<PAGE>
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-Q
----------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996.
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
COMMISSION FILE NUMBER 01-12846
SECURITY CAPITAL INDUSTRIAL TRUST
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MARYLAND 74-2604728
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
14100 EAST 35TH PLACE, AURORA, 80011
COLORADO (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
(303) 375-9292
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing for the past 90 days. Yes X No
The number of shares outstanding of the Registrant's common stock as of
April 19, 1996 was:
Shares of Beneficial Interest, $.01 par value--81,442,820 shares
Page 1 of 71 Pages
Exhibit Index on Page 21
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<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
INDEX
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
PART I. Financial Information
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets--March 31, 1996 and December 31, 1995.. 3
Consolidated Statements of Operations--Three months ended March 31,
1996 and 1995..................................................... 4
Consolidated Statements of Cash Flows--Three months ended March 31,
1996 and 1995..................................................... 5
Notes to Consolidated Financial Statements......................... 6
Report of Independent Public Accountants........................... 10
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................ 11
PART II. Other Information
Item 5. Other Information............................................. 16
Item 6. Exhibits and Reports on Form 8-K.............................. 16
</TABLE>
2
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
ASSETS (UNAUDITED) (AUDITED)
------ ----------- ------------
<S> <C> <C>
REAL ESTATE........................................... $1,972,126 $1,827,670
Less accumulated depreciation....................... 68,301 56,406
---------- ----------
1,903,825 1,771,264
CASH AND CASH EQUIVALENTS............................. 6,057 22,235
ACCOUNTS RECEIVABLE................................... 6,935 5,764
OTHER ASSETS.......................................... 37,565 34,709
---------- ----------
Total assets...................................... $1,954,382 $1,833,972
========== ==========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
LIABILITIES:
Line of credit...................................... $ 28,500 $ 81,000
Long term debt...................................... 324,541 324,527
Mortgage notes payable.............................. 95,427 96,013
Securitized debt.................................... 37,866 38,090
Assessment bonds payable............................ 11,145 11,173
Accounts payable and accrued expenses............... 24,902 32,826
Construction payable................................ 17,439 20,437
Distributions payable............................... 1,526 20,558
Other liabilities................................... 14,429 14,416
---------- ----------
Total liabilities................................. 555,775 639,040
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST..................................... 58,321 58,741
SHAREHOLDERS' EQUITY:
Series A Preferred shares; $0.01 par value;
5,400,000 shares issued and outstanding at March
31, 1996 and December 31, 1995; stated liquidation
preference of $25 per share........................ 135,000 135,000
Series B Preferred shares; $0.01 par value;
8,050,000 shares issued and outstanding at March
31, 1996; stated liquidation preference of $25 per
share.............................................. 201,250 --
Common shares of beneficial interest, $0.01 par
value; 81,442,820 shares issued and outstanding at
March 31, 1996 and 81,416,451 at December 31, 1995. 814 814
Additional paid-in-capital.......................... 1,050,183 1,059,142
Distributions in excess of net earnings............. (46,961) (58,765)
---------- ----------
Total shareholders' equity........................ 1,340,286 1,136,191
---------- ----------
Total liabilities and shareholders' equity........ $1,954,382 $1,833,972
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
----------------
1996 1995
------- --------
<S> <C> <C>
INCOME:
Rental income............................................... $50,062 $ 32,901
Other real estate income.................................... 143 --
Interest income............................................. 157 112
------- --------
Total income.............................................. 50,362 33,013
------- --------
EXPENSES:
Rental expenses, net of recoveries of $6,761 and $4,598 for
the three month periods in 1996 and 1995, respectively..... 6,145 3,242
Depreciation and amortization............................... 13,089 8,442
Interest expense............................................ 8,508 6,761
REIT management fee......................................... 4,641 3,392
General and administrative.................................. 249 276
Other....................................................... 468 372
------- --------
Total expenses............................................ 33,100 22,485
------- --------
NET EARNINGS BEFORE MINORITY INTEREST AND LOSS ON DISPOSITION
OF REAL ESTATE............................................... 17,262 10,528
Minority interest share in net earnings....................... 756 865
------- --------
NET EARNINGS BEFORE LOSS ON DISPOSITION OF REAL ESTATE........ 16,506 9,663
Loss on disposition of real estate............................ 29 --
------- --------
NET EARNINGS.................................................. 16,477 9,663
Less preferred share dividends................................ 4,673 --
------- --------
NET EARNINGS ATTRIBUTABLE TO COMMON SHARES.................... $11,804 $ 9,663
======= ========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING.................... 81,428 64,587
======= ========
PER SHARE NET EARNINGS ATTRIBUTABLE TO COMMON SHARES.......... $ 0.14 $ 0.15
======= ========
DISTRIBUTIONS PER COMMON SHARE................................ $0.2525 $0.23375
======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------
1996 1995
--------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net earnings............................................ $ 16,477 $ 9,663
Minority interest....................................... 756 865
Adjustments to reconcile net earnings to cash flows
provided by operating activities:
Depreciation and amortization......................... 13,089 8,442
Loss on disposition of real estate.................... 29 --
Rent leveling......................................... (1,118) (910)
Amortization of deferred financing costs.............. 704 308
Increase in accounts receivable and other assets........ (3,176) (2,656)
Increase (decrease) in accounts payable, accrued
expenses and other liabilities......................... (7,911) 1,334
--------- --------
Net cash provided by operating activities........... 18,850 17,046
--------- --------
INVESTING ACTIVITIES:
Real estate investments................................. (146,560) (113,002)
Recurring capital expenditures and tenant improvements.. (1,818) (595)
Lease commissions and other leasing costs............... (1,648) (479)
Proceeds from disposition of real estate................ 1,092 --
--------- --------
Net cash used in investing activities............... (148,934) (114,076)
--------- --------
FINANCING ACTIVITIES:
Proceeds from sale of preferred shares, net of expenses. 191,992 --
Proceeds from dividend reinvestment and share purchase
plan and from exercised warrants....................... 299 --
Proceeds from long term debt offering................... -- 200,000
Distributions paid to common shareholders............... (19,032) (15,097)
Distributions paid to minority interest holders......... (1,329) (1,325)
Preferred share dividends............................... (4,673) --
Proceeds from line of credit............................ 127,000 106,500
Payments on line of credit.............................. (179,500) (195,500)
Regularly scheduled principal payments on mortgage notes
payable................................................ (846) (728)
Debt issuance costs..................................... (5) (2,940)
--------- --------
Net cash provided by financing activities........... 113,906 90,910
--------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS................. (16,178) (6,120)
CASH AND CASH EQUIVALENTS, beginning of period............ 22,235 21,270
--------- --------
CASH AND CASH EQUIVALENTS, end of period.................. $ 6,057 $ 15,150
========= ========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
In conjunction with real estate acquired:
Assumption of existing mortgage notes payable or
assessment bonds payable.............................. $ 9 $ 7,982
--------- --------
Total............................................... $ 9 $ 7,982
========= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(UNAUDITED)
1. GENERAL:
The consolidated financial statements of Security Capital Industrial Trust
("SCI") as of March 31, 1996 are unaudited and, pursuant to the rules of the
Securities and Exchange Commission, certain information and footnote
disclosures normally included in financial statements have been omitted. The
consolidated financial statements for 1995 have been restated to conform to
the 1996 presentation. While management of SCI believes that the disclosures
presented are adequate, these interim consolidated financial statements should
be read in conjunction with SCI's December 31, 1995 consolidated financial
statements.
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments, consisting of normal recurring
adjustments, necessary for a fair presentation of SCI's consolidated financial
position and results of operations for the interim periods. The results of
operations for the three month periods ended March 31, 1996 and 1995 are not
necessarily indicative of the results to be expected for the entire year.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. RECENT ACCOUNTING PRONOUNCEMENT:
Effective January 1, 1996, SCI adopted Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," which had no impact on its consolidated
financial statements. SFAS 121 establishes accounting standards for the review
of long-lived assets to be held and used for impairment whenever the carrying
amount of an asset may not be recoverable, and requires that certain long-
lived assets to be disposed of be reported at the lower of carrying amount or
fair value less cost to sell.
3. REAL ESTATE:
The following summarizes real estate investments as of March 31, 1996 and
December 31, 1995 (in thousands):
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
(UNAUDITED) (AUDITED)
----------- ------------
<S> <C> <C>
Land held for development........................ $ 51,697 $ 60,363
Land under development........................... 61,352 56,944
Improved land.................................... 269,284 242,015
Buildings and improvements....................... 1,518,104 1,380,389
Construction in progress......................... 63,206 80,958
Capitalized preacquisition costs................. 8,483 7,001
---------- ----------
Total real estate............................ 1,972,126 1,827,670
Less accumulated depreciation.................... 68,301 56,406
---------- ----------
Net real estate.............................. $1,903,825 $1,771,264
========== ==========
</TABLE>
6
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
MARCH 31, 1996
(UNAUDITED)
4. BORROWINGS:
Line of Credit
On June 1, 1995, SCI entered into an increased line of credit of $350 million
agented by NationsBank of Texas, N.A. ("NationsBank") as agent for a bank
group. The line of credit, as amended and restated to be effective in May 1996,
will bear interest at SCI's option at either (a) the greater of the federal
funds rate plus 0.5% and prime or (b) LIBOR plus 1.25%, based upon SCI's
current senior debt ratings, and is scheduled to mature in May 1998. This line
may be extended annually for an additional year with the approval of
NationsBank and the other participating lenders. All debt incurrences are
subject to a covenant that SCI maintain a debt to tangible net worth ratio of
not greater than 1 to 1. Additionally, SCI will be required to maintain an
adjusted net worth (as defined) of at least $1.0 billion, to maintain interest
payment coverage of not less than 2 to 1, and to maintain a fixed charge
coverage ratio of not less than 1.4 to 1. As of March 31, 1996, SCI was in
compliance with all covenants, and as of April 19, 1996, $42.0 million of
borrowings were outstanding.
Long Term Debt
On May 16, 1995, SCI issued $75 million of Senior Notes due 2009 (the "May
2009 Notes"), $17.5 million of Senior Notes due 2001 (the "2001 Notes"), $17.5
million of Senior Notes due 2000 (the "2000 Notes") and $15 million of Senior
Notes due 1998 (the "1998 Notes"), together with the May 2009 Notes, the 2001
Notes and the 2000 Notes collectively referred to as the "May Notes"). The May
2009 Notes bear interest at 7.875% per annum, and require annual principal
payments of $9.375 million, commencing May 15, 2002. The 2001 Notes, 2000 Notes
and 1998 Notes bear interest at 7.30%, 7.25% and 7.125% per annum,
respectively, with the principal payable at maturity. Collectively, the May
Notes originally had an average life to maturity of 8.2 years and an average
effective interest cost, inclusive of offering discounts and issuance costs, of
7.92% per annum.
On March 2, 1995, SCI issued $150 million of Senior Notes due 2009 (the
"March 2009 Notes") and $50 million of Senior Notes due 2015 (the "2015 Notes",
together with the March 2009 Notes collectively referred to as the "March
Notes"). The March 2009 Notes bear interest at 8.72% per annum and require
annual principal payments of $18.75 million, commencing March 1, 2002. The 2015
Notes bear interest at 9.34% per annum and require aggregate annual principal
payments of $5 million in 2010, $6.25 million in 2011, $7.5 million in 2012,
$8.75 million in 2013, $10 million in 2014 and $12.5 million in 2015.
Collectively, the March Notes originally had an average life to maturity of
12.38 years and an average effective interest cost, net of offering discounts
and issuance costs, of 9.04% per annum.
All of the foregoing notes are redeemable at any time at the option of SCI,
in whole or in part, at a redemption price equal to the sum of the principal
amount of the notes being redeemed plus accrued interest thereon to the
redemption date plus an adjustment, if any, based on the yield to maturity
relative to market yields available at redemption. Such notes are governed by
the terms and provisions of an indenture agreement (the "Indenture") between
SCI and State Street Bank and Trust Company, as trustee.
Under the terms of the Indenture, SCI can incur additional debt only if,
after giving effect to the debt being incurred and application of proceeds
therefrom, (i) the ratio of debt to total assets, as defined in the Indenture,
does not exceed 60%, (ii) the ratio of secured debt to total assets, as defined
in the Indenture, does not exceed 40%, and (iii) SCI's pro forma interest
coverage ratio, as defined in the Indenture, for the four preceding fiscal
quarters is not less than 1.5:1. In addition, SCI may not at any time own Total
Unencumbered Assets, as defined in the Indenture, equal to less than 150% of
the aggregate outstanding principal amount of SCI's unsecured debt. At March
31, 1996, SCI was in compliance with all debt covenants.
7
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
MARCH 31, 1996
(UNAUDITED)
Mortgage Notes Payable, Assessment Bonds Payable and Securitized Debt
Mortgage notes payable are secured by real estate with an aggregate
undepreciated cost of $166.6 million at March 31, 1996. Assessment bonds
payable are secured by real estate with an aggregate undepreciated cost of
$191.2 million at March 31, 1996. Securitized debt is collateralized by real
estate with an aggregate undepreciated cost of $68.9 million at March 31, 1996.
Approximate principal payments due on mortgage notes payable, assessment
bonds payable and securitized debt during each of the years in the five-year
period ending December 31, 2001 and thereafter are as follows (in thousands):
<TABLE>
<S> <C>
Remainder of 1996............... $ 11,218
1997............................ 13,258
1998............................ 5,191
1999............................ 15,996
2000............................ 4,694
2001............................ 11,342
2002 and thereafter............. 82,739
--------
Total....................... $144,438
========
</TABLE>
For the three month periods ending March 31, 1996 and 1995, interest expense
was $8,508,000 and $6,761,000, respectively, which was net of capitalized
interest of $3,311,000 and $1,299,000, respectively. The total interest paid in
cash was $13,920,000 and $6,486,000 for the three month periods ending March
31, 1996 and 1995, respectively.
5. MINORITY INTEREST:
Minority interest represents limited partners' interests in five real estate
partnerships controlled by SCI (Red Mountain Joint Venture, SCI Limited
Partnership-I, SCI Limited Partnership-II, SCI Limited Partnership-III, and SCI
Limited Partnership-IV). As of March 31, 1996, a total of 5,194,258 limited
partnership units were held by minority interest limited partners in the
various real estate partnerships. Limited partners are entitled to exchange
each partnership unit for one common share of SCI.
In October 1994, SCI IV, Inc., a wholly-owned subsidiary of SCI, made a $27.5
million cash contribution to SCI Limited Partnership-IV, a Delaware limited
partnership (Partnership-IV), in exchange for a 96.4% general partner interest
in Partnership-IV, and third party investors that were not affiliated with SCI
contributed an aggregate of $1.0 million in assets to Partnership-IV in
exchange for limited partner interests totalling 3.6% in Partnership-IV. SCI
IV, Inc., as general partner, manages the activities of Partnership-IV and has
fiduciary responsibilities to Partnership-IV and its other partners.
Both Partnership-IV and SCI IV, Inc. are legal entities that are separate and
distinct from SCI, its affiliates and each other, and each has separate assets,
liabilities, business functions and operations. The assets owned by
Partnership-IV consist of income producing, improved real property located in
Florida, Ohio, Oklahoma and Michigan. The sole assets owned by SCI IV, Inc. are
its general partner advances to and interest in Partnership-IV. SCI and its
affiliates had no borrowings from Partnership-IV at March 31, 1996.
Partnership-IV had $504,000 of borrowings from SCI IV, Inc. at March 31, 1996.
SCI IV, Inc. had $504,000 of borrowings from SCI and its affiliates at March
31, 1996. For financial reporting purposes, the assets, liabilities, results of
operations and cash
8
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
MARCH 31, 1996
(UNAUDITED)
flows of each of Partnership-IV and SCI IV, Inc. are included in SCI's
consolidated financial statements, and the third party investors' interests in
Partnership-IV are reflected as minority interest. Limited partners are
entitled to exchange each partnership unit for one common share of beneficial
interest in SCI and are entitled to receive preferential cumulative quarterly
distributions per unit equal to the quarterly distribution in respect of common
shares. At March 31, 1996, there were 68,612 limited partnership units
outstanding in Partnership-IV.
6. SHAREHOLDERS' EQUITY:
On February 21, 1996, and February 26, 1996, SCI issued a total of 8,050,000
Series B Cumulative Convertible Redeemable Preferred Shares, (the "Series B
Preferred Shares"). The Series B Preferred Shares have a liquidation preference
of $25 per share for an aggregate liquidation preference of $201,250,000 plus
any accrued and unpaid dividends. Holders of the Series B Preferred Shares are
only entitled to limited voting rights under certain conditions. The Series B
Preferred Shares are convertible at any time, unless previously redeemed, at
the option of the holders thereof into SCI common shares at a conversion price
of $19.50 per share (equivalent to a conversion rate of 1.282 common shares for
each Series B Preferred Share), subject to adjustment in certain circumstances.
Holders of the Series B Preferred Shares are entitled to receive, when, as and
if declared by the Board of Trustees, out of funds legally available for the
payment of distributions, cumulative preferential cash distributions in an
amount per share equal to the greater of 7% of the liquidation preference per
annum (equivalent to $1.75 per share) or the distributions on the common
shares, or portion thereof, into which a Series B Preferred Share is
convertible. Distributions on the Series B Preferred Shares are cumulative from
the date of original issue and payable quarterly in arrears on the last day of
March, June, September and December of each year, commencing June 30, 1996. The
Series B Preferred Shares are redeemable at the option of SCI on or after
February 21, 2001. The Series B Preferred Shares rank on a parity with the
Series A Cumulative Redeemable Preferred Shares ("Series A Preferred Shares")
with respect to payment of distributions and amounts upon liquidation.
On February 19, 1996, SCI paid a distribution of $0.2525 per common share to
common shareholders of record as of February 8, 1996. On March 29, 1996, SCI
paid a quarterly dividend of $0.5875 per Series A Preferred Share to preferred
shareholders of record on March 15, 1996. On April 19, 1996, SCI declared a
distribution of $0.2525 per common share payable on May 16, 1996 to common
shareholders of record on May 7, 1996.
7. EARNINGS PER SHARE:
Earnings per share is computed based on the weighted average number of common
shares outstanding during the period. Exercise of outstanding warrants and
options to acquire 21,764 SCI common shares would not have a material dilutive
effect on earnings per share. The conversion of limited partnership units into
5,194,258 SCI common shares is not assumed since the effect would not be
dilutive.
9
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Trustees and Shareholders of
Security Capital Industrial Trust:
We have reviewed the accompanying consolidated balance sheet of Security
Capital Industrial Trust and subsidiaries as of March 31, 1996, and the related
consolidated statements of operations and cash flows for the three months ended
March 31, 1996 and 1995. These financial statements are the responsibility of
the Trust's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the financial statements referred to above in order for them
to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Security Capital Industrial Trust
and subsidiaries as of December 31, 1995, and, in our report dated March 1,
1996, we expressed an unqualified opinion on that statement. In our opinion,
the information set forth in the accompanying consolidated balance sheet as of
December 31, 1995, is fairly stated, in all material respects, in relation to
the consolidated balance sheet from which it has been derived.
Arthur Andersen LLP
Chicago, Illinois,
April 19, 1996
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
SCI's operating results depend primarily upon net operating income from
industrial properties, which is substantially influenced by (i) the demand for
and supply of industrial properties in SCI's target market cities, (ii) the
pace and economic returns at which SCI can acquire and develop additional
industrial properties and (iii) the extent to which SCI can sustain improved
market performance as measured by lease rates and occupancy. SCI's target
market cities and submarkets have benefitted substantially in recent periods
from demographic trends (including population and job growth) which increase
the demand for industrial properties. REIT management believes SCI's ability to
compete is significantly enhanced relative to other companies because of the
REIT manager's depth of acquisition and development personnel and presence in
local markets. As a result of acquisitions and developments for the last nine
months of 1995 and the first three months of 1996, SCI's rentable square
footage increased by 21.9 million square feet or 50.7% to 65.1 million square
feet as of March 31, 1996 from 43.2 million square feet as of March 31, 1995.
As of March 31, 1996, the portfolio was 94.1% leased. REIT management expects
that SCI's ability to acquire and develop a large number of industrial
properties at favorable economic returns will continue through 1996. Over the
longer term, SCI expects master-planned, full service distribution park
developments to constitute an increasing percentage of SCI's growth.
SCI frequently acquires properties which are underleased, which reduces SCI's
overall occupancy rate below its stabilized level but provides opportunities to
increase revenues. The term "stabilized" means that capital improvements,
repositioning, new management and new marketing programs (or development and
marketing, in the case of newly developed properties) have been completed and
in effect for a sufficient period of time (but in no case longer than 12 months
for properties acquired by SCI and 18 months after shell completion for
properties developed by SCI) to achieve stabilized occupancy (typically 93%,
but ranging from 90% to 95%, depending on the submarket and product type) at
market rents. SCI has been successful in increasing occupancies on acquired
properties during the months after acquisition, resulting in an occupancy rate
of 95.56% for stabilized properties owned as of March 31, 1996. Average
effective rents on the 187 stabilized leases (minimum term of 12 months) signed
in the first quarter were 11.5% higher than the rents expiring on such
previously occupied space. As leases are renewed or new leases are acquired,
SCI expects most lease rates on renewals or new leases to increase in the
remainder of 1996. These factors should improve SCI's results of operations.
Capital and credit market conditions which affect SCI's costs of equity and
debt capital may influence future growth in operating results. No assurance can
be given that expected trends for the remainder of 1996 in leasing rates,
occupancy rates and economic returns on acquired and developed properties will
be realized.
RESULTS OF OPERATIONS
Interim Period Comparisons
Net earnings attributable to common shares increased by $2.1 million or 21.6%
to $11.8 million for the first three months of 1996 from $9.7 million for the
same period in 1995.
Net earnings are expected to increase in subsequent periods due to the
acquisition and development of additional operating properties and the
continued increase in the stabilized portfolio rental rates.
Historically, the primary components of revenue and earnings growth have been
SCI's acquisition and development activity. SCI has acquired and developed $1.8
billion of operating properties from its inception through March 31, 1996.
Projected 1996 property level earnings before interest, taxes, depreciation and
amortization ("EBITDA") for these properties is 10.45% of SCI's aggregate cost.
Aggregate cost for the properties includes the purchase price, closing costs
and budgeted capital improvements and marketing costs prior to stabilization
(and all development costs, in the case of developed properties). Projected
EBITDA is based on current lease rates for stabilized properties and current
market rates for properties being stabilized and
11
<PAGE>
anticipated operating expenses. No assurance can be given that projected
levels of EBITDA will be achieved by these properties nor that future
acquisitions and developments will achieve the same level of EBITDA relative
to SCI's investment basis.
Rental Revenues
Rental revenues for the first three months of 1996 increased by $17.2
million or 52.3% to $50.1 million, as compared to $32.9 million for the same
period in 1995. Of this increase, $9.9 million was generated by the 181
properties acquired in 1995, $4.3 million was generated by the 49 developments
completed in 1995, $1.4 million was generated by the 44 properties acquired in
1996, and $508,000 was generated by the 25 developments completed in 1996. The
remaining $1.1 million increase was attributable to revenue increases in the
520 properties owned at January 1, 1995. The revenue increase in properties
owned at January 1, 1995 was due to an increase in their average occupancy
level from 93.14% for the first three months of 1995 to 95.34% for the first
three months of 1996 and increased rental rates on leases signed on previously
occupied space.
Other Real Estate Income
Substantially all of other real estate income relates to gains on
disposition of property generated by SCI Development Services Incorporated
("SCI Development Services"). SCI owns a preferred stock interest representing
95% of the net operating cash flow of SCI Development Services. SCI
Development Services develops build-to-suit distribution space facilities for
customers whose space needs do not meet SCI's strict investment criteria for
long-term ownership. Through its preferred stock ownership, SCI will realize
substantially all economic benefits of SCI Development Services activities.
The activities of SCI Development Services are consolidated with SCI. SCI
Development Services pays federal and state taxes at the applicable corporate
rate. SCI Development Services is expected to contribute an increasing level
of income in subsequent periods.
Interest Income
Interest income for the first three months of 1996 increased $45,000 from
the same period in 1995. The increase in interest income was a result of
higher average balances in interest bearing accounts and higher interest rates
in the first three months of 1996 compared to the same period in 1995.
Rental Expenses
Rental expenses, net of recoveries, increased by $2.9 million or 90.6% to
$6.1 million for the first three months of 1996 from $3.2 million for the same
period in 1995. The increase in rental expenses is primarily attributable to
acquisitions and developments for the last nine months of 1995 and the first
three months of 1996.
Interest Expense
Interest expense increased by $1.7 million or 25.0% to $8.5 million for the
first three months of 1996 from $6.8 million for the same period in 1995.
Total interest capitalized increased by $2.0 million or 153.8% to $3.3 million
for the first three months of 1996 from $1.3 million for the same period in
1995. The increase in interest expense was principally caused by the 1995
issuance of $325 million in Senior Notes (See "--Liquidity and Capital
Resources"). The capitalized interest increase is attributable to increased
development activity in the first three months of 1996 as compared to the
first three months of 1995.
REIT Management Fee
The REIT Management fee paid by SCI is based on SCI's cash flow (as defined
in the REIT Management Agreement between SCI and its REIT manager) before the
REIT management fee and therefore increased for the first three months of 1996
as compared to the same period in 1995 because cash flow increased
substantially.
12
<PAGE>
Other Expenses
Other expenses increased by $96,000 or 25.8% to $468,000 for the first three
months of 1996 from $372,000 for the same period in 1995. Other expenses
consist of land holding costs and acquisition and build-to-suit pursuit cost
write-offs. Land holding costs were $401,000 for the first three months of 1996
compared to $286,000 for the same period in 1995, and acquisition and build-to-
suit pursuit cost write-offs were $67,000 for the first three months of 1996
compared to $86,000 for the same period in 1995. The increase in land holding
costs is principally the result of the increase in the average balance in land
holdings.
Preferred Share Dividends
In June 1995, SCI issued $135 million of Series A Preferred Shares that are
entitled to receive an annual dividend of $2.35 per share (9.4% annual dividend
rate), which amounted to $3.2 million for the first three months of 1996. In
February 1996, SCI issued $201.3 million of Series B Preferred Shares that are
entitled to receive an annual dividend of $1.75 per share (7% annual dividend
rate) which amounted to $1.5 million for the first quarter of 1996.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities increased from $17.0 million in the
first three months of 1995 to approximately $18.9 million in the first three
months of 1996. Cash used in investing activities increased from approximately
$114.1 million in the first three months of 1995 to approximately $148.9
million in the first three months of 1996. Cash provided by financing
activities was approximately $113.9 million in the first three months of 1996
compared to approximately $90.9 million in the first three months of 1995. Cash
provided by financing activities for the first three months of 1996 consisted,
primarily, of $192 million of net proceeds from the sale of the Series B
Preferred Shares and a net repayment on the line of credit of $52.5 million.
Cash provided by financing activities in the first three months of 1995
consisted, primarily, of $198 million of net proceeds from a long term debt
offering and a $89 net repayment on the line of credit. Additionally,
distributions paid to common and preferred shareholders used $8.6 million more
cash in the first three months of 1996 as compared to the first three months of
1995.
On February 21, 1996 and February 26, 1996, SCI issued a total of 8,050,000
Series B Preferred Shares. The Series B Preferred Shares have a liquidation
preference of $25 per share for an aggregate liquidation preference of
$201,250,000 plus any accrued and unpaid dividends. Holders of the Series B
Preferred Shares are only entitled to limited voting rights under certain
conditions. The Series B Preferred Shares are convertible at any time, unless
previously redeemed, at the option of the holders thereof into SCI common
shares at a conversion price of $19.50 per common share (equivalent to a
conversion rate of 1.282 common shares for each Series B Preferred Share),
subject to adjustment in certain circumstances. Holders of the Series B
Preferred Shares are entitled to receive, when, as and if declared by the Board
of Trustees, out of funds legally available for the payment of distributions,
cumulative preferential cash distributions in an amount per share equal to the
greater of 7% of the liquidation preference per annum (equivalent to $1.75 per
share) or the distributions on the common shares, or portion thereof, into
which a Series B Preferred Share is convertible. Distribution on the Series B
Preferred Shares are cumulative from the date of original issue and are payable
quarterly in arrears on the last day of March, June, September and December of
each year, commencing June 30, 1996. The Series B Preferred Shares are
redeemable at the option of SCI on or after February 21, 2001. The Series B
Preferred Shares rank on a parity with the Series A Preferred Shares with
respect to payment of distributions and amounts upon liquidation.
On September 29, and October 3, 1995, SCI completed a $250.0 million public
offering and issued a total of 16,260,163 common shares at a price of $15.375
per common share in conjunction with a rights offering.
On June 21, 1995, SCI issued 5,400,000 Series A Preferred Shares. The Series
A Preferred Shares have a liquidation preference of $25 per share for an
aggregate liquidation preference of $135,000,000 plus any accrued but unpaid
dividends. The net proceeds (after underwriting commission and other offering
costs) of the Series A
13
<PAGE>
Preferred Shares issued were $130.4 million. Holders of the Series A Preferred
Shares are entitled only to limited voting rights under certain conditions.
Holders of the Series A Preferred Shares are entitled to receive, when, as and
if declared by the Board of Trustees, out of funds legally available for the
payment of distributions, cumulative preferential cash distributions at the
rate of 9.4% of the liquidation preference per annum (equivalent to $2.35 per
share). The Series A Preferred Shares are redeemable at the option of SCI on or
after June 21, 2000. The redemption price (other than the portion thereof
consisting of accrued and unpaid distributions) is payable solely out of the
sale proceeds of other capital shares of SCI, which may include shares of other
series of preferred shares.
On May 16, 1995, SCI issued $75 million of Senior Notes due 2009 (the "May
2009 Notes"), $17.5 million of Senior Notes due 2001 (the "2001 Notes"), $17.5
million of Senior Notes due 2000 (the "2000 Notes") and $15 million of Senior
Notes due 1998 (the "1998 Notes," together with the May 2009 Notes, the 2001
Notes and the 2000 Notes, collectively referred to herein as the "May Notes").
The May 2009 Notes bear interest at 7.875% per annum and require annual
principal payments of $9.375 million, commencing May 15, 2002. The 2001 Notes,
2000 Notes and 1998 Notes bear interest at 7.30%, 7.25% and 7.125% per annum,
respectively, with the principal payable at maturity. Collectively, the May
Notes originally had an average life to maturity of 8.2 years and an average
effective interest cost, inclusive of offering discount and issuance costs, of
7.92% per annum.
On March 2, 1995, SCI issued $150 million of Senior Notes due 2009 (the
"March 2009 Notes") and $50 million of Senior Notes due 2015 (the "2015 Notes,"
together with the March 2009 Notes, collectively referred to as the "March
Notes"). The March 2009 Notes bear interest at 8.72% per annum and require
annual principal payments of $18.75 million, commencing March 1, 2002. The 2015
Notes bear interest at 9.34% per annum and require aggregate annual principal
payments of $5 million in 2010, $6.25 million in 2011, $7.5 million in 2012,
$8.75 million in 2013, $10 million in 2014 and $12.5 million in 2015.
Collectively, the March Notes originally had an average life to maturity of
12.38 years and an average effective interest cost, inclusive of offering
discount and issuance costs, of 9.04% per annum.
All of the foregoing notes are redeemable at any time at the option of SCI,
in whole or in part, at a redemption price equal to the sum of the principal
amount of the notes being redeemed plus accrued interest thereon to the
redemption date plus an adjustment, if any, based on the yield to maturity
relative to market yields available at redemption. Such notes are governed by
the terms and provisions of an Indenture agreement (the "Indenture") between
SCI and State Street Bank and Trust Company, as trustee.
Under the terms of the Indenture, SCI can incur additional debt only if,
after giving effect to the debt being incurred and application of proceeds
therefrom, (i) the ratio of debt to total assets, as defined in the Indenture,
does not exceed 60%, (ii) the ratio of secured debt to total assets, as defined
in the Indenture, does not exceed 40%, and (iii) SCI's pro forma interest
coverage ratio, as defined in the Indenture, for the four preceding fiscal
quarters is not less than 1.5:1. In addition, SCI may not at any time own Total
Unencumbered Assets, as defined in the Indenture, equal to less than 150% of
the aggregate outstanding principal amount of SCI's unsecured debt. At March
31, 1996, SCI was in compliance with all debt covenants.
On June 1, 1995, SCI entered into an increased line of credit of $350 million
agented by NationsBank. The line of credit, as amended and restated effective
May 2, 1996, bears interest at SCI's option at either (a) the greater of the
federal funds rate plus 0.5% and prime or (b) LIBOR plus 1.25%, based upon
SCI's current senior debt ratings, and is scheduled to mature in May 1998. This
line may be extended annually for an additional year with the approval of
NationsBank and the other participating lenders. All debt incurrences are
subject to a covenant that SCI maintain a debt to tangible net worth ratio of
not greater than 1 to 1. Additionally, SCI is required to maintain an adjusted
net worth (as defined) of at least $1.0 billion, to maintain interest payment
coverage of not less than 2 to 1, and to maintain a fixed charge coverage ratio
of not less than 1.4 to 1. As of March 31, 1996, SCI was in compliance with all
covenants, and as of May 2, 1996, $67.2 million of borrowings were outstanding.
14
<PAGE>
From inception through March 31, 1996, SCI had invested $1.8 billion for the
acquisition and development of 819 industrial properties. These acquisitions
and developments were financed with cash on hand, the issuance of limited
partnership units, the assumption of existing mortgage debt and borrowings
under SCI's line of credit which were repaid with the proceeds of SCI's equity
and debt offerings.
At March 31, 1996, SCI had $336.8 million of budgeted development cost for
developments in process, of which $214.1 million was unfunded. In addition, at
March 31, 1996, SCI had letters of intent or contingent contracts, subject to
SCI's final due diligence, for the acquisition of 4.6 million square feet in
various target market cities with an acquisition cost of $100.2 million. The
foregoing transactions are subject to a number of conditions, and SCI cannot
predict with certainty that any of them will be consummated.
SCI expects to finance construction, development and acquisitions primarily
with cash on hand, borrowings under its line of credit and cash from future
securities offerings. When issuing debt, SCI intends primarily to arrange fully
amortizing, fixed rate 10 year to 20 year debt to finance additional
acquisitions and developments. To a lesser extent, under certain circumstances,
SCI may arrange for debt with different maturities in order to optimize its
debt maturity schedule.
The REIT manager considers SCI's liquidity and ability to generate cash from
operations and financings to be adequate and expects it to continue to be
adequate to meet SCI's acquisition, development, operating, debt service and
shareholder distribution requirements.
SCI's current distribution policy is to pay quarterly distributions to
shareholders based upon what REIT management considers to be a reasonable
percentage of cash flow. Because depreciation is a non-cash expense, cash flow
typically will be greater than earnings from operations and net earnings.
Therefore, quarterly distributions will consistently be higher than quarterly
earnings.
Pursuant to the terms of the Series A Preferred Shares and the Series B
Preferred Shares, SCI is restricted from declaring or paying any distribution
with respect to the common shares unless all cumulative distributions with
respect to the Series A Preferred Shares and the Series B Preferred Shares have
been paid and sufficient funds have been set aside for distributions that have
been declared for the then current distribution period with respect to the
Series A Preferred Shares and the Series B Preferred Shares. The Series A
Preferred Share and Series B Preferred Share dividends do not reduce the amount
SCI has budgeted for common share distributions, but do increase the percentage
of the common share distribution that constitutes a non-taxable return of
capital.
Funds from Operations
Funds from Operations attributable to common shares increased $6.7 million or
35.3% from $19.0 million for the first three months of 1995 to $25.7 million
for the same period in 1996. SCI believes that Funds from Operations is helpful
in understanding a property portfolio in that such calculation reflects cash
flow from operating activities and the properties' ability to support interest
payments and general operating expenses before the impact of certain
activities, such as changes in accounts receivable and accounts payable. Funds
from Operations should not be considered as an alternative to net earnings or
any other generally accepted accounting principles ("GAAP") measurement of
performance as an indicator of SCI's operating performance or as an alternative
to cash flows from operating, investing or financing activities as a measure of
liquidity.
Funds from Operations represents SCI's net earnings (computed in accordance
with GAAP) before minority interest and before gains/losses on disposition of
depreciated property, plus depreciation and amortization. In January 1995, SCI
changed to a more conservative policy of expensing loan cost amortization in
determining Funds from Operations.
15
<PAGE>
STATEMENTS OF FUNDS FROM OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Net earnings attributable to Common Shares..................... $11,804 $ 9,663
Add (Deduct):
Depreciation and amortization.............................. 13,089 8,442
Minority interest.......................................... 756 865
Loss on disposition of depreciated real estate............. 29 --
------- -------
Funds from Operations attributable to Common Shares............ $25,678 $18,970
======= =======
</TABLE>
PART II--OTHER INFORMATION
ITEM 5. OTHER INFORMATION
On December 22, 1995 Security Capital Industrial Trust filed a shelf
registration statement with the Securities and Exchange Commission regarding
the offering from time to time of $600 million in one or more series of its
debt securities, preferred shares of beneficial interest and common shares of
beneficial interest, and had $90 million remaining available under its previous
shelf registration statement. After the February 1996 Series B Preferred Share
offering, SCI has $488.75 in securities remaining available to be issued under
its shelf registration statement.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
<TABLE>
<CAPTION>
<C> <S> <C>
10 Amended and Restated Credit Agreement among Security Capi-
tal Industrial Trust, NationsBank of Texas, N.A., as agent
bank, and the lenders party thereto dated as of May 2,
1996.
12 Statement re Computation of Ratio of Earnings to Fixed
Charges.
27 Financial Data Schedule
</TABLE>
(b) REPORTS ON FORM 8-K:
<TABLE>
<CAPTION>
DATE ITEM REPORTED FINANCIAL STATEMENTS
---- ------------- --------------------
<S> <C> <C>
January 15, 1996 5,7 Yes
February 14, 1996 5 No
</TABLE>
16
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.
Security Capital Industrial Trust
/s/ Edward F. Long
-------------------------------------
Edward F. Long, Vice President
(Duly Authorized Officer) and
Controller (Principal Financial
and Accounting Officer)
Date: May 9, 1996
17
<PAGE>
SECURITY CAPITAL INDUSTRIAL TRUST
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIAL
PAGE
EXHIBIT DOCUMENT DESCRIPTION NUMBER
------- -------------------- ----------
<C> <S> <C>
10 Amended and Restated Credit Agreement among Security 22
Capital Industrial Trust, NationsBank of Texas, N.A., as
agent bank, and the lenders party thereto dated as of May
2, 1996
12 Statement re Computation of Ratio of Earnings to Fixed 70
Charges.
27 Financial Data Schedule 71
</TABLE>
<PAGE>
AMENDED AND RESTATED
CREDIT AGREEMENT
among
SECURITY CAPITAL INDUSTRIAL TRUST,
Borrower
NATIONSBANK OF TEXAS, N.A.,
Agent
and
THE LENDERS NAMED HEREIN,
Lenders
$350,000,000
AS OF
MAY 2, 1996
22
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1 DEFINITIONS AND TERMS...................................................................... (1)
1.1 Definitions.........................................................................(11)
1.2 Time References.....................................................................(11)
1.3 Other References....................................................................(11)
1.4 Accounting Principles...............................................................(11)
SECTION 2 COMMITMENT.................................................................................(12)
2.1 Revolving Facility..................................................................(12)
2.2 Borrowing Procedure.................................................................(12)
2.3 Termination.........................................................................(12)
2.4 Swing Line Sub-Facility.............................................................(13)
SECTION 3 TERMS OF PAYMENT...........................................................................(13)
3.1 Notes and Payments..................................................................(13)
3.2 Interest and Principal Payments.....................................................(14)
(a) Interest Payments...............................................................(14)
(b) Principal Payments..............................................................(14)
(c) Voluntary Prepayment............................................................(14)
3.3 Interest Options....................................................................(14)
3.4 Quotation of Rates..................................................................(14)
3.5 Default Rate........................................................................(14)
3.6 Interest Recapture..................................................................(14)
3.7 Interest Calculations...............................................................(15)
3.8 Maximum Rate........................................................................(15)
3.9 Interest Periods....................................................................(15)
3.10 Conversions.........................................................................(16)
3.11 Order of Application................................................................(16)
3.12 Sharing of Payments, Etc............................................................(16)
3.13 Offset..............................................................................(16)
3.14 Booking Borrowings..................................................................(17)
3.15 Basis Unavailable or Inadequate for the LIBOR Rate..................................(17)
3.16 Additional Costs....................................................................(17)
(a) Eurocurrency Reserves...........................................................(17)
(b) Reserves........................................................................(17)
(c) Capital Adequacy................................................................(18)
(d) Taxes...........................................................................(18)
3.17 Change in Law.......................................................................(18)
3.18 Funding Loss........................................................................(19)
3.19 Foreign Lenders.....................................................................(19)
3.20 Extension of Termination Date.......................................................(19)
3.21 Conversion to Term Loan.............................................................(19)
3.22 Option to Replace Lenders...........................................................(20)
SECTION 4 FEES.......................................................................................(21)
4.1 Treatment of Fees...................................................................(21)
4.2 Agent Fees..........................................................................(21)
4.3 Commitment Fees.....................................................................(21)
4.4 Extension Fee.......................................................................(21)
4.5 Conversion Fee......................................................................(21)
SECTION 5 CONDITIONS PRECEDENT.......................................................................(22)
SECTION 6 REPRESENTATIONS AND WARRANTIES.............................................................(22)
</TABLE>
23
<PAGE>
<TABLE>
<S> <C>
6.1 Purpose of Credit Facility..........................................................(22)
6.2 Corporate Existence, Good Standing, Authority and Compliance........................(22)
6.3 Affiliates..........................................................................(22)
6.4 Authorization and Contravention.....................................................(22)
6.5 Binding Effect......................................................................(23)
6.6 Financial Statements; Fiscal Year...................................................(23)
6.7 Litigation..........................................................................(23)
6.8 Taxes...............................................................................(23)
6.9 Environmental Matters...............................................................(23)
6.10 Employee Plans......................................................................(24)
6.11 Properties; Liens...................................................................(24)
6.12 Locations...........................................................................(24)
6.13 Government Regulations..............................................................(24)
6.14 Transactions with Affiliates........................................................(24)
6.15 Liabilities.........................................................................(24)
6.16 Insurance...........................................................................(24)
6.17 Labor Matters.......................................................................(25)
6.18 Solvency............................................................................(25)
6.19 Full Disclosure.....................................................................(25)
6.20 Exemption from ERISA; Plan Assets...................................................(25)
6.21 Intercreditor Agreement.............................................................(25)
6.22 Minority Interests..................................................................(25)
SECTION 7 AFFIRMATIVE COVENANTS......................................................................(25)
7.1 Items to be Furnished...............................................................(25)
7.2 Use of Proceeds.....................................................................(27)
7.3 Books and Records...................................................................(27)
7.4 Inspections.........................................................................(27)
7.5 Taxes...............................................................................(27)
7.6 Payment of Obligations..............................................................(27)
7.7 Expenses............................................................................(27)
7.8 Maintenance of Existence, Assets, and Business......................................(27)
7.9 Insurance...........................................................................(27)
7.10 Preservation and Protection of Rights...............................................(28)
7.11 Environmental Laws..................................................................(28)
7.12 Indemnification.....................................................................(28)
7.13 REIT Status.........................................................................(28)
7.14 ERISA Exemptions....................................................................(28)
7.15 Property Pool.......................................................................(28)
SECTION 8 NEGATIVE COVENANTS.........................................................................(29)
8.1 Payment of Obligations..............................................................(29)
8.2 Employee Plans......................................................................(29)
8.3 Recourse Debt.......................................................................(29)
8.4 Transactions with Affiliates........................................................(29)
8.5 Compliance with Laws and Documents..................................................(30)
8.6 Loans, Advances and Investments.....................................................(30)
8.7 Dividends and Distributions.........................................................(31)
8.8 Sale of Assets......................................................................(31)
8.9 Mergers and Dissolutions............................................................(31)
8.10 Assignment..........................................................................(31)
8.11 Fiscal Year and Accounting Methods..................................................(31)
8.12 New Businesses......................................................................(31)
8.13 Government Regulations..............................................................(31)
8.14 Negative Pledge Agreements..........................................................(31)
</TABLE>
24
<PAGE>
<TABLE>
<S> <C>
SECTION 9 FINANCIAL COVENANTS........................................................................(32)
9.1 Leverage Ratio......................................................................(32)
9.2 Minimum Tangible Net Worth..........................................................(32)
9.3 Interest Expense Coverage Ratio.....................................................(32)
9.4 Fixed Charge Coverage Ratio.........................................................(32)
9.5 Debt to Total Asset Value Ratio.....................................................(32)
SECTION 10 DEFAULT....................................................................................(32)
10.1 Payment of Obligation...............................................................(32)
10.2 Covenants...........................................................................(32)
10.3 Debtor Relief.......................................................................(32)
10.4 Judgments and Attachments...........................................................(32)
10.5 Government Action...................................................................(33)
10.6 Misrepresentation...................................................................(33)
10.7 Default Under Other Agreements......................................................(33)
10.8 Validity and Enforceability of Loan Documents.......................................(33)
10.9 Management Changes..................................................................(33)
10.10 Plan Assets.........................................................................(34)
SECTION 11 RIGHTS AND REMEDIES........................................................................(34)
11.1 Remedies Upon Default...............................................................(34)
11.2 Waivers.............................................................................(34)
11.3 Performance by Agent................................................................(34)
11.4 Not in Control......................................................................(34)
11.5 Course of Dealing...................................................................(34)
11.6 Cumulative Rights...................................................................(35)
11.7 Application of Proceeds.............................................................(35)
11.8 Diminution in Value of Collateral...................................................(35)
11.9 Certain Proceedings.................................................................(35)
SECTION 12 AGENT AND LENDERS..........................................................................(35)
12.1 Agent...............................................................................(35)
12.2 Delegation of Duties; Reliance......................................................(36)
12.3 Limitation of Agent's Liability.....................................................(36)
12.4 Limitation of Liability.............................................................(37)
12.5 Intercreditor Agreement.............................................................(37)
12.6 Confirmation of Intercreditor Agreement.............................................(37)
SECTION 13 MISCELLANEOUS..............................................................................(37)
13.1 Headings............................................................................(37)
13.2 Nonbusiness Days; Time..............................................................(37)
13.3 Communications......................................................................(37)
13.4 Form and Number of Documents........................................................(38)
13.5 Survival............................................................................(38)
13.6 Governing Law.......................................................................(38)
13.7 Invalid Provisions..................................................................(38)
13.8 Venue; Service of Process; Jury Trial...............................................(38)
13.9 Amendments, Consents, Conflicts and Waivers.........................................(39)
13.10 Multiple Counterparts...............................................................(39)
13.11 Successors and Assigns; Participations..............................................(39)
13.12 Discharge Only Upon Payment in Full; Reinstatement in Certain Circumstances.........(41)
13.13 Confidentiality.....................................................................(41)
</TABLE>
25
<PAGE>
<TABLE>
<S> <C>
13.14 Arbitration.........................................................................(41)
(a) SPECIAL RULES..................................................................(42)
(b) RESERVATION OF RIGHTS..........................................................(42)
13.15 Limitation of Liability of Trustees, Shareholders and Officers of Borrower..........(42)
13.16 Entirety............................................................................(42)
13.17 Amendment and Restatement...........................................................(42)
</TABLE>
26
<PAGE>
SCHEDULES AND EXHIBITS
<TABLE>
<S> <C>
Schedule 1.......................Parties, Addresses, Commitments and Wiring Information
Schedule 5.......................Conditions Precedent
Schedule 6.2.....................Jurisdictions of Incorporation, Business and Names
Schedule 6.7.....................Litigation
Schedule 6.9.....................Environmental Matters
Schedule 6.12....................Chief Executive Office, Location of Material
Assets and Real Estate Interests
Schedule 6.14....................Affiliates Transactions
Schedule 6.22....................Minority Interests
Schedule 8.6.....................Permitted Minority Interests
Exhibit A........................Form of Revolving Credit Note
Exhibit B........................Borrowing Request
Exhibit C........................Compliance Certificate
Exhibit D........................Form of Assignment and Acceptance
</TABLE>
27
<PAGE>
AMENDED AND RESTATED
CREDIT AGREEMENT
----------------
THIS AMENDED AND RESTATED CREDIT AGREEMENT is dated as of May 2, 1996,
among SECURITY CAPITAL INDUSTRIAL TRUST, a Maryland real estate investment trust
("BORROWER"), the Lenders (defined below), and NationsBank of Texas, N.A.
("NATIONSBANK"), for itself and as Agent for the Lenders (in such capacity,
"AGENT").
R E C I T A L S:
- - - - - - - -
1. Reference is hereby made to that certain Credit Agreement dated as
of May 3, 1995, by and between Borrower, Agent and the Lenders defined therein
(the "ORIGINAL CREDIT AGREEMENT").
2. Agent, Lenders and Borrower amended and restated the Original
Credit Agreement in its entirety as and pursuant to that certain Amended and
Restated Credit Agreement dated as of June 1, 1995 (the "RESTATED LOAN
AGREEMENT").
3. Agent, Lenders and Borrower amended the Restated Loan Agreement
pursuant to that certain First Amendment to Credit Agreement dated as of June 1,
1995 and that certain Second Amendment to Credit Agreement dated as of February
15, 1996.
4. Borrower has requested that Lenders modify certain provisions
contained in the Restated Loan Agreement.
5. Agent, Lenders and Borrower desire and have agreed to amend and
restate the Restated Loan Agreement in its entirety as and pursuant to this
Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1 DEFINITIONS AND TERMS.
- --------- ---------------------
1.1 Definitions. Unless otherwise indicated, as used in the Loan
-----------
Documents:
ADVISORY AGREEMENT means that certain Sixth Amended and Restated REIT
Management Agreement dated as of June 30, 1995, between Borrower and Security
Capital Industrial Incorporated, as amended, supplemented or restated from time
to time.
AFFILIATE of a Person means any other individual or entity who
directly or indirectly controls, or is controlled by, or is under common control
with, that Person. For purposes of this definition "control," "controlled by,"
and "under common control with" mean possession, directly or indirectly, of
power to direct (or cause the direction of) management or policies (whether
through ownership of voting securities or other ownership interests, by
contract, or otherwise).
AGENT means NationsBank of Texas, N.A., a national banking
association, and its successor or successors as agent for Lenders under this
Agreement.
AGREEMENT means this Credit Agreement, as amended, supplemented or
restated from time to time.
APPLICABLE MARGIN means, at the time of determination thereof, the
interest margin over the Base Rate or the LIBOR Rate, as the case may be, based
on the Rating Requirement as follows:
28
<PAGE>
<TABLE>
<CAPTION>
RATING REQUIREMENT APPLICABLE MARGIN
- ---------------------------------------------------------------
Moody's S & P DCR Base Rate LIBOR
Rating Rating Rating Borrowings Borrowings
- ---------------------------------------------------------------
<S> <C> <C> <C> <C>
Less than Less than Less than .5% 2.0%
Baa3 or BBB- or BBB- or
not rated not rated not rated
- ---------------------------------------------------------------
Baa3 BBB- BBB- 0% 1.500%
- ---------------------------------------------------------------
Baa2 BBB BBB 0% 1.375%
- ---------------------------------------------------------------
Baa1 BBB+ BBB+ 0% 1.250%
- ---------------------------------------------------------------
A3 A- A- 0% 1.125%
- ---------------------------------------------------------------
A2 or A or better A or better 0% 1.000%
better
- ---------------------------------------------------------------
</TABLE>
BASE RATE means, for any day, the greater of (a) the sum of the
Federal Funds Rate plus one-half of one percent (0.5%), and (b) the annual
interest rate most recently announced by Agent as its prime rate (or, if the
Person then acting as Agent under this Agreement is not a bank organized under
the Laws of the United States or any State, then the rate announced by
NationsBank of Texas, N.A. as its prime rate) in effect at its principal office,
automatically fluctuating upward and downward with and as specified in each
announcement without special notice to Borrower or any other Person (which prime
rate may not necessarily represent the lowest or best rate actually charged to a
customer).
BASE RATE BORROWING means a Borrowing bearing interest at the sum of
the Base Rate plus the Applicable Margin.
BORROWER is defined in the preamble to this Agreement.
BORROWING means (without duplication) any amount disbursed by (a)
Lenders to or on behalf of Borrower under the Loan Documents (including any
Swing Line Loan) or (b) any Lender in accordance with, and to satisfy the
obligations of Borrower under, any Loan Document.
BORROWING DATE means for any Borrowing (a) the date for which funds
are requested by Borrower, or (b) the date any Borrowing is converted hereunder
to another Type of Borrowing.
BORROWING REQUEST means a request substantially in the form of the
attached EXHIBIT B.
BUSINESS DAY means (a) for all purposes, any day other than Saturday,
Sunday, and any other day that commercial banks are authorized by Law to be
closed in Texas or New York and (b) for purposes of any LIBOR Borrowing, a day
that satisfies the requirements of clause (a) and is a day when commercial banks
are open for domestic or international business in London.
CAPITAL EXPENDITURES means, on an annual basis, an amount equal to the
product of (a) the sum of the total square footage with respect to all completed
industrial space in all Properties of Borrower and its Consolidated Affiliates
as of the last day of each of the immediately preceding five (5) calendar
quarters, divided by five (5), and (b) $0.15.
29
<PAGE>
CAPITAL LEASE means any capital lease or sublease that has been (or
under GAAP should be) capitalized on a balance sheet.
CASH EQUIVALENTS means (a) investments and direct obligations of the
United States of America or any agency thereof, or obligations fully guaranteed
by the United States of America or any agency thereof, provided that such
obligations mature within one (1) year of the date of acquisition thereof,
(b) commercial paper rated "A-1" (or higher) according to S & P, or "P-1" (or
higher) according to Moody's and maturing not more than one hundred eighty (180)
days from the date of acquisition thereof, (c) time deposits with, and
certificates of deposit and bankers' acceptances issued by, Agent or any United
States bank having capital surplus and undivided profits aggregating at least
$1,000,000,000, and (d) mutual funds whose investments are substantially limited
to the foregoing.
CHANGE IN CONTROL means, with respect to Borrower, the transfer of
beneficial ownership of the outstanding capital stock of Borrower such that
(a) Security Capital Group Incorporated and/or its Affiliates own, directly or
indirectly, less than twenty percent (20%) of the capital stock of Borrower, and
(b) any Person other than Security Capital Group Incorporated and/or its
Affiliates owns, directly or indirectly, more than twenty percent (20%) of the
capital stock of Borrower.
CLOSING DATE means the date this Agreement is fully executed and
delivered.
CODE means the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
COMMITMENT means, for a Lender, the amount (which is subject to
reduction and cancellation as provided in this Agreement) stated beside such
Lender's name on SCHEDULE 1 as most recently amended under this Agreement.
COMMITMENT PERCENTAGE means, for any Lender, the proportion (stated as
a percentage) that its Commitment bears to the Total Commitment.
COMPLIANCE CERTIFICATE means a certificate substantially in the form
of the attached EXHIBIT C and signed by a Responsible Officer.
CONSENTING LENDERS is defined in SECTION 3.20.
CONSOLIDATED AFFILIATE means, in respect of any Person, any other
Person in whom such Person holds an equity or ownership interest and whose
financial results would be consolidated under GAAP with the financial results of
such Person on the consolidated financial statements of such Person.
CONSTRUCTION INTEREST means Interest Expense for the construction of
projects on Properties, which is capitalized in accordance with GAAP.
CONVERSION DATE is defined in SECTION 3.21.
CONVERSION NOTICE is defined in SECTION 3.21.
CONVERSION REQUEST means a request substantially in the form of the
attached EXHIBIT B.
CURRENT FINANCIALS means, at any time, the consolidated Financial
Statements of Borrower and its Consolidated Affiliates most recently delivered
to Agent under SECTION 7.1(a) or 7.1(b), as the case may be.
DCR means Duff & Phelps Credit Rating Co., or if DCR no longer
publishes ratings, then such other ratings agency acceptable to Agent.
30
<PAGE>
DCR RATING means the most recently-announced rating from time to time
of DCR assigned to any class of long-term senior, unsecured Liability securities
issued by Borrower, as to which no letter of credit, guaranty, or third party
credit support is in place, regardless of whether all or any part of such
Liability has been issued at the time such rating was issued.
DEBTOR RELIEF LAWS means Title 11 of the United States Code and all
other applicable state or federal liquidation, conservatorship, bankruptcy,
moratorium, rearrangement, receivership, insolvency, reorganization, suspension
of payments or similar Laws affecting creditors' Rights in effect from time to
time.
DEBT TO TOTAL ASSET VALUE RATIO means, with respect to any Person, the
ratio of Total Indebtedness to Total Asset Value of such Person.
DEFAULT is defined in SECTION 10.
DEFAULT RATE means an annual rate of interest equal from day to day to
the lesser of (a) the then-existing Base Rate plus 4% and (b) the Maximum Rate.
DISQUALIFIED STOCK means any of Borrower's capital stock which by its
terms (or by the terms of any security into which it is convertible or for which
it is exchangeable or exercisable) (a) matures or is subject to mandatory
redemption, pursuant to a sinking fund obligation or otherwise, (b) is
convertible into or exchangeable or exercisable for a Liability or Disqualified
Stock during the term of this Agreement, (c) is redeemable during the term of
this Agreement at the option of the holder of such stock, or (d) otherwise
requires any payments by Borrower, in each case on or before the Termination
Date.
DISTRIBUTION means, with respect to any shares of any capital stock or
other equity securities or other interests issued by a Person, (a) the
retirement, redemption, purchase or other acquisition for value of those
securities by such Person, (b) the declaration or payment of any dividend on or
with respect to those securities by such Person, (c) any loan or advance by that
Person to, or other investment by that Person in, the holder of any of those
securities, and (d) any other payment by that Person with respect to those
securities.
EMPLOYEE PLAN means an employee pension benefit plan covered by Title
IV of ERISA and established or maintained by Borrower or any of its Consolidated
Affiliates.
ENVIRONMENTAL LAW means any Law that relates to the pollution or
protection of the environment or to Hazardous Substances.
ERISA means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
EXTENSION REQUEST is defined in SECTION 3.20.
FEDERAL FUNDS RATE means, on any day, the annual rate (rounded
upwards, if necessary, to the nearest 0.01%) determined by Agent (which
determination is conclusive and binding, absent manifest error) to be equal to
the weighted average of the rates on overnight federal funds transactions with
member banks of the Federal Reserve System arranged by federal funds brokers as
published by the Federal Reserve Bank of New York on the next successive
Business Day; provided, however, that (i) if such determination date is not a
Business Day, the Federal Funds Rate for such day shall be the rate for such
transactions on the next preceding Business Day as published on the next
successive Business Day or, (ii) if those rates are not published for any
Business Day, the Federal Fund Rate shall be the average of the quotations at
approximately 10:00 a.m. on such Business Day received by Agent from three
federal funds brokers of recognized standing selected by Agent in its sole
discretion.
31
<PAGE>
FINANCIAL STATEMENTS of a Person means balance sheets, and statements
of earnings, shareholders' equity and cash flow prepared (a) according to GAAP,
(b) except as stated in SECTION 1.4, in comparative form to prior year-end
figures or corresponding periods of the preceding fiscal year, as applicable,
and (c) on a consolidated basis if that Person had any Consolidated Affiliates
during the applicable period; provided that Financial Statements for any fiscal
--------
quarter may omit footnotes and shall be subject to normal audit adjustments.
FIXED CHARGE COVERAGE RATIO means, as of any date, the ratio of
(a) (i) Funds from Operations, plus (ii) Interest Expense, minus (iii) Capital
---- -----
Expenditures, to (b) the sum of (i) Interest Expense, plus (ii) Distributions of
----
any kind or character or other proceeds paid or payable with respect to
Disqualified Stock, plus (iii) any regularly scheduled principal payments on
----
Total Indebtedness (excluding (1) any regularly scheduled principal payments on
the Term Loans, and (2) any regularly scheduled principal payments on any Total
Indebtedness which pays such Total Indebtedness in full, but only to the extent
that the amount of such final payment is greater than the scheduled principal
payment immediately preceding such final payment), in each case for the four
(4) fiscal quarters ending on the date of determination.
FUNDING LOSS, means, without duplication, any loss, expense or costs
incurred by any Lender (including any loss, expense or cost incurred by reason
of the liquidation or reemployment of deposits or other funds acquired by such
Lender to make or maintain any portion of any Borrowing as a LIBOR Borrowing,
but excluding loss of anticipated profit) when (i) Borrower fails or refuses
(for any reason other than any Lender's failure to comply with this Agreement)
to take any Borrowing that it has requested under this Agreement, or
(ii) Borrower prepays or pays any Borrowing or converts any Borrowing to a
Borrowing of another Type, in each case, before the last day of the applicable
Interest Period.
FUNDS FROM OPERATIONS means, for Borrower and its Consolidated
Affiliates on a consolidated basis for any period, net income plus depreciation
----
and amortization (exclusive of amortization of financing costs), all as
determined in accordance with GAAP; provided that there shall not be included in
--------
such calculation (a) any proceeds of any insurance policy other than rental or
business interruption insurance received by such Person, (b) any gain or loss
which is classified as "extraordinary" in accordance with GAAP, or (c) any
capital gains and taxes on capital gains (in each case exclusive of such amounts
that are attributable to SCI Services). Funds from Operations shall be
calculated as if all minority interests in Consolidated Affiliates have been
converted into capital stock of Borrower. Funds from Operations shall not be
increased or decreased by gains or losses from sales of Properties (in each case
exclusive of amounts that are attributable to SCI Services).
GAAP means generally accepted accounting principles of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
the Financial Accounting Standards Board that are applicable on the date of this
Agreement, subject to changes permitted by SECTION 1.4.
HAZARDOUS SUBSTANCE means any substance (a) the presence of which
requires removal, remediation, or investigation under any Environmental Law, or
(b) that is defined or classified as a hazardous waste, hazardous material,
pollutant, contaminant or toxic or hazardous substance under any Environmental
Law.
HISTORICAL VALUE means the purchase price of any of Property
(including improvements) and ordinary related purchase transaction costs, plus
the cost of subsequent capital improvements made by Borrower or a Consolidated
Affiliate, less any provision for losses, all determined in accordance with
GAAP.
INTERCREDITOR AGREEMENT means that certain Intercreditor Agreement
dated as of June 1, 1995, among Agent and Lenders, as modified, amended or
supplemented from time to time.
INTEREST EXPENSE means, for any Person for any period, all of such
Person's paid, accrued or capitalized interest expense on such Person's Total
Indebtedness (whether direct, indirect, or contingent,
32
<PAGE>
and including interest on all convertible Liabilities), but excluding
(a) Construction Interest, and (b) Interest Expense that is not paid or payable
in cash.
INTEREST EXPENSE COVERAGE RATIO means, as of any date, the ratio of
(a) the sum of (i) Funds from Operations, plus (ii) Interest Expense to (b) the
----
sum of (i) Interest Expense, plus (ii) Distributions of any kind or character or
----
other proceeds paid or payable with respect to any Disqualified Stock, in each
case for Borrower and its Consolidated Affiliates and for the four (4) fiscal
quarters ending on the date of determination.
INTEREST PERIOD has the meaning set forth in SECTION 3.9.
LAWS means all applicable statutes, laws, treaties, ordinances, rules,
regulations, orders, writs, injunctions, decrees, judgments, opinions and
interpretations of any Tribunal.
LENDERS means the financial institutions named on the attached
SCHEDULE 1 or on the most recently amended SCHEDULE 1, if any, delivered by
Agent under this Agreement, and, subject to this Agreement, their respective
successors and assigns (but not any Participant who is not otherwise a party to
this Agreement).
LEVERAGE RATIO means, for any Person as of any date, the ratio of
(a) Total Indebtedness of such Person, to (b) Tangible Net Worth of such Person.
LIABILITIES means (without duplication), for any Person, (a) any
obligations required by GAAP to be classified upon such Person's balance sheet
as liabilities, (b) any liabilities secured (or for which the holder of the
Liability has an existing Right, contingent or otherwise, to be so secured) by
any Lien existing on property owned or acquired by that Person, (c) any
obligations that have been (or under GAAP should be) capitalized for financial
reporting purposes, and (d) any guaranties, endorsements and other contingent
obligations with respect to Liabilities or obligations of others, and LIABILITY
means any of the Liabilities.
LIBOR BORROWING means a Borrowing bearing interest at the sum of the
LIBOR Rate plus the Applicable Margin.
LIBOR RATE means, with respect to a LIBOR Borrowing for the relevant
Interest Period, the annual interest rate (rounded upward, if necessary, to the
nearest 0.01%) equal to the rate that deposits in United States dollars are
offered by Agent to other major banks in the Eurodollar market at approximately
9:00 a.m. two (2) Business Days before the first day of the applicable Interest
Period in an amount comparable to the amount of the applicable LIBOR Borrowing
and having a maturity approximately equal to the applicable Interest Period.
LIEN means any lien, mortgage, security interest, pledge, assignment,
charge, title retention agreement or encumbrance of any kind and any other
substantially similar arrangement for a creditor's claim to be satisfied from
assets or proceeds prior to the claims of other creditors or the owners.
LITIGATION means any action by or before any Tribunal.
LOAN DOCUMENTS means (a) this Agreement, certificates and reports
delivered under this Agreement, and exhibits and schedules to this Agreement,
(b) the Notes and all agreements, documents and instruments in favor of Agent or
Lenders (or Agent on behalf of Lenders) ever delivered in connection with or
under this Agreement or otherwise delivered in connection with all or any part
of the Obligation, and (c) all renewals, extensions and restatements of, and
amendments and supplements to, any of the foregoing.
MATERIAL ADVERSE EVENT means any circumstance or event that,
individually or collectively with other circumstances or events, reasonably is
expected to result in any (a) material impairment of the ability of Borrower to
perform any of its payment or other material obligations under any Loan
Document, (b) material
33
<PAGE>
impairment of the ability of Agent or any Lender to enforce (i) any of the
material obligations of Borrower under this Agreement or (ii) any of their
respective Rights under the Loan Documents, and, in the case of (i) and (ii),
such impairment shall substantially interfere with the realization of the
principal legal benefits provided by this Agreement or the other Loan Documents,
(c) material and adverse effect on the financial condition of Borrower and its
Consolidated Affiliates as a whole as represented to Lenders in the Current
Financials, or (d) Default.
MAXIMUM AMOUNT and MAXIMUM RATE respectively mean, for a Lender, the
maximum non-usurious amount and the maximum non-usurious rate of interest that,
under applicable Law, such Lender is permitted to contract for, charge, take,
reserve or receive on the Obligation.
MOODY'S means Moody's Investors Service, Inc., or, if Moody's no
longer publishes ratings, such other ratings agency acceptable to Agent.
MOODY'S RATING means the most recently-announced rating from time to
time of Moody's assigned to any class of long-term senior, unsecured Liability
securities issued by Borrower, as to which no letter of credit, guaranty, or
third party credit support is in place, regardless of whether all or any part of
such Liability has been issued at the time such rating was issued.
MULTIEMPLOYER PLAN means a multiemployer plan as defined in Sections
3(37) or 4001(a)(3) of ERISA or Section 414(f) of the Code to which Borrower or
any of its Consolidated Affiliates (or any Person that, for purposes of Title IV
of ERISA, is a member of Borrower's controlled group or is under common control
with Borrower within the meaning of Section 414 of the Code) is making, or has
made, or is accruing, or has accrued, an obligation to make contributions.
NOI means, for any period and any Property owned for three (3) or more
months as of any determination date or on which substantial completion of
improvements thereon was completed for three (3) or more months as of any
determination date, the difference between (a) any cash rentals, proceeds,
expense reimbursements or income received from such Property (but excluding
security or other deposits, late fees, early lease termination or other
penalties of a non-recurring nature), less (b) all cash costs and expenses
----
(including interest on assessment bonds) incurred as a result of, or in
connection with, the development, operation or leasing of such Property, in each
case determined in accordance with GAAP.
NON-CONSENTING LENDERS is defined in SECTION 3.20.
NOTES means one of the promissory notes substantially in the form of
the attached EXHIBIT A and the Swing Line Note, and all renewals, extensions,
modifications, rearrangements and replacements thereof and any and all
substitutions therefor, and NOTE means any one of the Notes.
OBLIGATION means all present and future indebtedness and obligations,
and all renewals, increases and extensions thereof, or any part thereof, now or
hereafter owed to Agent or any Lender by Borrower under any Loan Document,
together with all interest accruing thereon, fees, costs and expenses (including
all reasonable attorneys' fees and expenses incurred in the enforcement or
collection thereof) payable under the Loan Documents or in connection with the
protection of Rights under the Loan Documents.
OPERATING SUB-POOL is defined in SECTION 7.15.
ORIGINAL UNPAID PRINCIPAL BALANCE is defined in SECTION 3.21(a).
PARTICIPANT is defined in SECTION 13.11(b).
PBGC means the Pension Benefit Guaranty Corporation, or any successor
thereof, established under ERISA.
34
<PAGE>
PERMITTED DISTRIBUTIONS means, for Borrower for any fiscal year of
Borrower, an amount not to exceed ninety-five percent (95%) of Funds from
Operations for such fiscal year.
PERMITTED LIENS means (a) Liens granted to Agent to secure the
Obligation, (b) pledges or deposits made to secure payment of worker's
compensation (or to participate in any fund in connection with worker's
compensation insurance), unemployment insurance, pensions or social security
programs, (c) encumbrances consisting of zoning restrictions, easements, or
other restrictions on the use of real property, provided that such items do not
materially impair the use of such property for the purposes intended and none of
which is violated in any material respect by existing or proposed structures or
land use, (d) the following: (i) Liens for taxes not yet due and payable or that
are being contested in good faith by appropriate proceedings diligently
conducted, and for which reserves in accordance with GAAP or otherwise
reasonably acceptable to Agent have been provided; or (ii) Liens imposed by
mandatory provisions of law such as for materialmen's, mechanic's,
warehousemen's and other like Liens arising in the ordinary course of business,
securing payment of any Liability whose payment is not yet due, (e) Liens for
taxes, assessments and governmental charges or assessments that are being
contested in good faith by appropriate proceedings diligently conducted, and for
which reserves in accordance with GAAP or otherwise reasonably acceptable to
Agent have been provided, (f) Liens on Properties where Borrower is insured
against such Liens by title insurance, (g) Liens securing assessments or charges
payable to a property owner association or similar entity, which assessments are
not yet due and payable or that are being contested in good faith by appropriate
proceedings diligently conducted, and for which reserves in accordance with GAAP
or otherwise reasonably acceptable to Agent have been provided, or (h) Liens
securing assessment bonds, so long as Borrower or its Consolidated Affiliates
are not in material default under the terms thereof.
PERSON means any individual, entity or Tribunal.
POOL is defined in SECTION 7.15.
POTENTIAL DEFAULT means the occurrence of any event or the existence
of any circumstance that would, upon notice or lapse of time or both, become a
Default.
PRINCIPAL DEBT means, for a Lender and at any time, the unpaid
principal balance of all outstanding Borrowings from such Lender hereunder.
PROPERTIES means real estate properties owned by Borrower or a
Consolidated Affiliate of Borrower, and PROPERTY means any one of the
Properties.
PRO RATA and PRO RATA PART means, when determined for any Lender, the
proportion (stated as a percentage) that such Lender's Commitment bears to the
Total Commitment, or, if the Total Commitments shall have been terminated, then
the proportion (stated as a percentage) that the sum of the Principal Debt owed
to such Lender bears to the Total Principal Debt owed to all Lenders.
PURCHASER is defined in SECTION 13.11(c).
RATING REQUIREMENT means, as of any date of determination, the lower
of the two (2) highest ratings of the Moody's Rating, the S & P Rating and the
DCR Rating. For purposes hereof, the correlation of the levels or grades of the
Moody's Rating, the S & P Rating and the DCR Rating shall be as set forth in the
table included herein in the definition of "Applicable Margin" in the column
-----------------
labeled "Rating Requirement." Each change in the Rating Requirement shall be
------------------
effective commencing on the fifth (5th) Business Day following the earlier to
occur of (a) Agent's receipt of notice from Borrower, as required in SECTION
7.1(K), of a change in the Moody's Rating, the S & P Rating, or the DCR Rating
and (b) Agent's actual knowledge of a change in the Moody's Rating, the S & P
Rating or the DCR Rating.
35
<PAGE>
REAL ESTATE MANAGER means, at any time, any Affiliate which is serving
at such time as an advisor to Borrower, or to any Consolidated Affiliate with
respect to the acquisition, sale, development, management or operation of real
property or interests therein.
RECOURSE DEBT means, for any Person, any Total Indebtedness of such
Person in which the holder of such Total Indebtedness may look to such Person
personally for repayment.
REIT means a "real estate investment trust" for purposes of the Code.
REPRESENTATIVES means representatives, officers, directors, employees,
attorneys and agents.
REQUIRED LENDERS means the Lenders required under the Intercreditor
Agreement to modify, amend, or waive any term or condition herein, or to require
Agent to take any action hereunder.
REQUIRED LEVEL means, with respect to Properties in the Operating Sub-
Pool, the lesser of (a) the aggregate Historical Value less the outstanding
----
balance of any assessment bonds of the Properties in the Operating Sub-Pool, and
(b) the aggregate NOI of the Properties in the Operating Sub-Pool divided by
nine and one quarter percent (9.25%); provided that for Properties in the
--------
Operating Sub-Pool owned for less than three (3) months, the Required Level
shall equal the Historical Value of such Properties. For purposes of the
foregoing, NOI shall be determined for the twelve- (12-) month period ending on
the date of determination; provided, however, that for any Property (i) owned by
Borrower or a Consolidated Affiliate for less than twenty-four (24) months as of
the date of determination, or (ii) on which substantial completion of
improvements thereon was completed less than twenty-four (24) months prior to
the date of determination, NOI shall be annualized based upon the NOI of such
Property in a manner satisfactory to Agent.
RESERVE REQUIREMENT means, with respect to any LIBOR Borrowing for the
relevant Interest Period, the actual aggregate reserve requirements (including
all basic, supplemental, emergency, special, marginal and other reserves
required by applicable Law) applicable to a member bank of the Federal Reserve
System for eurocurrency fundings or liabilities.
RESPONSIBLE OFFICER means any chairman, president, chief executive
officer, chief financial officer, controller, secretary, senior vice president
or vice president of Borrower.
RIGHTS means rights, remedies, powers, privileges and benefits.
SCI SERVICES means SCI Development Services Incorporated.
SOLVENT means, as to a Person, that (a) the aggregate fair market
value of its assets exceeds its liabilities, (b) it has sufficient cash flow to
enable it to pay its Liabilities as they mature, and (c) it does not have
unreasonably small capital to conduct its businesses.
S & P means Standard & Poor's Rating Group, a division of McGraw Hill,
Inc., a New York corporation, or if S & P no longer publishes ratings, then such
other ratings agency acceptable to Agent.
S & P RATING means the most recently-announced rating from time to
time of S & P assigned to any class of long-term senior, unsecured Liability
securities issued by Borrower, as to which no letter of credit, guaranty, or
third party credit support is in place, regardless of whether all or any part of
such Liability has been issued at the time such rating was issued.
STABILIZED PROPERTIES means, as of any date, Properties that (a) are
owned for the full quarterly period ending on such date, and (b) either (i) have
achieved an average occupancy level based upon bona fide tenant leases requiring
current rent payments of at least ninety-three percent (93%), or (ii) as of such
36
<PAGE>
date, have been owned for not less than twelve (12) consecutive months following
Borrower's or a Consolidated Affiliate's acquisition thereof or substantial
completion of improvements thereon.
SWING LINE LOAN means a Borrowing made pursuant to Section 2.4.
-----------
SWING LINE NOTE means that certain promissory note dated of even date
herewith, executed by Borrower and payable to the order of NationsBank in the
original principal amount of $25,000,000.00 substantially in the form of
EXHIBIT E.
SWING LINE MATURITY DATE means May 1, 1997, and successive one-year
extensions thereof if agreed to in writing by NationsBank in its sole
discretion, but in no event, a date later than the Termination Date.
TANGIBLE NET WORTH means, for any Person as of any date, (a) total
assets less (to the extent included therein) (i) the book value of all assets
----
that would be treated as intangible assets under GAAP (including goodwill,
trademarks, trade names, copyrights, patents, deferred charges, and unamortized
debt discount and expense) and (ii) the total book value of Borrower's equity
investments in each Unconsolidated Affiliate whose Total Indebtedness to
Tangible Net Worth exceeds 1.86 to 1.0, plus (b) accumulated depreciation with
----
respect to the net assets included in (a), minus (c) all Liabilities, in each
-----
case for such Person as of such date determined in accordance with GAAP.
TAXES means, for any Person, taxes, assessments or other governmental
charges or levies imposed upon it, its income, or any of its properties,
franchises or assets.
TERMINATION DATE means the earlier of (a) May 1, 1998 (subject to
annual extensions under SECTION 3.20), and (b) the effective date that Lenders'
commitments to lend hereunder are otherwise canceled or terminated in accordance
with this Agreement.
TERM LOAN and TERM LOANS are defined in SECTION 3.21(a).
TOTAL ASSET VALUE means, for Borrower and its Consolidated Affiliates
as of any date, the sum of (a) aggregate NOI (based on the three- (3-) month
period ending on the date of determination and annualized in a manner
satisfactory to Agent) from Stabilized Properties divided by eight and three-
----------
quarters of one percent (8.75%), plus (b) the total book value of (i) Properties
----
other than Stabilized Properties, plus (c) the amount of any cash and Cash
----
Equivalents, excluding tenant security and other restricted deposits, plus
----
(d) the total book value of all other assets not described in (a), (b) or (c)
--- --- ---
above, excluding all intangibles and all equity investments in Unconsolidated
Affiliates, plus (e) the total book value of Borrower's equity investments in
----
each Unconsolidated Affiliate if, as of the date of determination of Total Asset
Value, the ratio of such Unconsolidated Affiliate's Total Indebtedness to
Tangible Net Worth is equal to or less than 1.86 to 1.0. Total Asset Value shall
be calculated on a consolidated basis in accordance with GAAP.
TOTAL COMMITMENT means, at any time, the sum of the Commitments of all
of the Lenders.
TOTAL INDEBTEDNESS means, for any Person, all Liabilities of such
Person that are (a) a Liability for borrowed money of such Person, (b) evidenced
by bonds, debentures, notes or similar instruments of such Person, (c) an
obligation to pay the deferred purchase price of property or services, except
trade payables arising in ordinary course of business, (d) secured by a Lien
existing on any property of such Person or any interest of such Person therein,
whether or not such Liability shall have been assumed by such Person, (e) a
Capital Lease, (f) a guaranty, endorsement or other contingent obligation of
such Person (other than endorsements in the ordinary course of business of
negotiable instruments or documents for deposit or collection), and (g) accounts
payable, dividends of any kind or character or other proceeds payable with
respect to any stock, accrued expenses and other liabilities which in the
aggregate are in excess of five
37
<PAGE>
percent (5%) of the amount of total assets of such Person determined in
accordance with GAAP plus the amount of any accumulated depreciation with
----
respect to such assets, as of the date of determination.
TOTAL PRINCIPAL DEBT means, at any time, the sum of the Principal Debt
of all of the Lenders.
TRIBUNAL means any (a) local, state, or federal judicial, executive,
or legislative instrumentality, (b) private arbitration board or panel, or
(c) central bank.
TYPE means any type of Borrowing determined with respect to the
applicable interest option.
UNCONSOLIDATED AFFILIATE means, in respect of any Person, any other
Person in whom such Person holds a voting equity or ownership interest 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.
UNUSED COMMITMENT means, at any time, (a) the Total Commitment minus
-----
(b) the Total Principal Debt (other than the Principal Debt of any Swing Line
Loans).
1.2 Time References. Unless otherwise specified in the Loan Documents
---------------
(a) time references are to time in Dallas, Texas, and (b) in calculating a
period from one date to another, the word "from" means "from and including" and
the word "to" or "until" means "to but excluding."
1.3 Other References. Unless otherwise specified in the Loan
----------------
Documents (a) where appropriate, the singular includes the plural and vice
versa, and words of any gender include each other gender, (b) headings and
caption references may not be construed in interpreting provisions, (c) monetary
references are to currency of the United States of America, (d) section,
paragraph, annex, schedule, exhibit, and similar references are to the
particular Loan Document in which they are used, (e) references to "telecopy,"
"facsimile," "fax," or similar terms are to facsimile or telecopy transmissions,
(f) references to "including" mean including without limiting the generality of
any description preceding that word, (g) the rule of construction that
references to general items that follow references to specific items are limited
to the same type or character of those specific items is not applicable in the
Loan Documents, (h) references to any Person include that Person's heirs,
personal representatives, successors, trustees, receivers, and permitted
assigns, (i) references to any Law include every amendment or supplement to it,
rule and regulation adopted under it, and successor or replacement for it, and
(j) references to any Loan Document or other document include every renewal and
extension of it, amendment and supplement to it, and replacement or substitution
for it.
1.4 Accounting Principles. Under the Loan Documents, unless otherwise
---------------------
stated, (a) GAAP determines all accounting and financial terms and compliance
with financial covenants, (b) GAAP in effect on the date of this Agreement
determines compliance with financial covenants, (c) otherwise, all accounting
principles applied in a current period must be comparable in all material
respects to those applied during the preceding comparable period, and (d) while
Borrower has any Consolidated Affiliates, all accounting and financial terms and
compliance with financial covenants must be on a consolidated basis, as
applicable. If there is a change in GAAP after the date hereof, the Compliance
Certificate shall include calculations setting forth the adjustments from the
relevant financial items as shown in the Current Financials, based on the then-
current GAAP, to the corresponding financial items based on GAAP as used in the
Current Financials delivered to Agent and Lenders on or prior to the date
hereof, so as to demonstrate how such financial covenant compliance was derived
from the Current Financials; provided that Agent or Borrower may request the
--------
other to, whereupon the other party shall, negotiate in good faith for a period
for not more than thirty (30) days regarding amendments to any affected
covenants to make such covenants consistent with the prior covenants and GAAP,
as then in effect, and, after any such revision as shall be agreed to by
Borrower and Agent, this Agreement will be construed in accordance with GAAP as
then in effect.
38
<PAGE>
SECTION 2 COMMITMENT.
- --------- ----------
2.1 Revolving Facility. Subject to the provisions in the Loan
------------------
Documents, each Lender severally and not jointly agrees to lend to Borrower one
or more Borrowings (except for Swing Line Loans) hereunder which Borrower may
borrow, repay and reborrow under this Agreement, subject to the following
conditions:
(a) each Borrowing requested by Borrower hereunder must occur on
a Business Day and no later than the Business Day immediately
preceding the Termination Date;
(b) each Borrowing requested by Borrower must be in an amount not
less than $1,000,000 or a greater integral multiple of $100,000 or, if
less, the Unused Commitment less the Principal Debt of any Swing Line
----
Loans;
(c) the Total Principal Debt may not exceed the Total Commitment;
and
(d) no Lender's Principal Debt may exceed such Lender's
Commitment.
2.2 Borrowing Procedure. The following procedures apply to Borrowings
-------------------
(other than Swing Line Loans):
(a) Borrower may request a Borrowing by submitting to Agent a
Borrowing Request. The Borrowing Request must be received by Agent no
later than 11:00 a.m. on (i) the third (3rd) Business Day preceding
the Borrowing Date for any LIBOR Borrowing or (ii) the Business Day
preceding the Borrowing Date for any Base Rate Borrowing. Agent shall
promptly notify each Lender of its receipt of any Borrowing Request
and its contents. A Borrowing Request is irrevocable and binding on
Borrower.
(b) By 11:00 a.m. on the applicable Borrowing Date, each Lender
shall remit its Pro Rata Part of each requested Borrowing by wire
transfer to Agent pursuant to Agent's wire transfer instructions on
SCHEDULE 1 (or as otherwise directed by Agent) in funds that are
available for immediate use by Agent. Subject to receipt of such
funds, Agent shall make such funds available to Borrower in Dallas,
Texas at 12:00 noon on such Borrowing Date (unless it has actual
knowledge that any applicable condition precedent has not been
satisfied by Borrower).
(c) Absent contrary written notice from a Lender, Agent may
assume that each Lender has made its Pro Rata Part of the requested
Borrowing available to Agent on the applicable Borrowing Date, and
Agent may, in reliance upon such assumption (but is not required to),
make available to Borrower a corresponding amount. If a Lender fails
to make its Pro Rata Part of any requested Borrowing available to
Agent on the applicable Borrowing Date, Agent may recover the
applicable amount on demand (i) from that Lender, together with
interest at the Federal Funds Rate for the period commencing on the
date the amount was made available to Borrower by Agent and ending on
(but excluding) the date Agent recovers the amount from that Lender,
or (ii) if that Lender fails to pay its amount upon demand, then from
Borrower, together with interest at an annual interest rate equal to
the rate applicable to the requested Borrowing for the period
commencing on the Borrowing Date and ending on (but excluding) the
date Agent recovers the amount from Borrower. No Lender is responsible
for the failure of any other Lender to make its Pro Rata Part of any
Borrowing.
2.3 Termination. Without premium or penalty, and upon giving at least
-----------
three (3) Business Days prior written and irrevocable notice to Agent, Borrower
may terminate all or part of the unused portion of the Total Commitment,
provided that Borrower may not partially terminate the unused portion of the
- --------
Total Commitment such that the Total Commitment is less than $200,000,000. Each
partial termination must be
39
<PAGE>
in an amount of not less than $1,000,000 or a greater integral multiple of
$1,000,000, and shall be Pro Rata among all Lenders. Once terminated, the Total
Commitment may not be increased or reinstated.
2.4 Swing Line Sub-Facility.
-----------------------
(a) Subject to the terms and conditions hereof, if necessary to
meet Borrower's funding deadlines, NationsBank agrees to make Swing
Line Loans to Borrower at any time on or prior to the Swing Line
Maturity Date, not to exceed an amount at any one time outstanding
equal to the lesser of (i) $25,000,000.00, or (ii) the difference
between the Total Commitment and the Total Principal Debt. Swing Line
Loans shall constitute "Borrowings" for all purposes hereunder, except
that Swing Line Loans shall not be considered a utilization of any
Lender's Commitment. Notwithstanding the foregoing, the Total
Principal Debt (including, without limitation, all Swing Line Loans)
shall not at any time exceed the Total Commitment.
(b) Each request for a Swing Line Loan shall be in an amount
equal to $1,000,000 or a greater integral multiple of $100,000.
Borrower may request a Swing Line Loan by submitting a Borrowing
Request to Agent and NationsBank. Such Borrowing Request must be
received by Agent and NationsBank no later than 10:00 a.m. on the
Borrowing Date for such Swing Line Loan, provided that Borrower shall
have provided telephonic notice to Agent and NationsBank no later than
10:00 a.m. on the Borrowing Date for such Swing Line Loan. NationsBank
shall make such Swing Line Loan available to Borrower in Dallas, Texas
at 1:00 p.m. on such Borrowing Date.
(c) If necessary to meet Borrower's funding deadlines, Agent may
treat any Borrowing Request as a request for a Swing Line Loan from
NationsBank and NationsBank may fund it as a Swing Line Loan. Within
three (3) Business Days after each Swing Line Loan is funded,
NationsBank shall request that each Lender, and each Lender shall, on
the first Business Day after such request is made, purchase a portion
of any one or more Swing Line Loans in an amount equal to that
Lender's Pro Rata Part of such Swing Line Loans by funding under such
Lender's Note, such purchase to be made in accordance with the terms
of SECTION 2.2 of this Agreement just as if such Lender were funding
directly to Borrower under its Note (such that all Lenders other than
NationsBank shall fund only under their respective Note and not under
the Swing Line Loan Note). Unless Agent knew when NationsBank funded a
Swing Line Loan that Borrower had not satisfied the conditions in this
Agreement to obtain a Borrowing, each Lender's obligation to purchase
an interest in all Swing Line Loans shall be absolute and
unconditional and shall not be affected by any circumstance,
including, without limitation (i) any set-off, counterclaim,
recoupment, defense or other right which such Lender or any other
Person may have against NationsBank or any other Person for any reason
whatsoever, (ii) the occurrence or continuance of a Potential Default
or Default or the termination of any Lender's Commitment, (iii) the
occurrence of any Material Adverse Event, (iv) any breach of this
Agreement or any other Loan Document by Borrower, any of its
Affiliates, Agent or any other Lender, or (v) any other circumstance,
happening or event whatsoever, whether or not similar to any of the
foregoing. Any portion of a Swing Line Loan not so purchased and
converted may be treated by NationsBank as a Borrowing which was not
funded by the non-purchasing Lenders as contemplated in SECTION 2.2(C)
of this Agreement, and as a funding by NationsBank under the Total
Commitment in excess of NationsBank's Commitment. Each Swing Line
Loan, once so sold, shall cease to be a Swing Line Loan for the
purposes of this Agreement, but shall be a Borrowing made under the
Total Commitment and each Lender's Commitment.
SECTION 3 TERMS OF PAYMENT.
- --------- ----------------
3.1 Notes and Payments.
------------------
(a) The Principal Debt shall be evidenced by the Notes, one
payable to each Lender in the stated principal amount of its
Commitment.
40
<PAGE>
(b) Borrower must make each payment and prepayment on the
Obligation, without offset, counterclaim, or deduction, to Agent's
principal office in Dallas, Texas, in funds that will be available for
immediate use by Agent by 12:00 noon on the day due. Payments received
after such time shall be deemed received on the next Business Day.
Agent shall pay to each Lender any payment to which that Lender is
entitled on the same day Agent receives the funds from Borrower if
Agent receives the payment or prepayment before 12:00 noon, and
otherwise before 12:00 noon on the following Business Day. If and to
the extent that Agent does not make payments to Lenders when due,
unpaid amounts shall accrue interest at the Federal Funds Rate from
the due date until (but not including) the payment date.
3.2 Interest and Principal Payments.
-------------------------------
(a) Interest Payments. Accrued interest on each Borrowing is due
-----------------
and payable monthly as it accrues on the first day of each month
during the term hereof (commencing June 1, 1995) and on the
Termination Date.
(b) Principal Payments. The Total Principal Debt is due and
------------------
payable on the Termination Date.
(c) Voluntary Prepayment. Borrower may voluntarily repay or
--------------------
prepay all or any part of the Total Principal Debt at any time without
premium or penalty, subject to the following conditions:
(i) Agent must receive Borrower's written payment notice by
11:00 a.m. on (A) the Business Day preceding the date of payment
of a LIBOR Borrowing and (B) the Business Day preceding the date
of payment of a Base Rate Borrowing, which shall specify the
payment date and the Type and amount of the Borrowing(s) to be
paid, and which shall constitute an irrevocable and binding
obligation of Borrower to make a repayment or prepayment on the
designated date;
(ii) each partial repayment or prepayment must be in a
minimum amount of at least $1,000,000 or a greater integral
multiple of $100,000, or, if less, the Total Principal Debt; and
(iii) Borrower shall pay any related Funding Loss upon
demand.
3.3 Interest Options. Except as specifically otherwise provided,
----------------
Borrowings shall bear interest at an annual rate equal to the lesser of (a) the
Base Rate plus the Applicable Margin, or, except for Swing Line Loans, the LIBOR
Rate plus the Applicable Margin (in each case as designated or deemed designated
by Borrower and, in the case of LIBOR Borrowings, for the Interest Period
designated by Borrower), and (b) the Maximum Rate. Each change in the Base Rate
and Maximum Rate is effective, without notice to Borrower or any other Person,
upon the effective date of change.
3.4 Quotation of Rates. A Representative of Borrower may call Agent
------------------
before delivering a Borrowing Request to receive an indication of the interest
rates then in effect, but the indicated rates do not bind Agent or Lenders or
affect the interest rate that is actually in effect when Borrower delivers its
Borrowing Request or on the Borrowing Date.
3.5 Default Rate. If permitted by Law, all past-due Principal Debt
------------
and past-due interest accruing on any of the foregoing, bears interest from the
date due (stated or by acceleration) at the Default Rate until paid, regardless
whether payment is made before or after entry of a judgment.
3.6 Interest Recapture. If the designated interest rate applicable
------------------
to any Borrowing exceeds the Maximum Rate, the interest rate on that Borrowing
is limited to the Maximum Rate, but any subsequent
41
<PAGE>
reductions in the designated rate shall not reduce the interest rate thereon
below the Maximum Rate until the total amount of accrued interest equals the
amount of interest that would have accrued if that designated rate had always
been in effect. If at maturity (stated or by acceleration), or at final payment
of the Notes, the total interest paid or accrued is less than the interest that
would have accrued if the designated rates had always been in effect, then, at
that time and to the extent permitted by applicable Law, Borrower shall pay an
amount equal to the difference between (a) the lesser of the amount of interest
that would have accrued if the designated rates had always been in effect and
the amount of interest that would have accrued if the Maximum Rate had always
been in effect, and (b) the amount of interest actually paid or accrued on the
Notes.
3.7 Interest Calculations.
---------------------
(a) Interest will be calculated on the basis of actual number of
days elapsed (including the first day but excluding the last day) but
computed as if each calendar year consisted of 360 days for all
Borrowings (unless the calculation would result in an interest rate
greater than the Maximum Rate, in which event interest will be
calculated on the basis of a year of 365 or 366 days, as the case may
be). All interest rate determinations and calculations by Agent are
conclusive and binding absent manifest error.
(b) The provisions of this Agreement relating to calculation of
the Base Rate and the LIBOR Rate are included only for the purpose of
determining the rate of interest or other amounts to be paid under
this Agreement that are based upon those rates. Each Lender may fund
and maintain its funding of all or any part of each Borrowing as it
selects.
3.8 Maximum Rate. Regardless of any provision contained in any Loan
------------
Document or any document related thereto, it is the intent of the parties to
this Agreement that neither Agent nor any Lender contract for, charge, take,
reserve, receive or apply, as interest on all or any part of the Obligation any
amount in excess of the Maximum Rate or the Maximum Amount or receive any
unearned interest in violation of any applicable Law, and, if Lenders ever do
so, then any excess shall be treated as a partial repayment or prepayment of
principal and any remaining excess shall be refunded to Borrower. In determining
if the interest paid or payable exceeds the Maximum Rate, Borrower and Lenders
shall, to the maximum extent permitted under applicable Law, (a) treat all
Borrowings as but a single extension of credit (and Lenders and Borrower agree
that is the case and that provision in this Agreement for multiple Borrowings is
for convenience only), (b) characterize any nonprincipal payment as an expense,
fee or premium rather than as interest, (c) exclude voluntary repayments or
prepayments and their effects, and (d) amortize, prorate, allocate and spread
the total amount of interest throughout the entire contemplated term of the
Obligation. However, if the Obligation is paid in full before the end of its
full contemplated term, and if the interest received for its actual period of
existence exceeds the Maximum Amount, Lenders shall refund any excess (and
Lenders may not, to the extent permitted by Law, be subject to any penalties
provided by any Laws for contracting for, charging, taking, reserving or
receiving interest in excess of the Maximum Amount). If the Laws of the State of
Texas are applicable for purposes of determining the "Maximum Rate" or the
"Maximum Amount," then those terms mean the "indicated rate ceiling" from time
to time in effect under Article 5069-1.04, Title 79, Revised Civil Statutes of
Texas, as amended. Borrower agrees that Chapter 15, Subtitle 79, Revised Civil
Statutes of Texas, 1925, as amended (which regulates certain revolving credit
loan accounts and revolving tri-party accounts), does not apply to the
Obligation, other than Article 15.10(b).
3.9 Interest Periods. When Borrower requests any LIBOR Borrowing,
----------------
Borrower may elect the applicable interest period (each an "INTEREST PERIOD"),
which may be, at Borrower's option, one (1), two (2), three (3) or six (6)
months for LIBOR Borrowings, subject to the following conditions: (a) the
initial Interest Period for a LIBOR Borrowing commences on the applicable
Borrowing Date or conversion date, and each subsequent Interest Period
applicable to any Borrowing commences on the day when the next preceding
applicable Interest Period expires; (b) if any Interest Period for a LIBOR
Borrowing begins on a day for which there exists no numerically corresponding
Business Day in the calendar month at the end of the Interest
42
<PAGE>
Period ("ENDING CALENDAR MONTH"), then the Interest Period ends on the next
succeeding Business Day of the Ending Calendar Month, unless there is no
succeeding Business Day in the Ending Calendar Month in which case the Interest
Period ends on the next preceding Business Day of the Ending Calendar Month; (c)
no Interest Period for any portion of Principal Debt may extend beyond the
scheduled repayment date for that portion of Principal Debt; and (d) there may
not be in effect at any one time more than twelve (12) Interest Periods.
Notwithstanding the foregoing, subject to the foregoing conditions and the
consent of Agent (such consent to be in Agent's reasonable discretion), Borrower
may, not more often than during four (4) thirty (30) day periods during any
twelve (12) month period during the term of this Agreement in anticipation of
Borrower's prepayment of Borrowings from equity or debt offerings or financings,
elect Interest Periods of seven (7) days, fourteen (14) days, or twenty-one (21)
days.
3.10 Conversions. Borrower may (a) on the last day of the applicable
-----------
Interest Period convert all or part of a LIBOR Borrowing to a Base Rate
Borrowing, (b) at any time convert all or part of a Base Rate Borrowing to a
LIBOR Borrowing, and (c) on the last day of an Interest Period, elect a new
Interest Period for a LIBOR Borrowing. Any such conversion is subject to the
dollar limits and denominations of SECTION 2.1 and may be accomplished by
delivering a Conversion Request to Agent no later than 11:00 a.m. (i) on the
third (3rd) Business Day before (A) the conversion date for conversion to a
LIBOR Borrowing and (B) the last day of the Interest Period, for the election of
a new Interest Period, and (ii) one (1) Business Day before the last day of the
Interest Period for conversion to a Base Rate Borrowing. Absent Borrower's
notice of conversion or election of a new Interest Period, a LIBOR Borrowing
shall be converted to a Base Rate Borrowing when the applicable Interest Period
expires.
3.11 Order of Application.
--------------------
(a) If no Default exists, any payment shall be applied to the
Obligation in the order and manner as provided in this Agreement.
(b) If a Default exists, any payment (including proceeds from
the exercise of any Rights) shall be applied in the following order:
(i) to all fees and expenses for which Agent or Lenders have not been
paid or reimbursed in accordance with the Loan Documents (and if such
payment is less than all unpaid or unreimbursed fees and expenses,
then the payment shall be paid against unpaid and unreimbursed fees
and expenses in the order of incurrence or due date); (ii) to accrued
interest on the Principal Debt; (iii) to the Principal Debt of any
Swing Line Loans; and (iv) to the remaining Obligation in the order
and manner as Agent deems appropriate.
3.12 Sharing of Payments, Etc. If any Lender obtains any amount
-------------------------
(whether voluntary, involuntary or otherwise, including as a result of
exercising its Rights under SECTION 3.13) that exceeds the part of that payment
that such Lender is then entitled to receive under the Loan Documents, then such
Lender shall purchase from the other Lenders participations that will cause the
purchasing Lender to share the excess amount ratably with each other Lender. If
all or any portion of any excess amount is subsequently recovered from the
purchasing Lender, then the purchase shall be rescinded and the purchase price
restored to the extent of the recovery. Borrower agrees that any Lender
purchasing a participation from another Lender under this section may, to the
fullest extent permitted by Law, exercise all of its Rights of payment
(including the Right of offset) with respect to that participation as fully as
if that Lender were the direct creditor of Borrower in the amount of that
participation.
3.13 Offset. If a Default exists, each Lender is entitled, but is
------
not obligated, to exercise (for the benefit of all Lenders in accordance with
SECTION 3.12) the Rights of offset and banker's Lien against each and every
account and other property, or any interest therein, that Borrower may now or
hereafter have with, or which is now or hereafter in the possession of, that
Lender to the extent of the full amount of the Obligation owed to it.
43
<PAGE>
3.14 Booking Borrowings. To the extent permitted by Law, any Lender
------------------
may make, carry or transfer its Borrowings at, to, or for the account of any of
its branch offices or the office of any of its Affiliates. However, no Affiliate
is entitled to receive any greater payment under SECTION 3.16 than the
transferor Lender would have been entitled to receive with respect to those
Borrowings.
3.15 Basis Unavailable or Inadequate for the LIBOR Rate. If (a)
--------------------------------------------------
Agent determines that the basis for determining the applicable rate is not
available, or (b) any Lender determines that the resulting rate does not
accurately reflect the cost to such Lender of making or converting Borrowings at
that rate for the applicable Interest Period, then
(1) in the case of (a), Agent shall promptly notify Borrower and
Lenders of that determination (which is conclusive and binding on
Borrower absent manifest error), and all Borrowings shall bear
interest at the sum of the Base Rate plus the Applicable Margin. Until
Agent notifies Borrower that such circumstances no longer exist,
Lenders' commitments under this Agreement to make, or to convert to,
LIBOR Borrowings will be suspended.
(2) in the case of (b), such Lender shall promptly notify Agent
and Borrower, and all Borrowings of such Lender shall bear interest at
the sum of the Base Rate plus the Applicable Margin. Until Agent
notifies Borrower that such circumstances no longer exist, such
Lender's commitment under this Agreement to make, or to convert to,
LIBOR Borrowings will be suspended.
3.16 Additional Costs.
----------------
With respect to any Law, requirement, request, directive or
change affecting banking institutions generally:
(a) Eurocurrency Reserves. If any Lender shall be required
---------------------
under any Reserve Requirement to maintain reserves with respect to
liabilities or assets consisting of or including Eurocurrency
Liabilities, then (1) such Lender (through Agent) shall, within sixty
(60) days after the end of any Interest Period with respect to any
LIBOR Borrowing during which such Lender was so required to maintain
reserves, deliver to Borrower a certificate stating (A) that such
Lender was required to maintain reserves and as a result such Lender
incurred additional costs in connection with making LIBOR Borrowings
and (B) in reasonable detail, such Lender's computations of the amount
of additional interest payable by Borrower, pursuant to the provisions
below, and (2) Borrower shall, promptly upon receipt of any such
certificate, pay to Agent, for the account to such Lender, additional
interest on the unpaid principal amount of each LIBOR Borrowing of
such Lender made to it outstanding during the Interest Period with
respect to which the above-referenced certificate was delivered to
Agent, at a rate per annum equal to the difference obtained by
subtracting (x) the LIBOR Rate for such Interest Period from (y) the
rate obtained by dividing such LIBOR Rate by a percentage equal to
100% minus the Reserve Requirement of such Lender for such Interest
Period. The amount of interest payable by Borrower to any Lender as
stated in any certificate delivered to Agent pursuant to the
provisions of this SECTION 3.16(a) shall be conclusive and binding for
all purposes, absent manifest error. The provisions of this SECTION
3.16(a) shall survive the termination of this Agreement.
(b) Reserves. With respect to any LIBOR Borrowing, if (i) any
--------
change in present Law, any change in the interpretation or application
of any present Law, or any future Law imposes, modifies, or deems
applicable (or if compliance by any Lender with any such requirement
of any Tribunal results in) any such requirement that any reserves
(including any marginal, emergency, supplemental or special reserves)
be maintained, and (ii) those reserves reduce any sums receivable by
that Lender under this Agreement or increase the costs incurred by
that Lender in advancing or maintaining any portion of any LIBOR
Borrowing, then (unless the effect is already reflected in the rate of
interest then applicable under this Agreement) that Lender (through
Agent)
44
<PAGE>
shall deliver to Borrower a certificate setting forth in reasonable
detail the calculation of the amount necessary to compensate it for
its reduction or increase (which certificate is conclusive and binding
absent manifest error), and Borrower shall promptly pay that amount to
that Lender upon demand. Such Lender shall notify Agent and Borrower
of any such determination as soon as practicable (but in any event
within 120 days) after such Lender obtains actual knowledge of the
event or condition prompting such Lender to make such determination,
and Borrower shall not be liable for any such amount or amounts that
accrue between the date such notification is required to be given and
the date notice was actually given. The provisions of and undertakings
and indemnification set forth in this paragraph shall survive the
satisfaction and payment of the Obligation and termination of this
Agreement.
(c) Capital Adequacy. With respect to any Borrowing, if any
----------------
change in present Law or any future Law regarding capital adequacy or
compliance by Agent or any Lender with any request, directive or
requirement now existing or hereafter imposed by any Tribunal
regarding capital adequacy, or any change in its written policies or
in the risk category of this transaction, reduces the rate of return
on its capital as a consequence of its obligations under this
Agreement to a level below that which it otherwise could have achieved
(taking into consideration its policies with respect to capital
adequacy) by an amount deemed by it to be material (and it may, in
determining the amount, use reasonable assumptions and allocations of
costs and expenses and use any reasonable averaging or attribution
method), then (unless the effect is already reflected in the rate of
interest then applicable under this Agreement) Agent or that Lender
(through Agent) shall notify Borrower and deliver to Borrower a
certificate setting forth in reasonable detail the calculation of the
amount necessary to compensate it (which certificate is conclusive and
binding absent manifest error), and Borrower shall promptly pay that
amount to Agent or that Lender upon demand. Such Lender shall notify
Agent and Borrower of any such determination as soon as practicable
(but in any event within 120 days) after such Lender obtains actual
knowledge of the event or condition prompting such Lender to make such
determination, and Borrower shall not be liable for any such amount or
amounts that accrue between the date such notification is required to
be given and the date notice was actually given. The provisions of and
undertakings and indemnification set forth in this paragraph shall
survive the satisfaction and payment of the Obligation and termination
of this Agreement.
(d) Taxes. Any Taxes payable by Agent or any Lender or ruled (by
-----
a Tribunal) payable by Agent or any Lender in respect of this
Agreement or any other Loan Document shall, if permitted by Law, be
paid by Borrower, together with interest and penalties, if any (except
for (i)(1) Taxes imposed on or measured by the overall net income of
Agent or that Lender, (2) franchise or similar taxes of the Agent or
that Lender and (3) amounts requested to be withheld for Taxes
pursuant to the last sentence of SECTION 3.19 and (ii) and except for
interest and penalties incurred as a result of the gross negligence or
willful misconduct of Agent or any Lender). Agent or that Lender
(through Agent) shall notify Borrower and deliver to Borrower a
certificate setting forth in reasonable detail the calculation of the
amount of payable Taxes, which certificate is conclusive and binding
(absent manifest error), and Borrower shall promptly pay that amount
to Agent for its account or the account of that Lender, as the case
may be. If Agent or that Lender subsequently receives a refund of the
Taxes paid to it by Borrower, then the recipient shall promptly pay
the refund to Borrower.
3.17 Change in Law. If any Law makes it unlawful for any Lender to
-------------
make or maintain LIBOR Borrowings, then that Lender shall promptly notify
Borrower and Agent, and (a) as to undisbursed funds, that requested Borrowing
shall be made as a Base Rate Borrowing, and (b), as to any outstanding
Borrowing, (i) if maintaining the Borrowing until the last day of the applicable
Interest Period is unlawful, the Borrowing shall be converted to a Base Rate
Borrowing as of the date of notice, and Borrower shall pay any related Funding
Loss, or (ii) if not prohibited by Law, the Borrowing shall be converted to a
Base Rate Borrowing as of the last day of the applicable Interest Period, or
(iii) if any conversion will not resolve the unlawfulness, Borrower shall
promptly prepay the Borrowing, without penalty, together with any related
Funding Loss.
45
<PAGE>
3.18 Funding Loss. BORROWER AGREES TO INDEMNIFY EACH LENDER AGAINST,
------------
AND PAY TO IT UPON DEMAND, ANY FUNDING LOSS OF THAT LENDER. When any Lender
demands that Borrower pay any Funding Loss, that Lender shall deliver to
Borrower and Agent a certificate setting forth in reasonable detail the basis
for imposing Funding Loss and the calculation of the amount, which calculation
is conclusive and binding absent manifest error. The provisions of and
undertakings and indemnification set forth in this paragraph shall survive the
satisfaction and payment of the Obligation and termination of this Agreement.
3.19 Foreign Lenders. Each Lender that is organized under the Laws
---------------
of any jurisdiction other than the United States of America or any State thereof
(a) represents to Agent and Borrower that (i) no Taxes are required to be
withheld by Agent or Borrower with respect to any payments to be made to it in
respect of the Obligation and (ii) it has furnished to Agent and Borrower two
duly completed copies of U.S. Internal Revenue Service Form 4224, Form 1001,
Form W-8, or any other tax form acceptable to Agent (wherein it claims
entitlement to complete exemption from U.S. federal withholding tax on all
interest payments under the Loan Documents), and (b) covenants to (i) provide
Agent and Borrower a new tax form upon the expiration or obsolescence of any
previously delivered form according to Law, duly executed and completed by it,
and (ii) comply from time to time with all Laws with regard to the withholding
tax exemption. If any of the foregoing is not true or the applicable forms are
not provided, then Borrower or Agent (without duplication) may deduct and
withhold from interest payments under the Loan Documents United States federal
income tax at the full rate applicable under the Code.
3.20 Extension of Termination Date. If no Default or Potential
-----------------------------
Default exists, Borrower may request one-year extensions of the then-existing
Termination Date by making such request in writing (an "EXTENSION REQUEST") to
Agent between seventy-five (75) and ninety (90) days prior to the date that is
one (1) year prior to the then-existing Termination Date. The then-existing
Termination Date shall be extended for one (1) year only if (i) Agent and each
Lender consent in writing to such extension within thirty (30) days following
the receipt of the Extension Request and Borrower pays to Agent the extension
fee set forth in SECTION 4.4. The failure to respond by Agent or any Lender to
an Extension Request shall be deemed to be a denial of such consent by such
Person. If Lenders having a Pro Rata Part of at least eighty percent (80%)
consent to such extension (such Lenders being "CONSENTING LENDERS" and the
Lenders not consenting being "NON-CONSENTING LENDERS"), then the Termination
Date shall be extended as to the Consenting Lenders provided that Borrower on or
before the then-current Termination Date either (a) pays to the Non-Consenting
Lenders the Principal Debt owing to such Non-Consenting Lenders, together with
all interest and fees owing to such Non-Consenting Lenders, in which case the
Commitments of such Non-Consenting Lenders shall be terminated, or (b) effects
an assignment from the Non-Consenting Lenders to a new Lender or Lenders
pursuant to SECTION 13.10 who shall consent to the extension of the Termination
Date.
3.21 Conversion to Term Loan.
-----------------------
(a) Subject to the terms and conditions of this Agreement, if
any Extension Request shall be denied as provided in SECTION 3.20,
then, on the date that is one (1) year prior to the then-existing
Termination Date (the "CONVERSION DATE"), Borrower may elect to
convert the aggregate unpaid principal amount of the Total Principal
Debt (provided that any outstanding Swing Line Loans shall be
purchased and converted on or before the Conversion Date in accordance
with SECTION 2.4) outstanding on the Conversion Date (such amount
being the "ORIGINAL UNPAID PRINCIPAL BALANCE" into a term loan from
each Lender (each a "TERM LOAN" and collectively, the "TERM LOANS"),
provided that (i) all conditions precedent to a Borrowing set forth in
--------
SECTION 5 are satisfied as of the Conversion Date, (ii) no Default
exists, (iii) Borrower shall have delivered to Agent a written request
("CONVERSION NOTICE") to convert the Total Principal Debt to Term
Loans at least thirty (30) days prior to the date that is one (1) year
prior to the then-current Termination Date, and (iv) Borrower shall
have paid the conversion fee set forth in SECTION 4.5.
46
<PAGE>
(b) Upon the conversion of the Original Unpaid Principal Balance
to the Term Loans, the Commitments shall terminate and Borrower shall
have no further right to receive, and no Lender shall have the
obligation to make, any Borrowings or to extend the Termination Date
beyond the scheduled maturity of the Term Loans.
(c) If Borrower elects to convert the Original Unpaid Principal
Balance into Term Loans, Borrower shall repay the principal balance of
the Term Loans in quarterly installments, commencing on the August 1
immediately following the Conversion Date, and thereafter on the first
(1st) day of each succeeding November, February, May and August. The
amount of each quarterly principal installment shall be equal to the
following amount during the corresponding period:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
PERIOD QUARTERLY PAYMENT AMOUNT
- -----------------------------------------------------------------------------------------
<S> <C>
During the First Year After the Conversion Date An amount equal to the Original Unpaid
Principal Balance times 1.25%
- -----------------------------------------------------------------------------------------
During the Second Year After the Conversion An amount equal to the Original Unpaid
Date Principal Balance times 3.75%
- -----------------------------------------------------------------------------------------
During the Third Year After the Conversion Date An amount equal to the Original Unpaid
Principal Balance times 7.5%
- -----------------------------------------------------------------------------------------
</TABLE>
(d) If Borrower elects to convert the Original Unpaid Principal
Balance into Term Loans, interest on the unpaid principal of the Term
Loans shall continue to accrue and be due and payable as provided in
SECTION 3.
(e) If Borrower elects to convert the Original Unpaid Principal
Balance into Term Loans, then the unpaid principal balance of, and
accrued interest on, the Term Loans, together with all other amounts
due under this Agreement, shall be finally due and payable on the
third (3rd) anniversary of the Conversion Date.
3.22 Option to Replace Lenders. If any Lender shall make demand for
-------------------------
payment or reimbursement pursuant to SECTION 3.15(b) or SECTIONS 3.16(a), (b),
(c), or (d), or notify Borrower of the occurrence of the circumstances described
in SECTION 3.17, then, provided that (a) no Default has occurred and is
continuing, and (b) the circumstances resulting in such demand for payment or
reimbursement are not applicable to all Lenders, Borrower may terminate the
Commitment of such Lender, in whole but not in part, by either (i) (A) giving
such Lender and Agent not less than five (5) Business Days' written notice
thereof, which notice shall be irrevocable and effective only upon receipt
thereof by such Lender and Agent and shall specify the date of such termination,
and (B) paying such Lender (and there shall become due and payable) on such date
the outstanding Principal Debt of all Borrowings made by such Lender, all
interest thereon, and any other Obligation owed to such Lender (including under
SECTION 3.18), if any, or (ii) pursuant to the provisions of SECTION 13.11,
proposing the introduction of a replacement Lender satisfactory to Agent, or
obtaining the agreement of one or more existing Lenders, to assume the entire
amount of the Commitment of the Lender whose Commitment is being terminated, on
the effective date of such termination. Upon the satisfaction of all of the
foregoing conditions, such Lender that is being terminated shall cease to be a
"Lender" for purposes of this Agreement, provided that Borrower shall continue
to be obligated to such Lender under SECTION 7.12 with respect to Indemnified
Liabilities (as defined in SECTION 7.12) arising prior to such termination.
47
<PAGE>
SECTION 4 FEES.
- --------- ----
4.1 Treatment of Fees. The fees described in this SECTION 4 (a) are
-----------------
not compensation for the use, detention, or forbearance of money, (b) are in
addition to, and not in lieu of, interest and expenses otherwise described in
this Agreement, (c) are payable in accordance with SECTION 3.1(b), (d) are non-
refundable, (e) to the fullest extent permitted by Law, bear interest, if not
paid when due, at the Default Rate, and (f) are calculated on the basis of
actual number of days (including the first day but excluding the last day)
elapsed, but computed as if each calendar year consisted of 360 days, unless
computation would result in an interest rate in excess of the Maximum Rate in
which event the computation is made on the basis of a year of 365 or 366 days,
as the case may be. The fees described in this SECTION 4 are in all events
subject to the provisions of SECTION 3.8.
4.2 Agent Fees. Borrower shall pay to Agent, solely for its own
----------
account, the fees described in the letter agreement between Borrower and Agent
dated June 1, 1995.
4.3 Commitment Fees.
---------------
(a) On or before the date hereof, Borrower shall pay to Agent,
for the ratable account of Lenders, a commitment fee of $525,000. Such
fee shall be in lieu of the extension fee required by SECTION 4.4 of
the Restated Loan Agreement dated June 1, 1995.
(b) Borrower agrees to pay to Agent for the ratable account of
Lenders a commitment fee equal to the sum of the amounts obtained by
multiplying each portion of the daily Unused Commitment set forth
below times the applicable percentage set forth opposite such portion
-----
below:
<TABLE>
<CAPTION>
- ----------------------------------------------------------
UNUSED COMMITMENTS APPLICABLE PERCENTAGE
- ----------------------------------------------------------
<S> <C>
$0 through $114,999,999 0.125%
- ----------------------------------------------------------
$115,000,000 through $230,000,000 0.1875%
- ----------------------------------------------------------
Greater than $230,000,000 0.25%
- ----------------------------------------------------------
</TABLE>
Such commitment fee shall be due and payable on the first (1st) day of
each August, November, February and May during the term hereof,
commencing on August 1, 1996, and on the Termination Date, based upon
the Unused Commitment for each day during the quarter ending on such
date. Solely for purposes of this SECTION 4.3(b), "ratable" means, for
any calculation period, with respect to any Lender, the proportion
that (x) the average daily unused Commitment of that Lender during the
period bears to (y) the aggregate amount of the average daily unused
Total Commitment during the period.
4.4 Extension Fee. Upon each extension of the Termination Date, as
-------------
provided in SECTION 3.20, Borrower agrees to pay Agent, on or before the
existing Termination Date, for the ratable account of Lenders, an extension fee
equal to three-twentieths of one percent (.15%) of the Commitments of Lenders.
4.5 Conversion Fee. Borrower agrees to pay to Agent, for the ratable
--------------
account of the Lenders, a fee equal to one-quarter of one percent (.25%) of the
unpaid Principal Debt of the Term Loans (a) on the date that is the first (1st)
anniversary date of the Conversion Date if any portion of the Term Loans is
unpaid on that date, and (b) on the date that is the second (2nd) anniversary of
the Conversion Date if any portion of the Term Loans is unpaid on that date.
48
<PAGE>
SECTION 5 CONDITIONS PRECEDENT. Agent will not be obligated to fund the
- --------- --------------------
initial Borrowing unless Agent has timely received (a) a Borrowing Request, and
(b) all of the items described on the attached SCHEDULE 5. In addition, Agent
will not be obligated to make any Borrowing, unless on the applicable Borrowing
Date (and after giving effect to the requested Borrowing): (i) Agent shall have
timely received a Borrowing Request; (ii) Agent shall have received any
applicable fees; (iii) all of the representations and warranties of the Borrower
in the Loan Documents are true and correct in all material respects (unless they
speak to a specific date or are based on facts which have changed by
transactions contemplated or permitted by this Agreement); (iv) no Default or
Potential Default exists; and (v) the funding of the Borrowing is permitted by
Law. Upon Agent's request, Borrower shall deliver to Agent evidence
substantiating any of the matters in the Loan Documents that are necessary to
enable Borrower to qualify for the Borrowing. Each condition precedent in this
Agreement (including those on the attached SCHEDULE 5) is material to the
transactions contemplated by this Agreement, and time is of the essence with
respect to each condition precedent. Agent may fund any Borrowing without all
conditions being satisfied, but, to the extent permitted by Law, that funding
and issuance shall not be deemed to be a waiver of the requirement that each
condition precedent be satisfied as a prerequisite for any subsequent funding or
issuance, unless Agent specifically waives each item in writing.
SECTION 6 REPRESENTATIONS AND WARRANTIES. Borrower represents and
- --------- ------------------------------
warrants to Agent and Lenders as follows:
6.1 Purpose of Credit Facility. Borrower will use proceeds of the
--------------------------
Borrowings hereunder for working capital and general business purposes of
Borrower and its Consolidated Affiliates. Borrower is not engaged principally,
or as one of its important activities, in the business of extending credit for
the purpose of purchasing or carrying any "margin stock" within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System, as
amended. No part of the proceeds of any Borrowing will be used, directly or
indirectly, for a purpose that violates any Law, including the provisions of
Regulation U.
6.2 Corporate Existence, Good Standing, Authority and Compliance.
------------------------------------------------------------
Each of Borrower and its Consolidated Affiliates is duly formed, validly
existing and in good standing under the Laws of the jurisdiction in which it is
incorporated or formed as identified on the attached SCHEDULE 6.2 (as
supplemented from time to time). Each of Borrower and its Consolidated
Affiliates (a) is duly qualified to transact business and is in good standing as
a foreign trust, corporation or other entity in each jurisdiction where the
nature and extent of its business and properties require due qualification and
good standing, which jurisdictions are identified on the attached SCHEDULE 6.2
(as supplemented from time to time), (b) possesses all requisite authority,
permits and power to conduct its business as is now being, or is contemplated by
this Agreement to be, conducted, and (c) is in compliance with all applicable
Laws, except in any such case where failure to do so could not reasonably be
expected to result in a Material Adverse Event.
6.3 Affiliates. As of the date of this Agreement, Borrower has no
----------
Consolidated Affiliates or Unconsolidated Affiliates except as disclosed on the
attached SCHEDULE 6.2 (as supplemented from time to time to reflect changes as a
result of transactions permitted by this Agreement).
6.4 Authorization and Contravention. The execution and delivery by
-------------------------------
Borrower of each Loan Document or related document to which it is a party and
the performance by it of its obligations thereunder (a) are within its trust
power, (b) have been duly authorized by all necessary trust action, (c) require
no action by or filing with any Tribunal (other than any action or filing that
has been taken or made on or before the date of this Agreement), (d) do not
violate any provision of its declaration of trust or bylaws, (e) do not violate
any provision of Law or order of any Tribunal applicable to it, (f) do not
violate any material agreements to which it is a party, or (g) do not result in
the creation or imposition of any Lien on any asset of Borrower or any
Consolidated Affiliate, except in such case where failure to do so could not
reasonably be expected to result in a Material Adverse Event.
49
<PAGE>
6.5 Binding Effect. Upon execution and delivery by all parties
--------------
thereto, each Loan Document to which it is a party will constitute a legal and
binding obligation of Borrower, enforceable against it in accordance with its
terms, subject to applicable Debtor Relief Laws and general principles of
equity.
6.6 Financial Statements; Fiscal Year. The Current Financials were
---------------------------------
prepared in accordance with GAAP (except that quarterly Financial Statements may
omit footnotes required by GAAP) and present fairly, in all material respects,
the consolidated financial condition, results of operations, and cash flows of
Borrower and its Consolidated Affiliates as of, and for the portion of the
fiscal year ending on the date or dates thereof (subject only to normal audit
adjustments). All material liabilities of Borrower and its Consolidated
Affiliates as of the date or dates of the Current Financials are reflected
therein or in the notes thereto. Except for transactions directly related to,
or specifically contemplated by, the Loan Documents or disclosed in the Current
Financials, no subsequent material adverse changes have occurred in the
consolidated financial condition of Borrower and its Consolidated Affiliates
from that shown in the Current Financials, nor has Borrower or any Consolidated
Affiliate incurred any subsequent material liability. The fiscal year of
Borrower and its Consolidated Affiliates ends on December 31.
6.7 Litigation. Except as disclosed on the attached SCHEDULE 6.7 and
----------
as otherwise disclosed pursuant to SECTION 7.1(d)(i), neither Borrower nor any
of its Consolidated Affiliates is subject to, or aware of the threat of, any
Litigation that is reasonably likely to be determined adversely to Borrower or
such Consolidated Affiliate or, if so adversely determined, is a Material
Adverse Event. Except as permitted under SECTION 10.4, no outstanding and
unpaid judgments against Borrower or any of its Consolidated Affiliates exist.
6.8 Taxes.
-----
(a) All Tax returns of Borrower and its Consolidated Affiliates
required to be filed have been filed (or extensions have been granted)
before delinquency, except for returns for which the failure to file
could not reasonably be expected to result in a Material Adverse
Event, and all Taxes imposed upon Borrower and its Consolidated
Affiliates that are due and payable have been paid before delinquency
or are being contested in good faith by appropriate proceedings
diligently conducted and for which reserves in accordance with GAAP or
otherwise reasonably acceptable to Agent have been provided.
(b) As of the date hereof, no United States federal income tax
returns of the "affiliated group" (as defined in the Code) of which
Borrower is a member have been examined and closed. The members of
such affiliated group have filed all United States Federal income tax
returns and all other material tax returns which are required to be
filed by them and have paid all taxes due pursuant to such returns or
pursuant to any assessment received by or any of them. The charges,
accruals and reserves on the books of Borrower in respect of taxes or
other governmental charges are, in the opinion of Borrower, adequate.
(c) Borrower qualifies as a REIT.
6.9 Environmental Matters. Except as disclosed on SCHEDULE 6.9, and
---------------------
except for any of the following which could not reasonably be expected to result
in a Material Adverse Event, (a) no environmental condition or circumstance
exists that adversely affects any of Borrower's or any of its Consolidated
Affiliates properties or operations, (b) neither Borrower nor any of its
Consolidated Affiliates has received any report of Borrower or any of its
Consolidated Affiliates' violation of any Environmental Law, (c) neither
Borrower nor any of its Consolidated Affiliates knows that any of Borrower or
its Consolidated Affiliates is under any obligation to remedy any violation of
any Environmental Law, or (d) no facility of Borrower or any of its Consolidated
Affiliates is used for, or to the knowledge of Borrower or any of its
Consolidated Affiliates has been used for, storage, treatment or disposal of any
Hazardous Substance, except for (i) the storage and use of cleaning and
maintenance materials, used and stored in commercially reasonable quantities and
in
50
<PAGE>
compliance with applicable Environmental Laws, and (ii) light manufacturing and
distribution activities of tenants, in compliance with applicable Environmental
Laws, provided that such tenants are not primarily engaged in the treatment,
processing, recycling or disposal of any Hazardous Substance, or for any other
use that would give rise to the release of any Hazardous Substance on such
facility. Each of Borrower and its Consolidated Affiliates has taken prudent
steps to determine that its properties and operations do not violate any
Environmental Law, other than violations that, individually or in the aggregate,
could not reasonably be expected to result in a Material Adverse Event.
6.10 Employee Plans. Except where occurrence or existence could not
--------------
reasonably be expected to result in a Material Adverse Event, (a) no Employee
Plan has incurred an "accumulated funding deficiency" (as defined in section 302
of ERISA or section 412 of the Code), (b) neither Borrower nor any of its
Consolidated Affiliates has incurred liability under ERISA to the PBGC in
connection with any Employee Plan (other than required insurance premiums, all
of which have been paid), (c) neither Borrower nor any of its Consolidated
Affiliates has withdrawn in whole or in part from participation in a
Multiemployer Plan, (d) neither Borrower nor any of its Consolidated Affiliates
has engaged in any "prohibited transaction" (as defined in section 406 of ERISA
or section 4975 of the Code), and (e) no "reportable event" (as defined in
section 4043 of ERISA) has occurred, excluding events for which the notice
requirement is waived under applicable PBGC regulations.
6.11 Properties; Liens. Each of Borrower and its Consolidated
-----------------
Affiliates has good title to all its property reflected on the Current
Financials (except for property that is obsolete or that has been disposed in
the ordinary course of business or, after the date of this Agreement, as
otherwise permitted by SECTION 8.10 or SECTION 8.11). Except for Permitted
Liens and Liens on Properties acquired by Borrower or a Consolidated Affiliate,
provided such Liens are not incurred in contemplation of Borrower's or such
Consolidated Affiliate's acquisition of such Properties, no Lien exists on any
Property of Borrower or any of its Consolidated Affiliates in the Pool, and the
execution, delivery, performance or observance of the Loan Documents will not
require or result in the creation of any Lien on any of Borrower's or any of its
Consolidated Affiliates' Property in the Pool.
6.12 Locations. Borrower's chief executive office is located at the
---------
address on the attached SCHEDULE 6.12 (as supplemented from time to time).
Borrower's books and records are located at its chief executive office.
6.13 Government Regulations. Neither Borrower nor any of its
----------------------
Consolidated Affiliates is subject to regulation under the Investment Company
Act of 1940, as amended, or the Public Utility Holding Company Act of 1935, as
amended.
6.14 Transactions with Affiliates. Except as disclosed on the
----------------------------
attached SCHEDULE 6.14 (as supplemented from time to time) (if the disclosures
are approved by Agent) or as permitted by SECTION 8.4, neither Borrower nor any
of its Consolidated Affiliates is a party to a material transaction with any of
its Affiliates, other than transactions in the ordinary course of business and
upon fair and reasonable terms not materially less favorable than it could
obtain or could become entitled to in an arm's-length transaction with a Person
that was not its Affiliate.
6.15 Liabilities. Except for transactions directly related to, or
-----------
specifically contemplated or permitted by, the Loan Documents, neither Borrower
nor any of its Consolidated Affiliates is an obligor on any Liabilities, other
than Liabilities set forth in the Current Financials.
6.16 Insurance. Each of Borrower and its Consolidated Affiliates
---------
maintains with financially sound, responsible, and reputable insurance companies
or associations (or, as to workers' compensation or similar insurance, with an
insurance fund or by self-insurance authorized by the jurisdictions in which it
operates) insurance concerning its properties and businesses against casualties
and contingencies and of types and in amounts (and with co-insurance and
deductibles) as is customary in the case of similar businesses.
51
<PAGE>
6.17 Labor Matters. No actual or, to Borrower's knowledge, threatened
-------------
strikes, labor disputes, slow downs, walkouts, or other concerted interruptions
of operations by the employees of Borrower or any of its Consolidated Affiliates
that could reasonably be expected to result in a Material Adverse Event exist.
All payments due from Borrower or any of its Consolidated Affiliates for
employee health and welfare insurance have been paid or accrued as a liability
on its books, other than any nonpayments that are not, individually or
collectively, a Material Adverse Event.
6.18 Solvency. On each Borrowing Date, Borrower is, and after giving
--------
effect to the requested Borrowing will be, Solvent.
6.19 Full Disclosure. Each material fact or condition relating to
---------------
the financial condition or business of Borrower or any of its Consolidated
Affiliates which could reasonably be expected to result in a Material Adverse
Event has been disclosed to Agent. All information previously furnished,
furnished on the date of this Agreement, and furnished in the future, by
Borrower or any of its Consolidated Affiliates to Agent in connection with the
Loan Documents (a) was, is, and will be, true and accurate in all material
respects or based on good faith estimates on the date the information is stated
or certified, and (b) did not, does not, and will not, fail to state any
material fact the omission of which would otherwise make any such information
materially misleading, in each case taken as a whole.
6.20 Exemption from ERISA; Plan Assets. Borrower is a "real estate
---------------------------------
operating company" within the meaning of 29 C.F.R. (S) 2510.3-101(e) (or any
successor regulation) and the assets of Borrower would not be deemed "plan
assets" as defined in 29 C.F.R (S) 2510.3-101(a)(1) (or any successor
regulation) of any Employee Plan or Multiemployer.
6.21 Intercreditor Agreement. Borrower is aware of, and has been
-----------------------
furnished a copy of, the Intercreditor Agreement.
6.22 Minority Interests. All Consolidated Affiliates of Borrower
------------------
having minority interests are set forth on SCHEDULE 6.22 (as supplemented from
time to time).
SECTION 7 AFFIRMATIVE COVENANTS. So long as Lenders are committed to
- --------- ---------------------
fund any Borrowings under this Agreement and until the Obligation is paid in
full, Borrower covenants and agrees as follows:
7.1 Items to be Furnished. Borrower shall cause the following to be
---------------------
furnished to Agent (with sufficient copies for each Lender):
(a) Promptly after preparation, and no later than one hundred
(100) days after the last day of each fiscal year of Borrower,
Financial Statements showing the consolidated financial condition and
results of operations of Borrower and its Consolidated Affiliates as
of, and for the year ended on, that last day, accompanied by:
(i) the unqualified opinion of the firm of Arthur Andersen &
Co. or another firm of nationally-recognized independent
certified public accountants, based on an audit using generally
accepted auditing standards, that the Financial Statements were
prepared in accordance with GAAP and present fairly, in all
material respects, the consolidated financial condition and
results of operations of Borrower and its Consolidated
Affiliates;
(ii) any management letter prepared by the accounting firm
delivered in connection with its audit;
(iii) a certificate from the accounting firm to Agent
indicating that during its audit it obtained no knowledge of any
Default or Potential Default or, if it obtained knowledge, the
nature and period of existence thereof;
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(iv) a Compliance Certificate with respect to the Financial
Statements; and
(v) a certificate listing the Properties in the Pool and
Operating Sub-Pool, together with a computation in reasonable
detail of the Historical Values and the Required Level and
showing Borrower's compliance with SECTIONS 7.15 and 8.14.
(b) Promptly after preparation, and no later than fifty (50) days
after the last day of each fiscal quarter (except the last) of
Borrower, (i) Financial Statements showing the consolidated financial
condition and results of operations of Borrower and its Consolidated
Affiliates for the fiscal quarter and for the period from the
beginning of the current fiscal year to the last day of the fiscal
quarter, (ii) a Compliance Certificate with respect to the Financial
Statements, and (iii) a certificate listing the Properties in the Pool
and Operating Sub-Pool, together with a computation in reasonable
detail of the Historical Values and the Required Level and showing
Borrower's compliance with SECTIONS 7.15 and 8.14.
(c) Promptly after receipt, a copy of each interim or special
audit report and management letter issued by independent accountants
with respect to Borrower or any of its Consolidated Affiliates or its
financial records.
(d) Notice, promptly after a Responsible Officer of Borrower
knows of (i) the existence and status of any Litigation that, if
determined adversely to Borrower or any of its Consolidated
Affiliates, could reasonably be expected to result in a Material
Adverse Event, (ii) any change in any material fact or circumstance
represented or warranted by Borrower or any of its Consolidated
Affiliates in any Loan Document, (iii) the receipt by Borrower or any
of its Consolidated Affiliates of notice of any violation or alleged
violation of ERISA or any Environmental Law (which individually or
collectively with other violations or allegations could reasonably be
expected to result in a Material Adverse Event), or (iv) a Default or
Potential Default, specifying the nature thereof and what action
Borrower has taken, is taking, or proposes to take.
(e) Promptly after filing, true, correct, and complete copies of
all material reports or filings filed by or on behalf of Borrower or
any of its Consolidated Affiliates with any Tribunal (including copies
of each Form 10-K , Form 10-Q, and Form S-8 filed by or on behalf of
Borrower or any of its Consolidated Affiliates with the Securities and
Exchange Commission).
(f) Promptly after the mailing or delivery thereof, copies of all
material reports or other information from Borrower to its
shareholders.
(g) Promptly upon the consummation thereof, a description in
reasonable detail of any acquisition of material assets other than
investments in industrial Properties.
(h) Promptly upon any Change in Control of the outstanding
capital stock of Borrower, notice of such event together with a
description of the transaction giving rise thereto and a list of all
shareholders of Borrower after giving effect thereto.
(i) Promptly upon written request by Agent, a list of all major
shareholders of Borrower.
(j) Promptly upon the filing thereof, the annual report of
Borrower filed with the Maryland Department of Corporations.
(k) Promptly upon the receipt of notice thereof, and in any event
within five (5) Business Days after any change in the Moody's Rating,
the S & P Rating or the DCR Rating, notice of such change.
53
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(l) Promptly upon reasonable request by Agent, information (not
otherwise required to be furnished under the Loan Documents)
respecting the business affairs, assets and liabilities of Borrower
and its Consolidated Affiliates and opinions, certifications and
documents in addition to those mentioned in this Agreement.
7.2 Use of Proceeds. Borrower shall use the proceeds of Borrowings
---------------
only for the purposes represented in this Agreement.
7.3 Books and Records. Borrower shall, and shall cause each of its
-----------------
Consolidated Affiliates to, maintain books, records and accounts necessary
to prepare financial statements in accordance with GAAP.
7.4 Inspections. Upon reasonable request, and subject to SECTION
-----------
13.13, Borrower shall, and shall cause each of its Consolidated Affiliates
to, allow Agent (or its Representatives) to inspect any of its properties,
to review reports, files and other records and to make and take away
copies, to conduct tests or investigations, and to discuss in the presence
of Borrower any of its affairs, conditions and finances with its other
creditors, directors, officers, employees or representatives from time to
time, during reasonable business hours .
7.5 Taxes. Borrower shall, and shall cause each of its Consolidated
-----
Affiliates to, promptly pay when due any and all Taxes, other than Taxes
which are being contested in good faith by lawful proceedings diligently
conducted, against which reserve or other provision required by GAAP has
been made, and in respect of which levy and execution of any Lien have been
and continue to be stayed.
7.6 Payment of Obligations. Borrower shall, and shall cause each of
----------------------
its Consolidated Affiliates to, promptly pay (or renew and extend) all of
their respective material obligations as they become due (unless any such
obligations are being contested in good faith by appropriate proceedings).
7.7 Expenses. Borrower shall promptly pay upon demand (a) all costs,
--------
fees and expenses paid or incurred by Agent in connection with the
arrangement, syndication and negotiation of the loan evidenced by this
Agreement and the other Loan Documents and the negotiation, preparation,
delivery and execution of the Loan Documents and any related amendment,
waiver or consent (including in each case the reasonable fees and expenses
of Agent's counsel) and (b) all costs, fees and expenses of Agent and,
after the occurrence and during the continuance of a Default, Lenders
incurred by Agent or any Lender in connection with the enforcement of the
obligations of Borrower arising under the Loan Documents or the exercise of
any Rights arising under the Loan Documents (including reasonable
attorneys' fees, expenses and costs paid or incurred in connection with any
workout or restructure and any action taken in connection with any Debtor
Relief Laws), all of which shall be a part of the Obligation and shall bear
interest, if not paid upon demand, at the Default Rate until repaid.
7.8 Maintenance of Existence, Assets, and Business. Except as
----------------------------------------------
otherwise permitted by SECTION 8.09, Borrower shall continue, and shall
cause each of its Consolidated Affiliates to continue, to engage in
business of the same general type as now conducted by Borrower and its
Consolidated Affiliates, and will preserve, renew and keep in full force
and effect, and will cause each Consolidated Affiliate to preserve, renew
and keep in full force and effect, their respective trust or corporate
existence and their respective rights, privileges and franchises necessary
or desirable in the normal conduct of business, except in any such case
where failure to do so could not reasonably be expected to result in a
Material Adverse Event.
7.9 Insurance. Borrower shall, and shall cause each of its
---------
Consolidated Affiliates to, maintain with financially sound, responsible
and reputable insurance companies or associations (or, as to workers'
compensation or similar insurance, with an insurance fund or by self-
insurance authorized by the jurisdictions in which it operates) insurance
acceptable to Agent concerning its properties and businesses against
casualties and contingencies and of types and in amounts (and with co-
insurance and deductibles) as is customary in the case of similar
businesses. Borrower shall deliver to Agent (i) at Agent's request from
time
54
<PAGE>
to time, full information as to the insurance carried, (ii) within five (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 date of this Agreement,
and (iii) forthwith, notice of any cancellation or nonrenewal of coverage by
Borrower. At Agent's request, Borrower shall and shall cause each of its
Consolidated Affiliates to deliver to Agent evidence of insurance for each
policy of insurance and evidence of payment of all premiums.
7.10 Preservation and Protection of Rights. Borrower shall, and shall
-------------------------------------
cause each of its Consolidated Affiliates to, perform the acts and duly
authorize, execute, acknowledge, deliver, file and record any additional
writings as Agent may reasonably deem necessary or appropriate to preserve and
protect the Rights of Agent and Lenders under any Loan Document.
7.11 Environmental Laws. Borrower shall, and shall cause each of its
------------------
Consolidated Affiliates to (a) conduct its business so as to comply with all
applicable Environmental Laws and shall promptly take corrective action to
remedy any non-compliance with any Environmental Law, except where failure to
comply or take action could not reasonably be expected to result in a Material
Adverse Event, and (b) establish and maintain a management system designed to
ensure compliance with applicable Environmental Laws and minimize financial and
other risks to Borrower and each of its Consolidated Affiliates arising under
applicable Environmental Laws or as the result of environmentally related
injuries to Persons or property. Borrower shall deliver reasonable evidence of
compliance with the foregoing covenant to Agent within thirty (30) days after
any request from Agent.
7.12 Indemnification. Borrower shall, and shall cause each of its
---------------
Consolidated Affiliates to, jointly and severally, indemnify, protect and
holdagent and lenders and their respective representatives, successors and
assigns (including all officers, directors, employees and agents) (collectively,
the "indemnified parties") harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims and
proceedings and all costs, expenses (including all reasonable attorneys' fees
and legal expenses whether or not suit is brought) and disbursements of any kind
or nature (the "indemnified liabilities") that may at any time be imposed on,
incurred by or asserted against the indemnified parties, in any way relating to
or arising out of (a) the direct or indirect result of the violation by borrower
or any of its consolidated affiliates of any environmental law, (b) borrower's
or any of its consolidated affiliate's generation, manufacture, production,
storage, release, threatened release, discharge, disposal or presence in
connection with its properties of a hazardous substance (including (i) all
damages of any use, generation, manufacture, production, storage, release,
threatened release, discharge, disposal or presence, or (ii) the costs of any
environmental investigation, monitoring, repair, cleanup or detoxification and
the preparation and implementation of any closure, remedial or other plans), or
(c) the loan documents or any of the transactions contemplated therein. However,
although each indemnified party has the right to be indemnified under the loan
documents for its own ordinary negligence, no indemnified party has the right to
be indemnified under the loan documents for its own fraud, gross negligence or
willful misconduct. The provisions of and undertakings and indemnification set
forth in this paragraph shall survive the satisfaction and payment of the
obligation and termination of this agreement.
7.13 REIT Status. At all times, Borrower (including its organization
-----------
and method of operations and those of its subsidiaries) shall qualify as a REIT.
7.14 ERISA Exemptions. Borrower shall qualify as a "real estate
----------------
operating company" under the 29 C.F.R. (S) 2510.3-101(e) (or any successor
regulation) or other appropriate exemption such that its assets shall not be
deemed "plan assets" as defined in 29 C.F.R. (S) 2510.3-101(a)(1) (or any
successor regulation) of any Employee Plan or Multiemployer Plan.
7.15 Property Pool. Borrower and its Consolidated Affiliates shall, as
-------------
of any date during the term hereof, own fee simple title to Properties that are
not subject to any Lien (other than Permitted Liens) in any
55
<PAGE>
manner (the "POOL") with an aggregate Historical Value less the outstanding
balance of any assessment bonds on such Properties (plus the sum of Borrower's
and its Consolidated Affiliates' cash and Cash Equivalents, but only if no
Principal Debt is outstanding as of the date of determination) of at least one
hundred seventy-five percent (175%) of Borrower's and its Consolidated
Affiliates consolidated unsecured Total Indebtedness outstanding on such date.
The Pool must include income-producing operating industrial Properties (the
"OPERATING SUB-POOL"): (a) with a Required Level (plus the sum of Borrower's and
its Consolidated Affiliates' cash and Cash Equivalents, but only if no Principal
Debt is outstanding as of the date of determination) of at least one hundred
fifty percent (150%) of Borrower's and its Consolidated Affiliates consolidated
unsecured Total Indebtedness outstanding from time to time; (b) which have an
aggregate occupancy level based on bona fide tenant leases requiring current
rent payments of at least eighty-five percent (85%), where the occupancy level
is the average of the occupancy level for each of the immediately preceding
three (3) months; and (c) for which Borrower and its Consolidated Affiliates
must have received from third party independent environmental consultants,
written assessments for each property in, or to be added to, the Operating Sub-
Pool that do not disclose any material environmental conditions or risks related
to such properties.
SECTION 8 NEGATIVE COVENANTS. So long as Lenders are committed to fund
- --------- ------------------
Borrowings and until the Obligation is paid in full, Borrower covenants and
agrees as follows:
8.1 Payment of Obligations. Borrower shall not, and shall not permit
----------------------
any of its Consolidated Affiliates to, voluntarily prepay principal of, or
interest on, any Liabilities other than the Obligation, if a Default or
Potential Default exists.
8.2 Employee Plans. Except where a Material Adverse Event would not
--------------
result, Borrower shall not, and shall not permit any of its Consolidated
Affiliates to, permit any of the events or circumstances described in SECTION
6.10 to exist or occur.
8.3 Recourse Debt. Borrower shall not, and shall not permit any of its
-------------
Consolidated Affiliates to, as of any date during the term hereof, create, incur
or suffer to exist any Recourse Debt, other than:
(a) Recourse Debt (including Total Indebtedness under this
Agreement) not to exceed $400,000,000 in the aggregate at any time
outstanding;
(b) Recourse Debt (i) that has a final maturity date of greater
than five (5) years from the date of incurrence thereof, and (ii) in
which no more than fifty percent (50%) of the original principal
amount thereof is required to be paid in the first four (4) years of
the term thereof;
(c) Recourse Debt not to exceed $100,000,000 in the aggregate at
any time outstanding assumed by Borrower or any of its Consolidated
Affiliates in connection with Borrower's or such Consolidated
Affiliate's acquisition of Properties, provided that such Liability
was not incurred in contemplation of Borrower's or Consolidated
Affiliate's acquisition; and
(d) Recourse Debt issued by Borrower and rated investment grade
or better at the time of issuance by at least two (2) of Moody's, S &
P and DCR.
8.4 Transactions with Affiliates. Except as disclosed on SCHEDULE 6.14
----------------------------
(as supplemented from time to time to reflect changes as a result of
transactions permitted by this Agreement or approved by Agent), Borrower shall
not, and shall not permit any of its Consolidated Affiliates to, enter into any
material transaction with any of its Affiliates, other than (a) transactions in
the ordinary course of business and upon fair and reasonable terms not
materially less favorable than it could obtain or could become entitled to in an
arm's-length transaction with a Person that was not its Affiliate or that comply
with the requirements of the North America Security Administrators Association's
Statement of Policy of Real Estate Investment Trusts, (b) payments of fees under
the Advisory Agreement, which fees (notwithstanding anything to the contrary
56
<PAGE>
contained in the Advisory Agreement) shall not exceed one and one-half of one
percent (1.5%) per annum of average assets under management for the twelve (12)
month period preceding any date of determination, as reflected on the Current
Financials of Borrower furnished to Agent, during any period that a monetary
Default shall exist and is continuing, (c) payments to or from such Affiliates
under leases of office space on market terms, and (d) payment of fees under
property management agreements under terms and conditions available from
qualified management companies.
8.5 Compliance with Laws and Documents. Borrower shall not, and shall
----------------------------------
not permit any of its Consolidated Affiliates to, (a) violate the provisions of
any Laws applicable to it or of any material agreement to which it is a party if
that violation alone, or when aggregated with all other violations, could
reasonably be expected to result in Material Adverse Event, (b) violate the
provisions of its charter or bylaws, or (c) repeal, replace or amend any
provision of its charter or bylaws if that action could reasonably be expected
to result in a Material Adverse Event.
8.6 Loans, Advances and Investments. Borrower shall not, and shall not
-------------------------------
permit any of its Consolidated Affiliates to, have or make any investments in:
(a) Raw land (other than land under development or planned for
commencement of development within twelve (12) months following the
date such land was acquired) exceeding ten percent (10%) of Borrower's
consolidated total assets determined in accordance with GAAP;
(b) Non-industrial Properties exceeding ten percent (10%) of
Borrower's consolidated total assets determined in accordance with
GAAP;
(c) Partnerships, joint ventures and similar entities accounted
for on an equity basis (determined in accordance with GAAP) exceeding
ten percent (10%) of Borrower's consolidated total assets determined
in accordance with GAAP;
(d) Consolidated Affiliates, other than (i) Consolidated
Affiliates through which Borrower invests in Properties and that are
existing on the date hereof, (ii) Consolidated Affiliates through
which Borrower invests in Properties and that are formed or acquired
after the Closing Date, provided that (A) Borrower shall have at least
similar control with respect to Consolidated Affiliates having
minority interests as it has with respect to any of the Consolidated
Affiliates set forth on SCHEDULE 8.6, including the ability to cause
such Consolidated Affiliates to incur Total Indebtedness or grant
Liens, and (B) each such Consolidated Affiliates does not constitute
more than twenty percent (20%) of Borrower's consolidated total assets
determined in accordance with GAAP at the time of formation or
acquisition thereof;
(e) SCI Services, unless (i) all loans or advances to SCI
Services are secured by first priority liens and security interests
(subject only to prior liens and security interests securing
performance guaranties granted in the ordinary course of SCI Services'
business) in real properties developed or acquired by SCI Services,
(ii) SCI Services shall be managed by the Real Estate Manager or an
Affiliate of the Real Estate Manager, (iii) Borrower shall, at all
times, beneficially own at least ninety percent (90%) of the economic
interests in SCI Services, (iv) the financial condition and results of
operation of SCI Services shall be consolidated with those of Borrower
for purposes of the Financial Statements, (v) SCI Services shall
engage primarily in the construction of industrial real estate
properties for sale or lease to third parties on an arms-length basis
and under market terms, and (vi) all equity investments of Borrower in
SCI Services do not exceed $10,000,000.00 in the aggregate;
(f) The stock of any Person, other than stock received in
settlement of Liabilities of such Person created in the ordinary
course of business or in other REITs acquired in exchange for
57
<PAGE>
Properties not to exceed ten percent (10%) of Borrower's consolidated
total assets determined in accordance with GAAP prior to such
investment; or
(g) Loans, advances, and extensions of credit to Persons, other
than loans, advances, and extensions of credit to Persons secured by
valid and enforceable first priority liens on real estate for the
purpose of acquiring and developing such property for eventual
ownership by, or to be acquired by, Borrower prior to, or within a
reasonable period of time consistent with a business purpose after,
the completion of construction or development of such property.
8.7 Dividends and Distributions. Borrower shall not, and shall not
---------------------------
permit any of its Consolidated Affiliates to, declare, make or pay any
Distribution other than (a) Permitted Distributions, and (b) Distributions
declared, made or paid by (i) Borrower wholly in the form of its capital stock,
and (ii) any Consolidated Affiliate to Borrower. Borrower may not and may not
permit any of its Consolidated Affiliates to enter into or permit to exist any
arrangement or agreement (other than this Agreement) that prohibits it from
paying dividends or other distributions to its shareholders.
8.8 Sale of Assets. Borrower shall not, and shall not permit any of
--------------
its Consolidated Affiliates to, sell, assign, lease, transfer or otherwise
dispose of any of its assets, other than to Borrower or a Consolidated
Affiliate, and except for (a) occasional sales, leases or other dispositions of
immaterial assets for consideration not less than fair market value, (b) sales,
leases or other dispositions of assets that are obsolete or have negligible fair
market value, (c) sales of equipment for a fair and adequate consideration (but
if replacement equipment is necessary for the proper operation of the business
of the seller, the seller must promptly replace the sold equipment), and (d)
sales or other transfers of Properties during any twelve (12) month period
having a fair market value of not more than twenty percent (20%) of the fair
market value of all Properties of Borrower and its Consolidated Affiliates prior
to such sale or transfer.
8.9 Mergers and Dissolutions. Borrower shall not, and shall not permit
------------------------
any of its Consolidated Affiliates to, merge or consolidate with any other
Person or liquidate, wind up or dissolve (or suffer any liquidation or
dissolution); provided, however, that the foregoing shall not operate to prevent
-------- -------
(a) mergers or consolidations of any Consolidated Affiliate into Borrower or any
Consolidated Affiliate (if such transaction does not reduce the net worth of
Borrower determined in accordance with GAAP), or (b) a merger or consolidation
in which Borrower is the surviving entity and, immediately after giving effect
to such merger or consolidation, no Change in Control has occurred.
8.10 Assignment. Borrower shall not, and shall not permit any of its
----------
Consolidated Affiliates to, assign or transfer any of its Rights, duties, or
obligations under any of the Loan Documents.
8.11 Fiscal Year and Accounting Methods. Borrower shall not change its
----------------------------------
fiscal year or its method of accounting (other than immaterial changes in
methods or as required by GAAP).
8.12 New Businesses. Borrower shall not, and shall not permit any of
--------------
its Consolidated Affiliates to, engage in any business except the businesses in
which they are presently engaged and any other reasonably related business.
8.13 Government Regulations. Borrower shall not, and shall not permit
----------------------
any of its Consolidated Affiliates to, conduct its business in a way that it
becomes regulated under the Investment Company Act of 1940, as amended, or the
Public Utility Holding Company Act of 1935, as amended.
8.14 Negative Pledge Agreements. Borrower shall not, and shall not
--------------------------
permit any of its Consolidated Affiliates to, enter into any negative pledge
agreements with any other Person such that Borrower shall be prohibited from
granting, or causing any Consolidated Affiliates from granting, to Agent, for
the benefit of Lenders, a first priority lien and security interest in the
Operating Sub-Pool as security for
58
<PAGE>
the Obligation in an amount equal to one hundred thirty-three and one-third
percent (133.33%) of the Obligation. Nothing herein should be construed as
creating a Lien.
SECTION 9 FINANCIAL COVENANTS. So long as Lenders are committed to fund
- --------- -------------------
Borrowings under this Agreement and until the Obligation is paid and performed
in full, Borrower covenants and agrees with Agent and Lenders that Borrower will
not directly or indirectly permit, in each case for Borrower and its
Consolidated Affiliates on a consolidated basis:
9.1 Leverage Ratio. The Leverage Ratio, as of any date, to exceed
--------------
1.0to 1.0.
9.2 Minimum Tangible Net Worth. Tangible Net Worth, as of any date, to
--------------------------
be less than $1,000,000,000.
9.3 Interest Expense Coverage Ratio. The Interest Expense Coverage
-------------------------------
Ratio, as of the last day of each fiscal quarter during the term hereof, to be
less than 2.0 to 1.0.
9.4 Fixed Charge Coverage Ratio. The Fixed Charge Coverage Ratio, as
---------------------------
of the last day of each fiscal quarter during the term hereof, to be less than
1.4 to 1.0.
9.5 Debt to Total Asset Value Ratio. The Debt to Total Asset Value
-------------------------------
Ratio, as of any date following the Conversion Date, to exceed .50 to 1.0.
SECTION 10 DEFAULT. The term "DEFAULT" means the occurrence of any one or
- ---------- -------
more of the following events:
10.1 Payment of Obligation. The failure of Borrower (a) to pay any
---------------------
part of the Obligation (other than the Principal Debt or any other principal of
the Obligation) within three (3) days after it becomes due and payable under the
Loan Documents, and (b) to pay any Principal Debt or any other principal of the
Obligation when it becomes due and payable under the Loan Documents.
10.2 Covenants. The failure of Borrower (and, if applicable, any of
---------
its Consolidated Affiliates) to punctually and properly perform, observe and
comply with:
(a) Any covenant or agreement contained in SECTIONS 7.15, 8.3,
8.7, 8.14 and 9; or
(b) Any other covenant or agreement contained in any Loan
Document (other than the covenants to pay the Obligation and the
covenants in CLAUSE (A) preceding), and failure continues for thirty
(30) days after the first to occur of (i) Borrower knows of or (ii)
Borrower receives notice from Agent of, such failure.
10.3 Debtor Relief. Borrower, any of its Consolidated Affiliates, or
-------------
any Real Estate Manager (a) is not Solvent, (b) fails to pay its Liabilities
generally as they become due, (c) voluntarily seeks, consents to, or acquiesces
in the benefit of any Debtor Relief Law, or (d) becomes a party to or is made
the subject of any proceeding provided for by any Debtor Relief Law, other than
as a creditor or claimant, that could suspend or otherwise adversely affect the
Rights of Agent or any Lender granted in the Loan Documents (unless, if the
proceeding is involuntary, the applicable petition is dismissed within ninety
(90) days after its filing).
10.4 Judgments and Attachments. Borrower or any of its Consolidated
-------------------------
Affiliates fails, within sixty (60) days after entry, to pay, bond or otherwise
discharge any judgment or order for the payment of money in excess of $5,000,000
(individually or collectively) or any warrant of attachment, sequestration or
similar proceeding against Borrower or any of its Consolidated Affiliates'
assets having a value (individually or
59
<PAGE>
collectively) of $5,000,000 which is neither (a) stayed on appeal nor (b)
diligently contested in good faith by appropriate proceedings and adequate
reserves have been set aside on its books in accordance with GAAP.
10.5 Government Action. (a) A final non-appealable order is issued by
-----------------
any Tribunal (including the United States Justice Department) requiring Borrower
or any of its Consolidated Affiliates, to divest all or a substantial portion of
its assets under any antitrust, restraint of trade, unfair competition, industry
regulation or similar Laws, or (b) any Tribunal condemns, seizes or otherwise
appropriates, or takes custody or control of all or any substantial portion of
the assets of Borrower and its Consolidated Affiliates, taken as a whole.
10.6 Misrepresentation. Any material representation or warranty made
-----------------
by Borrower contained in any Loan Document at any time proves to have been
incorrect in any material respect when made.
10.7 Default Under Other Agreements.
------------------------------
(a) Borrower or any of its Consolidated Affiliates shall fail to
make any payment in respect of any Liability when due or within any
applicable grace period; provided that the failure of Borrower or any
--------
of its Consolidated Affiliates to make any payment when due or within
any applicable grace period in respect of (i) any Recourse Debt
arising in one or more related or unrelated transactions in an
aggregate principal amount not exceeding $5,000,000, and (ii) any non-
recourse Liabilities arising in one or more related or unrelated
transactions in an aggregate principal amount not exceeding
$50,000,000, shall not constitute a Default hereunder; or
(b) the acceleration of the maturity of any Liabilities of
Borrower or any of its Consolidated Affiliates or default shall occur
in the payment of any Liabilities of Borrower or any of its
Consolidated Affiliates or in respect of any note or credit agreement
relating to any such Liabilities and such default shall continue for
more than the period of grace, if any, specified therein or otherwise
granted by the lender thereof; provided that the acceleration of the
--------
maturity of (i) any Recourse Debt arising in one or more related or
unrelated transactions in an aggregate principal amount not exceeding
$5,000,000, and (ii) any non-recourse Liabilities arising in one or
more related or unrelated transactions in an aggregate principal
amount not exceeding $50,000,000 shall not constitute a Default
hereunder;
10.8 Validity and Enforceability of Loan Documents. Except in
---------------------------------------------
accordance with its terms or as otherwise expressly permitted by this Agreement,
any Loan Document at any time after its execution and delivery ceases to be in
full force and effect in any material respect or is declared by a Tribunal to be
null and void or its validity or enforceability is contested by Borrower or
Borrower denies that it has any further liability or obligations under any Loan
Document to which it is a party.
10.9 Management Changes.
------------------
(a) During any period of twelve (12) consecutive calendar
months, individuals who were directors or trustees of Borrower on the first
day of such period shall cease to constitute a majority of the board of
directors of Borrower; provided, however, that the directors or trustees of
-------- -------
Borrower may include new directors or trustees that (i) are an officer or
employee of an Affiliate, or (ii) that are required in order (as a
practical matter) for the majority of the board of directors or trustees of
Borrower to be independent directors or trustees; or
(b) Any Real Estate Manager which is an advisor to Borrower at
the date of this Agreement shall cease to be a Real Estate Manager to
Borrower and shall not have been replaced in such capacity by another
Person reasonably acceptable to Agent.
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10.10 Plan Assets. The assets of Borrower at any time constitute
-----------
assets, within the meaning of ERISA, the Code and the respective regulations
promulgated thereunder, of any Employee Plan or Multiemployer Plan.
SECTION 11 RIGHTS AND REMEDIES.
- ---------- -------------------
11.1 Remedies Upon Default.
---------------------
(a) If a Default (i) occurs under SECTION 10.3(c) or (ii) occurs
and is continuing under SECTION 10.3(a), (b) OR (d), the commitment to
extend credit under this Agreement automatically terminates, the
entire unpaid balance of the Obligation automatically becomes due and
payable without any action of any kind whatsoever.
(b) If a Default occurs and is continuing, subject to the terms
of SECTION 12.3(b), Agent may do any one or more of the following: (i)
if the maturity of the Obligation has not already been accelerated
under SECTION 11.1(a), declare the entire unpaid balance of all or any
part of the Obligation immediately due and payable, whereupon it is
due and payable; (ii) terminate the commitments of Lenders to extend
credit under this Agreement; (iii) reduce any claim to judgment; (iv)
to the extent permitted by Law, exercise (or request each Lender to,
and each Lender is entitled to, exercise) the Rights of offset or
banker's Lien against the interest of Borrower and its Consolidated
Affiliates in and to every account and other property of Borrower and
its Consolidated Affiliates that are in the possession of Agent or any
Lender to the extent of the full amount of the Obligation (and to the
extent permitted by Law, Borrower and its Consolidated Affiliates are
deemed directly obligated to each Lender in the full amount of the
Obligation for this purpose); and (v) exercise any and all other legal
or equitable Rights afforded by the Loan Documents, the Laws of the
State of Texas, or any other applicable jurisdiction.
11.2 Waivers. To the extent permitted by Law, Borrower waives
-------
presentment and demand for payment, protest, notice of intention to accelerate,
notice of acceleration and notice of protest and nonpayment, and agrees that its
liability with respect to all or any part of the Obligation is not affected by
any renewal or extension in the time of payment of all or any part of the
Obligation, by any indulgence, or by any release or change in any security for
the payment of all or any part of the Obligation.
11.3 Performance by Agent. If any covenant, duty or agreement of
--------------------
Borrower is not performed in accordance with the terms of the Loan Documents,
Agent may, while a Default exists, at its option, perform or attempt to perform
that covenant, duty or agreement on behalf of Borrower (and any amount expended
by Agent in its performance or attempted performance is payable by Borrower to
Agent on demand, becomes part of the Obligation, and bears interest at the
Default Rate from the date of Agent's expenditure until paid). However, neither
Agent nor any Lender assumes or shall have, except by its express written
consent, any liability or responsibility for the performance of any covenant,
duty or agreement of Borrower.
11.4 Not in Control. None of the covenants or other provisions
--------------
contained in any Loan Document shall, or shall be deemed to, give Agent or
Lenders the Right to exercise control over the assets (including real property),
affairs, or management of Borrower or any of its Consolidated Affiliates; the
power of Agent and Lenders is limited to the Right to exercise the remedies
provided in this SECTION 11.
11.5 Course of Dealing. The acceptance by Agent or Lenders of any
-----------------
partial payment on the Obligation shall not be deemed to be a waiver of any
Default then existing. No waiver by Agent or Lenders of any Default shall be
deemed to be a waiver of any other then-existing or subsequent Default. No delay
or omission by Agent or Lenders in exercising any Right under the Loan Documents
will impair that Right or be construed as a waiver thereof or any acquiescence
therein, nor will any single or partial exercise of any Right preclude other or
further exercise thereof or the exercise of any other Right under the Loan
Documents or otherwise.
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11.6 Cumulative Rights. All Rights available to Agent and Lenders
-----------------
under the Loan Documents are cumulative of and in addition to all other Rights
granted to Agent and Lenders at law or in equity, whether or not the Obligation
is due and payable and whether or not Agent or Lenders have instituted any suit
for collection, foreclosure, or other action in connection with the Loan
Documents.
11.7 Application of Proceeds. Any and all proceeds ever received by
-----------------------
Agent or Lenders from the exercise of any Rights pertaining to the Obligation
shall be applied to the Obligation according to SECTION 3.11.
11.8 Diminution in Value of Collateral. Neither Agent nor any Lender
---------------------------------
has any liability or responsibility whatsoever for any diminution in or loss of
value of any collateral now or hereafter securing payment or performance of all
or any part of the Obligation (other than diminution in or loss of value caused
by its gross negligence or willful misconduct).
11.9 Certain Proceedings. Borrower will promptly execute and
-------------------
deliver, or cause the execution and delivery of, all applications, certificates,
instruments, registration statements and all other documents and papers Agent or
any Lender reasonably request in connection with the obtaining of any consent,
approval, registration, qualification, permit, license or authorization of any
Tribunal or other Person necessary or appropriate for the effective exercise of
any Rights under the Loan Documents. Because Borrower agrees that Agent's and
Lenders' remedies at Law for failure of Borrower to comply with the provisions
of this paragraph would be inadequate and that failure would not be adequately
compensable in damages, Borrower agrees that the covenants of this paragraph may
be specifically enforced.
SECTION 12 AGENT AND LENDERS.
- ---------- -----------------
12.1 Agent.
-----
(a) Appointment. Each Lender appoints Agent (and Agent accepts
-----------
appointment) as its nominee and agent, in its name and on its behalf: (i) to act
as its nominee and on its behalf in and under all Loan Documents; (ii) to
arrange the means whereby its funds are to be made available to Borrower under
the Loan Documents; (iii) to take any action that it properly requests under the
Loan Documents (subject to the concurrence of other Lenders as may be required
under the Loan Documents or the Intercreditor Agreement); (iv) to receive all
documents and items to be furnished to it under the Loan Documents; (v) to be
the secured party, mortgagee, beneficiary, recipient, and similar party in
respect of any collateral, if any, for the benefit of Lenders; (vi) to promptly
distribute to it all material information, requests, documents, and items
received from Borrower under the Loan Documents; (vii) to promptly distribute to
it its ratable part of each payment or prepayment (whether voluntary, as
proceeds of collateral upon or after foreclosure, as proceeds of insurance
thereon, or otherwise) in accordance with the terms of the Loan Documents; and
(viii) to deliver to the appropriate Persons requests, demands, approvals, and
consents received from it. However, Agent may not be required to take any action
that exposes it to personal liability or that is contrary to any Loan Document
or applicable Law.
(b) Successor. Agent may voluntarily resign. If the initial or
---------
any successor Agent ever ceases to be a party to this Agreement or if the
initial or any successor Agent ever resigns or is removed, then the successor
Agent shall be appointed as provided in the Intercreditor Agreement. So long as
no Default has occurred and is continuing, Borrower shall have the right to
consent to any successor Agent that is not a Lender at the time of such
appointment. Any successor Agent must be a commercial bank having a combined
capital and surplus of at least $10,000,000,000 (as shown on its most recently
published statement of condition) and whose debt obligations (or whose parent's
debt obligations) are rated not less than investment grade or its equivalent by
Moody's or S & P. Upon its acceptance of appointment as successor Agent, the
successor Agent succeeds to and becomes vested with all of the Rights of the
prior Agent, and the prior Agent is discharged from
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its duties and obligations of Agent under the Loan Documents, and each
Lender shall execute the documents that any Lender, the resigning or
removed Agent, or the successor Agent reasonably request to reflect
the change. After any Agent's resignation as Agent under the Loan
Documents, the provisions of this section inure to its benefit as to
any actions taken or not taken by it while it was Agent under the Loan
Documents.
12.2 Delegation of Duties; Reliance. Lenders may perform any of
------------------------------
their duties or exercise any of their Rights under the Loan Documents by or
through Agent, and Lenders and Agent may perform any of their duties or exercise
any of their Rights under the Loan Documents by or through their respective
Representatives. Agent, Lenders, and their respective Representatives (a) are
entitled to rely upon (and shall be protected in relying upon) any written or
oral statement believed by it or them to be genuine and correct and to have been
signed or made by the proper Person and, with respect to legal matters, upon
opinion of counsel selected by Agent or that Lender (but nothing in this CLAUSE
(a) permits Agent to rely on (i) oral statements if a writing is required by
this agreement or (ii) any other writing if a specific writing is required by
this agreement), (b) are entitled to deem and treat each Lender as the owner and
holder of its portion of the Obligation for all purposes until, written notice
of the assignment or transfer is given to and received by Agent (and any
request, authorization, consent, or approval of any Lender is conclusive and
binding on each subsequent holder, assignee, or transferee of or Participant in
that Lender's portion of the Obligation until that notice is given and
received), (c) are not deemed to have notice of the occurrence of a Default
unless a responsible officer of Agent, who handles matters associated with the
Loan Documents and transactions thereunder, has actual knowledge or Agent has
been notified by a Lender or Borrower, and (d) are entitled to consult with
legal counsel (including counsel for Borrower), independent accountants, and
other experts selected by Agent and are not liable for any action taken or not
taken in good faith by it in accordance with the advice of counsel, accountants,
or experts.
12.3 Limitation of Agent's Liability.
-------------------------------
(a) Exculpation. Neither Agent nor any of its representatives
-----------
will be liable for any action taken or omitted to be taken by it or
them under the Loan Documents in good faith and believed by it or them
to be within the discretion or power conferred upon it or them by the
Loan Documents or be responsible for the consequences of any error of
judgment (except for fraud, gross negligence, or willful misconduct),
and neither Agent nor any of its representatives has a fiduciary
relationship with any Lender by virtue of the Loan Documents (but
nothing in this agreement negates the obligation of Agent to account
for funds received by it for the account of any Lender).
(b) Indemnity. Unless indemnified to its satisfaction against
---------
loss, cost, liability, and expense, Agent may not be compelled to do
any act under the Loan Documents or to take any action toward the
execution or enforcement of the powers thereby created or to prosecute
or defend any suit in respect of the Loan Documents. If Agent requests
instructions from Lenders, with respect to any act or action in
connection with any Loan Document, Agent is entitled to refrain
(without incurring any liability to any Person by so refraining) from
that act or action unless and until it has received instructions. In
no event, however, may Agent or any of its Representatives be required
to take any action that it or they determine could incur for it or
them criminal or onerous civil liability. Without limiting the
generality of the foregoing, no Lender has any right of action against
Agent as a result of Agent's acting or refraining from acting under
this Agreement in accordance with instructions of Required Lenders.
(c) Reliance. Agent is not responsible to any Lender or any
--------
Participant for, and each Lender represents and warrants that it has
not relied upon Agent in respect of, (i) the creditworthiness of
Borrower and its Consolidated Affiliates and the risks involved to
that Lender, (ii) the effectiveness, enforceability, genuineness,
validity, or the due execution of any Loan Document (except by Agent),
(iii) any representation, warranty, document, certificate, report, or
statement made therein (except by Agent) or furnished thereunder or in
connection therewith,
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(iv) the adequacy of any collateral now or hereafter securing the
Obligation or the existence, priority, or perfection of any Lien now
or hereafter granted or purported to be granted on the collateral
under any Loan Document, or (v) observation of or compliance with any
of the terms, covenants, or conditions of any Loan Document on the
part of Borrower and its Consolidated Affiliates. EACH LENDER AGREES
TO INDEMNIFY AGENT AND ITS REPRESENTATIVES AND HOLD THEM HARMLESS FROM
AND AGAINST (BUT LIMITED TO SUCH LENDER'S PRO RATA PART OF) ANY AND
ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS,
JUDGMENTS, SUITS, COSTS, REASONABLE EXPENSES, AND REASONABLE
DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER THAT MAY BE IMPOSED ON,
ASSERTED AGAINST, OR INCURRED BY THEM IN ANY WAY RELATING TO OR
ARISING OUT OF THE LOAN DOCUMENTS OR ANY ACTION TAKEN OR OMITTED BY
THEM UNDER THE LOAN DOCUMENTS IF AGENT AND ITS REPRESENTATIVES ARE NOT
REIMBURSED FOR SUCH AMOUNTS BY BORROWER. ALTHOUGH AGENT AND ITS
----------------------
REPRESENTATIVES HAVE THE RIGHT TO BE INDEMNIFIED UNDER THIS AGREEMENT
---------------------------------------------------------------------
FOR ITS OR THEIR OWN ORDINARY NEGLIGENCE, AGENT AND ITS
----------------------------------------
REPRESENTATIVES DO NOT HAVE THE RIGHT TO BE INDEMNIFIED UNDER THIS
AGREEMENT FOR ITS OR THEIR OWN FRAUD, GROSS NEGLIGENCE, OR WILLFUL
MISCONDUCT.
12.4 Limitation of Liability. No Lender or any Participant will
-----------------------
incur any liability to any other Lender or Participant except for acts or
omissions in bad faith, and neither Agent nor any Lender or Participant will
incur any liability to any other Person for any act or omission of any other
Lender or any Participant.
12.5 Intercreditor Agreement. Agent and Lenders agree that, so long
-----------------------
as no Default has occurred and is continuing, they will not amend or modify
Section 2.03 or the related definitions therein (including the definition of
"Required Lenders") of the Intercreditor Agreement without the prior written
consent of Borrower, which consent shall not be unreasonably withheld.
12.6 Confirmation of Intercreditor Agreement. Agent and Lenders
---------------------------------------
hereby (a) confirm the terms, conditions, rights and obligations set forth in
the Intercreditor Agreement and (b) that all references to the "Credit
Agreement" in the Intercreditor Agreement shall be to this Agreement, as
modified, amended, extended or restated from time to time.
SECTION 13 MISCELLANEOUS.
- ---------- -------------
13.1 Headings. The headings, captions and arrangements used in any
--------
of the Loan Documents are, unless specified otherwise, for convenience only and
shall not be deemed to limit, amplify or modify the terms of the Loan Documents,
nor affect the meaning thereof.
13.2 Nonbusiness Days; Time. Any payment or action that is due
----------------------
under any Loan Document on a non-Business Day may be delayed until the next-
succeeding Business Day (but interest shall continue to accrue on any applicable
payment until payment is in fact made) unless the payment concerns a LIBOR
Borrowing, in which case if the next-succeeding Business Day is in the next
calendar month, then such payment shall be made on the next-preceding Business
Day.
13.3 Communications. Unless otherwise specifically provided,
--------------
whenever any Loan Document requires or permits any consent, approval, notice,
request, demand or other communication from one party to another, communication
must be in writing (which may be by telex or telecopy) to be effective and shall
be deemed to have been given (a) if by telex, when transmitted to the
appropriate telex number and the appropriate answerback is received, (b) if by
telecopy, when transmitted to the appropriate telecopy number (and all
communications sent by telecopy must be confirmed promptly thereafter by
telephone; but any requirement in this parenthetical shall not affect the date
when the telecopy shall be deemed to have been delivered), (c) if by mail, on
the fifth (5th) Business Day after it is enclosed in an envelope and properly
addressed, stamped, sealed, certified mail, return receipt requested, and
deposited in the appropriate official postal service, or (d) if by any other
means, when actually delivered. Until changed by notice pursuant to this
Agreement, the address (and telecopy number) for each party to a Loan Document
is set forth on the attached SCHEDULE 1.
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13.4 Form and Number of Documents. The form, substance, and number
----------------------------
of counterparts of each writing to be furnished under this Agreement must be
satisfactory to Agent and its counsel.
13.5 Survival. All covenants, agreements, undertakings,
--------
representations and warranties made in any of the Loan Documents survive all
closings under the Loan Documents and, except as otherwise indicated, are not
affected by any investigation made by any party.
13.6 Governing Law. Except as expressly provided in a Loan Document,
-------------
the Laws (other than conflict-of-laws provisions) of the State of Texas and of
the United States of America govern the Rights and duties of the parties to the
Loan Documents and the validity, construction, enforcement and interpretation of
the Loan Documents.
13.7 Invalid Provisions. Any provision in any Loan Document held to
------------------
be illegal, invalid or unenforceable is fully severable; the appropriate Loan
Document shall be construed and enforced as if that provision had never been
included; and the remaining provisions shall remain in full force and effect and
shall not be affected by the severed provision. Agent, Lenders, and Borrower
agree to negotiate, in good faith, the terms of a replacement provision as
similar to the severed provision as may be possible and be legal, valid and
enforceable. However, if the provision held to be illegal, invalid or
unenforceable is a material part of this Agreement, such invalid, illegal or
unenforceable provision shall be, to the extent permitted by Law, replaced by a
clause or provision judicially construed and interpreted to be as similar in
substance and content to the original terms of such illegal, invalid or
unenforceable clause or provision as the context thereof would reasonably allow,
so that such clause or provision would thereafter be legal, valid and
enforceable.
13.8 Venue; Service of Process; Jury Trial. EACH PARTY TO ANY LOAN
-------------------------------------
DOCUMENT, IN EACH CASE FOR ITSELF, ITS SUCCESSORS AND ASSIGNS (AND IN THE CASE
OF BORROWER, FOR EACH OF ITS CONSOLIDATED AFFILIATES), (a) IRREVOCABLY SUBMITS
TO THE NONEXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS OF THE STATE OF
TEXAS, (b) IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY
LITIGATION ARISING OUT OF OR IN CONNECTION WITH THE LOAN DOCUMENTS AND THE
OBLIGATION BROUGHT IN DISTRICT COURTS OF DALLAS OR HARRIS COUNTY, TEXAS, OR IN
THE UNITED STATES DISTRICT COURT FOR THE NORTHERN OR SOUTHERN DISTRICT OF TEXAS,
DALLAS OR HOUSTON DIVISION, (c) IRREVOCABLY WAIVES ANY CLAIMS THAT ANY
LITIGATION BROUGHT IN ANY OF THE AFOREMENTIONED COURTS HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM, (d) IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF
ANY OF THOSE COURTS IN ANY LITIGATION BY THE MAILING OF COPIES THEREOF BY
CERTIFIED MAIL, RETURN RECEIPT REQUESTED, POSTAGE PREPAID, BY HAND-DELIVERY, OR
BY DELIVERY BY A NATIONALLY RECOGNIZED COURIER SERVICE, AND SERVICE SHALL BE
DEEMED COMPLETE UPON DELIVERY OF THE LEGAL PROCESS AT ITS ADDRESS SET FORTH IN
THIS AGREEMENT, (e) IRREVOCABLY AGREES THAT ANY LEGAL PROCEEDING AGAINST ANY
PARTY TO ANY LOAN DOCUMENT ARISING OUT OF OR IN CONNECTION WITH THE LOAN
DOCUMENTS OR THE OBLIGATION MAY BE BROUGHT IN ONE OF THE AFOREMENTIONED COURTS,
AND (f) IRREVOCABLY WAIVES TO THE FULLEST EXTENT PERMITTED BY LAW, ITS
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF ANY LOAN DOCUMENT. The scope of each of the foregoing waivers is
intended to be all-encompassing of any and all disputes that may be filed in any
court and that relate to the subject matter of this transaction, including
contract claims, tort claims, breach of duty claims, and all other common law
and statutory claims. Borrower (for itself and on behalf of each of its
Consolidated Affiliates) acknowledges that these waivers are a material
inducement to Agent's and each Lender's agreement to enter into a business
relationship, that Agent and each Lender has already relied on these waivers in
entering into this Agreement, and that Agent and each Lender will continue to
rely on each of these waivers in related future dealings. Borrower (for itself
and on behalf of each of its Consolidated Affiliates) further warrants and
represents that it has reviewed these waivers with its legal counsel, and that
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it knowingly and voluntarily agrees to each waiver following consultation with
legal counsel. THE WAIVERS IN THIS SECTION 13.8 ARE IRREVOCABLE, MEANING THAT
THEY MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THESE WAIVERS SHALL
APPLY TO ANY SUBSEQUENT AMENDMENTS, SUPPLEMENTS, OR REPLACEMENTS TO OR OF THIS
OR ANY OTHER LOAN DOCUMENT. In the event of Litigation, this Agreement may be
filed as a written consent to a trial by the court.
13.9 Amendments, Consents, Conflicts and Waivers.
-------------------------------------------
(a) Any provision of the Loan Documents may be amended or waived
if, but only if, such amendment or waiver is in writing and is signed
by Borrower and Agent; provided that no such amendment or waiver shall
--------
be effective, without the consent of the Required Lenders as provided
in the Intercreditor Agreement furnished to Borrower.
(b) Any conflict or ambiguity between the terms and provisions
of this Agreement and terms and provisions in any other Loan Document
is controlled by the terms and provisions of this Agreement to the
extent (and only to the extent) of such conflict.
(c) No course of dealing or any failure or delay by Agent, any
Lender, or any of their respective Representatives with respect to
exercising any Right of Agent or any Lender under this Agreement
operates as a waiver thereof. A waiver must be in writing and signed
by Agent and Lenders to be effective, and a waiver will be effective
only in the specific instance and for the specific purpose for which
it is given.
13.10 Multiple Counterparts. Any Loan Document may be executed in a
---------------------
number of identical counterparts, each of which shall be deemed an original for
all purposes and all of which constitute, collectively, one agreement; but, in
making proof of thereof, it shall not be necessary to produce or account for
more than one counterpart. Each Lender need not execute the same counterpart of
this Agreement so long as identical counterparts are executed by Borrower, each
Lender, and Agent. This Agreement shall become effective when counterparts of
this Agreement have been executed and delivered to Agent by each Lender, Agent
and Borrower, or, in the case only of Lenders, when Agent has received
telecopied, telexed or other evidence satisfactory to it that each Lender has
executed and is delivering to Agent a counterpart of this Agreement.
13.11 Successors and Assigns; Participations.
--------------------------------------
(a) Each Loan Document binds and inures to the benefit of the
parties thereto, any intended beneficiary thereof, and each of their
respective successors and permitted assigns. No Lender may, without
the prior written consent of Agent and, so long as no Default has
occurred and is continuing, Borrower, transfer, pledge, assign, sell
any participation in, or otherwise encumber its portion of the
Obligation, except as specifically permitted by this SECTION 13.11.
(b) Subject to the provisions of this section and in accordance
with applicable Law, any Lender having a Commitment equal to or
greater than $25,000,000, or if the Total Commitments have been
terminated, then Notes having outstanding Principal Debt equal to or
greater than $25,000,000, may, in the ordinary course of its
commercial banking business, at any time sell to one or more Persons
(each a "PARTICIPANT") participating interests in its portion of the
Obligation; provided that (i) each such participation is not less than
-------------
$10,000,000, (ii) except in the case of participants to any of such
Lender's Affiliates, Agent and, so long as no Default has occurred and
is continuing, Borrower have consented to such participation, such
consents not to be unreasonably withheld, and (iii) after giving
effect to such participation, the Lender granting such participation
shall
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retain a Commitment of at least $15,000,000, or if the Total
Commitments have been terminated, then Notes having outstanding
Principal Debt of at least $15,000,000. The selling Lender shall
remain a "Lender" under this Agreement (and the Participant shall not
constitute a "Lender" under this Agreement) and its obligations under
this Agreement shall remain unchanged. The selling Lender shall remain
solely responsible for the performance of its obligations under the
Loan Documents and shall remain the holder of its share of the
Principal Debt for all purposes under this Agreement. Borrower and
Agent shall continue to deal solely and directly with the selling
Lender in connection with that Lender's Rights and obligations under
the Loan Documents. Participants have no Rights under the Loan
Documents, other than certain voting Rights as provided below. Subject
to the following, each Lender may obtain (on behalf of its
Participants) the benefits of SECTION 3 with respect to all
participations in its part of the Obligation outstanding from time to
time so long as Borrower is not obligated to pay any amount in excess
of the amount that would be due to that Lender under SECTION 3
calculated as though no participations have been made. No Lender may
sell any participating interest under which the Participant has any
Rights to approve any amendment, modification or waiver of any Loan
Document, except to the extent the amendment, modification or waiver
extends the due date for payment of any principal, interest or fees
due under the Loan Documents, reduces the interest rate or the amount
of principal or fees applicable to the Obligation (except reductions
contemplated by this Agreement), or releases any guaranty or
collateral, if any, for the Obligation. However, if a Participant is
entitled to the benefits of SECTION 3 or a Lender grants Rights to its
Participants to approve amendments to or waivers of the Loan Documents
respecting the matters described in the previous sentence, then that
Lender must include a voting mechanism in the relevant participation
agreement whereby a majority of its portion of the Obligation (whether
held by it or participated) shall control the vote for all of that
Lender's portion of the Obligation. Except in the case of the sale of
a participating interest to another Lender, the relevant participation
agreement shall prohibit the Participant from transferring, pledging,
assigning, selling participations in, or otherwise encumbering its
portion of the Obligation.
(c) Subject to the provisions of this section, any Lender having
a Commitment equal to or greater than $40,000,000, or if the Total
Commitments have been terminated, then Notes having outstanding
Principal Debt equal to or greater than $40,000,000, may at any time,
in the ordinary course of its commercial banking business, (i) without
the consent of Borrower or Agent, assign all or any part of its Rights
and obligations under the Loan Documents to any of its Affiliates
(each a "PURCHASER") and (ii) upon the prior written consent of Agent,
and so long as no Default has occurred and is continuing, Borrower,
such consents not to be unreasonably withheld, assign to any other
Person (each of which is also a "PURCHASER") a proportionate part (not
less than $15,000,000 and an integral multiple of $1,000,000) of all
or any part of its Rights and obligations under the Loan Documents;
provided that after giving effect to such assignment, the Lender
--------
granting such assignment shall retain a Commitment of at least
$25,000,000, or if the Total Commitments have been terminated, then
Notes having outstanding Principal Debt of at least $25,000,000.
Notwithstanding the foregoing, Agent shall, at all times prior to its
resignation or replacement as Agent hereunder, retain a minimum
Commitment of $25,000,000, or if the Total Commitments have been
terminated, then Notes having outstanding Principal Debt of at least
$25,000,000. In each case, the Purchaser shall assume those Rights and
obligations under an assignment agreement substantially in the form of
the attached EXHIBIT D. Upon (i) delivery of an executed copy of the
assignment agreement to Borrower and Agent and (ii) payment of a fee
of $3,000 from the transferor to Agent, from and after the
assignment's effective date (which shall be after the date of
delivery), the Purchaser shall for all purposes be a Lender party to
this Agreement and shall have all the Rights and obligations of a
Lender under this Agreement to the same extent as if it were an
original party to this Agreement with commitments as set forth in the
assignment agreement, and the transferor Lender shall be released from
its obligations under this Agreement to a corresponding extent, and,
except as provided in the following sentence, no further consent or
action by Borrower, Lenders or Agent shall be required. Upon the
consummation of any transfer to a Purchaser under this CLAUSE (c), the
then-existing SCHEDULE 1 shall automatically be deemed to reflect the
name,
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address, and Commitment of such Purchaser, Agent shall deliver to
Borrower and Lenders an amended SCHEDULE 1 reflecting those changes,
Borrower shall execute and deliver to each of the transferor Lender
and the Purchaser a Note in the face amount of its respective
Commitment following transfer, and, upon receipt of its new Note, the
transferor Lender shall return to Borrower the Note previously
delivered to it under this Agreement. A Purchaser is subject to all
the provisions in this Section as if it were a Lender signatory to
this Agreement as of the date of this Agreement.
(d) Any Lender may at any time, without the consent of Borrower
or Agent, assign all or any part of its Rights under the Loan
Documents to a Federal Reserve Bank without releasing the transferor
Lender from its obligations thereunder.
(e) Notwithstanding any contrary provision in this Agreement, a
Lender may not sell or participate any of its interests for a purchase
price that, directly or indirectly, reflects a discount from face
value, without first offering the sale or participation to the other
Lenders on a Pro Rata basis (which must be accepted or rejected within
five (5) Business Days after the offer).
13.12 Discharge Only Upon Payment in Full; Reinstatement in Certain
-------------------------------------------------------------
Circumstances. Borrower's obligations under the Loan Documents remain in full
- -------------
force and effect until the Total Commitment is terminated and the Obligation is
paid in full (except for provisions under the Loan Documents which by their
terms expressly survive payment of the Obligation and termination of the Loan
Documents). If at any time any payment of the principal of or interest on any
Note or any other amount payable by Borrower or any other obligor on the
Obligation under any Loan Document is rescinded or must be restored or returned
upon the insolvency, bankruptcy or reorganization of Borrower or otherwise, the
obligations of Borrower under the Loan Documents with respect to that payment
shall be reinstated as though the payment had been due but not made at that
time.
13.13 Confidentiality. Each Lender agrees to hold any confidential
---------------
information which (a) it has received prior to the Closing Date from Borrower
which is confidential and is not otherwise publicly available, and (b) it may
receive from Borrower pursuant to this Agreement after the Closing Date which
Borrower has marked "confidential" and is not otherwise publicly available, in
confidence, except (i) to other Lenders, (ii) to legal counsel, accountants, and
other professional advisors to that Lender who agree to be bound by the terms of
this Section, (iii) to regulatory officials, but only to the extent required by
such officials, (iv) upon prior notice to Borrower (which Lenders agree shall be
delivered as promptly as practicable), in connection with or response to
compliance with any Law or at the request of any Tribunal, but only to the
extent required by such Law or Tribunal, (v) upon prior notice to Borrower
(which Lenders agree shall be delivered as promptly as practicable), in
connection with any legal proceedings to which that Lender is a party, but only
to the extent required by such proceedings, and (vi) to prospective Participants
or Purchasers who agree to be bound by the terms of this Section.
13.14 Arbitration. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE
-----------
PARTIES HERETO INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR ANY RELATED AGREEMENTS OR INSTRUMENTS, INCLUDING ANY CLAIM
BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL BE DETERMINED BY BINDING
ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION ACT (OR IF NOT
APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF PRACTICE AND PROCEDURE FOR
THE ARBITRATION OF J.A.M.S./ENDISPUTE, INC. OR ANY SUCCESSOR THEREOF
("J.A.M.S."), AND THE "SPECIAL RULES" SET FORTH BELOW. IN THE EVENT OF ANY
INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON ANY ARBITRATION
AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. ANY PARTY TO THIS
AGREEMENT MAY BRING AN ACTION, INCLUDING A SUMMARY OR EXPEDITED PROCEEDING, TO
COMPEL ARBITRATION OF ANY CONTROVERSY OR CLAIM TO WHICH THIS AGREEMENT APPLIES
IN ANY COURT HAVING JURISDICTION OVER SUCH ACTION.
68
<PAGE>
(A) SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN THE
-------------
CITY OF AGENT'S DOMICILE AT THE TIME OF THE ARBITRATION AND ADMINISTERED BY
J.A.M.S. WHO WILL APPOINT AN ARBITRATOR; IF J.A.M.S. IS UNABLE OR LEGALLY
PRECLUDED FROM ADMINISTERING THE ARBITRATION, THEN THE AMERICAN ARBITRATION
ASSOCIATION WILL SERVE. ALL ARBITRATION HEARINGS WILL BE COMMENCED WITHIN 90
DAYS OF THE DEMAND FOR ARBITRATION; FURTHER, THE ARBITRATOR SHALL ONLY, UPON A
SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE COMMENCEMENT OF SUCH HEARING FOR UP
TO AN ADDITIONAL 60 DAYS.
(B) RESERVATION OF RIGHTS. NOTHING IN THIS AGREEMENT SHALL BE
---------------------
DEEMED TO (i) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE STATUTES OF
LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS AGREEMENT; OR (ii) BE A
WAIVER BY LENDERS OF THE PROTECTION AFFORDED TO IT BY 12 U.S.C. (S) 91 OR ANY
SUBSTANTIALLY EQUIVALENT STATE LAW; OR (iii) LIMIT THE RIGHT OF LENDERS OR AGENT
HERETO (A) TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED TO) SET-OFF,
OR (B) TO FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY COLLATERAL, OR (C) TO
OBTAIN FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH AS (BUT NOT LIMITED
TO) INJUNCTIVE RELIEF OR THE APPOINTMENT OF A RECEIVER. AGENTS AND LENDERS MAY
EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE UPON SUCH PROPERTY, OR OBTAIN SUCH
PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR AFTER THE PENDENCY OF ANY
ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS AGREEMENT. AT AGENT'S AND
LENDERS' OPTION, FORECLOSURE UNDER A DEED OF TRUST OR MORTGAGE MAY BE
ACCOMPLISHED BY ANY OF THE FOLLOWING: THE EXERCISE OF A POWER OF SALE UNDER THE
DEED OF TRUST OR MORTGAGE, OR BY JUDICIAL SALE UNDER THE DEED OF TRUST OR
MORTGAGE, OR BY JUDICIAL FORECLOSURE. NEITHER THIS EXERCISE OF SELF HELP
REMEDIES NOR THE INSTITUTION OR MAINTENANCE OF AN ACTION FOR FORECLOSURE OR
PROVISIONAL OR ANCILLARY REMEDIES SHALL CONSTITUTE A WAIVER OF THE RIGHT OF ANY
PARTY, INCLUDING THE CLAIMANT IN ANY SUCH ACTION TO ARBITRATE THE MERITS OF THE
CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH REMEDIES.
13.15 Limitation of Liability of Trustees, Shareholders and Officers
--------------------------------------------------------------
of Borrower. ANY OBLIGATION OR LIABILITY WHATSOEVER OF BORROWER WHICH MAY ARISE
- -----------
AT ANY TIME UNDER THIS AGREEMENT OR ANY OBLIGATION OR LIABILITY WHICH MAY BE
INCURRED BY BORROWER PURSUANT TO ANY OTHER INSTRUMENT, TRANSACTION, OR
UNDERTAKING CONTEMPLATED HEREBY SHALL BE SATISFIED OUT OF BORROWER'S ASSETS
ONLY. NO SUCH OBLIGATION OR LIABILITY SHALL BE PERSONALLY BINDING UPON, NOR
SHALL RESORT FOR THE ENFORCEMENT THEREOF BE HAD TO, THE PROPERTY OF ANY OF
BORROWER'S TRUSTEES, SHAREHOLDERS, OFFICERS, EMPLOYEES OR AGENTS, REGARDLESS OF
WHETHER SUCH OBLIGATION OR LIABILITY IS IN THE NATURE OF CONTRACT, TORT, OR
OTHERWISE.
13.16 Entirety. THIS AGREEMENT AND THE OTHER WRITTEN LOAN DOCUMENTS
--------
(EACH AS AMENDED IN WRITING FROM TIME TO TIME) EXECUTED BY BORROWER, ANY LENDER
OR AGENT REPRESENT THE FINAL AGREEMENT AMONG BORROWER, LENDERS AND AGENT AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE
PARTIES.
13.17 Amendment and Restatement. This Agreement is in renewal,
-------------------------
amendment, modification and restatement of the Restated Loan Agreement. All
references in the Revolving Credit Notes to the Restated Loan Agreement shall be
to this Agreement, and all renewals, extensions, modifications, amendments and
restatements thereof.
69
<PAGE>
EXHIBIT 12
SECURITY CAPITAL INDUSTRIAL TRUST
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31, Period Ended December 31,
------------------ -------------------------------------------------
1996 1995 1995 1994 1993 1992 1991(a)
-------- -------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Earnings (Loss) from Operations $16,506 $ 9,663 $47,660 $25,066 $4,412 $(187) $(127)
Add:
Interest Expense 8,508 6,761 32,005 7,568 321 504 29
-------- -------- -------- -------- -------- -------- ---------
Earnings as Adjusted $25,014 $16,424 $79,665 $32,634 $4,733 $ 317 $ (98)
======== ======== ======== ======== ======== ======== =========
Fixed Charges:
Interest Expense $ 8,508 $ 6,761 $32,005 $ 7,568 $ 321 $ 504 $ 29
Capitalized Interest 3,311 1,299 8,599 2,208 98 124 68
-------- -------- -------- -------- -------- -------- ---------
Total Fixed Charges $11,819 $ 8,060 $40,604 $ 9,776 $ 419 $ 628 $ 97
======== ======== ======== ======== ======== ======== =========
Ratio of Earnings (Loss) to Fixed Charges 2.1 2.0 2.0 3.3 11.3 (b) (b)
======== ======== ======== ======== ======== ======== =========
</TABLE>
______________________________________________________________
(a) For the period from June 14, 1991 (the date of SCI's inception) to December
31, 1991.
(b) While SCI was researching markets and assembling its initial assets,
earnings were insufficient to cover fixed charges for the periods ended
December 31, 1991 and December 31, 1992 by $195,000 and $311,000,
respectively.
70
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM
10-Q FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 6,057
<SECURITIES> 0
<RECEIVABLES> 6,935
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,972,126
<DEPRECIATION> 68,301
<TOTAL-ASSETS> 1,954,382
<CURRENT-LIABILITIES> 0
<BONDS> 468,979
0
336,250
<COMMON> 814
<OTHER-SE> 1,003,222
<TOTAL-LIABILITY-AND-EQUITY> 1,954,382
<SALES> 50,205
<TOTAL-REVENUES> 50,362
<CGS> 0
<TOTAL-COSTS> 6,145
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,508
<INCOME-PRETAX> 11,804
<INCOME-TAX> 0
<INCOME-CONTINUING> 11,804
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,804
<EPS-PRIMARY> 0.14
<EPS-DILUTED> 0
</TABLE>
