less gains on sale of real estate.
Funds from operations does not replace net income as a measure of performance or
net cash provided by operating activities as a measure of liquidity. Rather,
funds from operations has been adopted by real estate investment trusts to
provide a consistent measure of operating performance in the industry.
The reconciliation of net income to funds from operations is as follows (in
thousands):
<TABLE>
<CAPTION>
Year ended December 31,
1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income available for common shareholders $ 37,010 $ 44,627 $ 28,742
Depreciation and amortization
of real estate assets 41,792 37,281 34,128
Amortization of initial direct
costs of leases 2,491 2,249 2,372
Income attributable to operating
Partnership units 578 - -
(Gain) loss on sale of real estate
and non-recurring items 4,665 (4,424) 12
--------- ---------- ----------
Funds from operations for
common shareholders $ 86,536 $ 79,733 $ 65,254
========= ========== ==========
</TABLE>
The Trust's retail leases generally provide for minimum rents with periodic
increases. Most retail tenants pay a majority of on-site operating expenses and
real estate taxes. Many leases also contain a percentage rent clause which calls
for additional rents based on tenant sales. These features in the Trust leases
reduce
21
<PAGE>
the Trust's exposure to higher costs caused by inflation and allow it to
participate in improved tenant sales.
Consolidated Results
- --------------------
1998 vs. 1997
Rental income, which consists of minimum rent, percentage rent and cost
recoveries, increased 18% or $33.7 million from $188.5 million in 1997 to
$222.2 million in 1998. If properties acquired and sold in 1998 and 1997 are
excluded, rental income increased 5%, due primarily to the favorable impact of
redeveloped and retenanted centers and to higher percentage rent.
Other property income includes items which, although recurring, tend to
fluctuate from period to period, such as utility reimbursements, telephone
income, merchant association dues, late fees, and temporary tenant income. Also
included are less regularly recurring items, such as lease termination fees.
Other income increased 6.6% from 1997 to $10.3 million in 1998 due to
contributions from the 1998 and 1997 acquisitions, which were partly offset by a
$1.3 million decrease in lease termination fees.
Rental expenses increased 16% from 1997 to $49.5 million in 1998, due to the
1998 and 1997 acquisitions. If rental expenses are adjusted for properties
acquired and sold in 1998 and 1997, rental expenses are constant at $40.6
million. Decreases in environmental expenses and common area expenses such as
snow removal were offset by increases in bad debt expense which had been
unusually low in 1997 due to the recovery in 1997 of amounts written off in
prior years.
Real estate taxes increased 19% from 1997 to $23.3 million in 1998, due to the
1998 and 1997 acquisitions. If real estate taxes are adjusted for properties
acquired and sold in 1998 and 1997, real estate taxes increased 5% due primarily
to increased taxes on recently redeveloped properties.
Depreciation and amortization expenses increased 11% from 1997 to $46.0
million in 1998 reflecting the impact of properties acquired in 1998 and 1997
and of recent tenant work and property improvements.
In 1998 the Trust incurred interest expense of $60.2 million, of which $5.1
million was capitalized, as compared to 1997's $50.9 million, of which $3.6
million was capitalized. The increase in interest expense reflects the
additional debt issued to fund the Trust's approximately $200 million of real
estate investments made in 1998. The weighted average interest rate was 8% in
1998 compared with 8.5% in 1997. The ratio of earnings to combined fixed
charges and preferred dividends was 1.46x in 1998 and 1.64x in 1997. The ratio
of earnings to fixed charges was 1.65x in 1998 and 1.70x in 1997. The ratio of
funds from operations to combined fixed charges and preferred dividends was
2.46x in 1998 and 2.50x in 1997.
Administrative expenses in 1998 reflect the adoption of the Emerging Issues
Task Force ("EITF") Issue 97-11, which requires the expensing of internal costs
of acquisition activities beginning in late March 1998. Prior to this date,
such costs were capitalized as
22
<PAGE>
a component of the basis of the acquired asset. The increase in administrative
expenses from $9.8 million in 1997 to $11.8 million in 1998 is substantially due
to its adoption. Administrative expenses for the fourth quarter of 1998,
however, have decreased approximately 5% from the fourth quarter of 1997 as the
benefits of the Trust's 1998 reorganization program are beginning to be
realized.
Reorganization expenses of $4.7 million in 1998 represent a one time charge
recorded in the third quarter related to a comprehensive restructuring program.
The charge included a provision for employee severance and related costs, office
closing and downsizing expenses, as well as legal and consulting fees related to
the restructuring program. The Trust's workforce was reduced by approximately
15% including several vice presidents and other senior personnel. The
foundation of the restructuring effort focused on a change in the Trust's
operating model from a functional hierarchy to an asset management discipline
where small focused teams are responsible for and compensated based on the
operating performance of a portfolio of assets. In addition, the restructuring
effort included a significant downsizing of the Trust's acquisition department,
in response to changing market conditions and business emphasis. In 1997 the
Trust incurred $2.0 million of costs associated with severance and other
expenses related to changes in the Trust's executive management.
Investors' share of operations represents the minority interest in the income
of certain properties. The increase from $1.3 million in 1997 to $3.1 million in
1998 is primarily due to the income attributable to the operating partnership
units issued upon the acquisition of Courthouse, Magruder's, Kings Court and
Leesburg Plaza shopping centers in late 1997 and 1998 and due to the minority
partners' share of the increased earnings in Congressional Plaza.
As a result of the foregoing items, net income before gain on sale of real
estate increased from $40.1 million in 1997 to $45.0 million in 1998, reflecting
not only the contribution to net income from the Trust's acquisitions, but also
the contribution from improved results of the core portfolio. Net income,
including gain on sale of real estate, decreased from $46.5 million in 1997 to
$45.0 million in 1998. In 1997 three shopping centers were sold at a net gain of
$6.4 million. Net income available for common shareholders decreased from $44.6
million in 1997 to $37.0 million in 1998, due to a full year of preferred
dividends in 1998 of $8.0 million compared with a partial year in 1997 of $1.9
million since the $100 million of 7.95% Series A Cumulative Redeemable Preferred
Shares were issued in October 1997.
The Trust expects growth in net income in 1999 both from contributions of
acquisitions and from contributions of its core portfolio, primarily the
properties undergoing redevelopment and retenanting. However, growth of net
income from the core portfolio is, in part, dependent on controlling expenses,
some of which are beyond the complete control of the Trust, such as snow removal
and trends in the retailing environment. The Trust currently expects that demand
for its retail space should remain at levels similar to those in 1998. A
weakening of the retail environment could, however, adversely impact the Trust
by increasing vacancies and
23
<PAGE>
decreasing rents. In past weak retail and real estate environments, the Trust
has been able to replace weak and bankrupt tenants with stronger tenants;
management believes that due to the quality of the Trust's properties there will
continue to be demand for its space. Growth in net income is also dependent on
interest rates and controlling administrative costs. If interest rates increase,
net income, as well as the ultimate cost of the Trust's development projects
will be negatively impacted due to the variable interest rates on the Trust's
revolving credit facilities. The Trust is aggressively managing its
administrative expenses through its reorganization efforts.
1997 vs. 1996
Rental income increased 14.3% or $23.6 million from $164.9 million in 1996 to
$188.5 million in 1997. If properties acquired and sold in 1996 and 1997 are
excluded, rental income increased 4.8%, due primarily to the favorable impact of
redeveloped and retenanted centers.
Other property income decreased 1% from 1996 to $9.7 million in 1997.
Contributions from the 1997 and 1996 acquisitions were offset by a decrease in
lease termination fees from 1996 to 1997.
Rental expenses increased 5% from 1996 to $42.8 million in 1997, due to the
1997 and 1996 acquisitions. If rental expenses are adjusted to remove the
effect of properties purchased and sold in 1997 and 1996, rental expenses
decreased 2% due primarily to decreases in snow removal and other related
expenses, such as roof and parking lot repairs. Real estate taxes increased 19%
from 1996 to $19.5 million in 1997, primarily due to properties acquired but
also due to increased assessments on recent renovations.
Depreciation and amortization expenses increased 9% from 1996 to $46.0 million
in 1997 reflecting the impact of properties acquired in 1997 and 1996 and of
recent tenant work and property improvements.
Interest income increased 39% from 1996 to $6.0 million in 1997, due to the
issuance of $10.4 million and $14.4 million, respectively, of mortgage notes
receivable in 1997 and 1996. In 1997 the Trust incurred interest expense of
$50.9 million, of which $3.6 million was capitalized, as compared to 1996's
$46.4 million of which $871,000 was capitalized. The increase in interest
expense reflects the additional debt issued to help fund the Trust's
approximately $316 million of real estate investments made in 1997. The ratio of
earnings to combined fixed charges and preferred dividends was 1.64x in 1997;
there were no preferred dividends in 1996. The ratio of earnings to fixed
charges was 1.70x in 1997 and 1.59x in 1996. The ratio of funds from operations
to combined fixed charges and preferred dividends was 2.50x in 1997; there were
no preferred dividends in 1996.
Administrative expenses increased 8% from 1996 to $9.8 million in 1997
primarily due to increased personnel costs as the Trust grew and as it
accelerated its acquisition and development efforts in 1997. Administrative
expenses as a percentage of total income, however, dropped from 5.1% in 1996 to
4.8% in 1997.
24
<PAGE>
In 1997 the Trust incurred $2.0 million of costs associated with severance
and other expenses related to changes in the Trust's executive management.
Investors' share of operations represents the minority interest in the income
of certain properties. The increase from $394,000 in 1996 to $1.3 million in
1997 is primarily due to the acquisition since 1995 of several properties in
partnership with third parties.
As a result of the foregoing items, net income before gain on sale of real
estate increased from $28.8 million in 1996 to $40.1 million in 1997, reflecting
not only the contribution to net income from the Trust's acquisitions but also
the contribution from improved operating results of the core portfolio. Net
income, including gain on sale of real estate, increased from $28.7 million in
1996 to $46.5 million in 1997. In 1997 three shopping centers were sold at a
net gain of $6.4 million and in 1996 one shopping center was sold at a loss of
$12,000. Net income available for common shareholders was $44.6 million in 1997
after net income was adjusted for a $1.9 million dividend on the $100 million of
7.95% Series A Cumulative Redeemable Preferred Shares issued on October 6, 1997.
Segment Results
- ---------------
The Trust has traditionally operated its business as a single business
segment. During the fourth quarter of 1998, however, the Trust completed a
comprehensive restructuring program which, among other things, changed the
Trust's operating structure from a functional hierarchy to an asset management
model, where small focused teams are responsible for a portfolio of assets. As a
result the Trust has divided its portfolio of properties into three geographic
operating regions: Northeast, Mid-Atlantic and West. Each region is operated
under the direction of a chief operating officer, with dedicated leasing,
property management and financial staff and operates largely autonomously with
respect to day to day operating decisions. Incentive compensation, throughout
the regional teams, is tied to the net operating income of the respective
portfolios.
Historical operating results for the three regions are as follows (in
thousands):
25
<PAGE>
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Rental income
Northeast $ 81,965 $ 70,447 $ 63,725
Mid-Atlantic 103,676 96,818 90,995
West 36,545 21,264 10,167
-------- -------- --------
Total $222,186 $188,529 $164,887
======== ======== ========
Net operating income
Northeast $ 58,401 $ 50,887 $ 44,955
Mid-Atlantic 76,065 71,298 66,141
West 25,306 13,680 6,509
-------- -------- --------
Total $159,772 $135,865 $117,605
======== ======== ========
</TABLE>
The Northeast
The Northeast region is comprised of forty-five assets, 762 tenants and 6.3
million square feet. Assets in this region extend from suburban Philadelphia
north to New York and its suburbs and further into New England. A significant
portion of this portfolio has been held by the Trust for many years although
acquisitions, redevelopment and retenanting remain major components to the
current and future performance of the region. Several redevelopment projects
are currently underway which are expected to add to revenues and net operating
income in 1999 and future years.
When comparing 1998 with 1997, rental income increased 16% from $70.4 million
in 1997 to $82.0 million in 1998. Excluding properties acquired and sold in
1998 and 1997, rental income increased 3.5%, driven by increases at the recently
redeveloped and retenanted Brick, Troy and Wynnewood shopping centers.
Net operating income increased 15% from $50.9 million in 1997 to $58.4 million
in 1998. Excluding properties acquired and sold in 1998 and 1997, net operating
income increased 5.2%, primarily due to increases at the recently redeveloped
and retenanted Brick, Troy and Wynnewood shopping centers.
When comparing 1997 with 1996, rental income increased 10.5% from $63.7
million in 1996 to $70.4 million in 1997. Excluding properties acquired and sold
in 1997 and 1996, rental income increased 3.9%, primarily due to increases from
the first phase of the redevelopment of Brick shopping center and from increases
at Willow Grove shopping center.
Net operating income increased 13% from $45.0 million in 1996 to $50.9 million
in 1997. Excluding properties acquired and sold in 1997 and 1996, net operating
income increased 4%.
The Mid-Atlantic
The Mid-Atlantic region is comprised of thirty-two assets, 1,020 tenants and
6.3 million square feet. Assets in this region extend from Baltimore south to
metropolitan Washington D.C. and
26
<PAGE>
further south through Virginia, Georgia, and Florida. As with the Northeast
region, a significant portion of this portfolio has been held by the Trust for
many years although acquisitions, redevelopment and retenanting remain major
components to its current and future performance. No significant redevelopment
projects are currently underway in this region as several have recently been
completed. Two of the Trust's major new development projects, Pentagon Row and
additional phases in Bethesda, will be managed by this regional operating team
upon their completion.
When comparing 1998 with 1997, rental income increased 7.1% from $96.8 million
in 1997 to $103.7 million in 1998. Excluding properties acquired and sold in
1998 and 1997, rental income increased 3.9%, in large part due to increases at
Bethesda Row and new anchors at Barracks Road and Mid-Pike Plaza shopping
centers.
Net operating income increased 6.7% from $71.3 million in 1997 to $76.1
million in 1998. Excluding properties acquired and sold in 1998 and 1997, net
operating income increased 3.4%.
When comparing 1997 with 1996, rental income increased 6.4% from $91.0
million in 1996 to $96.8 million in 1997. Excluding properties acquired and
sold in 1997 and 1996, rental income increased 1.8%.
Net operating income increased 7.8% from $66.1 million in 1996 to $71.3
million in 1997. Excluding properties acquired and sold in 1997 and 1996, net
operating income increased 2.1%.
The West
The Western region is comprised of forty-four assets, 508 tenants and 2.7
million square feet. Assets in this region extend from the Mid-West to the West
Coast. Unlike the Northeast and Mid-Atlantic regions, this portfolio is
relatively new to the Trust and is part of a deliberate expansion west over the
past several years. This region is the fastest growing at the Trust and such
major new development projects as San Jose and San Antonio will be managed by
this regional operating team upon their completion. Several redevelopment
projects are currently underway, particularly in Southern California, which are
expected to add to revenues and net operating income in 1999 and future years.
When comparing 1998 with 1997, rental income increased 72% from $21.3
million in 1997 to $36.5 million in 1998, reflecting the Trust's expansion in
this region. Excluding properties acquired and sold, rental income increased
22%. Fifteen percent of the increase was driven by the recent redevelopment and
retenanting of three shopping centers, Gratiot, Crossroads, and Finley and
seven percent was attributable to the balance of the region's portfolio.
Net operating income increased 85% from $13.7 million in 1997 to $25.3 million
in 1998. Excluding properties acquired and sold, net operating income increased
32% from $9.5 million in 1997 to $12.6 million in 1998. This increase resulted
from the redevelopment and retenanting of Gratiot, Crossroads and Finley
shopping centers and the retenanting of two of the Trust's California street
retail properties.
27
<PAGE>
When comparing 1997 with 1996, rental income increased 109% from $10.2 million
in 1996 to $21.3 million in 1997. Excluding properties acquired and sold in
1997 and 1996, rental income increased 6%.
Net operating income increased 110% from $6.5 million in 1996 to $13.7 million
in 1997. Excluding properties acquired and sold in 1997 and 1996, net operating
income increased 4.8%.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
- --------------------------------------------------------------------
The Trust's primary financial market risk is the fluctuation in interest
rates. At December 31, 1998, the Trust had $268.5 million of variable rate
debt. Based upon this balance of variable debt, if interest rates increased 1%,
the Trust's earnings and cash flows would decrease by $2.7 million. If interest
rates decreased 1%, the Trust's earnings and cash flows would increase by $2.7
million. The Trust believes that the change in the fair value of its financial
instruments resulting from a forseeable fluctuation in interest rates would be
immaterial to its total assets and total liabilities.
Item 8. Financial Statements and Supplementary Data.
- ---------------------------------------------------
Included in Item 14.
Item 9. Disagreements on Accounting and Financial Disclosure.
- ------------------------------------------------------------
None.
28
<PAGE>
Part III
--------
Item 10.Directors and Executive Officers of the Registrant.
---------------------------------------------------
Executive Officers of the Registrant
------------------------------------
The Executive Officers in 1998 were:
<TABLE>
<CAPTION>
Name Age Position with Trust
---- --- -------------------
<S> <C> <C>
Steven J. Guttman 52 President, Chief Executive
Officer and Trustee
Howard S. Biel 51 Senior Vice President, Managing
Director of Development
Nathan P. Fishkin 51 Senior Vice President,
(Ceased serving as an Acquisitions
executive officer on
October 30, 1998)
Nancy J. Herman 35 Vice President, General Counsel
and Secretary
Ron D. Kaplan 35 Senior Vice President-Capital
Markets, Chief Investment Officer
Catherine R. Mack 54 Vice President, General Counsel
(Resigned as of and Secretary
December 21, 1998)
Donald C. Wood 38 Senior Vice President, Finance
and Treasurer
Cecily A. Ward 52 Vice President-Controller
</TABLE>
Steven J. Guttman has been the Trust's President and Chief Executive Officer
since April 1980. Mr. Guttman has been associated with the Trust since 1972,
became Chief Operating Officer in 1975 and became a Managing Trustee in 1979.
Howard S. Biel joined the Trust in January 1998 as Senior Vice President-
Managing Director of Development. From 1991 through 1997, Mr. Biel was Regional
Partner for Faison where he was responsible for the development of over one
million square feet of retail and entertainment space in the Mid-Atlantic and
Northeast regions. From 1986 through 1990, Mr. Biel was Executive Vice President
for Western Development Corporation (now the Mills Corporation) where he oversaw
the development and management of over seven million square feet of value
oriented super-regional shopping malls. From 1979 through 1985, he was Senior
Vice President for Development at the Edward J. DeBartolo Corporation where he
was
29
<PAGE>
responsible for the planning and development of ten regional malls and several
urban mixed-use projects.
Nathan P. Fishkin served as Senior Vice President, Acquisitions from January
1998 through November 2, 1998, at which time he became a consultant for the
Trust. Mr. Fishkin joined the Trust in 1985 as an acquisition officer. In
1987, he became Vice President, Special Projects, overseeing all anchor and
specialty tenant leasing and in 1997, he became Senior Vice President, Real
Estate. Prior to joining the Trust, Mr. Fishkin practiced law for twelve years.
Nancy J. Herman became the Trust's Vice President, General Counsel and Secretary
on December 21, 1998. In this position, Ms. Herman has overall responsibility
for the Trust's legal affairs. Ms. Herman joined the Trust in 1990 as a staff
attorney. Since that time, she has had responsibility for managing legal issues
related to environmental matters, intellectual property and computers, insurance
and other legal matters. Prior to joining the Trust in 1990, Ms. Herman
practiced real estate law at Hogan & Hartson.
Ron D. Kaplan joined the Trust in November 1992 as Vice President-Capital
Markets. Mr. Kaplan was formerly a Vice President of Salomon Brothers Inc where
he was responsible for capital raising and financial advisory services for
public and private real estate companies. While at Salomon Brothers which he
joined in 1985, he participated in two of the Trust's debt offerings.
Catherine R. Mack came to the Trust in January 1985 as General Counsel and
became a Vice President in February 1986. Before joining the Trust, Ms. Mack
was an Assistant United States Attorney for the District of Columbia and, prior
to that, an attorney with Fried, Frank, Harris, Shriver and Jacobson in
Washington, D.C. where she represented several local real estate entities. Ms.
Mack resigned effective December 21, 1998; under the terms of Ms. Mack's
severance agreement with the Trust, upon her voluntary resignation, she will act
in a legal advisory position to the Trust for a two-year period.
Donald C. Wood joined the Trust in May 1998 as Senior Vice President, Chief
Financial Officer. Prior to joining the Trust, Mr. Wood was Senior Vice-
President and Chief Financial Officer for Caesars World, Inc., a wholly-owned
subsidiary of ITT Corporation, where he was responsible for all aspects of
finance throughout the company including strategic planning, process re-
engineering, capital allocation and financial analysis. Prior to joining ITT in
1990, Mr. Wood was employed at Arthur Andersen & Co. from 1982 where he served
in numerous positions including audit manager.
Cecily A. Ward joined the Trust in April 1987 as Controller. Prior to joining
the Trust, Ms. Ward, a certified public accountant, was with Grant Thornton LLP,
the Trust's independent accountants.
The schedule identifying Trustees under the caption "Election of Trustees" of
the 1999 Proxy Statement is incorporated herein by reference thereto.
Item 11. Executive Compensation.
- -------- -----------------------
30
<PAGE>
The sections entitled "Summary Compensation Table" and "Aggregated Option
Exercises in 1998 and December 31, 1998 Option Values" of the 1999 Proxy
Statement are incorporated herein by reference thereto.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
- -------- ---------------------------------------------------------------
The section entitled "Ownership of Shares by Trustees and Officers" of the 1999
Proxy Statement is incorporated herein by reference thereto.
Item 13. Certain Relationships and Related Transactions.
- -------- -----------------------------------------------
The section entitled "Certain Transactions" of the 1999 Proxy Statement is
incorporated herein by reference thereto.
31
<PAGE>
Part IV
-------
Item 14. Exhibits, Financial Statement
- -------- -----------------------------
Schedules, and Reports on
-------------------------
Form 8-K
--------
(a) 1. Financial Statements
--------------------
Report of Independent Certified
Public Accountants F-2
Consolidated Balance Sheets-
December 31, 1998 and 1997 F-3
Consolidated Statements of
Operations - years ended
December 31, 1998, 1997
and 1996 F-4
Consolidated Statements of
Shareholders' Equity - years
ended December 31, 1998, 1997
and 1996 F-5
Consolidated Statements of
Cash Flows - years ended
December 31, 1998, 1997 and
1996 F-6
Notes to Consolidated
Financial Statements
(Including Selected Quarterly
Data) F-7 - F23
(a) 2. Financial Statement Schedules
-----------------------------
Schedule III - Summary of Real Estate
and Accumulated Depreciation................... F24 - F27
Schedule IV - Mortgage Loans on Real
Estate......................................... F28 - F29
Report of Independent Certified
Public Accountants............................. F30
32
<PAGE>
(a) 3. Exhibits
--------
(3) (i) The Trust's Third Amended and Restated Declaration of Trust dated
May 24, 1984, filed with the Commission on July 5, 1984 as Exhibit 4 to
the Trust's Registration Statement on Form S-2 (file No. 2-92057) is
incorporated herein by reference thereto.
(ii) Bylaws of the Trust, filed with the Commission as an exhibit to
the Trust's Current Report on Form 8-K dated February 20, 1985, as most
recently amended and filed with the Commission as portions of Item 6 to
the Trust's Quarterly Report on Form 10-Q for the quarter ended June 30,
1998, is incorporated herein by reference thereto.
(4) (i) Specimen Share of Beneficial Interest, filed with the Commission
on November 23, 1982 as Exhibit 4 to the Trust's Registration Statement
on Form S-2 (file No. 2-80524), is incorporated herein by reference
thereto.
(ii) Statement of Designation for Shares, filed on Form 8-K with the
Commission on October 3, 1997, is incorporated herein by reference
thereto.
(iii) The 5 1/4% Convertible Subordinated Debenture due 2002 as
described in Amendment No. 1 to Form S-3 (File No. 33-15264), filed with
the Commission on August 4, 1987 is incorporated herein by reference
thereto.
(iv) Amended and Restated Rights Agreement, dated March 11, 1999,
between the Trust and American Stock Transfer & Trust Company, filed as
an exhibit to the Trust's Form 8-A/A filed with the Commission on March
11, 1999, is incorporated herein by reference thereto.
(v) Indenture dated December 13, 1993, related to the Trust's 7.48%
Debentures due August 15, 2026; 8 7/8% Senior Notes due January 15, 2000;
8% Notes due April 21, 2002; 6 5/8% Notes due 2005; 6.82% Medium Term
Notes due August 1, 2027; 6.74% Medium Term Notes due March 10, 2004; and
6.99% Medium Term Notes due March 10, 2006, filed with the commission on
December 13, 1993 as exhibit 4 (a) to the Trust's Registration Statement
on Form S-3, (File No. 33-51029) and amended on Form S-3 (File
No. 33-63687, effective December 4, 1995 is incorporated herein by
reference thereto) is incorporated herein by reference thereto.
(vi) Indenture dated September 1, 1998 filed as exhibit 4(a) to the
Trust's Registration Statement on Form S-3 (File No. 333-63619) is
incorporated herein by reference thereto.
(vii) Dividend Reinvestment and Share Purchase Plan, dated November 3,
1995, filed with the Commission on Form S-3 on November 3, 1995 (File No.
33-63955) is incorporated herein by reference thereto.
(9) Voting Trust Agreement...............................*
(10) (i) Consultancy Agreement with Samuel J. Gorlitz, as amended, filed
with the Commission as Exhibit 10 (v) to the Trust's Annual Report on
Form 10-K for the year ended December 31, 1983, is incorporated herein by
reference
33
<PAGE>
thereto.
(ii) The Trust's 1983 Stock Option Plan adopted May 12, 1983, filed
with the Commission as Exhibit 10 (vi) to the Trust's Annual Report on
Form 10-K for the year ended December 31, 1983, is incorporated herein by
reference.
(iii) Deferred Compensation Agreement with Steven J. Guttman dated
December 13, 1978, filed with the Commission as Exhibit 10 (iv) to the
Trust's Annual Report on Form 10-K for the year ended December 31, 1980 is
incorporated herein by reference thereto.
(iv) The Trust's 1985 Non-Qualified Stock Option Plan, adopted on
September 13, 1985, filed with the Commission as a portion of Exhibit 10
to the Trust's Annual Report on Form 10-K for the year ended December 31,
1985 is incorporated herein by reference thereto.
(v) Amendment No. 3 to Consultancy Agreement with Samuel J. Gorlitz,
filed as a portion of Exhibit 10 to the Trust's Annual Report on Form 10-K
for the year ended December 31, 1988 is incorporated herein by reference
thereto.
(vi) The 1991 Share Purchase Plan, dated January 31, 1991, filed with
the Commission as a portion of Exhibit 10 to the Trust's Annual Report on
Form 10-K for the year ended December 31, 1990 is incorporated herein by
reference thereto.
(vii) Amendment No. 4 to Consultancy Agreement with Samuel J. Gorlitz,
filed with the Commission as an exhibit to the Trust's Annual Report on
Form 10-K for the year ended December 31, 1992 is incorporated herein by
reference thereto.
(viii) Employment and Relocation Agreement between the Trust and Ron D.
Kaplan, dated September 30, 1992, filed as an exhibit to the Trust's
Annual Report on Form 10-K for the year ended December 31, 1992 is
incorporated herein by reference thereto.
(ix) Amendment dated October 1, 1992, to Voting Trust Agreement dated
as of March 3, 1989 by and between I. Wolford Berman and Dennis L. Berman
filed as an exhibit to the Trust's Annual Report on Form 10-K for the year
ended December 31, 1992 is incorporated herein by reference thereto.
(x) Federal Realty Investment Trust Amended and Restated 1993 Long-
Term Incentive Plan, as amended on October 6, 1997, filed with the
Commission as portions of Item 6 to the Trust's Quarterly Report on Form
10-Q for the quarter ended September 30, 1997, are incorporated herein by
reference thereto.
The following documents, filed with the Commission as portions of
34
<PAGE>
Item 6 to the Trust's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1993 are incorporated herein by reference thereto:
(xi) Consulting Agreement between Misner Development and Federal
Realty Investment Trust.
(xii) Fiscal Agency Agreement dated as of October 28, 1993 between
Federal Realty Investment Trust and Citibank, N.A.
(xiii) Other Share Award and Purchase Note between Federal Realty
Investment Trust and Ron D. Kaplan, dated January 1, 1994, filed with the
Commission as a portion of Item 6 to the Trust's Quarterly Report on Form
10-Q for the quarter ended March 31, 1994 is incorporated herein by
reference there to.
(xiv) Amended and Restated 1983 Stock Option Plan of Federal Realty
Investment Trust and 1985 Non-Qualified Stock Option Plan of Federal Realty
Investment Trust, filed with the Commission on August 17, 1994 on Form S-8,
(File No. 33-55111) is incorporated herein by reference thereto.
(xv) Form of Severance Agreement between Federal Realty Investment
Trust and Certain of its Officers dated December 31, 1994, filed with the
Commission as a portion of Exhibit 10 to the Trust's Annual Report on Form
10-K for the year ended December 31, 1994, is incorporated herein by
reference thereto.
The following filed with the Commission as portions of Exhibit 10 to the Trust's
Annual Report on Form 10-K for the year ended December 31, 1997, are
incorporated herein by reference thereto:
(xvi) Credit Agreement Dated as of December 19, 1997 by and among
Federal Realty Investment Trust, as Borrower, The Financial Institutions
Party Hereto and Their Assignees Under Section 13.5.(a), as Lenders,
Corestates Bank, N.A., as Syndication Agent, First Union National Bank, as
Administrative Agent and as Arranger, and Wells Fargo Bank, as
Documentation Agent and as Co-Arranger.
(xvii) Performance Share Award Agreement between Federal Realty
Investment Trust and Steven J. Guttman, as of January 1, 1998.
(xviii) Form of Amended and Restated Restricted Share Award Agreements
between Federal Realty Investment Trust and Steven J. Guttman for the years
1998 through 2002.
(xix) Performance Share Award Agreements between Federal Realty
Investment Trust and Ron D. Kaplan, as of January 1, 1998.
(xx) Restricted Share Award Agreements between Federal Realty
Investment Trust and Ron D. Kaplan, as of
35
<PAGE>
January 1, 1998.
(xxi) Amended and Restated Employment Agreement between the Trust and
Steven J. Guttman as of March 6, 1998.
(xxii) Amended and Restated Executive Agreement between the Trust and
Steven J. Guttman as of March 6, 1998.
(xxiii) Executive Agreement between the Trust and Ron D.Kaplan as of
March 6, 1998.
(xxiv) Amended and Restated Severance Agreement between the Trust and
Ron D. Kaplan as of March 6, 1998.
(xxv) Severance Agreement between the Trust and Catherine R. Mack as of
March 6, 1998.
The following are filed as exhibits hereto:
(xxvi) Federal Realty Investment Trust Amended and Restated 1993 Long-
Term Incentive Plan, as amended on May 6, 1998, and filed with the Trust's
1998 Proxy Statement.
(xxvii) Term Loan Agreement, dated as of December 22, 1998 by and among
Federal Realty Investment Trust, as Borrower, the Financial Institutions
Party Thereto and Their Assignees Under Section 13.5.(d), as Lenders,
Commerzbank Aktiengesellschaft, New York Branch as Syndication Agent, PNC,
National Association, as Administrative Agent and Fleet National Bank as
documentation agent.
(11) Statement regarding computation of per share
earnings.........................................*
(12) Statements regarding computation of ratios.......*
(13) Annual Report to Shareholders, Form 10Q or quarterly report to
shareholders...........................*
(18) Letter regarding change in accounting
principles.......................................*
(19) Report furnished to security holders.............*
(21) Subsidiaries of the registrant....................
(xxxvii) Articles of Incorporation of Street Retail, Inc. filed with the
Commission as a portion of Exhibit 21 to the Trust's Annual Report on Form
10-K for the year ended December 31, 1994 is incorporated herein by
reference thereto.
(xxxviii) By-Laws of Street Retail, Inc. filed with the Commission as a
portion of Exhibit 21 to the Trust's Annual Report on Form 10-K for the
year ended December 31, 1994 is incorporated herein by reference thereto.
36
<PAGE>
(22) Published report regarding matters submitted to
vote of security holders.........................*
(23) Consent of Grant Thornton LLP....................
(24) Power of attorney................................*
(27) Financial Data Schedule..........................+
(99) Additional exhibits..............................*
(b) Reports on Form 8-K Filed during the Last Quarter
-------------------------------------------------
A Form 8-K, dated October 28, 1998, was filed in response to Item 5.
_________
* Not applicable.
+ For Edgar filing only.
37
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 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.
FEDERAL REALTY INVESTMENT TRUST
Date: March 19, 1999 By: Steven J. Guttman
-----------------------
Steven J. Guttman
President
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.
Signatures Title Date
- ---------- ----- ----
President and
Trustee (Chief
Steven J. Guttman Executive Officer) March 19, 1999
- ------------------------- --------------
Steven J. Guttman
Senior Vice-President,
Finance and Treasurer
Donald C. Wood (Chief Financial Officer) March 19, 1999
- ------------------------- --------------
Donald C. Wood
Vice-President and
Controller (Principal
Cecily A. Ward Accounting Officer) March 19, 1999
- ------------------------- --------------
Cecily A. Ward
Dennis L. Berman Trustee March 19, 1999
- ------------------------- --------------
Dennis L. Berman
Kenneth D. Brody Trustee March 19, 1999
- ------------------------- --------------
Kenneth D. Brody
A. Cornet de Ways Ruart Trustee March 19, 1999
- ------------------------- --------------
A. Cornet de Ways Ruart
Trustee March 19, 1999
- ------------------------- --------------
Samuel J. Gorlitz
Kristin Gamble Trustee March 19, 1999
- ------------------------- --------------
Kristin Gamble
Walter F. Loeb Trustee March 19, 1999
- ------------------------- --------------
Walter F. Loeb
Mark S. Ordan Trustee March 19, 1999
- ------------------------- --------------
Mark S. Ordan
George L. Perry Trustee March 19, 1999
- ------------------------ --------------
George L. Perry
38
<PAGE>
FINANCIAL STATEMENTS AND
SCHEDULES
F1
<PAGE>
REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Trustees and Shareholders
Federal Realty Investment Trust
We have audited the accompanying consolidated balance sheets of Federal Realty
Investment Trust as of December 31, 1998 and 1997, and the related consolidated
statements of operations, shareholders' equity, and cash flows for each of the
three years in the period ended December 31, 1998. 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 generally accepted auditing
standards. 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 consolidated financial position of Federal Realty
Investment Trust as of December 31, 1998 and 1997 and the consolidated results
of its operations and its consolidated cash flows for each of the three years in
the period ended December 31, 1998 in conformity with generally accepted
accounting principles.
Grant Thornton LLP
Washington, D.C.
February 8, 1999
F2
<PAGE>
Federal Realty Investment Trust
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, December 31,
1998 1997
------------------ -----------------
<S> <C> <C>
ASSETS (in thousands)
Investments
Real estate, at cost $ 1,642,136 $ 1,453,639
Less accumulated depreciation and amortization (286,053) (247,497)
-------------- ----------------
1,356,083 1,206,142
Mortgage notes receivable 51,154 38,360
-------------- ----------------
1,407,237 1,244,502
Other Assets
Cash 17,230 17,043
Accounts and notes receivable 17,873 18,794
Prepaid expenses and other assets, principally
property taxes and lease commissions 38,502 32,128
Debt issue costs 3,475 4,106
-------------- ----------------
$ 1,484,317 $ 1,316,573
============== ================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Obligations under capital leases $ 122,401 $ 125,940
Mortgages payable 51,079 95,633
Notes payable 263,159 119,028
Accounts payable and accrued expenses 34,073 30,512
Dividends payable 18,972 18,368
Security deposits 5,214 4,423
Prepaid rents 3,641 2,818
Senior notes and debentures 335,000 255,000
5 1/4% Convertible subordinated debentures 75,289 75,289
Investors' interest in consolidated assets 45,542 35,752
Commitments and contingencies
Shareholders' equity
7.95% Series A Cumulative Redeemable Preferred Shares,
liquidation preference $25 per share, 4,000,000 shares issued in 1997 100,000 100,000
Common shares of beneficial interest, no par
or stated value, unlimited authorization,
issued 40,139,675 and 39,200,201 shares,
respectively 707,724 684,823
Accumulated dividends in excess of Trust net income (255,211) (222,709)
-------------- ----------------
552,513 562,114
Less 59,425 and 52,386 common shares in treasury - at cost, respectively,
deferred compensation and subscriptions receivable (22,566) (8,304)
-------------- ----------------
529,947 553,810
-------------- ----------------
$ 1,484,317 $ 1,316,573
============== ================
The accompanying notes are an integral part of these statements.
</TABLE>
F-3
<PAGE>
Federal Realty Investment Trust
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended December 31,
1998 1997 1996
----- ----- ------
<S> <C> <C> <C>
(In thousands, except per share data)
Revenue
Rental income $222,186 $188,529 $164,887
Interest and other income 5,945 6,037 4,352
Other property income 10,347 9,705 9,816
------------ ----------- ------------
238,478 204,271 179,055
Expenses
Rental 49,490 42,844 40,687
Real estate taxes 23,271 19,525 16,411
Interest 55,125 47,288 45,555
Administrative 11,796 9,793 9,100
Reorganization expenses 4,665 1,951 -
Depreciation and amortization 46,047 41,399 38,154
------------ ----------- ------------
190,394 162,800 149,907
------------ ----------- ------------
Operating income before investors' share
of operations and gain (loss) on sale of real estate 48,084 41,471 29,148
Investors' share of operations (3,124) (1,342) (394)
------------ ----------- ------------
Income before gain (loss) on sale of real estate 44,960 40,129 28,754
Gain (loss) on sale of real estate - 6,375 (12)
------------ ----------- ------------
Net income 44,960 46,504 28,742
Dividends on preferred stock (7,950) (1,877) -
------------ ----------- ------------
Net income available for common shareholders $ 37,010 $ 44,627 $ 28,742
============ =========== ============
Earnings per common share, basic
Income before gain (loss) on sale of real estate $ 0.94 $ 0.99 $ 0.87
Gain (loss) on sale of real estate - 0.17 -
------------ ----------- ------------
$ 0.94 $ 1.16 $ 0.87
============ =========== ============
Weighted average number of common shares, basic 39,174 38,475 33,175
============ =========== ============
Earnings per common share, diluted
Income before gain (loss) on sale of real estate $ 0.94 $ 0.98 $ 0.86
Gain (loss) on sale of real estate - 0.16 -
------------ ----------- ------------
$ 0.94 $ 1.14 $ 0.86
============ =========== ============
Weighted average number of common shares, diluted 40,080 38,988 33,573
============ =========== ============
</TABLE>
F-4
<PAGE>
Federal Realty Investment Trust
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Year ended December 31,
1998 1997 1996
----------- ----------- ----------- ----------- ------------ -----------
(In thousands, except share amounts) Shares Amount Shares Amount Shares Amount
<S> <C> <C> <C> <C> <C> <C>
Common Shares of Beneficial Interest
Balance, beginning of year 39,200,201 $ 684,823 35,948,044 $ 597,917 32,221,670 $ 508,870
Exercise of stock options 230,908 4,880 76,184 1,604 126,918 2,705
Shares issued under dividend reinvestment plan 167,511 3,990 153,973 4,115 181,274 4,057
Performance and Restricted Shares granted 541,055 14,031 22,000 686 - -
Net proceeds from sale of shares - - 3,000,000 83,925 3,418,182 82,285
Cost of 7.95% Series A Cumulative Preferred Shares - - (3,424) - -
----------- ----------- ----------- ----------- ----------- -----------
Balance, end of year 40,139,675 $ 707,724 39,200,201 $ 684,823 35,948,044 $ 597,917
=========== =========== =========== =========== =========== ===========
Common Shares of Beneficial Interest
in Treasury, Deferred Compensation and
Subscriptions Receivable
Balance, beginning of year (457,111) ($8,304) (480,948) ($8,332) (500,095) ($8,567)
Amortization of deferred compensation 50,999 976 30,125 480 30,250 482
Performance and Restricted Shares granted (576,055) (14,680) (22,000) (621) - -
Net increase in stock option loans (41,761) (963) (14,166) (299) (10,167) (242)
Reissuance (purchase) of treasury shares,net (7,039) (374) 10,000 184 (2,186) (24)
Purchase under share purchase plan 51,521 779 19,878 284 1,250 19
----------- ----------- ----------- ----------- ----------- -----------
Balance, end of year (979,446) ($22,566) (457,111) ($8,304) (480,948) ($8,332)
=========== =========== =========== =========== =========== ===========
Accumulated Dividends in Excess of Trust Net Income
Balance, beginning of year ($222,709) ($200,700) ($172,835)
Net income 44,960 46,504 28,742
Dividends declared to common shareholders (69,512) (66,636) (56,607)
Dividends declared to preferred shareholders (7,950) (1,877) -
----------- ----------- ------------
Balance, end of year ($255,211) ($222,709) ($200,700)
=========== =========== ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
Federal Realty Investment Trust
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended December 31,
(In thousands) 1998 1997 1996
------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 44,960 $ 46,504 $ 28,742
Items not requiring cash outlays
Depreciation and amortization 46,047 41,399 38,154
(Gain) loss on sale of real estate - (6,375) 12
Other, net 2,301 818 1,174
Changes in assets and liabilities
Decrease (increase) in accounts receivable 878 (1,493) (1,020)
Increase in prepaid expenses and other
assets before depreciation and amortization (9,571) (11,263) (7,665)
Increase (decrease) in operating accounts payable,
security deposits and prepaid rent 2,148 (287) 3,133
Increase in accrued expenses 3,664 2,867 3,118
----------- ------------- -----------
Net cash provided by operating activities 90,427 72,170 65,648
INVESTING ACTIVITIES
Acquisition of real estate (92,946) (251,351) (85,792)
Capital expenditures (73,030) (50,349) (42,356)
Decrease (increase) in deposit on purchase of real estate - 23,447 (23,401)
Issuance of mortgage notes receivable, net (21,375) (10,447) (14,352)
Proceeds from sale of real estate - 9,364 4,680
Other, net (295) (7) (598)
------------ ------------- -------------
Net cash used in investing activities (187,646) (279,343) (161,819)
FINANCING ACTIVITIES
Borrowing of short-term debt, net 144,357 55,391 19,290
Issuance of senior notes, net of costs 79,540 39,750 49,749
Issuance of common shares 5,310 86,893 86,054
Issuance of preferred shares - 96,576 -
Payments on mortgages, capital leases and notes payable, including
prepayment fees (55,248) (3,712) (5,735)
Dividends paid (74,284) (62,621) (52,084)
Increase (decrease) in minority interest, net (2,269) 898 (583)
----------- ----------- ------------
Net cash provided by financing activities 97,406 213,175 96,691
----------- ----------- ------------
Increase in cash 187 6,002 520
Cash at beginning of year 17,043 11,041 10,521
----------- ----------- ------------
Cash at end of year $ 17,230 $ 17,043 $ 11,041
=========== =========== ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
Federal Realty Investment Trust
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998, 1997, and 1996
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Federal Realty Investment Trust (the "Trust") invests in income-producing
retail real estate, primarily community and neighborhood shopping centers and
main street retail properties, retail buildings and shopping centers in densely
developed urban and suburban areas. In addition, the Trust has various land
parcels under its control for the purpose of developing multi-use projects that
center around the retail component.
The Trust operates in a manner intended to enable it to qualify as a real
estate investment trust under Sections 856-860 of the Internal Revenue Code (the
"Code"). Under those sections, a trust which distributes at least 95% of its
real estate trust 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. Therefore, no provision for Federal
income taxes is required.
The consolidated financial statements of the Trust include the accounts of the
Trust, its wholly owned corporate subsidiaries, several corporations where the
Trust has a majority ownership, numerous partnerships and a joint venture. The
equity interests of other investors are reflected as investors' interest in
consolidated assets. All significant intercompany transactions and balances are
eliminated.
Revenue Recognition. The Trust's leases with tenants are classified as operating
leases. Minimum rents are recognized on an accrual basis over the terms of the
related leases with appropriate valuation adjustments recorded to consider
credit and other business risk. Percentage rents, which represent additional
rents based on tenant sales, are recognized at the end of the lease year or
other period in which tenant sales volumes have been reached and the percentage
rents are due. Real estate tax and other cost reimbursements are recognized on
an accrual basis over the periods in which the expenditures occurred.
Real Estate. The Trust uses the straight-line method in providing for
depreciation. Estimated useful lives range from three to 25 years on apartment
buildings and improvements, and from three to 35 years on retail properties and
improvements. Maintenance and repair costs are charged to operations as
incurred. Major improvements are capitalized. The gain or loss resulting from
the sale of properties is included in net income at the time of sale. The Trust
has adopted FAS 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of". The Trust does not hold any assets that
meet the impairment criteria of FAS 121.
The Trust capitalizes certain external and internal costs
F7
<PAGE>
directly related to the development, redevelopment and leasing of real estate
including applicable salaries and other related costs. The capitalized costs
associated with developments, redevelopments and leasing are depreciated or
amortized over the life of the improvement and lease, respectively. Through
March 1998, the Trust also capitalized internal costs of preacquisition
activities incurred in connection with the acquisition of an operating property.
On March 19, 1998 the Emerging Issues Task Force ("EITF") of the Financial
Accounting Standards Board reached a consensus opinion on issue #97-11,
"Accounting for Internal Costs Relating to Real Estate Property Acquisitions"
which requires that the internal costs of preacquisition activities incurred in
connection with the acquisition of an operating property be expensed as
incurred. Consequently, the Trust has been expensing these costs since March
1998.
Interest costs on developments and major redevelopments are capitalized as
part of the development and redevelopment.
Debt Issue Costs. Costs related to the issuance of debt instruments are
capitalized and are amortized as interest expense over the life of the related
issue using the interest method. Upon conversion or in the event of redemption,
applicable unamortized costs are charged to shareholders' equity or to
operations, respectively.
Cash and Cash Equivalents. The Trust defines cash as cash on hand, demand
deposits with financial institutions and short term liquid investments with an
initial maturity under three months. Cash balances may exceed insurable
amounts.
Risk Management. The Trust occasionally enters into derivative contracts prior
to a scheduled financing or refinancing in order to minimize the risk of changes
in interest rates. The derivative contracts are designated as hedges when
acquired. The cost or gain on these transactions is recognized as a component
of interest expense over the life of the financing. The Trust does not use
derivative financial instruments for trading or speculative purposes. There
were no open derivative contracts at December 31, 1998 or 1997.
Use of Estimates. Inherent in the preparation of the Trust's financial
statements are certain estimates. These estimates are prepared using
management's best judgment, after considering past and current events.
Earnings Per Share. In 1997 the Financial Accounting Standards Board issued
Financial Accounting Standards No. 128 - "Earnings Per Share". Statement 128
replaces the presentation of primary and fully diluted earnings per share
("EPS") pursuant to Accounting Principles Board Opinion No. 15 with the
presentation of basic and diluted EPS. Basic EPS excludes dilution and is
computed by dividing net income available to common shareholders by the weighted
number of common shares outstanding for the period. Diluted EPS reflects the
potential dilution that could occur if securities or other contracts to issue
common shares were exercised or converted into common shares and then shared in
the
F8
<PAGE>
earnings of the Trust.
The following table sets forth the reconciliation between basic and diluted
EPS (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Numerator
- ---------
Net income available for common
shareholders - basic $37,010 $44,627 $28,742
Income attributable to
operating partnership units 578 32 -
------- ------- -------
Net income available for common
shareholders - diluted $37,588 $44,659 $28,742
======= ======= =======
Denominator
- -----------
Denominator for basic EPS-
weighted average shares 39,174 38,475 33,175
Effect of dilutive securities
Stock options and awards 292 494 398
Operating partnership units 614 19 -
------ ------ ------
Denominator for diluted EPS 40,080 38,988 33,573
====== ====== ======
</TABLE>
Stock options are accounted for in accordance with APB 25, whereby if options
are priced at fair market value or above at the date of grant, no compensation
expense is recognized.
NOTE 1: REAL ESTATE AND ENCUMBRANCES
A summary of the Trust's properties at December 31, 1998 and 1997 is as
follows (in thousands):
<TABLE>
<CAPTION>
Accumulated
depreciation and
1998 Cost amortization Encumbrances
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Retail properties $1,436,949 $227,728 $ 51,079
Retail properties
under capital leases 198,567 53,088 122,401
Apartments 6,620 5,237 -
---------- -------- --------
$1,642,136 $286,053 $173,480
========== ======== ========
1997
Retail properties $1,241,087 $186,195 $ 95,633
Retail properties
under capital leases 205,979 56,356 125,940
Apartments 6,573 4,946 -
---------- -------- --------
$1,453,639 $247,497 $221,573
========== ======== ========
</TABLE>
F9
<PAGE>
Real estate acquisitions during 1998 were as follows (in thousands, except for
quare footage):
<TABLE>
<CAPTION>
Existing
Total Cash Leasable
Property Cost Portion Square Footage
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Shopping Centers
Hauppauge, Long Island,NY $ 24,053 $24,053 131,000
Leesburg, Leesburg, VA (1)(2) 18,906 5,556 247,000
Tower, Springfield, VA 17,688 17,688 109,000
Kings Court, Los Gatos, CA (1)(3) 10,714 4,340 79,000
Leasehold buyout and other 7,736 2,012 -
Street Retail
Ten properties, San Antonio,TX (4) 14,163 14,163 235,000
Two properties, Tempe,AZ (5) 10,557 9,807 40,000
Two properties, Santa Monica,CA (6) 8,685 8,028 19,000
One property, Pasadena,CA (6) 6,366 5,733 17,000
Other 1,566 1,566 -
-------- ------- -------
$120,434 $92,946 877,000
======== ======= =======
</TABLE>
1)The Trust acquired these properties in partnership with
third parties, whose partnership units, valued at $3.5
million and $6.4 million, respectively, may be converted
into shares of the Trust.
2)The Trust placed a $9.9 million mortgage on this property.
3)The Trust acquired a leasehold interest in this property.
4)The Trust plans to develop these properties on Houston
Street, most of which are currently vacant.
5)The Trust owns 100% of one property and an 85% partnership
interest in the second property.
6)The Trust acquired a 90% partnership interest in these
properties.
The minority owners in Leesburg and Kings Court shopping centers may exchange
their 138,000 and 260,163 partnership units, respectively, into the same number
of common shares of the Trust or cash, at the Trust's option, after September
15, 2000 and August 24, 1999, respectively. A $9.9 million mortgage was placed
on Leesburg Plaza which bears interest at 6.51%, requires interest only payments
until October 2005 and is due September 1, 2008.
Approximately $25.0 million was invested in 1998 in predevelopment and
development projects in Bethesda, Maryland; Los Gatos, California; San Jose,
California; and in Arlington, Virginia. Other major capital expenditures include
$4.7 million on the renovation of Gratiot Plaza, $4.9 million on the renovation
of Feasterville shopping center, $3.3 million on the renovation of Falls Plaza,
and $3.1 million on the retenanting of Finley shopping center.
The Trust's 120 retail properties at December 31, 1998 are located in 16
states and the District of Columbia. There are approximately 2,290 tenants
providing a wide range of retail products and services. These tenants range
from sole proprietorships to national retailers; no one tenant or corporate
F10
<PAGE>
group of tenants account for 3% or more of revenue.
Mortgage notes receivable of $51.2 million are due over various terms from
January 2000 to May 2021 and have an average weighted interest rate of 10%.
Under the terms of certain of these mortgages, the Trust will receive additional
interest based upon the gross income of the secured properties and upon sale of
the properties, the Trust will share in the appreciation of the properties.
On May 13, 1997 the Trust sold Town & Country Shopping Center in Springfield,
Illinois for $7.5 million, resulting in a gain of $5.3 million. On May 30, 1997
Shillington Shopping Center in Shillington, Pennsylvania was sold for $4.6
million, resulting in a gain of $1.7 million. On September 25, 1997 the Trust
sold Brainerd Village Shopping Center in Chattanooga, Tennessee for $10.2
million, resulting in a loss of $659,000.
On December 31, 1996 the Trust sold Town and Country Shopping Center in
Hammond, Louisiana for $4.9 million, resulting in a loss of $12,000.
Mortgages payable and capital lease obligations are due in installments over
various terms extending to 2016 and 2060, respectively, with interest rates
ranging from 6.1% to 11.25%. Certain of the mortgage and capital lease
obligations require additional interest payments based upon property
performance. In 1998 the Trust paid off maturing mortgages totaling $53.5
million on Barracks Road, Falls Plaza, Falls Plaza-East, Old Keene Mill,
Loehmann's Plaza and Bristol Plaza. In 1997 the Trust repaid a $1.5 million
mortgage on Northeast Shopping Center in Philadelphia, Pennsylvania.
Aggregate mortgage principal payments due during the next three years are
$532,000, $583,000, and $30.7 million, respectively. There are no further
mortgage principal payments due until 2005 when principal payments begin on the
Leesburg mortgage.
Future minimum lease payments and their present value for property under
capital leases as of December 31, 1998, are as follows (in thousands):
<TABLE>
<CAPTION>
Year ending December 31,
<S> <C>
1999 $ 11,299
2000 11,736
2001 11,736
2002 11,527
2003 11,458
Thereafter 525,717
---------
583,473
Less amount representing interest (461,072)
---------
Present value $ 122,401
=========
</TABLE>
F11
<PAGE>
Leasing Arrangements
- --------------------
The Trust's leases with retail property and apartment tenants are
classified as operating leases. Leases on apartments are generally for a period
of one year, whereas retail property leases generally range from three to 10
years and usually provide for contingent rentals based on sales and sharing of
certain operating costs.
The components of rental income are as follows (in thousands):
<TABLE>
<CAPTION>
Year ended December 31,
1998 1997 1996
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Retail properties
Minimum rents $178,936 $147,147 $129,077
Cost reimbursements 34,897 34,089 28,805
Percentage rent 5,766 4,801 4,550
Apartments - rents 2,587 2,492 2,455
-------- -------- --------
$222,186 $188,529 $164,887
======== ======== ========
</TABLE>
The components of rental expense are as follows (in thousands):
<TABLE>
<CAPTION>
Year ended December 31,
1998 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Repairs and maintenance $13,942 $12,634 $11,865
Management fees and costs 9,510 8,452 7,264
Utilities 7,625 5,957 5,350
Payroll - properties 3,775 3,432 3,032
Ground rent 2,829 2,602 2,851
Insurance 2,610 2,227 2,183
Other operating 9,199 7,540 8,142
------- ------- -------
$49,490 $42,844 $40,687
======= ======= =======
</TABLE>
Minimum future retail property rentals on noncancelable operating leases as
of December 31, 1998 are as follows (in thousands):
<TABLE>
<CAPTION>
Year ending December 31,
<S> <C>
1999 $ 183,301
2000 168,192
2001 151,910
2002 133,744
2003 112,787
Thereafter 613,649
----------
$1,363,583
==========
</TABLE>
F12
<PAGE>
NOTE 2. FAIR VALUE OF FINANCIAL INSTRUMENTS
- -------------------------------------------
The following disclosure of estimated fair value was determined by the Trust,
using available market information and appropriate valuation methods.
Considerable judgment is necessary to develop estimates of fair value. The
estimates presented herein are not necessarily indicative of the amounts that
could be realized upon disposition of the financial instruments.
The Trust estimates the fair value of its financial instruments using the
following methods and assumptions: (1) quoted market prices, when available, are
used to estimate the fair value of investments in marketable debt and equity
securities; (2) quoted market prices are used to estimate the fair value of the
Trust's marketable convertible subordinated debentures; (3) discounted cash flow
analyses are used to estimate the fair value of long term notes receivable and
payable, using the Trust's estimate of current interest rates for similar notes;
(4) carrying amounts in the balance sheet approximate fair value for cash and
short term borrowings. Notes receivable from officers are excluded from fair
value estimation since they have been issued in connection with employee stock
ownership programs.
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
(in thousands) Carrying Fair Carrying Fair
Value Value Value Value
------------------ --------------------
<S> <C> <C> <C> <C>
Cash & equivalents $ 17,230 $ 17,230 $ 17,043 $ 17,043
Investments 1,661 1,661 1,304 1,304
Mortgage notes
receivable 51,154 52,433 38,360 39,864
Mortgages and notes
payable 314,238 316,722 214,662 218,194
Convertible
debentures 75,289 71,901 75,289 70,772
Senior notes 335,000 346,269 255,000 264,291
</TABLE>
NOTE 3. NOTES PAYABLE
- ---------------------
The Trust's notes consist of the following (in thousands):
<TABLE>
<CAPTION>
1998 1997
- --------------------------------------------------------
<S> <C> <C>
Revolving credit facilities $134,147 $114,790
Term note with banks 125,000 -
Other 4,012 4,238
-------- --------
$263,159 $119,028
======== ========
</TABLE>
In December 1997 the Trust replaced its unsecured medium term revolving credit
facilities with four banks with a five year syndicated credit facility, thereby
increasing the aggregate amount available from $135 million to $300 million and
decreasing the interest rate from LIBOR plus 75 basis points to LIBOR plus 65
basis points. The syndicated facility requires fees and has
F13
<PAGE>
various covenants including the maintenance of a minimum shareholders' equity
and a maximum ratio of debt to net worth.
In December 1998 the Trust obtained a four year loan of $125 million from five
institutional lenders. The loan, which bears interest at LIBOR plus 75 basis
points, requires fees and has the same covenants as the syndicated credit
facility.
The maximum drawn under these facilities during 1998, 1997 and 1996 was $259.1
million, $114.8 million and $76.2 million, respectively. In 1998, 1997 and 1996
the weighted average interest rate on borrowings was 6.1%, 6.5% and 6.4%,
respectively, and the average amount outstanding was $163.6 million, $59.9
million and $47.2 million, respectively.
NOTE 4. DIVIDENDS
- -----------------
On November 17, 1998 the Trustees declared a quarterly cash dividend of $.44
per common share, payable January 15, 1999 to common shareholders of record
January 4, 1999. For the years ended December 31, 1998, 1997 and 1996, $.31,
$.19, and $.21 of dividends paid per common share, respectively, represented a
return of capital.
On November 17, 1998 the Trustees declared a quarterly cash dividend of
$.49687 per share on its Series A Cumulative Redeemable Preferred Shares,
payable on February 1, 1999 to shareholders of record on January 15, 1999.
NOTE 5. COMMITMENTS AND CONTINGENCIES
- -------------------------------------
The Trust is involved in various lawsuits and environmental matters arising in
the normal course of business. Management believes that such matters will not
have a material effect on the financial condition or results of operations of
the Trust.
Pursuant to the provisions of the respective partnership agreements, in the
event of the exercise of put options by the other partners, the Trust would be
required to purchase the 99% limited partnership interest at Loehmann's Plaza at
its then fair market value and an 18.75% interest at Congressional Plaza at its
then fair market value.
Under the terms of certain partnerships, if certain leasing and revenue levels
are obtained for the properties, the limited partners may require the Trust to
purchase their partnership interests at a formula price based upon net operating
income. The purchase price may be paid in cash or common shares of the Trust, at
the election of the limited partners. If the limited partners do not redeem
their interest, the Trust may choose to purchase the limited partnership
interests upon the same terms. Under the terms of other partnerships, the
partners may exchange their 879,541 operating partnership units into cash or
the same number of common shares of the Trust, at the option of the Trust.
F14
<PAGE>
As of December 31, 1998 in connection with the renovation of certain shopping
centers, the Trust has contractual obligations of $14.7 million and $251,000 of
letters of credit outstanding. In addition the Trust is contractually obligated
under leases to provide up to $6.1 million in building and tenant improvements.
The Trust is obligated under ground lease agreements on several shopping
centers requiring minimum annual payments as follows (in thousands):
<TABLE>
<S> <C>
1999 $ 3,178
2000 3,183
2001 3,183
2002 3,183
2003 3,258
Thereafter 178,230
--------
$194,215
========
</TABLE>
NOTE 6. 5 1/4% CONVERTIBLE SUBORDINATED DEBENTURES
- ---------------------------------------------------
In October 1993 the Trust issued $75.0 million of 5 1/4% convertible
subordinated debentures, realizing cash proceeds of approximately $73.0 million.
The debentures were not registered under the Securities Act of 1933, and were
not publicly distributed within the United States. The debentures, which mature
in 2003, are convertible into shares of beneficial interest at $36 per share.
The debentures are redeemable by the Trust, in whole, at any time after October
28, 1998 at 100% of the principal amount plus accrued interest.
At December 1998 and 1997 the Trust had outstanding $289,000 of 5 1/4%
convertible subordinated debentures due 2002. The debentures which are
convertible into shares of beneficial interest at $30.625 were not registered
under the Securities Act of 1933 and were not publicly distributed within the
United States.
NOTE 7. SENIOR NOTES AND DEBENTURES
- -----------------------------------
Unsecured senior notes and debentures at December 31, 1998 and 1997 consist of
the following (in thousands):
<TABLE>
<CAPTION>
1998 1997
- --------------------------------------------------------------------
<S> <C> <C>
8.875% Notes due January 15, 2000 $100,000 $100,000
8% Notes due April 21, 2002 25,000 25,000
6.74% Medium-Term Notes due March 10, 2004 39,500 -
6.625% Notes due December 1, 2005 40,000 40,000
6.99% Medium-Term Notes due March 10, 2006 40,500 -
7.48% Debentures due August 15, 2026,
redeemable at par by holder August 15, 2008 50,000 50,000
6.82% Medium-Term Notes due August 1, 2027,
redeemable at par by holder August 1, 2007 40,000 40,000
-------- --------
$335,000 $255,000
======== ========
</TABLE>
F15
<PAGE>
The loan agreements contain various covenants, including limitations on the
amount of debt and minimum debt service coverage ratios. The Trust is in
compliance with all covenants.
In anticipation of the March 1998 Medium-Term Note issuance, on January 13,
1998 the Trust purchased a Treasury Yield Hedge (notional amount of $50 million)
to minimize the risk of changes in interest rates. The hedge was terminated on
March 5, 1998 at a gain of $1.1 million which is being recognized as a reduction
in interest expense over the term of the notes. There were no open hedge
agreements at December 31, 1998 or 1997.
In September 1998 the Trust filed a $500 million shelf registration statement
with the Securities and Exchange Commission which allows the issuance of debt
securities, preferred shares and common shares. There have been no drawdowns
under the shelf registration.
NOTE 8. SHAREHOLDERS' EQUITY
- ----------------------------
On February 4, 1997 the Trust sold three million common shares to an
institutional investor for $28 per share, netting $83.9 million.
On October 6, 1997 the Trust issued four million 7.95% Series A Cumulative
Redeemable Preferred Shares at $25 per share in a public offering, realizing
cash proceeds of approximately $96.6 million after costs of $3.4 million. The
Series A Preferred Shares are not redeemable prior to October 6, 2002. On or
after that date, the Preferred Shares may be redeemed, in whole or in part, at
the option of the Trust, at a redemption price of $25 per share plus all accrued
and unpaid dividends. The redemption price is payable solely out of proceeds
from the sale of other capital shares of the Trust. Dividends on the Preferred
Shares will be payable quarterly in arrears on the last day of January, April,
July and October.
On May 24, 1996 the Trust sold, to an institutional investor, 1.8 million
common shares at $22 per share, netting $39.3 million. On December 13, 1996
the Trust sold another 1.6 million common shares to the public at $27 7/8 per
share, netting $42.9 million.
The Trust has a Dividend Reinvestment Plan, whereby shareholders may use their
dividends and make optional cash payments to purchase shares. In 1998, 1997, and
1996, 167,511 shares, 153,973 shares, and 181,274 shares, respectively, were
issued under the Plan.
In 1998, 576,055 common shares, of which 35,000 were issued from treasury
shares, were awarded to the Trust's president and certain other officers under
various programs designed to directly link a significant portion of their long
term compensation to the prosperity of the Trust and its shareholders. Ten
thousand shares
F16
<PAGE>
vested upon award, 491,055 shares vest over terms from 5 to 13 years, and 75,000
shares vest upon the obtainment of certain performance criteria.
On January 31, 1997, 22,000 restricted shares were granted to an officer and
two employees of the Trust. The shares vest over three years. On September 26,
1997, 10,000 restricted common shares were granted to an officer; the shares,
which were fully vested upon grant, were issued from treasury shares.
In January 1994 under the terms of the 1993 Long Term Incentive Plan, an
officer of the Trust purchased 40,000 common shares at $25 per share with the
assistance of a $1.0 million loan from the Trust. The loan, which has a term of
12 years and a current balance of $687,500, bears interest at 6.24%. Forgiveness
of up to 75% of the loan is subject to the future performance of the Trust. One
eighth of the loan was forgiven on January 31, 1995 and an additional one
sixteenth has been forgiven each January 31 since then as certain performance
criteria of the Trust were met. The Trust has loaned the officer $125,000 to pay
taxes due in connection with the plan.
In January 1991 the Trustees adopted the Federal Realty Investment Trust Share
Purchase Plan. Under the terms of this plan, officers and certain employees of
the Trust purchased 446,000 common shares at $15.125 per share with the
assistance of loans of $6.7 million from the Trust. Originally, the Plan called
for one sixteenth of the loan to be forgiven each year for eight years, as long
as the participant was still employed by the Trust. The loans for all
participants, but two, were modified in 1994 to extend the term an additional
four years and to tie forgiveness in 1995 and thereafter to certain performance
criteria of the Trust. One sixteenth of the loan has been forgiven during each
year of the plan. At December 31, 1998 the Trust has outstanding loans to
participants of $3.0 million; $2.2 million of purchase loans and $824,000 of
loans with which to pay the taxes due in connection with the plan. The purchase
loans and the tax loans bear interest at 9.39%. The shares purchased under the
plan may not be sold, pledged or assigned until both the purchase and tax loans
are satisfied and the term has expired, without the consent of the Compensation
Committee of the Board of Trustees.
In connection with a restricted share grant, the Trust accepted from its
President a noninterest bearing note of $105,000 which is due April 15, 2001. In
connection with restricted share grants made in 1998 to the Chief Investment
Officer, the Trust accepted interest bearing notes of $93,000, which are due
eight years from issuance.
At December 31, 1998, 1997 and 1996, respectively, the Trust had 59,425 common
shares, 52,386 common shares and 62,386 common shares in treasury, at a cost of
$1.4 million, $1.0 million, and $1.2 million, respectively.
On April 13, 1989, the Trustees adopted a Shareholder Rights Plan (the Plan).
Under the Plan, one right was issued for each outstanding share of common stock
held as of April 24, 1989, and a
F17
<PAGE>
right will be attached to each share issued in the future. The rights are
exercisable into common shares upon the occurrence of certain events, including
acquisition by a person or group of certain levels of beneficial ownership or a
tender offer by such a person or group. The rights are redeemable by the Trust
for $.01.
NOTE 9. STOCK OPTION PLAN
- -------------------------
The 1993 Long Term Incentive Plan ("Plan") has been amended to authorize the
grant of options and other stock based awards for up to 5.5 million shares.
Options granted under the Plan have ten year terms and vest in one to five
years. Under the Plan, on each annual meeting date during the term of the Plan,
each nonemployee Trustee will be awarded 2,500 options.
The option price to acquire shares under the 1993 Plan and previous plans is
required to be at least the fair market value at the date of grant. As a result
of the exercise of options, the Trust had outstanding from its officers and
employees notes for $3.4 million and $2.5 million at December 31, 1998 and 1997,
respectively. The notes issued under the 1993 Plan bear interest at the dividend
rate on the date of exercise divided by the purchase price of such shares. The
notes issued under the previous plans bear interest at the lesser of (i) the
Trust's borrowing rate or (ii) the current indicated annual dividend rate on the
shares acquired pursuant to the option, divided by the purchase price of such
shares. The notes are collateralized by the shares and are with recourse. The
loans have a term extending to the employee's or officer's retirement date.
FAS Statement No. 123, "Accounting for Stock-Based Compensation" requires pro
forma information regarding net income and earnings per share as if the Trust
accounted for its stock options under the fair value method of that Statement.
The fair value for options issued in 1998, 1997, and 1996 has been estimated as
$2.6 million, $4.0 million, and $120,000, respectively, as of the date of grant,
using a binomial model with the following weighted-average assumptions for 1998,
1997 and 1996, respectively: risk-free interest rates of 5.7%, 6.5%, and 5.7%;
volatility factors of the expected market price of the Trust's shares of 19%,
19% and 19%; and a weighted average expected life of the option of 6.3 years,
6.6 years, and 5.6 years.
Because option valuation models require the input of highly subjective
assumptions, such as the expected stock price volatility, and because changes in
these subjective input assumptions can materially affect the fair value
estimate, the existing model may not necessarily provide a reliable single
measure of the fair value of its stock options.
For purposes of pro forma disclosures, the estimated fair value of the options
are amortized to expense over the options'
F18
<PAGE>
vesting period. The pro forma information is as follows (in thousands except for
earnings per share):
<TABLE>
<CAPTION>
1998 1997 1996
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Pro forma net income $43,179 $45,214 $28,241
Pro forma earnings per share, basic $ .90 $ 1.13 $ .85
Pro forma earnings per share, diluted $ .88 $ 1.11 $ .84
</TABLE>
A summary of the Trust's stock option activity for the years ended December
31, is as follows:
<TABLE>
<CAPTION>
Shares Weighted
Under Average
Option Exercise Price
------ --------------
<S> <C> <C>
January 1, 1996 1,514,632 $ 22.71
Options granted 81,181 21.21
Options exercised (126,918) 21.31
Options forfeited (35,166) 22.47
---------
December 31, 1996 1,433,729 22.737
Options granted 1,611,500 26.43
Options exercised (75,884) 21.05
Options forfeited (121,003) 25.99
---------
December 31, 1997 2,848,342 24.73
Options granted 1,293,500 25.06
Options exercised (228,908) 21.14
Options forfeited (304,118) 25.62
---------
December 31, 1998 3,608,816 25.00
=========
</TABLE>
At December 31, 1998 and 1997, options for 1.5 million and 1.2 million shares,
respectively, were exercisable. The average remaining contractual life of
options outstanding at December 31, 1998 and 1997 was 7.1 years and 7.9 years,
respectively. The weighted average grant date fair value per option for options
granted in 1998 and 1997 was $2.00 and $2.68, respectively. The exercise price
of options outstanding at December 31, 1998 ranged from $17.25 per share to
$27.13 per share.
NOTE 10. SAVINGS AND RETIREMENT PLANS
- -------------------------------------
The Trust has a savings and retirement plan in accordance with the provisions
of Section 401(k) of the Internal Revenue Code. Employees' contributions range,
at the discretion of each employee, from 1% to 17% of compensation up to a
maximum of $10,000. Under the plan, the Trust, out of its current net income,
contributes 50% of each employee's first 5% of contributions. In addition, the
Trust may make discretionary contributions within the limits of deductibility
set forth by the Code. Employees of the Trust, who work over 1,000 hours
annually,
F19
<PAGE>
are eligible to become plan participants. The Trust's expense for the years
ended December 31, 1998, 1997 and 1996 was $218,000, $210,000 and $179,000,
respectively. In 1996 the Trust recorded a liability for an additional
contribution of 1.5% of salary for all nonofficer employees who were eligible
for the 401(k) plan. In addition, 1.5% of salary in 1996 was accrued for all
eligible nonofficer employees as a bonus.
A nonqualified deferred compensation plan for Trust officers was established
in 1994. The plan allows the officers to defer future income until the earlier
of age 65 or termination of employment with the Trust. As of December 31, 1998,
the Trust is liable to participants for approximately $1.7 million under this
plan. Although this is an unfunded plan, the Trust has purchased certain
investments with which to match this obligation.
NOTE 11. INTEREST EXPENSE
- -------------------------
The Trust incurred interest expense totaling $60.2 million, $50.9 million and
$46.4 million in 1998, 1997 and 1996, respectively, of which $5.1 million, $3.6
million, and $871,000, respectively, was capitalized. Interest paid was $57.8
million in 1998, $49.4 million in 1997, and $44.2 million in 1996.
NOTE 12. REORGANIZATION EXPENSES
- --------------------------------
At September 30, 1998 the Trust recorded a $4.7 million charge related to a
comprehensive restructuring program that was implemented during the fourth
quarter of 1998. The charge included a provision for employee severance and
related costs, office closing and downsizing expenses, as well as legal and
consulting fees related to the restructuring program. The Trust's workforce was
reduced by approximately 15% including several vice presidents and other senior
personnel. The foundation of the restructuring effort focused on a change in the
Trust's operating model from a functional hierarchy to an asset management
discipline where small focused teams are responsible for and compensated based
on the operating performance of a portfolio of assets. In addition, the
restructuring effort included a significant downsizing of the Trust's
acquisition department, in response to changing market conditions and business
emphasis. Cash payments against the reserve totalled $1.5 million through
December 31, 1998 with the remaining cash expected to be paid in 1999.
NOTE 13. Year 2000 Readiness
- ----------------------------
The Trust has reviewed the software and hardware systems used internally to
operate its business, in order to assess their ability to handle the "Year 2000
Issue" which generally refers to the inability of systems hardware and software
to correctly identify two-digit references to specific calendar years, beginning
with 2000. The Year 2000 Issue can affect the Trust directly by impairing its
internal data-based
F20
<PAGE>
operations or processing and indirectly by impairing its suppliers' and tenants'
data-based operations or processing. The Trust has identified and evaluated the
Year 2000 compliance of its internal systems; the Trust believes that the
remediation of all accounting systems and other systems of high priority is
complete. The Trust will endeavor to remediate the remaining internal systems
throughout 1999.
The Trust is currently requesting information from its major banks, tenants,
suppliers and manufacturers of computerized components of its real estate
properties to determine their Year 2000 compliance. Based on costs spent to date
and projections of future costs, costs of addressing and solving potential
internal problems are not expected to have a material adverse impact on the
Trust's financial condition.
NOTE 14. SUBSEQUENT EVENTS
- --------------------------
Under a Restricted Share Agreement designed to link his compensation with the
prosperity of the shareholders, the Trust's President elected to accept stock in
lieu of cash for both his 1998 bonus and his 1999 salary. As a result, on
January 1, 1999, 26,741 common shares were awarded to the president in lieu of
his 1999 cash salary. Additional shares will be issued when his 1998 bonus is
determined. The shares vest at the end of five years if the president is still
employed by the Trust.
NOTE 15. SEGMENT INFORMATION
- ----------------------------
The Trust has traditionally operated its business as a single business
segment. During the fourth quarter of 1998, however, the Trust completed a
comprehensive restructuring program which, among other things, changed the
Trust's operating structure from a functional hierarchy to an asset management
model, where small focused teams are responsible for a portfolio of assets. As a
result the Trust has divided its portfolio of properties into three geographic
operating regions: Northeast, Mid-Atlantic and West. Each region is operated
under the direction of a chief operating officer, with dedicated leasing,
property management and financial staff and operates largely autonomously with
respect to day to day operating decisions.
F21
<PAGE>
A summary of the Trust's operations by geographic region is presented below
(in thousands):
<TABLE>
<CAPTION>
North Mid
1998 East Atlantic West Other Consolidated
- ---------------------------------------- -------------- --------------- -------------- --------------- --------------------
<S> <C> <C> <C> <C> <C>
Rental income $ 81,964 $ 103,676 $ 36,546 - $ 222,186
Other income 5,591 3,637 1,119 - 10,347
Rental expense (18,179) (22,826) (8,485) - (49,490)
Real estate tax (10,975) (8,422) (3,874) - (23,271
------------- -------------- ------------- -------------------
Net operating income 58,401 76,065 25,306 159,772
Interest income - - - 5,945 5,945
Interest expense - - - (55,125) (55,125)
Administrative expense - - - (11,796) (11,796)
Reorganization expense - - - (4,665) (4,665)
Depreciation and amortization (17,793) (22,218) (5,081) (955) (46,047)
------------- -------------- ------------- -------------- -------------------
Income before investors'
share of operations and
gain on sale of real estate $ 40,608 $ 53,847 $ 20,225 $ (66,596) $ 48,084
============= ============== ============= ============== ===================
Capital expenditures $ 46,001 $ 57,872 $ 86,049 - $ 189,922
============= ============== ============= ===================
Real estate assets $ 596,340 $ 676,842 $ 368,954 - $ 1,642,136
============= ============== ============= ===================
<CAPTION>
North Mid
1997 East Atlantic West Other Consolidated
- ---------------------------------------- -------------- --------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Rental income $ 70,447 $ 96,818 $ 21,264 - $ 188,529
Other income 4,511 4,867 327 - 9,705
Rental expense (15,755) (22,387) (4,702) - (42,844)
Real estate tax (8,316) (8,000) (3,209) - (19,525)
------------- -------------- ------------- - ---------------
Net operating income 50,887 71,298 13,680 135,865
Interest income - - - 6,037 6,037
Interest expense - - - (47,288) (47,288)
Administrative expense - - - (9,793) (9,793)
Reorganization expense - - - (1,951) (1,951)
Depreciation and Amortization (15,558) (21,690) (3,117) (1,034) (41,399)
------------- -------------- ------------- -------------- ---------------
Income before investors'
share of operations and
gain on sale of real estate $ 35,329 $ 49,608 $ 10,563 $ (54,029) $ 41,471
============= ============== ============= ============== ===============
Capital expenditures $ 99,423 $ 67,794 $ 165,398 - $ 332,615
============= ============== ============= ===============
Real estate assets $ 551,763 $ 618,971 $ 282,905 - $ 1,453,639
============= ============== ============= ===============
<CAPTION>
North Mid
1996 East Atlantic West Other Consolidated
- ---------------------------------------- -------------- --------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Rental income $ 63,725 $ 90,995 $ 10,167 - $ 164,887
Other income 3,765 5,230 821 - 9,816
Rental expense (15,123) (22,820) (2,744) - (40,687)
Real estate tax (7,412) (7,264) (1,735) - (16,411)
------------- -------------- ------------- --------------- ---------------
Net operating income 44,955 66,141 6,509 117,605
Interest income - - - 4,352 4,352
Interest expense - - - (45,555) (45,555)
Administrative expense - - - (9,100) (9,100)
Depreciation and
Amortization (14,507) (20,736) (1,996) (915) (38,154)
------------- -------------- ------------- -------------- ---------------
Income before investors'
share of operations and
gain on sale of real
estate $ 30,448 $ 45,405 $ 4,513 $ (51,218) $ 29,148
============= ============== ============= ============== ===============
Capital expenditures $ 60,140 $ 29,403 $ 54,144 - $ 143,687
============= ============== ============= ===============
Real estate assets $ 456,753 $ 565,302 $ 125,810 - $ 1,147,865
============= ============== ============= ===============
</TABLE>
There are no transactions between geographic areas.
F22
<PAGE>
NOTE 16. QUARTERLY DATA (UNAUDITED)
- ----------------------------------
The following summary represents the results of operations for each quarter
in 1998 and 1997 (in thousands, except per share amounts):
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
- --------------------------------------------------------------------------------
1998
<S> <C> <C> <C>
Revenue $56,177 $58,402 $59,003 $64,896
Net income available
for common shares 10,706 9,976 5,532 (1) 10,796
Earnings per common
share -basic $ .27 $ .26 $ .14 $ .27
Earnings per common
share -diluted .27 .26 .14 .27
1997
Revenue $48,647 50,802 $49,813 $55,009
Net income available
for common shares 9,311 17,010 (2) 9,489 (3) 8,817 (4)
Earnings per common
share -basic $ .25 $ .44 $ .24 $ .23
Earnings per common
share -diluted .24 .44 .24 .22
</TABLE>
(1)Net income includes a $4.7 million charge for reorganization expenses.
(2)Income before gain on sale of real estate was $10.0 million or $.26 per
common share, both basic and diluted.
(3)Income before loss on sale of real estate was $10.1 million or $.26 per
common share, both basic and diluted.
(4)Net income includes a $2.0 million charge for reorganization expenses.
F-23
<PAGE>
FEDERAL REALTY INVESTMENT TRUST
SCHEDULE III
SUMMARY OF REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1998
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- -----------------------------------------------------------------------------------------------------------------------------------
Initial cost to company Gross amount at which
Cost Capitalized carried at close of period
Building and Subsequent to
Descriptions Encumbrance Land Improvements Acquisition Land Land
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ALLWOOD (New Jersey) $3,549,000 $ $3,920,000 $230,000 $
ANDORRA (Pennsylvania) 2,432,000 12,346,000 3,061,000 2,432,000
ARIZONA BUILDINGS (2) 1,334,000 9,104,000 188,000 1,334,000
BALA CYNWYD (Pennsylvania) 3,565,000 14,466,000 2,426,000 3,565,000
BARRACKS ROAD (Virginia) 4,363,000 16,459,000 12,140,000 4,363,000
BETHESDA ROW (Maryland) 12,576,000 1,149,000 20,816,000 12,764,000 1,149,000
BLUESTAR (New Jersey) 27,091,000 29,922,000 2,971,000
BRICK PLAZA (New Jersey) 21,362,000 24,715,000 23,387,000
BRISTOL (Connecticut) 3,856,000 15,959,000 683,000 3,856,000
BRUNSWICK (New Jersey) 11,278,000 12,456,000 1,896,000
CALIFORNIA RETAIL BUILDINGS
SANTA MONICA (9) 20,055,000 12,709,000 13,643,000 20,055,000
SAN DIEGO (5) 3,844,000 1,352,000 1,958,000 3,844,000
150 POST STREET (SAN FRANCISCO) 11,685,000 9,181,000 226,000 11,685,000
OTHER (3) 6,379,000 4,338,000 3,090,000 6,379,000
CLIFTON (New Jersey) 3,301,000 3,646,000 541,000
CONGRESSIONAL PLAZA (Maryland) 2,793,000 7,424,000 35,209,000 2,793,000
CONNECTICUT RETAIL BUILDINGS (13) 25,061,000 27,739,000 2,043,000 25,061,000
COURTHOUSE CENTER (Maryland) 1,750,000 1,869,000 31,000 1,750,000
CROSSROADS (Illinois) 4,635,000 11,611,000 5,083,000 4,635,000
DEDHAM PLAZA (Massachusetts) 12,369,000 12,918,000 1,394,000 12,369,000
EASTGATE (North Carolina) 1,608,000 5,775,000 4,590,000 1,608,000
ESCONDIDO PROMENADE (California) 9,400,000 11,505,000 12,147,000 299,000 11,505,000
ELLISBURG CIRCLE (New Jersey) 4,028,000 11,309,000 9,758,000 4,028,000
FALLS PLAZA (Virginia) 530,000 735,000 6,419,000 530,000
FALLS PLAZA - East (Virginia) 538,000 535,000 2,256,000 559,000
FEASTERVILLE (Pennsylvania) 1,431,000 1,600,000 7,845,000 1,431,000
FEDERAL PLAZA (Maryland) 27,639,000 10,216,000 17,895,000 32,206,000 10,216,000
FINLEY SQUARE (Illinois) 9,252,000 9,544,000 5,891,000 9,252,000
FLORIDA RETAIL BUILDINGS (2) 5,206,000 1,631,000 17,000 5,206,000
FLOURTOWN (Pennsylvania) 1,345,000 3,943,000 3,214,000 1,345,000
FRESH MEADOWS (New York) 24,625,000 25,255,000 2,038,000 24,625,000
GAITHERSBURG SQUARE (Maryland) 7,701,000 5,271,000 10,084,000 6,012,000
GARDEN MARKET (Illinois) 2,677,000 4,829,000 670,000 2,677,000
GOVERNOR PLAZA (Maryland) 2,068,000 4,905,000 10,107,000 2,068,000
GRATIOT PLAZA (Michigan) 525,000 1,601,000 10,726,000 525,000
HAMILTON (New Jersey) 4,893,000 5,405,000 2,053,000
HAUPPAUGE (New York) 8,791,000 15,262,000 900,000 8,791,000
HUNTINGTON (New York) 14,493,000 16,008,000 4,675,000
IDYLWOOD PLAZA (Virginia) 4,308,000 10,026,000 575,000 4,308,000
ILLINOIS RETAIL BUILDINGS (3) 2,694,000 2,325,000 3,249,000 2,694,000
KINGS COURT (California) 10,714,000 95,000
LANCASTER (Pennsylvania) 753,000 2,103,000 2,535,000
LANGHORNE SQUARE (Pennsylvania) 720,000 2,974,000 8,853,000 720,000
LAUREL (Maryland) 7,458,000 22,525,000 14,167,000 7,458,000
LAWRENCE PARK (Pennsylvania) 5,723,000 7,160,000 7,542,000 5,723,000
LEESBURG PLAZA (Virginia) 9,900,000 8,184,000 10,722,000 653,000 8,184,000
LOEHMANN'S PLAZA (Virginia) 1,237,000 15,096,000 5,476,000 1,248,000
<CAPTION>
COLUMN F COLUMN G COLUMN H COLUMN I
- -----------------------------------------------------------------------------------------------------------------------------------
Life on which
Accumulated Date depreciation in latest
Building and Depreciation and of Date income statements
Descriptions Improvements Total Amortization Construction Acquired is computed
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ALLWOOD (New Jersey) $4,150,000 $4,150,000 $1,245,000 1958 12/12/88 35 years
ANDORRA (Pennsylvania) 15,407,000 17,839,000 4,794,000 1953 01/12/88 35 years
ARIZONA BUILDINGS (2) 9,292,000 10,626,000 130,000 1995-1998 05/07/98 35 years
BALA CYNWYD (Pennsylvania) 16,892,000 20,457,000 2,809,000 1955 09/22/93 35 years
BARRACKS ROAD (Virginia) 28,599,000 32,962,000 12,876,000 1958 12/31/85 35 years
BETHESDA ROW (Maryland) 33,580,000 34,729,000 3,685,000 1945-1991 12/31/93 35 years
BLUESTAR (New Jersey) 32,893,000 32,893,000 9,182,000 1959 12/12/88 35 years
BRICK PLAZA (New Jersey) 48,102,000 48,102,000 10,225,000 1958 12/28/89 35 years
BRISTOL (Connecticut) 16,642,000 20,498,000 1,546,000 1959 09/22/95 35 years
BRUNSWICK (New Jersey) 14,352,000 14,352,000 4,241,000 1957 12/12/88 35 years
CALIFORNIA RETAIL BUILDINGS
SANTA MONICA (9) 26,352,000 46,407,000 963,000 1888-1995 1996-1998 35 years
SAN DIEGO (5) 3,310,000 7,154,000 8,000 1888-1995 1996-1997 35 years
150 POST STREET (SAN FRANCISCO) 9,407,000 21,092,000 311,000 1908 10/23/97 35 years
OTHER (3) 7,428,000 13,807,000 84,000 var 1996-1998 35 years
CLIFTON (New Jersey) 4,187,000 4,187,000 1,145,000 1959 12/12/88 35 years
CONGRESSIONAL PLAZA (Maryland) 42,633,000 45,426,000 13,748,000 1965 04/01/65 20 years
CONNECTICUT RETAIL BUILDINGS (13) 29,782,000 54,843,000 2,790,000 1900-1991 1994-1996 35 years
COURTHOUSE CENTER (Maryland) 1,900,000 3,650,000 54,000 1975 12/17/97 35 years
CROSSROADS (Illinois) 16,694,000 21,329,000 2,385,000 1959 07/19/93 35 years
DEDHAM PLAZA (Massachusetts) 14,312,000 26,681,000 2,180,000 1959 12/31/93 35 years
EASTGATE (North Carolina) 10,365,000 11,973,000 4,793,000 1963 12/18/86 35 years
ESCONDIDO PROMENADE (California) 12,446,000 23,951,000 698,000 1987 12/31/96 35 years
ELLISBURG CIRCLE (New Jersey) 21,067,000 25,095,000 5,551,000 1959 10/16/92 35 years
FALLS PLAZA (Virginia) 7,154,000 7,684,000 1,665,000 1962 09/30/67 22 3/4 years
FALLS PLAZA - East (Virginia) 2,770,000 3,329,000 2,254,000 1960 10/05/72 25 years
FEASTERVILLE (Pennsylvania) 9,445,000 10,876,000 3,301,000 1958 07/23/80 20 years
FEDERAL PLAZA (Maryland) 50,101,000 60,317,000 11,823,000 1970 06/29/89 35 years
FINLEY SQUARE (Illinois) 15,435,000 24,687,000 1,790,000 1974 04/27/95 35 years
FLORIDA RETAIL BUILDINGS (2) 1,648,000 6,854,000 133,000 1920 02/28/96 35 years
FLOURTOWN (Pennsylvania) 7,157,000 8,502,000 2,013,000 1957 04/25/80 35 years
FRESH MEADOWS (New York) 27,293,000 51,918,000 743,000 1946-1949 12/05/97 35 years
GAITHERSBURG SQUARE (Maryland) 17,044,000 23,056,000 2,927,000 1966 04/22/93 35 years
GARDEN MARKET (Illinois) 5,499,000 8,176,000 813,000 1958 07/28/94 35 years
GOVERNOR PLAZA (Maryland) 15,012,000 17,080,000 7,296,000 1963 10/01/85 35 years
GRATIOT PLAZA (Michigan) 12,327,000 12,852,000 2,055,000 1964 03/29/73 25 3/4 years
HAMILTON (New Jersey) 7,458,000 7,458,000 2,590,000 1961 12/12/88 35 years
HAUPPAUGE (New York) 16,162,000 24,953,000 133,000 1963 08/06/98 35 years
HUNTINGTON (New York) 20,683,000 20,683,000 6,166,000 1962 12/12/88 35 years
IDYLWOOD PLAZA (Virginia) 10,601,000 14,909,000 1,579,000 1991 04/15/94 35 years
ILLINOIS RETAIL BUILDINGS (3) 5,574,000 8,268,000 383,000 1900-1927 1995-1997 35 years
KINGS COURT (California) 10,809,000 10,809,000 69,000 1960 08/24/98 26 years
LANCASTER (Pennsylvania) 4,638,000 4,638,000 3,394,000 1958 04/24/80 22 years
LANGHORNE SQUARE (Pennsylvania) 11,827,000 12,547,000 4,473,000 1966 01/31/85 35 years
LAUREL (Maryland) 36,692,000 44,150,000 13,080,000 1956 08/15/86 35 years
LAWRENCE PARK (Pennsylvania) 14,702,000 20,425,000 10,508,000 1972 07/23/80 22 years
LEESBURG PLAZA (Virginia) 11,375,000 19,559,000 77,000 1967 09/15/98 35 years
LOEHMANN'S PLAZA (Virginia) 20,561,000 21,809,000 9,668,000 1971 07/21/83 35 years
</TABLE>
F-24
<PAGE>
FEDERAL REALTY INVESTMENT TRUST
SCHEDULE II
SUMMARY OF REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1998
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLOUM E
- ---------------------------------------------------------------------------------------------------------------------------------
Initial cost to company Gross amount at
Cost Capitalized which carried at
Building and Subsequent to close of period
Descriptions Encumbrance Land Improvements Acquisition Land
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MAGRUDERS (Maryland) 4,554,000 4,859,000 144,000 4,554,000
MASSACHUSETTS RETAIL BLDG (1) 1,873,000 1,884,000 210,000 1,873,000
MID PIKE PLAZA (Maryland) 10,041,000 10,335,000 6,211,000
NEW JERSEY RETAIL BUILDING (1) 737,000 1,466,000 1,056,000 737,000
NEW YORK RETAIL BUILDINGS (4) 7,541,000 7,912,000 1,933,000 7,541,000
NORTHEAST (Pennsylvania) 1,152,000 10,596,000 8,996,000 1,153,000
NORTHEAST PLAZA (Georgia) 6,930,000 26,236,000 5,285,000 6,933,000
NORTH LAKE COMMONS (Illinois) 2,529,000 8,604,000 1,533,000 2,529,000
OLD KEENE MILL (Virginia) 638,000 998,000 3,076,000 638,000
OLD TOWN CENTER (California) 3,420,000 2,765,000 12,830,000 3,420,000
PAN AM SHOPPING CENTER (Virginia) 8,694,000 12,929,000 2,646,000 8,694,000
PARK & SHOP (District of Columbia) 4,840,000 6,319,000 535,000 4,840,000
PENINSULA (California) 20,880,000 23,288,000 454,000 20,880,000
PERRING PLAZA (Maryland) 2,800,000 6,461,000 14,661,000 2,800,000
PIKE 7 (Virginia) 9,709,000 22,799,000 279,000 9,709,000
QUEEN ANNE PLAZA (Massachusetts) 3,319,000 8,457,000 2,384,000 3,319,000
QUINCE ORCHARD PLAZA (Maryland) 3,197,000 7,949,000 5,426,000 2,928,000
ROLLINGWOOD APTS. (Maryland) 552,000 2,246,000 3,822,000 572,000
RUTGERS (New Jersey) 13,064,000 14,429,000 1,337,000
SAUGUS (Massachusetts) 4,383,000 8,291,000 288,000 4,383,000
SHIRLINGTON (Virginia) 9,761,000 14,808,000 2,774,000 9,816,000
TEXAS RETAIL BUILDINGS (10) 12,213,000 1,976,000 1,711,000 12,213,000
TOWER (Virginia) 7,170,000 10,518,000 95,000 7,170,000
TOWN & COUNTRY (California) 41,606,000 1,161,000 8,556,000 41,606,000
TROY (New Jersey) 3,126,000 5,193,000 11,900,000 3,126,000
TYSONS STATION (Virginia) 4,140,000 388,000 453,000 2,458,000 475,000
UPTOWN (Oregon) 10,257,000 5,846,000 167,000 10,257,000
WILDWOOD (Maryland) 9,111,000 1,061,000 5,174,000 9,111,000
WILLIAMSBURG (Virginia) 2,758,000 7,160,000 3,250,000 2,758,000
WILLOW GROVE (Pennsylvania) 1,499,000 6,643,000 17,025,000 1,499,000
WILLOW LAWN (Virginia) 3,192,000 7,723,000 44,178,000 7,790,000
WYNNEWOOD (Pennsylvania) 8,055,000 13,759,000 9,799,000 8,055,000
LAND FOR DEVELOPMENT
PENTAGON ROW (Virginia) 2,955,000 484,000
WOODMONT EAST 5,804,000 1,146,000 5,804,000
4925 & 4929 BETHESDA AVENUE 1,698,000 5,000 101,000 1,698,000
- ----------------------------------------------------------------------------------------------------------------------------------
TOTALS $173,480,000 $432,026,000 $748,329,000 $461,781,000 $434,864,000
============ ============ ============ ============ ============
<CAPTION>
COLUMN A COLUMN F COLUMN G COLUMN H CLOUMN I
- -----------------------------------------------------------------------------------------------------------------------------------
Lie on which
depreciation in
Accumulated Date latest income
Building and Depreciation and of Date statements is
Descriptions improvements Total Amortization Construction Acquired computed
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
MAGRUDERS (Maryland) 5,003,000 9,557,000 140,000 1955 12/17/97 35 years
MASSACHUSETTS RETAIL BLDG (1) 2,094,000 3,967,000 219,000 1930 09/07/95 35 years
MID PIKE PLAZA (Maryland) 16,546,000 16,546,000 7,158,000 1963 05/18/82 35 years
NEW JERSEY RETAIL BUILDING (1) 2,522,000 3,259,000 205,000 1940 08/16/95 35 years
NEW YORK RETAIL BUILDINGS (4) 9,845,000 17,386,000 286,000 1937 - 1987 12/16/97 35 years
NORTHEAST (Pennsylvania) 19,591,000 20,744,000 7,619,000 1959 08/30/83 35 years
NORTHEAST PLAZA (Georgia) 31,518,000 38,451,000 12,495,000 1952 12/31/86 35 years
NORTH LAKE COMMONS (Illinois) 10,137,000 12,666,000 1,273,000 1989 04/27/94 35 years
OLD KEENE MILL (Virginia) 4,074,000 4,712,000 2,325,000 1968 06/15/76 33 1/3 years
OLD TOWN CENTER (California) 15,595,000 19,015,000 37,000 1997-1998 10/22/97 35 years
PAN AM SHOPPING CENTER (Virginia) 15,575,000 24,269,000 3,682,000 1979 02/05/93 35 years
PARK & SHOP (District of Columbia) 6,854,000 11,694,000 623,000 1930 12/01/95 35 years
PENINSULA (California) 23,742,000 44,622,000 560,000 1960 12/19/97 35 years
PERRING PLAZA (Maryland) 21,122,000 23,922,000 7,754,000 1963 10/01/85 35 years
PIKE 7 (Virginia) 23,078,000 32,787,000 1,162,000 1968 03/31/97 35 years
QUEEN ANNE PLAZA (Massachusetts) 10,841,000 14,160,000 1,725,000 1967 12/23/94 35 years
QUINCE ORCHARD PLAZA (Maryland) 13,644,000 16,572,000 3,502,000 1975 04/22/93 35 years
ROLLINGWOOD APTS. (Maryland) 6,048,000 6,620,000 5,237,000 1960 01/15/71 25 years
RUTGERS (New Jersey) 15,766,000 15,766,000 4,317,000 1973 12/12/88 35 years
SAUGUS (Massachusetts) 8,579,000 12,962,000 521,000 1976 10/01/96 35 years
SHIRLINGTON (Virginia) 17,527,000 27,343,000 1,472,000 1940 12/21/95 35 years
TEXAS RETAIL BUILDINGS (10) 3,687,000 15,900,000 24,000 var Var 1998 35 years
TOWER (Virginia) 10,613,000 17,783,000 101,000 1953-1960 08/24/98 35 years
TOWN & COUNTRY (California) 9,717,000 51,323,000 512,000 1960-1962 03/05/97 35 years
TROY (New Jersey) 17,093,000 20,219,000 7,685,000 1966 07/23/80 22 years
TYSONS STATION (Virginia) 2,824,000 3,299,000 2,291,000 1954 01/17/78 17 years
UPTOWN (Oregon) 6,013,000 16,270,000 208,000 1913- 1959 09/26/97 35 years
WILDWOOD (Maryland) 6,235,000 15,346,000 5,236,000 1958 05/05/69 33 1/3 years
WILLIAMSBURG (Virginia) 10,410,000 13,168,000 4,234,000 1961 04/30/86 35 years
WILLOW GROVE (Pennsylvania) 23,668,000 25,167,000 8,698,000 1953 11/20/84 35 years
WILLOW LAWN (Virginia) 47,303,000 55,093,000 19,373,000 1957 12/05/83 35 years
WYNNEWOOD (Pennsylvania) 23,558,000 31,613,000 1,001,000 1948 10/29/96 35 years
LAND FOR DEVELOPMENT
PENTAGON ROW (Virginia) 3,439,000 3,439,000 1998
WOODMONT EAST 1,146,000 6,950,000 06/03/97
4925 & 4929 BETHESDA AVENUE 106,000 1,804,000 2,000 1997- 1998
- -------------------------------------------------------------------------------------------
TOTALS $1,207,272,000 $1,642,136,000 $286,053,000
============== ============== ==============
</TABLE>
F-25
<PAGE>
FEDERAL REALTY INVESTMENT TRUST
SCHEDULE III
SUMMARY OF REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
THREE YEARS ENDED DECEMBER 31, 1998
RECONCILIATION OF TOTAL COST
------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Balance, January 1, 1996 $1,009,682,000
Additions during period
Acquisitions 105,616,000
Improvements 42,257,000
Deduction during period - disposition
of property and miscellaneous retirements (9,690,000)
--------------
Balance, December 31, 1996 1,147,865,000
Additions during period
Acquisitions 275,207,000
Improvements 59,969,000
Deduction during period - disposition
of property and miscellaneous retirements (29,402,000)
--------------
Balance, December 31, 1997 1,453,639,000
Additions during period
Acquisitions 120,434,000
Improvements 73,296,000
Deduction during period - disposition
of property and miscellaneous retirements (5,233,000)
--------------
Balance, December 31, 1998 $1,642,136,000
==============
</TABLE>
(A) For Federal tax purposes, the aggregate cost basis is approximately
$ 1,472,000,000 as of December 31, 1998.
F-26
<PAGE>
FEDERAL REALTY INVESTMENT TRUST
SCHEDULE III
SUMMARY OF REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
THREE YEARS ENDED DECEMBER 31, 1998
RECONCILIATION OF ACCUMULATED DEPRECIATION AND AMORTIZATION
-----------------------------------------------------------------
Balance, January 1, 1996 $190,795,000
Additions during period
Depreciation and amortization expense 34,803,000
Deductions during period - disposition of
property and miscellaneous retirements (2,045,000)
---------------
Balance, December 31, 1996 223,553,000
Additions during period
Depreciation and amortization expense 38,053,000
Deductions during period - disposition of
property and miscellaneous retirements (14,109,000)
---------------
Balance, December 31, 1997 247,497,000
Additions during period
Depreciation and amortization expense 42,542,000
Deductions during period - disposition of
property and miscellaneous retirements (3,986,000)
---------------
Balance, December 31, 1998 $286,053,000
===============
F-27
<PAGE>
FEDERAL REALTY INVESTMENT TRUST
SCHEDULE IV
MORTGAGE LOANS ON REAL ESTATE
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
- ---------------------------------------------------------------------------------------------------------------------
Periodic Payment
Description of Lien Interest Rate Maturity Date Terms Prior Liens
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Leasehold mortgage 10% December 2003 Interest only ---
on shopping monthly; $10,000,000
center in New Jersey balloon payment due
at maturity
Mortgages on retail 10% September 2000 Interest only monthly;
buildings in Florida balloon payment due
and Pennsylvania at maturity
Land in San Jose, 10% December 2003 Interest only monthly;
California balloon payment due
at maturity
Mortgage on 10% January 2000 Interest only ---
shopping center monthly; balloon
in New Jersey payment due at maturity
Mortgage on retail Greater of prime plus May 2021 Interest only
buildings in Philadelphia 2% or 10% monthly; balloon payment
due at maturity
Mortgage on shopping none May 1999 Balloon payment due at
center in Illinois maturity
Mortgage on retail 10% plus participation May 2021 Interest only; balloon
buildings in Philadelphia payment due at maturity
Mortgage on land in 10% plus participation July 2001 None. Balloon and
Santa Monica, California accrued interest due at
maturity
Mortgage on land in 10% plus participation May 2007 None. Balloon and
Santa Monica, California accrued interest due at
maturity
------------------
---
==================
<CAPTION>
Column A Column F Column G
- ----------------------------------------------------------
Carrying
Face Amount Amount of
Description of Lien of Mortgages Mortgages (1)
- ----------------------------------------------------------
<S> <C> <C>
Leasehold mortgage 10,000,000 10,000,000 (2)
on shopping
center in New Jersey
Mortgages on retail 11,548,000 11,548,000
buildings in Florida
and Pennsylvania
Land in San Jose, 4,250,000 4,250,000
California
Mortgage on 4,020,000 3,208,000 (3)
shopping center
in New Jersey
Mortgage on retail 25,000,000 7,296,000 (4)
buildings in Philadelphia
Mortgage on shopping 175,000 175,000
center in Illinois
Mortgage on retail 9,250,000 9,250,000
buildings in Philadelphia
Mortgage on land in 2,543,000 2,714,000
Santa Monica, California plus accrued
interest
Mortgage on land in 2,330,000 2,713,000
Santa Monica, California plus accrued
interest
----------------------------
$69,116,000 $51,154,000
============================
</TABLE>
1) For Federal tax purposes, the aggregate tax basis is approximately
$51,154,000 as of December 31, 1998.
No payments are delinquent on these mortgages.
2) This mortgage is extendable for up to 45 years with interest increasing to
a maximum of 11%.
3) This mortgage is available for up to $4,020,000. At December 31, 1997,
$3,208,000 was outstanding.
3) This mortgage is available for up to $25,000,000.
F-28
<PAGE>
FEDERAL REALTY INVESTMENT TRUST
SCHEDULE IV
MORTGAGE LOANS ON REAL ESTATE - CONTINUED
THREE YEARS ENDED DECEMBER 31, 1998
RECONCILIATION OF CARRYING AMOUNT
---------------------------------------------
Balance, January 1, 1996 $13,561,000
Additions during period
Increase in existing loan 25,000
Issuance of loan 14,327,000
--------------
Balance, December 31, 1996 27,913,000
Additions during period
Issuance of loan 14,072,000
Deductions during period
Collection of loan (3,625,000)
--------------
Balance, December 31, 1997 38,360,000
Additions during period
Issuance of loans 21,375,000
Deductions during period
Collection of loan (8,581,000)
--------------
Balance, December 31, 1998 $51,154,000
==============
F-29
<PAGE>
Report of Independent Certified Public Accountants
- --------------------------------------------------
on Supplemental Information
- ---------------------------
Trustees and Shareholders
Federal Realty Investment Trust
In connection with our audit of the consolidated financial statements of Federal
Realty Investment Trust referred to in our report dated February 8, 1999 which
is included in this Form 10-K, we have also audited Schedules III and IV as of
December 31, 1998 and for each of the three years then ended. In our opinion,
these schedules present fairly, in all material respects, the information
required to be set forth therein.
Grant Thornton LLP
Washington, D.C.
February 8, 1999
F-30
<PAGE>
EXHIBIT 10.26
FEDERAL REALTY INVESTMENT TRUST
AMENDED AND RESTATED
1993 LONG-TERM INCENTIVE PLAN
Article I. Purpose and Adoption of the Plan
1.01 Purpose. The purpose of the Federal Realty Investment Trust Amended
and Restated 1993 Long-Term Incentive Plan (hereinafter referred to as the
"Plan") is to assist the Trust (as hereinafter defined) in attracting and
retaining individuals to serve as Trustees and highly competent personnel who
will contribute to the Trust's success and to act as an incentive in motivating
selected officers and key employees to achieve long-term objectives which will
inure to the benefit of all shareholders of the Trust. It is intended that this
purpose be achieved by extending to officers, employees, consultants, and
Trustees of the Trust and its Subsidiaries a long-term incentive for high levels
of performance and efforts through the grant of Options, Stock Appreciation
Rights, Dividend Equivalent Rights, Performance Awards and/or Restricted Shares
(as each such term is herein defined).
1.02 Adoption, Amendment and Term. The 1993 Long-Term Incentive Plan (the
"1993 Plan") was originally approved by the Trustees in 1993 and thereafter
approved by the Trust's shareholders at the 1993 Annual Meeting of Shareholders.
The first amendment and restatement of the 1993 Plan was approved by the
Trustees on March 24, 1997 subject to the approval of the Trust's shareholders
at the 1997 Annual Meeting of Shareholders. The 1993 Plan was amended and
restated at the 1997 Annual Meeting at which a quorum was present and a majority
of the votes cast at such meeting with respect to the Plan were cast in favor of
its approval (including, without limitation, abstentions to the extent
abstentions may be counted). The Plan was amended further by the Board of
Trustees on October 6, 1997. The Plan shall terminate without further action of
the Trustees and the shareholders on the tenth anniversary of the date on which
the 1993 Plan was approved by the shareholders.
Article II. Definitions
For purposes of this Plan, capitalized terms shall have the following
meanings:
2.01 Acceptance Date means the date, no later than the twentieth (20th)
Business Day after the Offer Date, on which a Participant accepts an offer to
purchase Shares made pursuant to a Stock Purchase Award.
2.02 Adjusted Fair Market Value means, in the event of a Change in Control,
the greater of (i) the highest price per Share paid to holders of the Shares in
any transaction (or series of transactions) constituting or resulting in a
Change in Control or (ii) the highest Fair Market Value of a Share during the
sixty (60) day period ending on the date of the Change in Control.
2.03 Annual Retainer means the total amount which is determined each year by
the Trustees to be payable to each Non-Employee Trustee for services during such
year as a Non-Employee Trustee and as a member of a committee or committees of
the Trustees.
2.04 Annual Retainer Payment Date means the date determined each year by the
Trustees as the date on which the Annual Retainer for such year shall be paid.
The Annual Retainer Payment Date for a year shall be at least six months after
the date on which the amount of the Annual Retainer for such year is determined.
2.05 Award means (a) any grant to a Participant of any one or a combination
of Non-Qualified Stock Options or Incentive Stock Options (with or without Stock
Appreciation Rights) described in Article VI, Dividend Equivalent Rights
described in Article VI, Restricted Shares described in Article VII, Performance
Awards described in Article VIII, or Stock Purchase Awards described in Article
IX or (b) any grant to a Non-Employee Trustee of a Non-Employee Trustee Award
described in Article X.
-1-
<PAGE>
2.06 Award Agreement means a written agreement between the Trust and a
Participant or a written acknowledgment from the Trust specifically setting
forth the terms and conditions of an Award granted to a Participant.
2.07 Award Period means, with respect to an Award, the period of time, if
any, set forth in the Award Agreement during which specified target performance
goals must be achieved or other conditions set forth in the Award Agreement must
be satisfied.
2.08 Beneficial Ownership means ownership within the meaning of Rule 13d-3
promulgated by the Securities and Exchange Commission under the Exchange Act.
2.09 Beneficiary means an individual, trust or estate who or which, by a
written designation of the Participant filed with the Trust or by operation of
law, succeeds to the rights and obligations of the Participant under the Plan
and an Award Agreement upon the Participant's death.
2.10 Business Day means any day on which the New York Stock Exchange is open
for trading.
2.11 Cause means (a) the definition set forth in the employment or other
agreement between the Participant and the Trust or, in absence thereof, (b)
Participant's: (i) failure (other than failure due to disability) to
substantially perform his duties with the Trust, which failure remains uncured
after written notice thereof and the expiration of a reasonable period of time
thereafter in which Participant is diligently pursuing cure; (ii) willful
misconduct which is demonstrably and materially injurious to the Trust or an
affiliate thereof, monetarily or otherwise; (iii) breach of fiduciary duty
involving personal profit; or (iv) willful violation in the course of performing
his duties for the Trust of any law, rule or regulation (other than traffic
violations or misdemeanor offenses). No act or failure to act shall be
considered willful unless done or omitted to be done in bad faith and without
reasonable belief that the action or omission was in the best interest of the
Trust.
2.12 Change in Capitalization means any increase or reduction in the number
of Shares, or any change (including, without limitation, a change in value) in
the Shares or exchange of Shares for a different number or kind of shares or
other securities of the Trust or another Person, by reason of a
reclassification, recapitalization, merger, consolidation, reorganization, spin-
off, split-up, issuance of warrants or rights or debentures, stock dividend,
stock split or reverse stock split, property dividend, combination or exchange
of shares, change in corporate structure or substantially similar event.
2.13 Change in Control means any of the events set forth below; provided,
however, that the Committee, in its sole discretion, may specify a more
restrictive definition of Change in Control in any Award Agreement and, in such
event, the definition of Change in Control set forth in the Award Agreement
shall apply to the Award granted under such Award Agreement:
(a) An acquisition in one or more transactions (other than directly from
the Trust or pursuant to options granted under this Plan or otherwise by the
Trust) of any Trust Voting Securities by any Person immediately after which
such Person has Beneficial Ownership of 20% or more of the combined voting
power of the then outstanding Trust Voting Securities; provided, however, in
determining whether a Change in Control has occurred, Trust Voting Securities
which are acquired in a "Non-Control Acquisition" (as hereinafter defined)
shall not constitute an acquisition which would cause a Change in Control. A
"Non-Control Acquisition" shall mean an acquisition by (i) an employee
benefit plan (or a trust forming a part thereof) maintained by (x) the Trust
or (y) a Subsidiary, (ii) the Trust or any Subsidiary, or (iii) any Person in
connection with a "Non-Control Transaction" (as hereinafter defined);
(b) The individuals who, as of the date of this Plan, are members of the
Trustees (the "Incumbent Trustees"), cease for any reason to constitute at
least two-thirds of the Trustees; provided, however, that if the election, or
nomination for election by the Trust's shareholders, of any new member was
approved by a vote of at least two-thirds of the Incumbent Trustees, such new
member shall, for purposes of this Plan, be considered as a member of the
Incumbent Trustees; provided, further, however, that no individual shall be
considered a member of the Incumbent Trustees if such individual initially
assumed office as a result of either an actual or
-2-
<PAGE>
threatened "Election Contest" (as described in Rule 14a-11 promulgated under
the Exchange Act) or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Trustees (a "Proxy
Contest"), including, without limitation, by reason of any agreement intended
to avoid or settle any Election Contest or Proxy Contest; or
(c) Approval by shareholders of the Trust of
(1) A merger, consolidation or other reorganization involving the Trust,
unless:
(i) the shareholders of the Trust, immediately before such merger,
consolidation or reorganization, own, directly or indirectly immediately
following such merger, consolidation or other reorganization, at least a
majority of the combined voting power of the outstanding voting
securities of the Person resulting from such merger, consolidation or
other reorganization (the "Surviving Person") in substantially the
same proportion as their ownership of the Trust Voting Securities
immediately before such merger, consolidation or other reorganization,
(ii) the individuals who were members of the Incumbent Trustees
immediately prior to the execution of the agreement providing for such
merger, consolidation or other reorganization constitute at least two-
thirds of the members of the governing board of the Surviving Person,
(iii) no Person (other than the Trust or any Subsidiary, any employee
benefit plan (or any trust forming a part thereof) maintained by the
Trust or any Subsidiary, or any Person which, immediately prior to such
merger, consolidation, or other reorganization had Beneficial Ownership
of 20% or more of the then outstanding Trust Voting Securities) has
Beneficial Ownership of 20% or more of the combined voting power of the
Surviving Person's then outstanding voting securities, and
(iv) a transaction described in clauses (i) through (iii) shall
herein be referred to as a "Non-Control Transaction,"
(2) A complete liquidation or dissolution of the Trust; or
(3) An agreement for the sale or other disposition of all or
substantially all of the assets of the Trust to any Person (other than a
transfer to a Subsidiary).
Notwithstanding the foregoing, a Change in Control shall not be deemed to
occur (i) solely because any Person (the "Subject Person") acquired Beneficial
Ownership of more than the permitted amount of the outstanding Trust Voting
Securities as a result of the acquisition of Trust Voting Securities by the
Trust which, by reducing the number of Trust Voting Securities outstanding,
increases the proportional number of shares Beneficially Owned by the Subject
Person; provided, however, that if a Change in Control would occur (but for the
operation of this sentence) as a result of the acquisition of Trust Voting
Securities by the Trust, and after such share acquisition by the Trust, the
Subject Person becomes the Beneficial Owner of any additional Trust Voting
Securities which increases the percentage of the then outstanding Trust Voting
Securities Beneficially Owned by the Subject Person, then a Change in Control
shall occur, or (ii) if the Trust (a) establishes a wholly-owned subsidiary
("Holding Company"), (b) causes the Holding Company to establish a wholly-
owned subsidiary ("Merger Sub"), and (c) merges with Merger Sub, with the
Trust as the surviving entity (such transactions collectively are referred as
the "Reorganization"). Immediately following the completion of the
Reorganization, all references to the Trust Voting Securities shall be deemed to
refer to the voting securities of the Holding Company.
2.14 Code means the Internal Revenue Code of 1986, as amended from time to
time, or any successor thereto. References to a section of the Code shall
include that section and any comparable section or sections of any future
legislation that amends, supplements or supersedes said section.
2.15 Committee means a Committee designated by the Trustees having the power
and authority to administer the Plan in accordance with Section 3.01 and as
described in Section 3.02.
-3-
<PAGE>
2.16 Date of Grant means the date designated by the Committee as the date as
of which it grants an Award, which shall not be earlier than the date on which
the Committee approves the granting of such Award.
2.17 Disability means any physical or mental injury or disease which renders
a Participant incapable of meeting the requirements of the employment performed
by such Participant immediately prior to the commencement of such disability.
The determination of whether a Participant is disabled shall be made by the
Committee in its sole discretion. Notwithstanding the foregoing, if a
Participant's employment by the Trust terminates by reason of a disability, as
defined in an employment or other agreement between such Participant and the
Trust, such Participant shall be deemed to be disabled for purposes of the Plan.
2.18 Disability Date means the date which is six months after the date on
which a Participant is first absent from active employment with the Trust by
reason of a Disability.
2.19 Disinterested Person shall have the meaning set forth in Rule 16b-3, as
promulgated by the Securities and Exchange Commission under the Exchange Act.
2.20 Dividend Equivalent Right means a right, as described in Section 6.05,
to receive all or some portion of the cash dividends that are or would be
payable with respect to Shares.
2.21 Division means any of the operating units or divisions of the Trust or
a Subsidiary thereof designated as a Division by the Committee.
2.22 Exchange Act means the Securities Exchange Act of 1934, as amended.
2.23 Fair Market Value means, as of any given date, with respect to any
Awards granted hereunder, the closing trading price of the Shares on such date
as reported on the New York Stock Exchange or, if the Shares are not then traded
on the New York Stock Exchange, on such other national securities exchange on
which the Shares are admitted to trade, or, if none, on the National Association
of Securities Dealers Automated Quotation System if the Shares are admitted for
quotation thereon; provided, however, if there were no sales reported as of such
date, Fair Market Value shall be computed as of the last date preceding such
date on which a sale was reported; provided, further, that if any such exchange
or quotation system is closed on any day on which Fair Market Value is to be
determined, Fair Market Value shall be determined as of the first date
immediately preceding such date on which such exchange or quotation system was
open for trading.
2.24 Incentive Stock Option means an Option designated as an incentive stock
option and which satisfies the requirements of Section 422 of the Code.
2.25 Interest means the amount of interest accrued on a Purchase Loan or a
Tax Loan made to a Participant during the relevant period. Interest on a
Purchase Loan or a Tax Loan shall accrue at a fixed rate per annum during the
entire term of the relevant loan. The interest rate for a Purchase Loan shall be
calculated by dividing (i) the amount of cash dividend paid on one Share for the
calendar year preceding the Acceptance Date by (ii) the Share Price, or such
other interest rate as the Committee, in its sole discretion, determines. The
interest rate for a Tax Loan shall be identical to the interest rate charged on
the related Purchase Loan. In no event, however, shall such rates be greater
than the maximum rate chargeable to consumers under the usury laws of the State
of Maryland.
2.26 Non-Employee Trustee means each member of the Trustees who is not an
employee of the Trust.
2.27 Non-Employee Trustee Awards means Awards granted in accordance with
Article X.
2.28 Non-Qualified Stock Option means an Option which is not an Incentive
Stock Option.
2.29 Normal Retirement Date means the date on which a Participant terminates
active employment with the Trust on or after attainment of age 65, but does not
include termination by the Trust for Cause.
2.30 Offer Date means the date on which the Committee grants a Participant a
Stock Purchase Award.
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<PAGE>
2.31 Options means any Incentive Stock Option or Non-Qualified Stock Option
granted pursuant to the Plan.
2.32 Optionee means a person to whom an Option has been granted under the
Plan.
2.33 Other Retirement Date means a date, on or after the Participant's
attainment of age 55 but earlier than the Participant's Normal Retirement Date,
which is specifically approved and designated in writing by the Committee to be
the date upon which a Participant retires for purposes of this Plan.
2.34 Outstanding Shares means, at any time, the issued and outstanding
Shares.
2.35 Participant shall mean any individual selected by the Committee to
receive an Award under the Plan in accordance with Article V and, solely to the
extent provided in Article X of the Plan, any Non-Employee Trustees of the
Trust.
2.36 Performance Award means Performance Units, Performance Shares or any
combination thereof.
2.37 Performance Shares means Shares issued or transferred to a Participant
under Section 8.03
2.38 Performance Target has the meaning set forth in Section 8.01.
2.39 Performance Units means Performance Units granted to a Participant
under Section 8.02.
2.40 Person means "person" as such term is used for purposes of Section
13(d) or 14(d) of the Exchange Act, including, without limitation, any
individual, firm, corporation, partnership, joint venture, association, trust or
other entity, or any group of Persons.
2.41 Plan means the Federal Realty Investment Trust Amended and Restated
1993 Long-Term Incentive Plan as set forth herein, and as the same may be
amended from time to time.
2.42 Pooling Transaction means an acquisition of the Trust in a transaction
which is intended to be treated as a "pooling of interests" under generally
accepted accounting principles.
2.43 Purchase Loan means the loan provided to a Participant by the Trust to
facilitate the Participant's purchase of Shares pursuant to a Stock Purchase
Award.
2.44 Purchase Loan Term means the period for repayment and satisfaction of a
Purchase Loan.
2.45 Reload Option shall have the meaning set forth in Section 6.03(f).
2.46 Restricted Shares means Shares subject to restrictions imposed in
connection with Awards granted under Article VII.
2.47 Rule 16b-3 means Rule 16b-3 promulgated by the Securities and Exchange
Commission under Section 16 of the Exchange Act, as the same may be amended from
time to time, and any successor rule.
2.48 Share Price means the price per share at which the Stock Purchase Award
shall be offered to a Participant, and shall be equal to the greater of (i) the
average of the closing price of a share in the New York Stock Exchange for the
twenty (20) trading days prior to the Offer Date or (ii) the Fair Market Value
of a Share on the Acceptance Date.
2.49 Shares mean the common shares of beneficial interest in the Trust, no
par value per share.
2.50 Stock Purchase Award means an Award, granted in accordance with Article
IX, of the right to acquire Shares.
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2.51 Stock Purchase Price means the number of Shares in a Participant's
Stock Purchase Award multiplied by the Share Price.
2.52 Stock Appreciation Rights means a right to receive all or some portion
of the increase in the value of the Shares as provided in Section 6.04.
2.53 Subsidiary means any Person of which a majority of its voting power or
equity securities or equity interests is owned directly or indirectly by the
Trust.
2.54 Tax Loan means a loan (or loans) offered to and accepted by a
Participant to offset all or a portion of federal and state taxes that a
Participant incurs as a result of the Trust's forgiveness of his Purchase Loan.
2.55 Termination of Employment means the voluntary or involuntary
termination of a Participant's employment with the Trust for any reason,
including, without limitation, death, Disability, retirement or as the result of
a Change in Control. Whether entering military or other government service shall
constitute Termination of Employment, and whether a Termination of Employment is
a result of Disability, shall be determined in each case by the Committee in its
sole discretion.
2.56 Trust means Federal Realty Investment Trust, a District of Columbia
unincorporated business trust, and its successors.
2.57 Trust Voting Securities means the combined voting power of all
outstanding voting securities of the Trust entitled to vote generally in the
election of the Trustees.
2.58 Trustees means the Board of Trustees of the Trust.
Article III. Administration
3.01 Authority of Committee.
(a) The Plan shall be administered by the Committee which shall have
exclusive and final authority in each determination, interpretation or other
action affecting the Plan and its Participants. The Committee shall have the
sole discretion to interpret the Plan, to select the officers, other
employees, consultants and Trustees (other than Non-Employee Trustees) to whom
Awards may be granted, to determine all claims for benefits under the Plan, to
impose such conditions and restrictions on Awards as it determines appropriate
and to take such steps in connection with the Plan and Awards granted
hereunder as it may deem necessary or advisable. The Committee may, with
respect to Participants who are not subject to Section 16(b) of the Exchange
Act, delegate such of its powers and authority under the Plan as it deems
appropriate to designated officers or employees of the Trust.
(b) Without limiting the Committee's authority under other provisions of
the Plan, but subject to any express limitations of the Plan, including,
without limitation, Section 11.13(b), the Committee shall have the authority
to accelerate an Award described in Section 2.05(a) and to waive restrictive
conditions for an Award described in Section 2.05(a) (including, without
limitation, any forfeiture conditions), in such circumstances as the Committee
deems appropriate. In the case of any acceleration of an Award described in
Section 2.05(a) after the attainment of the applicable Performance Target(s),
the amount payable shall be discounted to its present value using an interest
rate equal to Moody's Average Corporate Bond Yield for the month preceding the
month in which such acceleration occurs.
3.02 Committee. The Committee shall consist of at least two (2) members of
the Trustees and may consist of the entire Trustees; provided, however, that (A)
if the Committee consists of less than the entire Trustees, each member shall be
a "Non-Employee Director" within the meaning of Exchange Act Rule 16b-3 and
(B) to the extent necessary for any Award intended to qualify as performance-
based compensation under Section 162(m) of the Code
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to so qualify, each member of the Committee, whether or not it consists of the
entire Trustees, shall be an "outside director" within the meaning of Section
162(m) of the Code and the regulations promulgated thereunder. The Committee
shall hold meetings at such times as may be necessary for the proper
administration of the Plan. The Committee shall keep minutes of its meetings.
3.03 Requisite Action. A quorum shall consist of not fewer than two-thirds
of the members of the Committee and a majority of a quorum may authorize any
action. Any decision or determination reduced to writing and signed by a
majority of all of the members of the Committee shall be as fully effective as
if made by a majority vote at a meeting duly called and held.
3.04 Exculpation. No member of the Committee shall be liable for any
action, failure to act, determination or interpretation made in good faith with
respect to this Plan or any transaction hereunder, except for liability arising
from his own willful misfeasance, gross negligence or reckless disregard of his
duties. The Trust hereby agrees to indemnify each member of the Committee for
all costs and expenses and, to the extent permitted by applicable law, any
liability incurred in connection with defending against, responding to,
negotiating for the settlement of or otherwise dealing with any claim, cause of
action or dispute of any kind arising in connection with any actions in
administering this Plan or in authorizing or denying authorization to any
transaction hereunder.
Article IV. Awards
4.01 Performance Units Denominated in Dollars. The maximum dollar amount
that the Chief Executive Officer of the Trust may be awarded in any calendar
year in respect of Performance Units denominated in dollars is $3 million, and
the maximum dollar amount that any Participant (except the Chief Executive
Officer of the Trust) may be awarded in any calendar year in respect of
Performance Units denominated in dollars is $1 million.
4.02 Number of Shares Issuable. Subject to adjustments as provided in
Section 11.06, the maximum number of Shares that may be made the subject of
Awards granted under the Plan is 5,500,000; provided, however, that during the
term of the Plan (i) no Participant (other than the Chief Executive Officer of
the Trust) may be granted Awards (other than Performance Units denominated in
dollars and Dividend Equivalent Rights) in the aggregate in respect of more than
250,000 Shares per calendar year, (ii) the Chief Executive Officer of the Trust
may not be granted Awards (other than Performance Units denominated in dollars
and Dividend Equivalent Rights) in the aggregate in respect of more than 500,000
Shares per calendar year, (iii) no Participant (other then the Chief Executive
Officer of the Trust) may be granted Dividend Equivalent Rights with respect to
more than 250,000 Shares per calendar year, (iv) the Chief Executive Officer of
the Trust may not be granted Dividend Equivalent Rights with respect to more
than 500,000 Shares per calendar year, and (v) the aggregate Fair Market Value
of the Shares with respect to which Incentive Stock Options granted under the
Plan become exercisable for the first time by an Optionee during any calendar
year shall not exceed $100,000. The Trust shall reserve, for purposes of the
Plan, out of its authorized but unissued Shares or Shares held in the Trust's
treasury, or partly out of each, such number of Shares as shall be determined by
the Trustees.
4.03 Reduction. Solely for purposes of applying the Section 4.02 limit on
the maximum number of Shares that may be made the subject of Awards granted
under the Plan (but not for purposes of applying the Section 4.02 limits on the
number of Shares per calendar year that may be made the subject of Awards
granted to individual Participants), upon the granting of an Award, the maximum
number of Shares available under Section 4.02 for the granting of further Awards
shall be reduced as follows:
(a) In connection with the granting of an Award (other than the granting of
a Performance Unit denominated in dollars), the number of Shares shall be
reduced by the number of Shares in respect of which the Award is granted or
denominated.
(b) In connection with the granting of a Performance Unit denominated in
dollars, the number of Shares shall be reduced by an amount equal to the
quotient of (i) the dollar amount in which the Performance Unit is
denominated, divided by (ii) the Fair Market Value of a Share on the date the
Performance Unit is granted.
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4.04 Shares Subject to Terminated Awards. Solely for purposes of applying
the Section 4.02 limit on the maximum number of Shares that may be made the
subject of Awards granted under the Plan (but not for purposes of applying the
Section 4.02 limits on the number of Shares per calendar year that may be made
the subject of Awards granted to individual Participants), whenever any
outstanding Award or portion thereof expires, is canceled or is otherwise
terminated for any reason without having been exercised or payment having been
made in respect of the entire Award, the Shares allocable to the expired,
canceled or otherwise terminated portion of the Award may again be the subject
of Awards granted hereunder.
Article V. Participation
5.01 Eligible Participants. Participants in the Plan shall be such
officers, other employees, consultants and Trustees of the Trust and its
Subsidiaries as the Committee, in its sole discretion, may designate from time
to time. The Committee's designation of a Participant in any year shall not
require the Committee to designate such person to receive Awards or grants in
any other year. The designation of a Participant to receive Awards or grants
under one portion of the Plan shall not require the Committee to include such
Participant under other portions of the Plan. The Committee shall consider such
factors as it deems pertinent in selecting Participants and in determining the
type and amount of their respective Awards. More than one type of Award may be
granted to a Participant at one time or at different times. Non-Employee
Trustees shall receive Non-Employee Trustee Awards in accordance with Article X
of the Plan, the provisions of which are automatic and non-discretionary in
operation. Non-Employee Trustees shall not be eligible to receive any other
Awards under the Plan.
Article VI. Stock Options
6.01 Grant of Option. The Committee may grant Options to Participants
either alone or in addition to other Awards granted under the Plan. Any Option
granted under the Plan shall, subject to the provisions of the Plan, be in such
form as the Committee may, from time to time, approve, and the terms and
conditions of Option Awards need not be the same with respect to each
Participant. The Committee shall have the authority to grant to any Participant
one or more Incentive Stock Options, Non-Qualified Stock Options, or both types
of Options. To the extent that any Option does not qualify as an Incentive Stock
Option (whether because of its provisions or the time or manner of its exercise
or otherwise), such Option or the portion thereof which does not qualify shall
constitute a separate Non-Qualified Stock Option.
6.02 Incentive Stock Options. In the case of any grant of an Option,
designated by the Committee to be an Incentive Stock Option, each provision in
the Plan and in any related Award Agreement shall, to the maximum extent
possible, be interpreted in such a manner as to qualify the Option as an
Incentive Stock Option. If any provision of this Plan or such Award Agreement
shall be held not to comply with the requirements necessary to so qualify such
Option, then (i) such provision shall be deemed to have contained from the
outset such language as shall be necessary to qualify the Option as an Incentive
Stock Option, and (ii) all other provisions of this Plan and the Award Agreement
relating to such Option shall remain in full force and effect. If any Award
Agreement covering an Option designated by the Committee to be an Incentive
Stock Option shall not explicitly include any terms required to qualify such
Option as an Incentive Stock Option, all such terms shall be deemed implicit in
the designation of such Option and the Option shall be deemed to have been
granted subject to all such terms.
6.03 Terms of Options. Options granted under the Plan shall be subject to
the following terms and conditions and shall be in such form and contain such
additional terms and conditions, not inconsistent with the terms of this Plan,
as the Committee shall deem desirable:
(a) Option Price. The price per Share of an Option shall be determined by
the Committee at the Date of Grant but shall be not less than the Fair Market
Value of a Share on the Date of Grant.
(b) Option Term. The term of each Option shall be fixed by the Committee,
but no Option shall be exercisable more than ten years after the Date of
Grant. The Committee may, subsequent to the granting of any
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Option, extend the term thereof, but in no event shall the term so extended
exceed the maximum term provided for in the preceding sentence.
(c) Exercisability. Subject to Sections 6.03(g) and 6.03(h)(i) of the
Plan, (i) an Award Agreement with respect to Options may contain such
performance targets, waiting periods, exercise dates and restrictions on
exercise (including, without limitation, a requirement that an Option is
exercisable in periodic installments) as may be determined by the Committee at
the time of grant, and (ii) no Option may be exercised in whole or in part
prior to six months from the Date of Grant. To the extent not exercised,
installments shall accumulate and be exercisable, in whole or in part, at any
time after becoming exercisable, but not later than the date the Option
expires.
(d) Method of Exercise. Subject to whatever installment exercise and
waiting period provisions apply under subsection (c) above, Options may be
exercised in whole or in part at any time during the Award Period, only by
giving written notice of exercise delivered in person or by mail to the
Secretary of the Trust at the Trust's principal executive office. Such notice
shall specify the number of Shares to be purchased and shall be accompanied by
payment in full of the purchase price in such form as the Committee may accept
(including, without limitation, payment in accordance with a cashless exercise
program under which, if so instructed by the Participant, Shares may be issued
directly to the Participant's broker or dealer upon receipt of the purchase
price in cash from the broker or dealer). If and to the extent determined by
the Committee in its sole discretion at or after grant, payment in full or in
part may also be made in the form of Shares duly owned by the Participant (and
for which the Participant has good title, free and clear of any liens and
encumbrances) or, in the case of Non-Qualified Stock Options, of Restricted
Shares or by reduction in the number of Shares issuable upon such exercise
based, in each case, on the Fair Market Value of the Shares on the date the
Option is exercised (without regard to any forfeiture restrictions, applicable
to Restricted Shares). No Shares shall be issued until Participant shall
generally have the rights to dividends or other rights of a shareholder with
respect to Shares subject to the Option when the Participant has given written
notice of exercise and has paid for such Shares as provided herein.
Notwithstanding the foregoing, if payment in full or in part has been made in
the form of Restricted Shares, an equivalent number of Shares issued on
exercise of the Option shall be subject to the same restrictions and
conditions for the remainder of the Award Period applicable to the Restricted
Shares surrendered therefor.
(e) Alternative Method of Exercise. If the Fair Market Value of the
Shares with respect to which the Option is being exercised exceeds the
exercise price of such Option, an Optionee may, instead of exercising an
Option as provided in Section 6.03(d), request that the Committee authorize
payment to the Optionee of the difference between the Fair Market Value of
part or all of the Shares which are the subject of the Option and the exercise
price of the Option, such difference to be determined as of the date prior to
the date the Committee receives the request from the Optionee. The Committee,
in its sole discretion, may grant or deny such a request from an Optionee with
respect to part or all of the Shares as to which the Option is then
exercisable and, to the extent granted, shall direct the Trust to make the
payment to the Optionee either in cash or in Shares or in any combination
thereof; provided, however, that payment in Shares shall be made based upon
the Fair Market Value of Shares as of the date the Committee received the
request from the Optionee. An Option shall be deemed to have been exercised
and shall be canceled to the extent that the Committee grants a request
pursuant to this Section 6.03(e).
(f) Reload Options. On or before the date of the 1997 Annual Meeting of
Shareholders, the Committee shall have the authority to specify, at the time
of grant or, with respect to Non-Qualified Stock Options, at or after the time
of grant, that a Participant shall be granted a Non-Qualified Stock Option (a
"Reload Option") in the event such Participant exercises all or a part of an
Option (an "Original Option") by surrendering in accordance with Section
6.03(d) of the Plan already owned Shares in full or partial payment of the
purchase price under the Original Option, subject to the availability of
Shares under the Plan at the time of such exercise, and subject to the limits
provided for in Section 4.02; provided, however, that no Reload Option shall
be granted to a Non-Employee Trustee. Each Reload Option shall cover a number
of Shares equal to the number of Shares surrendered in payment of the purchase
price under such Original Option, shall have a purchase price per Share equal
to the Fair Market Value of a Share on the Date of Grant of such Reload Option
and shall expire on the stated expiration date of the Original Option. A
Reload Option shall be exercisable at any time
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and from time to time after the Date of Grant of such Reload Option (or, as
the Committee in its sole discretion shall determine at or after the time of
grant, at such time or times as shall be specified in the Reload Option);
provided, however, that a Reload Option granted to a Participant subject to
Section 16 of the Exchange Act shall not be exercisable during the first six
months from the Date of Grant of such Reload Option. Any Reload Option may
provide for the grant, when exercised, of subsequent Reload Options to the
extent and upon such terms and conditions, consistent with this Section
6.03(f), as the Committee in its sole discretion shall specify at or after the
time of grant of such Reload Option. A Reload Option shall contain such other
terms and conditions, which may include a restriction on the transferability
of the Shares received upon exercise of the Original Option representing at
least the after-tax profit received upon exercise of the Original Option, as
the Committee in its sole discretion shall deem desirable and which may be set
forth in rules or guidelines adopted by the Committee or in the Award
Agreements evidencing the Reload Options.
(g) Effect of Change in Control. In the event of a Change in Control, all
Options outstanding on the date of such Change in Control shall become
immediately and fully exercisable. In addition, in the sole discretion of the
Committee at the time of an Award, and to the extent set forth in an Award
Agreement evidencing the grant of an Option, an Optionee will be permitted to
surrender to the Trust for cancellation within sixty (60) days after such
Change in Control any Option or portion of an Option to the extent not yet
exercised and the Optionee will be entitled to receive a cash payment in an
amount equal to the excess, if any, of (x) (A) in the case of a Non-Qualified
Stock Option, the greater of (1) the Fair Market Value, on the date preceding
the date of surrender, of the Shares subject to the Option or portion thereof
surrendered or (2) the Adjusted Fair Market Value of the Shares subject to the
Option or portion thereof surrendered, or (B) in the case of an Incentive
Stock Option, the Fair Market Value, on the date preceding the date of
surrender, of the Shares subject to the Option or portion thereof surrendered
over (y) the aggregate purchase price for such Shares under the Option or
portion thereof surrendered.
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(h) Exercise of Options Upon Termination of Employment.
(i) Exercise of Vested Options Upon Termination of Employment.
(A) Termination. Subject to Section 6.03(b), unless the Committee,
in its sole discretion, provides otherwise, upon a Participant's
Termination of Employment other than by reason of death, Disability or
retirement on or after the Participant's Normal Retirement Date or
following a Change in Control, the Participant may, within three months
from the date of such Termination of Employment, or such longer period
as the Committee, in its sole discretion, provides, exercise all or any
part of his Options as were exercisable at the date of Termination of
Employment; provided, however, that if such Termination of Employment is
for Cause, the right of such Participant to exercise such Options shall
terminate at the date of Termination of Employment.
(B) Disability or Retirement. Subject to Section 6.03(b), unless
the Committee, in its sole discretion, provides otherwise, upon a
Participant's Disability Date or Termination of Employment by reason of
retirement on or after the Participant's Normal Retirement Date, the
Participant may, within two years after such Disability Date or
Termination of Employment, as the case may be, exercise all or a part of
his Options which were exercisable upon such Disability Date or
Termination of Employment (or which became exercisable at a later date
pursuant to Section 6.03(h)(ii)).
(C) Death. Subject to Section 6.03(b), unless the Committee, in its
sole discretion, provides otherwise, in the event of the death of a
Participant while employed by the Trust or within the additional period
of time described in Section 6.03(h)(i)(B) from the date of the
Participant's Disability Date or Termination of Employment by reason of
retirement on or after the Participant's Normal Retirement Date to the
extent all or any part of the Option was exercisable as of the
Disability Date or the date of such Termination of Employment and did
not expire during such additional period and prior to the Participant's
death, the right of the Participant's Beneficiary to exercise the Option
under the Plan shall expire upon the expiration of two years from the
date of the Participant's death (but in no event more than two years
from the Participant's Disability Date or the date of the Participant's
Termination of Employment, as the case may be) or on the date of
expiration of the Option determined pursuant to Section 6.03(b),
whichever is earlier. In all other cases of death following a
Participant's Termination of Employment, the Participant's Beneficiary
may exercise the Option within the time provided in 6.03(h)(i)(A),
above. In the event of the Participant's death, the Committee may, in
its sole discretion, accelerate the right to exercise all or any part of
an Option which would not otherwise be exercisable.
(D) Change in Control. Subject to Section 6.03(b), upon an
Optionee's Termination of Employment following a Change in Control, each
Option held by the Optionee that was exercisable as of the date of such
Termination of Employment shall remain exercisable for a period not
ending before the earlier of (A) the first anniversary of the
termination of the Optionee's employment or (B) the expiration of the
stated term of the Option.
(ii) Termination of Unvested Options Upon Termination of Employment.
Subject to Section 6.03(b), to the extent all or any part of an Option was
not exercisable as of the date of Termination of Employment, the right to
exercise such Option shall expire at the date of such Termination of
Employment. Notwithstanding the foregoing, and subject to Section 6.03(b),
the Committee, in its sole discretion and under such terms as it deems
appropriate, may permit a Participant who terminates employment on or after
the Participant's Normal Retirement Date or Other Retirement Date and who
will continue to render significant services to the Trust after his
Termination of Employment, to continue to accrue service with respect to
the right to exercise his Options during the period in which the individual
continues to render such services.
6.04 Stock Appreciation Rights.
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(a) Stock Appreciation Right Awards. The Committee may, in its sole
discretion, either alone or in connection with the grant of an Option, grant
Stock Appreciation Rights in accordance with the Plan, the terms and
conditions of which shall be set forth in an Award Agreement. If granted in
connection with an Option, a Stock Appreciation Right shall cover the same
Shares covered by the Option (or such lesser number of Shares as the Committee
may determine) and shall, except as provided in this Section 6.04, be subject
to the same terms and conditions as the related Option.
(b) Time of Grant. A Stock Appreciation Right may be granted (i) at any
time if unrelated to an Option, or (ii) if related to an Option, either at the
time of grant, or at any time thereafter during the term of the Option.
(c) Stock Appreciation Right Related to an Option.
(i) Exercise. Subject to Section 6.04(h), a Stock Appreciation Right
granted in connection with an Option shall be exercisable at such time or
times and only to the extent that the related Options are exercisable, and
will not be transferable except to the extent the related Option may be
transferable. A Stock Appreciation Right granted in connection with an
Incentive Stock Option shall be exercisable only if the Fair Market Value
of a Share on the date of exercise exceeds the purchase price specified in
the related Incentive Stock Option Agreement.
(ii) Amount Payable. Upon the exercise of a Stock Appreciation Right
related to an Option, the holder shall be entitled to receive an amount
determined by multiplying (A) the excess of the Fair Market Value of a
Share on the date preceding the date of exercise of such Stock Appreciation
Right over the per Share purchase price under the related Option, by (B)
the number of Shares as to which such Stock Appreciation Right is being
exercised. Notwithstanding the foregoing, the Committee may limit in any
manner the amount payable with respect to any Stock Appreciation Right by
including, without limitation, such a limit in the Agreement evidencing the
Stock Appreciation Right at the time it is granted.
(iii) Treatment of Related Options and Stock Appreciation Rights Upon
Exercise. Upon the exercise of a Stock Appreciation Right granted in
connection with an Option, the Option shall be canceled to the extent of
the number of Shares as to which the Stock Appreciation Right is exercised,
and upon the exercise of an Option granted in connection with a Stock
Appreciation Right, the Stock Appreciation Right shall be canceled to the
extent of the number of Shares as to which the Option is exercised or
surrendered.
(d) Stock Appreciation Right Unrelated to an Option. Stock Appreciation
Rights unrelated to Options shall contain such terms and conditions as to
exercisability (subject to Section 6.04(h)), vesting and duration as the
Committee shall determine, but in no event shall they have a term of greater
than ten (10) years. Upon exercise of a Stock Appreciation Right unrelated to
an Option, the Participant shall be entitled to receive an amount determined
by multiplying (A) the excess of the Fair Market Value of a Share on the date
preceding the date of exercise of such Stock Appreciation Right over the Fair
Market Value of a Share on the date the Stock Appreciation Right was granted,
by (B) the number of Shares as to which the Stock Appreciation Right is being
exercised. Notwithstanding the foregoing, the Committee may limit in any
manner the amount payable with respect to any Stock Appreciation Right by
including such a limit in the Agreement evidencing the Stock Appreciation
Right at the time it is granted.
(e) Method of Exercise. Stock Appreciation Rights shall be exercised by a
Participant only by a written notice delivered in person or by mail to the
Secretary of the Trust at the Trust's principal executive office, specifying
the number of Shares with respect to which the Stock Appreciation Right is
being exercised. If requested by the Trust, the Participant shall deliver the
Award Agreement evidencing the Stock Appreciation Right being exercised and
the Award Agreement evidencing any related Option to the Secretary of the
Trust who shall endorse thereon a notation of such exercise and return such
Agreement to the Participant.
(f) Form of Payment. Payment of the amount determined under Sections
6.04(c) and (d) may be made in the sole discretion of the Committee solely in
whole Shares in a number determined at their Fair Market Value on the date
preceding the date of exercise of the Stock Appreciation Right, or solely in
cash, or in a
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combination of cash and Shares. If the Committee decides to make full payment
in Shares and the amount payable results in a fractional Share, payment for
the fractional Share will be made in cash.
(g) Modification. No modification of an Award shall adversely alter or
impair any rights or obligations under the Award Agreement without the
Participant's consent.
(h) Effect of Change in Control. In the event of a Change in Control, all
Stock Appreciation Rights shall become immediately and fully exercisable. In
addition, in the sole discretion of the Committee at the time of an Award, and
to the extent set forth in an Award Agreement evidencing the grant of a Stock
Appreciation Right (but not with respect to any Stock Appreciation Right
granted in connection with an Incentive Stock Option), a Participant will be
entitled to receive a payment from the Trust in cash or Shares, in either
case, with a value equal to the excess, if any, of (A) the Adjusted Fair
Market Value, on the date preceding the date of exercise, of the Shares over
(B) the aggregate Fair Market Value, on the date the Stock Appreciation was
granted, of the Shares subject to the Stock Appreciation Right or portion
thereof exercised.
(i) Exercise of Stock Appreciation Rights Upon Termination of Employment.
(i) Exercise of Vested Stock Appreciation Rights Upon Termination of
Employment.
(A) Termination. Subject to Section 6.04(c) or (d), as the case may
be, unless the Committee, in its sole discretion, provides otherwise,
upon a Participant's Termination of Employment other than by reason of
death, Disability or retirement on or after the Participant's Normal
Retirement Date or following a Change in Control, the Participant may,
within three months from the date of such Termination of Employment, or
such longer period as the Committee, in its sole discretion, provides,
exercise all or any part of his Stock Appreciation Rights as were
exercisable at the date of Termination of Employment; provided, however,
that if such Termination of Employment is for Cause, the right of such
Participant to exercise such Stock Appreciation Rights shall terminate
at the date of Termination of Employment.
(B) Disability or Retirement. Subject to Section 6.04(c) or (d), as
the case may be, unless the Committee, in its sole discretion, provides
otherwise, upon a Participant's Disability Date or Termination of
Employment by reason of retirement on or after the Participant's Normal
Retirement Date, the Participant may, within two years after such
Disability Date or Termination of Employment, as the case may be,
exercise all or a part of his Stock Appreciation Rights which were
exercisable upon such Disability Date or Termination of Employment (or
which became exercisable at a later date pursuant to Section
6.04(i)(ii)).
(C) Death. Subject to Section 6.04(c) or (d), as the case may be,
unless the Committee, in its sole discretion, provides otherwise, in the
event of the death of a Participant while employed by the Trust or
within the additional period of time described in Section 6.04(i)(i)(B)
from the date of the Participant's Disability Date or Termination of
Employment by reason of retirement on or after the Participant's Normal
Retirement Date to the extent all or any part of the Stock Appreciation
Right was exercisable as of the Disability Date or the date of such
Termination of Employment did not expire during such additional period
and prior to the Participant's death, the right of the Participant's
Beneficiary to exercise the Stock Appreciation Right under the Plan
shall expire upon the earlier of (x) the expiration of two years from
the date of the Participant's death (but in no event more than two years
from the Participant's Disability Date or the date of the Participant's
Termination of Employment, as the case may be) or (y) the date of
expiration of the Stock Appreciation Right determined pursuant to
Section 6.04(c) or (d), as the case may be. In all other cases of death
following a Participant's Termination of Employment, the Participant's
Beneficiary may exercise the Stock Appreciation Right within the time
provided in 6.04(i)(i)(A), above. In the event of the Participant's
death, the Committee may, in its sole discretion, accelerate the right
to exercise all or any part of a Stock Appreciation Right which would
not otherwise be exercisable.
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(D) Change in Control. Subject to Section 6.04(c) or (d), as the
case may be, upon a Participant's Termination of Employment following a
Change in Control, each Stock Appreciation Right held by the Participant
that was exercisable as of the date of such Termination of Employment
shall remain exercisable for a period not ending before the earlier of
(A) the first anniversary of the termination of the Participant's
employment or (B) the expiration of the stated term of the Stock
Appreciation Right.
(ii) Termination of Unvested Stock Appreciation Rights Upon Termination
of Employment. Subject to Section 6.04(c) or (d), as the case may be, to
the extent all or any part of a Stock Appreciation Right was not
exercisable as of the date of Termination of Employment, the right to
exercise such Stock Appreciation Right shall expire at the date of such
Termination of Employment. Notwithstanding the foregoing, and subject to
Section 6.04(c) or (d), as the case may be, the Committee, in its sole
discretion and under such terms as it deems appropriate, may permit a
Participant who terminates employment on or after the Participant's Normal
Retirement Date or Other Retirement Date and who will continue to render
significant services to the Trust after his Termination of Employment, to
continue to accrue service with respect to the right to exercise his Stock
Appreciation Rights during the period in which the individual continues to
render such services.
6.05 Dividend Equivalent Rights. The Committee, in its sole discretion,
may grant to Participants Dividend Equivalent Rights in tandem with an Award.
The terms and conditions applicable to each Dividend Equivalent Right shall be
specified in the Award Agreement under which the Dividend Equivalent Right is
granted. Amounts payable in respect of Dividend Equivalent Rights may be payable
currently or deferred until the lapsing of restrictions on such Dividend
Equivalent Rights or until the vesting, exercise, payment, settlement or other
lapse of restrictions on the Award to which the Dividend Equivalent Rights
relate. In the event that the amount payable in respect of Dividend Equivalent
Rights are to be deferred, the Committee shall determine whether such amounts
are to be held in cash or reinvested in Shares or deemed (notionally) to be
reinvested in Shares. If amounts payable in respect of Dividend Equivalent
Rights are to be held in cash, there may be credited at the end of each year (or
portion thereof) interest on the amount of the account at the beginning of the
year at a rate per annum as the Committee, in its sole discretion, may
determine. Dividend Equivalent Rights may be settled in cash or Shares or a
combination thereof, in a single installment or multiple installments. With
respect to Dividend Equivalent Rights granted in tandem with an Option, the
Award Agreement may provide that the Participant may elect to have amounts
payable in respect of such Dividend Equivalent Rights applied against the
exercise price of such Option. To the extent necessary for any Dividend
Equivalent Right intended to qualify as performance-based compensation under
Section 162(m) of the Code to so qualify, the terms and conditions of the
Dividend Equivalent Right shall be such that payment of the Dividend Equivalent
Right is contingent upon the attainment of specified Performance Targets within
the Award Period, as provided for in Article VIII, and such Dividend Equivalent
Right shall be treated as a Performance Award for purposes of Section 11.13(b).
Article VII. Restricted Shares
7.01 Restricted Share Awards. The Committee, in its sole discretion, may
grant to Participants Restricted Shares, either alone or in addition to other
Awards. The Committee may grant to any Participant an Award of Restricted Shares
in such number, and subject to such terms and conditions relating to
forfeitability and restrictions on delivery and transfer (whether based on
performance standards, periods of service or otherwise) as the Committee shall
establish. The terms of any Restricted Share Award granted under this Plan shall
be set forth in an Award Agreement which shall contain provisions determined by
the Committee and not inconsistent with this Plan. The provisions of Restricted
Share Awards need not be the same for each Participant receiving such Awards.
(a) Issuance of Restricted Shares. As soon as practicable after the Date
of Grant of a Restricted Share Award, the Trust shall cause to be transferred
on the books of the Trust Shares, registered on behalf of the Participant in
nominee form, evidencing the Restricted Shares covered by the Award, but
subject to forfeiture to the Trust retroactive to the Date of Grant if an
Award Agreement delivered to the Participant by the Trust with respect to the
Restricted Shares covered by the Award is not duly executed by the Participant
and timely returned to the Trust. All Shares covered by Awards under this
Article VII shall be subject to the restrictions,
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terms and conditions contained in the Plan and the Award Agreement entered
into by and between the Trust and the Participant. Until the lapse or release
of all restrictions applicable to an Award of Restricted Shares, the stock
certificates representing such Restricted Shares shall be held in custody by
the Trust or its designee. Upon the lapse or release of all restrictions with
respect to an Award as described in Section 7.01(e), one or more stock
certificates, registered in the name of the Participant, for an appropriate
number of Shares as provided in Section 7.01(e), free of any restrictions set
forth in the Plan and the Award Agreement, shall be delivered to the
Participant.
(b) Shareholder Rights. Beginning on the Date of Grant of the Restricted
Share Award and subject to execution of the Award Agreement as provided in
Section 7.01(a), the Participant shall become a shareholder of the Trust with
respect to all Shares subject to the Award Agreement and shall have all of the
rights of a shareholder, subject to the provisions of Section 7.01(c).
(c) Treatment of Dividends. At the time an Award of Restricted Shares is
granted, the Committee may, in its sole discretion, determine that the payment
to the Participant of dividends, or a specified portion thereof, declared or
paid on such Restricted Shares shall be (i) deferred until the lapsing of the
restrictions imposed upon such Restricted Shares and (ii) held by the Trust
for the account of the Participant until such time. In the event that
dividends are to be deferred, the Committee shall determine whether such
dividends are to be reinvested in Shares (which shall be held as Restricted
Shares) or held in cash. If deferred dividends are to be held in cash, there
may be credited at the end of each year (or portion thereof) interest on the
amount of the account at the beginning of the year at a rate per annum as the
Committee, in its sole discretion, may determine. Payment of deferred
dividends in respect of Restricted Shares (whether held in cash or as
additional Shares of Restricted Shares), together with interest accrued
thereon, if any, shall be made upon the lapsing of restrictions imposed on the
Restricted Shares in respect of which the deferred dividends were paid, and
any dividends deferred (together with any interest accrued thereon) in respect
of any Restricted Shares shall be forfeited upon the forfeiture of such
Restricted Shares.
(d) No Pledge. None of the Restricted Shares may be pledged.
(e) Delivery of Shares Upon Release of Restrictions. Upon expiration or
earlier termination of the forfeiture period without a forfeiture and the
satisfaction of or release from any other conditions prescribed by the
Committee, the restrictions applicable to the Restricted Shares shall lapse.
As promptly as administratively feasible thereafter, subject to the
requirements of Section 11.06, the Trust shall deliver to the Participant or,
in case of the Participant's death, to the Participant's Beneficiary, one or
more stock certificates for the appropriate number of Shares, free of all such
restrictions, except for any restrictions that may be imposed by law.
(f) Effect of Change in Control. Unless the Committee shall determine
otherwise at the time of grant of an Award of Restricted Shares, any
restriction periods and restrictions imposed on Restricted Shares under the
Plan shall lapse upon a Change in Control and within ten (10) Business Days
the stock certificates representing Restricted Shares, without any such
restrictions, shall be delivered to the applicable Participant.
7.02 Terms of Restricted Shares.
(a) Forfeiture of Restricted Shares. Subject to Sections 7.01(f) and
7.02(b), all Restricted Shares shall be forfeited and returned to the Trust
and all rights of the Participant with respect to such Restricted Shares shall
terminate unless the Participant continues in the service of the Trust as an
employee until the expiration of the forfeiture period for such Restricted
Shares and satisfies any and all other conditions set forth in the Award
Agreement. The Committee, in its sole discretion, shall determine the
forfeiture period (which may, but need not, lapse in installments) and any
other terms and conditions applicable with respect to any Restricted Share
Award.
(b) Waiver of Forfeiture Period. Notwithstanding anything contained in
this Article VII to the contrary, the Committee may, in its sole discretion,
waive the forfeiture period and any other conditions set forth in any Award
Agreement under appropriate circumstances (including, without limitation, the
death, Disability or retirement of the Participant or a material change in
circumstances arising after the date of an Award) and
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subject to such terms and conditions (including, without limitation,
forfeiture of a proportionate number of the Restricted Shares) as the
Committee shall deem appropriate, provided that the Participant shall at that
time have completed at least one year of employment after the Date of Grant.
Article VIII. Performance Awards
8.01 Performance Targets.
(a) Performance Targets. Performance Targets for Performance Awards may
be expressed in terms of (i) earnings per Share, (ii) Share price, (iii) funds
from operations, (iv) pre-tax profits, (v) net earnings, (vi) return on equity
or assets, (vii) gross revenues, (viii) EBITDA, (ix) dividends, (x) market
share or market penetration or (xi) any combination of the foregoing, and may
be determined before or after accounting changes, special charges, foreign
currency effects, acquisitions, divestitures or other extraordinary events.
Performance Targets may be in respect of the performance of the Trust and its
Subsidiaries (which may be on a consolidated basis), a Subsidiary or a
Division. Performance Targets may be absolute or relative and may be expressed
in terms of a progression within a specified range. The Performance Targets
with respect to an Award Period shall be established in writing by the
Committee by the earlier of (i) the date on which a quarter of the Award
Period has elapsed or (ii) the date which is ninety (90) days after the
commencement of the Award Period, and, in any event while the performance
relating to the Performance Targets remain, substantially uncertain.
(b) Determination of Performance. Prior to the vesting, payment,
settlement or lapsing of any restrictions with respect to any Performance
Award made to a Participant who is subject to Section 162(m) of the Code, the
Committee shall certify in writing that the applicable Performance Targets
have been satisfied.
8.02 Performance Units. The Committee, in its sole discretion, may grant
Awards of Performance Units to Participants, the terms and conditions of which
shall be set forth in an Award Agreement between the Trust and the Participant.
Performance Units shall be denominated in Shares or a specified dollar amount
and, contingent upon the attainment of specified Performance Targets within the
Award Period, represent the right to receive payment as provided in Section
8.02(b) of the specified dollar amount or a percentage (which may not be more
than 100%) thereof depending on the level of Performance Target attainment. Each
Award Agreement shall specify either a fixed number of Performance Units to
which it relates or a formula pursuant to which the number of Performance Units
may be calculated, the Performance Targets which must be satisfied in order for
the Performance Units to vest and the Award Period within which such Performance
Targets must be satisfied.
(a) Vesting and Forfeiture. Subject to Sections 8.01(b) and 8.04, a
Participant shall become vested with respect to the Performance Units to the
extent that the Performance Targets set forth in the Agreement are satisfied
for the Award Period.
(b) Payment of Awards. Payment to Participants in respect of vested
Performance Units shall be made as soon as practicable after the last day of
the Award Period to which such Award relates unless the Award Agreement
evidencing the Award provides for the deferral of payment, in which event the
terms and conditions of the deferral shall be set forth in the Award
Agreement. Subject to Section 8.04, such payments may be made entirely in
Shares valued at their Fair Market Value as of the last day of the applicable
Award Period or such other date specified by the Committee, entirely in cash,
or in such combination of Shares and cash as the Committee in its sole
discretion shall determine at any time prior to such payment.
8.03 Performance Shares. The Committee, in its sole discretion, may grant
Awards of Performance Shares to Participants, the terms and conditions of which
shall be set forth in an Agreement between the Trust and the Participant. Each
Award Agreement may require that an appropriate legend be placed on Share
certificates. Awards of Performance Shares shall be subject to the following
terms and provisions:
(a) Rights of Participant. The Committee shall provide at the time an
Award of Performance Shares is made the time or times at which the actual
Shares represented by such Award shall be issued in the name of the
Participant; provided, however, that no Performance Shares shall be issued
until the Participant has executed an
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Award Agreement evidencing the Award, the appropriate blank stock powers and,
in the sole discretion of the Committee, an escrow agreement and any other
documents which the Committee may require as a condition to the issuance of
such Performance Shares. If a Participant shall fail to execute the Award
Agreement evidencing an Award of Performance Shares, the appropriate blank
stock powers and, in the sole discretion of the Committee, an escrow agreement
and any other documents which the Committee may require within the time period
prescribed by the Committee at the time the Award is granted, the Award shall
be null and void. At the sole discretion of the Committee, Shares issued in
connection with an Award of Performance Shares shall be deposited together
with the stock powers with an escrow agent (which may be the Trust) designated
by the Committee. Except as restricted by the terms of the Award Agreement,
and subject to Section 8.03(d), upon delivery of the Shares to the escrow
agent, the Participant shall have, in the sole discretion of the Committee,
all of the rights of a shareholder with respect to such Shares, including,
without limitation, the right to vote the Shares and to receive all dividends
or other distributions paid or made with respect to the Shares.
(b) Non-transferability. Subject to Section 11.04, until any restrictions
upon the Performance Shares awarded to a Participant shall have lapsed in the
manner set forth in Sections 8.03(c) or 8.04, such Performance Shares shall
not be sold, transferred or otherwise disposed of and shall not be pledged or
otherwise hypothecated, nor shall they be delivered to the Participant. The
Committee may also impose such other restrictions and conditions on the
Performance Shares, if any, as it deems appropriate.
(c) Lapse of Restrictions. Subject to Sections 8.01(b) and 8.04,
restrictions upon Performance Shares awarded hereunder shall lapse and such
Performance Shares shall become vested at such time or times and on such
terms, conditions and satisfaction of Performance Targets as the Committee
may, in its sole discretion, determine at the time an Award is granted.
(d) Treatment of Dividends. At the time the Award of Performance Shares
is granted, the Committee may, in its sole discretion, determine that the
payment to the Participant of dividends, or a specified portion thereof,
declared or paid on actual Shares represented by such Award which have been
issued by the Trust to the Participant shall be (i) deferred until the lapsing
of the restrictions imposed upon such Performance Shares and (ii) held by the
Trust for the account of the Participant until such time. In the event that
dividends are to be deferred, the Committee shall determine whether such
dividends are to be reinvested in Shares (which shall be held as additional
Performance Shares) or held in cash. If deferred dividends are to be held in
cash, there may be credited at the end of each year (or portion thereof)
interest on the amount of the account at the beginning of the year at a rate
per annum as the Committee, in its sole discretion, may determine. Payment of
deferred dividends in respect of Performance Shares (whether held in cash or
in additional Performance Shares), together with interest accrued thereon, if
any, shall be made upon the lapsing of restrictions imposed on the Performance
Shares in respect of which the deferred dividends were paid, and any dividends
deferred (together with any interest accrued thereon) in respect of any
Performance Shares shall be forfeited upon the forfeiture of such Performance
Shares.
(e) Delivery of Shares. Upon the lapse of the restrictions on Performance
Shares awarded, the Committee shall cause a stock certificate to be delivered
to the Participant, free of all restrictions hereunder.
8.04 Effect of Change in Control. In the event of a Change in Control:
(a) With respect to Performance Units, unless otherwise determined by the
Committee, the Participant shall (i) become vested in all Performance Units
and (ii) be entitled to receive in respect of all Performance Units which
become vested as a result of a Change in Control a cash payment within ten
(10) Business Days after such Change in Control in an amount as determined by
the Committee at the time of the Award of such Performance Unit and as set
forth in the Award Agreement.
(b) With respect to Performance Shares, unless otherwise determined by the
Committee, restrictions shall lapse immediately on all Performance Shares.
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(c) The Award Agreements evidencing Performance Shares and Performance
Units shall provide for the treatment of such Awards (or portions thereof)
which do not become vested as the result of a Change in Control, including,
without limitation, provisions for the adjustment of applicable Performance
Targets.
8.05 Termination. Except as provided in Section 8.04, and unless otherwise
provided by the Committee, in its sole discretion, in the Award Agreement, the
following provisions shall apply to Performance Awards:
(a) Termination of Employment. Unless otherwise provided below, in the
case of a Participant's Termination of Employment prior to the end of an Award
Period, the Participant will not be entitled to any Performance Awards, and
any Performance Shares shall be forfeited.
(b) Disability, Death or Retirement. Unless otherwise provided by the
Committee, in its sole discretion, in the Award Agreement, if a Participant's
Disability Date or Termination of Employment by reason of death or retirement
on or after the Normal Retirement Date or Other Retirement Date occurs
following at least twelve months of participation in any Award Period, but
prior to the end of an Award Period, the Participant or such Participant's
Beneficiary, as the case may be, shall be entitled to receive a pro-rata share
of his Performance Award as determined under Subsection (c).
(c) Pro-Rata Payment.
(i) Performance Units. With respect to Performance Units, the amount
of any payment made to a Participant (or Beneficiary) under circumstances
described in Section 8.05(b) will be the amount determined by multiplying
the amount of the Performance Units payable in Shares or dollars which
would have been earned, determined at the end of the Award Period, had such
employment not been terminated, by a fraction, the numerator of which is
the number of whole months such Participant was employed during the Award
Period, and the denominator of which is the total number of months of the
Award Period. Any such payment shall be made as soon as practicable after
the end of the respective Award Period, and shall relate to attainment of
Performance Targets over the entire Award Period.
(ii) Performance Shares. With respect to Performance Shares, the
amount of Performance Shares held by a Participant (or Beneficiary) with
respect to which restrictions shall lapse under circumstances described in
Section 8.05(b) will be the amount determined by multiplying the amount of
the Performance Shares with respect to which restrictions would have
lapsed, determined at the end of the Award Period, had such employment not
been terminated, by a fraction, the numerator of which is the number of
whole months such Participant was employed during the Award Period, and the
denominator of which is the total number of months of the Award Period. The
Committee shall determine the amount of Performance Shares with respect to
which restrictions shall lapse under this Section 8.05(c)(ii) as soon as
practicable after the end of the respective Award Period, and such
determination shall relate to attainment of Performance Targets over the
entire Award Period. At that time, all Performance Shares relating to that
Award Period with respect to which restrictions shall not lapse shall be
forfeited.
(d) Other Events. Notwithstanding anything to the contrary in this
Article VIII, the Committee may, in its sole discretion, determine to pay all
or any portion of a Performance Award to a Participant who has terminated
employment prior to the end of an Award Period under certain circumstances
(including, without limitation, a material change in circumstances arising
after the Date of Grant) and subject to such terms and conditions that the
Participant shall have completed, at his Termination of Employment, at least
one year of employment after the Date of Grant.
8.06 Modification or Substitution. Subject to the terms of the Plan, the
Committee may modify outstanding Performance Awards or accept the surrender of
outstanding Performance Awards and grant new Performance Awards in substitution
for them. Notwithstanding the foregoing, no modification of a Performance Award
shall adversely alter or impair any rights or obligations under the Agreement
without the Participant's consent.
Article IX. Stock Purchase Awards
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9.01 Grant of Stock Purchase Award. The Committee, in its sole discretion,
may grant Stock Purchase Awards to Participants either alone or in addition to
other Awards granted under the Plan. A Stock Purchase Award shall consist of the
right to purchase Shares of the Trust and to pay for such Shares either in cash
or through a Purchase Loan or a combination of both, in the Committee's sole
discretion. A Participant shall have until 5:00 P.M. on the twentieth (20th)
Business Day following his Offer Date to accept a Stock Purchase Award and sign
an Award Agreement relating to the Stock Purchase Award.
9.02 Terms of Purchase Loans and Tax Loans.
(a) Purchase Loan. The Trust shall provide to each Participant who
accepts a Stock Purchase Award a Purchase Loan in the principal amount equal
to the portion of the Stock Purchase Price designated by the Committee as not
payable in cash. Each Purchase Loan shall be evidenced by a promissory note.
The term of the Purchase Loan shall be such period of time as may be
determined by the Committee, in its sole discretion, but, payable in full upon
Termination of Employment subject to the terms of this Article IX, and the
proceeds of the Purchase Loan shall be used exclusively by the Participant for
payment of the Stock Purchase Price.
(i) Interest on Purchase Loan. From the Acceptance Date until the
Participant's Purchase Loan is forgiven, paid in full or otherwise
satisfied in full, Interest on the outstanding balance of the Purchase Loan
shall accrue and be payable quarterly in arrears on each date of payment of
a cash dividend on the Shares purchased by the Participant pursuant to a
Stock Purchase Award. If no quarterly cash dividend is paid on the Shares
for a quarter, Interest shall accrue (without any interest thereon) on the
last day of the quarter, and shall be satisfied from future cash dividends
paid on such Shares as provided for in Section 9.03(b) hereof. Any accrued
but unpaid Interest on a Purchase Loan shall be due on the last day of the
Purchase Loan Term.
(ii) Forgiveness of Purchase Loan. Subject to Section 9.02(a)(iii),
the Committee shall have the right, in its sole discretion, at the Offer
Date, to determine (i) the extent to which the Trust shall forgive the
repayment of all or a portion of a Purchase Loan and (ii) the terms of such
forgiveness. To the extent necessary for the forgiveness of a Purchase Loan
intended to qualify as performance-based compensation under Section 162(m)
of the Code to so qualify, the terms and conditions of the Purchase Loan
shall be such that forgiveness of the Purchase Loan is contingent upon the
attainment of specified Performance Targets within the Award Period, as
provided for in Article VIII, and such Purchase Loan shall be treated as a
Performance Award for purposes of Section 11.13(b).
(iii) Effect a Change in Control. In the event of a Change in Control,
the outstanding balance and Interest due on any Purchase Loan will be
completely forgiven as of the date of such Change in Control.
(b) Tax Loan. In order to provide a Participant cash to fulfill federal,
state and local tax obligations arising as a result of the forgiveness of a
Purchase Loan, the Committee may, in its sole discretion, offer a Tax Loan to
a Participant subject to such terms as the Committee, in its sole discretion,
determines. The Tax Loan shall be prepayable, in whole or in part, at any time
and from time to time, without penalty.
(i) Interest on Tax Loan. Each Tax Loan shall bear Interest at a rate
identical to the rate of Interest charged on the Participant's Purchase
Loan and shall be evidenced by a promissory note. Interest on each Tax
Loan, or any balance thereof, shall accrue and be payable quarterly in
arrears on the same date and in the same manner as Interest on a Purchase
Loan, as provided in Sections 9.02(a)(i) and 9.03(b) of the Plan, until
such Tax Loan is paid in full.
9.03 Security for Loans.
(a) Stock Power. Purchase Loans and Tax Loans granted to Participants
shall be secured by a pledge of the Shares acquired with a Purchase Loan
pursuant to a Stock Purchase Award. Except as the Committee may otherwise
determine, such loans shall be fully recourse with respect to a Participant.
The stock certificates for the Shares purchased by a Participant under the
Plan shall be issued in the Participant's name, but shall be held
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as security for repayment of the Participant's Purchase Loan and/or any Tax
Loan by the Chief Financial Officer of the Trust (or for a Stock Purchase
Award made to the Chief Financial Officer, by the Chief Executive Officer)
together with a stock power executed in blank by the Participant (the
execution and delivery of which by the Participant shall be a condition to the
issuance of the Stock Purchase Award). During the Purchase Loan Term, the
Participant shall be entitled to exercise all rights applicable to such
Shares, including, without limitation, the right to vote such Shares and,
subject to Section 9.03(b), the right to receive dividends paid on such
Shares. When the Purchase Loan and any accrued but unpaid Interest thereon has
been repaid or otherwise satisfied in full, the Chief Financial Officer (or
Chief Executive Officer, as the case may be) shall deliver to the Participant
the stock certificates for the Shares purchased by a Participant under the
Plan, other than the Shares, if any, retained as collateral for the Tax Loan
under Section 9.03(c), provided the Participant executes and delivers to the
Chief Financial Officer (or Chief Executive Officer, as the case may be) a
substitute stock power for any stock certificates representing the portion of
the Stock Purchase Award retained by the Trust to secure repayment of any Tax
Loan and any accrued but unpaid Interest thereon, as provided for in Section
9.03(c) of this Plan.
(b) Assignment of Dividends. To secure repayment of his Purchase Loan,
Tax Loan and Interest, each Participant shall also execute an assignment to
the Trust of all cash dividends paid on the Shares purchased by the
Participant with a Purchase Loan pursuant to a Stock Purchase Award. The Trust
shall deduct from each cash dividend paid by the Trust on such Shares an
amount equal to the Interest due to the Trust for that quarter on the
Participant's Purchase Loan, and Tax Loan, if any, and shall also deduct
accrued but unpaid Interest on the Purchase and Tax Loan, such deductions to
be made in the following order: (i) first to satisfy the Interest due on the
Purchase Loan for that quarter, (ii) second to satisfy the Interest due on the
Tax Loan for that quarter, (iii) third to satisfy any accrued but unpaid
Interest on the Purchase Loan, and (iv) fourth to satisfy any accrued but
unpaid Interest on the Tax Loan. To the extent that the cash dividend exceeds
the total of the foregoing subsections (i) through (iv), the Trust shall
distribute the remainder of the dividend to the Participant. In the event the
Interest due on the Participant's Purchase Loan and Tax Loan is greater than
the cash dividend paid that quarter on such Shares (or if the dividend is
insufficient to repay accrued but unpaid Interest from previous quarters),
such unpaid Interest shall accrue and be payable in each succeeding quarter
and then in accordance with Section 9.02(a)(i) (in the case of the Purchase
Loan), Section 9.02(b)(i) (in the case of the Tax Loan) and this Section 9.03.
(c) Release and Delivery of Stock Certificates at End of Purchase Loan
Term. The Trust shall release and deliver to each Participant certificates
for the Shares purchased by the Participant under the Plan at the end of the
Purchase Loan Term, provided the Participant has paid or otherwise satisfied
in full the balance of the Purchase Loan, any Tax Loan and any accrued but
unpaid Interest. In the event the balance of the Purchase Loan is not repaid,
forgiven or otherwise satisfied within ninety (90) days after the end of the
Purchase Loan Term (or such longer time as the Committee, in its sole
discretion, shall provide for repayment or satisfaction), the Trust shall
retain a portion of Shares purchased under the Stock Purchase Award, as
provided in Section 9.04(d).
If a Participant has not paid or otherwise satisfied the balance of the Tax
Loan and any accrued but unpaid Interest thereon at the end of the Purchase
Loan Term, the Trust shall retain as security for repayment of the Tax Loan
and any accrued but unpaid Interest thereon the stock certificates for a
portion of the Shares purchased by the Participant pursuant to a Stock
Purchase Award representing Shares that have a Fair Market Value (determined
as of the last day of the Purchase Loan Term) equal to 200% of the outstanding
balance of the Tax Loan and any accrued but unpaid Interest thereon as of the
last day of the Purchase Loan Term, such stock certificates to be retained in
the possession of the Chief Financial Officer, of the Trust (or the Chief
Executive Officer, as the case may be) as security for repayment of such
indebtedness.
For purposes of this Section, a Participant shall be considered to have
paid in full for that number of Shares acquired with a Purchase Loan
determined by multiplying the number of Shares covered by a Stock Purchase
Award by a fraction, the numerator of which is the sum of (i) the cumulative
amount of the Purchase Loan principal which has been forgiven under Section
9.02(c) on the date such calculation is made and (ii) the portion of the
Purchase Loan, if any, which has been prepaid by such date, and the
denominator of which is the original principal amount of the Purchase Loan.
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In the event of a Participant's Termination of Employment prior to the end
of the Purchase Loan Term, the stock certificates for the Shares purchased by
the Participant pursuant to a Stock Purchase Award shall be released and
delivered to the Participant (or his Beneficiary) or retained by the Trust,
depending upon whether the Participant has repaid the balance of the Purchase
Loan, Tax Loan and any accrued but unpaid Interest on the Purchase and Tax
Loans, in accordance with Section 9.04 of this Plan.
(d) Release and Delivery of Stock Certificates during Purchase Loan Term.
On January 31 of each year of a Purchase Loan Term, the Trust shall release
and deliver to each Participant certificates for a portion of the Shares
purchased by a Participant pursuant to a Stock Purchase Award, provided that
such Participant is employed by the Trust as of such date. The Trust shall
retain as security for repayment of the Purchase Loan, the Tax Loan and any
accrued but unpaid Interest thereon, a portion of the Shares purchased by a
Participant having a Fair Market Value (determined as of January 30 of each
year of the Purchase Loan Term) equal to 200% of the outstanding balance of
the Purchase Loan, Tax Loan and any accrued but unpaid Interest thereon as of
January 31 of each year during the Purchase Loan Term. Certificates
representing the remaining Shares purchased pursuant to a Stock Purchase Award
shall be delivered to such Participant. A Participant shall not transfer, sell
or otherwise dispose of Shares released pursuant to this Section during the
remainder of the Purchase Loan Term; provided, however, that such Shares may
be pledged as collateral for other indebtedness of the Participant; provided,
further, however, that in the event of a Change in Control, all such transfer
restrictions on such Shares shall lapse.
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9.04 Termination of Employment.
(a) Termination of Employment by Death or Disability. On the Offer Date,
the Committee, in its sole discretion, may provide for the forgiveness of a
Purchase Loan as of the date of Participant's Termination of Employment by
reason of death or Disability, in such an amount of the original principal
amount of the Purchase Loan as the Committee shall designate; provided that
the Participant (or his Beneficiary, in the case of the Participant's death)
shall first tender to the Trust within one hundred and eighty (180) days of
such Termination of Employment: (i) the amount of the Trust's minimum
withholding tax obligation which would be created as a result of the
forgiveness of the Purchase Loan and (ii) the amount of the balance of
Participant's Purchase Loan, Tax Loan and any accrued but unpaid Interest on
such Loans.
(b) Termination of Employment by Voluntary Resignation or Without Cause.
In the event of a Participant's Termination of Employment by voluntary
resignation, the Participant shall repay to the Trust the entire balance of
the Purchase Loan, the Tax Loan and any accrued but unpaid Interest on such
Loans, which shall be deemed immediately due and payable, within ninety (90)
days of the date of Participant's Termination of Employment by voluntary
resignation. In the event of a Participant's Termination of Employment by the
Trust without Cause, the Participant shall be obligated to repay the balance
of the Purchase Loan, Tax Loan and any accrued but unpaid Interest on the
Purchase and Tax Loans within twelve (12) months of the date of Participant's
Termination of Employment.
(c) Termination of Employment for Cause. In the event of a Participant's
Termination of Employment for Cause, the Participant's Purchase Loan, Tax
Loan, and accrued but unpaid Interest on such Loans, shall become due and
payable immediately upon the date of such Participant's Termination of
Employment.
(d) Retention of Stock Purchase Award. If a Participant fails to repay
the balance of the Purchase Loan, Tax Loan and accrued but unpaid Interest on
the Purchase and Tax Loans within the applicable time periods as provided in
the Participant's promissory notes and in this Section 9.04, the Trust shall
retain that portion of the Shares acquired through a Stock Purchase Award
which has a Fair Market Value (as of the last day of such applicable time
period) equal to the sum of the outstanding principal balance of Participant's
Purchase Loan and Tax Loan and accrued but unpaid Interest on the Purchase and
Tax Loans, and the Trust shall be obligated to distribute to the Participant
stock certificates for only that portion of the Stock Purchase Award which is
equal in value to the difference between the Fair Market Value of the Shares
covered by the Stock Purchase Award and the sum of the principal balance of
the Participant's Purchase Loan and Tax Loan and the accrued but unpaid
Interest on the Purchase and Tax Loans, such Fair Market Value and balance to
be determined as of the date such Purchase Loan, Tax Loan and Interest
payments are due as set forth in Participant's promissory notes and the
foregoing Section 9.04.
9.05 Restrictions on Transfer. Subject to Section 11.04, no Stock Purchase
Award or Shares purchased through such an Award and pledged to the Trust as
collateral security for the Participant's Purchase Loan, Tax Loan and accrued
but unpaid Interest thereon shall be transferable by the Participant other than
by will or by the laws of descent and distribution.
Article X. Non-Employee Trustee Awards
10.01 Grant of Non-Employee Trustee Awards. Each individual whose term as
a Trustee continues after the date of each annual meeting of shareholders of the
Trust, commencing with the 1997 annual meeting, and continuing until the date
this Plan terminates, shall as of the date of each such annual meeting of
shareholders be granted a Non-Employee Trustee Award consisting of an Option to
purchase 2,500 Shares. The exercise price for such Options shall be the Fair
Market Value of a Share on the Date of Grant. All such Options shall be
designated as Non-Qualified Stock Options and shall have a ten year term. Such
Options shall be fully exercisable six months after the Date of Grant, provided,
however, in the event of a Change in Control, such Options shall become
immediately and fully exercisable.
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If a Non-Employee Trustee's service with the Trust terminates by reason of
death or Disability, any Option held by such Non-Employee Trustee may be
exercised for a period of two years from the date of such termination or until
the expiration of the Option, whichever is shorter. If a Non-Employee Trustee's
service with the Trust terminates other than by reason of death or Disability,
under mutually satisfactory conditions, any Option held by such Non-Employee
Trustee may be exercised for a period of one year from the date of such
termination, or until the expiration of the stated term of the Option, whichever
is shorter. All applicable provisions of the Plan not inconsistent with this
Section 10.01 shall apply to Awards granted to Non-Employee Trustees; provided,
however, that the Committee may not exercise discretion under any provision of
the Plan with respect to Options granted under this Section 10.01 to the extent
that such discretion is inconsistent with Exchange Act Rule 16b-3.
10.02 Payment of Annual Retainer. During the term of this Plan, each Non-
Employee Trustee shall have the option of receiving his Annual Retainer in cash
or Shares or a combination of both. Each Non-Employee Trustee shall be required
to make an annual irrevocable election regarding the form of payment of his
Annual Retainer. The election must be in writing and must be delivered to the
Secretary of the Trust on or before the date on which the amount of the Annual
Retainer for a year is determined; provided, however, that for the Trust's 1997
fiscal year an election with respect to the form of payment of the Annual
Retainer was made on December 31, 1996, and the Annual Retainer Payment Date for
such fiscal year shall be June 30, 1997. If no election is made with respect to
a year, a Non-Employee Trustee's Annual Retainer for such year will
automatically be paid in Shares. The Annual Retainer for a year shall be paid to
the Trustees on the Annual Retainer Payment Date for such year. The total number
of Shares to be issued to a Non-Employee Trustee who receives Shares pursuant to
this Section 10.02 shall be determined by dividing the dollar amount of the
portion of the Annual Retainer payable in Shares for a particular year by the
Fair Market Value of a Share on the Business Day immediately preceding the
Annual Retainer Payment Date. In no event shall the Trust be required to issue
fractional Shares. Whenever under the terms of this Section a fractional Share
would otherwise be required to be issued, an amount in lieu thereof shall be
paid in cash based upon the Fair Market Value of such fractional Share. Shares
issued pursuant to this Section shall not be transferable for three years from
the date of their issuance, provided, however, in the event of a Change in
Control all such restrictions on such Shares shall lapse.
Article XI. Terms Applicable to All Awards Granted Under the Plan
11.01 Plan Provisions Control Award Terms Except Upon Termination.
(a) Termination. An employment or other agreement, if applicable, between
a Participant and the Trust shall govern with respect to the terms and
conditions applicable to Awards granted to such Participant under the Plan
upon a Termination of Employment; provided, however, that to the extent
necessary for an Award intended to qualify as performance-based compensation
under Section 162(m) of the Code to so qualify, the terms of the Plan shall
govern the Award; and, provided further, that the Committee shall have
reviewed and, in its sole discretion, approved the employment or other
agreement.
(b) Plan Provisions Control Generally. Except as provided in Section
11.01(a), the terms of the Plan shall govern all Awards granted under the
Plan, and in no event shall the Committee have the power to grant to a
Participant any Award under the Plan which is contrary to any provisions of
the Plan. In the event any provision of any Award granted under the Plan shall
conflict with any of the terms in the Plan as constituted on the Date of Grant
of such Award, the terms of the Plan as constituted on the Date of Grant of
such Award shall control. Except as provided in Section 3.01(b), Section 8.06
or Section 11.03 or unless otherwise provided by the Committee, in its sole
discretion, in the Award Agreement, the terms of any Award granted under the
Plan may not be changed after the Date of Grant of such Award so as to
materially decrease the value of the Award without the express written
approval of the Participant.
11.02 Award Agreement. No person shall have any rights under any Award
granted under the Plan unless and until the Trust and the Participant to whom
such Award shall have been granted shall have executed and delivered an Award
Agreement or received any other Award acknowledgment authorized by the Committee
expressly granting the Award to such person and containing provisions setting
forth the terms of the Award. If there
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is any conflict between the provisions of an Award Agreement and the terms of
the Plan, the terms of the Plan shall control.
11.03 Modification of Award After Grant. Except as provided in Section
3.01(b) or Section 8.06, or unless otherwise provided by the Committee, in its
sole discretion, in the Award Agreement, no Award granted under the Plan to a
Participant may be modified (unless such modification does not materially
decrease the value of the Award) after the Date of Grant except by express
written agreement between the Trust and the Participant; provided that any such
change (a) shall not be inconsistent with the terms of the Plan, and (b) shall
be approved by the Committee.
11.04 Limitation on Transfer. The rights and interest of a Participant in
any Award under the Plan may not be assigned or transferred other than by will
or the laws of descent and distribution or, in the Committee's sole discretion,
pursuant to a domestic relations order (within the meaning of Exchange Act Rule
16a-12). During the lifetime of a Participant, and except as the preceding
sentence provides, only the Participant personally may exercise rights under the
Plan. Except as otherwise specifically provided in the Plan, a Participant's
Beneficiary may exercise the Participant's rights only to the extent they were
exercisable under the Plan at the date of the death of the Participant and are
otherwise currently exercisable.
11.05 Taxes. The Trust shall be entitled, if the Committee deems it
necessary or desirable, to withhold (or secure payment from the Participant in
lieu of withholding) the amount of any withholding or other tax required by law
to be withheld or paid by the Trust with respect to any amount payable and/or
Shares issuable under such Participant's Award, or with respect to any income
recognized upon the lapse of restrictions applicable to an Award or upon a
disqualifying disposition of Shares received pursuant to the exercise of an
Incentive Stock Option, and the Trust may defer payment or issuance of the cash
or Shares upon the grant, exercise or vesting of an Award unless indemnified to
its satisfaction against any liability for any such tax. The amount of such
withholding or tax payment shall be determined by the Committee or its delegate
and shall be payable by the Participant at such time as the Committee
determines. The Committee shall prescribe in each Award Agreement one or more
methods by which the Participant will be permitted to satisfy his tax
withholding obligation, which methods may include, without limitation, the
payment of cash by the Participant to the Trust and the withholding from the
Award, at the appropriate time, of a number of Shares sufficient, based upon the
Fair Market Value of such Shares, to satisfy such tax withholding requirements.
The Committee shall be authorized, in its sole discretion, to establish such
rules and procedures relating to any such withholding methods as it deems
necessary or appropriate, including, without limitation, rules and procedures
relating to elections by Participants who are subject to the provisions of
Section 16 of the Exchange Act to have Shares withheld from an Award to meet
such withholding obligations.
11.06 Changes in Capitalization.
(a) In the event of a Change in Capitalization, the Committee shall
conclusively determine the appropriate adjustments, if any, to (i) the maximum
number and class of Shares or other securities with respect to which Awards
may be granted under the Plan, (ii) the maximum number and class of Shares or
other securities with respect to which Awards may be granted to any
Participant during any calendar year, (iii) the number and class of Shares or
securities which are subject to outstanding Awards granted under the Plan and
the purchase price therefor, if applicable, and (iv) the Performance Targets.
(b) Any such adjustment in the Shares or other securities subject to
outstanding Incentive Stock Options (including, without limitation, any
adjustments in the purchase price) shall be made in such manner as not to
constitute a modification as defined by Section 424(h)(3) of the Code and only
to the extent otherwise permitted by Sections 422 and 424 of the Code.
(c) If, by reason of a Change in Capitalization, a Participant shall be
entitled to exercise an Award with respect to, new, additional or different
shares of stock or securities, such new, additional or different shares shall
thereupon be subject to all of the conditions, restrictions and performance
criteria which were applicable to the Shares subject to the Award, as the case
may be, prior to such Change in Capitalization.
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(d) No adjustment of the number of Shares available under the Plan or to
which any Award relates that would otherwise be required under this Section
shall be made unless and until such adjustment either by itself or with other
adjustments not previously made under this Section would require an increase
or decrease of at least 1% in the number of Shares available under the Plan or
to which any Award relates immediately prior to the making of such adjustment
(the "Minimum Adjustment"). Any adjustment representing a change of less
than such minimum amount shall be carried forward and made as soon as such
adjustment together with other adjustments required by this Section and not
previously made would result in a Minimum Adjustment. Notwithstanding the
foregoing, any adjustment required by this Section which otherwise would not
result in a Minimum Adjustment shall be made with respect to Shares relating
to any Award immediately prior to exercise of such Award. No fractional Shares
or units of other securities shall be issued pursuant to any such adjustment,
and any fractions resulting from any such adjustment shall be eliminated in
each case by rounding downward to the nearest whole share.
11.07 Loans. The Trust shall be entitled, if the Committee in its sole
discretion deems it necessary or desirable, to lend money to a Participant for
purposes of (a) exercising his rights under an Award hereunder or (b) paying any
income tax liability related to an Award; provided, however, that Non-Employee
Trustees shall not be eligible to receive such loans. Such a loan shall be
evidenced by a promissory note payable to the order of the Trust executed by the
Participant and containing such other terms and conditions as the Committee may
deem desirable.
11.08 Surrender of Awards. Any Award granted to a Participant under the
Plan may be surrendered to the Trust for cancellation on such terms as the
Committee and such Participant approve.
11.09 No Right to Award; No Right to Employment. No employee or other
person shall have any claim of right to be granted an Award under this Plan.
Neither the Plan nor any action taken hereunder shall be construed as giving any
employee any right to be retained in the employ of the Trust.
11.10 Awards Not Includable for Benefit Purposes. Income recognized by a
Participant pursuant to the provisions of the Plan shall not be included in the
determination of benefits under any employee pension benefit plan (as such term
is defined in Section 3(2) of the Employee Retirement Income Security Act of
1974, as amended) or group insurance or other benefit plans applicable to the
Participant which are maintained by the Trust, except as may be provided under
the terms of such plans or determined by resolution of the Trustees.
11.11 Governing Law. The Plan and all determinations made and actions
taken pursuant to the Plan shall be governed by the laws of the District of
Columbia other than the conflict of laws provisions of such laws, and shall be
construed in accordance therewith.
11.12 No Strict Construction. No rule of strict construction shall be
implied against the Trust, the Committee, or any other person in the
interpretation of any of the terms of the Plan, any Award granted under the Plan
or any rule or procedure established by the Committee.
11.13 Interpretation.
(a) Rule 16b-3. The Plan is intended to comply with Exchange Act Rule
16b-3 and the Committee shall interpret and administer the provisions of the
Plan or any Award Agreement in a manner consistent therewith. Any provisions
inconsistent with such Rule shall be inoperative and shall not affect the
validity of the Plan. The Trustees are authorized to amend the Plan and to
make any such modifications to Award Agreements to comply with Exchange Act
Rule 16b-3, as it may be amended from time to time, and to make any other such
amendments or modifications deemed necessary or appropriate to better
accomplish the purposes of the Plan in light of any amendments made to
Exchange Act Rule 16b-3.
(b) Section 162(m) of the Code. Unless otherwise expressly stated in the
relevant Award Agreement, each Option, Stock Appreciation Right and
Performance Award granted under the Plan is intended to be performance-based
compensation within the meaning of Section 162(m)(4)(C) of the Code (except
that, in the event of a Change in Control, payment of Performance Awards to a
Participant who remains a "covered employee" with respect to such payment
within the meaning of Section 162(m)(3) of the Code may not qualify
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as performance-based compensation). The Committee shall not be entitled to
exercise any discretion otherwise authorized hereunder with respect to such
Awards if the ability to exercise such discretion or the exercise of such
discretion itself would cause the compensation attributable to such Awards to
fail to qualify as performance-based compensation. Notwithstanding anything to
the contrary in the Plan, the provisions of the Plan may at any time be
bifurcated by the Trustees or the Committee in any manner so that certain
provisions of the Plan or any Performance Award intended (or required in
order) to satisfy the applicable requirements of Section 162(m) of the Code
are only applicable to persons whose compensation is subject to Section
162(m).
11.14 Captions. The captions (i.e., all Section headings) used in the Plan
are for convenience only, do not constitute a part of the Plan, and shall not be
deemed to limit, characterize or affect in any way any provisions of the Plan,
and all provisions of the Plan shall be construed as if no captions have been
used in the Plan.
11.15 Severability. Whenever possible, each provision in the Plan and
every Award at any time granted under the Plan shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of the Plan or any Award at any time granted under the Plan shall be held to be
prohibited by or invalid under applicable law, then (a) such provision shall be
deemed amended to accomplish the objectives of the provision as originally
written to the fullest extent permitted by law and (b) all other provisions of
the Plan and every other Award at any time granted under the Plan shall remain
in full force and effect.
11.16 Regulations and Other Approvals.
(a) The obligation of the Trust to sell or deliver Shares with respect to
Awards granted under the Plan shall be subject to all applicable laws, rules
and regulations, including, without limitation, all applicable federal and
state securities laws, and the obtaining of such approvals by governmental
agencies as may be deemed necessary or appropriate by the Committee.
(b) Each Award is subject to the requirement that, if at any time the
Committee determines, in its sole discretion, that the listing, registration
or qualification of Shares issuable pursuant to the Plan is required by any
securities exchange or under any state or federal law, or the consent or
approval of any governmental regulatory body is necessary or desirable as a
condition of, or in connection with, the grant of an Award or the issuance of
Shares, no Awards shall be granted or payment made or Shares issues, in whole
or in part, unless listing, registration, qualification, consent or approval
has been effected or obtained free of any conditions as acceptable to the
Committee.
(c) Notwithstanding anything contained in the Plan or any Award Agreement
to the contrary, in the event that the disposition of Shares acquired pursuant
to the Plan is not covered by a then current registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), and is not
otherwise exempt from such registration, such Shares shall be restricted
against transfer to the extent required by the Securities Act and Rule 144 or
other regulations thereunder. The Committee may require any individual
receiving Shares pursuant to an Award granted under the Plan, as a condition
precedent to receipt of such Shares, to represent and warrant to the Trust in
writing that the Shares acquired by the individual are acquired without a view
to any distribution thereof and will not be sold or transferred other than
pursuant to an effective registration thereof under said Act or pursuant to an
exemption applicable under the Securities Act or the rules and regulations
promulgated thereunder. The certificates evidencing any of such Shares shall
be appropriately amended to reflect their status as restricted securities as
aforesaid.
11.17 Construction. Whenever used herein, nouns in the singular shall
include the plural and the masculine pronouns shall include the feminine gender.
11.18 Pooling Transactions. Notwithstanding anything contained in the Plan
or any Agreement to the contrary, in the event of a Change in Control which is
also intended to constitute a Pooling Transaction, the Committee shall take such
actions, if any, as are specifically recommended by an independent accounting
firm retained by the Trust to the extent reasonably necessary in order to assure
that the Pooling Transaction will qualify as such, including, without
limitation, (i) deferring the vesting, exercise, payment, settlement or lapsing
of restrictions with respect to any Award, (ii) providing that the payment or
settlement in respect of any Award be
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made in the form of cash, Shares or securities of a successor or acquirer of the
Trust, or a combination of the foregoing, (iii) postponing or deferring the
forgiveness of any Loan hereunder, and (iv) providing for the extension of the
term of any Award to the extent necessary to accommodate the foregoing, but not
beyond the maximum term permitted for any Award.
11.19 Amendment and Termination.
(a) Amendment. The Trustees shall have complete power and authority to
amend the Plan at any time it is deemed necessary or appropriate: provided,
however, that the Trustees shall not, without the affirmative approval of
shareholders of the Trust, make any amendment that requires shareholder
approval under Section 162(m) of the Code or under any other applicable law,
unless the Trustees determine that compliance therewith is no longer desired.
No termination or amendment of the Plan may, without the consent of the
Participant to whom any Award shall theretofore have been granted under the
Plan, adversely affect the right of such individual under such Award;
provided, however, that the Committee may, in its sole discretion, change
Performance Targets as provided in Section 8.06 and make such provision in the
Award Agreement for amendments which, in its sole discretion, it deems
appropriate.
(b) Termination. The Trustees shall have the right and the power to
terminate the Plan at any time. No Award shall be granted under the Plan after
the termination of the Plan, but the termination of the Plan shall not have
any other effect and any Award outstanding at the time of the termination of
the Plan may be exercised after termination of the Plan at any time prior to
the expiration date of such Award to the same extent such Award would have
been exercisable had the Plan not terminated.
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EXHIBIT 10.27
TERM LOAN AGREEMENT
Dated as of December 22, 1998
by and among
FEDERAL REALTY INVESTMENT TRUST,
as Borrower,
THE FINANCIAL INSTITUTIONS PARTY HERETO
AND THEIR ASSIGNEES UNDER SECTION 13.5.(d),
as Lenders,
COMMERZBANK AKTIENGESELLSCHAFT, NEW YORK BRANCH
as Syndication Agent,
PNC BANK, NATIONAL ASSOCIATION,
as Administrative Agent
and
FLEET NATIONAL BANK
as Documentation Agent
<PAGE>
TABLE OF CONTENTS
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Article I Definitions.............................................................. 1
Section 1.1.................................................................... 1
Article II. Credit Facility......................................................... 19
Section 2.1 Term Loan......................................................... 19
Section 2.2 [Intentionally Omitted]........................................... 20
Section 2.3 [Intentionally Omitted]........................................... 20
Section 2.4 Rates and Payment of Interest on the Loan......................... 20
Section 2.5 Number of Interest Periods........................................ 21
Section 2.6 Repayment of the Loan............................................. 21
Section 2.7 Prepayments....................................................... 21
Section 2.8 Continuation...................................................... 21
Section 2.9 Conversion........................................................ 21
Section 2.10 Notes............................................................. 22
Article III. Payments, Fees and Other General Provisions............................ 22
Section 3.1 Payments.......................................................... 22
Section 3.2 Pro Rata Treatment................................................ 23
Section 3.3 Sharing of Payments, Etc.......................................... 23
Section 3.4 Several Obligations............................................... 24
Section 3.5 Minimum Amounts................................................... 24
Section 3.6 Fees.............................................................. 24
Section 3.7 Computations...................................................... 25
Section 3.8 Usury............................................................. 25
Section 3.9 Agreement Regarding Interest and Charges.......................... 25
Section 3.10 Statements of Account............................................. 25
Section 3.11 Defaulting Lenders................................................ 25
Section 3.12 Taxes............................................................. 26
Article IV. Unencumbered Pool Properties........................................... 28
Section 4.1 Acceptance of Unencumbered Pool Properties........................ 28
Section 4.2 Termination of Designation as Unencumbered Pool Property.......... 29
Section 4.3 Additional Requirements of Unencumbered Pool Properties........... 30
Section 4.4 Acceptance and Termination under Revolving Credit Agreement....... 30
</TABLE>
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Article V. Yield Protection, Etc................................................. 30
Section 5.1 Additional Costs; Capital Adequacy................................ 30
Section 5.2 Suspension of the LIBOR Loan...................................... 31
Section 5.3 Illegality........................................................ 32
Section 5.4 Compensation...................................................... 32
Section 5.5 Treatment of Affected Loans....................................... 32
Section 5.6 Change of Lending Office.......................................... 33
Section 5.7 Assumptions Concerning Funding of LIBOR Loan...................... 33
Article VI. Conditions Precedent.................................................. 33
Section 6.1 Initial Conditions Precedent...................................... 33
Section 6.2 Credit Events..................................................... 36
Article VII. Representations and Warranties........................................ 36
Section 7.1 Representations and Warranties.................................... 36
Section 7.2 Survival of Representations and Warranties, Etc................... 42
Article VIII. Affirmative Covenants................................................. 42
Section 8.1 Preservation of Existence and Similar Matters..................... 42
Section 8.2 Compliance with Applicable Law and Material Contracts............. 43
Section 8.3 Maintenance of Property........................................... 43
Section 8.4 Conduct of Business............................................... 43
Section 8.5 Insurance......................................................... 43
Section 8.6 Payment of Taxes and Claims....................................... 44
Section 8.7 Visits and Inspections............................................ 44
Section 8.8 Use of Proceeds................................................... 44
Section 8.9 Environmental Matters............................................. 44
Section 8.10 Books and Records................................................. 45
Section 8.11 REIT Status....................................................... 45
Section 8.12 Further Assurances................................................ 45
Section 8.13 Additional Subsidiaries........................................... 45
Section 8.14 Exchange Listing.................................................. 45
Article IX. Information........................................................... 46
Section 9.1 Quarterly Financial Statements.................................... 46
Section 9.2 Year-End Statements............................................... 46
Section 9.3 Compliance Certificate............................................ 46
Section 9.4 Other Information................................................. 47
</TABLE>
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Article X. Negative Covenants.................................................... 49
Section 10.1 Financial Covenants.............................................. 49
Section 10.2 Indebtedness..................................................... 51
Section 10.3 Derivatives Obligations.......................................... 51
Section 10.4 Permitted Investments............................................ 51
Section 10.5 Liens; Agreements Regarding Liens; Other Matters................. 52
Section 10.6 Restricted Payments.............................................. 53
Section 10.7 Merger, Consolidation and Sales of Assets........................ 54
Section 10.8 No Plan Assets................................................... 54
Section 10.9 Fiscal Year...................................................... 55
Section 10.10 Modifications to Material Contracts.............................. 55
Section 10.11 Transactions with Affiliates..................................... 55
Article XI. Default............................................................... 55
Section 11.1 Events of Default................................................ 55
Section 11.2 Remedies Upon Event of Default................................... 59
Section 11.3 [Intentionally Omitted].......................................... 59
Section 11.4 Allocation of Proceeds........................................... 59
Section 11.5 [Intentionally Omitted].......................................... 60
Section 11.6 Performance by Administrative Agent.............................. 60
Section 11.8 Rights Cumulative................................................ 60
Section 11.9 Recision of Acceleration by Requisite Lenders.................... 61
Article XII. The Agents............................................................ 61
Section 12.1 Authorization and Action......................................... 61
Section 12.2 Administrative Agent's Reliance, Etc............................. 62
Section 12.3 Notice of Defaults............................................... 62
Section 12.4 PNC as Lender.................................................... 63
Section 12.5 Approvals of Lenders............................................. 63
Section 12.6 Lender Credit Decision, Etc...................................... 63
Section 12.7 Indemnification of the Administrative Agent...................... 64
Section 12.8 Successor Administrative Agent................................... 65
Section 12.9 Syndication and Documentation Agents............................. 65
Section 12.10 Approvals and Other Actions by Requisite Lenders................. 65
Article XIII. Miscellaneous......................................................... 66
Section 13.1 Notices.......................................................... 66
Section 13.2 Expenses......................................................... 67
Section 13.3 Setoff........................................................... 68
Section 13.4 Arbitration...................................................... 68
Section 13.5 Successors and Assigns........................................... 69
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
Section 13.6 Amendments....................................................... 72
Section 13.7 Nonliability of Administrative Agent and Lenders................. 73
Section 13.8 Confidentiality.................................................. 73
Section 13.9 Indemnification.................................................. 73
Section 13.10 Termination; Survival........................................... 75
Section 13.11 Severability of Provisions...................................... 75
Section 13.12 GOVERNING LAW................................................... 75
Section 13.13 Counterparts.................................................... 76
Section 13.14 Obligations with Respect to Loan Parties........................ 76
Section 13.15 Limitation of Liability......................................... 76
Section 13.16 Entire Agreement................................................ 76
Section 13.17 Construction.................................................... 76
Section 13.18 Limitation of Liability of Trustees, Etc........................ 76
</TABLE>
iv
<PAGE>
SCHEDULES
---------
SCHEDULE 1.1.A Loan Parties
SCHEDULE 4.1. Unencumbered Pool Properties
SCHEDULE 7.1.(b) Ownership Structure
SCHEDULE 7.1.(f) Ownership of Properties; Liens
SCHEDULE 7.1.(g) Indebtedness
SCHEDULE 7.1.(h) Material Contracts
SCHEDULE 7.1.(p) Environmental Laws
SCHEDULE 10.3. Derivatives Obligations
v
<PAGE>
EXHIBITS
--------
EXHIBIT A Form of Assignment and Acceptance Agreement
EXHIBIT B Intentionally Omitted
EXHIBIT C Form of Guaranty
EXHIBIT D Intentionally Omitted
EXHIBIT E Form of Notice of Continuation
EXHIBIT F Form of Notice of Conversion
EXHIBIT G Intentionally Omitted
EXHIBIT H Intentionally Omitted
EXHIBIT I Intentionally Omitted
EXHIBIT J Form of Term Note
EXHIBIT K Intentionally Omitted
EXHIBIT L Intentionally Omitted
EXHIBIT M-1 Form of Opinion of Counsel to the Loan Parties
EXHIBIT M-2 Form of Opinion of Pennsylvania Counsel to the Loan Parties
EXHIBIT N Form of Compliance Certificate
vi
<PAGE>
TERM LOAN AGREEMENT
THIS TERM LOAN AGREEMENT dated as of December 22, 1998 by and among FEDERAL
REALTY INVESTMENT TRUST, an unincorporated business trust organized under the
laws of the District of Columbia (the "Borrower"), each of the financial
institutions initially a signatory hereto together with their assignees pursuant
to Section 13.5.(d), PNC BANK, NATIONAL ASSOCIATION, as Administrative Agent
(the "Administrative Agent"), COMMERZBANK AKTIENGESELLSCHAFT, NEW YORK BRANCH,
as Syndication Agent (the "Syndication Agent"), and FLEET NATIONAL BANK, as
Documentation Agent.
WHEREAS, the Lenders desire to make available to the Borrower a
$125,000,000 term loan facility, on the terms and conditions contained herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, the parties
hereto agree as follows:
ARTICLE DEFINITIONS
SECTION 1.1 DEFINITIONS.
In addition to terms defined elsewhere herein, the following terms shall
have the following meanings for the purposes of this Agreement:
"ACCESSION AGREEMENT" means an Accession Agreement substantially in the
form of Annex I to the form of Guaranty attached to this Agreement as Exhibit C.
"ADDITIONAL COSTS" has the meaning given that term in Section 5.1.
"ADJUSTED EURODOLLAR RATE" means, with respect to each Interest Period,
when the Loan is a LIBOR Loan, the rate obtained by dividing (a) LIBOR for such
Interest Period by (b) a percentage equal to 1 minus the stated maximum rate
(stated as a decimal) of all reserves, if any, required to be maintained against
"Eurocurrency liabilities" as specified in Regulation D of the Board of
Governors of the Federal Reserve System (or against any other category of
liabilities which includes deposits by reference to which the interest rate on
the LIBOR Loan is determined or any category of extensions of credit or other
assets which includes loans by an office of any Lender outside of the United
States of America to residents of the United States of America). The parties
acknowledge that as of the Agreement Date, the percentage referred to in the
preceding clause (b) is 0.0%.
"ADMINISTRATIVE AGENT" means PNC Bank, National Association, in its
capacity as contractual representative of the Lenders under the terms of this
Agreement, together with its successors.
"AFFILIATE" means any Person (other than the Administrative Agent or any
Lender): (a) directly or indirectly controlling, controlled by, or under common
control with, the Borrower;
<PAGE>
(b) directly or indirectly owning or holding ten percent (10.0%) or more of any
equity interest in the Borrower; or (c) ten percent (10.0%) or more of whose
voting stock or other equity interest is directly or indirectly owned or held by
the Borrower. For purposes of this definition, "control" (including with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with") means the possession directly or indirectly of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities or by contract or otherwise.
"AGENT" means any of the Administrative Agent, the Syndication Agent or the
Documentation Agent.
"AGREEMENT DATE" means the date as of which this Agreement is dated.
"APPLICABLE LAW" means all applicable provisions of constitutions,
statutes, rules, regulations and orders of all Governmental Authority and all
orders and decrees of all courts, tribunals and arbitrators.
"APPLICABLE MARGIN" means the respective percentages per annum determined,
at any time, based on the range into which the Borrower's Credit Rating then
falls, in accordance with the table set forth below. Any change in the
Borrower's Credit Rating which would cause it to move to a different range in
the table shall effect a change in the Applicable Margin on the Business Day
immediately following the date on which such change occurs. Notwithstanding any
other provision contained in this definition, during any period in which the
Borrower has no Credit Rating from either S&P or Moody's, the Applicable Margin
shall be the percentage corresponding to Level 5 in the table. During any
period in which the Borrower shall only have one Credit Rating, the Applicable
Margin shall be based on such Credit Rating. During any period that the
Borrower receives two Credit Ratings and such Credit Ratings result in
Applicable Margins corresponding to different Levels in the table, the
Applicable Margin shall be determined by the higher of such two Credit Ratings
unless such Credit Ratings result in Applicable Margins corresponding to Levels
which are not adjacent in the table, in which case the Applicable Margin shall
be the average of the Applicable Margins determined by each of such two Credit
Ratings. During any period that the Borrower receives more than two Credit
Ratings and such Credit Ratings are not equivalent, the Applicable Margin shall
be determined by the two of such Credit Ratings which are equivalent and if none
of such Credit Ratings are equivalent, then the lowest of such Credit Ratings
shall be disregarded when determining the Applicable Margin.
<TABLE>
<CAPTION>
LEVEL BORROWER'S CREDIT RATING Applicable Applicable
(S&P/Moody's or Margin for Margin for
equivalent) the LIBOR the Base Rate
Loan Loan
--------------------------------------------------------------------
<S> <C> <C> <C>
1 A-/A3 or equivalent 0.55% 0.00%
--------------------------------------------------------------------
2 BBB+/Baa1 or equivalent 0.75% 0.00%
--------------------------------------------------------------------
3 BBB/Baa2 or equivalent 0.95% 0.00%
--------------------------------------------------------------------
4 BBB-/Baa3 or equivalent 1.075% 0.25%
--------------------------------------------------------------------
</TABLE>
2
<PAGE>
<TABLE>
<S> <C> <C> <C>
--------------------------------------------------------------------
5 Lower than BBB-/Baa3 or 1.25% 0.50%
equivalent
--------------------------------------------------------------------
</TABLE>
As of the Agreement Date and until redetermined in accordance with the foregoing
definition, the Applicable Margin shall be as provided in Level 2 above.
"ASSIGNEE" has the meaning given that term in Section 13.5.(d).
"ASSIGNMENT AND ACCEPTANCE AGREEMENT" means an Assignment and Acceptance
Agreement among a Lender, an Assignee and the Administrative Agent,
substantially in the form of Exhibit A.
"BASE RATE" means the per annum rate of interest equal to the greater of
(a) the Prime Rate or (b) the Federal Funds Rate plus one-half of one percent
(0.5%). Any change in the Base Rate resulting from a change in the Prime Rate or
the Federal Funds Rate shall become effective as of 12:01 a.m. on the Business
Day on which each such change occurs. The Base Rate is a reference rate used by
the Administrative Agent in determining interest rates on certain loans and is
not intended to be the lowest rate of interest charged by the Administrative
Agent or any Lender on any extension of credit to any debtor.
"BASE RATE LOAN" means the Loan when it is subject to a rate based on the
Base Rate.
"BENEFIT ARRANGEMENT" means at any time an employee benefit plan within the
meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan and
which is maintained or otherwise contributed to by any member of the ERISA
Group.
"BORROWER" has the meaning set forth in the introductory paragraph hereof
and shall include the Borrower's successors and assigns.
"BUSINESS DAY" means (a) any day other than a Saturday, Sunday or other day
on which banks in Washington, D.C., or Pittsburgh, Pennsylvania are authorized
or required to close and (b) with reference to any LIBOR Loan, any such day that
is also a day on which dealings in Dollar deposits are carried out in the London
interbank market.
"CAPITALIZATION RATE" means nine percent (9.00%).
"CAPITALIZED EBITDA" means, with respect to a Person and as of a given
date, (a)(i)(A) such Person's EBITDA for the fiscal quarter most recently ended
times (B) 4 minus (ii) Replacement Reserves determined for a 365 day period
- ----- -----
divided by (b) the Capitalization Rate.
- ----------
"CAPITAL LEASE" means a lease that is required to be capitalized for
financial reporting purposes in accordance with GAAP.
"CAPITALIZED LEASE OBLIGATION" means Indebtedness represented by
obligations under a Capital Lease and the amount of such Indebtedness shall be
the capitalized amount of such
3
<PAGE>
obligations determined in accordance with GAAP.
"CAPITALIZED LOAN RECEIVABLE INCOME" means (a) consolidated interest income
of the Borrower and its Subsidiaries earned on Loans Receivable for the fiscal
quarter most recently ended times (b) 4 divided by (c) 0.15.
----- ----------
"CAPITALIZED NOI" means, with respect to an Unencumbered Pool Property:
(a)(i)(A) the Net Operating Income of such Unencumbered Pool Property for the
fiscal quarter most recently ended times (B) 4 minus (ii) Replacement Reserves
----- -----
determined for a four-quarter period divided by (b) the Capitalization Rate.
----------
"CAPITAL STOCK" means any common stock, Preferred Stock, other capital
stock or other equity interest in a Person that is a corporation.
"CASH EQUIVALENTS" means: (a) securities issued, guaranteed or insured by
the United States of America or any of its agencies with maturities of not more
than one year from the date acquired; (b) certificates of deposit with
maturities of not more than one year from the date acquired issued by a United
States federal or state chartered commercial bank of recognized standing, which
has capital and unimpaired surplus in excess of $500,000,000 and which bank or
its holding company has a short-term commercial paper rating of at least A-2 or
the equivalent by S&P or at least P-2 or the equivalent by Moody's; (c) reverse
repurchase agreements with terms of not more than seven days from the date
acquired, for securities of the type described in clause (a) above and entered
into only with commercial banks having the qualifications described in clause
(b) above; (d) commercial paper issued by any Person incorporated under the laws
of the United States of America or any State thereof and rated at least A-2 or
the equivalent thereof by S&P or at least P-2 or the equivalent thereof by
Moody's, in each case with maturities of not more than one year from the date
acquired; and (e) investments in money market funds registered under the
Investment Company Act of 1940, which have net assets of at least $500,000,000
and at least 85% of whose assets consist of securities and other obligations of
the type described in clauses (a) through (d) above.
"COMMITMENT" means, as to each Lender, such Lender's obligation to make
the Loan pursuant to Section 2.1. in an amount up to, but not exceeding the
amount set forth for such Lender on its signature page hereto as such Lender's
"Commitment Amount" or as set forth in the applicable Assignment and Acceptance
Agreement, or as appropriate to reflect any assignments to or by such Lender
effected in accordance with Section 13.5.
"COMMITMENT PERCENTAGE" means, as to each Lender, the ratio, expressed as a
percentage, of (a) the amount of such Lender's Commitment to (b) the sum of the
--
aggregate amount of the Commitments of all Lenders hereunder; provided, however,
that if at the time of determination the Commitments have terminated or been
reduced to zero, the "Commitment Percentage" of each Lender shall be the
Commitment Percentage of such Lender in effect immediately prior to such
termination or reduction.
"COMPLIANCE CERTIFICATE" has the meaning given such term in Section 9.3.
4
<PAGE>
"CONSTRUCTION IN PROCESS" means, with respect to a Real Property Asset
which is Under Construction, the aggregate, good faith estimated cost of
construction (including land acquisition costs) for such Real Property Asset.
Construction in Process shall not include costs incurred for redevelopment of
any Real Property Asset which has an Occupancy Rate in excess of 70%.
"CONTINUE", "CONTINUATION" and "CONTINUED" each refers to the continuation
of the LIBOR Loan from one Interest Period to another Interest Period pursuant
to Section 2.8.
"CONVERT", "CONVERSION" and "CONVERTED" each refers to the conversion of
the Loan from one Type into another Type pursuant to Section 2.9.
"CREDIT EVENT" means the Conversion or the Continuation of the Loan.
"CREDIT RATING" means the lowest rating assigned by a Rating Agency to each
series of rated senior unsecured long term indebtedness of the Borrower.
"DEFAULT" means any of the events specified in Section 11.1., whether or
not there has been satisfied any requirement for the giving of notice, the lapse
of time, or both.
"DEFAULTING LENDER" has the meaning set forth in Section 3.11.
"DERIVATIVES OBLIGATION" as applied to any Person, means any direct or
indirect liability, contingent or otherwise, of that Person: (a) under Interest
Rate Agreements or (b) under any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect that
Person against fluctuations in currency values.
"DEVELOPED PROPERTY" means a Real Property Asset that is owned or leased by
the Borrower or any of its Subsidiaries and on which is located a shopping
center, a retail store or a multi-family residential complex.
"DOCUMENTATION AGENT" means Fleet National Bank, in its capacity as
"Documentation Agent" hereunder and shall include the Documentation Agent's
successors and assigns.
"DOLLARS" or "$" means the lawful currency of the United States of America.
"EBITDA" means, with respect to a Person and for a given period, such
Person's net earnings (loss) for such period plus the sum of the following (to
the extent included in the calculation of net earnings (loss) and without
duplication): (a) depreciation and amortization expense for such period plus
----
(b) Interest Expense for such period plus (c) income tax expense paid or accrued
----
during such period plus (d) extraordinary losses, losses from sales of assets
----
and losses resulting from forgiveness by such Person of Indebtedness minus (e)
-----
extraordinary gains and gains from sales of assets for such period plus (f)
----
expenses associated with significant non-recurring events for such period minus
-----
(g) income associated with significant non-recurring events for such period plus
----
(h) to the extent not already included in the immediately preceding clauses (a)
through (g), such Person's pro rata share of EBITDA of each Unconsolidated
Affiliate of such Person (determined in a manner
5
<PAGE>
consistent with this definition of EBITDA).
"EFFECTIVE DATE" means the later of: (a) the Agreement Date; and (b) the
date on which all of the conditions precedent set forth in Section 6.1. shall
have been fulfilled or waived in writing by the Administrative Agent.
"ELIGIBLE ASSIGNEE" means any Person who is: (i) currently a Lender; (ii) a
commercial bank, trust company, insurance company, savings and loan association,
investment bank or pension fund organized under the laws of the United States of
America, or any state thereof, and having total assets in excess of
$5,000,000,000; or (iii) a commercial bank organized under the laws of any other
country which is a member of the Organization for Economic Cooperation and
Development ("OECD"), or a political subdivision of any such country, and having
total assets in excess of $10,000,000,000, provided that such bank is acting
through a branch or agency located in the United States of America. If such
Person is not currently a Lender, the senior unsecured long term indebtedness of
such Person or its ultimate corporate parent must be rated BBB+ or higher by
S&P, Baa1 or higher by Moody's, or the equivalent or higher of either such
rating by another Rating Agency acceptable to the Administrative Agent.
"ELIGIBLE PROPERTY" means a Real Property Asset which satisfies all of the
following requirements as reasonably determined by the Administrative Agent:
(a) such Real Property Asset is a Developed Property and is either (i) owned in
fee simple by the Borrower or a Subsidiary or (ii) leased to the Borrower or a
Subsidiary under a Capital Lease with a scheduled termination date later than
the Termination Date; (b) neither such Real Property Asset, nor any interest of
the Borrower or such Subsidiary therein, is subject to any Lien other than
Permitted Liens or to any agreement (other than this Agreement or any other Loan
Document) that prohibits the creation of any Lien thereon as security for
Indebtedness of the Borrower or such Subsidiary, as applicable; (c) neither such
Real Property Asset, nor any interest of the Borrower or such Subsidiary
therein, is subject to any provision of the articles of incorporation, bylaws,
declaration of trust, limited partnership agreement, limited liability company
agreement or other comparable document of the Borrower or such Subsidiary
(including without limitation, any provision requiring the consent of
shareholders, partners or other Persons holding any equity interest in the
Borrower or such Subsidiary, as applicable) which limits in any way the
Borrower's or such Subsidiary's ability (i) to create any Lien on such Real
Property Asset as security for Indebtedness of the Borrower or such Subsidiary,
as applicable or (ii) to sell, transfer or otherwise dispose of such Real
Property Asset; (d) if such Real Property Asset is owned or leased by a
Subsidiary, none of the Borrower's direct or indirect ownership interest in such
Subsidiary is subject to any Lien other than Permitted Liens or to any agreement
(other than this Agreement or any other Loan Document) that prohibits the
creation of any Lien thereon as security for Indebtedness; (e) such Real
Property Asset had an Occupancy Rate of greater than 70%; and (f) such Real
Property Asset is free of all structural defects, title defects, environmental
conditions or other adverse matters except for defects, conditions or matters
individually or collectively which are not material to the profitable operation
of such Real Property Asset.
"EMPLOYEE BENEFIT PLAN" means any employee benefit plan within the meaning
of Section 3(3) of ERISA which (a) is maintained for employees of the Borrower,
any of its
6
<PAGE>
Subsidiaries or any of its other ERISA Affiliates or is assumed by the Borrower,
any of its Subsidiaries or any of its other ERISA Affiliates in connection with
any acquisition or other business combination or (b) has at any time been
maintained for the employees of the Borrower, any of its Subsidiaries or any
other current or former ERISA Affiliate.
"ENVIRONMENTAL LAWS" means any Applicable Law relating to environmental
protection or the manufacture, storage, disposal or clean-up of Hazardous
Materials including, without limitation, the following: Clean Air Act, 42 U.S.C.
(S) 7401 et seq; Federal Water Pollution Control Act, 33 U.S.C. (S) 1251 et
seq.; Solid Waste Disposal Act, 42 U.S.C. (S) 6901 et seq.; Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. (S) 9601 et
seq.; National Environmental Policy Act, 42 U.S.C. (S) 4321 et seq.; regulations
of the Environmental Protection Agency and any applicable rule of common law and
any judicial interpretation thereof relating primarily to the environment or
Hazardous Materials.
"EQUITY ISSUANCE" means any issuance or sale by a Person of its capital
stock or other similar equity interest, or any warrants, options or similar
rights to acquire, or securities convertible into or exchangeable for, such
capital stock or other similar equity interest.
"ERISA" means the Employee Retirement Income Security Act of 1974, as in
effect from time to time.
"ERISA GROUP" means the Borrower, any Subsidiary and 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
Subsidiary, are treated as a single employer under Section 414 of the Internal
Revenue Code.
"EVENT OF DEFAULT" means any of the events specified in Section 11.1.,
provided that any requirement for notice or lapse of time or any other condition
has been satisfied.
"EXEMPT SUBSIDIARY" has the meaning given that term in Section 10.7(a).
"FEDERAL FUNDS RATE" means, for any day, the rate per annum (rounded upward
to the nearest 1/100th of 1%) equal to the weighted average of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers on such day, as published by the Federal
Reserve Bank of New York on the Business Day next succeeding such day, provided
that (a) if such day is not a Business Day, the Federal Funds Rate for such day
shall be such rate on such transactions on the next preceding Business Day, and
(b) if no such rate is so published on such next succeeding Business Day, the
Federal Funds Rate for such day shall be the average rate quoted to the
Administrative Agent by federal funds dealers selected by the Administrative
Agent on such day on such transaction as determined by the Administrative Agent.
"FEES" means the fees and commissions provided for or referred to in
Section 3.6. and any other fees payable by the Borrower hereunder or under any
other Loan Document.
"FIXED CHARGES" means, with respect to a Person and for a given period, the
sum of (a) the
7
<PAGE>
Interest Expense of such Person for such period, plus (b) the aggregate of all
scheduled principal payments on Indebtedness made by such Person during such
period (excluding balloon, bullet or similar payments of principal due upon the
stated maturity of Indebtedness), plus (c) the aggregate of all dividends paid
or accrued by such Person on any Preferred Stock during such period, plus (d)
the Replacement Reserves for such period.
"FOREIGN LENDER" means any Lender organized under the laws of a
jurisdiction other than the United States of America.
"FUNDS FROM OPERATIONS" means, with respect to any Person income before
depreciation and amortization of real estate assets and before extraordinary
items and significant non-recurring events and excluding gains and losses from
sales of real estate assets and after adjustments for unconsolidated
partnerships and joint ventures. Adjustments for unconsolidated partnerships
and joint ventures will be calculated to reflect Funds From Operations on the
same basis.
"GAAP" means accounting principles as promulgated from time to time in
statements, opinions and pronouncements by the American Institute of Certified
Public Accountants and the Financial Accounting Standards Board and in such
statements, opinions and pronouncements of such other entities with respect to
financial accounting of for-profit entities as shall be accepted by a
substantial segment of the accounting profession in the United States.
"GOVERNMENTAL APPROVALS" means all authorizations, consents, approvals,
licenses and exemptions of, registrations and filings with, and reports to, all
Governmental Authorities.
"GOVERNMENTAL AUTHORITY" means any national, state or local government
(whether domestic or foreign), any political subdivision thereof or any other
governmental, quasi-governmental, judicial, public or statutory instrumentality,
authority, body, agency, bureau or entity (including, without limitation, the
Federal Deposit Insurance Corporation, the Comptroller of the Currency or the
Federal Reserve Board, any central bank or any comparable authority) or any
arbitrator with authority to bind a party at law.
"GROSS ASSET VALUE" means, at a given time, the sum of (a) the Capitalized
EBITDA of the Borrower and its Subsidiaries determined on a consolidated basis,
plus (b) all cash and cash equivalents of the Borrower and its Subsidiaries
- ----
determined on a consolidated basis at such time (excluding tenant deposits and
other cash and cash equivalents, the disposition of which by the Borrower or a
Subsidiary, as applicable, is restricted in any way (excluding restrictions in
the nature of early withdrawal penalties)), plus (c) with respect to any of Real
----
Property Assets which are under construction, the amount of construction in
process as determined in accordance with GAAP for such Real Property Assets at
such time (including without duplication the Borrower's or any Subsidiary's
proportionate share of all construction in process of Unconsolidated Affiliates
of the Borrower or such Subsidiary) plus (d) with respect to any Real Property
----
Asset acquired during the fiscal quarter most recently ending, the undepreciated
purchase price paid for such Real Property Asset less any amounts paid to the
Borrower or any Subsidiary as a purchase price adjustment, held in escrow,
retained as a contingency reserve, or other similar arrangements (including
without duplication the Borrower's or any Subsidiary's proportionate share of
undepreciated purchase price paid for such
8
<PAGE>
Real Property Asset of Unconsolidated Affiliates of the Borrower or such
Subsidiary). In determining Gross Asset Value of the Borrower or any Subsidiary
for the fiscal quarter most recently ending, EBITDA attributable to any Real
Property Asset acquired or disposed of during such fiscal quarter shall be
disregarded when calculating Capitalized EBITDA pursuant to the preceding clause
(a).
"GUARANTEED" or to "GUARANTEE" as applied to any Person, means any direct
or indirect liability, contingent or otherwise, of that Person with respect to
any Indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent of the Person incurring such liability, or the primary
effect thereof, is to provide assurance to the obligee of such liability that
such liability will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such liability will be
protected (in whole or in part) against loss with respect thereto. "Guaranteed"
or to "Guarantee" shall include (i) the direct or indirect guaranty, endorsement
(other than for collection or deposit in the ordinary course of business),
comaking, discounting with recourse or sale with recourse by such Person of the
obligation of another, (ii) the obligation to make take-or-pay or similar
payments if required regardless of nonperformance by any other party or parties
to an agreement, and (iii) any liability of such Person for the obligations of
another through any agreement to purchase, repurchase or otherwise acquire such
obligation or any property constituting security therefor, to provide funds for
the payment or discharge of such obligation or to maintain the solvency,
financial condition or any balance sheet item or level of income of another.
The amount of any Guarantee shall be equal to the amount of the obligation so
guaranteed or otherwise supported or, if not a fixed and determined amount, the
maximum amount so guaranteed or otherwise supported.
"HAZARDOUS MATERIALS" means all or any of the following: (a) substances
that are defined or listed in, or otherwise classified pursuant to, any
applicable Environmental Laws as "hazardous substances", "hazardous materials",
"hazardous wastes", "toxic substances" or any other formulation intended to
define, list or classify substances by reason of deleterious properties such as
ignitability, corrosivity, reactivity, carcinogenicity, reproductive toxicity or
"TLCP" toxicity, "EP toxicity"; (b) oil, petroleum or petroleum derived
substances, natural gas, natural gas liquids or synthetic gas and drilling
fluids, produced waters and other wastes associated with the exploration,
development or production of crude oil, natural gas or geothermal resources; (c)
any flammable substances or explosives or any radioactive materials; (d)
asbestos in any form; and (e) electrical equipment which contains any oil or
dielectric fluid containing levels of polychlorinated biphenyls in excess of
fifty parts per million.
"INDEBTEDNESS" means, with respect to a Person, at the time of computation
thereof, all of the following (without duplication): (a) obligations of such
Person in respect of money borrowed; (b) obligations of such Person (other than
trade debt incurred in the ordinary course of business), whether or not for
money borrowed (i) represented by notes payable, or drafts accepted, in each
case representing extensions of credit, (ii) evidenced by bonds, debentures,
notes or similar instruments, or (iii) constituting purchase money indebtedness,
conditional sales contracts, title retention debt instruments or other similar
instruments, upon which interest charges are customarily paid or that are issued
or assumed as full or partial payment for property; (c) Capitalized Lease
Obligations of such Person; (d) all reimbursement obligations of such Person
under any letters of credit or
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<PAGE>
acceptances (whether or not the same have been presented for payment); and (e)
all Indebtedness of other Persons which (i) such Person has Guaranteed or is
otherwise recourse to such Person or (ii) are secured by a Lien on any property
of such Person.
"INTELLECTUAL PROPERTY" has the meaning given that term in Section 7.1.(t).
"INTEREST EXPENSE" means, with respect to a Person and for any period, (a)
the total consolidated interest expense (including, without limitation,
capitalized interest expense and interest expense attributable to Capitalized
Lease Obligations) of such Person and in any event shall include all interest
expense with respect to any Indebtedness in respect of which such Person is
wholly or partially liable, plus (b) to the extent not included in the preceding
----
clause (a), such Person's proportionate share of all paid or accrued interest
expense for such period of Unconsolidated Affiliates of such Person.
"INTEREST PERIOD" means, at times when the Borrower shall elect that the
Loan shall be a LIBOR Loan, each period commencing on the last day of the next
preceding Interest Period for such Loan and ending on the numerically
corresponding day in the first, second, third or sixth calendar month
thereafter, as the Borrower may select in a Notice of Continuation or Notice of
Conversion, as the case may be, except that each Interest Period that commences
on the last Business Day of a calendar month (or on any day for which there is
no numerically corresponding day in the appropriate subsequent calendar month)
shall end on the last Business Day of the appropriate subsequent calendar month.
Notwithstanding the foregoing: (i) if any Interest Period would otherwise end
after the Termination Date, such Interest Period shall end on the Termination
Date; (ii) each Interest Period that would otherwise end on a day which is not a
Business Day shall end on the next succeeding Business Day; and (iii)
notwithstanding the immediately preceding clause (i), no Interest Period shall
have a duration of less than one month and, if the Interest Period would
otherwise be a shorter period, the Loan shall be a Base Rate Loan. The initial
Interest Period applicable to the Loan shall extend for one month from the
Effective Date.
"INTEREST RATE AGREEMENT" means any interest rate swap agreement, interest
rate cap agreement, interest rate collar agreement or other similar contractual
agreement or arrangement entered into with a nationally recognized financial
institution then having an Investment Grade Rating for the purpose of protecting
against fluctuations in interest rates.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended.
"INVESTMENT" means, with respect to any Person and whether or not such
investment constitutes a controlling interest in such Person: (a) the purchase
or other acquisition of any share of capital stock or other equity interest,
evidence of Indebtedness or other security issued by any other Person; (b) any
loan, advance or extension of credit to, or contribution to the capital of, any
other Person; (c) any Guarantee of the Indebtedness of any other Person; (d) the
subordination of any claim against a Person to other Indebtedness of such
Person; and (e) any other investment in any other Person.
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"INVESTMENT GRADE RATING" means a Credit Rating of BBB- or higher by S&P,
Baa3 or higher by Moody's, or the equivalent or higher of either such rating by
another Rating Agency.
"LENDER" means each financial institution from time to time party hereto as
a "Lender" together with its respective successors and assigns.
"LENDER'S SHARE OF LIBOR LOAN" means, for each Lender, the portion of a
LIBOR Loan owned by such Lender.
"LENDING OFFICE" means, for each Lender and for each Type of Loan, the
office of such Lender specified as such on its signature page hereto or in the
applicable Assignment and Acceptance Agreement, or such other office of such
Lender as such Lender may notify the Administrative Agent in writing from time
to time.
"LIBOR" means, when the Loan is a LIBOR Loan, for any Interest Period
therefor, the rate per annum (rounded upwards, if necessary, to the nearest
1/100 of 1%) appearing on Telerate Page 3750 (or any successor page) as the
London interbank offered rate for deposits in Dollars for a period of comparable
duration to such Interest Period at approximately 11:00 a.m. (London time) two
Business Days prior to the first day of such Interest Period. If for any reason
such rate is not available, the term "LIBOR" shall mean, for any LIBOR Loan for
any Interest Period therefor, the rate per annum (rounded upwards, if necessary,
to the nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as the London
interbank offered rate for deposits in Dollars at approximately 11:00 a.m.
(London time) two Business Days prior to the first day of such Interest Period
for a term comparable to such Interest Period; provided, however, if more than
one rate is specified on Reuters Screen LIBO Page, the applicable rate shall be
the arithmetic mean of all such rates.
"LIBOR LOAN" means the Loan when it is subject to a rate based on LIBOR.
"LIEN" as applied to the property of any Person means: (a) any security
interest, encumbrance, mortgage, deed to secure debt, deed of trust, pledge,
lien, charge, ground lease or lease constituting a Capitalized Lease Obligation,
conditional sale or other title retention agreement, or other security title or
encumbrance of any kind in respect of any property of such Person, or upon the
income or profits therefrom; (b) any arrangement, express or implied, under
which any property of such Person is transferred, sequestered or otherwise
identified for the purpose of subjecting the same to the payment of Indebtedness
or performance of any other obligation in priority to the payment of the
general, unsecured creditors of such Person; (c) the filing of any financing
statement under the Uniform Commercial Code or its equivalent in any
jurisdiction and (d) any agreement by such Person to grant, give, or otherwise
convey any of the foregoing.
"LOAN" means the term loan made by the Lenders to the Borrower pursuant to
Section 2.1 on the Effective Date.
"LOAN DOCUMENT" means this Agreement, each Note, and each other document or
instrument now or hereafter executed and delivered by a Loan Party in connection
with, pursuant
11
<PAGE>
to or relating to this Agreement.
"LOAN PARTY" means each of the Borrower, each other Person who Guarantees
all or a portion of the Obligations and/or who pledges any collateral security
to secure all or a portion of the Obligations. Schedule 1.1.(A) sets forth the
Loan Parties in addition to the Borrower as of the Agreement Date.
"LOANS RECEIVABLE" means promissory notes held by the Borrower or any
Subsidiary which promissory notes (i) are secured by a mortgage or other similar
Lien on real property and related improvements and (ii) are not subject to any
Lien.
"MATERIAL ADVERSE EFFECT" means a materially adverse effect on (a) the
business, assets, liabilities, financial condition, results of operations or
business prospects of the Borrower and its Subsidiaries taken as a whole, (b)
the ability of the Borrower or any other Loan Party to perform its obligations
under any Loan Document to which it is a party, (c) the validity or
enforceability of any of the Loan Documents, (d) the rights and remedies of the
Lenders and the Administrative Agent under any of such Loan Documents or (e) the
timely payment of the principal of or interest on the Loan or other amounts
payable in connection therewith. All determinations of materiality shall be
made by the Requisite Lenders in their reasonable judgment unless expressly
provided otherwise and shall be subject to the arbitration provisions contained
in Section 13.4.
"MATERIAL CONTRACT" means any contract or other arrangement (other than the
Loan Documents), whether written or oral, to which the Borrower or any other
Loan Party is a party as to which the breach, nonperformance, cancellation or
failure to renew by any party thereto could reasonably be expected to have a
Material Adverse Effect.
"MATERIAL PLAN" means, at any time, a Plan or Plans having aggregate
Unfunded Liabilities in excess of $500,000.
"MATERIAL SUBSIDIARY" means any Subsidiary of the Borrower which (a) owns,
or otherwise has any interest in, any Unencumbered Pool Property or any other
property or asset which is taken into account when calculating Unencumbered
Asset Value; (b) has total assets greater than or equal to 10% of total assets
of the Borrower and its Subsidiaries determined on a consolidated basis
(calculated as of the fiscal quarter most recently ending) or (c) has net
earnings greater than or equal to 10% of the net earnings of the Borrower and
its Subsidiaries determined on a consolidated basis.
"MOODY'S" means Moody's Investors Services, Inc.
"MORTGAGE" means a mortgage, deed of trust, deed to secure debt or similar
security instrument made or to be made by a Person owning an interest in real
property granting a Lien on such interest in real property as security for the
payment of Indebtedness.
"MULTIEMPLOYER PLAN" means at any time an employee pension benefit plan
within the meaning of Section 4001(a)(3) of ERISA to which any member of the
ERISA Group is then making
12
<PAGE>
or accruing an obligation to make contributions or has within the preceding five
plan years made contributions, including for these purposes any Person which
ceased to be a member of the ERISA Group during such five year period.
"NET OPERATING INCOME" means, for any Unencumbered Pool Property and for a
given period, the sum of the following (without duplication): (a) rents and
other revenues received in the ordinary course from such Unencumbered Pool
Property (including proceeds of rent loss insurance but excluding pre-paid rents
and revenues and security deposits except to the extent applied in satisfaction
of tenants' obligations for rent) minus (b) all expenses (other than interest)
-----
paid or accrued related to the ownership, operation or maintenance of such
Unencumbered Pool Property, including but not limited to taxes, assessments and
other similar charges, insurance, utilities, payroll costs, maintenance, repair
and landscaping expenses, marketing expenses, and general and administrative
expenses (including an appropriate allocation for legal, accounting,
advertising, marketing and other expenses incurred in connection with such
Unencumbered Pool Property, but specifically excluding general overhead expenses
of the Borrower and any property management fees).
"NET PROCEEDS" means, with respect to an Equity Issuance by a Person, the
aggregate amount of all cash received by such Person in respect of such Equity
Issuance net of investment banking fees, legal fees, accountants' fees,
underwriting discounts and commissions and other customary fees and expenses
actually incurred by such Person in connection with such Equity Issuance.
"NON-CONFORMING PROPERTY" has the meaning given that term in Section 4.2.
"NON-GUARANTOR SUBSIDIARY" means (a) Congressional Plaza Associates Joint
Venture, Street Retail Forest Hills I LLC, Street Retail West I L.P., Street
Retail West II L.P., FR Pike 7 Limited Partnership and FRIT San Jose Town and
Country Village LLC and (b) any Subsidiary of the Borrower which becomes a
Material Subsidiary after the date hereof and which is prohibited from executing
a Guaranty or Accession Agreement, as applicable, pursuant to Sections
6.1.(a)(viii) and 8.13. herein, by (i) the terms of its articles of
incorporation, bylaws, declaration of trust, partnership agreement, operating
agreement or other comparable organizational document (and which terms have not
been waived in accordance with the terms of any such organizational document) or
(i) Applicable Law.
"NOTE" means a Term Note.
"NOTICE OF CONTINUATION" means a notice in the form of Exhibit E to be
delivered to the Administrative Agent pursuant to Section 2.8. evidencing the
Borrower's request for the Continuation of the Loan as a LIBOR Loan.
"NOTICE OF CONVERSION" means a notice in the form of Exhibit F to be
delivered to the Administrative Agent pursuant to Section 2.9. evidencing the
Borrower's request for the Conversion of the Loan from one Type to another Type.
"OBLIGATIONS" means, individually and collectively: (a) the aggregate
principal balance of,
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<PAGE>
and all accrued and unpaid interest on, all Loans; and (b) all other
indebtedness, liabilities, obligations, covenants and duties of the Borrower and
the other Loan Parties owing to the Administrative Agent or any Lender of every
kind, nature and description, under or in respect of this Agreement or any of
the other Loan Documents, including, without limitation, the Fees and
indemnification obligations, whether direct or indirect, absolute or contingent,
due or not due, contractual or tortious, liquidated or unliquidated, and whether
or not evidenced by any promissory note.
"OCCUPANCY RATE" means, with respect to a Real Property Asset at such time,
the ratio, expressed as a percentage, of (a) the net rentable square footage of
such Real Property Asset actually occupied by tenants paying rent pursuant to
binding leases to (b) the aggregate net rentable square footage of such Real
Property Asset at such time.
"PARTICIPANT" has the meaning given that term in Section 13.5.(c).
"PBGC" means the Pension Benefit Guaranty Corporation and any successor
agency.
"PERMITTED LIENS" means, as to any Person: (a) Liens securing taxes,
assessments and other charges or levies imposed by any Governmental Authority
(excluding any Lien imposed pursuant to any of the provisions of ERISA) or the
claims of materialmen, mechanics, carriers, warehousemen or landlords for labor,
materials, supplies or rentals incurred in the ordinary course of business,
which are not at the time required to be paid or discharged under Section 8.6.;
(b) Liens consisting of deposits or pledges made, in the ordinary course of
business, in connection with, or to secure payment of, obligations under
workmen's compensation, unemployment insurance or similar Applicable Laws; (c)
Liens consisting of encumbrances in the nature of zoning restrictions,
easements, and rights or restrictions of record on the use of real property,
which do not materially detract from the value of such property or impair the
use thereof in the business of such Person; (d) Liens in existence as of the
Agreement Date and set forth in Schedule 7.1.(f); and (e) Liens in favor of the
Administrative Agent for the benefit of the Lenders.
"PERSON" means an individual, corporation, partnership, limited liability
company, association, trust or unincorporated organization, or a government or
any agency or political subdivision thereof.
"PLAN" means at any time an employee pension benefit plan (other than a
Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Internal Revenue Code and
either (i) is maintained, or contributed to, by any member of the ERISA Group
for employees of any member of the ERISA Group or (ii) has at any time within
the preceding five years been maintained, or contributed to, by any Person which
was at such time a member of the ERISA Group for employees of any Person which
was at such time a member of the ERISA Group.
"PNC" means PNC Bank, National Association, and its successors and assigns.
"POST-DEFAULT RATE" means, in respect of the principal of the Loan or any
other Obligation
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<PAGE>
that is not paid when due (whether at stated maturity, by acceleration, by
optional or mandatory prepayment or otherwise), a rate per annum equal to four
percent (4.0%) plus the Base Rate as in effect from time to time.
"PREFERRED STOCK" means, with respect to any Person, shares of capital
stock of, or other equity interests in, such Person which are entitled to
preference or priority over any other capital stock of, or other equity interest
in, such Person in respect of the payment of dividends or distribution of assets
upon liquidation or both.
"PRIME RATE" means the rate of interest per annum announced publicly by the
Administrative Agent as its prime rate from time to time. The Prime Rate is not
necessarily the best or the lowest rate of interest offered by the
Administrative Agent or any Lender.
"PRINCIPAL OFFICE" means the office of the Administrative Agent located at
One PNC Plaza, 249 Fifth Avenue, Mail Stop, P1-POPP-22-1, Pittsburgh, PA 15222-
2707, Attention: Arlene Ohler, Agency Services, or such other office of the
Administrative Agent as the Administrative Agent may designate from time to
time.
"QUARTERLY DATE" means the last Business Day of March, June, September and
December in each year, the first of which shall be December 31, 1998.
"RATING AGENCY" means S&P, Moody's Duff & Phelps/MCM, Fitch Investors
Service, Inc. or any other nationally recognized securities rating agency
selected by the Borrower and reasonably acceptable to the Administrative Agent.
"REAL PROPERTY ASSETS" means the real property assets currently owned in
whole or in part by the Borrower or any Subsidiary and listed on Schedule
7.1.(f), as such Schedule may be modified from time to time to reflect sales,
transfers, assignments, conveyances, development, acquisitions and purchases of
real property assets.
"REGISTER" has the meaning given that term in Section 13.5.(e).
"REGULATORY CHANGE" means, with respect to any Lender, any change effective
after the Agreement Date in Applicable Law (including without limitation,
Regulation D of the Board of Governors of the Federal Reserve System) or the
adoption or making after such date of any interpretation, directive or request
applying to a class of banks, including such Lender, of or under any Applicable
Law (whether or not having the force of law and whether or not failure to comply
therewith would be unlawful) by any Governmental Authority or monetary authority
charged with the interpretation or administration thereof or compliance by any
Lender with any request or directive regarding capital adequacy.
"REIT" means a Person qualifying for treatment as a "real estate investment
trust" under the Internal Revenue Code.
"REPLACEMENT RESERVES" means, for any period and with respect to any Real
Property
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<PAGE>
Asset, an amount equal to (a) $0.60 times, (b) a fraction, the numerator of
-----
which is the number of days of such period, and the denominator of which is 365
times the aggregate gross leasable square feet of such Real Property Asset. If
- -----
the term Replacement Reserves is used without reference to any specific Real
Property Asset, then it shall be determined on an aggregate basis with respect
to all Real Property Assets and a proportionate share of all real property of
all Unconsolidated Affiliates.
"REQUISITE LENDERS" means, as of any date, Lenders holding at least 66-2/3%
of the Obligations,provided that, so long as there are at least four (4)
Lenders, the Requisite Lenders must consist of at least three (3) Lenders.
"RESTRICTED PAYMENT" means: (a) any dividend or other distribution, direct
or indirect, on account of any shares of any class of stock or other equity
interest of the Borrower or any of its Subsidiaries now or hereafter
outstanding, except a dividend payable solely in shares of that class of stock
to the holders of that class; (b) any redemption, conversion, exchange,
retirement, sinking fund or similar payment, purchase or other acquisition for
value, direct or indirect, of any shares of any class of stock or other equity
interest of the Borrower or any of its Subsidiaries now or hereafter
outstanding; (c) any payment or prepayment of principal of, premium, if any, or
interest on, redemption, conversion, exchange, purchase, retirement, defeasance,
sinking fund or similar payment with respect to, any Subordinated Debt; and (d)
any payment made to retire, or to obtain the surrender of, any outstanding
warrants, options or other rights to acquire shares of any class of stock of the
Borrower or any of its Subsidiaries now or hereafter outstanding.
"REVOLVING CREDIT AGREEMENT" means that certain Credit Agreement dated as
of December 19, 1997, by and among the Borrower, CoreStates Bank, N.A., as
Syndication Agent, First Union National Bank as Administrative Bank and
Arranger, Wells Fargo Bank, National Association as Documentation Agent and Co-
Arranger and the other financial institutions signatory thereto, as such Credit
Agreement may be amended, modified, supplemented or restated from time to time.
"REVOLVING CREDIT COMMITMENTS" means the Commitments as defined in the
Revolving Credit Agreement, as such Commitments may be adjusted from time to
time.
"SECURED INDEBTEDNESS" means, with respect to any Person, any Indebtedness
of such Person that is secured in any manner by any Lien, and shall include
without duplication such Person's pro rata share of the Secured Indebtedness of
any of such Person's Unconsolidated Affiliates.
"SECURITIES ACT" means the Securities Act of 1933, as amended from time to
time, together with all rules and regulations issued thereunder.
"SHAREHOLDER'S EQUITY" means, for a Person at any given time, such Person's
shareholder's equity determined on a consolidated basis in accordance with GAAP
plus, in the case of the Borrower, (i) the "minority interest" as reported on
- ----
the Borrower's most recent quarterly consolidated balance sheet as of the end of
such quarter and (ii) the amount by which
16
<PAGE>
the Borrower's accumulated dividends in excess of its net income determined on a
consolidated basis exceeds $208,000,000.
"SOLVENT" means, when used with respect to any Person, that (a) the fair
value and the fair salable value of its assets (excluding any Indebtedness due
from any affiliate of such Person) are each in excess of the fair valuation of
its total liabilities (including all contingent liabilities); and (b) such
Person is able to pay its debts or other obligations in the ordinary course as
they mature and (c) that the Person has capital not unreasonably small to carry
on its business and all business in which it proposes to be engaged.
"S&P" means Standard & Poor's Rating Group, a division of McGraw-Hill
Companies, Inc.
"SUBORDINATED DEBT" means Indebtedness of the Borrower or any of its
Subsidiaries that is subordinated in right of payment and otherwise to the Loans
and the other Obligations in a manner satisfactory to the Administrative Agent
in its sole and absolute discretion.
"SUBSIDIARY" means, for any Person, any corporation, partnership or other
entity of which at least a majority of the securities or other ownership
interests having by the terms thereof ordinary voting power to elect a majority
of the board of directors or other persons performing similar functions of such
corporation, partnership or other entity (without regard to the occurrence of
any contingency) is at the time directly or indirectly owned or controlled by
such Person or one or more Subsidiaries of such Person or by such Person and one
or more Subsidiaries of such Person. "WHOLLY OWNED SUBSIDIARY" means any such
corporation, partnership or other entity of which all of the equity securities
or other ownership interests (other than, in the case of a corporation,
directors' qualifying shares) are so owned or controlled.
"SYNDICATION AGENT" means Commerzbank Aktiengesellschaft, New York Branch,
in its capacity as "Syndication Agent" hereunder and shall include the
Syndication Agent's successors and assigns.
"TAXES" has the meaning given that term in Section 3.12.
"TERMINATION DATE" means December 19, 2002.
"TERM NOTE" has the meaning given that term in Section 2.10.(a).
"TOTAL LIABILITIES" means, as to any Person and as of a given date, all
liabilities which would, in conformity with GAAP, be properly classified as a
liability on the consolidated balance sheet of such Person as at such date, and
in any event shall include (without duplication): (a) all Indebtedness of such
Person; (b) all accounts payable of such Person; (c) all accrued expenses of
such Person and (d) to the extent not already included in any of the preceding
clauses, such Person's proportionate share of the Total Liabilities of any
Unconsolidated Affiliate of such Person.
"TYPE" with respect to the Loan, refers to whether the Loan is a LIBOR
Loan, or a Base Rate Loan.
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"UNCONSOLIDATED AFFILIATE" shall mean, with respect to any Person, any
other Person in whom such Person holds an Investment, which Investment is
accounted for in the financial statements of such Person on an equity basis of
accounting and whose financial results would not be consolidated under GAAP with
the financial results of such Person on the consolidated financial statements of
such Person.
"UNDER CONSTRUCTION" means, with respect to a Real Property Asset, that
construction of improvements has begun (as evidenced by foundation excavation)
on such Real Property Asset but has not yet been completed (as such completion
shall be evidenced by the issuance of a certificate of occupancy or its
equivalent after completion of all budgeted amenities).
"UNENCUMBERED POOL PROPERTIES" means those Eligible Properties that have
been approved pursuant to Article IV.
"UNENCUMBERED ASSET VALUE" means the sum of (a) the Capitalized NOI for
each Unencumbered Pool Property owned by the Borrower or a Subsidiary during the
fiscal quarter most recently ending, plus (b) the undepreciated purchase price
----
paid for any Unencumbered Pool Property acquired by the Borrower or a Subsidiary
during the fiscal quarter most recently ending (less any amounts paid to the
Borrower or any Subsidiary as a purchase price adjustment, held in escrow,
retained as a contingency reserve, or other similar arrangements), plus (c) the
----
Capitalized NOI for each Unencumbered Pool Property leased under a Capital Lease
by the Borrower or a Subsidiary during the fiscal quarter most recently ending,
plus (d) Capitalized Loan Receivable Income. For purposes of determining the
- ----
Unencumbered Asset Value, the following limitations shall apply: (i) if the
Capitalized NOI of an Unencumbered Pool Property exceeds 9.99% of the
Unencumbered Asset Value, such excess shall be excluded from Unencumbered Asset
Value; (ii) with respect to any Unencumbered Pool Property owned or leased by a
Subsidiary that is not a Wholly Owned Subsidiary, then (x) only the Borrower's
pro rata share (determined in proportion to the Borrower's ownership interest in
such Subsidiary) of the Capitalized NOI or undepreciated purchase price, as
applicable, of such Unencumbered Pool Property shall be included in Unencumbered
Asset Value, (y) not more than 15% of the total Unencumbered Asset Value shall
be attributable to Unencumbered Pool Properties owned or leased by Subsidiaries
that are not a Wholly Owned Subsidiary and (z) not more than 7.5% of the total
Unencumbered Asset Value shall be attributable to Unencumbered Pool Properties
owned or leased by Non-Guarantor Subsidiaries; (iii) not more than $300,000,000
of the total Unencumbered Asset Value shall be attributable to Unencumbered Pool
Properties of the type described in the immediately preceding clause (c) and
(iv) not more than 5% of the total Unencumbered Asset Value shall be
attributable to Capitalized Loan Receivable Income. For purposes of this
definition only and as long as the Borrower continues to own an equity interest
in each equal to at least the percentage amount set forth for each on Schedule
7.1.(b) as of the Agreement Date, each of the following shall be considered a
Wholly Owned Subsidiary: Governor Plaza Associates, Andorra Associates, Shopping
Center Associates , FR Pike 7 Limited Partnership, FRIT San Jose Town and
Country Village LLC and Berman Enterprises II, Limited Partnership.
"UNFUNDED LIABILITIES" means, with respect to any Plan at any time, the
amount (if any) by which (a) the value of all benefit liabilities under such
Plan, determined on a plan termination basis
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<PAGE>
using the assumptions prescribed by the PBGC for purposes of Section 4044 of
ERISA, exceeds (b) the fair market value of all Plan assets allocable to such
liabilities under Title IV of ERISA (excluding any accrued but unpaid
contributions), all determined as of the then most recent valuation date for
such Plan, but only to the extent that such excess represents a potential
liability of a member of the ERISA Group to the PBGC or any other Person under
Title IV of ERISA.
"UNSECURED INDEBTEDNESS" means, with respect to a Person, all Indebtedness
of such Person that is not Secured Indebtedness.
"VARIABLE RATE DEBT" means all Indebtedness of Borrower and its
Subsidiaries which bears interest at fluctuating rates (and in any event shall
include all Loans and other Indebtedness of the Borrower under any of the Loan
Documents) and for which Borrower or such Subsidiary has not obtained Interest
Rate Agreements which effectively cause such variable rates to be equivalent to
fixed rates less than or equal to 9.0% per annum.
"Year 2000 Problem" has the meaning given that term in Section 7.1(y).
SECTION 1.2 GENERAL; REFERENCES TO TIMES.
Unless otherwise indicated, all accounting terms, ratios and measurements
shall be interpreted or determined in accordance with GAAP applied on a basis
consistent (except for changes concurred in by the Borrower's independent public
accountants) with the most recent audited consolidated financial statements of
the Borrower and its Subsidiaries delivered to the Lenders pursuant to the terms
of this Agreement. References in this Agreement to "Sections", "Articles",
"Exhibits" and "Schedules" are to sections, articles, exhibits and schedules
herein and hereto unless otherwise indicated. References in this Agreement to
any document, instrument or agreement (a) shall include all exhibits, schedules
and other attachments thereto, (b) shall include all documents, instruments or
agreements issued or executed in replacement thereof, to the extent permitted
hereby and (c) shall mean such document, instrument or agreement, or replacement
or predecessor thereto, as amended, supplemented, restated or otherwise modified
from time to time to the extent permitted hereby and in effect at any given
time. Wherever from the context it appears appropriate, each term stated in
either the singular or plural shall include the singular and plural, and
pronouns stated in the masculine, feminine or neuter gender shall include the
masculine, the feminine and the neuter. Unless explicitly set forth to the
contrary, a reference to "Subsidiary" means a Subsidiary of the Borrower or a
Subsidiary of such Subsidiary and a reference to an "Affiliate" means a
reference to an Affiliate of the Borrower. Titles and captions of Articles,
Sections, subsections and clauses in this Agreement are for convenience only,
and neither limit nor amplify the provisions of this Agreement. Unless
otherwise indicated, all references to time are references to Pittsburgh,
Pennsylvania time.
ARTICLE II. CREDIT FACILITY
SECTION 2.1 TERM LOAN.
(a) Generally. Subject to the terms and conditions hereof, on the
---------
Effective Date, each Lender severally and not jointly agrees to make a portion
of the Loan to the Borrower in an
19
<PAGE>
aggregate principal amount equal to the amount of such Lender's Commitment. The
Borrower may not reborrow any portion of the Loan which may have been repaid.
(b) [Intentionally Omitted].
(c) Disbursements of Loan Proceeds. No later than 3:00 p.m. on the
------------------------------
Effective Date, each Lender will make available for the account of its
applicable Lending Office to the Administrative Agent at the Principal Office,
in immediately available funds, the proceeds of the portion of the Loan to be
made by such Lender. Subject to satisfaction of the applicable conditions set
forth in Article VI. for such borrowing, the Administrative Agent will make the
proceeds of such borrowing available to the Borrower no later than 4:00 p.m. on
the Effective Date and at the account specified by the Borrower in a notice
delivered on the Effective Date.
SECTION 2.2 [INTENTIONALLY OMITTED].
SECTION 2.3 [INTENTIONALLY OMITTED].
SECTION 2.4 RATES AND PAYMENT OF INTEREST ON THE LOAN.
(a) Rates. The Borrower promises to pay to the Administrative Agent for
-----
the account of each Lender interest on the unpaid principal amount of the
portion of the Loan made by such Lender for the period from and including the
date of the making of the Loan to but excluding the date that the Loan shall be
paid in full, or, if earlier, at the end of the applicable Interest Period, at
the following per annum rates:
(i) during such periods as the Loan is a Base Rate Loan, , at the
Base Rate (as in effect from time to time) plus the Applicable Margin; and
(ii) during such periods as the Loan is a LIBOR Loan, at the Adjusted
Eurodollar Rate for the Interest Period therefor, plus the Applicable
Margin.
Notwithstanding the foregoing, during the continuance of an Event of Default the
Borrower hereby promises to pay to the Administrative Agent for account of each
Lender interest at the Post-Default Rate on the aggregate outstanding principal
of the portion of the Loan made by such Lender and on any other amount payable
by the Borrower hereunder or under the Note held by such Lender (including
without limitation, accrued but unpaid interest to the extent permitted under
Applicable Law).
(b) Payment of Interest. Accrued interest on the Loan shall be payable (i)
-------------------
when the Loan is a Base Rate Loan, monthly on the first Business Day of each
calendar month, (ii) when the Loan is a LIBOR Loan, on the last day of each
Interest Period therefor and, if such Interest Period is longer than three
months, at three-month intervals following the first day of such Interest
Period, and (iii) when the Loan is a LIBOR Loan, upon the payment, prepayment or
Continuation thereof or the Conversion of the Loan to another Type. Interest
payable at the Post-Default Rate shall be payable from time to time on demand.
Promptly after the determination of any interest rate provided for herein or any
change therein, the Administrative Agent shall give notice thereof to the
Lenders to
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which such interest is payable and to the Borrower. All determinations by the
Administrative Agent of an interest rate hereunder shall be conclusive and
binding on the Lenders and the Borrower for all purposes, absent manifest error.
SECTION 2.5 NUMBER OF INTEREST PERIODS.
Except to the extent required to comply with Section 5.5., there may be no
more than one (1) Interest Period outstanding at any one time and the Loan shall
never be subject to more than one interest rate.
SECTION 2.6 REPAYMENT OF THE LOAN.
The Borrower shall repay the entire outstanding principal amount of, and
all accrued but unpaid interest on, the Loan on the Termination Date.
SECTION 2.7 PREPAYMENTS.
Subject to Section 5.4., the Borrower may prepay the Loan in whole or in
part at any time without premium or penalty.
SECTION 2.8 CONTINUATION.
So long as no Default or Event of Default shall have occurred and be
continuing, the Borrower may on any Business Day, when the Loan is a LIBOR Loan,
elect to maintain the Loan as a LIBOR Loan by selecting a new Interest Period
for the Loan. Each new Interest Period selected under this Section shall
commence on the last day of the current Interest Period. Each selection of a
new Interest Period shall be made by the Borrower giving to the Administrative
Agent a Notice of Continuation not later than 12:00 noon on the third Business
Day prior to the date of any such Continuation. Such notice by the Borrower of
a Continuation shall be by telephone or telecopy, confirmed immediately in
writing if by telephone, in the form of a Notice of Continuation, specifying (a)
the proposed date of such Continuation, and (b) the duration of the selected
Interest Period, all of which shall be specified in such manner as is necessary
to comply with all limitations on the Loan outstanding hereunder. Each Notice
of Continuation shall be irrevocable by and binding on the Borrower once given.
Promptly after receipt of a Notice of Continuation, the Administrative Agent
shall notify each Lender by telex or telecopy, or other similar form of
transmission of the proposed Continuation. If the Borrower shall fail to select
in a timely manner a new Interest Period in accordance with this Section, the
Loan will automatically, on the last day of the current Interest Period
therefor, become a Base Rate Loan, notwithstanding failure of the Borrower to
comply with Section 2.9.
SECTION 2.9 CONVERSION.
So long as no Default or Event of Default shall have occurred and be
continuing, the Borrower may on any Business Day, upon the Borrower's giving of
a Notice of Conversion to the Administrative Agent, Convert the Loan from one
Type into another Type. Any Conversion to a Base Rate Loan shall be made on,
and only on, the last day of an Interest Period. Each such Notice
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of Conversion shall be given not later than 12:00 noon on the Business Day of
any proposed Conversion into a Base Rate Loan and not later than 12:00 noon on
the third Business Day prior to the date of any proposed Conversion into a LIBOR
Loan. Promptly after receipt of a Notice of Conversion, the Administrative Agent
shall notify each Lender by telecopy or other similar form of transmission of
the proposed Conversion. Subject to the restrictions specified above, each
Notice of Conversion shall be by telephone or telecopy confirmed immediately in
writing if by telephone, in the form of a Notice of Conversion specifying (a)
the requested date of such Conversion, (b) the Type into which the Loan is to be
Converted, (c) the Type of Loan that the Loan is to be Converted into and (e) if
such Conversion is into a LIBOR Loan, the requested duration of the Interest
Period. Each Notice of Conversion shall be irrevocable by and binding on the
Borrower once given.
SECTION 2.10 NOTES.
(a) Term Notes. The portion of the Loan made by each Lender shall, in
----------
addition to this Agreement, also be evidenced by a promissory note of the
Borrower substantially in the form of Exhibit J (each a "Term Note"), payable to
the order of such Lender in a principal amount equal to the amount of its
Commitment as originally in effect and otherwise duly completed.
(b) Records; Endorsement on Transfer. The date, amount, interest rate,
--------------------------------
Type and duration of Interest Periods (if applicable) of the portion of the Loan
made by each Lender to the Borrower, and each payment made on account of the
principal thereof, shall be recorded by such Lender on its books and such
entries shall be binding on the Borrower absent manifest error. The failure of
such Lender to make any such recordation shall not affect the obligations of the
Borrower to make a payment when due of any amount owing hereunder or under such
Note in respect of the portion of the Loan evidenced by such Note.
ARTICLE III. PAYMENTS, FEES AND OTHER GENERAL PROVISIONS
SECTION 3.1 PAYMENTS.
Except to the extent otherwise provided herein, all payments of principal,
interest and other amounts to be made by the Borrower under this Agreement or
any other Loan Document shall be made in Dollars, in immediately available
funds, without deduction, set-off or counterclaim, to the Administrative Agent
at its Principal Office, not later than 2:00 p.m. on the date on which such
payment shall become due (each such payment made after such time on such due
date to be deemed to have been made on the next succeeding Business Day). Prior
to making any such payment, the Borrower shall give the Administrative Agent
notice of such payment. Subject to Sections 3.2. and 3.3., the Administrative
Agent, or any Lender for whose account any such payment is made, may (but shall
not be obligated to) debit the amount of any such payment which is not made by
such time from any special or general deposit account of the Borrower with the
Administrative Agent or such Lender, as the case may be (with notice to the
Borrower, the other Lenders and the Administrative Agent). The Borrower shall,
at the time of making each payment under this Agreement or any Note, specify to
the Administrative Agent the amounts payable by the Borrower hereunder to which
such payment is to be applied. Each payment received by the Administrative
Agent for the account of a Lender under this Agreement or any Note shall be paid
to such Lender at the applicable Lending
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Office of such Lender no later than 5:00 p.m. on the date of receipt. If the
Administrative Agent fails to pay such amount to a Lender as provided in the
previous sentence, the Administrative Agent shall pay interest on such amount
until paid at a rate per annum equal to the Federal Funds Rate from time to time
in effect. If the due date of any payment under this Agreement or any other Loan
Document would otherwise fall on a day which is not a Business Day such date
shall be extended to the next succeeding Business Day and interest shall be
payable for the period of such extension.
SECTION 3.2 PRO RATA TREATMENT.
Except to the extent otherwise provided herein: (a) each borrowing from the
Lenders under Section 2.1.(a) shall be made from the Lenders and, each payment
of the Fees under Section 3.6.(a), shall be made for account of the Lenders, and
shall be applied to the respective Commitments of the Lenders, pro rata
according to the amounts of their respective Commitments; (b) each payment or
prepayment of principal of the Loan by the Borrower shall be made for account of
the Lenders pro rata in accordance with the respective unpaid principal amounts
of the Loan held by them, provided that if immediately prior to giving effect to
any such payment in respect of the Loan the outstanding principal amount of the
Loan shall not be held by the Lenders pro rata in accordance with their
respective Commitments in effect at the time the Loan was made, then such
payment shall be applied to the Loan in such manner as shall result, as nearly
as is practicable, in the outstanding principal amount of the Loan being held by
the Lenders pro rata in accordance with their respective Commitments; (c) each
payment of interest on the Loan by the Borrower shall be made for account of the
Lenders pro rata in accordance with the amounts of interest on the Loan then due
and payable to the respective Lenders; and (d) the Conversion and Continuation
of the Loan of a particular Type (other than Conversions provided for by Section
5.5.) shall be made pro rata among the Lenders according to the amounts of their
respective portions of the Loan (in the case of Conversions and Continuations of
the Loan) and the then current Interest Period for each Lender's portion of the
Loan of such Type shall be coterminous.
SECTION 3.3 SHARING OF PAYMENTS, ETC.
The Borrower agrees that, in addition to (and without limitation of) any
right of set-off, banker's lien or counterclaim a Lender or the Administrative
Agent may otherwise have, each Lender and the Administrative Agent shall be
entitled, upon the occurrence and during the continuation of a Default or an
Event of Default, at its option but in the case of any Lender only with the
prior written consent of the Administrative Agent, to offset balances held by it
for the account of the Borrower at any of such Lender's (or the Administrative
Agent's) offices, in Dollars or in any other currency, against any principal of,
or interest on, any of such Lender's portion of the Loan hereunder (or other
Obligations owing to such Lender or the Administrative Agent hereunder) which is
not paid when due (regardless of whether such balances are then due to the
Borrower), in which case such Lender shall promptly notify the Borrower, all
other Lenders and the Administrative Agent thereof; provided, however, such
Lender's failure to give such notice shall not affect the validity of such
offset. If a Lender shall obtain payment of any principal of, or interest on,
the portion of the Loan made by it to the Borrower under this Agreement, or
shall obtain payment on any other Obligation owing by the Borrower through the
exercise of any right of set-off, banker's lien or counterclaim or similar right
or otherwise or through voluntary prepayments directly to a Lender or other
payments
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<PAGE>
made by the Borrower to a Lender not in accordance with the terms of this
Agreement and such payment should be distributed to the Lenders pro rata in
accordance with Section 3.2. or Section 11.4., as applicable, such Lender shall
promptly pay such amounts to the other Lenders and make such other adjustments
from time to time as shall be equitable, to the end that all the Lenders shall
share the benefit of such payment (net of any reasonable expenses which may be
incurred by such Lender in obtaining or preserving such benefit) pro rata in
accordance with Section 3.2. or Section 11.4. To such end, all the Lenders shall
make appropriate adjustments among themselves (by the resale of participations
sold or otherwise) if such payment is rescinded or must otherwise be restored.
Nothing contained herein shall require any Lender to exercise any such right or
shall affect the right of any Lender to exercise, and retain the benefits of
exercising, any such right with respect to any other indebtedness or obligation
of the Borrower.
SECTION 3.4 SEVERAL OBLIGATIONS.
No Lender shall be responsible for the failure of any other Lender to make
its portion of the Loan or to perform any other obligation to be made or
performed by such other Lender hereunder, and the failure of any Lender to make
its portion of the Loan or to perform any other obligation to be made or
performed by it hereunder shall not relieve the obligation of any other Lender
to make its portion of the Loan or to perform any other obligation to be made or
performed by such other Lender.
SECTION 3.5 MINIMUM AMOUNTS.
(a) Conversions and Continuations. Each Conversion and Continuation shall
-----------------------------
be applicable to the entire Loan.
(b) Prepayments. Each voluntary prepayment of the Loans shall be in an
-----------
aggregate minimum amount of $5,000,000 and integral multiples of $1,000,000 in
excess thereof.
SECTION 3.6 FEES.
(a) Closing Fee. In consideration of the extension of the credit facility
-----------
established hereby, on the Agreement Date, the Borrower agrees to pay to the
Administrative Agent for the account of the Lenders a closing fee to each Lender
in an amount equal to (i) such Lender's Commitment times (ii) one-half of one
percent (0.5%).
(b) [Intentionally Omitted].
(c) [Intentionally Omitted].
(d) [Intentionally Omitted].
(e) Administrative and Other Fees. The Borrower agrees to pay the
-----------------------------
administrative fees of the Administrative Agent in the amounts agreed upon by
the Administrative Agent and the Borrower in writing from time to time.
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<PAGE>
SECTION 3.7 COMPUTATIONS.
Unless otherwise expressly set forth herein, any accrued interest on the
Loan, or other Obligations due hereunder shall be computed on the basis of a
year of 360 days and the actual number of days elapsed.
SECTION 3.8 USURY.
In no event shall the amount of interest due or payable on the Loan or
other Obligations exceed the maximum rate of interest allowed by Applicable Law
and, if any such payment is paid by the Borrower or received by any Lender, then
such excess sum shall be credited as a payment of principal, unless the Borrower
shall notify the respective Lender in writing that the Borrower elects to have
such excess sum returned to it forthwith. It is the express intent of the
parties hereto that the Borrower not pay and the Lenders not receive, directly
or indirectly, in any manner whatsoever, interest in excess of that which may be
lawfully paid by the Borrower under Applicable Law.
SECTION 3.9 AGREEMENT REGARDING INTEREST AND CHARGES.
The parties hereto hereby agree and stipulate that the only charge imposed
upon the Borrower for the use of money in connection with this Agreement is and
shall be the interest specifically described in Section 2.4.(a)(i) and (ii).
Notwithstanding the foregoing, the parties hereto further agree and stipulate
that all agency fees, syndication fees, facility fees, letter of credit fees,
underwriting fees, default charges, funding or "breakage" charges, increased
cost charges, attorneys' fees and reimbursement for costs and expenses paid by
the Administrative Agent or any Lender to third parties or for damages incurred
by the Administrative Agent or any Lender, are charges made to compensate the
Administrative Agent or any such Lender for underwriting or administrative
services and costs or losses performed or incurred, and to be performed or
incurred, by the Administrative Agent and the Lenders in connection with this
Agreement and shall under no circumstances be deemed to be charges for the use
of money.
SECTION 3.10 STATEMENTS OF ACCOUNT.
The Administrative Agent will provide to the Borrower a monthly statement
of the Loan, accrued interest and Fees, charges and payments made pursuant to
this Agreement and the other Loan Documents, and such account rendered by the
Administrative Agent shall be deemed conclusive upon Borrower absent manifest
error. The failure of the Administrative Agent to deliver such a statement of
accounts shall not relieve or discharge the Borrower from any of its obligations
hereunder.
SECTION 3.11 DEFAULTING LENDERS.
(a) Generally. If for any reason any Lender (a "Defaulting Lender") shall
---------
fail or refuse to perform any of its obligations under this Agreement or any
other Loan Document to which it is a party within the time period specified for
performance of such obligation or, if no time period is specified, if such
failure or refusal continues for a period of five Business Days after notice
from the Administrative Agent, then, in addition to the rights and remedies that
may be available to the
25
<PAGE>
Administrative Agent or the Borrower under this Agreement or Applicable Law,
such Defaulting Lender's right to participate in the administration of the Loan,
this Agreement and the other Loan Documents, including without limitation, any
right to vote in respect of, to consent to or to direct any action or inaction
of the Administrative Agent or to be taken into account in the calculation of
the Requisite Lenders, shall be suspended during the pendency of such failure or
refusal. If a Lender is a Defaulting Lender because it has failed to make timely
payment to the Administrative Agent of any amount required to be paid to the
Administrative Agent hereunder (without giving effect to any notice or cure
periods), in addition to other rights and remedies which the Administrative
Agent or the Borrower may have under the immediately preceding provisions or
otherwise, the Administrative Agent shall be entitled (i) to collect interest
from such Defaulting Lender on such delinquent payment for the period from the
date on which the payment was due until the date on which the payment is made at
the Federal Funds Rate, (ii) to withhold or setoff and to apply in satisfaction
of the defaulted payment and any related interest, any amounts otherwise payable
to such Defaulting Lender under this Agreement or any other Loan Document until
such defaulted payment and related interest has been paid in full and such
default no longer exists and (iii) to bring an action or suit against such
Defaulting Lender in a court of competent jurisdiction to recover the defaulted
amount and any related interest. Any amounts received by the Administrative
Agent in respect of a Defaulting Lender's portion of the Loan shall not be paid
to such Defaulting Lender and shall be held uninvested by the Administrative
Agent and either applied against the purchase price of such portion of the Loan
under the following subsection (b) or paid to such Defaulting Lender upon the
default of such Defaulting Lender being cured.
(b) Purchase of Defaulting Lender's Commitment. Any Lender who is not a
------------------------------------------
Defaulting Lender shall have the right, but not the obligation, in its sole
discretion, to acquire all of a Defaulting Lender's Commitment. If more than
one Lender exercises such right, each such Lender shall have the right to
acquire such proportion of such Defaulting Lender's Commitment as they may
mutually agree. Upon any such purchase, the Defaulting Lender's interest in the
Loan and its rights hereunder (but not its liability in respect thereof or under
the Loan Documents or this Agreement to the extent the same relate to the period
prior to the effective date of the purchase) shall terminate on the date of
purchase, and the Defaulting Lender shall promptly execute all documents
reasonably requested to surrender and transfer such interest to the purchaser
thereof subject to and in accordance with the requirements set forth in Section
13.5.(d), including an appropriate Assignment and Acceptance Agreement. The
purchase price for the Commitment of a Defaulting Lender shall be equal to the
amount of the portion of the principal balance of the Loan outstanding and owed
by the Borrower to the Defaulting Lender. Prior to payment of such purchase
price to a Defaulting Lender, the Administrative Agent shall apply against such
purchase price any amounts retained by the Administrative Agent pursuant to the
last sentence of the immediately preceding subsection (a). The Defaulting
Lender shall be entitled to receive amounts owed to it by the Borrower under the
Loan Documents which accrued prior to the date of the default by the Defaulting
Lender, to the extent the same are received by the Administrative Agent from or
on behalf of the Borrower. There shall be no recourse against any Lender or the
Administrative Agent for the payment of such sums except to the extent of the
receipt of payments from any other party or in respect of the Loan.
SECTION 3.12 TAXES.
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(a) Taxes Generally. All payments by the Borrower of principal of, and
---------------
interest on, the Loan and all other Obligations shall be made free and clear of
and without deduction for any present or future excise, stamp or other taxes,
fees, duties, levies, imposts, charges, deductions, withholdings or other
charges of any nature whatsoever imposed by any taxing authority, but excluding
(i) franchise taxes, (ii) any taxes (other than withholding taxes) that would
not be imposed but for a connection between the Administrative Agent or a Lender
and the jurisdiction imposing such taxes (other than a connection arising solely
by virtue of the activities of the Administrative Agent or such Lender pursuant
to or in respect of this Agreement or any other Loan Document), (iii) any
withholding taxes payable with respect to payments hereunder or under any other
Loan Document under Applicable Law in effect on the Agreement Date, (iv) any
taxes imposed on or measured by any Lender's assets, net income, gross receipts
or branch profits and (v) any taxes arising after the Agreement Date solely as a
result of or attributable to a Lender changing its designated Lending Office
after the date such Lender becomes a party hereto (such non-excluded items being
collectively called "Taxes"). If any withholding or deduction from any payment
to be made by the Borrower hereunder is required in respect of any Taxes
pursuant to any Applicable Law, then the Borrower will:
(A) pay directly to the relevant Governmental Authority the full
amount required to be so withheld or deducted;
(B) promptly forward to the Administrative Agent an official receipt
or other documentation satisfactory to the Administrative Agent evidencing
such payment to such Governmental Authority; and
(C) pay to the Administrative Agent for its account or the account of
the applicable Lender, as the case may be, such additional amount or
amounts as is necessary to ensure that the net amount actually received by
the Administrative Agent or such Lender will equal the full amount that the
Administrative Agent or such Lender would have received had no such
withholding or deduction been required.
(b) Tax Indemnification. If the Borrower fails to pay any Taxes when due
-------------------
to the appropriate Governmental Authority or fails to remit to the
Administrative Agent, for its account or the account of the respective Lender,
as the case may be, the required receipts or other required documentary
evidence, the Borrower shall indemnify the Administrative Agent and the Lenders
for any incremental Taxes, interest or penalties that may become payable by the
Administrative Agent or any Lender as a result of any such failure. For
purposes of this Section, a distribution hereunder by the Administrative Agent
or any Lender to or for the account of any Lender shall be deemed a payment by
the Borrower.
(c) Tax Forms. Prior to the date that any Lender or participant organized
---------
under the laws of a jurisdiction outside the United States of America becomes a
party hereto, such Person shall deliver to the Borrower and the Administrative
Agent such certificates, documents or other evidence, as required by the
Internal Revenue Code or Treasury Regulations issued pursuant thereto (including
Internal Revenue Service Forms 4224, 1001, W-8 or W-9, as applicable, or
appropriate successor forms), properly completed, currently effective and duly
executed by such Lender or participant
27
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establishing that payments to it hereunder and under the Notes are (i) not
subject to United States Federal backup withholding tax or (ii) not subject to
United States Federal withholding tax under the Code because such payment is
either effectively connected with the conduct by such Lender or participant of a
trade or business in the United States or totally exempt from United States
Federal withholding tax by reason of the application of the provisions of a
treaty to which the United States is a party or such Lender is otherwise exempt.
ARTICLE IV. UNENCUMBERED POOL PROPERTIES
SECTION 4.1 ACCEPTANCE OF UNENCUMBERED POOL PROPERTIES.
(a) The Borrower has made available to each Lender such information, if
any, as such Lender has deemed necessary to evaluate the Real Property Assets
set forth on Schedule 4.1. for acceptance as an Unencumbered Pool Property.
Accordingly, the Lenders have accepted the Real Property Assets listed on
Schedule 4.1. as of the Agreement Date as Unencumbered Pool Properties. At any
time when the outstanding principal balance of the Loan shall exceed the
Revolving Credit Commitments, if the Borrower desires that the Lenders accept an
additional Real Property Asset as an Unencumbered Pool Property, the Borrower
shall so notify the Administrative Agent in writing and the Administrative Agent
shall promptly notify each of the Lenders. No Real Property Asset will be
evaluated by the Lenders unless it is an Eligible Property, and unless and until
the Borrower delivers to the Administrative Agent the following, in form and
substance satisfactory to the Administrative Agent:
(i) a description of such Real Property Asset, such description to
include the age, location and Occupancy Rate of such Real Property Asset;
(ii) an operating statement and a rent roll for such Real Property
Asset for the three prior fiscal years, for the current fiscal year through
the fiscal quarter most recently ending and for the current fiscal quarter,
certified by a representative of the Borrower to the best of such
representative's knowledge as being true and correct in all material
respects provided that, with respect to any period such Real Property Asset
was not owned by a Loan Party, such information shall only be required to
be delivered to the extent reasonably available to the Borrower;
(iii) an operating budget for such Real Property Asset with respect
to the current fiscal year;
(iv) copies of all engineering, mechanical, structural and
maintenance studies performed with respect to such Real Property Asset not
more than twelve months old;
(v) a "Phase I" environmental assessment of such Real Property
Asset not more than 12 months old prepared by an environmental engineering
firm acceptable to the Administrative Agent, and any additional
environmental studies or assessments available to the Borrower performed
with respect to such Real Property Asset;
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(vi) with respect to any Real Property Asset being acquired by a
Loan Party, a copy of the materials relating to such Real Property Asset
submitted by the Borrower to its board of trustees for their approval (but
only to the extent such materials have not already been provided under any
of the preceding subsections);
(vii) a copy of the most recent ALTA Owner's Policy of Title
Insurance (or if such policy has not been issued, a binding commitment to
issue such policy) relating to such Real Property Asset showing fee simple
title (or a leasehold estate) being vested in the Borrower or a Subsidiary
and all matters of record; and
(viii) such other information the Administrative Agent may reasonably
request in order to determine whether such Real Property Asset constitutes
an Eligible Property.
Following receipt of the foregoing documents and information, the
Administrative Agent shall review them as expeditiously as is reasonably
practicable under the circumstances but in any event within 10 Business Days of
receipt of all such documents and information. If, following such review, the
Administrative Agent has determined that such Real Property Asset constitutes an
Eligible Property, the Administrative Agent will promptly (i) so notify the
Borrower and (ii) submit the foregoing documents and information to the Lenders.
Each Lender shall notify the Administrative Agent whether it approves (which
approval shall not be unreasonably withheld) of the designation of such Real
Property Asset as an Unencumbered Pool Property within 15 Business Days of
receipt of all such documents and information. If a Lender shall fail to so
notify the Administrative Agent, then such Lender shall be deemed to have
approved of such Real Property Asset. Upon approval of such Real Property Asset
by the Requisite Lenders, and upon execution and delivery of all of the
following, such Real Property Asset shall become an Unencumbered Pool Property:
(1) If such Real Property Asset is owned or leased by a Loan Party
other than the Borrower, all of the documents required to be provided under
Section 8.13. if not previously delivered to the Administrative Agent; and
(2) Such other items or documents as may be appropriate under the
circumstances as reasonably requested by the Administrative Agent.
SECTION 4.2 TERMINATION OF DESIGNATION AS UNENCUMBERED POOL PROPERTY.
A Real Property Asset shall cease to be an Unencumbered Pool Property if it
shall cease to be an Eligible Property; provided, however, with respect to any
--------
Real Property Asset accepted as an Unencumbered Pool Property even though at the
time of such acceptance such Real Property Asset did not meet all of the
requirements of an Eligible Property (a "Non-Conforming Property"), such Real
Property Asset shall cease to be an Unencumbered Pool Property if it shall cease
to satisfy those requirements of an Eligible Property that it did satisfy at the
time of its acceptance as an Unencumbered Pool Property. Subject to Section
4.4, from time to time the Borrower may request, upon not less than 30 days
prior written notice to the Administrative Agent and the Lenders, that an
Unencumbered Pool Property cease to be an Unencumbered Pool Property. The
Administrative
29
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Agent shall grant such request if all of the following conditions are satisfied:
(a) no Default or Event of Default shall have occurred and be continuing
both at the time of such request and immediately after giving effect to such
request; and
(b) the Borrower shall have delivered to the Administrative Agent a
Compliance Certificate demonstrating on a pro forma basis, and the
Administrative Agent shall have determined, that the Borrower will remain in
compliance with Section 10.1 hereof after giving effect to such request and any
prepayment to be made and/or the acceptance of any Real Property Asset as an
additional or replacement Unencumbered Pool Property to be given concurrently
with such request.
SECTION 4.3 ADDITIONAL REQUIREMENTS OF UNENCUMBERED POOL PROPERTIES.
The aggregate Occupancy Rate of all Unencumbered Pool Properties shall at
all times equal or exceed 85%.
SECTION 4.4 ACCEPTANCE AND TERMINATION UNDER REVOLVING CREDIT AGREEMENT.
Any Real Property Asset which is determined to be an Eligible Property and
is accepted as an Unencumbered Pool Property under the Revolving Credit
Agreement shall be deemed to have been determined to be an Eligible Property and
accepted as an Unencumbered Pool Property under this Agreement, provided that at
the time of any such determination or acceptance under the Revolving Credit
Agreement, the then Revolving Credit Commitments shall exceed the then
outstanding principal balance of the Loan. In the event that any Real Property
Asset ceases to be an Unencumbered Pool Property under the Revolving Credit
Agreement, such Real Property Asset shall cease to be an Unencumbered Pool
Property under this Agreement.
ARTICLE V. YIELD PROTECTION, ETC.
SECTION 5.1 ADDITIONAL COSTS; CAPITAL ADEQUACY.
(a) Additional Costs. The Borrower shall promptly pay to the
----------------
Administrative Agent for the account of a Lender from time to time such amounts
as such Lender may reasonably determine to be necessary to compensate such
Lender for any costs incurred by such Lender that it determines are attributable
to its making or maintaining of its Lender's Share of LIBOR Loan or its
obligation to make its Lender's Share of LIBOR Loan hereunder, any reduction in
any amount receivable by such Lender under this Agreement or any of the other
Loan Documents in respect of its Lender's Share of LIBOR Loan or such obligation
or the maintenance by such Lender of capital in respect of its Lender's Share of
LIBOR Loan or its Commitment (such increases in costs and reductions in amounts
receivable being herein called "Additional Costs"), resulting from any
Regulatory Change that: (i) changes the basis of taxation of any amounts
payable to such Lender under this Agreement or any of the other Loan Documents
in respect of any of its Lender's Share of LIBOR Loan or its Commitment (other
than taxes imposed on or measured by the overall net income of such Lender or of
its Lending Office for its Lender's Share of LIBOR Loan by the jurisdiction in
which such Lender has its principal office or such Lending Office); or (ii)
imposes or modifies any reserve, special deposit or similar requirements (other
than Regulation D of the Board of Governors of the
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Federal Reserve System or other reserve requirement utilized in the
determination of the Adjusted Eurodollar Rate for such Loan) relating to any
extensions of credit or other assets of, or any deposits with or other
liabilities of, such Lender, or any commitment of such Lender (including,
without limitation, the Commitment of such Lender hereunder); or (iii) has or
would have the effect of reducing the rate of return on capital of such Lender
to a level below that which such Lender could have achieved but for such
Regulatory Change (taking into consideration such Lender's policies with respect
to capital adequacy).
(b) Lender's Suspension. Without limiting the effect of the provisions of
-------------------
the immediately preceding subsection (a), if by reason of any Regulatory Change,
any Lender either (i) incurs Additional Costs based on or measured by the excess
above a specified level of the amount of a category of deposits or other
liabilities of such Lender that includes deposits by reference to which LIBOR is
determined as provided in this Agreement or a category of extensions of credit
or other assets of such Lender that includes its Lender's Share of LIBOR Loan
or (ii) becomes subject to restrictions on the amount of such a category of
liabilities or assets that it may hold, then, if such Lender so elects by notice
to the Borrower (with a copy to the Administrative Agent), the obligation of
such Lender to make or Continue, or to Convert into, a LIBOR Loan hereunder
shall be suspended until such Regulatory Change ceases to be in effect (in which
case the provisions of Section 5.5. shall apply).
(c) [Intentionally Omitted].
(d) Notification and Determination of Additional Costs. Each of the
--------------------------------------------------
Administrative Agent and each Lender agrees to notify the Borrower of any event
occurring after the Agreement Date entitling the Administrative Agent or such
Lender to compensation under any of the preceding subsections of this Section as
promptly as practicable; provided, however, the failure of the Administrative
Agent or any Lender to give such notice shall not release the Borrower from any
of its obligations hereunder. The Administrative Agent and/or such Lender
agrees to furnish to the Borrower a certificate setting forth the basis and
amount of each request by the Administrative Agent or such Lender for
compensation under this Section. Determinations by the Administrative Agent or
any Lender of the effect of any Regulatory Change shall be conclusive, provided
that such determinations are made on a reasonable basis and in good faith.
SECTION 5.2 SUSPENSION OF THE LIBOR LOAN.
Anything herein to the contrary notwithstanding, if, on or prior to the
determination of any Adjusted Eurodollar Rate for any Interest Period:
(a) the Administrative Agent reasonably determines (which determination
shall be conclusive) that by reason of circumstances affecting the relevant
market, adequate and reasonable means do not exist for ascertaining LIBOR for
such Interest Period; or
(b) the Administrative Agent reasonably determines (which determination
shall be conclusive) that the Adjusted Eurodollar Rate will not adequately and
fairly reflect the cost to the Lenders of maintaining the LIBOR Loan for such
Interest Period.
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then the Administrative Agent shall give the Borrower and each Lender prompt
notice thereof and, so long as such condition remains in effect, the Lenders
shall be under no obligation to, and shall not, Continue, or Convert the Loan as
or into a LIBOR Loan and the Borrower shall, on the last day of the current
Interest Period, Convert the Loan into a Base Rate Loan.
SECTION 5.3 ILLEGALITY.
Notwithstanding any other provision of this Agreement, if it becomes
unlawful for any Lender to honor its obligation to maintain its Lender's Share
of LIBOR Loan hereunder, then such Lender shall promptly notify the Borrower
thereof (with a copy to the Administrative Agent) and such Lender's obligation
to make or Continue, or to Convert the Loan from any other Type into, a LIBOR
Loan shall be suspended until such time as such Lender may again make and
maintain a LIBOR Loan (in which case the provisions of Section 5.5. shall be
applicable).
SECTION 5.4 COMPENSATION.
The Borrower shall pay to the Administrative Agent for account of each
Lender, upon the request of such Lender through the Administrative Agent, such
amount or amounts as shall be sufficient (in the reasonable opinion of such
Lender) to compensate it for any loss, cost or expense that such Lender
determines is attributable to:
(a) any payment or prepayment (whether mandatory or optional) of the LIBOR
Loan or Conversion of the LIBOR Loan, made by such Lender for any reason
(including, without limitation, acceleration) on a date other than the last day
of the Interest Period for such LIBOR Loan; or
(b) any failure by the Borrower for any reason (including, without
limitation, the failure of any of the applicable conditions precedent specified
in Article VI. to be satisfied) to Convert a Base Rate Loan into a LIBOR Loan
or to Continue the Loan as a LIBOR Loan on the requested date of such Conversion
or Continuation.
Such payments shall include, but shall not be limited to, in the case of a LIBOR
Loan, an amount equal to the then present value of (A) the amount of interest
that would have accrued on such LIBOR Loan for the remainder of the applicable
Interest Period (or duration of the requested Interest Period in the case of a
failure to convert a LIBOR Loan) at the rate applicable to such LIBOR Loan, less
(B) the amount of interest that would accrue on the same Loan for the same
period if LIBOR were set on the date such payment, prepayment or failure
occurred (the "Adjustment Date"), calculating the present value by using as a
discount rate LIBOR quoted on the Adjustment Date.
SECTION 5.5 TREATMENT OF AFFECTED LOANS.
If the obligation of any Lender to Continue, or to Convert a Base Rate Loan
into, a LIBOR Loan shall be suspended pursuant to Section 5.1.(b), 5.2. or 5.3.,
then its Lender's Share of LIBOR Loan shall be automatically Converted into a
Base Rate Loan on the last day of the then current Interest Period (or, in the
case of a Conversion required by Section 5.1.(b) or 5.3., on such earlier date
as such Lender may specify to the Borrower with a copy to the Administrative
Agent) and,
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unless and until such Lender gives notice as provided below that the
circumstances specified in Section 5.1., 5.2. or 5.3. that gave rise to such
Conversion no longer exist:
(a) to the extent that its Lender's Share of LIBOR Loan have been so
Converted, all payments and prepayments of principal that would otherwise be
applied to such Lender's Share of LIBOR Loan shall be applied instead to its
Base Rate Loan; and
(b) such Lender's portion of any Loan that would otherwise be made or
Continued by such Lender as a LIBOR Loan shall be made or Continued instead as a
Base Rate Loan, and any portion of a Base Rate Loan of such Lender that would
otherwise be Converted into a LIBOR Loan shall remain as a Base Rate Loan.
If such Lender gives notice to the Borrower (with a copy to the Administrative
Agent) that the circumstances specified in Section 5.1. or 5.3. that gave rise
to the Conversion of such Lender's Share of LIBOR Loan pursuant to this Section
no longer exist (which such Lender agrees to do promptly upon such circumstances
ceasing to exist provided that its failure to do so shall not cause it to be a
Defaulting Lender hereunder) at a time when a LIBOR Loan made by other Lenders
is outstanding, then such Lender's Base Rate Loan shall be automatically
Converted, on the first day of the next succeeding Interest Period into the
LIBOR Loan.
SECTION 5.6 CHANGE OF LENDING OFFICE.
Each Lender agrees that it will use reasonable efforts to designate an
alternate Lending Office with respect to its Lender's Share of LIBOR Loan
affected by the matters or circumstances described in Sections 3.12., 5.1. or
5.3. to reduce the liability of the Borrower or avoid the results provided
thereunder, so long as such designation is not disadvantageous to such Lender as
determined by such Lender in its sole discretion, except that such Lender shall
have no obligation to designate a Lending Office located in the United States of
America.
SECTION 5.7 ASSUMPTIONS CONCERNING FUNDING OF LIBOR LOAN.
Calculation of all amounts payable to a Lender under this Article V. shall
be made as though such Lender had actually funded its Lender's Share of LIBOR
Loan through the purchase of deposits in the relevant market bearing interest at
the rate applicable to such LIBOR Loan in an amount equal to the amount of its
Lender's Share of LIBOR Loan and having a maturity comparable to the relevant
Interest Period; provided, however, that each Lender may fund each of its
Lender's Share of LIBOR Loan in any manner it sees fit and the foregoing
assumption shall be used only for calculation of amounts payable under this
Article V.
ARTICLE VI. CONDITIONS PRECEDENT
SECTION 6.1 INITIAL CONDITIONS PRECEDENT.
The obligation of the Lenders to make the Loan, is subject to the following
conditions precedent:
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(a) The Administrative Agent shall have received each of the following, in
form and substance satisfactory to the Administrative Agent:
(i) Counterparts of this Agreement executed by each of the parties
hereto;
(ii) Notes executed by the Borrower, payable to each Lender and
complying with the terms of Section 2.10.(a);
(iii) (A) An opinion of Shulman, Rogers, Gandal, Pordy & Ecker, P.A.,
counsel to the Borrower, addressed to the Administrative Agent and the
Lenders, in substantially the form of Exhibit M-1 and (B) an opinion of
Kirkpatrick & Lockhart LLP, local Pennsylvania counsel to the Borrower,
addressed to the Administrative Agent and the Lenders, in substantially the
form of Exhibit M-2;
(iv) the declaration of trust of the Borrower certified as of a
recent date by the Department of Consumer and Regulatory Affairs of the
District of Columbia;
(v) a good standing certificate issued as of a recent date by the
Department of Consumer and Regulatory Affairs of the District of Columbia
and certificates of qualification to transact business or other comparable
certificates issued by each Secretary of State (and any state department of
taxation, as applicable) of each state in which the Borrower is required to
be so qualified;
(vi) A certificate of incumbency signed by the Secretary or
Assistant Secretary of the Borrower with respect to each of the officers of
the Borrower authorized to execute and deliver the Loan Documents to which
the Borrower is a party and the officers of the Borrower then authorized to
deliver Notices of Continuation and Notices of Conversion;
(vii) certified copies (certified by the Secretary or Assistant
Secretary of the Borrower) of all action taken by the Borrower's Board of
Trustees to authorize the execution, delivery and performance of the Loan
Documents to which it is a party;
(viii) A Guaranty executed by each Material Subsidiary other than any
Non-Guarantor Subsidiary in substantially the form of Exhibit C;
(ix) The articles of incorporation, articles of organization,
certificate of limited partnership or other comparable organizational
instrument (if any) of each Material Subsidiary (other than any Non-
Guarantor Subsidiary) certified as of a recent date by the Secretary of
State of the state of formation of such Material Subsidiary (provided that
the Lenders agree to fund the Loan without all such organizational
documents as long as the missing organizational documents are provided to
the Administrative Agent within 30 days following the Closing Date);
(x) A certificate of good standing or certificate of similar
meaning with respect to each Material Subsidiary (other than any Non-
Guarantor Subsidiary) issued as of a recent
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date by the Secretary of State of the state of formation of each such
Material Subsidiary and certificates of qualification to transact business
or other comparable certificates issued by each Secretary of State (and any
state department of taxation, as applicable) of each state in which such
Material Subsidiary is required to be so qualified;
(xi) A certificate of incumbency signed by the Secretary or
Assistant Secretary (or other individual performing similar functions) of
each Material Subsidiary with respect to each of the officers of such
Material Subsidiary authorized to execute and deliver the Loan Documents to
which such Material Subsidiary is a party;
(xii) Copies certified by the Secretary or Assistant Secretary
of each Material Subsidiary (or other individual performing similar
functions) (but not including any Non-Guarantor Subsidiary) of (i) the by-
laws of such Material Subsidiary, if a corporation, the operating
agreement, if a limited liability company, the partnership agreement, if a
limited or general partnership, or other comparable document in the case of
any other form of legal entity and (ii) all corporate, partnership, member
or other necessary action taken by such Material Subsidiary to authorize
the execution, delivery and performance of the Loan Documents to which it
is a party;
(xiii) A copy, if requested by the Administrative Agent, of each
Material Contract, certified as true, correct and complete by the chief
financial officer or chief accounting officer of the Borrower;
(xiv) Evidence that all insurance required to be maintained by
the Borrower and the other Loan Parties under the terms of the Loan
Documents is in effect;
(xv) The Fees, if any, then due under Section 3.6.;
(xvi) A Compliance Certificate calculated as of the fiscal
quarter ending September 30, 1998; and
(xvii) Such other documents, agreements and instruments as the
Administrative Agent may reasonably request on behalf of the Lenders; and
(b) In the good faith judgment of the Administrative Agent and the
Lenders:
(i) There shall not have occurred or become known to the
Administrative Agent or the Lenders any event, condition, situation or
status since the date of the information contained in the financial and
business projections, budgets, pro forma data and forecasts concerning the
Borrower and its Subsidiaries delivered to the Administrative Agent and the
Lenders prior to the Agreement Date that has had or could reasonably be
expected to result in a Material Adverse Effect;
(ii) No litigation, action, suit, investigation or other
arbitral, administrative or judicial proceeding shall be pending or
threatened which could reasonably be expected to (1)
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<PAGE>
result in a Material Adverse Effect or (2) restrain or enjoin, impose
materially burdensome conditions on, or otherwise materially and adversely
affect the ability of the Borrower or any other Loan Party to fulfill its
obligations under the Loan Documents to which it is a party;
(iii) The Borrower and the other Loan Parties shall have received all
approvals, consents and waivers, and shall have made or given all necessary
filings and notices as shall be required to consummate the transactions
contemplated hereby without the occurrence of any default under, conflict
with or violation of (1) any Applicable Law or (2) any agreement, document
or instrument to which the Borrower or any other Loan Party is a party or
by which any of them or their respective properties is bound, except for
such approvals, consents, waivers, filings and notices the receipt, making
or giving of which could not reasonably be expected to have to (A) have a
Material Adverse Effect, or (B) restrain or enjoin, impose materially
burdensome conditions on, or otherwise materially and adversely affect the
ability of the Borrower or any other Loan Party to fulfill its obligations
under the Loan Documents to which it is a party; and
(iv) There shall not have occurred or exist any other material
disruption of financial or capital markets that could reasonably be
expected to materially and adversely affect the transactions contemplated
by the Loan Documents.
SECTION 6.2 CREDIT EVENTS.
Each Credit Event shall constitute a certification by the Borrower to the
effect that (both as of the date of the giving of notice relating to such Credit
Event and, unless the Borrower otherwise notifies the Administrative Agent prior
to the date of such Credit Event, as of the date of the occurrence of such
Credit Event) (a) no Default or Event of Default shall have occurred and be
continuing; and (b) the representations and warranties made or deemed made by
the Borrower and each other Loan Party in the Loan Documents to which it is a
party, shall be true and correct with the same force and effect as if made on
and as of such date except to the extent that such representations and
warranties expressly relate to an earlier date (in which case such
representations and warranties shall have been true and accurate on and as of
such earlier date) and except for changes in factual circumstances expressly and
specifically permitted hereunder.
ARTICLE VII. REPRESENTATIONS AND WARRANTIES
SECTION 7.1 REPRESENTATIONS AND WARRANTIES.
In order to induce the Administrative Agent and each Lender to enter into
this Agreement and to make Loans, the Borrower represents and warrants to the
Administrative Agent and each Lender as follows:
(a) Organization; Power; Qualification. Each of the Loan Parties is a
----------------------------------
corporation, partnership, trust or other legal entity, duly organized or formed,
validly existing and, to the extent applicable, in good standing under the
jurisdiction of its incorporation or formation, has the power
36
<PAGE>
and authority to own or lease its respective properties and to carry on its
respective business as now being and hereafter proposed to be conducted and is
duly qualified and is in good standing as a foreign corporation, partnership or
other legal entity and authorized to do business, in each jurisdiction in which
the character of its properties or the nature of its business requires such
qualification or authorization and where the failure to be so qualified or
authorized could reasonably be expected to have, in each instance, a Material
Adverse Effect.
(b) Ownership Structure. As of the Agreement Date, Schedule 7.1.(b)
-------------------
correctly sets forth the corporate structure and ownership interests of the
Borrower's Subsidiaries including the correct legal name of each Subsidiary, its
jurisdiction of formation, the Persons holding equity interests in such
Subsidiary and their percentage equity or voting interest in such Subsidiary.
Except as set forth in such Schedule:
(i) no Subsidiary has issued to any third party any securities
convertible into such Subsidiary's capital stock or other equity interests
or any options, warrants or other rights to acquire any securities
convertible into such capital stock or other equity interests, and
(ii) the outstanding capital stock of, or other equity interests in,
each such Subsidiary are owned by the Borrower and its Subsidiaries
indicated on such Schedule, free and clear of all Liens, warrants, options
and rights of others of any kind whatsoever. All such outstanding capital
stock and other equity interests have been validly issued and, in the case
of capital stock, are fully paid and nonassessable.
(c) Authorization of Agreement, Notes, Loan Documents and Borrowings. The
----------------------------------------------------------------
Borrower has the right and power, and has taken all necessary action to
authorize it, to borrow hereunder. The Borrower and the other Loan Parties each
has the right and power, and has taken all necessary action to authorize it, to
execute, deliver and perform each of the Loan Documents to which it is a party
in accordance with their respective terms and to consummate the transactions
contemplated hereby and thereby. This Agreement and each of the other Loan
Documents to which the Borrower or any other Loan Party is a party have been
duly executed and delivered by the duly authorized officers of such Person and
each is a legal, valid and binding obligation of such Person enforceable against
such Person in accordance with its respective terms except as the same may be
limited by bankruptcy, insolvency, and other similar laws affecting the rights
of creditors generally and the availability of equitable remedies for the
enforcement of certain obligations (other than the payment of principal)
contained herein or therein may be limited by equitable principles generally.
(d) Compliance of Agreement, Notes, Loan Documents and Borrowing with Laws,
-----------------------------------------------------------------------
etc. The execution, delivery and performance of this Agreement, the Notes and
- ---
the other Loan Documents to which the Borrower or any other Loan Party is a
party in accordance with their respective terms and the borrowings hereunder do
not and will not, by the passage of time, the giving of notice, or otherwise:
(i) require any Governmental Approval or violate any Applicable Law (including
all Environmental Laws) relating to the Borrower or any other Loan Party; (ii)
conflict with, result in a breach of or constitute a default under the
declaration of trust of the Borrower or the organizational documents of any
other Loan Party, or any indenture, agreement or other instrument to which the
Borrower or any other Loan Party is a party or by which it or any of its
respective
37
<PAGE>
properties may be bound; or (iii) result in or require the creation or
imposition of any Lien upon or with respect to any property now owned or
hereafter acquired by the Borrower or any other Loan Party other than in favor
of the Administrative Agent for the benefit of the Lenders.
(e) Compliance with Law; Governmental Approvals. The Borrower, each
-------------------------------------------
Subsidiary and each other Loan Party is in compliance with each Governmental
Approval applicable to it and in compliance with all other Applicable Law
relating to the Borrower, a Subsidiary or such Loan Party except for
noncompliances which, and Governmental Approvals the failure to possess which
could not, individually or in the aggregate, reasonably be expected to cause a
Default or Event of Default or have a Material Adverse Effect.
(f) Ownership of Properties; Liens. As of the Agreement Date, Schedule
------------------------------
7.1.(f) sets forth all the real property owned or leased by the Borrower, its
Subsidiaries, any other Loan Party and any of their Unconsolidated Affiliates,
and if a Developed Property, the applicable Occupancy Rate thereof. The
Borrower and such other Persons have good and insurable fee simple title (or
leasehold title if so designated on such Schedule) to all of such real property.
As of the Agreement Date, there are no mortgages, deeds of trust, indentures,
debt instruments or other agreements creating a Lien against any of such real
property or any other property or assets of the Borrower or any of its
Subsidiaries except for Permitted Liens and except as set forth on Schedule
7.1.(f).
(g) Indebtedness. Schedule 7.1.(g) is, as of the Agreement Date, a
------------
complete and correct listing of all Indebtedness of the Borrower, its
Subsidiaries and the other Loan Parties, including all Guarantees of the
Borrower, its Subsidiaries and the other Loan Parties and all letters of credit
and acceptance facilities extended to the Borrower, any Subsidiary or any other
Loan Party.
(h) Material Contracts. Schedule 7.1.(h) is, as of the Agreement Date, a
------------------
true, correct and complete listing of all Material Contracts.
(i) Litigation. There are no actions, suits or proceedings pending (nor,
----------
to the knowledge of the Borrower, are there any actions, suits or proceedings
threatened, nor is there any reasonable basis therefor) against or in any other
way relating adversely to or affecting the Borrower, any Subsidiary or any other
Loan Party or any of its respective property in any court or before any
arbitrator of any kind or before or by any other Governmental Authority which,
if adversely determined, could reasonably be expected to have a Material Adverse
Effect, and there are no strikes, slow downs, work stoppages or walkouts or
other labor disputes in progress or threatened relating to the Borrower, any
Subsidiary or any other Loan Party which, if adversely determined, could
reasonably be expected to have a Material Adverse Effect.
(j) Taxes. All federal, state and other tax returns of the Borrower, any
-----
Subsidiary or Loan Party required by Applicable Law to be filed have been duly
filed, and all federal, state and other taxes, assessments and other
governmental charges or levies upon the Borrower, any Subsidiary and each Loan
Party and its respective properties, income, profits and assets which are due
and payable have been paid, except any such nonpayment which is at the time
permitted under Section 8.6. None of the United States income tax returns of
the Borrower, its Subsidiaries or any Loan Party is under audit as of the
Agreement Date. All charges, accruals and reserves on the books
38
<PAGE>
of the Borrower, each of its Subsidiaries and each other Loan Party in respect
of any taxes or other governmental charges are in accordance with GAAP.
(k) Financial Statements. The Borrower has furnished to each Lender copies
--------------------
of (i) the audited consolidated balance sheet of the Borrower and its
consolidated Subsidiaries for the fiscal year ending December 31, 1997, and the
related consolidated statements of income, retained earnings and cash flow for
the fiscal year ending on such date, with the opinion thereon of Grant Thornton
LLP, and (ii) the unaudited consolidated balance sheet of the Borrower and its
consolidated Subsidiaries for the fiscal quarter ending September 30, 1998, and
the related consolidated statements of income, retained earnings and cash flow
of the Borrower and its consolidated Subsidiaries for the three fiscal quarter
period ending on such date. Such balance sheets and statements (including in
each case related schedules and notes) are complete and correct and present
fairly, in accordance with GAAP consistently applied throughout the periods
involved, the consolidated financial position of the Borrower and its
consolidated Subsidiaries as at their respective dates and the results of
operations and the cash flow for such periods (subject, as to interim
statements, to changes resulting from normal year-end adjustments). None of the
Borrower, any of its consolidated Subsidiaries nor any other Loan Party has on
the Agreement Date any material contingent liabilities, liabilities, liabilities
for taxes, unusual or long-term commitments or unrealized or forward anticipated
losses from any unfavorable commitments, except as referred to or reflected or
provided for in said financial statements. Each of the Borrower, its
Subsidiaries and the other Loan Parties is Solvent.
(l) Unencumbered Pool Properties. Except for Non-Conforming Properties,
----------------------------
each of the Unencumbered Pool Properties qualifies as an Eligible Property.
Each Non-Conforming Property continues to satisfy those requirements of an
Eligible Property that it satisfied at the time of its acceptance as an
Unencumbered Pool Property.
(m) No Material Adverse Change. Since December 31, 1997, there has been no
--------------------------
material adverse change in the consolidated financial condition, results of
operations, business or prospects of the Borrower and its consolidated
Subsidiaries taken as a whole.
(n) ERISA. Each member of the ERISA Group has fulfilled its obligations
-----
under the minimum funding standards of ERISA and the Internal Revenue Code with
respect to each Plan and is in compliance in all material respects with the
presently applicable provisions of ERISA and the Internal Revenue Code with
respect to each Plan. No member of the ERISA Group has (i) sought a waiver of
the minimum funding standard under Section 412 of the Internal Revenue Code in
respect of any Plan, (ii) failed to make any contribution or payment to any Plan
or Multiemployer Plan or in respect of any Benefit Arrangement, or made any
amendment to any Plan or Benefit Arrangement, which has resulted or could result
in the imposition of a Lien or the posting of a bond or other security under
ERISA or the Internal Revenue Code or (iii) incurred any liability under Title
IV of ERISA other than a liability to the PBGC for premiums under Section 4007
of ERISA.
(o) Absence of Defaults. Neither the Borrower, any Subsidiary nor any
-------------------
other Loan Party is in default under its declaration of trust, articles of
incorporation, bylaws, partnership agreement or other similar organizational
documents, and no event has occurred, which has not been remedied,
39
<PAGE>
cured or waived: (i) which constitutes a Default or an Event of Default; or (ii)
which constitutes, or which with the passage of time, the giving of notice, or
both would constitute, a default or event of default by the Borrower, any
Subsidiary or any Loan Party under any agreement (other than this Agreement) or
judgment, decree or order to which the Borrower, any Subsidiary or other Loan
Party is a party or by which the Borrower, any Subsidiary or Loan Party or any
of their respective properties may be bound where such default or event of
default could, individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect.
(p) Environmental Laws. In the ordinary course of business, each of the
------------------
Borrower and its Subsidiaries conducts an ongoing review of the effect of
Environmental Laws on its respective business, operations and properties,
including without limitation, its respective Real Property Assets, in the course
of which the Borrower or such Subsidiary identifies and evaluates associated
liabilities and costs (including, without limitation, determining whether any
capital or operating expenditures are required for clean-up or closure of
properties presently or previously owned, determining whether any capital or
operating expenditures are required to achieve or maintain compliance with
Environmental Laws or required as a condition of any Governmental Approval, any
contract, or any related constraints on operating activities, determining
whether any costs or liabilities exist in connection with off-site disposal of
wastes or Hazardous Materials, and determining whether any actual or potential
liabilities to third parties, including employees, and any related costs and
expenses exist). The Borrower, its Subsidiaries and the other Loan Parties have
obtained all Governmental Approvals which are required under Environmental Laws,
and are in compliance with all terms and conditions of such Governmental
Approvals, which the failure to obtain or to comply with could reasonably be
expected to have a Material Adverse Effect. Each of the Borrower, its
Subsidiaries and the other Loan Parties is also in compliance with all other
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules, and timetables contained in the Environmental Laws the
failure with which to comply could reasonably be expected to have a Material
Adverse Effect. Except as set forth in Schedule 7.1.(p) and except as could not
be reasonably expected to have a Material Adverse Effect, neither the Borrower,
any Subsidiary nor any other Loan Party is aware of, or has received notice of,
any past, present, or future events, conditions, circumstances, activities,
practices, incidents, actions, or plans which, with respect to the Borrower, any
of its Subsidiaries or any other Loan Party may interfere with or prevent
compliance or continued compliance with Environmental Laws, or may give rise to
any common-law or legal liability, or otherwise form the basis of any claim,
action, demand, suit, proceeding, hearing, study, or investigation, based on or
related to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling or the emission, discharge, release or
threatened release into the environment, of any pollutant, contaminant,
chemical, or industrial, toxic, or other Hazardous Material; and there is no
civil, criminal, or administrative action, suit, demand, claim, hearing, notice,
or demand letter, notice of violation, investigation, or proceeding pending or,
to the knowledge of the Borrower, any Subsidiary or any other Loan Party, after
due inquiry, threatened, against the Borrower, any Subsidiary or any other Loan
Party relating in any way to Environmental Laws.
(q) Investment Company; Public Utility Holding Company. Neither the
--------------------------------------------------
Borrower, any Subsidiary nor any other Loan Party is (i) an "investment company"
or a company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended,
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(ii) 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, or (iii) subject to any other Applicable Law which purports to
regulate or restrict its ability to borrow money or to consummate the
transactions contemplated by this Agreement or to perform its obligations under
any Loan Document to which it is a party.
(r) Margin Stock. Neither the Borrower, any Subsidiary nor any other Loan
------------
Party is engaged principally, or as one of its important activities, in the
business of extending credit for the purpose, whether immediate, incidental or
ultimate, of buying or carrying "margin stock" within the meaning of Regulations
G or U of the Board of Governors of the Federal Reserve System.
(s) Affiliate Transactions. Except for transactions permitted under
----------------------
Section 10.11., neither the Borrower, any Subsidiary nor any other Loan Party is
a party to or bound by any agreement or arrangement (whether oral or written) to
which any Affiliate of the Borrower, any Subsidiary or other Loan Party is a
party.
(t) Intellectual Property. The Borrower and each Subsidiary owns or has
---------------------
the right to use, under valid license agreements or otherwise, all patents,
licenses, franchises, trademarks, trademark rights, trade names, trade name
rights, trade secrets and copyrights (collectively, "Intellectual Property")
necessary to, or used in, the conduct of its businesses as now conducted and as
contemplated by the Loan Documents, without known conflict with any patent,
license, franchise, trademark, trade secret, trade name, copyright, or other
proprietary right of any other Person.
(u) Accuracy and Completeness of Information. All written information,
----------------------------------------
reports and other papers and data furnished to the Administrative Agent or any
Lender by, on behalf of, or at the direction of, the Borrower, any Subsidiary or
any other Loan Party were, at the time the same were so furnished, complete and
correct in all material respects, to the extent necessary to give the recipient
a true and accurate knowledge of the subject matter, or, in the case of
financial statements, present fairly, in accordance with GAAP consistently
applied throughout the periods involved, the financial position of the Persons
involved as at the date thereof and the results of operations for such periods.
No fact is known to the Borrower which has had, or may in the future have (so
far as the Borrower can reasonably foresee), a Material Adverse Effect which has
not been set forth in the financial statements referred to in Section 7.1.(k) or
in such information, reports or other papers or data or otherwise disclosed in
writing to the Administrative Agent and the Lenders prior to the Effective Date.
No document furnished or written statement made to the Administrative Agent or
any Lender in connection with the negotiation, preparation of execution of this
Agreement or any of the other Loan Documents contains or will contain any untrue
statement of a fact material to the creditworthiness of the Borrower, any
Subsidiary or any other Loan Party or omits or will omit to state a material
fact necessary in order to make the statements contained therein not misleading.
(v) REIT Status. The Borrower qualifies as a REIT.
-----------
(w) Not Plan Assets. The assets of the Borrower, its Subsidiaries and the
---------------
other Loan Party do not and will not constitute "plan assets", within the
meaning of ERISA, the Internal
41
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Revenue Code and the respective regulations promulgated thereunder. The
execution, delivery and performance of this Agreement, and the borrowing and
repayment of amounts hereunder, do not and will not constitute "prohibited
transactions" under ERISA or the Internal Revenue Code.
(x) Business. As of the Agreement Date, the Borrower, its Subsidiaries and
--------
the other Loan Parties are primarily engaged in the business of acquiring,
owning, managing and developing directly or indirectly shopping centers,
residential and multi-family residential apartment complexes, together with
providing services related thereto.
(y) Year 2000. The Borrower has reviewed the areas within its businesses
---------
and operations which could be adversely affected by, and has developed or is
developing a program to address on a timely basis, the risk that certain
computer applications used by the Borrower may be unable to recognize and
perform properly date sensitive functions involving dates prior to and after
December 31, 1999 (the "Year 2000 Problem"). The Year 2000 Problem is not
expected to materially and adversely affect the Borrower.
SECTION 7.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC.
All statements contained in any certificate, financial statement or other
instrument delivered by or on behalf of the Borrower, any Subsidiary or any
other Loan Party to the Administrative Agent or any Lender pursuant to or in
connection with this Agreement or any of the other Loan Documents (including,
but not limited to, any such statement made in or in connection with any
amendment thereto or any statement contained in any certificate, financial
statement or other instrument delivered by or on behalf of the Borrower or any
other Loan Party prior to the Agreement Date and delivered to the Administrative
Agent or any Lender in connection with closing the transactions contemplated
hereby) shall constitute representations and warranties made by the Borrower
under this Agreement. All representations and warranties made under this
Agreement and the other Loan Documents shall be deemed to be made at and as of
the Agreement Date, the Effective Date and at and as of the date of the
occurrence of any Credit Event, except to the extent that such representations
and warranties expressly relate solely to an earlier date (in which case such
representations and warranties shall have been true and accurate on and as of
such earlier date) and except for changes in factual circumstances specifically
permitted hereunder. All such representations and warranties shall survive the
effectiveness of this Agreement, the execution and delivery of the Loan
Documents and the making of the Loan.
ARTICLE VIII. AFFIRMATIVE COVENANTS
For so long as this Agreement is in effect, unless the Requisite Lenders
(or, if required pursuant to Section 13.6., all of the Lenders) shall otherwise
consent in the manner provided for in Section 13.6., the Borrower shall:
SECTION 8.1 PRESERVATION OF EXISTENCE AND SIMILAR MATTERS.
Except as otherwise permitted under Section 10.7., preserve and maintain,
and cause each Subsidiary and each other Loan Party to preserve and maintain,
its respective existence, rights, franchises, licenses and privileges in the
jurisdiction of its incorporation or formation and qualify
42
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and remain qualified and authorized to do business in each jurisdiction in which
the character of its properties or the nature of its business requires such
qualification and authorization and where the failure to be so authorized and
qualified could reasonably be expected to have a Material Adverse Effect.
SECTION 8.2 COMPLIANCE WITH APPLICABLE LAW AND MATERIAL CONTRACTS.
Comply, and cause each Subsidiary and each other Loan Party to comply, with
(a) all Applicable Law, including the obtaining of all Governmental Approvals,
the failure to comply with which could reasonably be expected to have a Material
Adverse Effect, and (b) all terms and conditions of all Material Contracts to
which it is a party.
SECTION 8.3 MAINTENANCE OF PROPERTY.
In addition to the requirements of any of the other Loan Documents, (a)
protect and preserve, and cause each Subsidiary and other Loan Party to protect
and preserve, all of its material properties, including, but not limited to, all
Real Property Assets and all Intellectual Property, and maintain in good repair,
working order and condition all tangible properties, ordinary wear and tear
excepted and (b) from time to time make or cause to be made all needed and
appropriate repairs, renewals, replacements and additions to such properties, so
that the business carried on in connection therewith may be properly and
advantageously conducted at all times.
SECTION 8.4 CONDUCT OF BUSINESS.
At all times carry on, and cause its Subsidiaries and the other Loan
Parties to carry on, the businesses as described in Section 7.1.(x).
SECTION 8.5 INSURANCE.
In addition to the requirements of any of the other Loan Documents,
maintain, and cause each Subsidiary and Loan Party to maintain, insurance with
financially sound and reputable insurance companies against such risks and in
such amounts as is customarily maintained by Persons engaged in similar
businesses or as may be required by Applicable Law. Not in limitation of the
foregoing, the Borrower shall, and shall cause its Subsidiaries and the other
Loan Parties to, maintain builder's risk insurance during any period of
construction and, upon completion, "all risk" insurance in an amount at least
equal to the greater of (i) 80% of the replacement cost of the improvements, if
any, on each of its Real Property Assets, and (ii) an amount sufficient to avoid
the application of any coinsurance clause contained in the related insurance
policy, with insurers having an A.M. Best policyholder's rating of not less than
A- and financial size category of not less than X, which insurance shall in any
event not provide for materially less coverage than the insurance in effect on
the Agreement Date. The Borrower will deliver to the Lenders (i) upon request
of any Lender through the Administrative Agent from time to time full
information as to the insurance carried, (ii) within 5 days of receipt of notice
from any insurer a copy of any notice of cancellation or material change in
coverage from that existing on the Agreement Date and (iii) promptly upon
receipt, notice of any cancellation or nonrenewal of coverage by the Borrower,
any Subsidiary or any other Loan Party.
43
<PAGE>
SECTION 8.6 PAYMENT OF TAXES AND CLAIMS.
Pay or discharge, and cause each Subsidiary and other Loan Party to pay and
discharge, when due (a) all taxes, assessments and governmental charges or
levies imposed upon it or upon its income or profits or upon any properties
belonging to it, and (b) all lawful claims of materialmen, mechanics, carriers,
warehousemen and landlords for labor, materials, supplies and rentals which, if
unpaid, might become a Lien on any properties of such Person; provided, however,
that this Section shall not require the payment or discharge of any such tax,
assessment, charge, levy or claim which is being contested in good faith by
appropriate proceedings which operate to suspend the collection thereof and for
which adequate reserves have been established on the books of the Borrower, such
Subsidiary or such other Loan Party, as applicable, in accordance with GAAP.
SECTION 8.7 VISITS AND INSPECTIONS.
Permit, and cause each Subsidiary and other Loan Party to permit,
representatives or agents of the Administrative Agent or any Lender, from time
to time, as often as may be reasonably requested and at the expense of the
Administrative Agent (unless an Event of Default shall be continuing in which
case the exercise by the Administrative Agent of its rights under this Section
shall be at the expense of the Borrower) or such Lender, but only during normal
business hours, to: (a) visit and inspect all properties of the Borrower, such
Subsidiary or such other Loan Party; (b) inspect and make extracts from their
respective relevant books and records, including but not limited to management
letters prepared by independent accountants; and (c) discuss with its principal
officers, and its independent accountants, its business, assets, liabilities,
financial conditions, results of operations and business prospects. If
requested by the Administrative Agent, the Borrower shall execute an
authorization letter addressed to its accountants authorizing the Administrative
Agent or any Lender to discuss the financial affairs of the Borrower and any
Subsidiary with its accountants.
SECTION 8.8 USE OF PROCEEDS.
Use the proceeds of the Loan for general corporate purposes including, but
not limited to, (a) the acquisition, renovation and development of Real Property
Assets, (b) the repayment of existing Indebtedness and (c) general working
capital needs. The Borrower shall not, and shall not permit any Subsidiary or
any other Loan Party to, use any part of such proceeds to purchase or carry, or
to reduce or retire or refinance any credit incurred to purchase or carry, any
margin stock (within the meaning of Regulations U and X of the Board of
Governors of the Federal Reserve System) or to extend credit to others for the
purpose of purchasing or carrying any such margin stock.
SECTION 8.9 ENVIRONMENTAL MATTERS.
Comply, and cause all of its Subsidiaries to comply, in all material
respects with all Environmental Laws. If the Borrower, any Subsidiary or any
other Loan Party shall (a) receive notice that any violation of any
Environmental Law may have been committed or is about to be committed by such
Person, (b) receive notice that any administrative or judicial complaint or
order has been filed or is about to be filed against the Borrower, any
Subsidiary or any other Loan Party alleging violations of any Environmental Law
or requiring the Borrower, or Subsidiary or any other Loan Party to take any
action in connection with the release of Hazardous Materials or (c) receive
44
<PAGE>
any notice from a Governmental Authority or private party alleging that the
Borrower, or Subsidiary or any other Loan Party may be liable or responsible for
costs associated with a response to or cleanup of a release of a Hazardous
Materials or any damages caused thereby, and such notices, individually or in
the aggregate, could reasonably be expected to have a Material Adverse Effect,
the Borrower shall provide the Administrative Agent with a copy of such notice
within 10 days after the receipt thereof by the Borrower or any of the
Subsidiaries. The Borrower and the Subsidiaries shall promptly take all actions
necessary to prevent the imposition of any Liens on any of their respective
properties arising out of or related to any Environmental Laws.
SECTION 8.10 BOOKS AND RECORDS.
Maintain, and cause each of the Subsidiaries to maintain, books and records
pertaining to its business operations in such detail, form and scope as is
consistent with good business practice in accordance with GAAP.
SECTION 8.11 REIT STATUS.
At all times maintain its status as a REIT.
SECTION 8.12 FURTHER ASSURANCES.
At the Borrower's cost and expense, upon request of the Administrative
Agent, duly execute and deliver or cause to be duly executed and delivered, to
such Arranging Agent such further instruments, documents and certificates, and
do and cause to be done such further acts that may be necessary or advisable in
the opinion of the Administrative Agent to carry out more effectively the
provisions and purposes of this Agreement and the other Loan Documents.
SECTION 8.13 ADDITIONAL SUBSIDIARIES.
Within 5 Business Days of any Person becoming a Material Subsidiary after
the Agreement Date, deliver to the Administrative Agent each of the following in
form and substance satisfactory to the Administrative Agent: (a) a Guaranty
executed by such Material Subsidiary and (b) the items that would have been
delivered under Sections 6.1.(a)(iii), (ix) through (xiii) and (xvii) if such
Material Subsidiary had been one on the Agreement Date; provided, however, a
-------- -------
Non-Guarantor Subsidiary shall not be required to provide an Accession Agreement
nor any of the items referred to in Sections 6.1.(a)(iii) or (xi); provided,
--------
further, however, promptly (and in any event within 5 Business Days) of a Non-
- ------- -------
Guarantor Subsidiary ceasing to be subject to the restriction which prevented it
from delivering a Accession Agreement pursuant to this Section, such Non-
Guarantor Subsidiary shall deliver such Accession Agreement and the items
referred to in Sections 6.1.(a)(iii) and (xi).
SECTION 8.14 EXCHANGE LISTING.
Maintain at least one class of common shares of the Borrower having trading
privileges on the New York Stock Exchange or the American Stock Exchange or
which is the subject of price quotations in the over-the-counter market as
reported by the National Association of Securities
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<PAGE>
Dealers Automated Quotation System.
ARTICLE IX. INFORMATION
For so long as this Agreement is in effect, unless the Requisite Lenders
(or, if required pursuant to Section 13.6., all of the Lenders) shall otherwise
consent in the manner set forth in Section 13.6., the Borrower shall furnish to
each Lender (or to the Administrative Agent if so provided below) at its Lending
Office (but without duplication with respect to any Lenders which shall also
receive such materials pursuant to the Revolving Credit Agreement):
SECTION 9.1 QUARTERLY FINANCIAL STATEMENTS.
As soon as available and in any event within 60 days after the close of
each of the first, second and third fiscal quarters of the Borrower, the
consolidated balance sheet of the Borrower and its Subsidiaries as at the end of
such period and the related consolidated statements of income, retained earnings
and cash flows of the Borrower and its Subsidiaries for such period, setting
forth in each case in comparative form the figures for the corresponding periods
of the previous fiscal year, all of which shall be certified by the chief
financial officer or chief accounting officer of the Borrower, in his or her
opinion, to present fairly, in accordance with GAAP, the consolidated financial
position of the Borrower and its Subsidiaries as at the date thereof and the
results of operations for such period (subject to normal year-end adjustments).
SECTION 9.2 YEAR-END STATEMENTS.
As soon as available and in any event within 120 days after the end of each
fiscal year of the Borrower, the consolidated balance sheet of the Borrower and
its Subsidiaries as of the end of such fiscal year and the related consolidated
statements of income, retained earnings and cash flows of the Borrower and its
Subsidiaries for such fiscal year, setting forth in comparative form the figures
as at the end of and for the previous fiscal year, all of which shall be
certified by (i) the chief financial officer or chief accounting officer of the
Borrower, in his or her opinion, to present fairly, in accordance with GAAP, the
financial position of the Borrower and its Subsidiaries as at the date thereof
and the result of operations for such period and (ii) independent certified
public accountants of recognized national standing acceptable to the Requisite
Lenders, whose opinion shall be unqualified.
SECTION 9.3 COMPLIANCE CERTIFICATE.
At the time the financial statements and reports are furnished pursuant to
Sections 9.1. and 9.2., a certificate in the form of Exhibit N (a "Compliance
Certificate") executed by the chief financial officer or chief accounting
officer of the Borrower: (a) setting forth in reasonable detail as at the end
of such quarterly accounting period or fiscal year, as the case may be, the
calculations required to establish whether or not the Borrower, and when
appropriate its consolidated Subsidiaries, were in compliance with the covenants
contained in Sections 10.1., 10.4., and 10.6.; and (b) stating that, to the best
of his or her knowledge, information and belief, no Default or Event of Default
exists, or, if such is not the case, specifying such Default or Event of Default
and its nature, when it occurred and whether it is continuing and the steps
being taken by the Borrower with
46
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respect to such event, condition or failure.
SECTION 9.4 OTHER INFORMATION.
(a) not later than 30 days after the last day of each fiscal year of the
Borrower, pro forma projected consolidated income statements for the Borrower
and its Subsidiaries reflecting the forecasted results of operations of the
Borrower and its Subsidiaries on an annual basis for the three succeeding fiscal
years thereafter;
(b) at the time the financial statements and reports are furnished pursuant
to Sections 9.1. and 9.2., operating statements for each Unencumbered Pool
Property for the immediately preceding fiscal quarter or fiscal year of the
Borrower, as applicable, in each case certified by a representative of the
Borrower as being true and correct in all material respects;
(c) at the time the financial statements and reports are furnished pursuant
to Section 9.2., a property budget for each Unencumbered Pool Property for the
coming fiscal year of the Borrower;
(d) as soon as available and in any event within 60 days after the end of
each fiscal quarter of the Borrower, a statement demonstrating a comparison
between the cost budget of each Real Property Asset in development to the actual
disbursements made, together with a description of each such Real Property Asset
setting forth the ownership, scope, status of completion and occupancy, if
applicable, of each such Real Property Asset, certified by the chief financial
officer or chief accounting officer of the Borrower to the best of his or her
knowledge as being complete and correct;
(e) promptly upon receipt thereof, copies of all reports, if any, submitted
to the Borrower or its Board of Trustees by its independent public accountants
including, without limitation, any management report;
(f) within 10 days of the filing thereof, copies of all registration
statements (excluding the exhibits thereto and any registration statements on
Form S-8 or its equivalent), reports on Forms 10-K, 10-Q and 8-K (or their
equivalents) and all other periodic reports which the Borrower, any Subsidiary
or any other Loan Party shall file with the Securities and Exchange Commission
(or any Governmental Authority substituted therefor) or any national securities
exchange;
(g) promptly upon the mailing thereof to the shareholders of the Borrower
generally, copies of all financial statements, reports and proxy statements so
mailed and promptly upon the issuance thereof copies of all press releases
issued by the Borrower, any Subsidiary or any other Loan Party;
(h) within 60 days after the end of each fiscal quarter of the Borrower, an
updated Schedule 7.1.(f), certified by the chief financial officer or chief
accounting officer of the Borrower as true, correct and complete as of the date
such updated schedules are delivered;
(i) if and when any member of the ERISA Group (i) gives or is required to
give notice
47
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to the PBGC of any "reportable event" (as defined in Section 4043 of ERISA) with
respect to any Plan which might constitute grounds for a termination of such
Plan under Title IV of ERISA, or knows that the plan administrator of any Plan
has given or is required to give notice of any such reportable event, a copy of
the notice of such reportable event given or required to be given to the PBGC;
(ii) receives notice of complete or partial withdrawal liability under Title IV
of ERISA or notice that any Multiemployer Plan is in reorganization, is
insolvent or has been terminated, a copy of such notice; (iii) receives notice
from the PBGC under Title IV of ERISA of an intent to terminate, impose
liability (other than for premiums under Section 4007 of ERISA) in respect of,
or appoint a trustee to administer any Plan, a copy of such notice; (iv) applies
for a waiver of the minimum funding standard under Section 412 of the Internal
Revenue Code, a copy of such application; (v) gives notice of intent to
terminate any Plan under Section 4041(c) of ERISA, a copy of such notice and
other information filed with the PBGC; (vi) gives notice of withdrawal from any
Plan pursuant to Section 4063 of ERISA, a copy of such notice; or (vii) fails to
make any payment or contribution to any Plan or Multiemployer Plan or in respect
of any Benefit Arrangement or makes any amendment to any Plan or Benefit
Arrangement which has resulted or could result in the imposition of a Lien or
the posting of a bond or other security, a certificate of the chief financial
officer or chief accounting officer of the Borrower setting forth details as to
such occurrence and action, if any, which the Borrower or applicable member of
the ERISA Group is required or proposes to take;
(j) to the extent the Borrower, any Subsidiary or any other Loan Party is
aware of the same, prompt notice of the commencement of any proceeding or
investigation by or before any Governmental Authority and any action or
proceeding in any court or other tribunal or before any arbitrator against or in
any other way relating adversely to, or adversely affecting, the Borrower, such
Subsidiary or such Loan Party or any of their respective properties, assets or
businesses which, if determined or resolved adversely to such Person, could
reasonably be expected to have a Material Adverse Effect, and prompt notice of
the receipt of notice that any United States income tax returns of the Borrower,
any of its Subsidiaries or any other Loan Party are being audited;
(k) a copy of any amendment to the declaration of trust, articles of
incorporation, bylaws, partnership agreement or other similar organizational
documents of the Borrower, any Subsidiary or any other Loan Party within 60 days
of the effectiveness thereof;
(l) prompt notice of any change in the senior management of the Borrower
and any change in the business, assets, liabilities, financial condition,
results of operations or business prospects of the Borrower, any Subsidiary or
any other Loan Party which has had or could reasonably be expected to have a
Material Adverse Effect;
(m) prompt notice of the occurrence of any Default or Event of Default or
any event which constitutes or which with the passage of time, the giving of
notice, or otherwise, would constitute a default or event of default by the
Borrower, any Subsidiary or any other Loan Party under any Material Contract to
which any such Person is a party or by which any such Person or any of its
respective properties may be bound or under any document, instrument or
agreement evidencing or securing any Indebtedness of such Person;
48
<PAGE>
(n) prompt notice of the entry of any order, judgment or decree (not
adequately covered by insurance as to which the insurance company has
acknowledged coverage in writing) in excess of $2,500,000 against the Borrower,
any Subsidiary or any other Loan Party or any of their respective properties or
assets;
(o) any notification of a violation of any material Applicable Law or any
inquiry shall have been received by the Borrower, any Subsidiary or any other
Loan Party from any Governmental Authority;
(p) prompt notice of the acquisition, incorporation or other creation of
any Subsidiary, the purpose for such Subsidiary, the nature of the assets and
liabilities thereof;
(q) prompt notice of the proposed sale, transfer or other disposition of
any Unencumbered Pool Property and notice within 30 days of the consummation of
any sale, transfer or other disposition by the Borrower or any Subsidiary of any
other material asset owned directly or indirectly by the Borrower and its
Subsidiaries taken as a whole to any Subsidiary, Affiliate or other Person;
(r) prompt notice of any strikes, slow downs, work stoppages or walkouts or
other labor disputes in progress or threatened relating to the Borrower, any
Subsidiary or any other Loan Party if such action could reasonably be expected
to have a Material Adverse Effect;
(s) within 30 days of entering into any Material Contract after the
Agreement Date, a copy to the Administrative Agent of such Material Contract;
(t) prompt notice of any change in any rating assigned by a Rating Agency
to any series of rated senior unsecured long term indebtedness of the Borrower;
and
(u) from time to time and promptly upon each request, such data,
certificates, reports, statements, opinions of counsel, documents or further
information regarding the business, assets, liabilities, financial condition,
results of operations or business prospects of the Borrower, any of its
Subsidiaries or any other Loan Party as the Administrative Agent or any Lender
may reasonably request.
ARTICLE X. NEGATIVE COVENANTS
For so long as this Agreement is in effect, unless the Requisite Lenders
(or, if required pursuant to Section 13.6., all of the Lenders) shall otherwise
consent in the manner set forth in Section 13.6., the Borrower shall not,
directly or indirectly:
SECTION 10.1 FINANCIAL COVENANTS.
Permit:
(a) Leverage. The ratio of (i) the Total Liabilities of the Borrower and
--------
its Subsidiaries
49
<PAGE>
determined on a consolidated basis to (ii) Gross Asset Value, to be greater than
--
0.60 to 1.00 at any time.
(b) Interest Coverage. The ratio of (i) the EBITDA of the Borrower and its
-----------------
Subsidiaries determined on a consolidated basis for the four consecutive fiscal
quarter period most recently ended to (ii) the Interest Expense of the Borrower
--
and its Subsidiaries determined on a consolidated basis for such four-fiscal
quarter period, to be less than 1.75 to 1.00 at the end of such four-fiscal
quarter period.
(c) Fixed Charge Coverage. The ratio of (i) EBITDA of the Borrower and its
---------------------
Subsidiaries determined on a consolidated basis for the four consecutive fiscal
quarter period most recently ended to (ii) Fixed Charges of the Borrower and its
--
Subsidiaries determined on a consolidated basis for such four-fiscal quarter
period, to be less than 1.60 to 1.00 at the end of such four-fiscal quarter
period.
(d) Unencumbered Asset Test. The ratio of (i) the Unencumbered Asset Value
-----------------------
to (ii) the sum of (A) the Unsecured Indebtedness of the Borrower and its
- --
Subsidiaries determined on a consolidated basis plus (B) to the extent not
----
already included in clause (A), the Capitalized Lease Obligations of the
Borrower and its Subsidiaries determined on a consolidated basis, to be less
than 1.67 to 1.00 at any time.
(e) Unencumbered Asset Cash Flow Coverage. The ratio of (i) the Net
-------------------------------------
Operating Income for all Unencumbered Pool Properties for the four consecutive
fiscal quarter period most recently ended minus Replacement Reserves for such
-----
four-quarter period to (ii) the sum of Interest Expense on Unsecured
--
Indebtedness of the Borrower and its Subsidiaries for such four-quarter period
determined on a consolidated basis plus to the extent not already included in
----
this clause (ii), all interest expense attributable to payments made in respect
of Capitalized Lease Obligations by the Borrower and its Subsidiaries during
such four-quarter period determined on a consolidated basis, to be less than
1.75 to 1.00 at the end of such four-fiscal quarter period.
(f) Minimum Shareholder's Equity. The aggregate amount of the
----------------------------
Shareholder's Equity of the Borrower determined on a consolidated basis at the
end of any fiscal quarter to be less than (i) $445,000,000 plus (ii) 75% of the
----
Net Proceeds of all Equity Issuances (other than issuances of operating
partnership units) effected by the Borrower or any of its Subsidiaries at any
time after June 30, 1997 plus (iii) 100% of the value generated by the issuance
----
of operating partnership units after June 30, 1997.
(g) Secured Debt Ratio. The ratio of (i) the Secured Indebtedness of the
------------------
Borrower and its Subsidiaries determined on a consolidated basis to (ii) Gross
--
Asset Value, to be greater than 0.35 to 1.00 at any time.
(h) Variable Rate Debt. The ratio of (i) the aggregate outstanding
------------------
principal amount of Variable Rate Debt of the Borrower and its Subsidiaries
determined on a consolidated basis to (ii) the Gross Asset Value of the Borrower
--
and its Subsidiaries determined on a consolidated basis, to be greater than 0.35
to 1.00 at any time.
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SECTION 10.2 INDEBTEDNESS.
Create, incur, assume, or permit or suffer to exist, or permit any
Subsidiary or other Loan Party to create, incur, assume, or permit or suffer to
exist, any Indebtedness other than the following:
(a) the Obligations;
(b) Indebtedness set forth on Schedule 7.1.(g);
(c) Subordinated Debt;
(d) intercompany Indebtedness among the Borrower and its Wholly Owned
Subsidiaries; provided, however, that the obligations of each obligor of such
Indebtedness shall be subordinate to the Obligations on terms acceptable to the
Requisite Lenders in their sole discretion; and
(e) other Indebtedness created, incurred or assumed after the Agreement
Date so long as immediately prior to the creation, incurring or assumption
thereof, and immediately thereafter and after giving effect thereto, no Default
or Event of Default is or would be in existence, including without limitation, a
Default or Event of Default resulting from a violation of any of the covenants
contained in Section 10.1.
Notwithstanding anything set forth in this Section 10.2. to the contrary so long
as each Non-Guarantor Subsidiary owns an Unencumbered Pool Property, such Non-
Guarantor Subsidiary shall not create, incur, assume, or permit or suffer to
exist any Indebtedness other than (x) Indebtedness of the types described in
clauses (a) and (b) of the definition of Indebtedness owing to the Borrower and
(y) Indebtedness of the types described in clauses (a), (b) and (d) of the
definition of Indebtedness in an aggregate amount not to exceed at any time
outstanding the lesser of (i) 5% of the Unencumbered Asset Value attributable to
Unencumbered Pool Properties owned or leased by such Non-Guarantor Subsidiaries
or (ii) $2,500,000.
SECTION 10.3 DERIVATIVES OBLIGATIONS.
Become or remain liable, or permit any Subsidiary to become or remain
liable, on or under any Derivatives Obligation other than the following:
(a) Derivatives Obligations in existence as of the Agreement Date and set
forth in Schedule 10.3.; and
(b) Derivatives Obligations under Interest Rate Agreements (i) with
respect to the Loan and (ii) indexed to interest rates or yields on United
States Treasury Bills or Notes with respect to other Indebtedness incurred or
anticipated to be incurred by the Borrower or any of its Subsidiaries to finance
the acquisition of Real Property Assets.
SECTION 10.4 PERMITTED INVESTMENTS.
(a) Make any Investment in or otherwise own, and shall not permit any
Subsidiary to
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make any Investment in or otherwise own, any of the following items which would
cause the value of such holdings of the Borrower and its Subsidiaries determined
on a consolidated basis to exceed the following percentages of Gross Asset
Value:
(i) Capital Stock of any Unconsolidated Affiliate, such that the
aggregate value of such Capital Stock calculated on the basis of the lower
of cost or market, exceeds 5% of Gross Asset Value;
(ii) Investments in partnerships, joint ventures and other non-
corporate Persons accounted for on an equity basis (determined in
accordance with GAAP), such that the aggregate book value of such
Investments exceeds 10% of Gross Asset Value;
(iii) Mortgages in favor of the Borrower or any Subsidiary, such that
the aggregate book value of Indebtedness secured by such Mortgages exceeds
10% of Gross Asset Value;
(iv) unimproved real estate (excluding unimproved real estate on
which development of a property has commenced), such that the aggregate
book value of all such unimproved real estate exceeds 5% of Gross Asset
Value; and
(v) Real Property Assets Under Construction, such that the
aggregate amount of related Construction in Process exceeds 15% of Gross
Asset Value.
(b) In addition to the foregoing limitations, the aggregate value of the
Investments subject to the limitations in the preceding clauses (i) through (iv)
shall not exceed 30% of Gross Asset Value.
SECTION 10.5 LIENS; AGREEMENTS REGARDING LIENS; OTHER MATTERS.
(a) Create, assume, incur or permit or suffer to exist, or permit any
Subsidiary or any other Loan Party to create, assume, incur or permit or suffer
to exist, any Lien (other than Permitted Liens) upon any of its properties,
assets, income or profits of any character whether now owned or hereafter
acquired if immediately prior to the creation, assumption or incurring of such
Lien, or immediately thereafter, a Default or Event of Default is or would be in
existence, including without limitation, a Default or Event of Default resulting
from a violation of any of the covenants contained in Section 10.1; provided
that for so long as the Revolving Credit Agreement remains in effect and
continues to include the prohibition on restrictions on Liens currently set
forth in Section 10.5(b) of the Revolving Credit Agreement, this Section 10.5(a)
shall have no force or effect, but upon the complete termination of the
Revolving Credit Agreement and the irrevocable payment in full of all
indebtedness and other amounts due thereunder, without further act or deed on
the part of the Administrative Agent, the Lenders, the Borrower or any
Guarantor, this Section 10.5(a) shall be in full force and effect.
(b) Enter into, assume or otherwise be bound by, or permit any Material
Subsidiary or any Wholly Owned Subsidiary to enter into assume or otherwise be
bound by any agreement (other than the Loan Documents), prohibiting the creation
or assumption of any Lien upon its properties
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or assets, whether now owned or hereafter acquired except for (A) any agreement
(i) evidencing Indebtedness which the Borrower or such Subsidiary may create,
incur, assume, or permit or suffer to exist under Section 10.2.; (ii) which
Indebtedness is secured by a Lien permitted to exist under the immediately
preceding subsection (a) and (iii) which prohibits the creation of any other
Lien in only the property securing such Indebtedness as of the date such
agreement was entered into, (B) provisions contained as of the date hereof in
the articles of incorporation, bylaws, declaration of trust, partnership
agreement, operating agreement or other comparable organizational document of a
Non-Guarantor Subsidiary which prohibit the creation of a Lien upon any equity
interest of such Non-Guarantor Subsidiary, and (C) the provisions of the
Revolving Credit Agreement; or
(c) Create or otherwise cause or suffer to exist or become effective, or
permit any Subsidiary or to create or otherwise cause or suffer to exist or
become effective, any consensual encumbrance or restriction of any kind on the
ability of any Subsidiary to: (i) pay dividends or make any other distribution
on any of the capital stock or other equity interests owned by the Borrower, any
Subsidiary or any other Loan Party; (ii) pay any Indebtedness owed to the
Borrower, any other Subsidiary or any other Loan Party in accordance with its
terms; (iii) make loans or advances to the Borrower, any Subsidiary or any other
Loan Party; or (iv) transfer any of its property or assets to the Borrower, any
Subsidiary or any other Loan Party, other than (x) any such consensual
encumbrances or restrictions in existence as of the date hereof and (y) in the
case of any Subsidiary that is not a Wholly Owned Subsidiary, limitations
arising after the date hereof that any such dividends, distributions, loans,
advances or transfers of property must be on fair and reasonable terms and on an
arm's length basis; provided that for so long as the Revolving Credit Agreement
remains in effect and continues to include the prohibition on restrictions on
Liens currently set forth in Section 10.5(b) of the Revolving Credit Agreement,
this Section 10.5(c) shall not prohibit the creation or assumption of any Lien
in violation of Section 10.5(b) of the Revolving Credit Agreement, but upon the
complete termination of the Revolving Credit Agreement and the irrevocable
payment in full of all indebtedness and all other amounts due thereunder,
without further act or deed on the part of the Administrative Agent, the
Lenders, the Borrower or any Guarantor, this proviso shall be null and void and
of no effect.
SECTION 10.6 RESTRICTED PAYMENTS.
Declare or make, or permit any Subsidiary or other Loan Party to declare or
make, any Restricted Payment; provided, however, that (a) so long as no Event of
Default shall have occurred and be continuing or would occur as a result
thereof, the Borrower may make distributions to its shareholders during any
four-quarter period in an aggregate amount not to exceed 95% of the Borrower's
Funds From Operations for such four-quarter period determined on a consolidated
basis; (b) Subsidiaries and other Loan Parties may make Restricted Payments to
the Borrower; (c) so long as no Event of Default shall have occurred and be
continuing or would occur as a result thereof, Subsidiaries may make cash
distributions to Persons owning equity interest in them or Borrower may purchase
or acquire such equity interests from such Persons and (d) the Borrower may make
payments with respect to any Subordinated Debt permitted by the terms of Section
10.2. in accordance with the terms thereof but only, in each case, to the extent
required by, and subject to the subordination provisions contained in, the
agreements evidencing such Indebtedness was issued. Notwithstanding anything
contained in this Section to the contrary, the Borrower may make distributions
to its shareholders in the minimum amount necessary to maintain compliance with
53
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Section 8.11. so long as (a) no Event of Default specified in Section 11.1.(a)
shall have occurred and be continuing; (b) the Borrower shall not have failed to
make two consecutive scheduled payments of interest on any of the Obligations
when due which failure shall remain uncured and (c) none of the Obligations have
been accelerated as a result of any Event of Default.
SECTION 10.7 MERGER, CONSOLIDATION AND SALES OF ASSETS.
(a) Enter into, or permit any Subsidiary or other Loan Party to enter
into, any transaction of merger or consolidation; (b) liquidate, wind-up or
dissolve itself (or suffer any liquidation or dissolution) or permit any
Subsidiary or other Loan Party to do any of the foregoing; or (c) convey, sell,
lease, sublease, transfer or otherwise dispose of, in one transaction or a
series of transactions, all or any substantial part of its business or assets,
or the capital stock of or other equity interests in any of its Subsidiaries,
whether now owned or hereafter acquired or permit any Subsidiary or other Loan
Party to do any of the foregoing; provided, however, that:
(i) any Subsidiary of the Borrower may merge or consolidate with
the Borrower or a Wholly Owned Subsidiary of the Borrower;
(ii) any Subsidiary or other Loan Party may sell, transfer or
dispose of its assets to the Borrower or a Wholly Owned Subsidiary of the
Borrower;
(iii) a Wholly Owned Subsidiary may liquidate provided that
immediately prior to such liquidation and immediately thereafter and after
giving effect thereto, no Default or Event of Default is or would be in
existence;
(iv) a Subsidiary that is not a Material Subsidiary, does not own an
Unencumbered Pool Property and is not a party to a Guaranty or Accession
Agreement delivered pursuant to Sections 6.1.(a)(viii) and 8.13., as
applicable (an "Exempt Subsidiary"), may merge or consolidate with another
Person, so long as immediately prior to such merger or consolidation, and
immediately thereafter and after giving effect thereto, no Default or Event
of Default is or would be in existence; and
(v) an Exempt Subsidiary may sell all or substantially all of its
business or assets, and the Borrower or any Exempt Subsidiary may sell all
or substantially all of the capital stock of or other equity interests in
any Subsidiary that is itself an Exempt Subsidiary, so long as immediately
prior to any such sale, and immediately thereafter and after giving effect
thereto, no Default or Event of Default is or would be in existence.
Further, neither the Borrower, any Subsidiary nor any other Loan Party shall
enter into any sale-leaseback transactions or other transaction by which the
Borrower, a Subsidiary or a Loan Party shall remain liable as lessee (or the
economic equivalent thereof) of any real or personal property that it has sold
or leased to another Person.
SECTION 10.8 NO PLAN ASSETS.
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Permit, or permit any Subsidiary or any other Loan Party to permit, any of
its respective assets to become or be deemed to be "plan assets" within the
meaning of ERISA, the Internal Revenue Code and the respective regulations
promulgated thereunder other than the contributions to an Employee Benefit Plan.
SECTION 10.9 FISCAL YEAR.
Change its fiscal year from that in effect as of the Agreement Date.
SECTION 10.10 MODIFICATIONS TO MATERIAL CONTRACTS.
Enter into, or permit any Subsidiary or other Loan Party to enter into, any
amendment or modification to any Material Contract which could reasonably be
expected to have a Material Adverse Effect or default in the performance of any
obligations of any Material Contract or permit any Material Contract to be
canceled or terminated more than one month prior to its stated maturity.
SECTION 10.11 TRANSACTIONS WITH AFFILIATES.
Permit to exist or enter into, and will not permit any of its Subsidiaries
or any of the other Loan Parties to permit to exist or enter into, any
transaction (including the purchase, sale, lease or exchange of any property or
the rendering of any service) with any Affiliate of the Borrower or with any
director, officer or employee of the Borrower or any other Loan Party, except
transactions in the ordinary course of and pursuant to the reasonable
requirements of the business of the Borrower or any of its Subsidiaries and upon
fair and reasonable terms which are no less favorable to the Borrower or such
Subsidiary than would be obtained in a comparable arm's length transaction with
a Person that is not an Affiliate.
ARTICLE XI. DEFAULT
SECTION 11.1 EVENTS OF DEFAULT.
Each of the following shall constitute an Event of Default, whatever the
reason for such event and whether it shall be voluntary or involuntary or be
effected by operation of Applicable Law or pursuant to any judgment or order of
any Governmental Authority:
(a) Default in Payment of Principal. The Borrower shall fail to pay when
-------------------------------
due (whether upon demand, at maturity, by reason of acceleration or otherwise)
the principal of the Loan.
(b) Default in Payment of Other Amounts. The Borrower shall fail to pay
-----------------------------------
when due any interest on the Loan or any of the other payment Obligations (other
than the principal of any Loan) owing by the Borrower under this Agreement or
any other Loan Document and such failure shall continue for a period of 3
Business Days after the date upon which the Borrower or any Subsidiary obtains
knowledge of such failure.
(c) Default in Performance. (i) The Borrower shall fail to perform or
----------------------
observe any term, covenant, condition or agreement on its part to be performed
or observed contained in Section 8.11.,
55
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Section 9.4.(l) or Article X. or (ii) the Borrower, any Subsidiary or any other
Loan Party shall fail to perform or observe any term, covenant, condition or
agreement contained in this Agreement or any other Loan Document to which it is
a party and not otherwise mentioned in this Section and in the case of this
clause (ii) such failure shall continue for a period of 60 days after the
earlier of (x) the date upon which the Borrower, such Subsidiary or such Loan
Party obtains knowledge of such failure or (y) the date upon which the Borrower
has received written notice of such failure from the Administrative Agent.
(d) Misrepresentations. Any written statement, representation or warranty
------------------
made or deemed made by or on behalf of the Borrower, any Subsidiary or any other
Loan Party under this Agreement or under any other Loan Document, or any
amendment hereto or thereto, or in any other writing or statement at any time
furnished or made or deemed made by or on behalf of the Borrower, any Subsidiary
or any other Loan Party to the Administrative Agent or any Lender, shall at any
time prove to have been incorrect or misleading in any material respect when
furnished or made.
(e) Indebtedness Cross-Default.
--------------------------
(i) The Borrower, any Subsidiary or any other Loan Party shall fail
to pay when due and payable the principal of, or interest on (after giving
effect to the expiration of any applicable grace period for the payment of
such interest), any Indebtedness (other than the Loan) having an aggregate
outstanding principal amount of $15,000,000 or more; or
(ii) the maturity of any such Indebtedness shall have (x) been
accelerated in accordance with the provisions of any indenture, contract or
instrument evidencing, providing for the creation of or otherwise
concerning such Indebtedness or (y) been required to be prepaid prior to
the stated maturity thereof; or
(iii) any other event shall have occurred and be continuing (and any
related grace period shall have expired) which would permit any holder or
holders of such Indebtedness, any trustee or agent acting on behalf of such
holder or holders or any other Person, to accelerate the maturity of any
such Indebtedness or require any such Indebtedness to be prepaid prior to
its stated maturity.
(f) Voluntary Bankruptcy Proceeding. The Borrower, any Material Subsidiary
-------------------------------
or any other Loan Party shall: (i) commence a voluntary case under the
Bankruptcy Code of 1978, as amended or other federal bankruptcy laws (as now or
hereafter in effect); (ii) file a petition seeking to take advantage of any
other Applicable Laws, domestic or foreign, relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or adjustment of debts; (iii) consent
to, or fail to contest in a timely and appropriate manner, any petition filed
against it in an involuntary case under such bankruptcy laws or other Applicable
Laws or consent to any proceeding or action described in the immediately
following subsection; (iv) apply for or consent to, or fail to contest in a
timely and appropriate manner, the appointment of, or the taking of possession
by, a receiver, custodian, trustee, or liquidator of itself or of a substantial
part of its property, domestic or foreign; (v) admit in writing its inability to
pay its debts as they become due; (vi) make a general assignment for the benefit
of creditors; (vii) make a conveyance fraudulent as to creditors under any
Applicable
56
<PAGE>
Law; or (viii) take any corporate or similar action for the purpose of effecting
any of the foregoing.
(g) Involuntary Bankruptcy Proceeding. A case or other proceeding shall be
---------------------------------
commenced against the Borrower, any Material Subsidiary or any other Loan Party,
in any court of competent jurisdiction seeking: (i) relief under the Bankruptcy
Code of 1978, as amended or other federal bankruptcy laws (as now or hereafter
in effect) or under any other Applicable Laws, domestic or foreign, relating to
bankruptcy, insolvency, reorganization, winding-up, or composition or adjustment
of debts; or (ii) the appointment of a trustee, receiver, custodian, liquidator
or the like of such Person, or of all or any substantial part of the assets,
domestic or foreign, of such Person, and such case or proceeding shall continue
undismissed or unstayed for a period of sixty consecutive calendar days, or an
order granting the relief requested in such case or proceeding against such
Person (including, but not limited to, an order for relief under such Bankruptcy
Code of 1978 or such other federal bankruptcy laws) shall be entered.
(h) Contest of Loan Documents. The Borrower or any other Loan Party shall
-------------------------
disavow, revoke or terminate any Loan Document to which it is a party or shall
otherwise challenge or contest in any action, suit or proceeding in any court or
before any Governmental Authority the validity or enforceability of this
Agreement, any Note or any other Loan Document.
(i) Judgment. A judgment or order for the payment of money (not adequately
--------
covered by insurance as to which the insurance company has acknowledged coverage
in writing) shall be entered against the Borrower, any Material Subsidiary or
any other Loan Party by any court or other tribunal which exceeds, individually
or together with all other such judgments or orders entered against the
Borrower, the Subsidiaries and the other Loan Parties, $5,000,000 in amount (or
which shall otherwise have a Material Adverse Effect) and such judgment or order
shall continue for a period of 30 days without being stayed or dismissed through
appropriate appellate proceedings.
(j) Attachment. A warrant, writ of attachment, execution or similar
----------
process shall be issued against any property of the Borrower or any other Loan
Party which exceeds, individually or together with all other such warrants,
writs, executions and processes, $5,000,000 in amount and such warrant, writ,
execution or process shall not be discharged, vacated, stayed or bonded for a
period of 30 days; provided, however, that if a bond has been issued in favor of
the claimant or other Person obtaining such warrant, writ, execution or process,
the issuer of such bond shall execute a waiver or subordination agreement in
form and substance satisfactory to the Administrative Agent pursuant to which
the issuer of such bond subordinates its right of reimbursement, contribution or
subrogation to the Obligations and waives or subordinates any Lien it may have
on the assets of any Loan Party.
(k) ERISA. Any member of the ERISA Group shall fail to pay when due an
-----
amount or amounts aggregating in excess of $5,000,000 which it shall have become
liable to pay under Title IV of ERISA; or notice of intent to terminate a
Material Plan shall be filed under Title IV of ERISA by any member of the ERISA
Group, any plan administrator or any combination of the foregoing; or the PBGC
shall institute proceedings under Title IV of ERISA to terminate, to impose
liability (other than for premiums under Section 4007 of ERISA) in respect of,
or to cause a trustee to be appointed to administer any Material Plan; or a
condition shall exist by reason of which the PBGC would be
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<PAGE>
entitled to obtain a decree adjudicating that any Material Plan must be
terminated; or there shall occur a complete or partial withdrawal from, or a
default, within the meaning of Section 4219(c)(5) of ERISA, with respect to, one
or more Multiemployer Plans which could cause one or more members of the ERISA
Group to incur a current payment obligation in excess of $5,000,000.
(l) Loan Documents. An Event of Default (as defined therein) shall occur
--------------
under any of the other Loan Documents.
(m) Change of Control/Change in Management.
--------------------------------------
(i) any "person" or "group" (as such terms are used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) is or becomes the "beneficial owner" (as defined in Rules
13d-3 and 13d-5 under the Exchange Act, except that a Person will be deemed
to have "beneficial ownership" of all securities that such Person has the
right to acquire, whether such right is exercisable immediately or only
after the passage of time), directly or indirectly, of more than 20% of the
total voting power of the then outstanding voting stock of the Borrower; or
(ii) during any twelve-month period (commencing both before and
after the Agreement Date), a majority of the Board of Trustees of the
Borrower shall no longer be composed of individuals (i) who were members of
such Board of Trustees on the first date of such period, (ii) whose
election or nomination to such Board of Trustees was approved by
individuals referred to in clause (i) above constituting at the time of
such election or nomination at least a majority of such Board of Trustees
or (iii) whose election or nomination to such Board of Trustees was
approved by individuals referred to in clauses (i) and (ii) above
constituting at the time of such election or nomination at least a majority
of such Board of Trustees; or
(iii) Steven J. Guttman and any two of Howard S. Biel, Ron D. Kaplan
and Cecily A. Ward shall cease for any reason (including death or
disability) to be principally involved in the senior management of the
Borrower on a full-time basis (such event a "Change in Management") and the
Borrower shall fail to replace such individuals with individuals reasonably
acceptable to the Requisite Lenders within 120 days of the last day the
occurrence of such Change in Management.
(n) Dissolution. Any order, judgment or decree is entered against the
-----------
Borrower, any Material Subsidiary or any other Loan Party decreeing the
dissolution or split up of the Borrower, such Subsidiary or such other Loan
Party and such order remains undischarged or unstayed for a period in excess of
30 days.
(o) Subordination of Obligations. (i) Any Loan Document shall cease to be
----------------------------
in full force and effect, or (ii) any Obligation shall be subordinated in right
of payment to any other liability of the Borrower, and, in either case, such
condition or event shall continue for 15 days after the Borrower or any other
Loan Party obtains knowledge of such condition or event.
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SECTION 11.2 REMEDIES UPON EVENT OF DEFAULT.
Upon the occurrence of an Event of Default the following provisions shall
apply:
(a) Acceleration; Termination of Facilities.
---------------------------------------
(i) Automatic. Upon the occurrence of an Event of Default specified
---------
in Sections 11.1.(f) or 11.1.(g), (A) the principal of, and all accrued
interest on, the Loan and the Notes at the time outstanding, and (B) all
of the other Obligations of the Borrower, including, but not limited to,
the other amounts owed to the Lenders and the Administrative Agent under
this Agreement, the Notes or any of the other Loan Documents shall become
immediately and automatically due and payable by the Borrower without
presentment, demand, protest, or other notice of any kind, all of which are
expressly waived by the Borrower.
(ii) Optional. If any other Event of Default shall have occurred and
--------
be continuing, the Administrative Agent may, and at the direction of the
Requisite Lenders shall: declare (1) the principal of, and accrued
interest on, the Loan and the Notes at the time outstanding, and (2) all of
the other Obligations, including, but not limited to, the other amounts
owed to the Lenders and the Administrative Agent under this Agreement, the
Notes or any of the other Loan Documents to be forthwith due and payable,
whereupon the same shall immediately become due and payable without
presentment, demand, protest or other notice of any kind, all of which are
expressly waived by the Borrower.
(b) Loan Documents. The Requisite Lenders may direct the Administrative
--------------
Agent to, and the Administrative Agent if so directed shall, exercise any and
all of its rights under any and all of the other Loan Documents.
(c) Applicable Law. The Requisite Lenders may direct the Administrative
--------------
Agent to, and the Administrative Agent if so directed shall, exercise all other
rights and remedies it may have under any Applicable Law.
(d) Appointment of Receiver. To the extent permitted by Applicable Law,
-----------------------
the Administrative Agent and the Lenders shall be entitled to the appointment of
a receiver for the assets and properties of the Borrower and its Subsidiaries,
without notice of any kind whatsoever and without regard to the adequacy of any
security for the Obligations or the solvency of any party bound for its payment,
to take possession of all or any portion of the business operations of the
Borrower and its Subsidiaries and to exercise such power as the court shall
confer upon such receiver.
SECTION 11.3 [INTENTIONALLY OMITTED].
SECTION 11.4 ALLOCATION OF PROCEEDS.
If an Event of Default shall have occurred and be continuing and the
Obligations have been accelerated, all payments received by the Administrative
Agent under any of the Loan Documents, in respect of any principal of or
interest on the Obligations or any other amounts payable by the
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Borrower hereunder or thereunder, shall be applied by the Administrative Agent
in the following order and priority:
(a) amounts due to the Administrative Agent and the Lenders in
respect of Fees and expenses due under Section 13.2.;
(b) payments of interest on the Loan to be applied for the ratable
benefit of the Lenders;
(c) payments of principal of the Loan to be applied for the ratable
benefit of the Lenders;
(d) [Intentionally Omitted]
(e) amounts due to the Administrative Agent and the Lenders pursuant
to Sections 12.7. and 13.9.;
(f) payments of all other amounts due under any of the Loan
Documents, if any, to be applied for the ratable benefit of the Lenders;
and
(g) any amount remaining after application as provided above, shall
be paid to the Borrower or whomever else may be legally entitled thereto.
SECTION 11.5 [INTENTIONALLY OMITTED].
SECTION 11.6 PERFORMANCE BY ADMINISTRATIVE AGENT.
If the Borrower shall fail to perform any covenant, duty or agreement
contained in any of the Loan Documents, the Administrative Agent may perform or
attempt to perform such covenant, duty or agreement on behalf of the Borrower
after the expiration of any cure or grace periods set forth herein. In such
event, the Borrower shall, at the request of the Administrative Agent, promptly
pay any amount reasonably expended by the Administrative Agent in such
performance or attempted performance to the Administrative Agent, together with
interest thereon at the applicable Post-Default Rate from the date of such
expenditure until paid. Notwithstanding the foregoing, neither the
Administrative Agent nor any Lender shall have any liability or responsibility
whatsoever for the performance of any obligation of the Borrower under this
Agreement or any other Loan Document.
SECTION 11.8 RIGHTS CUMULATIVE.
The rights and remedies of the Administrative Agent and the Lenders under
this Agreement and each of the other Loan Documents shall be cumulative and not
exclusive of any rights or remedies which any of them may otherwise have under
Applicable Law. In exercising their respective rights and remedies the
Administrative Agent and the Lenders may be selective and no failure or delay by
the Administrative Agent or any of the Lenders in exercising any right shall
operate as a waiver of it, nor shall any single or partial exercise of any power
or right preclude its
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other or further exercise or the exercise of any other power or right.
SECTION 11.9 RECISION OF ACCELERATION BY REQUISITE LENDERS.
If at any time after acceleration of the maturity of the Obligations, the
Borrower shall pay all arrears of interest and all payments on account of
principal of the Obligations which shall have become due otherwise than by
acceleration (with interest on principal and, to the extent permitted by
Applicable Law, on overdue interest, at the rates specified in this Agreement)
and all Events of Default and Defaults (other than nonpayment of principal of
and accrued interest on the Obligations due and payable solely by virtue of
acceleration) shall be remedied or waived to the satisfaction of the Requisite
Lenders, then by written notice to the Borrower, the Requisite Lenders may
elect, in the sole discretion of such Requisite Lenders, to rescind and annul
the acceleration and its consequences; but such action shall not affect any
subsequent Default or Event of Default or impair any right or remedy consequent
thereon. The provisions of the preceding sentence are intended merely to bind
the Lenders to a decision which may be made at the election of the Requisite
Lenders; they are not intended to benefit the Borrower and do not give the
Borrower the right to require the Lenders to rescind or annul any acceleration
hereunder, even if the conditions set forth herein are satisfied.
ARTICLE XII. THE AGENTS
SECTION 12.1 AUTHORIZATION AND ACTION.
Each Lender hereby appoints and authorizes the Administrative Agent to take
such action as agent on such Lender's behalf and to exercise such powers under
this Agreement and the other Loan Documents as are specifically delegated to the
Administrative Agent by the terms hereof and thereof, together with such powers
as are reasonably incidental thereto. The relationship between the
Administrative Agent and the Lenders shall be that of principal and agent only
and nothing herein shall be construed to deem the Administrative Agent a trustee
or fiduciary for any Lender nor to impose on the Administrative Agent duties or
obligations other than those expressly provided for herein. At the request of a
Lender, the Administrative Agent will forward to such Lender copies or, where
appropriate, originals of the documents delivered to the Administrative Agent
pursuant to this Agreement or the other Loan Documents. The Administrative Agent
will also furnish to any Lender, upon the request of such Lender, a copy of any
certificate or notice furnished to the Administrative Agent by the Borrower, any
Subsidiary or any other Loan Party, pursuant to this Agreement or any other Loan
Document not already delivered to such Lender pursuant to the terms of this
Agreement or any such other Loan Document. As to any matters not expressly
provided for by the Loan Documents (including, without limitation, enforcement
or collection of any of the Obligations), the Administrative Agent shall not be
required to exercise any discretion or take any action, and the Administrative
Agent shall only 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 Requisite Lenders (or all of the Lenders if explicitly required under any
other provisions of this Agreement), and such instructions shall be binding upon
all Lenders and all holders of any of the Obligations; provided, however, that,
notwithstanding anything in this Agreement to the contrary, the Administrative
Agent shall not be required to take any action which exposes the Administrative
Agent to personal liability or which is contrary to this Agreement or any other
Loan Document or Applicable Law. Not in
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limitation of the foregoing, the Administrative Agent shall not exercise any
right or remedy it or the Lenders may have under any Loan Document upon the
occurrence of a Default or an Event of Default unless the Requisite Lenders have
so directed the Administrative Agent to exercise such right or remedy.
SECTION 12.2 ADMINISTRATIVE AGENT'S RELIANCE, ETC.
Notwithstanding any other provision of any Loan Document, neither the
Administrative Agent nor any of the Administrative Agent's directors, officers,
agents, employees or counsel 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 limiting the
generality of the foregoing, the Administrative Agent: (a) may treat the payee
of any Note as the holder thereof until the Administrative Agent receives
written notice of the assignment or transfer thereof signed by such payee and in
form satisfactory to the Administrative Agent; (b) may consult with legal
counsel (including its own counsel or counsel for the Borrower or any Loan
Party), 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; (c)
makes no warranty or representation to any Lender or any other Person and shall
not be responsible to any Lender or any other Person for any statements,
warranties or representations made by any Person in or in connection with this
Agreement or any other Loan Document; (d) 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 any of this Agreement or any other Loan Document or the
satisfaction of any conditions precedent under this Agreement or any Loan
Document on the part of the Borrower or other Persons or inspect the property,
books or records of the Borrower or any other Person; (e) shall not be
responsible to any Lender for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or any other
Loan Document, any other instrument or document furnished pursuant thereto or
any collateral covered thereby or the perfection or priority of any Lien in
favor of the Administrative Agent on behalf of the Lenders in any such
collateral; and (f) shall incur no liability under or in respect of this
Agreement or any other Loan Document by acting upon any notice, consent,
certificate or other instrument or writing (which may be by telephone or
telecopy) believed by it to be genuine and signed, sent or given by the proper
party or parties.
SECTION 12.3 NOTICE OF DEFAULTS.
The Administrative Agent shall not be deemed to have knowledge or notice of
the occurrence of a Default or Event of Default, other than a Default or Event
of Default under Section 11.1.(a) or (b), unless the Administrative Agent has
received notice from a Lender or the Borrower referring to this Agreement,
describing with reasonable specificity such Default or Event of Default and
stating that such notice is a "notice of default." If any Lender becomes aware
of any Default or Event of Default, it shall promptly send to the Administrative
Agent such a "notice of default." Further, if the Administrative Agent receives
such a "notice of default", the Administrative Agent shall give prompt notice
thereof to the Lenders.
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SECTION 12.4 PNC AS LENDER.
PNC, as a Lender, shall have the same rights and powers under this
Agreement and any other Loan Document as any other Lender and may exercise the
same as though it were not an Agent; and the term "Lender" or "Lenders" shall,
unless otherwise expressly indicated, include PNC in its individual capacity.
PNC and and its affiliates may accept deposits from, maintain deposits or credit
balances for, invest in, lend money to, act as trustee under indentures of,
serve as financial advisor to, and generally engage in any kind of business with
the Borrower, any Subsidiary, any other Loan Party or any other affiliate
thereof as if it were any other bank and without any duty to account therefor to
the other Lenders. Further, the Administrative Agent and any affiliate may
accept fees and other consideration from the Borrower for services in connection
with this Agreement and otherwise without having to account for the same to the
other Lenders.
SECTION 12.5 APPROVALS OF LENDERS.
All communications from the Administrative Agent to any Lender requesting
such Lender's determination, consent, approval or disapproval (a) shall be given
in the form of a written notice to such Lender, (b) shall be accompanied by a
description of the matter or issue as to which such determination, approval,
consent or disapproval is requested, or shall advise such Lender where
information, if any, regarding such matter or issue may be inspected, or shall
otherwise describe the matter or issue to be resolved, (c) shall include, if
reasonably requested by such Lender and to the extent not previously provided to
such Lender, written materials and a summary of all oral information provided to
the Administrative Agent by the Borrower in respect of the matter or issue to be
resolved, and (d) shall include the Administrative Agent's recommended course of
action or determination in respect thereof. Each Lender shall reply promptly,
but in any event within 10 Business Days (or such lesser or greater period as
may be specifically required or permitted under the Loan Documents for the
Administrative Agent to respond). Unless a Lender shall give written notice to
the Administrative Agent that it objects to the recommendation or determination
of the Administrative Agent (together with a written explanation of the reasons
behind such objection) within the applicable time period for reply, such Lender
shall be deemed to have conclusively approved of or consented to such
recommendation or determination.
SECTION 12.6 LENDER CREDIT DECISION, ETC.
Each Lender expressly acknowledges and agrees that neither the
Administrative Agent nor any of the Administrative Agent's respective officers,
directors, employees, agents, counsel, attorneys-in-fact or other affiliates has
made any representations or warranties as to the financial condition,
operations, creditworthiness, solvency or other information concerning the
business or affairs of the Borrower, any Subsidiary, any other Loan Party or
other Person to such Lender and that no act by the Administrative Agent
hereinafter taken, including any review of the affairs of the Borrower, shall be
deemed to constitute any such representation or warranty by the Administrative
Agent to any Lender. Each Lender acknowledges that it has, independently and
without reliance upon the Administrative Agent, any other Lender or counsel to
the Administrative Agent, or any of their respective officers, directors,
employees and agents, and based on the financial statements of the Borrower, the
Subsidiaries or any other Affiliate thereof, and inquiries of such Persons, its
independent due diligence of the business and affairs of the Borrower, the
Subsidiaries, the other
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Loan Parties and other Persons, its review of the Loan Documents, the legal
opinions required to be delivered to it hereunder, the advice of its own counsel
and such other documents and information as it has deemed appropriate, made its
own credit and legal analysis and decision to enter into this Agreement and the
transaction contemplated hereby. Each Lender also acknowledges that it will,
independently and without reliance upon the Administrative Agent, any other
Lender or counsel to the Administrative Agent or any of their respective
officers, directors, employees and agents, and based on such review, advice,
documents and information as it shall deem appropriate at the time, continue to
make its own decisions in taking or not taking action under the Loan Documents.
Except for notices, reports and other documents and information expressly
required to be furnished to the Lenders by the Administrative Agent under this
Agreement or any of the other Loan Documents, the Administrative Agent shall not
have any duty or responsibility to provide any Lender with any credit or other
information concerning the business, operations, property, financial and other
condition or creditworthiness of the Borrower, any other Loan Party or any other
Affiliate thereof which may come into possession of the Administrative Agent or
any of its officers, directors, employees, agents, attorneys-in-fact or other
affiliates.
SECTION 12.7 INDEMNIFICATION OF THE ADMINISTRATIVE AGENT.
Each Lender agrees to indemnify the Administrative Agent (to the extent not
reimbursed by the Borrower and without limiting the obligation of the Borrower
to do so) pro rata in accordance with such Lender's respective Commitment
Percentage, from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever which may at any time be imposed on, incurred
by, or asserted against the Administrative Agent in any way relating to or
arising out of the Loan Documents (collectively "Indemnifiable Amounts"), any
transaction contemplated hereby or thereby or any action taken or omitted by the
Administrative Agent under the Loan Documents; provided, however, that no Lender
shall be liable for any portion of such Indemnifiable Amounts to the extent
resulting from the Administrative Agent's gross negligence or willful misconduct
or, if the Administrative Agent fails to follow the written direction of the
Requisite Lenders unless such failure is pursuant to the advice of counsel of
which the Lenders have received notice. Without limiting the generality of the
foregoing, each Lender agrees to reimburse the Administrative Agent promptly
upon demand for its ratable share of any out-of-pocket expenses (including
counsel fees of the counsel(s) of the Administrative Agent's own choosing)
incurred by the Administrative Agent in connection with the preparation,
execution, administration, or enforcement of, or legal advice with respect to
the rights or responsibilities of the parties under, the Loan Documents, any
suit or action brought by the Administrative Agent to enforce the terms of the
Loan Documents and/or collect any Obligations, any "lender liability" suit or
claim brought against the Administrative Agent and/or the Lenders, and any claim
or suit brought against the Administrative Agent and/or the Lenders arising
under any Environmental Laws, to the extent that the Administrative Agent is not
reimbursed for such expenses by the Borrower. Such out-of-pocket expenses
(including counsel fees) shall be advanced by the Lenders on the request of the
Administrative Agent notwithstanding any claim or assertion that the
Administrative Agent is not entitled to indemnification hereunder upon receipt
of an undertaking by the Administrative Agent that the Administrative Agent will
reimburse the Lenders if it is actually and finally determined by a court of
competent jurisdiction that the Administrative Agent is not so entitled to
indemnification. The agreements in this Section shall survive the payment of the
Loan
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and all other amounts payable hereunder or under the other Loan Documents and
the termination of this Agreement. If the Borrower shall reimburse the
Administrative Agent for any Indemnifiable Amount following payment by any
Lender to the Administrative Agent in respect of such Indemnifiable Amount
pursuant to this Section, the Administrative Agent shall share such
reimbursement on a ratable basis with each Lender making any such payment.
SECTION 12.8 SUCCESSOR ADMINISTRATIVE AGENT.
The Administrative Agent may resign at any time as Administrative Agent
under the Loan Documents by giving written notice thereof to the Lenders and the
Borrower. In the event of a material breach of its duties hereunder, the
Administrative Agent may be removed as Administrative Agent under the Loan
Documents at any time by the Requisite Lenders upon 30-day's prior notice. The
Requisite Lenders shall have the right to appoint a successor Administrative
Agent and, provided no Default or Event of Default shall have occurred and be
continuing, be subject to the Borrower's approval, which approval shall not be
unreasonably withheld or delayed (except that Borrower shall, in all events, be
deemed to have approved each Lender as a successor Administrative Agent). If no
successor Administrative Agent shall have been so appointed by the Requisite
Lenders, and shall have accepted such appointment, within 30 days after the
resigning Administrative Agent's giving of notice of resignation or the
Requisite Lenders' removal of the resigning Administrative Agent, then the
resigning or removed Administrative Agent may, on behalf of the Lenders, appoint
a successor Administrative Agent, which shall be a Lender, if any Lender shall
be willing to serve, and otherwise shall be a commercial bank having total
combined assets of at least $50,000,000,000. Upon the acceptance of any
appointment as Administrative Agent hereunder by a successor Administrative
Agent, such successor Administrative Agent, as applicable, shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the resigning Administrative Agent, and the retiring Administrative Agent
shall be discharged from its duties and obligations as "Administrative Agent"
under the Loan Documents. After any resigning Administrative Agent's resignation
or removal hereunder as Administrative Agent, the provisions of this Article
XII. shall inure to its benefit as to any actions taken or omitted to be taken
by it while it was Administrative Agent under the Loan Documents.
SECTION 12.9 SYNDICATION AND DOCUMENTATION AGENTS.
The Syndication Agent and Documentation Agent in their respective
capacities as such, do not assume any responsibility or obligation hereunder,
including, without limitation, for servicing, enforcement or collection of the
Loan, nor any duties as agents hereunder for the Lenders. The titles of
"Syndication Agent" and "Documentation Agent" are solely honorific and imply no
fiduciary responsibility on the part and of the Syndication Agent or the
Documentation Agent, in their respective capacities as such, to the
Administrative Agent, the Borrower or any Lender and the use of such titles do
not impose on the Syndication Agent or the Documentation Agent any duties or
obligations greater than those of any other Lender or entitle the Syndication
Agent or the Documentation Agent to any rights other than those to which any
other Lender is entitled.
SECTION 12.10 APPROVALS AND OTHER ACTIONS BY REQUISITE LENDERS.
Each of the following shall require the approval of, or may be taken at the
request of, the
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Requisite Lenders:
(a) Consent to an increase in the aggregate amount of the Commitments from
$125,000,000 to $150,000,000, provided that no such consent shall obligate any
Lender to increase its Commitment;
(b) Subject to Section 4.4, approval of Eligible Properties as
Unencumbered Pool Properties as provided in Section 4.1.;
(c) Termination of the Commitments and acceleration of the Obligations
upon the occurrence of an Event of Default as provided in Section 11.2.;
(d) Rescission of acceleration of any of the Obligations as provided in
Section 11.8.;
(e) Removing the Administrative Agent for good cause and approving of its
replacement as provided in Section 12.8.; and
(f) Except as specifically provided otherwise in Section 13.6., any
consent or approval regarding, any waiver of the performance or observance by
the Borrower of and the waiver of the continuance of any Default or Event of
Default in respect of, any term of this Agreement or any other Loan Document.
ARTICLE XIII. MISCELLANEOUS
SECTION 13.1 NOTICES.
Unless otherwise provided herein, communications provided for hereunder
shall be in writing and shall be mailed, telecopied or delivered as follows:
If to the Borrower:
Federal Realty Investment Trust
1626 East Jefferson Street
Rockville, Maryland 20852-4041
Attention: Legal Department
Telecopy Number: (301) 998-3703
Telephone Number: (301) 998-8333
If to the Administrative Agent:
PNC Bank, National Association
One PNC Plaza, 249 Fifth Avenue
Mail Stop P1-POPP-22-1
Pittsburgh, PA 15222-2707
Attention: Arlene Ohler, Agency Services
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(412) 762.8672
(412) 762.3627
With a copy to:
PNC Bank, National Association
1401 Eye Street, N.W., Suite 200
Washington, DC 20005
Attention: Ashley Smith
Telephone Number: (202) 393.2752
Telecopy Number: (202) 393.1545
If to a Lender:
To such Lender's address or telecopy number, as applicable, set forth
on its signature page hereto or in the applicable Assignment and
Acceptance Agreement.
or, as to each party at such other address as shall be designated by such party
in a written notice to the other parties delivered in compliance with this
Section. All such notices and other communications shall be effective (i) if
mailed, when received; (ii) if telecopied, when transmitted; or (iii) if hand
delivered, when delivered. Notwithstanding the immediately preceding sentence,
all notices or communications to the Administrative Agent or any Lender under
Article II. shall be effective only when actually received. Neither the
Administrative Agent nor any Lender shall incur any liability to the Borrower
(nor shall the Administrative Agent incur any liability to the Lenders) for
acting upon any telephonic notice referred to in this Agreement which the
Administrative Agent or such Lender, as the case may be, believes in good faith
to have been given by a Person authorized to deliver such notice or for
otherwise acting in good faith under hereunder.
SECTION 13.2 EXPENSES.
The Borrower agrees (a) to pay or reimburse the Administrative Agent for
all of its reasonable out-of-pocket costs and expenses incurred in connection
with the preparation, negotiation and execution of, and any amendment,
supplement or modification to, any of the Loan Documents (including due
diligence expenses and travel expenses relating to closing), and the
consummation of the transactions contemplated thereby, including the reasonable
fees and disbursements of counsel to the Administrative Agent, (b) to pay or
reimburse the Administrative Agent and the Lenders for all their costs and
expenses incurred in connection with the enforcement or preservation of any
rights under the Loan Documents, including the reasonable fees and disbursements
of their respective counsel (including the allocated fees and expenses of in-
house counsel) and any payments in indemnification or otherwise payable by the
Lenders to the Administrative Agent pursuant to the Loan Documents, (c) to pay,
indemnify and hold the Administrative Agent and the Lenders harmless from any
and all recording and filing fees and any and all liabilities with respect to,
or resulting from any failure to pay or delay in paying, documentary, stamp,
excise and other similar taxes, if any, which may be payable or determined to be
payable in connection with the execution and delivery of any of the Loan
Documents, or consummation of any amendment, supplement or modification
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of, or any waiver or consent under or in respect of, any Loan Document and (d)
to the extent not already covered by any of the preceding subsections, to pay or
reimburse the Administrative Agent and the Lenders for all their costs and
expenses incurred in connection with any bankruptcy or other proceeding of the
type described in Sections 11.1.(f) or 11.1.(g), including the reasonable fees
and disbursements of counsel to the Administrative Agent and any Lender, whether
such fees and expenses are incurred prior to, during or after the commencement
of such proceeding or the confirmation or conclusion of any such proceeding.
SECTION 13.3 SETOFF.
Subject to Section 3.3. and in addition to any rights now or hereafter
granted under Applicable Law and not by way of limitation of any such rights,
upon the occurrence and during the continuation of a Default or an Event of
Default, the Administrative Agent and each Lender is hereby authorized by the
Borrower, at any time or from time to time, without notice to the Borrower or to
any other Person, any such notice being hereby expressly waived, but in the case
of any Lender only with the prior written consent of the Administrative Agent,
to set-off and to appropriate and to apply any and all deposits (general or
special, including, but not limited to, indebtedness evidenced by certificates
of deposit, whether matured or unmatured) and any other indebtedness at any time
held or owing by the Administrative Agent, such Lender or any affiliate of the
Administrative Agent or such Lender, to or for the credit or the account of the
Borrower against and on account of any of the Obligations, irrespective of
whether or not the Loan and all other Obligations have declared to be due and
payable as permitted by Section 11.2., and although such obligations shall be
contingent or unmatured.
SECTION 13.4 ARBITRATION.
UPON DEMAND OF ANY PARTY HERETO, WHETHER MADE BEFORE OR AFTER INSTITUTION
OF ANY JUDICIAL PROCEEDING, ANY CLAIM OR CONTROVERSY ARISING OUT OF, OR RELATING
TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENTS ("DISPUTES") BETWEEN OR AMONG ANY
SUCH PARTIES SHALL BE RESOLVED BY BINDING ARBITRATION CONDUCTED UNDER AND
GOVERNED BY THE COMMERCIAL FINANCIAL DISPUTES ARBITRATION RULES (THE
"ARBITRATION RULES") OF THE AMERICAN ARBITRATION ASSOCIATION (THE "AAA") AND THE
FEDERAL ARBITRATION ACT. DISPUTES MAY INCLUDE, WITHOUT LIMITATION, TORT CLAIMS,
COUNTERCLAIMS, DISPUTES AS TO WHETHER A MATTER IS SUBJECT TO ARBITRATION, CLAIMS
BROUGHT AS CLASS ACTIONS, AND CLAIMS ARISING FROM LOAN DOCUMENTS EXECUTED IN THE
FUTURE. A JUDGMENT UPON THE AWARD MAY BE ENTERED IN ANY COURT HAVING
JURISDICTION. NOTWITHSTANDING THE FOREGOING, THIS ARBITRATION PROVISION DOES NOT
APPLY TO DISPUTES UNDER OR RELATED TO INTEREST RATE AGREEMENTS TO WHICH ANY
LENDER IS A PARTY. ALL ARBITRATION HEARINGS SHALL BE CONDUCTED IN WASHINGTON,
D.C. A HEARING SHALL BEGIN WITHIN 90 DAYS OF DEMAND FOR ARBITRATION AND ALL
HEARINGS SHALL CONCLUDED WITHIN 120 DAYS OF DEMAND FOR ARBITRATION. THESE TIME
LIMITATIONS MAY NOT BE EXTENDED UNLESS A PARTY SHOWS CAUSE FOR EXTENSION AND
THEN NO MORE THAN A TOTAL EXTENSION OF 60 DAYS. THE
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EXPEDITED PROCEDURES SET FORTH IN RULE 51 ET. SEQ. OF THE ARBITRATION RULES
SHALL BE APPLICABLE TO CLAIMS OF LESS THAN $1,000,000. ARBITRATORS SHALL BE
LICENSED ATTORNEYS SELECTED FROM THE COMMERCIAL FINANCIAL DISPUTE ARBITRATION
PANEL OF THE AAA. THE PARTIES DO NOT WAIVE ANY APPLICABLE LAWS EXCEPT AS
PROVIDED HEREIN. NOTWITHSTANDING THE PRECEDING BINDING ARBITRATION PROVISIONS,
THE PARTIES AGREE TO PRESERVE, WITHOUT DIMINUTION, THE FOLLOWING REMEDIES THAT
THE ADMINISTRATIVE AGENT OR THE LENDERS MAY EXERCISE BEFORE OR AFTER AN
ARBITRATION PROCEEDING IS BROUGHT. SUBJECT TO THE OTHER TERMS HEREOF, THE
ADMINISTRATIVE AGENT AND THE LENDERS SHALL HAVE THE RIGHT TO PROCEED IN ANY
COURT OF PROPER JURISDICTION OR BY SELF-HELP TO EXERCISE OR PROSECUTE THE
FOLLOWING REMEDIES, AS APPLICABLE: (I) ALL RIGHTS TO FORECLOSE AGAINST ANY REAL
OR PERSONAL PROPERTY OR OTHER SECURITY BY EXERCISING A POWER OF SALE OR UNDER
APPLICABLE LAW BY JUDICIAL FORECLOSURE INCLUDING A PROCEEDING TO CONFIRM THE
SALE; (II) ALL RIGHTS OF SELF-HELP INCLUDING PEACEFUL OCCUPATION OF REAL
PROPERTY AND COLLECTION OF RENTS, SET-OFF, AND PEACEFUL POSSESSION OF PERSONAL
PROPERTY; (III) OBTAINING PROVISIONAL OR ANCILLARY REMEDIES INCLUDING INJUNCTIVE
RELIEF, SEQUESTRATION, GARNISHMENT, ATTACHMENT, APPOINTMENT OF RECEIVER AND
FILING AN INVOLUNTARY BANKRUPTCY PROCEEDING; AND (IV) WHEN APPLICABLE, A
JUDGMENT BY CONFESSION OF JUDGMENT. ANY CLAIM OR CONTROVERSY WITH REGARD TO
PARTIES' ENTITLEMENT TO SUCH REMEDIES IS A DISPUTE. THE PARTIES HERETO
ACKNOWLEDGE THAT BY AGREEING TO BINDING ARBITRATION THEY HAVE IRREVOCABLY WAIVED
ANY RIGHT THEY MAY HAVE TO A JURY TRIAL WITH REGARD TO A DISPUTE. FURTHER, THE
PARTIES AGREE THAT IF (X) THE ADMINISTRATIVE AGENT OR THE LENDERS SHALL BE
ENTITLED TO EXERCISE ANY RIGHT OR REMEDY UNDER ARTICLE XI. SOLELY BECAUSE ANY
EVENT OR CONDITION HAS OCCURRED OR EXISTS (OR HAS FAILED TO OCCUR OR EXIST)
WHICH COULD REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT (AS DEFINED
HEREIN) AND (Y) THE BORROWER IN GOOD FAITH SHALL DISPUTE THE REQUISITE LENDERS'
DETERMINATION OF MATERIALITY AS PERMITTED BY THE LAST SENTENCE OF THE DEFINITION
OF THE TERM MATERIAL ADVERSE EFFECT, THEN THE EXERCISE OF SUCH RIGHTS AND
REMEDIES SHALL BE SUBJECT TO RESOLUTION OF SUCH DISPUTE PURSUANT TO ARBITRATION
IN ACCORDANCE WITH THIS SECTION.
SECTION 13.5 SUCCESSORS AND ASSIGNS.
(a) The provisions of this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns,
except that the Borrower may not assign or otherwise transfer any of its rights
under this Agreement without the prior written consent of all Lenders.
(b) Any Lender may make, carry or transfer its portion of the Loan at, to
or for the
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account of, any of its branch offices or the office of an affiliate of such
Lender except to the extent such transfer would result in increased costs to the
Borrower.
(c) Any Lender may at any time grant to one or more banks or other
financial institutions (each a "Participant") participating interests in its
Commitment or the Obligations owing to such Lender; provided, however, (i) any
such participating interest must be for a constant and not a varying percentage
interest, (ii) no Lender may grant a participating interest in its Commitment,
or if the Commitments have been terminated, the aggregate outstanding principal
balance of Notes held by it, in an amount less than $5,000,000 and integral
multiples of $5,000,000 in excess thereof and (iii) after giving effect to any
such participation a Lender, the amount of its Commitment, or if the Commitments
have been terminated, the aggregate outstanding principal balance of Notes held
by it, in which it has not granted any participating interests must be at least
$5,000,000. Except as otherwise provided in Section 13.3., no Participant shall
have any rights or benefits under this Agreement or any other Loan Document. In
the event of any such grant by a Lender of a participating interest to a
Participant, such Lender shall remain responsible for the performance of its
obligations hereunder, and the Borrower and the Administrative Agent shall
continue to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement. Any agreement pursuant to
which any Lender may grant such a participating interest shall provide that such
Lender shall retain the sole right and responsibility to enforce the obligations
of the Borrower hereunder including, without limitation, the right to approve
any amendment, modification or waiver of any provision of this Agreement;
provided, however, such Lender may agree with the Participant that it will not,
without the consent of the Participant, agree to (i) increase, or extend the
term or extend the time or waive any requirement for the reduction or
termination of, such Lender's Commitment, (ii) extend the date fixed for the
payment of principal of or interest on the Loans or portions thereof owing to
such Lender, (iii) reduce the amount of any such payment of principal, or (iv)
reduce the rate at which interest is payable thereon. An assignment or other
transfer which is not permitted by subsection (d) or (e) below shall be given
effect for purposes of this Agreement only to the extent of a participating
interest granted in accordance with this subsection (c). The selling Lender
shall notify the Administrative Agent and the Borrower of the sale of any
participation hereunder and the terms thereof.
(d) Any Lender may with the prior written consent of the Administrative
Agent and the Borrower (which consent in the case of the Administrative Agent
and the Borrower shall not be unreasonably withheld) assign to one or more
Eligible Assignees (each an "Assignee") all or a portion of its Commitment and
its other rights and obligations under this Agreement and the Notes; provided,
however, (i) no such consent by the Borrower shall be required (x) in the case
of any assignment to another Lender or any affiliate of such Lender or another
Lender or (y) if a Default or Event of Default shall have occurred and be
continuing; (ii) any partial assignment shall be in an amount at least equal to
$5,000,000 and integral multiples in of $5,000,000 in excess thereof and after
giving effect to such assignment the assigning Lender retains a Commitment, or
if the Commitments have been terminated, holds Notes having an aggregate
outstanding principal balance, of at least $5,000,000 and integral multiples of
$5,000,000 in excess thereof; (iii) each such assignment shall be effected by
means of an Assignment and Acceptance Agreement; (iv) the Administrative Agent,
in the Administrative Agent's capacity as a Lender, shall not effect any
assignment of its Commitment, if after giving effect thereto, the amount of such
Commitment would
70
<PAGE>
be less than $5,000,000 more than the Commitment of any other Lender in its
capacity as a Lender, provided that, to the extent that an Event of Default
shall occur and be continuing hereunder, the Administrative Agent shall not be
required to maintain a Commitment in excess of the commitment of any other
Lender hereunder, subject to the right of the Requisite Lenders to remove the
Administrative Agent within thirty (30) days following the reduction in the
Administrative Agent's Commitment to less than $5,000,000 more than the
Commitment of any other Lender. Upon execution and delivery of such instrument
and payment by such Assignee to such transferor Lender of an amount equal to the
purchase price agreed between such transferor Lender and such Assignee, such
Assignee shall be deemed to be a Lender party to this Agreement as of the
effective date of the Assignment and Acceptance Agreement and shall have all the
rights and obligations of a Lender with a Commitment as set forth in such
Assignment and Acceptance Agreement, and the transferor Lender shall be released
from its obligations hereunder to a corresponding extent, and no further consent
or action by any party shall be required. Upon the consummation of any
assignment pursuant to this subsection (d), the transferor Lender, the
Administrative Agent and the Borrower shall make appropriate arrangements so
that new Notes are issued to the Assignee and such transferor Lender, as
appropriate. In connection with any such assignment, the transferor Lender shall
pay to the Administrative Agent an administrative fee for processing such
assignment in the amount of $3,500.
(e) The Administrative Agent shall maintain at the Principal Office a copy
of each Assignment and Acceptance Agreement delivered to and accepted by it and
a register for the recordation of the names and addresses of the Lenders and the
Commitment of each Lender from time to time (the "Register"). The
Administrative Agent shall give each Lender and the Borrower notice of the
assignment by any Lender of its rights as contemplated by this Section. The
Borrower, the Administrative Agent and the Lenders may treat each Person whose
name is recorded in the Register as a Lender hereunder for all purposes of this
Agreement. The Register and copies of each Assignment and Acceptance Agreement
shall be available for inspection by the Borrower or any Lender at any
reasonable time and from time to time upon reasonable prior notice to the
Administrative Agent. Upon its receipt of an Assignment and Acceptance
Agreement executed by an assigning Lender, together with each Note subject to
such assignment (the "Surrendered Note"), the Administrative Agent shall, if
such Assignment and Acceptance Agreement has been completed and if the
Administrative Agent receives the processing and recording fee described in
subsection (d) above, (i) accept such Assignment and Acceptance Agreement, (ii)
record the information contained therein in the Register, and (iii) give prompt
notice thereof to the Borrower.
(f) In addition to the assignments and participations permitted under the
foregoing provisions of this Section, any Lender may assign and pledge all or
any of its portion of the Loan and its Note to any Federal Reserve Bank as
collateral security pursuant to Regulation A and any Operating Circular issued
by such Federal Reserve Bank, and such portion of the Loan and Notes shall be
fully transferable as provided therein. No such assignment shall release the
assigning Lender from its obligations hereunder.
(g) A Lender may furnish any information concerning the Borrower, any other
Loan Party or any of their respective Subsidiaries in the possession of such
Lender from time to time to Assignees and Participants (including prospective
Assignees and Participants) subject to compliance
71
<PAGE>
with Section 13.8.
(h) Anything in this Section to the contrary notwithstanding, no Lender may
assign or participate any interest in its portion of the Loan held by it
hereunder to the Borrower, any other Loan Party or any of their respective
Affiliates or Subsidiaries.
(i) Each Lender agrees that, without the prior written consent of the
Borrower, or the Administrative Agent, it will not make any assignment hereunder
in any manner or under any circumstances that would require registration or
qualification of, or filings in respect of, the Loan or its Note under the
Securities Act or any other securities laws United States of America or of any
other jurisdiction.
SECTION 13.6 AMENDMENTS.
Except as otherwise expressly provided in this Agreement, any consent or
approval required or permitted by this Agreement or in any Loan Document to be
given by the Lenders may be given, and any term of this Agreement or of any
other Loan Document may be amended, and the performance or observance by the
Borrower or any Loan Party or Subsidiary of any terms of this Agreement or such
other Loan Document or the continuance of any Default or Event of Default may be
waived (either generally or in a particular instance and either retroactively or
prospectively) with, but only with, the written consent of the Requisite Lenders
(and, in the case of an amendment to any Loan Document, the written consent of
the Borrower). Notwithstanding the foregoing, no amendment, waiver or consent
shall, unless in writing, and signed by all of the Lenders (or the
Administrative Agent at the written direction of all of the Lenders), do any of
the following: (i) increase the Commitments of the Lenders or subject the
Lenders to any additional obligations, except as provided in Section 12.10(a),
(ii) reduce the principal of, or interest rates that have accrued or that will
be charged on the outstanding principal amount of, the Loan or other
Obligations; (iii) reduce the amount of any Fees payable hereunder; (iv)
postpone any date fixed for any payment of any principal of, interest on, or
Fees with respect to, the Loan or any other Obligations; (v) change the
Commitment Percentages, except to the extent that an increase in the Commitments
is approved in accordance with Section 12.10(a), (vi) amend this Section or
amend the definitions of the terms used in this Agreement or the other Loan
Documents insofar as such definitions affect the substance of this Section;
(vii) release any Guarantor from its obligations under its Guaranty or (viii)
modify the definition of the term "Requisite Lenders" or modify in any other
manner the number or percentage of the Lenders required to make any
determinations or waive any rights hereunder or to modify any provision hereof.
Further, no amendment, waiver or consent unless in writing and signed by the
Administrative Agent, in addition to the Lenders required hereinabove to take
such action, shall affect the rights or duties of the Administrative Agent under
this Agreement or any of the other Loan Documents. No waiver shall extend to or
affect any obligation not expressly waived or impair any right consequent
thereon and any amendment, waiver or consent shall be effective only in the
specific instance and for the specific purpose set forth therein. No course of
dealing or delay or omission on the part of the Administrative Agent or any
Lender in exercising any right shall operate as a waiver thereof or otherwise be
prejudicial thereto. Except as otherwise explicitly provided for herein or in
any other Loan Document, no notice to or demand upon the Borrower shall
72
<PAGE>
entitle the Borrower to other or further notice or demand in similar or other
circumstances.
SECTION 13.7 NONLIABILITY OF ADMINISTRATIVE AGENT AND LENDERS.
The relationship between the Borrower, on the one hand, and the Lenders and
the Administrative Agent, on the other, shall be solely that of borrower and
lender. Neither the Administrative Agent nor any Lender shall have any
fiduciary responsibilities to the Borrower and no provision in this Agreement or
in any of the other Loan Documents, and no course of dealing between or among
any of the parties hereto, shall be deemed to create any fiduciary duty owing by
the Administrative Agent or any Lender to any Lender, the Borrower or any
Subsidiary. Neither the Administrative 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.
SECTION 13.8 CONFIDENTIALITY.
Except as otherwise provided by Applicable Law, the Administrative Agent
and each Lender shall utilize all non-public information obtained pursuant to
the requirements of this Agreement in accordance with its customary procedure
for handling confidential information of this nature and in accordance with safe
and sound banking practices but in any event may make disclosure: (a) to any of
their respective affiliates (provided they shall agree to keep such information
confidential in accordance with the terms of this Section); (b) as reasonably
required by any bona fide Assignee, Participant or other transferee in
connection with the contemplated transfer of any Commitment or participations
therein as permitted hereunder (provided they shall agree to keep such
information confidential in accordance with the terms of this Section); (c) as
required by any Governmental Authority or representative thereof or pursuant to
legal process; (d) to the Administrative Agent's or such Lender's independent
auditors and other professional advisors (provided they shall be notified of the
confidential nature of the information); and (e) after the happening and during
the continuance of an Event of Default, to any other Person, in connection with
the exercise by the Administrative Agent or the Lenders of rights hereunder or
under any of the other Loan Documents.
SECTION 13.9 INDEMNIFICATION.
(a) The Borrower shall and hereby agrees to indemnify, defend and hold
harmless the Administrative Agent, any affiliate of the Administrative Agent and
each of the Lenders and their respective directors, officers, shareholders,
agents, employees and counsel (each referred to herein as an "Indemnified
Party") from and against any and all losses, costs, claims, damages,
liabilities, deficiencies, judgments or expenses of every kind and nature
(including, without limitation, amounts paid in settlement, court costs and the
fees and disbursements of counsel incurred in connection with any litigation,
investigation, claim or proceeding or any advice rendered in connection
therewith, but excluding lost profits) (the foregoing items referred to herein
as "Claims and Expenses") incurred by an Indemnified Party in connection with,
arising out of, or by reason of, any suit, cause of action, claim, arbitration,
investigation or settlement, consent decree or other proceeding (the foregoing
referred to herein as an "Indemnity Proceeding") which is in any way related
directly or indirectly to: (i) this Agreement or any other Loan Document or the
transactions contemplated thereby; (ii) the
73
<PAGE>
making of the Loan; (iii) any actual or proposed use by the Borrower of the
proceeds of the Loan; (iv) the Administrative Agent's or any Lender's entering
into this Agreement; (v) the fact that the Administrative Agent and the Lenders
have established the credit facility evidenced hereby in favor of the Borrower;
(vi) the fact that the Administrative Agent and the Lenders are creditors of the
Borrower and have or are alleged to have information regarding the financial
condition, strategic plans or business operations of the Borrower and the
Subsidiaries; (vii) the fact that the Administrative Agent and the Lenders are
material creditors of the Borrower and are alleged to influence directly or
indirectly the business decisions or affairs of the Borrower and the
Subsidiaries or their financial condition; (viii) the exercise of any right or
remedy the Administrative Agent or the Lenders may have under this Agreement or
the other Loan Documents; and (ix) any violation or non-compliance by the
Borrower or any Subsidiary of any Applicable Law (including any Environmental
Law) including, but not limited to, any Indemnity Proceeding commenced by (A)
the Internal Revenue Service or state taxing authority or (B) any Governmental
Authority or other Person under any Environmental Law, including any Indemnity
Proceeding commenced by a Governmental Authority or other Person seeking
remedial or other action to cause the Borrower or its Subsidiaries (or its
respective properties) (or the Administrative Agent and/or the Lenders as
successors to the Borrower) to be in compliance with such Environmental Laws;
provided, however, that the Borrower shall not be obligated to indemnify any
Indemnified Party (x) for any acts or omissions of such Indemnified Party in
connection with matters described in the preceding clause (viii) that constitute
gross negligence or willful misconduct or (y) for Claims and Expenses of a
Defaulting Lender to the extent such Claims and Expenses result from the gross
negligence or willful misconduct of such Defaulting Lender.
(b) The Borrower's indemnification obligations under this Section shall
apply to all Indemnity Proceedings arising out of, or related to, the foregoing
whether or not an Indemnified Party is a named party in such Indemnity
Proceeding. In this connection, this indemnification shall cover all costs and
expenses of any Indemnified Party in connection with any deposition of any
Indemnified Party or compliance with any subpoena (including any subpoena
requesting the production of documents). This indemnification shall, among
other things, apply to any Indemnity Proceeding commenced by other creditors of
the Borrower or any Subsidiary, any shareholder of the Borrower or any
Subsidiary (whether such shareholder(s) are prosecuting such Indemnity
Proceeding in their individual capacity or derivatively on behalf of the
Borrower), any account debtor of the Borrower or any Subsidiary or by any
Governmental Authority.
(c) This indemnification shall apply to any Indemnity Proceeding arising
during the pendency of any bankruptcy proceeding filed by or against the
Borrower and/or any Subsidiary.
(d) All out-of-pocket fees and expenses of, and all amounts paid to third-
persons by, an Indemnified Party shall be advanced by the Borrower at the
request of such Indemnified Party notwithstanding any claim or assertion by the
Borrower that such Indemnified Party is not entitled to indemnification
hereunder upon receipt of an undertaking by such Indemnified Party that such
Indemnified Party will reimburse the Borrower if it is actually and finally
determined by a court of competent jurisdiction that such Indemnified Party is
not so entitled to indemnification hereunder.
(e) An Indemnified Party may conduct its own investigation and defense of,
and may
74
<PAGE>
formulate its own strategy with respect to, any Indemnified Proceeding covered
by this Section and, as provided above, all costs and expenses incurred by the
Indemnified Party shall be reimbursed by the Borrower. No action taken by legal
counsel chosen by an Indemnified Party in investigating or defending against any
such Indemnified Proceeding shall vitiate or in any way impair the obligations
and duties of the Borrower hereunder to indemnify and hold harmless each such
Indemnified Party; provided, however, that (i) if the Borrower is required to
indemnify an Indemnified Party pursuant hereto and (ii) the Borrower has
provided evidence reasonably satisfactory to such Indemnified Party that the
Borrower has the financial wherewithal to reimburse such Indemnified Party for
any amount paid by such Indemnified Party with respect to such Indemnified
Proceeding, such Indemnified Party shall not settle or compromise any such
Indemnified Proceeding without the prior written consent of the Borrower (which
consent shall not be unreasonably withheld or delayed).
(f) If and to the extent that the obligations of the Borrower hereunder are
unenforceable for any reason, the Borrower hereby agrees to make the maximum
contribution to the payment and satisfaction of such obligations which is
permissible under Applicable Law.
(g) The Borrower's obligations hereunder shall survive any termination of
this Agreement and the other Loan Documents and the payment in full of the
Obligations, and are in addition to, and not in substitution of, any other of
their obligations set forth in this Agreement or any other Loan Document to
which it is a party.
SECTION 13.10 TERMINATION; SURVIVAL.
At such time as (a) all of the Commitments have been terminated, (b) none
of the Lenders is obligated any longer under this Agreement to make the Loan,
and (c) all Obligations (other than obligations which survive as provided in the
following sentence) have been paid and satisfied in full, this Agreement shall
terminate. Notwithstanding any termination of this Agreement, or of the other
Loan Documents, the indemnities to which the Administrative Agent and the
Lenders are entitled under the provisions of Sections 12.7., 13.2. and 13.9. and
any other provision of this Agreement and the other Loan Documents, and the
waivers of jury trial and submission to jurisdictions contained in Section
13.4., shall continue in full force and effect and shall protect the
Administrative Agent and the Lenders against events arising after such
termination as well as before.
SECTION 13.11 SEVERABILITY OF PROVISIONS.
Any provision of this Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective only to the extent
of such prohibition or unenforceability without invalidating the remainder of
such provision or the remaining provisions or affecting the validity or
enforceability of such provision in any other jurisdiction.
SECTION 13.12 GOVERNING LAW.
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE COMMONWEALTH OF PENNSYLVANIA APPLICABLE TO CONTRACTS EXECUTED, AND
TO BE FULLY PERFORMED, IN SUCH STATE.
75
<PAGE>
SECTION 13.13 COUNTERPARTS.
This Agreement and any amendments, waivers, consents or supplements may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed an original, but all of which counterparts together shall constitute but
one and the same instrument.
SECTION 13.14 OBLIGATIONS WITH RESPECT TO LOAN PARTIES.
The obligations of the Borrower to direct or prohibit the taking of certain
actions by the other Loan Parties as specified herein shall be absolute and not
subject to any defense the Borrower may have that the Borrower does not control
such Loan Parties.
SECTION 13.15 LIMITATION OF LIABILITY.
Neither the Administrative Agent nor any Lender, nor any affiliate,
officer, director, employee, attorney, or agent of either Administrative Agent
or any Lender shall have any liability with respect to, and the Borrower hereby
waives, releases, and agrees not to sue any of them upon, any claim for any
special, indirect, incidental, or consequential damages suffered or incurred by
the Borrower in connection with, arising out of, or in any way related to, this
Agreement or any of the other Loan Documents, or any of the transactions
contemplated by this Agreement or any of the other Loan Documents. The Borrower
hereby waives, releases, and agrees not to sue the Administrative Agent or any
Lender or any of Administrative Agent's or any Lender's affiliates, officers,
directors, employees, attorneys, or agents for punitive damages in respect of
any claim in connection with, arising out of, or in any way related to, this
Agreement or any of the other Loan Documents, or any of the transactions
contemplated by this Agreement or financed hereby.
SECTION 13.16 ENTIRE AGREEMENT.
This Agreement, the Notes, and the other Loan Documents referred to herein
embody the final, entire agreement among the parties hereto and supersede any
and all prior commitments, agreements, representations, and understandings,
whether written or oral, relating to the subject matter hereof and may not be
contradicted or varied by evidence of prior, contemporaneous, or subsequent oral
agreements or discussions of the parties hereto.
SECTION 13.17 CONSTRUCTION.
The Administrative Agent, the Borrower and each Lender acknowledge that
each of them has had the benefit of legal counsel of its own choice and has been
afforded an opportunity to review this Agreement and the other Loan Documents
with its legal counsel and that this Agreement and the other Loan Documents
shall be construed as if jointly drafted by the Administrative Agent, the
Borrower and each Lender.
SECTION 13.18 LIMITATION OF LIABILITY OF TRUSTEES, ETC.
THE ADMINISTRATIVE AGENT AND THE LENDERS SHALL LOOK SOLELY TO
76
<PAGE>
THE PROPERTY OF THE BORROWER AND THE OTHER LOAN PARTIES FOR THE ENFORCEMENT OF
ANY CLAIM AGAINST THE BORROWER AND SUCH LOAN PARTY UNDER OR IN RESPECT OF ANY OF
THE LOAN DOCUMENTS AND ACCORDINGLY NEITHER THE TRUSTEES, OFFICERS, EMPLOYEES,
AGENTS NOR SHAREHOLDERS OF THE BORROWER SHALL HAVE ANY PERSONAL LIABILITY FOR
OBLIGATIONS ENTERED INTO BY OR ON BEHALF OF THE BORROWER OR ANY OTHER LOAN
PARTY.
[Signatures on Following Pages]
77
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Term Loan Agreement
to be executed by their authorized officers all as of the day and year first
above written.
BORROWER:
FEDERAL REALTY INVESTMENT TRUST
By: /s/ Steven J. Guttman
---------------------------------------
Name: /s/ Steven J. Guttman
-------------------------------
Title: Trustee
------------------------------
By: /s/ Ron D Kaplan
----------------------------------------
Name: Ron D Kaplan
-----------------------------------
Title: Chief Investment Officer
----------------------------------
[Signatures Continued on Next Page]
78
<PAGE>
[SIGNATURE PAGE TO TERM LOAN AGREEMENT DATED AS OF
DECEMBER 22, 1998 WITH FEDERAL REALTY INVESTMENT TRUST]
PNC BANK, NATIONAL ASSOCIATION,
as Administrative Agent, and as a Lender
By: /s/ Ashley J. Smith
--------------------------------------
Name: Ashley J. Smith
---------------------------------
Title: Assistant Vice President
--------------------------------
COMMITMENT AMOUNT:
$40,000,000
LENDING OFFICE (EACH TYPE OF LOAN):
PNC BANK, National Association
One PNC Plaza
249 Fifth Avenue
Mail Stop P1-POPP-22-1
Pittsburgh, PA 15222-2707
Attn: Arlene Ohler, Agency Services
Telecopier: (412) 762.8672
Telephone: (412) 762.3627
[Signatures Continued on Next Page]
79
<PAGE>
[SIGNATURE PAGE TO TERM LOAN AGREEMENT DATED AS OF
DECEMBER 22, 1998 WITH FEDERAL REALTY INVESTMENT TRUST]
COMMERZBANK AKTIENGESELLSCHAFT,
NEW YORK BRANCH, as Syndication Agent
and as a Lender
By: /s/ Douglas P. Traynor
-----------------------------------
Name: Douglas P. Traynor
-----------------------------
Title: Vice Presdent
-----------------------------
By: /s/ Christian Berry
-----------------------------------
Name: Christian Berry
------------------------------
Title: Assistant Treasurer
-----------------------------
COMMITMENT AMOUNT:
$35,000,000
LENDING OFFICE (EACH TYPE OF LOAN):
Commerzbank AG, New York Branch
2 World Financial Center
New York, New York 10281
Attn: Christine Scaffidi, Assistant
Vice President
Telecopier: 212-266-7593
Telephone: 212-266-7396
80
<PAGE>
[SIGNATURE PAGE TO TERM LOAN AGREEMENT DATED AS OF
DECEMBER 22, 1998 WITH FEDERAL REALTY INVESTMENT TRUST]
FLEET NATIONAL BANK, as Documentation
Agent and as Lender
By: /s/ Aron D. Levine
-----------------------------------
Name: Aron D. Levine
------------------------------
Title: Vice President
-----------------------------
COMMITMENT AMOUNT:
$25,000,000
LENDING OFFICE (EACH TYPE OF LOAN):
Fleet National Bank
75 State Street
Mail Code: MA BO F11A
Boston, Massachusetts 02109
Attn: Lancy Chan, Loan Administrator
Telecopier: 617-346-3233
Telephone: 617-346-2843
81
<PAGE>
[SIGNATURE PAGE TO TERM LOAN AGREEMENT DATED AS OF
DECEMBER 22, 1998 WITH FEDERAL REALTY INVESTMENT TRUST]
BANK OF MONTREAL, CHICAGO BRANCH
By: /s/ Richard W. Camm
----------------------------
Name: RICHARD W. CAMM
-------------------------
Title: MANAGING DIRECTOR
-------------------------
COMMITMENT AMOUNT:
$15,000,000
LENDING OFFICE (EACH TYPE OF LOAN):
Bank of Montreal, Chicago Branch
Real Estate Department
115 South LaSalle Street, 12W
Chicago, Illinois 60603
Attn: Josie Nichols, Client Services Supervisor
Telecopier: 312-750-4345
Telephone: 312-750-3748
82
<PAGE>
[SIGNATURE PAGE TO TERM LOAN AGREEMENT DATED AS OF
DECEMBER 22, 1998 WITH FEDERAL REALTY INVESTMENT TRUST]
FIRST UNION, NATIONAL BANK
By: /s/ John A. Schissel
---------------------------
Name: John A. Schissel
------------------------
Title: Director
-----------------------
COMMITMENT AMOUNT:
$10,000,000
LENDING OFFICE (EACH TYPE OF LOAN):
83
<PAGE>
Exhibit 23
Consent of Independent Accountants
- ----------------------------------
We have issued our reports dated February 8, 1999 accompanying the consolidated
financial statements and schedules included in the Annual Report of Federal
Realty Investment Trust on Form 10K for the year ended December 31, 1998. We
hereby consent to the incorporation by reference of said reports in the
Registration Statements of Federal Realty Investment Trust on Form S-3 (File No.
333-63619, effective September 30, 1998; which pursuant to Rule 429 of the
Securities and Exchange Act of 1934 constitutes a post-effective amendment to
Registration Statement No. 33-63687 effective December 4, 1995; File
No. 33-63955, effective November 3, 1995; and File No. 33-15264, effective
August 4, 1987).
Grant Thornton LLP
Washington, D.C.
March 18, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET OF FEDERAL REALTY INVESTMENT TRUST AS OF DECEMBER 31,
1998 AND THE RELATED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE TWELVE MONTHS
ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> $17,230
<SECURITIES> 0
<RECEIVABLES> 17,873
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 1,642,136
<DEPRECIATION> (286,053)
<TOTAL-ASSETS> 1,484,317
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 846,928
0
100,000
<COMMON> 707,724
<OTHER-SE> (277,777)
<TOTAL-LIABILITY-AND-EQUITY> 1,484,317
<SALES> 0
<TOTAL-REVENUES> 232,533
<CGS> 0
<TOTAL-COSTS> 72,761
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 55,125
<INCOME-PRETAX> 37,010
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 37,010
<EPS-PRIMARY> .94
<EPS-DILUTED> .94
<FN>
<F1>Current assets and current liabilities are not listed since Federal Realty
does not prepare a classified balance sheet.
</FN>
</TABLE>
